Neostellar Capital Corp.

Investing in our securities involves a number of significant risks. In addition to the other information contained in this report, you should carefully consider the factors discussed in our annual report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 11, 2026, which could materially affect our business, financial condition and/or operating results. Although the risks described in our annual report on Form 10-K for the fiscal year ended December 31, 2025 represent the principal risks associated with an investment in us, they are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, might materially and adversely affect our business, financial condition and/or operating results. Other than as stated below, there have been no material changes to the risk factors discussed in “Item 1A. Risk Factors” of Part I of our annual report on Form 10-K for the fiscal year ended December 31, 2025.

In connection with the Externalization, which became effective July 15, 2026, we became an externally managed BDC and no longer have any employees. Accordingly, the risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2025 that describe us as an internally managed BDC, including those relating to our dependence on our own management team and investment professionals and to the compensation of our employees, no longer apply to us and are superseded by the risk factors set forth below. In addition, on July 30, 2026, we filed a shelf registration statement on Form N-2 with the SEC, and on August 3, 2026, we, the Adviser and certain affiliated funds and accounts filed an application with the SEC for an order permitting us to engage in certain negotiated co-investment transactions. We are subject to the additional risks set forth below.

We depend on the Adviser and its key investment professionals for our future success, we no longer have any employees, and the departure of those personnel could materially and adversely affect our ability to achieve our investment objective.

All of our investment and administrative personnel are employees of the Adviser, the Administrator or their affiliates, and we no longer have any employees of our own. We do not determine the compensation, retention or allocation of time of those personnel, and we have no control over whether they remain employed by the Adviser or the Administrator. Our ability to achieve our investment objective depends on the Adviser’s ability to identify, evaluate, negotiate, structure, monitor and exit investments, which in turn depends on the continued service of its senior investment professionals, including Mr. Klein and Ms. Green. Those investment professionals have and will continue to have management responsibilities for other investment funds, accounts and investment vehicles sponsored or managed by the Adviser, Magnetar and their affiliates, and they are not required to devote any specific amount of time to our affairs. The departure of any of those individuals, or of a significant number of the Adviser’s investment professionals, could have a material adverse effect on our ability to achieve our investment objective. Our rights with respect to the Adviser and the Administrator are limited to those under the Investment Advisory Agreement and the Administration Agreement, each of which may be terminated without penalty on 60 days’ written notice.

We now bear advisory fees that we did not previously bear, and the base management fee is payable without regard to our performance.

We pay the Adviser a base management fee at an annual rate of 1.75% of gross assets and a two-part incentive fee, and we reimburse the Administrator for our allocable portion of its costs and overhead, including our allocable portion of the compensation of personnel providing administrative, financial, accounting, legal and compliance services to us. We did not bear advisory fees of this nature under our former internally managed structure, and these fees may increase our expenses relative to the periods presented in this report. The base management fee is calculated on gross assets, including investments held before the Effective Date and assets acquired with borrowed funds, and is payable without regard to our performance. The fact that the base management fee is payable based upon our gross assets, rather than our net assets, means that the base management fee as a percentage of net assets attributable to our common stock will increase when we use leverage. Accordingly, the Adviser may have an incentive to cause us to incur more leverage than is prudent, or not to repay our outstanding indebtedness when it may be advantageous for us to do so, in order to maximize its compensation. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor the holders of our securities, and would magnify losses as well as gains.

We may be obligated to pay the Adviser incentive fees even if we incur a net loss, and the incentive fee may create an incentive for the Adviser to make riskier or more speculative investments or to influence the timing of dispositions.

The incentive fee consists of an income-based fee and a capital gains fee, and no incentive fee is payable with respect to investments held prior to the Effective Date. As our portfolio shifts toward investments made on or after the Effective Date, the incentive fees we pay are expected to increase. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter in which we incur a loss. If our pre-incentive fee net investment income exceeds the applicable hurdle rate for a quarter, we will pay the income-based fee even if we have incurred a loss in that quarter as a result of realized and unrealized capital losses. The income-based fee may create an incentive for the Adviser to invest in assets with higher current yields, including riskier or more speculative assets, in order to increase the income on which that fee is calculated. The income-based fee may also create an incentive for the Adviser to invest in instruments with a deferred interest feature, such as original issue discount, payment-in-kind interest or zero-coupon securities, because we would be required to accrue, and to pay an incentive fee on, income that we have not yet received in cash and that we may never collect, and the Adviser is not obligated to reimburse us for any incentive fee previously paid on income that is not ultimately received.

The Externalization gives rise to conflicts of interest, and the Adviser is not required to provide services to us on an exclusive basis.

Certain of our executive officers, including Mr. Klein and Ms. Green, are equity owners and employees of the Adviser, and a portion of the fees we pay the Adviser inures to their benefit. Those persons participated in the negotiation of the terms of the Externalization while holding prospective ownership interests in the Adviser. The Adviser is not required to provide services to us on an exclusive basis and may in the future sponsor or advise other investment vehicles with investment objectives and strategies that overlap with ours. As a result, the Adviser and its investment professionals may face conflicts in allocating their time and investment opportunities between us and those other vehicles, and investments that would be suitable for us may be allocated elsewhere. The investment advice given to us by the Adviser may differ from, and the actions it takes on behalf of Magnetar and its other clients may compete with or be adverse to, the advice given to, or actions taken on behalf of, us. Because the Adviser, Magnetar and their affiliates may receive performance-based compensation from other funds and accounts, they may have an incentive to allocate investment opportunities to those other funds and accounts rather than to us. There can be no assurance that any allocation policy adopted by the Adviser will result in our participating in any particular investment opportunity or in an allocation that we would consider favorable.

Our application for co-investment exemptive relief is pending, and there can be no assurance if or when relief will be granted, which may reduce the investment opportunities available to us.

On August 3, 2026, we, the Adviser and certain affiliated funds and accounts filed an application with the SEC for an exemptive order permitting us to co-invest in negotiated transactions alongside funds and accounts advised by the Adviser, Magnetar and their affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions, as well as regulatory requirements and other pertinent factors. There can be no assurance if or when we will receive the requested exemptive relief, or that any relief granted will be on the terms requested. Until such relief is obtained, our ability to participate in negotiated co-investment transactions with affiliates is limited by the 1940 Act, which may reduce the investment opportunities available to us and may prevent us from participating in transactions sourced through the Magnetar platform, which was one of the anticipated benefits of the Externalization. Even if the requested relief is granted, the Adviser would be required to consider whether each investment opportunity is appropriate for us and for its other advised clients and, if so, to propose an allocation of the opportunity among them. As a consequence, it may be more difficult for us to maintain or increase the size of our portfolio, and we may not participate in any particular co-investment opportunity.

Our relationship with Magnetar exposes us to additional risks, and the redemption of the Magnetar note could dilute existing stockholders.

An affiliate of Magnetar holds a $20.0 million redeemable promissory note issued by us that bears interest at 6.50% per annum and matures in 2029, and a Magnetar partner serves on our Board of Directors as an interested director. If we consummate a qualified fundraising, the note is mandatorily redeemed through the issuance of shares of our common stock, which would dilute the interests of our existing stockholders, and upon a change of control we must repay 105% of the outstanding principal and accrued interest in cash. We have also agreed to file a resale shelf registration statement covering the resale of the shares issuable upon redemption of the note, and sales of those shares, or the perception that such sales could occur, could adversely affect the market price of our common stock.

We may be unable to replace the Adviser or the Administrator on comparable terms if either agreement is terminated.

The Investment Advisory Agreement and the Administration Agreement may each be terminated without penalty on 60 days’ written notice, and the Investment Advisory Agreement terminates automatically upon its assignment. If either agreement were terminated, we would need to identify and engage a replacement adviser or administrator, and there can be no assurance that we could do so on a timely basis or on terms as favorable as those of our current agreements. Because we no longer have any employees, any period during which we lacked an investment adviser or administrator could disrupt our investment activities, our compliance program and our financial reporting.

The Investment Advisory Agreement limits the Adviser’s liability to us and requires us to indemnify the Adviser, which may cause the Adviser to act in a manner that is riskier than it otherwise would.

Under the Investment Advisory Agreement, the Adviser and its affiliates and their respective personnel are not liable to us for acts or omissions taken in the performance of their duties absent willful misfeasance, bad faith, gross negligence or reckless disregard of duty, and we are required to indemnify them against certain liabilities incurred in connection with their services to us. These provisions may reduce the incentive of the Adviser and its personnel to exercise the degree of care they would otherwise exercise and may limit the remedies available to us and our stockholders if the Adviser’s conduct causes us to incur losses.