(a)
The following table is being provided to update, as of June 30, 2025, and correct certain information previously provided in our annual report on Form 10-K for the year ended December 31, 2024. The following table is intended to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The footnotes to the fee table state which items are estimates. The following table should not be considered a representation of our future expenses; actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this Quarterly Report on Form 10-Q contains a reference to fees or expenses paid by “you,” “us,” “the Company” or “Stellus,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in us.
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| Stockholder transaction expenses: · · · |
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| Sales load (as percentage of offering price) | | — | (1) | |
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| Offering expenses born by us (as a percentage of offering price) | | — | (2) | |
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| Dividend reinvestment plan expenses | | — | (3) | |
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| Total stockholder transaction expenses paid by us (as a percentage of offering price) | | — | | |
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| Annual expenses (as a percentage of net assets attributable to common stock)(5): | | | | |
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| Base management fee | | 4.36 | % (6) | |
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| Incentive fees payable under Investment Advisory Agreement | | 2.63 | % (7) | |
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| Interest payments on borrowed funds | | 8.29 | % (8) | |
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| Other expenses | | 1.91 | % (9) | |
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| Total annual expenses | | 17.19 | % (10) | |
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| (1) | In the event that securities are sold to or through underwriters, a corresponding prospectus supplement will disclose the applicable sales load. |
| (2) | In the event that we conduct an offering of any of our securities, a corresponding prospectus will disclose the estimated offering expenses because they will be ultimately borne by us (and indirectly by our stockholders). |
| (3) | The expenses of administering our dividend reinvestment plan are included in other expenses. |
| (4) | Total stockholder transaction expenses may include a sales load and will be disclosed in a future prospectus supplement, if any. |
| (5) | Net assets attributable to common stock equals average net assets, which is calculated as the average of the net assets balances as of each quarter end during the year ended December 31, 2024 and the prior year end. |
| (6) | Our base management fee is 1.75% of the average value of our total assets (other than cash and cash equivalents but including assets purchased with borrowed amounts). This item represents actual base management fees incurred for the year ended December 31, 2024. We may from time to time decide it is appropriate to change the terms of the Investment Advisory Agreement. Under the 1940 Act, any material change to our Investment Advisory Agreement must be submitted to stockholders for approval. The 4.90% reflected in the table is calculated on our net assets (rather than our total assets). See “Item 1. Business — Management and Other Agreements — Investment Advisory Agreement” in our Annual Report on Form 10-K filed with the SEC on March 4, 2025. |
| (7) | This item represents actual fees incurred on pre-incentive fee net investment income (income incentive fee) for the year ended December 31, 2024. The incentive fee consists of two parts, please See “Item 1. Business — Management and Other Agreements — Investment Advisory Agreement — Incentive Fee” in our Annual Report on Form 10-K filed with the SEC on March 4, 2025 for additional information on the ordinary income and capital gains components of our incentive fee. |
| (8) | As of March 4, 2025, we had outstanding SBA debentures of $308.8 million; and we had an outstanding balance of $230.8 million under our Credit Facility, which has a total commitment of $315.0 million. |
| (9) | Other expenses represent our estimated annual operating expenses, as a percentage of net assets attributable to common shares estimated for the current year, including professional fees, directors’ fees, insurance costs, expenses of our dividend reinvestment plan and payments under the Administration Agreement based on our allocable portion of overhead and other expenses incurred by our administrator. See “Item 1. Business — Management and Other Agreements — Administration Agreement” in our Annual Report on Form 10-K filed with the SEC on March 4, 2025. Other expenses exclude interest payments on borrowed funds, and if we issue debt securities or preferred stock, interest payments on debt securities and distributions with respect to preferred stock. “Other expenses” are based on actual other expenses for the year ended December 31, 2024. |
| (10) | “Total annual expenses” as a percentage of consolidated net assets attributable to common stock are higher than the total annual expenses percentage would be for a company that is not leveraged. We borrow money to leverage our net assets and increase our total assets. The SEC requires that the “total annual expenses” percentage be calculated as a percentage of net assets (defined as total assets less total liabilities), rather than the total assets, including assets that have been purchased with borrowed amounts. If the “total annual expenses” percentage were calculated instead as a percentage of average consolidated total assets, our “total annual expenses” would be 6.48% of average consolidated total assets. |
The following example demonstrates the projected dollar amount of total cumulative expenses over various periods with respect to a hypothetical investment in us. In calculating the following expense amounts, we have assumed we would have no additional leverage, that none of our assets are cash or cash equivalents and that our annual operating expenses would remain at the levels set forth in the table above. Transaction expenses are not included in the following example.
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| · · 1 year · · · 2 years · · · 5 years · · · 10 years |
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| You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return | | $174 | | $436 | | $638 | | $964 |
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| You would pay the following expenses on a $1,000 investment, assuming a 5.0% annual return resulting entirely from net realized capital gains (all of which is subject to our incentive fee on capital gains) | | $179 | | $446 | | $650 | | $971 |
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The foregoing table is to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5.0% annual return, our performance will vary and may result in a return greater or less than 5.0%. Assuming a 5.0% annual return, the incentive fee under the Investment Advisory Agreement would either not be payable or have an insignificant impact on the expense amounts shown above. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses, and returns to our investors, would be higher. In addition, while the example assumes reinvestment of all distributions at net asset value, if our Board authorizes and we declare a cash dividend, participants in our dividend reinvestment plan who have not otherwise elected to receive cash will receive a number of shares of our common stock, determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the distribution.
This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.
| (c) | Rule 10b5-1 Trading Plans |
During the three and six months ended June 30, 2025, none of the Company’s directors or executive officers adopted orterminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
