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SKRADD Non-Traded BDC Index Methodology

Index Objective

The SKRADD Non-Traded BDC (“SKRADD-BDC”) Index aims to track the performance of the 20 largest non-traded business development companies (“BDC”), based on net assets and subject to the eligibility requirements discussed below. The constituents of the index are weighted by net assets, with a maximum weight cap of 10% for any individual constituent. The index is calculated on a quarterly basis and rebalanced annually. The index has a Base Date of December 31, 2020, and a Base Value of 100.0.

Any changes to or deviations from the methodology described are made in the sole judgment and discretion of SK Research and Due Diligence, LLC so that the index continues to achieve its objective.

Index Eligibility

To be eligible for inclusion in the SKRADD-BDC Index, a BDC must meet the following criteria:

  • It must be a non-traded company structured as a BDC, as specified in its SEC filings.

Constituent Selection

The index includes the 20 largest non-traded BDCs, as determined by their net assets as of the rebalancing reference date, provided they satisfy the index eligibility criteria.

Constituent Weighting and Rebalancing

The index is rebalanced annually at the end of each calendar year. During rebalancing, the constituents are assigned weights based on their most recently reported net assets.

Individual index constituents are limited to a maximum weight of 10% and the excess weight is distributed proportionately among the remaining index constituents.

Event-Driven Constituent Removal and Impact on Index Composition

A constituent of the SKRADD-BDC Index may undergo certain significant corporate events that could render it ineligible for inclusion in the index. These events include, but are not limited to, an initial public offering, a merger, or a liquidation. Should a constituent experience any such qualifying event, it remains in the index only until the end of the quarter preceding the occurrence of the event. It is removed from subsequent index calculations within that indexing year.

Following the removal of an ineligible constituent due to a qualifying event, the index does not undertake midyear replacements. The constituent is only replaced during the annual rebalancing. Therefore, there may be instances when the index comprises less than 20 constituents for a certain period of the indexing year.

Index Calculation

Individual Constituent Quarterly Returns

For each constituent BDC, the quarterly total return is calculated. This return includes both capital appreciation and reinvested distributions, where applicable. The specific methodology for calculating the quarterly return may depend on the available data and any adjustments required by the BDC’s reporting characteristics in SKRADD’s discretion.

Weighted Returns

The next step involves weighting the individual constituent returns based on their respective weights. The quarterly return of each constituent is multiplied by its corresponding weight.

Index Return Calculation

The index return for the calendar quarter is obtained by summing the weighted returns of all the constituent BDCs in the index. This provides an aggregated measure of the performance of the index during that quarter:

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