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What changed in Oxford Square Capital Corp.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Oxford Square Capital Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+381 added−433 removedSource: 10-K (2024-03-19) vs 10-K (2023-03-23)

Top changes in Oxford Square Capital Corp.'s 2023 10-K

381 paragraphs added · 433 removed · 315 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

83 edited+24 added−17 removed157 unchanged
Biggest changeRisks Relating to Our Investments • Our investment portfolio may be concentrated in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that we hold or if the sectors in which we invest experience a market downturn. • The lack of liquidity in our investments may adversely affect our business. • If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending and investment activities, our net asset value could decrease and our level of distributions and liquidity could be affected adversely. • Our investments in the companies that we target may be extremely risky and we could lose all or part of our investments. • Our incentive fee may induce Oxford Square Management to use leverage and to make speculative investments. • Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies. • Our investments in CLO vehicles are riskier and less transparent to us and our stockholders than direct investments in the underlying senior loans. 18 Risks Relating to an Investment in Our Securities • Our common stock price may be volatile. • Our shares of common stock have traded at a discount from net asset value and may do so in the future. • There is a risk that investors in our equity securities will not receive distributions or that our distributions will not grow over time and a portion of our distributions could be a return of capital. • We may choose to pay distributions in our own common stock, in which case, our stockholders may be required to pay U.S. federal income taxes in excess of the cash distributions they receive.] Risks Relating to the Economy • The COVID -19 pandemic has caused severe disruptions in the U.S. economy and has disrupted financial activity in the areas in which we or our portfolio companies operate. • We are currently operating in a period of capital markets disruption and economic uncertainty. • Political, social and economic uncertainty, including uncertainty related to the COVID -19 pandemic, creates and exacerbates risks.
Biggest changeRisks Relating to Our Investments • Our investment portfolio may be concentrated in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt securities that we hold or if the sectors in which we invest experience a market downturn. • The lack of liquidity in our investments may adversely affect our business. • If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending and investment activities, our net asset value could decrease and our level of distributions and liquidity could be affected adversely. • Our investments in the companies that we target may be extremely risky and we could lose all or part of our investments. • Our incentive fee may induce Oxford Square Management to use leverage and to make speculative investments. • Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies. • Our investments in CLO vehicles are riskier and less transparent to us and our stockholders than direct investments in the underlying senior loans.
For example: • pursuant to Rule 13a -14 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the financial statements contained in our periodic reports; • pursuant to Item 307 of Regulation S -K , our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; • pursuant to Rule 13a -15 of the Exchange Act, our management must prepare a report regarding its assessment of our internal control over financial reporting; and • pursuant to Item 308 of Regulation S -K and Rule 13a -15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
For example: • pursuant to Rule 13a -14 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the financial statements contained in our periodic reports; 24 • pursuant to Item 307 of Regulation S -K , our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; • pursuant to Rule 13a -15 of the Exchange Act, our management must prepare a report regarding its assessment of our internal control over financial reporting; and • pursuant to Item 308 of Regulation S -K and Rule 13a -15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
The Net Investment Income Incentive Fee is then calculated as follows: (i) no Net Investment Income Incentive Fee is payable to Oxford Square Management in any calendar quarter in which the “Pre -Incentive Fee Net Investment Income” does not exceed the “Preferred Return Amount”; (ii) 100% of the “Pre -Incentive Fee Net Investment Income” for such quarter, if any, that exceeds the “Preferred Return Amount” but is less than or equal to a “Catch -Up Amount” determined on a quarterly basis by multiplying 2.1875% by OXSQ’s net asset value at the end of such calendar quarter; and (iii) for any quarter in which the “Pre -Incentive Fee Net Investment Income” exceeds the “Catch -Up Amount,” the Net Investment Income Incentive Fee will be calculated at the rate of 20% of the amount of the “Pre -Incentive Fee Net Investment Income” for such quarter. c.
The Net Investment Income Incentive Fee is then calculated as follows: (i) no Net Investment Income Incentive Fee is payable to Oxford Square Management in any calendar quarter in which the “Pre -Incentive Fee Net Investment Income” does not exceed the “Preferred Return Amount”; 13 (ii) 100% of the “Pre -Incentive Fee Net Investment Income” for such quarter, if any, that exceeds the “Preferred Return Amount” but is less than or equal to a “Catch -Up Amount” determined on a quarterly basis by multiplying 2.1875% by OXSQ’s net asset value at the end of such calendar quarter; and (iii) for any quarter in which the “Pre -Incentive Fee Net Investment Income” exceeds the “Catch -Up Amount,” the Net Investment Income Incentive Fee will be calculated at the rate of 20% of the amount of the “Pre -Incentive Fee Net Investment Income” for such quarter. c.
To ensure that its vote is not the product of a conflict of interest, Oxford Square Management requires that: (i) anyone involved in the decision making process disclose to Oxford Square Management’s Chief Compliance Officer any potential conflict that he or she is 24 aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how Oxford Square Management intends to vote on a proposal without the prior approval of the Chief Compliance Officer and senior management in order to reduce any attempted influence from interested parties.
To ensure that its vote is not the product of a conflict of interest, Oxford Square Management requires that: (i) anyone involved in the decision making process disclose to Oxford Square Management’s Chief Compliance Officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how Oxford Square Management intends to vote on a proposal without the prior approval of the Chief Compliance Officer and senior management in order to reduce any attempted influence from interested parties.
In such a calculation, in order to reflect the theoretical Capital Gains Incentive Fee that would have been payable for a given period as if all unrealized gains were realized, we will accrue a Capital Gains Incentive Fee based upon net realized gains and unrealized depreciation for that calendar year (in accordance with the terms of the Investment Advisory 10 Agreement), plus unrealized appreciation on investments held at the end of the period.
In such a calculation, in order to reflect the theoretical Capital Gains Incentive Fee that would have been payable for a given period as if all unrealized gains were realized, we will accrue a Capital Gains Incentive Fee based upon net realized gains and unrealized depreciation for that calendar year (in accordance with the terms of the Investment Advisory Agreement), plus unrealized appreciation on investments held at the end of the period.
Hypothetical Scenarios: • Year 1 = no realized capital gains or losses • Year 2 = 9% realized capital gains, 0% realized capital losses, 1% unrealized depreciation and 0% unrealized appreciation • Year 3 = 12% realized capital gains, 0% realized capital losses, 2% unrealized depreciation and 2% unrealized appreciation Year 1 incentive fee • Total Incentive Fee Capital Gains = 0 • No Capital Gains Incentive Fee paid to Oxford Square Management in Year 1 Year 2 incentive fee • Total Incentive Fee Capital Gains = 8% (9% realized capital gains less 1% unrealized depreciation ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 2 = 20% × 8% = 1.6% Year 3 incentive fee • Total Incentive Fee Capital Gains = 10% (12% realized capital gains less 2% unrealized depreciation; unrealized appreciation has no effect ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 3 = 20% × 10% = 2% ____________ (*) The theoretical amounts of returns shown are based on a percentage of our total net assets and assume no leverage.
Hypothetical Scenarios: • Year 1 = no realized capital gains or losses • Year 2 = 9% realized capital gains, 0% realized capital losses, 1% unrealized depreciation and 0% unrealized appreciation • Year 3 = 12% realized capital gains, 0% realized capital losses, 2% unrealized depreciation and 2% unrealized appreciation 15 Year 1 incentive fee • Total Incentive Fee Capital Gains = 0 • No Capital Gains Incentive Fee paid to Oxford Square Management in Year 1 Year 2 incentive fee • Total Incentive Fee Capital Gains = 8% (9% realized capital gains less 1% unrealized depreciation ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 2 = 20% × 8% = 1.6% Year 3 incentive fee • Total Incentive Fee Capital Gains = 10% (12% realized capital gains less 2% unrealized depreciation; unrealized appreciation has no effect ) • Total Capital Gains Incentive Fee paid to Oxford Square Management in Year 3 = 20% × 10% = 2% ____________ (*) The theoretical amounts of returns shown are based on a percentage of our total net assets and assume no leverage.
Yonon received a B.S. in Economics with concentrations in Finance and Accounting from the Wharton School at the University of Pennsylvania, where he graduated magna cum laude, and an M.B.A. from the Harvard Business School. 4 Established deal sourcing network Through the investment professionals of Oxford Square Management, we have extensive contacts and sources from which to generate investment opportunities.
Yonon received a B.S. in Economics with concentrations in Finance and Accounting from the Wharton School at the University of Pennsylvania, where he graduated magna cum laude, and an M.B.A. from the Harvard Business School. Established deal sourcing network Through the investment professionals of Oxford Square Management, we have extensive contacts and sources from which to generate investment opportunities.
Example 1: Net Investment Income Portion of Incentive Fee for Each Calendar Quarter (applying 2016 Fee Waiver) Hypothetical Scenario 1 Quarterly Investment income (including interest, dividends, fees, etc.) = 1.25% Quarterly Hurdle rate = 1.75% Base Fee (1) = 0.375% Quarterly Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2% 13 Pre -Incentive Fee Net Investment Income (investment income – (Base Fee + other expenses)) = 0.675% Pre -Incentive Fee Net Investment Income does not exceed hurdle rate, therefore there is no income -related incentive fee.
Example 1: Net Investment Income Portion of Incentive Fee for Each Calendar Quarter (applying 2016 Fee Waiver) Hypothetical Scenario 1 Quarterly Investment income (including interest, dividends, fees, etc.) = 1.25% Quarterly Hurdle rate = 1.75% Base Fee (1) = 0.375% Quarterly Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2% Pre -Incentive Fee Net Investment Income (investment income – (Base Fee + other expenses)) = 0.675% Pre -Incentive Fee Net Investment Income does not exceed hurdle rate, therefore there is no income -related incentive fee.
We also reimburse Oxford Funds for the costs associated with the functions performed by our Chief Compliance Officer that Oxford Funds pays on our behalf pursuant to the terms of an agreement between us and ACA Group. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.
We also reimburse Oxford Funds for the costs associated with the functions performed by our Chief Compliance Officer that Oxford Funds pays on our behalf pursuant to the terms of an agreement between us and ACA Group, LLC. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.
If we elect to treat a 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 such income is not distributed by the QEF.
If we elect to treat a 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 such income is 21 not distributed by the QEF.
We prefer to invest in companies in which established private equity or venture capital funds or other financial or strategic sponsors have previously invested and are willing to make an ongoing contribution to the management of the business, including participation as board members or as business advisers. • Strong competitive position in industry.
We prefer to invest in companies in which established private equity or venture capital funds or other financial or strategic sponsors have previously invested and are willing to make an ongoing contribution to the management of the business, including participation as board members or as business advisers. 5 • Strong competitive position in industry.
As a private debt holder, we may incur losses from our investing activities from time to time; however, we attempt, where possible, to work with troubled portfolio companies in order to recover as much of our investments as is practicable. Portfolio Grading We have developed a credit grading system to monitor the quality of our debt investment portfolio.
As a private debt holder, we may incur losses from our investing activities from time to time; however, we attempt, where possible, to work with troubled portfolio companies in order to recover as much of our investments as is practicable. 7 Portfolio Grading We have developed a credit grading system to monitor the quality of our debt investment portfolio.
We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to: • expenses of offering our debt and equity securities; • the investigation and monitoring of our investments, including expenses and travel fees incurred in connection with investment due diligence and on -site visits; • the cost of calculating our net asset value (“NAV”); • the cost of effecting sales and repurchases of shares of our common stock and other securities; • investment management and incentive fees payable pursuant to the Investment Advisory Agreement; • fees payable to third parties relating to, or associated with, making investments and valuing investments (including third -party valuation firms); • transfer agent, trustee and custodial fees; • interest payments and other costs related to our borrowings; 15 • fees and expenses associated with our website, public relations and marketing efforts (including attendance at industry and investor conferences and similar events); • federal and state registration fees; • any exchange listing fees; • U.S. federal, state and local taxes; • independent directors’ fees and expenses, including travel expenses, and other costs of the Board’s meetings and other costs associated with the performance of independent directors’ responsibilities; • brokerage commissions; • costs of preparing and mailing proxy statements, stockholders’ reports and notices, including annual proxy solicitations and shareholder meetings; • costs of preparing government filings, including periodic and current reports with the SEC; • fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums; and • direct costs such as printing, mailing, long distance telephone, staff, rent, independent audits and outside legal costs and all other expenses incurred by either Oxford Funds or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Oxford Funds on our behalf under the Administration Agreement, including a portion of the rent and the compensation and related expenses of our Chief Financial Officer, our accounting support staff and other administrative support personnel.
We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to: • expenses of offering our debt and equity securities; • the investigation and monitoring of our investments, including expenses and travel fees incurred in connection with investment due diligence and on -site visits; • the cost of calculating our net asset value (“NAV”); • the cost of effecting sales and repurchases of shares of our common stock and other securities; • investment management and incentive fees payable pursuant to the Investment Advisory Agreement; • fees payable to third parties relating to, or associated with, making investments and valuing investments (including third -party valuation firms); • transfer agent, trustee and custodial fees; • interest payments and other costs related to our borrowings; • fees and expenses associated with our website, public relations and marketing efforts (including attendance at industry and investor conferences and similar events); • federal and state registration fees; • any exchange listing fees; • U.S. federal, state and local taxes; • independent directors’ fees and expenses, including travel expenses, and other costs of the Board’s meetings and other costs associated with the performance of independent directors’ responsibilities; • brokerage commissions; 16 • costs of preparing and mailing proxy statements, stockholders’ reports and notices, including annual proxy solicitations and stockholder meetings; • costs of preparing government filings, including periodic and current reports with the SEC; • fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums; and • direct costs such as printing, mailing, long distance telephone, staff, rent, independent audits and outside legal costs and all other expenses incurred by either Oxford Funds or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Oxford Funds on our behalf under the Administration Agreement, including a portion of the rent and the compensation and related expenses of our Chief Financial Officer, our accounting support staff and other administrative support personnel.
The “Capital Gains Incentive Fee,” is determined as described above. For more information about the calculation of the advisory fee under the Investment Advisory Agreement prior to effectiveness of the 2016 Fee Waiver, refer to our Annual Report on Form 10 -K for the fiscal year ended December 31, 2016. Calculation of Fees under the 2016 Fee Waiver.
The “Capital Gains Incentive Fee,” is determined as described above. For more information about the calculation of the advisory fee under the Investment Advisory Agreement prior to effectiveness of the 2016 Fee Waiver, refer to our Annual Report on Form 10 -K for the fiscal year ended December 31, 2016. 12 Calculation of Fees under the 2016 Fee Waiver.
Related expenses include but are not limited to employee benefit costs, payroll taxes and travel and training expenses. The costs associated with the functions performed by our Chief Compliance Officer are paid by us pursuant to the terms of an agreement between the Company and ACA Group, a compliance consulting firm.
Related expenses include but are not limited to employee benefit costs, payroll taxes and travel and training expenses. The costs associated with the functions performed by our Chief Compliance Officer are paid by us pursuant to the terms of an agreement between the Company and ACA Group, LLC, a compliance consulting firm.
Refer to “Item 1A. Risk Factors — Risks Relating to our Business and Structure.” 22 Qualifying Assets As a BDC, we may not acquire any asset other than “qualifying assets” unless, at the time we make the acquisition, the value of our qualifying assets represent at least 70% of the value of our total assets.
Refer to “Item 1A. Risk Factors — Risks Relating to our Business and Structure.” Qualifying Assets As a BDC, we may not acquire any asset other than “qualifying assets” unless, at the time we make the acquisition, the value of our qualifying assets represent at least 70% of the value of our total assets.
These policies and procedures for voting proxies for Oxford Square Management’s investment advisory clients are intended to comply with Section 206 of, and Rule 206(4) -6 under, the Advisers Act. Proxy Policies Oxford Square Management will vote proxies relating to our portfolio securities in the best interests of our stockholders.
These policies and procedures for voting proxies for Oxford Square Management’s investment advisory clients are intended to comply with Section 206 of, and Rule 206(4) -6 under, the Advisers Act. Proxy Policies Oxford Square Management will vote proxies relating to our portfolio securities in the best interests of the Company’s stockholders.
Rosenthal. • Our financial condition and results of operations will depend on our ability to manage our existing portfolio and future growth effectively. • Our business and operation could be negatively affected if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price. • We operate in a highly competitive market for investment opportunities. 17 • Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the senior investment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. • There will be uncertainty as to the value of our portfolio investments, which may impact our net asset value. • Further downgrades of the U.S. credit rating, impending automatic spending cuts or another government shutdown could negatively impact our liquidity, financial condition and earnings. • Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect our business and financial results. • The interest rates of our term loans to our portfolio companies that extend beyond 2021 might be subject to change based on recent regulatory changes. • A disruption in the capital markets and the credit markets could negatively affect our business. • We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. • Regulations governing our operation as a BDC affect our ability to, and the way in which we raise additional capital, which may expose us to risks, including the typical risks associated with leverage. • Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners. • Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited. • There are significant potential conflicts of interest between OXSQ and our management team. • Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
Rosenthal. • Our financial condition and results of operations will depend on our ability to manage our existing portfolio and future growth effectively. • Our business and operation could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price. • We operate in a highly competitive market for investment opportunities. • Our business model depends to a significant extent upon strong referral relationships with financial sponsors, and the inability of the senior investment professionals of our investment adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business. • There will be uncertainty as to the value of our portfolio investments, which may impact our net asset value. • Further downgrades of the U.S. credit rating, impending automatic spending cuts or another government shutdown could negatively impact our liquidity, financial condition and earnings. 18 • Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect our business and financial results. • The interest rates of our term loans to our portfolio companies that extend beyond 2023 might be subject to change based on recent regulatory changes. • A disruption in the capital markets and the credit markets could negatively affect our business. • We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. • Regulations governing our operation as a BDC affect our ability to, and the way in which we raise additional capital, which may expose us to risks, including the typical risks associated with leverage. • Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners. • Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited. • There are significant potential conflicts of interest between OXSQ and our management team. • Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
Structured Finance Vehicles • review of indenture structures; • review of underlying collateral loans; • analysis of projected future cash flows; and • analysis of compliance with covenants. Contemporaneous with our due diligence process, the investment team presents the investment proposal to our Investment Committee, which currently consists of Messrs. Cohen and Rosenthal.
Structured Finance Vehicles • review of indenture structures; • review of underlying collateral loans; • analysis of projected future cash flows; and • analysis of compliance with covenants. 6 Contemporaneous with our due diligence process, the investment team presents the investment proposal to our Investment Committee, which currently consists of Messrs. Cohen and Rosenthal.
Therefore the income -related incentive fee is 0.685%. ____________ (1) Represents 1.50% annualized Base Fee. 14 Example 2: Capital Gains Portion of Incentive Fee (*) Capital Gains Incentive Fee = 20% × Incentive Fee Capital Gains (i.e., our realized capital gains for each calendar year, computed net of all realized capital losses and unrealized capital depreciation for that calendar year).
Therefore the income -related incentive fee is 0.685%. ____________ (1) Represents 1.50% annualized Base Fee. Example 2: Capital Gains Portion of Incentive Fee (*) Capital Gains Incentive Fee = 20% × Incentive Fee Capital Gains (i.e., our realized capital gains for each calendar year, computed net of all realized capital losses and unrealized capital depreciation for that calendar year).
Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non -accrual status. 7 Significant Managerial Assistance As a BDC, we are required to offer significant managerial assistance to portfolio companies.
Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non -accrual status. Significant Managerial Assistance As a BDC, we are required to offer significant managerial assistance to portfolio companies.
The 6.50% Unsecured Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQL.” 6.25% Unsecured Notes On April 3, 2019, we completed an underwritten public offering of approximately $44.8 million in aggregate principal amount of our 6.25% unsecured notes due 2026, or the “6.25% Unsecured Notes.” The 6.25% Unsecured Notes will mature on April 30, 2026, and may be redeemed in whole or in part at any time or from time to time at our option (on or after April 30, 2022).
The 6.50% Unsecured Notes were listed on the NASDAQ Global Select Market under the trading symbol “OXSQL.” 6.25% Unsecured Notes On April 3, 2019, we completed an underwritten public offering of approximately $44.8 million in aggregate principal amount of our 6.25% unsecured notes due 2026, or the “6.25% Unsecured Notes.” The 6.25% Unsecured Notes will mature on April 30, 2026, and may be redeemed in whole or in part at any time or from time to time at our option (on or after April 30, 2022).
We will also pay the costs associated with the functions performed by our Chief Compliance Officer under the terms of an agreement between the Company and ACA Group. CERTAIN U.S.
We will also pay the costs associated with the functions performed by our Chief Compliance Officer under the terms of an agreement between the Company and ACA Group, LLC. CERTAIN U.S.
In the event that the second set of calculations produces lower combined Base Fee and Net Investment Income Incentive Fee for that quarterly period, those lower combined fees are adopted for that quarterly period.
In the event that the second set of calculations produces lower combined Base Fee and Net Investment 11 Income Incentive Fee for that quarterly period, those lower combined fees are adopted for that quarterly period.
As of December 31, 2022, approximately $47.3 million remained outstanding on our investment. Carlyle Global Market Strategies CLO 2021-6, Ltd. Carlyle Global Market Strategies CLO 2021 -6 , Ltd. is a collateralized loan obligation investing primarily in U.S. -based senior secured loans. As of December 31, 2022, approximately $29.6 million remained outstanding on our investment.
As of December 31, 2023, approximately $47.3 million remained outstanding on our investment. Carlyle Global Market Strategies CLO 2021-6, Ltd. Carlyle Global Market Strategies CLO 2021 -6 , Ltd. is a collateralized loan obligation investing primarily in U.S. -based senior secured loans. As of December 31, 2023, approximately $29.6 million remained outstanding on our investment.
This additional tax and interest may apply even if we make a distribution in an amount equal to any “excess distribution” or gain from the disposition of such shares as a taxable dividend by us to our shareholders.
This additional tax and interest may apply even if we make a distribution in an amount equal to any “excess distribution” or gain from the disposition of such shares as a taxable dividend by us to our stockholders.
Kupka received a B.S. in Mechanical Engineering from the University of Pennsylvania, where he was the Abel and Bernstein Class of 1945 Scholarship Recipient. • Kevin Yonon is a Managing Director of Oxford Square Management, and also holds the same position at Oxford Lane Management, the investment adviser to Oxford Lane Capital Corp., and Oxford Gate Management, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC.
Kupka received a B.S. in Mechanical Engineering from the University of Pennsylvania, where he was the Abel and Bernstein Class of 1945 Scholarship Recipient. • Kevin Yonon is a Managing Director of Oxford Square Management, and also holds the same position at Oxford Lane Management, the investment adviser to Oxford Lane Capital Corp., Oxford Gate Management, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC, and Oxford Park Management, the investment adviser to Oxford Park Income Fund, Inc.
The 6.50% Unsecured Notes bear interest at a rate of 6.50% per year payable quarterly on March 30, June 30, September 30, and December 30 of each year.
The 6.50% Unsecured Notes bore interest at a rate of 6.50% per year payable quarterly on March 30, June 30, September 30, and December 30 of each year.
Cohen has also served as Chief Executive Officer of Oxford Gate Management, LLC, or “Oxford Gate Management,” the investment adviser to Oxford Gate Master Fund, LLC, Oxford Gate, LLC and Oxford Gate (Bermuda), LLC (collectively, the “Oxford Gate Funds”), and Oxford Bridge II, LLC. Oxford Bridge II, LLC and the Oxford Gate Funds are private investment funds. Previously, Mr.
Cohen has also served as Chief Executive Officer of Oxford Gate Management, LLC, or “Oxford Gate Management,” the investment adviser to Oxford Gate Master Fund, LLC, Oxford Gate, LLC and Oxford Gate (Bermuda), LLC (collectively, the “Oxford Gate Funds”), and Oxford Bridge II, LLC. Oxford Bridge II, LLC and the Oxford Gate Funds are private investment funds. Since 2023, Mr.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • at all times during each taxable year, be registered under the 1940 Act as a management company or unit investment trust, or have in effect an election under the 1940 Act to be treated as a BDC; • derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”); and • diversify our holdings so that at the end of each quarter of the taxable year: • at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and • no more than 25% of the value of our assets is invested in (i) the securities, other than U.S. government securities or securities of other RICs, of one issuer (ii) the securities, other than securities of other RICs, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses; or (iii) the securities of certain “qualified publicly traded partnerships” (the “Diversification Tests”).
We generally will endeavor in each taxable year to make sufficient distributions to our stockholders to satisfy the Excise Tax Avoidance Requirement. 20 In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • at all times during each taxable year, be registered under the 1940 Act as a management company or unit investment trust, or have in effect an election under the 1940 Act to be treated as a BDC; • derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”); and • diversify our holdings so that at the end of each quarter of the taxable year: • at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and • no more than 25% of the value of our assets is invested in (i) the securities, other than U.S. government securities or securities of other RICs, of one issuer (ii) the securities, other than securities of other RICs, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses; or (iii) the securities of certain “qualified publicly traded partnerships” (the “Diversification Tests”).
On April 21, 2022, the Board of Directors re -approved the Investment Advisory Agreement at an in -person meeting. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. Refer to “Item 1A.
On April 25, 2023, the Board of Directors re -approved the Investment Advisory Agreement at an in -person meeting. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. Refer to “Item 1A.
The operation of the incentive fee with respect to our Pre -Incentive Fee Net Investment Income for each quarter is as follows: i. no incentive fee was payable to Oxford Square Management in any calendar quarter in which our Pre -Incentive Fee Net Investment Income did not exceed one fourth of the annual hurdle rate (approximately 6.26% for the 2022 calendar year). ii. 20% of the amount of our Pre -Incentive Fee Net Investment Income, if any, that exceeds one -fourth of the annual hurdle rate (approximately 6.26% for the 2022 calendar year) in any calendar quarter was payable to Oxford Square Management (i.e., once the hurdle rate is reached, 20% of all Pre -Incentive Fee Net Investment Income thereafter was allocated to Oxford Square Management). 3) Capital Gains Incentive Fee .
The operation of the incentive fee with respect to our Pre -Incentive Fee Net Investment Income for each quarter is as follows: i. no incentive fee was payable to Oxford Square Management in any calendar quarter in which our Pre -Incentive Fee Net Investment Income did not exceed one fourth of the annual hurdle rate (approximately 8.99% for the 2023 calendar year). ii. 20% of the amount of our Pre -Incentive Fee Net Investment Income, if any, that exceeds one -fourth of the annual hurdle rate (approximately 8.99% for the 2023 calendar year) in any calendar quarter was payable to Oxford Square Management (i.e., once the hurdle rate is reached, 20% of all Pre -Incentive Fee Net Investment Income thereafter was allocated to Oxford Square Management). 3) Capital Gains Incentive Fee .
(Taxation) from New York University School of Law. • Joseph Kupka is a Managing Director of Oxford Square Management, and also holds the same position at Oxford Lane Management, the investment adviser to Oxford Lane Capital Corp. and Oxford Gate Management, LLC, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC.
(Taxation) from New York University School of Law. • Joseph Kupka is a Managing Director of Oxford Square Management, and also holds the same position at Oxford Lane Management, the investment adviser to Oxford Lane Capital Corp., Oxford Gate Management, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC, and Oxford Park Management, the investment adviser to Oxford Park Income Fund, Inc.
Our net investment income (to the extent not distributed to our shareholders) used to calculate the Net Investment Income Incentive Fee was also included in the amount of our gross assets used to calculate the 2.00% Base Fee. 11 c.
Our net investment income (to the extent not distributed to our stockholders) used to calculate the Net Investment Income Incentive Fee was also included in the amount of our gross assets used to calculate the 2.00% Base Fee. c.
We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) to our stockholders. 19 We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one -year period ending October 31 in that calendar year and (3) any income and net capital gain that we recognized in preceding years but were not distributed in such years, and on which we paid no U.S. federal income tax (the “Excise Tax Avoidance Requirement”).
We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one -year period ending October 31 in that calendar year and (3) any income and net capital gain that we recognized in preceding years but were not distributed in such years, and on which we paid no U.S. federal income tax (the “Excise Tax Avoidance Requirement”).
The Code of Ethics is available on the EDGAR Database on the SEC’s website at http://www.sec.gov. You may obtain copies of the Code of Ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov.
The Code of Ethics is available on the EDGAR Database on the SEC’s website at http://www.sec.gov. You may obtain copies of the Code of Ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov. Our Code of Ethics is also available on our website at http://oxfordsquarecapital.com/.
Treasury note plus 5.00% (with a maximum of 10%), to a fixed rate of 7.00%. 12 More specifically, for the purpose of calculating the amount of total advisory fees (if any) to be waived during a particular calendar quarter, the Base Fee and Net Investment Income Incentive Fee are calculated as follows under the 2016 Fee Waiver: 1) Base Fee : The Base Fee is calculated at an annual rate of 1.50%, adjusted pro rata for any share issuances, debt issuances, repurchases or redemptions during the current calendar quarter; provided, however, that no Base Fee is payable on the cash proceeds received by us in connection with any share or debt issuances until such proceeds have been invested in accordance with our investment objectives.
More specifically, for the purpose of calculating the amount of total advisory fees (if any) to be waived during a particular calendar quarter, the Base Fee and Net Investment Income Incentive Fee are calculated as follows under the 2016 Fee Waiver: 1) Base Fee : The Base Fee is calculated at an annual rate of 1.50%, adjusted pro rata for any share issuances, debt issuances, repurchases or redemptions during the current calendar quarter; provided, however, that no Base Fee is payable on the cash proceeds received by us in connection with any share or debt issuances until such proceeds have been invested in accordance with our investment objectives.
Treasury Notes, up to a maximum annual hurdle rate of 10.0%. The annual hurdle rates for the 2022, 2021 and 2020 calendar years, calculated as of December 31, were approximately 6.26%, 5.36%, and 6.69%, respectively, under the terms of the Investment Advisory Agreement.
Treasury Notes, up to a maximum annual hurdle rate of 10.0%. The annual hurdle rates for the 2023, 2022 and 2021 calendar years, calculated as of December 31, were approximately 8.99%, 6.26%, and 5.36%, respectively, under the terms of the Investment Advisory Agreement.
Rosenthal.” Indemnification The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oxford Square Management and its officers, managers, agents, employees, controlling persons, members and any other person or entity affiliated with it, including without limitation Oxford Funds, are entitled to indemnification from OXSQ for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Oxford Square Management’s services under the Investment Advisory Agreement or otherwise as an investment adviser of OXSQ. 16 Organization of the Investment Adviser Oxford Square Management is a Delaware limited liability company that is registered as an investment adviser under the Advisers Act.
Rosenthal.” Indemnification The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, Oxford Square Management and its officers, managers, agents, employees, controlling persons, members and any other person or entity affiliated with it, including without limitation Oxford Funds, are entitled to indemnification from OXSQ for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Oxford Square Management’s services under the Investment Advisory Agreement or otherwise as an investment adviser of OXSQ.
Subject to a limited exception applicable to RICs that qualified as such under the Code for at least one year prior to disqualification and that requalify as a RIC no later than the second year following the nonqualifying year, we would be subject to tax on any unrealized net built -in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent 5 years, unless we made a special election to pay U.S. federal income tax at corporate rates on such built -in gains at the time of our requalification as a RIC. 21 REGULATION AS A BUSINESS DEVELOPMENT COMPANY General A BDC is regulated by the 1940 Act.
Subject to a limited exception applicable to RICs that qualified as such under the Code for at least one year prior to disqualification and that requalify as a RIC no later than the second year following the nonqualifying year, we would be subject to tax on any unrealized net built -in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent 5 years, unless we made a special election to pay U.S. federal income tax at corporate rates on such built -in gains at the time of our requalification as a RIC.
Oxford Funds is the managing member of Oxford Square Management. Charles M. Royce, a member of our Board, has a minority, non -controlling interest in Oxford Square Management. ADMINISTRATION AGREEMENT Pursuant to a separate Administration Agreement, Oxford Funds furnishes us with office facilities, together with equipment and clerical, bookkeeping and record keeping services at such facilities.
Royce, a member of our Board, has a minority, non -controlling interest in Oxford Square Management. 17 ADMINISTRATION AGREEMENT Pursuant to a separate Administration Agreement, Oxford Funds furnishes us with office facilities, together with equipment and clerical, bookkeeping and record keeping services at such facilities.
Quest Software, Inc. is an infrastructure software provider. They have five main product/service offerings: platform management, information management, identity management, data protection, and endpoint management. As of December 31, 2022, approximately $3.0 million and $20.0 million remained outstanding on our investment in the first lien notes and second lien notes, respectively. Octagon Investment Partners 49, Ltd.
Quest Software, Inc. Quest Software, Inc. is an infrastructure software provider. They have five main product/service offerings: platform management, information management, identity management, data protection, and endpoint management. As of December 31, 2023, approximately $3.0 million and $20.0 million remained outstanding on our investment in the first lien notes and second lien notes, respectively. Affinion Insurance Solutions, Inc.
(f/k/a AIS Intermediate, LLC) Affinion Insurance Solutions, Inc. is an insurance company that offers insurance, value -added checking programs, customer acquisition solutions, data analysis, multi -channel marketing, direct mail, and online marketing services. As of December 31, 2022, approximately $15.2 million remained outstanding on our investment in the first lien notes. Quest Software, Inc.
(f/k/a AIS Intermediate, LLC) Affinion Insurance Solutions, Inc. is an insurance company that offers insurance, value -added checking programs, customer acquisition solutions, data analysis, multi -channel marketing, direct mail, and online marketing services. As of December 31, 2023, approximately $14.5 million remained outstanding on our investment in the first lien notes. Verifone Systems, Inc.
As of December 31, 2022, approximately $2.0 million and $15.0 million remained outstanding on our investment in the first lien notes and second lien notes, respectively. 9 HealthChannels, Inc. (f/k/a ScribeAmerica, LLC) HealthChannels, Inc. is a health -care company that offers clerical support services, including electronic medical record documentation, patient engagement, and medical coding to improve clinical outcomes.
(f/k/a ScribeAmerica, LLC) HealthChannels, Inc. is a health -care company that offers clerical support services, including electronic medical record documentation, patient engagement, and medical coding to improve clinical outcomes. As of December 31, 2023, approximately $18.8 million remained outstanding on our investment in the first lien notes.
The following is a representative list of the industries in which we have invested: • Structured Finance • IT Consulting • Business Services • Utilities • Software • Healthcare • Telecommunication Services • Plastics Manufacturing • Diversified Insurance During the fiscal year ended December 31, 2022, we purchased approximately $84.2 million of investments, comprised of approximately $57.0 million in senior secured notes and $27.2 million in CLO equity.
The following is a representative list of the industries in which we have invested: • Structured Finance • IT Consulting • Business Services • Utilities • Software • Healthcare • Telecommunication Services • Diversified Insurance During the fiscal year ended December 31, 2023, we purchased approximately $11.7 million of investments, comprised of approximately $8.2 million in senior secured notes and $3.5 million in CLO equity.
Substantially all of the CLO vehicles in which we may invest would be deemed to be investment companies under the 1940 Act but for the exceptions set forth in section 3(c)(1) or section 3(c)(7).
Substantially all of the CLO vehicles in which we may invest would be deemed to be investment companies under the 1940 Act but for the exceptions set forth in section 3(c)(1) or section 3(c)(7). Structurally, CLO vehicles are entities formed to originate and/or acquire a portfolio of loans.
Our Code of Ethics is also available on our website at http://oxfordsquarecapital.com/. 23 Compliance Policies and Procedures We and Oxford Square Management have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws, and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation, and to designate a Chief Compliance Officer to be responsible for administering the policies and procedures.
Compliance Policies and Procedures We and Oxford Square Management have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws, and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation, and to designate a Chief Compliance Officer to be responsible for administering the policies and procedures.
TEN LARGEST PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 2022 Our ten largest portfolio company investments as of December 31, 2022, based on the combined fair value of the debt and equity securities (including CLO side letter related investments) we hold in each portfolio company, were as follows: Portfolio Company Industry Cost (1) December 31, 2022 ($ in millions) Fair Value (1) Fair Value Percentage of Total Portfolio (1) Dryden 43 Senior Loan Fund Structured Finance $ 28.8 $ 25.0 8.0 % Carlyle Global Market Strategies CLO 2021-6, Ltd.
As a percentage of fair value of the total invested portfolio as of December 31, 2023, our portfolio was invested approximately 67.2% in senior secured notes, 30.8% in CLO equity, and 2.0% in equity and other investments. 8 TEN LARGEST PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 2023 Our ten largest portfolio company investments as of December 31, 2023, based on the combined fair value of the debt and equity securities (including CLO side letter related investments) we hold in each portfolio company, were as follows: Portfolio Company Industry December 31, 2023 ($ in millions) Cost (1) Fair Value Fair Value Percentage of Total Portfolio (1) Dryden 43 Senior Loan Fund Structured Finance $ 27.5 $ 21.7 8.1 % Carlyle Global Market Strategies CLO 2021-6, Ltd.
Hypothetical Scenario 2 Quarterly Investment income (including interest, dividends, fees, etc.) = 2.50% Quarterly Hurdle rate = 1.75% Base Fee (1) = 0.375% Quarterly Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2% Pre -Incentive Fee Net Investment Income (investment income – (Base Fee + other expenses)) = 1.925% The Total Return Requirement is met (no Net Investment Income Incentive Fee would be payable if the Total Return Requirement were not met).
Hypothetical Scenario 2 Quarterly Investment income (including interest, dividends, fees, etc.) = 2.50% Quarterly Hurdle rate = 1.75% Base Fee (1) = 0.375% Quarterly Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2% Pre -Incentive Fee Net Investment Income (investment income – (Base Fee + other expenses)) = 1.925% The Total Return Requirement is met (no Net Investment Income Incentive Fee would be payable if the Total Return Requirement were not met). 14 Incentive fee = 100%* Pre -Incentive Fee Net Investment Income in excess of the hurdle rate but less than 2.1875% and 20% of any Pre -Incentive Fee Net Investment Income thereafter. = 100%* (1.925% – 1.75%) = 100%* 0.175% = 0.175% Pre -Incentive Fee Net Investment Income exceeds the hurdle rate but is less than 2.1875%.
In addition, the costs associated with our borrowings, including any increase in the advisory fee payable to our investment adviser, Oxford Square Management, LLC (“Oxford Square Management”), will be borne by our common stockholders. 6.50% Unsecured Notes On April 12, 2017, we completed an underwritten public offering of approximately $64.4 million in aggregate principal amount of our 6.50% unsecured notes due 2024, or the “6.50% Unsecured Notes.” The 6.50% Unsecured Notes will mature on March 30, 2024, and may currently be redeemed in whole or in part at any time or from time to time at our option (on or after March 30, 2020).
In addition, the costs associated with our borrowings, including any increase in the advisory fee payable to our investment adviser, Oxford Square Management, LLC (“Oxford Square Management”), will be borne by our common stockholders. 6.50% Unsecured Notes On April 12, 2017, we completed an underwritten public offering of approximately $64.4 million in aggregate principal amount of our 6.50% unsecured notes due 2024, or the “6.50% Unsecured Notes.” On July 24, 2023, the Company redeemed $40.0 million in aggregate principal amount of the 6.50% Unsecured Notes.
We consider both tangible assets, such as accounts receivable, inventory and equipment, and intangible assets, such as intellectual property, software code, customer lists, networks and databases. 5 Due Diligence Our due diligence process generally includes some or all of the following elements: Corporate Loans Management team and financial sponsor • management assessment including a review of management’s track record with respect to product development, sales and marketing, mergers and acquisitions, alliances, collaborations, research and development outsourcing and other strategic activities; and • financial sponsor reputation, track record, experience and knowledge (where a financial sponsor is present in a transaction).
Due Diligence Our due diligence process generally includes some or all of the following elements: Corporate Loans Management team and financial sponsor • management assessment including a review of management’s track record with respect to product development, sales and marketing, mergers and acquisitions, alliances, collaborations, research and development outsourcing and other strategic activities; and • financial sponsor reputation, track record, experience and knowledge (where a financial sponsor is present in a transaction).
Structurally, CLO vehicles are entities that are formed to originate and or acquire a portfolio of loans. The loans within the CLO vehicle are limited to loans which meet established credit criteria and are subject to concentration limitations in order to limit a CLO vehicle’s exposure to a single credit.
The loans within the CLO vehicle are limited to loans which meet established credit criteria and are subject to concentration limitations in order to limit a CLO vehicle’s exposure to a single credit.
Under the terms of our Investment Advisory Agreement with Oxford Square Management (the “Investment Advisory Agreement”), Oxford Square Management: • determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes; • identifies, evaluates and negotiates the structure of the investments we make; • closes, monitors and services the investments we make; and • determines what securities we will purchase, retain or sell.
Under the terms of our Investment Advisory Agreement with Oxford Square Management (the “Investment Advisory Agreement”), Oxford Square Management: • determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes; • identifies, evaluates and negotiates the structure of the investments we make; • closes, monitors and services the investments we make; and • determines what securities we will purchase, retain or sell. 10 Oxford Square Management’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.
(f/k/a ScribeAmerica, LLC) Healthcare 18.8 13.2 4.2 % $ 194.8 $ 153.0 48.7 % ____________ (1) Totals may not sum due to rounding. 8 For a description of the factors relevant to the changes in the value of the above portfolio investments for the year ended December 31, 2022, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Grading.” Set forth below are descriptions of the ten largest portfolio investments as of December 31, 2022: Dryden 43 Senior Loan Fund Dryden 43 Senior Loan Fund is a collateralized loan obligation investing primarily in U.S. -based senior secured loans.
For a description of the factors relevant to the changes in the value of the above portfolio investments for the year ended December 31, 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio Grading.” Set forth below are descriptions of the ten largest portfolio investments as of December 31, 2023: Dryden 43 Senior Loan Fund Dryden 43 Senior Loan Fund is a collateralized loan obligation investing primarily in U.S. -based senior secured loans.
If we are prohibited to make distributions, we may fail to qualify for tax treatment as a RIC and become subject to tax as an ordinary corporation. 20 We have purchased and may in the future purchase residual or subordinated interests in CLOs that are treated for U.S. federal income tax purposes as shares in a “passive foreign investment company” or a PFIC.
We have purchased and may in the future purchase residual or subordinated interests in CLOs that are treated for U.S. federal income tax purposes as shares in a “passive foreign investment company” or a PFIC.
Subject to the overall supervision of our Board, Oxford Square Management manages our day -to-day operations and provides investment advisory services to us.
INVESTMENT ADVISORY AGREEMENT Management Services Oxford Square Management serves as our investment adviser. Oxford Square Management is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our Board, Oxford Square Management manages our day -to-day operations and provides investment advisory services to us.
The hurdle rate used to calculate the Net Investment Income Incentive Fee is changed from a variable rate, based on the five -year U.S.
The hurdle rate used to calculate the Net Investment Income Incentive Fee is changed from a variable rate, based on the five -year U.S. Treasury note plus 5.00% (with a maximum of 10%), to a fixed rate of 7.00%.
We believe this strategy allows us to maintain corporate debt investments which have sufficient liquidity in order to take advantage of market opportunities. 3 COMPETITIVE ADVANTAGES We believe that we are well positioned to provide financing to corporate borrowers and structured finance vehicles that, in turn, provide capital to corporate borrowers for the following reasons: • Expertise in credit analysis and monitoring investments; and • Established transaction sourcing network.
COMPETITIVE ADVANTAGES We believe that we are well positioned to provide financing to corporate borrowers and structured finance vehicles that, in turn, provide capital to corporate borrowers for the following reasons: • Expertise in credit analysis and monitoring investments; and • Established transaction sourcing network.
Our investment strategy may also include warehouse facilities, which are early stage CLO vehicles intended to aggregate loans that may be used to form the basis of a traditional CLO vehicle. We have historically borrowed funds to make investments and may continue to do so.
Our investment strategy also includes warehouse facilities, which are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle. Warehouse facilities typically incur leverage between four and six times prior to a CLO’s pricing. We have historically borrowed funds to make investments and may continue to do so.
Oxford Square Management is owned by Oxford Funds, LLC (“Oxford Funds”), its managing member, and Charles M. Royce, a member of our Board of Directors (the “Board”) who holds a minority, non -controlling interest in Oxford Square Management. Jonathan H. Cohen, our Chief Executive Officer, and Saul B.
Oxford Square Management is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Oxford Square Management is owned by Oxford Funds, LLC (“Oxford Funds”), its managing member, and Charles M. Royce, a member of our Board of Directors (the “Board”) who holds a minority, non -controlling interest in Oxford Square Management. Jonathan H.
Oxford Funds, a Delaware limited liability company, is Oxford Square Management’s managing member and provides it with all personnel necessary to manage our day -to-day operations and provide the services under the Investment Advisory Agreement. The principal address of Oxford Square Management and of Oxford Funds is 8 Sound Shore Drive, Suite 255, Greenwich, Connecticut 06830.
Organization of the Investment Adviser Oxford Square Management is a Delaware limited liability company that is registered as an investment adviser under the Advisers Act. Oxford Funds, a Delaware limited liability company, is Oxford Square Management’s managing member and provides it with all personnel necessary to manage our day -to-day operations and provide the services under the Investment Advisory Agreement.
Under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met.
Under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. If we are prohibited to make distributions, we may fail to qualify for tax treatment as a RIC and become subject to tax as an ordinary corporation.
Although we do not operate as an asset -based lender, the prospective liquidation value of the assets, if any, collateralizing the debt securities that we hold is a consideration in our credit analysis.
Although we do not operate as an asset -based lender, the prospective liquidation value of the assets, if any, collateralizing the debt securities that we hold is a consideration in our credit analysis. We consider both tangible assets, such as accounts receivable, inventory and equipment, and intangible assets, such as intellectual property, software code, customer lists, networks and databases.
Our loan documents also provide protection against customary events of default such as non -payment , breach of covenant, insolvency and change of control. 6 In identifying CLO investments, we seek to ascertain the asset quality of the underlying collateral pool, the structural integrity of the CLO liability capital structure, the expected return profile of the CLO equity or debt tranche we are investing in, as well as the quality of the prospective collateral manager.
In identifying CLO investments, we seek to ascertain the asset quality of the underlying collateral pool, the structural integrity of the CLO liability capital structure, the expected return profile of the CLO equity or debt tranche we are investing in, as well as the quality of the prospective collateral manager.
Under the Investment Advisory Agreement, and without applying the 2016 Fee Waiver, the total advisory fee would be calculated as follows: 1) Base Fee : The Base Fee is calculated at an annual rate of 2.00% of our gross assets, and appropriately adjusted for any equity or debt capital raises, repurchases or redemptions during the current calendar quarter. 2) Net Investment Income Incentive Fee : The Net Investment Income Incentive Fee is calculated based on our “Pre -Incentive Fee Net Investment Income” for the immediately preceding calendar quarter. a.For this purpose, “Pre -Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter minus our operating expenses for the quarter (including the Base Fee, expenses payable under our administration agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee).
For this purpose, “Pre -Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter minus our operating expenses for the quarter (including the Base Fee, expenses payable under our administration agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee).
An eligible portfolio company is generally a domestic company that is not an investment company (other than a small business investment company wholly owned by a BDC) and that: • does not have a class of securities with respect to which a broker may extend margin credit at the time the acquisition is made; • is controlled by the BDC and has an affiliate of the BDC on its board of directors; • does not have any class of securities listed on a national securities exchange; • is a public company that lists its securities on a national securities exchange with a market capitalization of less than $250 million; or • meets such other criteria as may be established by the SEC.
The principal categories of qualifying assets relevant to our business are: • securities purchased in transactions not involving any public offering, the issuer of which is an eligible portfolio company; • securities received in exchange for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights relating to such securities; and • cash, cash items, government securities or high quality debt securities (within the meaning of the 1940 Act), maturing in one year or less from the time of investment. 23 An eligible portfolio company is generally a domestic company that is not an investment company (other than a small business investment company wholly owned by a BDC) and that: • does not have a class of securities with respect to which a broker may extend margin credit at the time the acquisition is made; • is controlled by the BDC and has an affiliate of the BDC on its board of directors; • does not have any class of securities listed on a national securities exchange; • is a public company that lists its securities on a national securities exchange with a market capitalization of less than $250 million; or • meets such other criteria as may be established by the SEC.
Periodic Reporting and Audited Financial Statements We have registered our common stock under the Exchange Act, and have reporting obligations thereunder, including the requirement that we file annual and quarterly reports with the SEC. In accordance with the requirements of the Exchange Act, this annual report contains financial statements audited and reported on by our independent registered public accounting firm.
In accordance with the requirements of the Exchange Act, this annual report contains financial statements audited and reported on by our independent registered public accounting firm.
Rosenthal has also served as President of Oxford Gate Management, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC, since 2015 and 2018, respectively. Mr. Rosenthal was previously an attorney at the law firm of Shearman & Sterling LLP. Mr. Rosenthal serves on the board of the National Museum of Mathematics. Mr.
Since 2023, Mr. Rosenthal has also served as President of Oxford Park Income Fund, Inc., a non -diversified closed -end management investment company, and its investment adviser, Oxford Park Management. Mr. Rosenthal was previously an attorney at the law firm of Shearman & Sterling LLP. Mr. Rosenthal serves on the board of the National Museum of Mathematics. Mr.
As a BDC, we are required to meet certain regulatory tests, including the requirement to invest at least 70% of our total assets in eligible portfolio companies.
We are a Maryland corporation and a closed -end , non -diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to meet certain regulatory tests, including the requirement to invest at least 70% of our total assets in eligible portfolio companies.
We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by the vote of a majority of the outstanding voting securities, as required by the 1940 Act.
A BDC provides stockholders the ability to retain the liquidity of a publicly traded stock, while sharing in the possible benefits, if any, of investing in primarily privately owned companies. 22 We may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by the vote of a majority of the outstanding voting securities, as required by the 1940 Act.
Structured Finance 22.1 16.3 5.2 % Access CIG, LLC Business Services 16.8 14.7 4.7 % Affinion Insurance Solutions, Inc. (f/k/a AIS Intermediate, LLC) Diversified Insurance 14.9 14.7 4.7 % Quest Software, Inc. Software 22.7 14.3 4.6 % Octagon Investment Partners 49, Ltd.
Structured Finance 20.7 17.6 6.6 % Access CIG, LLC Business Services 16.8 16.7 6.2 % Global Tel Link Corp. Telecommunication Services 16.9 15.0 5.6 % Viant Medical Holdings, Inc. Healthcare 14.5 14.2 5.3 % Quest Software, Inc. Software 22.7 14.1 5.3 % Affinion Insurance Solutions, Inc. (f/k/a AIS Intermediate, LLC) Diversified Insurance 14.3 13.9 5.2 % Verifone Systems, Inc.
Access CIG, LLC Access CIG, LLC is a records and documents storage firm. As of December 31, 2022, approximately $16.8 million remained outstanding on our investment in the second lien notes. Affinion Insurance Solutions, Inc.
Access CIG, LLC Access CIG, LLC is a records and documents storage firm. As of December 31, 2023, approximately $16.8 million remained outstanding on our investment in the second lien notes. Global Tel Link Corp Global Tel Link Corp. is a provider of telecom and technology products and services used by inmates, investigators and administrators in the corrections industry.
The address of the SEC’s website is http://www.sec.gov . Information contained on our website or on the SEC’s website about us is not incorporated into this report and you should not consider information contained on our website or on the SEC’s website to be part of this report.
Information contained on our website or on the SEC’s website about us is not incorporated into this report and you should not consider information contained on our website or on the SEC’s website to be part of this report. 3 MARKET OVERVIEW AND OPPORTUNITY The broader corporate loan and CLO equity markets displayed strength throughout 2023.
Proxy Voting Records You may obtain information about how Oxford Square Management voted proxies by making a written request for proxy voting information to: Chief Compliance Officer, Oxford Square Management, LLC, 8 Sound Shore Drive, Suite 255, Greenwich, CT 06830.
Proxy Voting Records You may obtain information about how Oxford Square Management voted proxies by making a written request for proxy voting information to: Chief Compliance Officer, Oxford Square Management, LLC, 8 Sound Shore Drive, Suite 255, Greenwich, CT 06830. 25 Periodic Reporting and Audited Financial Statements We have registered our common stock under the Exchange Act, and have reporting obligations thereunder, including the requirement that we file annual and quarterly reports with the SEC.
The 5.50% Unsecured Notes are listed on the NASDAQ Global Select Market under the trading symbol “OXSQG.” ATM Offering On August 1, 2019, we entered into an Equity Distribution Agreement with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of our common stock through an At -the-Market (“ATM”) offering.
Approximately 1.7 million shares of our common stock were purchased in the rights offering by affiliates of Oxford Square Management. 2 ATM Offering On August 22, 2023, we entered into Amendment No. 1 to the Equity Distribution Agreement dated August 1, 2019 with Ladenburg Thalmann & Co. through which we may offer for sale, from time to time, up to $150.0 million of our common stock through an At -the-Market (“ATM”) offering.
The S&P/LSTA Leveraged Loan Index ended the year at a price of 92.44%, with lower credit quality loans continuing to underperform higher credit quality loans during the second half of 2022. For the full year, BB rated loan prices decreased 1.66%, B rated loan prices decreased 6.58%, and CCC rated loan prices decreased 19.01%.
The S&P/LSTA Leveraged Loan Index increased from a price of 92.44% at the end of December 2022 to 96.21% at the end of December 2023. During 2023, lower credit quality loans outperformed higher credit quality loans. For the full year, BB rated loan prices increased 2.03%, B rated loan prices increased 5.82%, and CCC rated loan prices increased 7.71%.
A BDC must be organized in the United States for the purpose of investing in or lending to primarily private companies and making managerial assistance available to them. A BDC may use capital provided by public stockholders and from other sources to invest in long -term , private investments in businesses.
A BDC may use capital provided by public stockholders and from other sources to invest in long -term , private investments in businesses.
We believe that the loan market’s performance during 2022 was driven by macroeconomic uncertainty as well as significant investment outflows from the loan and CLO asset classes. Moreover, loan market credit quality deteriorated during 2022 as exhibited by an increase in default rates to 0.72% at the end of 2022 versus 0.29% at the end of 2021.
Moreover, loan market credit quality deteriorated during 2023 as exhibited by an increase in default rates to 1.53% at the end of 2023 versus 0.72% at the end of 2022.
Rosenthal, our President and Chief Operating Officer, directly or indirectly own or control all of the outstanding equity interests 2 of Oxford Funds. Under the investment advisory agreement, we have agreed to pay Oxford Square Management an annual base advisory fee based on our gross assets as well as an incentive fee based on our performance.
Under the investment advisory agreement, we have agreed to pay Oxford Square Management an annual base advisory fee based on our gross assets as well as an incentive fee based on our performance. Refer to “— Investment Advisory Agreement.” We were founded in July 2003 and completed an initial public offering of shares of our common stock in November 2003.
The CLO vehicles which we focus on are collateralized primarily by senior secured loans made to companies whose debt is unrated or is rated below investment grade, and generally 1 have very little or no direct exposure to real estate, mortgage loans or to pools of consumer -based debt, such as credit card receivables or auto loans.
CLOs generally have very little or no exposure to real estate, mortgage loans or to pools of consumer -based debt, such as credit card receivables or auto loans.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAmong other things, the applicable Due Diligence Requirements require that prior to holding a “securitization position” (as defined in each Securitization Regulation) an Institutional Investor (other than the originator, sponsor or original lender) has verified that: (1) the originator, sponsor or original lender will retain on an ongoing basis a material net economic interest which, in any event, shall be not less than five per cent. in the securitization, determined in accordance with Article 6 of the applicable Securitization Regulation, and has disclosed the risk retention to such Institutional Investor; (2) (in the case of each EU Institutional Investor only) the originator, sponsor or securitization special purpose entity (“SSPE”) has, where applicable, made available the information required by Article 7 of the EU Securitization Regulation in accordance with the frequency and modalities provided for thereunder; (3) (in the case of each UK Institutional Investor only) the originator, sponsor or SSPE: (i) if established in the UK has, where applicable, made available the information required by Article 7 of the UK Securitization Regulation (the “UK Transparency Requirements”) in accordance with the frequency and modalities provided for thereunder; or (ii) if established in a country other than the UK, where applicable, made available information which is substantially the same as that which it would have made available under the UK Transparency Requirements if it had been established in the UK, and has done so with such frequency and modalities as are substantially the same as those with which it would have made information available under the UK Transparency Requirements if it had been established in the UK; and (4) in the case of each Institutional Investor, where the originator or original lender either (i) is not a credit institution or an investment firm (each as defined in the applicable Securitization Regulation) or (ii) is established in a third country (being (x) in respect of the EU Securitization Regulation, a country other than an EU member state, or (y) in respect of the UK Securitization Regulation, a country other than the UK), the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well -defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in order to ensure that credit -granting is based on a thorough assessment of the obligor’s creditworthiness. 43 The Due Diligence Requirements further require that prior to holding a securitization position, an Institutional Investor, other than the originator, sponsor or original lender, carry out a due diligence assessment which enables it to assess the risks involved, including but not limited to (a) the risk characteristics of the individual securitization position and the underlying exposures; and (b) all the structural features of the securitization that can materially impact the performance of the securitization position, including the contractual priorities of payment and priority of payment -related triggers, credit enhancements, liquidity enhancements, market value triggers, and transaction -specific definitions of default.
Biggest changeAmong other things, the applicable Due Diligence Requirements require that prior to holding a “securitization position” (as defined in each Securitization Regulation) an Institutional Investor (other than the originator, sponsor or original lender) has verified that: (1) the originator, sponsor or original lender will retain on an ongoing basis a material net economic interest which, in any event, shall be not less than five per cent. in the securitization, determined in accordance with Article 6 of the applicable Securitization Regulation, and has disclosed the risk retention to such Institutional Investor; (2) (in the case of each EU Institutional Investor only) the originator, sponsor or securitization special purpose entity (“SSPE”) has, where applicable, made available the information required by Article 7 of the EU Securitization Regulation in accordance with the frequency and modalities provided for thereunder; (3) (in the case of each UK Institutional Investor only) the originator, sponsor or SSPE: (i) if established in the UK has, where applicable, made available the information required by Article 7 of the UK Securitization Regulation (the “UK Transparency Requirements”) in accordance with the frequency and modalities provided for thereunder; or (ii) if established in a country other than the UK, where applicable, made available information which is substantially the same as that which it would have made available under the UK Transparency Requirements if it had been established in the UK, and has done so with such frequency and modalities as are substantially the same as those with which it would have made information available under the UK Transparency Requirements if it had been established in the UK; and (4) in the case of each Institutional Investor, where the originator or original lender either (i) is not a credit institution or an investment firm (each as defined in the applicable Securitization Regulation) or (ii) is established in a third country (being (x) in respect of the EU Securitization Regulation, a country other than an EU member state, or (y) in respect of the UK Securitization Regulation, a country other than the UK), the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well -defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in order to ensure that credit -granting is based on a thorough assessment of the obligor’s creditworthiness.
If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline.
If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline.
The due diligence requirements of Article 5 of the EU Securitization Regulation (the “EU Due Diligence Requirements”) apply to each investor that is an “institutional investor” (as such term is defined in the EU Securitization Regulation), being an investor which is one of the following: (a) an insurance undertaking as defined in Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking -up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast) (“Solvency II”); (b) a reinsurance undertaking as defined in Solvency II; (c) subject to certain conditions and exceptions, an institution for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (the “IORP Directive”), or an investment manager or an authorized entity appointed by an institution for occupational retirement provision pursuant to the IORP Directive; (d) an alternative investment fund manager (“AIFM”) as defined in Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers that manages and/or markets alternative investment funds in the EU; (e) an undertaking for the collective investment in transferable securities (“UCITS”) management company, as defined in Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in 42 transferable securities (UCITS) (the “UCITS Directive”); (f) an internally managed UCITS, which is an investment company authorized in accordance with the UCITS Directive and which has not designated a management company authorized under the UCITS Directive for its management; or (g) a credit institution as defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (the “CRR”) for the purposes of the CRR, or an investment firm as defined in the CRR, in each case, such investor an “EU Institutional Investor”.
The due diligence requirements of Article 5 of the EU Securitization Regulation (the “EU Due Diligence Requirements”) apply to each investor that is an “institutional investor” (as such term is defined in the EU Securitization Regulation), being an investor which is one of the following: (a) an insurance undertaking as defined in Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking -up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast) (“Solvency II”); (b) a reinsurance undertaking as defined in Solvency II; (c) subject to certain conditions and exceptions, an institution for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (the “IORP Directive”), or an investment manager or an authorized entity appointed by an institution for occupational retirement provision pursuant to the IORP Directive; (d) an alternative investment fund manager (“AIFM”) as defined in Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers that manages and/or markets alternative investment funds in the EU; (e) an undertaking for the collective investment in transferable securities (“UCITS”) management company, as defined in Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (the “UCITS Directive”); (f) an internally managed UCITS, which is an investment company authorized in accordance with the UCITS Directive and which has not designated a management company authorized under the UCITS Directive for its management; or (g) a credit institution as defined in Regulation (EU) 42 No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (the “CRR”) for the purposes of the CRR, or an investment firm as defined in the CRR, in each case, such investor an “EU Institutional Investor”.
Specifically, investment in certain of the companies that we are invested in involves a number of significant risks, including: • these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any value from the liquidation of such collateral; • they may have limited operating histories, narrower product lines and smaller market shares than larger businesses, which may tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; 45 • because many of them tend to be privately owned, there is generally little publicly available information about these businesses; therefore, although Oxford Square Management’s agents will perform “due diligence” investigations on these portfolio companies, their operations and their prospects, we may not learn all of the material information we need to know regarding these businesses; • some of these companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; • some of these companies may have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and • many of these companies may be more susceptible to economic recessions or downturns than other better capitalized companies that operate in less capital -intensive industries.
Specifically, investment in certain of the companies that we are invested in involves a number of significant risks, including: • these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any value from the liquidation of such collateral; • they may have limited operating histories, narrower product lines and smaller market shares than larger businesses, which may tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; • because many of them tend to be privately owned, there is generally little publicly available information about these businesses; therefore, although Oxford Square Management’s agents will perform “due diligence” investigations on these portfolio companies, their operations and their prospects, we may not learn all of the material information we need to know regarding these businesses; • some of these companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; • some of these companies may have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and • many of these companies may be more susceptible to economic recessions or downturns than other better capitalized companies that operate in less capital -intensive industries.
Through comprehensive new global regulatory regimes impacting derivatives ( e.g. , the Dodd -Frank Act, European Market Infrastructure Regulation (“EMIR”), Markets in Financial Investments Regulation (“MIFIR”)/Markets in Financial Instruments Directive (“MIFID II”)), certain over -the-counter derivatives transactions in which we may engage are either now or will soon be subject to various requirements, such as mandatory central clearing of transactions which include additional margin requirements and in certain cases trading on electronic platforms, pre -and post -trade transparency reporting requirements and mandatory bi -lateral exchange of initial margin for non -cleared swaps.
Through comprehensive new global regulatory regimes impacting derivatives ( e.g. , the Dodd -Frank Act, European Market Infrastructure Regulation (“EMIR”), Markets in Financial Investments Regulation (“MIFIR”)/Markets in Financial Instruments Directive (“MIFID II”)), certain over -the-counter derivatives transactions in which we may engage are either now or will soon be subject to various requirements, such as mandatory central clearing of transactions which include additional margin requirements and in certain cases trading on electronic platforms, pre -and post -trade transparency reporting requirements and mandatory bi -lateral 33 exchange of initial margin for non -cleared swaps.
These factors include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of securities of regulated investment companies, BDCs or other financial services companies; • exclusion of our common stock from certain indices could reduce the ability of certain investment funds to own our common stock and put short -term selling pressure on our common stock; • changes in regulatory policies or tax guidelines with respect to regulated investment companies or BDCs; • actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts; • general economic conditions and trends; • loss of a major funding source; or • departures of key personnel.
These factors include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time to time; • significant volatility in the market price and trading volume of securities of regulated investment companies, BDCs or other financial services companies; • exclusion of our common stock from certain indices could reduce the ability of certain investment funds to own our common stock and put short -term selling pressure on our common stock; 49 • changes in regulatory policies or tax guidelines with respect to regulated investment companies or BDCs; • actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts; • general economic conditions and trends; • loss of a major funding source; or • departures of key personnel.
Regulation (EU) 2017/2402 relating to a European framework for simple, transparent and standardized securitization (as amended by Regulation (EU) 2021/557 and as further amended from time to time, the “EU Securitization Regulation”) applies to certain specified EU investors, and Regulation (EU) 2017/2402 relating to a European framework for simple, transparent and standardised securitization in the form in effect on 31 December 2020 (which forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended, the “EUWA”)) (as amended by the Securitization (Amendment) (EU Exit) Regulations 2019 and as further amended from time to time, the “UK Securitization Regulation” and, together with the EU Securitization Regulation, the “Securitization Regulations”) applies to certain specified UK investors, in each case, who are investing in a “securitization” (as such term is defined under each Securitization Regulation).
Regulation (EU) 2017/2402 relating to a European framework for simple, transparent and standardized securitization (as amended by Regulation (EU) 2021/557 and as further amended from time to time, the “EU Securitization Regulation”) applies to certain specified EU investors, and Regulation (EU) 2017/2402 relating to a European framework for simple, transparent and standardized securitization in the form in effect on 31 December 2020 (which forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended, the “EUWA”)) (as amended by the Securitization (Amendment) (EU Exit) Regulations 2019 and as further amended from time to time, the “UK Securitization Regulation” and, together with the EU Securitization Regulation, the “Securitization Regulations”) applies to certain specified UK investors, in each case, who are investing in a “securitization” (as such term is defined under each Securitization Regulation).
Where investments are suitable for more than one entity, the allocation policy generally provides that, depending on size and subject to current and anticipated cash availability, the absolute size of the investment as well as its relative size compared to the total assets of each entity, current and anticipated weighted average costs of capital, and whether the proposed 34 investment is an add -on investment to an existing investment, among other factors, an investment amount will be determined by the adviser to each entity.
Where investments are suitable for more than one entity, the allocation policy generally provides that, depending on size and subject to current and anticipated cash availability, the absolute size of the investment as well as its relative size compared to the total assets of each entity, current and anticipated weighted average costs of capital, and whether the proposed investment is an add -on investment to an existing investment, among other factors, an investment amount will be determined by the adviser to each entity.
If we hold more than 10% of the shares in a foreign corporation that is treated as a controlled foreign corporation or CFC (including equity tranche investments in a CLO treated as CFC), we may be treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporation in an amount equal to our pro rata share of the corporation’s income for the tax year (including both ordinary earnings and capital gains).
If we hold more than 10% of the shares in a foreign corporation that is treated as a controlled foreign corporation or CFC (including equity tranche investments in a CLO treated as CFC), we may be treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporation in an amount equal to 38 our pro rata share of the corporation’s income for the tax year (including both ordinary earnings and capital gains).
Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all. Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.
Moreover, we can offer no assurance that we will be able to issue and sell additional equity securities in the future, on favorable terms or at all. 32 Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.
Refer to “— We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us” for a description of our outstanding senior securities. 31 Our ability to pay distributions or issue additional senior securities may be restricted if our asset coverage ratio is not at least 150%.
Refer to “— We are permitted to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us” for a description of our outstanding senior securities. Our ability to pay distributions or issue additional senior securities may be restricted if our asset coverage ratio is not at least 150%.
As a result of this arrangement, there may be times when the management team of Oxford Square Management has interests that differ from those of our stockholders, giving rise to a conflict. Oxford Square Management receives a quarterly incentive fee based, in part, on our “Pre -Incentive Fee Net Investment Income,” if any, for the immediately preceding calendar quarter.
As a result of this arrangement, there may be times when the management team of Oxford Square Management has interests that differ from those of our stockholders, giving rise to a conflict. 34 Oxford Square Management receives a quarterly incentive fee based, in part, on our “Pre -Incentive Fee Net Investment Income,” if any, for the immediately preceding calendar quarter.
In general, the tax treatment of these investments may result in higher distributable earnings in the early years and a capital loss at maturity, while for reporting purposes the totality of cash flows are reflected in a constant yield to maturity. Some instruments issued by CLO vehicles may not be readily marketable and may be subject to restrictions on resale.
In general, the tax treatment of these investments may result in higher distributable earnings in the early years and a capital loss at maturity, while for reporting purposes the totality of cash flows are reflected in a constant yield to maturity. 47 Some instruments issued by CLO vehicles may not be readily marketable and may be subject to restrictions on resale.
A BDC that enters into reverse repurchase agreements or similar financing transactions would need to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions could either (i) comply with the asset coverage requirements of the Section 18 of the 1940 Act when engaging in reverse 33 repurchase agreements or (ii) choose to treat such agreements as derivative transactions under the adopted rule.
A BDC that enters into reverse repurchase agreements or similar financing transactions would need to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions could either (i) comply with the asset coverage requirements of the Section 18 of the 1940 Act when engaging in reverse repurchase agreements or (ii) choose to treat such agreements as derivative transactions under the adopted rule.
Generally, covenant -lite loans permit borrowers more opportunity to negatively impact lenders because their covenants, if any, tend to be incurrence -based , which means they are only tested and can only be breached following certain actions of the borrower, rather than by a deterioration in the borrower’s financial condition.
Generally, covenant -lite loans permit borrowers more opportunity to negatively impact lenders because their covenants, if any, tend to be incurrence -based , which means they are only tested and can only be breached following certain actions of the borrower, rather than 44 by a deterioration in the borrower’s financial condition.
We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective. 49 We will have no influence on management of underlying investments managed by non-affiliated third party CLO collateral managers.
We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective. We will have no influence on management of underlying investments managed by non-affiliated third party CLO collateral managers.
A return of capital distribution could cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price. Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering.
A return of capital distribution could cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price. 50 Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering.
In addition, subject to certain exceptions, FATCA also imposes a 30% withholding on certain payments to certain foreign entities that are not FFIs unless such foreign entities certify that they do not have a greater than 10% owner that is a specified U.S. person or provide 38 the withholding agent with identifying information on each greater than 10% owner that is a specified U.S. person.
In addition, subject to certain exceptions, FATCA also imposes a 30% withholding on certain payments to certain foreign entities that are not FFIs unless such foreign entities certify that they do not have a greater than 10% owner that is a specified U.S. person or provide the withholding agent with identifying information on each greater than 10% owner that is a specified U.S. person.
In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage, including any increase in the Base Fee (and incentive fee) payable to Oxford Square Management. 29 Our asset coverage requirement under the 1940 Act for senior securities is 150%, effective as of April 6, 2019.
In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage, including any increase in the Base Fee (and incentive fee) payable to Oxford Square Management. Our asset coverage requirement under the 1940 Act for senior securities is 150%, effective as of April 6, 2019.
Our net asset value may also decline over time if our principal recovery with respect to CLO equity investments is less than the price we paid for those investments Investments in structured vehicles, including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk and market risk.
Our net asset value may also decline over time if our principal recovery with respect to CLO equity investments is less than the price we paid for those investments. 48 Investments in structured vehicles, including equity and junior debt instruments issued by CLO vehicles, involve risks, including credit risk and market risk.
This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance.
This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a 51 proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting interest in us than the increase in our assets resulting from such issuance.
Despite actions of the U.S. federal government and various foreign governments, these events contributed to worsening general economic conditions 52 that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular.
Despite actions of the U.S. federal government and various foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular.
Our investment adviser will not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never receive as a result of a default by an entity on the obligation that resulted in the accrual of such income.
Our investment adviser will 29 not be under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never receive as a result of a default by an entity on the obligation that resulted in the accrual of such income.
If at any time our current Investment Advisory Agreement is terminated we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms.
If at any time our current Investment Advisory Agreement is terminated we may not be able to find a new investment adviser or hire internal 37 management with similar expertise and ability to provide the same or equivalent services on acceptable terms.
The illiquidity of our 39 investments may make it difficult for us to sell such investments if the need arises. Also, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments.
The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. Also, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments.
While the CLO vehicles we have and continue to target generally enable the investor to acquire interests in a pool of leveraged corporate loans without the expenses associated with directly holding the same investments, we will generally indirectly pay 48 a proportionate share of the CLO vehicles’ administrative and other expenses.
While the CLO vehicles we have and continue to target generally enable the investor to acquire interests in a pool of leveraged corporate loans without the expenses associated with directly holding the same investments, we will generally indirectly pay a proportionate share of the CLO vehicles’ administrative and other expenses.
Such a failure would have a material adverse effect on us and our stockholders. 37 Our investments in CLOs may be subject to special anti-deferral provisions that could result in us incurring tax or recognizing income prior to receiving cash distributions related to such income.
Such a failure would have a material adverse effect on us and our stockholders. Our investments in CLOs may be subject to special anti-deferral provisions that could result in us incurring tax or recognizing income prior to receiving cash distributions related to such income.
Because we will borrow money and may issue debt securities or preferred stock to make investments, our net investment income is dependent upon the difference 40 between the rate at which we borrow funds or pay interest or dividends on such debt securities or preferred stock and the rate at which we invest these funds.
Because we will borrow money and may issue debt securities or preferred stock to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities or preferred stock and the rate at which we invest these funds.
Our efforts to comply with these requirements have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management’s time from other business activities. 27 A disruption in the capital markets and the credit markets could negatively affect our business.
Our efforts to comply with these requirements have resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management’s time from other business activities. A disruption in the capital markets and the credit markets could negatively affect our business.
Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment.
Also, in the event of 46 insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment.
If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.
If we need to dispose of such 36 investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.
As a result, because the Base Fee that we pay to our investment 28 adviser is based on the value of our gross assets, the receipt by us of PIK interest/dividend will result in an increase in the amount of the Base Fee payable by us.
As a result, because the Base Fee that we pay to our investment adviser is based on the value of our gross assets, the receipt by us of PIK interest/dividend will result in an increase in the amount of the Base Fee payable by us.
In addition, the degree of correlation between price movements of the instruments 32 used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged.
In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged.
If we fail to obtain funds from such sources or from other sources to fund our investments, it could limit our ability to grow, which may have an adverse effect on the value of our securities.
If we 31 fail to obtain funds from such sources or from other sources to fund our investments, it could limit our ability to grow, which may have an adverse effect on the value of our securities.
If additional funds are not available to us, we could be forced to curtail or cease our 50 new lending and investment activities, and our net asset value could decrease and our level of distributions could be impacted.
If additional funds are not available to us, we could be forced to curtail or cease our new lending and investment activities, and our net asset value could decrease and our level of distributions could be impacted.
Refer to “Risks relating to our business and structure — Our business and operation could be negatively affected if we become subject to any additional securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price.” Our shares of common stock have traded at a discount from net asset value and may do so in the future.
Refer to “Risks relating to our business and structure — Our business and operation could be negatively affected if we become subject to any additional securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price.” Our shares of common stock have traded at a discount from net asset value and may do so in the future.
The debt capital that will be available to us in the future, if any, may be at a higher cost and on less favorable terms and conditions than would currently be available.
The debt capital that will be available to us in the future, if any, may be at 52 a higher cost and on less favorable terms and conditions than would currently be available.
Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters.
Additionally, such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist stockholder matters.
We must distribute at least 90% of our investment company taxable income to our stockholders to maintain our tax treatment as a regulated investment company. As a result, any such cash earnings may not be available to fund investment originations. We expect to borrow from financial institutions and issue additional debt and equity securities.
We must distribute at least 90% of our investment company taxable income to our stockholders to maintain our tax treatment as a RIC. As a result, any such cash earnings may not be available to fund investment originations. We expect to borrow from financial institutions and issue additional debt and equity securities.
Nevertheless, the effects may adversely affect our business and impact our ability to make distributions. Our business and operation could be negatively affected if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price.
Nevertheless, the effects may adversely affect our business and impact our ability to make distributions. Our business and operation could be negatively affected if we become subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of our investment strategy and impact our stock price.
On June 14, 2017, the SEC issued an order permitting Oxford Square and certain of its affiliates to complete negotiated co -investment transactions in portfolio companies, subject to certain conditions, or the “Order.” Subject to satisfaction of certain conditions to the Order, Oxford Square and certain of its affiliates are now permitted, together with any future BDCs, registered closed -end funds and certain private funds, each of whose investment adviser is Oxford Square’s investment adviser or an investment adviser controlling, controlled by, or under common control with Oxford Square’s investment adviser, to co -invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing Oxford Square’s stockholders with access to a broader array of investment opportunities.
On June 14, 2017, the SEC issued an order permitting the Company and certain of its affiliates to complete negotiated co -investment transactions in portfolio companies, subject to certain conditions, or the “Order.” Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed -end funds and certain private funds, each of whose investment adviser is Oxford Square’s investment adviser or an investment adviser controlling, controlled by, or under common control with Oxford Square Management, to co -invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, 35 providing the Company’s stockholders with access to a broader array of investment opportunities.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against such company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC space.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against such company. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing in the BDC space.
This additional tax and interest may apply even if we make a distribution in an amount equal to any “excess distribution” or gain from the disposition of such shares as a taxable dividend by us to our shareholders.
This additional tax and interest may apply even if we make a distribution in an amount equal to any “excess distribution” or gain from the disposition of such shares as a taxable dividend by us to our stockholders.
Shares of BDCs have frequently traded at a market price that is less than the net asset value that is attributable to those shares. Our common stock traded below our net asset value per share during some periods from 2010 through March 2023.
Shares of BDCs have frequently traded at a market price that is less than the net asset value that is attributable to those shares. Our common stock traded below our net asset value per share during some periods from 2010 through March 2024.
While we are currently not subject to any securities litigation, due to the volatility of our stock price and for a variety of other reasons, we may in the future become the target of additional securities litigation and the subject of additional shareholder activism.
While we are currently not subject to any securities litigation, due to the volatility of our stock price and for a variety of other reasons, we may in the future become the target of additional securities litigation and the subject of additional stockholder activism.
In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your investment. RISKS RELATING TO OUR BUSINESS AND STRUCTURE Any failure on our part to maintain our status as a business development company would reduce our operating flexibility, including our ability to borrow money.
In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your investment. RISKS RELATING TO OUR BUSINESS AND STRUCTURE Any failure on our part to maintain our status as a BDC would reduce our operating flexibility, including our ability to borrow money.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism. RISKS RELATED TO U.S.
Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and stockholder activism. RISKS RELATED TO U.S.
Certain of our service providers may be impacted by hybrid work policies adopted by companies in response to the COVID -19 pandemic, which are obstructing the regular functioning of business workforces (including requiring employees to work from external locations and their homes).
Certain of our service providers may be impacted by hybrid work policies adopted by companies following the COVID -19 pandemic, which are obstructing the regular functioning of business workforces (including requiring employees to work from external locations and their homes).
Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our Board of Directors’ attention and resources from our business.
Securities litigation and stockholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our Board of Directors’ attention and resources from our business.
The failure by a CLO vehicle in which we invest to satisfy certain financial covenants, including as a result of political and economic events not directly associated with the leveraged corporate loans held by the CLO such as the COVID -19 pandemic, and specifically those with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us.
The failure by a CLO vehicle in which we invest to satisfy certain financial covenants, including as a result of political and economic events not directly associated with the leveraged corporate loans held by the CLO, and specifically those with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us.
Our portfolio must have an annual return of at least 3.8% in order to cover the annual interest payments on our current borrowings. If we are unable to comply with the covenants or restrictions in our borrowings, our business could be materially adversely affected.
Our portfolio must have an annual return of at least 2.83% in order to cover the annual interest payments on our current borrowings. If we are unable to comply with the covenants or restrictions in our borrowings, our business could be materially adversely affected.
RISKS RELATING TO THE ECONOMY We are operating in a period of capital markets volatility and economic uncertainty. The conditions have materially and adversely affected debt and equity capital markets in the United States, and any future volatility or instability in capital markets may have a negative impact on our business and operations.
GENERAL RISKS We are operating in a period of capital markets volatility and economic uncertainty. The conditions have materially and adversely affected debt and equity capital markets in the United States, and any future volatility or instability in capital markets may have a negative impact on our business and operations.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of the information resources of us or our portfolio companies.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of the information resources of us, Oxford Square Management or our portfolio companies.
We have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber -incident , do not guarantee that a cyber -incident will not occur and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
Oxford Square Management has implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that a cyber incident will not occur and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage to the extent that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to our portfolio companies.
If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage to the extent that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to our portfolio companies. 40 Risks related to the transition away from LIBOR.
We cannot assure you that these market conditions will not continue or worsen in the future. 54 Furthermore, we cannot assure you that market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not impact the global economy, and we cannot assure you that assistance packages will be available, or if available, be sufficient to stabilize countries and markets in Europe or elsewhere affected by a financial crisis.
Furthermore, we cannot assure you that market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not impact the global economy, and we cannot assure you that assistance packages will be available, or if available, be sufficient to stabilize countries and markets in Europe or elsewhere affected by a financial crisis.
The occurrence of a disaster such as a cyber -attack against us or against a third -party that has access to our data or networks, a natural catastrophe, an industrial accident, a terrorist attack or war, disease pandemics, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer -based data processing, transmission, storage, and retrieval systems or destroy data. 56 We depend heavily upon computer systems to perform necessary business functions.
The occurrence of a disaster such as a cyber -attack against us or against a third -party that has access to our data or networks, a natural catastrophe, an industrial accident, a terrorist attack or war, disease pandemics, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have 55 an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer -based data processing, transmission, storage, and retrieval systems or destroy data.
These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems or those of our portfolio companies or third -party vendors for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our or Oxford Square Management’s information systems or those of our portfolio companies for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
To the extent a CLO is structured in compliance with the Securitization Regulations, our ability to invest in the CLO equity of such CLOs could be limited, or we could be required to hold our investment for the life of the CLO.
To the extent a CLO is structured in compliance with the Securitization Regulations, the Company’s ability to invest in the CLO equity of such CLOs could be limited, or the Company could be required to hold its investment for the life of the CLO.
Gerald Cummins, our Chief Compliance Officer, currently serves in similar capacities for Oxford Lane Management, Oxford Lane Capital Corp., Oxford Square Management, LLC and Oxford Gate Management, LLC.
Gerald Cummins, our Chief Compliance Officer, currently serves in similar capacities for Oxford Lane Management, Oxford Lane Capital Corp., Oxford Square Management, LLC, Oxford Gate Management, LLC, Oxford Park Income Fund, Inc. and Oxford Park Management.
Oxford Square Management, Oxford Lane Management, LLC and Oxford Gate Management, LLC are subject to a written policy with respect to the allocation of investment opportunities among Oxford Square, Oxford Lane Capital Corp., Oxford Bridge II, LLC and the Oxford Gate Funds.
Oxford Square Management, Oxford Lane Management, Oxford Gate Management, and Oxford Park Management are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Bridge II, LLC, the Oxford Gate Funds and Oxford Park Income Fund, Inc.
As our, our portfolio companies’ and our third party vendor’s reliance on technology has increased, so have the risks posed to our information systems, both internal and those 57 provided by third -party service providers, and the information systems of our portfolio companies and third -party vendors.
As our and our portfolio companies’ reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided by Oxford Square Management and third -party service providers, and the information systems of our portfolio companies.
In addition, if a portfolio company goes bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance” to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors.
In addition, if a portfolio company goes bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance” to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors. 45 Inflation may adversely affect our and our portfolio companies’ business, results of operations and financial condition.
As of December 31, 2022, the CLO vehicles in which we were invested had average leverage of 9.1 times and ranged from approximately 2.8 times to 12.6 times levered. In particular, investors in CLO vehicles indirectly bear risks of the underlying debt investments held by such CLO vehicles.
As of December 31, 2023, the CLO vehicles in which we were invested had average leverage of 8.3 times and ranged from approximately 2.3 times to 11.7 times levered. In particular, investors in CLO vehicles indirectly bear risks of the underlying debt investments held by such CLO vehicles.
In addition, we may be required to accrue for U.S. federal income tax purposes amounts attributable to our investment in CLOs that may differ from the distributions received in respect of such investments. We also may be required to include in income certain other amounts that we will not receive in cash.
In addition, we may be required to accrue for U.S. federal income tax purposes amounts attributable to our investment in CLOs that may differ from the distributions received in respect of such investments.
If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increases the difficulty of consummating such a transaction.
If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act (in accordance with any applicable law, rules or regulations), the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increases the difficulty of consummating such a transaction.
Despite our implementation of a variety of security measures, our computers, networks, and data, like those of other companies, could be subject to cyber -attacks and unauthorized access, use, alteration, or destruction, such as from physical and electronic break -ins or unauthorized tampering.
We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computers, networks, and data, like those of other companies, could be subject to cyber -attacks and unauthorized access, use, alteration, or destruction, such as from physical and electronic break -ins or unauthorized tampering.
The terms of our future borrowings may contractually limit our ability to incur additional indebtedness. We will need additional capital to fund new investments and grow our portfolio of investments. We intend to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital.
We will need additional capital to fund new investments and grow our portfolio of investments. We intend to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital.
In some cases, the prepayment of a loan may reduce our achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations. The SEC has raised questions regarding certain non-traditional investments, including investments in CLOs.
In some cases, the prepayment of a loan may reduce our achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations.
As a result, 30 any default could have serious consequences to our financial condition. An event of default or an acceleration under any future borrowings also cause a cross -default or cross -acceleration of another debt instrument or contractual obligation, which would adversely impact our liquidity.
As a result, any default could have serious consequences to our financial condition. An event of default or an acceleration under any future borrowings also cause a cross -default or cross -acceleration of another debt instrument or contractual obligation, which would adversely impact our liquidity. The terms of our future borrowings may contractually limit our ability to incur additional indebtedness.
Our charter permits our Board of Directors to reclassify any authorized but unissued shares of stock into one or more classes of preferred stock. We are currently authorized to issue up to 100,000,000 shares of common stock, of which 49,871,062 shares are issued and outstanding as of March 17, 2023.
Our charter permits our Board of Directors to reclassify any authorized but unissued shares of stock into one or more classes of preferred stock. We are currently authorized to issue up to 100,000,000 shares of common stock, of which 59,672,337 shares are issued and outstanding as of March 14, 2024.
Even if we have sufficient capital to make a desired follow -on investment, we may elect not to make a follow -on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with BDC requirements or the desire to maintain our tax status. 46 Our incentive fee may induce Oxford Square Management to use leverage and to make speculative investments.
Even if we have sufficient capital to make a desired follow -on investment, we may elect not to make a follow -on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with BDC requirements or the desire to maintain our tax status.
General interest rate fluctuations may have a substantial negative impact on our investments and our investment returns and, accordingly, may have a material adverse effect on our investment objective and our net investment income. In an effort to combat inflation, the U.S.
General interest rate fluctuations may have a substantial negative impact on our investments and our investment returns and, accordingly, may have a material adverse effect on our investment objective and our net investment income. In an effort to combat inflation, the U.S. Federal Reserve embarked on a campaign of raising interest rates during 2022 and 2023.
The board of directors discusses valuations and determines the fair value in good faith based on the input of our investment adviser and the respective third -party valuation firms.
Our board of directors utilizes the services of third -party valuation firms to aid it in determining the fair value of certain securities. The board of directors discusses valuations and determines the fair value in good faith based on the input of our investment adviser and the respective third -party valuation firms.
In addition, if we do not comply with applicable laws, regulations and decisions, then we may lose licenses needed for the conduct of our business and be subject to civil fines and criminal penalties, any of which could have a material adverse effect upon our business results of operations or financial condition. 35 If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a business development company or be precluded from investing according to our current business strategy.
In addition, if we do not comply with applicable laws, regulations and decisions, then we may lose licenses needed for the conduct of our business and be subject to civil fines and criminal penalties, any of which could have a material adverse effect upon our business results of operations or financial condition.
Assumed total return on our portfolio (net of expenses) (10.0)% (5.0)% 0.0% 5.0% 10.0% Corresponding return to stockholder (1) (32.6 )% (20.7 )% (8.9 )% 2.9 % 14.7 % ____________ (1) Assumes $328.0 million in total assets and $189.7 million in total debt principal outstanding, which reflects our total assets and total debt outstanding as of December 31, 2022, and a cost of funds of approximately 6.5%.
Assumed total return on our portfolio (net of expenses) (10.0 )% (5.0 )% 0.0 % 5.0 % 10.0 % Corresponding return to stockholder (1) (23.5 )% (14.4 )% (5.2 )% 4.0 % 13.2 % ____________ (1) Assumes $277.7 million in total assets and $125.3 million in total debt principal outstanding, which reflects our total assets and total debt outstanding as of December 31, 2023, and a cost of funds of approximately 6.26%.
These situations may arise due to circumstances that we may be unable to control, such as access to the credit markets, a severe decline in the value of the U.S. dollar, another economic downturn or an operational problem that affects third parties or us, and could materially harm our business.
If we are unable to raise additional equity capital or consummate new credit facilities on terms that are acceptable to us, we may not be able to initiate significant originations. 28 These situations may arise due to circumstances that we may be unable to control, such as access to the credit markets, a severe decline in the value of the U.S. dollar, another economic downturn or an operational problem that affects third parties or us, and could materially harm our business.
Due to the lack of liquidity for the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments. 47 Our investments in CLO vehicles are riskier and less transparent to us and our stockholders than direct investments in the underlying senior loans.
Due to the lack of liquidity for the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments.
Further, inflation could make it difficult to extend the maturity of, or refinance existing indebtedness or obtain new indebtedness on favorable terms. Certain of our portfolio companies may be impacted by inflation.
These events could limit our investment originations, limit our ability to grow and negatively impact our operating results. Further, inflation could make it difficult to extend the maturity of, or refinance existing indebtedness or obtain new indebtedness on favorable terms. Certain of our portfolio companies may be impacted by inflation.
Because in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty satisfying the Annual Distribution Requirement applicable to RICs.
We also may be required to include in income certain other amounts that we will not receive in cash. 39 Because in certain cases we may recognize income before or without receiving cash representing such income, we may have difficulty satisfying the Annual Distribution Requirement applicable to RICs.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 58 PART II
Biggest changeWhile the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Item 4. Mine Safety Disclosures Not applicable. 59 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe indirect expenses associated with the Company’s CLO equity investments are not included in the fee table presentation, but if such expenses were included in the fee table presentation then OXSQ’s total annual expenses would have been 26.17%. 62 Example The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock, assuming (1) a 2.00% sales load (underwriting discounts and commissions) and offering expenses totaling 0.37%, (2) total net estimated annual expenses of 11.77% of average net assets attributable to our common stock as set forth in the table above and (3) a 5% annual return. 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (1) $ 135 $ 335 $ 508 $ 850 You would pay the following expenses on a $1,000 investment, assuming a 5% annual return entirely from realized gains (2) $ 143 $ 356 $ 537 $ 879 ____________ (1) Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation.
Biggest changeThe indirect expenses associated with the Company’s CLO equity investments are not included in the fee table presentation, but if such expenses were included in the fee table presentation then OXSQ’s total annual expenses would have been 19.71%. 63 Example The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock.
This table includes all of the commitment fees, interest expense and amortized financing costs of the 6.50% Unsecured Notes, 6.25% Unsecured Notes, and 5.50% Unsecured Notes, as well as the fees and expenses of issuing and servicing any other borrowings or leverage that the Company expects to incur during the 12 months following the filing of this Annual Report on Form 10 -K .
This table includes all of the commitment fees, interest expense and amortized financing costs of the 6.25% Unsecured Notes and 5.50% Unsecured Notes, as well as the fees and expenses of issuing and servicing any other borrowings or leverage that the Company expects to incur during the 12 months following the filing of this Annual Report on Form 10 -K .
For a more detailed discussion of the requirements under Subchapter M, please refer to the discussion in “Business — Certain U.S. Federal Income Tax Considerations” set forth above.
For a more detailed discussion of the requirements under Subchapter M, please refer to the discussion in “Business — Certain U.S. Federal Income 60 Tax Considerations” set forth above.
It assumes that distributions paid are reinvested in like securities. 60 The graph and the information furnished under this Part II Item 5 of this Form 10 -K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
It assumes that distributions paid are reinvested in like securities. 61 The graph and the information furnished under this Part II Item 5 of this Form 10 -K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
The graph assumes that, on December 31, 2017, a person invested $100 in each of our common stock, the NASDAQ Composite Index and the NASDAQ Financial 100, which includes the 100 largest domestic and international financial organizations listed on the NASDAQ Stock Market based on market capitalization.
The graph assumes that, on December 31, 2018, a person invested $100 in each of our common stock, the NASDAQ Composite Index and the NASDAQ Financial 100, which includes the 100 largest domestic and international financial organizations listed on the NASDAQ Stock Market based on market capitalization.
Performance Graph The graph below compares the cumulative stockholder return on our common stock with that of the NASDAQ Composite Index and the NASDAQ Financial 100, as we do not believe there is an appropriate index of companies with an investment strategy similar to our own with which to compare the return on our common stock, for the period from December 31, 2017 through December 31, 2022.
Performance Graph The graph below compares the cumulative stockholder return on our common stock with that of the NASDAQ Composite Index and the NASDAQ Financial 100, as we do not believe there is an appropriate index of companies with an investment strategy similar to our own with which to compare the return on our common stock, for the period from December 31, 2018 through December 31, 2023.
(7) “Other expenses” is based on the actual expenses for the year ended December 31, 2022, and adjusted for any new and non -recurring expenses, such as an assumed issuance of an additional $50.0 million of common stock.
(7) “Other expenses” are based on the actual expenses for the year ended December 31, 2023, and adjusted for any new and non -recurring expenses, such as an assumed issuance of an additional $50.0 million of common stock.
The aggregate value for the shares of common stock issued under the distribution reinvestment plan was approximately $0.5 million. Issuer Purchases of Equity Securities During the year ended December 31, 2022, no common stock was repurchased.
The aggregate value for the shares of common stock issued under the distribution reinvestment plan was approximately $0.9 million. Issuer Purchases of Equity Securities During the year ended December 31, 2023, no common stock was repurchased.
Recent Sales of Unregistered Securities We did not engage in unregistered sales of equity securities during the year ended December 31, 2022, however, we issued a total of 154,737 shares of common stock under our distribution reinvestment plan. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended.
Recent Sales of Unregistered Securities We did not engage in unregistered sales of equity securities during the year ended December 31, 2023, however, we issued a total of 309,016 shares of common stock under our distribution reinvestment plan. This issuance was not subject to the registration requirements of the Securities Act of 1933, as amended.
For a detailed discussion of the calculation of the incentive fees, see Item 1 — Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K . (6) Assumes that we have $189.7 million of outstanding principal borrowings as of December 31, 2022.
For a detailed discussion of the calculation of the incentive fees, see Item 1 — Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K . (6) Assumes that we have $125.3 million of outstanding principal borrowings as of December 31, 2023.
The calculation also assumes an effective interest rate of 7.00% (including amortization of deferred issuance costs) on the approximately $64.4 million of 6.50% Unsecured Notes outstanding as of December 31, 2022, an effective interest rate of 6.77% (including amortization of deferred issuance costs) on the approximately $44.8 million of 6.25% Unsecured Notes outstanding as of December 31, 2022, and an effective interest rate of 5.98% (including amortization of deferred issuance costs) on the approximately $80.5 million of 5.50% Unsecured Notes outstanding as of December 31, 2022.
The calculation also assumes an effective interest rate of 6.77% (including amortization of deferred issuance costs) on the approximately $44.8 million of 6.25% Unsecured Notes outstanding as of December 31, 2023, and an effective interest rate of 5.98% (including amortization of deferred issuance costs) on the approximately $80.5 million of 5.50% Unsecured Notes outstanding as of December 31, 2023.
Stockholder transaction expenses: Sales load (as a percentage of offering price) — % (1) Offering expenses borne by our common stockholders (as a percentage of offering price) — % (2) Distribution reinvestment plan expenses None ​ (3) Total stockholder transaction expenses (as a percentage of offering price) — % Annual expenses (as a percentage of net assets attributable to our common stock): Base management fee 3.01 % (4) Incentive fees payable under our investment advisory agreement — % (5) Interest payments on borrowed funds 6.55 % (6) Other expenses 2.21 % (7) Total annual expenses 11.77 % (8) ____________ (1) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable sales load and the “Example” will be updated accordingly. 61 (2) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable offering expenses and total stockholder transaction expenses as a percentage of the offering price.
Stockholder transaction expenses: Sales load (as a percentage of offering price) — % (1) Offering expenses borne by our common stockholders (as a percentage of offering price) — % (2) Distribution reinvestment plan expenses — ​ (3) Total stockholder transaction expenses (as a percentage of offering price) — % Annual expenses (as a percentage of net assets attributable to our common stock): Base management fee 2.44 % (4) Incentive fees payable under our investment advisory agreement — % (5) Interest payments on borrowed funds 3.90 % (6) Other expenses 2.73 % (3) (7) Total annual expenses 9.07 % (8) ____________ (1) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable sales load and the “Example” will be updated accordingly. 62 (2) If applicable, the prospectus or prospectus supplement relating to an offering of our securities will disclose the applicable offering expenses and total stockholder transaction expenses as a percentage of the offering price.
(4) Assumes gross assets (which equals the total assets on our Statements of Assets and Liabilities adjusted as described in this footnote) of $378.0 million and $189.7 million of leverage (including $64.4 million in aggregate principal of our 6.50% Unsecured Notes, $44.8 million in aggregate principal of our 6.25% Unsecured Notes, and $80.5 million in aggregate principal of our 5.50% Unsecured Notes in each case, as of December 31, 2022), and assumes net assets of $188.7 million (which has been adjusted to reflect the issuance of an additional $50.0 million of common stock).
(4) Assumes gross assets (which equals the total assets on our Statements of Assets and Liabilities adjusted as described in this footnote) of $327.7 million and $125.3 million of leverage (including $44.8 million in aggregate principal of our 6.25% Unsecured Notes and $80.5 million in aggregate principal of our 5.50% Unsecured Notes in each case, as of December 31, 2023), and assumes net assets of $201.3 million (which has been adjusted to reflect the net issuance of an additional $50.0 million of common stock).
(3) Represents the cash distributions, including dividends, dividends reinvested and returns of capital, if any, per share that we have declared on our common stock in the specified quarter. On March 17, 2023, the last reported sales price of our common stock was $3.06 per share. As of March 17, 2023, we had 129 stockholders of record.
(3) Represents the cash distributions, including dividends, dividends reinvested and returns of capital, if any, per share that we have declared on our common stock in the specified quarter. On March 14, 2024, the last reported sales price of our common stock was $3.09 per share. As of March 14, 2024, we had 125 stockholders of record.
We cannot assure stockholders that they will receive any distributions. To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders.
To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders.
Since 2008, our shares of common stock have traded both at a premium and a discount to the net assets attributable to those shares. As of March 17, 2023, our shares of common stock traded at a premium equal to approximately 10.1% of the net asset value per share as of December 31, 2022.
Our shares of common stock have traded both at a premium and a discount to the net assets attributable to those shares. As of March 14, 2024, our shares of common stock traded at a premium equal to approximately 21.2% of the net asset value per share as of December 31, 2023.
In order to qualify as a RIC, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and realized net short -term capital gains in excess of realized net long -term capital losses to our stockholders on an annual basis. 59 A written statement identifying the nature of our distributions for tax reporting purposes was posted on our website.
In order to qualify as a RIC, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and realized net short -term capital gains in excess of realized net long -term capital losses to our stockholders on an annual basis.
Price Range Premium or (Discount) of High Sales Price to NAV (2) Premium or (Discount) of Low Sales Price to NAV (2) Distributions Per Share (3) NAV (1) High Low Fiscal 2022 Fourth Quarter $ 2.78 $ 3.25 $ 2.82 16.9 % 1.4 % $ 0.105 Third Quarter $ 3.34 $ 4.05 $ 2.94 21.3 % (12.0 )% $ 0.105 Second Quarter $ 3.67 $ 4.29 $ 3.45 16.9 % (6.0 )% $ 0.105 First Quarter $ 4.65 $ 4.42 $ 3.68 (4.9 )% (20.9 )% $ 0.105 Fiscal 2021 Fourth Quarter $ 4.92 $ 4.47 $ 3.79 (9.1 )% (23.0 )% $ 0.105 Third Quarter $ 5.03 $ 5.00 $ 3.86 (0.6 )% (23.3 )% $ 0.105 Second Quarter $ 4.91 $ 5.22 $ 4.56 6.3 % (7.1 )% $ 0.105 First Quarter $ 4.88 $ 4.78 $ 3.05 (2.0 )% (37.5 )% $ 0.105 ____________ (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.
Price Range Premium or (Discount) of High Sales Price to NAV (2) Premium or (Discount) of Low Sales Price to NAV (2) Distributions Per Share (3) NAV (1) High Low Fiscal 2024 First Quarter (through March 14, 2024) * $ 3.22 $ 2.85 * * * Fiscal 2023 Fourth Quarter $ 2.55 $ 3.12 $ 2.82 22.4 % 10.6 % $ 0.105 Third Quarter $ 2.78 $ 3.29 $ 2.68 18.3 % (3.6 )% $ 0.225 Second Quarter $ 2.88 $ 3.20 $ 2.60 11.1 % (9.7 )% $ 0.105 First Quarter $ 2.80 $ 3.70 $ 3.00 32.1 % 7.1 % $ 0.105 Fiscal 2022 Fourth Quarter $ 2.78 $ 3.25 $ 2.82 16.9 % 1.4 % $ 0.105 Third Quarter $ 3.34 $ 4.05 $ 2.94 21.3 % (12.0 )% $ 0.105 Second Quarter $ 3.67 $ 4.29 $ 3.45 16.9 % (6.0 )% $ 0.105 First Quarter $ 4.65 $ 4.42 $ 3.68 (4.9 )% (20.9 )% $ 0.105 ____________ (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.
Oxford Square Management did not earn incentive fees during the year ended December 31, 2022 due to the Total Return Requirement described under Item 1. Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K .
While Oxford Square Management did earn incentive fees during the year ended December 31, 2023, due to the Total Return Requirement described under Item 1.
The final determination of the nature of distribution can only be made upon the filing of our tax return. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a BDC under the 1940 Act.
In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a BDC under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of RIC tax treatment.
If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of RIC tax treatment. We cannot assure stockholders that they will receive any distributions.
Added
A written statement identifying the nature of our distributions for tax reporting purposes was posted on our website. The final determination of the nature of distribution can only be made upon the filing of our tax return.
Added
Business — Investment Advisory Agreement — Advisory Fee in this Annual Report on Form 10 -K , there is no expectation for Oxford Square Management to earn incentive fees for the year ending December 31, 2024.
Added
In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above. 1 Year 3 Years 5 Years 10 Years You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (1) $ 89 $ 256 $ 410 $ 742 You would pay the following expenses on a $1,000 investment, assuming a 5% annual return entirely from realized gains (2) $ 98 $ 280 $ 444 $ 785 ____________ (1) Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

91 edited+18 added−40 removed53 unchanged
Biggest changeWe have until October 15, 2023 to file our U.S. federal income tax return for the year ended December 31, 2022. 75 The following table reflects the cash distributions, including distributions reinvested, if any, per share that we have paid on our common stock since the beginning of the 2020 fiscal year through 2022: Date Declared Record Date Payment Date Total Distributions GAAP net investment income Distributions in excess of/ (less than) GAAP net investment income (1) Fiscal 2022 July 21, 2022 December 16, 2022 December 30, 2022 $ 0.035 $ N/A $ — July 21, 2022 November 16, 2022 November 30, 2022 0.035 N/A — July 21, 2022 October 17, 2022 October 31, 2022 0.035 N/A — Total (Fourth Quarter 2022) 0.105 0.13 (0.03 ) April 21, 2022 September 16, 2022 September 30, 2022 $ 0.035 $ N/A $ — April 21, 2022 August 17, 2022 August 31, 2022 0.035 N/A — April 21, 2022 July 15, 2022 July 29, 2022 0.035 N/A — Total (Third Quarter 2022) 0.105 0.11 (0.01 ) March 1, 2022 June 16, 2022 June 30, 2022 $ 0.035 $ N/A $ — March 1, 2022 May 17, 2022 May 31, 2022 0.035 N/A — March 1, 2022 April 15, 2022 April 29, 2022 0.035 N/A — Total (Second Quarter 2022) 0.105 0.09 0.02 October 22, 2021 March 17, 2022 March 31, 2022 $ 0.035 $ N/A $ — October 22, 2021 February 14, 2022 February 28, 2022 0.035 N/A — October 22, 2021 January 17, 2022 January 31, 2022 0.035 N/A — Total (First Quarter 2022) 0.105 0.09 0.02 Total (2022) $ 0.420 ​ (1) $ 0.42 $ — Fiscal 2021 July 22, 2021 December 17, 2021 December 31, 2021 $ 0.035 $ N/A $ — July 22, 2021 November 16, 2021 November 30, 2021 0.035 N/A — July 22, 2021 October 15, 2021 October 29, 2021 0.035 N/A — Total (Fourth Quarter 2021) 0.105 0.09 0.02 April 22, 2021 September 16, 2021 September 30, 2021 $ 0.035 $ N/A $ — April 22, 2021 August 17, 2021 August 31, 2021 0.035 N/A — April 22, 2021 July 16, 2021 July 30, 2021 0.035 N/A — Total (Third Quarter 2021) 0.105 0.08 0.02 February 23, 2021 June 16, 2021 June 30, 2021 $ 0.035 $ N/A $ — February 23, 2021 May 14, 2021 May 28, 2021 0.035 N/A — February 23, 2021 April 16, 2021 April 30, 2021 0.035 N/A — Total (Second Quarter 2021) 0.105 0.06 0.05 October 22, 2020 March 17, 2021 March 31, 2021 $ 0.035 $ N/A $ — October 22, 2020 February 12, 2021 February 26, 2021 0.035 N/A — October 22, 2020 January 15, 2021 January 29, 2021 0.035 N/A — Total (First Quarter 2021) 0.105 0.10 — Total (2021) $ 0.420 ​ (2) $ 0.32 ​ (4) $ 0.10 ​ (4) Fiscal 2020 September 11, 2020 December 16, 2020 December 31, 2020 $ 0.035 $ N/A $ — September 11, 2020 November 13, 2020 November 30, 2020 0.035 N/A — September 11, 2020 October 16, 2020 October 30, 2020 0.035 N/A — Total (Fourth Quarter 2020) 0.105 0.10 — June 1, 2020 September 16, 2020 September 30, 2020 $ 0.035 $ N/A $ — June 1, 2020 August 17, 2020 August 31, 2020 0.035 N/A — June 1, 2020 July 17, 2020 July 31, 2020 0.035 N/A — Total (Third Quarter 2020) 0.105 0.09 0.01 February 24, 2020 June 15, 2020 June 30, 2020 $ 0.067 $ N/A $ — February 24, 2020 May 14, 2020 May 29, 2020 0.067 N/A — February 24, 2020 April 15, 2020 April 30, 2020 0.067 N/A — Total (Second Quarter 2020) 0.201 0.09 0.11 October 25, 2019 March 17, 2020 March 31, 2020 $ 0.067 $ N/A $ — October 25, 2019 February 14, 2020 February 28, 2020 0.067 N/A — October 25, 2019 January 17, 2020 January 31, 2020 0.067 N/A — Total (First Quarter 2020) 0.201 0.13 0.07 Total (2020) $ 0.612 ​ (3) $ 0.40 ​ (4) $ 0.21 ​ (4) 76 ____________ (1) The tax characterization of cash distributions for the year ended December 31, 2022 will not be known until the tax return for such year is finalized.
Biggest changeWe have until October 15, 2024 to file our U.S. federal income tax return for the year ended December 31, 2023. 76 The following table reflects the cash distributions, including distributions reinvested, if any, per share that we have paid on our common stock since the beginning of the 2021 fiscal year through 2023: Date Declared Record Date Payment Date Total Distributions GAAP Net Investment Income Distributions in Excess of/ (Less than) GAAP Net Investment Income (1) Fiscal 2023 August 3, 2023 December 15, 2023 December 29, 2023 $ 0.035 $ N/A $ — August 3, 2023 November 16, 2023 November 30, 2023 0.035 N/A — August 3, 2023 October 17, 2023 October 31, 2023 0.035 N/A — Total (Fourth Quarter 2023) 0.105 0.13 (0.03 ) August 3, 2023 (5) September 15, 2023 September 29, 2023 $ 0.120 $ N/A $ — April 25, 2023 September 15, 2023 September 29, 2023 0.035 N/A — April 25, 2023 August 17, 2023 August 31, 2023 0.035 N/A — April 25, 2023 July 17, 2023 July 31, 2023 0.035 N/A — Total (Third Quarter 2023) 0.225 0.11 0.12 March 16, 2023 June 16, 2023 June 30, 2023 $ 0.035 $ N/A $ — March 16, 2023 May 17, 2023 May 31, 2023 0.035 N/A — March 16, 2023 April 14, 2023 April 28, 2023 0.035 N/A — Total (Second Quarter 2023) 0.105 0.13 (0.03 ) October 20, 2022 March 17, 2023 March 31, 2023 $ 0.035 $ N/A $ — October 20, 2022 February 14, 2023 February 28, 2023 0.035 N/A — October 20, 2022 January 17, 2023 January 31, 2023 0.035 N/A — Total (First Quarter 2023) 0.105 0.13 (0.03 ) Total (2023) $ 0.540 ​ (1) $ 0.51 ​ (4) $ 0.03 ​ (4) Fiscal 2022 July 21, 2022 December 16, 2022 December 30, 2022 $ 0.035 $ N/A $ — July 21, 2022 November 16, 2022 November 30, 2022 0.035 N/A — July 21, 2022 October 17, 2022 October 31, 2022 0.035 N/A — Total (Fourth Quarter 2022) 0.105 0.13 (0.03 ) April 21, 2022 September 16, 2022 September 30, 2022 $ 0.035 $ N/A $ — April 21, 2022 August 17, 2022 August 31, 2022 0.035 N/A — April 21, 2022 July 15, 2022 July 29, 2022 0.035 N/A — Total (Third Quarter 2022) 0.105 0.11 (0.01 ) March 1, 2022 June 16, 2022 June 30, 2022 $ 0.035 $ N/A $ — March 1, 2022 May 17, 2022 May 31, 2022 0.035 N/A — March 1, 2022 April 15, 2022 April 29, 2022 0.035 N/A — Total (Second Quarter 2022) 0.105 0.09 0.02 October 22, 2021 March 17, 2022 March 31, 2022 $ 0.035 $ N/A $ — October 22, 2021 February 14, 2022 February 28, 2022 0.035 N/A — October 22, 2021 January 17, 2022 January 31, 2022 0.035 N/A — Total (First Quarter 2022) 0.105 0.09 0.02 Total (2022) $ 0.420 ​ (2) $ 0.42 $ — Fiscal 2021 July 22, 2021 December 17, 2021 December 31, 2021 $ 0.035 $ N/A $ — July 22, 2021 November 16, 2021 November 30, 2021 0.035 N/A — July 22, 2021 October 15, 2021 October 29, 2021 0.035 N/A — Total (Fourth Quarter 2021) 0.105 0.09 0.02 April 22, 2021 September 16, 2021 September 30, 2021 $ 0.035 $ N/A $ — April 22, 2021 August 17, 2021 August 31, 2021 0.035 N/A — April 22, 2021 July 16, 2021 July 30, 2021 0.035 N/A — Total (Third Quarter 2021) 0.105 0.08 0.02 February 23, 2021 June 16, 2021 June 30, 2021 $ 0.035 $ N/A $ — February 23, 2021 May 14, 2021 May 28, 2021 0.035 N/A — February 23, 2021 April 16, 2021 April 30, 2021 0.035 N/A — Total (Second Quarter 2021) 0.105 0.06 0.05 October 22, 2020 March 17, 2021 March 31, 2021 $ 0.035 $ N/A $ — October 22, 2020 February 12, 2021 February 26, 2021 0.035 N/A — October 22, 2020 January 15, 2021 January 29, 2021 0.035 N/A — Total (First Quarter 2021) 0.105 0.10 — Total (2021) $ 0.420 ​ (3) $ 0.32 ​ (4) $ 0.10 ​ (4) 77 ____________ (1) The tax characterization of cash distributions for the year ended December 31, 2023 will not be known until the tax return for such year is finalized.
Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed -end funds and certain private funds, each of whose investment adviser is the Company’s investment adviser or an investment adviser controlling, controlled by, or under common control with the Company’s investment adviser, to co -invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing 77 the Company’s stockholders with access to a broader array of investment opportunities.
Subject to satisfaction of certain conditions to the Order, the Company and certain of its affiliates are now permitted, together with any future BDCs, registered closed -end funds and certain private funds, each of whose investment adviser is the Company’s investment adviser or an investment adviser controlling, controlled by, or under common control with the Company’s investment adviser, to co -invest in negotiated investment opportunities where doing so would otherwise be prohibited under the 1940 Act, providing the Company’s stockholders with access to a broader array of investment opportunities.
This includes net unrealized appreciation of approximately $20.4 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $37.3 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $17.0 million.
This includes net unrealized 73 appreciation of approximately $20.4 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $37.3 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $17.0 million.
The forward -looking statements contained in this Annual Report on Form 10 -K involve risks and uncertainties, including statements as to: • our future operating results, including our ability to achieve objectives; • our business prospects and the prospects of our portfolio companies; • the impact of investments that we expect to make; • our contractual arrangements and relationships with third parties; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • the ability of our portfolio companies and CLO investments to achieve their objectives; 63 • the valuation of our investments in portfolio companies and CLOs, particularly those having no liquid trading market; • market conditions and our ability to access alternative debt markets and additional debt and equity capital; • our expected financings and investments; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies and CLO investments; and • the ability of our investment adviser to locate suitable investments for us and monitor and administer our investments .
The forward -looking statements contained in this Annual Report on Form 10 -K involve risks and uncertainties, including statements as to: • our future operating results, including our ability to achieve objectives; • our business prospects and the prospects of our portfolio companies; • the impact of investments that we expect to make; • our contractual arrangements and relationships with third parties; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • the ability of our portfolio companies and CLO investments to achieve their objectives; 64 • the valuation of our investments in portfolio companies and CLOs, particularly those having no liquid trading market; • market conditions and our ability to access alternative debt markets and additional debt and equity capital; • our expected financings and investments; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies and CLO investments; and • the ability of our investment adviser to locate suitable investments for us and monitor and administer our investments.
The components of the net change in unrealized depreciation during the year ended December 31, 2022 were as follows ($ in millions): Portfolio Company Changes in unrealized depreciation ConvergeOne Holdings, Inc. $ (10.3 ) Quest Software, Inc. (8.3 ) Sound Point CLO XVI, Ltd. (7.6 ) Octagon Investment Partners 49, Ltd.
The components of the net change in unrealized appreciation/depreciation during the year ended December 31, 2022 were as follows ($ in millions): Portfolio Company Changes in Unrealized Depreciation ConvergeOne Holdings, Inc. $ (10.3 ) Quest Software, Inc. (8.3 ) Sound Point CLO XVI, Ltd. (7.6 ) Octagon Investment Partners 49, Ltd.
Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Lane Capital Corp., a non -diversified closed -end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and its investment adviser, Oxford Lane Management, LLC.
Cohen and Rosenthal currently serve as Chief Executive Officer and President, respectively, of Oxford Lane Capital Corp., a non -diversified closed -end management investment company that invests primarily in equity and junior debt tranches of CLO vehicles, and its investment adviser, Oxford Lane Management.
Oxford Funds provides Oxford Lane Capital Corp. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Lane Management, LLC. In addition, Bruce L.
Oxford Funds provides Oxford Lane Capital Corp. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Lane Management. In addition, Bruce L.
Related Party Transactions” in the notes to our financial statements. 71 The expense attributable to the capital gains incentive fee, as reported under GAAP, is calculated as if the Company’s entire portfolio had been liquidated at period end, and therefore is calculated on the basis of net realized and unrealized gains and losses at the end of each period.
Related Party Transactions” in the notes to our financial statements. 72 The expense attributable to the capital gains incentive fee, as reported under GAAP, is calculated as if the Company’s entire portfolio had been liquidated at period end, and therefore is calculated on the basis of net realized and unrealized gains and losses at the end of each period.
The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations. (2) Cash distributions for the year ended December 31, 2021 represented 100% net investment income and therefore there was no tax return of capital.
The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations. (2) Cash distributions for the year ended December 31, 2022 represented 100% net investment income and therefore there was no tax return of capital.
The weighted average annualized yield was computed using the effective interest rates as of December 31, 2022, including accretion of OID and excluding any debt investments on non -accrual status. There can be no assurance that the weighted average annualized yield will remain at its current level.
The weighted average annualized yield was computed using the effective interest rates as of December 31, 2023, including accretion of OID and excluding any debt investments on non -accrual status. There can be no assurance that the weighted average annualized yield will remain at its current level.
(2) Totals may not sum due to rounding. The following tables present the top ten industries (based upon Moody’s industry classifications) of the aggregate holdings of the CLOs included in our portfolio, based on par value, as of December 31, 2022 and December 31, 2021.
(2) Totals may not sum due to rounding. The following tables present the top ten industries (based upon Moody’s industry classifications) of the aggregate holdings of the CLOs included in our portfolio, based on par value, as of December 31, 2023 and December 31, 2022.
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10 -K . 64 OVERVIEW Our investment objective is to maximize our portfolio’s total return.
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10 -K . 65 OVERVIEW Our investment objective is to maximize our portfolio’s total return.
Estimates made in the preparation of our financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We believe that there is no single definitive method for determining fair value in good faith.
Estimates made in the preparation of our financial statements include the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We believe that there is no single definitive method for determining fair value.
On June 14, 2017, the Securities and Exchange Commission issued an order permitting the Company and certain of its affiliates to complete negotiated co -investment transactions in portfolio companies, subject to certain conditions (the “Order”).
On June 14, 2017, the Securities and Exchange Commission issued the Order permitting the Company and certain of its affiliates to complete negotiated co -investment transactions in portfolio companies, subject to certain conditions.
ASC 820 -10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition.
ASC 820 -10 clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition.
For the years ended December 31, 2022 and 2021, no accrual was required as a result of the impact of accumulated net unrealized depreciation and net realized losses on our portfolio.
For the years ended December 31, 2023 and 2022, no accrual was required as a result of the impact of accumulated net unrealized depreciation and net realized losses on our portfolio.
The final determination of the source of all distributions in 2022 will be made after year -end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099 -DIV notice.
The final determination of the source of all distributions in 2023 will be made after year -end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099 -DIV notice.
For information regarding results of operations for the year ended December 31, 2020, refer to Part II Item 7 in our Form 10 -K for the year ended December 31, 2021, as filed with the SEC on March 7, 2022, which is incorporated by reference herein.
For information regarding results of operations for the year ended December 31, 2021, refer to Part II Item 7 in our Form 10 -K for the year ended December 31, 2022, as filed with the SEC on March 23, 2023, which is incorporated by reference herein.
For the year ended December 31, 2022, the amounts and sources of distributions reported are only estimates and are not being provided for U.S. tax reporting purposes.
For the year ended December 31, 2023, the amounts and sources of distributions reported are only estimates and are not being provided for U.S. tax reporting purposes.
We consider the attributes of current market conditions on an on -going basis and 78 have determined that due to the general illiquidity of the market for its investment portfolio, whereby little or no market data exists, substantially all of our fair valued investments are measured based upon Level 3 inputs as of December 31, 2022 and 2021.
We consider the attributes of current market conditions on an on -going basis and have determined that due to the general illiquidity of the market for our investment portfolio, whereby little or no market data exists, substantially all of our fair valued investments are measured based upon Level 3 inputs as of December 31, 2023 and December 31, 2022.
Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Lane Capital Corp. and Chief Financial Officer and Treasurer of Oxford Lane Management, LLC, and Mr. Cummins serves as the Chief Compliance Officer of Oxford Lane Capital Corp. and Oxford Lane Management, LLC.
Rubin serves as the Chief Financial Officer, Treasurer and Corporate Secretary of Oxford Lane Capital Corp. and Chief Financial Officer and Treasurer of Oxford Lane Management, and Mr. Cummins serves as the Chief Compliance Officer of Oxford Lane Capital Corp. and Oxford Lane Management. • Messrs.
CRITICAL ACCOUNTING POLICIES The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported.
CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) revenues and expenses during the periods reported.
We also engage third -party valuation firms to provide assistance in valuing certain of its syndicated loans and bilateral investments, including related equity investments, although our Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the statements of operations as net change in unrealized appreciation/depreciation.
We may also engage a third -party valuation firm to provide assistance in valuing certain of our syndicated loans and bilateral investments, including related equity investments, although our Board of Directors ultimately determines the appropriate valuation of each such investment. Changes in fair value, as described above, are recorded in the statements of operations as net change in unrealized appreciation/depreciation.
For the year ended December 31, 2022, the net decrease in net assets resulting from operations per common share was $1.72 (basic and diluted), compared to a net increase in net assets per common share of $0.80 (basic and diluted) for the year ended December 31, 2021, based on the weighted average common shares outstanding for the respective periods.
For the year ended December 31, 2023, the net increase in net assets resulting from operations per common share was $0.32 (basic and diluted), compared to a net decrease in net assets per common share of $1.72 (basic and diluted) for the year ended December 31, 2022, based on the weighted average common shares outstanding for the respective periods.
As a result, certain conflicts of interest may arise with respect to the management of our portfolio by Messrs. Cohen and Rosenthal on the one hand, and the obligations of Messrs. Cohen and Rosenthal to manage Oxford Lane Capital Corp., Oxford Bridge II, LLC and the Oxford Gate Funds, respectively, on the other hand.
As a result, certain conflicts of interest may arise with respect to the management of our portfolio by Messrs. Cohen and Rosenthal on the one hand, and the obligations of Messrs. Cohen and Rosenthal to manage Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford Gate Funds, respectively, on the other hand.
The aggregate accrued interest which remained payable as of December 31, 2022 and 2021, was approximately $1.2 million.
The aggregate accrued interest which remained payable as of December 31, 2023 and 2022, was approximately $1.2 million.
The number and amount of investments included in Grade 3, 4 or 5 may fluctuate from year to year. 69 RESULTS OF OPERATIONS Set forth below is a comparison of our results of operations for the years ended December 31, 2022 and 2021.
The number and amount of investments included in Grade 3, 4 or 5 may fluctuate from year to year. 70 RESULTS OF OPERATIONS Set forth below is a comparison of our results of operations for the years ended December 31, 2023 and 2022.
Refer to the table below, which reconciles the investment portfolio for the year ended December 31, 2022 and the year ended December 31, 2021.
Refer to the table below, which reconciles the investment portfolio for the year ended December 31, 2023 and the year ended December 31, 2022.
As of December 31, 2022, our asset coverage for borrowed amounts was approximately 171%. As of December 31, 2021, our asset coverage for borrowed amounts was approximately 227%. The following are our outstanding principal amounts, carrying values and fair values of our borrowings as of December 31, 2022 and December 31, 2021.
As of December 31, 2022, our asset coverage for borrowed amounts was approximately 171%. The following are our outstanding principal amounts, carrying values and fair values of our borrowings as of December 31, 2023 and December 31, 2022.
Top Ten Industries December 31, 2022 High Tech Industries 10.1 % Healthcare & Pharmaceuticals 9.8 % Banking, Finance, Insurance & Real Estate 9.6 % Business Services 8.8 % Media: Broadcasting & Subscription 5.0 % Telecommunications 4.8 % Hotels, Gaming & Leisure 4.7 % Chemicals, Plastics & Rubber 4.5 % Beverage, Food & Tobacco 3.7 % Construction & Building 3.6 % Total 64.6 % Top Ten Industries December 31, 2021 Healthcare & Pharmaceuticals 9.9 % Banking, Finance, Insurance & Real Estate 9.7 % High Tech Industries 9.5 % Business Services 8.4 % Hotels, Gaming & Leisure 5.2 % Media: Broadcasting & Subscription 5.0 % Telecommunications 4.6 % Chemicals, Plastics & Rubber 4.1 % Beverage, Food & Tobacco 3.8 % Construction & Building 3.6 % Total 63.8 % 68 PORTFOLIO GRADING We have adopted a credit grading system to monitor the quality of our debt investment portfolio.
Top Ten Industries December 31, 2023 High tech industries 11.3 % Healthcare & pharmaceuticals 10.1 % Banking, finance, insurance & real estate 9.9 % Business services 9.4 % Media: broadcasting & subscription 5.6 % Telecommunications 4.9 % Hotels, gaming & leisure 4.4 % Chemicals, plastics & rubber 3.9 % Beverage, food & tobacco 3.7 % Construction & building 3.5 % Total 66.7 % Top Ten Industries December 31, 2022 High tech industries 10.1 % Healthcare & pharmaceuticals 9.8 % Banking, finance, insurance & real estate 9.6 % Business services 8.8 % Media: broadcasting & subscription 5.0 % Telecommunications 4.8 % Hotels, gaming & leisure 4.7 % Chemicals, plastics & rubber 4.5 % Beverage, food & tobacco 3.7 % Construction & building 3.6 % Total 64.6 % 69 PORTFOLIO GRADING We have adopted a credit grading system to monitor the quality of our debt investment portfolio.
If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment company tax treatment. We cannot assure stockholders that they will receive any distributions.
If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable RIC tax treatment. We cannot assure stockholders that they will receive any distributions.
Equity securities are not graded. As of December 31, 2022 and 2021 our portfolio had a weighted average grade of 2.2 and 2.1, respectively, based upon the fair value of the debt investments in the portfolio.
Equity securities are not graded. As of December 31, 2023 and 2022 our portfolio had a weighted average grade of 2.3 and 2.2, respectively, based upon the fair value of the debt investments in the portfolio.
Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non -qualifying assets. As of December 31, 2022 and 2021, we held qualifying assets that represented 70.1% and 64.1%, respectively, of the total assets.
Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non -qualifying assets. As of December 31, 2023 and 2022, we held qualifying assets that represented 70.6% and 70.1%, respectively, of the total assets.
In addition, we receive principal repayments of some of our investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. For the years ended December 31, 2022 and December 31, 2021, we had loan principal repayments of approximately $50.0 million and approximately $24.3 million, respectively.
In addition, we receive principal repayments of some of our investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. For the years ended December 31, 2023 and December 31, 2022, we had loan principal repayments of approximately $15.8 million and approximately $50.0 million, respectively.
The following table indicates the quarterly portfolio investment activity for the years ended December 31, 2022 and 2021: ($ in millions) Purchases of Investments Repayments of Principal Sales of Investments Reductions to CLO Equity Cost (1) Quarter ended December 31, 2022 $ 6.1 $ 0.2 $ — $ 2.3 September 30, 2022 3.9 11.0 1.8 3.9 June 30, 2022 26.9 0.2 9.5 6.4 March 31, 2022 47.4 38.6 3.4 7.8 Total (2) $ 84.2 $ 50.0 $ 14.6 $ 20.4 December 31, 2021 $ 23.3 $ 1.6 $ 10.3 $ 7.4 September 30, 2021 23.1 5.7 — 8.6 June 30, 2021 99.5 0.6 3.0 15.5 March 31, 2021 32.9 16.4 1.8 6.0 Total (2) $ 178.9 $ 24.3 $ 15.2 $ 37.5 ____________ (1) Represents reductions to CLO equity cost value (representing distributions received, or entitled to be received, in excess of effective yield interest income and amortized cost adjusted CLO fee note income).
The following table indicates the quarterly portfolio investment activity for the years ended December 31, 2023 and 2022: ($ in millions) Purchases of Investments Repayments of Principal Sales of Investments Reductions to CLO Equity Cost (1) Quarter ended December 31, 2023 $ 3.5 $ 0.8 $ 3.7 $ 2.8 September 30, 2023 — 14.2 1.9 5.1 June 30, 2023 — 0.4 13.9 4.4 March 31, 2023 8.2 0.3 — 3.0 Total (2) $ 11.7 $ 15.8 $ 19.6 $ 15.3 December 31, 2022 $ 6.1 $ 0.2 $ — $ 2.3 September 30, 2022 3.9 11.0 1.8 3.9 June 30, 2022 26.9 0.2 9.5 6.4 March 31, 2022 47.4 38.6 3.4 7.8 Total (2) $ 84.2 $ 50.0 $ 14.6 $ 20.4 ____________ (1) Represents reductions to CLO equity cost value (representing distributions received, or entitled to be received, in excess of effective yield interest income and amortized cost adjusted CLO fee note income).
For the year ended December 31, 2022, the net increase in net assets resulting from net investment income per common share was $0.42 (basic and diluted), compared to $0.32 (basic and diluted) for the year ended December 31, 2021, based on the weighted average common shares outstanding for the respective period.
For the year ended December 31, 2023, the net increase in net assets resulting from net investment income per common share was $0.51 (basic and diluted), compared to $0.42 (basic and diluted) for the year ended December 31, 2022, based on the weighted average common shares outstanding for the respective periods.
Oxford Square Management, Oxford Lane Management, LLC and Oxford Gate Management, LLC are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Bridge II, LLC and the Oxford Gate Funds.
Oxford Square Management, Oxford Lane Management, Oxford Park Management and Oxford Gate Management are subject to a written policy with respect to the allocation of investment opportunities among the Company, Oxford Lane Capital Corp., Oxford Park Income Fund, Inc., Oxford Bridge II, LLC and the Oxford 78 Gate Funds.
In connection with that determination, members of Oxford Square Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information.
Our Board of Directors determines the value of our investment portfolio each quarter. In connection with that determination, members of Oxford Square Management’s portfolio management team prepare a quarterly analysis of each portfolio investment using the most recent portfolio company financial statements, forecasts and other relevant financial and operational information.
When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock. 65 PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY The total fair value of our investment portfolio was approximately $314.7 million and $420.8 million as of December 31, 2022 and December 31, 2021, respectively.
When we receive a warrant to purchase stock in a portfolio company, the warrant will typically have a nominal strike price, and will entitle us to purchase a modest percentage of the borrower’s stock. 66 PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY The total fair value of our investment portfolio was approximately $266.9 million and $314.7 million as of December 31, 2023 and December 31, 2022, respectively.
At December 31, 2022 and 2021, our debt investment portfolio was graded as follows: ($ in millions) December 31, 2022 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 230.1 74.9 % 180.0 85.1 % 3 Closer monitoring is required.
At December 31, 2023 and 2022, our debt investment portfolio was graded as follows: ($ in millions) December 31, 2023 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 175.5 60.4 % 134.5 74.9 % 3 Closer monitoring is required.
In light of these and other uncertainties, the inclusion of a projection or forward -looking statement in this annual report on Form 10 -K should not be regarded as a representation by us that our plans and objectives will be achieved.
In light of these and other uncertainties, the inclusion of a projection or forward -looking statement in this annual report on Form 10 -K should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in Item 1A.
The aggregate accrued interest which remained payable as of December 31, 2022 and 2021 was approximately $1.2 million. The Base Fee decreased approximately $383,000 in 2022 compared to 2021 due to lower average adjusted gross assets in 2022.
The aggregate accrued interest which remained payable as of December 31, 2023 and 2022 was approximately $1.2 million. The Base Fee decreased by approximately $1.3 million in 2023 compared to 2022 due to lower average adjusted gross assets in 2023.
In valuing such investments, we consider the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period -end , as well as the indicative prices provided by the broker who arranges transactions in such investment vehicles.
In valuing our CLO debt and equity investments, we consider the indicative prices provided by a recognized industry pricing service as a primary source, and the implied yield of such prices, supplemented by actual trades executed in the market at or around period -end , as well as the indicative prices provided by brokers who arrange transactions in such investment vehicles.
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward -looking statements, including without limitation: • an economic downturn could impair our portfolio companies’ and CLO investments’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies and CLO investments; • the impact of the elimination of the London Interbank Offered Rate (“LIBOR”) and implementation of alternatives to LIBOR on our operating results; • a contraction of available credit and/or an inability to access the equity markets, including as a result of the current COVID -19 pandemic, could impair our lending and investment activities; • interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; • the elevated levels of inflation and its impact on our investment activities and the industries in which we invest; • currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; • the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions and cybersecurity attacks; and • the risks, uncertainties and other factors we identify in Item 1A. — Risk Factors and elsewhere in this Annual Report on Form 10 -K and in our filings with the SEC.
These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward -looking statements, including without limitation: • an economic downturn could impair our portfolio companies’ and CLO investments’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies and CLO investments; • a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities; • interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy; • the elevated levels of inflation and its impact on our investment activities and the industries in which we invest; • currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; • the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions and cybersecurity attacks; and • the risks, uncertainties and other factors we identify in Item 1A.
A reconciliation of the investment portfolio for the years ended December 31, 2022 and 2021 follows: ($ in millions) December 31, 2022 December 31, 2021 Beginning investment portfolio $ 420.8 $ 294.7 Portfolio investments acquired 84.2 178.9 Debt repayments (50.0 ) (24.3 ) Sales of securities (14.6 ) (15.2 ) Reductions to CLO equity cost value (1) (20.4 ) (37.5 ) Accretion of discounts on investments (2) 0.9 0.7 Net change in unrealized (depreciation)/appreciation on investments (105.9 ) 38.5 Net realized loss on investments (0.3 ) (15.0 ) Ending investment portfolio $ 314.7 $ 420.8 ____________ (1) For the year ended December 31, 2022, the reductions to CLO equity cost value of approximately $20.4 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $37.3 million, plus the amortization of cost on our CLO fee notes of approximately $128,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $17.1 million.
A reconciliation of the investment portfolio for the years ended December 31, 2023 and 2022 follows: ($ in millions) December 31, 2023 December 31, 2022 Beginning investment portfolio $ 314.7 $ 420.8 Portfolio investments acquired 11.7 84.2 Debt repayments (15.8 ) (50.0 ) Sales of securities (19.6 ) (14.6 ) Reductions to CLO equity cost value (1) (15.3 ) (20.4 ) Accretion of discounts on investments 1.1 0.9 Net change in unrealized appreciation/(depreciation) on investments 7.1 (105.9 ) Net realized losses on investments (17.1 ) (0.3 ) Ending investment portfolio (2) $ 266.9 $ 314.7 ____________ (1) For the year ended December 31, 2023, the reductions to CLO equity cost value of approximately $15.3 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $32.0 million, plus the amortization of cost on our CLO fee notes of approximately $123,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $16.8 million.
A summary of our significant contractual payment obligations is as follows as of December 31, 2022. Refer to “Note 5. Borrowings” in the notes to our financial statements.
Related Party Transactions” in the notes to our financial statements. A summary of our significant contractual payment obligations is as follows as of December 31, 2023. Refer to “Note 5. Borrowings” in the notes to our financial statements.
RECENT DEVELOPMENTS The following distributions payable to stockholders are shown below: Date Declared Record Dates Payable Dates Per Share Distribution Amount Declared October 20, 2022 January 17, 2023 January 31, 2023 $ 0.035 October 20, 2022 February 14, 2023 February 28, 2023 $ 0.035 October 20, 2022 March 17, 2023 March 31, 2023 $ 0.035 March 16, 2023 April 14, 2023 April 28, 2023 $ 0.035 March 16, 2023 May 17, 2023 May 31, 2023 $ 0.035 March 16, 2023 June 16, 2023 June 30, 2023 $ 0.035
RECENT DEVELOPMENTS The following distributions payable to stockholders are shown below: Date Declared Record Dates Payable Dates Per Share Distribution Amount Declared November 2, 2023 January 17, 2024 January 31, 2024 $ 0.035 November 2, 2023 February 15, 2024 February 29, 2024 $ 0.035 November 2, 2023 March 15, 2024 March 29, 2024 $ 0.035 March 14, 2024 April 16, 2024 April 30, 2024 $ 0.035 March 14, 2024 May 17, 2024 May 31, 2024 $ 0.035 March 14, 2024 June 14, 2024 June 28, 2024 $ 0.035
This includes net unrealized appreciation of approximately $37.5 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $55.8 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $18.3 million.
This includes net unrealized appreciation of approximately $15.3 million resulting from reductions to the cost value of our CLO equity investments representing the difference between distributions received, or entitled to be received, on our investments held in CLO equity subordinated notes and fee notes, of approximately $32.0 million and the effective yield interest income recognized on our CLO equity subordinated notes and the amortized cost adjusted income on our CLO equity fee notes of approximately $16.7 million.
The following table shows the fair value of our portfolio of investments by asset class as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 ($ in millions) Investments at Fair Value Percentage of Total Portfolio Investments at Fair Value Percentage of Total Portfolio Senior Secured Notes $ 211.4 67.2 % $ 264.5 62.8 % CLO Equity 98.9 31.4 % 155.6 37.0 % Equity and Other Investments 4.3 1.4 % 0.8 0.2 % Total (1) $ 314.7 100.0 % $ 420.8 100.0 % ____________ (1) Totals may not sum due to rounding.
The following table shows the fair value of our portfolio of investments by asset class as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 ($ in millions) Investments at Fair Value Percentage of Total Portfolio Investments at Fair Value Percentage of Total Portfolio Senior Secured Notes $ 179.5 67.2 % $ 211.4 67.2 % CLO Equity 82.2 30.8 % 98.9 31.4 % Equity and Other Investments 5.3 2.0 % 4.3 1.4 % Total (1) $ 266.9 100.0 % $ 314.7 100.0 % ____________ (1) Totals may not sum due to rounding.
Compensation expense was approximately $916,000 for the year ended December 31, 2022, compared to approximately $724,000 for the year ended December 31, 2021, reflecting the allocation of compensation expenses for the services of our Chief Financial Officer, accounting personnel, and other administrative support staff. As of December 31, 2022, approximately $31,000 in compensation expenses remained payable.
Compensation expense was approximately $825,000 for the year ended December 31, 2023, compared to approximately $916,000 for the year ended December 31, 2022, reflecting the allocation of compensation expenses for the services of our Chief Financial Officer, accounting personnel, and other administrative support staff. As of December 31, 2023, there was no compensation expense payable.
In addition, our total portfolio had a weighted average annualized yield on debt investments of approximately 11.85%.
In addition, our total portfolio had a weighted average annualized yield on debt investments of approximately 13.30%.
As of December 31, 2022, our debt investments had stated interest rates of between 7.63% and 14.24% and maturity dates of between 1 and 86 months. As of December 31, 2021, our debt investments had stated interest rates of between 3.85% and 10.50% and maturity dates of between 3 and 91 months.
As of December 31, 2022, our debt investments had stated interest rates of between 7.63% and 14.24% and maturity dates of between 1 and 86 months.
Rubin serves as the Chief Financial Officer and Secretary, and Gerald Cummins serves as the Chief Compliance Officer, respectively, of Oxford Gate Management, LLC. • Messrs.
In addition, Bruce L. Rubin serves as the Chief Financial Officer and Secretary, and Gerald Cummins serves as the Chief Compliance Officer, respectively, of Oxford Gate Management. • Messrs.
Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 14.7 4.9 % 13.9 5.3 % 4 A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status.
Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 72.3 24.8 % 43.3 24.1 % 4 A loss of interest income has occurred or is expected to occur and, in most cases, the investment is placed on non-accrual status.
No additional non -qualifying assets were acquired during the periods, if any, when qualifying assets were less than 70% of the total assets. 67 The following table shows our portfolio of investments by industry at fair value, in millions, as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Investments at Fair Value Percentage of Fair Value Investments at Fair Value Percentage of Fair Value ($ in millions) ($ in millions) Structured finance (1) $ 98.9 31.4 % $ 155.6 36.9 % Software 69.0 21.9 % 50.9 12.1 % Business services 53.4 17.0 % 88.7 21.0 % Healthcare 33.6 10.7 % 63.0 15.0 % Telecommunication services 22.2 7.1 % 15.8 3.8 % Diversified insurance 14.7 4.7 % 25.9 6.2 % Plastics Manufacturing 11.7 3.7 % 12.7 3.0 % Utilities 6.8 2.2 % 7.5 1.8 % IT consulting 4.3 1.4 % 0.8 0.2 % Total (2) $ 314.7 100.0 % $ 420.8 100.0 % ____________ (1) Reflects our equity investments in CLOs as of December 31, 2022 and December 31, 2021, respectively.
No additional non -qualifying assets were acquired during the periods, if any, when qualifying assets were less than 70% of the total assets. 68 The following table shows our portfolio of investments by industry at fair value, in millions, as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Investments at Fair Value Percentage of Fair Value Investments at Fair Value Percentage of Fair Value ($ in millions) ($ in millions) Structured finance (1) $ 82.2 30.8 % $ 98.9 31.4 % Software 66.0 24.7 % 69.0 21.9 % Business services 43.0 16.1 % 53.4 17.0 % Healthcare 28.4 10.7 % 33.6 10.7 % Telecommunication services 20.9 7.8 % 22.2 7.0 % Diversified insurance 13.9 5.2 % 14.7 4.7 % Utilities 7.2 2.7 % 6.8 2.2 % IT consulting 5.3 2.0 % 4.3 1.4 % Plastics manufacturing — — % 11.7 3.7 % Total (2) $ 266.9 100.0 % $ 314.7 100.0 % ____________ (1) Reflects our equity investments in CLOs as of December 31, 2023 and December 31, 2022, respectively.
As of December 31, 2021, no compensation expenses remained payable. General and administrative expenses, which consist primarily of listing fees, office supplies, facilities costs and other miscellaneous expenses, increased by approximately $314,000 in 2022 compared to 2021.
As of December 31, 2022, approximately $31,000 in compensation expenses remained payable. General and administrative expenses, which consist primarily of listing fees, office supplies, facilities costs and other miscellaneous expenses, increased by approximately $55,000 for the year ended December 31, 2023 compared to the year ended December 31, 2022.
These risks and uncertainties include those described or identified in Item 1A. — Risk Factors and elsewhere in this annual report on Form 10 -K . You should not place undue reliance on these forward -looking statements, which apply only as of the date of this annual report on Form 10 -K .
Risk Factors and elsewhere in this annual report on Form 10 -K . You should not place undue reliance on these forward -looking statements, which apply only as of the date of this annual report on Form 10 -K .
The tables below summarize the components of interest expense for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 ($ in thousands) Stated Interest Expense Amortization of Deferred Debt Issuance Costs Total 6.50% Unsecured Notes $ 4,184.1 $ 324.7 $ 4,508.8 6.25% Unsecured Notes 2,799.4 233.2 3,032.6 5.50% Unsecured Notes 4,427.5 385.5 4,813.0 Total $ 11,411.0 $ 943.4 $ 12,354.4 Year Ended December 31, 2021 ($ in thousands) Stated Interest Expense Amortization of Deferred Debt Issuance Costs Total 6.50% Unsecured Notes $ 4,184.1 $ 324.7 $ 4,508.8 6.25% Unsecured Notes 2,799.4 233.2 3,032.6 5.50% Unsecured Notes 2,718.0 236.6 2,954.5 Total (1) $ 9,701.5 $ 794.4 $ 10,495.9 ____________ (1) Totals may not sum due to rounding.
The tables below summarize the components of interest expense for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 ($ in thousands) Stated Interest Expense Amortization of Deferred Debt Issuance Costs Loss on Extinguishment Total 6.50% Unsecured Notes $ 2,765.0 $ 215.3 $ 190.4 $ 3,170.6 6.25% Unsecured Notes 2,799.4 233.2 — 3,032.6 5.50% Unsecured Notes 4,427.5 385.5 — 4,813.0 Total $ 9,991.9 $ 834.0 $ 190.4 $ 11,016.2 Year Ended December 31, 2022 ($ in thousands) Stated Interest Expense Amortization of Deferred Debt Issuance Costs Total 6.50% Unsecured Notes $ 4,184.1 $ 324.7 $ 4,508.8 6.25% Unsecured Notes 2,799.4 233.2 3,032.6 5.50% Unsecured Notes 4,427.5 385.5 4,813.0 Total $ 11,411.0 $ 943.4 $ 12,354.4 ____________ (1) Totals may not sum due to rounding.
For the year ended December 31, 2021, the reductions to CLO equity cost value of approximately $37.5 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $55.8 million, plus the amortization of cost on our CLO fee notes of approximately $351,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $18.7 million.
For the year ended December 31, 2022, the reductions to CLO equity cost value of approximately $20.4 million represented the distributions received, or entitled to be received, on our investments held in CLO equity subordinated and income notes of approximately $37.3 million, plus the amortization of cost on our CLO fee notes of approximately $128,000, less the effective yield interest income recognized on our CLO equity subordinated and income notes of approximately $17.1 million.
We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5.0% of the total portfolio. As of December 31, 2022, our debt investments had stated interest rates of between 7.63% and 14.24% and maturity dates of between 1 and 86 months.
We expect that our investment portfolio will be diversified among a large number of investments with few investments, if any, exceeding 5.0% of the total portfolio. As of December 31, 2023, our debt investments had stated interest rates of between 9.22% and 16.00% and maturity dates of between 0 and 74 months.
During the year ended December 31, 2022, we purchased approximately $84.2 million in portfolio investments, including additional investments of approximately $58.9 million in existing portfolio companies and approximately $25.3 million in new portfolio companies.
During the year ended December 31, 2022, we purchased approximately $84.2 million in portfolio investments, including additional investments of approximately $58.9 million in existing portfolio companies and approximately $25.3 million in new portfolio companies. In certain instances, we receive payments based on scheduled amortization of the outstanding balances.
(14.6 ) Net all other 13.9 Total (1) $ 38.5 ____________ (1) Totals may not sum due to rounding. Net Increase in Net Assets Resulting from Net Investment Income Net investment income for the year ended December 31, 2022 was approximately $20.7 million, compared to $16.1 million for the year ended December 31, 2021.
(3.7 ) Net all other (43.4 ) Total (1) $ (105.9 ) ____________ (1) Totals may not sum due to rounding. Net Increase in Net Assets Resulting from Net Investment Income Net investment income for the year ended December 31, 2023 was approximately $27.4 million, compared to $20.7 million for the year ended December 31, 2022.
Realized and Unrealized Gains/Losses on Investments For the year ended December 31, 2022, we recognized net realized losses on investments of approximately $340,000, which primarily represents offsetting gains and losses from sales and repayments of multiple CLO equity investments.
Realized and Unrealized Gains/Losses on Investments For the year ended December 31, 2023, we recognized net realized losses on investments of approximately $17.1 million, which primarily represents sales of multiple CLO equity investments.
The decrease in the value of investments during the year ended December 31, 2022 was due primarily to a net change in unrealized depreciation on our investment portfolio of approximately $105.9 million (which incorporates reductions to CLO equity cost value of $20.4 million), repayments of principal and sales of securities totaling approximately $64.6 million, partially offset by purchases of investments of approximately $84.2 million.
The decrease in the value of investments during the year ended December 31, 2023 was due primarily to repayments of principal of approximately $15.8 million and sales of securities totaling approximately $19.6 million, partially offset by a net change in unrealized appreciation on our investment portfolio of approximately $7.1 million (which incorporates reductions to CLO equity cost value of $15.3 million) and purchases of investments of approximately $11.7 million.
Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, at Oxford Gate Management, LLC, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC. Oxford Funds is the managing member of Oxford Gate Management, LLC. In addition, Bruce L.
In addition, Oxford Funds provides us with office facilities and administrative services pursuant to the Administration Agreement. • Messrs. Cohen and Rosenthal also currently serve as Chief Executive Officer and President, respectively, at Oxford Gate Management, the investment adviser to the Oxford Gate Funds and Oxford Bridge II, LLC. Oxford Funds is the managing member of Oxford Gate Management.
As of ($ in millions) December 31, 2022 December 31, 2021 Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value 6.50% Unsecured Notes $ 64.4 $ 64.0 $ 63.4 $ 64.4 $ 63.6 $ 65.1 6.25% Unsecured Notes 44.8 44.0 42.6 44.8 43.8 45.5 5.50% Unsecured Notes 80.5 78.3 70.0 80.5 78.0 80.7 Total $ 189.7 $ 186.3 $ 176.0 $ 189.7 $ 185.4 $ 191.3 74 The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of December 31, 2022 were 6.02% and 3.6 years, respectively, and as of December 31, 2021 were 6.02% and 4.6 years, respectively.
As of ($ in millions) December 31, 2023 December 31, 2022 Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value 6.50% Unsecured Notes $ — $ — $ — $ 64.4 $ 64.0 $ 63.4 6.25% Unsecured Notes 44.8 44.2 42.9 44.8 44.0 42.6 5.50% Unsecured Notes 80.5 78.7 72.5 80.5 78.3 70.0 Total (1) $ 125.3 $ 123.0 $ 115.4 $ 189.7 $ 186.3 $ 176.0 ____________ (1) Totals may not sum due to rounding. 75 The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of December 31, 2023 were 5.77% and 3.8 years, respectively, and as of December 31, 2022 were 6.02% and 3.6 years, respectively.
Although we believe that the assumptions on which these forward -looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward -looking statements based on those assumptions also could be inaccurate.
Risk Factors and elsewhere in this Annual Report on Form 10 -K and in our filings with the SEC. Although we believe that the assumptions on which these forward -looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward -looking statements based on those assumptions also could be inaccurate.
For the year ended December 31, 2021, our net change in unrealized appreciation was approximately $38.5 million, composed of approximately $40.0 million in gross unrealized appreciation, approximately $20.4 million in gross unrealized depreciation and approximately $18.9 million relating to the reversal of prior 72 period net unrealized depreciation as investment gains and losses were realized.
For the year ended December 31, 2023, our net change in unrealized appreciation was approximately $7.1 million, composed of approximately $16.6 million in gross unrealized appreciation, approximately $28.7 million in gross unrealized depreciation and approximately $19.2 million relating to the reversal of prior period net unrealized depreciation as investment gains and losses were realized.
($ in millions) December 31, 2021 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 256.3 86.1 % 249.2 94.2 % 3 Closer monitoring is required.
Full repayment of the outstanding amount of OXSQ’s cost basis is expected for the specific tranche. — — % — — % 5 Full repayment of the outstanding amount of OXSQ’s cost basis is not expected for the specific tranche and the investment is placed on non-accrual status 42.9 14.8 % 1.7 1.0 % Total $ 290.7 100.0 % $ 179.5 100.0 % ($ in millions) December 31, 2022 Grade Summary Description Principal Value Percentage of Debt Portfolio Portfolio at Fair Value Percentage of Debt Portfolio 1 Company is ahead of expectations and/or outperforming financial covenant requirements of the specific tranche and such trend is expected to continue. $ — — % $ — — % 2 Full repayment of the outstanding amount of OXSQ’s cost basis and interest is expected for the specific tranche. 230.1 74.9 % 180.0 85.1 % 3 Closer monitoring is required.
We did not sell any shares of common stock under the ATM program during the years ended December 31, 2022 and 2021. Borrowings In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 150% immediately after such borrowing.
Borrowings In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 150% immediately after such borrowing. As of December 31, 2023, our asset coverage for borrowed amounts was approximately 219%.
Net cash used in operating activities for the year ended December 31, 2022, consisting primarily of the items described in “— Results of Operations,” was approximately $20.4 million, largely reflecting purchases of new investments of approximately $84.2 million, partially offset by repayments of principal of approximately $50.0 million and proceeds from the sale of investments of approximately $14.6 million.
Net cash provided by operating activities for the year ended December 31, 2023, consisting primarily of the items described in “— Results of Operations,” was approximately $65.7 million, largely reflecting repayments of principal of approximately $15.8 million, proceeds from the sale of investments of approximately $19.6 million and reductions to CLO equity cost value of approximately $15.3 million, partially offset by purchases of new investments of approximately $11.7 million.
The calculation of the Net Investment Income Incentive Fee had no change in 2022 compared to 2021. There was no Net Investment Income Incentive Fee in 2022, nor in 2021, primarily as a result of the Net Investment Income Incentive Fee being reduced as the result of the Total Return Requirement.
There was no Net Investment Income Incentive Fee for the year ended December 31, 2022, primarily as a result of the Net Investment Income Incentive Fee being reduced as the result of the Total Return Requirement.
LIQUIDITY AND CAPITAL RESOURCES During the year ended December 31, 2022, cash and cash equivalents increased from $9,015,700 at the beginning of the period to $9,019,164 at the end of the period.
LIQUIDITY AND CAPITAL RESOURCES During the year ended December 31, 2023, cash and cash equivalents decreased from approximately $9.0 million at the beginning of the period to approximately $5.7 million at the end of the period.
Investment Income The following table sets forth the components of investment income for the years ended December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Interest Income Stated interest income $ 23,954,078 $ 16,142,294 Original issue discount and market discount income 880,671 740,731 Discount income derived from unscheduled remittances at par 399,566 557,204 Total interest income 25,234,315 17,440,229 Income from securitization vehicles and investments 17,093,203 18,691,631 Other income Fee letters 544,267 405,010 Loan prepayment and bond call fees — 300,000 All other fees 246,327 338,143 Total other income 790,594 1,043,153 Total investment income $ 43,118,112 $ 37,175,013 The increase in total investment income for the year ended December 31, 2022 compared to the year ended December 31, 2021 was largely due to an increase of stated interest income from our debt investments (approximately $7.8 million) resulting from higher weighted average yields in 2022 compared to 2021.
Investment Income The following table sets forth the components of investment income for the years ended December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Interest Income Stated interest income $ 32,434,732 $ 23,954,078 Original issue discount and market discount income 1,094,874 880,671 Discount income derived from unscheduled remittances at par 62,560 399,566 Total interest income 33,592,166 25,234,315 Income from securitization vehicles and investments 16,796,699 17,093,203 Other income Fee letters 649,260 544,267 Money market fund income and all other fees 786,056 246,327 Total other income 1,435,316 790,594 Total investment income $ 51,824,181 $ 43,118,112 The increase in total investment income of approximately $8.7 million for the year ended December 31, 2023 over the year ended December 31, 2022 was largely due to an increase of stated interest income from our debt investments (approximately $8.5 million) resulting from higher weighted average yields in 2023 compared to 2022.
Net Decrease/Increase in Net Assets Resulting from Operations Net decrease in net assets resulting from operations for the year ended December 31, 2022 was approximately $85.6 million, compared to a net increase of $39.6 million for year ended December 31, 2021. These changes were largely due to a net change in unrealized depreciation, as discussed above.
Net Increase/Decrease in Net Assets Resulting from Operations Net increase in net assets resulting from operations for the year ended December 31, 2023 was approximately $17.2 million, compared to a net decrease of $85.6 million for year ended December 31, 2022.
Oxford Square Management is controlled by Oxford Funds, its managing member. In addition to Oxford Funds, Oxford Square Management is owned by Charles M. Royce, a member of our Board, who holds a minority, non -controlling interest in Oxford Square Management as the non -managing member.
Royce, a member of our Board, who holds a minority, non -controlling interest in Oxford Square Management as the non -managing member. Oxford Funds, as the managing member of Oxford Square Management, manages the business and internal affairs of Oxford Square Management.
In addition, our total portfolio had a weighted average yield on debt investments of approximately 11.85% as of December 31, 2022, compared to a weighted average yield on debt investments of 7.70% as of December 31, 2021. 70 Operating Expenses The following table sets forth the components of operating expenses for the years ended December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Interest expense $ 12,354,392 $ 10,495,897 Base Fee 5,903,986 6,287,173 Professional fees 1,393,116 1,910,390 Compensation expense 915,583 723,931 General and administrative 835,912 521,541 Director’s fees 417,500 490,500 Insurance 378,804 422,805 Transfer agent and custodian fees 231,241 222,581 Net Investment Income Incentive Fees — — Total operating expenses $ 22,430,534 $ 21,074,818 Total operating expenses for the year ended December 31, 2022 increased by approximately $1.4 million compared to the year ended December 31, 2021.
In addition, our total portfolio had a weighted average yield on debt investments of approximately 13.30% as of December 31, 2023, compared to a weighted average yield on debt investments of 11.85% as of December 31, 2022. 71 Operating Expenses The following table sets forth the components of operating expenses for the years ended December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Interest expense $ 10,825,877 $ 12,354,392 Base Fee 4,613,664 5,903,986 Net Investment Income Incentive Fees 3,705,387 — Professional fees 1,426,098 1,393,116 Excise Tax 1,423,686 252,172 Compensation expense 825,226 915,583 General and administrative 638,350 583,740 Director’s fees 429,500 417,500 Insurance 329,892 378,804 Transfer agent and custodian fees 246,562 231,241 Total operating expenses $ 24,464,242 $ 22,430,534 Total operating expenses for the year ended December 31, 2023 increased by approximately $2.0 million compared to the year ended December 31, 2022.
Oxford Funds, as the managing member of Oxford Square Management, manages the business and internal affairs of Oxford Square Management. In addition, Oxford Funds provides us with office facilities and administrative services pursuant to the Administration Agreement. • Messrs.
Oxford Funds provides Oxford Park Income Fund, Inc. with office facilities and administrative services pursuant to an administration agreement and also serves as the managing member of Oxford Park Management. In addition, Bruce L.
Oxford Square Management or the Valuation Committee may request an additional analysis by a third -party firm to assist in the valuation process of CLO investment vehicles.
Oxford Square Management or the Valuation Committee may request an additional analysis by a third -party firm to assist in the valuation process of CLO investment vehicles. All information is presented to our Board for its determination of fair value of these investments. Recently Issued Accounting Standards See “Note 16.
The Base Fee which remained payable to Oxford Square Management as of December 31, 2022 and 2021 was approximately $1.3 million and $1.7 million, respectively. Professional fees, largely consisting of legal, valuation, consulting, audit and tax fees decreased by approximately $517,000 in 2022 compared to 2021 primarily due to decreased legal fees.
The Base Fee which remained payable to Oxford Square Management as of December 31, 2023 and 2022 was approximately $1.0 million and $1.3 million, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including changes in interest rates. As of December 31, 2022, all debt investments in our portfolio were at variable interest rates, representing approximately $307.2 million in principal debt. As of December 31, 2022, all except three of our variable rate investments were income producing.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including changes in interest rates. As of December 31, 2023, all but four of our variable rate investments were income producing. The variable rates are generally based upon the five -year U.S.
Changes in interest rates can also affect, among other things, our ability to acquire leveraged loans, high yield bonds and other debt investments and the value of our investment portfolio. We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts.
Changes in interest rates can also affect, among other things, our ability to acquire leveraged loans, high yield bonds and other debt investments and the value of our investment portfolio. 81 We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts.
Changes 81 in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest -bearing debt and liabilities.
Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest -bearing debt and liabilities.
Based on our Statements of Assets and Liabilities as of December 31, 2022, the following table shows the annualized impact on net investment income of hypothetical base rate changes in interest rates for our settled investments (considering interest rate floors for floating rate instruments), excluding CLO equity investments.
Based on our Statements of Assets and Liabilities as of December 31, 2023, the following table shows the annualized impact on net investment income of hypothetical base rate changes in interest rates for our settled investments (considering interest rate floors for floating rate instruments), excluding CLO equity investments.
The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of December 31, 2022. These hypothetical calculations are based on a model of the investments in our portfolio, held as of December 31, 2022, and are only adjusted for assumed changes in the underlying base interest rates.
The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of December 31, 2023. These hypothetical calculations are based on a model of the investments in our portfolio, held as of December 31, 2023, and are only adjusted for assumed changes in the underlying base interest rates.
The variable rates are generally based upon the five -year U.S. Department of Treasury note, the Prime rate, SOFR, or LIBOR, and, in the case of our bilateral investments, are generally reset annually, whereas our non -bilateral investments generally reset quarterly. We expect that future debt investments will generally be made at variable rates.
Department of Treasury note, the Prime rate, or SOFR, and, in the case of our bilateral investments, are generally reset annually, whereas our non -bilateral investments generally reset quarterly. We expect that future debt investments will generally be made at variable rates. Many of the variable rate investments contain interest rate floors.
Hypothetical Change in LIBOR Estimated Percentage change in Investment Income Up 300 basis points 17.6 % Up 200 basis points 11.7 % Up 100 basis points 5.9 % Down 25 basis points (1.5 )% Down 50 basis points (2.9 )% Down 100 basis points (5.9 )% 82
Hypothetical Change in Floating Interest Rates Estimated Percentage change in Investment Income Up 300 basis points 15.1 % Up 200 basis points 10.1 % Up 100 basis points 5.0 % Down 100 basis points (5.0 )% Down 200 basis points (10.1 )% Down 300 basis points (15.1 )% 82
Removed
Many of the variable rate investments contain interest rate floors.

Other OXSQH 10-K year-over-year comparisons