Table of Contents

 

 

 

FORM 10-Q

 

SECURITIES AND EXCHANGE COMMISSION

Washington D.C.  20549

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2015 or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 814-00201

 

MVC CAPITAL, INC.

(Exact name of the registrant as specified in its charter)

 

DELAWARE

 

94-3346760

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

287 Bowman Avenue
2nd Floor
Purchase, New York

 

10577

(Address of principal
executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (914) 701-0310

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

There were 22,702,821 shares of the registrant’s common stock, $.01 par value, outstanding as of December 1, 2015.

 

 

 



Table of Contents

 

MVC Capital, Inc.

(A Delaware Corporation)

Index

 

 

 

 

 

Page

 

 

 

 

 

Part I. Consolidated Financial Information

 

 

 

 

 

Item 1.

Consolidated Financial Statements

 

 

 

Consolidated Balance Sheets

 

 

 

-

January 31, 2015 and October 31, 2014

 

3

 

Consolidated Statements of Operations

 

 

 

-

For the Quarter Ended January 31, 2015 and

 

 

 

-

For the Quarter Ended January 31, 2014

 

4

 

Consolidated Statements of Cash Flows

 

 

 

-

For the Quarter Ended January 31, 2015 and

 

 

 

-

For the Quarter Ended January 31, 2014

 

5

 

Consolidated Statements of Changes in Net Assets

 

 

 

-

For the Quarter Ended January 31, 2015,

 

 

 

-

For the Quarter Ended January 31, 2014 and

 

 

 

-

For the Year ended October 31, 2014

 

6

 

Consolidated Selected Per Share Data and Ratios

 

 

 

-

For the Quarter Ended January 31, 2015,

 

 

 

-

For the Quarter Ended January 31, 2014 and

 

 

 

-

For the Year ended October 31, 2014

 

7

 

Consolidated Schedules of Investments

 

 

 

-

January 31, 2015

 

8

 

-

October 31, 2014

 

10

 

Notes to Consolidated Financial Statements

 

12

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

40

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

68

 

 

 

Item 4. Controls and Procedures

 

82

 

 

 

 

Part II. Other Information

 

83

 

 

 

SIGNATURE

 

85

 

 

 

Exhibits

 

 

 



Table of Contents

 

Part I. Consolidated Financial Information

 

Item 1. Consolidated Financial Statements

 

CONSOLIDATED FINANCIAL STATEMENTS

 

MVC Capital, Inc.

Consolidated Balance Sheets

 

 

 

January 31,

 

October 31,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash

 

$

10,951,140

 

$

8,781,375

 

Restricted cash equivalents (cost $5,648,500 and $6,265,500)

 

5,648,500

 

6,265,500

 

Cash equivalents (cost $5,295,107 and $8,391,089)

 

5,295,107

 

8,391,089

 

Investments at fair value

 

 

 

 

 

Short-term investments (cost $0 and $99,999,629)

 

 

99,897,404

 

Non-control/Non-affiliated investments (cost $163,332,791 and $150,682,873)

 

137,495,925

 

126,303,048

 

Affiliate investments (cost $115,052,751 and $115,021,554)

 

170,748,354

 

173,682,927

 

Control investments (cost $173,877,631 and $174,266,037)

 

140,782,365

 

147,644,189

 

Total investments at fair value (cost $452,263,173 and $539,970,093)

 

449,026,644

 

547,527,568

 

Receivable on sale of short-term investments

 

100,185,061

 

 

Deferred financing fees

 

3,132,869

 

2,972,864

 

Dividends and interest receivables, net of reserves

 

1,594,754

 

1,188,398

 

Fee and other receivables

 

771,091

 

1,939,827

 

Prepaid expenses

 

495,623

 

646,801

 

 

 

 

 

 

 

Total assets

 

$

577,100,789

 

$

577,713,422

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Senior notes

 

$

114,408,750

 

$

114,408,750

 

Revolving credit facility

 

100,000,000

 

100,000,000

 

Bridge Loan

 

14,882,481

 

 

Provision for incentive compensation (Note 11)

 

12,614,319

 

14,733,887

 

Professional fees payable

 

1,280,316

 

1,309,085

 

Management fee payable

 

1,155,799

 

1,474,223

 

Interest payable

 

441,592

 

374,875

 

Management fee payable - Asset Management

 

296,812

 

296,812

 

Accrued expenses and liabilities

 

293,908

 

456,148

 

Portfolio fees payable - Asset Management

 

263,110

 

436,791

 

Liability for share exchange

 

223,281

 

221,424

 

Consulting fees payable

 

146,864

 

97,250

 

Taxes payable

 

538

 

1,219

 

 

 

 

 

 

 

Total liabilities

 

246,007,770

 

233,810,464

 

 

 

 

 

 

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock, $0.01 par value; 150,000,000 shares authorized; 28,304,448 shares issued and 22,702,821 and 22,702,821 shares outstanding, respectively

 

283,044

 

283,044

 

Additional paid-in-capital

 

421,035,869

 

421,037,726

 

Accumulated earnings

 

85,195,891

 

83,996,734

 

Dividends paid to stockholders

 

(119,818,259

)

(116,753,378

)

Accumulated net realized gain

 

2,560,086

 

2,697,840

 

Net unrealized (depreciation) appreciation

 

(2,867,406

)

7,937,198

 

Treasury stock, at cost, 5,601,627 and 5,601,627 shares held, respectively

 

(55,296,206

)

(55,296,206

)

 

 

 

 

 

 

Total shareholders’ equity

 

331,093,019

 

343,902,958

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

577,100,789

 

$

577,713,422

 

 

 

 

 

 

 

Net asset value per share

 

$

14.58

 

$

15.15

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Operations

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

 

 

January 31, 2015

 

January 31, 2014

 

Operating Income:

 

 

 

 

 

Dividend income

 

 

 

 

 

Non-control/Non-affiliated investments

 

$

260

 

$

190

 

Affiliate investments

 

 

106,323

 

 

 

 

 

 

 

Total dividend income

 

260

 

106,513

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

2,967,671

 

1,303,394

 

Affiliate investments

 

327,429

 

1,076,169

 

Control investments

 

87,128

 

95,305

 

 

 

 

 

 

 

Total interest income

 

3,382,228

 

2,474,868

 

 

 

 

 

 

 

Payment-in-kind interest income

 

 

 

 

 

Non-control/Non-affiliated investments

 

833,724

 

782,066

 

Affiliate investments

 

31,305

 

246,873

 

Control investments

 

39,272

 

39,272

 

 

 

 

 

 

 

Total payment-in-kind interest income

 

904,301

 

1,068,211

 

 

 

 

 

 

 

Fee income

 

 

 

 

 

Non-control/Non-affiliated investments

 

 

504

 

Affiliate investments

 

183,000

 

230,000

 

Control investments

 

80,750

 

80,750

 

 

 

 

 

 

 

Total fee income

 

263,750

 

311,254

 

 

 

 

 

 

 

Fee income - Asset Management (1)

 

 

 

 

 

Portfolio fees

 

271,475

 

141,435

 

Management fees

 

33,629

 

308,775

 

 

 

 

 

 

 

Total fee income - Asset Management

 

305,104

 

450,210

 

 

 

 

 

 

 

Other income

 

 

202,198

 

 

 

 

 

 

 

Total operating income

 

4,855,643

 

4,613,254

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

Interest and other borrowing costs

 

2,455,010

 

2,255,510

 

Management fee

 

1,979,805

 

2,189,078

 

Legal fees

 

409,000

 

138,000

 

Portfolio fees - Asset Management (1)

 

203,606

 

106,076

 

Audit & tax preparation fees

 

162,000

 

162,400

 

Other expenses

 

150,072

 

140,738

 

Consulting fees

 

115,851

 

135,151

 

Directors’ fees

 

105,000

 

103,125

 

Insurance

 

85,920

 

86,700

 

Administration

 

61,613

 

64,675

 

Public relations fees

 

46,500

 

51,000

 

Printing and postage

 

22,431

 

25,806

 

Management fee - Asset Management (1)

 

16,307

 

231,581

 

Net Incentive compensation (Note 11)

 

(2,119,568

)

434,851

 

 

 

 

 

 

 

Total operating expenses

 

3,693,547

 

6,124,691

 

 

 

 

 

 

 

Less: Voluntary Expense Waiver by Adviser (2)

 

(37,500

)

(37,500

)

 

 

 

 

 

 

Total waivers

 

(37,500

)

(37,500

)

 

 

 

 

 

 

Net operating income (loss) before taxes

 

1,199,596

 

(1,473,937

)

 

 

 

 

 

 

Tax Expenses:

 

 

 

 

 

Current tax expense

 

439

 

900

 

 

 

 

 

 

 

Total tax expense

 

439

 

900

 

 

 

 

 

 

 

Net operating income (loss)

 

1,199,157

 

(1,474,837

)

 

 

 

 

 

 

Net Realized and Unrealized (Loss) Gain on Investments:

 

 

 

 

 

 

 

 

 

 

 

Net realized loss on investments

 

 

 

 

 

Short term investments

 

(137,754

)

 

Non-control/Non-affiliated investments

 

 

(237,139

)

 

 

 

 

 

 

Total net realized loss on investments

 

(137,754

)

(237,139

)

 

 

 

 

 

 

Net unrealized (depreciation) appreciation on investments

 

(10,804,604

)

3,397,190

 

 

 

 

 

 

 

Net realized and unrealized (loss) gain on investments

 

(10,942,358

)

3,160,051

 

 

 

 

 

 

 

Net (decrease) increase in net assets resulting from operations

 

$

(9,743,201

)

$

1,685,214

 

 

 

 

 

 

 

Net (decrease) increase in net assets per share resulting from operations

 

$

(0.43

)

$

0.08

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.135

 

$

0.135

 

 

 

 

 

 

 

Weighted average number of shares outstanding(3)

 

22,702,821

 

22,617,688

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 


(1) These items are related to the management of the MVC Private Equity Fund, L.P. (“PE Fund”).  Please see Note 10 “Management” for more information.

 

(2) Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of $150,000 of expenses for the 2015 and 2014 fiscal years, that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”).  Please see Note 10 “Management” for more information.

 

(3) Please see Note 13 “Dividends and Distributions to Shareholders and Share Repurchase Program” for more information.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

 

 

January 31, 2015

 

January 31, 2014

 

 

 

 

 

 

 

Cash flows from Operating Activities:

 

 

 

 

 

Net (decrease) increase in net assets resulting from operations

 

$

(9,743,201

)

$

1,685,214

 

Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash used in operating activities:

 

 

 

 

 

Net realized loss

 

137,754

 

237,139

 

Net change in unrealized depreciation (appreciation)

 

10,804,604

 

(3,397,190

)

Amortization of premiums (discounts) and fees

 

(37,725

)

(354,744

)

Increase in accrued payment-in-kind dividends and interest

 

(436,878

)

(1,008,665

)

Amortization of deferred financing fees

 

(160,005

)

123,600

 

Allocation of flow through income

 

 

(101,099

)

Changes in operating assets and liabilities:

 

 

 

 

 

Dividends, interest and fees receivable

 

(406,356

)

(380,664

)

Fee and other receivables

 

1,168,736

 

(497,499

)

Escrow receivables, net of reserves

 

 

300,000

 

Prepaid expenses

 

151,178

 

(30,182

)

Prepaid taxes

 

 

336

 

Short-term investments receivable

 

(100,185,061

)

 

Incentive compensation (Note 11)

 

(2,119,568

)

434,851

 

Other liabilities

 

(567,464

)

40,328

 

Purchases of equity investments

 

 

(5,258,643

)

Purchases of debt instruments

 

(39,853,543

)

(14,250,000

)

Purchases of short-term investments

 

(99,323,398

)

(99,703,473

)

Proceeds from equity investments (1)

 

388,406

 

107,673

 

Proceeds from debt instruments

 

27,637,376

 

6,100,000

 

Sales/maturities of short-term investments

 

199,186,185

 

49,772,576

 

 

 

 

 

 

 

Net cash used in operating activities

 

(13,358,960

)

(66,180,442

)

 

 

 

 

 

 

Cash flows from Financing Activities:

 

 

 

 

 

Net proceeds from revolving credit facility

 

 

50,000,000

 

Net proceeds from bridge loan

 

14,882,481

 

 

Share exchange

 

(1,857

)

 

Distributions paid to shareholders

 

(3,064,881

)

(3,053,388

)

 

 

 

 

 

 

Net cash provided by financing activities

 

11,815,743

 

46,946,612

 

 

 

 

 

 

 

Net change in cash and cash equivalents for the period

 

(1,543,217

)

(19,233,830

)

 

 

 

 

 

 

Unrestricted and restricted cash and cash equivalents, beginning of period

 

$

23,437,964

 

$

81,026,560

 

 

 

 

 

 

 

Unrestricted and restricted cash and cash equivalents, end of period

 

$

21,894,747

 

$

61,792,730

 

 


(1) For the quarter ended January 31, 2014, proceeds from equity investments includes $107,673, in escrow receivables, net of reserves.

 

During the quarters ended January 31, 2015 and 2014 MVC Capital, Inc. paid $2,272,426 and $2,107,007 in interest expense, respectively.

 

During the quarters ended January 31, 2015 and 2014 MVC Capital, Inc. paid $1420 and $300 in income taxes, respectively.

 

Non-cash activity:

 

During the quarters ended January 31, 2015 and 2014, MVC Capital, Inc. recorded payment in-kind dividend and interest of $436,878 and $1,008,665, respectively. This amount was added to the principal balance of the investments and recorded as dividend/interest income.

 

During the quarter ended January 31, 2014, MVC Capital, Inc. was allocated $202,198, in flow-through income from its equity investment in Octagon Credit Investors, LLC.  Of these amounts, $101,099, was received in cash and the balance of $101,099, was undistributed and therefore increased the cost of the investment.  The fair value was then increased by $202,198, by the Company’s Valuation Committee.

 

On November 19, 2013, MVC Capital, Inc. converted the MVC Automotive Group B.V. bridge loan of approximately $1.6 million to addional common equity interest.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5



Table of Contents

 

MVC Capital, Inc.

Consolidated Statements of Changes in Net Assets

 

 

 

For the Quarter Ended

 

For the Quarter Ended

 

For the Year Ended

 

 

 

January 31, 2015

 

January 31, 2014

 

October 31, 2014

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

Operations:

 

 

 

 

 

 

 

Net operating gain (loss)

 

$

1,199,157

 

$

(1,474,837

)

$

1,579,417

 

Net realized (loss) gain on investments

 

(137,754

)

(237,139

)

16,519,778

 

Net change in (depreciation) appreciation unrealized appreciation on investments

 

(10,804,604

)

3,397,190

 

(37,941,262

)

 

 

 

 

 

 

 

 

Net (decrease) increase in net assets from operations

 

(9,743,201

)

1,685,214

 

(19,842,067

)

 

 

 

 

 

 

 

 

Shareholder Distributions from:

 

 

 

 

 

 

 

Income

 

(1,199,157

)

 

(1,579,417

)

Realized gain

 

 

 

(10,636,482

)

Return of capital

 

(1,865,724

)

(3,053,388

)

 

 

 

 

 

 

 

 

 

Net decrease in net assets from shareholder distributions

 

(3,064,881

)

(3,053,388

)

(12,215,899

)

 

 

 

 

 

 

 

 

Capital Share Transactions:

 

 

 

 

 

 

 

Reissuance of treasury stock for share exchange

 

 

 

4,350,722

 

Provision for share exchange

 

(1,857

)

 

(221,424

)

Offering expenses

 

 

 

(139,000

)

Repurchase of common stock

 

 

 

(4,114,967

)

 

 

 

 

 

 

 

 

Net decrease in net assets from capital share transactions

 

(1,857

)

 

(124,669

)

 

 

 

 

 

 

 

 

Total decrease in net assets

 

(12,809,939

)

(1,368,174

)

(32,182,635

)

 

 

 

 

 

 

 

 

Net assets, beginning of period/year

 

343,902,958

 

376,085,593

 

376,085,593

 

 

 

 

 

 

 

 

 

Net assets, end of period/year

 

$

331,093,019

 

$

374,717,419

 

$

343,902,958

 

 

 

 

 

 

 

 

 

Common shares outstanding, end of period/year

 

22,702,821

 

22,617,688

 

22,702,821

 

 

 

 

 

 

 

 

 

Undistributed net operating income

 

$

 

$

 

$

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6



Table of Contents

 

MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios

 

 

 

For the

 

For the

 

For the

 

 

 

Quarter Ended

 

Quarter Ended

 

Year Ended

 

 

 

January 31, 2015

 

January 31, 2014

 

October 31, 2014

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period/year

 

$

15.15

 

$

16.63

 

$

16.63

 

 

 

 

 

 

 

 

 

(Loss) Gain from operations:

 

 

 

 

 

 

 

Net operating gain (loss)

 

0.05

 

(0.06

)

0.07

 

Net realized and unrealized (loss) gain on investments

 

(0.48

)

0.14

 

(0.95

)

 

 

 

 

 

 

 

 

Total (loss) gain from investment operations

 

(0.43

)

0.08

 

(0.88

)

 

 

 

 

 

 

 

 

Less distributions from:

 

 

 

 

 

 

 

Income

 

(0.05

)

 

(0.07

)

Realized gain

 

 

 

(0.47

)

Return of capital

 

(0.09

)

(0.14

)

 

 

 

 

 

 

 

 

 

Total distributions

 

(0.14

)

(0.14

)

(0.54

)

 

 

 

 

 

 

 

 

Capital share transactions

 

 

 

 

 

 

 

Dilutive effect of share issuance

 

 

 

(0.10

)

Anti-dilutive effect of share repurchase program

 

 

 

0.04

 

 

 

 

 

 

 

 

 

Total capital share transactions

 

 

 

(0.06

)

 

 

 

 

 

 

 

 

Net asset value, end of period/year

 

$

14.58

 

$

16.57

 

$

15.15

 

 

 

 

 

 

 

 

 

Market value, end of period/year

 

$

9.48

 

$

14.25

 

$

11.27

 

 

 

 

 

 

 

 

 

Market discount

 

(34.98

)%

(14.00

)%

(25.61

)%

 

 

 

 

 

 

 

 

Total Return - At NAV (a)

 

(2.87

)%(d)

0.45

%(d)

(5.75

)%

 

 

 

 

 

 

 

 

Total Return - At Market (a)

 

(14.69

)%(d)

4.01

%(d)

(14.97

)%

 

 

 

 

 

 

 

 

Ratios and Supplemental Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio turnover ratio

 

6.25

%

1.45

%

14.16

%

 

 

 

 

 

 

 

 

Net assets, end of period/year (in thousands)

 

$

331,093

 

$

374,717

 

$

343,903

 

 

 

 

 

 

 

 

 

Ratios to average net assets:

 

 

 

 

 

 

 

Expenses including tax expense

 

4.30

%(c)

6.43

%(c)

5.04

%

Expenses excluding tax expense

 

4.30

%(c)

6.43

%(c)

5.04

%

 

 

 

 

 

 

 

 

Net operating income (loss) before tax expense

 

1.41

%(c)

(1.56

)%(c)

0.44

%

Net operating income (loss) after tax expense

 

1.41

%(c)

(1.56

)%(c)

0.44

%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers:

 

 

 

 

 

 

 

Expenses including tax expense

 

4.34

%(c)

6.47

%(c)

5.08

%

Expenses excluding tax expense

 

4.34

%(c)

6.47

%(c)

5.08

%

 

 

 

 

 

 

 

 

Net operating income (loss) before tax expense

 

1.37

%(c)

(1.60

)%(c)

0.40

%

Net operating income (loss) after tax expense

 

1.37

%(c)

(1.60

)%(c)

0.40

%

 


(a) Total annual return is historical and assumes changes in share price, reinvestments of all dividends and distributions, and no sales charge for the period/year.

 

(b) Supplemental Ratio information

 

Ratios to average net assets: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

6.79

%(c)

5.97

%(c)

6.35

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

3.90

%(c)

3.59

%(c)

3.75

%

 

 

 

 

 

 

 

 

Net operating loss before incentive compensation

 

(1.08

)%(c)

(1.10

)%(c)

(0.87

)%

Net operating income before incentive compensation, interest and other borrowing costs

 

1.81

%(c)

1.28

%(c)

1.73

%

 

 

 

 

 

 

 

 

Ratios to average net assets excluding waivers: (b)

 

 

 

 

 

 

 

Expenses excluding incentive compensation

 

6.84

%(c)

6.01

%(c)

6.40

%

Expenses excluding incentive compensation, interest and other borrowing costs

 

3.95

%(c)

3.63

%(c)

3.79

%

 

 

 

 

 

 

 

 

Net operating loss before incentive compensation

 

(1.13

)%(c)

(1.14

)%(c)

(0.92

)%

Net operating income before incentive compensation, interest and other borrowing costs

 

1.76

%(c)

1.24

%(c)

1.69

%

 

(c) Annualized.

(d) Non- Annualized.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedule of Investments

January 31, 2015

(Unaudited)

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments- 41.53% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Actelis Networks, Inc.

 

Technology Investment

 

Preferred Stock (150,602 shares) (d), (i)

 

 

 

$

5,000,003

 

 

Agri-Carriers Group, Inc.

 

Transportation

 

Senior Subordinated Debt 12.0000% Cash, 3.0000% Deferred, 07/20/2017 (l), (m)

 

$

11,774,486

 

11,792,612

 

$

11,774,486

 

Biogenic Reagents

 

Renewable energy

 

Senior Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b), (l)

 

5,300,587

 

5,300,587

 

5,300,587

 

 

 

 

 

Senior Convertible Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b), (l)

 

4,770,528

 

4,770,528

 

4,822,104

 

 

 

 

 

Senior Note 12.0000% Cash, 4.0000% PIK, 09/30/2015 (b), (l)

 

4,041,338

 

4,041,338

 

4,041,338

 

 

 

 

 

Warrants (d)

 

1

 

 

281,412

 

 

 

 

 

 

 

 

 

14,112,453

 

14,445,441

 

Biovation Holdings, Inc.

 

Manufacturer of Laminate Material and Composites

 

Bridge Loan 6.0000% Cash, 6.0000% PIK, 10/31/2014 (b), (h)

 

3,779,322

 

3,779,322

 

2,675,433

 

 

 

 

 

Warrants (d)

 

3

 

397,677

 

 

 

 

 

 

 

 

 

 

4,176,999

 

2,675,433

 

Custom Alloy Corporation

 

Manufacturer of Pipe Fittings

 

Second Lien Loan, 7.3000% Cash, 3.7000% PIK, 04/30/2020 (b), (l)

 

23,146,561

 

23,146,561

 

23,062,374

 

 

 

 

 

Unsecured Subordinated Loan 12.0000% Cash, 09/04/2016 (l)

 

4,000,000

 

4,000,000

 

4,000,000

 

 

 

 

 

 

 

 

 

27,146,561

 

27,062,374

 

FOLIOfn, Inc.

 

Technology Investment - Financial Services

 

Preferred Stock (5,802,259 shares) (d), (i)

 

 

 

15,000,000

 

6,002,000

 

G3K Display, Inc.

 

Retail Store Fixtures

 

Senior Lien Loan 13.0000% Cash, 04/11/2019 (h)

 

5,625,000

 

5,625,000

 

 

 

 

 

 

Warrants (d)

 

1

 

 

 

 

 

 

 

 

 

 

 

5,625,000

 

 

Inland Environmental & Remediation LP

 

Environmental Services

 

Senior Secured Loan 12.0000% Cash, 04/17/2019 (l)

 

15,000,000

 

14,400,237

 

14,400,237

 

 

 

 

 

Warrants (d)

 

1

 

713,000

 

 

 

 

 

 

 

 

 

 

15,113,237

 

14,400,237

 

Legal Solutions Holdings, Inc.

 

Business Services

 

Senior Subordinated Debt 12.0000% Cash, 2.0000% Deferred, 09/12/2018 (l), (m)

 

8,705,000

 

8,723,160

 

8,705,000

 

MainStream Data, Inc.

 

Technology Investment

 

Common Stock (5,786 shares) (d), (i)

 

 

 

3,750,000

 

 

Morey’s Seafood International, LLC

 

Food Services

 

Second Lien Loan 10.0000% Cash, 3.0000% PIK, 08/12/2018 (b), (l)

 

15,455,087

 

15,455,087

 

15,707,954

 

NPWT Corporation

 

Medical Device Manufacturer

 

Series B Common Stock (281 shares) (d)

 

 

 

1,231,638

 

3,000

 

 

 

 

 

Series A Convertible Preferred Stock (5,000 shares) (d)

 

 

 

 

45,000

 

 

 

 

 

 

 

 

 

1,231,638

 

48,000

 

Prepaid Legal Services, Inc.

 

Consumer Services

 

Second Lien Term Loan , 9.7500% Cash, 07/01/2020 (l)

 

10,000,000

 

9,882,972

 

10,000,000

 

The Results Companies, LLC

 

Business Services

 

Senior Subordinated Debt 13.0000% Cash, 2.5000% Deferred, 07/01/2016 (l), (m)

 

9,000,000

 

9,017,687

 

9,000,000

 

RXInnovation, Inc.

 

Software

 

Senior Subordinated Debt 12.0000% Cash, 4.0000% Deferred, 03/01/2017 (l), (m)

 

10,300,000

 

10,317,382

 

10,300,000

 

U.S. Spray Drying Holding Company

 

Specialty Chemicals

 

Class B Common Stock (784 shares) (d)

 

 

 

5,488,000

 

5,875,000

 

 

 

 

 

Secured Loan 12.0000% Cash, 05/02/2019

 

1,500,000

 

1,500,000

 

1,500,000

 

 

 

 

 

 

 

 

 

6,988,000

 

7,375,000

 

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

163,332,791

 

137,495,925

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 51.57% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Advantage Insurance Holdings LTD

 

Insurance

 

Preferred Stock (750,000 shares) (d), (e)

 

 

 

7,500,000

 

7,741,000

 

Centile Holdings B.V.

 

Software

 

Common Equity Interest (d), (e)

 

 

 

3,274,376

 

4,456,000

 

JSC Tekers Holdings

 

Real Estate Management

 

Common Stock (3,201 shares) (d), (e)

 

 

 

4,500

 

4,200

 

 

 

 

 

Preferred Stock (9,159,085 shares) (d), (e)

 

 

 

11,810,188

 

5,558,800

 

 

 

 

 

 

 

 

 

11,814,688

 

5,563,000

 

Security Holdings B.V.

 

Electrical Engineering

 

Common Equity Interest (d), (e)

 

 

 

52,846,140

 

49,500,000

 

SGDA Europe B.V.

 

Environmental Services

 

Common Equity Interest (d), (e)

 

 

 

28,544,800

 

9,248,000

 

U.S. Gas & Electric, Inc.

 

Energy Services

 

Second Lien Loan, 13.0000% Cash, 07/1/2019 (l)

 

7,500,000

 

7,500,000

 

7,500,000

 

 

 

 

 

Unsecured Loan 10.0000% Cash, 4.0000% PIK , 07/1/2018 (b), (l)

 

3,072,747

 

3,072,747

 

3,072,747

 

 

 

 

 

Convertible Series I Preferred Stock (32,200 shares) (d), (k)

 

 

 

500,000

 

83,667,607

 

 

 

 

 

Convertible Series J Preferred Stock (8,216 shares) (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

11,072,747

 

94,240,354

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Affiliate investments

 

 

 

 

 

 

 

115,052,751

 

170,748,354

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

8



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedule of Investments - (Continued)

January 31, 2015

(Unaudited)

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market Value

 

Control Investments - 42.52% (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Equus Total Return, Inc.

 

Regulated Investment Company

 

Common Stock (4,444,644 shares) (d)

 

 

 

$

10,030,272

 

$

8,755,949

 

Harmony Health & Beauty, Inc.

 

Health & Beauty - Distributor

 

Common Stock (147,621 shares) (a), (d)

 

 

 

6,700,000

 

 

MVC Automotive Group GmbH

 

Automotive Dealerships

 

Common Equity Interest (a), (d), (e)

 

 

 

45,662,438

 

15,654,000

 

MVC Private Equity Fund LP

 

Private Equity

 

Limited Partnership Interest (a), (d), (j)

 

 

 

13,838,539

 

19,229,306

 

 

 

 

 

General Partnership Interest (a), (d), (j)

 

 

 

353,024

 

485,370

 

 

 

 

 

 

 

 

 

14,191,563

 

19,714,676

 

Ohio Medical Corporation

 

Medical Device Manufacturer

 

Common Stock (8,512 shares) (a), (d)

 

 

 

15,763,637

 

 

 

 

 

 

Series A Convertible Preferred Stock 16.0000% PIK (30,140 shares) (a), (b)

 

 

 

30,000,000

 

23,800,000

 

 

 

 

 

Series C Convertible Preferred Stock 16.0000% PIK (9,545 shares) (a), (b)

 

 

 

22,618,466

 

28,873,971

 

 

 

 

 

 

 

 

 

68,382,103

 

52,673,971

 

RuMe Inc.

 

Consumer Products

 

Common Stock (5,297,548 shares) (a), (d)

 

 

 

924,475

 

924,475

 

 

 

 

 

Series C Preferred Stock (23,896,634 shares) (a), (d)

 

 

 

3,410,694

 

5,085,525

 

 

 

 

 

Series B-1 Preferred Stock (4,999,076 shares) (a), (d)

 

 

 

999,815

 

1,290,000

 

 

 

 

 

 

 

 

 

5,334,984

 

7,300,000

 

SIA Tekers Invest

 

Port Facilities

 

Common Stock (68,800 shares) (a), (d), (e)

 

 

 

2,300,000

 

1,055,000

 

Turf Products, LLC

 

Distributor - Landscaping and

 

Senior Subordinated Debt 7.0000% Cash, 4.0000% PIK, 11/1/2018 (a), (b), (l)

 

$

3,895,262

 

3,895,262

 

3,865,835

 

 

 

Irrigation Equipment

 

Limited Liability Company Interest (a), (d)

 

 

 

3,535,694

 

3,991,794

 

 

 

 

 

Guarantee (a), (d)

 

1

 

 

(66,860

)

 

 

 

 

Warrants (a), (d)

 

150

 

 

 

 

 

 

 

 

 

 

 

7,430,956

 

7,790,769

 

Velocitius B.V.

 

Renewable Energy

 

Common Equity Interest (a), (d), (e)

 

 

 

11,395,315

 

10,338,000

 

Vestal Manufacturing Enterprises, Inc.

 

Iron Foundries

 

Senior Subordinated Debt 12.0000% Cash, 04/29/2015 (a), (l)

 

600,000

 

600,000

 

600,000

 

 

 

 

 

Common Stock (81,000 shares) (a), (d)

 

 

 

1,850,000

 

16,900,000

 

 

 

 

 

 

 

 

 

2,450,000

 

17,500,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Control Investments

 

 

 

 

 

 

 

173,877,631

 

140,782,365

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL PORTFOLIO INVESTMENTS - 135.62% (f)

 

 

 

 

 

 

 

$

452,263,173

 

$

449,026,644

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Equivalents and Restricted Cash Equivalents - 3.30% (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Fidelity Institutional Government Money Market Fund

 

Money Market Fund

 

Beneficial Shares (3,443,616 shares)

 

 

 

3,443,616

 

3,443,616

 

JP Morgan Prime Money Market Fund

 

Money Market Fund

 

Beneficial Shares (7,499,991 shares)

 

 

 

7,499,991

 

7,499,991

 

Total Cash Equivalents and Restricted Cash Equivalents

 

 

 

 

 

 

 

10,943,607

 

10,943,607

 

TOTAL INVESTMENTS - 138.92% (f) 

 

 

 

 

 

 

 

$

463,206,780

 

$

459,970,251

 

 


(a) These securities are restricted from public sale without prior registration under the Securities Act of 1933.  The Company negotiates certain aspects of the method and timing of the disposition of these investments, including registration, rights and related costs.

 

(b) These securities accrue a portion of their interest/dividends in “payment in kind” interest/dividends which is capitalized to the investment.

 

(c) All of the Company’s equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except MVC Automotive Group GmbH, Security Holdings B.V.,  SGDA Europe B.V., SIA Tekers Invest, JSC Tekers Holdings, Centile Holdings B.V., Velocitius B.V., Equus Total Return, Inc., MVC Private Equity Fund L.P., and Advantage Insurance LTD.  The Company makes available significant managerial assistance to all of the portfolio companies in which it has invested.

 

(d) Non-income producing assets.

 

(e) The principal operations of these portfolio companies are located in Europe and Cayman Islands which represents approximately 31% of the net assets.  The remaining portfolio companies are located in North America which represents approximately 104% of the net assets.

 

(f) Percentages are based on net assets of $331,093,019 as of January 31, 2015.

 

(g) See Note 3 for further information regarding “Investment Classification.”

 

(h) All or a portion of the accrued interest on these securities have been reserved for.

 

(i) Legacy Investments.

 

(j) MVC Private Equity Fund, LP is a private equity fund focused on control equity investments in the lower middle market.  The fund currently holds five investments, four located in the United States and one in Gibraltar, the investments are in the energy, services, contract manufacturing, and industrial sectors.

 

(k) Upon a liquidity event, the Company may receive additional ownership in U.S. Gas & Electric, Inc.

 

(l) All or a portion of these securities may serve as collateral for the Firstrust Bank Bridge Loan.

 

(m) Deferred interest of $206,065, $86,724, $254,689 and $159,119 for Agri-Carriers Group, Legal Solutions Holdings, RXInnovation and The Results Companies, respectively, is shown as a receivable  on the Consolidated Balance Sheet as of January 31, 2015.

 

PIK - Payment-in-kind

 

–– Denotes zero cost or fair value.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

9



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedule of Investments

October 31, 2014

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-control/Non-affiliated investments- 36.73% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Actelis Networks, Inc.

 

Technology Investment

 

Preferred Stock (150,602 shares) (d), (i)

 

 

 

$

5,000,003

 

 

Biogenic Reagents

 

Renewable energy

 

Senior Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b)

 

$

5,246,951

 

5,246,951

 

$

5,246,951

 

 

 

 

 

Senior Convertible Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b)

 

4,722,256

 

4,722,256

 

5,027,257

 

 

 

 

 

Senior Note 12.0000% Cash, 4.0000% PIK, 09/30/2015 (b)

 

4,000,444

 

4,000,444

 

4,000,444

 

 

 

 

 

Warrants (d)

 

1

 

 

 

 

 

 

 

 

 

 

 

13,969,651

 

14,274,652

 

Biovation Holdings, Inc.

 

Manufacturer of Laminate Material and Composites

 

Bridge Loan 6.0000% Cash, 6.0000% PIK, 10/31/2014 (b), (h)

 

3,779,321

 

3,779,321

 

3,391,663

 

 

 

 

 

Warrants (d)

 

3

 

397,677

 

 

 

 

 

 

 

 

 

 

4,176,998

 

3,391,663

 

Custom Alloy Corporation

 

Manufacturer of Pipe Fittings

 

Second Lien Loan, 7.3% Cash, 3.7% PIK, 04/30/2020 (b)

 

23,000,000

 

23,000,000

 

23,000,000

 

 

 

 

 

Unsecured Subordinated Loan 12.0000% Cash, 09/04/2016

 

6,500,000

 

6,500,000

 

6,500,000

 

 

 

 

 

 

 

 

 

29,500,000

 

29,500,000

 

FOLIOfn, Inc.

 

Technology Investment - Financial Services

 

Preferred Stock (5,802,259 shares) (d), (i)

 

 

 

15,000,000

 

5,893,000

 

G3K Display, Inc.

 

Retail Store Fixtures

 

Senior Lien Loan 13.0000% Cash, 4/11/2019 (h)

 

5,625,000

 

5,625,000

 

 

 

 

 

 

Warrants (d)

 

1

 

 

 

 

 

 

 

 

 

 

 

5,625,000

 

 

Inland Environmental & Remediation LP

 

Environmental Services

 

Senior Secured Loan 12.0000% Cash, 4/17/2019

 

15,000,000

 

14,364,313

 

14,364,313

 

 

 

 

 

Warrants (d)

 

1

 

713,000

 

713,000

 

 

 

 

 

 

 

 

 

15,077,313

 

15,077,313

 

MainStream Data, Inc.

 

Technology Investment

 

Common Stock (5,786 shares) (d), (i)

 

 

 

3,750,000

 

 

Morey’s Seafood International, LLC

 

Food Services

 

Second Lien Loan 10.0000% Cash, 3.0000% PIK, 08/12/2018 (b)

 

15,338,768

 

15,338,768

 

15,591,635

 

NPWT Corporation

 

Medical Device Manufacturer

 

Series B Common Stock (281 shares) (d)

 

 

 

1,231,638

 

5,000

 

 

 

 

 

Series A Convertible Preferred Stock (5,000 shares) (d)

 

 

 

 

81,000

 

 

 

 

 

 

 

 

 

1,231,638

 

86,000

 

Prepaid Legal Services, Inc.

 

Consumer Services

 

Second Lien Term Loan , 9.7500% Cash, 07/01/2020

 

10,000,000

 

9,877,526

 

10,100,000

 

Summit Research Labs, Inc.

 

Specialty Chemicals

 

Second Lien Loan 10.0000% Cash, 4.0000% PIK , 10/01/2018 (b)

 

25,147,976

 

25,147,976

 

25,400,785

 

U.S. Spray Drying Holding Company

 

Specialty Chemicals

 

Class B Common Stock (784 shares)

 

 

 

5,488,000

 

5,488,000

 

 

 

 

 

Secured Loan 12.0000% Cash, 5/02/2019

 

1,500,000

 

1,500,000

 

1,500,000

 

 

 

 

 

 

 

 

 

6,988,000

 

6,988,000

 

Sub Total Non-control/Non-affiliated investments

 

 

 

 

 

 

 

150,682,873

 

126,303,048

 

 

 

 

 

 

 

 

 

 

 

 

 

Affiliate investments - 50.50% (a), (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Advantage Insurance Holdings LTD

 

Insurance

 

Preferred Stock (750,000 shares) (d), (e)

 

 

 

7,500,000

 

7,721,000

 

Centile Holdings B.V.

 

Software

 

Common Equity Interest (d), (e)

 

 

 

3,274,376

 

4,994,000

 

JSC Tekers Holdings

 

Real Estate Management

 

Common Stock (3,201 shares) (d), (e)

 

 

 

4,500

 

4,200

 

 

 

 

 

Preferred Stock (9,159,085 shares) (d),(e)

 

 

 

11,810,188

 

6,157,906

 

 

 

 

 

 

 

 

 

11,814,688

 

6,162,106

 

Security Holdings B.V.

 

Electrical Engineering

 

Common Equity Interest (d), (e)

 

 

 

52,846,140

 

50,600,000

 

SGDA Europe B.V.

 

Environmental Services

 

Common Equity Interest (d), (e)

 

 

 

28,544,800

 

9,996,664

 

U.S. Gas & Electric, Inc.

 

Energy Services

 

Second Lien Loan, 13.0000% Cash, 07/1/2019

 

7,500,000

 

7,500,000

 

7,500,000

 

 

 

 

 

Unsecured Loan 10.0000% Cash, 4.0000% PIK , 07/1/2018 (b)

 

3,041,550

 

3,041,550

 

3,041,550

 

 

 

 

 

Convertible Series I Preferred Stock (32,200 shares) (d), (k)

 

 

 

500,000

 

83,667,607

 

 

 

 

 

Convertible Series J Preferred Stock (8,216 shares) (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

11,041,550

 

94,209,157

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total Affiliate investments

 

 

 

 

 

 

 

115,021,554

 

173,682,927

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

10



Table of Contents

 

MVC Capital, Inc.

Consolidated Schedule of Investments - (Continued)

October 31, 2014

 

Company

 

Industry

 

Investment

 

Principal

 

Cost

 

Fair Value/Market Value

 

Control Investments - 42.93% (c), (f), (g)

 

 

 

 

 

 

 

 

 

 

 

Equus Total Return, Inc.

 

Regulated Investment Company

 

Common Stock (4,444,644 shares) (d)

 

 

 

$

10,030,272

 

$

9,778,217

 

Harmony Health & Beauty, Inc.

 

Health & Beauty - Distributor

 

Common Stock (147,621 shares) (a), (d)

 

 

 

6,700,000

 

 

MVC Automotive Group GmbH

 

Automotive Dealerships

 

Common Equity Interest (a), (d), (e)

 

 

 

45,662,438

 

21,548,000

 

MVC Private Equity Fund LP

 

Private Equity

 

Limited Partnership Interest (a), (d), (j)

 

 

 

14,217,283

 

19,969,408

 

 

 

 

 

General Partnership Interest (a), (d), (j)

 

 

 

362,686

 

503,924

 

 

 

 

 

 

 

 

 

14,579,969

 

20,473,332

 

Ohio Medical Corporation

 

Medical Device Manufacturer

 

Common Stock (8,512 shares) (a), (d)

 

 

 

15,763,637

 

 

 

 

 

 

Series A Convertible Preferred Stock 16.0000% PIK (28,981 shares) (a), (b)

 

 

 

30,000,000

 

23,800,000

 

 

 

 

 

Series C Convertible Preferred Stock 16.0000% PIK (9,178 shares) (a), (b)

 

 

 

22,618,466

 

27,763,434

 

 

 

 

 

 

 

 

 

68,382,103

 

51,563,434

 

RuMe Inc.

 

Consumer Products

 

Common Stock (5,297,548 shares) (a), (d)

 

 

 

924,475

 

924,475

 

 

 

 

 

Series C Preferred Stock (23,896,634 shares) (a), (d)