AB 2020 Form 10-K

Changes to United States tariff and import/export regulations may have a negative effect on the Fund’s portfolio companies and, in turn, harm the Fund. There has been ongoing discussion and commentary regarding potential significant changes to United States trade policies, treaties and tariffs. The current administration, along with Congress, has created significant uncertainty about the future relationship between the United States and other countries with respect to such trade policies, treaties and tariffs. 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. Any of these factors could depress economic activity and restrict the Fund’s portfolio companies’ access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact the Fund. Defaults by the Fund’s portfolio companies will harm its operating results. A portfolio company’s failure to satisfy financial or operating covenants imposed by the Fund or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that the Fund holds. The Fund 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. These expenses could materially and adversely affect the Fund’s operating results and cash flow. Any unrealized losses the Fund experiences on its loan portfolio may be an indication of future realized losses, which could reduce its income available for distribution. As a BDC, the Fund will be required to carry its investments at market value or, if no market value is ascertainable, at the fair value as determined in good faith by the Board. Decreases in the market values or fair values of the Fund’s investments will be recorded as unrealized depreciation. Any unrealized losses in the Fund’s loan portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to the Fund with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of the Fund’s income available for distribution in future periods. The Fund may pay distributions from offering proceeds, borrowings or the sale of assets to the extent its cash flows from operations, net investment income or earnings are not sufficient to fund declared distributions. The Fund may fund distributions from the uninvested proceeds of an offering and borrowings, and the Fund has not established limits on the amount of funds it may use from such proceeds or borrowings to make any such distributions. The Fund has paid and may continue to pay distributions from the sale of assets to the extent distributions exceed its earnings or cash flows from operations. Distributions from offering proceeds or from borrowings could reduce the amount of capital the Fund ultimately invests in its investment portfolio. Prepayments of the Fund’s debt investments by its portfolio companies could adversely impact its results of operations and reduce its return on equity. The Fund will be subject to the risk that the investments the Fund makes in its portfolio companies may be repaid prior to maturity. When this occurs, the Fund may reinvest these proceeds in temporary investments, pending future investment in new portfolio companies, so that 70% of the Fund’s assets are qualifying assets. These temporary investments will typically have substantially lower yields than the debt being prepaid and the Fund could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, the Fund’s results of operations could be materially adversely affected if one or more of the Fund’s portfolio companies elect to prepay amounts owed to the Fund. Additionally, prepayments could negatively impact the Fund’s return on equity. To the extent the Fund uses debt to finance its investments, changes in interest rates will affect its cost of capital and net investment income. To the extent the Fund uses debt to finance its investments, its net investment income will depend, in part, upon the difference between the rate at which it borrows funds and the rate at which it invests those funds. In addition, many of the Fund’s debt investments and borrowings have floating interest rates that reset on a periodic basis, and many of its investments are subject to interest rate floors. As a result, a change in market interest rates could have a material adverse effect on the Fund’s net investment 55