SLR Investment Corp. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our common stock is traded on the NASDAQ Global Select Market under the symbol “SLRC”. The following table sets forth, for each fiscal quarter during the last two fiscal years, the net asset value (“NAV”) per share of our common stock, the high and low closing sales prices for our common stock, such sales prices as a percentage of NAV per share and quarterly distributions per share. Price Range Premium or (Discount) of High Closing Premium or (Discount) of Low Closing Price to Declared NAV (1) High Low Price to NAV (2) NAV (2) Distributions (3) Fiscal 2021 Fourth Quarter $ 19.93 $ 19.90 $ 17.55 (0.2 )% (11.9 )% $ 0.41 Third Quarter 20.20 19.75 18.42 (2.2 ) (8.8 ) 0.41 Second Quarter 20.29 19.58 17.88 (3.5 ) (11.9 ) 0.41 First Quarter 20.26 19.35 17.35 (4.5 ) (14.4 ) 0.41 Fiscal 2020 Fourth Quarter $ 20.16 $ 18.14 $ 15.43 (10.0 )% (23.5 )% $ 0.41 Third Quarter 20.14 17.38 15.36 (13.7 ) (23.7 ) 0.41 Second Quarter 20.11 17.73 11.03 (11.8 ) (45.2 ) 0.41 First Quarter 19.24 21.15 7.55 9.9 (60.8 ) 0.41 (1) NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of each period. (2) Calculated as of the respective high or low closing price divided by NAV and subtracting 1. (3) Represents the cash distribution for the specified quarter. On February 25, 2022 the last reported sales price of our common stock was $18.04 per share. As of February 25, 2022, we had 17 shareholders of record. Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from net asset value or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value will decrease. Since our IPO on February 9, 2010, our shares of common stock have traded at both a discount and a premium to the net assets attributable to those shares. As of February 25, 2022, our shares of common stock traded at a discount equal to approximately 9.5% of the net assets attributable to those shares based upon our net asset value as of December 31, 2021. It is not possible to predict whether the shares offered hereby will trade at, above, or below net asset value. DISTRIBUTIONS Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Future quarterly distributions, if any, will be determined by the Company’s board of directors (the “Board”). We expect that our distributions to stockholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable return of capital, if any, as applicable. 72 Table of Contents We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax treatment, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains ( i.e. , net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions. Also, our revolving credit facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind income, which represents contractual income added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a regulated investment company. With respect to the distributions to stockholders, income from origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders. We cannot assure stockholders that they will receive any distributions at a particular level. All distributions declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally automatically reinvested in shares of our common stock. As a result, stockholders that do not participate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to receive distributions in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the distribution payable to a stockholder. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. 73 Table of Contents STOCK PERFORMANCE GRAPH This graph compares the cumulative total return on our common stock with that of the Standard & Poor’s BDC Index, Standard & Poor’s 500 Stock Index and the Russell 2000 Financial Services Index, for the period from December 31, 2016 through December 31, 2021. The graph assumes that a person invested $10,000 in each of the following: our common stock (SLRC), the S&P BDC Index, the S&P 500 Index, and the Russell 2000 Financial Services Index. The graph measures total stockholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are invested in additional shares of the same class of equity securities at the frequency with which dividends are paid of such securities during the applicable fiscal year. The graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the 1934 Act. The stock price performance included in the above graph is not necessarily indicative of future stock price performance. FEES AND EXPENSES The following table is intended to assist an investor in understanding the costs and expenses that you will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this report contains a reference to fees or expenses paid by “us” or “SLRC,” or that “we” will pay fees or expenses, you will indirectly bear such fees or expenses as an investor in SLR Investment Corp.. Stockholder transaction expenses: Sales load (as a percentage of offering price) — % (1) Offering expenses (as a percentage of offering price) — % (2) Dividend reinvestment plan expenses — % (3) Total stockholder transaction expenses (as a percentage of offering price) — % (2) 74 Table of Contents Annual expenses (as a percentage of net assets attributable to common stock) (4) : Base management fee 3.36 % (5) Incentive fees payable under our Investment Advisory and Management Agreement (up to 20%) 1.22 % (6) Interest payments on borrowed funds 3.55 % (7) Acquired fund fees and expenses — % Other expenses (estimated) 1.18 % (8) Total annual expenses 9.31 % (1) In the event that the shares of common stock are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load and the “Example” will be updated accordingly. (2) The prospectus supplement corresponding to each offering will disclose the applicable offering expenses and total stockholder transaction expenses. (3) The expenses of the dividend reinvestment plan are included in “other expenses.” (4) Annual Expenses are presented in this manner because common shareholders will bear all costs of running the Company. (5) Our 1.75% base management fee under the Investment Advisory and Management Agreement is based on our gross assets, which is defined as all the assets of SLRC, excluding temporary assets, including those acquired using borrowings for investment purposes, and assumes our gross assets remain consistent with gross assets for the fiscal year ended December 31, 2021. The base management fee is reduced to 1.00% on gross assets that execeed 200% of total net assets as of the immediately preceding quarter. (6) Assumes that annual incentive fees earned by our investment adviser, SLR Capital Partners, remain consistent with the incentive fees earned by SLR Capital Partners for the fiscal year ended December 31, 2021. The incentive fee consists of two parts: The first part, which is payable quarterly in arrears, equals 20% of the excess, if any, of our “Pre-Incentive Fee Net Investment Income” that exceeds a 1.75% quarterly (7.00% annualized) hurdle rate, which we refer to as the Hurdle, subject to a “catch-up” provision measured at the end of each calendar quarter. The first part of the incentive fee is computed and paid on income that may include interest that is accrued but not yet received in cash. The operation of the first part of the incentive fee for each quarter is as follows: • no incentive fee is payable to our investment adviser in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the Hurdle of 1.75%; • 100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized) is payable to our investment adviser. We refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the Hurdle but is less than 2.1875%) as the “catch-up.” The “catch-up” is meant to provide our investment adviser with 20% of our Pre-Incentive Fee Net Investment Income, as if a Hurdle did not apply when our Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any calendar quarter; and • 20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to our investment adviser (once the Hurdle is reached and the catch-up is achieved, 20% of all Pre-Incentive Fee Investment Income thereafter is allocated to our investment adviser). The second part of the incentive fee equals 20% of our “Incentive Fee Capital Gains,” if any, which equals our realized capital gains 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 capital gain incentive fees. The second part of the incentive fee is payable, in arrears, at the end of each calendar year (or upon termination of the Investment Advisory and Management Agreement, as of the termination date). 75 Table of Contents (7) We have historically and will in the future borrow funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. The costs associated with our outstanding borrowings are indirectly born by our investors. For purposes of this section, we have computed interest expense using the average consolidated balance outstanding for borrowings during the fiscal year ended December 31, 2021. We used the London Interbank Offered Rate (“LIBOR”) rate or similar base rate on December 31, 2021 and the interest rate on the Credit Facility, the 2027 Unsecured Notes, the 2026 Unsecured Notes, the 2024 Unsecured Notes, the 2023 Unsecured Notes, the 2022 Unsecured Notes and the 2022 Tranche C Notes on December 31, 2021. We have also included, as applicable, the estimated amortization of fees incurred in establishing the Credit Facility, the 2027 Unsecured Notes, the 2026 Unsecured Notes, the 2024 Unsecured Notes, the 2023 Unsecured Notes, the 2022 Unsecured Notes and the 2022 Tranche C Notes as of December 31, 2021. Additionally, we included the estimated cost of commitment fees for unused balances on the Credit Facility. As of December 31, 2021, we had $322.5 million outstanding under the Credit Facility and $50 million, $75 million, $125 million, $75 million, $150 million and $21 million outstanding under the 2027 Unsecured Notes, the 2026 Unsecured Notes, the 2024 Unsecured Notes, the 2023 Unsecured Notes, the 2022 Unsecured Notes and the 2022 Tranche C Notes, respectively. We may also issue preferred stock, subject to our compliance with applicable requirements under the 1940 Act, although we have no immediate intention to do so. (8) “Other expenses” are based on estimated amounts for the current fiscal year, which considers the amounts incurred for the fiscal year ended December 31, 2021 and include our overhead expenses, including payments under our Administration Agreement based on our allocable portion of overhead and other expenses incurred by SLR Capital Management in performing its obligations under the Administration Agreement. Example The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above and have excluded performance-based incentive fees. As such, the below example is based on an annual expense ratio of 8.09%. See Note 7 above for additional information regarding certain assumptions regarding our level of leverage. In the event that shares are sold to or through underwriters, a corresponding prospectus supplement will restate this example to reflect the applicable sales load. 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 investment, assuming a 5% annual return $ 81 $ 235 $ 380 $ 705 The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the Investment Advisory and Management Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. This illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses and returns to our investors would be higher. For example, if we assumed that we received our 5% annual return completely in the form of net realized capital gains on our investments, computed net of all cumulative unrealized depreciation on our investments, the projected dollar amount of total cumulative expenses set forth in the above illustration would be as follows: 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 investment, assuming a 5% annual return $ 91 $ 262 $ 419 $ 759 76 Table of Contents In addition, the example assumes no sales load. Also, while the example assumes reinvestment of all distributions at net asset value, participants in our dividend reinvestment plan will receive a number of shares of our common stock, determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the distribution payment date, which may be at, above or below net asset value unless the company makes open market purchases and the shares received will be determined based on the average price paid by our agent, plus commissions. Item 6. Reserved Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The information contained in this section should be read in conjunction with the Selected Financial and Other Data and our Consolidated Financial Statements and notes thereto appearing elsewhere in this report. Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained herein involve risks and uncertainties, including statements as to: • our future operating results, including our ability to achieve objectives as a result of the current COVID-19 pandemic; • our business prospects and the prospects of our portfolio companies; • the impact of investments that we expect to make; • our contractual arrangements and relationships with third parties; • the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon; • the impact of any protracted decline in the liquidity of credit markets on our business and the impact of the COVID-19 pandemic thereon; • the ability of our portfolio companies to achieve their objectives, including as a result of the current COVID-19 pandemic; • the valuation of our investments in portfolio companies, particularly those having no liquid trading market, and the impact of the COVID-19 pandemic thereon; • market conditions and our ability to access alternative debt markets and additional debt and equity capital, and the impact of the COVID-19 pandemic thereon; • our expected financings and investments; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19 pandemic thereon; and • the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments and the impacts of the COVID-19 pandemic thereon. • changes in the political conditions and relations between the United States, Russia, Ukraine and other nations. 77 Table of Contents These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation: • an economic downturn, including as a result of the current COVID-19 pandemic, could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies; • a contraction of available credit and/or an inability to access the equity markets, including as a result of the current COVID-19 pandemic, could impair our lending and investment activities; • interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; • currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; • the ability of the parties to consummate the Mergers on the expected timeline, or at all; • the ability to realize the anticipated benefits of the Mergers; • the effects of disruption on our business from the proposed Mergers; • the combined company’s plans, expectations, objectives and intentions as a result of the Mergers; • any potential termination of the Merger Agreement; • the actions of our stockholders or the stockholders of SLRC with respect to the proposals submitted for their approval in connection with the Mergers; and • the risks, uncertainties and other factors we identify in Item 1A. — Risk Factors contained in this Annual Report on Form 10-K for the year ended December 31, 2021 and in our other filings with the SEC. We generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “Risk Factors” and elsewhere in this report. We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including any annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Overview Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 with initial capital of $1.2 billion of which 47.04% was funded by affiliated parties. SLR Investment Corp. (the “Company”, “SLRC”, “we” or “our”) f/k/a Solar Capital, Ltd., a Maryland corporation formed in November 2007, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company, it continues to apply the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, for U.S federal income tax purposes, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). 78 Table of Contents On February 9, 2010, we priced our initial public offering, selling 5.68 million shares of our common stock. Concurrent with our initial public offering, Michael S. Gross, our Chairman, Co-Chief Executive Officer and President, and Bruce Spohler, our Co-Chief Executive Officer and Chief Operating Officer, collectively purchased an additional 0.6 million shares of our common stock through a private placement transaction exempt from registration under the Securities Act. We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in leveraged middle-market companies in the form of senior secured loans, financing leases and to a lesser extent, unsecured loans and equity securities. From time to time, we may also invest in public companies that are thinly traded. Our business is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Our investments generally range between $5 million and $100 million each, although we expect that this investment size will vary proportionately with the size of our capital base and/or with strategic initiatives. Our investment activities are managed by SLR Capital Partners, LLC (the “Investment Adviser”) and supervised by the Board, a majority of whom are non-interested, as such term is defined in the 1940 Act. SLR Capital Management, LLC (the “Administrator”) provides the administrative services necessary for us to operate. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. These investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of the United States. As of December 31, 2021, the Investment Adviser has directly invested approximately $12.5 billion in more than 450 different portfolio companies since 2006. Over the same period, the Investment Adviser completed transactions with over 200 different financial sponsors. Merger Agreement On December 1, 2021, we entered into the Merger Agreement, which provides that, subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into SUNS, with SUNS continuing as the surviving company and as our wholly-owned subsidiary and, immediately thereafter, SUNS will merge with and into us, with us continuing as the surviving company. Both the Board and SUNS’s board of directors, including all of the respective independent directors, in each case, on the recommendation of a special committee comprised solely of the independent directors of us and SUNS, as applicable, have approved the Merger Agreement and the transactions contemplated thereby. At the effective time of the Merger (“Effective Time”), each share of our common stock issued and outstanding immediately prior to the Effective Time (other than shares owned by us or any of our controlled subsidiaries (the “Cancelled Shares”)) will be converted into the right to receive a number of shares of our common stock equal to the Exchange Ratio (as defined below) (cash may be paid in lieu of fractional shares). As of a mutually agreed date no earlier than 48 hours (excluding Sundays and holidays) prior to the Effective Time (such date, the “Determination Date”), each of us and SUNS will deliver to the other a calculation of its NAV as of such date, in each case using a pre-agreed set of assumptions, methodologies and adjustments. We refer to such calculation with respect to us as the “Closing SLRC Net Asset Value” and with respect to SUNS as the “Closing SUNS Net Asset Value”. Based on such calculations, the parties will calculate the “SLRC Per Share NAV”, which will be equal to (i) the Closing SLRC Net Asset Value divided by (ii) the number of shares of our common stock issued and outstanding as of the Determination Date (excluding any Cancelled Shares), and the “SUNS Per Share NAV”, which will be equal to (A) the Closing SUNS Net Asset Value divided by (B) the number of shares of SUNS Common Stock issued and outstanding as of the Determination Date. The “Exchange Ratio” will be equal to the quotient (rounded to four decimal places) of (i) the SUNS Per Share NAV divided by (ii) the SLRC Per Share NAV. 79 Table of Contents We and SUNS will update and redeliver the Closing SLRC Net Asset Value or the Closing SUNS Net Asset Value, respectively, in the event of a material change to such calculation between the Determination Date and the closing of the Mergers and if needed to ensure that the calculation is determined within 48 hours (excluding Sundays and holidays) prior to the Effective Time. The Merger Agreement contains customary representations and warranties by each of us, SUNS and SLR Capital Partners. The Merger Agreement also contains customary covenants, including, among others, covenants relating to the operation of each of our and SUNS’s businesses during the period prior to the closing of the Mergers. Consummation of the Mergers, which is currently anticipated to occur during the first half of calendar year 2022, is subject to certain closing conditions, including requisite approvals of our and SUNS’s stockholders and certain other closing conditions. The Merger Agreement also contains certain termination rights in favor of us and SUNS, including if the Mergers are not completed on or before December 1, 2022 or if the requisite approvals of our or SUNS’s stockholders are not obtained. The Merger Agreement provides that, upon the termination of the Merger Agreement under certain circumstances, a third party acquiring SUNS may be required to pay us a termination fee of approximately $7.6 million. The Merger Agreement provides that, upon the termination of the Merger Agreement under certain circumstances, a third party acquiring us may be required to pay to SUNS a termination fee of approximately $25.6 million. Effective upon the closing of the Mergers, SLR Capital Partners has voluntarily agreed to a permanent reduction of the annual base management fee rate by 25 basis points, resulting in an annual base management fee rate payable by us to SLR Capital Partners of 1.50% on gross assets up to 200% of our total net assets as of the immediately preceding quarter end. We will retain the contractual annual base management fee rate payable by us to SLR Capital Partners of 1.00% on gross assets that exceed 200% of our total net assets as of the immediately preceding quarter end. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is incorporated by reference as Exhibit 2.1 to this Annual Report on Form 10-K and incorporated by reference herein. The representations, warranties, covenants and agreements contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement (except as may be expressly set forth in the Merger Agreement); may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors and security holders should not rely on such representations, warranties, covenants or agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any of the parties to the Merger Agreement or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, covenants and agreements may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by the parties to the Merger Agreement. Recent Developments On January 6, 2022, the Company closed a private offering of $135 million of the 2027 Series F Unsecured Notes with a fixed interest rate of 3.33% and a maturity date of January 6, 2027. Interest on the 2027 Series F Unsecured Notes is due semi-annually on January 6 and July 6. The 2027 Series F Unsecured Notes were issued in a private placement only to qualified institutional buyers. 80 Table of Contents On March 1, 2022, the Board declared a quarterly distribution of $0.41 per share payable on April 1, 2022 to holders of record as of March 18, 2022. The global outbreak of the COVID-19 pandemic, and the related effect on the U.S. and global economies, has continued to have adverse consequences for the business operations of some of the Company’s portfolio companies and, as a result, has had adverse effects on the Company’s operations. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, including the Company, remain uncertain. The operational and financial performance of the issuers of securities in which the Company invests depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Company’s investments and negatively impact the Company’s performance. Investments Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” The definition of “eligible portfolio company” includes certain public companies that do not have any securities listed on a national securities exchange and companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million. Revenue We generate revenue primarily in the form of interest and dividend income from the securities we hold and capital gains, if any, on investment securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rate usually determined on the basis of a benchmark London interbank offered rate (“LIBOR”), commercial paper rate, or the prime rate. Interest on our debt investments is generally payable monthly or quarterly but may be bi-monthly or semi-annually. In addition, our investments may provide payment-in-kind (“PIK”) income. Such amounts of accrued PIK income are added to the cost of the investment on the respective capitalization dates and generally become due at maturity of the investment or upon the investment being called by the issuer. We may also generate revenue in the form of commitment, origination, structuring fees, fees for providing managerial assistance and, if applicable, consulting fees, etc. Expenses All investment professionals of the investment adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by SLR Capital Partners. We bear all other costs and expenses of our operations and transactions, including (without limitation): • the cost of our organization and public offerings; • the cost of calculating our net asset value, including the cost of any third-party valuation services; • the cost of effecting sales and repurchases of our shares and other securities; • interest payable on debt, if any, to finance our investments; • fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and advisory fees; 81 Table of Contents • transfer agent and custodial fees; • fees and expenses associated with marketing efforts; • federal and state registration fees, any stock exchange listing fees; • federal, state and local taxes; • independent directors’ fees and expenses; • brokerage commissions; • fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums; • direct costs and expenses of administration, including printing, mailing, long distance telephone and staff; • fees and expenses associated with independent audits and outside legal costs; • costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and • all other expenses incurred by either SLR Capital Management 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 SLR Capital Management in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and their respective staffs. We expect our general and administrative operating expenses related to our ongoing operations to increase moderately in dollar terms. During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative periods, among other factors. Portfolio and Investment Activity During the year ended December 31, 2021, we invested approximately $596 million across 52 portfolio companies. This compares to investing approximately $427 million in 40 portfolio companies for the year ended December 31, 2020. Investments sold, prepaid or repaid during the year ended December 31, 2021 totaled approximately $468 million versus approximately $363 million for the year ended December 31, 2020. At December 31, 2021, our portfolio consisted of 106 portfolio companies and was invested 26.7% in cash flow senior secured loans, 27.0% in asset-based senior secured loans / SLR Credit Solutions (“SLR Credit”), 13.5% in Kingsbridge Holdings LLC (“KBH”), 16.4% in equipment senior secured financings / SLR Equipment Finance (“SLR Equipment”), and 16.4% in life science senior secured loans, in each case, measured at fair value, versus 105 portfolio companies invested 18.8% in cash flow senior secured loans, 27.0% in asset-based senior secured loans / SLR Credit, 14.2% in KBH, 18.6% in equipment senior secured financings / SLR Equipment, and 21.4% in life science senior secured loans, in each case, measured at fair value, at December 31, 2020. At December 31, 2021, 79.4% or $1.20 billion of our income producing investment portfolio * is floating rate and 20.6% or $313.4 million is fixed rate, measured at fair value. At December 31, 2020, 72.1% or $1.10 billion of our income producing investment portfolio * is floating rate and 27.9% or $425.4 million is fixed rate, measured at fair value. As of December 31, 2021 and 2020, we had one and zero issuers on non-accrual status, respectively. 82 Table of Contents Since inception through December 31, 2021, SLRC and its predecessor companies have invested approximately $7.3 billion in more than 320 portfolio companies. Over the same period, SLRC has completed transactions with more than 150 different financial sponsors. * We have included SLR Credit Solutions, SLR Equipment Finance and Kingsbridge Holdings, LLC within our income producing investment portfolio. SLR Credit Solutions On December 28, 2012, we acquired an equity interest in Crystal Capital Financial Holdings LLC (“Crystal Financial”) for $275 million in cash. Crystal Financial owned approximately 98% of the outstanding ownership interest in SLR Credit Solutions (“SLR Credit”), f/k/a Crystal Financial LLC. The remaining financial interest was held by various employees of SLR Credit, through their investment in Crystal Management LP. SLR Credit had a diversified portfolio of 23 loans having a total par value of approximately $400 million at November 30, 2012 and a $275 million committed revolving credit facility. On July 28, 2016, the Company purchased Crystal Management LP’s approximately 2% equity interest in SLR Credit for approximately $5.7 million. Upon the closing of this transaction, the Company holds 100% of the equity interest in SLR Credit. On September 30, 2016, Crystal Capital Financial Holdings LLC was dissolved. As of December 31, 2021, total commitments to the revolving credit facility are $200 million. As of December 31, 2021, SLR Credit had 22 funded commitments to 19 different issuers with total funded loans of approximately $287.4 million on total assets of $347.8 million. As of December 31, 2020, SLR Credit had 30 funded commitments to 24 different issuers with total funded loans of approximately $404.1 million on total assets of $433.9 million. As of December 31, 2021 and December 31, 2020, the largest loan outstanding totaled $35.0 million and $45.0 million, respectively. For the same periods, the average exposure per issuer was $15.1 million and $16.8 million, respectively. SLR Credit’s credit facility, which is non-recourse to the Company, had approximately $100.7 million and $183.9 million of borrowings outstanding at December 31, 2021 and December 31, 2020, respectively. For the years ended December 31, 2021 and 2020, SLR Credit had net income of $14.2 million and $23.3 million, respectively, on gross income of $34.0 million and $45.3 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in SLR Credit’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that SLR Credit will be able to maintain consistent dividend payments to us. SLR Credit’s consolidated financial statements for the fiscal years ended December 31, 2021 and December 31, 2020 are attached as an exhibit to this annual report on Form 10-K. SLR Equipment Finance On July 31, 2017, we acquired a 100% equity interest in NEF Holdings, LLC, which conducts its business through its wholly-owned subsidiary Nations Equipment Finance, LLC. Effective February 25, 2021, Nations Equipment Finance, LLC and its related companies is doing business as SLR Equipment Finance (“SLR Equipment”). SLR Equipment is an independent equipment finance company that provides senior secured loans and leases primarily to U.S. based companies. We invested $209.9 million in cash to effect the transaction, of which $145.0 million was invested in the equity of SLR Equipment through our wholly-owned consolidated taxable subsidiary NEFCORP LLC and our wholly-owned consolidated subsidiary NEFPASS LLC and $64.9 million was used to purchase certain leases and loans held by SLR Equipment through NEFPASS LLC. Concurrent with the transaction, SLR Equipment refinanced its existing senior secured credit facility into a $150.0 million non-recourse facility with an accordion feature to expand up to $250.0 million. In September 2019, SLR Equipment amended the facility, increasing commitments to $214.0 million with an accordion feature to expand up to $314.0 million and extended the maturity date of the facility to July 31, 2023. As of December 31, 2021, SLR Equipment had 135 funded equipment-backed leases and loans to 61 different customers with a total net investment in leases and loans of approximately $211.0 million on total assets 83 Table of Contents of $264.0 million. As of December 31, 2020, SLR Equipment had 138 funded equipment-backed leases and loans to 61 different customers with a total net investment in leases and loans of approximately $188.4 million on total assets of $263.4 million. As of December 31, 2021 and December 31, 2020, the largest position outstanding totaled $19.2 million and $25.1 million, respectively. For the same periods, the average exposure per customer was $3.5 million and $3.1 million, respectively. SLR Equipment’s credit facility, which is non-recourse to the Company, had approximately $118.0 million and $100.6 million of borrowings outstanding at December 31, 2021 and December 31, 2020, respectively. For the years ended December 31, 2021 and 2020, SLR Equipment had net losses of $9.7 million and $8.9 million, respectively, on gross income of $22.9 million and $24.5 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in SLR Equipment’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that SLR Equipment will be able to maintain consistent dividend payments to us. SLR Equipment’s consolidated financial statements for the fiscal years ended December 31, 2021 and December 31, 2020 are attached as an exhibit to this annual report on Form 10-K. Kingsbridge Holdings, LLC On November 3, 2020, the Company acquired 87.5% of Kingsbridge Holdings, LLC (“KBH”) through KBH Topco LLC (“KBHT”), a newly formed Delaware corporation. KBH is a residual focused independent mid-ticket lessor of equipment primarily to U.S. investment grade companies. The Company invested $216.6 million to effect the transaction, of which $136.6 million was invested to acquire 87.5% of KBHT’s equity and $80.0 million in KBH’s debt. The existing management team of KBH committed to continue to lead KBH after the transaction. Post the transaction, the Company owns 87.5% of KBHT equity and the KBH management team owns the remaining 12.5% of KBHT’s equity. As of December 31, 2021 and 2020, KBHT had total assets of $738.4 million and $744.7 million, respectively. For the same periods, debt recourse to KBHT totaled $216.9 million and $219.0 million, respectively, and non-recourse debt totaled $323.8 million and $335.9 million, respectively. For the year ended December 31, 2021 and the period November 3, 2020 through December 31, 2020, KBHT had net income of $12.2 million and $2.2 million, respectively, on gross income of $245.9 million and $43.6 million, respectively. Due to timing and non-cash items, there may be material differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in KBHT’s funded commitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that KBHT will be able to maintain consistent dividend payments to us. KBHT’s consolidated financial statements for the year ended December 31, 2021 and the period November 3, 2020 to December 31, 2020 are attached as an exhibit to this annual report on Form 10-K. Critical Accounting Policies The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies. Within the context of these critical accounting policies and disclosed subsequent events herein, we are not currently aware of any other reasonably likely events or circumstances that would result in materially different amounts being reported. Valuation of Portfolio Investments We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with GAAP, and the 1940 Act. Our valuation procedures are set forth in more detail in Note 2(b) to the Company’s Consolidated Financial Statements. 84 Table of Contents Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements. Valuation of 2022 Unsecured Notes The Company has made an election to apply the fair value option of accounting to the 2022 Unsecured Notes, in accordance with ASC 825-10. We believe accounting for the 2022 Unsecured Notes at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility. Revenue Recognition The Company records dividend income and interest, adjusted for amortization of premium and accretion of discount, on an accrual basis. Investments that are expected to pay regularly scheduled interest and/or dividends in cash are generally placed on non-accrual status when principal or interest/dividend cash payments are past due 30 days or more (90 days or more for equipment financing) and/or when it is no longer probable that principal or interest/dividend cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or dividends are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash payments received on investments may be recognized as income or applied to principal depending upon management’s judgment. Some of our investments may have contractual PIK income. PIK income computed at the contractual rate, as applicable, is accrued and reflected as a receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis in the additional securities received). PIK generally becomes due at the maturity of the investment or upon the investment being called by the issuer. At the point the Company believes PIK is not expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends is reversed from the related receivable through interest or dividend income, respectively. The Company does not reverse previously capitalized PIK income. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company again believes that PIK is expected to be realized. Loan origination fees, original issue discount, and market discounts are capitalized and amortized into income using the effective interest method. Upon the prepayment of a loan, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Capital structuring fees are recorded as other income when earned. The typically higher yields and interest rates on PIK securities, to the extent we invested, reflects the payment deferral and increased credit risk associated with such instruments and that such investments may represent a significantly higher credit risk than coupon loans. PIK securities may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. PIK income has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, the deferral of PIK income also increases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to the Investment Adviser based on non-cash accruals that ultimately may not be realized, but the Investment Adviser will be under no obligation to reimburse the Company for these fees. For the fiscal years ended December 31, 2021 and 2020, capitalized PIK income totaled $7.6 million and $5.4 million, respectively. Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss We generally measure realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation 85 Table of Contents previously recognized, but considering unamortized origination or commitment fees and prepayment penalties. The net change in unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gain or loss, when gains or losses are realized. Gains or losses on investments are calculated by using the specific identification method. Income Taxes SLRC, a U.S. corporation, has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. In order to qualify for U.S. federal income taxation as a RIC, the Company is required, among other things, to timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each year. Depending on the level of taxable income earned in a given tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company accrues an estimated excise tax, if any, on estimated excess taxable income. Recent Accounting Pronouncements In March 2020, the FASB issued Accounting Standards Update No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is evaluating the potential impact that the adoption of this guidance will have on the Company’s financial statements. RESULTS OF OPERATIONS Results comparisons are for the fiscal years ended December 31, 2021 and December 31, 2020. Results for the fiscal year ended December 31, 2019 can be found in Item 7 of the Company’s report on Form 10-K filed on February 24, 2021, which is incorporated by reference herein. Investment Income For the fiscal years ended December 31, 2021 and 2020, gross investment income totaled $139.4 million and $121.7 million, respectively. The increase in gross investment income for the year over year periods was primarily due to growth in the size of the income producing portfolio. Expenses Expenses totaled $78.4 million and $62.5 million, respectively, for the fiscal years ended December 31, 2021 and 2020, of which $38.6 million and $27.2 million, respectively, were base management fees and performance-based incentive fees and $29.9 million and $27.2 million, respectively, were interest and other credit facility expenses. Administrative services and other general and administrative expenses totaled $9.9 million and $8.2 million, respectively, for the fiscal years ended December 31, 2021 and 2020. Expenses generally consist of management and performance-based incentive fees, interest and other credit facility expenses, administrative services fees, insurance expenses, legal fees, directors’ fees, transfer agency fees, printing and proxy expenses, audit and tax services expenses, and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others. The increase in expenses from 2020 to 2021 was primarily driven by a larger income producing investment portfolio, which resulted in higher management and incentive fees as well as higher interest costs. Additionally, higher general and administrative expenses resulted from expenses related to the potential merger with SLR Senior Investment Corp. 86 Table of Contents Net Investment Income The Company’s net investment income totaled $60.9 million and $59.2 million, or $1.44 and $1.40, per average share, respectively, for the fiscal years ended December 31, 2021 and 2020. Net Realized Gain (Loss) The Company had investment sales and prepayments totaling approximately $468 million and $363 million, respectively, for the fiscal years ended December 31, 2021 and 2020. Net realized gain (loss) over the same periods were $0.03 million and ($26.6) million, respectively. Net realized gain for fiscal year 2021 was de minimis. Net realized loss for fiscal year 2020 was primarily related to the exit of our investment in IHS Intermediate, Inc. Net Change in Unrealized Loss For the fiscal years ended December 31, 2021 and 2020, net change in unrealized loss on the Company’s assets and liabilities totaled $1.4 million and $17.1 million, respectively. Net unrealized loss for the fiscal year ended December 31, 2021 is primarily due to depreciation in the value of our investments in American Teleconferencing Services, Ltd., Rug Doctor and SOAGG LLC, among others, partially offset by appreciation in the value of our investments in KBH Topco, LLC, SLR Credit Solutions and PhyMed Management LLC, among others. Net unrealized loss for the fiscal year ended December 31, 2020 is primarily due to depreciation in the value of our investments in NEF Holdings LLC, Rug Doctor, PhyMed Management LLC, SOINT, LLC and SOAGG LLC, among others, partially offset by the reversal of previously recognized unrealized depreciation in the value of our investment in IHS Intermediate, Inc. and unrealized appreciation in the value of our investments in Crystal Financial LLC and B. Riley Financial Inc., among others. Net Increase in Net Assets From Operations For the fiscal years ended December 31, 2021 and 2020, the Company had a net increase in net assets resulting from operations of $59.6 million and $15.5 million, respectively. For the fiscal years ended December 31, 2021 and 2020, earnings per average share were $1.41 and $0.37, respectively. LIQUIDITY AND CAPITAL RESOURCES The Company’s liquidity and capital resources are generated and generally available through its Credit Facility (as defined below), the 2022 Unsecured Notes, the 2022 Tranche C Notes, the 2023 Unsecured Notes, the 2024 Unsecured Notes, the 2026 Unsecured Notes and the 2027 Unsecured Notes, through cash flows from operations, investment sales, prepayments of senior and subordinated loans, income earned on investments and cash equivalents, and periodic follow-on equity and/or debt offerings. As of December 31, 2021, we had a total of $377.5 million of unused borrowing capacity under the Credit Facility, subject to borrowing base limits. We may from time to time issue equity and/or debt securities in either public or private offerings. The issuance of such securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful. The primary uses of existing funds and any funds raised in the future is expected to be for investments in portfolio companies, repayment of indebtedness, cash distributions to our stockholders, or for other general corporate purposes. On December 28, 2021, the Company closed on Amendment No. 1 to its August 28, 2019 senior secured credit agreement (the “Credit Facility”). Post amendment, the Credit Facility is composed of $600 million of revolving credit and $100 million of term loans. Borrowings generally bear interest at a rate per annum equal to the base rate plus a range of 1.75%-2.00% or the alternate base rate plus 0.75%-1.00%. The Credit Facility has a 0% floor and matures in December 2026 and includes ratable amortization in the final year. 87 Table of Contents On December 28, 2021, the Company prepaid and terminated the NEFPASS SPV LLC credit facility, dated September 26, 2018. On September 14, 2021, the Company closed a private offering of $50,000 of the 2027 Unsecured Notes with a fixed interest rate of 2.95% and a maturity date of March 14, 2027. Interest on the 2027 Unsecured Notes is due semi-annually on March 14 and September 14. The 2027 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On February 12, 2020, a new lender to the Company executed a commitment increase to the Credit Facility providing for an additional $75.0 million of revolving credit, bringing the Credit Facility’s total revolving credit capacity to $545.0 million. On December 18, 2019, the Company closed a private offering of $125 million of the 2024 Unsecured Notes with a fixed interest rate of 4.20% and a maturity date of December 15, 2024. Interest on the 2024 Unsecured Notes is due semi-annually on June 15 and December 15. The 2024 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On December 18, 2019, the Company closed a private offering of $75 million of the 2026 Unsecured Notes with a fixed interest rate of 4.375% and a maturity date of December 15, 2026. Interest on the 2026 Unsecured Notes is due semi-annually on June 15 and December 15. The 2026 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On December 28, 2017, the Company closed a private offering of $21 million of the 2022 Tranche C Notes with a fixed interest rate of 4.50% and a maturity date of December 28, 2022. Interest on the 2022 Tranche C Notes is due semi-annually on June 28 and December 28. The 2022 Tranche C Notes were issued in a private placement only to qualified institutional buyers. On November 22, 2017, we issued $75 million in aggregate principal amount of publicly registered 2023 Unsecured Notes for net proceeds of $73.8 million. Interest on the 2023 Unsecured Notes is paid semi-annually on January 20 and July 20, at a fixed rate of 4.50% per year, commencing on January 20, 2018. The 2023 Unsecured Notes mature on January 20, 2023. On February 15, 2017, the Company closed a private offering of $100 million of the 2022 Unsecured Notes with a fixed interest rate of 4.60% and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On November 8, 2016, the Company closed a private offering of $50 million of the 2022 Unsecured Notes with a fixed interest rate of 4.40% and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On January 11, 2013, the Company closed its most recent follow-on public equity offering of 6.3 million shares of common stock raising approximately $146.9 million in net proceeds. The primary uses of the funds raised were for investments in portfolio companies, reductions in revolving debt outstanding and for other general corporate purposes. Cash Equivalents We deem certain U.S. Treasury bills, repurchase agreements and other high-quality, short-term debt securities as cash equivalents. The Company makes purchases that are consistent with its purpose of making investments in securities described in paragraphs 1 through 3 of Section 55(a) of the 1940 Act. From time to 88 Table of Contents time, including at or near the end of each fiscal quarter, we consider using various temporary investment strategies for our business. One strategy includes taking proactive steps by utilizing cash equivalents as temporary assets with the objective of enhancing our investment flexibility pursuant to Section 55 of the 1940 Act. More specifically, from time-to-time we may purchase U.S. Treasury bills or other high-quality, short-term debt securities at or near the end of the quarter and typically close out the position on a net cash basis subsequent to quarter end. We may also utilize repurchase agreements or other balance sheet transactions, including drawing down on the Credit Facility, as deemed appropriate. The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined. We held approximately $320 million in cash equivalents as of December 31, 2021. Debt Unsecured Notes On September 14, 2021, the Company closed a private offering of $50,000 of the 2027 Unsecured Notes with a fixed interest rate of 2.95% and a maturity date of March 14, 2027. Interest on the 2027 Unsecured Notes is due semi-annually on March 14 and September 14. The 2027 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On December 18, 2019, the Company closed a private offering of $125 million of the 2024 Unsecured Notes with a fixed interest rate of 4.20% and a maturity date of December 15, 2024. Interest on the 2024 Unsecured Notes is due semi-annually on June 15 and December 15. The 2024 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On December 18, 2019, the Company closed a private offering of $75 million of the 2026 Unsecured Notes with a fixed interest rate of 4.375% and a maturity date of December 15, 2026. Interest on the 2026 Unsecured Notes is due semi-annually on June 15 and December 15. The 2026 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On December 28, 2017, the Company closed a private offering of $21 million of the 2022 Tranche C Notes with a fixed interest rate of 4.50% and a maturity date of December 28, 2022. Interest on the 2022 Tranche C Notes is due semi-annually on June 28 and December 28. The 2022 Tranche C Notes were issued in a private placement only to qualified institutional buyers. On November 22, 2017, we issued $75 million in aggregate principal amount of publicly registered 2023 Unsecured Notes for net proceeds of $73.8 million. Interest on the 2023 Unsecured Notes is paid semi-annually on January 20 and July 20, at a fixed rate of 4.50% per year, commencing on January 20, 2018. The 2023 Unsecured Notes mature on January 20, 2023. On February 15, 2017, the Company closed a private offering of $100 million of the 2022 Unsecured Notes with a fixed interest rate of 4.60% and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Notes were issued in a private placement only to qualified institutional buyers. On November 8, 2016, the Company closed a private offering of $50 million of the 2022 Unsecured Notes with a fixed interest rate of 4.40% and a maturity date of May 8, 2022. Interest on the 2022 Unsecured Notes is due semi-annually on May 8 and November 8. The 2022 Unsecured Notes were issued in a private placement only to qualified institutional buyers. Revolving & Term Loan Facilities On December 28, 2021, the Company closed on Amendment No. 1 to its August 28, 2019 senior secured credit agreement. Post amendment, the Credit Facility is composed of $600 million of revolving credit and 89 Table of Contents $100 million of term loans. Borrowings generally bear interest at a rate per annum equal to the base rate plus a range of 1.75%-2.00% or the alternate base rate plus 0.75%-1.00%. The Credit Facility has a 0% floor and matures in December 2026 and includes ratable amortization in the final year. The Credit Facility may be increased up to $800 million with additional new lenders or an increase in commitments from current lenders. The Credit Facility contains certain customary affirmative and negative covenants and events of default. In addition, the Credit Facility contains certain financial covenants that among other things, requires the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio. At December 31, 2021, outstanding USD equivalent borrowings under the Credit Facility totaled $322.5 million, composed of $222.5 million of revolving credit and $100.0 million of term loans. On December 28, 2021, the Company prepaid and terminated the NEFPASS SPV LLC credit facility, dated September 26, 2018. Certain covenants on our issued debt may restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code. At December 31, 2021, the Company was in compliance with all financial and operational covenants required by our credit facilities. Contractual Obligations A summary of our significant contractual payment obligations is as follows as of December 31, 2021: Payments Due by Period (in millions) Total Less than 1 Year 1-3 Years 3-5 Years More Than 5 Years Credit Facility (1) $ 222.5 $ — $ — $ 222.5 $ — Unsecured senior notes 496.0 171.0 200.0 75.0 50.0 Term Loans 100.0 — — 100.0 — (1) As of December 31, 2021, we had a total of $377.5 million of unused borrowing capacity under the Credit Facility, subject to borrowing base limits. Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy the asset coverage test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. We have also entered into two contracts under which we have future commitments: the Advisory Agreement, pursuant to which SLR Capital Partners, LLC has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which the Administrator has agreed to furnish us with the facilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance. Payments under the Advisory Agreement are equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, technology systems, insurance and our allocable portion of the costs of our chief financial officer and chief compliance officer and their respective staffs. Either party may terminate each of the Advisory Agreement and administration agreement without penalty upon 60 days’ written notice to the other. See note 3 to our Consolidated Financial Statements. 90 Table of Contents On July 31, 2017, the Company, NEFPASS LLC and NEFCORP LLC entered into a servicing agreement. NEFCORP LLC was engaged to provide NEFPASS LLC with administrative services related to the loans and capital leases held by NEFPASS LLC. NEFPASS LLC may terminate this agreement upon 30 days’ written notice to NEFCORP LLC. Senior Securities Information about our senior securities is shown in the following table (in thousands) as of each year ended December 31 for the past ten years, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities. Class and Year Total Amount Outstanding(1) Asset Coverage Per Unit(2) Involuntary Liquidating Preference Per Unit(3) Average Market Value Per Unit(4) Revolving Credit Facility Fiscal 2021 $ 222,500 $ 552 — N/A Fiscal 2020 126,000 421 — N/A Fiscal 2019 42,900 182 — N/A Fiscal 2018 96,400 593 — N/A Fiscal 2017 245,600 1,225 — N/A Fiscal 2016 115,200 990 — N/A Fiscal 2015 207,900 1,459 — N/A Fiscal 2014 — — — N/A Fiscal 2013 — — — N/A Fiscal 2012 264,452 1,510 — N/A 2022 Unsecured Notes Fiscal 2021 150,000 372 — N/A Fiscal 2020 150,000 501 — N/A Fiscal 2019 150,000 638 — N/A Fiscal 2018 150,000 923 — N/A Fiscal 2017 150,000 748 — N/A Fiscal 2016 50,000 430 — N/A 2022 Tranche C Notes Fiscal 2021 21,000 52 — N/A Fiscal 2020 21,000 70 — N/A Fiscal 2019 21,000 89 — N/A Fiscal 2018 21,000 129 — N/A Fiscal 2017 21,000 105 — N/A 2023 Unsecured Notes Fiscal 2021 75,000 186 — N/A Fiscal 2020 75,000 250 — N/A Fiscal 2019 75,000 319 — N/A Fiscal 2018 75,000 461 — N/A Fiscal 2017 75,000 374 — N/A 2024 Unsecured Notes Fiscal 2021 125,000 309 — N/A Fiscal 2020 125,000 417 — N/A Fiscal 2019 125,000 531 — N/A 2026 Unsecured Notes Fiscal 2021 75,000 186 — N/A Fiscal 2020 75,000 250 — N/A Fiscal 2019 75,000 319 — N/A 91 Table of Contents Class and Year Total Amount Outstanding(1) Asset Coverage Per Unit(2) Involuntary Liquidating Preference Per Unit(3) Average Market Value Per Unit(4) 2027 Unsecured Notes Fiscal 2021 $ 50,000 $ 124 — N/A 2042 Unsecured Notes Fiscal 2017 — — — N/A Fiscal 2016 100,000 859 — $ 1,002 Fiscal 2015 100,000 702 — 982 Fiscal 2014 100,000 2,294 — 943 Fiscal 2013 100,000 2,411 — 934 Fiscal 2012 100,000 571 — 923 Senior Secured Notes Fiscal 2017 — — — N/A Fiscal 2016 75,000 645 — N/A Fiscal 2015 75,000 527 — N/A Fiscal 2014 75,000 1,721 — N/A Fiscal 2013 75,000 1,808 — N/A Fiscal 2012 75,000 428 — N/A Term Loans Fiscal 2021 100,000 248 — N/A Fiscal 2020 75,000 250 — N/A Fiscal 2019 75,000 319 — N/A Fiscal 2018 50,000 308 — N/A Fiscal 2017 50,000 250 — N/A Fiscal 2016 50,000 430 — N/A Fiscal 2015 50,000 351 — N/A Fiscal 2014 50,000 1,147 — N/A Fiscal 2013 50,000 1,206 — N/A Fiscal 2012 50,000 285 — N/A NEFPASS Facility Fiscal 2021 — — — N/A Fiscal 2020 30,000 100 — N/A Fiscal 2019 30,000 128 — N/A Fiscal 2018 30,000 185 — N/A SSLP Facility Fiscal 2019 — — — N/A Fiscal 2018 53,785 331 — N/A Total Senior Securities Fiscal 2021 818,500 2,029 — N/A Fiscal 2020 677,000 2,259 — N/A Fiscal 2019 593,900 2,525 — N/A Fiscal 2018 476,185 2,930 — N/A Fiscal 2017 541,600 2,702 — N/A Fiscal 2016 390,200 3,354 — N/A Fiscal 2015 432,900 3,039 — N/A Fiscal 2014 225,000 5,162 — N/A Fiscal 2013 225,000 5,425 — N/A Fiscal 2012 489,452 2,794 — N/A (1) Total amount of each class of senior securities outstanding (in thousands) at the end of the period presented. 92 Table of Contents (2) The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by all senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage Per Unit. In order to determine the specific Asset Coverage Per Unit for each class of debt, the total Asset Coverage Per Unit is allocated based on the amount outstanding in each class of debt at the end of the period. As of December 31, 2021, asset coverage was 202.9%. (3) The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. (4) Not applicable except for the 2042 Unsecured Notes which were publicly traded. The Average Market Value Per Unit is calculated by taking the daily average closing price during the period and dividing it by twenty-five dollars per share and multiplying the result by one thousand to determine a unit price per thousand consistent with Asset Coverage Per Unit. The average market value for the fiscal 2016, 2015, 2014, 2013 and 2012 periods was $100,175, $98,196, $94,301, $93,392, and $92,302, respectively. The following is a schedule of financial highlights for the respective years: Year ended December 31, 2016 Year ended December 31, 2015 Year ended December 31, 2014 Year ended December 31, 2013 Year ended December 31, 2012 Per Share Data: (a) Net asset value, beginning of year $ 20.79 $ 22.05 $ 22.50 $ 22.70 $ 22.02 Net investment income 1.68 1.52 1.56 1.91 2.20 Net realized and unrealized gain (loss) 0.84 (1.18 ) (0.43 ) (0.22 ) 0.91 Net increase in net assets resulting from operations 2.52 0.34 1.13 1.69 3.11 Distributions to stockholders (see note 8a): From net investment income (1.60 ) (1.60 ) (1.55 ) (1.55 ) (2.27 ) From net realized gains — — — (0.46 ) (0.16 ) From return of capital — — (0.05 ) — — Anti-dilution 0.03 — 0.02 0.12 — Net asset value, end of year $ 21.74 $ 20.79 $ 22.05 $ 22.50 $ 22.70 Per share market value, end of year $ 20.82 $ 16.43 $ 18.01 $ 22.55 $ 23.91 Total Return(b) 37.49 % (0.29 )% (13.58 )% 2.82 % 20.03 % Net assets, end of year $ 918,507 $ 882,698 $ 936,568 $ 995,637 $ 878,273 Shares outstanding, end of year 42,248,525 42,464,762 42,465,162 44,244,195 38,694,060 Ratios to average net assets: Net investment income 7.91 % 6.94 % 6.93 % 8.43 % 9.79 % Operating expenses 6.25 % 3.84 %* 4.24 % 5.82 % 6.25 % Interest and other credit facility expenses** 2.73 % 1.68 % 1.50 % 1.99 % 2.28 % Total expenses 8.98 % 5.52 %* 5.74 % 7.81 % 8.53 % Average debt outstanding $ 495,795 $ 262,341 $ 225,000 $ 318,186 $ 237,859 Portfolio turnover ratio 31.0 % 13.0 % 53.7 % 25.6 % 54.7 % (a) Calculated using the average shares outstanding method. 93 Table of Contents (b) Total return is based on the change in market price per share during the year and takes into account distributions, if any, reinvested in accordance with the dividend reinvestment plan. Total return does not include a sales load. * The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets is shown net of a voluntary incentive fee waiver (see note 3). For the year ended December 31, 2015, the ratios of operating expenses to average net assets and total expenses to average net assets would be 4.02% and 5.70%, respectively, without the voluntary incentive fee waiver. ** Ratios shown without the non-recurring costs associated with the amendments and establishment of the Credit Facility and 2022 Unsecured Notes would be 2.39%, 1.68%, 1.50%, 1.74% and 1.41%, respectively for the years shown. Off-Balance Sheet Arrangements From time-to-time and in the normal course of business, the Company may make unfunded capital commitments to current or prospective portfolio companies. Typically, the Company may agree to provide delayed-draw term loans or, to a lesser extent, revolving loan or equity commitments. These unfunded capital commitments always take into account the Company’s liquidity and cash available for investment, portfolio and issuer diversification, and other considerations. Accordingly, the Company had the following unfunded capital commitments at December 31, 2021 and December 31, 2020, respectively: December 31, 2021 December 31, 2020 (in millions) SLR Credit Solutions* $ 44.3 $ 44.3 Arcutis Biotherapeutics, Inc. 43.5 — Glooko, Inc. 25.1 — BridgeBio Pharma, Inc. 23.0 — CC SAG Holdings Corp. (Spectrum Automotive) 18.8 — Inszone Mid, LLC 12.5 — One Touch Direct, LLC 7.2 5.0 Rezolute, Inc. 5.7 — Maurices, Incorporated 5.7 — SLR Equipment Finance 5.0 4.2 NAC Holdings Corporation 4.8 — Ivy Fertility Services, LLC 4.5 — SOC Telemed, Inc. 4.4 — RQM+ Corp. 3.8 — Atria Wealth Solutions, Inc. 3.7 3.5 Kid Distro Holdings, LLC 2.7 — Foundation Consumer Brands, LLC 2.3 — Neuronetics, Inc. 2.2 6.7 MMIT Holdings, LLC 2.0 — Basic Fun, Inc. 1.9 1.1 Pinnacle Treatment Centers, Inc. 1.4 1.4 SunMed Group Holdings, LLC 0.8 — Ultimate Baked Goods Midco LLC 0.8 — American Teleconferencing Services, Ltd. 0.6 — Smile Doctors LLC — 26.7 Soleo Health Holdings, Inc. — 7.4 94 Table of Contents December 31, 2021 December 31, 2020 (in millions) Cardiva Medical, Inc. $ — $ 7.3 Kindred Biosciences, Inc. — 6.9 PQ Bypass, Inc. — 5.0 Centrexion Therapeutics, Inc. — 3.8 Sentry Data Systems, Inc. — 1.6 Delphinus Medical Technologies, Inc. — 1.3 Total Commitments $ 226.7 $ 126.2 * The Company controls the funding of the SLR Credit Solutions commitment and may cancel it at its discretion. The credit agreements of the above loan commitments contain customary lending provisions and/or are subject to the portfolio company’s achievement of certain milestones that allow relief to the Company from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business outlook for the company. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. As of December 31, 2021 and December 31, 2020, the Company had sufficient cash available and/or liquid securities available to fund its commitments and had reviewed them for any appropriate fair value adjustment. In the normal course of its business, we invest or trade in various financial instruments and may enter into various investment activities with off-balance sheet risk, which may include forward foreign currency contracts. Generally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates. These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligations may exceed the amount recognized in our Consolidated Statements of Assets and Liabilities. Distributions The following table reflects the cash distributions per share on our common stock for the two most recent fiscal years and the current fiscal year to date: Date Declared Record Date Payment Date Amount Fiscal 2022 March 1, 2022 March 18, 2022 April 1, 2022 $ 0.41 Fiscal 2021 November 3, 2021 December 16, 2021 January 5, 2022 $ 0.41 August 3, 2021 September 23, 2021 October 5, 2021 0.41 May 5, 2021 June 23, 2021 July 2, 2021 0.41 February 24, 2021 March 18, 2021 April 2, 2021 0.41 Total 2021 $ 1.64 Fiscal 2020 November 5, 2020 December 17, 2020 January 5, 2021 $ 0.41 August 4, 2020 September 17, 2020 October 2, 2020 0.41 May 7, 2020 June 18, 2020 July 2, 2020 0.41 February 20, 2020 March 19, 2020 April 3, 2020 0.41 Total 2020 $ 1.64 95 Table of Contents Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Future quarterly distributions, if any, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated net investment income, from net realized capital gains or non-taxable return of capital, if any, as applicable. We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC tax treatment, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains ( i.e. , net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. We maintain an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a business development company, we may in the future be limited in our ability to make distributions. Also, the Credit Facility may limit our ability to declare distributions if we default under certain provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a regulated investment company. In addition, in accordance with GAAP and tax regulations, we include in income certain amounts that we have not yet received in cash, such as contractual payment-in-kind income, which represents contractual income added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a regulated investment company. With respect to the distributions to stockholders, income from origination, structuring, closing and certain other upfront fees associated with investments in portfolio companies are treated as taxable income and accordingly, distributed to stockholders. Related Parties We have entered into a number of business relationships with affiliated or related parties, including the following: • We have entered into the Advisory Agreement with SLR Capital Partners. Mr. Gross, our Chairman, Co-Chief Executive Officer and President and Mr. Spohler, our Co-Chief Executive Officer, Chief Operating Officer and board member, are managing members and senior investment professionals of, and have financial and controlling interests in, the Investment Adviser. In addition, Mr. Peteka, our Chief Financial Officer, Treasurer and Secretary serves as the Chief Financial Officer for SLR Capital Partners. • The Administrator provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse the Administrator for the allocable portion of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief compliance officer, our chief financial officer and their respective staffs. 96 Table of Contents • We have entered into a license agreement with the Investment Adviser, pursuant to which the Investment Adviser has granted us a non-exclusive, royalty-free license to use the licensed marks “SOLAR” and “SLR”. The Investment Adviser may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, the Investment Adviser presently serves as investment adviser to SLR Senior Investment Corp., a publicly traded BDC, which focuses on investing in senior secured loans, including first lien and second lien debt instruments, as well as SCP Private Credit Income BDC LLC, an unlisted BDC that focuses on investing primarily in senior secured loans, including non-traditional asset-based loans and first lien loans and SLR HC BDC LLC, an unlisted BDC whose principal focus is to invest directly and indirectly in senior secured loans and other debt instruments typically to middle market companies within the healthcare industry. In addition, Michael S. Gross, our Chairman, Co-Chief Executive Officer and President, Bruce Spohler, our Co-Chief Executive Officer and Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for SLR Senior Investment Corp., SCP Private Credit Income BDC LLC and SLR HC BDC LLC. The Investment Adviser and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with the Investment Adviser’s allocation procedures. On June 13, 2017, the Adviser received an exemptive order that permits the Company to participate in negotiated co-investment transactions with certain affiliates, in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to various conditions (the “Order”). If the Company is unable to rely on the Order for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunity being allocated, and second, if the terms of the opportunity are consistent with more than one entity’s investment strategy, on an alternating basis. Although the Adviser’s investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, the Company and its stockholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated with, our executive officers, directors and members of the Adviser. Related party transactions may occur among SLR Investment Corp., SLR Credit Solutions, Equipment Operating Leases LLC, Kingsbridge Holdings, LLC, Loyer Capital LLC, SLR Business Credit, SLR Healthcare ABL and SLR Equipment Finance. These transactions may occur in the normal course of business. No administrative or other fees are paid to SLR Capital Partners by SLR Credit Solutions, Equipment Operating Leases LLC, Kingsbridge Holdings, LLC, Loyer Capital LLC, SLR Business Credit, SLR Healthcare ABL or SLR Equipment Finance. In addition, we have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law.