The Company began operating as an Investment Company in March 2009 to take advantage of attractive pricing in the high yield market with the objectives of: (i) maximizing the total return for Shareholders, consisting of dividend income and capital appreciation; and (ii) providing Shareholders with monthly dividends targeted to payout a minimum of 75% of net earnings annually. During 2012, the Company made monthly dividend payments totalling $7,371,869, or $0.70 per common share (2011 - $7,371,869, or $0.70 per common share). This represented approximately 83.9% of net investment income (2011 - 83.4%).
Since commencement of its investment business, the Company has made monthly dividend payments totalling $26,415,864, or $2.51 per common share. This represents approximately 90.3% of net investment income earned since March 17, 2009. On January 4, 2013, the Company announced it will maintain monthly cash dividends at $0.0583 per common share for each of the first three months of 2013.
The net assets of the Company grew in 2012 from $13.43 per common share to $13.50. The net asset value was actually down 3.4% for the first 6 months of the year but was up 4.0% in the second half contributing to the $0.07 increase in our net assets per common share. Since inception, the Company's net assets per common share have appreciated from the issue price of $10 by 35%. Over half of the capital appreciation came in the first twelve months following the issue as the economy showed signs of life from the 2008/09 credit crunch. Since that time, we have added additional value as spreads continued to narrow and from a handful of creatively structured private debt financings. The private debt financings are typically short term in nature; pay a high coupon; in some cases are fully secured; and, provide the aforementioned capital growth through "equity kickers" in the form of warrants or convertible debt.
As an example, in April 2012, Deans Knight structured a secured debt financing with Petroamerica Oil Corp. for $35 million, of which $4.0 million was subscribed to by the Company. The debentures mature on April 19, 2015 and bear interest of 11.5%. In addition to the coupon, the Company received a commitment fee of 1.5% and warrants to purchase 100 common shares per $100 of debt at an exercise price of $0.20 per share, which mature on April 19, 2015. Petroamerica is an oil producer with assets in Colombia. They started 2012 producing 200 barrels of oil equivalent per day ("boepd") with proceeds from the debt financing to be used to develop and appraise their assets. They drilled 5 wells on their Las Maracas property which, at year end, were producing 4,000 boepd net to Petroamerica. In addition to the Las Maracas asset, Petroamerica announced a new discovery at La Casona in November 2012 with one well testing at 480 boepd net to Petroamerica. With this success, Petroamerica's stock was trading at $0.35 per share at December 31, 2012, almost double the exercise price. Deans Knight Capital Management, the Company, and related parties did not receive compensation for structuring the debt financing.
Comparison of net asset value and net assets
National Instrument 81-106 ("NI 81-106") permits investment companies to have two different net asset values: (i) one for financial statements, which will be prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") including Section 3855 (and referred to as "net assets") and (ii) another for all other purposes, including unit pricing for investor transactions (referred to as "net asset value"). The main difference in calculating net assets and net asset value is that GAAP requires bid price to be used in valuing securities traded in an active market where quoted prices are readily and regularly available, rather than the use of a price between the bid and the ask price currently used for determining net asset value. This difference results in an insignificant difference of approximately $0.08 per common share at December 31, 2012 (2011 - $0.06 per common share), as outlined in the notes to the Financial Statements.
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