AB 2020 Form 10-K

The 1940 Act provides that the Fund may not change the nature of its business so as to cease to be, or withdraw its election as, a BDC unless authorized by vote of a majority of the outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if the holders of more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. The Fund does not anticipate any substantial change in the nature of its business. As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements. A majority of the Fund’s directors must be persons who are not “interested persons,” as that term is defined in the 1940 Act. Additionally, the Fund is required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC. Furthermore, as a BDC, the Fund is prohibited from protecting any director or officer against any liability to the Fund or its stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office. As a BDC, the Fund is required to meet an asset coverage ratio, defined under the 1940 Act, as amended by the Small Business Credit Availability Act (the “SBCAA”), as the ratio of the Fund’s gross assets (less all liabilities and indebtedness not represented by senior securities) to the Fund’s outstanding senior securities, of at least 150% after each issuance of senior securities. On July 5, 2018, the Board voted to approve the adoption of the reduced asset coverage ratio and separately recommended that stockholders approve the reduced asset coverage requirements at the Fund’s 2018 annual meeting of stockholders. On September 26, 2018, at the Fund’s 2018 annual meeting of stockholders, stockholders approved the reduction of the required minimum asset coverage ratio applicable to the Fund from 200% to 150%, which took effect on September 27, 2018. This reduction in the required minimum asset coverage ratio increases the amount of debt that the Fund is permitted to incur. See “ Risk Factors — Risks Related to The Fund’s Business and Structure — The SBCAA allows the Fund to incur additional leverage, which may increase the risk of investing with the Fund. ” The Fund is prohibited under the 1940 Act from knowingly participating in certain transactions with its affiliates without the prior approval of the Independent Directors and, in some cases, prior approval by the SEC. The Fund does not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, the Fund generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of its total assets in the securities of one investment company or invest more than 10% of the value of its total assets in the securities of investment companies in the aggregate. SEC rules permit BDCs to exceed these limits subject to certain conditions. The portion of the Fund’s portfolio invested in securities issued by investment companies ordinarily will subject the Fund’s stockholders to additional expenses. The Fund’s investment portfolio is also subject to diversification requirements by virtue of its intention to qualify as a RIC for U.S. tax purposes. The Fund is generally not able to issue and sell its common stock at a price below net asset value per share. See “ Risk Factors — Risks Related to the Fund’s Business and Structure — Regulations governing the Fund’s operation as a BDC affect the Fund’s ability to raise additional capital and the way in which it does so. As a BDC, the necessity of raising additional capital may expose the Fund to risks, including the typical risks associated with leverage .” The Fund may, however, sell its common stock, or warrants, options or rights to acquire its common stock, at a price below the then-current net asset value of its common stock if the Board determines that such sale is in the Fund’s best interests and the best interests of its stockholders, and its stockholders approve such sale. In addition, the Fund may issue new Shares at a price below net asset value in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances. As a BDC, the Fund is limited in its ability to invest in any portfolio company of a fund which the Adviser manages or in which the Fund’s affiliates currently is investing, or to make any co-investments with the Adviser or such of its affiliates without an exemptive order from the SEC, subject to certain exceptions. The Fund is subject to periodic examination by the SEC for compliance with the 1940 Act. As a BDC, the Fund is subject to certain risks and uncertainties. See “ Risk Factors — Risks Related to the Fund’s Business and Structure .” 24