KKR FS Income Trust 10Q 2024 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________

FORM 10-Q

_________________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 814-01620

_________________________________________________

KKR FS Income Trust

(Exact name of registrant as specified in its charter)

_________________________________________________


Delaware						88-0591692
(State of Organization)						(I.R.S. Employer Identification Number)

201 Rouse Boulevard Philadelphia, Pennsylvania						19112
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (215) 495-1150

_______________________________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	x	Smaller reporting company	¨

		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.

Securities registered pursuant to Section 12(b) of the Act.

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

N/A

Indicate the number of shares outstanding of each of the issuer’s classes of common shares, as of the latest practicable date.

The number of shares of the registrant’s common shares of beneficial interest, par value $0.01 per share, outstanding as of October 31, 2024 was 23,168,304 of Class I shares.

TABLE OF CONTENTS



		Page
PART I—FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	1
	Consolidated Statements of Assets and Liabilities as of September 30, 2024 (Unaudited) and December 31, 2023	1
	Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023	2
	Unaudited Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2024 and 2023	3
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	4
	Consolidated Schedules of Investments as of September 30, 2024 (Unaudited) and December 31, 2023	14
	Notes to Unaudited Consolidated Financial Statements	18
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	57
ITEM 4.	CONTROLS AND PROCEDURES	58

PART II—OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	59
ITEM 1A.	RISK FACTORS	59
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	59
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	60
ITEM 4.	MINE SAFETY DISCLOSURES	60
ITEM 5.	OTHER INFORMATION	60
ITEM 6.	EXHIBITS	61
	SIGNATURES	62

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

KKR FS Income Trust

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share amounts)


	September 30, 2024
	(Unaudited)		December 31, 2023
Assets
Investments, at fair value
Non-controlled/unaffiliated investments (amortized cost—$804,410 and $259,157, respectively)	$	816,188	$	262,547
Non-controlled/affiliated investments (amortized cost—$7,679 and $0, respectively)	7,985		—
Controlled/affiliated investments (amortized cost—$3,799 and $1,304, respectively)	3,919		1,383
Total investments, at fair value (amortized cost—$815,888 and $260,461, respectively)	828,092		263,930
Cash	36,278		78,558
Foreign currency (amortized cost—$1,330 and $425, respectively)	1,337		433
Receivable for investments sold and repaid	151		210
Income receivable	7,752		3,204
Expense support receivable	—		436
Deferred financing costs	3,589		3,781
Prepaid expenses and other assets	266		184
Total assets	$	877,465	$	350,736

Liabilities
Payable for investments purchased	$	23,900	$	8,400
Debt(1)	222,228		94,231
Unrealized depreciation on foreign currency forward contracts	119		—
Shareholders’ distributions payable	7,302		2,030

Organizational and offering costs payable	1,749		—


Accrued capital gains incentive fee(2)	1,362		390
Administrative services expense payable	590		174
Accrued accounting and administrative fees	55		43
Interest payable	2,429		445

Other accrued expenses and liabilities	557		614
Total liabilities	260,291		106,327

Commitments and contingencies(3)

Series A Preferred Shares, $0.001 par value, unlimited shares authorized, 515 and 515 shares issued and outstanding, respectively; liquidation preference of $515 and $515, respectively	515		515

Shareholders’ equity
Common Shares, $0.01 par value, unlimited shares authorized, 20,862,875 and 8,457,385 Class I shares issued and outstanding, respectively	209		85
Capital in excess of par value	603,483		238,811
Retained earnings (accumulated deficit)	12,967		4,998
Total shareholders’ equity	616,659		243,894
Total liabilities, preferred shares and shareholders’ equity	$	877,465	$	350,736
Net asset value per share of common shares at period end	$	29.56	$	28.84

_______________

(1)See Note 9 for a discussion of the Company’s financing arrangements.

(2)See Note 2 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees.

(3)See Note 10 for a discussion of the Company’s commitments and contingencies.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Investment income
From non-controlled/unaffiliated investments:
Interest income	$	19,809	$	3,884	$	42,795	$	4,586

Fee income	2,253		509		4,812		760
Dividend and other income	115		81		1,158		81
From non-controlled/affiliated investments:
Interest income	136		—		200		—

Fee income	8		—		8		—

From controlled/affiliated investments:



Dividend and other income	86		—		114		—
Total investment income	22,407		4,474		49,087		5,427

Operating expenses
Management fees	1,596		523		3,428		585
Subordinated income incentive fees(1)	2,034		399		4,250		399
Capital gains incentive fees(1)	247		203		971		404
Interest expense(2)	3,804		292		9,172		292
Administrative services expense	560		357		1,376		499
Accounting and administrative fees	72		1		186		4

Organizational and offering costs	1,025		—		2,290		—
Insurance expense	46		92		137		329
Audit expense	147		200		436		332
Other general and administrative expenses	469		136		1,008		220
Total operating expenses	10,000		2,203		23,254		3,064
Management and incentive fee waivers	(3,630)		(922)		(7,678)		(984)
Expense waiver(3)	—		—		—		(147)
Recoupment of previously waived expenses(3)	—		—		436		—
Net expenses	6,370		1,281		16,012		1,933
Net investment income	16,037		3,193		33,075		3,494

Realized and unrealized gain/loss
Net realized gain (loss) on investments:
Non-controlled/unaffiliated investments	21		—		77		17


Net realized gain (loss) on foreign currency forward contracts	9		—		9		—
Net realized gain (loss) on foreign currency	(192)		(52)		(141)		(54)
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/unaffiliated investments	2,921		1,335		8,388		3,083
Non-controlled/affiliated investments	319		—		306		—
Controlled/affiliated investments	(29)		—		41		—
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts	(113)		—		(119)		—
Net change in unrealized appreciation (depreciation) on foreign currency	(962)		348		(793)		351
Total net realized and unrealized gain (loss)	1,974		1,631		7,768		3,397
Net increase (decrease) in net assets resulting from operations	$	18,011	$	4,824	$	40,843	$	6,891

Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings (Losses) per Share)	$	0.98	$	0.94	$	3.12	$	3.34
Weighted average shares outstanding	18,447,883		5,106,788		13,059,527		2,053,050

_______________

(1)See Note 2 and 4 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees and capital gains incentive fees.

(2)See Note 9 for a discussion of the Company’s financing arrangements.

(3)See Note 4 for a discussion of the Company’s expense support and conditional reimbursement.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Statements of Changes in Net Assets

(in thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023

Operations
Net investment income (loss)	$	16,037	$	3,193	$	33,075	$	3,494
Net realized gain (loss) on investments, foreign currency forward contracts and foreign currency	(162)		(52)		(55)		(37)
Net change in unrealized appreciation (depreciation) on investments and foreign currency forward contracts	3,098		1,335		8,616		3,083
Net change in unrealized appreciation (depreciation) on foreign currency	(962)		348		(793)		351
Net increase (decrease) in net assets resulting from operations	18,011		4,824		40,843		6,891

Shareholder distributions
Distributions to common shareholders	(16,030)		(2,030)		(32,828)		(2,030)
Distributions to preferred shareholders	(15)		(16)		(46)		(31)
Net decrease in net assets resulting from shareholder distributions	(16,045)		(2,046)		(32,874)		(2,061)

Capital transactions(1)
Issuance of capital	222,940		150,000		363,244		231,500
Reinvestment of shareholder distributions	1,349		—		1,552		—



Net increase (decrease) in net assets resulting from capital share transactions	224,289		150,000		364,796		231,500

Total increase (decrease) in net assets	226,255		152,778		372,765		236,330
Net assets at beginning of period	390,404		90,781		243,894		7,229
Net assets at end of period	$	616,659	$	243,559	$	616,659	$	243,559

_______________

(1)See Note 3 for a discussion of the Company’s capital share transactions.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Statements of Cash Flows

(in thousands, except share and per share amounts)


	Nine Months Ended September 30,
	2024		2023

Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations	$	40,843	$	6,891
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments	(613,073)		(156,127)
Paid-in-kind interest	(1,574)		—
Proceeds from sales and repayments of investments	60,091		1,100
Net realized (gain) loss on investments	(77)		(17)
Net change in unrealized (appreciation) depreciation on investments	(8,735)		(3,083)
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts	119		—
Accretion of discount	(794)		(365)
Amortization of deferred financing costs	722		56
Unrealized (gain)/loss on borrowings in foreign currency	795		(394)
(Increase) decrease in receivable for investments sold and repaid	59		(1)
(Increase) decrease in income receivable	(4,548)		(854)
(Increase) decrease in expense support receivable	436		(147)
(Increase) decrease in prepaid expenses and other assets	(82)		53
Increase (decrease) in payable for investments purchased	15,500		34,753

Increase (decrease) in organizational and offering costs payable	1,749		—


Increase (decrease) in accrued capital gains incentive fee	972		404
Increase (decrease) in administrative services expense payable	416		473
Increase (decrease) in accrued accounting and administrative fees	12		10
Increase (decrease) in interest payable	1,984		34

Increase (decrease) in other accrued expenses and liabilities	(57)		549
Net cash provided by (used in) operating activities	(505,242)		(116,665)
Cash flows from financing activities
Issuance of capital	363,244		231,500
Issuance of preferred shares	—		515
Reinvestment of shareholder distributions	1,552		—

Distributions to common shareholders	(27,556)		—
Distributions to preferred shareholders	(46)		(31)
Borrowings under financing arrangements	439,252		33,030
Repayments under financing arrangements	(312,050)		(22,864)
Deferred financing costs paid	(530)		(980)
Net cash provided by (used in) financing activities	463,866		241,170
Total increase (decrease) in cash	(41,376)		124,505
Cash and foreign currency at beginning of period	78,991		465
Cash and foreign currency at end of period	$	37,615	$	124,970
Supplemental disclosure



Interest paid during the period	$	6,469	$	202

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments

As of September 30, 2024

(in thousands, expect share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Senior Secured Loans—First Lien—108.3%
Advanced Dermatology & Cosmetic Surgery	(f)(i)	Health Care Equipment & Services	SF+625	1.0%	5/7/27	$	827	$	827	$	827
Affordable Care Inc	(f)	Health Care Equipment & Services	SF+550	0.8%	8/2/28	1,654		1,654		1,648
Alera Group Intermediate Holdings Inc	(f)	Insurance	SF+525	0.8%	10/2/28	1,654		1,654		1,664
Amerivet Partners Management Inc	(f)	Health Care Equipment & Services	SF+525	0.8%	2/25/28	3,308		3,308		3,308
Apex Service Partners LLC	(f)	Commercial & Professional Services	SF+500	1.0%	10/24/29	877		877		877
Apex Service Partners LLC	(f)	Commercial & Professional Services	SF+500	1.0%	10/24/30	286		273		284
Apex Service Partners LLC	(f)(g)(i)	Commercial & Professional Services	SF+500	1.0%	10/24/30	21,482		21,250		21,548
Apex Service Partners LLC	(f)	Commercial & Professional Services	SF+500	1.0%	10/24/30	5,531		5,531		5,548
Apex Service Partners LLC	(h)	Commercial & Professional Services	SF+500	1.0%	10/24/29	950		950		950
Apex Service Partners LLC	(h)	Commercial & Professional Services	SF+500	1.0%	10/24/30	2,287		2,287		2,276
Ardonagh Group Ltd/The	(f)(j)	Insurance	SF+475	0.5%	2/17/31	6,826		6,762		6,962
Area Wide Protective Inc	(g)	Commercial & Professional Services	SF+475	1.0%	12/23/30	938		928		930
Area Wide Protective Inc	(g)	Commercial & Professional Services	SF+475	1.0%	12/23/30	2,875		2,868		2,852
Area Wide Protective Inc	(h)	Commercial & Professional Services	SF+475	1.0%	12/23/30	4,312		4,291		4,278
Avetta LLC	(f)	Software & Services	SF+450, 0.0% PIK (2.3% Max PIK)	0.5%	7/26/31	6,557		6,493		6,518
Avetta LLC	(h)	Software & Services	SF+450	0.5%	7/26/30	1,146		1,146		1,140
Avetta LLC	(h)	Software & Services	SF+450, 0.0% PIK (2.3% Max PIK)	0.5%	7/26/31	1,605		1,605		1,595
BDO USA PA	(f)(g)	Commercial & Professional Services	SF+600	2.0%	8/31/28	16,885		16,644		17,053
Cadence Education LLC	(f)	Consumer Services	SF+500	0.8%	5/1/31	9,205		9,161		9,215
Cadence Education LLC	(f)	Consumer Services	SF+500	0.8%	5/1/31	768		765		769
Cadence Education LLC	(h)	Consumer Services	SF+500	0.8%	5/1/30	1,414		1,412		1,414
Cadence Education LLC	(h)	Consumer Services	SF+500	0.8%	5/1/31	1,632		1,632		1,634
Carrier Fire Protection	(f)(i)	Commercial & Professional Services	SF+500, 0.0% PIK (3.0% Max PIK)	0.5%	7/1/31	7,798		7,729		7,784
Carrier Fire Protection	(f)(i)	Commercial & Professional Services	SF+500	0.5%	7/1/31	317		310		317
Carrier Fire Protection	(f)(i)	Commercial & Professional Services	E+500, 0.0% PIK (3.0% Max PIK)	0.5%	7/1/31	€	1,934	2,092		2,151
Carrier Fire Protection	(h)(i)	Commercial & Professional Services	SF+500, 0.0% PIK (3.0% Max PIK)	0.5%	7/1/31	$	2,070	2,056		2,067
Carrier Fire Protection	(h)(i)	Commercial & Professional Services	SF+500	0.5%	7/1/31	1,753		1,753		1,750
Clarience Technologies LLC	(f)	Capital Goods	SF+575	0.8%	2/13/30	41		—		41
Clarience Technologies LLC	(f)(g)	Capital Goods	SF+575, 0.0% PIK (2.5% Max PIK)	0.8%	2/13/31	37,430		36,947		37,670
Clarience Technologies LLC	(h)	Capital Goods	SF+575	0.8%	2/13/30	4,026		4,026		4,026
Clarience Technologies LLC	(h)	Capital Goods	SF+575, 0.0% PIK (2.5% Max PIK)	0.8%	2/13/31	4,067		4,026		4,093
CLEAResult Consulting Inc	(f)(g)	Commercial & Professional Services	SF+500, 0.0% PIK (2.5% Max PIK)	0.8%	8/27/31	12,493		12,370		12,368
CLEAResult Consulting Inc	(f)	Commercial & Professional Services	SF+500	0.8%	8/27/31	1,041		1,021		1,031
CLEAResult Consulting Inc	(h)	Commercial & Professional Services	SF+500, 0.0% PIK (2.5% Max PIK)	0.8%	8/27/31	3,123		3,108		3,092
CLEAResult Consulting Inc	(h)	Commercial & Professional Services	SF+500	0.8%	8/27/31	1,041		1,041		1,031

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Community Brands Inc	(g)	Software & Services	SF+525	0.8%	7/1/31	$	5,836	$	5,779	$	5,821
Community Brands Inc	(h)	Software & Services	SF+525	0.8%	7/1/31	641		641		639
Community Brands Inc	(h)	Software & Services	SF+525	0.8%	7/1/31	1,644		1,644		1,640
CSafe Global	(f)(g)	Transportation	SF+575	0.8%	12/14/28	28,896		28,902		29,184
CSafe Global	(f)	Transportation	SA+575	0.8%	12/14/28	£	3,868	4,886		5,234
CSafe Global	(f)	Transportation	SF+575	0.8%	3/8/29	$	2,245	2,248		2,245
CSafe Global	(h)	Transportation	SF+575	0.8%	3/8/29	633		633		633
Dental365 LLC	(f)	Health Care Equipment & Services	SF+575	0.8%	5/5/28	177		177		177
Dental365 LLC	(f)(g)	Health Care Equipment & Services	SF+525	0.8%	8/5/28	10,452		10,452		10,432
Dental365 LLC	(h)	Health Care Equipment & Services	SF+575	0.8%	5/5/28	2,039		2,039		2,035
Dental365 LLC	(h)	Health Care Equipment & Services	SF+525	0.8%	8/5/28	4,955		4,955		4,945
DOXA Insurance Holdings LLC	(f)	Insurance	SF+525	0.8%	12/20/30	5,723		5,672		5,780
DOXA Insurance Holdings LLC	(f)	Insurance	SF+550	0.8%	12/20/30	4,729		4,729		4,777
DOXA Insurance Holdings LLC	(h)	Insurance	SF+550	0.8%	12/20/29	1,233		1,233		1,233
DOXA Insurance Holdings LLC	(h)	Insurance	SF+550	0.8%	12/20/30	712		712		719
DOXA Insurance Holdings LLC	(h)	Insurance	SF+500	0.8%	12/20/30	838		838		844
DuBois Chemicals Inc	(f)(g)	Materials	SF+475	0.8%	6/13/31	12,786		12,724		12,797
DuBois Chemicals Inc	(h)	Materials	SF+475	0.8%	6/13/31	2,138		2,138		2,138
DuBois Chemicals Inc	(h)	Materials	SF+475	0.8%	6/13/31	2,138		2,138		2,140
Excelitas Technologies Corp	(f)(i)	Technology Hardware & Equipment	SF+525	0.8%	8/12/29	1,095		1,106		1,094
Galway Partners Holdings LLC	(f)	Insurance	SF+525	0.8%	9/30/27	241		241		241
Galway Partners Holdings LLC	(f)	Insurance	SF+450, 0.0% PIK (1.0% Max PIK)	0.8%	9/29/28	8,109		8,109		8,116
Galway Partners Holdings LLC	(h)	Insurance	SF+525	0.8%	9/30/27	677		677		677
Gigamon Inc	(f)	Software & Services	SF+575	1.0%	3/9/29	827		827		827
Granicus Inc	(f)	Software & Services	SF+350, 2.3% PIK (2.3% Max PIK)	0.8%	1/17/31	325		324		330
Granicus Inc	(f)	Software & Services	SF+350, 2.3% PIK (2.3% Max PIK)	0.8%	1/17/31	3,502		3,502		3,476
Granicus Inc	(h)	Software & Services	SF+525	0.8%	1/17/31	46		46		46
Granicus Inc	(h)	Software & Services	SF+475, 0.0% PIK (1.8% Max PIK)	0.8%	1/17/31	1,339		1,339		1,329
Heritage Environmental Services Inc	(f)(g)	Commercial & Professional Services	SF+525	0.8%	1/31/31	19,953		19,816		20,352
Heritage Environmental Services Inc	(f)	Commercial & Professional Services	SF+500	0.8%	1/31/31	521		521		521
Heritage Environmental Services Inc	(h)	Commercial & Professional Services	SF+550	0.8%	1/31/30	2,797		2,797		2,797
Heritage Environmental Services Inc	(h)	Commercial & Professional Services	SF+500	0.8%	1/31/31	276		276		275
Highgate Hotels Inc	(f)(g)	Consumer Services	SF+550	1.0%	11/5/29	12,641		12,490		12,767
Highgate Hotels Inc	(f)	Consumer Services	SF+550	1.0%	11/5/29	159		147		159
Highgate Hotels Inc	(h)	Consumer Services	SF+550	1.0%	11/5/29	1,433		1,433		1,433
Individual FoodService	(f)(g)	Capital Goods	SF+600	1.0%	10/31/29	22,298		21,933		22,298

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Individual FoodService	(h)	Capital Goods	SF+600	1.0%	10/31/29	$	655	$	655	$	655
Insightsoftware.Com Inc	(f)	Software & Services	SF+525	1.0%	5/25/28	115		115		115
Insightsoftware.Com Inc	(f)	Software & Services	SF+525	1.0%	5/25/28	2,776		2,776		2,774
Insightsoftware.Com Inc	(h)	Software & Services	SF+525	0.8%	5/25/28	1,173		1,173		1,173
Insightsoftware.Com Inc	(h)	Software & Services	SF+525	1.0%	5/25/28	774		774		773
Integrity Marketing Group LLC	(f)(g)(i)	Insurance	SF+500	0.8%	8/25/28	28,404		28,241		28,404
Integrity Marketing Group LLC	(h)(i)	Insurance	SF+500	0.8%	8/28/28	5,291		5,291		5,291
Integrity Marketing Group LLC	(h)(i)	Insurance	SF+500	0.8%	8/28/28	9,188		9,230		9,188
Karman Space Inc	(f)	Capital Goods	SF+625	2.0%	12/21/25	850		839		854
Lazer Logistics Inc	(f)(g)	Transportation	SF+500	0.8%	5/6/30	13,800		13,647		13,897
Lazer Logistics Inc	(h)	Transportation	SF+500	0.8%	5/4/29	1,244		1,230		1,244
Lazer Logistics Inc	(h)	Transportation	SF+500	0.8%	5/6/30	1,918		1,918		1,931
Legends Hospitality LLC	(f)(g)	Consumer Services	SF+500, 0.0% PIK (2.8% Max PIK)	0.8%	8/22/31	17,086		16,918		16,915
Legends Hospitality LLC	(h)	Consumer Services	SF+500, 0.0% PIK (2.5% Max PIK)	0.8%	8/22/30	2,010		2,010		1,990
Legends Hospitality LLC	(h)	Consumer Services	SF+500, 0.0% PIK (2.8% Max PIK)	0.8%	8/22/31	1,005		1,005		995
Lexitas Inc	(f)(g)	Commercial & Professional Services	SF+625	1.0%	5/18/29	20,924		20,613		21,343
Lipari Foods LLC	(f)(g)	Consumer Staples Distribution & Retail	SF+650	1.0%	10/31/28	16,696		16,487		16,506
Lipari Foods LLC	(h)	Consumer Staples Distribution & Retail	SF+650	1.0%	10/31/28	1,930		1,930		1,908
Magna Legal Services LLC	(f)	Commercial & Professional Services	SF+600	0.8%	11/21/29	1,216		1,216		1,228
Magna Legal Services LLC	(f)(g)	Commercial & Professional Services	SF+650	0.8%	11/22/29	9,310		9,152		9,403
Magna Legal Services LLC	(h)	Commercial & Professional Services	SF+650	0.8%	11/22/28	861		848		861
Magna Legal Services LLC	(h)	Commercial & Professional Services	SF+600	0.8%	11/21/29	2,386		2,386		2,410
MAI Capital Management LLC	(f)	Financial Services	SF+475, 0.0% PIK (2.4% Max PIK)	0.8%	8/29/31	8,909		8,865		8,864
MAI Capital Management LLC	(h)	Financial Services	SF+475, 0.0% PIK (2.4% Max PIK)	0.8%	8/29/31	5,235		5,209		5,209
MAI Capital Management LLC	(h)	Financial Services	SF+475	0.8%	8/29/31	1,968		1,968		1,958
MB2 Dental Solutions LLC	(f)(g)	Health Care Equipment & Services	SF+600	0.8%	2/13/31	19,273		19,020		19,436
MB2 Dental Solutions LLC	(h)	Health Care Equipment & Services	SF+600	0.8%	2/13/31	9,149		9,130		9,226
MB2 Dental Solutions LLC	(h)	Health Care Equipment & Services	SF+600	0.8%	2/13/31	1,901		1,882		1,901
Model N Inc	(f)	Software & Services	SF+500, 0.0% PIK (3.0% Max PIK)	0.8%	6/27/31	10,878		10,826		10,871
Model N Inc	(h)	Software & Services	SF+500, 0.0% PIK (3.0% Max PIK)	0.8%	6/27/31	2,220		2,220		2,219
Model N Inc	(h)	Software & Services	SF+500	0.8%	6/27/31	1,184		1,184		1,183
Netsmart Technologies Inc	(f)	Health Care Equipment & Services	SF+475, 0.0% PIK (2.3% Max PIK)	0.5%	8/23/31	31,937		31,780		31,777
Netsmart Technologies Inc	(h)	Health Care Equipment & Services	SF+475, 0.0% PIK (2.3% Max PIK)	0.5%	8/23/31	4,258		4,236		4,236
Netsmart Technologies Inc	(h)	Health Care Equipment & Services	SF+475	0.5%	8/23/31	4,343		4,343		4,321
OEConnection LLC	(f)(g)	Software & Services	SF+525	0.8%	4/22/31	14,725		14,636		14,775
OEConnection LLC	(h)	Software & Services	SF+525	0.8%	4/22/31	2,563		2,560		2,572

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
OEConnection LLC	(h)	Software & Services	SF+525	0.8%	4/22/31	$	1,602	$	1,596	$	1,602
Personify Health Inc	(g)	Software & Services	SF+325, 3.0% PIK (3.0% Max PIK)	0.8%	11/8/29	13,064		13,008		13,194
PSC Group	(f)	Transportation	SF+525	0.8%	4/3/30	231		231		231
PSC Group	(f)	Transportation	SF+525	0.8%	4/3/31	2,662		2,641		2,669
PSC Group	(h)	Transportation	SF+525	0.8%	4/3/30	177		177		177
PSC Group	(h)	Transportation	SF+525	0.8%	4/3/31	543		543		545
Radwell International LLC	(f)	Capital Goods	SF+550	0.8%	4/1/28	363		333		363
Radwell International LLC	(f)(g)	Capital Goods	SF+550	0.8%	4/1/29	28,712		28,377		28,839
Radwell International LLC	(h)	Capital Goods	SF+550	0.8%	4/1/28	1,451		1,451		1,451
Rockefeller Capital Management LP	(f)	Financial Services	SF+500	0.5%	4/4/31	1,702		1,687		1,720
RSC Insurance Brokerage Inc	(f)	Insurance	SF+475	0.8%	11/1/29	395		397		395
RSC Insurance Brokerage Inc	(f)	Insurance	SF+475	0.8%	11/1/29	434		436		434
Service Express Inc	(f)	Commercial & Professional Services	SF+475, 0.0% PIK (2.4% Max PIK)	0.5%	8/15/31	13,705		13,638		13,637
Service Express Inc	(h)	Commercial & Professional Services	SF+475, 0.0% PIK (2.4% Max PIK)	0.5%	8/15/31	3,263		3,263		3,247
Service Express Inc	(h)	Commercial & Professional Services	SF+475	0.5%	8/15/31	1,865		1,865		1,855
Shaw Development LLC	(f)(g)	Capital Goods	SF+600	0.5%	10/30/29	17,168		16,963		17,002
Shaw Development LLC	(h)	Capital Goods	SF+600	0.5%	10/30/29	2,054		2,049		2,034
Spotless Brands LLC	(f)(g)	Consumer Services	SF+575	1.0%	7/25/28	16,198		15,923		16,230
Spotless Brands LLC	(f)	Consumer Services	SF+550	1.0%	7/25/28	404		366		402
Spotless Brands LLC	(h)	Consumer Services	SF+550	1.0%	7/25/28	7,175		7,175		7,139
STV Group Inc	(f)	Capital Goods	SF+525	0.8%	3/20/30	198		197		198
STV Group Inc	(g)	Capital Goods	SF+500	0.8%	3/20/31	6,879		6,813		6,905
STV Group Inc	(h)	Capital Goods	SF+525	0.8%	3/20/30	1,185		1,185		1,185
STV Group Inc	(h)	Capital Goods	SF+500	0.8%	3/20/31	1,975		1,974		1,983
Turnpoint Services Inc	(g)	Capital Goods	SF+500, 0.0% PIK (3.0% Max PIK)	0.8%	6/17/31	5,650		5,595		5,607
Turnpoint Services Inc	(h)	Capital Goods	SF+500, 0.0% PIK (3.0% Max PIK)	0.8%	6/17/30	692		692		687
Turnpoint Services Inc	(h)	Capital Goods	SF+500, 0.0% PIK (3.0% Max PIK)	0.8%	6/17/31	1,108		1,108		1,100
USIC Holdings Inc	(f)(g)	Commercial & Professional Services	SF+550	0.8%	9/10/31	21,075		20,970		20,970
USIC Holdings Inc	(f)	Commercial & Professional Services	SF+550	0.8%	9/10/31	32		32		32
USIC Holdings Inc	(f)	Commercial & Professional Services	SF+525	0.8%	9/10/31	1,303		1,303		1,303
USIC Holdings Inc	(h)	Commercial & Professional Services	SF+550	0.8%	9/10/31	1,211		1,211		1,211
USIC Holdings Inc	(h)	Commercial & Professional Services	SF+525	0.8%	9/10/31	1,379		1,379		1,379
VetCor Professional Practices LLC	(f)	Health Care Equipment & Services	SF+575	0.8%	8/31/29	3,166		3,166		3,166
Wealth Enhancement Group LLC	(f)	Financial Services	SF+550	1.0%	10/4/28	4,678		4,678		4,699
Wealth Enhancement Group LLC	(h)	Financial Services	SF+550	1.0%	10/4/28	298		298		298
Woolpert Inc	(f)(i)	Capital Goods	SF+500	1.0%	4/5/29	557		567		557

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Woolpert Inc	(f)(g)(i)	Capital Goods	SF+500	1.0%	4/5/30	$	20,805	$	20,809	$	20,857
Woolpert Inc	(h)(i)	Capital Goods	SF+500	1.0%	4/5/29	2,536		2,536		2,536
Woolpert Inc	(h)(i)	Capital Goods	SF+500	1.0%	4/5/30	5,195		5,195		5,208
Zeus Industrial Products Inc	(f)	Health Care Equipment & Services	SF+550, 0.0% PIK (2.8% Max PIK)	0.8%	2/28/31	23,314		23,120		23,533
Zeus Industrial Products Inc	(h)	Health Care Equipment & Services	SF+550	0.8%	2/28/30	3,261		3,244		3,261
Zeus Industrial Products Inc	(h)	Health Care Equipment & Services	SF+550	0.8%	2/28/31	4,348		4,326		4,389
Total Senior Secured Loans—First Lien								815,751		823,498
Unfunded Loan Commitments								(155,539)		(155,539)
Net Senior Secured Loans—First Lien								660,212		667,959

Subordinated Debt—0.3%
Apex Service Partners LLC	(f)	Commercial & Professional Services	14.3% PIK (14.3% Max PIK)		4/23/31	1,642		1,622		1,608
Total Subordinated Debt								1,622		1,608

Asset Based Finance—25.7%
Altitude II IRL WH Borrower DAC, Revolver	(f)(j)	Capital Goods	SF+1,000	0.0%	1/12/30	$	71	71		71
Altitude II IRL WH Borrower DAC, Revolver	(h)(j)	Capital Goods	SF+1,000	0.0%	1/12/30	$	71	71		71
Australis Maritime II, ABF Equity	(f)(j)(m)	Transportation				733,056		733		755
Auxilior Capital Partners Inc, Preferred Equity	(f)	Financial Services	5.0%, 9.5% PIK (9.5% Max PIK)		4/30/30	$	1,100	1,100		1,115
Bankers Healthcare Group LLC, Term Loan	(f)(j)	Financial Services	22.0%		11/8/27	$	771	771		758
Bausch Health Cos Inc, Revolver	(f)(j)	Pharmaceuticals, Biotechnology & Life Sciences	SF+665	1.0%	1/28/28	$	18,750	18,244		18,750
Bausch Health Cos Inc, Revolver	(h)(j)	Pharmaceuticals, Biotechnology & Life Sciences	SF+665	1.0%	1/28/28	$	18,750	18,750		18,750
Curia Global Inc, Revolver	(f)(j)	Pharmaceuticals, Biotechnology & Life Sciences	SF+625	1.0%	1/29/29	$	10,500	10,352		10,500
Curia Global Inc, Revolver	(h)(j)	Pharmaceuticals, Biotechnology & Life Sciences	SF+625	1.0%	1/29/29	$	10,333	10,333		10,333
Discover Financial Services, ABF Equity	(f)(j)(k)(m)	Financial Services				646,956		647		647
Discover Financial Services, Subordinated Loan	(f)(j)(m)	Financial Services	15.0%		9/6/34	$	1,201	1,201		1,201
Discover Financial Services, Subordinated Loan	(h)(j)(m)	Financial Services	15.0%		9/6/34	$	8,530	8,530		8,530
Drive Revel, ABF Equity	(f)(j)	Financial Services				267,636		290		364
EFMT 2024-INV1, Term Loan	(e)(f)(j)	Real Estate Management & Development	7.6%		3/25/69	$	6,380	6,083		6,233
FIGRE Trust 2024-HE3, Term Loan	(e)(f)(j)	Real Estate Management & Development	9.3%		7/25/54	$	1,913	1,921		1,972

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Global Lending Services LLC, ABF Equity	(f)(j)(k)	Financial Services				2,941,919		$	2,942	$	3,140
GreenSky Holdings LLC, ABF Equity	(f)(k)(l)	Financial Services				1,332,761		1,333		1,682
GreenSky Holdings LLC, ABF Equity	(f)(j)(k)(l)	Financial Services				2,158,225		2,158		2,115
GreenSky Holdings LLC, Term Loan	(f)(i)(l)	Financial Services	9.3% PIK (9.3% Max PIK)		3/14/34	$	4,188	4,188		4,188
GreenSky Holdings LLC, Term Loan	(h)(i)(l)	Financial Services	9.3% PIK (9.3% Max PIK)		3/14/34	$	374	374		374
HOMES 2024-AFC1 Trust, Structured Mezzanine	(e)(f)(j)	Real Estate Management & Development	7.6%		8/25/59	$	1,944	1,848		1,848
Homeward Opportunities Fund Trust 2024-RRTL2	(e)(f)(j)	Real Estate Management & Development	9.1%		9/25/39	$	7,878	7,878		7,945
KKR Altitude II Offshore Aggregator LP, Partnership Interest	(f)(j)(m)	Capital Goods				1,218,441		1,218		1,316
Lennar Corp, ABF Equity	(f)(j)	Consumer Durables & Apparel				3,621,836		3,622		3,612
Lennar Corp, Term Loan	(f)(j)	Consumer Durables & Apparel	10.8%		8/30/29	$	3,119	3,119		3,119
Lennar Corp, Term Loan	(h)(j)	Consumer Durables & Apparel	10.8%		8/30/29	$	1,487	1,487		1,487
LHOME Mortgage Trust 2024-RTL4	(e)(f)(j)	Real Estate Management & Development	9.3%		7/25/39	$	7,513	7,513		7,618
Norway_France, ABF Equity	(f)(j)(k)	Financial Services				2,679,228		2,981		2,986
Optio Invest, ABF Equity	(f)(j)	Financial Services				459,091		583		595
PayPal Europe Sarl et Cie SCA, ABF Equity	(f)(j)	Financial Services				2,651,412		2,871		3,179
Pretium Partners LLC P1, Structured Mezzanine	(f)(j)	Equity Real Estate Investment Trusts (REITs)	2.8%, 5.3% PIK (5.3% Max PIK)		10/22/26	$	20,676	19,870		20,676
Progress Residential 2024-SFR4 Trust, Structured Mezzanine	(e)(f)(j)	Real Estate Management & Development	3.4%		7/17/41	$	6,250	4,872		5,063
PRPM 2024-RCF4 LLC, Term Loan	(e)(f)(j)	Real Estate Management & Development	4.0%		7/25/54	$	2,813	2,298		2,367
PRPM 2024-RCF5 LLC, Term Loan	(e)(f)(j)	Real Estate Management & Development	4.0%		8/25/54	$	3,750	3,146		3,177
Rosemawr Management LLC, Structured Mezzanine	(f)	Utilities	7.3%		8/15/54	$	653	588		595
Rosemawr Management LLC, Term Loan	(f)	Utilities	5.0%		8/15/54	$	1,102	990		1,007
Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine	(f)(j)	Real Estate Management & Development	8.0%		7/25/30	$	219	219		219
Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine	(f)(j)	Real Estate Management & Development	18.0%		7/25/30	$	147	106		128
Saluda Grade Alternative Mortgage Trust 2022-BC2, Term Loan	(f)(j)	Real Estate Management & Development	7.3%		7/25/30	$	1,313	1,313		1,318
Saluda Grade Alternative Mortgage Trust 2023-LOC2, Structured Mezzanine	(f)(j)	Real Estate Management & Development			10/25/53	$	324,980	531		498
SunPower Financial, ABF Equity	(f)(j)(k)	Financial Services				161,479		161		173
Synovus Financial Corp, ABF Equity	(f)(j)	Banks				1,291,023		1,291		1,380

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
TalkTalk Telecom Group Ltd, Revolver	(f)(j)	Commercial & Professional Services	SA+700	1.5%	9/5/26	£	8,475	$	10,472	$	11,355
TalkTalk Telecom Group Ltd, Revolver	(h)(j)	Commercial & Professional Services	SA+700	1.5%	9/5/26	£	2,368	3,173		2,943
TDC LLP, ABF Equity	(f)(j)	Financial Services				68,953		87		88
TDC LLP, Preferred Equity	(f)(j)	Financial Services	8.0%			£	1,166	1,475		1,574
Trinseo Materials Operating SCA / Trinseo Materials Finance Inc, Revolver	(f)(j)	Materials	SF+475	1.0%	1/18/28	$	8,537	8,537		8,552
Trinseo Materials Operating SCA / Trinseo Materials Finance Inc, Revolver	(h)(j)	Materials	SF+475	1.0%	1/18/28	$	8,537	8,537		8,552
Vehicle Secured Funding Trust, ABF Equity	(f)(j)(k)	Financial Services				2,638,928		2,639		2,739
Vehicle Secured Funding Trust, Term Loan	(f)(i)(j)	Financial Services	15.0% PIK (15.0% Max PIK)		1/25/46	$	7,917	7,917		7,917
Weber-Stephen Products LLC, Revolver	(f)(j)	Consumer Discretionary Distribution & Retail	SF+575	1.0%	12/19/26	$	3,870	3,645		3,889
Weber-Stephen Products LLC, Revolver	(h)(j)	Consumer Discretionary Distribution & Retail	SF+575	1.0%	12/19/26	$	16,964	16,964		17,050
Total Asset Based Finance								222,043		226,514
Unfunded commitments								(67,989)		(67,989)
Net Asset Based Finance								154,054		158,525
TOTAL INVESTMENTS—134.3%								$	815,888	828,092
LIABILITIES AND PREFERRED SHARES IN EXCESS OF OTHER ASSETS—(34.3)%										(211,433)
NET ASSETS—100.0%										$	616,659

Foreign currency forward contracts


Foreign Currency	Settlement Date	Counterparty	Amount and Transaction			US$ Value at Settlement Date		US$ Value at September 30, 2024		Unrealized Appreciation (Depreciation)
EUR	5/25/28	Goldman Sachs Bank USA	€	1,300	Sold	$	1,470	$	1,519	$	(49)
GBP	6/10/25	Goldman Sachs Bank USA	£	2,500	Sold	3,296		3,341		(45)
SEK	10/2/24	Goldman Sachs Bank USA	SEK	4,351	Bought	447		429		(18)
SEK	10/2/24	Goldman Sachs Bank USA	SEK	4,350	Sold	429		429		—
SEK	3/15/27	Goldman Sachs Bank USA	SEK	4,351	Bought	447		445		(2)
SEK	3/15/27	Goldman Sachs Bank USA	SEK	4,351	Sold	440		445		(5)
Total						$	6,529	$	6,608	$	(119)

________

(a)Security may be an obligation of one or more entities affiliated with the named company.

(b)Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of September 30, 2024, the Secured Overnight Financing Rate, or SOFR or “SF”, was 4.59%, the Sterling Overnight Index Average, or SONIA or “SA”, was 4.82% and the Euro Interbank Offered Rate, or EURIBOR or “E”, was 3.28%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the performance of the underlying investment. Variable rate securities with no floor rate use the respective benchmark rate in all cases.

(c)Denominated in U.S. dollars unless otherwise noted.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)

(d)See Note 8 for additional information regarding the fair value of the Company’s financial instruments.

(e)Security is classified as Level 1 or Level 2 in the Company’s fair value hierarchy (see Note 8).

(f)Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).

(g)Security or portion thereof held within K-FIT Finance AB-1 LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Ally Bank (see Note 9).

(h)Security is an unfunded commitment. Reflects the stated spread at the time of commitment, but may not be the actual rate received upon funding.

(i)Position or portion thereof unsettled as of September 30, 2024.

(j)The investment, or portion of the investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company, or BDC, may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of September 30, 2024, of the Company’s total assets represented qualifying assets.

(k)Security is non-income producing.

(l)Under the 1940 Act, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and is generally deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of September 30, 2024, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person as of September 30, 2024:


Portfolio Company	Fair Value at December 31, 2023		Gross Additions(1)		Gross Reductions(2)		Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Fair Value at September 30, 2024		Interest Income(3)		Fee Income(3)		Dividend and Other Income(3)
Asset Based Finance
GreenSky Holdings LLC, ABF Equity	$	—	$	1,333	$	—	$	—	$	349	$	1,682	$	—	$	—	$	—
GreenSky Holdings LLC, ABF Equity	—		2,158		—		—		(43)		2,115		—		8		—
GreenSky Holdings LLC, Term Loan	—		4,188		—		—		—		4,188		200		—		—



Total	$	—	$	7,679	$	—	$	—	$	306	$	7,985	$	200	$	8	$	—

__________

(1)Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.

(2)Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

(3)Interest, fee and dividend and other income presented for the full nine months ended September 30, 2024.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2024

(in thousands, except share amounts)

(m)Under the Investment Company Act of 1940, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and is generally deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of September 30, 2024, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” and deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person and deemed to control as of September 30, 2024:


Portfolio Company	Fair Value at December 31, 2023		Gross Additions(1)		Gross Reductions(2)		Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Fair Value at September 30, 2024		Interest Income(3)		Fee Income(3)		Dividend and Other Income(3)
Asset Based Finance
Australis Maritime II, ABF Equity	$	426	$	352	$	—	$	—	$	(23)	$	755	$	—	$	—	$	57
Discover Financial Services, ABF Equity	—		647		—		—		—		647		—		—		—
Discover Financial Services, Subordinated Loan	—		1,201		—		—		—		1,201		—		—		—
KKR Altitude II Offshore Aggregator LP, Partnership Interest	957		295		—		—		64		1,316		—		—		57



Total	$	1,383	$	2,495	$	—	$	—	$	41	$	3,919	$	—	$	—	$	114

__________

(3)Interest, fee and dividend and other income presented for the full nine months ended September 30, 2024.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Consolidated Schedule of Investments

As of December 31, 2023

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Senior Secured Loans—First Lien—83.8%
Apex Service Partners LLC	(f)	Commercial & Professional Services	SF+650	1.0%	10/24/29	$	146	$	146	$	144
Apex Service Partners LLC	(f)(g)	Commercial & Professional Services	SF+500, 2.0% PIK (2.0% Max PIK)	1.0%	10/24/30	22,408		22,150		22,128
Apex Service Partners LLC	(h)	Commercial & Professional Services	SF+650	1.0%	10/24/29	1,682		1,682		1,661
Apex Service Partners LLC	(h)	Commercial & Professional Services	SF+500, 2.0% PIK (2.0% Max PIK)	1.0%	10/24/30	4,264		4,264		4,211
BDO USA PA	(f)(g)(i)	Commercial & Professional Services	SF+600	2.0%	8/31/28	17,012		16,751		16,842
DOXA Insurance Holdings LLC	(f)	Insurance	SF+550	0.8%	12/31/30	5,751		5,694		5,694
DOXA Insurance Holdings LLC	(h)	Insurance	SF+550	0.8%	12/20/29	1,233		1,233		1,233
DOXA Insurance Holdings LLC	(h)	Insurance	SF+550	0.8%	12/31/30	5,465		5,465		5,410
Highgate Hotels Inc	(g)	Consumer Services	SF+550	1.0%	11/5/29	6,368		6,306		6,305
Highgate Hotels Inc	(h)	Consumer Services	SF+550	1.0%	11/5/29	796		796		788
Individual FoodService	(f)(g)	Capital Goods	SF+600	1.0%	10/31/29	21,387		20,975		20,959
Individual FoodService	(h)	Capital Goods	SF+600	1.0%	10/31/29	1,731		1,731		1,696
Individual FoodService	(h)	Capital Goods	SF+600	1.0%	10/31/29	1,764		1,764		1,729
Integrity Marketing Group LLC	(f)	Insurance	SF+650	0.8%	8/27/26	2,837		2,810		2,837
Integrity Marketing Group LLC	(f)(g)	Insurance	SF+600	0.8%	8/27/26	20,657		20,456		20,616
Integrity Marketing Group LLC	(h)	Insurance	SF+650	1.0%	8/27/26	4,525		4,525		4,525
Lazer Logistics Inc	(f)(g)	Transportation	SF+550	0.8%	5/6/30	1,119		1,113		1,096
Lazer Logistics Inc	(f)(g)	Transportation	SF+625	0.8%	5/6/30	11,819		11,655		12,035
Lazer Logistics Inc	(h)	Transportation	SF+625	0.8%	5/4/29	1,244		1,228		1,244
Lazer Logistics Inc	(h)	Transportation	SF+550	0.8%	5/6/30	2,877		2,877		2,818
Lexitas Inc	(f)(g)	Commercial & Professional Services	SF+675	1.0%	5/18/29	16,441		16,093		16,694
Lexitas Inc	(h)	Commercial & Professional Services	SF+675	1.0%	5/18/29	4,643		4,643		4,714
Lipari Foods LLC	(f)(g)	Consumer Staples Distribution & Retail	SF+650	1.0%	10/31/28	16,823		16,553		16,688
Lipari Foods LLC	(h)	Consumer Staples Distribution & Retail	SF+650	1.0%	10/31/28	1,930		1,930		1,915
Magna Legal Services LLC	(g)	Commercial & Professional Services	SF+650	0.8%	11/22/29	7,325		7,185		7,322
Magna Legal Services LLC	(f)	Commercial & Professional Services	SF+650	0.8%	11/22/29	2,051		2,013		2,050
Magna Legal Services LLC	(f)	Commercial & Professional Services	SF+600	0.8%	11/21/29	124		124		122

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Consolidated Schedule of Investments (continued)

As of December 31, 2023

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Magna Legal Services LLC	(h)	Commercial & Professional Services	SF+650	0.8%	11/22/28	$	861	$	845	$	861
Magna Legal Services LLC	(h)	Commercial & Professional Services	SF+600	0.8%	11/21/29	3,483		3,483		3,449
Radwell International LLC/PA	(f)	Capital Goods	SF+675	0.8%	4/1/28	293		268		293
Radwell International LLC/PA	(f)(g)	Capital Goods	SF+675	0.8%	4/1/29	24,314		24,022		24,801
Radwell International LLC/PA	(h)	Capital Goods	SF+675	0.8%	4/1/28	1,172		1,172		1,172
Shaw Development LLC	(g)	Capital Goods	SF+600	0.5%	10/30/29	8,627		8,543		8,583
Shaw Development LLC	(h)	Capital Goods	SF+600	0.5%	10/30/29	1,027		1,027		1,022
Spotless Brands LLC	(g)	Consumer Services	SF+650	1.0%	7/25/28	6,488		6,286		6,509
Spotless Brands LLC	(h)	Consumer Services	SF+675	1.0%	7/25/28	9,805		9,706		9,952
Virgin Pulse Inc	(g)	Software & Services	SF+575, 0.0% PIK (2.5% Max PIK)	0.8%	11/8/29	12,833		12,770		12,698

Total Senior Secured Loans—First Lien								250,284		252,816
Unfunded Loan Commitments								(48,502)		(48,502)
Net Senior Secured Loans—First Lien								201,782		204,314

Subordinated Debt—0.4%
Apex Service Partners LLC	(f)	Commercial & Professional Services	14.3% PIK (14.3% Max PIK)		4/23/31	996		$	973	$	972
Apex Service Partners LLC	(h)	Commercial & Professional Services	14.3% PIK (14.3% Max PIK)		4/23/31	485		485		474

Total Subordinated Debt								1,458		1,446
Unfunded Loan Commitments								(485)		(485)
Net Subordinated Debt								973		961

Asset Based Finance—24.0%
Altitude II IRL WH Borrower DAC, Revolver	(f)(j)	Capital Goods	SF+1,000	0.0%	1/12/30	$	71	$	71	$	71
Altitude II IRL WH Borrower DAC, Revolver	(h)(j)	Capital Goods	SF+1,000	0.0%	1/12/30	$	71	71		71
Australis Maritime II, Private Equity	(f)(j)(k)(l)	Transportation				380,719		381		426
Bankers Healthcare Group LLC, Term Loan	(f)(j)	Financial Services	22.0%		11/8/27	$	788	788		785
Bausch Health Cos Inc, Revolver	(f)(j)	Pharmaceuticals, Biotechnology & Life Sciences	SF+665	1.0%	1/28/28	$	21,875	21,280		21,875
Bausch Health Cos Inc, Revolver	(h)(j)	Pharmaceuticals, Biotechnology & Life Sciences	SF+665	1.0%	1/28/28	$	15,625	15,625		15,625
Drive Revel, Private Equity	(f)(j)(k)	Financial Services				81,101		89		96
KKR Altitude II Offshore Aggregator LP, Partnership Interest	(f)(j)(l)	Capital Goods				922,641		923		957

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Consolidated Schedule of Investments (continued)

As of December 31, 2023

(in thousands, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/Shares		Amortized Cost		Fair Value(d)
Optio Invest, Private Equity	(f)(j)(k)	Financial Services				101,365		$	128	$	129
PayPal Europe Sarl et Cie SCA, Private Equity	(f)(j)(k)	Financial Services				2,498,362		2,685		2,679
Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine	(f)(j)	Real Estate Management & Development	8.0%		7/25/30	$	251	251		246
Saluda Grade Alternative Mortgage Trust 2022-BC2, Structured Mezzanine	(f)(j)	Real Estate Management & Development	18.0%		7/25/30	$	147	103		118
Saluda Grade Alternative Mortgage Trust 2022-BC2, Term Loan	(f)(j)	Real Estate Management & Development	7.3%		7/25/30	$	1,507	1,507		1,489
SG Residential Mortgage Trust 2022-2, Structured Mezzanine	(e)(f)(j)	Real Estate Management & Development	5.4%		8/25/62	$	201	167		180
SunPower Financial, Private Equity	(f)(j)(k)	Financial Services				161,479		161		196
Synovus Financial Corp, Private Equity	(f)(j)	Banks				2,086,357		2,086		2,093
TalkTalk Telecom Group Ltd, Revolver	(f)(j)	Commercial & Professional Services	SA+700	1.5%	9/5/26	£	8,267	10,429		10,532
TalkTalk Telecom Group Ltd, Revolver	(h)(j)	Commercial & Professional Services	SA+700	1.5%	9/5/26	£	2,576	3,216		3,216
TDC LLP, Preferred Equity	(f)(j)	Financial Services	8.0%			£	948	1,153		1,215
TDC LLP, Private Equity	(f)(j)	Financial Services				68,953		87		89
Vehicle Secured Funding Trust, Private Equity	(f)(j)(k)	Financial Services				11,865,999		11,866		11,866
Verus Securitization Trust 2023-5, Structured Mezzanine	(e)(f)(j)	Real Estate Management & Development	8.1%		6/25/68	$	596	533		558
Verus Securitization Trust 2023-5, Structured Mezzanine	(e)(f)(j)	Real Estate Management & Development	8.1%		6/25/68	$	881	839		876
Weber-Stephen Products LLC, Revolver	(f)(j)	Consumer Discretionary Distribution & Retail	SF+575	1.0%	12/19/26	$	2,179	2,179		2,179
Weber-Stephen Products LLC, Revolver	(h)(j)	Consumer Discretionary Distribution & Retail	SF+575	1.0%	12/19/26	$	4,487	4,487		4,487


Total Asset Based Finance								81,105		82,054
Unfunded Loan Commitments								(23,399)		(23,399)
Net Asset Based Finance								57,706		58,655
TOTAL INVESTMENTS—108.2%								$	260,461	263,930
LIABILITIES AND PREFERRED SHARES IN EXCESS OF OTHER ASSETS—(8.2)%										(20,036)
NET ASSETS—100.0%										$	243,894

________

(a)Security may be an obligation of one or more entities affiliated with the named company.

(b)Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2023, the Secured Overnight Financing Rate, or SOFR or “SF”, was 5.33% and the Sterling Interbank Offered Rate, or SONIA or “SA”, was 5.21%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the performance of the underlying investment. Variable rate securities with no floor rate use the respective benchmark rate in all cases.

(c)Denominated in U.S. dollars unless otherwise noted.

(d)See Note 8 for additional information regarding the fair value of the Company’s financial instruments.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Consolidated Schedule of Investments (continued)

As of December 31, 2023

(in thousands, except share amounts)

(e)Security is classified as Level 1 or Level 2 in the Company’s fair value hierarchy (see Note 8).

(f)Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).

(g)Security or portion thereof held within K-FIT Finance AB-1 LLC and is pledged as collateral supporting the amounts outstanding under the K-FIT AB-1 Credit Facility (see Note 9).

(h)Security is an unfunded commitment. Reflects the stated spread at the time of commitment, but may not be the actual rate received upon funding.

(i)Position or portion thereof unsettled as of December 31, 2023.

(j)The investment, or portion of the investment is not a qualifying asset under the 1940 Act. A BDC may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2023, 83.1% of the Company’s total assets represented qualifying assets.

(k)Security is non-income producing.

(l)Under the Investment Company Act of 1940, as amended, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2023, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” and deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person and deemed to control for the year ended December 31, 2023:


Portfolio Company	Fair Value at December 31, 2022		Gross Additions(1)		Gross Reductions(2)		Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Fair Value at December 31, 2023		Interest Income(3)		Fee Income(3)		Dividend and Other Income(3)
Asset Based Finance
Australis Maritime II, Private Equity	$	—	$	381	$	—	$	—	$	45	$	426	$	—	$	—	$	—
KKR Altitude II Offshore Aggregator LP, Partnership Interest	—		931		(8)		—		34		957		—		—		28





Total	$	—	$	1,312	$	(8)	$	—	$	79	$	1,383	$	—	$	—	$	28

__________

(3)Interest, fee and dividend and other income presented for the full year ended December 31, 2023.

See notes to unaudited consolidated financial statements.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements

(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization

KKR FS Income Trust, or the Company, is a specialty finance company, organized on February 4, 2022 as a Delaware statutory trust, that seeks to invest primarily in the debt securities of private middle market U.S. companies. The Company is externally managed by FS/KKR Advisor, LLC, or the Adviser, pursuant to an amended and restated investment advisory agreement, or the Advisory Agreement. The Adviser also performs, or oversees the performance of, the Company’s corporate operations and required administrative services pursuant to the terms of an administration agreement, or the Administration Agreement. The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

The Company is an externally managed, non-diversified, closed-end management investment company that, on March 31, 2023, elected to be regulated as a BDC under the 1940 Act. The Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually thereafter, as a regulated investment company, or a RIC, under the Internal Revenue Code of 1986, as amended, or the Code.

The Company has various wholly-owned subsidiaries, including special-purpose financing subsidiaries and subsidiaries through which it holds interests in portfolio companies. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of September 30, 2024. All intercompany transactions have been eliminated in consolidation. Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions for Form 10-Q and Articles 6, 10 and 12 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company’s interim unaudited consolidated financial statements should be read in conjunction with its audited financial statements as of and for the year ended December 31, 2023 included in the Company’s annual report on Form 10-K, filed with the U.S. Securities and Exchange Commission, or the SEC. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The December 31, 2023 statement of assets and liabilities and schedule of investments are derived from the Company’s audited financial statements as of and for the year ended December 31, 2023. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 946, Financial Services—Investment Companies.

Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. All cash balances are maintained with high credit quality financial institutions, which are members of the Federal Deposit Insurance Corporation.

Organizational and Offering: Organizational and offering costs will only be borne by the Company upon the initial issuance of the Class I common shares of beneficial interest, or the Common Shares, or the Class I shares, to non-affiliated investors in the Company’s monthly closings for the Company’s continuous private offering of its Common Shares, or the Private Offering, in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended, or the Securities Act, including the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, Regulation S under the Securities Act and other exemptions from the registration requirements of the Securities Act. At such time, costs associated with the organization of the Company will be expensed. These expenses consist primarily of legal fees, audit fees and other costs of organizing the Company. In no event will the Company bear in excess of $1.5 million in organizational expenses; the Adviser has agreed to be responsible for any organizational expenses in excess of $1.5 million.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

Costs associated with the offering of Common Shares will be capitalized as deferred offering expenses and included as prepaid and other assets on the statement of assets and liabilities and eligible to be amortized over a twelve-month period.

As of September 30, 2024 and December 31, 2023, the Adviser has paid $4,181 and $2,820, respectively, in organizational and offering expenses, and will be subject to reimbursement as described above. The Company has no obligation to reimburse the Adviser for organizational and offering costs until the initial issuance of the Company’s Common Shares to non-affiliated investors in the monthly closings for the Company’s Private Offering.

Subordinated Income Incentive Fee: Pursuant to the terms of the Advisory Agreement, the Adviser may be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the Advisory Agreement, which is calculated and payable quarterly in arrears commencing with the first full calendar quarter after the date of the Company’s election to be regulated as a BDC under the 1940 Act on March 31, 2023, or the BDC Election Date, equals 12.5% of the Company’s “pre-incentive fee net investment income” for the immediately preceding quarter (or portion thereof with respect to the quarter in which the BDC Election Date occurs) and is subject to a hurdle rate, expressed as a rate of return on the value of the Company’s net assets, equal to 1.25% per quarter, or an annualized hurdle rate of 5.0%. As a result, the Adviser will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.25%. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, the Adviser will be entitled to a “catch-up” fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals 1.43%, or 5.72% annually, of net assets. Thereafter, the Adviser will be entitled to receive 12.5% of pre-incentive fee net investment income.

The Adviser has agreed to waive the Company’s base management fee and subordinated incentive fee on income through March 31, 2025.

Capital Gains Incentive Fee: Pursuant to the terms of the Advisory Agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the Advisory Agreement) commencing with the end of the first calendar year in which the BDC Election Date occurs. This fee equals 12.5% of the Company’s incentive fee capital gains, which equals the Company’s realized capital gains on a cumulative basis from the BDC Election Date, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis from the BDC Election Date, less the aggregate amount of any capital gain incentive fees previously paid by the Company. For purposes of calculating the incentive fee on capital gains under the Advisory Agreement, the cost basis for any investment as of the BDC Election Date will be deemed to be the most recently determined fair value for such investment as of the BDC Election Date, determined in accordance with the Adviser’s valuation policies and procedures. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

The Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to the Adviser if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Adviser is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

Revenue Recognition: Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company records dividend income on the ex-dividend date. Distributions received from limited liability company, or LLC, and limited partnership, or LP, investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income. The Company’s policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that the Company will receive any previously accrued interest, then the accrued interest will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on the Company’s judgment.

Loan origination fees, original issue discount and market discount are capitalized and the Company accretes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

recorded as fee income when earned. For the nine months ended September 30, 2024 and 2023, the Company recognized $2,848 and $614, respectively in structuring fee revenue. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

Income Taxes: Prior to making its BDC election, the Company was classified as a partnership for U.S. federal income tax purposes. As such, no provision has been made in the accompanying consolidated financial statements for federal, state or local income taxes of the partners. Each partner is individually responsible for reporting its share of the Company’s taxable income or loss. Interest and other income realized by the Company from non-U.S. sources and capital gains realized on the sale of securities of non-U.S. issuers may be subject to withholding and other taxes levied by the jurisdiction in which the income is sourced. The Company has elected to be treated for U.S. federal income tax purposes for its first taxable year after the BDC election ending December 31, 2023, and intends to qualify annually thereafter, as a RIC under the Code.

Note 3. Share Transactions

Below is a summary of transactions with respect to shares of the Company’s Common Shares during the nine months ended September 30, 2024 and 2023:


	Nine Months Ended September 30,
	2024			2023
	Shares	Amount		Shares	Amount
Gross Proceeds from Offering	12,353,109	$	363,244	8,177,385	$	231,500
Reinvestment of Distributions	52,381	1,552		—	—



Share Repurchase Program	—	—		—	—


Net Proceeds from Share Transactions	12,405,490	$	364,796	8,177,385	$	231,500

Status of Continuous Private Offering

The Company is conducting the continuous Private Offering in reliance on exemptions from the registration requirements of the Securities Act, including the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, Regulation S under the Securities Act and other exemptions from the registration requirements of the Securities Act. In connection with the Private Offering, the Company has entered into, and expects to continue to enter into, subscription agreements with investors. An investor will make a capital contribution pursuant to such subscription agreement and will become a common shareholder in the Company bound by the terms of the subscription agreement and the Company’s organizational documents.

As of September 30, 2024, the Company has issued 20,862,875 Class I shares in the Private Offering for gross proceeds of $603,287, including Class I shares issued under its distribution reinvestment plan. Of the 20,862,875 Class I shares issued in the Private Offering, 8,861,448 shares were issued to investors with capital commitments to the Company in exchange for an aggregate of $250,500 in capital contributions. As of September 30, 2024, the Company had received capital commitments of $420,000 from investors in the Private Offering, 59.6% of which has been called for funding. In addition to $169,500 in aggregate amount of remaining uncalled capital commitments for Class I shares, the Company intends to continue selling Class I shares in the Private Offering on a monthly basis.

During the nine months ended September 30, 2024 and 2023, the Company issued 12,405,490 and 8,177,385 Class I shares for gross proceeds of $364,796 and $231,500 at an average price per share of $29.41 and $28.31, respectively. The gross proceeds received during the nine months ended September 30, 2024 include reinvested shareholder distributions of $1,552 for which the Company issued 52,381 Class I shares under its distribution reinvestment plan. During the period from October 1, 2024 to October 31, 2024, the Company issued 2,305,429 Class I shares for gross proceeds of $68,173 at an average price per share of $29.57. The gross proceeds received during the period from October 1, 2024 to October 31, 2024 include reinvested shareholder distributions of $1,033 for which the Company issued 34,936 Class I shares under its distribution reinvestment plan.

Discretionary Share Repurchase Program

Beginning with the quarter ended September 30, 2024, the Company has commenced a share repurchase program in which it intends, subject to market conditions and the discretion of the Company’s Board of Trustees, or the Board, to offer to repurchase, in each quarter, up to 5% of the Common Shares outstanding (either by number of shares or aggregate net asset value, or NAV) as of the close of the previous calendar quarter. The Board may amend or suspend the share repurchase program if in its reasonable judgment it

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 3. Share Transactions (continued)

deems such action to be in the Company’s best interest and the best interest of the Company’s shareholders. As a result, share repurchases may not be available each quarter, such as when a repurchase offer would place an undue burden on the Company’s liquidity, adversely affect its operations or risk having an adverse impact on the Company that would outweigh the benefit of the repurchase offer. The Company intends to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the 1940 Act. All shares purchased by the Company pursuant to the terms of each tender offer will be retired and thereafter will be authorized and unissued shares.

Under the Company’s discretionary share repurchase program, to the extent the Company offers to repurchase Common Shares in any particular quarter, the Company expects to repurchase shares pursuant to quarterly tender offers using a purchase price equal to the NAV per share as of the last calendar day of the applicable quarter, or the Valuation Date. If shareholders tender Common Shares in a tender offer with a Valuation Date that is within the 12-month period following the initial issue date of their tendered Common Shares, the Company may repurchase such Common Shares subject to an “early repurchase deduction” of 2% of the aggregate NAV of the Common Shares repurchased, or an Early Repurchase Deduction. The Early Repurchase Deduction will be retained by the Company for the benefit of remaining holders of Common Shares.

The Company did not repurchase any Common Shares under its discretionary share repurchase program during the three and nine months ended September 30, 2024.

Series A Preferred Shares

On April 3, 2023, the Company issued 515 shares of its preferred shares of beneficial interest, or Preferred Shares, designated as 12.0% Series A Cumulative Preferred Shares, par value $0.001 per share, or the Series A Preferred Shares, for $1,000 per share. Each individual investor in the Preferred Shares offering was entitled to purchase only one Series A Preferred Share. Each holder of Series A Preferred Shares is entitled to a liquidation preference of $1,000 per share, or the Liquidation Value, plus additional amounts as set forth in the Supplement to the Company’s Amended and Restated Declaration of Trust Relating to 12.0% Series A Cumulative Preferred Shares. With respect to distributions, including the payment of dividends and distribution of the Company’s assets upon dissolution, liquidation, or winding up, the Series A Preferred Shares are senior to all other classes and series of Common Shares, and rank on parity with any other class or series of Preferred Shares, whether such class or series is now existing or is created in the future, to the extent of the aggregate Liquidation Value and all accrued but unpaid dividends and any applicable redemption premium on the Series A Preferred Shares.

Dividends on each Series A Preferred Share accrue on a daily basis at the rate of 12.0% per annum of the sum of the Liquidation Value thereof plus all accumulated and unpaid dividends thereon, from and including April 3, 2023 to and including the earlier of (1) the date of any liquidation, dissolution, or winding up of the Company or (2) the date on which such Series A Preferred Share is redeemed. Dividends will accrue whether or not they have been authorized or declared, whether or not the Company has earnings, and whether or not there are funds legally available for payment of dividends.

The outstanding Series A Preferred Shares are subject to redemption at any time by notice of such redemption on a date selected by the Company for such redemption, such date being referred to as the Redemption Date. If the Company elects to cause the redemption of the Series A Preferred Shares, each Series A Preferred Share will be redeemed for a price, payable in cash on the Redemption Date, equal to 100% of such share’s Liquidation Value, plus all accrued and unpaid dividends to and including the Redemption Date, plus a redemption premium per share as follows: (1) until the date that is two years from the date of original issuance, $100; and (2) thereafter, no redemption premium. From and after the close of business on the Redemption Date, all dividends on the outstanding Series A Preferred Shares will cease to accrue, such shares will no longer be deemed to be outstanding, and all rights of the holders of such shares (except the right to receive the redemption price for such shares from the Company) will cease.

See the Supplement to the Company’s Amended and Restated Declaration of Trust Relating to 12.0% Series A Cumulative Preferred Shares for more information relating to the Series A Preferred Shares.

The Company classifies the Series A Preferred Shares as temporary equity outside of shareholders’ equity on its accompanying unaudited consolidated statement of assets and liabilities due to certain redemption features that are not solely within the Company’s control.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions

Compensation of the Investment Adviser and its Affiliates

Pursuant to the Advisory Agreement, commencing on and after the BDC Election Date, the Adviser is entitled to a base management fee calculated at an annual rate of 1.25% of the average monthly value of the Company’s net assets during the most recently completed quarter and an incentive fee based on the Company’s performance. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that the Adviser may be entitled to under the Advisory Agreement. The Adviser has agreed to waive the base management fee and the subordinated incentive fee on income under the Advisory Agreement through March 31, 2025.

Pursuant to the Administration Agreement, the Adviser oversees the Company’s day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Adviser also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s shareholders and reports filed with the SEC. In addition, the Adviser assists the Company in calculating its NAV, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to the Company’s shareholders, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others.

Pursuant to the Administration Agreement, the Company reimburses the Adviser for expenses necessary to perform services related to its administration and operations, including the Adviser’s allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P., which does business as FS Investments, or FS Investments, and KKR Credit Advisers (US), LLC, or KKR Credit, providing administrative services to the Company on behalf of the Adviser. The Company reimburses the Adviser no less than monthly for all costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the Administration Agreement. The Adviser allocates the cost of such services to the Company based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Board reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of administrative expenses among the Company and certain affiliates of the Adviser. The Board then assesses the reasonableness of such reimbursements for expenses allocated to the Company based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party service providers known to be available. In addition, the Board considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Board compares the total amount paid to the Adviser for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs.

Distribution/Servicing Fees

The Company has entered into a placement agent agreement, as amended and supplemented from time to time, or a Placement Agent Agreement, and, together, the Placement Agent Agreements, with each of KKR Capital Markets LLC and FS Investment Solutions, LLC, the Company’s principal placement agents for the Private Offering and affiliates of the Adviser, or the Placement Agents, pursuant to which the Placement Agents have agreed to, among other things, manage the Company’s relationships with third-party brokers engaged by the Placement Agents to participate in the distribution of Common Shares, which are referred to as “participating brokers,” and financial advisors. The Placement Agents also coordinate the Company’s marketing and distribution efforts with participating brokers and their registered representatives with respect to communications related to the terms of the Private Offering, the Company’s investment strategies, material aspects of the Company’s operations and subscription procedures.

Subject to any applicable Financial Industry Regulatory Authority, Inc., or FINRA, limitations on underwriting compensation, the Company is obligated to pay the Placement Agents a shareholder servicing and/or distribution fee, or the Distribution/Servicing Fees, for Class I shares equal to 0.85% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class I shares. However, pursuant to a fee waiver agreement, or the Rule 12b-1 Fee Waiver Agreement, between the Company and each of the Placement Agents, the Placement Agents have agreed to waive the Distribution/Servicing Fees for Class I shares in full during the term of the Rule 12b-1 Fee Waiver Agreement, and any such waived fees will not be subject to recoupment by the Placement Agents or any other person during or following the term of the Rule 12b-1 Fee Waiver Agreement. The Rule 12b-1 Fee Waiver Agreement will remain in effect until terminated by vote of the Board, including the vote of a majority of the members of the Board who are not “interested persons” (as defined in the 1940 Act) of the Company, or the Independent Trustees.

The distribution and servicing expenses borne by the participating brokers may be different from and substantially less than the amount of Distribution/Servicing Fees charged. Following any termination of the Rule 12b-1 Fee Waiver Agreement, the Distribution/Servicing Fees will be payable to the Placement Agents, but the Placement Agents anticipate that all or a portion of the

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

Distribution/Servicing Fees will be retained by, or re-allowed (paid) to, eligible participating brokers and servicing broker-dealers for ongoing services performed by such broker-dealers. The Company may pay for expenses related to its distribution out of its own assets under the amended and restated distribution and servicing plan outside of the Distribution/Servicing Fees, including but not limited to, expenses associated with advertising, compensation of underwriters, dealers, and sales personnel, the printing and mailing of prospectuses to other than current shareholders, and the printing and mailing of sales literature, each as may be determined to be in the best interests of the Company.

All or a portion of the Distribution/Servicing Fees may be used to pay for sub-transfer agency, sub-accounting and certain other administrative services that are not required to be paid pursuant to the shareholder servicing and/or distribution fees under applicable FINRA rules; however, the Company also may pay for these sub-transfer agency, sub-accounting and certain other administrative services outside of the Distribution/Servicing Fees and the amended and restated distribution and servicing plan. The total amount that will be paid over time for other underwriting compensation depends on the average length of time for which shares remain outstanding, the term over which such amount is measured and the performance of the Company’s investments. The Company will also pay or reimburse certain organizational and offering expenses, including, subject to FINRA limitations on underwriting compensation, certain wholesaling expenses.

The Board, including a majority of the Independent Trustees, have reviewed and approved the Placement Agent Agreements in accordance with Section 15(c) of the 1940 Act, and will annually review the Placement Agent Agreements and Distribution/Servicing Fees to determine that the provisions of the Placement Agent Agreements are carried out satisfactorily and to determine, among other things, whether the fees payable under such agreements are reasonable in light of the services provided and that there is a reasonable likelihood that the continuation of the plan for the Distribution/Servicing Fees will benefit the Company and its shareholders. The Board assesses the reasonableness of such fees based on the breadth, depth and quality of the distribution services to be provided to the Company, and reviews other information relating to the Placement Agents, such as their relationships with financial intermediaries and the adequacy of their compliance program.

The following table describes the fees and expenses accrued under the Advisory Agreement, the Administration Agreement and the Expense Support Agreement, as applicable, during the three and nine months ended September 30, 2024 and 2023:


			Three Months Ended				Nine Months Ended
Related Party			September 30,				September 30,
	Source Agreement	Description	2024		2023		2024		2023
The Adviser	Investment advisory agreement	Base Management Fee(1)	$	1,596	$	523	$	3,428	$	585
The Adviser	Investment advisory agreement	Capital Gains Incentive Fee(2)	$	247	$	203	$	971	$	404
The Adviser	Investment advisory agreement	Subordinated Incentive Fee on Income(3)	$	2,034	$	399	$	4,250	$	399
The Adviser	Administration agreement	Administrative Services Expenses(4)	$	560	$	357	$	1,376	$	499
The Adviser	Administration agreement	Organizational & Offering Costs(5)	$	1,025	$	—	$	2,290	$	—
The Adviser	Expense support agreement	Expense Recoupment(6)	$	—	$	—	$	436	$	—

________________

(1)The Adviser agreed to waive all management fees accrued under the Advisory Agreement through March 31, 2025. As of September 30, 2024, no management fees were payable to the Adviser.

(2)During the nine months ended September 30, 2024, the Company accrued capital gains incentive fees of $971 based on the performance of its portfolio, of which $1,127 was based on unrealized appreciation and $(156) was based on realized gains net of unrealized depreciation. No capital gains incentive fees are actually payable by the Company with respect to unrealized gains unless and until those gains are actually realized. See Note 2 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees.

(3)The Adviser agreed to waive all subordinated incentive fees on income accrued under the Advisory Agreement through March 31, 2025. As of September 30, 2024, no subordinated incentive fees on income were payable to the Adviser.

(4)During the nine months ended September 30, 2024, $1,156 of administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by the Adviser and the remainder related to other reimbursable expenses, including reimbursement of fees related to transactional expenses for prospective investments, such as fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. Broken deal costs were $124 for the nine months ended September 30, 2024. The Company paid $960 and $26 in administrative services expenses to the Adviser during the nine months ended September 30, 2024 and 2023, respectively.

(5)During the nine months ended September 30, 2024, the Company expensed organizational and offering costs of $2,290, which related to reimbursements to the Adviser for organizational and offering costs incurred on the Company’s behalf, including salaries and other direct expenses of the Adviser’s personnel and employees of its affiliates while engaged in registering and marketing the Company’s Common Shares.

(6)During the nine months ended September 30, 2024, the Company accrued $436 for expense recoupments payable to the Adviser under the Expense Support Agreement (see “—Expense Support and Conditional Reimbursement” below). As of September 30, 2024, no expense recoupments remained payable to the Adviser.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

Potential Conflicts of Interest

The members of the senior management and investment teams of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. For example, the Adviser is the investment adviser to FS KKR Capital Corp. and KKR FS Income Trust Select, and the officers, managers and other personnel of the Adviser may serve in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or KKR Credit. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best interests or in the best interest of the Company’s shareholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles.

Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term.

In an order dated January 5, 2021, the SEC granted exemptive relief that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Adviser or KKR Credit, with certain affiliates of the Adviser.

Capital Commitments

Affiliates of the Adviser committed to invest an aggregate of $35,000 in Common Shares, or the Seed Contribution, and will not transfer or otherwise dispose of their respective capital commitment or Common Shares without the Company’s prior written consent for a period ending on the third anniversary of the BDC Election Date.

As of September 30, 2024, the full $35,000 of capital commitments under the Seed Contribution had been called and funded.

As of September 30, 2024, an additional $215,500 of capital commitments from third-party private investors had been called and funded in connection with the Private Offering.

Expense Support and Conditional Reimbursement

The Company has entered into an Expense Support and Conditional Reimbursement Agreement, or the Expense Support Agreement, with the Adviser. The Adviser may elect to pay certain of our expenses on the Company’s behalf, including, but not limited to, organizational and offering expenses and any of the Company’s expenses related to investor relations, outside legal counsel and other outside advisors and experts, finance, operations and administration, each, an Expense Payment, provided that no portion of the payment will be used to pay any interest expense or distribution and/or shareholder servicing fees of the Company. Any Expense Payment that the Adviser has committed to pay must be paid by the Adviser to the Company in any combination of cash or other immediately available funds no later than 90 days after such commitment was made in writing, and/or offset against amounts due from us to the Adviser or its affiliates.

Following any calendar month in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to the Company’s shareholders based on distributions declared with respect to record dates occurring in such calendar month (the amount of such excess referred to as Excess Operating Funds), the Company will pay such Excess Operating Funds, or a portion thereof, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar month have been reimbursed. Any payments required to be made by the Company are referred to as a Reimbursement Payment. Available Operating Funds means the sum of (i) the Company’s net investment income (excluding organizational and offering costs and extraordinary expenses, taxes (including excise tax) and accrued capital gains incentive fees on unrealized appreciation) and (ii) the Company’s net capital gains.

For the nine months ended September 30, 2024 and the year ended December 31, 2023, the Adviser has agreed to pay $0 and $147, respectively, in Expense Payments, subject to reimbursement by the Company in accordance with the Expense Support Agreement. For the nine months ended September 30, 2024, the Company reimbursed the Adviser for $436 of previously waived expenses. As of September 30, 2024, there are no remaining amounts of previously waived expenses subject to recoupment.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Distributions

The following tables reflect the cash distributions per share that the Company has declared on its Common Shares during the nine months ended September 30, 2024 and 2023:

For the Nine Months Ended
September 30, 2024

Date Declared

Distribution

Record Date

Payment Date

Distribution per Share

January 5, 2024

Regular

January 31, 2024

February 27, 2024

0.24

February 20, 2024

Regular

February 29, 2024

March 26, 2024

0.24

March 7, 2024

Regular

March 28, 2024

April 26, 2024

0.25

April 3, 2024

Regular

April 30, 2024

May 29, 2024

0.25

May 2, 2024

Regular

May 31, 2024

June 26, 2024

0.25

June 11, 2024

Regular

June 28, 2024

July 29, 2024

0.25

June 11, 2024

Special

June 28, 2024

July 29, 2024

0.10

July 11, 2024

Regular

July 31, 2024

August 28, 2024

0.25

July 31, 2024

Regular

August 30, 2024

September 26, 2024

0.25

September 16, 2024

Regular

September 30, 2024

October 29, 2024

0.25

September 16, 2024

Special

September 30, 2024

October 29, 2024

0.10

Total

2.43

For the Nine Months Ended
September 30, 2023

Date Declared

Distribution

Record Date

Payment Date

Distribution per Share

September 26, 2023

Regular

September 29, 2023

October 27, 2023

0.24

Total

0.24

Subject to applicable legal restrictions and the sole discretion of the Company’s Board, the Company intends to declare and pay regular cash distributions on a monthly basis. From time to time, the Company may also declare and pay special interim distributions in the form of cash or shares of its Common Shares at the discretion of the Company’s Board. These distributions have been or will be paid monthly to shareholders of record as of monthly record dates previously determined by the Company’s Board. Shareholders receive the distribution payments in cash or in Common Shares in accordance with their election under the Company’s distribution reinvestment plan. The timing and amount of any future distributions to shareholders are subject to applicable legal restrictions and the sole discretion of the Company’s Board.

The Company may fund its cash distributions to shareholders from any sources of funds legally available to it, including proceeds from the sale of Common Shares in the Private Offering, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, and dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a shareholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a nontaxable distribution) will be mailed to the Company’s shareholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Distributions (continued)

The following table reflects the sources of the cash distributions on a tax basis that the Company has paid on its Common Shares during the nine months ended September 30, 2024:


	Nine Months Ended September 30,
	2024
Source of Distribution	Distribution Amount		Percentage
Offering proceeds	$	—	—
Borrowings	—		—
Net investment income(1)	32,418		99	%
Short-term capital gains proceeds from the sale of assets	410		1	%
Long-term capital gains proceeds from the sale of assets	—		—
Non-capital gains proceeds from the sale of assets	—		—
Distributions on account of preferred and common equity	—		—
Total	$	32,828	100	%

________________

(1)During the nine months ended September 30, 2024, 95.3% of the Company’s gross investment income was attributable to cash income earned, 1.5% was attributable to non-cash accretion of discount and 3.2% was attributable to paid-in-kind, or PIK, interest.

The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. The actual tax characteristics of distributions to shareholders are reported to shareholders annually on Form 1099-DIV.

As of September 30, 2024 and December 31, 2023, the Company’s gross unrealized appreciation on a tax basis was $12,711 and $3,854, respectively. As of September 30, 2024 and December 31, 2023, the Company’s gross unrealized depreciation on a tax basis was $1,579 and $586, respectively.

The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled $815,846 and $260,461 as of September 30, 2024 and December 31, 2023, respectively. The aggregate net unrealized appreciation (depreciation) on investments on a tax basis was $12,246 and $3,469 as of September 30, 2024 and December 31, 2023, respectively. The aggregate net unrealized appreciation (depreciation) on investments on a tax basis excludes net unrealized appreciation (depreciation) from foreign currency transactions.

Note 6. Investment Portfolio

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of September 30, 2024 and December 31, 2023:


	September 30, 2024
	(Unaudited)						December 31, 2023
	Amortized Cost(1)		Fair Value		Percentage of Portfolio		Amortized Cost(1)		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	660,212	$	667,959	80.7	%	$	201,782	$	204,314	77.4	%


Subordinated Debt	1,622		1,608		0.2	%	973		961		0.4	%
Asset Based Finance	154,054		158,525		19.1	%	57,706		58,655		22.2	%

Total	$	815,888	$	828,092	100.0	%	$	260,461	$	263,930	100.0	%

____________

(1)Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Investment Portfolio (continued)

As of September 30, 2024, the Company held investments in three portfolio companies of which it is deemed to “control.” As of September 30, 2024, the Company held one investment in a portfolio company of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnotes (l) and (m) to the unaudited consolidated schedule of investments as of September 30, 2024.

As of December 31, 2023, the Company held investments in two portfolio companies of which it is deemed to “control.” As of December 31, 2023, the Company did not hold investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnote (l) to the consolidated schedule of investments as of December 31, 2023.

The Company’s investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of September 30, 2024, the Company had unfunded debt investments with aggregate unfunded commitments of $223,540 and unfunded equity/other commitments of $44,492. As of December 31, 2023, the Company had unfunded debt investments with aggregate unfunded commitments of $72,255. The Company maintains sufficient cash on hand and available capital in connection with undrawn commitments to fund such unfunded commitments should the need arise. For additional details regarding the Company’s unfunded debt investments, see the Company’s unaudited consolidated schedule of investments as of September 30, 2024 and the Company’s audited consolidated schedule of investments as of December 31, 2023.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of September 30, 2024 and December 31, 2023:


	September 30, 2024
	(Unaudited)				December 31, 2023
Industry Classification	Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio

Banks	$	1,380	0.2	%	$	2,093	0.8	%
Capital Goods	142,592		17.2	%	55,589		21.1	%
Commercial & Professional Services	174,400		21.1	%	76,758		29.1	%
Consumer Discretionary Distribution & Retail	3,975		0.5	%	2,179		0.8	%
Consumer Durables & Apparel	6,731		0.8	%	—		—
Consumer Services	56,393		6.8	%	12,953		4.9	%
Consumer Staples Distribution & Retail	16,484		2.0	%	16,673		6.3	%


Equity Real Estate Investment Trusts (REITs)	20,676		2.5	%	—		—
Financial Services	49,708		6.0	%	17,055		6.5	%

Health Care Equipment & Services	94,364		11.4	%	—		—

Insurance	56,786		6.9	%	29,092		11.0	%
Materials	21,366		2.6	%	—		—

Pharmaceuticals, Biotechnology & Life Sciences	29,250		3.5	%	21,875		8.3	%
Real Estate Management & Development	38,386		4.6	%	3,467		1.3	%

Software & Services	58,675		7.1	%	12,698		4.8	%
Technology Hardware & Equipment	1,094		0.1	%	—		—

Transportation	54,230		6.5	%	13,498		5.1	%
Utilities	1,602		0.2	%	—		—
Total	$	828,092	100.0	%	$	263,930	100.0	%

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Financial Instruments

The following is a summary of the fair value and location of the Company’s derivative instruments not designated as a qualifying hedge accounting relationship in the unaudited consolidated statements of assets and liabilities held as of September 30, 2024:

Derivative Instrument

Statement Location

September 30, 2024

Foreign currency forward contracts

Unrealized appreciation on foreign currency forward contracts

—

Foreign currency forward contracts

Unrealized depreciation on foreign currency forward contracts

(119)

Total

(119)

Net realized and unrealized gains and losses on derivative instruments not designated as a qualifying hedge accounting relationship recorded by the Company for the nine months ended September 30, 2024 are in the following locations in the unaudited consolidated statements of operations:


		Nine Months Ended September 30,
Derivative Instrument	Statement Location	2024
Foreign currency forward contracts	Net realized gain (loss) on foreign currency forward contracts	$	9
Foreign currency forward contracts	Net change in unrealized appreciation (depreciation) on foreign currency forward contracts	(119)
Total		$	(110)

Offsetting of Derivative Instruments

The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation and depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the consolidated statements of assets and liabilities. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of September 30, 2024:


	As of September 30, 2024 (Unaudited)
Counterparty	Derivative Assets Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Received(1)		Cash Collateral Received(1)		Net Amount of Derivative Assets(2)
Goldman Sachs Bank USA	$	—	$	—	$	—	$	—	$	—

Total	$	—	$	—	$	—	$	—	$	—
Counterparty	Derivative Liabilities Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Pledged(1)		Cash Collateral Pledged(1)		Net Amount of Derivative Liabilities(3)
Goldman Sachs Bank USA	$	(119)	$	—	$	—	$	—	$	(119)

Total	$	(119)	$	—	$	—	$	—	$	(119)

____________

(1)In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.

(2)Net amount of derivative assets represents the net amount due from the counterparty to the Company.

(3)Net amount of derivative liabilities represents the net amount due from the Company to the counterparty.

Foreign Currency Forward Contracts

The Company may enter into foreign currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Financial Instruments (continued)

contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit counterparty risk by only dealing with well-known counterparties.

The average notional balance of foreign currency forward contracts during the period from June 28, 2024, the date in which the Company first entered into the foreign currency forward contracts, through September 30, 2024 was $3,669.

Note 8. Fair Value of Financial Instruments

Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or would pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.

Level 3: Inputs that are unobservable for an asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of September 30, 2024 and December 31, 2023, the Company’s investments were categorized as follows in the fair value hierarchy:


	September 30, 2024
Valuation Inputs	(Unaudited)		December 31, 2023
Level 1—Price quotations in active markets	$	—	$	—
Level 2—Significant other observable inputs	36,223		1,614
Level 3—Significant unobservable inputs	791,869		262,316
	$	828,092	$	263,930

In addition, the Company had foreign currency forward contracts, as described in Note 7, which were categorized as Level 2 in the fair value hierarchy as of September 30, 2024.

The Board is responsible for overseeing the valuation of the Company’s portfolio investments at fair value as determined in good faith pursuant to the Adviser’s valuation policy. The Board has designated the Adviser as the Company’s valuation designee, with day-to-day responsibility for implementing the portfolio valuation process set forth in the Adviser’s valuation policy.

The Company’s investments will consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated repayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Adviser determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Adviser typically values the Company’s other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

third-party pricing services and screened for validity by such services and are typically classified as Level 2 within the fair value hierarchy.

The Adviser periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms, as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Adviser believes that these prices are reliable indicators of fair value. As of September 30, 2024, the Adviser reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Adviser’s valuation policy.

The following is a reconciliation of investments for which significant unobservable inputs (Level 3) were used in determining fair value for the nine months ended September 30, 2024 and 2023:


	For the Nine Months Ended September 30, 2024
	Senior Secured Loans—First Lien		Subordinated Debt		Asset Based Finance		Total
Fair value at beginning of period	$	204,314	$	961	$	57,041	$	262,316
Accretion of discount (amortization of premium)	507		2		232		741
Net realized gain (loss)	(20)		—		9		(11)
Net change in unrealized appreciation (depreciation)	5,215		(2)		2,933		8,146
Purchases	479,613		485		97,469		577,567
Paid-in-kind interest	696		162		716		1,574
Sales and repayments	(22,366)		—		(36,098)		(58,464)
Transfers into Level 3	—		—		—		—
Transfers out of Level 3	—		—		—		—
Fair value at end of period	$	667,959	$	1,608	$	122,302	$	791,869
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	5,180	$	(2)	$	2,933	$	8,111


	For the Nine Months Ended September 30, 2023
	Senior Secured Loans—First Lien		Asset Based Finance		Total
Fair value at beginning of period	$	2,646	$	3,485	$	6,131
Accretion of discount (amortization of premium)	363		2		365
Net realized gain (loss)	1		—		1
Net change in unrealized appreciation (depreciation)	3,003		33		3,036
Purchases	150,849		3,906		154,755
Paid-in-kind interest	—		—		—
Sales and repayments	(412)		(267)		(679)
Transfers into Level 3	—		—		—
Transfers out of Level 3	—		—		—
Fair value at end of period	$	156,450	$	7,159	$	163,609
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	3,017	$	33	$	3,050

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of September 30, 2024 and December 31, 2023 were as follows:

Type of Investment

Fair Value at September 30, 2024

(Unaudited)

Valuation
Technique

Unobservable
Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input(1)

Senior Debt

645,134

Discounted Cash Flow

Discount Rate

7.6% - 10.7% (9.0%)

Decrease

22,825

Cost

Subordinated Debt

1,608

Discounted Cash Flow

Discount Rate

15.4% - 15.4% (15.4%)

Decrease

Asset Based Finance

107,558

Discounted Cash Flow

Discount Rate

5.0% - 41.6% (8.5%)

Decrease

11,565

Cost

3,179

Waterfall

EBITDA Multiple

1.1x - 1.1x (1.1x)

Increase

Total

791,869

Type of Investment

Fair Value at December 31, 2023

Valuation
Technique

Unobservable
Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input(1)

Senior Debt

185,976

Discounted Cash Flow

Discount Rate

10.0% - 11.5% (10.9%)

Decrease

18,338

Cost

Subordinated Debt

961

Discounted Cash Flow

Discount Rate

15.4% - 15.4% (15.4%)

Decrease

Asset Based Finance

39,896

Discounted Cash Flow

Discount Rate

5.9% - 43.2% (8.0%)

Decrease

2,679

Waterfall

EBITDA Multiple

1.0x - 1.0x (1.0x)

Increase

292

Other(2)

14,174

Cost

Total

262,316

__________

(1)Represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

(2)Fair value based on expected outcome of proposed corporate transactions and/or other factors.

Note 9. Financing Arrangements

In accordance with the 1940 Act, the Company is allowed to borrow amounts such that its asset coverage, as calculated pursuant to the 1940 Act, equals at least 150% after such borrowing. As of September 30, 2024, the aggregate amount outstanding of the senior securities issued by the Company was $222,743. As of September 30, 2024, the Company’s asset coverage was 377%.

The following tables present summary information with respect to the Company’s outstanding financing arrangements as of September 30, 2024 and December 31, 2023. For additional information regarding these financing arrangements, see the notes to the Company’s audited consolidated financial statements contained in its annual report on Form 10-K for the year ended December 31, 2023. Any significant changes to the Company’s financing arrangements during the three months ended September 30, 2024 are discussed below.


	As of September 30, 2024 (Unaudited)
Arrangement	Type of Arrangement	Rate	Amount Outstanding			Amount Available		Maturity Date
Senior Secured Revolving Credit Facility(1)	Revolving Credit Facility	SOFR+2.125%(2)	$	104,228	(3)	$	20,772	July 19, 2028
K-FIT AB-1 Credit Facility(1)	Revolving Credit Facility	SOFR+2.75%(2)	118,000			132,000		October 10, 2028
Total			$	222,228		$	152,772

___________

(1)The carrying amount outstanding under the facility approximates its fair value.

(2)The benchmark rate is subject to a 0% floor.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 9. Financing Arrangements (continued)

(3)Amount includes borrowing in Euros and pounds sterling. Euro balance outstanding of €6,000 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.11 as of September 30, 2024 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £11,600 has been converted to U.S. dollars at an exchange rate of £1.00 to $1.34 as of September 30, 2024 to reflect total amount outstanding in U.S. dollars.


	As of December 31, 2023
Arrangement	Type of Arrangement	Rate	Amount Outstanding			Amount Available		Maturity Date
Senior Secured Revolving Credit Facility(1)	Revolving Credit Facility	SOFR+2.13%(2)	$	29,231	(3)	$	20,769	July 19, 2028
K-FIT AB-1 Credit Facility(1)	Revolving Credit Facility	SOFR+2.75%(2)	65,000			185,000		October 10, 2028
Total			$	94,231		$	205,769

___________

(1)The carrying amount outstanding under the facility approximates its fair value.

(2)The benchmark rate is subject to a 0% floor.

(3)Amount includes borrowing in Euros and pounds sterling. Euro balance outstanding of €2,500 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.11 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £9,000 has been converted to U.S. dollars at an exchange rate of £1.00 to $1.27 as of December 31, 2023 to reflect total amount outstanding in U.S. dollars.

For the nine months ended September 30, 2024 and 2023, the components of total interest expense for the Company’s financing arrangements were as follows:


	Nine Months Ended September 30,
	2024						2023
Arrangement(1)	Direct Interest Expense		Amortization of Deferred Financing Costs		Total Interest Expense		Direct Interest Expense		Amortization of Deferred Financing Costs		Total Interest Expense
Senior Secured Revolving Credit Facility(2)	$	3,564	$	297	$	3,861	$	236	$	56	$	292
K-FIT AB-1 Credit Facility(2)	4,886		425		5,311		—		—		—
Total	$	8,450	$	722	$	9,172	$	236	$	56	$	292

_____________________

(1)Borrowings of each of the Company’s wholly-owned, special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.

(2)Direct interest expense includes the effect of non-usage fees.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the nine months ended September 30, 2024 were $119,552 and 9.42%, respectively. As of September 30, 2024, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 7.88%.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the nine months ended September 30, 2023 were $15,461 and 8.33%, respectively. As of September 30, 2023, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 8.79%.

Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of September 30, 2024.

Note 10. Commitments and Contingencies

On August 2, 2022, the Company entered into a facility agreement, or the Cliffwater Facility Agreement, with Cliffwater Corporate Lending Fund, or Cliffwater, an independent third-party, to acquire portfolio investments from time to time by purchasing all or a portion of certain investments owned and held by Cliffwater at the Company’s or Cliffwater’s request pursuant to the terms and provisions of the Cliffwater Facility Agreement, or the Warehousing Transaction. The Cliffwater Facility Agreement creates a forward obligation of Cliffwater to sell, and a forward obligation of the Company or its designee to purchase, all or a portion of certain investments owned and held by Cliffwater at the Company’s or Cliffwater’s request pursuant to the terms and conditions of the Cliffwater Facility Agreement. Prior to the date on which (i) an insolvency proceeding is commenced by the Company or (ii) an insolvency proceeding is commenced against the Company and is not dismissed or stayed within 60 days, such date, the Facility End Date, the Company’s obligation to purchase such investments is conditional upon satisfying certain conditions, including that the

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies (continued)

Company has called and received cash funding from subscriptions in an aggregate amount of at least $250,000, such condition, the Capital Condition.

On May 9, 2024, the Company, Cliffwater, and CCLF Holdings (D13) LLC, or CCLF Sub, together with Cliffwater, individually and collectively, the Financing Provider, each an unaffiliated third party, entered into an amendment and restatement of that certain Cliffwater Facility Agreement, dated as of August 2, 2022, or the A&R Cliffwater Facility Agreement, effective as of March 29, 2024. The A&R Cliffwater Facility Agreement provides for among other things, an increase in the Capital Condition from $250,000 to $500,000.

During the nine months ended September 30, 2024, the Company purchased investments, including unfunded commitments, with a cost of $204,259 from the Financing Provider. As of September 30, 2024, $22,051 of these purchases are included in payable for investments purchased in the statement of assets and liabilities. For the period from October 1, 2024 through November 8, 2024, the Company purchased investments, including unfunded commitments, with a cost of $3,256 from the Financing Provider.

As of September 30, 2024, the conditions precedent to the Company’s obligation to purchase any additional investments from the Financing Provider had not been met. The Company did not hold any beneficial interest in the warehouse.

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Adviser has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of operations.

Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s statement of assets and liabilities. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company has sufficient liquidity to fund these commitments. As of September 30, 2024, the Company’s unfunded commitments consisted of the following:


Category / Company(1)	Commitment Amount
Senior Secured Loans—First Lien
Apex Service Partners LLC	$	950
Apex Service Partners LLC	2,287
Area Wide Protective Inc	4,291
Avetta LLC	1,146
Avetta LLC	1,605
Cadence Education LLC	1,412
Cadence Education LLC	1,632
Carrier Fire Protection	2,056
Carrier Fire Protection	1,753
Clarience Technologies LLC	4,026
Clarience Technologies LLC	4,026
CLEAResult Consulting Inc	3,108
CLEAResult Consulting Inc	1,041
Community Brands Inc	641
Community Brands Inc	1,644
CSafe Global	633
Dental365 LLC	2,039
Dental365 LLC	4,955
DOXA Insurance Holdings LLC	1,233
DOXA Insurance Holdings LLC	712
DOXA Insurance Holdings LLC	838
DuBois Chemicals Inc	2,138
DuBois Chemicals Inc	2,138

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies (continued)


Category / Company(1)	Commitment Amount
Galway Partners Holdings LLC	$	677
Granicus Inc	46
Granicus Inc	1,339
Heritage Environmental Services Inc	2,797
Heritage Environmental Services Inc	276
Highgate Hotels Inc	1,433
Individual FoodService	655
Insightsoftware.Com Inc	1,173
Insightsoftware.Com Inc	774
Integrity Marketing Group LLC	5,291
Integrity Marketing Group LLC	9,230
Lazer Logistics Inc	1,230
Lazer Logistics Inc	1,918
Legends Hospitality LLC	2,010
Legends Hospitality LLC	1,005
Lipari Foods LLC	1,930
Magna Legal Services LLC	848
Magna Legal Services LLC	2,386
MAI Capital Management LLC	5,209
MAI Capital Management LLC	1,968
MB2 Dental Solutions LLC	9,130
MB2 Dental Solutions LLC	1,882
Model N Inc	2,220
Model N Inc	1,184
Netsmart Technologies Inc	4,236
Netsmart Technologies Inc	4,343
OEConnection LLC	2,560
OEConnection LLC	1,596
PSC Group	177
PSC Group	543
Radwell International LLC	1,451
Service Express Inc	3,263
Service Express Inc	1,865
Shaw Development LLC	2,049
Spotless Brands LLC	7,175
STV Group Inc	1,185
STV Group Inc	1,974
Turnpoint Services Inc	692
Turnpoint Services Inc	1,108
USIC Holdings Inc	1,211
USIC Holdings Inc	1,379
Wealth Enhancement Group LLC	298
Woolpert Inc	2,536
Woolpert Inc	5,195
Zeus Industrial Products Inc	3,244
Zeus Industrial Products Inc	4,326
Asset Based Finance
Altitude II IRL WH Borrower DAC, Revolver	71
Bausch Health Cos Inc, Revolver	18,750
Curia Global Inc, Revolver	10,333
Discover Financial Services, Subordinated Loan	8,530

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies (continued)


Category / Company(1)	Commitment Amount
GreenSky Holdings LLC, Term Loan	$	374
Lennar Corp, Term Loan	1,487
TalkTalk Telecom Group Ltd, Revolver	3,173
Trinseo Materials Operating SCA / Trinseo Materials Finance Inc, Revolver	8,537
Weber-Stephen Products LLC, Revolver	16,964
Total	$	223,540
Unfunded Equity/Other commitments	$	44,492

__________

(1)May be commitments to one or more entities affiliated with the named company.

As of September 30, 2024, the Company’s debt commitments are comprised of $113,746 revolving credit facilities and $109,794 delayed draw term loans, which generally are used for acquisitions or capital expenditures and are subject to certain performance tests. Such unfunded debt commitments have a fair value representing unrealized appreciation (depreciation) of $(50). The Company’s unfunded Equity/Other commitments generally require certain conditions to be met or actual approval from the Adviser prior to funding.

While the Company does not expect to fund all of its unfunded commitments, there can be no assurance that it will not be required to do so.

In the normal course of business, the Company may enter into guarantees on behalf of portfolio companies. Under such arrangements, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. The Company had no such guarantees outstanding at September 30, 2024 and December 31, 2023.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 11. Financial Highlights

The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2024 and the year ended December 31, 2023:


	Nine Months Ended September 30, 2024 (Unaudited)			Year Ended December 31, 2023
Per Share Data:(1)
Net asset value, beginning of period	$	28.84		$	25.82
Results of operations(2)
Net investment income (loss)	2.53			2.74
Net realized gain (loss) and unrealized appreciation (depreciation)	0.62			2.01
Net increase (decrease) in net assets resulting from operations	3.15			4.75
Shareholder distributions(3)
Distributions from net investment income	(2.43)			(0.96)

Net decrease in net assets resulting from shareholder distributions	(2.43)			(0.96)
Capital share transactions
Issuance of Common Shares(4)	—			(0.77)




Net increase (decrease) in net assets resulting from capital share transactions	—			(0.77)
Net asset value, end of period	$	29.56		$	28.84
Shares outstanding, end of period	20,862,875			8,457,385
Total return based on net asset value(5)	10.92		%	15.41		%
Ratio/Supplemental Data:
Net assets, end of period	$	616,659		$	243,894
Ratio of net investment income to average net assets(6)	11.60		%	9.59		%

Ratio of total operating expenses to average net assets(6)	8.09		%	6.12		%
Ratio of waived expenses to average net assets(6)	(2.66)		%	(2.59)		%
Ratio of net operating expenses to average net assets(6)	5.43		%	3.53		%
Portfolio turnover(7)	11.23		%	8.40		%
Total amount of senior securities outstanding, exclusive of treasury securities	$	222,743		$	94,746
Asset coverage per unit(8)	3.77			3.57

____________________

(1)Per share data may be rounded in order to recompute the ending NAV per share.

(2)The per share data was derived by using the weighted average shares outstanding during the applicable period.

(3)The per share data for distributions reflect the actual amount of distributions paid per share during the applicable period.

(4)The issuance of Common Shares on a per share basis reflects the incremental net asset value changes as a result of the issuance of Common Shares in connection with the Seed Contribution. The issuance of Common Shares at a price that is less than the net asset value per share results in a decrease in net asset value per share.

(5)The total return based on NAV for each period presented was calculated by taking the NAV per share as of the end of the applicable period, adding the cash distributions per share that were declared during the period and dividing the total by the NAV per share at the beginning of the period. Total return based on NAV does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of Common Shares. The historical calculation of total return based on NAV in the table should not be considered a representation of the Company’s future total return based on NAV, which may be greater or less than the return shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total return on the Company’s investment portfolio during the applicable period and do not represent an actual return to shareholders.

(6)Weighted average net assets during the applicable period are used for this calculation. Ratios for the nine months ended September 30, 2024 are annualized, with the exception of capital gains incentive fees and recoupment of previously waived expenses. Annualized ratios for the nine months ended September 30, 2024 are not necessarily indicative of the ratios that may be expected for the year ending December 31, 2024. The following is a schedule of supplemental ratios for the nine months ended September 30, 2024 and the year ended December 31, 2023:


	Nine Months Ended September 30, 2024 (Unaudited)		Year Ended December 31, 2023
Ratio of accrued capital gains incentive fees to average net assets	0.25	%	0.37	%

Ratio of interest expense to average net assets	3.18	%	1.06	%

(7)Portfolio turnover for the nine months ended September 30, 2024 is not annualized.

Table of Contents

KKR FS Income Trust

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 11. Financial Highlights (continued)

(8)Asset coverage per unit is the ratio of the carrying value of the Company’s total consolidated assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.

Note 12. Subsequent Events

Loan and Security Agreement

On October 2, 2024, K-FIT Finance AB-1 LLC, or K-FIT AB-1, a wholly-owned, special purpose financing subsidiary of the Company entered into the First Amendment, or First Amendment, to the Loan and Security Agreement, dated October 10, 2023, or the Loan Agreement, by and among K-FIT AB-1, as borrower, Ally Bank, as administrative agent and arranger, each of the lenders from time to time party thereto, and Computershare Trust Company, N.A., as collateral administrator and collateral custodian. The First Amendment provides for, among other things, (a) a reduction of applicable spread over Daily 1M SOFR from (i) 275 basis points to (ii) 225 basis points; and (b) certain changes to value adjustment events.

Distributions

On October 10, 2024, the Board declared a distribution of $0.25 per Common Share, payable on or about November 26, 2024 to shareholders of record as of the close of business on October 31, 2024. Additionally, on November 7, 2024, the Board declared a distribution of $0.25 per Common Share, payable on or about December 27, 2024 to shareholders of record as of the close of business on November 29, 2024. Shareholders may receive the distribution payments in cash or in Common Shares in accordance with their election under the Company’s distribution reinvestment plan.

Private Offering Closings

On October 1, 2024, the Company issued and sold 2,135,994 Common Shares in the Private Offering (with the final number of Common Shares issued being determined on October 22, 2024) pursuant to subscription agreements entered into with the participating investors for aggregate consideration of $63,140.

On October 25, 2024, the Company issued and sold 134,499 Common Shares in the Private Offering pursuant to subscription agreements entered into with the participating investors for aggregate consideration of $4,000.

On November 1, 2024, the Company issued and sold Common Shares in the Private Offering pursuant to subscription agreements entered into with the participating investors for aggregate consideration of $45,454. The final number of Common Shares issued as of November 1, 2024 in connection with the monthly closing will be determined at a later date in connection with the Company’s determination of its net asset value per Common Share as of October 31, 2024.

Series A Preferred Shares

On October 28, 2024, the Company directed that written notices of redemption be issued to the holders of its Series A Preferred Shares, regarding the Company’s exercise of its option to redeem all of the 515 issued and outstanding shares of Series A Preferred Shares, pursuant to Article IV of that certain Supplement to the Amended and Restated Declaration of Trust of KKR FS Income Trust Relating to 12.0% Series A Cumulative Preferred Shares, dated April 3, 2023, or the Preferred Shares Supplement. The Company intends to redeem all of its issued and outstanding shares of Series A Preferred Shares on or about November 27, 2024, or the Redemption Date. In accordance with the Preferred Shares Supplement, the shares of Series A Preferred Shares will be redeemed at a price equal to $1,000 per share, plus all accrued and unpaid dividends thereon to and including the Redemption Date and a $100 redemption premium per share.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(in thousands, except share and per share amounts and percentages)

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us,” “our” and the “Company” refer to KKR FS Income Trust and the “Adviser” refers to FS/KKR Advisor, LLC.

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:

•our future operating results;

•our business prospects and the prospects of the companies in which we may invest;

•the impact of the investments that we expect to make;

•the ability of our portfolio companies to achieve their objectives;

•our current and expected financings and investments;

•changes in the general interest rate environment;

•the elevated levels of inflation, and its impact on our portfolio companies and on the industries in which we invest;

•the adequacy of our cash resources, financing sources and working capital;

•the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;

•our contractual arrangements and relationships with third parties;

•actual and potential conflicts of interest with the other funds managed by the Adviser, FS Investments, KKR Credit or any of their respective affiliates;

•the dependence of our future success on the general economy and its effect on the industries in which we may invest;

•general economic, political and industry trends and other external factors, including uncertainty surrounding the financial and political stability of the United States and other countries;

•our use of financial leverage;

•the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments;

•the ability of the Adviser or its affiliates to attract and retain highly talented professionals;

•our ability to maintain our qualification as a RIC and as a BDC;

•the impact on our business of U.S. and international financial reform legislation, rules and regulations;

•the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position; and

•the tax status of the enterprises in which we may invest.

Words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause our actual results to differ materially from those expressed or forecasted in the forward-looking statements. Factors that could cause actual results to differ materially include changes relating to those set forth above and the following, among others:

•changes in the economy;

Table of Contents

•geo-political risks;

•risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or pandemics; and

•future changes in laws or regulations and conditions in our operating areas.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. You should not place undue reliance on these forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Shareholders are advised to consult any additional disclosures that we may make directly to shareholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act.

Overview

We are an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. Formed as a Delaware statutory trust on February 4, 2022, we are externally managed by the Adviser, which manages our day-to-day operations and provides us with investment advisory and administrative services pursuant to the terms of the Advisory Agreement and the Administration Agreement. The Adviser is registered as an investment adviser with the SEC. We also have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. We commenced operations concurrent with the initial closing on the Seed Contribution on July 25, 2022.

The Adviser oversees (subject to the oversight of the Board, a majority of whom are not “interested persons,” as defined in Section 2(a)(19) of the 1940 Act) the management of our operations and is responsible for making investment decisions with respect to our portfolio pursuant to the terms of the Advisory Agreement. Under the Advisory Agreement, we have agreed to pay the Adviser an annual management fee as well as an incentive fee based on our investment performance.

We are conducting the continuous Private Offering of our Common Shares in reliance on exemptions from the registration requirements of the Securities Act, including the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, Regulation S under the Securities Act and other exemptions from the registration requirements of the Securities Act.

Investments

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We seek to meet our investment objectives by:

•utilizing the experience and expertise of the management team of the Adviser;

•employing a defensive investment approach focused on long-term credit performance and principal protection;

•focusing primarily on debt investments in a broad array of private U.S. companies, including middle-market companies, which we define as companies with annual EBITDA of $50 million to $150 million at the time of investment;

•investing primarily in established, stable enterprises with positive cash flows; and

•maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio, such as an event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company.

We pursue our investment objective by investing primarily in the debt of private middle market U.S. companies with a focus on originated transactions sourced through the network of the Adviser and its affiliates. We define direct originations as any investment where our investment adviser or its affiliates had negotiated the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These directly originated transactions include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions.

See “Item 1. Business - Investment Objectives and Strategy” in the annual report on Form 10-K for the year ended December 31, 2023 filed with the SEC for more information.

Table of Contents

Revenues

The principal measure of our financial performance is net change in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net unrealized appreciation or depreciation on investments and net unrealized gain or loss on foreign currency. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign-denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign-denominated investments. Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations.

We principally generate revenues in the form of interest income on the debt investments and asset based finance investments, or ABF Investments, we hold, as well as dividends and other distributions on the equity or other securities we hold. In addition, we generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees.

Expenses

Our primary operating expenses include the payment of management and incentive fees and other expenses under the Advisory Agreement and the Administration Agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Adviser for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

The Adviser oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Adviser also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our shareholders and reports filed with the SEC. In addition, the Adviser assists us in calculating our NAV, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our shareholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

Pursuant to the Administration Agreement, we reimburse the Adviser for expenses necessary to perform services related to our administration and operations, including the Adviser’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of the Adviser. We reimburse the Adviser no less than monthly for all costs and expenses incurred by the Adviser in performing its obligations and providing personnel and facilities under the Administration Agreement. The Adviser allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Board reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Adviser. The Board then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, the Board considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Board compares the total amount paid to the Adviser for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.

Except as provided in the Administration Agreement and the Advisory Agreement, we bear all expenses of our operations and transactions, including all other expenses incurred by the Adviser in performing services for us and administrative personnel paid by the Adviser, subject to the limitations included in the Advisory Agreement and the Administration Agreement. See Note 4 to our unaudited consolidated financial statements included herein for more information regarding the expenses borne by us and, thus, our shareholders.

In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by the Adviser, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance. We pay State Street Bank and Trust Company directly for the costs of such services.

The Adviser has agreed to advance all of our organizational and offering expenses on our behalf (including legal, accounting, printing, mailing, subscription processing and filing fees and expenses and other offering expenses, including costs associated with technology integration between our systems and those of our participating brokers, reasonable bona fide due diligence expenses of participating brokers supported by detailed and itemized invoices, costs in connection with preparing sales materials and other

Table of Contents

marketing expenses, design and website expenses, fees and expenses of our transfer agent, fees to attend retail seminars sponsored by participating brokers and costs, expenses and reimbursements for travel (provided that we shall not be required to bear the cost of private airfare in excess of comparable first-class/business rates on a commercial airline, if available), meals, accommodations, entertainment and other similar expenses related to meetings or events with prospective investors, brokers, registered investment advisors or financial or other advisors, but excluding the shareholder servicing and/or distribution fee) through a date determined by the Adviser in its discretion. We had no obligation to reimburse the Adviser for such advanced expenses until the initial issuance of Common Shares to non-affiliated investors after commencement of the monthly closings for the Private Offering, which commenced on March 1, 2024. As of September 30, 2024, the Company had incurred organizational and offering expenses of $991 and $3,190, respectively, which expenses the Adviser elected to cover pursuant to the Expense Support Agreement, subject to reimbursement by the Company pursuant to its terms. See “Expense Support and Conditional Reimbursement” below for more information. In no event will we bear in excess of $1.5 million in organizational expenses; the Adviser has agreed to be responsible for any organizational expenses in excess of $1.5 million. For the nine months ended September 30, 2024, the Company reimbursed $2,290 of organizational and offering expenses.

From time to time, the Adviser or its affiliates may pay third-party providers of goods or services. We will reimburse the Adviser or such affiliates thereof for any such amounts paid on our behalf. From time to time, the Adviser may defer or waive fees and/or rights to be reimbursed for expenses. All of the foregoing expenses will ultimately be borne by our shareholders.

Expense Support and Conditional Reimbursement

For the nine months ended September 30, 2024 and the year ended December 31, 2023, the Adviser has agreed to pay $0 and $147, respectively, in Expense Payments, subject to reimbursement by the Company in accordance with the Expense Support Agreement. For the nine months ended September 30, 2024, the Company reimbursed the Adviser for $436 of previously waived expenses. As of September 30, 2024, there are no amounts of previously waived expenses subject to recoupment.

Table of Contents

Fees and Expenses

The following table illustrates the aggregate fees and expenses that the Company expects to incur and that shareholders can expect to bear, either directly or indirectly, during the following twelve months.


Shareholder transaction expenses (fees paid directly from shareholder investment)
Maximum sales load imposed on purchases(1)	—
Annual operating expenses (as a percentage of average net assets attributable to shares)(2)
Base management fee(3)	1.25	%
Incentive fees payable under our investment advisory agreement(4)	—
Interest payments on borrowed funds(5)	4.55	%
Distribution fee(6)	—
Organizational and offering costs(7)	0.16	%
Other expenses(8)	0.57	%
Total annual expenses	6.53	%
Waiver of management and subordinated income incentive fees(3)	(0.63)	%
Net annual expenses	5.90	%

_______________

(1)If Class I shares are purchased through certain financial intermediaries, they may directly charge transaction or other fees, including upfront placement fees or brokerage commissions, in such amount as they may determine, provided that selling agents limit such charges to a 3.5% cap on NAV for Class I shares. In connection with the sales of Class I shares, participating broker-dealers may charge investors a placement fee, subject to the discretion of the broker-dealer. Any such placement fee is not part of (and is in addition to) an investor’s aggregate purchase price for its Class I shares and will be directly charged to such investor.

(2)Amount assumes that we sell $794.1 million worth of Class I shares during the following twelve months, resulting in estimated average net assets of $1,013.7 million based on current asset levels. That amount also assumes that we borrow funds of approximately 70% of our average net assets during such period. Actual expenses will depend on the number of Class I shares we sell in the Private Offering and the amount of leverage we employ, if any. There can be no assurance that we will sell $794.1 million worth of Class I shares during the following twelve months.

(3)The Management Fee is calculated and payable quarterly in arrears at an annual rate of 1.25% of our average monthly net assets during such period. The Adviser has agreed to waive the management and subordinated income incentive fees through March 31, 2025.

(4)Based on our current business plan, we anticipate that we may have capital gains and interest income that could result in the payment of an incentive fee to the Adviser in the following twelve months. However, the incentive fee payable to the Adviser is based on our performance and will not be paid unless we achieve certain performance targets. As we cannot predict whether we will meet the necessary performance targets, we have assumed that no incentive fee will be paid for purposes of this table. We expect the incentive fees we pay to increase to the extent we earn greater interest income through our investments in portfolio companies, and realize capital gains upon the sale of investments in our portfolio companies.

(5)We may borrow funds to make investments, including before we have fully invested the initial proceeds of the Private Offering. To the extent that we determine it is appropriate to borrow funds to make investments, the costs associated with such borrowing will be indirectly borne by our shareholders. The figure in the table assumes we borrow for investment purposes an amount of approximately 70% of our average net assets (including such borrowed funds) during such period and that the annual interest rate on the amount borrowed is 6.5%.

Our ability to incur leverage during the following twelve months depends, in large part, on the amount of money we are able to raise through the sale of Class I shares in the Private Offering and capital markets conditions.

(6)Distribution fees reflect an annual shareholder servicing and/or distribution fee of 0.85% per annum of the aggregate NAV as of the beginning of the first calendar day of the month for the Class I shares. However, pursuant to a fee waiver agreement, or the Rule 12b-1 Fee Waiver Agreement, between the Company and each of the Placement Agents, the Company’s principal placement agents for the Private Offering and affiliates of the Adviser, the Placement Agents have agreed to waive the shareholder servicing and/or distribution fees for Class I shares in full during the term of the Rule 12b-1 Fee Waiver Agreement, and any such waived fees will not be subject to recoupment by the Placement Agents or any other person during or following the term of the Rule 12b-1 Fee Waiver Agreement. The Rule 12b-1 Fee Waiver Agreement will remain in effect until terminated by vote of the Board (including a vote of a majority of its independent trustees).

(7)Amount reflects estimated organizational and offering costs to be paid by us of up to approximately $1.6 million if we raise $794.1 million in gross proceeds. The Adviser has agreed to advance all of our organizational and offering expenses on our behalf through a date determined by the Adviser in its discretion. We will reimburse the Adviser for any such amounts paid on our behalf pursuant to the terms of the Expense Support Agreement. See “Expenses” and “Expense Support and Conditional Reimbursement” sections above for more information.

(8)Other expenses primarily include accounting, legal and auditing fees, as well as the reimbursement of the compensation of administrative personnel and fees payable to our directors who do not also serve in an executive officer capacity for us or the Adviser. The amount presented in the table reflects estimated amounts we expect to pay during the following twelve months and does not include preferred pricing arrangements we may receive from certain parties as a newly formed entity.

Table of Contents

Example

The following example demonstrates the projected dollar amount of total expenses that would be incurred over various periods with respect to a $10,000 investment assuming our direct and indirect annual operating expenses would remain at the percentage levels set forth in the table above (assuming we borrow an amount of approximately 70% of our average net assets) and Class I shares earn a 5.0% annual return:


Share Class	1 Year	3 Years	5 Years	10 Years
Class I	$587	$1,861	$3,097	$6,024

Portfolio Investment Activity for the Three and Nine Months Ended September 30, 2024 and for the Year Ended
December 31, 2023

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three and nine months ended September 30, 2024:


	For the Three Months Ended		For the Nine Months Ended
Net Investment Activity	September 30, 2024		September 30, 2024
Purchases	$	218,604	$	613,073
Sales and Repayments	(13,094)		(60,091)
Net Portfolio Activity	$	205,510	$	552,982


	For the Three Months Ended								For the Nine Months Ended
	September 30, 2024								September 30, 2024
New Investment Activity by Asset Class	Purchases		Percentage		Sales and Repayments		Percentage		Purchases		Percentage		Sales and Repayments		Percentage
Senior Secured Loans—First Lien	$	161,177	74	%	$	1,253	10	%	$	479,613	78	%	$	22,366	37	%


Subordinated Debt	—		—		—		—		485		0	%	—		—
Asset Based Finance	57,427		26	%	11,841		90	%	132,975		22	%	37,725		63	%

Total	$	218,604	100	%	$	13,094	100	%	$	613,073	100	%	$	60,091	100	%

The following table summarizes the composition of our investment portfolio at cost and fair value as of September 30, 2024 and December 31, 2023:


	September 30, 2024
	(Unaudited)						December 31, 2023
	Amortized Cost(1)		Fair Value		Percentage of Portfolio		Amortized Cost(1)		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	660,212	$	667,959	80.7	%	$	201,782	$	204,314	77.4	%


Subordinated Debt	1,622		1,608		0.2	%	973		961		0.4	%
Asset Based Finance	154,054		158,525		19.1	%	57,706		58,655		22.2	%

Total	$	815,888	$	828,092	100.0	%	$	260,461	$	263,930	100.0	%

_____________________

(1)Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

Table of Contents

The following table presents certain selected information regarding the composition of our investment portfolio as of September 30, 2024 and December 31, 2023:


	September 30, 2024	December 31, 2023
Number of Portfolio Companies	88	31
% of Direct Originations in Investment Portfolio	100.0%	100.0%
% Variable Rate Debt Investments (based on fair value)(1)	91.2%	90.6%
% Fixed Rate Debt Investments (based on fair value)(1)	5.8%	2.4%
% Other Income Producing Investments (based on fair value)(2)	1.4%	1.2%
% Non-Income Producing Investments (based on fair value)	1.6%	5.8%

Weighted Average Annual Yield on Accruing Debt Investments(1)(3)	10.6%	12.1%
Weighted Average Annual Yield on All Debt Investments(4)	10.6%	12.1%

_____________________

(1)“Debt Investments” means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return.

(2)“Other Income Producing Investments” means investments that pay or are expected to pay interest, dividends or other income to the Company on an ongoing basis but do not have a stated interest rate, stated dividend rate or other similar stated return.

(3)The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of September 30, 2024, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of September 30, 2024.

(4)The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of September 30, 2024, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of September 30, 2024.

For the nine months ended September 30, 2024, our total return based on NAV was 10.92%. For the year ended December 31, 2023, our total return based on NAV was 15.41%. See footnote 5 to the table included in Note 11 to our unaudited consolidated financial statements included herein for information regarding the calculation of our total return based on NAV.

Table of Contents

Portfolio Composition by Industry Classification


	September 30, 2024
	(Unaudited)				December 31, 2023
Industry Classification	Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio

Banks	$	1,380	0.2	%	$	2,093	0.8	%
Capital Goods	142,592		17.2	%	55,589		21.1	%
Commercial & Professional Services	174,400		21.1	%	76,758		29.1	%
Consumer Discretionary Distribution & Retail	3,975		0.5	%	2,179		0.8	%
Consumer Durables & Apparel	6,731		0.8	%	—		—
Consumer Services	56,393		6.8	%	12,953		4.9	%
Consumer Staples Distribution & Retail	16,484		2.0	%	16,673		6.3	%


Equity Real Estate Investment Trusts (REITs)	20,676		2.5	%	—		—
Financial Services	49,708		6.0	%	17,055		6.5	%

Health Care Equipment & Services	94,364		11.4	%	—		—

Insurance	56,786		6.9	%	29,092		11.0	%
Materials	21,366		2.6	%	—		—

Pharmaceuticals, Biotechnology & Life Sciences	29,250		3.5	%	21,875		8.3	%
Real Estate Management & Development	38,386		4.6	%	3,467		1.3	%

Software & Services	58,675		7.1	%	12,698		4.8	%
Technology Hardware & Equipment	1,094		0.1	%	—		—

Transportation	54,230		6.5	%	13,498		5.1	%
Utilities	1,602		0.2	%	—		—
Total	$	828,092	100.0	%	$	263,930	100.0	%

Portfolio Asset Quality

In addition to various risk management and monitoring tools, the Adviser uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. The Adviser uses an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating:


Investment Rating						Summary Description
1						Performing investment—generally executing in accordance with plan and there are no concerns about the portfolio company’s performance or ability to meet covenant requirements.

2						Performing investment—no concern about repayment of both interest and our cost basis but company’s recent performance or trends in the industry require closer monitoring.

3						Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment.

4						Underperforming investment—concerns about the recoverability of principal or interest.

Table of Contents

The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of September 30, 2024 and December 31, 2023:


	September 30, 2024				December 31, 2023
Investment Rating	Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio
1	$	810,781	98	%	$	247,257	94	%
2	17,311		2	%	16,673		6	%
3	—		—		—		—
4	—		—		—		—
Total	$	828,092	100	%	$	263,930	100	%

The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2024 and September 30, 2023

Revenues

Our investment income for the three and nine months ended September 30, 2024 and 2023 was as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
	Amount		Percentage of Total Income		Amount		Percentage of Total Income		Amount		Percentage of Total Income		Amount		Percentage of Total Income
Interest income	$	19,945	89.0	%	$	3,884	86.8	%	$	42,995	87.6	%	$	4,586	84.5	%

Fee income	2,261		10.1	%	509		11.4	%	4,820		9.8	%	760		14.0	%
Dividend income	201		0.9	%	81		1.8	%	1,272		2.6	%	81		1.5	%
Total investment income(1)	$	22,407	100.0	%	$	4,474	100.0	%	$	49,087	100.0	%	$	5,427	100.0	%

___________

(1)Such revenues represent $20,964 and $4,399 of cash income earned as well as $1,443 and $75 in non-cash portions relating to accretion of discount and PIK interest for the three months ended September 30, 2024 and 2023, respectively. Such revenues represent $46,793 and $5,337 of cash income earned as well as $2,294 and $90 in non-cash portions relating to accretion of discount and PIK interest for the nine months ended September 30, 2024 and 2023, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.

The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. We expect the dollar amount of interest and any dividend income that we earn to increase as the size of our investments portfolio increases.

The increase in interest income, fee income and dividend income for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 is primarily due to the increase in the size of our investment portfolio.

Table of Contents

Expenses

Our operating expenses for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

Management fees	$	1,596	$	523	$	3,428	$	585
Subordinated income incentive fees	2,034		399		4,250		399
Capital gains incentive fees	247		203		971		404
Interest Expense	3,804		292		9,172		292
Administrative services expenses	560		357		1,376		499
Accounting and administrative fees	72		1		186		4
Organizational and offering costs	1,025		—		2,290		—
Insurance expense	46		92		137		329
Audit expense	147		200		436		332
Other expenses	469		136		1,008		220
Total operating expenses	10,000		2,203		23,254		3,064
Management and incentive fee waivers	(3,630)		(922)		(7,678)		(984)
Expense (waiver) recoupment	—		—		436		(147)
Net operating expenses	$	6,370	$	1,281	$	16,012	$	1,933

The following table reflects selected expense ratios as a percent of average net assets for the three and nine months ended September 30, 2024 and 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

Ratio of operating expenses to average net assets	1.84	%	1.51	%	6.16	%	5.30	%
Ratio of expense waivers to average net assets(1)	(0.67)	%	(0.63)	%	(2.00)	%	(1.96)	%
Ratio of net operating expenses to average net assets	1.17	%	0.88	%	4.16	%	3.34	%
Ratio of net incentive fees and interest expense to average net assets(1)	0.74	%	0.34	%	2.63	%	1.20	%
Ratio of net operating expenses, excluding certain expenses, to average net assets	0.43	%	0.54	%	1.53	%	2.14	%

__________

(1)Ratio data may be rounded in order to recompute the ending ratio of net operating expenses to average net assets or net operating expenses, excluding certain expenses, to average net assets.

We generally expect our general and administrative expenses to decrease as a percentage of our average net assets because of the anticipated growth in the size of our asset base.

The increase in expenses for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 is primarily due to the increase in the size of our investment portfolio, the acceleration of our operational activity during the three and nine months ended September 30, 2024 and the incurrence of borrowings under the K-FIT AB-1 Credit Facility and the Senior Secured Revolving Credit Facility.

Interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance, changes in amounts outstanding under our financing arrangements and benchmark interest rates such as SOFR, among other factors.

Net Investment Income

Our net investment income totaled $16,037 ($0.87 per share) and $3,193 ($0.63 per share) for the three months ended September 30, 2024 and 2023, respectively. The increase in net investment income during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 can primarily be attributed to the increase in interest, fee and dividend income discussed above.

Our net investment income totaled $33,075 ($2.53 per share) and $3,494 ($1.70 per share) for the nine months ended September 30, 2024 and 2023, respectively. The increase in net investment income during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 can primarily be attributed to the increase in interest, fee and dividend income discussed above.

Table of Contents

Net Realized Gains or Losses

Our net realized gains (losses) on investments, foreign currency forward contracts and foreign currency for the three and nine months ended September 30, 2024 and 2023 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net realized gain (loss) on investments(1)	$	21	$	—	$	77	$	17

Net realized gain (loss) on foreign currency forward contracts	9		—		9		—
Net realized gain (loss) on foreign currency	(192)		(52)		(141)		(54)
Total net realized gain (loss)	$	(162)	$	(52)	$	(55)	$	(37)

______________

(1)We sold investments and received principal repayments of $6,411 and $6,683, respectively, during the three months ended September 30, 2024 and $438 and $184, respectively, during the three months ended September 30, 2023. We sold investments and received principal repayments of $52,076 and $8,015, respectively, during the nine months ended September 30, 2024 and $877 and $223, respectively, during the nine months ended September 30, 2023.

Net Change in Unrealized Appreciation (Depreciation)

Our net change in unrealized appreciation (depreciation) on investments, foreign currency forward contracts and unrealized gain (loss) on foreign currency for the three and nine months ended September 30, 2024 and 2023 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

Net change in unrealized appreciation (depreciation) on investments	$	3,211	$	1,335	$	8,735	$	3,083

Net change in unrealized appreciation (depreciation) on foreign currency forward contracts	(113)		—		(119)		—
Net change in unrealized gain (loss) on foreign currency	(962)		348		(793)		351
Total net change in unrealized appreciation (depreciation)	$	2,136	$	1,683	$	7,823	$	3,434

The net change in unrealized appreciation (depreciation) during the three and nine months ended September 30, 2024 was driven primarily by appreciation on several specific assets in the portfolio.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended September 30, 2024, the net increase in net assets resulting from operations was $18,011 ($0.98 per share) compared to a net increase in net assets resulting from operations of $4,824 ($0.94 per share) for the three months ended September 30, 2023.

For the nine months ended September 30, 2024, the net increase in net assets resulting from operations was $40,843 ($3.12 per share) compared to a net increase in net assets resulting from operations of $6,891 ($3.34 per share) for the nine months ended September 30, 2023.

Financial Condition, Liquidity and Capital Resources

Overview

We intend to generate cash primarily from the net proceeds from the Private Offering and from cash flows from interest and fees earned from our investments and principal repayments and proceeds from sales of our investments. We may also fund a portion of our investments through borrowings from banks and issuances of senior securities, including before we have fully invested the proceeds of the Private Offering. Our primary use of cash will be investments in portfolio companies, payments of our expenses, including management fees, incentive fees and interest expenses, payment of cash distributions to our shareholders and repurchases of our Common Shares under our discretionary share repurchase program.

As of September 30, 2024, we had received capital commitments of $420,000 from investors in the Private Offering, and have called an aggregate of $250,500 in capital contributions in exchange for 8,861,448 in Class I shares in connection with such commitments.

Table of Contents

As of September 30, 2024, we had $37,615 in cash and foreign currency, which we held in custodial accounts, and $152,772 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of September 30, 2024, we had unfunded debt investments with aggregate unfunded commitments of $223,540 and unfunded equity/other commitments of $44,492. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.

We intend to utilize leverage to finance our investments. The amount of leverage that we employ will be subject to the restrictions of the 1940 Act and the supervision of the Board. At the time of any proposed borrowing, the amount of leverage we employ will also depend on our Adviser’s assessment of market and other factors. We have established credit facilities and other financing arrangements, and intend to establish one or more additional credit facilities or enter into other financing arrangements to facilitate investments and the timely payment of our expenses.

Asset Coverage

Under the provisions of the 1940 Act, following approval from our initial shareholders of the reduced asset coverage requirements under Section 61(a)(2) of the 1940 Act, which approval became effective on July 26, 2022, we are currently permitted to issue “senior securities” only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after each issuance of senior securities. For purposes of the 1940 Act, “asset coverage” means the ratio of (1) the total assets of a BDC, less all liabilities and indebtedness not represented by senior securities, to (2) the aggregate amount of senior securities representing indebtedness (plus, in the case of senior securities represented by preferred stock, the aggregate involuntary liquidation preference of such BDC’s preferred stock). Under the 1940 Act, any Preferred Shares we issue, including the Series A Preferred Shares, will constitute a “senior security” for purposes of the 150% asset coverage test. In addition, while any senior securities remain outstanding, we will be required to make provisions to prohibit any dividend distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the dividend distribution or repurchase.

As of September 30, 2024, the aggregate amount outstanding of the senior securities issued by us was $222,743. As of September 30, 2024, our asset coverage ratio as calculated under the 1940 Act was 377%.

Prior to investing in securities of portfolio companies, we invest the cash received from fees, interest and dividends earned from our investments and principal repayments and proceeds from sales of our investments primarily in cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.

Financing Arrangements

The following table presents summary information with respect to our outstanding financing arrangements as of September 30, 2024:


	As of September 30, 2024 (Unaudited)
Arrangement	Type of Arrangement	Rate	Amount Outstanding			Amount Available		Maturity Date
Senior Secured Revolving Credit Facility(1)	Revolving Credit Facility	SOFR+2.125%(2)	$	104,228	(3)	$	20,772	July 19, 2028
K-FIT AB-1 Credit Facility(1)	Revolving Credit Facility	SOFR+2.75%(2)	118,000			132,000		October 10, 2028
Total			$	222,228		$	152,772

___________

(1)The carrying amount outstanding under the facility approximates its fair value.

(2)The benchmark rate is subject to a 0% floor.

See Note 9 to our unaudited consolidated financial statements included herein for additional information regarding our financing arrangements.

RIC Status and Distributions

We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the tenth month following the close of a tax year or the due date of the tax return for such tax year, including

Table of Contents

extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our shareholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our shareholders generally of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to shareholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our shareholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions.

Subject to applicable legal restrictions, and to the extent that we have taxable income available, we intend to make distributions to holders of our Common Shares and Preferred Shares. We intend to make monthly distributions to holders of our Common Shares and such distributions are recorded on the record date. All such distributions will be paid at the discretion of the Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time.

The IRS currently requires that a RIC has two or more classes of stock allocate to each such class proportionate amounts of each type of its income (such as ordinary income and capital gains) based upon the percentage of total dividends paid to each class for the tax year. Accordingly, while our Preferred Shares are outstanding, we intend to allocate capital gain dividends, if any, between our Common Shares and Preferred Shares in proportion to the total dividends paid to each class with respect to such tax year.

We intend to make dividends and distributions to our preferred shareholders semi-annually on or before June 30 and December 31 of each year. Dividends and distributions to preferred shareholders will be payable to holders of record at the close of business on the applicable record date, which shall be the fifteenth day of the calendar month in which the applicable dividend payment date falls or on such other date designated by the Board for the payment of dividends to preferred shareholders that is not more than 30 nor less than ten days prior to such dividend payment date.

During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a shareholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our shareholders. No portion of the distributions paid during the nine months ended September 30, 2024 represented a return of capital.

We intend to make our regular distributions in the form of cash, out of assets legally available for distribution, except for those shareholders who have elected to receive their distributions in the form of additional Common Shares under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. shareholder.

The following table reflects the cash distributions per share that we have declared on our Common Shares during the nine months ended September 30, 2024:

For the Nine Months Ended
September 30, 2024

Date Declared

Distribution

Record Date

Payment Date

Distribution per Share

January 5, 2024

Regular

January 31, 2024

February 27, 2024

0.24

February 20, 2024

Regular

February 29, 2024

March 26, 2024

0.24

March 7, 2024

Regular

March 28, 2024

April 26, 2024

0.25

April 3, 2024

Regular

April 30, 2024

May 29, 2024

0.25

May 2, 2024

Regular

May 31, 2024

June 26, 2024

0.25

June 11, 2024

Regular

June 28, 2024

July 29, 2024

0.25

June 11, 2024

Special

June 28, 2024

July 29, 2024

0.10

July 11, 2024

Regular

July 31, 2024

August 28, 2024

0.25

July 31, 2024

Regular

August 30, 2024

September 26, 2024

0.25

September 16, 2024

Regular

September 30, 2024

October 29, 2024

0.25

September 16, 2024

Special

September 30, 2024

October 29, 2024

0.10

Total

2.43

See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions.

Table of Contents

Recent Developments

Loan and Security Agreement

Distributions

Private Offering Closings

On October 1, 2024, we issued and sold 2,135,994 Common Shares in the Private Offering (with the final number of Common Shares issued being determined on October 22, 2024) pursuant to subscription agreements entered into with the participating investors for aggregate consideration of $63,140.

On November 1, 2024, we issued and sold Common Shares in the Private Offering pursuant to subscription agreements entered into with the participating investors for aggregate consideration of $45,454. The final number of Common Shares issued as of November 1, 2024 in connection with the monthly closing will be determined at a later date in connection with the Company’s determination of its net asset value per Common Share as of October 31, 2024.

Series A Preferred Shares

Critical Accounting Policies and Estimates

Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management utilizes available information, including our past history, industry standards and the current economic environment, among other factors, in forming the estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in Note 2 to our unaudited consolidated financial statements included herein.

Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, valuation of portfolio investments, specifically the valuation of Level 3 investments, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a

Table of Contents

material impact on our reported results of operations or financial condition. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below and in the notes to our unaudited consolidated financial statements included herein.

As of September 30, 2024, our investment portfolio, valued at fair value in accordance with our Board-approved valuation policy, represented 94.37% of our total assets, as compared to 75.25% of our total assets as of December 31, 2023.

Valuation of Portfolio Investments and Determination of NAV

Valuation of Portfolio Investments

The Board is responsible for overseeing the valuation of our portfolio investments at fair value as determined in good faith pursuant to the Adviser’s valuation policy. As permitted by Rule 2a-5 of the 1940 Act, the Board has designated the Adviser as our valuation designee with day-to-day responsibility for implementing the portfolio valuation process set forth in the Adviser’s valuation policy.

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the FASB clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical securities; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Adviser determines the fair value of our investment portfolio on at least a quarterly basis. Securities that are publicly-traded with readily available market prices will be valued at the reported closing price on the valuation date. Securities that are not publicly-traded with readily available market prices will be valued at fair value as determined in good faith by the Adviser, in accordance with valuation policies approved by the Board. In connection with that determination, the Adviser will prepare portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party pricing and valuation services.

With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:

•our quarterly fair valuation process begins by the Adviser facilitating the delivery of updated quarterly financial and other information relating to each investment to an independent third-party pricing or valuation service;

•the independent third-party pricing or valuation service then reviews and analyzes the information, along with relevant market and economic data, and determines proposed valuations for each portfolio company or investment according to the valuation methodologies in the Adviser’s valuation policy and communicates the information to the Adviser in the form of a valuation range for Level 3 assets;

•the Adviser then reviews the preliminary valuation information for each portfolio company or investment and provides feedback about the accuracy, completeness and timeliness of the valuation-related inputs considered by the independent third-party pricing or valuation service and any suggested revisions thereto prior to the independent third-party pricing or valuation service finalizing its valuation range;

•the Adviser then provides the Board’s valuation committee with its valuation determinations and valuation-related information for each portfolio company or investment, along with any applicable supporting materials; and other information that is relevant to the fair valuation process as required by the Adviser’s Board-reporting obligations;

•the Board’s valuation committee meets with the Adviser to receive the relevant quarterly reporting from the Adviser and to discuss any questions from the valuation committee in connection with the valuation committee’s role in overseeing the fair valuation process; and

•following the completion of its fair value oversight activities, the valuation committee (with the assistance of the Adviser) provides the Board with a report regarding the quarterly valuation process.

In circumstances where the Adviser deems appropriate, the Adviser’s internal valuation team values certain investments. When performing the internal valuations, the Adviser utilizes similar valuation techniques as an independent third-party pricing service

Table of Contents

would use. Such valuations are approved by an internal valuation committee of the Adviser, with oversight from the valuation committee of the Board, as described above.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, the Adviser may use any independent third-party pricing or valuation services for which it has performed the appropriate level of due diligence. However, the Adviser is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information sourced by the Adviser or provided by any independent third-party valuation or pricing service that the Adviser deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Adviser and any independent third-party valuation services may consider when determining the fair value of our investments.

The valuation methods utilized for each portfolio company may vary depending on industry and company-specific considerations. Typically, the first step is to make an assessment as to the enterprise value of the portfolio company’s business in order to establish whether the portfolio company’s enterprise value is greater than the amount of its debt as of the valuation date. This analysis helps to determine a risk profile for the applicable portfolio company and its related investments, and the appropriate valuation methodology to utilize as part of the security valuation analysis. The enterprise valuation may be determined using a market or income approach.

Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, the Adviser may incorporate these factors into discounted cash flow models to arrive at fair value. Various methods may be used to determine the appropriate discount rate in a discounted cash flow model.

Domestic and foreign fixed-income instruments and non-exchange traded derivatives are normally valued on the basis of quotes obtained from brokers and dealers or pricing services using data reflecting the earlier closing of the principal markets for those securities. Bank loans, including senior secured floating rate and fixed-rate loans, are valued by using readily available market quotations or another commercially reasonable method selected by an independent, third-party pricing service that has been engaged by the Adviser, or, if such independent, third-party valuations are not available, by using broker quotations. Senior secured adjustable, variable or floating rate loans for which an active secondary market exists to a reliable degree will be valued at the bid price in the market for such loans, as provided by a loan pricing service. Directly originated loans are valued on an individual loan level. In doing so, the Adviser may engage an independent, third-party valuation agent, and fair valuation of such loans will be performed using inputs that incorporate borrower level data, including significant events affecting the issuer or collateral and market developments. Prices obtained from independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange. The value of swaps, including credit default swaps, total return swaps and interest rate swaps will be determined by obtaining at least one dealer quotation (including information from counterparties) or valuations from third-party pricing services. If no quotations or valuations are available, or if such quotations or valuations are believed to be unreliable, swaps will be fair valued pursuant to procedures adopted by the Adviser and overseen by the Board.

Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing the debt investments.

For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.

Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security. The Adviser will normally use pricing data for domestic or foreign equity securities received shortly after the close of the primary securities exchange on which such securities trade and does not normally take into account trading, clearances or settlements that take place after the close of the exchange.

When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. The Adviser subsequently values these warrants or other equity securities received at their fair value.

Table of Contents

See Note 8 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.

Determination of NAV

We expect to determine our NAV for the Common Shares each month as of the last day of each calendar month, and in no event less frequently than quarterly. The NAV per share for our Common Shares is determined by dividing the value of total assets attributable to the Common Shares minus liabilities attributable to the Common Shares by the total number of Common Shares outstanding at the date as of which the determination is made. We will use the valuation procedures set forth above in order to determine our NAV, as applied by the Adviser as our valuation designee under Rule 2a-5 under the 1940 Act. Fair value pricing may require subjective determinations about the value of a security. If events materially affecting the price of foreign portfolio securities occur between the time when their price was last determined on such foreign securities exchange or market and the time when our NAV was last calculated (for example, movements in certain U.S. securities indices which demonstrate strong correlation to movements in certain foreign securities markets), such securities may be valued at their fair value as determined in good faith in accordance with procedures established by the Adviser and overseen by the Board.

For purposes of calculating NAV, all assets and liabilities initially expressed in foreign currencies will be converted into U.S. dollars at prevailing exchange rates as may be determined in good faith by the Adviser under the supervision of the Board. Although the Adviser’s policy is intended to result in a calculation of our NAV that fairly reflects security values as of the time of pricing, we cannot ensure that fair values determined by the Adviser would accurately reflect the price that we could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Adviser when determining fair value may differ from the value that would be realized if the securities were sold.

The NAV calculation is available generally within 20 business days after the end of the applicable month. Changes in our monthly NAV will reflect factors including, but not limited to, accruals for net portfolio income, interest expense and unrealized/realized gains (losses) on assets, any applicable organizational and offering costs and any expense reimbursements. When the Adviser determines NAV as of a day that is not the last day of a calendar quarter in connection with a drawdown on capital commitments or, for monthly closings to investors for immediate cash investment, as of the last day of a month that is not also the last day of a calendar quarter, we intend to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter-end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Adviser’s valuation policy, pursuant to authority designated by the Board. Additionally, the Adviser may otherwise determine to update the most recent quarter-end valuation of an investment without reliable market quotations that the Adviser considers to be material to the Company using a range of values from an independent valuation firm.

The most recently determined NAV per share for the Common Shares will be reported by the Company under cover of a Current Report on Form 8-K filed with the SEC.

Contractual Obligations

We have entered into the Advisory Agreement and Administration Agreement with the Adviser to provide us with investment advisory and administrative services. Payments for investment advisory services under the Advisory Agreement are equal to (a) an annual base management fee based on the average monthly value of the Company’s net assets during the most recently completed calendar quarter, and (b) an incentive fee based on our performance. The Adviser is reimbursed for administrative expenses incurred on our behalf. See Note 4 to our unaudited consolidated financial statements included herein for a discussion of these agreements and for the amount of fees and expenses accrued under these agreements during the nine months ended September 30, 2024.

If any of our contractual obligations are terminated, our costs may increase under any new agreements that we enter into as replacements. We would also likely incur expenses in locating alternative parties to provide the services we expect to receive under our Advisory Agreement and our Administration Agreement.

Off-Balance Sheet Arrangements

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of September 30, 2024, we had off-balance sheet arrangements with the Financing Provider under the Cliffwater Facility Agreement, as described below.

Table of Contents

Warehousing Transaction

On May 9, 2024, the Company entered into the A&R Cliffwater Facility Agreement with the Financing Provider to acquire portfolio investments from time to time by purchasing all or a portion of certain investments owned and held by the applicable Financing Provider at the Company’s or the applicable Financing Provider’s request pursuant to the terms and provisions of the A&R Cliffwater Facility Agreement. The Cliffwater Facility Agreement creates a forward obligation of the applicable Financing Provider to sell, and a forward obligation of the Company or its designee to purchase, all or a portion of certain investments owned and held by the applicable Financing Provider at the Company’s or the applicable Financing Provider’s request pursuant to the terms and conditions of the A&R Cliffwater Facility Agreement. Prior to the date on which (i) an insolvency proceeding is commenced by the Company or (ii) an insolvency proceeding is commenced against the Company and is not dismissed or stayed within 60 days, such date referred to as the Facility End Date, the Company’s obligation to purchase such investments is conditional upon satisfying certain conditions, including the Capital Condition. The Company made customary representations and warranties in the A&R Cliffwater Facility Agreement.

Subject to satisfaction of the Capital Condition, the A&R Cliffwater Facility Agreement provides that the applicable Financing Provider can require the Company to purchase from the applicable Financing Provider such investments entered into in connection with the A&R Cliffwater Facility Agreement (x) with respect to such investment initially acquired by the applicable Financing Provider prior to the date that the Company has raised investor subscriptions that are callable, have been called or received in an aggregate amount of at least $750,000, such date referred to as the Subscription Threshold Date, in an amount up to 3.0% of the aggregate subscriptions that the Company has raised on or prior to the trade date of any purchase and (y) with respect to such investment initially acquired by the applicable Financing Provider on or after the Subscription Threshold Date, in an amount up to 2.0% of the aggregate subscriptions that the Company has raised on or prior to the trade date of any purchase. Such purchases will be at the prices determined under the A&R Cliffwater Facility Agreement, as discussed further below; provided that, (i) the Company may, on one occasion, extend the Facility End Date by three months and (ii) if no notice requiring a purchase or sale, as applicable, of such investments is delivered in accordance with the A&R Cliffwater Facility Agreement by the Facility End Date, none of the parties to the A&R Facility Agreement may require the other party to purchase or sell, as applicable, such investments after the Facility End Date.

The applicable Financing Provider will receive during the period commencing on the date the applicable Financing Provider acquires an investment and ending on the date immediately preceding the trade date of such investment, or the Holding Period, (i) all principal proceeds, all OID and Fees (as defined in the A&R Cliffwater Facility Agreement) paid on account of any portion of an underlying purchased loan that is repaid or prepaid and not available to be reborrowed and an available unfunded commitment that has been terminated, not funded and is not available to be reborrowed by the underlying obligor and all amendment fees on such investments it holds pursuant to the A&R Cliffwater Facility Agreement, in each case, during the Holding Period, (ii) all cash interest and payment-in-kind interest and all fees (other than one-time fees) that regularly accrue and are payable to all lenders under the underlying documents for such investments on account of such lenders’ loans or commitments outstanding pursuant to such underlying documents, in each case, during the Holding Period and (iii) additional consideration for any such investments transferred to the purchaser that have paid OID and Fees prior to the trade date during the Holding Period equal to an amount from 0.25% to 1.50% (based on the length of time such asset is held by the applicable Financing Provider) of the par value or unfunded amount, as applicable, of any such investment as of immediately prior to any transfer of such investment by the applicable Financing Provider to the Fund, the consideration under this clause (iii), the Additional Consideration.

Unless otherwise agreed to by the Company, Cliffwater, and CCLF SUB, each investment transaction under the A&R Cliffwater Facility Agreement is expected to be for portfolio investments with a purchase price of at least $1.0 million or, if less, the purchase price of all remaining portfolio investments, including related unfunded commitments, held by the applicable Financing Provider.

Following fulfillment of the conditions precedent to the Company’s obligations to purchase any loans under the A&R Cliffwater Facility Agreement, the Company will purchase such loans owned and held by the applicable Financing Provider under the A&R Cliffwater Facility Agreement at a purchase price equal to (i) the par amount of such loan plus, without duplication, (ii) PIK interest accrued during the Holding Period and PIK interest accrued but not capitalized prior to the Holding Period minus (iii) the sum of (x) OID, upfront fees and other similar fees on account of such purchase loan (all of which are attributable to the Holding Period) plus (y) any termination fees or other similar fees during the Holding Period plus (iv) solely to the extent that such loan has paid OID, upfront fees or other similar fees, the Additional Consideration.

Similarly, following fulfillment of the conditions precedent to the Company’s obligations to purchase any unfunded commitments under the A&R Cliffwater Facility Agreement, the Company will purchase such assets owned and held by the applicable Financing Provider under the A&R Cliffwater Facility Agreement at a purchase price equal to (i) zero plus (ii) solely to the extent that such unfunded commitment has paid OID, upfront fees or other similar fees, the Additional Consideration, minus (iii) OID, upfront fees and other similar fees on account of such unfunded commitment. The above purchase price calculations are subject to adjustment in certain circumstances under the A&R Cliffwater Facility Agreement.

Table of Contents

In connection with investments, including related unfunded commitments, underwritten primarily on investments backed by large and diversified pools of financial hard and contractual assets, or the Warehouse Asset Based Finance Investments, following fulfillment of the conditions precedent to the Company’s obligations to purchase any Warehouse Asset Based Finance Investments under the A&R Cliffwater Facility Agreement, the Company will purchase such Warehouse Asset Based Finance Investments owned and held by the applicable Financing Provider under the A&R Cliffwater Facility Agreement at a purchase price equal to (i) the funded cost of such Warehouse Asset Based Finance Investments, minus (ii) the amount of any PIK interest accrued during the Holding Period, minus (iii) the amount of any OID upfront fees and other similar fees on account of such Warehouse Asset Based Finance Investments during the Holding Period, minus (iv) an amount equal to 11% per annum (or, after the one year anniversary of the date the applicable Financing Provider acquired the Warehouse Asset Based Finance Investments, 12%) on the aggregate funded investment cost during the Holding Period of such Warehouse Asset Based Finance Investments, minus, (v) the amount of interest, dividends, fees and other amounts (other than proceeds of principal and other amounts paid on account of indemnification and reimbursement expenses) received by the applicable Financing Provider during the Holding Period on account of such Warehouse Asset Based Finance Investments. This purchase price calculation is subject to adjustment in certain circumstances under the A&R Cliffwater Facility Agreement. Except as set forth above, the Company receives all other economics arising before, during and after the Holding Period on such Asset-Based Finance.

In the event the settlement date for any purchase by the Company occurs (i) on or before seven business days after the applicable trade date, such date, a Delayed Comp Trigger Date, the above amounts received by the applicable Financing Provider will be extended to the Delayed Comp Trigger Date and (ii) after the seventh business days after the applicable trade date (in the event such purchase has not occurred by way of a participation), the amounts received by the applicable Financing Provider will include the amounts set forth in the foregoing clause (i) through the Delayed Comp Trigger Date and will also include an amount equal to daily simple SOFR plus 11.448 basis points for each day that elapses between the Delayed Comp Trigger Date and the applicable settlement date. The Company will receive all other OID and Fees and all termination fees, prepayment premiums, make-whole or similar fees or payments with respect to such investments.

The fair value of the loans under the A&R Cliffwater Facility Agreement is not reflected in the purchase price. As such, for loans, to the extent the Company is required to buy a loan from the applicable Financing Provider, the Company bears the risk of the fair value of such loan falling below the par value. In contrast, to the extent that the Company is not required to buy a loan, the applicable Financing Provider bears the risk of the fair value of such loan falling below such par value. Similarly, for unfunded commitments, to the extent the Company is required to buy an unfunded commitment, it will bear the risk of being required to buy a loan that, upon funding, may be valued below the par value. In contrast, to the extent that the Company is not required to buy a loan, the applicable Financing Provider will bear such risk.

The portfolio investments expected to be purchased by the Company from time to time pursuant to the A&R Cliffwater Facility Agreement are expected to generally consist of directly originated loans to middle-market U.S. companies consistent with the Company’s investment objective and investment strategies. There are no material differences between the underwriting standards used in the acquisition of the portfolio investments the Company expects to acquire pursuant to the A&R Cliffwater Facility Agreement and the underwriting standards to be employed by the Adviser on the Company’s behalf for any other portfolio investments to be acquired or held by the Company from time to time.

As of September 30, 2024, the conditions precedent to the Company’s obligation to purchase any additional investments from the Financing Provider had not been met. The Company does not hold any beneficial interest in the warehouse.

As of November 8, 2024, there were six loans with an aggregate commitment par value of $45,048, inclusive of $9,995 of unfunded commitments, that the Financing Provider purchased and was holding at the Company’s request pursuant to the Facility Agreement.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are subject to financial market risks, including changes in interest rates. As of September 30, 2024, 91.2% of our portfolio investments (based on fair value) were debt investments paying variable interest rates, 5.8% were debt investments paying fixed interest rates, 1.4% were other income producing investments and the remaining 1.6% consisted of non-income producing investments. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to the Adviser with respect to our increased pre-incentive fee net investment income. A prolonged reduction in interest rates could reduce our gross investment income and could result in a decrease in our net investment income if such decreases in interest rates are not offset by a corresponding increase in the spread over the specified reference rate that we earn on any portfolio investments, a decrease in our operating expenses or a decrease in the interest rate of our floating interest rate liabilities.

Pursuant to the terms of the Senior Secured Revolving Credit Facility and the K-FIT AB-1 Credit Facility, we borrow at a floating rate based on a benchmark interest rate. To the extent that any present or future credit facilities or other financing arrangements that we enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we have such debt outstanding, or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve-month period of changes in interest rates on our interest income, interest expense and net interest income assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of September 30, 2024 (dollar amounts are presented in thousands):


Basis Point Change in Interest Rates	Increase (Decrease) in Interest Income(1)		Increase (Decrease) in Interest Expense(2)		Increase (Decrease) in Net Interest Income(1)		Percentage Change in Net Interest Income
Down 250 basis points	$	(18,853)	$	(5,556)	$	(13,297)	(15.9)	%
Down 200 basis points	(15,083)		(4,445)		(10,638)		(12.7)	%
Down 150 basis points	(11,312)		(3,333)		(7,979)		(9.5)	%
Down 100 basis points	(7,541)		(2,222)		(5,319)		(6.4)	%
Down 50 basis points	(3,771)		(1,111)		(2,660)		(3.2)	%
Up 50 basis points	3,771		1,111		2,660		3.2	%
Up 100 basis points	7,541		2,222		5,319		6.4	%
Up 150 basis points	11,312		3,333		7,979		9.5	%
Up 200 basis points	15,083		4,445		10,638		12.7	%
Up 250 basis points	18,853		5,556		13,297		15.9	%

_______________

(1)Assumes no defaults or prepayments by portfolio companies over the next twelve months.

(2)Assumes current debt outstanding as of September 30, 2024, and no changes over the next twelve months.

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the nine months ended September 30, 2024, we did not engage in interest rate hedging activities.

Foreign Currency Risk

From time to time, we may make investments that are denominated in a foreign currency that are subject to the effects of exchange rate movements between the foreign currency of each such investment and the U.S. dollar, which may affect future fair values and cash flows, as well as amounts translated into U.S. dollars for inclusion in our consolidated financial statements.

Table of Contents

The table below presents the effect that a 10% immediate, unfavorable change in the foreign currency exchange rates (i.e. strengthening of the U.S. dollar) would have on the fair value of our investments denominated in foreign currencies as of September 30, 2024, by foreign currency, all other valuation assumptions remaining constant. In addition, the table below presents the par value of our investments denominated in foreign currencies and the notional amount of foreign currency forward contracts in local currency in place as of September 30, 2024 to hedge against foreign currency risks. Dollar amounts are presented in thousands.


	Investments Denominated in Foreign Currencies As of September 30, 2024								Economic Hedging As of September 30, 2024
	Cost in Local Currency		Cost in US$		Fair Value		Reduction in Fair Value as of September 30, 2024 if 10% Adverse Change in Exchange Rate(1)		Net Foreign Currency Hedge Amount in Local Currency		Net Foreign Currency Hedge Amount in US$
British Pound Sterling	£	13,236	$	17,733	$	18,846	$	1,885	£	2,494	$	3,341
Euros	€	7,389	8,234		8,680		868		€	1,363	1,519
Total			$	25,967	$	27,526	$	2,753			$	4,860

_______________

(1)Excludes effect, if any, of any foreign currency hedges.

As illustrated in the table above, we use derivative instruments from time to time, including foreign currency forward contracts, to manage the impact of fluctuations in foreign currency exchange rates. In addition, we have the ability to borrow in foreign currencies under our Senior Secured Revolving Credit Facility, which provides a natural hedge with regard to changes in exchange rates between the foreign currencies and U.S. dollar and reduces our exposure to foreign exchange rate differences. We are typically a net receiver of these foreign currencies as related for our international investment positions, and, as a result, our investments denominated in foreign currencies, to the extent not hedged, benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar.

As of September 30, 2024, the net contractual amount of our foreign currency forward contracts totaled $4,860, all of which related to hedging of our foreign currency denominated debt investments. As of September 30, 2024, we had outstanding borrowings denominated in foreign currencies of €6,000 and £11,600 under our Senior Secured Revolving Credit Facility.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024.

Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the three-month period ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Neither we, the Adviser, nor our subsidiaries are currently subject to any material pending legal proceedings, other than ordinary routine litigation incidental to our businesses. We, the Adviser, and our subsidiaries may from time to time, however, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.

Item 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that appeared under Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K. There are no material changes from the risk factors included within our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Sales of Unregistered Equity Securities

During the three months ended September 30, 2024, we issued and sold an aggregate of 7,562,110 Class I shares pursuant to subscription agreements entered into with participating investors for aggregate consideration of $222.9 million. All offers and sales of Class I shares during the three months ended September 30, 2024 were conducted in connection with the Private Offering in reliance on the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. We relied, in part, upon representations from each participating investor in the relevant subscription agreement that such investor is an “accredited investor” as defined in Regulation D under the Securities Act.

Issuer Purchases of Equity Securities

Common Shares Discretionary Repurchase Program

Beginning with the quarter ended September 30, 2024, we have commenced a share repurchase program in which we intend to offer to repurchase, in each quarter, up to 5% of our Common Shares outstanding (either by number of shares or aggregate NAV) as of the close of the previous calendar quarter. The Board may amend or suspend the share repurchase program if in its reasonable judgment it deems such action to be in our best interest and the best interest of our shareholders. As a result, share repurchases may not be available each quarter, such as when a repurchase offer would place an undue burden on our liquidity, adversely affect our operations or risk having an adverse impact on the Company that would outweigh the benefit of the repurchase offer. We intend to conduct such repurchase offers in accordance with the requirements of Rule 13e-4 promulgated under the Exchange Act and the 1940 Act.

Under our share repurchase program, to the extent we offer to repurchase shares in any particular quarter, we expect to repurchase shares pursuant to quarterly tender offers using a purchase price equal to the NAV per share as of the Valuation Date, which will be the last calendar day of the applicable quarter. Shareholders should keep in mind that if they tender Common Shares in a tender offer with a Valuation Date that is within the 12-month period following the initial issue date of their tendered Common Shares, the Company may repurchase such Common Shares subject to the 2% Early Repurchase Deduction. The Early Repurchase Deduction will be retained by the Company for the benefit of remaining holders of Common Shares. This Early Repurchase Deduction will also generally apply to minimum account repurchases.

Shareholders may tender all of the Common Shares that they own in connection with any of our quarterly tender offers. In the event the amount of shares tendered exceeds the repurchase offer amount, shares will be repurchased on a pro rata basis. All unsatisfied repurchase requests must be resubmitted in the next quarterly tender offer, or upon the recommencement of the share repurchase program, as applicable. We will have no obligation to repurchase shares, including if the repurchase would violate the restrictions on distributions under federal law or Delaware law. The limitations and restrictions described above may prevent us from accommodating all repurchase requests made in any quarter. Our share repurchase program has many limitations, including the limitations described above, and should not in any way be viewed as the equivalent of a secondary market. We will offer to repurchase shares on such terms as may be determined by the Board in its complete and absolute discretion unless, in the judgment of the Board, such repurchases would not be in the best interests of our shareholders or would violate applicable law. There is no assurance that the Board will exercise its discretion to offer to repurchase shares or that there will be sufficient funds available to accommodate all of our shareholders’ requests for repurchase. As a result, we may repurchase less than the full amount of shares that a shareholder requests to have repurchased. If we do not repurchase the full amount of shares that a shareholder has requested to be repurchased, or we

Table of Contents

determine not to make repurchases of our shares, such shareholder will likely not be able to dispose of its shares, even if we under-perform. Any periodic repurchase offers will be subject in part to our available cash and compliance with the RIC qualification and diversification rules and the 1940 Act. Repurchases of shares from shareholders by the Company will be paid in cash within 65 days of the expiration of the applicable tender offer, after the determination of the relevant NAV per share is finalized. Repurchases will be effective after receipt and acceptance by the Company of eligible written tenders of shares from shareholders by the applicable repurchase offer deadline.

On September 3, 2024, we commenced a tender offer (the “September 2024 Tender Offer”) pursuant to which we offered to repurchase up to 662,765 Common Shares tendered prior to 11:59 p.m., E.T. on September 30, 2024 (the “September 2024 Tender Offer Expiration Date”). There were no Common Shares validly tendered by shareholders prior to the September 2024 Tender Offer Expiration Date.

The following table sets forth information regarding repurchases of shares of our Common Shares effectuated under our discretionary share repurchase program during the three months ended September 30, 2024:

Offer Date

Tender Offer Expiration

Purchase Price per Share

Common Shares Repurchased

Aggregate Dollar Amount of Common Shares Accepted for Repurchase (in thousands)

September 3, 2024

September 30, 2024

—

See Note 3 to our unaudited consolidated financial statements included herein for more information regarding our discretionary share repurchase program.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Rule 10b5-1 Trading Plans

During the fiscal quarter ended September 30, 2024, none of our trustees or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

Table of Contents

Item 6. Exhibits


3.1						Certificate of Trust (Previously filed as an exhibit Amendment No. 1 to the Registrant’s Registration Statement on Form 10 (File No. 000-56493) filed on November 17, 2022 and incorporated herein by reference)

3.2						Certificate of Amendment to Certificate of Trust (Previously filed as an exhibit to Amendment No. 1 to the Registrant’s Registration Statement on Form 10 (File No. 000-56493) filed on May 26, 2023 and incorporated herein by reference)

3.3						Supplement to the Amended and Restated Declaration of Trust of KKR FS Income Trust Relating to 12.0% Series A Cumulative Preferred Shares (Previously filed as an exhibit to Amendment No. 1 to the Registrant’s Registration Statement on Form 10 (File No. 000-56493) filed on May 26, 2023 and incorporated herein by reference)

3.4						Second Amended and Restated Declaration of Trust (Previously filed as an exhibit to Amendment No. 1 to the Registrant’s Registration Statement on Form 10 (File No. 000-56493) filed on May 26, 2023 and incorporated herein by reference)

3.5						Bylaws (Previously filed as an exhibit to the Registrant’s Registration Statement on Form 10 (File No. 000-56493) filed on November 17, 2022 and incorporated herein by reference)

10.1						First Amendment to Loan and Security Agreement, dated as of October 2, 2024, by the K-FIT AB-1, Ally Bank, as administrative agent and lender, and Computershare Trust Company, N.A., as collateral administrator, collateral custodian and securities intermediary. (Incorporated by reference to Exhibit 10.1 on the Registrant's form 8-K filed on October 8, 2024)

31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended

31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended

32.1**						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended

101.INS*						Inline XBRL Instance Document

101.SCH*						Inline XBRL Taxonomy Extension Schema Document

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

*						Filed herewith.
**						Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized on November 13, 2024.


KKR FS Income Trust

By:			/s/ Michael C. Forman
			Michael C. Forman Chief Executive Officer (Principal Executive Officer)

By:			/s/ Steven Lilly
			Steven Lilly Chief Financial Officer (Principal Financial Officer)

By:			/s/ William Goebel
			William Goebel Chief Accounting Officer

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. senior Avg

KKR FS Income Trust 10-Q2024 Q3 Quarterly report

Content analysis