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Approach—We are committed to a value oriented philosophy used by the investment professionals who manage our portfolio and will seek to minimize the risk of capital loss without foregoing potential for capital appreciation.

We have identified several criteria, discussed below, that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for our investment decisions. However, we caution that not all of these criteria will be met by each prospective portfolio company in which we choose to invest.

Generally, we will seek to use our experience and access to market information to identify investment candidates and to structure investments quickly and effectively.

Target Characteristics– In focusing on Floating Rate Loans, our primary investment focus differs from that of PennantPark Investment Corporation, a business development company for which the Investment Adviser also acts as investment adviser, although there may be overlap in terms of targeted investments for us and such other entity. Floating Rate Loans are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions. Portfolio Companies may obtain Floating Rate Loans to refinance existing debt and for acquisitions, dividends and leveraged buyouts as well as for general corporate purposes.

Investment Size– Investments will initially generally range between $2 million and $20 million on average, although we expect that this investment size will vary proportionately with the size of our capital base. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns.

Investment Structure– We expect our Floating Rate Loans to have terms of three to ten years. We may obtain security interests in the assets of our portfolio companies that will serve as collateral in support of the repayment of these loans. This collateral may take the form of first or second priority liens on the assets of a portfolio company.

In the case of our Floating Rate Loans, we will seek to tailor the terms of the investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its business plan and improve its profitability.