PENNANTPARK INVESTMENT CORP

In this annual report on Form 10-K, or the Report, except where context suggest otherwise, the terms “Company,” “we,” “our” or “us” refers to PennantPark Investment Corporation and its consolidated subsidiaries; “2024 Notes” refers to our 5.50% Notes due 2024; “2026 Notes” refers to our 4.50% Notes due May 2026; “2026 Notes-2” refers to our 4.00% Notes due November 2026; “BDC” refers to a business development company under the Investment Company Act of 1940, as amended, or the “1940 Act”; “BNP Credit Facility” refers to our revolving credit facility with BNP Paribas prior to deconsolidation of Funding I; “Code” refers to the Internal Revenue Code of 1986, as amended; “Funding I” refers to PennantPark Investment Funding I, LLC, a wholly-owned subsidiary prior to deconsolidation on July 31, 2020; “PennantPark Investment” refers to only PennantPark Investment Corporation; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; “PennantPark Investment Advisers” or “Investment Adviser” refers to PennantPark Investment Advisers, LLC; “PSLF” refers to PennantPark Senior Loan Fund, LLC, an unconsolidated joint venture; “PTSF II” refers to PennantPark-TSO Senior Loan Fund II, LP, an unconsolidated limited partnership; “RIC” refers to a regulated investment company under the Code. References to our portfolio, our investments and our business include investments we made through SBIC II and other consolidated subsidiaries; “SBA” refers to the Small Business Administration; “SBCAA” refers to the Small Business Credit Availability Act; “SBIC” refers to a small business investment company under the Small Business Investment Act of 1958, as amended, or the “1958 Act”; “SBIC Fund” refers collectively to our consolidated subsidiaries, PennantPark SBIC II LP, or SBIC II, and its general partner, PennantPark SBIC GP II, LLC;“Taxable Subsidiary” refers collectively to our consolidated subsidiaries, PNNT Investment Holdings II, LLC and PNNT Investment Holdings, LLC; and “Truist Credit Facility” refers to our multi-currency, amended and restated senior secured revolving credit facility with Truist Bank (formerly SunTrust Bank); Some of the statements in this annual report constitute forward-looking statements, which apply to us and relate to future events, future performance or future financial condition. The forward-looking statements involve risks and uncertainties for us and actual results could differ materially from those projected in the forward-looking statements for any reason, including those factors discussed in “Risk Factors” and elsewhere in this Report.

Investing in our common stock involves a high degree of risk. Some, but not all, of the risks and uncertainties that we face are related to:

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our ability to remain in compliance with the financial and operational covenants of our Truist Credit Facility;

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our ability to operate in a highly competitive market for investment opportunities;

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the prospects of our portfolio companies and the ability of our portfolio companies to achieve their objectives, the decline or failure of which may result in our borrowers defaulting on their payments to us;

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the ability of our Investment Adviser to hire and retain qualified personnel, to monitor and administer our investments and to manage our future growth effectively;

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the impact of alternative reference rates on our business and certain of our investments;

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our reliance on information systems, the failure of which could result in delays or other problems with our business activities, and the susceptibility of such systems to cybersecurity threats;

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our ability to replicate historical performance of other investment companies and funds with which our professionals have been affiliated;

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our ability to raise additional capital while remaining in compliance with certain annual distribution, asset coverage, asset composition and other regulatory requirements needed to maintain our status as a BDC and a RIC;

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our ability to comply with applicable SBA requirements;

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the use of leverage to fund our investments, including the indebtedness resulting from our Truist Credit Facility, 2026 Notes, and 2026 Notes-2, and the risk that we may fail to comply with the terms governing such indebtedness or maintain certain asset coverage ratio requirements;

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our issuance of debt securities and/or preferred stock and the impact of such issuances on the value of our common stock or NAV;

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market conditions that may make it difficult for us to refinance or extend the maturity of our existing indebtedness;

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potential conflicts of interest of our Investment Adviser and Administrator;

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the potential dilution caused by any future issuances of subscription rights or warrants;

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the impact of recent financial reform legislation, and uncertainty about any future laws and regulations on our business and our portfolio companies;

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the investment objectives and decisions advanced by the board of directors or the Investment Adviser which are not subject to stockholder approval and potential activism by our shareholders;

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the illiquid nature of the assets in which we invest and our valuation procedures with respect to such assets;

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making investments in first lien secured debt, second lien secured debt, subordinated debt and the equity of certain portfolio companies, and the risks of making such investments in privately held middle-market companies;

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the Investment Adviser’s incentive to make speculative investments to earn a greater incentive fee and, in some instances, our obligation to pay incentive compensation to our Investment Adviser even after we incur a loss;

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our investment in derivatives and the use of leverage

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the potential dilution of our common stock which may result from issuances of our common stock below the then current NAV per share;

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our allocation of net proceeds from offering in ways which you may not agree and our inability to invest proceeds from offerings in new investment opportunities, which could negatively affect our financial performance;

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tax liabilities resulting from reinvestments in our common stock or from receiving our stock as a distribution;

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the measures we have taken to deter takeover attempts, which may adversely impact the price of our common stock;

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changes to political, economic or industry conditions or conditions affecting the financial and capital markets that could cause volatility or prolonged disruption of the capital markets and impact the value of our assets;

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our cash balances at financial institutions that exceeds federally insured limits and the impact of adverse developments affecting the financial services industry;

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the impact of economic sanction laws in the United States and other jurisdictions which may prohibit us and our affiliates from transacting with certain countries, individuals and companies;

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potential litigation, whether initiated by shareholders or other parties; and

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the impact of global climate change on the operations of our portfolio companies.

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We have identified material weaknesses in our internal controls over financial reporting, and we may identify additional material weaknesses in the future or otherwise fail to maintain effective internal controls over financial reporting, which may result in future financial statements containing errors that will be undetected and could impact the operations of our business including our ability to obtain financing, the cost of any financing we obtain or require additional expenditures of resources to comply with applicable requirements.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition and/or operating results. For a more detailed discussion of the risks that you should consider prior to investing in our securities, see Item “1A. Risk Factors” below.