AB 2020 Form 10-K

The annual distribution requirement will be satisfied if the Fund distributes to the Fund’s stockholders on an annual basis at least 90% of the Fund’s net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because the Fund may use debt financing, the Fund is 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 the Fund from making distributions necessary to satisfy the distribution requirement. If the Fund is unable to obtain cash from other sources, the Fund could fail to qualify as a RIC. If the Fund fails to qualify as a RIC for any reason and therefore becomes subject to corporate income tax, the resulting corporate taxes could substantially reduce the Fund’s net assets, the amount of income available for distribution and the amount of the Fund’s distributions. There are risks that may arise in connection with the rules under ERISA related to investment by ERISA Plans. The Fund intends to operate so that it will be an appropriate investment for employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Fund will use reasonable efforts to conduct the Fund’s affairs so that the assets of the Fund will not be deemed to be “plan assets” for purposes of ERISA. In this regard, prior to the completion of a Qualified IPO, the Fund may be (and currently are) operated as an annual “venture capital operating company,” under the ERISA rules in order to avoid its assets being treated as “plan assets” for purposes of ERISA. Accordingly, there may be constraints on the Fund’s ability to make or dispose of investments at optimal times (or to make certain investments at all). The Fund may have difficulty paying its required distributions if it recognizes income before or without receiving cash representing such income. For U.S. federal income tax purposes, the Fund will include in its taxable income certain amounts that it has not yet received in cash, such as original issue discount, which may arise if it receives warrants in connection with the origination of a loan or possibly in other circumstances, or contractual “payment-in-kind,” or PIK interest, which 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 Fund’s taxable income before it receives any corresponding cash payments. The Fund 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 Fund may recognize taxable income before or without receiving corresponding cash payments, it may have difficulty meeting the annual distribution requirement necessary to maintain its qualification as a RIC. Accordingly, to satisfy its RIC distribution requirements, the Fund may have to sell some of its investments at times and/or at prices it would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities. If the Fund is not able to obtain cash from other sources, it may fail to qualify as a RIC and thus become subject to corporate-level income tax. For additional discussion regarding the tax implications of the Fund’s election to be taxed as a RIC, please see “ Business — Material U.S. Federal Income Tax Considerations. ” The Fund may in the future choose to pay dividends in its own stock, in which case you may be required to pay tax in excess of the cash you receive. The Fund may distribute dividends that are payable predominantly in Shares. Under certain private rulings issued by the Internal Revenue Service, distributions payable to stockholders in cash or stock at the election of stockholders are treated as taxable dividends even if the total amount of the distribution payable in cash is limited, provided that at least 20% of the distribution is payable in cash. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of the Fund’s current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of the Fund’s stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, the Fund may be required to withhold U.S. federal tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of the Fund’s stockholders sell Shares in order to pay taxes owed on dividends, it may put downward pressure on the trading price of the Fund’s stock if the Fund is publicly traded. There is a risk that the Fund’s stockholders may not receive any distributions. The Fund intends to make distributions on a quarterly basis to its stockholders out of assets legally available for distribution, or at other times, as determined by the Board in its discretion. The Fund cannot assure you that it will achieve investment results that will allow it to make a specified level of cash distributions. In addition, due to the asset coverage test applicable to the Fund as a BDC, the Fund may be limited in its ability to make distributions. See “ Business — Regulation as a Business Development Company. ” 41