Varagon Capital Corp - 10-K

Item 1A. Risk Factors

Investments in the Company involve a high degree of risk. There can be no assurance that our investment objective will be achieved, or that a shareholder will receive a return of its capital. In addition, there will be occasions when the Adviser and its affiliates may encounter potential conflicts of interest in connection with us. The following considerations should be carefully evaluated before making an investment in the Company.

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

Capital markets are experiencing a period of disruption and instability.

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

We are subject to risks related to changes in interest rates.

The lack of liquidity in our investments may adversely affect our business.

We borrow money, which magnifies the potential for gain or loss and may increase the risk of investing in us.

Our ability to enter into transactions with our affiliates is restricted.

The Company will be subject to U.S. federal income tax imposed at corporate rates if it is unable to qualify as a RIC.

The lack of liquidity in our investments may adversely affect our business.

Shareholders may not redeem their shares of common stock.

We may compete for investment opportunities with other entities managed by Varagon, subjecting our Adviser to certain conflicts of interest.

Our fee structure may create incentives for our Adviser to make speculative investments or use substantial leverage.

Our investments in middle market companies may be risky, and we could lose all or part of our investments.

Risks Related to the Company’s Business and Structure.

Non-Specified Investments and Discretion in Determining Use of Drawdown Amounts. Capital drawn will be used to finance or invest in portfolio companies and investment vehicles that will not be meaningfully described to the shareholders prior to such financing or investment. To the extent that we conduct repurchase offers, from time to time at the Board's discretion, beginning after the end of the Fundraising Period, which ended on December 2, 2025, we may use a portion of the capital drawn for the repurchase of the common stock pursuant to such repurchase offers. Further, the Adviser will have broad discretion in determining the specific uses of Drawdown Amounts. The Adviser is neither obligated to allocate the Company’s resources to any particular subset or niche market, nor precluded from allocation any of such resources to a particular subset or niche market. Shareholders will not have opportunity to evaluate the economic, financial or other information on which the Adviser bases its decisions on how to use Drawdown Amounts. Shareholders must rely on the judgment and ability of the Adviser with respect to the investment of the Company’s capital. The Company also will pay operating expenses, and may pay other expenses such as due diligence expenses of potential new investments, from Drawdown Amounts. The Company’s ability to achieve the Company’s investment objective may be limited to the extent that Drawdown Amounts are used to pay operating expenses. No assurance can be given that the Company will be successful in identifying portfolio companies suitable for financing or investment or that, if such financings or investments are made, the objectives of the Company will be achieved. These factors increase the uncertainty, and thus the risk, of investing in the Company. The Company’s investments may be materially affected by conditions in the financial markets and overall economic conditions occurring globally and in particular markets where the Company may invest its assets.

The Adviser’s methods of minimizing such risks may not accurately predict future risk exposures. Risk management techniques are based in part on the observation of historical market behavior, which may not predict market divergences that are larger than historical indicators. Also, information used to manage risks may not be accurate, complete or current, and such information may be misinterpreted. Although the Adviser intends to utilize appropriate risk management strategies, such strategies cannot fully insulate the Company from the risks inherent in its planned activities. Moreover, in certain situations the Adviser may be unable to, or may choose not to, implement risk management strategies because of the costs involved or other relevant factors.

General Market and Economic Conditions. General economic conditions may affect the Company’s activities. Changing economic, political, regulatory or market conditions, interest rates, general levels of economic activity, the price of securities and debt instruments and participation by other investors in the financial markets may affect the value and number of investments made by the Company or considered for prospective investment. The Company’s investment strategy and the availability of opportunities satisfying its risk-adjusted return parameters rely in part on the continuation of certain trends and conditions observed in the market for originated debt as well as the larger financial markets. No assurance can be given that such conditions, trends or opportunities will arise or continue, as applicable. Trends and historical events do not imply, forecast or predict future events and, in any event, past performance is not

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necessarily indicative of future results. There can be no assurance that the assumptions made, or the beliefs and expectations currently held, by the Company will prove correct and actual events and circumstances could vary significantly. While the Company expects that the current environment will yield attractive investment opportunities, investments are expected to be sensitive to the performance of the overall economy. A negative impact on U.S. or global economic fundamentals or consumer or business confidence will likely increase market volatility and reduce liquidity, both of which could adversely affect the overall performance of borrowers to which the Company may have extended loans, and these or similar events will affect the ability to execute the investment strategy pursued by the Company.

The value of investments may fluctuate in accordance with changes in the financial condition of portfolio companies and other factors that affect the markets in which the Company invests. Economic, political, global health, regulatory or market developments can affect a single obligor, obligors within an industry, economic sector or geographic region, or the market as a whole. Different parts of the market and different types of investments can react differently to these developments. Every investment has some level of market volatility risk. Economic slowdowns, recessions or downturns could lead to financial losses in the Company’s investments. In addition, many portfolio companies may be similarly subject to the same economic conditions, which could adversely impact the ability to repay loans made or acquired by the Company. As a result, companies that the Company expected to be stable may operate, or expect to operate, at a loss or have significant variations in operating results, may require substantial additional capital to support their operations or maintain their competitive position, or may otherwise have a weak financial condition or be experiencing financial distress. Market conditions, including increased competition, also may cause the Company’s portfolio to comprise assets that differ significantly from the Adviser’s expectations at the time of the initial offering of common stock.

Capital Markets are Experiencing a Period of Disruption and Instability. We may need to raise additional capital in the future to continue to make investments in accordance with our investment strategy and investment objective. Ongoing disruptive conditions in the capital markets or credit markets and the impact of new legislation in response to those conditions could restrict our business operations and could adversely impact our results of operations and financial condition. Uncertainty with respect to, among other things, inflationary pressures, elevated interest rates, new tariffs and trade barriers, geopolitical conditions, including the ongoing conflict between Russia and Ukraine, turmoil in Europe and the Middle East and the failure of major financial institutions introduced significant volatility in the financial markets, and the effect of this volatility has materially impacted and could continue to materially impact our market risks. We anticipate our portfolio companies would be materially and adversely affected by any prolonged economic downturn or recession in the United States and other major markets. In addition, disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets.

The current economic conditions have resulted in an adverse impact on the ability of lenders to originate loans, the volume, type, and quality of loans originated, the ability of borrowers to make payments and the volume and type of amendments and waivers granted to borrowers and remedial actions taken in the event of a borrower default, each of which could negatively impact the amount and quality of loans available for investment by the Company and returns to the Company, among other things. The U.S. credit markets (in particular for middle-market loans) have experienced the following among other things: (i) increased draws by borrowers on revolving lines of credit and other financing instruments; (ii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans and increased uses of PIK features; and (iii) greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility, and liquidity issues.

These conditions and future market disruptions and/or illiquidity could have an adverse effect on our (and our portfolio companies') business, financial condition, results of operations and cash flows. Ongoing unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to our portfolio companies and/or us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our portfolio investments. We may have to access, if available, alternative markets for debt and equity capital, and a severe disruption in the global financial markets, deterioration in credit and financing conditions, fluctuations in interest rates or uncertainty regarding U.S. government spending and deficit levels or other global economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Even if capital markets remain stable or improve, conditions could deteriorate again in the future. Past economic downturns or recessions have had a significant negative impact on the operating performance and fair value of middle market companies. For example, between 2008 and 2009, the U.S. and global capital markets were unstable as evidenced by periodic disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major financial institutions. Despite actions of the U.S. federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular.

Economic Recessions or Downturns Could Impair our Portfolio Companies and Harm our Operating Results. The companies in which we have invested and intend to invest may be susceptible to economic slowdowns or recessions, and as a result, may be unable to repay our debt investments during these periods. In the past, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions. In particular, in past periods of instability, the

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financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest.

Our portfolio companies may be susceptible to economic downturns or recessions. During these periods, the value of our portfolio may decrease if we are required to write down the values of our investments, and we may have non-performing assets or non-performing assets may increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions also may decrease the value of any collateral securing our loans, and decrease the value of our equity investments. A severe recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. In addition, a prolonged economic downturn or recession could extend our investment time horizon by limiting our ability to achieve timely liquidity events, such as a sale, merger or IPO, or the refinancing of our debt investments, and could ultimately impact our ability to realize anticipated investment returns. These events could prevent us from increasing investments and adversely impact our operating results.

The occurrence of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our investments, and our ongoing operations, costs and profitability. Any such unfavorable economic conditions, including rising interest rates, also may increase our funding costs, limit our access to capital markets or negatively impact our ability to obtain financing, particularly from the debt markets. In addition, any future financial market uncertainty could lead to financial market disruptions and could further impact our ability to obtain financing. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results and financial condition.

We are Subject to Risks Related to Changes in Interest Rates. Because we may borrow money to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in interest rates would not have a material adverse effect on our net investment income in the event we use debt to finance our investments. In periods of elevated interest rates, our cost of funds would increase, which could reduce our net investment income. Elevated borrowing costs may contribute to the difficulty of companies in servicing their debt obligations and may lead to increases in default rates. Certain changes in interest rates could have a material adverse effect on the Company and its investments. Moreover, changes in interest rates could have a material negative impact on the financial condition of borrowers, the valuations for loans, the unanticipated repayments of loans, and pressure to renegotiate terms on existing loans.

In response to market indicators showing a rise in inflation, the Federal Reserve raised certain benchmark interest rates in an effort to slow inflation. This elevated interest rate environment may impact our cost of capital and net investment income. A prolonged period of elevated interest rates can make it more expensive to use debt to finance our investments. Following a period of elevated interest rates, the Federal Reserve reduced its benchmark interest rate by 0.25% in each of September 2025, October 2025, and December 2025, bringing the benchmark rate to the 3.50% to 3.75% range. While Federal Reserve has indicated that there may be additional rate cuts in the future, policymakers continue to emphasize their commitment to monitoring and addressing inflationary pressures. Given the evolving economic environment and policy considerations, there can be no assurance regarding the magnitude or timing of future federal funds rate adjustments in either direction. If interest rates decline and we are in a prolonged low-interest rate environment, the difference between the total interest income earned on interest earning assets and the total interest expense incurred on interest bearing liabilities may be compressed, reducing our net income. General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our ability to achieve our investment objective and the rate of return on invested capital. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

Further, elevated interest rates could also adversely affect our performance if we hold investments with floating interest rates, subject to specified minimum (or "floor") interest rates, while at the same time engaging in borrowings subject to floating interest rates not subject to such minimums. In such a scenario, high interest rates may temporarily increase our interest expense, even though our interest income from investments is not increasing in a corresponding manner if market rates remain lower than the existing floor rate.

Risks Relating to Hedging Transactions. We may seek to hedge against interest rate and currency exchange rate fluctuations and credit risk by using structured financial instruments such as futures, options, interest rate swaps, and forward contracts, subject to the requirements of the 1940 Act. Use of structured financial instruments for hedging purposes may present significant risks, including the risk of loss of the amounts invested. Defaults by the other party to a hedging transaction can result in losses in the hedging transaction. Hedging activities also involve the risk of an imperfect correlation between the hedging instrument and the asset being hedged, which could result in losses both on the hedging transaction and on the instrument being hedged. Use of hedging activities may not prevent significant losses and could increase our losses. Further, hedging transactions may reduce cash available to pay distributions to our shareholders.

The success of our hedging strategy will depend on our ability to correctly identify appropriate exposures for hedging. In connection with our issuance of the Company’s Series A Senior Notes, Tranche A, due December 21, 2026, and Series A Senior Notes, Tranche B, due December 21, 2028, which bear interest at a fixed rate, we entered into interest rate swaps to continue to align the interest rates of our liabilities with our investment portfolio, which consists of predominately floating rate loans. In addition, the degree of correlation

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between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary, as may the time period in which the hedge is effective relative to the time period of the related exposure. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security. If restrictions on exercise were imposed, we might be unable to exercise an option we had purchased. If we were unable to close out an option that we had purchased on a security, it would have to exercise the option in order to realize any profit or the option may expire worthless.

Our Business is Dependent on Bank Relationships and Strain on the Banking System May Adversely Impact Us. The financial markets have periodically encountered volatility associated with concerns about the balance sheets of banks, especially small and regional banks that have experienced significant losses in connection with previous events of insolvency. In such distress events, it may be difficult for such banks to fund demands to withdraw deposits and other liquidity needs. Although the federal government previously announced measures to assist these banks and protect depositors, there can be no assurance that similar measures will be implemented during future periods of volatility. Our business is dependent on bank relationships, including small and regional banks, and we proactively monitor the financial health of banks with which we (or our portfolio companies) do or may in the future do business. To the extent that our portfolio companies work with banks that have been, or may be, negatively impacted by the foregoing, such portfolio companies’ ability to access their own cash, cash equivalents and investments may be threatened. In addition, such affected portfolio companies may not be able to enter into new banking arrangements or credit facilities, or receive the benefits of their existing banking arrangements or credit facilities. Any such developments could harm our business, financial condition, and operating results, and prevent us from fully implementing our investment plan. Any continued strain on the banking system may adversely impact our business, financial condition and results of operations.

Price Declines in the Corporate Leveraged Loan Market. Conditions in the medium- and large-sized U.S. corporate debt market may experience disruption or deterioration in the future, which may cause pricing levels to decline or be volatile. As a result, our NAV could decline through an increase in unrealized depreciation and incurrence of realized losses in connection with the sale of our investments, which could have a material adverse impact on our business, financial condition and results of operations.

Defaults Under a Credit Facility. In the event we default under the SMBC Facility, or other borrowings, our business could be adversely affected as we may be forced to sell a portion of our investments quickly and prematurely at what may be disadvantageous prices to us in order to meet our outstanding payment obligations and/or support working capital requirements under such borrowings, any of which would have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, following any such default, the agent for the lenders under a borrowing facility could assume control of the disposition of any or all of our assets, including the selection of such assets to be disposed and the timing of such disposition, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. As part of certain credit facilities, the right to make capital calls of shareholders may be pledged as collateral to the lender, which will be able to call for capital contributions upon the occurrence of an event of default under such credit facility. To the extent such an event of default does occur, shareholders could therefore be required to fund any shortfall up to their remaining Capital Commitments, without regard to the underlying value of their investment.

Provisions in our Credit Facilities May Limit Discretion. We currently have in place the SMBC Facility, and in the future may enter into additional borrowings. The SMBC Facility is backed by a portion of our loans and securities on which the lenders have a security interest. We may pledge up to 100% of our assets and may grant a security interest in all of our assets under the terms of any debt instrument we enter into with lenders. We expect that any security interests we grant will be set forth in a pledge and security agreement and evidenced by the filing of financing statements by the agent for the lenders. In addition, we expect that the custodian for our securities serving as collateral for such loan would include in its electronic systems notices indicating the existence of such security interests and, following notice of occurrence of an event of default, if any, and during its continuance, will only accept transfer instructions with respect to any such securities from the lender or its designee. If we breach a covenant under the terms of the SMBC Facility and seek a waiver, we may not be able to obtain a waiver from the required lenders. If we were to default under the terms of any debt instrument relating to the SMBC Facility and do not obtain a waiver, the agent for the applicable lenders would be able to assume control of the timing of disposition of any or all of our assets securing such debt, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, the SMBC Facility has, and any future credit facility may have, customary cross-default provisions. If the indebtedness under the SMBC Facility or under any future borrowings is accelerated, we may be unable to repay or finance the amounts due.

The terms of certain credit facilities that we enter into may provide (and, in the case of the SMBC Facility, provide) that, if we do not draw on the borrowings available under such credit facility, then we must pay a commitment fee to the lender for the difference between the total commitment amount and the actual amounts we have then borrowed. To the extent that draw amounts are significantly below the stated minimum funding amount, we could be required to make a sizable “make whole” payment to the applicable lender. In addition, the terms of certain credit facilities that we enter into may provide that an optional termination of that credit facility or reduction, in full or in part, of the borrowings available under that credit facility generally will require us to may a “make whole” payment and pay a fee based on the amount of borrowings terminated or reduced, as applicable, under that credit facility. In each of these circumstances, our ability to pay such fees depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. This, in certain circumstances, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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In addition, any security interests and/or negative covenants required by the SMBC Facility may limit our ability to create liens on assets to secure additional debt and may make it difficult for us to restructure or refinance indebtedness at or prior to maturity or obtain additional debt or equity financing. In addition, if our borrowing base under the SMBC Facility were to decrease, we may be required to secure additional assets in an amount sufficient to cure any borrowing base deficiency. In the event that all of our assets are secured at the time of such a borrowing base deficiency, we could be required to repay advances under the SMBC Facility or make deposits to a collection account, either of which could have a material adverse impact on our ability to fund future investments and to make distributions.

We also may be subject to limitations as to how borrowed funds may be used, which may include restrictions on geographic and industry concentrations, loan size, payment frequency and status, average life, collateral interests and investment ratings, as well as regulatory restrictions on leverage which may affect the amount of funding that may be obtained. There also may be certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, a violation of which could limit further advances and, in some cases, result in an event of default. An event of default under the SMBC Facility could result in an accelerated maturity date for all amounts outstanding thereunder, which could have a material adverse effect on our business and financial condition. This could reduce our liquidity and cash flow and impair our ability to grow our business.

We are subject to risks associated with our debt securitization. We are subject to a variety of risks relating to our debt securitization, including those set forth below. We use the term “debt securitization” to describe a form of secured borrowing under which an operating company (sometimes referred to as an “originator” or “sponsor”) acquires or originates loans or other assets that earn income, whether on a one-time or recurring basis (collectively, “income producing assets”), and borrows money on a non-recourse basis against a legally separate pool of loans or other income producing assets. In a typical debt securitization, the originator transfers the loans or income producing assets to a single-purpose, bankruptcy-remote subsidiary (also referred to as a “special purpose entity”), which is established solely for the purpose of holding loans and income producing assets and issuing debt secured by these income producing assets. The special purpose entity completes the borrowing through the issuance of notes secured by the loans or other assets. The special purpose entity may issue the notes in the capital markets to a variety of investors, including banks, non-bank financial institutions and other investors. In our debt securitizations, institutional investors purchase certain notes issued by our indirect, wholly owned subsidiary, in private placements. Pursuant to a collateral management agreement governing our debt securitization, we may incur liability as the collateral manager to our indirect, wholly owned subsidiary. Additionally, as collateral manager to our indirect, wholly owned subsidiary, we manage multiple tranches of debt associated with the debt securitization. We also hold equity in the debt securitization, and this first loss position may create a more concentrated risk of loss compared to our overall portfolio.

The Notes and the membership interests that we hold that were issued by our CLO are subordinated obligations of the Issuer and we could be prevented from receiving cash from such CLO. The notes offered in the debt securitization (the “Notes”) were issued by VCC CLO 1, LLC, our indirect, wholly owned subsidiary (the “Issuer”). The Notes that were issued by the Issuer and retained by us, through VCC CLO 1 Depositor, LLC, our direct wholly owned subsidiary, are the most junior class of notes issued by the Issuer, are subordinated in priority of payment to the other notes issued by the Issuer and will be subject to certain payment restrictions set for thin the indenture governing the Notes issued by such Issuer. Therefore, we only receive cash distributions on the Notes if the Issuer has made all cash interest payments to all other notes it has issued. Consequently, to the extent that the value of the portfolio of loan investments held by the Issuer has been reduced as a result of conditions in the credit markets, or as a result of defaulted loans or individual fund assets, the value of the Notes that we have retained at their redemption could be reduced. If the Issuer does not meet the asset coverage tests or the interest coverage test set forth in the documents governing such debt securitization, cash would be diverted from the Notes that we hold to first pay the more senior notes issued by the Issuer in amounts sufficient to cause such tests to be satisfied. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with the Issuer or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows. The Issuer is the residual claimant on funds, if any, remaining after holders of all classes of notes issued by the Issuer have been paid in full on each payment date or upon maturity of such notes under such debt securitization documents. As the indirect holder of the membership interests in the Issuer, we could receive distributions, if any, only to the extent that the Issuer makes distributions out of funds remaining after holders of all classes of notes issued by the Issuer have been paid in full on the payment date any amounts due and owing on such payment date or upon maturity of such notes. In the event that we fail to receive cash from the Issuer, we could be unable to make distributions in amounts sufficient to maintain our ability to qualify as a RIC, or at all.

We may be subject to conflicts of interest caused by our role as a collateral manager in CLO transactions. We serve as collateral manager to the Issuer in the debt securitization under a collateral management agreement, and we may serve as collateral manager for additional CLOs in the future. There may be conflicts of interest associated with sponsoring and managing a CLO, including from the issuance of debt securitizations through CLOs we create to refinance our secured borrowings. In creating a CLO, we depend in part on distributions from the CLO’s assets out of its earnings and cash flows to enable us to make distributions to shareholders. The ability of a CLO to make distributions will be subject to various limitations, including the terms and covenants of the debt it issues. A CLO also may take actions that delay distributions in order to preserve ratings and to keep the cost of present and future financings lower or the CLO may be obligated to retain cash or other assets to satisfy over-collateralization requirements commonly provided for holders of the CLO’s debt, which could impact our ability to receive distributions from the CLO. Our use of CLOs that we manage to satisfy financing

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needs, including through the declaration of distributions or the negotiation of terms and covenants in the debt it issues, may create conflicts of interest.

Competition for Investments. Other entities, including commercial banks, commercial financing companies, BDCs and insurance companies compete to make the types of investments that we plan to make in middle market loans. Certain of these competitors may be substantially larger, have considerably greater financial, technical and marketing resources than we will have and offer a wider array of financial services. For example, some competitors may have a lower cost of funds or access to funding sources that are not available to us. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. There may be intense competition for financings or investments of the type we intend to make, and such competition may result in less favorable financing or investment terms than might otherwise exist. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the source-of-income, asset diversification and distribution requirements we must satisfy to maintain our RIC tax treatment. There can be no assurance that there will be a sufficient number of attractive potential investments available to us to achieve target returns. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. The competitive pressures we face may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Downgrades of the U.S. Credit Rating, Automatic Spending Cuts or Government Shutdowns could Negatively Impact our Liquidity, Financial Condition and Earnings. U.S. debt ceiling and budget deficit concerns have increased the possibility of credit-rating downgrades or a recession in the United States. U.S. lawmakers have passed legislation to raise the federal debt ceiling on multiple occasions, but there is no guarantee that any such legislation will be passed in the future. Additionally, concerns over the United States' budget deficit have led ratings agencies to lower, or threaten to lower, the long-term sovereign credit rating of the United States, including downgrades by Fitch from AAA to AA+ in August 2023 and by Moody's from AAA to AA1 in May 2025. There is no guarantee that there will not be further downgrades or downgrades by other ratings agencies in the future.

The impact of the increased debt ceiling and/or downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. These developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time, including most recently in the fall of 2025, and future disagreements may lead to additional shutdowns during periods of budget negotiation. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Broad Authority for Board Action. The Board has the authority to modify or waive certain of our operating policies and strategies without prior notice (except as required by the 1940 Act) and without approval. However, absent shareholder approval, the Board may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our common stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.

Changes in Law, Regulation or Policies. Our portfolio companies and we are subject to regulation at the local, state, and federal levels. Changes to the laws and regulations governing our operations may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. These changes could result in material differences to the strategies and plans described herein and may result in a shift in investment focus. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment in us.

The Republican Party currently controls the Presidency, the Senate and the House of Representatives, which increases the likelihood that legislation may be adopted. Any new or changed laws or regulations, as well as changes in the positions of regulatory agencies, which may lead to changes in the level of oversight in the financial service industry, could have a material adverse effect on our business, and we expect to see continued regulatory uncertainty in the near term. The nature, timing and economic effects of any potential changes to the current legal and regulatory framework affecting the financial service industry remains uncertain.

Changes in Tax Legislation. Legislative or other actions relating to taxes could have a negative effect on us. Matters pertaining to U.S. federal income tax are subject to ongoing review by the legislative branch and by the IRS and the U.S. Treasury Department. Congress recently passed legislation impacting certain tax rules, and any new legislation, U.S. Treasury Regulations, administrative interpretations or court decisions interpreting such legislation could result in adverse tax consequences to us and our shareholders, such as affecting our ability to qualify as a RIC or otherwise impacting the U.S. federal income tax consequences applicable to us and our investors. Shareholders are urged to consult with their tax advisor regarding legislative, regulatory, or administrative tax developments and proposals and their potential effect on an investment in our common stock.

Changes to U.S. tariff and import/export regulations may have a negative effect on the operations of our portfolio companies and, in turn, negatively impact us. The U.S. government continues to enact and propose the imposition of new tariffs on specific countries and commodities, and may in the future increase or propose additional tariffs. In response, certain foreign trading partners, and others

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in the future, may impose retaliatory tariffs on certain U.S. goods or take other actions with respect to U.S. trade barriers. Although the Supreme Court recently invalidated the tariffs imposed under the International Emergency Economic Powers Act ("IEEPA"), certain tariff rates and obligations established through trade agreements that were negotiated during active IEEPA tariffs remain in effect, and the current administration has announced widely applicable tariffs pursuant to the Trade Act of 1974, effective February 24, 2026. The administration has indicated that it will continue seeking to implement tariffs through other statutory authorities as well. The scope of the Supreme Court's decision may create market uncertainty as it relates to the availability of refunds for prior tariffs and the imposition of new tariffs to replace those imposed under the IEEPA.

The foregoing trade policy landscape has created significant uncertainty about the future relationship between the United States and certain other countries with respect to trade policies, treaties and new and increased tariffs. These developments, or the continued uncertainty relating to U.S. trade policies. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. The uncertainty relating to U.S. trade policies has increased market volatility. Additionally, trade tensions, political disagreement, and regulatory concerns from trading partners may make customers, governments and investors more hesitant to engage with, purchase from, or invest in U.S.-based companies

Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers, and increase costs, decrease margins, and reduce the competitiveness of products and services offered by our portfolio companies. The foregoing may adversely affect the revenues and profitability of such portfolio companies and, in turn, negatively affect our results of operations, which could cause the net asset value of our Common Shares to decline. It is not possible to predict the impact that these or similar future events will have on the United States and other economies, specific industries, us or our underlying portfolio companies from an economic, tax or regulatory perspective, but any such impact could be material and adverse for us.

Reliance on Personnel. The Company's success depends upon the diligence, skill and network of business contacts of the Adviser's investment professionals. They will evaluate, negotiate, structure, close and monitor our investments in accordance with the terms of the Investment Advisory Agreement. There can be no assurance that the Adviser’s personnel will continue to be associated with the Adviser throughout the life of the Company. Adviser personnel, and any investment professionals that the Adviser may subsequently retain, will identify, evaluate, negotiate, structure, close, monitor and manage our investments. The Company's future success will depend to a significant extent on the continued service and coordination of Adviser personnel. If the Adviser does not maintain its existing relationships with sources of investment opportunities and does not develop new relationships with other sources of investment opportunities available to us, the Adviser may not be able to grow the Company's investment portfolio. In addition, individuals with whom Adviser personnel have relationships are not obligated to provide us with investment opportunities. Therefore, the Company and the Adviser can offer no assurance that such relationships will generate investment opportunities for us.

Our ability to achieve our investment objective also will depend on the Adviser’s ability to manage the Company and to grow our investments and earnings. This will depend, in turn, on the Adviser’s ability to identify, invest in and monitor portfolio companies that meet our investment criteria. The achievement of our investment objective will depend upon the Adviser’s execution of our investment process, its ability to provide competent, attentive and efficient services to us and, to a lesser extent, our access to financing on acceptable terms. The Adviser’s team of investment professionals will have substantial responsibilities in connection with the management of other investment funds, accounts and investment vehicles. The personnel of the Adviser may be called upon to provide managerial assistance to our portfolio companies. These activities may distract them from servicing new investment opportunities for us or slow our rate of investment. Any failure to manage our business and our future growth effectively could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Similarly, the success of the SDLP, in which we hold the Subordinated Certificates, depends upon the diligence, skill and network of business contacts of the Company, and in the case of the SDLP, also of ARCC, our joint venture partner to the SDLP.

Resignation of Adviser. Generally, the Adviser has the right, under the Investment Advisory Agreement, to resign at any time upon not less than 60 days’ written notice, regardless of whether we have found a replacement. In certain circumstances, the Adviser may only be able to terminate the Investment Advisory Agreement upon 60 days’ written notice. If the Adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, as applicable, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected, and the value of our common stock may decline.

Lack of Diversification and Risks Associated with Significant Investments. Our portfolio may hold a limited number of investments. Beyond the asset diversification requirements associated with our qualification as a RIC, we do not have fixed guidelines for diversification, and our investments may be concentrated in a relatively limited number of portfolio companies and industries from time to time. As our portfolio is less diversified than the portfolios of some larger funds, we are more susceptible to failure if a single loan or investment fails. Similarly, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment.

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Moreover, even if we invest in a large number of investments, our portfolio is expected to include investments that may be significant, individually or in the aggregate. If a significant investment in one or more companies fails to perform as expected, such a failure could have a material adverse effect on our financial condition and results of operations, and the magnitude of such effect could be more significant than if we had further diversified our portfolio.

Valuation of Portfolio Securities. Investments are valued at the end of each calendar quarter. Most of our investments may be in loans that do not have readily available market quotations. Assets that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Board. In connection with that determination, portfolio company valuations will be prepared using sources, preliminary valuations obtained from independent valuation firms depending on the availability of information on our assets and the type of asset being valued, all in accordance with our valuation policy. The participation of the Adviser in the valuation process could result in a conflict of interest because the Adviser’s management fee is based in part on our gross assets.

Because fair values, and particularly fair values of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and are often based to a large extent on estimates, comparisons and qualitative evaluations of private information, our determinations of fair value may differ materially from the values that would have been determined if a ready market for these securities existed. This could make it more difficult for our shareholders to value accurately our portfolio investments and could lead to undervaluation or overvaluation of our interests. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility.

NAV as of a particular date may be materially greater than or less than the value that would be realized if assets were to be liquidated as of such date. For example, if we were required to sell a certain asset or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our NAV. Volatile market conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially less than the values of such assets as reflected in NAV.

Potential Fluctuations in Quarterly Results. We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire and the default rate on such securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in the markets in which we operate and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as indicative of performance in future periods. These factors could have a material adverse effect on our results of operations, the value of an investment in our common stock and our ability to pay distributions.

Certain Provisions of the MGCL, the Charter and the Company’s Bylaws Could Deter Takeover Attempts. The Charter and the Bylaws as well as the Maryland General Corporation Law (the “MGCL”) contain provisions that may have the effect of discouraging a third party from making an acquisition proposal for the Company. Among other things, the Charter and the Bylaws:

provide that the Board is classified, which may delay the ability of shareholders to change the membership of a majority of the Board;

do not provide for cumulative voting;

provide that, except for vacancies on the Board caused by the removal of a director by shareholders before the time that the Company has three Independent Directors, newly created directorships and vacancies on the Board may be filled only by a majority vote of directors then in office;

provide that directors may be removed only for cause, and only by a supermajority vote of the shareholders entitled to elect such directors;

provide that shareholders may only take action (i) at an annual or special meeting of shareholders or (ii) by unanimous written consent;

require a supermajority vote of shareholders to effect amendments to certain provisions of the Charter;

vest in the Board the exclusive power to amend the Bylaws; and

require shareholders to provide advance notice of new business proposals and director nominations under specific procedures.

In addition, except as otherwise provided in the Charter, the affirmative vote of at least 75% of the votes entitled to be cast thereon, with each class or series of stock voting as a separate class, as well as the affirmative vote of at least 75% of the Board is required to effect a number of actions, including certain business combinations, that the holders of shares of common stock may view as desirable or in their best interest.

Under the MGCL, certain “business combinations,” including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between a Maryland corporation and any person who owns 10% or more of the voting power of the corporation’s outstanding voting stock, and certain other parties (each an “interested

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shareholder”), or an affiliate of the interested shareholder, are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder to the extent such statute is not superseded by applicable requirements of the 1940 Act. Thereafter, any of the specified business combinations must be approved by two supermajority votes of the shareholders unless, among other conditions, holders of the corporation’s common stock receive a minimum price for their shares. However, the Board intends to adopt a resolution exempting from the above restrictions any business combination between the Company and any other person, provided that such business combination is first approved by the Board (including a majority of the Independent Directors). This resolution, however, may be altered or repealed in whole or in part at any time.

These anti-takeover provisions may inhibit a change of control in circumstances that could give the shareholders the opportunity to realize a premium over the market price for the common stock.

Terrorist Attacks, Acts of War, Natural Disasters or Pandemics. Terrorist acts, acts of war, natural disasters, epidemics, pandemics, conflicts, social unrest and other social, political and economic conditions may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security operations, natural disasters, global health emergencies or pandemics could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks, global health emergencies and natural disasters are generally uninsurable.

In late February 2022, Russia launched a large-scale military attack on Ukraine, and the ongoing conflict has resulted in geopolitical volatility among Russia, Ukraine, Europe, NATO and other western countries, including the United States. In response to continued military action by Russia, various countries, including the United States, the United Kingdom, and European Union issued broad-ranging economic sanctions against Russia and additional sanctions may be imposed in the future. Such sanctions (and any future sanctions) and other actions against Russia may adversely impact various sectors of the Russian economy, including, but not limited to, financials, energy, metals and mining, engineering and defense and defense-related materials sectors. Such sanctions may result in a decline in the value and liquidity of Russian securities; result in boycotts, tariffs, and purchasing and financing restrictions on Russia’s government, companies and certain individuals; weaken the value of the ruble; downgrade the country’s credit rating; freeze Russian securities and/or funds invested in prohibited assets and impair the ability to trade in Russian securities and/or other assets; and have other adverse consequences on the Russian government, economy, companies and region. Further, several large corporations and U.S. states have divested their interests or otherwise curtailed business dealings with certain Russian businesses.

In addition, the ongoing conflicts in Europe and the Middle East and escalating tensions in the region may create volatility and disruption of global markets.

The ramifications of the conflicts and sanctions, however, may not be limited to Russia, Europe and the Middle East and Russian, European or Middle Eastern companies, respectively, but may extend to and negatively impact other regional and global economic markets (including the United States), companies in other countries and various sectors, industries and markets for securities and commodities globally, such as oil and natural gas. Accordingly, the actions discussed above and any further expansion of ongoing conflicts could increase financial market volatility, negatively impact regional and global economic markets, and have a negative effect on the Company’s investments and performance, which may, in turn, impact the valuation of such portfolio companies. In addition, parties in such conflicts may take retaliatory actions such as cyberattacks or espionage against other countries and companies around the world, and any such countermeasures could negatively impact such countries and/or the companies in which the Company invests. The extent and duration of the military action or future escalation of such hostilities, the extent and impact of existing and future sanctions, market disruptions and volatility, and the result of any diplomatic negotiations cannot be predicted. These and any related events could have a significant impact on the Company’s performance and the value of an investment in the Company.

Cybersecurity Risks. We, and others in our industry, are the targets of malicious cyber activity. A successful cyber-attack, whether perpetrated by criminal or state-sponsored actors, against us or our service providers, or an accidental disclosure of non-public information could have an adverse effect on our ability to communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of our data, especially personal and other confidential information. The rapid evolution and scale of artificial intelligence technologies also may increase the likelihood or effectiveness of a cyber-attack against us, the Advisers or our third-party service providers. For example, artificial intelligence-enabled fraud can materially impact the effectiveness of our traditional cybersecurity controls by accelerating and scaling social engineering, creating realistic synthetic documents, and defeating common authentication methods.

We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems, networks, and data, like those of other companies, could be subject to unauthorized access, acquisition, use, alteration, or destruction, such as from the insertion of malware (including ransomware), physical and electronic break-ins or unauthorized tampering, or system failures and disruptions of our computer systems, networks and data. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary, personal and other information processed, stored in, and transmitted through our computer systems and networks. Such an attack could cause, among other adverse effects, interruptions or malfunctions in

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our operations, misstated or unreliable financial data, misappropriation of assets, loss of personal information, liability for stolen information, any of which could result in financial losses, litigation, regulatory enforcement action and penalties, client dissatisfaction or loss, reputational damage, and increased costs associated with mitigation of damages and remediation.

We may have to make a significant investment to fix or replace any inoperable or compromised systems or to modify or enhance its cybersecurity controls, procedures and measures. Similarly, the public perception that we or our affiliates may have been the target of a cybersecurity threat, whether successful or not, also could have a material adverse effect on our reputation and lead to financial losses from loss of business, depending on the nature and severity of the threat.

Third parties with which we do business (including vendors that provide us with services) are sources of cybersecurity or other technological risks. We outsource certain functions and these relationships allow for the storage and processing of our information, as well as client, counterparty, employee and borrower information. Cybersecurity failures or breaches to service providers (including, but not limited to, accountants and custodians), and the issuers of securities in which we invest, also have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with our ability to calculate its NAV, impediments to trading, the inability of our shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputation damages, reimbursement of other compensation costs, or additional compliance costs. While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, acquisition, use, alteration or destruction of data, or other cybersecurity incidents that affects our data, resulting in increased costs and other consequences, as described above.

The Company does not control the cybersecurity measures put in place by such third parties, and such third parties could have limited indemnification obligations to the Company and its affiliates. If such a third party fails to adopt or adhere to adequate cybersecurity procedures, or if despite such procedures its networks or systems are breached, information relating to investor transactions and/or personal information of investors may be lost or improperly accessed, used or disclosed. The Company, the Adviser and its affiliates have implemented processes, procedures and internal controls to mitigate cybersecurity risks and cyber intrusions, including in its vendors, but these measures, as well as the Company’s increased awareness of the nature and extent of a risk of a cyber-incident, may be ineffective and do not guarantee that a cyber-incident will not occur or that the Company’s financial results, operations or confidential information will not be negatively impacted by a cybersecurity or cyber intrusion incident. Substantial costs may be incurred in order to prevent any cyber incidents in the future.

Privacy and information security laws and regulatory changes (including any regulations to report material cybersecurity incidents to the SEC), and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. For example, the SEC adopted rules requiring disclosure of material cybersecurity incidents and disclosure relating to cybersecurity risk management, and amendments to Regulation S-P governing policies and procedures designed to address unauthorized access to customer information. We may face increased costs to comply with any new or changing regulations. In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks.

Technological innovations, including those related to artificial intelligence and machine learning, may negatively impact us. There continues to be significant evolution and developments in the use of artificial intelligence (“AI”) and machine learning technologies. We cannot fully determine the impact or related risks of such evolving technology to our business at this time. We and the Adviser may utilize AI tools in our business activities, including generative AI technologies, machine learning, data analytics, and aggregation tools. The use of AI is in its early stages, and ineffective or inadequate development or deployment could be costly and may involve unforeseen difficulties, such as undetected errors or material performance issues.

AI has the potential to result in significant and disruptive changes in companies, sectors or industries, including those in which we invest, and any potential to result in significant and disruptive changes in companies, sectors or industries, including those in which we invest, and any such changes could create new and unpredictable operational, legal and/or regulatory risks. Subject to internal compliance policies, the Adviser may incorporate, directly or through third-party vendors, the use of AI into its business and operations, and anticipates that usage and adoption of AI in the marketplace will continue to grow.

As with other innovations, AI presents risks and challenges that could affect its accuracy. While the use of AI is intended to make processes more efficient, AI models may not achieve sufficient levels of accuracy. AI algorithms may be flawed, the datasets on which such algorithms are trained may be insufficient, raise privacy concerns or contain biased information, and AI could provide results that contain in whole or in part inaccurate information, which may be difficult to identify. It may be difficult or impossible to eliminate these occurrences. Any such inaccuracies or errors could undermine the decisions, predictions or analysis AI applications produce, subjecting the user to competitive harm, legal liability, and brand or reputational harm. A number of jurisdictions have passed laws and implemented regulations, or are considering the same, related to the use of AI and affecting AI companies, which could limit or adversely affect our business to the extent we, or our portfolio companies, use AI in our operations. Use of AI could include the input of confidential information (including material non-public information) in contravention of applicable policies, contractual or other obligations or restrictions, resulting in such confidential information becoming part of a dataset that is accessible by other third-party AI applications and users. The misuse or misappropriation of data could have an adverse impact on the user's reputation and could subject the user to legal and regulatory investigations and/or actions. We cannot control the use of AI or machine learning in our portfolio companies or third-party products or services and therefore could be exposed to associated risks if our portfolio companies, third-party service providers or any counterparties use AI or machine learning in their business activities.

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Additionally, uncertainty in the legal and regulatory regime relating to AI, such as evolving review by the SEC, the U.S. Federal Trade Commission, and other U.S. and non-U.S. agencies and regulators, may require significant resources to modify and maintain business practices to comply with such regulations.

California Consumer Privacy Act (“CCPA”) Considerations. The Company and the Adviser are subject to the requirements of the CCPA. The CCPA imposes a number of obligations on covered businesses, including, among others: (a) obligations to comply with certain privacy requests made by California residents; (b) requirements to provide enhanced privacy notice disclosures; and (c) a requirement to ensure that all individuals responsible for handling consumer inquiries about the business’s privacy practices are informed of the CCPA’s requirements. The CCPA is enforceable by the California Attorney General as of July 1, 2020 and authorizes civil penalties for domestic and intentional violations. The CCPA also provides a private right of action but only in connection with certain “unauthorized access and exfiltration, theft, or disclosure” of a California resident’s non-encrypted or non-redacted personal information, if the business failed to implement and maintain reasonable security procedures and practices appropriate to the nature of the information to protect the personal information. There is a risk that the measures taken to comply with the CCPA will not be implemented correctly or that individuals within the business will not be fully compliant with the new procedures. If there are breaches of these measures, the Company and the Adviser and their respective affiliates (as relevant) could face significant administrative and monetary sanctions as well as reputational damage which could have a material adverse effect on the operations, financial condition and prospects of the Company. The above considerations also apply to the portfolio companies of the Company and other counterparties with which the Company conducts investment activities.

Exposure to Financial Institutions . The Company may invest or participate in financial instruments issued by financial institutions, such as investment and commercial banks, insurance companies, savings and loan associations, mortgage originators and other companies engaged in the financial services industry (collectively, “financial institutions”). In addition, financial institutions will act as counterparties to the Company in connection with the Company’s investment activities and may provide certain services to the Company. The Company also may gain exposure to these entities through derivative transactions, including, without limitation, interest rate swaps, options, credit default swaps and credit linked notes, and through long and short strategies. In the course of conducting their business operations, financial institutions are exposed to a variety of risks that are inherent to the financial services industry. Significant risks that could affect the financial condition and results of operations of financial institutions include, but are not limited to, fluctuations in interest rates, exchange rates, equity and commodity prices and credit spreads caused by global and local market and economic conditions; credit-related losses that can occur as a result of an individual, counterparty or issuer being unable or unwilling to honor its contractual obligations; the potential inability to repay short-term borrowings with new borrowings or assets that can be quickly converted into cash while meeting other obligations; operational failures or unfavorable external events; potential changes to the established rules and policies of various U.S. and non-U.S. legislative bodies and regulatory and exchange authorities, such as federal and state securities, bank regulators and industry participants; risks associated with litigation, investigations and/or proceedings by private claimants and governmental and self-regulatory agencies arising in connection with a financial institution’s activities; and its continuing ability to compete effectively in the market.

Litigation Risks . The Company is subject to a variety of litigation risks, particularly if one or more of its portfolio companies face financial or other difficulties. It is by no means unusual for participants to use the threat of, as well as actual, litigation as a negotiating technique. Legal disputes, involving any or all of the Company, the Adviser, or their respective affiliates, may arise from their activities and investments and could have a significant adverse effect on the Company, including the expense of defending against claims by third parties and paying any amounts pursuant to settlements or judgments.

Legal and Regulatory Risks, Generally . Legal and regulatory changes could occur that may adversely affect the Company. For example, the Company may invest in a number of different industries, some of which are or may become subject to regulation by one or more government agencies in the jurisdictions in which they operate. New and existing regulations, changing regulatory schemes and the burdens of regulatory compliance all may have a material negative impact on the performance of companies that operate in these industries. The Adviser cannot predict whether new legislation or regulation governing those industries will be enacted by legislative bodies or governmental agencies, or the effect that such legislation or regulation might have. There can be no assurance that new legislation or regulation, including changes to existing laws and regulations, will not have a material negative impact on the Company’s investment performance.

State Licensing Requirements. We may be required to obtain various state licenses in order to, among other things, originate commercial loans. Applying for and obtaining required licenses can be costly and take several months. There is no assurance that we will obtain all of the licenses that we need on a timely basis. Furthermore, we will be subject to various information and other requirements in order to obtain and maintain these licenses, and there is no assurance that we will satisfy those requirements. Our failure to obtain or maintain licenses might restrict investment options and have other adverse consequences.

Risks Related to RICs and BDCs

The Company will be Subject to U.S. Federal Income Tax Imposed at Corporate Rates if it is Unable to Qualify as a RIC. Although we have elected to be treated, and intend to qualify annually, as a RIC, no assurance can be given that we will be able to qualify for and maintain our qualification as a RIC. To obtain and maintain our qualification as a RIC, we must meet the following source-of-income, asset diversification, and distribution requirements.

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The source-of-income requirement will be satisfied if we derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, other income derived with respect to our business of investing in stock, securities or currencies, or net income derived from an interest in a “qualified publicly traded partnership,” (as defined in the Code).

The asset diversification requirement will be satisfied if at the end of each quarter of our taxable year (i) at least 50% of the value of our total assets are represented by cash and cash items, U.S. government securities, the securities of other RICs and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer, and (ii) no more than 25% of the value of our assets are invested in securities of (a) any one issuer (other than U.S. government securities and securities of other RICs), of one issuer, (b) the securities, other than securities of other RICs of any two or more issuers that are controlled, as determined under the applicable Code rules, by us and are engaged in the same or similar or related trades or businesses, or (c) the securities of one or more “qualified publicly traded partnerships” (as defined in the Code). Failure to meet those requirements may result in us having to dispose of certain investments quickly in order to prevent the loss of our qualification as a RIC. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses. We may have difficulty satisfying the diversification requirement during our ramp-up phase until we have a portfolio of investments.

The annual distribution requirement generally will be satisfied if we timely distribute (or are deemed to distribute) to our shareholders on an annual basis at least 90% of our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses, if any. Because we may use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to obtain cash from other sources, we could fail to qualify as a RIC.

If we fail to qualify as a RIC for any reason and therefore become subject to U.S. federal income tax, the resulting taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

Limits on Capital Raising; Asset Coverage Ratio. Our business will require a substantial amount of capital. However, we may not be able to raise additional capital in the future on favorable terms or at all. We may issue debt securities, other evidences of indebtedness or preferred stock, and may borrow money from banks or other financial institutions, which are referred to collectively herein as “senior securities,” up to the maximum amount permitted by the 1940 Act. The 1940 Act permits us to issue senior securities in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements under the 1940 Act are met, which we met in connection with our Initial Closing) after each issuance of senior securities. Our ability to pay dividends or issue additional senior securities would be restricted if our asset coverage ratio were not at least 200% (or 150% if certain requirements under the 1940 Act are met, which we met in connection with our Initial Closing). If the value of our assets declines, we may be unable to satisfy this requirement. If that happens, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales or repayment may be disadvantageous. As a result of issuing senior securities, we also will be exposed to typical risks associated with leverage, including an increased risk of loss. If we issue preferred stock, such preferred stock will rank “senior” to our common stock in our capital structure, preferred shareholders will have separate voting rights for certain purposes and may have rights, preferences or privileges more favorable than those of our common stock and the issuance of common stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for our shareholders or otherwise be in the best interest of our shareholders.

To the extent we are constrained in our ability to issue debt or other senior securities, we will depend on issuances of common stock to finance our operations. As a BDC, we will not generally be able to issue our common stock at a price below NAV without first obtaining required approvals of our shareholders and our Independent Directors. If we raise additional funds by issuing more of our common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our shareholders at that time would decrease and our shareholders may experience dilution. In addition to issuing securities to raise capital as described above, we could, in the future, securitize our loans to generate cash for funding new investments. An inability to successfully securitize our loan portfolio could limit our ability to grow our business, fully execute our business strategy and improve our profitability.

We Borrow Money, Which Magnifies the Potential for Gain or Loss and May Increase the Risk of Investing in us . The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% or 150%, if certain requirements are met. Under the 1940 Act, we are allowed to increase our leverage capacity if shareholders representing at least a majority of the votes cast, when a quorum is present, approve a proposal to do so. If we receive shareholder approval, we would be allowed to increase our leverage capacity on the first day after such approval. Alternatively, the 1940 Act allows the majority of our Independent Directors to approve an increase in our leverage capacity, and such approval would become effective after one year. In addition, the 1940 Act requires non-listed BDCs, like the Company, to offer to repurchase 25% of its securities each quarter following the calendar quarter in which the BDC obtains such approval. In either case, we would be required

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to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage.

In connection with the Initial Closing, investors both consented to the minimum asset coverage ratio of 150% and agreed not to seek to redeem their shares of common stock in connection therewith, in each case in the subscription agreements.

Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases, then leveraging would cause the NAV attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay common stock dividends, scheduled debt payments or other payments related to our securities. Leverage is generally considered a speculative investment technique.

The Company May Have Difficulty Paying its Required Distributions if the Company Recognizes Income Before or Without Receiving Cash Representing Such Income. For U.S. federal income tax purposes, the Company may be required to recognize its taxable income in circumstances in which it has not yet received a corresponding payment in cash, such as original issue discount, which may arise if the Company receives warrants in connection with the origination of a loan or possibly in other circumstances, or contractual PIK interest, which generally represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discount or increases in loan balances as a result of contractual PIK arrangements will be included in the Company’s taxable income before the Company receives any corresponding cash payments. The Company also may be required to include in its taxable income certain other amounts that it will not receive in cash. Since, in certain cases, the Company may recognize taxable income before or without receiving corresponding cash payments, the Company may have difficulty meeting the annual distribution requirement necessary to maintain its qualification as a RIC. Accordingly, to satisfy its RIC distribution requirements, the Company may have to sell some of its investments at times and/or at prices that it would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities. If the Company is not able to obtain cash from other sources, it may fail to qualify as a RIC and thus become subject to U.S. federal income tax. For additional discussion regarding the tax implications of the Company’s election to be taxed as a RIC, please see “ Item 1. Business — Certain U.S. Federal Income Tax Considerations. ”

Distribution and Asset Coverage Ratio Requirements May Impact the Company’s Ability to Grow. In order to satisfy the requirements applicable to RICs and to avoid payment of excise taxes, we intend to distribute to our shareholders substantially all of our ordinary income and capital gain net income except for certain net capital gains, which we intend to retain and to elect to treat as deemed distributions to our shareholders. As a BDC, we are generally required to meet a coverage ratio of total assets to total senior securities, which would include all of our borrowings and any preferred stock that we may issue in the future, of at least 200% (or 150% if certain requirements under the 1940 Act are met, which we met in connection with our Initial Closing). This requirement will limit the amount that we may borrow. Because we will continue to need capital to grow our loan and investment portfolio, this limitation may prevent us from incurring debt and require us to raise additional equity at a time when it may be disadvantageous to do so. While we expect to be able to borrow and to issue additional debt and equity securities, there is no assurance that debt and equity financing will be available to us on favorable terms or at all. In addition, as a BDC, we are not permitted to issue equity securities priced below NAV without shareholder and Independent Director approval. However, if we do obtain the necessary approvals to issue securities at prices below their NAVs, a shareholder’s investment in our common stock will experience dilution as a result of such issuance. If additional funds are not available to us, we could be forced to curtail or cease our lending and investment activities, and our NAV could decrease.

Unrealized Depreciation on Our Loan Portfolio Indicating Future Realized Losses and Reduction in Income Available for Distribution. As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by the Board. Decreases in the market values or fair values of our investments will be recorded as unrealized depreciation. Any unrealized depreciation in our loan portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the loans whose market values or fair values decreased. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods.

Qualifying Asset Requirement. As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of such acquisition, at least 70% of our total assets are qualifying assets. Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. Similarly, this requirement could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments. Conversely, if we failed to invest a sufficient portion of our assets in qualifying assets, we could lose our status as a BDC, which would subject us to substantially more regulatory restrictions and significantly decrease our operating flexibility.

Our ability to enter into transactions involving derivatives and unfunded commitment transactions may be limited. Rule 18f-4 under the 1940 Act, relates to the use of derivatives and other transactions that create future payment or delivery obligations by BDCs (and other funds that are registered investment companies). Under Rule 18f-4, BDCs that use derivatives are subject to a value-at-risk (“VaR”)

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leverage limit, certain derivatives risk management program and testing requirements, and requirements related to board reporting. These requirements apply unless the BDC qualifies as a “limited derivatives user,” as defined in Rule 18f-4. A BDC that enters into reverse repurchase agreements or similar financing transactions could either (i) comply with the asset coverage requirements of Section 18, as modified by Section 61 of the 1940 Act, when engaging in reverse repurchase agreements or (ii) choose to treat such agreements as derivatives transactions under Rule 18f-4. In addition, under Rule 18f-4, a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has a reasonable belief, at the time it enters into such an agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements, in each case as it becomes due. If the BDC cannot meet this requirement, it is required to treat the unfunded commitment as a derivatives transaction subject to the aforementioned requirements of Rule 18f-4. Collectively, these requirements may limit our ability to use derivatives and/or enter into certain other financial contracts. We qualify as a “limited derivatives user,” and as a result the requirements applicable to us under Rule 18f-4 may limit our ability to use derivatives and enter into certain other financial contracts. However, if we fail to qualify as a limited derivatives user and become subject to the additional requirements under Rule 18f-4, compliance with such requirements may increase cost of doing business, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our Ability to Enter into Transactions with our Affiliates is Restricted . We generally are prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our Independent Directors and, in some cases, of the SEC. Those transactions include purchases from, sales to, and so-called “joint” transactions, in which we and one or more of our affiliates engage in certain types of profit-making activities, with such affiliates. Any person that owns, directly or indirectly, five percent or more of our outstanding voting securities will be considered an affiliate of ours for purposes of the 1940 Act, and we generally are prohibited from engaging in purchases of assets from or sales of assets to or joint transactions with such affiliates, absent the prior approval of our Independent Directors. Additionally, without receiving an exemptive order from the SEC, we are prohibited from engaging in purchases of assets from, or sales of assets to or joint transactions with certain affiliates, including our officers, directors, and employees, and investment adviser (and its affiliates) and their clients, as well as any person that owns more than 25% of our voting securities. As a result of these restrictions, we may be limited in the scope of investment opportunities that would otherwise be available to us.

We may, however, co-invest with the Adviser and its affiliates’ other clients in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may co-invest with such accounts consistent with guidance promulgated by the SEC staff permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that the Adviser, acting on our behalf and on behalf of other clients, negotiates no term other than price.

Additionally, we, the Advisers and certain other funds and accounts sponsored or managed by the Advisers and their affiliates have been granted an exemptive order by the SEC, which permits the Company to participate in joint transactions with the foregoing affiliates subject to the conditions of such exemptive order.

When we are permitted to co-invest with Varagon’s other clients as permissible under regulatory guidance, applicable regulations, and in accordance with the exemptive order, we do so pursuant to Varagon’s allocation policy. Under this allocation policy, a portion of each opportunity, which may vary based on asset class and from time to time, is offered to us and similar eligible accounts, as determined by Varagon. However, we can offer no assurance that investment opportunities will be allocated to us fairly or equitably in the short-term or over time.

In situations where co-investment with other funds or accounts managed by Varagon is not permitted or appropriate, such as when there is an opportunity to invest in different securities of the same issuer on a differential basis between clients or where the different investments could be expected to result in a conflict between our interests and those of other clients of Varagon that cannot be mitigated or otherwise addressed pursuant to Varagon’s policies and procedure, Varagon must decide which client will proceed with the investment. The Adviser and Varagon make these determinations based on its policies and procedures, which generally require that such opportunities be offered to eligible accounts on a basis that will be fair and equitable over time (and which takes into consideration the ability of the relevant account(s) to acquire securities in an amount and on terms suitable for the relevant transaction). However, we can offer no assurance that investment opportunities will be allocated to us fairly or equitably in the short-term or over time.

Our Status as an “Emerging Growth Company” under the JOBS Act May Make it More Difficult to Raise Capital as and When We Need it. Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

Risks Related to the Private Placement of Common Stock

Capital Commitments and Drawdowns. Until the earlier of a Liquidity Event and a repurchase of all common stock of a shareholder or such later time as set forth under “Item 1. Business — The Private Offering , ” each such shareholder will be obligated to fund Drawdowns to purchase additional common stock based on its Capital Commitment at the time the Company makes such financing or investment. To satisfy such obligations, shareholders may need to maintain a substantial portion of their Capital Commitments in assets that can be

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readily converted to cash. Failure by a shareholder to timely fund its Capital Commitment may result in some of its common stock being forfeited or subject the shareholder to other remedies available to the Company. Failure of shareholders to contribute their Capital Commitments also could cause the Company to be unable to realize its investment objectives. A default by a substantial number of shareholders or by one or more shareholders who have made substantial Capital Commitments would limit the Company’s opportunities for investment or diversification and would likely reduce returns to the Company. In addition, the Adviser will have broad discretion in determining the specific uses of Drawdown Amounts. See “Non-Specified Investments and Discretion in Determining Use of Drawdown Amounts” for more information.

Exchange Act Filing Requirements. Because the common stock is registered under the Exchange Act, ownership information for any person who beneficially owns 5% or more of the common stock will have to be disclosed in a Schedule 13G or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having voting or investment power over the securities. Our shareholders who subscribe for over 5% of our common stock or, in some circumstances, our shareholders who choose to reinvest their dividends and who therefore see their percentage stake in the Company increased to more than 5% of our common stock, will trigger this filing requirement. Each shareholder is responsible for determining their filing obligations and preparing the filings. In addition, our shareholders who hold more than 10% of a class of our common stock may be subject to Section 16(b) of the Exchange Act, which recaptures for the benefit of the Company profits from the purchase and sale of registered stock within a six-month period.

Investment by ERISA Plans. We intend to conduct our operations so that they will not trigger “prohibited transactions” for benefit plan investors. We will use reasonable efforts to conduct our affairs so that our assets will not be deemed to be “plan assets” under the plan asset regulations promulgated by the Department of Labor. The fiduciary of each prospective benefit plan investor must independently determine that our common stock is an appropriate investment for such plan, taking into account the fiduciary’s obligations under the Employee Retirement Income Security Act of 1974 and the facts and circumstances of each investing benefit plan.

The Lack of Liquidity in our Investments May Adversely Affect our Business. There is currently no public market for our common stock, and a market for the common stock may never develop. The common stock is not registered under the 1933 Act, or any state securities law and is restricted as to transfer by law and the terms of the Subscription Agreement. Shareholders generally may not Transfer common stock unless (i) the Adviser provides prior written consent, which the Adviser may grant or withhold in its sole discretion, (ii) the Transfer is in compliance with the restrictions set forth in the Subscription Agreement, and (iii) the Transfer is made in accordance with applicable laws. Except in limited circumstances for legal or regulatory purposes or in connection with repurchase offers, as described below, shareholders are not entitled to redeem their common stock. While we may undertake a Liquidity Event, there can be no assurance that any potential liquidity event can be achieved. Furthermore, a Public Listing does not ensure that an actual market will develop for a listed security. In addition, following a Public Listing, shareholders may be restricted from selling or disposing of their shares of common stock by applicable securities laws or contractually by a lock-up agreement with the underwriters of any public offering of the common stock conducted in connection with a Public Listing or otherwise. Accordingly, the shareholders must be prepared to bear the economic risk of an investment in the common stock for an indefinite period of time, as there is no guarantee that any liquidity event other than the ultimate dissolution of the Company will occur, and it cannot be determined when such dissolution can be achieved.

Absence of SEC and Applicable State Securities Commission Reviews. Because we are conducting a private offering that will not be registered under the 1933 Act or under applicable state securities or “blue sky” laws, any offering material will not be reviewed by the SEC or by the equivalent agency of any state or governmental entity. Review by any such agency might result in additional disclosures or substantially different disclosures from those actually included in any offering material.

Certain Regulatory Considerations, Securities Act of 1933. Pursuant to Rule 506 of Regulation D promulgated under the 1933 Act, the Company’s reliance on the “private placement” exemption from registration provided under Regulation D may become unavailable if “covered persons” become subject to a “disqualifying event.” “Covered persons” include beneficial owners of 20% or more of the Company’s outstanding equity securities, calculated on the basis of total voting power rather than on the basis of ownership of any single class of securities (a “20% Beneficial Owner”). In the event that a shareholder that is a 20% Beneficial Owner becomes subject to a disqualifying event, the Company may treat such shareholder as a Defaulting shareholder or take such other equitable measures as it may determine.

Shareholders May Experience Dilution. Shareholders will not have preemptive rights to subscribe to or purchase any common stock issued in the future. To the extent we issue additional equity interests, including in a public offering or in a private offering subsequent to the Offering, a shareholder’s percentage ownership interest in the Company will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, a shareholder also may experience dilution in the NAV and fair value of our common stock.

P re ferred Stock Could be Issued. Although we have no current intention to do so, under the terms of the Charter, the Board is authorized, to the fullest extent permitted by the 1940 Act, to authorize us to issue preferred stock in one or more classes or series without shareholder approval. The Board, subject to the terms of any class or series of stock outstanding at the time, is required to set the preferences, conversion, and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of each class or series, including preferred stock with terms that might adversely affect the interest of our

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existing shareholders. If we issue preferred stock, there can be no assurance that such issuance would result in a higher yield or return to the shareholders. The issuance of preferred stock would likely cause the NAV of the common stock to become more volatile.

Significant Financial and Other Resources to Comply with the Requirements of Being a Public Reporting Entity. We are subject to the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires the Company to file annual, quarterly and current reports with respect to its business and financial condition. The Sarbanes-Oxley Act requires that the Company maintain effective disclosure controls and procedures and internal controls over financial reporting, which are discussed below. In order to maintain and improve the effectiveness of disclosure controls and procedures and internal controls, significant resources and management oversight will be required. The Company has implemented disclosure controls and procedures, processes, policies and practices for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on business, financial condition, results of operations and cash flows. The Company expects to incur significant additional annual expenses related to these steps and, among other things, directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, additional administrative expenses payable to the Administrator to compensate them for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.

The systems and resources necessary to comply with public company reporting requirements will increase further once the Company ceases to be an “emerging growth company” under the JOBS Act. As long as the Company remains an emerging growth company, it intends to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. This may increase the risk that material weaknesses or other deficiencies in the Company’s internal control over financial reporting go undetected. The Company will remain an emerging growth company for up to five years following an IPO, although if the market value of its common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, it would cease to be an emerging growth company as of the following December 31.

Risks and Conflicts Related to the Adviser

Conflicts Related to Obligations the Adviser Has to Other Clients. Certain Adviser personnel serve, or may serve, as officers, directors, members, or principals of entities that operate in the same or a related line of business as we do, or of investment funds, accounts, or investment vehicles managed by the Adviser or affiliates of the Adviser. Similarly, the Adviser may have other clients with similar, different or competing investment objectives. In serving in these multiple capacities, the Adviser and certain personnel may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best interests of the Company or our shareholders. The Adviser intends to allocate any investment opportunities in a fair and equitable manner over time; however, there is no assurance that we will be able to participate in all investment opportunities or that investment opportunities will be allocated in a fair and equitable manner over time.

Our investment strategy primarily includes investments in senior secured loans, but we may selectively make investments in second lien and subordinated or mezzanine loans, and equity and equity-related securities. As a result, members of the Adviser’s senior investment team and the IC, in their roles at the Adviser, may face conflicts in the allocation of investment opportunities among us and other entities sponsored or managed by the Adviser, Varagon and its affiliates with similar or overlapping investment objectives in a manner that is fair and equitable over time and consistent with the Adviser’s allocation policy. Generally, when a particular investment would be appropriate for us as well as other entities sponsored or managed by the Adviser, Varagon and its affiliates, such investment will be apportioned by the Adviser’s senior investment team in accordance with (1) the Adviser’s internal conflict of interest and allocation policies, (2) the requirements of the Advisers Act, and (3) certain restrictions under the 1940 Act regarding co-investments with affiliates. Such apportionment may not be strictly pro rata, depending on the good faith determination of all relevant factors, including without limitation differing investment objectives, diversification considerations and the terms of our or the respective governing documents of such investment funds, accounts or investment vehicles. These procedures could, in certain circumstances, limit whether a co-investment opportunity is available to us, the timing of acquisitions and dispositions of investments, the price paid or received by us for investments or the size of the investment purchased or sold by us. The Adviser believes this allocation system is fair and equitable, and consistent with its fiduciary duty to us. In particular, we have disclosed to investors how allocation determinations are made among any investment vehicles sponsored or managed by the Adviser or its affiliates.

As a BDC, the Company may be prohibited under the 1940 Act from conducting certain transactions with its affiliates without the prior approval of the Independent Directors and, in some cases, the prior approval of the SEC. We generally will only be permitted to co-invest with such investment funds, accounts and vehicles where the only term that is negotiated is price. The Company has received an exemptive order from the SEC that permits it, among other things, to co-invest with certain other persons and certain funds managed and controlled by Varagon or an affiliate, subject to the satisfaction of certain conditions. However, there can be no assurance that we will be able to participate in all investment opportunities that are suitable to us.

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Fee-Related and Other Economic Potential Conflicts. As a BDC, we are generally limited in our ability to invest in any portfolio company in which the Adviser or any of its affiliates currently has an investment or to make any co-investments with other funds managed by our investment adviser or other affiliates without an exemptive order from the SEC, subject to certain exceptions.

Nonetheless, potential conflicts may arise when the Adviser or its affiliates manage accounts that make performance payments or base management fees to the Adviser or its affiliates at different net rates or subject to different types of calculation methodologies from arrangements with the Company. The Adviser and its affiliates may have an economic incentive to allocate more favorable investment opportunities to, or otherwise for, an account from which the Adviser or an affiliate receives a higher performance payment or in which the Adviser or an affiliate has an ownership or other economic interests. In connection with certain investments made by the Company and investments made by certain clients, the Adviser or its affiliates may receive transaction fees and/or other consideration from portfolio investments in which one or more clients may invest or propose to invest, including portions of investments held by the Company or its subsidiaries, which may create additional conflicts of interest in connection with the structuring and allocation of investments.

Potential Conflicts Arising from the Ability of Varagon to Appoint Members of the IC. Varagon is responsible for appointing the members of the IC, which may include Varagon employees and independent members, and Varagon may replace members of the IC in its sole discretion. Therefore, a conflict may arise in the future to the extent that Varagon appoints an individual to the IC who has conflicts with the Company.

Possession of Material Non-Public Information, Limiting the Adviser’s Investment Discretion. Adviser personnel, including members of the IC, may serve as directors of, or in a similar capacity with, portfolio companies in which we invest, the securities of which are purchased or sold on our behalf. In the event that material non-public information is obtained with respect to such companies, or we become subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us.

Our Fee Structure May Create Incentives for our Adviser to Make Speculative Investments or use Substantial Leverage. Even if the value of a shareholder’s investment declines, the management fee and, in certain cases, the incentive fee payable by us to the Adviser still will be payable to the Adviser. The management fee payable to the Adviser is calculated as a percentage of the Company’s adjusted gross assets, excluding cash and cash equivalents but including assets purchased with borrowed amounts. This management fee calculation may create an incentive for the Adviser to purchase assets with borrowed funds when it is unwise to do so or to pursue investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to the Adviser is calculated based on a percentage of our return on invested capital. The incentive fee arrangement may encourage the Adviser to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of our common stock. In addition, in the event of a Public Listing, the Management Fee will increase from 0.75% to 1.00% of the average of the Company’s adjusted gross assets (for these purposes, “adjusted gross assets” exclude undrawn capital commitments and cash and cash equivalents but include assets purchased with borrowed amounts). Further, in the event of a Public Listing, the Income Incentive Fee and the Capital Gains Incentive Fees will increase from 12.5% to 20%, but otherwise will be calculated as set forth herein.

Limitation on Liability of the Adviser. The Adviser does not assume any responsibility to us other than to render the services described in, and on the terms of, the Investment Advisory Agreement, and will not be responsible for any action of our Board in declining to follow the advice or recommendations of the Adviser. The Investment Advisory Agreement provides that the Adviser, its officers, members and personnel, and any person controlling or controlled by the Adviser will not be liable to us or our shareholders for acts or omissions performed in accordance with and pursuant to the Investment Advisory Agreement, except those resulting from acts constituting willful misfeasance, bad faith or gross negligence, in the performance of his or her duties, or by reason of his or her reckless disregard of his or her obligations and duties under the Investment Advisory Agreement. In addition, as part of the Investment Advisory Agreement, we have agreed to indemnify the Adviser and each of its officers, directors, members, managers and employees from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement, except where attributable to willful misfeasance, bad faith or gross negligence, in the performance of his or her duties, or by reason of his or her reckless disregard of his or her obligations and duties under the Investment Advisory Agreement. These protections may lead the Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account.

Risks Associated with the Company’s Investments

Nature of Investments. We primarily invest in senior secured loans, but also may selectively invest in second lien and subordinated or mezzanine loans, and equity and equity-related securities.

Senior Secured Loans. There is a risk that the collateral securing our senior secured loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. In some circumstances, our liens on the collateral securing our loans could be subordinated to claims of other creditors. In addition, deterioration in a portfolio

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company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be compelled to enforce our remedies.

Second Lien and Subordinated Loans. We may invest in secured subordinated loans, including second and lower lien loans. Second lien loans are generally second in line in terms of repayment priority. A second lien loan may have a claim on the same collateral pool as the first lien or it may be secured by a separate set of assets. Second lien loans generally give investors priority over general unsecured creditors in the event of an asset sale. The priority of the collateral claims of third or lower lien loans ranks below holders of second lien loans and so on. Such junior loans are subject to the same general risks inherent to any loan investment, including credit risk, market and liquidity risk, and interest rate risk. Due to their lower place in the borrower’s capital structure and possible unsecured or partially secured status, such loans involve a higher degree of overall risk than senior secured loans of the same borrower.

Mezzanine Loans. Our mezzanine loans generally will be subordinated to senior secured loans on a payment basis, are typically unsecured and rank pari passu with other unsecured creditors. As such, other creditors may rank senior to us in the event of insolvency. This may result in an above average amount of risk and loss of principal.

Lower Grade Obligations . In addition, our investments will be in lower grade obligations. The lower grade investments in which we invest may be rated below investment grade (often referred to as “junk”) by one or more nationally recognized statistical rating agencies at the time of investment or may be unrated but determined by the Adviser to be of comparable quality. Loans or debt securities rated below investment grade are considered speculative with respect to the issuer’s capacity to pay interest and repay principal. The major risks of non-investment grade investments include:

Non-investment grade securities may be issued by less creditworthy issuers. Issuers of non-investment grade securities may have a larger amount of outstanding debt relative to their assets than issuers of investment grade securities. In the event of an issuer’s bankruptcy, claims of other creditors may have priority over the claims of holders of non-investment grade securities, leaving few or no assets available to repay holders of non-investment grade securities.

Prices of non-investment grade securities are subject to extreme price fluctuations. Adverse changes in an issuer’s industry and general economic conditions may have a greater impact on the prices of non-investment grade securities than on other higher rated fixed-income securities.

Issuers of non-investment grade securities may be unable to meet their interest or principal payment obligations because of an economic downturn, specific issuer developments, or the unavailability of additional financing.

Non-investment grade securities frequently have redemption features that permit an issuer to repurchase the security from us before it matures. If the issuer redeems non-investment grade securities, we may have to invest the proceeds in securities with lower yields and may reduce income.

Non-investment grade securities may be less liquid than higher rated fixed-income securities, even under normal economic conditions. There are fewer dealers in the non-investment grade securities market, and there may be significant differences in the prices quoted by the dealers. Judgment may play a greater role in valuing these securities and we may be unable to sell these securities at an advantageous time or price.

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

The credit rating of a high yield security does not necessarily address its market value risk. Ratings and market value may change from time to time, positively or negatively, to reflect new developments regarding the issuer.

Equity and Equity-related Investments . When we invest in senior secured loans, second lien and subordinated or mezzanine loans, we may acquire equity and equity-related securities in such portfolio company, such as rights and warrants that may be converted into or exchanged for the issuer’s common stock or the cash value of the issuer’s common stock. In addition, we may invest directly in the equity securities of portfolio companies. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We will generally have little, if any, control over the timing of any gains we may realize from our equity investments. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We may be unable to exercise any put rights we acquire, which would grant us the right to sell our equity securities back to the portfolio company, for the consideration provided in its investment documents if the issuer is in financial distress.

Investments in the Subordinated Certificates and Subordinated Interests of Structured Vehicles. The Company invests in the Subordinated Certificates, and in the future may invest in similar first loss or subordinated interests of other structured investment vehicles, including without limitation CLOs (together with other structured investment vehicles, “Structured Vehicles”). Structured Vehicles have leverage embedded in their structures, which can affect the risk and return profile of various tranches of such structures.

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The Company expects to invest, directly or indirectly, in the unrated or most subordinated tranches of Structured Vehicles that own middle market or other loans and that may be advised by affiliates of the Adviser.

The Company’s rights with respect to first loss or subordinated interest investments in Structured Vehicles, such as the SDLP and CLO equity investments, differ from other types of investments. For example, the Company will not have recourse against the issuers or obligors of the underlying asset pools. If proceeds from the underlying asset pools are not sufficient to provide payments on, or reduce the residual value of, the tranches that the Company, directly or indirectly, holds, the Company will lose money. In addition, the amount of distributions on the Subordinated Certificates will be affected by, among other things, the timing of purchases of underlying loans, the rates of repayment of or distributions on the underlying loans, the rates of delinquencies and defaults on and liquidations of the underlying loans and any unexpected significant expenses incurred by the Structured Vehicle. Moreover, upon the Structured Vehicle’s failure to satisfy its financial covenants or other covenants or upon the occurrence of any other event of default, proceeds otherwise available for distribution to the subordinated tranches of Structured Vehicle (such as the Subordinated Certificates) may be required instead to redeem senior tranches or held to satisfy applicable covenants. Interests of the holders of the senior tranches of a Structured Vehicle, in the event of a default or otherwise, may diverge from the interest of the holders of the subordinated tranches, including the Company. In an event of default, payment to the Company may be deferred or significantly reduced and the Company may be unable to exercise additional remedies under the governing documents.

Certificates, including the Subordinated Certificates, issued in connection with Structured Vehicles may not be registered under the 1933 Act, and may have a limited market or no market, and the Company may not be able to sell such certificates at favorable prices, if at all. Generally, certificates in which the Company invests would be unrated (as is the case with the Subordinated Certificates); however, a downgrade in more senior tranches could still negatively impact the value of the unrated tranches. In addition, certain downgrades in the ratings of the rated tranches, or a withdrawal of the ratings of a tranche, may result in an event of default under the Structured Vehicle’s governing documents. Moreover, there is no assurance that any holder of any of the issued securities of a Structured Vehicle will fund its respective capital contributions when required. A failure by any such holder to fund any commitment when required, including in the case of the SDLP, may impair the ability of the Structured Vehicle to fund amounts required, resulting in an impairment in the value of the Structured Vehicle, and therefore the Company’s investment in its certificates.

In the case of the SDLP, the Company, as a minority indirect holder of the Subordinated Certificates, in numerous instances will not control the timing of a redemption or refinancing of, or purchase of certain assets from, the SDLP following certain trigger events, as these rights are reserved to the majority Certificate holder. In the event that the majority Certificate holder elects to direct a redemption or refinancing or exercises its right to purchase those assets from SDLP, the Company will have the right to participate ratably in the proceeds allocated to the Subordinated Certificates and the right to purchase its pro rata portion of any assets sold to the majority Certificate holder on the same terms. Nonetheless, investment and other material decisions of the SDLP require the approval of the SDLP’s investment committee, on which investment committee each of the Company and ARCC exercises two votes. As a result, the Company does not have sole discretionary authority in respect of actions of the SDLP. The Company has no current plan or intent to sell the Subordinated Certificates within the five-year period beginning on the date of the Initial Closing, although the Company, in its sole discretion acting in the best interest of the Company, may determine to so sell the Subordinated Certificates at any time in the future.

In October 2014, six federal agencies adopted joint final rules implementing the credit risk retention requirements of Section 941 of the Dodd-Frank Act (the “Final U.S. Risk Retention Rules”) in respect of a variety of financing securitization structures. There is uncertainty as to whether or not the Final U.S. Risk Retention Rules would apply to the SDLP and similar CLOs. While we believe that the SDLP has been structured to comply with the Final U.S. Risk Retention Rules (the “RR Structure”) were they to apply, there can be no assurance that the applicable governmental authorities will agree that the RR Structure, will satisfy any such requirements of the Final U.S. Risk Retention Rules. To the extent the Final U.S. Risk Retention Rules were determined to apply to the SDLP and the RR Structure was determined to not be compliant with the Final U.S. Risk Retention Rules, the Company, through its indirect interest in the Subordinated Certificates, could be required to pay damages, transfer interests, be subject to cease and desist orders or other regulatory action, which could materially adversely affect the value of the Subordinated Certificates.

Our Investments in Middle Market Companies May be Risky, and We Could Lose All or Part of our Investments. Investment in private and middle market companies involves a number of significant risks including:

such companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with its investment;

such companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as to general economic downturns;

such companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on the portfolio company and, in turn, on us;

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such companies generally have less predictable operating results, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;

debt investments in such companies generally may have a significant portion of principal due at the maturity of the investment, which would result in a substantial loss to us if such borrowers are unable to refinance or repay their debt at maturity;

our executive officers, directors and the Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in such companies;

such companies may utilize off-balance sheet arrangements or maintain obligations that are not fully reflected on their balance sheets, such that we may not be able to identify, diligence or quantify the risks associated with our financing to such portfolio company;

such companies generally have less publicly available information about their businesses, operations and financial condition and, if we are unable to uncover all material information about these companies, we may not make a fully informed investment decision; and

such companies may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.

Portfolio Company Debt and Equity. Our portfolio companies may have, or may be permitted to incur, other debt or issue equity securities that rank equally with, or senior to, the debt in which we invest. By their terms, such debt instruments or equity securities may entitle the holders to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments with respect to our investments. These debt instruments or equity securities would usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt or equity securities. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments or equity securities ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt or equity securities ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt or equity in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

Risks Relating to our Investment in SDLP.

We may make indirect investments in portfolio companies through joint ventures, including SDLP. In general, the risks associated with indirect investments in portfolio companies through a joint venture are similar to those associated with a direct investment in a portfolio company. While we intend to analyze the credit and business of a potential portfolio company in determining whether to make an investment in SDLP, we will nonetheless be exposed to the creditworthiness of SDLP. In the event of a bankruptcy proceeding against the portfolio company, the assets of the portfolio company may be used to satisfy its obligations prior to the satisfaction of our investment in the SDLP (i.e., our investment in SDLP could be structurally subordinated to the other obligations of the portfolio company). In addition, we may be required to rely on ARCC, our joint venture partner in SDLP, when making decisions regarding SDLP’s investments, accordingly, the value of the investment could be adversely affected if our interests diverge from those of ARCC in SDLP. See “Risks Associated with the Company’s Investments – Investments in the Subordinated Certificates and Subordinated Interests of Structured Vehicles” for more information relating to risks associated with the Subordinated Certificates.

Subordinated Liens on Collateral. Certain debt investments that we may make in portfolio companies will be secured on a subordinated priority basis by the same collateral securing more senior secured debt of such companies. A significant portion of our first lien and unitranche loans may be subordinated to “first-out” revolving loans following certain events with respect to such loans. While such first lien and unitranche loans are expected to have many attributes of senior secured loans, these investments may involve additional risks that could adversely affect such investments. In addition, certain loans that we may make in portfolio companies will be secured on a second priority basis by the same collateral securing senior secured debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the company under the agreements governing the debt. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before we are so entitled. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then, to the extent not repaid from the proceeds of the sale of the collateral, we will only have an unsecured claim against the company’s remaining assets, if any.

We also may make unsecured debt investments in portfolio companies, meaning that such investments may not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations

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under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before we are so entitled. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy its unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then its unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the debt investments we make in portfolio companies with senior debt outstanding also may be limited pursuant to the terms of one or more inter-creditor agreements that we enter into with the holders of senior debt. Under such an inter-creditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.

The Company’s Investments Will Be Illiquid and Long Term. We generally will make loans to private companies that are illiquid and may be difficult for us to sell if the need arises. Although portfolio financings and investments by us may generate current income, the return of capital and the realization of gains, if any, from a financing or investment generally will occur only upon the partial or complete satisfaction of the financing conditions or disposition of such investment, which may not occur for a number of years after the investment is made. If we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded such investments. In addition, we will not be able to sell securities we purchase publicly, if we hold any, unless the sale of such securities is registered under applicable securities laws, or unless an exemption from such registration requirements is available. In addition, in some cases, we may be prohibited by contract from selling certain securities we invest in for a period of time or we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we hold a significant portion of a company’s equity or if we have material non-public information regarding that company. Furthermore, under the 1940 Act, if there is no readily available market for these investments, we are required to carry these investments at fair value as determined by the Board. As a result, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments.

Risks Relating to Covenant-Lite Loans. On occasion, the Company and/or SDLP may invest in covenant-lite loans if the investment’s credit merits are particularly strong (e.g., high recurring revenue, strong retention rates, market leader, compelling value proposition, highly diversified customer base, etc.), the sponsors are highly reputable and relationship-oriented, and the economic profile is highly favorable (e.g., large established company with greater than $50 million of EBITDA and strong EBITDA margins). We use the term “covenant-lite” loans to refer generally to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, to the extent the Company and/or SDLP invests in “covenant-lite” loans, the Company and/or SDLP may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants.

Limited Number of Portfolio Companies. To the extent we assume large positions in the securities of a small number of issuers or industries, our NAV may fluctuate to a greater extent than that of a more diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. In addition, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Additionally, a downturn in any particular industry in which we are invested could significantly affect our aggregate returns.

Follow-on Investments in Portfolio Companies. Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in seeking to:

increase or maintain in whole or in part our position as a creditor or equity ownership percentage in a portfolio company;

exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or

preserve or enhance the value of our investment.

We have discretion to make follow-on investments, subject to the availability of capital resources. Failure on our part to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation.

Portfolio Company Leverage. Our portfolio companies will typically have capital structures with significant leverage. Leveraged companies in which we invest may have limited financial resources and may be unable to meet their obligations under their loans and

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debt securities that we hold. Although the Adviser will seek to structure transactions in an attempt to minimize these risks, such leverage may increase our exposure to adverse economic factors such as changes in interest rates, downturns in the general economy or deterioration in the condition of the portfolio company or its sector in its particular industry. Such developments may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees that we may have obtained in connection with our investment. Smaller leveraged companies also may have less predictable operating results and may require substantial additional capital to support their operations, finance their expansion or maintain their competitive position.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its assets representing collateral for its obligations, which could trigger cross defaults under other agreements and jeopardize the value of any equity securities we own and the portfolio company’s ability to meet its obligations under any debt that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company.

Defaults by Portfolio Companies. Our business is at risk if one of our borrowers defaults. A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its assets. This could trigger cross-defaults under other agreements and jeopardize such portfolio company’s ability to meet its obligations under the loans or debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. Borrowers may also file for bankruptcy to stay foreclosure proceedings, delaying the Company's ability to enforce its rights.

Additionally, the return of principal of loans will depend in large part on the creditworthiness and financial strength of borrowers. If there is a default by the borrower under a loan, we will, in many circumstances, have contractual remedies pursuant to the loan agreements, including, in many cases, the sale of collateral. However, exercising such contractual rights may involve delays or costs. Additionally, deterioration in a portfolio company's financial condition is often accompanied by deterioration in the value of the collateral securing our investment and any available collateral may prove to be unsaleable or saleable only at a price less than the loaned amount, which could result in a loss to the Company. There can be no guarantee that legal action will allow for the recovery of all outstanding loan balances due to the Company. We may choose to enter into forbearance agreements or delay legal action if it believes that such action improves the opportunity for a better outcome. The pursuit or delay of legal action may significantly increase the amount of time required to collect principal balances or lead to principal losses.

Prepayments by Portfolio Companies. We will be subject to the risk that the debt investments we make in portfolio companies may be repaid prior to maturity. The Adviser expects that our investments will generally allow for repayment at any time subject to certain penalties. When this occurs, the Adviser may reinvest a portion of these proceeds in temporary investments, pending their future investment in accordance with our investment strategy. These temporary investments will typically have substantially lower yields than the debt being prepaid, and we could experience significant delays in reinvesting these amounts. Any future investment also may be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us.

Risks Related to Non-Controlling Investments. We expect that at least a majority of investments we make will be non-controlling investments, meaning we will not be in a position to control the management, operation and strategic decision-making of the companies in which we invest. As a result, we will be subject to the risk that a portfolio company we do not control, or in which we do not have a majority ownership position, may make business decisions with which we disagree, and the equity holders and management of such a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the debt investments that we will typically hold in our portfolio companies, we may not be able to dispose of our investments in the event that we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of such portfolio company.

Risks Associated with Bankruptcy Cases. As part of the Company’s lending activities, the Company may originate loans to companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. While the Company expects that the terms of such financing may result in significant financial returns to the Company, it involves a substantial degree of risk. The level of analytical sophistication, both financial and legal, necessary for successful financing to companies experiencing significant business and financial difficulties is unusually high. There is no assurance that the Company will correctly evaluate the value of the assets collateralizing the Company’s loans or the prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to a company that the Company invests in, the Company may lose all or part of the amounts advanced to the portfolio company or may be required to accept collateral with a value less than the amount of the loan advanced by the Company to the portfolio company.

Many of the events within a bankruptcy case are adversarial and often beyond the control of the creditors. While creditors generally are afforded an opportunity to object to significant actions, there can be no assurance that a bankruptcy court would not approve actions that may be contrary to the interests of the Company. Furthermore, there are instances where creditors and equity holders lose their ranking and priority as such if they are considered to have taken over management and functional operation of a debtor.

Generally, the duration of a bankruptcy case can only be roughly estimated. The reorganization of a company usually involves the development and negotiation of a plan of reorganization, plan approval by the creditors and confirmation by a bankruptcy court. This

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process can involve substantial legal, professional and administrative costs to the debtor company and the Company; it is subject to unpredictable and lengthy delays; and during the process the Company’s competitive position may erode, key management may depart and the debtor company may not be able to operate adequately. In some cases, the debtor company may not be able to reorganize and may be required to liquidate assets. The debt of companies in financial reorganization, in most cases, will not pay current interest, may not accrue interest during reorganization and may be adversely affected by an erosion of the issuer’s fundamental value. Such investments can result in a total loss of principal. U.S. bankruptcy law permits the classification of “substantially similar” claims in determining the classification of claims in reorganization for purposes of voting on a plan of reorganization. Because the standard for classification is vague, there exists a significant risk that the Company’s influence with respect to a class of securities can be lost by the inflation of the number and amount of claims in, or other gerrymandering of, the class. In addition, certain administrative costs and claims that have priority by law over the claims of certain creditors (for example, claims for taxes) may be quite high.

Furthermore, there are instances where creditors and equity holders lose their ranking and priority as such when they take over management and functional operating control of a debtor. Therefore, depending on the facts and circumstances, including the extent to which the Company actually provided managerial assistance to a portfolio company or its representative or the Adviser sat on the board of directors of such portfolio company, a bankruptcy court might re-characterize the Company’s debt investment and subordinate all or a portion of its claim to that of other creditors.

A representative of the Company may serve on creditors’ committees or other groups to ensure preservation or enhancement of its position as a creditor or equity holder. A member of any such committee or group may owe certain obligations generally to all parties similarly situated that the committee represents. If the Company’s representative concludes that the obligations they owe to other parties as a committee or group member conflict with the duties they owe to the Company, they will resign from that committee or group, and the Company will not realize the benefits, if any, of participating on the committee or group. In addition, and also as discussed above, if the Company is represented on a committee or group, it may be restricted or prohibited under applicable law from, disposing of or increasing its investments in such debtor company while it continues to be represented on such committee or group.

In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercise control over the borrower. For example, the Company could become subject to a lender’s liability claim, if, among other things, the Company actually renders significant managerial assistance.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K.

Except as otherwise specified, references to “we,” “us,” “our,” or the “Company,” refer to Varagon Capital Corporation. The term “Adviser” refers to VCC Advisors, LLC, our investment adviser; the term “Varagon” refers to Varagon Capital Partners, L.P.; the parent company of the Adviser; and the term “Administrator” refers to Varagon Capital Partners, L.P., when acting in its capacity as our administrator.

Forward-Looking Statements

Some of the statements in this Annual Report on Form 10-K constitute forward-looking statements, which relate to future events or our performance or financial condition. The forward-looking statements contained in this Annual Report on Form 10-K involve risks and uncertainties, including statements as to:

an economic downturn or recession could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

an economic downturn or recession could disproportionately impact the companies which we target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;

an economic downturn or recession could impact availability and pricing of our financing;

a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;

interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;

the impact of supply chain constraints and labor difficulties on our portfolio companies and the global economy generally;

the elevated levels of inflation, and its impact on our portfolio companies and on the industries in which we invest;

the uncertainty associated with the imposition of tariffs and trade barriers and changes in trade policies and its impact on our portfolio companies and the global economy;

the impact of geopolitical conditions, including the ongoing conflicts between Ukraine and Russia and ongoing turmoil in Europe and the Middle East, and its impact on financial market volatility, global economic market, and various sectors, industries and markets for commodities globally;

changes in the financial, capital, and lending markets;

currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars;

social, political, economic and other conditions and events (including natural disasters, epidemics, pandemics and terrorism) could adversely affect our results and the financial performance of our portfolio companies;

our future operating results;

our business prospects and the prospects of our portfolio companies;

the expected return or impact of our investments;

our contractual arrangements and relationships with third parties;

the ability of our portfolio companies to achieve their objectives;

competition with other entities and our affiliates for investment opportunities;

the speculative and illiquid nature of our investments;

the use of borrowed money to finance a portion of our investments;

the adequacy of our financing sources and working capital;

the loss of key personnel;

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

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

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the ability of the Adviser to attract and retain highly talented professionals;

the ability of the Adviser to adequately allocate investment opportunities among the Company and Varagon’s advisory clients;

any conflicts of interest posed by the structure of the management fee and incentive fee to be paid to the Adviser;

our ability to qualify and maintain our qualification, for U.S. federal income tax purposes, as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and our ability to operate as a business development company (“BDC”);

the effect of legal, tax and regulatory changes on our business and on our portfolio companies; and

other risks, uncertainties and other factors we identify under “ Item 1A. Risk Factors ” and elsewhere in this Annual Report on Form 10-K.

Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Overview

We were formed on July 31, 2019 as a corporation under the laws of Maryland. We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, the Company has elected, and intends to qualify annually, to be treated as a RIC under the Code. The Company’s fiscal year end is December 31.

The Adviser serves as the Company’s investment adviser. The Adviser is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is a subsidiary of Varagon, which is also registered with the SEC as an investment adviser under the Advisers Act. Subject to the overall supervision of the Company’s board of directors (the “Board”), the Adviser manages the day-to-day operation of and provides investment advisory and management services to the Company.

The Company’s investment objective is to generate current income with a focus on capital preservation and, to a lesser extent, capital appreciation by investing primarily in directly originated leveraged loans to U.S. middle market companies.

The Company seeks to achieve its investment objective by investing primarily in senior secured loans to performing middle market companies controlled by private equity sponsors. The Company focuses on loans to middle market companies that have sustainable competitive advantages, experienced management teams, solid financial performance, stable and recurring cash flow and strong enterprise value. The Company expects that such companies and their sponsors will require financing from the Company for growth, acquisitions, recapitalizations, refinancings or leveraged buyouts, among other things. The Company generally expects to invest in companies with EBITDA between $10 million and $75 million annually, though we may invest in smaller or larger companies if an attractive opportunity presents itself. The Company also generally intends to directly originate its investments as a lead lender to allow for deeper diligence, greater control over terms and structure, and superior economics.

VCC Equity Holdings, LLC (“VCCEH”), VCC Funding, LLC (“VCCF”), Varagon SDLP, LLC (“VSDLP”), and VCC CLO 1 Depositor, LLC ("VCC CLO Depositor") are wholly owned subsidiaries of the Company and are consolidated in the Company’s consolidated financial statements from June 2, 2022, the commencement of investment operations, or the date of their respective formation, in accordance with the Company’s consolidation policy. VCCEH is taxed as a corporation for U.S. federal income tax purposes and was formed to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code. The assets held by VCCEH guarantee the borrowings outstanding under the SMBC Facility (as defined below) (See "Note 6. Borrowings" in our consolidated audited financial statements). VCCF, a bankruptcy remote special purpose entity, whose assets were pledged as collateral supporting the amounts outstanding under the JPM Facility before its termination on November 26, 2024 (See "Note 6. Borrowings"), held no collateral assets, effective as of December 31, 2024. VSDLP holds the Company's interest in the SDLP (as defined below). VCC CLO Depositor wholly owns VCC CLO 1, LLC ("VCC CLO"), which was formed for the purpose of issuing a term debt securitization and VCC CLO is consolidated in the Company's consolidated financial statements.

Substantially concurrent with our initial closing on June 2, 2022 (the “Initial Closing”) and immediately prior to our election to be regulated as a BDC, Varagon Fund I, L.P. (“VF1”), a private fund exempt from registration pursuant to Section 3(c)(7) of the 1940 Act, merged with and into the Company, with the Company continuing in existence as the surviving entity in the merger (the “Merger”). As a result of the Merger, we acquired all of VF1’s assets and liabilities (the “Existing Portfolio”), including all VF1’s interests in the joint venture, Senior Direct Lending Program (“SDLP”), in exchange for shares of our common stock. In addition, immediately prior to our election to be regulated as a BDC, the Company purchased a portfolio of existing loans (the “Warehoused Portfolio” and together with the Existing Portfolio, the “Initial Portfolio”) from certain affiliates of the Adviser.

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Key Components of Our Results of Operations

Investments

We focus primarily on the direct origination and syndication of loans to middle market companies domiciled in the United States.

Our level of investment activity (both the number of investments and the size of each investment) varies substantially from period to period depending on many factors, including the amount of debt and equity capital generally available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. Based on current market conditions, the pace of our investment activities, including originations and repayments, may vary. There have been headwinds in the financing and merger and acquisitions markets resulting from uncertainty associated with the imposition of tariffs and trade barriers, inflation, supply chain disruptions, labor and resource shortages, a shifting interest rate environment, geopolitical conditions (including the war in Ukraine, turmoil in Europe and the Middle East, and U.S. and China relations), and the uncertain economic outlook for the United States and globally generally, which could include a recession. We are closely monitoring the effect that the current market and economic conditions may have on our portfolio companies and our investment activities, and we will continue to seek to invest in defensive businesses with low levels of cyclicality and strong levels of free cash flow generation.

As a BDC, we may not acquire any assets other than “qualifying assets” specified in Section 55(a) of the 1940 Act, unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. Qualifying assets include investments in “eligible portfolio companies”, which, under the 1940 Act, includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million. In addition, we must be organized in the United States to qualify as a BDC.

Revenues

We plan to generate revenues in the form of interest income from the debt securities we hold and dividends and capital appreciation on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. The debt we invest in typically will not be rated by any rating agency, but if it were, it is likely that such debt would be below investment grade. Our investment bias will be toward adjustable-rate senior secured loans. We do not anticipate a secondary market to develop for our private investments. We expect most of our investments to be in corporations, partnerships, limited liability companies or other business entities, including in investment vehicles that issue certificates to us. We also may generate revenue in the form of commitment, loan origination, structuring or diligence fees, fees for providing managerial assistance to our portfolio companies, repayment fees, and waiver and amendment fees associated with our portfolio investments based on our pro rata ownership of the applicable term loan investment or our interest in securities (including the subordinated certificates (the "Subordinated Certificates") issued by SDLP, a joint venture between the Company and Ares Capital Corporation ("ARCC")) related to an underlying investment, as applicable. Certain of these fees may be capitalized and amortized as additional interest income over the life of the related loan.

Expenses

All professionals of the Adviser, when and to the extent engaged in providing investment advisory and management services to us, and the compensation and routine overhead expenses of personnel allocable to these services to us, will be provided and paid for by the Adviser and not by us. Payments under the Administration Agreement are based upon our allocable portion of overhead and other expenses incurred by our administrator, Varagon (in its capacity as our administrator, the "Administrator"), in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. In accordance with the terms of the Administration Agreement, overhead and other administrative expenses are generally allocated between the Administrator and us by reference to the relative time spent by personnel in performing administrative and similar functions on our behalf as compared to performing administrative functions on behalf of the Administrator, its other clients or the Adviser. To the extent personnel retained by the Administrator perform administrative tasks for the Adviser, the fees incurred with respect to the actual time dedicated to such tasks will be reimbursed by the Adviser. We will bear all other out-of-pocket costs and expenses of our operations and transactions, including those relating to:

organization and offering of the common stock, subject to the terms of the Expense Reimbursement Agreement;

the Company’s fees and expenses related to any of the following: (i) an initial public offering (“IPO”) or a listing of the common stock on a national securities exchange (a “Public Listing”), (ii) a sale of all or substantially all of our assets to, or other liquidity event with, an entity for consideration of either cash and/or publicly listed securities of the acquirer, which potential acquirers may include entities affiliated with Varagon, or (iii) a permanent election by the Adviser not to make new investments and to distribute proceeds of investments to shareholders as they are received, or the wind down and/or liquidation and dissolution of the Company;

calculating the Company’s net asset value ("NAV") (including the cost and expenses of any independent valuation firm);

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fees and expenses payable to third parties, including agents, consultants or other advisers, in connection with monitoring financial and legal affairs for the Company and in providing administrative services, monitoring the Company’s investments and performing due diligence on the Company’s prospective portfolio investments or otherwise relating to, or associated with, evaluating and making investments;

fees and expenses incurred in connection with debt, if any, incurred to finance the Company’s investments or operations, and payment of interest and repayment of principal on such debt;

fees and expenses related to sales and repurchases of the common stock and other securities;

investment advisory and management fees;

administration fees, if any, payable under the Administration Agreement;

transfer agent, sub-administrator and custodial fees;

expenses relating to the issue, repurchase and transfer of common stock to the extent not borne by the relevant transferring shareholders and/or assignees;

federal and state registration fees;

all costs associated with a Public Listing;

federal, state and local taxes and other governmental charges assessed against the Company;

independent directors’ fees and expenses and the costs associated with convening a meeting of the Board or any committee thereof;

fees and expenses and the costs associated with convening a meeting of the shareholders or holders of any preferred stock, as well as the compensation of an investor relations professional responsible for the coordination and administration of the foregoing;

costs of preparing and filing reports or other documents required by the SEC, the Financial Industry Regulatory Authority or other regulators;

costs of any reports, proxy statements or other notices to shareholders, including printing and mailing costs;

costs and expenses related to the preparation of the Company’s financial statements and tax returns;

the Company’s allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;

direct costs and expenses of administration, including printing, mailing, long distance telephone, and copying;

independent auditors and outside legal costs, including legal costs associated with any requests for exemptive relief, “no-action” positions or other guidance sought from a regulator, pertaining to the Company;

compensation of other third-party professionals to the extent they are devoted to preparing the Company’s financial statements or tax returns or providing similar “back office” financial services to the Company;

Adviser costs and expenses (excluding travel) in connection with identifying and investigating investment opportunities for the Company, monitoring the investments of the Company and disposing of any such investments;

portfolio risk management costs;

commissions or brokerage fees or similar charges incurred in connection with the purchase or sale of securities (including merger fees) and other assets;

costs and expenses attributable to normal and extraordinary investment banking, commercial banking, accounting, auditing, appraisal, valuation, administrative agent activities, custodial and registration services provided to the Company, including in each case services with respect to the proposed purchase or sale of securities by the Company that are not reimbursed by the issuer of such securities or others (whether or not such purchase or sale is consummated);

costs of amending, restating or modifying the Company’s charter and the Company’s bylaws or the Investment Advisory Agreement, the Administration Agreement or related documents of the Company or related entities;

fees, costs, and expenses incurred in connection with any restructuring, IPO or reorganization of the Company or related entities, the termination, liquidation or dissolution of the Company or related entities, or the required redemption of all or substantially all outstanding common stock (including the fees and expenses associated with any such transaction);

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the expense reimbursements set forth in the Administration Agreement; and

all other properly and reasonably chargeable expenses incurred by the Company or the Administrator in connection with administering the Company’s business, including rent and the allocable portion of the cost of the Company’s Chief Compliance Officer and Chief Financial Officer and their respective staffs; while certain of these expenses may not be ascertainable at any given time, any such expenses will be subject to the approval of the Board on a quarterly basis.

Leverage

The ratio of a BDC's total assets (less total liabilities other than indebtedness represented by senior securities) to its total indebtedness represented by senior securities plus preferred stock, if any, must be at least 200% or 150%, if certain requirements are met. In connection with the Company’s organization and the Initial Closing, the Board and its initial shareholder authorized us to adopt the 150% asset coverage ratio. Additionally, investors both consented to the minimum asset coverage ratio of 150% and agreed not to seek to redeem their shares of common stock in connection therewith, in each case in the subscription agreement. The Company therefore may be exposed, to a greater extent, to the risks of leverage, which may be considered a speculative investment technique. The use of leverage magnifies the potential for gain and loss on amounts invested and therefore increases the risks associated with investing in our securities. In any period, our interest expense will depend largely on the extent of our borrowing, and we expect interest expense will increase as we increase our debt outstanding. As of December 31, 2025, the Company's asset coverage ratio was 176.81%.

Portfolio and Investment Activity

As of December 31, 2025, our portfolio had a fair value of approximately $849.4 million. The following table summarizes our portfolio and investment activity during the year ended December 31, 2025, and December 31, 2024 (dollars in thousands):

For the year ended December 31,

Investments made in new portfolio companies

Investments made in existing portfolio companies

Aggregate amount in exits and repayments

Net investment activity

Portfolio Companies, at beginning of period

Number of new portfolio companies

Number of exited portfolio companies

Portfolio companies, at end of period

The following table shows the amortized cost and the fair value of the Company’s portfolio investments as of December 31, 2025 (dollars in thousands):

As of December 31, 2025

Amortized Cost

Percentage

Fair Value

Percentage

Senior Secured First Lien Loans

Equity

Subordinated Certificates of the SDLP

Total Investments

The following table presents the fair value measurements of the Company's investments, by major class according to the fair value hierarchy, as of December 31, 2024 (dollars in thousands):

As of December 31, 2024

Amortized Cost

Percentage

Fair Value

Percentage

Senior Secured First Lien Loans

Equity

Subordinated Certificates of the SDLP

Total Investments

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The following table shows weighted average current yield to maturity based on the amortized cost and fair value as of December 31, 2025 and December 31, 2024:

As of December 31, 2025

As of December 31, 2024

Weighted Average Current Yield for Total Portfolio (Amortized Cost)

Weighted Average Current Yield for Total Portfolio (Fair Value)

Weighted Average Current Yield for Total Portfolio (Amortized Cost)

Weighted Average Current Yield for Total Portfolio (Fair Value)

Senior Secured First Lien Loans

Equity

Subordinated Certificates of the SDLP (1)

Total

(1) "Weighted average yields” of investments are computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount or premium earned on the relevant accruing investments, divided by (b) the total relevant investments at amortized cost or at fair value, as applicable.

The weighted average yield of our debt and income producing securities is not the same as a return on investment for our shareholders, but rather relates to our investment portfolio and is calculated before the payment of all of our and our subsidiaries’ fees and expenses. The weighted average yield was computed using the effective interest rates as of each respective date, including accretion of original issue discount, but excluding investments on non-accrual status. There can be no assurance that the weighted average yield will remain at its current level.

Portfolio Asset Quality

Our Adviser employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Adviser grades the credit risk of all debt investments on a scale of 1 to 5 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio debt investment relative to the inherent risk at the time the original debt investment was made (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage of the investment and other relevant factors.

Loan Rating

Summary Description

Involves the least amount of risk to our initial cost basis. The borrower is performing above expectations, and the trends and risk factors for this investment since origination or acquisition are generally favorable.

Involves an acceptable level of risk that is similar to the risk at the time of origination or acquisition. The borrower is generally performing as expected and the risk factors are generally neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a rating of 2.

Involves a borrower performing below expectations and indicates that the loan’s risk has increased somewhat since origination or acquisition.

Involves a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination or acquisition. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 120 days past due).

Involves a borrower performing substantially below expectations and indicates that the loan’s risk has increased substantially since origination or acquisition. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

The weighted average risk rating of our investments based on fair value was 2.0 as of December 31, 2025 and December 31, 2024, respectively.

Based on a generally uncertain economic outlook in the United States (which includes a possible recession), we are maintaining close communications with our portfolio companies to proactively assess and manage potential risks across our debt investment portfolio. We also have increased oversight and analysis of credits to assess vulnerable industries and ways to mitigate any decline in loan performance and reduce credit risk. While we are not seeing signs of an overall, broad deterioration in our operating results or those of our portfolio companies at this time, there can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by economic conditions, which could have a negative impact on our future results.

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The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as of December 31, 2025 and December 31, 2024 (dollars in thousands):

As of December 31, 2025

As of December 31, 2024

Investment Performance Rating

Fair Value

Percentage

Fair Value

Percentage

Total

The following table shows the amortized cost of our performing and non-accrual debt investments as of December 31, 2025 and December 31, 2024 (dollars in thousands):

As of December 31, 2025

As of December 31, 2024

Amortized Cost

Percentage

Amortized Cost

Percentage

Performing (1)

Non-Accrual

Total

(1) As of December 31, 2025, the Company had investments in three portfolio companies that were current on cash interest payments and were on non-accrual status with respect to the portion of the interest that is PIK interest only.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. Accrued 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 management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Senior Direct Lending Program

In 2015, VSDLP, a wholly owned subsidiary of the Company, and ARCC formed SDLP, a joint venture established for the purpose of providing senior stretch and unitranche loan financings to middle market borrowers. The Company received, indirectly through its membership interest in VSDLP, limited liability company membership interests and Subordinated Certificates in each case in SDLP, as a result of the Merger. The SDLP finances its investment activity through the issuance of securities (“SDLP Securities”) backed by its loan portfolio, including, in order of seniority, rated senior notes (the “Senior Note”), a rated intermediate funding note (the “IFN”), and capital provided by the Company and ARCC through the Subordinated Certificates. The Subordinated Certificates are the most junior securities issued by SDLP and collateralize the profits earned or losses incurred across the SDLP loan portfolio. As of December 31, 2025 and December 31, 2024, the Company and ARCC own 12.5% and 87.5%, respectively, of the outstanding Subordinated Certificates.

SDLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of SDLP must be approved by an investment committee of SDLP consisting of representatives of the Company (and/or VSDLP) and ARCC (the “SDLP Investment Committee”).

As of December 31, 2025 and December 31, 2024, the Company and ARCC had agreed to make capital available to the SDLP totaling $1.7 billion and $1.7 billion, respectively, of which $206.3 million and $206.3 million, respectively, is to be made available from the Company. The Company and ARCC will continue to provide capital to the SDLP in the form of Subordinated Certificates. This capital will only be committed to the SDLP upon approval of transactions by the SDLP Investment Committee as discussed above. As of December 31, 2025 and December 31, 2024, the Company has funded $183.6 million and $187.1 million, respectively, of its commitment to the SDLP and had $22.7 million and $19.2 million in unfunded commitments remaining to the SDLP, respectively.

The Subordinated Certificates pay a coupon equal to SOFR plus 8.0% and also entitle the holders thereof to receive a portion of the excess cash flow from the loan portfolio, after expenses, which may result in a return to the holders of the Subordinated Certificates that is greater than the stated coupon. The Subordinated Certificates are junior in right of payment to the Senior Notes and IFNs.

The amortized cost and fair value of the Subordinated Certificates held by the Company were $178.0 million and $165.7 million, respectively, as of December 31, 2025, and $184.0 million and $172.2 million, respectively, as of December 31, 2024. The Company’s yield on its investment in the Subordinated Certificates at amortized cost and fair value was 11.8% and 12.6%, respectively, as of

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December 31, 2025, and 13.5% and 14.4%, respectively, as of December 31, 2024. For the years ended December 31, 2025 and 2024, the Company earned interest income of $21.5 million and $27.7 million, respectively, from its investment in the Subordinated Certificates. As of December 31, 2025 and December 31, 2024, $5.3 million and $6.3 million, respectively, was in Interest receivable on the consolidated statements of assets and liabilities.

As of December 31, 2025 and December 31, 2024, the SDLP’s portfolio was comprised entirely of first lien senior secured loans to U.S. middle-market companies and were in industries similar to the companies in the Company’s portfolio. As of December 31, 2025, no loans were on non-accrual status. As of December 31, 2024, loans in two portfolio companies were on non-accrual status. Below is a summary of the SDLP’s portfolio as of December 31, 2025 and December 31, 2024 (dollars in millions):

As of December 31, 2025

As of December 31, 2024

Total first lien senior secured loans (1)

Largest loan to a single borrower (1)

Total of five largest loans to borrower (1)

Number of borrowers in the SDLP

Commitments to fund delayed draw loans (2)

(1) At principal amount.

(2) As discussed above, these commitments have been approved by the SDLP Investment Committee.

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Below is a listing of SDLP’s individual investments as of December 31, 2025 (dollars in thousands):

Company

Type of Investment

Reference Rate and Spread (1)

Interest Rate

Maturity

Par / Shares

Amortized Cost

Fair Value (4)

Footnotes

Senior Secured First Lien Loans

Aerospace & Defense

Acron Aviation, Inc.

Term Loan

SOFR

Auto Components

Midco Holding, LLC

Term Loan

SOFR

Automobile Components

Arrowhead Holdco Company

Delayed Draw Term Loan

SOFR

2.5%(2.75% PIK)

Arrowhead Holdco Company

Delayed Draw Term Loan

SOFR

2.5%(2.75% PIK)

Arrowhead Holdco Company

Delayed Draw Term Loan

SOFR

2.5%(2.75% PIK)

Arrowhead Holdco Company

Term Loan

SOFR

2.5%(2.75% PIK)

Arrowhead Holdco Company

Term Loan

SOFR

2.5%(2.75% PIK)

Chemicals

RCR Buyer, LLC

Term Loan

SOFR

SePRO Holdings, LLC

Term Loan

SOFR

Commercial Services & Supplies

Accommodations Plus Technologies LLC

Term Loan

SOFR

Accommodations Plus Technologies LLC

Term Loan

SOFR

Astra Service Partners, LLC

Delayed Draw Term Loan

Astra Service Partners, LLC

Term Loan

SOFR

CARDS-Live Oak Holdings, Inc.

Delayed Draw Term Loan

CARDS-Live Oak Holdings, Inc.

Term Loan

SOFR

ISQ Hawkeye HoldCo, Inc.

Delayed Draw Term Loan

SOFR

ISQ Hawkeye HoldCo, Inc.

Delayed Draw Term Loan

SOFR

ISQ Hawkeye HoldCo, Inc.

Term Loan

SOFR

Pritchard Industries, LLC

Delayed Draw Term Loan

SOFR

Pritchard Industries, LLC

Term Loan

SOFR

Construction & Engineering

Ground Penetrating Radar Systems, LLC

Delayed Draw Term Loan

SOFR

Ground Penetrating Radar Systems, LLC

Term Loan

SOFR

Pave America Holding, LLC

Delayed Draw Term Loan

SOFR

Pave America Holding, LLC

Term Loan

SOFR

2.375%(2.875% PIK)

Valcourt Holdings II, LLC

Delayed Draw Term Loan

SOFR

Valcourt Holdings II, LLC

Delayed Draw Term Loan

SOFR

Valcourt Holdings II, LLC

Delayed Draw Term Loan

SOFR

Valcourt Holdings II, LLC

Delayed Draw Term Loan

SOFR

Valcourt Holdings II, LLC

Delayed Draw Term Loan

SOFR

Valcourt Holdings II, LLC

Term Loan

SOFR

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Company

Type of Investment

Reference Rate and Spread (1)

Interest Rate

Maturity

Par / Shares

Amortized Cost

Fair Value (4)

Footnotes

Consumer Staples Distribution & Retail

FS Squared Holding Corp.

Delayed Draw Term Loan

SOFR

FS Squared Holding Corp.

Delayed Draw Term Loan

SOFR

FS Squared Holding Corp.

Term Loan

SOFR

Distributors

Big Bucks Acquisition Corporation

Term Loan

SOFR

Electronic Equipment, Instruments & Components

EIS Legacy Holdco, LLC

Delayed Draw Term Loan

SOFR

EIS Legacy Holdco, LLC

Term Loan

SOFR

Financial Services

Convera International Holdings Limited

Term Loan

SOFR

Convera International Holdings Limited

Term Loan

SOFR

Convera International Holdings Limited

Term Loan

SOFR

Oak Funding, LLC

Delayed Draw Term Loan

Oak Funding, LLC

Term Loan

SOFR

Tiger Holdco LLC

Delayed Draw Term Loan

SOFR

Tiger Holdco LLC

Term Loan

SOFR

Food Products

GMF Parent, Inc.

Delayed Draw Term Loan

GMF Parent, Inc.

Delayed Draw Term Loan

GMF Parent, Inc.

Term Loan

SOFR

Manna Pro Products, LLC

Delayed Draw Term Loan

SOFR

3%(3.5% PIK)

Manna Pro Products, LLC

Term Loan

SOFR

3%(3.5% PIK)

Manna Pro Products, LLC

Term Loan

SOFR

3%(3.5% PIK)

Manna Pro Products, LLC

Term Loan

SOFR

3%(3.5% PIK)

Quirch Foods Holdings, LLC

Delayed Draw Term Loan

Quirch Foods Holdings, LLC

Term Loan

SOFR

Health Care Equipment & Supplies

NMN Holdings III Corp

Term Loan

SOFR

Health Care Providers & Services

Premise Health Holding Corp

Term Loan

SOFR

U.S. Urology Partners, LLC

Term Loan

SOFR

Health Care Technology

Surescripts, LLC

Term Loan

SOFR

Hotels, Restaurants & Leisure

Birdie Bidco, Inc.

Delayed Draw Term Loan

Birdie Bidco, Inc.

Term Loan

SOFR

4.5%(2.25% PIK)

Triwizard Holdings, Inc.

Delayed Draw Term Loan

SOFR

Triwizard Holdings, Inc.

Delayed Draw Term Loan

SOFR

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Company

Type of Investment

Reference Rate and Spread (1)

Interest Rate

Maturity

Par / Shares

Amortized Cost

Fair Value (4)

Footnotes

Triwizard Holdings, Inc.

Term Loan

SOFR

Household Durables

LHS Borrower, LLC

Term Loan

SOFR

Household Products

Walnut Parent, Inc.

Term Loan

SOFR

Walnut Parent, Inc.

Term Loan

SOFR

Walnut Parent, Inc.

Term Loan

SOFR

Insurance

THG Acquisition, LLC

Delayed Draw Term Loan

SOFR

THG Acquisition, LLC

Term Loan

SOFR

IT Services

UFS, LLC

Term Loan

SOFR

Victors Purchaser, LLC

Delayed Draw Term Loan

Victors Purchaser, LLC

Term Loan

SOFR

Victors Purchaser, LLC

Term Loan

SOFR

Machinery

Harvey Tool Company, LLC

Delayed Draw Term Loan

Harvey Tool Company, LLC

Term Loan

SOFR

Software

Cority Software Inc.

Term Loan

SOFR

Doxim Inc.

Term Loan

SOFR

Merit Software Finance Holdings, LLC

Delayed Draw Term Loan

Merit Software Finance Holdings, LLC

Term Loan

SOFR

ML Holdco, Inc.

Delayed Draw Term Loan

ML Holdco, Inc.

Term Loan

SOFR

Trading Companies & Distributors

Penn Detroit Diesel Allison, LLC

Term Loan

SOFR

Total Senior Secured First Lien Loans

Equity

Auto Components

Midco Holding, LLC

Common Stock

Midco Holding, LLC

Preferred Shares

Food Products

Manna Pro Products, LLC

Common Stock

Total Equity

Total Investments, December 31, 2025

(1) Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to SOFR, or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower’s option, which reset semi-annually (S), quarterly (Q) or monthly (M). For each such loan, the interest rate provided was the rate in effect as of December 31, 2025.

(2) Loan includes interest rate floor feature.

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(3) Investment is domiciled outside of the United States.

(4) The negative fair value, if applicable, results from the fair valuation of the unfunded commitment.

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Below is a listing of SDLP’s individual investments as of December 31, 2024 (dollars in thousands):

Company

Type of Investment

Reference Rate and Spread (1)

Interest Rate

Maturity

Par

Amortized Cost

Fair Value

Footnotes

Senior Secured First Lien Loans

Aerospace & Defense

Qnnect, LLC and Connector TopCo, LP

Term Loan

SOFR

Qnnect, LLC and Connector TopCo, LP

Delayed Draw Term Loan

SOFR

Automobile Components

Arrowhead Holdco Company

Term Loan

SOFR

Arrowhead Holdco Company

Delayed Draw Term Loan

SOFR

Arrowhead Holdco Company

Delayed Draw Term Loan

SOFR

Arrowhead Holdco Company

Term Loan

SOFR

Arrowhead Holdco Company

Delayed Draw Term Loan

SOFR

North Haven Falcon Buyer, LLC

Term Loan

SOFR

North Haven Falcon Buyer, LLC

Delayed Draw Term Loan

SOFR

Chemicals

SePRO Holdings, LLC

Term Loan

SOFR

Commercial Services & Supplies

ISQ Hawkeye HoldCo, Inc.

Term Loan

SOFR

ISQ Hawkeye HoldCo, Inc.

Delayed Draw Term Loan

SOFR

ISQ Hawkeye HoldCo, Inc.

Delayed Draw Term Loan

SOFR

Pritchard Industries, LLC

Term Loan

SOFR

Pritchard Industries, LLC

Delayed Draw Term Loan

SOFR

Construction & Engineering

Valcourt Holdings II, LLC

Term Loan

SOFR

Valcourt Holdings II, LLC

Delayed Draw Term Loan

SOFR

Consumer Staples Distribution & Retail

FS Squared Holding Corp.

Term Loan

SOFR

Electronic Equipment, Instruments & Components

EIS Legacy Holdco, LLC

Term Loan

SOFR

Food Products

Manna Pro Products, LLC

Term Loan

SOFR

Manna Pro Products, LLC

Delayed Draw Term Loan

SOFR

Manna Pro Products, LLC

Term Loan

SOFR

Manna Pro Products, LLC

Term Loan

SOFR

Health Care Providers and Services

Center for Autism and Related Disorders, LLC

Delayed Draw Term Loan

SOFR

Center for Autism and Related Disorders, LLC

Term Loan

SOFR

Center for Autism and Related Disorders, LLC

Term Loan

SOFR

Center for Autism and Related Disorders, LLC

Term Loan

SOFR

NMN Holdings III Corp

Term Loan

SOFR

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Company

Type of Investment

Reference Rate and Spread (1)

Interest Rate

Maturity

Par

Amortized Cost

Fair Value

Footnotes

Health Care Technology

Surescripts, LLC

Term Loan

SOFR

Hotels, Restaurants & Leisure

Triwizard Holdings, Inc.

Delayed Draw Term Loan

SOFR

Triwizard Holdings, Inc.

Delayed Draw Term Loan

SOFR

Triwizard Holdings, Inc.

Term Loan

SOFR

Concert Golf Partners Holdco LLC

Delayed Draw Term Loan

SOFR

Concert Golf Partners Holdco LLC

Delayed Draw Term Loan

SOFR

Concert Golf Partners Holdco LLC

Term Loan

SOFR

HGC Holdings, LLC

Delayed Draw Term Loan

SOFR

HGC Holdings, LLC

Delayed Draw Term Loan

SOFR

HGC Holdings, LLC

Delayed Draw Term Loan

SOFR

HGC Holdings, LLC

Delayed Draw Term Loan

SOFR

HGC Holdings, LLC

Term Loan

SOFR

Household Products

Walnut Parent, Inc.

Term Loan

SOFR

Walnut Parent, Inc.

Term Loan

SOFR

Walnut Parent, Inc.

Term Loan

SOFR

Insurance

THG Acquisition, LLC

Term Loan

SOFR

Machinery

Harvey Tool Company, LLC

Delayed Draw Term Loan

SOFR

Harvey Tool Company, LLC

Term Loan

SOFR

Harvey Tool Company, LLC

Term Loan

SOFR

Trading Companies & Distributors

Penn Detroit Diesel Allison, LLC

Term Loan

SOFR

Total Investments, December 31, 2024

(1) Variable rate loans to the portfolio companies bear interest at a rate that may be determined by reference to LIBOR, SOFR, or an alternate base rate (commonly based on the Federal Funds Rate or the Prime Rate), at the borrower’s option, which reset semi-annually (S), quarterly (Q), or monthly (M). For each such loan, the interest rate provided was the rate in effect as of December 31, 2024.

(2) Loan includes interest rate floor feature.

(3) The investment was on non-accrual status as of December 31, 2024.

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In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, the Company must determine if any of its portfolio companies is considered a “significant subsidiary.” Pursuant to the definition of “significant subsidiary” applicable to investment companies set forth in Rule 1-02(w) of Regulation S-X, a portfolio company will meet the definition of “significant subsidiary” if either the investment test or the income test is triggered. Rule 3-09 of Regulation S-X requires the Company to include separate audited financial statements of any unconsolidated majority-owned subsidiary (portfolio company in which the Company owns greater than 50% of the unconsolidated subsidiary) in the Company's annual report on Form 10-K if one of the following conditions are met: (i) if the portfolio investment’s fair value exceeds 20% of the Company’s total investments at fair value (the investment test); or (ii) either (A) if the income from the portfolio investment exceeds 80% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries (the income test) or (B) if the income from the portfolio investment exceeds 20% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries and have a fair value exceeding 5% of the Company’s total investment fair value (the alternate income test). If the Company has an unconsolidated majority-owned subsidiary and does not satisfy any Rule 3-09 significant subsidiary conditions during a quarter end, the Company must include a summarized income statement within the notes to the quarterly financial statements.

Rule 4-08(g) of Regulation S-X requires the Company to include summarized financial information of any unconsolidated controlled subsidiary (portfolio company in which the Company owns greater than 25% of the voting securities of the unconsolidated subsidiary or otherwise controls the subsidiary) in the Company's annual report on Form 10-K if one of the following conditions are met: (i) if the portfolio investment’s fair value exceeds 10% of the Company’s total investments fair value (the investment test); or (ii) either (A) if the income from the portfolio investment exceeds 80% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries (the income test) or (B) if the income from the portfolio investment income exceeds 10% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries and have a fair value exceeding 5% of the Company’s total investment fair value (the alternate income test).

After performing the investment analysis and income analysis for the year ended December 31, 2025, the Company determined that the SDLP's income exceeded 10% of the Company's absolute value of the change in net assets from operations and had a fair value exceeding 5% of the Company's total investment fair value. Accordingly, the audited financial statements of SDLP are attached as an exhibit to this Annual Report on Form 10-K.

Results of Operations

Set forth below is a comparison of our results of operations for the years ended December 31, 2025, and 2024. For a comparison of our results of operations for the years ended December 31, 2024 and 2023, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on March 21, 2025.

For the year ended December 31,

Total investment income

Total expenses (including excise tax expense)

Net investment income

Net realized gain (loss)

Net change in unrealized appreciation (depreciation)

Net increase in net assets resulting from operations

Net investment income per share - basic and diluted

Net increase in net assets resulting from operations per share - basic and diluted

Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including the level of new investment commitments, expenses, the recognition of realized gains and losses, and changes in unrealized appreciation and depreciation on the investment portfolio.

Investment Income

We expect our portfolio to continue to grow as we deploy capital raised in our private offering and our investment income to grow commensurately. Shifts in base interest rates, such as SOFR and other applicable benchmark rates, may affect our investment income over the long term.

Investment income decreased to $91.0 million for the year ended December 31, 2025, from $96.3 million for the comparable period in the prior year, primarily due to a decrease in SOFR as well as a decrease in the yield of the Subordinated Certificates.

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Operating Expenses

Expenses for the years ended December 31, 2025 and 2024 were as follows (dollars in thousands):

For the year ended December 31,

Base management fees

Income-based incentive fees

Professional fees

Administrator expenses

Interest expenses

Credit facility fees

Directors’ fees and expenses

Organizational expenses

Insurance expenses

Other general and administrative

Total expenses

Total expenses increased to $48.4 million for the year ended December 31, 2025 from $45.8 million for the year ended December 31, 2024.

Management and Incentive Fees

Management fees for the year ended December 31, 2025 increased from the comparable period in the prior year primarily due to an increase in our invested balance. Incentive fees on income for the year ended December 31, 2025 decreased from the comparable period in the prior year primarily due to the decrease of investment income during the current period.

Interest Expenses and Credit Facility Fees

Interest expenses and credit facility fees increased to $32.1 million for the year ended December 31, 2025 from $30.0 million for the year ended December 31, 2024. The increase was primarily attributable to increased interest expenses related to our term debt securitization that closed on November 26, 2024.

Net Realized Gains/Losses

We measure realized gains or losses by the difference between the net proceeds from the disposition and the amortized cost basis of an investment, without regard to unrealized gains or losses previously recognized.

For the year ended December 31, 2025, we had realized losses of $(3.7) million, due to the restructuring of two of our portfolio investments.

For the year ended December 31, 2024, we had realized losses of $(5.1) million, due to the extinguishments of the CIBC Facility and the JPM Facility. We also had a realized gain on investments of $0.1 million, due to an escrow payment from a previously realized investment offset by the wind down of two interest rate swaps during the year.

Net Change in Unrealized Appreciation/Depreciation

For the year ended December 31, 2025, we had $(5.7) million of unrealized depreciation on portfolio investments and derivatives, which was primarily due to the adjustment of a minority of portfolio investments facing operational difficulties.

For the year ended December 31, 2024, we had $(6.4) million of unrealized depreciation on investments and derivatives which was due to the decrease in fair value of our investment in the Subordinated Certificates, partially offset by an increase in fair value of the rest of the portfolio during the year.

Net Increase in Net Assets Resulting from Operations

For the year ended December 31, 2025, the net increase in net assets resulting from operations was $33.1 million or $0.80 per share. For the year ended December 31, 2024, the net increase in net assets resulting from operations was $39.1 million and $0.94 per share.

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Financial Condition, Liquidity and Capital Resources

We expect to generate cash primarily from (i) the net proceeds from drawdowns of our capital commitments to purchase shares of our common stock pursuant to our private offering of our shares (the "Offering"), (ii) cash flows from our operations, (iii) proceeds from net borrowings from the SMBC Facility and CLO debt issuances (as described below), and (iv) any future offerings of our equity or debt securities. We may fund a portion of our investments through borrowings under the SMBC Facility and issuances of senior securities. Our primary use of cash will be for (i) investments in portfolio companies in accordance with our investment objective and investment strategies and to comply with certain portfolio diversification requirements, (ii) providing capital to the SDLP through the Subordinated Certificates, (iii) the cost of operations (including paying the Adviser), (iv) debt service and other financing costs of any borrowings, (v) any cash distributions to the holders of our common stock, and (vi) general working capital purposes. We will also pay operating expenses, including advisory and administrative fees and expenses, and may pay other expenses such as due diligence expenses of potential new investments, from the net proceeds of the Offering.

Equity

We are authorized to issue 500,000,000 shares of common stock at $0.01 par value per share.

On March 29, 2022, in connection with our seed audit, we issued 100 shares of common stock for $10.00 to Varagon, which were subsequently redeemed on June 2, 2022 in connection with the Merger.

As of December 31, 2025, we had received capital commitments totaling $488.2 million ($73.5 million remaining undrawn), of which $5.9 million ($1.0 remaining undrawn) is from Varagon and current officers and directors of the Company. On June 2, 2022, we held our Initial Closing and entered into Subscription Agreements with a number of investors providing for the private placement of our shares of common stock.

The following table summarizes the total shares issued and proceeds received related to capital drawdowns delivered pursuant to the Subscription Agreements from inception through December 31, 2025 (dollars in thousands, except per share data):

Capital Drawdown Notice Date

Date of Issuance

Number of

Shares Issued

Aggregate

Offering Price

Issuance Price per Share

May 20, 2022

June 2, 2022

June 27, 2022

July 12, 2022

August 23, 2022

September 7, 2022

Distributions and Dividend Reinvestments

Distributions to common shareholders are recorded on the ex-dividend date. We have elected, and intend to qualify annually, to be treated as a RIC for U.S. federal income tax purposes under the Code. The Company will be required to distribute dividends each tax year as a RIC to its shareholders of an amount generally at least equal to 90% of its investment company taxable income, determined without regard to any deduction for dividends paid, in order to be eligible for tax benefits allowed to a RIC under subchapter M of the Code. The Company anticipates paying out as a distribution all or substantially all of those amounts. The amount to be paid out as a dividend is determined by the Board and is based on management’s estimate of the Company’s annual taxable income. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such net realized capital gains for investment.

With respect to distributions, we have adopted an “opt out” distribution reinvestment plan (“DRIP”) for common shareholders. As a result, in the event of a declared distribution, each shareholder that has not “opted out” of the DRIP will have their dividends or distributions automatically reinvested in additional shares of our common stock rather than receiving cash distributions. Shareholders who receive distributions in the form of shares of common stock will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.

The following table reflects the distributions per share that the Company has declared, including shares issued under the DRIP, on its common stock from inception through December 31, 2025 (dollars in thousands):

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Distribution

Date Declared

Record Date

Payment Dates

Amount per Share

Cash Distribution

DRIP Shares Issued

DRIP Shares Value

Quarterly

December 12, 2022

December 15, 2022

December 21, 2022

Quarterly

December 19, 2022

December 23, 2022

January 27, 2023

Quarterly

March 23, 2023

March 27, 2023

March 31, 2023

Quarterly

May 10, 2023

July 1, 2023

July 15, 2023

Quarterly

August 8, 2023

October 2, 2023

October 16, 2023

Quarterly

November 7, 2023

December 27, 2023

January 17, 2024

Special

December 18, 2023

December 27, 2023

January 17, 2024

Quarterly

March 20, 2024

March 29, 2024

April 10, 2024

Special

March 20, 2024

March 29, 2024

April 10, 2024

Quarterly

May 9, 2024

June 28, 2024

July 17, 2024

Special

May 9, 2024

June 28, 2024

July 17, 2024

Quarterly

August 6, 2024

September 30, 2024

October 17, 2024

Special

August 6, 2024

September 30, 2024

October 17, 2024

Quarterly

November 6, 2024

December 31, 2024

January 17, 2025

Special

November 6, 2024

December 31, 2024

January 17, 2025

Quarterly

March 13, 2025

March 31, 2025

April 17, 2025

Special

March 13, 2025

March 31, 2025

April 17, 2025

Quarterly

May 7, 2025

June 30, 2025

July 17, 2025

Special

May 7, 2025

June 30, 2025

July 17, 2025

Quarterly

August 6, 2025

September 30, 2025

October 17, 2025

Special

August 6, 2025

September 30, 2025

October 17, 2025

Quarterly

November 5, 2025

December 31, 2025

January 16, 2026

Special

November 5, 2025

December 31, 2025

January 16, 2026

Total

Income Taxes

The Company has elected, and intends to qualify annually, to be treated as a RIC under subchapter M of the Code. As a RIC, the Company generally will not be subject to U.S. federal income tax on any ordinary income or capital gains that it timely distributes to its shareholders as dividends. To qualify as a RIC, the Company must meet certain minimum distribution, source-of-income, and asset diversification requirements. The minimum distribution requirements applicable to the RIC require the Company to distribute at least 90% of its investment company taxable income, as defined by the Code, each year.

The Company is subject to a nondeductible 4% U.S. federal excise tax on its undistributed income, unless it timely distributes (or is deemed to have timely distributed) an amount equal to the sum of (1) 98% of ordinary income for each calendar year, (2) 98.2% of the amount by which capital gains exceeds capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31 of the calendar year, and (3) certain un-distributed amounts from the previous years on which we paid no U.S. federal income tax. While the Company intends to distribute any income and capital gains to avoid imposition of this 4% U.S. federal excise tax, it may not be successful in avoiding entirely the imposition of this tax. In that case, the Company will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirement.

The Company evaluates tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority in accordance with ASC Topic 740, Income Taxes (“ASC 740”). Tax benefits of positions not deemed to meet the more-likely-than-not threshold, or uncertain tax positions, would be recorded as tax expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. As of December 31, 2025, the Company did not have any uncertain tax positions that met the recognition or measurement criteria, nor did the Company have any unrecognized tax benefits.

Our accounting policy on income taxes is critical because if we are unable to maintain our tax treatment as a RIC, we would be required to record a provision for U.S. federal income taxes, which may be significant to our financial results.

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Federal Income Taxes

The Company is subject to the Code, U.S. federal income tax regulations, and other administrative guidance pertaining to U.S. federal income tax filing requirements. The Company is expected to have minimal or no income subject to tax and therefore no provision has been included for taxes due. The Company has elected, and intends to qualify annually, as a RIC under subchapter M of the Code. As a result, the Company generally does not expect to be subject to U.S. federal income taxes.

The Company has not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740 as of December 31, 2025.

In the normal course of business, the Company is subject to examination by federal and certain state and local tax regulators. The Company adopted a tax year-end of December 31.

For U.S federal income tax purposes, distributions paid to shareholders are reported as ordinary income, return of capital, long-term capital gains, or a combination thereof.

Credit Facilities

JPM Facility

On June 2, 2022, the Company's wholly owned subsidiary, VCCF, entered into the Loan and Security Agreement (as amended on January 26, 2023 and November 20, 2023, the “Loan and Security Agreement” and the revolving credit facility thereunder, the “JPM Facility”) with JPMorgan Chase Bank, National Association, as administrative agent (“JPMorgan”).

The JPM Facility permitted VCCF to borrow up to $300 million, subject to certain leverage and borrowing base restrictions, and could have increased up to $600 million with the consent of the lenders. The reinvestment period and termination date of the JPM Facility was June 2, 2025 and June 2, 2027, respectively.

The JPM Facility bore interest at an annual rate of: (i) with respect to interest based reference rate other than a term SOFR, the reference rate plus a margin equal to 2.375% per annum; provided that, in the case of advances denominated in British Pounds, the margin was 2.494% per annum (ii) with respect to interest based on a term SOFR, the SOFR plus a margin equaled to 2.475% per annum and (iii) with respect to interest based on a Base Rate, the Base Rate plus a margin equaled to 2.475% per annum. JPMorgan determined the reference rate. The Company paid a fee of 0.50% per annum on the average daily committed but unused amounts under the JPM Facility during its ramp-up period (June 2, 2022 up to but not including March 2, 2023), and, beginning March 3, 2023 through its termination (as described below), paid a fee of 0.75% on annum.

On January 26, 2023, the Company entered into the First Amendment to the Loan and Security Agreement (the “First Amendment”). The First Amendment, among other things: (i) reduced the borrowings available under the JPM Facility from up to $500 million to up to $300 million, subject to certain leverage and borrowing base restrictions; and (ii) reduced the commitment increase, subject to lender consent, from up to $800 million to up to $600 million. The reduction was accounted for as a debt modification to a line-of-credit or revolving-debt arrangement in accordance with ASC 470-50, Modifications and Extinguishments , which attributed to an acceleration of debt financing costs in the amount of $1.4 million and was recorded on the consolidated statements of operations as a component of "Credit facility fees."

On November 20, 2023, the Company entered into the Second Amendment to the Loan and Security Agreement (the "Second Amendment"). The Second Amendment, among other things: (i) permitted the inclusion of revolving loans as collateral to the JPM Facility; (ii) decreased the minimum funding amount under the Loan and Agreement from 85% to 75% of the financing commitment which commenced on November 21, 2023; and (iii) increased the percentage of Collateral Principal Amount (as defined in the Second Amendment) that may consist of portfolio investments the obligors of which have a leverage ratio equal to or greater than 7.0x from 0.0% to 10.0%.

On November 26, 2024, the Company terminated in full (i) the JPM Facility, and (ii) the security interest over the collateral granted by VCCF to the collateral agent pursuant to the Loan and Security Agreement and the other loan documents relating to the JPM Facility. The JPM Facility terminated upon the satisfaction of all obligations and liabilities of the Company to secured parties thereunder, including, without limitation, payments of principal and interest, other fees, breakage costs and other amounts owing to the secured parties. The termination was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments , which resulted in a realized loss of $4.2 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

The following table summarizes the interest expense, unused fees and amortization of debt issuance costs incurred on the JPM Facility for the year ended December 31, 2025 and 2024 (dollars in thousands):

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For the year ended December 31,

JPM Facility interest

JPM Facility unused fees

Amortization of debt issuance costs

Total interest and financing expenses related to the JPM Facility

Weighted average outstanding debt balance of the JPM Facility

Weighted average interest rate of the JPM Facility (annualized)

(1) On November 26, 2024, the Company terminated the JPM Facility in full upon the satisfaction of all obligations and liabilities of the Company.

CIBC Facility

On January 31, 2023, the Company entered into a Senior Secured Revolving Credit Agreement (the “CIBC Credit Agreement” and the senior secured credit facility thereunder, the “CIBC Facility”) among the Company, as borrower, the lenders party thereto from time to time, the issuing banks party thereto from time to time, and CIBC Bank USA ("CIBC"), as administrative agent and as sole lead arranger. The CIBC Facility was guaranteed by VCCEH, and could have been guaranteed by certain domestic subsidiaries of the Company that would have been formed or acquired by the Company in the future. Proceeds of the CIBC Facility were used for general corporate purposes, including the funding of portfolio investments. The initial maximum principal amount of the CIBC Facility was $75 million, subject to availability under the borrowing base, which was based on the Company’s and Guarantor’s portfolio investments and other outstanding indebtedness. The CIBC Facility was secured by a perfected first-priority interest in substantially all of the portfolio investments held by the Company and each Guarantor, subject to certain exceptions. The CIBC Facility's commitment termination date was January 31, 2026 and had a final maturity date of January 31, 2028.

The CIBC Facility bore interest from January 1, 2023 to January 31, 2026 (the "Availability Period") at an annual rate of: (i) with respect to interest based on the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 1/2 of 1% and (c) zero (the "ABR"), the ABR plus a margin equal to 1.500% per annum; and (ii) with respect to interest based on a term SOFR, the SOFR plus a margin equal to 2.500% per annum and after the Availability Period at an annual rate of: (i) with respect to interest based on the ABR, the ABR plus a margin equal to 1.750% per annum; and (ii) with respect to interest based on a term SOFR, the SOFR plus a margin equal to 2.750% per annum. CIBC, as the administrative agent determines the reference rate. The Company paid a fee of 0.375% per annum on the average daily committed but unused amounts under the CIBC Facility during the first nine months of the CIBC Facility (January 31, 2023 up to but not including October 31, 2023), and thereafter, 0.375% if the average daily used amount of the commitment exceeds 25% of the total commitment or otherwise, 0.50%.

On August 9, 2024, the Company terminated in full (i) the CIBC Credit Agreement and the CIBC Facility, and (ii) the security interest over the collateral granted to CIBC as the lender pursuant to the CIBC Credit Agreement and the other loan documents relating to the CIBC Facility. The CIBC Facility terminated upon the satisfaction of all obligations and liabilities of the Company to CIBC as the lender thereunder, including, without limitation, payments of principal and interest, other fees, breakage costs and other amounts owing to CIBC. The termination was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments , which resulted in a realized loss of $0.8 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the CIBC Facility for the year ended December 31, 2025 and 2024 (dollars in thousands):

For the year ended December 31,

CIBC Facility interest

CIBC Facility unused fees

Amortization of debt issuance costs

Total interest and financing expenses related to the CIBC Facility

Weighted average outstanding debt balance of the CIBC Facility

Weighted average interest rate of the CIBC Facility (annualized)

(1) On August 9, 2024, the Company terminated the CIBC Facility in full upon the satisfaction of all obligations and liabilities of the Company.

SMBC Facility

On August 9, 2024, the Company entered into a Senior Secured Revolving Credit Agreement (the “SMBC Credit Agreement” and the senior secured credit facility thereunder, the “SMBC Facility”) by and among the Company, as borrower, the lenders party thereto from

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time to time, the issuing banks party thereto from time to time, and Sumitomo Mitsui Banking Corporation, as administrative agent, sole book runner and lead arranger.

The SMBC Facility is guaranteed by VCCEH, a wholly owned subsidiary of the Company, and will be guaranteed by certain subsidiary guarantors. Proceeds of the SMBC Facility may be used for general corporate purposes, including the funding of portfolio investments.

The initial maximum principal amount of the SMBC Facility was $170 million, subject to availability under the borrowing base, which is based on the Company’s and subsidiary guarantors’ portfolio investments and other outstanding indebtedness. Maximum capacity under the SMBC Facility may be increased to $400 million through the exercise by the Company of an uncommitted accordion feature through which existing and new lenders may, at their option, agree to provide additional financing. On August 28, 2024, the Company closed an additional $25 million of commitments under the accordion feature of the SMBC Credit Agreement, increasing the maximum principal amount available under the SMBC Facility from $170 million to $195 million. The SMBC Facility provides for the issuance of letters of credit in an initial aggregate face amount of up to $10 million, subject to increase or reduction from time to time pursuant to the terms of the SMBC Facility. The SMBC Facility is secured by a perfected first-priority interest in substantially all of the portfolio investments held by the Company and each subsidiary guarantor, subject to certain exceptions.

The availability period under the SMBC Facility will terminate on August 9, 2028 (the “SMBC Commitment Termination Date”) and the SMBC Facility will mature on August 9, 2029 (the “SMBC Maturity Date”). During the period from the SMBC Commitment Termination Date to the SMBC Maturity Date, the Company will be obligated to make mandatory prepayments under the SMBC Credit Agreement out of the proceeds of certain asset sales and other recovery events, equity and debt issuances and other returns of capital and extraordinary receipts.

The Company may borrow amounts in U.S. dollars or certain other permitted currencies. Amounts drawn under the SMBC Facility will bear interest at either term SOFR plus a 2.125% or 2.000% margin, or the alternate base rate plus a 1.125% or 1.000% margin depending on the ratio of the borrowing base compared to the outstanding debt of the SMBC Facility. The Company may elect either the term SOFR or the alternate base rate at the time of drawdown, and loans may be converted from one rate to another at any time at the Company’s option, subject to certain conditions. The Company also will pay a fee of 0.375% on average daily undrawn amounts under the SMBC Facility. The Company is also required to pay letter of credit participation fees and a fronting fee on the daily amount of any lender's exposure with respect to any letters of credit issued at the request of the Company under the SMBC Facility. As of December 31, 2025 the Company had $1.0 million in letters of credit issued through the SMBC Facility, and had issued none as of December 31, 2024. The amount available for borrowing under the SMBC Facility is reduced by any letters of credit issued. As of December 31, 2025, there was $126.9 million available for borrowing (net of letters of credit) under the SMBC Facility, subject to borrowing base limitations.

The SMBC Credit Agreement includes customary covenants, including certain limitations on the incurrence by the Company of additional indebtedness and on the Company’s ability to make distributions to its shareholders, or redeem, repurchase or retire shares of stock, upon the occurrence of certain events and certain financial covenants related to asset coverage and liquidity and other maintenance covenants, as well as customary events of default.

On August 28, 2024, the Company closed an additional $25 million of commitments under the accordion feature of the SMBC Credit Agreement, increasing the maximum principal amount available under the SMBC Facility from $170 million to $195 million.

At December 31, 2025, the carrying amount of the Company's borrowings under the SMBC Facility approximated their fair value. The fair values of the Company's debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of our borrowings under the SMBC Facility would be deemed to be Level 3 investments.

The following table summarizes the interest expense, non-usage fees and amortization of financing costs incurred on the SMBC Facility for the year ended December 31, 2025 and 2024 (dollars in thousands):

For the year ended December 31,

SMBC Facility interest

SMBC Facility unused fees

Amortization of debt issuance costs

Total interest and financing expenses related to the SMBC Facility

Weighted average outstanding debt balance of the SMBC Facility

Weighted average interest rate of the SMBC Facility (1)

(1) Figure for the year ended December 31, 2024 is annualized.

VCC CLO 1, LLC

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On November 26, 2024 (the “Closing Date”), the Company completed its $493.77 million term debt securitization (the “2024 Debt Securitization”), also known as a collateralized loan obligation, in connection with which a subsidiary of the Company issued the Debt (as defined below). The 2024 Debt Securitization is subject to the Company’s’ overall asset coverage requirement.

The debt offered in the 2024 Debt Securitization was issued and incurred by VCC CLO, an indirect, wholly-owned and consolidated subsidiary of the Company, and consists of (i) Class A-1 Senior Secured Floating Rate Notes, Class A-2 Senior Secured Floating Rate Loans, Class B Senior Secured Floating Rate Notes, Class B Senior Secured Floating Rate Loans and the Class C Mezzanine Secured Deferrable Floating Rate Notes (collectively, the “Secured Debt”), and (ii) the subordinated notes (the “Subordinated Notes” and, together with the Secured Debt, the “Debt”), the terms of which are summarized in the table below (dollars in thousands):

Class

Par Size ($)

Ratings (S&P)

Ratings (Fitch)

Coupon

Class A-1 Notes

AAA(sf)

AAA(sf)

SOFR + 1.71%

Class A-2 Loans

AAA(sf)

SOFR + 1.85%

Class B Notes

SOFR + 2.15%

Class B Loans

SOFR + 2.15%

Class C Notes

SOFR + 2.65%

Subordinated Notes

VCC CLO Depositor, a direct, wholly owned subsidiary of the Company, retained all of the Subordinated Notes issued in the 2024 Debt Securitization and eliminated in consolidation.

The 2024 Debt Securitization is backed by a diversified portfolio of middle market commercial loans and participation interests therein, which is managed by the Company pursuant to a collateral management agreement entered into with VCC CLO on the Closing Date (the “Collateral Management Agreement”). The Company has agreed to irrevocably waive all collateral management fees payable to it so long as it is the collateral manager under the Collateral Management Agreement. The Debt is scheduled to mature on October 20, 2036; however, the Debt may be redeemed by VCC CLO, at the written direction of (i) a majority of the Subordinated Notes with the consent of the Company or (ii) the Company, in each case, on any business day on or after November 26, 2026.

As part of the 2024 Debt Securitization, the Company, VCC CLO Depositor and VCC CLO entered into a loan sale and contribution agreement on the Closing Date (the “Sale Agreement”), pursuant to which the Company sold, transferred, assigned, contributed or otherwise conveyed to VCC CLO Depositor and VCC CLO Depositor subsequently sold, transferred, assigned, contributed or otherwise conveyed to VCC CLO the loans and participations therein securing the 2024 Debt Securitization for the purchase price and other consideration set forth in the Sale Agreement. Following this transfer, VCC CLO, and not VCC CLO Depositor or the Company, holds all of the ownership interest in such loans and participations therein. The Company made customary representations, warranties and covenants in the Sale Agreement.

The Secured Debt is a secured obligation of VCC CLO, the Subordinated Notes are the unsecured obligations of VCC CLO, and the indenture and security agreement governing the Debt includes customary covenants and events of default. The Debt has not been, and will not be, registered under the Securities Act of 1933, as amended (the "1933 Act"), or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable exemption from registration.

At December 31, 2025, the carrying amount of the Secured Debt of VCC CLO approximated its fair value. The fair values of the Company's debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Secured Debt of VCC CLO would be deemed to be Level 3 investments.

The following table summarizes the interest expense and amortization of debt issuance costs incurred on VCC CLO for the year ended December 31, 2025 and 2024 (dollars in thousands):

For the year ended December 31,

VCC CLO interest

Amortization of debt issuance costs

Total interest and financing expenses related to VCC CLO

Weighted average outstanding debt balance of VCC CLO

Weighted average interest rate of VCC CLO (1)

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(1) Figure for the year ended December 31, 2024 is annualized.

Unsecured Notes

On December 21, 2023, the Company entered into a Master Note Purchase Agreement (the “Note Purchase Agreement”) governing the issuance of $25,000,000 in aggregate principal amount of Series A Senior Notes, Tranche A, due December 21, 2026, with a fixed interest rate of 8.10% per year (the “2026 Notes”), and $25,000,000 in aggregate principal amount of Series A Senior Notes, Tranche B, due December 21, 2028, with a fixed interest rate of 8.20% per year (the “2028 Notes” and, together with the 2026 Notes, the “Notes”), to qualified institutional investors in a private offering exempt from the registration requirements of the 1933 Act. The Notes are guaranteed by VCCEH, a wholly owned subsidiary of the Company. The interest rate of each Note is subject to an adjustment in the event of certain triggering events, including, an Asset Coverage Ratio Event, a Secured Debt Ratio Event, and a Below Investment Grade Event (each as defined in the Note Purchase Agreement). As of December 31, 2024, the Company's asset coverage ratio was below 200%, which triggered an Asset Coverage Ratio Event. Accordingly, effective January 1, 2025, the interest rates of the 2026 Notes and the 2028 Notes increased to 9.10% and 9.20% per year, respectively.

Interest on the Notes are payable semi-annually on June 21 and December 21 each year. The 2026 Notes and the 2028 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option prior to September 21, 2026 and September 21, 2028, respectively, at par plus accrued interest to the redemption date and a make-whole premium, and thereafter at par plus accrued interest to the redemption date. In addition, the Company is obligated to offer to prepay the Notes at par plus accrued and unpaid interest up to, but excluding, the date of prepayment, if certain change in control events occur. The Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

On February 2, 2024, in connection with each of the 2026 Notes and the 2028 Notes, the Company entered into an interest rate swap

agreement for a total notional amount of $25,000,000 and $25,000,000 that matures on December 21, 2026 and December 21, 2028,

respectively. Under the interest rate swap agreement for the 2026 Notes and the 2028 Notes, the Company receives a fixed interest rate of 8.10% and 8.20% and pays a floating interest rate of SOFR + 4.226% and SOFR + 4.595%, respectively. The Company designated these interest rate swaps, the 2026 Notes, and the 2028 Notes as a qualifying fair value hedge accounting relationship. For more information, see “ Note 5. Derivative Instruments ” to the consolidated financial statements included in this Annual Report on Form 10-K.

At December 31, 2025, and December 31, 2024 the carrying amount of the Notes approximated their fair value. The fair values of the Company's debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Notes would be deemed to be Level 3 investments.

The following table summarizes the interest expenses and amortization of debt issuance costs incurred on the Notes for the year ended December 31, 2025 and 2024 (dollars in thousands):

For the year ended December 31,

2026 Notes interest

2028 Notes interest

Amortization of debt issuance costs

Effect of interest rate swap

Total

Weighted average stated interest rate, net of effect of interest rate swaps (annualized)

Weighted average outstanding balance

Contractual Obligations

The following table shows the contractual maturities of our debt obligations as of December 31, 2025 (dollars in thousands):

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Payments Due by Period

Contractual Obligations

Total

Less than

1 Year

Years

Years

More than

5 Years

SMBC Facility

2026 Notes

2028 Notes

VCC CLO

Total debt obligations

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Related-Party Transactions

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

the Investment Advisory Agreement;

the Administration Agreement;

the Expense Reimbursement Agreement;

the Fronting Letter Agreement; and

the Placement Agent Agreements.

For more information on the above agreements, see "Note 7. Related Party Transactions" in our consolidated audited financial statements in this Annual Report on Form 10-K.

On June 3, 2025, the Company and certain of its affiliates were granted an order for co-investment exemptive relief by the SEC based on an updated model of co-investment order that was recently granted by the SEC (the “Order”). The Order supersedes the prior exemptive order granted on December 22, 2022. The Order permits the Company to participate in negotiated co-investment transactions with other funds managed by the Adviser and certain other affiliates pursuant to the conditions of the Order. The Order requires that a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Board make certain findings with respect to the following, among other things: (1) when the Company co-invests with an affiliated entity (as defined in the exemptive application) in an issuer where an affiliated entity has an existing investment in the issuer under certain circumstances, and (2) if the Company disposes of an asset acquired in a co-investment transaction unless the disposition is done on a pro rata basis or the disposition is of a tradable security. Pursuant to the Order, the Board will oversee the Company’s participation in the co-investment program. As required by the Order, the Company has adopted, and the Board has approved, policies and procedures reasonably designed to ensure the Company’s compliance with the conditions of the Order, and the Adviser and the Company’s Chief Compliance Officer will provide reporting to the Board.

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Off-Balance Sheet Arrangements

Portfolio Company Commitments

As of December 31, 2025 and December 31, 2024, we had commitments under loan and financing agreements to fund up to $104.9 million to 76 portfolio companies and $112.5 million to 53 portfolio companies, respectively. These commitments are primarily composed of senior secured term loans and revolvers, including underlying investments in the SDLP, and an analysis of their fair value is included in the Consolidated Schedule of Investments. The commitments are generally subject to the borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio. A summary of the composition of the unfunded commitments as of December 31, 2025 and December 31, 2024 are shown in the table below (dollars in thousands):

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Issuer

As of December 31, 2025

As of December 31, 2024

360 Partners LLC

360 Partners LLC

3G Intermediate, Inc.

3G Intermediate, Inc.

Accupac, LLC

ACP Oak Buyer, Inc.

ACP Oak Buyer, Inc.

ACP Oak Buyer, Inc.

ACP Vault Acquisition, Inc.

ACP Vault Acquisition, Inc.

ADPD Holdings, LLC

ADPD Holdings, LLC

ADPD Holdings, LLC

Advanced Web Technologies Holding Company

Advanced Web Technologies Holding Company

Alert SRC Newco LLC

Alert SRC Newco LLC

Allergy & Clinical MidCo, LLC

Allergy & Clinical MidCo, LLC

Apex Dental Partners, LLC

Apex Dental Partners, LLC

Basin Innovation Group, LLC

Basin Innovation Group, LLC

Bebright MSO, LLC

Bebright MSO, LLC

BH Buyer, Inc.

Big Bucks Acquisition Corporation

Boulder Scientific Company, LLC

National Safety Apparel LLC (fka BPCP NSA Intermedco, Inc.)

National Safety Apparel LLC (fka BPCP NSA Intermedco, Inc.)

BRG Acquisition Co., LLC

Castleworks Home Services Company

Concord III, L.L.C.,

Distinct Holdings, Inc.

DRML Holdings LLC

DRML Holdings LLC

Easy Ice, LLC

Easy Ice, LLC

Easy Ice, LLC

Eventus Buyer, LLC

Eventus Buyer, LLC

Express Wash Acquisition Company, LLC

Eye Health America, LLC

Eye Health America, LLC

FS Squared Holding Corp.

FS Squared Holding Corp.

FS Squared Holding Corp.

Gen4 Dental Partners OPCO, LLC

Gen4 Dental Partners OPCO, LLC

Graffiti Buyer, Inc.

Healthfuse, LLC

Hissho Parent, LLC

HLSG Intermediate, LLC

HLSG Intermediate, LLC

Horizon Freight Holdings, Inc.

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Issuer

As of December 31, 2025

As of December 31, 2024

Horizon Freight Holdings, Inc.

Horizon Freight Holdings, Inc.

HTI Intermediate, LLC

HTI Intermediate, LLC

Hub Pen Company, LLC

JTM Foods LLC

KL Bronco Acquisition, Inc.

KL Bronco Acquisition, Inc.

KL Charlie Acquisition Company

Krayden Holdings, Inc.

Krayden Holdings, Inc.

Krayden Holdings, Inc.

Krayden Holdings, Inc.

Lav Gear Intermediate Holdings, INC.

Leiters, Inc.

Lightspeed Buyer, Inc.

Lightspeed Buyer, Inc.

M&D Midco, Inc.

M&D Midco, Inc.

MDI Buyer, Inc.

MDI Buyer, Inc.

MechanAir, LLC

MechanAir, LLC

MES Intermediate, Inc. (fka Municipal Emergency Services, Inc. )

MWD Management, LLC

NBPT Acquisition LLC

NBPT Acquisition LLC

NS and Associates LLC

OIS Management Services, LLC

OIS Management Services, LLC

Oliver Packaging, LLC

Online Labels Group, LLC

Online Labels Group, LLC

Online Labels Group, LLC

Pareto Buyer, LLC

Pareto Buyer, LLC

Pediatric Home Respiratory Services, LLC

Pediatric Home Respiratory Services, LLC

Phia Purchaser, LLC

Phia Purchaser, LLC

Pillr Health Intermediate II, LLC

Pillr Health Intermediate II, LLC

QM Buyer, Inc.

QM Buyer, Inc.

RBS Buyer Inc.

RBS Buyer Inc.

Reliable Medical Supply Acquisitionco LLC

Reliable Medical Supply Acquisitionco LLC

RFI Buyer, Inc.

RFI Buyer, Inc.

RFI Buyer, Inc.

RWA Wealth Partners, LLC

RWA Wealth Partners, LLC

Senior Direct Lending Program, LLC

Sentinel Technologies, Inc

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Issuer

As of December 31, 2025

As of December 31, 2024

SGA Dental Partners Opco, LLC

SHF Holdings, Inc.

SI Holdings, Inc.

Source Holding Delaware, LLC

Source Holding Delaware, LLC

Techmer BB Bidco, LLC

Techmer BB Bidco, LLC

Titan Group Holdco, LLC

Titan Group Holdco, LLC

Titan Group Holdco, LLC

UHY Advisors, Inc.

UHY Advisors, Inc.

US Health Partners Management, LLC

US Health Partners Management, LLC

U.S. Urology Partners, LLC

U.S. Urology Partners, LLC

Specialized Dental Holdings II, LLC

USN Opco, LLC

USSC Holding Corp.

Velocity Buyer, Inc.

VG Target Holdings, LLC

VP Security Buyer, Inc.

VP Security Buyer, Inc.

VTC Buyer Corp

VTC Buyer Corp

VTC Buyer Corp

Xifin, Inc.

Zavation Medical Products, LLC

Zep Holdco Inc.

Total Unfunded Commitments

Also included within commitments, as of December 31, 2025, and 2024 were commitments to issue up to $0.2 million and $0.1 million, respectively, in letter of credit through a financial intermediary on behalf of certain portfolio companies. As of December 31, 2025, the Company had not issued any letters of credit. If the Company were to issue any letters of credit, it would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated statements of assets and liabilities. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods.

Valuation of Portfolio Securities.

Investments are valued at the end of each calendar quarter. Most of our investments may be in loans that do not have readily available market quotations. Assets that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Board. In connection with that determination, portfolio company valuations will be prepared using sources, preliminary valuations obtained from independent valuation firms depending on the availability of information on our assets and the type of asset being valued, all in accordance with our valuation policy. The participation of the Adviser in the valuation process could result in a conflict of interest because the Adviser’s management fee is based in part on our gross assets.

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Because fair values, and particularly fair values of private securities and private companies, are inherently uncertain, they may fluctuate over short periods of time, and are often based to a large extent on estimates, comparisons and qualitative evaluations of private information, our determinations of fair value may differ materially from the values that would have been determined if a ready market for these securities existed. This could make it more difficult for our shareholders to value accurately our portfolio investments and could lead to undervaluation or overvaluation of our interests. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility.

NAV as of a particular date may be materially greater than or less than the value that would be realized if assets were to be liquidated as of such date. For example, if we were required to sell a certain asset or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our NAV. Volatile market conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially less than the values of such assets as reflected in NAV.

For more information regarding the fair value hierarchies, our framework for determining fair value and the composition of our portfolio, see "Note 2. Significant Accounting Policies” in our consolidated audited financial statements in this Annual Report on Form 10-K.

Revenue Recognition

Investment transactions are accounted for on a trade-date basis. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously recognized. The Company reports current period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

Investment Income

Interest income, including amortization of premium and accretion of discount, is recorded on the accrual basis to the extent that such amounts are expected to be collected. The Company records amortized or accreted discounts or premiums as interest income using the effective interest method and is adjusted only for material amendments or prepayments. Dividend income, which represents dividends from equity investments and distributions from subsidiaries, if any, is recognized on an accrual basis to the extent that the Company expects to collect such amount.

Interest income from investments in the Subordinated Certificates of SDLP is recorded based on an estimate of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC Topic 325-40, Beneficial Interests in Securitized Financial Assets . The Company monitors the expected cash flows from these investments, including the expected residual payments, and the effective yield is determined and updated periodically. Any difference between the cash distribution received and the amount calculated pursuant to the effective interest method is recorded as an adjustment to the cost basis of such investments.

PIK Interest

The Company may, from time to time, hold loans in its portfolio that contain a payment-in-kind ("PIK") interest provision. PIK interest, computed at the contractual rate specified in each loan agreement, is periodically added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment.

PIK interest, which is a non-cash source of income at the time of recognition, is included in the Company’s taxable income, and therefore affects the amount the Company would be required to distribute to its shareholders to maintain its tax treatment as a RIC for federal income tax purposes, even though the Company had not yet collected the cash. For the years ended December 31, 2025 and December 31, 2024, the Company earned PIK interest of $2.6 million and $2.3 million, respectively, reflected on the accompanying consolidated statements of operations as part of interest income.

When the Company does not expect the borrower will be able to pay future accrual of PIK interest, the Company will place the investment's PIK interest on non-accrual status and will generally cease recognizing PIK interest income on that loan for financial reporting purposes. As of December 31, 2025, the Company had investments in three portfolio companies that were current on cash interest payments and were on non-accrual status with respect to its PIK interest only.

Fee Income

Origination fees received are recorded as deferred income and recognized as investment income over the term of the loan. Upon prepayment of a loan, any unamortized origination fees are recorded as investment income. The Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, covenant waiver fees and loan amendment fees, and are recorded as investment income when earned. Some of the fees earned by the Company may be PIK fee income. For the year ended December 31, 2025, and 2024, the Company did not earn any PIK fee income.

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Non-accrual loans

A loan can be left on accrual status during the period the Company is pursuing repayment of the loan. Management reviews all loans that become 90 days or more past due on principal and interest, or when there is reasonable doubt that principal or interest will be collected, for possible placement on non-accrual status. When a loan is placed on non-accrual status, unpaid interest credited to income is reversed. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans are recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid, and, in management’s judgment, payments are likely to remain current. As of December 31, 2025, certain loans in one portfolio company held by the Company were on non-accrual with an aggregate amortized cost of $6.1 million and a fair value of $2.0 million, respectively. As of December 31, 2024, there were no loans on non-accrual.

Recent Developments

Dividend Declaration

On March 12, 2026, the Board declared a dividend of $0.2300 per share payable on April 24, 2026 to shareholders of record as of the close of business on March 31, 2026.

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