What changed in this filing

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Item 1. Business

2021-03-12 compared with 2020-03-13 · 113 added, 233 removed, 359 unchanged (49% of the section changed)

Sutter Rock Capital

Sutter Rock Capital Corp.

("we", "us", "our", “Company” or “Sutter Rock Capital”), formerly known as GSV Capital Corp.

SuRo Capital Corp.

("we", "us", "our", “Company” or “SuRo Capital”), formerly known as Sutter Rock Capital Corp.

and as GSV Capital Corp.

and formed in September 2010 as a Maryland corporation, is an internally-managed, non-diversified closed-end management investment company.

The Company has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the “1940 Act”), and has elected to be treated, and intends to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On and effective March 12, 2019, our Board of Directors approved internalizing our operating structure ("Internalization") and we began operating as an internally-managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act.

Prior to March 12, 2019, we were externally managed by our former investment adviser, GSV Asset Management, LLC (“GSV Asset Management”), pursuant to an investment advisory agreement (the “Investment Advisory Agreement”), and our former administrator, GSV Capital Service Company, LLC (“GSV Capital Service Company”), provided the administrative services necessary for our operations pursuant to an administration agreement (the “Administration Agreement”).

See "— Internalization of Operating Structure" and "Note 3 — Related-Party Arrangements" to our consolidated financial statements for the year ended December 31, 2019 for more information.

On and effective June 22, 2020, we changed our name to “SuRo Capital Corp.” from “Sutter Rock Capital Corp.” On and effective March 12, 2019 (the “Effective Date”), our board of directors ("Board of Directors") approved internalizing our operating structure (“Internalization”) and we began operating as an internally-managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act.

Our Board of Directors approved the Internalization in order to better align the interests of the Company’s stockholders with its management.

As an internally managed BDC, the Company is managed by its employees, rather than the employees of an external investment adviser, thereby allowing for greater transparency to stockholders through robust disclosure regarding the Company’s compensation structure.

Prior to the Effective Date, we were externally managed by our former investment adviser, GSV Asset Management, LLC (“GSV Asset Management”), pursuant to an investment advisory agreement (the “Investment Advisory Agreement”), and our former administrator, GSV Capital Service Company, LLC ("GSV Capital Service Company"), provided the administrative services necessary for our operations pursuant to an administration agreement (the “Administration Agreement”).

In connection with our Internalization, the Investment Advisory Agreement and the Administration Agreement were terminated as of the Effective Date in accordance with their respective terms.

As a result, we no longer pay any fees or expenses under an investment advisory agreement or administration agreement, and instead pay the operating costs associated with employing investment management professionals including, without limitation, compensation expenses related to salaries, discretionary bonuses and restricted stock grants.

See “Part II, Item 8—Note 3—Related-Party Arrangements” in this Form 10-K for more information.

The Company’s date of inception was January 6, 2011, which is the date it commenced its development stage activities, and it commenced operations as a BDC upon completion of its initial public offering (“IPO”) in May 2011.

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See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K.

Our investment objective is to maximize our portfolio’s total return, principally by seeking capital gains on our equity and equity-related investments.

Our investment objective is to maximize our portfolio’s total return, principally by seeking capital gains on our equity and equity-related investments, and to a lesser extent, income from debt investments.

We invest principally in the equity securities of what we believe to be rapidly growing venture-capital-backed emerging companies.

We acquire our investments through direct investments in prospective portfolio companies, secondary marketplaces for private companies, and negotiations with selling stockholders.

In addition, we may invest in private credit and in the founders equity, founders warrants, forward purchase agreements, and private investment in public equity (“PIPE”) transactions of special purpose acquisition companies (“SPACs”).

We may also invest on an opportunistic basis in select publicly traded equity securities or certain non-U.S.

companies that otherwise meet our investment criteria.

companies that otherwise meet our investment criteria, subject to applicable requirements of the 1940 Act.

To the extent we make investments in private equity funds and hedge funds that are excluded from the definition of “investment company” under the 1940 Act by Section 3(c)(1) or 3(c)(7) of the 1940 Act, we will limit such investments to no more than 15% of our net assets.

Our investment philosophy is based on a disciplined approach of identifying promising investments in high-growth, venture-backed companies across several key industry themes which may include, among others, social mobile, cloud computing and big data, internet commerce, financial technology, mobility, and enterprise software.

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We seek to deploy capital primarily in the form of non-controlling equity and equity-related investments, including common stock, warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity, and convertible debt securities with a significant equity component.

Typically, our preferred stock investments are non-income producing, have different voting rights than our common stock investments and are generally convertible into common stock at our discretion.

Typically, our preferred stock investments are non-income producing, have different voting rights than our common stock investments and are generally convertible into common stock at our discretion.As our investment strategy is primarily focused on equity positions, our investments generally do not produce current income and therefore we may be dependent on future capital raising to meet our operating needs if no other source of liquidity is available.

We seek to create a low-turnover portfolio that includes investments in companies representing a broad range of investment themes.

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On March 11, 2021, the last reported sale price of a share of our common stock on the Nasdaq Capital Market was $13.58.

Internalization of Operating Structure

On and effective March 12, 2019 (the “Effective Date”), our Board of Directors approved our Internalization and we began operating as an internally managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act.

In connection with our Internalization, the Investment Advisory Agreement and the Administration Agreement were terminated and Michael T.

Moe resigned from our Board of Directors as of the Effective Date.

As of such date, we entered into a Consulting Agreement with Mr.

Moe (the former Chairman of our Board of Directors and the Chief Executive Officer and Chief Investment Officer of GSV Asset Management), pursuant to which Mr.

Moe provides certain services to us in connection with our transition to an internally managed operating structure.

We also entered into an Amended and Restated Trademark License Agreement with GSV Asset Management to permit us to to use the trade name “GSV”, and other state or unregistered “GSV” marks, including the trading symbol “GSVC”.

Effective as of July 30, 2019, we changed our name to Sutter Rock Capital Corp.

and effective as of August 1, 2019, we changed our trading symbol to “SSSS”.

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Rebranding to Sutter Rock Capital Corp.”

Except as otherwise disclosed herein, this Form 10-K discusses our business and operations as an internally managed BDC during the period covered by this Form 10-K.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Form 10-K for additional information regarding the forgoing and our Internalization.

Operating and Regulatory Structure

We are a Maryland corporation formed in 2010 that operates as an internally managed, non-diversified closed-end management investment company.

We formed in 2010 as a Maryland corporation and operate as an internally managed, non-diversified closed-end management investment company.

Our investment activities are supervised by our Board of Directors and managed by our executive officers and investments professionals, all of which are our employees.

As a BDC, we are required to meet regulatory tests.

As a BDC, we are subject to certain regulatory requirements.

See “—Regulation as a Business Development Company.” Also, while we are permitted to finance investments using debt, our ability to use debt is limited in certain significant aspects.

See “Risk Factors” in Part I, Item 1A of this Form 10-K for more information.

With certain limited exceptions, we may issue “senior securities,” including borrowing money from banks or other financial institutions only in amounts such that the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, is at least 200% (or 150% if certain conditions are met) after such incurrence or issuance.

This means that generally, we can borrow up to $1 for every $1 of investor equity (or, if certain conditions are met, we can borrow up to $2 for every $1 of investor equity).

In March 2018, the Small Business Credit Availability Act modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur by decreasing the asset coverage percentage from 200% to 150%, if certain requirements under the 1940 Act are met.

Under the 1940 Act, we are allowed to increase our leverage capacity if stockholders representing at least a majority of the votes cast, when a quorum is present, approve a proposal to do so.

If we receive stockholder approval, we would be allowed to increase our leverage capacity on the first day after such approval.

Alternatively, the 1940 Act allows the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after the one-year anniversary of such approval.

In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage.

The Company currently does not intend to seek stockholder approval or board approval to increase its leverage capacity as set forth above.

See “Risk Factors” in Part I, Item 1A for more information.

We have elected to be treated as a RIC under Subchapter M of the Code and expect to continue to operate in a manner so as to qualify for the tax treatment applicable to RICs.

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Federal and State Income Taxes” and “Note 9—Income Taxes” to our consolidated financial statements for the year ended December 31, 2020 for more information.

As of December 31, 2019, we had six employees, each of whom was directly employed by us.

Human Capital Resources

As of December 31, 2020, we had seven employees, each of whom was directly employed by us.

These employees include our executive officers, investment and finance professionals, and administrative staff.

All of our employees are located in our principal executive office in San Francisco, California.

Carl Rizzo, a director at Alaric Compliance Services LLC, served as our Chief Compliance Officer during the fiscal year ended December 31, 2019 pursuant to an agreement between us and Alaric Compliance Services LLC.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments".

Our principal office is located at One Sansome Street, Suite 730, San Francisco, CA 94104, and our telephone number is (650) 235-4769.

In response to the COVID-19 pandemic, we instituted a temporary work-from-home policy in March 2020, pursuant to which our employees have and continue to primarily work remotely without disruption to our operations.

This policy will remain in effect until it is deemed safe to return to our office.

As an internally managed BDC, the success of our business and investment strategy, including achieving our investment objective, depends in material part on our employees.

We depend upon the members of our management team and our

investment professionals for the identification, final selection, structuring, closing and monitoring of our investments.

These employees have critical industry experience and relationships on which we rely to implement our business plan.

We expect that the members of our management team and our investment professionals will maintain key informal relationships, which we will use to help identify and gain access to investment opportunities.

If we do not attract, develop and retain highly skilled employees, we may not be able to operate our business as we expect and our operating results could be adversely affected.

See “Item 1A, Risk Factors.”

We strive to attract, develop and retain our employees by offering unique employment opportunities, advancement and promotion opportunities, training programs and opportunities, and competitive compensation and benefit structures, as well as a safe, harassment-free work environment.

Investment Opportunity

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We seek to maintain our portfolio of potentially high-growth emerging private companies via a repeatable and disciplined investment approach, as well as to provide investors with access to such companies through our publicly traded common stock.

Our investment objective is to maximize our portfolio’s total return, principally by seeking capital gains on our equity and equity-related investments.

We have adopted the following business strategies to achieve our investment objective:

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Private secondary marketplaces and direct share purchases.

We also utilize private secondary marketplaces as a means to acquire equity and equity-related interests in privately held companies that meet our investment criteria and that we believe are attractive candidates for investment.

We also utilize private secondary marketplaces as a means to acquire equity and equity-related interests in privately held companies that meet our investment criteria and that

we believe are attractive candidates for investment.

We believe that such markets offer new channels for access to equity investments in private companies and provide a potential source of liquidity should we decide to exit an investment.

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Investment opportunities that fall within our identified themes are validated against the observed behavior of leading venture capitalists and institutional investors, as well as through our own internal and external research.

We evaluate potential portfolio companies across a spectrum of criteria, including industry positioning and leadership, stage of growth, path to profitability, and several other factors that collectively characterize our proprietary investment process.

We evaluate potential portfolio companies across a spectrum of criteria, including industry positioning and leadership, stage of growth, path to profitability, the uniqueness and defensibility of the portfolio company's strategy, investor sponsorship, and the portfolio company's potential access to capital to continue to fund its growth that collectively characterize our proprietary investment process.

We typically seek to invest our assets under management in the equity of well-established and growth stage companies, and debt investments of emerging companies that fit within our targeted areas.

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We generally choose to pursue specific investments based on the availability of shares and valuation expectations.

We utilize a combination of secondary marketplaces, direct purchases from stockholders and direct equity investments in order to make investments in our portfolio companies.

We utilize a combination of secondary marketplaces, direct purchases from stockholders and direct equity investments in order to make investments in our portfolio

Once we have established an initial position in a portfolio company, we may choose to increase our stake through subsequent purchases.

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The following table shows the fair value of our portfolio of investments by asset class as of December 31, 2020 and 2019:

December 31, 2019

December 31, 2018

Percentage of

December 31, 2020 December 31, 2019

Value Percentage of

Portfolio Fair

Value Percentage of

Private Portfolio Companies:

Common Stock $ 34,190,839 7.9 % $ 59,209,559 24.5 %

Preferred Stock 141,235,987 32.8 % 125,448,358 51.9 %

Debt Investments 4,845,340 1.1 % 1,644,155 0.7 %

Options 5,872,210 1.4 % 5,283,506 2.2 %

Private Portfolio Companies 186,144,376 43.2 % 191,585,578 79.3 %

Publicly Traded Portfolio Companies:

Common Stock 94,635,398 22.0 % — — %

Total Portfolio Investments 280,779,774 65.2 % 191,585,578 79.3 %

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Publicly traded securities that remain subject to lock-up restrictions are discounted accordingly.

For those investments that are not publicly traded and for which there are no readily

available market quotations, we record unrealized depreciation on such investments when we believe that an investment has become impaired and record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and our equity security has also appreciated in value.

For those investments that are not publicly traded and for which there are no readily available market quotations, we record unrealized depreciation on such investments when we believe that an investment has become impaired and record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and our equity security has also appreciated in value.

Changes in fair value are recorded in the consolidated statement of operations as the net change in unrealized appreciation or depreciation.

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See “Note 1—Nature of Operations” to our consolidated financial statements for the year ended December 31, 2020 for a list of our taxable subsidiaries.

Investment Advisory Agreement

The following disclosure regards the Investment Advisory Agreement, which was terminated in accordance with its terms on the Effective Date in connection with our Internalization.

See “ — Internalization of Operating Structure.”

Management Services

GSV Asset Management served as our investment adviser until our Internalization and termination of the Investment Advisory Agreement on the Effective Date.

Subject to the overall supervision of our Board of Directors, GSV Asset Management managed our day-to-day operations and provided us with investment advisory services.

Under the terms of the Investment Advisory Agreement, GSV Asset Management:

determined the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

determined what securities we would purchase, retain or sell;

performed due diligence on prospective portfolio companies;

identified, evaluated and negotiated the structure of the investments we would make;

closed, monitored and serviced the investments we would make;

provided us with such other investment advisory, research and related services as we, from time to time, would reasonably require for the investment of our funds.

GSV Asset Management’s services under the Investment Advisory Agreement were not exclusive, and it was free to furnish similar services to other entities so long as its services to us were not impaired.

For example, GSV Asset Management also managed:

Coursera@GSV Fund, LP, Coursera@GSV-EDBI Fund, LP, and GSV@CS, LP, special purpose vehicles each comprised of an underlying investment in the capital stock of Coursera, Inc.

(the “Coursera Funds”);

GSV@SP, LLC, a special purpose vehicle

comprised of an underlying investment in the capital stock of Spotify Technology S.A.

(the “GSV@SP Fund”);

and GSV@LT, LLC, GSV@LT II, LP, and GSV@LT III, LP, special purpose vehicles each comprised of an underlying investment in the capital stock of Lyft, Inc.

(the “Lyft Funds”).

The Company has no ownership interests in the Coursera Funds, the GSV@SP Fund or the Lyft Funds.

The 1940 Act prohibits the Company from making certain negotiated co-investments with affiliates unless it receives an order from the SEC permitting it to do so.

To the extent that the Company competed with entities managed by GSV Asset Management or any of its affiliates for one or more investment or disposition opportunities, GSV Asset Management would allocate any such opportunity across the entities for which the opportunity was appropriate, consistent with (1) its internal conflict-resolution and allocation policies, (2) the requirements of the Investment Advisers Act of 1940, and (3) certain restrictions under the 1940 Act regarding co-investments with affiliates.

In situations where a particular investment or disposition opportunity was appropriate for both the Company and another entity managed by GSV Asset Management, even where co-investments were permissible under the 1940 Act, GSV Asset Management would first offer any such opportunity in its entirety to the Company.

In the event that the size of such investment or disposition opportunity exceeded the Company’s capacity, other funds managed by GSV Asset Management could have been offered the opportunity, but only to the extent that the Company and its Board of Directors confirmed that any such investment or disposition by an affiliated entity was permissible under the 1940 Act and otherwise in the Company’s best interests.

The Company’s Chief Compliance Officer and Board of Directors would monitor on a quarterly basis any such allocation of investment or disposition opportunities between the Company and any such other funds.

We, GSV Asset Management, and certain of our affiliates submitted an exemptive relief application to the SEC to permit us to co-invest with other funds managed by GSV Asset Management or its affiliates in a manner consistent with our investment objective and the conditions to the application.

As a result of our Internalization, we and GSV Asset Management withdrew such exemptive application on April 2, 2019 because the relief sought was no longer necessary.

As a business development company, we are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of our Board of Directors, including the independent directors, and, in some cases, the SEC.

The affiliates with which we may be prohibited from transacting include our officers, directors and employees and any person controlling or under common control with us, subject to certain exceptions.

Management Fees

We paid GSV Asset Management a fee for its services under the Investment Advisory Agreement consisting of two components — a base management fee and an incentive fee.

The base management fee compensated GSV Asset Management for its work in identifying, evaluating, negotiating, executing and servicing our investments.

Under the terms of the Investment Advisory Agreement, the base management fee was calculated at an annual rate of 2.00% of our gross assets, which was our total assets as reflected on our balance sheet (with no deduction for liabilities).

Effective January 1, 2017 through January 31, 2018, however, pursuant to a voluntary waiver by GSV Asset Management, we paid GSV Asset Management a base management fee of 1.75%, a 0.25% reduction from the 2.00% base management fee payable under the Investment Advisory Agreement.

On February 2, 2018 GSV Asset Management voluntarily agreed to reduce fees payable under the Investment Advisory Agreement (the “Waiver Agreement”).

Pursuant to the Waiver Agreement, effective February 1, 2018, the base management fee was reduced to 1.75% of the Company’s gross assets, as further described below.

The waiver of a portion of the base management fee was not subject to recourse against or reimbursement by the Company.

The base management fee was payable monthly in arrears, and was calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any equity or debt capital raises, repurchases or redemptions during the current calendar quarter.

The base management fee for any partial month or quarter would be appropriately prorated.

Under the Investment Advisory Agreement, GSV Asset Management's incentive fee was determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and would equal the lesser of:

20% of our realized capital gains during such calendar year, if any, calculated on an investment-by-investment basis, subject to a non-compounded preferred return, or “hurdle,” and a “catch-up” feature, and

20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees.

Our realized capital gains from each investment, expressed as a non-compounded annual rate of return on the cost of such investment since we initially acquired it, would be compared to a hurdle rate of 8.00% per year.

We would only pay an incentive fee on any realized capital gains from an investment that exceeded the hurdle rate.

We would pay GSV Asset Management an incentive fee with respect to our realized capital gains from each investment as follows:

No incentive fee would be payable on the amount of any realized capital gains from an investment that, when expressed as a non-compounded annual rate of return on the cost of such investment since we initially acquired it, did not exceed the hurdle rate of 8.00% per year.

We would pay as an incentive fee 100% of the amount of any realized capital gains from an investment that, when expressed as a non-compounded annual rate of return on the cost of such investment since we initially acquired it, exceeded the hurdle rate of 8.00% per year but was less than a rate of 10.00% per year.

We refer to this portion of our realized capital gains from each investment (which exceeded the hurdle rate but was less than 10.00%) as the “catch-up.” The “catch-up” was meant to provide our investment adviser with 20% of the amount of our realized capital gains from an investment that, when expressed as a non-compounded annual rate of return on the cost of such investment since we initially acquired it, exceeded a rate of 10.00% per year.

We would pay as an incentive fee 20% of the amount of any realized capital gains from an investment that, when expressed as a non-compounded annual rate of return on the cost of such investment since we initially acquired it, exceeded a rate of 10.00% per year.

However, pursuant to the Waiver Agreement, certain high-water marks were required to be reached before any incentive fee was paid to GSV Asset Management under the Investment Advisory Agreement.

In addition, in no event would we pay an incentive fee for any calendar year that exceeded 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees.

The following is a graphical representation of the calculation of our incentive fee under the Investment Advisory Agreement with respect to a single investment, assuming certain "High Water Marks" (detailed below) were met:

For accounting purposes, in order to reflect the theoretical capital gains incentive fee that would be payable for a given period as if all unrealized gains were realized, we were required to accrue a capital gains incentive fee based upon realized capital gains and losses during the current calendar year through the end of the period, plus any unrealized capital appreciation and depreciation as of the end of the period.

It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of capital gains incentive fees in subsequent periods.

Amounts paid under the Investment Advisory Agreement would be consistent with the formula reflected in the Investment Advisory Agreement, except as modified by the Waiver Agreement.

We seek to deploy capital primarily in the form of non-controlling investments in our portfolio companies.

Although we primarily invest through private secondary markets, to the extent we made a direct minority investment in a portfolio company,

neither we, nor GSV Asset Management, would have the ability to control the timing of when we realize capital gains or losses with respect to such investment.

We expected the timing of such realization events to be determined by our portfolio companies in such cases.

To the extent we had non-minority investments, or the securities we held were traded on a private secondary market or public securities exchange, GSV Asset Management would have greater control over the timing of a realization event.

In such cases, our Board of Directors would monitor such investments in connection with their general oversight of the investment management services provided by GSV Asset Management.

In addition, as of the end of each fiscal quarter, we would evaluate whether the cumulative aggregate unrealized appreciation on our portfolio would be sufficient to require us to pay an incentive fee to GSV Asset Management if such unrealized appreciation were actually realized as of the end of such quarter, and if so, we would accrue an expense equal to the amount of such incentive fee.

Any such accrual of incentive fees would be reflected in the calculation of our net asset value.

In no event would we pay an incentive fee for any calendar year that exceeded 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees.

See “Note 3—Related-Party Arrangements” to our consolidated financial statements as of December 31, 2019 for details of incentive fees paid and accrued.

The cost of both the base management fee payable to GSV Asset Management, and any incentive fees earned by GSV Asset Management, were ultimately borne by our common stockholders.

In aggregate, inclusive of accruals and reversals, GSV Asset Management earned $14,588,355 under the Investment Advisory Agreement during the fiscal years ended December 31, 2019 , 2018 and 2017.

Refer to our Consolidated Statements of Operation as of December 31, 2019 , 2018 and 2017 included in Part II, Item 8 of this report on Form 10-K for details of management and incentive fees earned and waived.

Waiver Agreement

On February 2, 2018, GSV Asset Management voluntarily agreed to reduce the fees payable under the Investment Advisory Agreement pursuant to the Waiver Agreement.

The Waiver Agreement was effective February 1, 2018 and changed the fee structure set forth in the Investment Advisory Agreement by:

(i) reducing our base management fee from 2.00% to 1.75%;

and (ii) creating certain high-water marks that were required to be reached before any incentive fee would be paid to GSV Asset Management.

In addition to the foregoing changes to the fee structure, GSV Asset Management also agreed to a one-time forfeiture of $5.0 million of previously accrued but unpaid incentive fees.

Pursuant to the Waiver Agreement, effective February 1, 2018, the base management fee was reduced to 1.75% of gross assets.

The base management fee was calculated based on the average value of gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any equity or debt capital raises, repurchases or redemptions during the current calendar quarter.

The base management fee for any partial month or quarter would be appropriately prorated.

In addition, because our 5.25% Convertible Senior Notes matured on September 15, 2018 (the "5.25% Convertible Senior Notes due 2018"), we were previously carrying a larger cash balance than we would in the ordinary course of business.

As a result, under the Waiver Agreement, GSV Asset Management agreed to waive its base management fee on any cash balances effective as of February 1, 2018 until the 5.25% Convertible Senior Notes due 2018 matured on September 15, 2018, at which time we repaid the remaining outstanding aggregate principal amount of the 5.25% Convertible Senior Notes due 2018, including accrued but unpaid interest.

As a result, as of and after September 15, 2018, we paid GSV Asset Management a 1.75% base management fee on our cash balances.

Further, pursuant to the Waiver Agreement, in addition to the “hurdle” feature in the incentive fee, GSV Asset Management agreed to additional conditions on its ability to receive an incentive fee.

Specifically, the Waiver Agreement provided that an incentive fee earned by GSV Asset Management under the Investment Advisory Agreement would be payable to GSV Asset Management only if, at the time that such incentive fee becomes payable under the Investment Advisory Agreement, both our stock price and our last reported net asset value per share were equal to or greater than $12.55 (the “High-Water Mark”).

The High-Water Mark was based upon the volume weighted average price (VWAP) of all our equity offerings since the initial public offering, less the dollar amount of all dividends paid by us since inception.

Upon such time that the High-Water Mark was achieved, and GSV Asset Management was paid an incentive fee, a new High-Water Mark would be established.

Each new High-Water Mark would be equal to the most recent High-Water Mark, plus 10%.

Any High-Water Mark then in effect would be adjusted to reflect any dividends paid by us or any stock split effected by us.

For the avoidance of doubt, after these changes took effect, under no circumstances would the aggregate fees earned by GSV Asset Management in any quarterly period be higher than those aggregate fees that would have been earned prior to the effectiveness of the Waiver Agreement.

Payment of our Expenses

Prior to our Internalization, our primary operating expenses were the payment of a base management fee and any incentive fees under the Investment Advisory Agreement and the allocable portion of overhead and other expenses incurred by GSV Capital Service Company in performing its obligations under the Administration Agreement.

We bore all other costs and expenses of our operations, administration, and transactions, including (without limitation) fees and expenses relating to:

• organization and offering;

• calculating our net asset value (including the cost and expenses of any independent valuation firm);

expenses incurred by GSV Asset Management payable to third parties, including agents, consultants, or other advisers in monitoring our financial and legal affairs and in providing administrative services, monitoring our investments and performing due diligence on any prospective portfolio companies;

interest payable on debt and any other related costs, if any, incurred to finance our investments;

the cost of effecting sales and repurchases of shares our common stock and other securities;

investment advisory and management fees payable pursuant to the Investment Advisory Agreement

administration fees, if any, payable pursuant to the Administration Agreement

fees payable to third parties, including agents, consultants, or other advisers, relating to, or associated with, evaluating and making investments

transfer agent, trustee, and custodial fees;

federal and state registration fees;

all costs of registration and listing our shares on any securities exchange;

federal, state, and local taxes;

independent directors’ fees and expenses, including travel expenses, and other costs of our Board of Directors’ meetings;

costs of preparing and filing reports or other documents required by the SEC;

costs of any reports, proxy statements, or other notices to stockholders, including printing costs;

our allocable portion of the of the fidelity bond, directors and officers, errors and omissions liability insurance, and any other insurance premiums;

fees and expenses associated with our website, public relations and marketing efforts (including attendance at industry and investor conferences and similar events);

direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors, and outside legal costs;

all other expenses incurred by either GSV Capital Service Company or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by GSV Capital Service Company in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of our President, Chief Financial Officer, Chief Compliance Officer and other administrative support personnel.

All of these expenses were ultimately borne by our common stockholders.

All personnel of GSV Asset Management, when and to the extent engaged in providing investment advisory services, and the compensation and expenses of such personnel allocable to such services, were provided and paid for by GSV Asset Management.

Duration and Termination

The Investment Advisory Agreement was initially approved by our Board of Directors on March 28, 2011 and became effective on April 11, 2011.

Unless earlier terminated as described below, the Investment Advisory Agreement would remain in effect from year to year if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons of any such party, as such term is defined in Section 2(a)(19) of the 1940 Act.

The Investment Advisory Agreement would automatically terminate in

the event of its assignment.

The Investment Advisory Agreement could be terminated by either party without penalty upon not more than 60 days’ written notice to the other.

The Investment Advisory Agreement could also be terminated, without penalty, upon the vote of a majority of our outstanding voting securities.

In connection with our Internalization, the Investment Advisory Agreement was terminated on the Effective Date in accordance with its terms.

Indemnification

The Investment Advisory Agreement provided 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, GSV Asset Management and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it would be entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of GSV Asset Management’s services under the Investment Advisory Agreement or otherwise as our investment adviser.

Board Approval of the Investment Advisory Agreement

On April 9, 2018, at an in-person meeting, our Board of Directors, including a majority of the directors who were not “interested persons,” as defined by the 1940 Act, of the Company or GSV Asset Management, approved the continuation of the Investment Advisory Agreement to April 9, 2019.

In its consideration of the re-approval of the Investment Advisory Agreement, the Board of Directors focused on information it had received relating to, among other things:

the nature, quality and extent of the advisory and other services to be provided to us by GSV Asset Management;

the investment performance of GSV Asset Management;

comparative data with respect to advisory fees or similar expenses paid by other BDCs with similar investment objectives;

our projected operating expenses and expense ratio;

any existing and potential sources of indirect income to GSV Asset Management or GSV Capital Service Company from their relationships with us and the profitability of those relationships;

information about the services to be performed and the personnel performing such services under the Investment Advisory Agreement;

the organizational capability and financial condition of GSV Asset Management and its affiliates;

the possibility of obtaining similar services from other third-party service providers or through an internally-managed structure.

Based on the information reviewed and related discussions, our Board of Directors concluded that fees payable to GSV Asset Management pursuant to the Investment Advisory Agreement were reasonable in relation to the services to be provided.

The Board of Directors did not assign relative weights to the above factors or the other factors considered by it.

In addition, our Board of Directors did not reach any specific conclusion on each factor considered, but rather, conducted an overall analysis of these factors.

Individual members of the Board of Directors may have given different weights to different factors.

Administration Agreement

The following disclosure regards the Administration Agreement, which was terminated in accordance with its terms on the Effective Date in connection with our Internalization.

See “ — Internalization of Operating Structure.”

Under the Administration Agreement, GSV Capital Service Company performed, or oversaw the performance of, our required administrative services, which included being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC.

In addition, GSV Capital Service Company assisted us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

Further, pursuant to the Administration Agreement, GSV Capital Service Company furnished us with office facilities, together with equipment and clerical, bookkeeping and record-keeping services at such facilities.

Costs Incurred Under the Administration Agreement

Costs incurred under the Administration Agreement were based upon our allocable portion of overhead and other expenses incurred by GSV Capital Service Company in performing its obligations under the Administration Agreement, including a portion of the rent and the compensation of our President, Chief Financial Officer, Chief Compliance Officer and other staff providing administrative services.

In accordance with the terms of the Administration Agreement, overhead and other administrative expenses were generally allocated between us and GSV Asset Management by reference to the relative time spent by personnel in performing administrative and similar functions on our behalf as compared to performing investment advisory or administrative functions on behalf of GSV Asset Management.

To the extent personnel retained by GSV Capital Service Company performed administrative tasks for GSV Asset Management, the fees incurred with respect to the actual time dedicated to such tasks would be reimbursed by GSV Asset Management.

While there was no limit on the total amount of expenses we could be required to reimburse to GSV Capital Service Company, our administrator would only charge us for the actual expenses it incurred on our behalf, or our allocable portion thereof, without any profit to GSV Capital Service Company.

GSV Asset Management wholly owns and controls GSV Capital Service Company, which is a disregarded entity for tax purposes.

The Administration Agreement could be terminated at any time without penalty upon 60 days’ written notice, by a vote of a majority of our outstanding voting securities, by a vote of our Board of Directors or by GSV Capital Service Company.

In connection with our Internalization, the Administration Agreement was terminated on the Effective Date in accordance with its terms.

Indemnification

The Administration Agreement provided that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, GSV Capital Service Company and its officers, manager, agents, employees, controlling persons, members and any other person or entity affiliated with it would be entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of GSV Capital Service Company’s services under the Administration Agreement or otherwise as our administrator.

Regulation as a Business Development Company

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As a BDC, we are generally required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 200% after each issuance of senior securities.

We may also be prohibited under the 1940 Act from knowingly participating in

certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

The Small Business Credit Availability Act (the “SBCAA”) modifies the asset coverage percentage from 200% to 150%.

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See “Risk Factors—Risks Related to Our Business and Structure” in Part I, Item 1A of this Form 10-K for more information.

In addition, investment companies registered under the 1940 Act and private funds that are excluded from the definition of “investment company” pursuant to either Section 3(c)(1) or 3(c)(7) of the 1940 Act may not acquire directly or through a controlled entity more than 3% of our total outstanding voting stock (measured at the time of the acquisition), unless the funds comply with an exemption under the 1940 Act.

comply with an exemption under the 1940 Act.

As a result, certain of our investors may hold a smaller position in our shares than if they were not subject to these restrictions.

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In addition, a BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.

If at any time less than 70% of our gross assets are comprised of qualifying assets, including as a result of an increase in the value of any non-qualifying assets or decrease in the value of any qualifying assets, we would generally not be permitted to acquire any additional non-qualifying assets, other than office furniture and equipment, interests in real estate and leasehold improvements and facilities maintained to conduct the business operations of the BDC, deferred organization and operating expenses, and other noninvestment assets necessary and appropriate to its operations as a BDC, until such time as 70% of our then-current gross assets

were comprised of qualifying assets.

We would not be required, however, to dispose of any non-qualifying assets in such circumstances.

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In particular, the amount of capital stock that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase capital stock cannot exceed 25% of the BDC’s total outstanding shares of capital stock.

This amount is reduced to 20% of the BDC’s total outstanding shares of capital stock if the amount of warrants, options or rights issued pursuant to an executive compensation plan would exceed 15% of the BDC’s total outstanding shares of capital stock.

Senior Securities

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Our code of ethics and our code of business conduct and ethics are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov , and are available on our website.

also obtain copies of our code of ethics and our code of business conduct and ethics, after paying a duplicating fee, by electronic request at the following Email address:

You may also obtain copies of our code of ethics and our code of business conduct and ethics, after paying a duplicating fee, by electronic request at the following email address:

publicinfo@sec.gov.

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You may obtain information about how we voted proxies with respect to our portfolio securities by making a written request for proxy voting information to:

Chief Compliance Officer, Sutter Rock Capital Corp., One Sansome Street, Suite 730, San Francisco, CA 94104 or compliance@sutterrock.com.

Chief Compliance Officer, SuRo Capital Corp., One Sansome Street, Suite 730, San Francisco, CA 94104 or compliance@surocap.com.

Privacy Principles

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The address of that site is http://www.sec.gov .

Our internet address is www.sutterrock.com.

Our internet address is www.surocap.com.

We make available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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Election to be Taxed as a RIC

We elected to be treated as a RIC for the taxable year ended December 31, 2014 in connection with the filing of its 2014 tax return.

As a result, the Company was required to pay a corporate-level U.S.

federal income tax on the amount of the net built-in gains in its assets (the amount by which the net fair market value of the Company’s assets exceeds the net adjusted basis in its assets) either (1) as of the date it converted to a RIC (i.e., the beginning of the first taxable year that the Company qualifies as a RIC, which would be January 1, 2014), or (2) to the extent that the Company recognized such net built-in gains during the five-year recognition period beginning on the date of conversion.

As of January 1, 2014, the Company had net unrealized built-in gains, but did not incur a built-in-gains tax for the 2014 tax year due to the fact that there were sufficient net capital loss carryforwards to completely offset recognized built-in gains as well as available net operating losses.

The five-year recognition period ended on December 31, 2018.

As a RIC, we generally will not be subject to corporate-level U.S.

federal income taxes on any income that we distribute to our stockholders.

To maintain our tax status as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below).

In addition, in order to maintain our status as a RIC, we must timely distribute to our stockholders, for each taxable year, at least 90.0% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gain over realized net long-term capital loss, or the

Annual Distribution Requirement.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4.0% U.S.

federal excise tax on such income.

In such case, we must distribute any such carryover taxable income through a distribution declared prior to filing the final tax return for the year in which we generated such taxable income.

Even if we maintain our status as a RIC, we generally will be subject to corporate-level U.S.

federal income tax on our undistributed taxable income and could be subject to U.S.

federal excise, state, local and foreign taxes.

We elected to be taxed as a RIC under the Code beginning with our taxable year ended December 31, 2014, and qualified for taxation as a RIC for such taxable year and each of the subsequent taxable years.

We intend to operate in a manner so as to qualify for taxation as a RIC.

So long as we maintain our qualification for taxation a RIC, we generally will not be required to pay corporate-level U.S.

federal income taxes on any ordinary income or capital gains that we timely distribute to our stockholders as dividends.

To qualify for taxation as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below).

In addition, in order to qualify for the special treatment accorded to RICs, we are required to distribute to our stockholders on a timely basis each year at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses (the “Annual Distribution Requirement”).

Taxation as a Regulated Investment Company

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then we will not be subject to U.S.

federal income tax on the portion of our income we distribute (or are deemed to distribute) to stockholders.

federal income tax on the portion of our income and capital gains that we timely distribute (or are deemed to distribute) to stockholders.

We will be subject to U.S.

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We will be subject to a 4% nondeductible U.S.

federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending October 31 in that calendar year and (3) any ordinary income and net capital gains we recognized in preceding years but were not distributed during such years and on which we paid no U.S.

federal excise tax on certain undistributed income unless we distribute in a timely manner each calendar year an amount equal to at least the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending October 31 in that calendar year and (3) any ordinary income and net capital gains that we recognized for preceding years but were not distributed during such years and on which we paid no U.S.

federal income tax (the “Excise Tax Avoidance Requirement”).

We generally will endeavor in each year to make sufficient distributions to our stockholders to avoid any U.S.

federal excise tax on our earnings.

While we intend to timely distribute our income and capital gains in order to avoid imposition of this 4% U.S.

federal excise tax, we may not be successful in avoiding entirely the imposition of this tax.

In that case, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement.

In order to qualify as a RIC for U.S.

federal income tax purposes, we must, among other things:

have in effect an election to be regulated as a BDC under the 1940 Act at all times during each taxable year;

derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities or foreign currencies, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”);

distribute to our stockholders on a timely basis each year at least 90% of “investment company taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses (the “Annual Distribution Requirement”).

• continue to qualify as a BDC under the 1940 Act at all times during each taxable year;

• derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities or foreign currencies, other income derived with respect to our business of investing in such stock or securities and net income from “qualified publicly traded partnerships” (the “90% Income Test”);

• diversify our holdings so that at the end of each quarter of the taxable year:

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Rather, we will fail the Diversification Tests as of the end of a subsequent quarter only if such a discrepancy existed immediately after our acquisition of any asset and such discrepancy is wholly or partly the result of that acquisition.

In addition, if we fail the Diversification Tests as of the end of any quarter, we will not lose our status as a RIC if we eliminate the discrepancy within thirty days of the end of such quarter and, if we eliminate the discrepancy within that thirty-day period, we will be treated as having satisfied the Diversification Tests as of the end of such

quarter for purposes of applying the rule described in the preceding sentence, assuming that it is not the first quarter of RIC qualification.

Any corporate-level built-in gain tax is payable at the time the built-in gains are recognized (which generally will be the years in which the built-in gain assets are sold in a taxable transaction).

The amount of this tax will vary depending on the assets that are actually sold by us in the applicable period, the amount of realized gain (loss), the actual amount of net built-in gain or loss present in those assets as of the date of conversion, and the effective tax rates at such times.

The payment of any such corporate-level U.S.

federal income tax on built-in gain will be an expense that will reduce the amount available for distribution to our stockholders.

The built-in gain tax is calculated by determining a RIC’s net unrealized built-in gains, if any, by which the fair market value of the assets of the RIC at the beginning of the first RIC-year exceeds the aggregate adjusted basis of such assets at that time.

We may be required to recognize taxable income in circumstances in which we do not receive cash.

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If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

We may be required to sell assets in order to satisfy the Diversification Tests.

However, our ability to dispose of assets to meet the Diversification Tests may be limited by the illiquid nature of our portfolio.

If we dispose of assets in order to meet the Diversification Tests, we may make such dispositions at times that, from an investment standpoint, are not advantageous and may result in substantial losses.

We may invest in partnerships, including qualified publicly traded partnerships, which may result in our being subject to state, local or foreign income taxes, franchise taxes, or withholding liabilities.

To the extent that we invest in entities treated as partnerships for U.S.

federal income tax purposes (other than a “qualified publicly-traded partnership”), we generally must include the items of gross income derived by the partnerships for purposes of the 90% Income Test, and the income that is derived from a partnership (other than a “qualified publicly-traded partnership”) will be treated as qualifying income for

purposes of the 90% Income Test only to the extent that such income is attributable to items of income of the partnership which would be qualifying income if realized by us directly.

In order to meet the 90% Income Test, we may establish one or more special purpose corporations to hold assets from which we do not anticipate earning dividend, interest or other qualifying income under the 90% Income Test.

Any investments held through a special purpose corporation would generally be subject to U.S.

federal income and other taxes, and therefore we can expect to achieve a reduced after-tax yield on such investments.

Certain of our investment practices may be subject to special and complex U.S.

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We will monitor our transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions.

A portfolio company may face financial difficulty that requires us to work-out, modify or otherwise restructure our investment in the portfolio company.

Any such restructuring may result in unusable capital losses and future non-cash income.

Any restructuring may also result in our recognition of a substantial amount of non-qualifying income for purposes of the 90% Income Test.

Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss.

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Upon the exercise of a warrant acquired by us, our tax basis in the stock purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise of the warrant.

As a RIC, we are generally limited in our ability to deduct expenses in excess of our “investment company taxable income” (which is, generally, ordinary income plus the excess of net short-term capital gains over net long-term capital losses).

If our expenses in a given year exceed investment company taxable income, we would experience a net operating loss for that year.

However, a RIC is not permitted to carry forward net operating losses to subsequent years.

In addition, expenses can be used only to offset investment company taxable income, not net capital gain.

Due to these limits on the deductibility of expenses, we may, for tax purposes, have aggregate taxable income or net capital gains for several years that we are required to distribute and that is taxable to our stockholders even if such income or net capital gains is greater than the aggregate net income we actually earned during those years.

Such required distributions may be made from the Company’s cash assets or by liquidation of investments, if necessary.

We may realize gains or losses from such liquidations.

In the event we realize net capital gains from such transactions, a stockholder may receive a larger capital gain distribution than it would have received in the absence of such transactions.

federal income tax law generally permits RICs to carry forward net capital losses indefinitely.

However, future Company transactions may limit its ability to use any capital loss carryforwards, and unrealized losses once realized, under Section 382 of the Code.

Our investment in non-U.S.

securities may be subject to non-U.S.

income, withholding and other taxes.

In that case, our yield on those securities would be decreased.

Stockholders will generally not be entitled to claim a credit or deduction with respect to non-U.S.

taxes paid by us.

If we purchase shares in a “passive foreign investment company” (a “PFIC”), we may be subject to U.S.

federal income tax on our allocable share of a portion of any “excess distribution” received on, or any gain from the disposition of, such shares even if our allocable share of such income is distributed to our stockholder as a taxable dividend.

Additional charges in the nature of interest generally will be imposed on us in respect of deferred taxes arising from any such excess distribution or gain.

If we invest in a PFIC and elect to treat the PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, we will be required to include in income each year our proportionate share of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed by the QEF.

Alternatively, we may be able to elect to mark-to-market at the end of each taxable year its shares in a PFIC;

in this case, we will recognize as ordinary income our allocable share of any increase in the value of such shares, and as ordinary loss our allocable share of any decrease in such value to the extent that any such decrease does not exceed prior increases included in our income.

Under either election, we may be required to recognize in a year income in excess of distributions from PFICs and proceeds from dispositions of PFIC stock during that

year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of the 4% U.S.

federal excise tax.

Failure to Maintain our Qualification as a RIC

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Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends-received deduction.

Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions

would be treated as a capital gain.

Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital that would reduce the stockholder's adjusted tax basis in its common stock (and correspondingly increase such stockholder's gain, or reduce such stockholder's loss, on disposition of such common stock), and any remaining distributions would be treated as a capital gain.

To requalify as a RIC in a subsequent taxable year, we would be required to satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed to qualify as a RIC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business