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management team and investment professionals and to the compensation of our employees, no longer apply to us and are superseded by the risk factors set forth below.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 31, 2026, we filed a shelf registration statement on Form N-2 with the SEC, which was declared effective on September 30, 2026, and on August 3, 2026, we, the Adviser and certain affiliated funds and accounts filed an application with the SEC, which was amended on October 2, 2026, 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 periods prior to the Externalization. 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.

Sales or restructurings of Pre-Existing Investments could change our fee profile and portfolio composition.

Because the incentive fee applies only to Eligible Investments and excludes Pre-Existing Investments (each as defined in “Note 3—Related-Party Arrangements” to our Condensed Consolidated Financial Statements as of September 30, 2026), decisions by the Adviser to dispose of Pre-Existing Investments and redeploy the proceeds into Eligible Investments could, over time, increase the incentive fee payable to the Adviser and alter the composition and risk profile of our portfolio. We cannot predict the timing or extent of any such dispositions or redeployments, which will depend on market conditions, portfolio company developments and the Adviser’s judgment.

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, which was amended on October 2, 2026, 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, criminal conduct 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.

We may invest in private equity funds and through special purpose vehicles, joint ventures or similar private funds, and our investments through these vehicles may entail greater risks, or risks that we otherwise would not incur, than if we made such investments directly.

We hold an interest in a venture capital fund and may invest in other private equity funds on an opportunistic basis, and we hold, and may acquire, interests in special purpose vehicles and similar private funds formed principally to invest in a single portfolio company. In general, the risks associated with indirect investments in portfolio companies through a private fund, joint venture or special purpose vehicle are similar to those associated with a direct investment in a portfolio company, but also include some additional risks. While the Adviser expects to analyze the business of the underlying portfolio companies, and to conduct due diligence on the fund or vehicle and its manager, including investment, operational, legal and, as applicable, tax considerations, before making such an investment, we will nonetheless be exposed to the costs, strategies and risks of the fund or vehicle itself, over which neither we nor the Adviser has control, and we may be required to rely on the manager of, or our partners in, the fund or vehicle when decisions are made regarding its investments. In addition, investments through private funds and special purpose vehicles can have a different risk profile than direct investments made by us due to the fact that we may have less information available to us and fewer rights compared to companies in which we invest directly. For example, there may be less information available to us and our stockholders about the underlying investments held by such funds and vehicles, including with respect to their holdings, liquidity and valuation, and we will typically have fewer rights relating to the oversight of the underlying portfolio companies. Our stockholders indirectly bear the expenses of the private funds and special purpose vehicles in which we invest. As an investor in a private equity fund, we would bear our ratable share of the fund’s fees and expenses, including management fees and performance-based compensation or carried interest payable to the fund’s manager, which are separate from and in addition to the base management fee, the incentive fee and the other expenses that we bear directly, and these multiple layers of fees could reduce the returns on any such investment below those we would achieve investing directly. Performance-based compensation payable to the manager of an underlying private equity fund is generally calculated separately for each fund, without netting across funds, so we could bear performance-based compensation with respect to an underlying private equity fund that has appreciated even if other underlying private equity funds in which we invest, or our portfolio as a whole, decline in value (commonly referred to as “netting risk”). Future fees and expenses of such funds and vehicles may be substantially higher or lower because certain fees are based on performance, which may fluctuate over time. The types of underlying private equity funds in which we may invest are not limited and could include, among others, buyout, growth equity, venture capital, credit and secondary funds, each of which presents its own strategies, risks and considerations, including investments that may be more volatile or speculative than our direct investments, conflicts of interest and limited liquidity of the fund’s underlying investments. Interests in private equity funds and special purpose vehicles are generally illiquid, are typically subject to restrictions on transfer and, where applicable, withdrawal, and are difficult to value, and the accounting and tax implications of such investments can be complicated. In addition, interests in private equity funds and other private funds generally are not “qualifying assets” for purposes of the 70% test applicable to BDCs under the 1940 Act, and we may be precluded from making investments in private funds that we believe are attractive if such investments would cause us to fail to satisfy that test. Such investments may also present tax considerations for us, including with respect to the source-of-income and asset diversification requirements applicable to RICs.

A number of our portfolio companies are, or may be, in the Financial Technology & Services industry and such companies are subject to additional risks that are unique to that industry, and the financial results of our portfolio companies in the Financial Technology & Services industry could materially adversely affect our financial results.

Financial Technology & Services is one of our key investment themes, and we may in the future invest, and have previously invested, in portfolio companies that provide technology-enabled financial products and services, including payments, lending, digital banking, brokerage and investing. Our portfolio companies in the financial technology sector are subject to many risks, including the negative impact of regulation, changing technology, a competitive marketplace and difficulty in obtaining financing. The laws and rules governing the business of financial technology companies, including those relating to money transmission, lending, securities, consumer protection, anti-money laundering and data privacy, and interpretations of those laws and rules, are subject to frequent change, and broad latitude is given to the agencies administering those regulations. Existing or future laws and rules could force our portfolio companies engaged in financial technology to change how they do business, restrict revenue, increase costs and change business practices, and if any of these portfolio companies fail to comply with applicable regulations or to obtain or maintain required licenses, they could lose licenses that they then hold for the conduct of business and could be subject to significant penalties and claims that could materially and adversely affect their operations. Many financial technology companies also rely on relationships with banks, payment networks or other regulated financial institutions, and the loss of those relationships could disrupt their operations. The business of our portfolio companies in this sector relies upon secure information technology systems for data processing, storage and reporting, and cyber-attacks, fraud and data breaches could result in disrupted operations, liability for stolen information, misappropriation of assets, regulatory fines or penalties and damage to their business relationships. Financial technology companies may also bear credit, liquidity and interest rate risks associated with the financial products and services they offer, and certain of our portfolio companies may have direct or indirect exposure to cryptocurrencies and other digital assets, which have experienced extreme price volatility and remain subject to evolving regulatory treatment. Adverse economic, business or regulatory developments affecting the financial technology sector could have a negative impact on the value of our investments in portfolio companies operating in this industry, and therefore could negatively impact our business and results of operations.