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Significant Portfolio Companies
Set forth below is a brief description of each portfolio company in which we have made an investment whose fair value represented greater than 5% of our total assets as of December 31, 2023. Because of the relative size of our investments in these companies, we are exposed to a greater degree to the risks associated with these companies.
Brunswick Bowling Products, Inc. (“Brunswick”)
Our investments in Brunswick had an aggregate fair value of $68.1 million as of December 31, 2023, and included $6.7 million of preferred stock, at cost, and two secured first lien term loans with an aggregate principal amount outstanding of $24.6 million, which matures on January 23, 2026.
Founded in 1845, Brunswick, headquartered in Muskegon, Michigan, is a leader in the recreation industry and provides industry expertise, products, installation and maintenance for the development and renovation of new and existing bowling centers as well as
mixed-use
facilities across the entertainment industry.
Our Adviser has entered into a services agreement with Brunswick, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by Brunswick and our Adviser.
Because of the relative size of this investment, we are significantly exposed to the risks associated with Brunswick’s business. Brunswick’s business is dependent on the development and construction of new bowling and bowling-related venues, and a decline in the popularity of these venues would have a negative impact on Brunswick’s financial performance. Additionally, the death, disability or departure by one or more of Brunswick’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s managing directors, Christopher Lee, serves as a director of Brunswick’s board. Brunswick’s principal executive office is located at 525 West Laketon Ave., Muskegon, Michigan 49441.
Dema/Mai Holdings, Inc. (“Dema”)
Our investments in Dema had an aggregate fair value of $64.4 million as of December 31, 2023, and included $21.0 million of preferred stock, at cost, and a secured first lien term loan with an aggregate principal amount outstanding of $38.3 million, which matures on July 1, 2027.
Dema is the largest provider of plumbing construction services to national homebuilders focused on single family houses in the Colorado Front Range. Dema is also a leading provider of mechanical contracting services to multi-family developers in the Denver metropolitan area.
Our Adviser has entered into a services agreement with Dema, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by Dema and our Adviser.
Because of the relative size of this investment, we are significantly exposed to the risks associated with Dema’s business. Dema’s business is dependent on continued housing development in Colorado’s Front Range. Additionally, the death, disability or departure by one or more of Dema’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s principals, Daniel Crump, serves as a director of Dema’s board. Dema’s principal executive office is located at 7384 S Alton Way, Centennial, Colorado 80112.
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Educators Resource, Inc. (“Educators Resource”)
Our investments in Educators Resource had an aggregate fair value of $50.2 million as of December 31, 2023, and included $8.6 million of preferred stock, at cost, and a secured first lien term loan with a principal amount outstanding of $20.0 million, which matures on March 31, 2025.
Educators Resource is a leading wholesale distributor of school supplies
and K-12 supplemental
teaching materials to market
leading e-retailers and brick-and-mortar stores
nationwide. By supplying more than 20,000 educational SKUs, Educators Resource is
a one-stop shop
for school supplies for school districts, teachers, and parents nationwide.
Our Adviser has entered into a services agreement with Educators Resource, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by Educators Resource and our Adviser.
Because of the relative size of this investment, we are exposed to the risks associated with Educators Resource’s business. Educators Resource’s business is dependent on ample supply of educational products from its vendors and labor availability for fulfilling orders in the warehouse. Additionally, the death, disability or departure by one or more of Educators Resource’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s managing directors, Erika Highland, serves as a director of Educators Resource’s board. Educators Resource’s principal executive office is located at 2575 Schillinger Rd N, Semmes, Alabama 36575.
Horizon Facilities Services, Inc. (“Horizon”)
Our investments in Horizon had an aggregate fair value of $63.1 million as of December 31, 2023, and included preferred stock with zero cost basis, and a secured first lien term loan with an aggregate principal amount outstanding of $57.7 million, which matures on June 28, 2026.
Horizon is a leading provider of outsourced services to the rental car industry under the Managed Labor Solutions brand. Additionally, Horizon provides commercial janitorial services under the Professional Maintenance Co. brand. Horizon partners with its customers through a transaction-based pricing model which enhances customer cost visibility and operational efficiency.
Our Adviser has entered into a services agreement with Horizon, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by Horizon and our Adviser.
Because of the relative size of this investment, we are significantly exposed to the risks associated with Horizon’s business. Horizon’s business is dependent on the continued volume of cars rented, and the car rental industry is exposed to economic cycles as car rental expenditures are highly correlated with economic activity. Horizon has two large customers and the loss of either or both customers would have a significant impact on the company’s financial performance. Additionally, the death, disability, or departure by one or more of Horizon’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s managing directors, Christopher Lee, serves as a director of Horizon’s board. Horizon’s principal executive office is located at 5235 Oakview Drive, Allentown, Pennsylvania 18104.
Nocturne Luxury Villas, Inc. (“Nocturne”)
Our investments in Nocturne had an aggregate fair value of $80.6 million as of December 31, 2023, and included $6.6 million of preferred stock, at cost, a secured first lien revolving line of credit with a principal
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amount outstanding of $4.0 million, which matures on June 2, 2024, and a secured first lien term loan with a principal amount outstanding of $61.1 million, which matures on June 3, 2026.
Nocturne isa platform built to acquire and manage leading villa rental management companies located throughout North America, with properties in the Caribbean, Telluride, Cabo San Lucas, Santa Barabara, and the 30A corridor of Florida’s Gulf Coast. Across these five markets, Nocturne manages over 1,000 properties.
Our Adviser has entered into a services agreement with Nocturne, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by Nocturne and our Adviser.
Because of the relative size of this investment, we are exposed to the risks associated with Nocturne’s business. Nocturne’s business is dependent on continued activity in the domestic luxury travel market, which could be negatively impacted by travel shifting to Europe or a pronounced slowdown in the overall economy. Additionally, the death, disability or departure by one or more of Nocturne’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s managing directors, Erika Highland, serves as a director of Nocturne’s board. Nocturne’s principal executive office is located at 28 Pelham St, Newport, Rhode Island 02840.
Nth Degree Investment Group, LLC (“Nth Degree”)
Our investments in Nth Degree had an aggregate fair value of $61.2 million as of December 31, 2023, and included $6.2 million of common stock, at cost, and a secured second lien term loan with a principal amount outstanding of $25.0 million, which matures on June 28, 2029.
Founded in 1979, Nth Degree is a multifaceted
event marketing and management services organization. Nth Degree operates three divisions. The labor division provides installation and dismantle services for tradeshow exhibits across the country. Nth Degree is the largest exhibitor-appointed provider of this service in the U.S. The events division provides event management services for large corporate events, managing logistics, sales and sponsorship, education services, and all other facets of these events. The Fern Exposition Services division is a leading trade show service provider and general contractor.
Our Adviser has entered into a services agreement with Nth Degree, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by Nth Degree and our Adviser.
Because of the relative size of this investment, we are significantly exposed to the risks associated with Nth Degree’s business. The tradeshow industry is exposed to economic cycles as tradeshow expenditures are highly correlated with economic activity. Nth Degree’s events division has two large customers and the loss of either or both customers would have a significant impact on the company’s financial performance, however, these customers do not represent a significant percentage of the company’s overall revenue. Additionally, the death, disability, or departure by one or more of Nth Degree’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s principals, Mitchell Grant, serves as a director of Nth Degree’s board. Nth Degree’s principal executive office is located at 3237 Satellite Boulevard Suite 600, Duluth, Georgia 30096.
Old World Christmas, Inc. (“Old World”)
Our investments in Old World had an aggregate fair value of $75.6 million as of December 31, 2023, and included preferred stock with zero cost basis, and a secured first lien term loan with a principal amount outstanding of $43.0 million, which matures on December 17, 2025.
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Old World is a designer, manufacturer, and marketer of premium figural glass Christmas ornaments.
Our Adviser has entered into a services agreement with Old World, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by Old World and our Adviser.
Because of the relative size of this investment, we are exposed to the risks associated with Old World’s business. Old World’s business is largely dependent on sales in physical retail stores within the United States, and the continued decline of physical retail could have a negative impact on Old World’s financial performance. Additionally, the death, disability or departure by one or more of Old World’s senior managers could have a negative impact on its business and operations.
One of our Adviser’s managing directors, Erika Highland, serves as a director of Old World’s board. Old World’s principal executive office is located at 4007 East Main Ave., Spokane, Washington 99202.
SFEG Holdings Inc. (“SFEG”)
Our investments in SFEG had an aggregate fair value of $92.3 million as of December 31, 2023, and included $30.7 million of common stock, at cost, and a secured second lien term loan with an aggregate principal amount outstanding of $54.6 million, which matures on October 19, 2028.
SFE Group is an industry leading designer & provider of Specialized Fabrication, Machining & Welding equipment headquartered out of the global energy hub of Houston in the USA, but serving customers globally with a presence in 30+ countries through world class facilities and extended network of distributors and partners. SFE Group owns brands like Mathey Dearman, Climax, H&S Tools, Axxair & Magnatech, who are industry pioneers in the field of portable machine fabrication & welding. Utilized for high precision fabrication of critical industrial & infrastructure assets, SFE Group’s
products & unrivaled engineering capabilities, enable mission-critical MRO and manufacturing jobs to be performed safer, faster & more cost effectively.
Our Adviser has entered into a services agreement with SFEG, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by SFEG and our Adviser.
Because of the relative size of this investment, we are significantly exposed to the risks associated with SFEG’s business. SFEG’s business serves the industrial markets, and so is dependent on the level of economic activity, particularly around the energy, construction, and general industrial markets. Additionally, the death, disability or departure by one or more of SFEG’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s managing directors, Christopher Lee, serves as a director of SFEG’s board. SFEG’s principal executive office is located at 4433 South Dr. Houston, Texas 77053.
The E3 Company, LLC (“E3”)
Our investments in E3 had an aggregate fair value of $46.0 million as of December 31, 2023, and included $11.2 million of preferred stock, at cost, a secured first lien revolving line of credit with a principal amount outstanding of $1.0 million, which matures on February 8, 2025, and a secured first lien term loan with a principal amount outstanding of $33.8 million, which matures on September 8, 2028.
E3 is focused on enhancing safety in the oilfield, which they do by designing, manufacturing, and servicing automated pressure management systems used by oil and gas companies in the well completion process. These patented systems increase safety in the oilfield by removing humans from the red zone, which is increasingly important to oil and gas companies.
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Our Adviser has entered into a services agreement with E3, pursuant to which our Adviser has agreed to advise and provide certain management and consulting services as mutually agreed upon by E3 and our Adviser.
Because of the relative size of this investment, we are significantly exposed to the risks associated with E3’s business. E3 is dependent on the continued development of domestic oil and gas resources, as well as a continued focus by oil and gas companies on improving the safety of operating conditions in the oilfield. Additionally, the death, disability or departure by one or more of E3’s senior managers could have a negative impact on its business and operations.
One of the Adviser’s managing directors, Christopher Lee, serves as a director of E3’s board. E3’s principal executive office is located at 301 Marvin A. Smith Road, Kilgore, Texas 75662.
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The information contained under the captions “
Proposal 1 — Election of Directors
,” “
Information Regarding the Board of Directors and Corporate Governance — Director Independence
,” “
,” “
” and “
” in our most recent
Definitive Proxy Statement with respect to an annual meeting of our stockholders incorporated by reference into Part III of our Annual Report on
Form 10-K
and “
” in Part I. Item 1 of our most recent Annual Report on
Form 10-K is incorporated by reference herein.
We are externally managed by our Adviser, an affiliate of ours, under an investment advisory agreement between us and the Adviser (the “Advisory Agreement”) and another of our affiliates, the Administrator, provides administrative services to us pursuant to an administrative agreement (the “Administration Agreement”). Each of the Adviser and Administrator is a privately held company that is currently indirectly owned and controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone and Terry Lee Brubaker, our chief operating officer, also serve on the board of directors of the Adviser, the board of managers of the Administrator, and serve as executive officers of the Adviser and the Administrator. Our Adviser directly employs personnel that manage our portfolio investments and directly pays our payroll, benefits and general expenses regarding such personnel. The Administrator employs, among others, our chief financial officer and treasurer, chief valuation officer, chief compliance officer, general counsel and secretary (who also serves as the president of the Administrator) and their respective staffs. In addition to the fees payable under the Advisory Agreement and the Administration Agreement (as described below), we pay our direct expenses, including directors’ fees, legal and accounting fees and stockholder related expenses. The Adviser and Administrator have extensive experience in our lines of business and also provide investment advisory and administrative services, respectively, to our affiliates, including the Affiliated Public Funds. In the future, the Adviser and Administrator may provide investment advisory and administrative services, respectively, to other funds and companies, both public and private.
The principal executive office of the Adviser and Administrator is 1521 Westbranch Drive, Suite 100, McLean, Virginia 22102.
Management Services Provided to Us by our Adviser
Our Adviser is a Delaware corporation registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our Board of Directors, our Adviser provides investment advisory and management services to us. Under the terms of our Advisory Agreement, our Adviser has investment discretion with respect to our capital and, in that regard:
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determines the composition of our portfolio, the nature and timing of the changes to our portfolio, and the manner of implementing such changes; |
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identifies, evaluates, and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); |
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closes and monitors the investments we make; and |
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makes available on our behalf, and provides if requested, managerial assistance to our portfolio companies. |
Our Adviser’s services under the Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities, provided that its services to us are not impaired.
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Our Adviser takes a team approach to portfolio management; however, the following persons are primarily responsible for
the day-to-day management
of our portfolio: David Gladstone, Terry Lee Brubaker and David Dullum, whom we refer to collectively as the Portfolio Managers. In addition, our Adviser has an investment committee that evaluates and approves each of our investments. This investment committee is currently comprised of Messrs. Gladstone, Brubaker, and Dullum, along with Mr. John Sateri, who is a managing director of our Adviser; and Ms. Laura Gladstone, who is a managing director of our Adviser. Our investment decisions are made on our behalf by the investment committee of our Adviser upon approval of at least 75% of the investment committee.
Mr. Gladstone has served as the chairman and the chief executive officer of the Adviser, since he founded the Adviser in 2002, along with Mr. Brubaker. Mr. Brubaker has served as the vice chairman and chief operating officer of the Adviser since 2002 and served as secretary of the Adviser from 2002 to February 2011. Mr. Dullum has served as an executive managing director of the Adviser since 2008. Mr. Sateri has been a managing director of our Adviser since 2007. Ms. Gladstone has been a managing director of our Adviser since 2001. Ms. Gladstone and Mr. Sateri each have over 20 years of experience in investing in middle market companies and continue to hold the role of managing director with the Company and the Adviser. For more complete biographical information on Messrs. Gladstone, Brubaker and Dullum, see “Proposal 1 — Election of Directors” in our most recent Definitive Proxy Statement for our Annual Meeting of Stockholders which is incorporated by reference herein.
As discussed above, the Portfolio Managers are all officers or directors, or both, of our Adviser, and Messrs. Gladstone and Brubaker are managers of the Administrator. Mr. Gladstone is also the sole stockholder of the parent company of the Adviser and the Administrator. Although we believe that the terms of the Advisory Agreement and the Administration Agreement are no less favorable to us than those that could be obtained from unaffiliated third parties in arms’ length transactions, our Adviser and Administrator and their officers and directors have a material interest in the terms of these agreement.
Our Adviser and Administrator provide investment advisory and administration services, respectively, to the other Affiliated Public Funds. As such, certain of our Portfolio Managers also are primarily responsible for
the day-to-day management
of the portfolios of other pooled investment vehicles in the Affiliated Public Funds that are managed by the Adviser. As of the date hereof, Messrs. Gladstone, Brubaker and Robert Marcotte (the president of Gladstone Capital and an executive managing director of the Adviser) are primarily responsible
for the day-to-day management of
the portfolio of Gladstone Capital, another publicly-traded BDC; Messrs. Gladstone, Brubaker and Arthur Cooper (the president of Gladstone Commercial and an executive managing director of the Adviser) are primarily responsible for
the day-to-day management
of Gladstone Commercial, a publicly-traded real estate investment trust; and Messrs. Gladstone and Brubaker are primarily responsible for
the day-to-day management
of Gladstone Land, a publicly traded real estate investment trust. As of December 31, 2023, the Adviser had an aggregate of approximately $4.2 billion in total assets under management in the Company and the Affiliated Public Funds, all of which is subject to performance-based advisory fees and for which Messrs. Gladstone and Brubaker are primarily responsible
for the day-to-day management.
As discussed above, the Portfolio Managers who are our executive officers and directors, and the officers and directors of the Adviser, serve or may serve as officers, directors, or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by our affiliates. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders. For example, Mr. Gladstone, our chairman and chief executive officer, is chairman of the board and chief executive officer of the Adviser, the Administrator and the Affiliated Public Funds. In addition, Mr. Brubaker, our chief operating officer, is vice chairman and chief operating officer of the Adviser, the
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Administrator and the Affiliated Public Funds. Mr. Dullum, our president, is an executive managing director of the Adviser. Moreover, the Adviser may establish or sponsor other investment vehicles which from time to time may have potentially overlapping investment objectives with ours and accordingly may invest in, whether principally or secondarily, asset classes we target. While the Adviser generally has broad authority to make investments on behalf of the investment vehicles that it advises, the Adviser has adopted investment allocation procedures to address these potential conflicts and intends to direct investment opportunities to the Company or the Affiliated Public Fund with the investment strategy that most closely fits the investment opportunity. Nevertheless, the management of the Adviser may face conflicts in the allocation of investment opportunities to other entities managed by the Adviser. As a result, it is possible that we may not be given the opportunity to participate in certain investments made by other funds managed by the Adviser.
In certain circumstances, we may make investments in a portfolio company in which one of our affiliates has or will have an investment, subject to satisfaction of any regulatory restrictions and, where required, the prior approval of our Board of Directors. As of December 31, 2023, our Board of Directors has approved the following types of transactions:
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Our affiliate, Gladstone Commercial, may, under certain circumstances, lease property to portfolio companies that we do not control. We may pursue such transactions only if (i) the portfolio company is not controlled by us or any of our affiliates, (ii) the portfolio company satisfies the tenant underwriting criteria of Gladstone Commercial, and (iii) the transaction is approved by a majority of our independent directors and a majority of the independent directors of Gladstone Commercial. We expect that any such negotiations between Gladstone Commercial and our portfolio companies would result in lease terms consistent with the terms that the portfolio companies would be likely to receive were they not portfolio companies of ours. |
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We may invest simultaneously with our affiliate Gladstone Capital in senior loans in the broadly syndicated market whereby neither we nor any affiliate has the ability to dictate the terms of the loans. |
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Pursuant to the Co-Investment Order, under certain circumstances, we may co-invest with Gladstone Capital and any future BDC or closed-end management investment company that is advised by the Adviser (or sub-advised by the Adviser if it controls the fund) or any combination of the foregoing subject to the conditions included therein. |
Certain of our officers, who are also officers of the Adviser, may from time to time serve as directors of certain of our portfolio companies. If an officer serves in such capacity with one of our portfolio companies, such officer will owe fiduciary duties to stockholders of the portfolio company, which duties may from time to time conflict with the interests of our stockholders.
In the course of our investing activities, we will pay management and incentive fees to the Adviser and will reimburse the Administrator for certain expenses it incurs. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through our investors themselves making direct investments. As a result of this arrangement, there may be times when the management team of the Adviser has interests that differ from those of our stockholders, giving rise to a conflict. In addition, as a BDC, we make available significant managerial assistance to our portfolio companies and provide other services to such portfolio companies. While neither we nor the Adviser currently receive fees in connection with managerial assistance, the Adviser and Gladstone Securities have, at various times, provided other services to certain of our portfolio companies and received fees for services other than managerial assistance as discussed in “
Business — Ongoing Management of Investments and Portfolio Company Relationships — Managerial Assistance and Services”
in Part I, Item 1 of our most recent Annual Report on Form
10-K.
Portfolio Manager Compensation
The Portfolio Managers receive compensation from our Adviser in the form of a base salary plus a bonus. Each Portfolio Manager’s base salary is determined by a review of salary surveys for persons with comparable
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experience who are serving in comparable capacities in the industry. Each Portfolio Manager’s base salary is set and reviewed yearly. Like all employees of the Adviser, a Portfolio Manager’s bonus is tied to
the post-tax
performance of the Adviser and the entities that it advises. A Portfolio Manager’s bonus increases or decreases when the Adviser’s income increases or decreases. The Adviser’s income, in turn, is directly tied to the management and incentive fees earned in managing its investment funds, including Gladstone Investment. Pursuant to the Advisory Agreement, the Adviser receives a base management fee and an incentive fee based on net investment income in excess of the hurdle rates and capital gains as set out in the Advisory Agreement. During the fiscal years ended March 31, 2023, 2022 and 2021, we incurred net fees of approximately $20.2 million, $21.0 million and $17.9 million, respectively, to our Adviser under the Advisory Agreement. See “
Business — Transactions with Related Parties – Investment Advisory and Management Agreement
” in Part I, Item 1 of our most recent Annual Report on Form
10-K
for a full discussion of how such fees are computed and paid. A discussion regarding the basis for the Board of Directors approving the Advisory Agreement is available in our Annual Report on Form
10-K
for the fiscal year ended March 31, 2023.
Portfolio Manager Beneficial Ownership
The following table sets forth, as of December 31, 2023, the dollar range of equity securities that are beneficially owned by each of our Portfolio Managers.
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Dollar Range of Equity Securities of
the Company Owned by
Directors(1)(2) |
David Gladstone |
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Over $1,000,000 |
Terry Lee Brubaker |
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Over $1,000,000 |
David A.R. Dullum |
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Over $1,000,000 |
| (1) |
Ownership is calculated in accordance with Rule 16-1(a)(2) of the Exchange Act. |
| (2) |
The dollar range of equity securities beneficially owned is calculated by multiplying the closing price of the respective class as reported on Nasdaq as of December 31, 2023, times the number of shares of the respective class so beneficially owned and aggregated accordingly. |
CONTROL PERSONS AND PRINCIPAL STOCKHOLDERS
The information contained under the captions “
Security Ownership of Certain Beneficial Owners and Management
” in our most recent
Definitive Proxy Statement with respect to an annual meeting of our stockholders incorporated by reference into Part III of our Annual Report on Form
10-K
is incorporated by reference herein.
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DIVIDEND REINVESTMENT PLAN
Our transfer agency and services agreement with our transfer agent, Computershare, Inc. (“Computershare”), authorizes Computershare to provide a dividend reinvestment plan that allows for reinvestment of our distributions on behalf of our common stockholders upon their election as provided below. As a result, if our Board of Directors authorizes, and we declare, a cash dividend, then our common stockholders who have “opted in” to the dividend reinvestment plan will not receive cash dividends but, instead, such cash dividends will automatically be reinvested in additional shares of our common stock.
Pursuant to the dividend reinvestment plan, if your shares of our common stock are registered in your own name you can have all distributions reinvested in additional shares of our common stock by Computershare, as the plan agent, if you enroll in the dividend reinvestment plan by delivering an enrollment form to the plan agent prior to the corresponding dividend record date, available at
www.computershare.com/investor
. The plan agent will effect purchases of our common stock under the dividend reinvestment plan in the open market.
If you do not elect to participate in the dividend reinvestment plan, you will receive all distributions in cash paid by check mailed directly to you (or if you hold your shares in street or other nominee name, then to your nominee) as of the relevant record date, by the plan agent, as our distribution disbursing agent. If your shares are held in the name of a broker or nominee, you can transfer the shares into your own name and then enroll in the dividend reinvestment plan or contact your broker or nominee to determine if they offer a dividend reinvestment plan.
The plan agent serves as agent for the holders of our common stock in administering the dividend reinvestment plan. After we declare a dividend, the plan agent will, as agent for the participants, receive the cash payment and use it to buy common stock on Nasdaq or elsewhere for the participants’ accounts. The price of the shares will be the weighted average price of all shares purchased by the plan agent on such trade date or dates.
Stockholders can obtain additional information about, and participants in the dividend reinvestment plan may withdraw from, the dividend reinvestment plan at any time by contacting Computershare online at
www.computershare.com/investor
, via telephone at (781)
575-2000
or by mailing a request to 150 Royall Street, Canton, Massachusetts 02021 or by selling or transferring all applicable shares. If the plan agent receives a request to withdraw near a dividend record date, the plan agent, in its sole discretion, may either distribute such dividends in cash or reinvest the shares on behalf of the withdrawing participant. If such dividends are reinvested, the plan agent will process the withdrawal as soon as practicable, but in no event later than five business days after the reinvestment is completed.
The plan agent will maintain each participant’s account in the dividend reinvestment plan and will furnish periodic written confirmations of all transactions in such account, including information needed by the stockholder for personal and tax records. Common stock in the account of each dividend reinvestment plan participant will be held by the plan agent in
non-certificated
form in the name of such participant; however participants may request that such shares be certificated in their name. The plan agent will provide proxy materials relating to our stockholders’ meetings that will include those shares purchased through the plan agent, as well as shares held pursuant to the dividend reinvestment plan.
We pay the plan agent’s fees for the handling or reinvestment of dividends and other distributions. If a participant elects by written notice to the plan agent prior to termination of his or her account to have the plan agent sell part or all of the shares held by the plan agent in the participant’s account and remit the proceeds to the participant, the plan agent is authorized to deduct a transaction fee of $15.00 for each batch order sale and $25.00 for each market order, day limit order and
limit order sale, plus brokerage commissions of $0.10 per share, from the proceeds. The participants in the dividend reinvestment plan will also bear a transaction fee of up to $5.00, plus per share brokerage commissions of $0.10, incurred with respect to open market purchases.
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Distributions are taxable whether paid in cash or reinvested in additional shares, and the reinvestment of distributions pursuant to the dividend reinvestment plan will not relieve participants of any U.S. federal income tax or state income tax that may be payable or required to be withheld on such distributions. For more information regarding taxes that our stockholders may be required to pay, see “
Material U.S. Federal Income Tax Considerations.
”
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
This is a general summary of certain material U.S. federal income tax considerations applicable to us, to our qualification and taxation as a RIC for U.S. federal income tax purposes under Subchapter M of the Code and to the ownership and disposition of our common stock. This discussion applies only to beneficial owners that acquired our shares in an initial offering.
This summary does not purport to be a complete description of all the income tax considerations applicable to an investment in our common stock. In particular, we have not described certain considerations that may be relevant to certain types of stockholders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax,
tax-exempt
organizations, insurance companies, dealers in securities, a trader in securities that elects to use a
method of accounting for its securities holdings, pension plans and trusts, financial institutions, real estate investment trusts, RICs, banks and other financial institutions, stockholders that are treated as partnerships for U.S. federal income tax purposes, U.S. persons whose functional currency is not the U.S. dollar,
non-U.S.
stockholders (as defined below) engaged in a trade or business in the United States or entitled to claim the benefits of an applicable income tax treaty, persons who have ceased to be U.S. citizens or to be taxed as residents of the United States, “controlled foreign corporations,” “passive foreign investment companies” and persons that will hold our common stock as a position in a “straddle,” “hedge” or as part of a “constructive sale” for U.S. federal income tax purposes or to the owners or partners of a stockholder. If we issue preferred stock that may be convertible into or exercisable or exchangeable for securities or other property or preferred stock with other terms that may have different U.S. federal income tax consequences than those described in this summary, the U.S. federal income tax consequences of that preferred stock will be described in the relevant prospectus supplement. This summary assumes that investors hold our common stock as capital assets (within the meaning of the Code). The discussion is based upon the Code, its legislative history, existing and proposed U.S. Treasury regulations and published rulings and court decisions all as currently in effect, all of which are subject to change or differing interpretations, possibly retroactively, which could affect the continuing validity of this discussion. We have not sought, and do not expect to seek, any ruling from the Internal Revenue Service (“IRS”) regarding any matter discussed herein, and this discussion is not binding on the IRS. Accordingly, there can be no assurance that the IRS will not assert, and a court will not sustain, a position contrary to any of the tax consequences discussed herein.
This summary does not discuss any aspect of state, local or foreign tax laws, or the U.S. estate or gift tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invest in
tax-exempt
securities or certain other investment assets. For purposes of this discussion, a “U.S. stockholder” is a beneficial owner of our common stock who is for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States; |
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a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia; |
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a trust, if a court within the United States has primary supervision over its administration and one or more U.S. persons (as defined in the Code) have the authority to control all of its substantial decisions, or if the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes; or |
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source. |
For purposes of this discussion, a
“non-U.S.
stockholder” is a beneficial owner of our common stock that is not a U.S. stockholder.
An investment in shares is complex, and certain aspects of the U.S. tax treatment of such investment are not certain.
Tax matters are complicated, and the tax consequences of an investment in our common stock will depend on the facts of a stockholder’s particular situation. Holders of our common stock are strongly
23
encouraged to consult their tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition of our common stock, as well as the effect of state, local and foreign tax laws, and the effect of any possible changes in tax laws.
The information contained under the subheadings “
”, “
Failure to Qualify as a RIC
” and “
” under the caption “
Material U.S. Federal Income Tax Considerations
” in Part I. Item 1 of our most recent Annual Report on Form
10-K
is incorporated by reference herein.
Our Investments — General
Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (1) treat dividends that would otherwise constitute qualified dividend income as
non-qualified
dividend income, (2) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (3) convert lower-taxed long-term capital gain into higher-taxed short-term capital gain or ordinary income, (4) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (5) cause us to recognize income or gain without receipt of a corresponding cash payment, (6) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (7) adversely alter the characterization of certain complex financial transactions and (8) produce income that will not be qualifying income for purposes of the 90% Gross Income Test. We intend to monitor our transactions and may make certain tax elections in order to mitigate the effects of these provisions; however, no assurances can be given that we will be eligible for any of those tax elections or that any elections we make will fully mitigate the effects of these provisions.
Gain or loss recognized by us from securities and other financial assets acquired by us, as well as any loss attributable to the lapse of options, warrants, or other financial assets taxed as options, generally will be treated as capital gain or loss. The gain or loss generally will be long-term or short-term depending on how long we held a particular security or other financial asset. However, gain on the lapse of an option issued by us will be treated as short-term capital gain.
A portfolio company in which we invest may face financial difficulties that require us to
work-out,
modify or otherwise restructure our investment in the portfolio company. Any such transaction could, depending upon the specific terms of the transaction, cause us to recognize taxable income without a corresponding receipt of cash, which could affect our ability to satisfy the Annual Distribution Requirement or the Excise Tax Distribution Requirements or result in unusable capital losses and future
non-cash
income. Any such transaction could also result in us receiving assets that give rise to
non-qualifying
income for purposes of the 90% Gross Income Test.
Our investment in
non-U.S.
securities may be subject to
non-U.S.
income, withholding and other taxes. Stockholders generally will not be entitled to claim a U.S. foreign tax credit or deduction with respect to
non-U.S.
taxes paid by us.
If we purchase shares in a “passive foreign investment company” (a “PFIC”), we may be subject to U.S. federal income tax on a portion of any “excess distribution” received on, or any gain from the disposition of, such shares even if we distribute that income as a taxable dividend to the holders of our common stock. Additional charges in the nature of interest generally will be imposed on us in respect of deferred taxes arising from any such excess distribution or gain. If we invest in a PFIC and elect to treat the PFIC as a “qualified electing fund” under the Code (a “QEF”), in lieu of the foregoing requirements, we will be required to include in income each year our proportionate share of the ordinary earnings and net capital gain of the QEF, even if that income is not distributed by the QEF. Any required inclusions from the QEF election will be considered “good income” for purposes of the 90% Gross Income Test. Alternatively, we may be able to elect to
at
24
the end of each taxable year our shares in a PFIC; in this case, we will recognize as ordinary income any increase in the value of those shares, and as ordinary loss any decrease in such value to the extent that any such decrease does not exceed prior increases included in our income. Our ability to make either election will depend on factors beyond our control, and is subject to restrictions which may limit the availability of the benefit of these elections. Under either election, we may be required to recognize in a year income in excess of any distributions we receive from PFICs and any proceeds from dispositions of PFIC stock during that year, and that income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of determining whether we satisfy the Excise Tax Distribution Requirements. See “
— Taxation as a Regulated Investment Company
” above.
Our functional currency is the U.S. dollar for U.S. federal income tax purposes. Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time we accrue income, expenses or other liabilities denominated in a currency other than the U.S. dollar and the time we actually collect that income or pay that expense or liability are generally treated as ordinary income or loss. Similarly, gains or losses on foreign currency forward contracts, the disposition of debt denominated in a foreign currency, and other financial transactions denominated in a foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.
Taxation of U.S. Stockholders
The following discussion applies only to U.S. stockholders. If you are not a U.S. stockholder, this section does not apply to you. U.S. stockholders who have elected to participate in our dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Any dividends or distributions reinvested under the plan will nevertheless remain taxable to U.S. stockholders. A U.S. stockholder will have an adjusted basis in the additional common stock purchased through the plan equal to the dollar amount that would have been received if the U.S. stockholder had received the dividend or distribution in cash, unless we were to issue new shares that are trading at or above net asset value (“NAV”), in which case, the U.S. stockholder’s basis in the new shares would generally be equal to their fair market value. The additional shares will have a new holding period commencing on the day following the day on which the shares are credited to the U.S. stockholder’s account.
For any period during which we qualify as a RIC for U.S. federal income tax purposes, distributions to our stockholders attributable to our Investment Company Taxable Income generally will be taxable as ordinary income to our stockholders to the extent of our current or accumulated earnings and profits. We first allocate our earnings and profits to distributions to our preferred stockholders, if any, and then to distributions to our common stockholders based on priority in our capital structure. Any distributions in excess of our earnings and profits will first be treated as a return of capital to the extent of the stockholder’s adjusted basis in his or her shares of stock and thereafter as capital gain. Distributions of our long-term capital gains, reported by us as such, will be taxable to our stockholders as long-term capital gains regardless of the stockholder’s holding period of the stock and whether the distributions are paid in cash or invested in additional stock. Corporate U.S. stockholders generally are eligible for the 50% dividends received deduction with respect to ordinary income dividends received from us, but only to the extent such amount is attributable to dividends received by us from taxable domestic corporations.
A RIC that has two or more classes of stock generally is required to allocate to each class proportionate amounts of each type of its income (such as ordinary income, capital gains, qualified dividend income and dividends qualifying for the dividends-received deduction) based upon the percentage of total distributions paid to each class for the tax year. Accordingly, for any tax year in which we have common shares and preferred shares, we intend to allocate capital gain distributions, distributions of qualified dividend income, and distributions qualifying for the dividends-received deduction, if any, between our common shares and preferred shares in proportion to the total distributions paid to each class with respect to such tax year.
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Any distribution declared by us in October, November or December of any calendar year, payable to our stockholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it were paid by us and received by our stockholders on December 31 of the previous year. In addition, we may elect (in accordance with Section 855(a) of the Code) to relate a distribution back to the prior taxable year if we (1) declare such distribution prior to the later of the extended due date for filing our return for that taxable year or the 15th day of the ninth month following the close of the taxable year, (2) make the election in that return, and (3) distribute the amount in the
12-month
period following the close of the taxable year but not later than the first regular distribution payment of the same type following the declaration. Any such election will not alter the general rule that a stockholder will be treated as receiving a distribution in the taxable year in which the distribution is made, subject to the October, November, December rule described above.
If a common stockholder participates in our “opt in” dividend reinvestment plan, then the common stockholder will have their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Any distributions reinvested under the plan will be taxable to the common stockholder to the same extent, and with the same character, as if the common stockholder had received the distribution in cash. The common stockholder will have an adjusted basis in the additional common shares purchased through the plan equal to the dollar amount that would have been received if the U.S. stockholder had received the dividend or distribution in cash, unless we were to issue new shares that are trading at or above net asset value, in which case, the U.S. stockholder’s basis in the new shares would generally be equal to their fair market value. The additional common shares will have a new holding period commencing on the day following the day on which the shares are credited to the common stockholder’s account. The plan agent purchases shares in the open market in connection with the obligations under the plan.
We expect to be treated as a “publicly offered regulated investment company.” As a “publicly offered regulated investment company,” in addition to our dividend reinvestment plan, we may choose to pay a majority of a required dividend in stock rather than cash. In order for the distribution to qualify for the Annual Distribution Requirement, the dividend must be payable at the election of each shareholder in cash or common stock (or a combination of the two), but may have a “cash cap” that limits the total amount of cash paid to not less than 20% of the entire distribution. If shareholders in the aggregate elect to receive an amount of cash greater than our cash cap, then each shareholder who elected to receive cash will receive a pro rata share of the cash and the rest of their distribution in our stock. The value of the portion of the distribution made in common stock will be equal to the amount of cash for which the common stock is substituted, and U.S. stockholders will be subject to tax on those amount as though they had received cash.
We may elect to retain our net capital gain or a portion thereof for investment and be taxed at corporate-level tax rates on the amount retained, and therefore designate the retained amount as a “deemed dividend.” In this case, we may report the retained amount as undistributed capital gains to our U.S. stockholders, who will be treated as if each U.S. stockholder received a distribution of its pro rata share of this gain, with the result that each U.S. stockholder will (i) be required to report its pro rata share of this gain on its tax return as long-term capital gain, (ii) receive a refundable tax credit for its pro rata share of tax paid by us on the gain and (iii) increase the tax basis for its shares of common stock by an amount equal to the deemed distribution less the tax credit. In order to utilize the deemed distribution approach, we must provide written notice to our stockholders prior to the expiration of 60 days after the close of the relevant taxable year. We cannot treat any of our investment company taxable income as a “deemed distribution.”
If a U.S. stockholder purchases shares of our common stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the U.S. stockholder will be subject to tax on the distribution even though it economically represents a return of investment.
A U.S. stockholder generally will recognize taxable gain or loss if the U.S. stockholder sells or otherwise disposes of the shares of our common stock. Any gain arising from such sale or disposition generally will be
26
treated as long-term capital gain or loss if the U.S. stockholder has held the shares for more than one year. Otherwise, it will be classified as short-term capital gain or loss. However, any capital loss arising from the sale or disposition of shares of our stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares. All or a portion of any loss realized upon a taxable disposition of shares will be disallowed under the Code’s “wash sale” rule if other substantially identical shares are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss. Under the tax laws in effect as of the date of this filing, individual U.S. stockholders are subject to a maximum federal income tax rate of 20% on their net capital gain (i.e. the excess of realized net long-term capital gain over realized net short-term capital loss for a taxable year) including any long-term capital gain derived from an investment in our shares. Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. stockholders currently are subject to federal income tax on net capital gain at the same rates applied to their ordinary income. Capital losses are subject to limitations on use for both corporate and
non-corporate
stockholders. Certain U.S. stockholders who are individuals, estates or trusts generally are also subject to a 3.8% Medicare tax on, among other things, dividends on and capital gain from the sale or other disposition of shares of our stock.
We will send to each of our U.S. stockholders, after the end of each calendar year, a notice providing, on a per share and per distribution basis, the amounts includible in the U.S. stockholder’s taxable income for the applicable year as ordinary income and as long-term capital gain. In addition, the U.S. federal tax status of each year’s distributions generally will be reported to the IRS (including the amount of dividends, if any, eligible for the preferential rates applicable to long-term capital gains).
Dividends paid by us generally will not be eligible for the dividends-received deduction or the preferential tax rate applicable to Qualifying Dividends because our income generally will not consist of dividends. Distributions by us out of current or accumulated earnings and profits also generally will not be eligible for the 20% pass through deduction under Section 199A of the Code, although under recently proposed regulations, qualified real estate investment trust dividends earned by us may qualify for the deduction under Section 199A of the Code. Distributions may also be subject to additional state, local and
non-U.S.
taxes depending on a U.S. stockholder’s particular situation.
Tax Shelter Reporting Regulations
If a U.S. stockholder recognizes a loss with respect to our common stock in excess of $2 million or more for a
non-corporate
U.S. stockholder or $10 million or more for a corporate U.S. stockholder in any single taxable year, the U.S. stockholder must file with the IRS a disclosure statement on Form 8886. Direct investors of portfolio securities in many cases are excepted from this reporting requirement, but under current guidance, equity owners of a RIC are not excepted. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Significant monetary penalties apply to a failure to comply with this reporting requirement. States may also have similar reporting requirements. Shareholders are urged to consult their tax advisor to determine the applicability of these regulations in light of their individual circumstances.
Taxation of
non-U.S.
stockholders
The following discussion applies only to persons that are
non-U.S.
stockholders. If you are not a
non-U.S.
stockholder, this section does not apply to you. Whether an investment in shares of our common stock is appropriate for a
non-U.S.
stockholder will depend upon that person’s particular circumstances. An investment in shares of our common stock by a
non-U.S.
stockholder may have adverse tax consequences and, accordingly, may not be appropriate for a
non-U.S.
stockholder.
Non-U.S.
stockholders are urged to consult their tax advisors before investing in our common stock.
27
Distributions by us to
non-U.S.
stockholders generally will be subject to U.S. withholding tax (unless lowered or eliminated by an applicable income tax treaty) to the extent payable from our current or accumulated earnings and profits unless an exception applies.
If a
non-U.S.
stockholder receives distributions and those distributions are effectively connected with a U.S. trade or business of the
non-U.S.
stockholder and, if an income tax treaty applies, attributable to a permanent establishment in the United States of that
non-U.S.
stockholder, those distributions generally will be subject to U.S. federal income tax at the rates applicable to U.S. persons. In that case, we will not be required to withhold U.S. federal income tax if the
non-U.S.
stockholder complies with applicable certification and disclosure requirements.
Actual or deemed distributions of our net capital gain to a
non-U.S.
stockholder, and gains recognized by a
non-U.S.
stockholder upon the sale of our common stock, will not be subject to withholding of U.S. federal income tax and generally will not be subject to U.S. federal income tax unless (a) the distributions or gains, as the case may be, are effectively connected with a U.S. trade or business of the
non-U.S.
stockholder and, if an income tax treaty applies, are attributable to a permanent establishment maintained by the
non-U.S.
stockholder in the United States (as discussed above) or (b) the
non-U.S.
stockholder is an individual, has been present in the United States for 183 days or more during the taxable year, and certain other conditions are satisfied. For a corporate
non-U.S.
stockholder, distributions (both actual and deemed), and gains recognized upon the sale of our common stock that are effectively connected with a U.S. trade or business may, under certain circumstances, be subject to an additional “branch profits tax” (unless lowered or eliminated by an applicable income tax treaty).
Non-U.S.
stockholders of our common stock are encouraged to consult their own advisors as to the applicability of an income tax treaty in their individual circumstances.
In general, no U.S. source withholding taxes will be imposed on dividends paid by us to
non-U.S.
stockholders to the extent the dividends are designated as “interest related dividends” or “short term capital gain dividends.” Under this exemption, interest related dividends and short term capital gain dividends generally represent distributions of interest or short term capital gain that would not have been subject to U.S. withholding tax at the source if they had been received directly by a
non-U.S.
stockholder, and that satisfy certain other requirements. No assurance can be given that we will distribute any interest related dividends or short term capital gain dividends.
If we distribute our net capital gain in the form of deemed rather than actual distributions (which we may do in the future), a
non-U.S.
stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the
non-U.S.
stockholder’s allocable share of the tax we pay on the capital gain deemed to have been distributed. In order to obtain the refund, the
non-U.S.
stockholder must obtain a U.S. taxpayer identification number (“TIN”) (if one has not been previously obtained) and file a U.S. federal income tax return even if the
non-U.S.
stockholder would not otherwise be required to obtain a U.S. TIN or file a U.S. federal income tax return.
Non-U.S.
stockholders who have elected to participate in our
“opt-in”
dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of our common stock, rather than receiving cash dividends and distributions. Any dividends or distributions reinvested under the plan will nevertheless remain taxable to
non-U.S.
stockholders to the same extent as if those dividends were received in cash. In addition, we have the ability to declare a large portion of a dividend in shares of our common stock, even if a
non-U.S.
stockholder has not elected to participate in our dividend reinvestment plan, in which case, as long as a portion of the dividend is paid in cash (which portion could be as low as 20%) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, our
non-U.S.
stockholders will be taxed on 100% of the fair market value of the dividend paid entirely or partially in our common stock on the date the dividend is received in the same manner (and to the extent that
non-U.S.
stockholder is subject to U.S. federal income taxation) as a cash dividend (including the application of
28
withholding tax rules described above), even if most or all of the dividend is paid in common stock. In such a circumstance, we may be required to withhold all or substantially all of the cash we would otherwise distribute to a
non-U.S.
stockholder.
Backup Withholding and Other Required Withholding
We may be required to withhold U.S. federal income tax (i.e. backup withholding) from all taxable distributions to any
non-corporate
U.S. stockholder (i) who fails to furnish us with a correct taxpayer identification number or a certificate that such stockholder is exempt from backup withholding, or (ii) with respect to whom the Internal Revenue Service (“IRS”) notifies us that such stockholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An individual’s taxpayer identification number is generally his or her social security number. Any amount withheld under backup withholding is allowed as a credit against the U.S. stockholder’s federal income tax liability, provided that proper information is timely provided to the IRS.
Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder (collectively, “FATCA”) generally require that we ob
tai
n information sufficient to identify the status of each shareholder under FATCA or under an applicable intergovernmental agreement (an “IGA”) between the United States and a foreign government. If a shareholder fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, we may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding rules will not apply to the gross proceeds of share redemptions or capital gain dividends we pay. If a payment is subject to FATCA withholding, we are required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to foreign shareholders described above (e.g., interest-related dividends). In addition, subject to certain exceptions, this legislation also imposes a 30% withholding on payments to foreign entities that are not financial institutions unless the foreign entity certifies that it does not have a greater than 10% U.S. owner or provides the withholding agent with identifying information on each greater than 10% U.S. owner. Depending on the status of a
non-U.S.
stockholder and the status of the intermediaries through which they hold their shares,
non-U.S.
stockholders could be subject to this 30% withholding tax with respect to distributions on their shares and proceeds from the sale of their shares. Under certain circumstances, a
non-U.S.
stockholder might be eligible for refunds or credits of such taxes.
All stockholders are urged to consult their tax advisers with respect to the U.S. federal income and withholding tax consequences, and state, local and
non-U.S.
tax consequences, of an investment in our common stock. We will not pay any additional amounts in respect to any amounts withheld.
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DESCRIPTION OF OUR SECURITIES
Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.
The following are our outstanding classes, and series thereof, of Securities as of February 23, 2024.