Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
COMMON STOCK AND HOLDERS
Our common stock is traded on the Nasdaq Global Select Market under the symbol "OFS". The last reported sale price for our common stock on the Nasdaq Global Select Market on March 1, 2021 was $7.92 per share. As of March 1, 2021, there were two holders of record of the common stock, one of which was OFSAM. The other holder of record does not identify stockholders for whom shares are held beneficially in “nominee” or “street name.”
The following table lists the high and low closing sale price for our common stock, net asset value per share, and the cash distributions per share that we have declared on our common stock for each fiscal quarter during the last two most recently completed fiscal years and the current fiscal year through March 1, 2021. The stock quotations are inter-dealer quotations and do not include markups, markdowns or commissions.
NAV Per Share (1)
Price Range Premium (Discount) of High Sales Price to NAV Premium (Discount) of Low Sales Price to NAV Cash Distribution per Share (2)
Period High Low
Fiscal 2021
First Quarter (3)
* $ 7.92 $ 6.82 * * $ 0.20
Fiscal 2020
Fourth Quarter $ 11.85 $ 7.58 $ 3.97 -36.0 % -66.5 % $ 0.18
Third Quarter
$ 11.18 $ 5.08 $ 4.04 -54.6 % -63.9 % $ 0.17
Second Quarter $ 10.10 $ 5.70 $ 3.52 -43.6 % -65.1 % $ 0.17
First Quarter $ 9.71 $ 11.97 $ 3.70 23.3 % -61.9 % $ 0.34
Fiscal 2019
Fourth Quarter $ 12.46 $ 12.01 $ 10.99 -3.6 % -11.8 % $ 0.34
Third Quarter
$ 12.74 $ 12.27 $ 10.98 -3.7 % -13.8 % $ 0.34
Second Quarter $ 12.95 $ 12.80 $ 11.85 -1.2 % -8.5 % $ 0.34
First Quarter $ 13.04 $ 12.52 $ 10.77 -4.0 % -17.4 % $ 0.34
(1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value 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) The return of capital portion of these distributions for the years ended December 31, 2020 and 2019 were $-0- and $-0-, respectively.
(3) Period from January 1, 2021 through March 1, 2021.
* Not determinable at the time of filing.
Issuer Purchases of Equity Securities
On May 22, 2018, the Board authorized the Stock Repurchase Program under which we could acquire up to $10.0 million of our outstanding common stock through the two-year period ending May 22, 2020. On May 4, 2020, the Board extended the Stock Repurchase Program for an additional two-year period. Under the extended Stock Repurchase Program, we are authorized to repurchase shares in open-market transactions, including through block purchases, depending on prevailing market conditions and other factors. We expect the Stock Repurchase Program to be in place through May 22, 2022, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not obligate us to acquire any specific number of shares, and all repurchases will be made in accordance with SEC Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of stock repurchases. The Stock Repurchase Program may be extended, modified or discontinued at any time for any reason. We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. We retire all shares of common stock that we purchased in connection with the Stock Repurchase Program.
61
The following table summarizes the shares of common stock that we repurchased under the Stock Repurchase Program during the years ended December 31, 2020, 2019 and 2018 (amount in thousands except shares).
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet be Purchased Under the Plans or Programs
May 22, 2018 through December 31, 2018 300 $ 10.29 300 $ 9,997
January 1, 2019 through December 31, 2019 — — — —
January 1, 2020 through December 31, 2020 — — — —
Total 300 $ 10.29 300 $ 9,997
Sales of Unregistered Securities
There was $0.2 million of distributions reinvested during the year ended December 31, 2020 under the DRIP.
62
Stock Performance Graph
This graph compares the return on our common stock with that of the Standard & Poor’s 500 Stock Index, the Russell 1000 Index and the SNL U.S. RICs Index, for the last five fiscal years. The graph assumes that, on December 31, 2015, a person invested $100 in our common stock, the Standard & Poor’s 500 Stock Index, the Russell 1000 Index and the SNL U.S. RICs Index. The graph measures total stockholder return, which takes into account changes in stock price and assumes reinvestment of all dividends and distributions prior to any tax effect.
December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020
OFS Capital Corporation 133.2 127.3 131.1 154.8 118.3
S&P 500 112.0 136.4 130.4 171.5 203.0
SNL U.S. RICs 123.7 137.1 131.5 161.9 135.1
Russell 1000 112.1 136.4 129.8 170.6 206.4
The graph and other information under the heading "Stock Performance Graph" in Part II Item 5 of this Annual Report on Form 10-K is "furnished" and 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 Exchange Act and shall not be deemed incorporated by reference in any filing under the Exchange Act. The stock price performance included in the above graph is not necessarily indicative of future stock price performance.
63
Fees and Expenses
The following table is intended to assist you in understanding the costs and expenses that you will bear directly or indirectly. We caution you that the percentages indicated in the table below are estimates and may vary. Except where the context suggests otherwise, whenever this Annual Report on Form 10-K contains a reference to fees or expenses paid by “us,” “the Company” or “OFS Capital,” or that “we” will pay fees or expenses, you will indirectly bear such fees or expenses as an investor in OFS Capital.
Stockholder transaction expenses :
Sales load borne by us (as a percentage of offering price) — % (1)
Offering expenses borne by us (as a percentage of offering price) — % (1)
Dividend reinvestment plan fees (per sales transaction fee) $15.00 (2)
Total Stockholder transaction expenses (as a percentage of offering price) — % (1)
Annual expenses (as a percentage of net assets attributable to common stock) (9) :
Base management fees payable under the Investment Advisory Agreement 5.96 % (3)
Incentive fees payable under the Investment Advisory Agreement 1.74 % (4)
Interest payments on borrowed funds 9.94 % (5)
Other expenses 2.74 % (6)
Total annual expenses 20.38 %
Base management fee reduction (1.32) % (8)
Total annual expenses, net of fee waiver 19.06 % (7)
(1) The amounts set forth in this table do not reflect the impact of any sales load, sales commission or other offering expenses borne by the Company and its stockholders. If applicable, the prospectus or prospectus supplement relating to an offering of our common stock will disclose the offering price and the estimated offering expenses and total stockholder transaction expenses borne by the Company and its common stockholders as a percentage of the offering price. In the event that shares of our common stock are sold to or through underwriters, the applicable prospectus or prospectus supplement will also disclose the applicable sales load.
(2) The expenses of the dividend reinvestment plan are included in “other expenses.” The plan administrator’s fees will be paid by us. There will be no brokerage charges or other charges to stockholders who participate in the plan except that, if a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant’s account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15.00 transaction fee plus a $0.10 per share brokerage commission from the proceeds.
(3) Our base management fee is 1.75% of the average value of our total assets (other than cash and cash equivalents, and the intangible assets resulting from the SBIC Acquisitions; but including assets purchased with borrowed amounts, and including assets owned by any consolidated entity). This item represents projected base management fees for the the next twelve month assuming no additional leverage is incurred. We increased our leverage to a level below a 200% asset coverage ratio, as permitted under Section 61(a)(2) of the 1940 Act. As discussed in footnote (8), below, OFS Advisor agreed to reduce a portion of its base management fee on certain assets associated with the increase in leverage; the base management fees of 5.96% presented in the table above does not reflect the effect of the base management fee reduction on certain assets. See “Management and Other Agreements — Investment Advisory Agreement”.
(4) The Part One incentive fee was estimated based on our projected results of operations for the next twelve months including the anticipated impact of additional assets purchased with the added leverage discussed in footnote (5) and assumed yields thereon, and the effects of the expected base management fee waiver discussed in footnote (3). The Part Two incentive fee will be accrued, but not necessarily become payable, if, on a cumulative basis, the sum of net realized capital gains and losses plus net unrealized appreciation and depreciation is positive. Net realized gains and losses result from sales transactions and no such transactions are currently contemplated by OFS Advisor; and unrealized capital gains or losses result from fluctuations in the fair value of our investments, which vary substantially from period to period and cannot be reasonably predicted. Accordingly, the Part Two fee in the table above is -0-%.
The two parts of the incentive fee follows:
• The first ("Part One"), payable quarterly in arrears, equals 20.0% of our pre-incentive fee net investment income initially calculated based on values at the closing of this offering (including income that is accrued but not yet received in cash), subject to a 2.0% quarterly (8.0% annualized) hurdle rate and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, OFS Advisor receives no incentive fee until our
64
pre-incentive fee net investment income equals the hurdle rate of 2.0% but then receives, as a “catch-up,” 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 rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, OFS Advisor will receive 20.0% of our pre-incentive fee net investment income as if a hurdle rate did not apply.
The hurdle rate is fixed at 2.0% quarterly (8% annualized), which means that, if interest rates rise, it will be easier for our pre-incentive fee net investment income to surpass the hurdle rate, which could lead to the payment of fees to OFS Advisor in an amount greater than expected. There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle rate and there is no delay of payment if prior quarters are below the quarterly hurdle rate.
• The second part ("Part Two"), payable annually in arrears, equals 20.0% of our realized capital gains on a cumulative basis, if any (or upon the termination of the Investment Advisory Agreement, as of the termination date), 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 incentive fee is determined on a consolidated basis. We accrue the Part Two incentive fee if, on a cumulative basis, the sum of net realized capital gains and losses plus net unrealized appreciation and depreciation is positive. See “Management and Other Agreements — Investment Advisory Agreement.”
(5) The borrowing costs included in the table above are based on our proforma debt balances as of February 2021, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments”, (which could be subject to change) at a level equivalent to a debt-to-equity ratio of up to 2.08x (equivalent to $2.08 of debt outstanding for each $1 of equity) which is also equivalent to having an asset coverage ratio of 176% (which excludes the SBA debentures as a result of exemptive relief granted to us by the SEC) as permitted under Section 61(a)(2) of the 1940 Act, and assuming a weighted average interest rate for total outstanding debt of 5.10%.
We may borrow additional funds from time to time to make investments to the extent we determine that the economic situation is conducive to doing so. We do not expect to issue any preferred stock during the next twelve months and, therefore, have not included the cost of issuing and servicing preferred stock in the table. Availability under the PWB Credit Facility as of December 31, 2020, was $19.4 million based on the stated advance rate of 50% under the borrowing base, and the $0.6 million outstanding as of December 31, 2020. Our stockholders will bear directly or indirectly the costs of borrowings under any debt instruments we may enter into.
(6) Includes our overhead expenses, including payments under the Administration Agreement based on our allocable portion of overhead and other expenses incurred by OFS Services. See “Management and Other Agreements — Administration Agreement.”
(7) Our stockholders indirectly bear the expenses of underlying funds or other investment vehicles that would be investment companies under section 3(a) of the 1940 Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the 1940 Act (“Acquired Funds”) in which we invest. We do not currently invest in underlying funds or other investment companies and therefore do not expect to incur any acquired fund fees and expenses. The indirect expenses that will be associated with our Structured Finance Note investments are not included in the fee table presentation, but if such expenses were included in the fee table presentation then our total annual expenses would have been 20.56%.
(8) OFS Advisor agreed to reduce a portion of its base management fee by reducing the portion of such fee from 1.75% to 1.00% on the average total assets at the end of the two most recently completed quarters on assets held by the Company through OFSCC-FS, LLC, an indirect wholly owned subsidiary of the Company. The base management fee reduction will be renewable on an annual basis and the amount of the base management fee reduction with respect to the OFSCC-FS Assets shall not be subject to recoupment by OFS Advisor.
(9) Estimated.
Example. The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we would have no additional leverage and that our annual operating expenses would remain at the levels set forth in the table above. The expense amounts assume an annual base management fee 1.75% for each year. Transaction expenses are not included in the following example.
While the example assumes, as required by the applicable rules of the SEC, a 5.0% annual return, our performance will vary and may result in a return greater or less than 5.0%. The incentive fee under the Investment Management Agreement, which, assuming a 5.0% annual return, would either not be payable or would have an
65
insignificant impact on the expense amounts shown above, is not included in the above example. The above 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 5.0% 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 5.0% annual return
$160 $416 $604 $887
While the examples assume 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 dividend payment date. The market price per share of our common stock may be at, above or below net asset value.
The example should not be considered a representation of future expenses, and actual expenses may be greater or less than those shown.
66
SENIOR SECURITIES
Information about our senior securities (including preferred stock, debt securities and other indebtedness) is shown in the following tables for the years ended December 31, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and 2012. The senior securities table as of December 31, 2020 and 2019 was audited by KPMG LLP and the senior securities table as of December 31, 2018, 2017, 2016, 2015, 2014, 2013, and 2012 were audited by our former independent registered public accounting firms. The “ — ” indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities. The reports of our current and former independent registered public accounting firms on the senior securities table are attached as an exhibit to this Annual Report.
(dollar amounts in thousands, except per unit data)
Class and Year (8)
Total Amount Outstanding (1)
Asset Coverage Per Unit (2)
Involuntary Liquidating Preference Per Unit (3)
Average Market Value Per Unit (4)
6.25% Notes due 2023
December 31, 2020 $ 25,000 $ 14,754 — $24.82
6.375% Notes due 2025 (9)
December 31, 2020 $ 50,000 $ 7,377 — $22.66
December 31, 2019 $ 50,000 $ 7,519 — 25.30
December 31, 2018 $ 50,000 $ 5,645 — 24.84
6.50% Notes due 2025 (9)
December 31, 2020 $ 48,525 $ 7,601 — $22.80
December 31, 2019 $ 48,525 $ 7,747 — 25.29
December 31, 2018 $ 48,525 $ 5,817 — 24.43
5.95% Notes due 2026
December 31, 2020 $ 54,325 $ 6,790 — $21.89
December 31, 2019 $ 54,325 $ 6,920 — 24.75
BNP Facility
December 31, 2020 $ 31,450 $ 11,728 — N/A
December 31, 2019 $ 56,450 $ 6,659 — N/A
PWB Credit Facility
December 31, 2020 $ 600 $ 614,760 — N/A
December 31, 2019 $ — $ — — N/A
December 31, 2018 $ 12,000 $ 23,521 — N/A
December 31, 2017 $ 17,600 $ 11,540 — N/A
December 31, 2016 $ 9,500 $ 15,821 — N/A
December 31, 2015 $ — $ — — N/A
WM Credit Facility (6)
December 31, 2014 $ 72,612 $ 2,847 — N/A
December 31, 2013 $ 108,955 $ 2,256 — N/A
December 31, 2012 $ 99,224 $ 2,429 — N/A
SBA debentures (SBIC I LP) (5)
December 31, 2020 $ 105,270 $ — — N/A
December 31, 2019 $ 149,880 $ — — N/A
December 31, 2018 $ 149,880 $ — — N/A
67
(dollar amounts in thousands, except per unit data)
Class and Year (8)
Total Amount Outstanding (1)
Asset Coverage Per Unit (2)
Involuntary Liquidating Preference Per Unit (3)
Average Market Value Per Unit (4)
December 31, 2017 $ 149,880 $ — — N/A
December 31, 2016 $ 149,880 $ — — N/A
December 31, 2015 $ 149,880 $ — — N/A
December 31, 2014 $ 127,295 $ — — N/A
December 31, 2013 $ 26,000 $ — — N/A
December 31, 2012 $ — $ — — N/A
Total Senior Securities (7)
December 31, 2020 $ 315,170 $ 1,757 — N/A
December 31, 2019 $ 359,180 $ 1,796 — N/A
December 31, 2018 $ 260,405 $ 2,554 — N/A
December 31, 2017 $ 167,480 $ 11,540 — N/A
December 31, 2016 $ 159,380 $ 15,821 — N/A
December 31, 2015 $ 149,880 $ — — N/A
December 31, 2014 $ 199,907 $ 2,847 — N/A
December 31, 2013 $ 134,955 $ 2,256 — N/A
December 31, 2012 $ 99,224 $ 2,429 — N/A
(1) Total amount of each class of senior securities outstanding at the end of the period presented.
(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 the class of senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the “Asset Coverage Per Unit.”
(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. The “ — ” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.
(4) Average market value per unit for our unsecured notes represents the average of the daily closing prices as reported on the Nasdaq Market during the period presented. Not applicable to our PWB Credit Facility, BNP Facility, WM Credit Facility or SBA debentures because these senior securities are not registered for public trading.
(5) The SBA debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC.
(6) The secured revolving line of credit with Wells Fargo Bank, N.A., as lender and OFS Capital WM, LLC, a previous wholly owned investment company subsidiary of the Company, as borrower (the "WM Credit Facility") was terminated on May 25, 2015.
(7) The Asset Coverage Per Unit does not include the SBA debentures as described in footnote 5 above.
(8) Does not include the Unsecured Notes Due February 2026. See Recent Developments for additional information.
(9) On February 10, 2021, a redemption notice was issued. See Recent Developments for additional information.
68
FINANCIAL HIGHLIGHTS
The following is a schedule of financial highlights for the each year in the ten-year period ended December 31, 2020. The financial highlights as of December 31, 2020 and 2019 were audited by KPMG LLP and the financial highlights for each of the eight years in the period ended December 31, 2018 were audited by our former independent registered public accounting firms.
Years Ended December 31,
2020 2019 2018 2017 2016 2015 2014 2013 2012
Per share operating performance:
Net asset value per share at beginning of year
$ 12.46 $ 13.10 $ 14.12 $ 14.82 $ 14.76 $ 14.24 $ 14.58 $ 14.80 N/A (11)
Net investment income (4)
0.92 1.43 1.38 1.28 1.46 1.39 0.95 0.59 N/A (11)
Net realized gain (loss) on non-control/non-affiliate investments (4)
(0.75) (0.29) (0.37) (0.26) 0.25 (0.31) 0.02 0.01 N/A (11)
Net realized gain on affiliate investments (4)
— — 0.01 0.81 — 0.14 — — N/A (11)
Net realized loss on control investment (4)
— — — — — — (0.37) — N/A (11)
Realized gain from SBIC Acquisition (4)
— — — — — — — 0.29 N/A (11)
Net unrealized depreciation on non-control/non-affiliate investments (4)
(0.82) (0.72) (0.19) (0.78) (0.69) 0.53 0.05 0.04 N/A (11)
Net unrealized appreciation (depreciation) on affiliate investments (4)
0.94 0.40 (0.06) (0.41) 0.33 0.13 0.19 0.05 N/A (11)
Net unrealized appreciation (depreciation) on control investment (4)
0.13 (0.10) (0.06) — 0.07 — 0.18 (0.18) N/A (11)
Loss on extinguishment of debt (4)
(0.06) — — — — — — — N/A (11)
Loss on impairment of goodwill (4)
(0.08) — — — — — — — N/A (11)
Total from operations 0.28 0.72 0.71 0.64 1.42 1.88 1.02 0.80 N/A (11)
Distributions
(0.86) (1.36) (1.73) (1.36) (1.36) (1.36) (1.36) (1.02) N/A (11)
Issuance of common stock (5)
(0.03) — — (0.03) — — — — N/A (11)
Other (6)
— — — 0.05 — — — — N/A (11)
Net asset value per share at end of year $ 11.85 $ 12.46 $ 13.10 $ 14.12 $ 14.82 $ 14.76 $ 14.24 $ 14.58 $ 14.80
Per share market value, end of period
$ 7.15 $ 11.17 $ 10.60 $ 11.90 $ 13.76 $ 11.48 $ 11.78 $ 12.83 $ 13.69
Total return based on market value (1)
(24.0) % 18.3 % 3.5 % (4.7) % 32.3 % 9.0 % 2.4 % 1.3 % (7.6) %
Total return based on net asset value (2)
13.6 % 6.7 % 7.8 % 5.0 % 10.9 % 16.0 % 7.5 % 7.7 % N/M (12)
Shares outstanding at end of period 13,409,559 13,376,836 13,357,337 13,340,217 9,700,297 9,691,170 9,650,834 9,629,797 9,578,691
Weighted average shares outstanding
13,394,005 13,364,244 13,348,203 12,403,706 9,693,801 9,670,153 9,634,471 9,619,723 9,578,691
Ratio/Supplemental Data (in thousands except ratios)
Average net asset value (3)
$ 148,175 $ 171,889 $ 182,468 $ 171,631 $ 142,818 $ 140,002 $ 138,131 $ 141,058 $ 98,164
Net asset value at end of year
$ 158,956 $ 166,627 $ 175,023 $ 188,336 $ 143,778 $ 143,012 $ 137,471 $ 140,378 $ 141,799
Net investment income
$ 12,295 $ 19,098 $ 18,385 $ 15,877 $ 14,145 $ 13,411 $ 9,135 $ 5,718 $ 661
Ratio of total expenses, net to average net assets (8)
22.4 % 19.4 % 13.4 % 10.2 % 11.9 % 13.5 % 9.9 % 8.0 % 13.6% (13)
Ratio of total expenses, net and losses on impairment of goodwill and extinguishment of debt to average net assets (9)
23.7 % — % — % — % — % — % — % — % — %
Ratio of net investment income to average net assets (10)
8.3 % 11.1 % 10.5 % 8.4 % 9.8 % 9.6 % 6.6 % 4.1 % 4.6% (13)
Ratio of goodwill impairment loss to average net assets 0.7 % — % — % — % — % — % — % — % — %
Ratio of loss on extinguishment of debt to average net assets 0.6 % — % — % — % — % — % — % — % — %
Portfolio turnover (7)
28.1 % 21.2 % 41.9 % 50.4 % 18.1 % 44.6 % 34.9 % 19.7 % — %
(1) Calculated as ending market value less beginning market value, adjusted for distributions reinvested at prices based on the Company’s dividend reinvestment plan for the respective distributions.
(2) Calculated as ending net asset value less beginning net asset value, adjusted for distributions reinvested at the Company’s dividend reinvestment plan for the respective distributions.
69
(3) Based on the average of the net asset value at the beginning of the indicated period and the end of each calendar quarter within the period indicated.
(4) Calculated on the average share method.
(5) The issuance of common stock on a per share basis reflects the incremental net asset value change as a result of the Offering.
(6) Represents the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on a weighted average shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
(7) Portfolio turnover rate is calculated using the lesser of year-to-date sales, Structured Finance Note distributions and principal payments or year-to-date purchases over the average of the invested assets at fair value at the beginning of the indicated period and the end of each calendar quarter within the period indicated.
(8) Ratio of total expenses before incentive fee waiver to average net assets was 22.7% and 13.4% for the years ended December 31, 2020 and December 31, 2018, respectively.
(9) Ratio of total expenses before incentive fee waiver and losses on impairment of goodwill and extinguishment of debt to average net assets was 24.0% for the year ended December 31, 2020.
(10) Ratio of net investment income before incentive fee waiver to average net assets was 8.0% and 10.5% for the years ended December 31, 2020 and December 31, 2018, respectively.
(11) Per share data is not provided as the Company did not have shares of common stock outstanding prior to its IPO.
(12) Not meaningful.
(13) Annualized.
70
Item 6. Selected Consolidated Financial Data
The following selected financial and other data should be read in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included in this Annual Report on Form 10-K (amounts in thousands, except per share data and number of portfolio companies at period end):
For the Years Ended December 31,
2020 2019 2018 2017 2016
Statement of Operations Data:
Investment income
Interest income
$ 41,517 $ 48,902 $ 38,607 $ 28,124 $ 26,400
PIK interest income
1,528 926 1,193 1,508 1,194
Dividend income
450 502 315 482 475
Preferred equity PIK dividend income
504 899 906 1,399 1,433
Fee income
1,476 1,292 1,813 1,913 1,592
Total investment income
45,475 52,521 42,834 33,426 31,094
Expenses
Management fees
7,605 8,271 6,335 4,999 4,516
Incentive fees, net of waiver
1,584 4,760 4,387 2,962 3,333
Other expenses
23,991 20,439 13,727 9,588 9,100
Total expenses, net
33,180 33,470 24,449 17,549 16,949
Net investment income
12,295 19,098 18,385 15,877 14,145
Net realized gain (loss) on investments
(10,021) (3,900) (4,779) 6,833 2,404
Net unrealized appreciation (depreciation) on investments
3,317 (5,645) (4,034) (14,800) (2,721)
Loss on extinguishment of debt (820) — — — —
Loss on impairment of goodwill (1,077) — — — —
Net increase in net assets resulting from operations
3,694 9,553 9,572 7,910 13,828
Per share data:
Net asset value
$ 11.85 $ 12.46 $ 13.10 $ 14.12 $ 14.82
Net investment income
0.92 1.43 1.38 1.28 1.46
Net realized gain (loss) on investments
(0.75) (0.29) (0.36) 0.55 0.25
Net unrealized appreciation (depreciation) on investments
0.25 (0.42) (0.30) (1.19) (0.29)
Net increase in net assets resulting from operations
0.28 0.71 0.72 0.64 1.43
Distributions declared (1)
0.86 1.36 1.73 1.36 1.36
Total return based on market value (7)
(24.0) % 18.3 % 3.5 % (4.7) % 32.3 %
Balance sheet data at period end:
Investments, at fair value
$ 442,323 $ 516,931 $ 396,797 $ 277,499 $ 281,627
Cash and cash equivalents
37,708 13,447 38,172 72,952 17,659
Other assets
3,782 7,810 6,452 7,327 5,744
Total assets
483,813 538,188 441,421 357,778 305,030
Debt 309,185 352,478 254,826 164,823 156,343
Total liabilities
324,857 371,561 266,398 169,442 161,252
Total net assets
158,956 166,627 175,023 188,336 143,778
Other data (unaudited):
Weighted average yield on performing debt and Structured Finance Note investments (3) (6)
10.27 % 10.40 % 11.50 % 12.11 % 12.08 %
Weighted average yield on total debt and Structured Finance Note investments (4) (6)
9.15 % 9.94 % 11.12 % 11.59 % 11.72 %
Weighted average yield on total investments (5) (6)
8.56 % 9.59 % 10.49 % 10.35 % 10.88 %
Number of portfolio companies at end of year
62 85 50 37 41
(1) The return of capital portion of these distributions for the years ended December 31, 2020, 2019, 2018, 2017, 2016, and 2015, was $0, $0 $0, $0, $0.09, and $0.23, respectively.
(2) On January 1, 2016, we adopted ASU 2015-03 which requires that debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the carrying amount of the debt liability rather than as an asset. Adoption of ASU 2015-03 requires the changes to be applied retrospectively.
71
(3) The weighted average yield on our performing debt and Structured Finance Note investments is computed as (a) the sum of (i) the annual stated accruing interest on our debt investments plus the annualized accretion of Net Loan Fees; and (ii) the annual effective yield on Structured Finance Notes divided by (b) amortized cost of our debt and Structured Finance Note investments, excluding debt investments in non-accrual status as of the balance sheet date.
(4) The weighted average yield on our total debt and Structured Finance Note investments is computed as (a) the sum of (i) the annual stated accruing interest on our debt investments plus the annualized accretion of Net Loan Fees and (ii) plus the annual effective yield on Structured Finance Notes divided by (b) amortized cost of our debt and Structured Finance Note investments, including debt investments in non-accrual status as of the balance sheet date.
(5) The weighted average yield on total investments is computed as (a) the sum of (i) the annual stated accruing interest on our debt investments plus the annualized accretion of Net Loan Fees, (ii) the effective yield on our performing preferred equity investments, and (iii) the annual effective yield on Structured Finance Notes, divided by (b) amortized cost of our total investment portfolio, including debt investments in non-accrual status as of the balance sheet date.
(6) The weighted average yield of our investments is not the same as a return on investment for our stockholders but, rather, the gross investment income from our investment portfolio before the payment of all of our fees and expenses. There can be no assurance that the weighted average yield will remain at its current level.
(7) Calculation is ending market value less beginning market value, adjusting for distributions reinvested at prices based on the Company’s dividend reinvestment plan for the respective distributions.
72