UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

(RULE 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Check the appropriate box:

RAND CAPITAL CORPORATION

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Rand Capital Corporation 2200 Rand Building Buffalo, New York 14203

Dear Fellow Shareholders:

You are cordially invited to attend the special meeting of the shareholders of Rand Capital Corporation (the “Company”) to be held on December 16, 2020, at 10:00 a.m., local time. We are providing shareholders the option of attending the special meeting virtually via the internet at www.virtualshareholdermeeting.com/RAND2020SM or in person at the offices of Hodgson Russ LLP, The Guaranty Building, 140 Pearl Street, Buffalo, New York 14202. However, due to the public health concerns related to the COVID-19 pandemic and to support the health and wellbeing of our shareholders, service providers, personnel and other stakeholders, the Company strongly encourages all shareholders to utilize the remote access option.

As of November 13, 2020, the requirement under New York corporate law to hold an in-person meeting has been suspended through December 3, 2020 by an act of the New York State Legislature and an executive order by the Governor of the State of New York. If the suspension of the in-person meeting requirement is extended by an executive order of the Governor through the date of the special meeting, the Company intends to hold the special meeting as a virtual meeting only with no in-person location. In such case, the Company will announce the decision to do so at least one week in advance of the special meeting, by press release, in a filing with the U.S. Securities and Exchange Commission, and on the Company’s website at www.randcapital.com, and the Company strongly encourages you to check this website prior to the special meeting.

Only shareholders of record at the close of business on November 9, 2020 are entitled to notice of, and to vote at, the special meeting, or any adjournment or postponement thereof. By attending the meeting virtually or in person, you will be able to participate in the special meeting, including by voting at the special meeting and submitting questions to be answered at the special meeting in advance of the special meeting. You will find the details of the business to be conducted at the special meeting in the accompanying Notice of Special Meeting of Shareholders (“Notice”) and proxy statement.

Background

Rand Capital Management LLC (the “Adviser”) has advised the Board of Directors of the Company that Callodine Group, LLC (“Callodine”), an entity controlled by James Morrow, intends to acquire the controlling interest in the Adviser currently held by East Asset Management, LLC (the “Adviser Change in Control”). As a result of the proposed Adviser Change in Control, Callodine will be the majority owner of the Adviser. CB Advisors LLC, an entity owned by Brian Collins (“CB Advisors”), will continue to own a minority interest in the Adviser.

Consummation of the Adviser Change in Control will result in an assignment and subsequent termination of the current investment advisory and management agreement, dated November 8, 2019, between the Company and the Adviser (the “Existing Advisory Agreement”) in accordance with the Investment Company Act of 1940, as amended (the “1940 Act”). Although the ownership of the Adviser will change in connection with the completion of the Adviser Change in Control, it is important to note that management of the Adviser is not changing, nor are the terms of the advisory agreement between the Adviser and the Company.

The continuity and enhancements provided by the Adviser Change in Control are as follows:

The shareholders of the Company are being asked to approve a new investment advisory and management agreement between the Company and the Adviser (the “New Advisory Agreement”), the terms of which are identical to those contained in the Existing Advisory Agreement as described in the accompanying proxy statement. The 1940 Act requires that the New Advisory Agreement be approved by both a majority of an investment company’s “non-interested” (i.e., independent) directors and “a majority of the outstanding voting securities,” as that term is defined under the 1940 Act. The Company’s Board of Directors (the “Board”), including all of its non-interested directors, has unanimously approved the New Advisory Agreement and believes it to be in the best interests of the Company and its shareholders.

In evaluating the New Advisory Agreement, the Board requested, and received, information and materials regarding the Adviser, Callodine and their affiliates. The Board believes that the Company and its shareholders will benefit from access to Callodine’s greater scale and resources, while maintaining continuity in the Adviser’s investment advisory personnel. In particular, the Board believes that the Company, through the Adviser, will benefit from Callodine’s research capabilities, ability to source transactions, access to capital and distribution network.

The proposed Adviser Change in Control is expected to close during the first quarter of 2021.

Shareholder Proposals

We are holding a special meeting to ask our shareholders to approve the Company’s entry into the New Advisory Agreement. Under the New Advisory Agreement, the Adviser will continue to act as the investment adviser for the Company following consummation of the Adviser Change in Control with no changes to the terms of the agreement. We refer to this proposal as the “New Advisory Agreement Proposal.” We are also asking our shareholders to approve a proposal for the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the New Advisory Agreement Proposal (the “Adjournment Proposal”). These proposals are fully described in the Notice and in the accompanying proxy statement, both of which we encourage you to read in full.

Your vote is very important. The Board unanimously recommends that you vote “FOR” the approval of (i) the New Advisory Agreement Proposal and (ii) the Adjournment Proposal.

Whether or not you expect to attend the special meeting, virtually or in person, please sign the enclosed proxy card and return it promptly in the envelope provided, or vote via internet or telephone. Instructions are provided on the proxy card. Returning the proxy card does not deprive you of your right to attend, virtually or in person, the special meeting or to vote your shares.

Abstentions and broker non-votes – which occur when you do not provide voting instructions to your bank, broker or other nominee when your shares are held in “street name” – will have the same effect as a vote “AGAINST” the New Advisory Agreement Proposal. Abstentions will have the same effect as a vote “AGAINST” the Adjournment Proposal and broker non-votes, if any, will have no effect on the vote for the Adjournment Proposal.

If you have any questions concerning how to vote at the special meeting or would like additional copies of the accompanying proxy statement or need help voting your shares of Common Stock, please contact our proxy tabulator:

Broadridge Investor Communications Solutions, Inc.

By Internet: www.proxyvote.com

By Telephone: 1-800-579-1639

By E-Mail: sendmaterial@proxyvote.com

If you have questions about the meeting, the information in the proxy statement or attending the meeting, please contact investor relations at:

Deborah Pawlowski, Kei Advisors LLC

Investor Relations for Rand Capital Corporation

Phone: 1-716-843-3908

https://www.randcapital.com/contact-us

Again, your vote is very important and we ask that you submit your vote in a timely fashion. Thank you for your anticipated support.

Sincerely,

Erland E. Kailbourne Chairman of the Board		Allen F. Grum President and Chief Executive Officer

Buffalo, New York

November 13, 2020

Rand Capital Corporation

2200 Rand Building14 Lafayette Square, Suite 1405

Buffalo, New York 14203

NOTICE OF SPECIALANNUAL MEETING OF SHAREHOLDERS

To be held on

December 16, 2020, 10:00 a.m., local timeTO OUR SHAREHOLDERS:

The 2022 Annual Meeting of Shareholders of Rand Capital Corporation (the “Company”“Corporation”) will hold a special meeting of shareholdersbe held on December 16, 2020,Thursday, April 21, 2022 at 10:0030 a.m., local time, virtually via the internet at

www.virtualshareholdermeeting.com/RAND2020SM and in person at the offices of Hodgson Russ LLP, The Guaranty Building, 140 Pearl Street, Buffalo, New York 14202,RAND2022, to consider and vote on the following proposals:

Shareholders of record at the close of business on March 3, 2022 are entitled to notice of, and to vote at the annual meeting, and any adjournment thereof.

TheIMPORTANT NOTICE REGARDING

INTERNET AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING TO BE HELD ON

APRIL 21, 2022

THE PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS

IS AVAILABLE AT: www.proxyvote.com

Rand Capital Corporation

14 Lafayette Square, Suite 1405

Buffalo, New York 14203

Proxy Statement

GENERAL INFORMATION

We are furnishing this Proxy Statement in connection with the solicitation of proxies by the Board unanimously recommends that you vote “FOR”of Directors of Rand Capital Corporation (“Rand” or the approval“Corporation” or “we”) for the Annual Meeting of Shareholders to be held on April 21, 2022 (“Annual Meeting”) at 10:30 a.m., local time, virtually via the New Advisory Agreement Proposalinternet at www.virtualshareholdermeeting.com/RAND2022. This Proxy Statement and the Adjournment Proposal.accompanying form of proxy are first being mailed to shareholders on or about March 17, 2022. A copy of Rand’s annual report, which contains Rand’s financial statements accompanies this Proxy Statement.

Only shareholders of record at the close of business on November 9, 2020March 3, 2022 (“Record Date”) are entitled to notice of and to vote at the special meeting orAnnual Meeting, and at any adjournment or postponement thereof.

While the Company has scheduled, at this time, an in-person location for the special meeting, the Company is sensitive to the public health and travel concerns its shareholders may have and recommendations that public health officials may issue in light of the evolving COVID-19 pandemic. As a result, the Company strongly encourages shareholders to attend the special meeting remotely by visiting www.virtualshareholdermeeting.com/RAND2020SM. Due to the impact of COVID-19, the Company recommends that all shareholders utilize the remote access option. By attending the meeting virtually or in person, you will be able to participate in the special meeting, including by voting at the special meeting and submitting questions to be answered at the special meeting in advance of the special meeting. The Company recommends that all shareholders who are currently planning to attend the special meeting in person continue to review guidance from public health authorities as the time for the special meeting approaches.

As of November 13, 2020, the requirement under New York corporate law to hold an in-person meeting has been suspended through December 3, 2020 by an act of the New York State Legislature and an executive order by the Governor of the State of New York. If the suspension of the in-person meeting requirement is extended by an executive order of the Governor through the date of the special meeting, the Company intends to hold the special meeting as a virtual meeting only with no in-person location. In such case, the Company will announce the decision to do so at least one week in advance of the special meeting, by press release, in a filing with the U.S. Securities and Exchange Commission, and on the Company’s website at www.randcapital.com, and the Company strongly encourages you to check this website prior to the special meeting. Note that any decision to proceed with a virtual-only meeting does not necessarily mean that the Company will utilize a virtual-only format or any means of remote communication for future shareholder meetings.

By the Order of the Board of Directors,

Daniel P. Penberthy Executive Vice President, Chief Financial Officer and Secretary

Buffalo, New York

November 13, 2020

TABLE OF CONTENTS

APPENDIX A - The New Advisory Agreement

Rand Capital Corporation

2200 Rand Building

Buffalo, New York 14203

PROXY STATEMENT

Special Meeting of Shareholders

QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Adviser Change in Control (as defined herein) and the special meeting. These questions and answers may not address all of the questions that are important to you. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement and the appendix to this proxy statement. This proxy statement is first being sent or made available to Shareholders (as defined herein) on or about November 18, 2020.

If you hold your shares of Common Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person or virtually at the special meeting if you obtain a “legal proxy” from your bank, broker or other nominee.

FORWARD-LOOKING STATEMENTS

Some of the statements in this proxy statement may include “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than historical facts, including but not limited to statements regarding the expected timing of the Adviser Change in Control; the receipt of necessary Shareholder approval; East’s intention to vote in favor of the proposals; the expected benefits of the Adviser Change in Control such as (i) increased opportunities for the Adviser to utilize the resources and relationships of and with Callodine and its affiliates; (ii) enhanced access to capital markets; (iii) increased deal sourcing opportunities; and (iv) enhanced the analytical and research resources available for the Company’s investment activity and streamlined administrative processes; and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue,” “target” or other similar words or expressions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements.

Shareholders should carefully review the risks outlined in the “Risk Factors” sections of the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q. The forward-looking statements in this proxy statement represent the Company’s views as of the date of this proxy statement. The Company anticipates that subsequent events and developments will cause its views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, it has no current intention of doing so, except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing the Company’s views as of any date subsequent to the date of this proxy statement.

THE SPECIAL MEETING

This proxy statement summarizes the information regarding the matters to be voted on at the special meeting. However, you do not need to attend the special meeting to vote your shares of Common Stock. You may simply complete, sign, and return the enclosed proxy card, or submit your vote by calling toll free at the telephone number indicated on the enclosed proxy card, or vote your shares through the internet, as indicated on the proxy card. You may also grant a proxy (i.e., authorize someone to vote your shares). If you properly sign and date the accompanying proxy card or otherwise provide voting instructions, either via the internet or telephone, as indicated on the proxy card and the Company receives the proxy card or such instruction in time for the special meeting, the persons named as proxies will vote the shares registered directly in your name in the manner that you specified.

As of On the Record Date, there were 2,583,772Rand had 2,581,021 shares of Common Stockcommon stock, par value $0.10 per share (“shares”), issued, outstanding and entitled to vote at the special meeting.Annual Meeting.

Each share entitles the holder to one vote. Shares cannot be voted at the Annual Meeting unless the shareholder is present or represented by proxy. If the enclosed form of proxy is returned properly executed and dated, the shares represented thereby will be voted at the Annual Meeting in accordance with the instructions contained in the proxy, unless the proxy is revoked prior to its exercise or a subsequently dated proxy is executed and submitted. If you areauthorize a holder of Common Stock, you are entitled to oneproxy without indicating your voting instructions, the proxyholder will vote at the special meeting for each share of Common Stock that you held as of the close of business on the Record Date. The Company began mailing this proxy statement on or about November 18, 2020 to all Shareholders entitled to vote theiryour shares of Common Stock at the special meeting.

Time and Location

We will hold the special meeting on December 16, 2020 at 10:00 a.m., local time. Shareholders may attend the special meeting virtually via the internet at www.virtualshareholdermeeting.com/RAND2020SM and in person at the offices of Hodgson Russ LLP, The Guaranty Building, 140 Pearl Street, Buffalo, New York 14202. Due to the impact of the COVID-19 pandemic, the Company encourages all shareholders to utilize the remote access option.

As of November 13, 2020, the requirement under New York corporate law to hold an in-person meeting has been suspended through December 3, 2020 by an act of the New York State Legislature and an executive order by the Governor of the State of New York. If the Governor’s executive order is extended through the date of the special meeting, the Company intends to hold the special meeting solely by means of remote communications with no in-person location. In such case, the Company will announce the decision to do so at least one week in advance of the special meeting, by press release, in a filing with the SEC, and on the Company’s website at www.randcapital.com, and the Company strongly encourages you to check this website prior to the special meeting.

Attending the Special Meeting

You are entitled to attend the special meeting only if you were a Shareholder as of the close of business on the Record Date, or if you hold a valid proxy for the special meeting. You can attend the virtual meeting by visiting www.virtualshareholdermeeting.com/RAND2020SM. To participate, you will need your 16-digit control number included in your proxy materials or voting instruction form. The special meeting will begin promptly at 10:00 a.m., local time, on December 16, 2020. We recommend that you log in at least 15 minutes before the special meeting begins to ensure ample time to complete the check-in procedures and test your computer audio system. We recommend that you carefully review the procedures needed to gain admission in advance.

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page www.virtualshareholdermeeting.com/RAND2020SM.

If you have questions you would like answered at the special meeting, you can submit your questions for consideration by logging onto www.virtualshareholdermeeting.com/RAND2020SM with your 16-digit control number. Please submit your questions by 11:59 p.m. on December 15, 2020.

Proposals to approve each of the New Advisory Agreement Proposal and the Adjournment Proposal.

At the special meeting, you will be asked to vote on each of the New Advisory Agreement Proposal and the Adjournment Proposal.

Recommendation of the Board

The Board unanimously recommends that you vote “FOR” each of the New Advisory Agreementdirectors standing for election in Proposal 1 and “FOR” Proposal 2 (Ratification of the Adjournment Proposal.Appointment of the Independent Registered Public Accounting Firm).

Any shareholder may revoke a proxy by executing a subsequently dated proxy or a notice of revocation, provided that the subsequent proxy or notice is delivered to the Corporation prior to the taking of a vote, or by voting in person or virtually at the Annual Meeting. If you hold shares through a broker, bank or other nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Attending the Annual Meeting virtually does not revoke your proxy unless you also vote electronically at the Annual Meeting.

Shareholders Entitled to Vote

You are entitled to vote if you were a holder of record of Common Stock as of the close of business on the Record Date.

All holders of Common Stock as of the Record Date, voting together, will be entitled to vote for the approval of each ofUnder the New Advisory Agreement ProposalYork Business Corporation Law (the “BCL”) and the Adjournment Proposal, in each case, at the special meeting.

Quorum

To conduct business at the special meeting, a quorum of Shareholders must be present at the special meeting. Under the BCL and ourCorporation’s by-laws, the presence, whether in person virtually, or by proxy, of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the special meetingAnnual Meeting is necessary to constitute a quorum of the Shareholdersshareholders to take action at the special meeting.Annual Meeting. The shares of Common Stock that are present (in person or virtually) at the special meetingAnnual Meeting or represented by a proxy will be counted for quorum purposes. AbstentionsProxies submitted with abstentions and broker non-votes will be treatedcounted in determining whether or not a quorum is present. Under the BCL and the Corporation’s by-laws, once a quorum is established, Directors standing for election Proposal 1 (Election of Directors) are to be elected by a plurality of the votes cast (meaning that the director nominees who receive the highest number of shares voted “for” their election are elected), and Proposal 2 (Ratification of the Appointment of the Independent Registered Public Accounting Firm) is to be approved by a majority of votes cast in favor of the matter (meaning that the number of shares voted “for” a proposal must exceed the number of shares voted “against” such proposal). With respect to the election of directors (Proposal 1), you may vote “for” or “withhold” authority to vote for each of the nominees for the Board. With respect to Proposal 2, you may vote “for,” “against” or “abstain” from voting on this proposal. Votes withheld, broker non-votes, and abstentions will not be counted as votes cast on a proposal and will have no effect on the results of the vote such proposal. A broker non-vote occurs when a bank, broker or other nominee holding shares present for quorum purposes. Sharesa beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for which brokers havethat particular item and has not received voting instructions on how to vote from the beneficial owner of the shares and do not have discretionary authority to vote on certain proposals (which are considered “broker non-votes” with respect to such proposals) will not be treated as shares present for quorum purposes.

If a quorum is not present, the vote of a majority of the Shareholders present in person, virtually, or by proxy and entitled to vote or the presiding officer of the special meeting shall have the power to adjourn the special meeting from time to time, for a period not to exceed 30 days at any one time, until a quorum shall be present and the business of the meeting accomplished, without notice other than announcement at the special meeting.

Shareholders Holding Shares Through Brokers, Banks or Other Nominees

If you hold shares of Common Stock through a broker, bank or other nominee, you must follow the voting instructions you receive from your broker, bank or other nominee. If you hold shares of Common Stock through a broker, bank or other nominee and want to vote in person or virtually at the special meeting, you must obtain a legal proxy from the record holder of your shares and present it at the special meeting. Please instruct your broker, bank or other nominee so your vote can be counted..

Granting Authority to Vote to Brokers, Banks or Other Nominees

Brokers, banks and other nominees have discretionary authority to vote on “routine” matters, but not on “non-routine” matters. All proposals beingProposal 1 (Election of Directors) is considered at this special meeting are non-routine.a non-routine matter, whereas Proposal 2 (Ratification of the Appointment of the Independent Registered Public Accounting Firm) is a routine matter. If you hold your shares of Common Stock in street name (or “nominee name”) and do not provide your broker, bank or other nominee who holds such shares of record with specific instructions regarding how to vote on the proposals,Proposal 1, your bank, broker or other nominee may not be permitted to vote your shares on eitherProposal 1 with respect to the election of the proposals.Directors. Please instruct your broker, bank or other nominee so your vote can be counted.

Voting by Proxy

If you are a record holder of shares of Common Stock, you may authorize a proxy to vote on your behalf by following the instructions provided on the enclosed proxy card. Authorizing your proxy will not limit your right to vote in person or virtually at the special meeting. A properly completed and submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your instructions. If you authorize a proxy without indicating your voting instructions, the proxyholder will vote your shares “FOR” each of the New Advisory Agreement Proposal and the Adjournment Proposal. Internet and telephone voting procedures are designed to authenticate the Shareholder’s identity and to allow such Shareholders to vote their shares and confirm that their instructions have been properly recorded. Your internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.

Receiving Multiple Proxy Cards

Many Shareholders hold their shares in more than one account and may receive separate proxy cards or voting instruction forms for each of those accounts. To ensure that all of your shares are represented at the special meeting, we recommend that you vote by following the instructions on each proxy card or voting instruction form you receive.

Revocation of Proxy

If you are a Shareholder of record, you can revoke your proxy at any time before it is exercised by (i) delivering a written revocation notice prior to the special meeting to Rand Capital Corporation, 2200 Rand Building Buffalo, New York 14203, (ii) submitting a later-dated proxy that the Company receives no later than the conclusion of voting at the special meeting, (iii) voting in person at the special meeting, (iv) voting virtually at the special meeting or (v) submitting a new proxy electronically over the internet or by telephone as indicated on the proxy card after the date of the earlier submitted proxy. If you hold shares of Common Stock through a broker, bank or other nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Attending the special meeting does not revoke your proxy unless you also vote in person or virtually at the special meeting.

Approval Standards

New Advisory Agreement Proposal: Approval of the New Advisory Agreement Proposal requires the affirmative vote of holders of at least a “majority of the outstanding voting securities” as defined in the 1940 Act. Under the 1940 Act, the vote of holders of a “majority of the outstanding voting securities” means the vote of the holders of the lesser of (a) 67% or more of the voting securities present or represented by proxy at the special meeting if the holders of more than 50% of the voting securities are present or represented by proxy or (b) more than 50% of the outstanding voting securities. Abstentions and broker non-votes, if any, will have the same effect as a vote “AGAINST” this proposal.

Adjournment Proposal: Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority of shares of Common Stock present in person or represented by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote “AGAINST” the Adjournment Proposal and broker non-votes, if any, will have no effect on the vote for the Adjournment Proposal.

Methods of Proxy Solicitation and Related Expenses

The Adviser and CallodineWe will bear all costs of soliciting proxies for the special meeting. The Adviser and CallodineAnnual Meeting. We may also reimbursepay brokers, nominees, fiduciaries and other custodians their reasonable fees and expenses for sending proxy materials to beneficial owners and obtaining their instructions.

In addition to solicitation by mail, our Directors, our officers and the solicitationemployees of Rand Capital Management LLC, the Corporation’s external investment adviser (“RCM”), may solicit proxies by the use of mail, proxies may be solicitedin person or by telephone, electronic transmission or facsimile transmission by directors or officers of the Company or the Adviser without specialand they will receive no additional compensation therefor.

Our office is located at 14 Lafayette Square, Suite 1405, Buffalo, New York 14203 and our telephone number is 716-853-0802.

Other MattersEXPLANATORY NOTE REGARDING THE EXTERNALIZATION

On November 8, 2019, the Corporation entered into an investment advisory and management agreement (the “Prior Advisory Agreement”) and an administration agreement (the “Prior Administration Agreement”) with RCM whereby RCM agreed to Be Votedprovide investment advisory and management services to the Corporation (the “Externalization”). Following the Externalization, all of the Corporation’s employees, including its executive officers, became employees of RCM and no longer receive any direct compensation from the Corporation. The Corporation’s day-to-day investment operations are managed by RCM and services necessary for its business, including the origination and administration of its investment portfolio, are provided by individuals who are employees of RCM.

Subsequently, in late 2020, the Corporation’s Board of Directors (the “Board”) was advised by RCM that Callodine Group, LLC (“Callodine”) intended to acquire a controlling interest in RCM, which was then-currently majority owned by East Asset Management, LLC (“East”). As the Investment Company Act of 1940, as amended (the “1940 Act”) requires that any investment management contract, such as the Prior Advisory Agreement, terminates automatically upon on its “assignment,” and, given that the transfer of a controlling interest in an investment adviser, such as was to be caused by East’s transfer of its controlling interest in RCM to Callodine (the “Adviser Change in Control”), constitutes an “assignment,” the Corporation’s shareholders were asked to approve a new investment advisory and management agreement (the “New Advisory Agreement”) with RCM at a special meeting of shareholders held in December 2020 (the “Special Meeting”). The terms of the New Advisory Agreement were identical to those contained in the Prior Advisory Agreement, with RCM continuing to provide investment advisory and management services to the Corporation following the Adviser Change in Control. Following approval by the Corporation’s shareholders at the Special Meeting, the Corporation, on December 31, 2020, entered into the New Advisory Agreement and a new administration agreement (the “New Administration Agreement”) with RCM.

As a result of the foregoing, RCM currently acts as the Corporation’s investment adviser and administrator pursuant to the terms of the New Advisory Agreement and the New Administration Agreement. As described in greater detail in the Corporation’s Annual Report on Form 10-K under Part I, Item 1 “Business ‒ Investment Advisory and Management Agreement,” the compensation paid by the Corporation to RCM for providing investment advisory and management services under the New Advisory Agreement consists of two components — (i) a base management fee and (ii) an incentive fee consisting of two parts: (A) an income based fee and (B) a capital gains based fee. In addition, the Corporation reimburses RCM for the Corporation’s allocable portion of expenses incurred by RCM in performing administrative obligations and functions for the Corporation under the New Administration Agreement. The address of RCM is 14 Lafayette Square, Suite 1405, Buffalo, New York 14203.

VIRTUAL MEETING INFORMATION

PursuantDue to public health concerns related to the BCLCOVID-19 pandemic and to support the health and well-being of our by-laws, no matters may properlyshareholders, services providers, personnel and other stakeholders, the Annual Meeting will be broughtheld virtually via the internet at www.virtualshareholdermeeting.com/RAND2022.

We have structured the Annual Meeting to provide shareholders with the same rights as if they participated in person, including the ability to vote shares electronically during the Annual Meeting and ask questions in accordance with the rules of conduct for the Annual Meeting.

To participate virtually in the Annual Meeting, you will need your 16-digit control number included in your proxy materials or voting instruction form. The Annual Meeting will begin promptly at 10:30 a.m., local time, on April 21, 2022. We recommend that you log in at least 15 minutes before the specialAnnual Meeting begins to ensure ample time to complete the check-in procedures and test your computer audio system. If you encounter any difficulties accessing the virtual meeting except as specified inplatform during check-in or during the Notice ofAnnual Meeting, please call the Special Meeting of Shareholders.technical support number that will be posted on the virtual meeting platform login page at www.virtualshareholdermeeting.com/RAND2022.

Whether or not you expect to attendYou can submit questions by logging into www.virtualshareholdermeeting.com/RAND2022 with your 16-digit control number. Additional information regarding the rules and procedures for asking questions during the Annual Meeting will be provided in our rules of conduct, which shareholders can view on the virtual special meeting please complete, date, sign and promptly returnplatform.

You will also be permitted to vote through the accompanying proxy card so thatvirtual meeting platform using your 16-digit control number. If you may be representedhold your shares in a brokerage account or through a bank or another nominee, since you are not the shareholder of record, in order to vote these shares electronically at the special meeting.

Who to Contact if You Have QuestionsAnnual Meeting you must obtain and submit a legal proxy from your bank, broker or other nominee through the virtual meeting platform.

If you have any questions concerning how to vote at the special meeting or would like additional copies of the accompanying proxy statement or need help voting your shares of Common Stock, please contact our proxy tabulator:

Broadridge Investor Communications Solutions, Inc.

By Internet: www.proxyvote.com

By Telephone: 1-800-579-1639

By E-Mail: sendmaterial@proxyvote.com

If you have questions about the meeting, the information in the proxy statement or attending the meeting , please contact investor relations at:

Deborah Pawlowski, Kei Advisors LLC

Investor Relations for Rand Capital Corporation

Phone: 1-716-843-3908

https://www.randcapital.com/contact-us

SECURITYBENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSHARES

Unless otherwise indicated, the following table sets forth beneficial ownership of our shares on the Record Date,March 3, 2022, by (a) persons known by us to be beneficial owners of more than 5% of the outstanding shares, of Common Stock, (b) the directorsDirectors, nominees for Director and the named executive officers of the Company,Rand, and (c) all directorsDirectors and executive officers as a group. For purposes of the table, the address for each of our Directors, nominees for Director and named executive officers is c/o 2200 Rand Building,14 Lafayette Square, Suite 1405, Buffalo, New YorkNY 14203. Unless otherwise stated, each person named in the table has sole voting and investment power with respect to the shares indicated as beneficially owned by that person.

* Less than 1%.

(1) The beneficial ownership information presented is based upon information furnished by each person or contained in filings made with the Securities and Exchange Commission (“SEC”).

(2) This amount includes 139 shares owned by Mr. Kailbourne’s spouse.

(3) The directorship term for Mr. Grum will expire at the Annual Meeting.

(4) This amount includes 7,581 shares held by AG Energy, LLC, which may be deemed to be beneficially owned by Mr. Gusky by virtue of his control of AG Energy, LLC. In addition, Mr. Gusky is the Chief Investment Officer of East and may be deemed to have beneficial ownership of the shares held directly by East by virtue of his position with East. Mr. Gusky disclaims beneficial ownership of the shares held by East.

(5) Except as noted in footnotes 2 and 4 above with respect to Mr. Kailbourne and Mr. Gusky, respectively, members of the group have sole voting and investment power over their respective shares.

(6) Percent of Class calculated based on 2,581,021 shares issued and outstanding at the Record Date.

DELINQUENT SECTION 16(a) REPORTS

Except as noted below, during 2021, the executive officers and directors of the Corporation and owners of more than 10% of the outstanding common stock of the Corporation timely filed with the SEC the required reports under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding their beneficial ownership of the Corporation’s common stock. As a practical matter, the Corporation assists its executive officers and directors by monitoring transactions and completing and filing Section 16 reports on their behalf.

The initial statement of beneficial ownership of securities on Form 3 was filed late by Nancy M. Stone, the Corporation’s prior chief compliance officer, on December 14, 2021 due to a delay in Ms. Stone’s ability to obtain her SEC EDGAR filing codes.

The purchase of the Corporation’s common stock on November 22, 2021 by East, an owner of more than 10% of the Corporation’s outstanding common stock, was reported late on a Form 4 filed with the SEC on November 26, 2021. The purchase of the Corporation’s common stock on November 10, 2021 by Adam Gusky, a director of the Corporation, was reported late on a Form 4 filed on November 15, 2021.

PROPOSAL 1.     ELECTION OF DIRECTORS

Five Directors are to be elected at the Annual Meeting. Four of the Director nominees, Messrs. Godley, Gusky, Kailbourne and Zak, were elected at the last annual meeting of shareholders held in April 2021. Messrs. Gusky and Godley were each designated for nomination for election to the Board by East pursuant to the terms of that certain shareholder agreement, dated as of November 8, 2019, by and between Rand and East (the “Shareholder Agreement”). For additional information on the terms of the Shareholder Agreement with East, see the description included in “Nomination of Directors” below. Ms. Jaroslawsky, a Director nominee, was identified as a candidate for election as a director by the Board and the executive officers of the Corporation based upon her prominent leadership roles and work history in public and private businesses in Buffalo, New York.

Each of the nominees, including Messrs. Gusky and Godley that were designated for nomination by East under the terms of the Shareholder Agreement, was recommended for nomination for election by the Governance and Nominating Committee, which is comprised solely of Independent Directors. Each of the nominees has consented to serve as a Director if elected. If, at the time of the Annual Meeting, any nominee should be unable to serve, it is the intention of the persons designated as proxies to vote, in their discretion, for such other person as may be designated as a nominee by the Board.

Director Independence

The Board has affirmatively determined that the following current non-employee Directors and Director Nominees are “Independent Directors” under the rules of the SEC and under the rules and guidelines of the Nasdaq Stock Market: Benjamin E. Godley, Cari L. Jaroslawsky, Erland E. Kailbourne and Robert M. Zak. The Board applies the standards of the SEC and the rules and guidelines of the Nasdaq Stock Market to assist it in making director independence determinations. The Board considers all relevant facts and circumstances in determining whether a material relationship between Rand and a director exists that would interfere with that director’s exercise of independent judgment in carrying out their responsibilities as a director. In making this determination, the Board considered the analysis and recommendations of the Governance and Nominating Committee, as well as any related person transactions and other relationships with the Corporation or RCM. Material relationships that the Board may consider include commercial, consulting, legal, accounting, industrial, charitable and family relationships.

The nominees for election as a Director at the Annual Meeting have been nominated by the Independent Directors of the Board upon the recommendation of Rand’s Governance and Nominating Committee, which is comprised solely of Independent Directors in compliance with the requirements of Nasdaq Listing Rule 5605(e)(1).

Adam S. Gusky, a Director nominee, has been determined to be an “interested person” under Section 2(a)(19) of the 1940 Act with respect to Rand. In addition, Allen F. Grum, who served as a Director during 2021 and will serve through the date of the Annual Meeting, was previously determined to be an “interested person” under Section 2(a)(19) of the 1940 Act with respect to Rand during his term of service. Directors who are determined to be interested persons do not qualify as Independent Directors under the rules and guidelines of the Nasdaq Stock Market.

The Board, with reference to the SEC rules and the Nasdaq Stock Market rules and guidelines, has also determined that:

Rand’s Board Chair (Mr. Kailbourne for the period of January 1, 2021 to December 1, 2021 and Mr. Zak for the period of December 1, 2021 to December 31, 2021), served as chair of the “executive sessions” of the Independent Directors of the Board during 2021. These “executive sessions” occurred at least twice during 2021. The Corporation also held separate committee meetings of the Board during 2021, which committees were comprised solely of Independent Directors.

Board Leadership Structure

The Board monitors and performs oversight roles with respect to the Corporation’s business and affairs, including with respect to investment practices and performance, compliance with regulatory requirements and the services, expenses and performance of service providers. Among other things, the Board approves the appointment of the Corporation’s investment adviser, reviews and monitors the services and activities performed by the Corporation’s investment adviser and officers and approves the engagement of, and reviews the performance of the independent registered public accounting firm.

Erland E. Kailbourne, who served as Chair of the Board for the period from January 1, 2021 to December 1, 2021, is not an “interested person” under Section 2(a)(19) of the 1940 Act with respect to Rand. In addition, Robert M. Zak, who served as Vice Chair of the Board the period from January 1, 2021 to December 1, 2021 and began serving as Chair of the Board effective December 1, 2021, is also not an “interested person” under Section 2(a)(19) of the 1940 Act with respect to Rand. Allen F. Grum, a director whose directorship term will expire at the Annual Meeting, previously served as President and Chief Executive Officer of the Corporation during 2021 until his retirement effective December 1, 2021. The Corporation believes that separating the Board Chair and President (CEO) roles provides independent oversight of the Corporation, enhanced leadership by the Independent Directors, and a check on the executive officers of the Corporation, who are also employees of RCM.

The Board’s Role in Risk Oversight

The Board’s role in the Corporation’s risk oversight process includes receiving regular reports from the officers of the Corporation and RCM, including their respective chief compliance officers, on areas of material risk to the Corporation, including portfolio valuation, operational, financial, legal, regulatory and compliance, strategic and reputational risks. The full Board (or the appropriate committee in the case of risks that are under the purview of a particular committee) reviews these reports from the officers of the Corporation and RCM to understand and provide oversight and direction on the management of these risks.

In addition, the Board also performs its risk oversight responsibilities with the assistance of the Corporation’s chief compliance officer and RCM’s chief compliance officer. The Board reviews written reports from the Corporation’s chief compliance officer and RCM’s chief compliance officer discussing the adequacy and effectiveness of the compliance policies and procedures of the Corporation, RCM and the Corporation’s other service providers. Annual reports provided by the Corporation’s chief compliance officer and RCM’s chief compliance officer address: (i) the operation of the compliance policies and procedures of the Corporation and RCM since the last report; (ii) any material changes to such policies and procedures since the last report; (iii) any recommendations for material changes to such policies and procedures as a result of an annual review; and (iv) any compliance matter that has occurred since the date of the last report as to which the Board would reasonably need to know to oversee compliance.

Information Regarding Directors, Nominees for Director, and Executive Officers

The following table provides information concerning all persons who are nominees for Director or executive officers of Rand.

(1) Indicates initial year in which such person became a Director. All Directors’ terms of office will be through the next annual meeting of shareholders and until their successors have been duly elected and qualified.

(2) Indicates directorships of companies with a class of equity securities registered under Section 12 of the Exchange Act, subject to the requirements of Section 15(d) of the Exchange Act, or registered as an investment company under the 1940 Act.

(3) Deemed to be an interested person under Section 2(a)(19) of the 1940 Act due to his position as a director of the Corporation and a member of the RCM investment committee.

(4) Ms. Jaroslawsky is standing for election as a Director of the Corporation for the first time at the Annual Meeting.

(5) Deemed to be an interested person under Section 2(a)(19) of the 1940 Act due to Mr. Penberthy’s positions as an officer of the Corporation, an officer of RCM and a member of the RCM investment committee.

(6) Deemed to be an interested person under Section 2(a)(19) of the 1940 Act due to Ms. Brechtel’s positions as an officer of the Corporation and an officer of RCM.

(7) Ms. Eastgate was retained by the Corporation as its Chief Compliance Officer in January 2022 pursuant to the terms of a Master Service Agreement and BDC CCO Services Agreement (collectively the “CCO Agreement”) by and between the Corporation and Foreside Consulting Services. The CCO Agreement is terminable by either party upon 30 days’ prior written notice.

Board Diversity Matrix

The Corporation is committed to diversity and inclusion, and believes it is important that the Board is composed of individuals representing the diversity of our communities. The Governance and Nominating Committee seeks Director nominees with a broad diversity of experience, professions, skills and backgrounds. To this end, after the completion of the Annual Meeting and the expected election of Ms. Jaroslawsky to the Board, 20% of the Board will have self-identified as female.

The Board Diversity Matrix set forth below reports self-identified diversity statistics for the Board, as constituted prior to the Annual Meeting and prior to the expected election of Ms. Jaroslawsky at the Annual Meeting, in the format required by Nasdaq’s rules.

The Board Diversity Matrix set forth below reports self-identified diversity statistics for the Board as expected to be constituted after the completion of the Annual Meeting, assuming the election of each of the Director nominees under Proposal 1.

(1) Assumes the election of each of the Director nominees nominated for election under Proposal 1.

Shareholder Communications

Communications to an individual Director, to non-employee Directors as a group, or to the entire Board, should be addressed as follows: Robert M. Zak, Security Holder Board Communications, Rand Capital Corporation, 14 Lafayette Square, Suite 1405, Buffalo, New York, 14203, with an indication of the individual or subgroup (if any) to whose attention the communication is directed. All security holder communications addressed in that manner will be delivered directly to Mr. Zak, who will receive communications for the Board and non-employee Directors, and who will deliver the communication unopened to any individually indicated Director.

Meeting Attendance

Directors are expected to attend the Annual Meeting each year, but such attendance is not required. All of the Corporation’s directors attended the 2021 annual meeting of shareholders, which was held as a virtual meeting by means of remote communication due to the COVID-19 pandemic.

The Board of Directors of the Corporation unanimously recommends a vote “FOR” the election of the Director nominees named in this Proxy Statement.

Approximate Value of Investments in the CompanyRand

The following table indicates the range of value as of the Record DateMarch 3, 2022 of the shares of the CompanyRand (the “Fund”) beneficially owned by each directorDirector and executive officer. The Company is not partnominee for Director of a familyRand. None of investment companies.our independent directors own any equity interests in other funds managed by RCM or its affiliates.

COMMITTEES AND MEETING DATA

The Committees of the Board had the following members from January 1, 2021 through December 31, 2021:

(1) Mr. Kailbourne was elected as the chair of the Audit Committee of the Board as of January 27, 2022.

As described in greater detail below under “Compensation Committee,” upon the completion of the 2019 annual meeting of shareholders and after the Externalization, (i) consistent with the requirements of the Nasdaq Listing Rules given the Corporation’s status as a “controlled company” and (ii) given all of the Corporation’s employees, including its executive officers, became employees of RCM and no longer receive any direct compensation from the Corporation, the Board determined to no longer have an active Compensation Committee.

During 2021, the full Board met 11 times, the Audit Committee met six times, and the Governance and Nominating Committee met two times. During 2021, each Director attended 100% of the total number of meetings of the Board and of the committees of which such Director was a member.

PROPOSAL 1 – APPROVAL OF THE NEW ADVISORY AGREEMENT PROPOSALCompensation Committee

As of the Record Date, East owns approximately 64.2% of our outstanding shares. As a result of East’s ownership percentage, the Corporation qualifies as a “controlled company” under Nasdaq Listing Rule 5615(c) and therefore is permitted to avail itself of the exemptions under the Nasdaq Listing Rules afforded to a “controlled company.” Pursuant to the Nasdaq Listing Rules, the Corporation, as a “controlled company,” is exempt from the requirements of Nasdaq Listing Rule 5605(d) regarding the need to have a standing and fully independent compensation committee. Given, upon the completion of the Externalization, the Corporation no longer has any employees and the employees of RCM do not receive any direct compensation from the Corporation, the Board determined after the completion of the 2019 annual meeting of shareholders that it was no longer necessary or useful to establish and retain a standing compensation committee. Any functions previously performed by the Compensation Committee that are still applicable for the Corporation after the completion of the Externalization are now performed by the Governance and Nominating Committee. Given the Board’s focus on good corporate governance, at this time, the Board has decided not to avail itself of any of the other exemptions that are permitted to be used by a “controlled company” under the Nasdaq Listing Rules.

GeneralCompensation Committee Interlocks and Insider Participation

Shareholders are being asked to consider and vote on a proposal to approve the New Advisory Agreement between the Company and the Adviser. At a meeting of the Board held on October 29, 2020, the Board, including all of the Company’s independent directors, unanimously voted to approve the New Advisory Agreement, subject to the approval of the Shareholders, and determined that the New Advisory Agreement is in the best interests of the Company and the Shareholders. The Board then recommended that the Shareholders vote to approve the New Advisory Agreement Proposal.

As discussed in greater detail below, the terms of the New Advisory Agreement are identical to the terms of the Existing Advisory Agreement and the day to day management of the Adviser and the investment objectives and strategies of the Company will not changeNo interlocking relationship, as a result of Adviser Change in Control or the Company’s entry into the New Advisory Agreement. The New Advisory Agreement, attached as Appendix A to this proxy statement, is marked to show changes against the Existing Advisory Agreement.

The Existing Advisory Agreement was previously approveddefined by the Shareholders atrules adopted by the Company’s special meeting of shareholders held on May 16, 2019. ForSEC, existed during the year ended December 31, 2019, the Adviser earned base management fees of $85,483. This represents Base Management Fees for the period from the Company’s externalization on November 8, 2019 through December 31, 2019. There were no Incentive Fees earned for the year ended December 31, 2019.

Summary of the Adviser Change in Control

Currently, East owns a majority interest of the Adviser, and CB Advisors LLC, which is wholly owned by Brian Collins, owns a minority interest in Adviser. In connection with the Adviser Change in Control, East will transfer 100% its interests in the Adviser to Callodine, an entity that is majority owned by James Morrow. No consideration will be exchanged in connection with the Adviser Change in Control. CB Advisors will continue to own its minority interest in the Adviser.

Upon the consummation of the Adviser Change in Control, Callodine is expected to have over $200 million of assets under management through its wholly owned subsidiary, Callodine Capital, an SEC registered investment adviser, and the Adviser. Following the Adviser Change in Control, and subject to receipt of new exemptive relief, as discussed in more detail below, the Company, the Company’s wholly-owned small business investment company subsidiary, Rand Capital SBIC, Inc., and certain existing and future funds advised by Callodine and/or their affiliates, or the Adviser and/or its affiliates, would be permitted to co-invest in transactions together, subject to the conditions of the New Order (as defined below). The Adviser believes that the ability to co-invest would create additional opportunities to invest in larger transactions with less risk.

Interests of Certain Persons Related to the Company

Shareholders should be aware that the Company’s executive officers and directors may have interests that are different from, or in addition to, those of the Shareholders generally.

Allen F. “Pete” Grum and Daniel P. Penberthy currently serve as the executive officers of the Company, but are also employed by, and serve as officers of, the Adviser. In addition, Messrs. Grum and Penberthy each also serve as members of the Adviser’s Investment Committee. As a result, Messrs. Grum and Penberthy have an interest in the Company continuing to retain the Adviser under the New Advisory Agreement.

In addition, Adam Gusky, a2021 between any member of the Board and a memberan Executive Officer of the Adviser’s investment committee, serves as Chief Investment Officer of East. The address for East is 7777 NW Beacon Square Blvd., Boca Raton, Florida 33487. East owns 1,641,640 shares of the Common Stock, or 63.5% of the total outstanding shares of Common Stock, as of the Record Date. East has advised the Company that East intends to vote in favor of the New Advisory Agreement Proposal and that it does not intend to sell any of its shares of Common Stock in connection with the Adviser Change in Control.

The Board was aware of these interests and considered them, among other matters, in approving the New Advisory Agreement, and in making its recommendation that Shareholders vote “FOR” the New Advisory Agreement Proposal.Corporation.

Reasons for the New Advisory AgreementGovernance and Nominating Committee

Shareholders are being asked to approve the Company’s entry into the New Advisory Agreement, pursuant to which the Adviser will continue to act as the investment adviserThe primary purposes of the Company, because this approval is required by the 1940 Act. Section 15(a) of the 1940 Act provides that any investment management contract terminates automatically upon its “assignment.” The acquisition by Callodine of the controlling interest in the Adviser pursuant to the Adviser Change in Control would, pursuant to Section 2(a)(4) of the 1940 Act, constitute an “assignment” of the Existing Advisory Agreement. If the New Advisory Agreement Proposal is not approved, the Existing Advisory Agreement will terminate upon consummation of the Adviser Change in ControlGovernance and the Company will no longer be managed by the Adviser.

About the Adviser

The Adviser Change in Control is not expected to impact the day-to-day management of the Company. The Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and serves as the Company’s investment adviser pursuant to the Existing Advisory Agreement. The Adviser’s principal investment portfolio managers are Messrs. Grum and Penberthy, who manage the Company’s investment portfolio on a day-to-day basis, and will continue to do so after the Adviser Change in Control. Messrs. Grum and Penberthy do not currently provide portfolio advisory services to any accounts other than the Company. The address for the Adviser and its principal executive officers is 2200 Rand Building, Buffalo, New York 14203. The address for CB Advisors, the managing member of the Adviser, is Two International Place, Suite 1830, Boston, Massachusetts 02110.

Upon consummation of the Adviser Change in Control, Callodine will acquire a controlling interest in the Adviser. Callodine is controlled by James Morrow and has several subsidiaries, including Callodine Capital Management LLC, a registered investment adviser with over $180 million of assets under management. Mr. Morrow, the Principal and Chief Investment Officer of Callodine has over 20 years of experience in the investment management industry. The address for Callodine is Two International Place, Suite 1830, Boston, Massachusetts 02110.

On October 7, 2020, the Company, East, the Adviser, and certain of their affiliates received exemptive relief from the SEC to permit the Company to co-invest in portfolio companies with certain other funds, including other business development companies and registered investment companies, managed by the Adviser and certain of its affiliates in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, the Company is generally permitted to co-invest with affiliated funds if a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Company’s independent directors makes certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to the Company and its Shareholders and do not involve overreaching in respect of the Company or its Shareholders on the part of any person concerned and (2) the transaction is consistent with the interests of the Shareholders and is consistent with the Company’s investment objective and strategies.

In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all business development companies, through at least December 31, 2020, the Company may, subject to the satisfaction of certain conditions, co-invest in its existing portfolio companies with certain other funds managed by the Adviser or its affiliates, even if such other fund has not previously invested in such existing portfolio company. Without this order, the Company generally would not be able to participate in such co-investments unless the affiliated fund had previously acquired securities of the portfolio company in a co-investment transaction with the Company.

Concurrent with seeking Shareholder approval of the New Advisory Agreement, Callodine and the Adviser are seeking a new exemptive relief order from the SEC that would supersede the Order and would permit the Company to co-invest with affiliates of Callodine (the “New Order”). Under the Order, the Company is permitted to co-invest with funds managed by the Adviser and its affiliates under the Adviser’s current ownership structure. The New Order, if and when granted by the SEC, would replace East with Callodine. There can be no assurance that the Company will be able to obtain such new exemptive relief from the SEC.

The InvestmentNominating Committee

All decisions to acquire or dispose of assets on behalf of the Company are made by the Adviser’s investment committee (the “Investment Committee”). Each such decision must be approved by a majority of Investment Committee members. The Investment Committee is currently composed of five individuals. Following the consummation of the Adviser Change in Control, it is expected that James Morrow will join the Investment Committee. The composition of the Investment Committee following the Adviser Change in Control is expected to be as follows: include:

The following provides additional biographical information for each current and proposed member of the investment committee:

Brian Collins – Mr. Collins is a cofounder and the Managing Member of the Adviser and serves on the Investment Committee. He was previously the managing partner of The Collins Group, which was a private investment firm located in Boston, Massachusetts. This company specialized in early stage equity and bridge financing. He has worked on the due diligence, deal structuring and financing for several private equity deals in different industries including real estate, biotechnology, and manufacturing. He also oversees a portfolio of companies in a variety of different industries, and has served on the boards of several of these firms. Mr. Collins is also the managing member of a real estate-focused limited liability company, which owns and/or manages both commercial and residential real estate. Mr. Collins earned his Master of Business Administration from Bentley University and his Bachelor of Science degree from Lehigh University.

Allen F. “Pete” Grum – As Chief Executive Officer and President of the Adviser, Mr. Grum is responsible, along with Mr. Penberthy, for the day to day management of the Company’s investment portfolio and also serves on the Investment Committee. Mr. Grum also serves as a director of the Company. Mr. Grum has served as President and Chief Executive Officer of the Company since 1996 and also serves as the Chief Compliance Officer of the Company. Prior thereto, Mr. Grum served as Senior Vice President of the Company commencing in June 1995. From 1994 to 1995, Mr. Grum was Executive Vice President of Hamilton Financial Corporation and from 1991-1994 he served as Senior Vice President of Marine Midland Mortgage Corporation. Mr. Grum serves on a number of Boards of Directors of companies in which the Company has an investment.

Adam Gusky – Mr. Gusky has been the Chief Investment Officer of East since its inception in 2010 and serves on the Investment Committee. Mr. Gusky also serves as a director of the Company. During his tenure, East has underwritten over 100 private transactions and has invested in over 30 loan or preferred equity transactions totaling over $200 million of invested capital. Prior to joining East, Mr. Gusky worked for CNN/Sports Illustrated and O2 Wireless Solutions. Mr. Gusky earned both his Master of Business Administration and his Bachelor of Arts degrees from Duke University, and as an undergraduate was the captain of the Duke University Men’s Tennis Team, which won three ACC Team Championships during his years there.

Scott Barfield - Mr. Barfield currently serves as the principal investment manager for Rand Capital Credit, LLC (“RCC”), a exempt reporting investment adviser and an affiliate of the Adviser, and also serves as a member of the Adviser’s Investment Committee. Prior to joining RCC in 2020, Mr. Barfield was a Managing Director within BlueArc Mezzanine Partners, the mezzanine lending strategy of BlueArc Capital Management, where he was responsible for the origination, execution, monitoring, and realization of investments within the fund. With more than 25 years of experience working with middle market companies, Mr. Barfield has executed M&A, capital raise, and principal investment transactions aggregating over $10 billion in value. Prior to joining BlueArc Mezzanine Partners, Mr. Barfield was a Principal in the debt investment arm of H.I.G. Capital, a $20 billion private equity and debt investment firm. Prior to H.I.G. Capital, he was a Partner at Nancy Creek Capital, a mezzanine debt fund focused on the lower middle market. At Nancy Creek Capital, Mr. Barfield raised institutional and high-net worth capital, originated and executed on new debt and equity transactions, monitored the portfolio, served on company board of directors, and guided the successful realization of investments. Prior to Nancy Creek Capital, Mr. Barfield worked within the Investment Banking group of Wachovia Securities. Over 11 years at Wachovia Securities, he worked within various M&A and debt capital market groups, including private equity and mezzanine placement, high yield, investment grade senior notes, and origination. Prior to Wachovia Securities, he began his career at Ernst & Young, first within corporate tax consulting and then within the National Corporate Finance practice. He has a B.S. in Business Administration and a Master of Accounting degree, both from the Kenan-Flagler Business School at UNC – Chapel Hill. He received his CPA license in 1995 (inactive).

Daniel P. Penberthy – As Executive Vice President and Chief Financial Officerl of the Adviser, Mr. Penberthy is responsible, along with Mr. Grum, for the day to day management of the Company’s investment portfolio and also serves on the Investment Committee. Mr. Penberthy is also the Chief Compliance Officer of the Adviser. Mr. Penberthy has served as Treasurer of the Company since August 1997. Since January 2002, Mr. Penberthy has served as the Company’s Executive Vice President, and he has continued to serve as the Chief Financial Officer of the Company since 1997. Mr. Penberthy has also previously served as the Company’s Chief Compliance Officer. From 1993 to 1997, Mr. Penberthy served as Chief Financial Officer for both the Greater Buffalo Partnership (formerly the Chamber of Commerce) and the Greater Buffalo Convention and Visitors Bureau. Prior thereto, from 1990 to 1993, Mr. Penberthy was previously employed by Greater Buffalo Development Foundation and KPMG.

James Morrow – Mr. Morrow is the CEO, Founder, PM, and CIO of Callodine Capital. The Adviser expects that Mr. Morrow will join the Adviser’s Investment Committee in connection with the Adviser Change in Control. Prior to founding Callodine Capital, Mr. Morrow spent the previous 19 years at Fidelity Investments, where, at peak, he managed $40 billion of assets across multiple equity-income strategies. He announced his retirement in February 2017 and remained with the firm through January 2018 as he transitioned all portfolio management responsibilities to his successors. In his role as portfolio manager at Fidelity, Mr. Morrow managed a wide array of funds with experience structuring value-focused portfolios within equities, fixed income and specialty niches, including investing in business development companies. He is an experienced active manager with a history of managing portfolios with significant absolute and relative over/under weight positions, private investments and activist positions. Further, Mr. Morrow has substantial experience recruiting, training and managing research teams. Before serving as an equity research summer intern with Fidelity in 1998, Mr. Morrow worked as a distressed debt analyst for Chase Manhattan Bank from 1995 to 1997. Mr. Morrow earned his Master of Business Administration degree from the University of Chicago and his Bachelor of Science degree in finance from the State University of New York at Buffalo.

Administration Agreement

In connection with the Adviser Change in Control, the Adviser will continue to act as the Administrator pursuant to the same terms as the administration agreement between the Company and the Adviser (the “Administration Agreement”). Under the terms of the Administration Agreement, the Adviser performs (or oversees, or arranges for, the performance of) the administrative services necessary for the operation of the Company, including, but not limited to, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and such other services as the Adviser, subject to review by the Board, from time to time determines to be necessary or useful to perform its obligations under the Administration Agreement. The Adviser also, on behalf of the Company, arranges for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable. The Adviser makes reports to the Board regarding its performance of the obligations under the Administration Agreement and furnishes advice and recommendations with respect to such other aspects of the business and affairs of the Company as it determine to be desirable.

For the year ended December 31, 2019, the Company had $1,205 payable to Adviser for the expenses associated with the Administration Agreement. This represents expenses associated with the Administration Agreement for the period from the Company’s externalization on November 8, 2019 through December 31, 2019.

Terms of the New Advisory Agreement

The following description is qualified in its entirety by reference to the form of New Advisory Agreement attached hereto as Appendix A.

The terms of the New Advisory Agreement are identical to the terms of the Existing Advisory Agreement. Under the terms of the New Advisory Agreement, the Adviser will continue to manage the investment and reinvestment of the Company’s assets, and, without limiting the generality of the foregoing:

The Adviser’s servicesGovernance and Nominating Committee’s charter may be accessed at Rand’s website, www.randcapital.com. None of the persons that served on the Governance and Nominating Committee during 2021 were “interested persons” as defined in Section 2(a)(19) of the 1940 Act. Each member of the Governance and Nominating Committee during 2021 met the independence requirements of the Nasdaq Stock Market.

Nomination of Directors

The Governance and Nominating Committee, as part of its responsibilities under its Charter, oversees the New Advisory Agreementidentification of qualified individuals to serve on the Board.

We seek Directors who have the required and appropriate skills and characteristics, including business experience and personal skills in finance, marketing, business and other areas that are not exclusive,necessary to contribute to an effective Board of Directors. We identify new Director candidates from prominent business persons and itprofessionals in the communities Rand serves or who have a shared interest in the types of investments in which Rand transacts. We consider nominees of shareholders in the same manner as other nominees.

If a vacancy occurs on the Board, or if the size of the Board is changed, the Governance and Nominating Committee may, furnish similar services to other entities. In addition, subject toin compliance with the requirements of the 1940 Act,Shareholder Agreement described below, recommend candidates to the AdviserBoard for election. The Board may elect a new Director to fill any unexpired term of the seat. Annually, the Governance and Nominating Committee will recommend a slate of new and/or continuing candidates for nomination for election to the Board. The Board will select a slate of nominees for Director from recommendations of the Governance and Nominating Committee, and submit the slate of nominees to be voted on by shareholders at Rand’s next annual meeting of shareholders. Rand’s by-laws provide that an annual meeting of shareholders shall be held on the date that the Board shall determine. The number of Directors on the Board is authorizeddetermined by the Board, but in no event may it be less than three Directors.

Pursuant to enter into onethe terms of the Shareholder Agreement, East has the right to designate two or three persons, depending upon the size of the Board, for nomination for election to the Board. East will have the right to designate (i) up to two persons if the size of the Board is composed of fewer than seven directors or (ii) up to three persons if the size of the Board is composed of seven or more sub-advisory agreements with other investment advisors (each a “Sub-Advisor”), includingdirectors. East’s right to designate persons for purposesnomination for election to the Board under the Shareholder Agreement is the exclusive means by which East may designate or nominate persons for election to the Board. Given the Board currently consists of recommending specific securities or other investments based uponfive Directors, East has the Company’s investment objectives and policies, and working, alongright to designate up to two persons for nomination for election to the Board. In connection with the Adviser,Annual Meeting, Messrs. Gusky and Godley were each designated for nomination for election to the Board by East pursuant to the terms of the Shareholder Agreement.

Criteria and Diversity

In considering whether to recommend any candidate for inclusion in structuring, negotiating, arrangingthe Board’s slate of recommended director nominees, including candidates recommended by shareholders, the Governance and Nominating Committee will consider a candidate’s background, professional experience, business skill set and the ability to act in the interests of all shareholders. In addition, the Governance and Nominating Committee is committed to diversity and inclusion, and believes it is important that the Board is composed of individuals representing the diversity of our communities. The Board and the Governance and Nominating Committee conceptualizes diversity to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint, education, skill and other qualities that contribute to the Board when identifying and recommending director nominees. The Governance and Nominating Committee has sought and expects to continue to seek nominees with a broad diversity of experience, professions, skills, and backgrounds. The Governance and Nominating Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees, but the Committee is focused on the importance that the Board consists of members that represent the diversity of our communities. Rand believes that the backgrounds and qualifications of the Directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.

Code of Conduct and Business Ethics

Rand has adopted a written Code of Conduct that applies to Rand’s Chief Executive Officer and Chief Financial Officer that meets the requirements of Item 406 of Regulation S-K. Rand will disclose any substantive amendments to, or effectingwaiver from provisions of, the acquisition or dispositionCode of investmentsConduct made with respect to the Chief Executive Officer and monitoring investmentsthe Chief Financial Officer on its website.

In addition, the Corporation has adopted a Board of Directors (Non-Interested) Business Ethics Policy Statement that is applicable to Rand’s Independent Directors. This Business Ethics Policy Statement acts as a general statement of the Corporation’s expectations regarding the ethical standards that each Independent Director should adhere to while acting on behalf of the Company. UnderCorporation, including acting in good faith and in the termshonest belief that their actions are in the best interests of the New Advisory Agreement, the Adviser,Corporation and not the Company, will be responsible for any compensation that is payable to any Sub-Adviser.its shareholders.

Under the New Advisory Agreement, the Company will pay the Adviser, as compensation for the investment advisory and management services, fees consistingFinally, a Joint Code of two components: (i) the Base Management Fee and (ii) the Incentive Fee.

Base Management Fee

As under the Existing Advisory Agreement, the Base Management Fee will be 1.50% per annum of the Company’s total assets (other than cash or cash equivalents but including assets purchased with borrowed funds), determined according to procedures dulyEthics has been jointly adopted by the Board.Corporation and RCM that is applicable to the directors, officers and employees of RCM and the officers and Directors of the Corporation that are interested persons. In addition to establishing general standards of conduct for such persons, the Joint Code of Ethics also includes additional procedures as provided by Rule 17j-1 under the 1940 Act to prevent officers and Directors of the Corporation that are interested persons from abusing their access to information about the Corporation’s investments.

The Base Management Fee will be calculated based onCode of Conduct, the average valueBusiness Ethics Policy Statement and the Joint Code of Ethics are each available in the Company’s total assets (other than cash or cash equivalents but including assets purchased with borrowed funds)Governance section of Rand’s website at the end of the two most recently completed calendar quarters and will be payable quarterlywww.randcapital.com.They are also available in arrears promptly following the filing of the Company’s financial statements for such quarter. Base Management Fees forprint to any partial month or quarter will be appropriately prorated.shareholder who requests them.

Incentive Fee

Also, as with the Existing Advisory Agreement, the Incentive Fee will be comprised of two parts: (1) the Income Based Fee and (2) the Capital Gains Fee. The Incentive Fee calculation is identical under both the Existing Advisory Agreement and the New Advisory Agreement, as described below.

Income Based Fee

Audit Committee

The Income Based Fee will be calculated and payable quarterly in arrears based on the Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter and shall be payable promptly following the filing of the Company’s financial statements for such quarter.

For purposes of the New Advisory Agreement, Pre-Incentive Fee Net Investment Income is defined as interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued by the Company during the relevant calendar quarter, minus the Company’s operating expenses for such calendar quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding any portion of Incentive Fee).

Pre-Incentive Fee Net Investment Income includes any accretion of original issue discount, market discount, payment-in-kind interest, payment-in-kind dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that the Company and its consolidated subsidiaries have recognized in accordance with GAAP, but have not yet received in cash (collectively, “Accrued Unpaid Income”). Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized and unrealized capital losses or unrealized capital appreciation or depreciation.

Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness) at the end of the immediately preceding calendar quarter, will be compared to a “hurdle rate”, expressed as a rate of return on the value of the Company’s net assets at the end of the most recently completed calendar quarter, of 1.75% per quarter (7% annualized). The Company will pay the Adviser an Incentive Fee with respect to the Company’s Pre-Incentive Fee Net Investment Income in each calendar quarter as follows:

However, the Income Based Fee paid to the Adviser for any calendar quarter that begins after February 8, 2022 shall not be in excess of the Incentive Fee Cap. The “Incentive Fee Cap” for any quarter is an amount equal to (1) 20.0% of the Cumulative Net Return (as defined below) during the relevant Income Based Fee Calculation Period (as defined below) minus (2) the aggregate Income Based Fee that was paid in respect of the calendar quarters included in the relevant Income Based Fee Calculation Period.

For purposes of the calculation of the Income Based Fee, “Income Based Fee Calculation Period” is defined as, with reference to a calendar quarter, the period of time consisting of such calendar quarter and the additional quarters that comprise the lesser of (1) the number of quarters immediately preceding such calendar quarter that began after February 8, 2022 or (2) the eleven calendar quarters immediately preceding such calendar quarter.

For purposes of the calculation of the Income Based Fee, “Cumulative Net Return” is defined as (1) the aggregate net investment income in respect of the relevant Income Based Fee Calculation Period minus (2) any Net Capital Loss, if any, in respect of the relevant Income Based Fee Calculation Period. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no Income Based Fee to the Adviser for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the Income Based Fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an Income Based Fee to the Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the Income Based Fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an Income Based Fee to the Adviser equal to the Income Based Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.

For purposes of the calculation of the Income Based Fee, “Net Capital Loss,” in respect of a particular period, means the difference, if positive, between (1) aggregate capital losses, whether realized or unrealized, in such period and (2) aggregate capital gains, whether realized or unrealized, in such period.

Any Income Based Fee otherwise payable under the New Advisory Agreement with respect to Accrued Unpaid Income (such fees being the “Accrued Unpaid Income Based Fees”) shall be deferred, on a security by security basis, and shall become payable to the Adviser only if, as, when and to the extent cash is received by the Company or its consolidated subsidiaries in respect of any Accrued Unpaid Income. Any Accrued Unpaid Income that is subsequently reversed by the Company in connection with a write-down, write-off, impairment or similar treatment of the investment giving rise to such Accrued Unpaid Income will, in the applicable period of reversal, (1) reduce Pre-Incentive Fee Net Investment Income and (2) reduce the amount of Accrued Unpaid Income Based Fees. Subsequent payments of Accrued Unpaid Income Based Fees deferred pursuant to this paragraph shall not reduce the amounts otherwise payable for any quarter as an Income Based Fee.

Capital Gains Fee

The Capital Gains Fee will be determined and payable in arrears as of the end of each calendar year (or upon termination of the New Advisory Agreement). Under the terms of the New Advisory Agreement, the Capital Gains Fee is calculated at the end of each applicable year by subtracting (1) the sum of the Company’s cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) the Company’s cumulative aggregate realized capital gains, in each case calculated from the effective date of the Existing Advisory Agreement. If this amount is positive at the end of any calendar year, then the Capital Gains Fee for such year is equal to 20.0% of such amount, less the cumulative aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee payable for that calendar year. If the New Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date shall be treated as though it were a calendar year end for purposes of calculating and paying the Capital Gains Fee.

For purposes of the Capital Gains Fee:

The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in the Company’s portfolio when sold and (b) the accreted or amortized cost basis of such investment.

The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in the Company’s portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.

The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in the Company’s portfolio as of the applicable Capital Gains Fee calculation date and (b) the accreted or amortized cost basis of such investment.

The accreted or amortized cost basisBoard of an investment shall mean, with respect to an investment owned by the Company asDirectors has determined that none of the effective datemembers of the Existing Advisory Agreement,Audit Committee during 2021 were “interested persons” as defined in Section 2(a)(19) of the fair value1940 Act. During 2021, the Audit Committee was comprised solely of Independent Directors, all of whom met the independence requirements of the Nasdaq Stock Market and the rules of the SEC during their term of service. The Board of Directors has determined that, investmentfor 2021, Robert M. Zak was an audit committee financial expert (as defined by SEC regulations). In addition to Mr. Zak, the Board also believes that each of the other members of the Audit Committee during 2021 possessed the requisite skills and experience to also qualify as an audit committee financial expert. In addition, each member that served on the Audit Committee during 2021 possessed the financial qualifications required of Audit Committee members set forth in the Company’s most recently filed Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as applicable, as filed withrules and guidelines of the SEC priorNasdaq Stock Market.

The Audit Committee’s charter may be accessed at Rand’s website, www.randcapital.com. The Audit Committee reviews the scope and results of the annual audit, receives reports from Rand’s independent registered public accountants, and reports the Audit Committee’s findings and recommendations to the effective dateBoard of the Existing Advisory Agreement and, with respect to an investment acquired by the Company subsequent to the effective date of the Existing Advisory Agreement, the accreted or amortized cost basis of such investment as reflected in the Company’s financial statements.

Example 1: Income Based Fee Calculations:*

Alternative 1

Assumptions:Directors.

Investment income (including interest, dividends, fees, etc.) = 1.25%

Hurdle rate⁽¹⁾ = 1.75%

Base Management Fee⁽²⁾ = 0.375%

Other expenses (legal, accounting, transfer agent, etc.) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income – (Base Management Fee + other expenses)) = 0.675%

Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate, therefore there is no Income Based Fee is payableThe Audit Committee has adopted necessary reporting procedures for the calendar quarter.

Alternative 2

Assumptions:

Investment income (including interest, dividends, fees, etc.) = 2.70%

Hurdle rate⁽¹⁾ = 1.75%

Base Management Fee⁽²⁾ = 0.375%

Other expenses (legal,confidential submission, receipt, retention and treatment of accounting transfer agent, etc.) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income – (Base Management Fee + other expenses)) = 2.125%

Income Based Fee (subject to “catch up”)⁽³⁾ = 100.00% × (2.125% – 1.75%) = 0.375%

Pre-Incentive Fee Net Investment Income exceeds the hurdle rate, but does not fully satisfy the “catch-up” provision, therefore the Income Based Fee payable for the calendar quarter is 0.375%.

Alternative 3

Assumptions:

Investment income (including interest, dividends, fees, etc.) = 3.50%

Hurdle rate⁽¹⁾ = 1.75%

Base Management Fee⁽²⁾ = 0.375%

Other expenses (legal, accounting, transfer agent, etc.) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income – (management fee + other expenses)) = 2.925%

Income Based Fee (subject to “catch up”)⁽³⁾ = 100.00% × “catch-up” + (20.00% × (Pre-Incentive Fee Net Investment Income above 2.1875%))

Catch-up = 2.1875% – 1.75% = 0.4375%

Income Based Fee = (100.00% × .4375%) + (20.00% × (2.925% – 2.1875%))

= 0.4375% + (20.00% × 0.7375%)

= 0.4375% + 0.1475%

= 0.585%

Pre-Incentive Fee Net Investment Income exceeds the hurdle rate, and fully satisfies the “catch-up” provision, therefore the Income Based Fee payable for the calendar quarter is 0.585%.

* For ease of review, (i) the hypothetical amounts of Pre-Incentive Fee Net Investment Income, investment income, Base Management Fee, other expenses, and Income Based Fee are each expressed as a percentage of total assets, though as described in greater detail above, each of these amounts will be calculated as a numerical dollar amount as set forth in the New Advisory Agreement, (ii) the hypothetical amount of the Base Management Fee is assumed to be consistent from quarter to quarter, and (iii) these examples each assume that the Incentive Fee Cap (as described above) is not yet in effect.

Example 2: Capital Gains Fee Calculations:auditing complaints.

Alternative 1

Assumptions:

Year 1: $20.0 million investment madeFactors used in Company A (“Investment A”), and $30.0 million investment made in Company B (“Investment B”)

Year 2: Investment A sold for $50.0 million and fair market value (“FMV”) of Investment B determined to be $32.0 million

Year 3: FMV of Investment B determined to be $25.0 million

Year 4: Investment B sold for $31.0 million

The Capital Gains Fees, if any, would be calculated as follows:

Year 1: None

Year 2: Capital Gains Fee of $6.0 million — ($30.0 million realized capital gains on sale of Investment A multiplied by 20.0%)

Year 3: None — $5.0 million (20.0% multiplied by ($30.0 million cumulative capital gains less $5.0 million cumulative capital depreciation)) less $6.0 million (previous Capital Gains Fee paid in Year 2)

Year 4: Capital Gains Fee of $0.2 million — $6.2 million ($31.0 million cumulative realized capital gains multiplied by 20.0%) less $6.0 million (Capital Gains Fee taken in Year 2)

Alternative 2

Assumptions:

Year 1: $20.0 million investment made in Company A (“Investment A”), $30.0 million investment made in Company B (“Investment B”) and $25.0 million investment made in Company C (“Investment C”)

Year 2: Investment A sold for $50.0 million, FMV of Investment B determined to be $25.0 million and FMV of Investment C determined to be $25.0 million

Year 3: FMV of Investment B determined to be $27.0 million and Investment C sold for $30.0 million

Year 4: FMV of Investment B determined to be $35.0 million

Year 5: Investment B sold for $20.0 million

The Capital Gains Fees, if any, would be calculated as follows:

Year 1: None

Year 2: $5.0 million Capital Gains Fee — 20.0% multiplied by $25.0 million ($30.0 million realized capital gains on Investment A less $5.0 million unrealized capital depreciation on Investment B)

Year 3: $1.4 million Capital Gains Fee — $6.4 million (20.0% multiplied by $32.0 million ($35.0 million cumulative realized capital gains less $3.0 million unrealized capital depreciation)) less $5.0 million Capital Gains Fee received in Year 2

Year 4: $0.6 million Capital Gains Fee — $7.0 million (20.0% multiplied by $35.0 million cumulative realized capital gains) less cumulative $6.4 million Capital Gains Fee received in Year 2 and Year 3

Year 5: None — $5.0 million (20.0% multiplied by $25.0 million (cumulative realized capital gains of $35.0 million less realized capital losses of $10.0 million)) less $7.0 million cumulative Capital Gains Fee paid in Year 2, Year 3 and Year 4

Payment of Expenses

Just as with the Existing Advisory Agreement, under the terms of New Advisory Agreement, all investment professionalsAudit Committee’s Assessment of the AdviserExternal Auditor Qualifications and its staff, when and to the extent engaged in providing investment advisory services for the Company, and the compensation of such personnel and the general office and facilities and overhead expenses incurred by the Adviser in maintaining its place of business allocable to these services, will be provided and paid for by the Adviser and not by the Company. The Company will bear all other costs and expenses of its operations and transactions, including those relating to:

Indemnification

Just as with the Existing Advisory Agreement, the New Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Adviser, its members and their respective officers, managers, partners, agents, employees, controlling persons, members and any other person affiliated with any of them (collectively, the “Indemnified PartiesWork Quality”), are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) incurred by the Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under the New Advisory Agreement or otherwise as an investment adviser of the Company.

Duration and Termination of New Advisory Agreement

The New Advisory Agreement will remainAudit Committee is responsible for the appointment, compensation and oversight of external auditors.

The Audit Committee annually reviews the Corporation’s independent registered public accounting firm’s (the “audit firm”) performance and independence in effect for two years after the date it is signed. Thereafter, it willdeciding whether to continue to renew automatically for successive annual periods so long asretain such continuance is specifically approved at least annually by: (i)audit firm. In the votecourse of these reviews, the Board, or by the vote of Shareholders holding a majority of the outstanding voting securities of the Company; and (ii) the vote of a majority of the Company’s independent directors, in either case, in accordance with the requirements of the 1940 Act. The New Advisory Agreement may be terminated at any time, without the payment of any penalty, upon sixty (60) days’ written notice, by: (a) by vote of a majority of the Board or by vote of a majority of the outstanding voting securities of the Company (as defined in the 1940 Act); or (b) the Adviser. Furthermore, the New Advisory Agreement will automatically terminate in the event of its “assignment” (as such term is defined for purposes of Section 15(a)(4) of the 1940 Act).

Notwithstanding the termination or expiration of the New Advisory Agreement, the Adviser will be entitled to any amounts owed as payment of the Base Management Fees and the Incentive Fees through the date of termination or expiration.

Board Approval of the New Advisory Agreement

At the meeting of the Board held on October 29, 2020, the Board, including all of the independent directors, unanimously approved the New Advisory Agreement. The Board, including the independent directors, met with the Company’s officers and representatives of Callodine several times in connection with their review of the New Advisory Agreement and the Adviser Change in Control. In reaching its decision to approve the New Advisory Agreement, the Board, including all of the independent directors, reviewed a significant amount of information, which had been furnished by the Adviser at the request of the Board. In reaching a decision to approve the New Advisory Agreement, the Board considered,Audit Committee considers, among other things:

In particular, in connection with the Adviser Change in Control, the Board believes that the CompanyThe Audit Committee considers non-audit fees and the Shareholders will benefit from access to Callodine’s greater scale and resources, while maintaining continuity in the Adviser’s investment advisory personnel.services provided when assessing auditor independence.

Nature, Extent and Quality of Services to be ProvidedIndependent Registered Public Accounting Firm Fees

The Board considered the Adviser’s expected responsibilities under the New Advisory Agreement, which are not expected to change as compared to its current involvement in all aspectsaggregate fees for each of the day-to-day investment management of the Company. In considering the nature, extent and quality of the investment managementlast two fiscal years for services providedrendered by the Adviser, the Board noted that it had previously reviewed the written responses of the Adviser to inquiries from counsel on behalf of the Board, which included, among other things, information about the background and experience of its management, investment professionals and members of the Investment Committee. The Board also considered information regarding the past year’s performance of the AdviserFreed Maxick CPAs, P.C. (“Freed”) are as indicative of the quality of investment management services expected to be provided in the future to the Company.follows: