Under the Investment Company Act of 1940, the Company is required to maintain an asset coverage of at least 200% of the Preferred Stock. In addition, pursuant to Moody’s Investor Service, Inc. Rating Agency Guidelines, the Company is required to maintain a certain discounted asset coverage for its portfolio that equals or exceeds a Basic Maintenance Amount. If the Company fails to meet these requirements in the future and does not cure such failure, the Company may be required to redeem, in whole or in part, shares of Preferred Stock at a redemption price of $25.00 per share plus accumulated and unpaid dividends. In addition, failure to meet the foregoing asset coverage requirements could restrict the Company’s ability to pay dividends on shares of Common Stock and could lead to sales of portfolio securities at inopportune times.
The holders of Preferred Stock have voting rights equivalent to those of the holders of Common Stock (one vote per share) and, generally, vote together with the holders of Common Stock as a single class.
Holders of Preferred Stock will elect two members to the Company’s Board of Directors and the holders of Preferred and Common Stock, voting as a single class, will elect the remaining directors. If the Company fails to pay dividends on the Preferred Stock in an amount equal to two full years’ dividends, the holders of Preferred Stock will have the right to elect a majority of the directors. In addition, the Investment Company Act of 1940 requires that approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class, would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Stock and (b) take any action requiring a vote of security holders, including, among other things, changes in the Company’s subclassification as a closed-end investment company or changes in its fundamental investment policies.
The Company presents its Preferred Stock, for which its redemption is outside of the Company’s control, outside of the net assets applicable to Common Stock in the Statement of Assets and Liabilities.
Transactions in Common Stock during the three months ended March 31, 2021 and the year ended December 31, 2020 were as follows:
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Shares
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Amount
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2021
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2020
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2021
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2020
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Par value of Shares issued in payment of dividends and distributions (issued from treasury)
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—
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725,430
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—
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$725,430
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Increase in paid-in capital
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—
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—
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—
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25,988,530
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Total increase
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—
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725,430
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—
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26,713,960
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Par value of Shares purchased (at an average discount from net asset value of 14.9% and 16.5%, respectively)
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(334,842
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)
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(750,415
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)
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$(334,842
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)
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(750,415
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)
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Decrease in paid-in capital
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—
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—
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(12,538,276
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)
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(25,564,718
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)
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Total decrease
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(334,842
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)
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(750,415
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)
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(12,873,118
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)
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(26,315,133
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)
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Net decrease
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(334,842
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)
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(24,985
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)
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$(12,873,118
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)
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$398,827
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At March 31, 2021, the Company held in its treasury 7,587,508 shares of Common Stock with an aggregate cost of $258,912,057.
The tax basis distributions during the year ended December 31, 2020 are as follows: ordinary distributions of $4,241,853 and net capital gains distributions of $67,658,671. As of December 31, 2020, distributable earnings on a tax basis totaled $681,564,932 consisting of $10,330,141 from undistributed net capital gains and $671,234,791 from net unrealized appreciation on investments. Reclassifications arising from permanent “book/tax” difference reflect non-tax deductible expenses during the year ended December 31, 2020. As a result, additional paid-in capital was decreased by $763,267 and total distributable earnings was increased by $763,267. Net assets were not affected by this reclassification. As of December 31, 2020, the Company had wash loss deferrals of $511,174 and straddle loss deferrals of $2,292,993.
6. Officers’ Compensation – The aggregate compensation accrued and paid by the Company during the three months ended March 31, 2021 to its officers (identified on back cover) amounted to $1,792,083.
7. Benefit Plans – The Company has funded (qualified) and unfunded (supplemental) noncontributory defined benefit pension plans that are available to its employees. The pension plans provide defined benefits based on years of service and final average salary with an offset for a portion of social security covered compensation. The components of the net periodic benefit cost (income) of the plans for the three months ended March 31, 2021 were:
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Service cost
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$170,699
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Interest cost
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179,713
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Expected return on plan assets
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(429,879
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)
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Amortization of recognized net actuarial loss
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151,188
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Net periodic benefit cost
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$71,721
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