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When navigating to K2 Designer, a Server Error message for the targetFramework node appears.
K2 Smartforms Application Pool was using the Microsoft .NET Framework Version 2.50727.8762.
Seeing from the screenshot, it was somehow set to Version 2.50727.8762.
Updating the K2 Smartforms application pool to use the .Net Framework 4.0.30319 resolved the issue.