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What changed in Hercules Capital, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Hercules Capital, Inc.'s 2024 and 2025 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 2025 report.

+333 added−301 removedSource: 10-K (2026-02-12) vs 10-K (2025-02-13)

Top changes in Hercules Capital, Inc.'s 2025 10-K

333 paragraphs added · 301 removed · 256 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe Board considers the following factors, among others, in making such determination: • the NAV per share of our common stock disclosed in the most recent periodic report we filed with the SEC; 22 Table of Contents • our management’s assessment of whether any material change in the NAV per share has occurred (including through the realization of net gains on the sale of our portfolio investments) from the period beginning on the date of the most recently disclosed NAV per share to the period ending two days prior to the date of the sale of our common stock; and • the magnitude of the difference between (i) a value that our Board or an authorized committee thereof has determined reflects the current NAV per share of our common stock, which is generally based upon the NAV per share of our common stock disclosed in the most recent periodic report that we filed with the SEC, as adjusted to reflect our management’s assessment of any material change in the NAV per share of our common stock since the date of the most recently disclosed NAV per share of our common stock, and (ii) the offering price per share of the shares of our common stock in the proposed offering.
Biggest changeIn making such determination, the following factors, among others, are generally considered: • the NAV per share of our common stock disclosed in the most recent periodic report we filed with the SEC; 22 Table of Contents • our management’s assessment of whether any material change in the NAV per share has occurred (including through the realization of net gains on the sale of our portfolio investments) from the period beginning on the date of the most recently disclosed NAV per share to the period ending two days prior to the date of the sale of our common stock; and • the magnitude of the difference between (i) the offering price per share of the shares of our common stock in the proposed offering and (ii) management’s assessment of any material change in the NAV per share of our common stock since the date of the most recently disclosed NAV per share of our common stock.
See “Certain United States Federal Income Tax Considerations” for additional information. Additionally, we have established wholly owned subsidiaries that are not consolidated for U.S. federal tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities as a result of their ownership of certain portfolio investments.
See “Certain United States Federal Income Tax Considerations” for additional information. Additionally, we have established wholly owned subsidiaries that are not consolidated for U.S. federal income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities as a result of their ownership of certain portfolio investments.
We provide growth capital to technology-related companies at all stages of development, including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancings and established-stage companies.
We provide growth capital to technology-related companies at all stages of development, including select publicly listed companies, select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancings and established-stage companies.
Due to these limitations on the deductibility of expenses and net capital losses, we may for U.S. federal tax purposes have aggregate taxable income for several tax years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the aggregate net income we actually earned during those tax years.
Due to these limitations on the deductibility of expenses and net capital losses, we may for U.S. federal income tax purposes have aggregate taxable income for several tax years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the aggregate net income we actually earned during those tax years.
The Code provides some relief from RIC disqualification due to failures to comply with the Income Test and the Asset Test, although there could be additional taxes 21 Table of Contents due in such cases. We cannot assure you that we would qualify for any such relief should we fail the Income Test or the Asset Test.
The Code provides some relief from RIC 21 Table of Contents disqualification due to failures to comply with the Income Test and the Asset Test, although there could be additional taxes due in such cases. We cannot assure you that we would qualify for any such relief should we fail the Income Test or the Asset Test.
Consummation of any such transaction will be subject to completion of due diligence, finalization of key business and financial terms (including price) and negotiation of final definitive documentation as well as a number of other factors and conditions, which may include, depending on the transaction and without limitation, the approval of our Board of Directors (the "Board"), required regulatory or third-party consents, and/or the approval of our stockholders.
Consummation of any such transaction will be subject to completion of due diligence, finalization of key business and financial terms (including price) and negotiation of final definitive documentation as well as a number of other factors and conditions, which may include, depending on the transaction and without limitation, the approval of our Board of Directors (the “Board”), required regulatory or third-party consents, and/or the approval of our stockholders.
Any such transactions that are not directly related to our investment in securities (possibly including speculative currency positions or currency derivatives not used for hedging purposes) also could, under future Treasury regulations, produce income not among the types of qualifying income from which a RIC must derive at least 90% of its annual gross income.
Any such transactions that are not directly related to our investment in securities (possibly including speculative currency positions or currency derivatives not used for hedging purposes) also could, under future Treasury regulations, produce income which is not among the types of qualifying income from which a RIC must derive at least 90% of its annual gross income.
However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we generally would not meet the diversification tests imposed on us by the Code in order to qualify as a RIC for U.S. federal tax purposes.
However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we generally would not meet the diversification tests imposed on us by the Code in order to qualify as a RIC for U.S. federal income tax purposes.
In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions, then such sales may put downward pressure on the trading price of our stock. We may in the future determine to make taxable distributions that are payable in part in our common stock.
In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions, then such sales may put downward pressure on the trading price of our stock. As such, we may in the future determine to make taxable distributions that are payable in part in our common stock.
We have received exemptive relief from the SEC permitting us to issue stock options to our independent directors and restricted stock to our executive officer, employees and directors subject to the above conditions, among others.
We have received exemptive relief from the SEC permitting us to issue stock options to our independent directors and restricted stock and restricted stock units to our executive officer, employees and directors subject to the above conditions, among others.
We also have offices in Boston, MA, New York, NY, Denver, CO, Westport, CT, Chicago, IL, San Diego, CA, and London, United Kingdom. AVAILABLE INFORMATION We file with or submit to the SEC our annual, quarterly, current reports, proxy statements and other information meeting the informational requirements of the Securities Exchange Act of 1934, as amended (“the Exchange Act”).
We also have offices in Boston, MA, New York, NY, Denver, CO, Westport, CT, San Diego, CA, and London, United Kingdom. AVAILABLE INFORMATION We file with or submit to the SEC our annual, quarterly, current reports, proxy statements and other information meeting the informational requirements of the Securities Exchange Act of 1934, as amended (“the Exchange Act”).
Under present SBA regulations, eligible small businesses include those businesses that are below small business size standards as published by the North American Industry Classification System (“NASIC”) and adopted by the SBA or any eligible business that has a tangible net worth not exceeding $24.0 million and has average annual fully taxed net income not exceeding $8.0 million for the two most recent fiscal years.
Under present SBA regulations, eligible small businesses include those businesses that are below small business size standards as published by the North American Industry Classification System (“NAICS”) and adopted by the SBA or any eligible business that has a tangible net worth not exceeding $24.0 million and has average annual fully taxed net income not exceeding $8.0 million for the two most recent fiscal years.
The effective rate of foreign taxes may vary depending on the location, status of tax treaties, changes in international tax laws, and types of investment held, among other reasons. Further, we do not anticipate being eligible for the special election that allows a RIC to treat foreign income taxes paid by us as having been paid by its stockholders.
The effective rate of foreign taxes may vary depending on the location, status of tax treaties, changes in international tax laws, and types of investment held, among other reasons. Further, we do not anticipate being eligible for the special election that allows a RIC to treat foreign income taxes paid by it as having been paid by its stockholders.
SBA regulations also include restrictions on a “change of control” or transfer of an SBIC and require that SBICs invest idle funds in accordance with SBA regulations. As of December 31, 2024, as a result of having sufficient capital as defined under the SBA regulations, our SBICs were in compliance with the terms of the SBA’s leverage requirements.
SBA regulations also include restrictions on a “change of control” or transfer of an SBIC and require that SBICs invest idle funds in accordance with SBA regulations. As of December 31, 2025, as a result of having sufficient capital as defined under the SBA regulations, our SBICs were in compliance with the terms of the SBA’s leverage requirements.
We have been investing in venture capital-backed and institutional-backed companies for over 20 years. Our investment professionals are led by individuals with extensive experience as venture capitalists, commercial lenders, and originators of Structured Debt and equity investments in technology-related companies.
We have been investing in venture capital-backed and institutional-backed companies for over 21 years. Our investment professionals are led by individuals with extensive experience as venture capitalists, commercial lenders, and originators of Structured Debt and equity investments in technology-related companies.
A smaller enterprise is one that meets the NASIC size standard for its industry or has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years.
A smaller enterprise is one that meets the NAICS size standard for its industry or has a tangible net worth not exceeding $6.0 million and has average annual fully taxed net income not exceeding $2.0 million for the two most recent fiscal years.
In 2020, we formed Hercules Capital Management LLC and Hercules Adviser LLC as wholly owned Delaware limited liability subsidiaries.
In 2020, we formed Hercules Capital Management LLC and Hercules Adviser LLC as wholly owned Delaware limited liability company subsidiaries.
Except as otherwise noted, this discussion assumes you are a taxable U.S. person (as defined for U.S. federal income tax purposes) and that you hold your shares of our stock as capital assets for U.S. federal income tax purposes (generally, assets held for investment).
Except as otherwise noted, this discussion assumes you are a taxable United States person (as defined for U.S. federal income tax purposes) and that you hold your shares of our stock as capital assets for U.S. federal income tax purposes (generally, assets held for investment).
In addition to the cash yields received on our loans, our loans generally include one or more of the following: exit fees, balloon payment fees, commitment fees, success fees, or prepayment fees. In some cases, our loans also include contractual payment-in-kind ("PIK") interest arrangements.
In addition to the cash yields received on our loans, our loans generally include one or more of the following: exit fees, balloon payment fees, commitment fees, success fees, or prepayment fees. In some cases, our loans also include contractual payment-in-kind (“PIK”) interest arrangements.
In addition, the investment team and credit team advise the investment committee and the audit committee of our Board (the "Audit Committee"), accordingly, regarding the credit and investment grading for each portfolio company as well as material changes in the value of collateral that may occur.
In addition, the investment team and credit team advise the investment committee and the audit committee of our Board (the “Audit Committee”), accordingly, regarding the credit and investment grading for each portfolio company as well as material changes in the value of collateral that may occur.
We believe that having established financial sponsors with meaningful commitments to the business is a key 8 Table of Contents characteristic of a prospective portfolio company. In addition, we look for representatives of one or more financial sponsors to maintain seats on the board of directors of a prospective portfolio company as an indication of such commitment.
We believe that having established financial sponsors with meaningful commitments to the business is a key characteristic of a prospective portfolio company. In addition, we look for representatives of one or more financial sponsors to maintain seats on the board of directors of a prospective portfolio company as an indication of such commitment.
We believe that many of these contributions help us raise our profile in the communities and benefit us in attracting and retaining talent and investment opportunities. Effective January 1, 2006, we elected to be treated for U.S. federal tax purposes as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (“the Code”).
We believe that many of these contributions help us raise our profile in the communities and benefit us in attracting and retaining talent and investment opportunities. Effective January 1, 2006, we elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”).
As of December 31, 2024, our investment origination team, which consists of more than 50 investment professionals, is headed by our Chief Investment Officer and Chief Executive Officer.
As of December 31, 2025, our investment origination team, which consists of more than 50 investment professionals, is headed by our Chief Investment Officer and Chief Executive Officer.
As of December 31, 2024, our team comprises over 100 professionals across our 8 offices globally. Our investment team is comprised of more than 50 employees, and is led by professionals with extensive experience in venture capital, structured finance, origination of debt and equity investments, commercial lending and acquisition finance with technology and biomedical companies.
As of December 31, 2025, our team comprises over 100 professionals across our 7 offices globally. Our investment team is comprised of more than 50 employees, and is led by professionals with extensive experience in venture capital, structured finance, origination of debt and equity investments, commercial lending and acquisition finance with technology and biomedical companies.
We may also make stand-alone direct equity investments into portfolio companies in which we may not have any debt investment in the company. As of December 31, 2024, we held warrant and equity securities in 151 portfolio companies. In addition to the characteristics described above, the table below compares the typical features of our investments.
We may also make stand-alone direct equity investments into portfolio companies in which we may not have any debt investment in the company. As of December 31, 2025, we held warrant and equity securities in 164 portfolio companies. In addition to the characteristics described above, the table below compares the typical features of our investments.
Continuing Support from One or More Financial Sponsors - We generally invest in companies in which one or more established financial sponsors have previously invested and continue to make a contribution to the management of the business.
Continuing Support from One or More Financial Sponsors - We generally invest in companies in which one or more established financial sponsors have previously invested and continue to make a contribution to the management of the 8 Table of Contents business.
Importantly, this determination does not require that we calculate NAV per share in connection with each offering of shares of our common stock, but instead it involves the determination by the Board or a committee thereof that we are not selling shares of our common stock at a price below the then current NAV per share at the time at which the sale is made.
Importantly, this determination does not require that we calculate NAV per share in connection with each offering of shares of our common stock, but instead it involves a determination that we are not selling shares of our common stock at a price below the then current NAV per share at the time at which the sale is made.
Our loans will typically be collateralized by a security interest in the borrower’s assets, although we may not have the first claim on these assets and the assets may not include intellectual property. Our debt investments carry fixed or variable contractual interest rates which generally ranged from approximately 8% to 15% as of December 31, 2024.
Our loans will typically be collateralized by a security interest in the borrower’s assets, although we may not have the first claim on these assets and the assets may not include intellectual property. Our debt investments carry fixed or variable contractual interest rates which generally ranged from approximately 7% to 14% as of December 31, 2025.
Grade 5 loans will require the fair value of the loans be reduced to the amount, if any, we anticipate will be recovered. As of December 31, 2024, our investment portfolio had a weighted average investment grading of 2.26.
Grade 5 loans will require the fair value of the loans be reduced to the amount, if any, we anticipate will be recovered. As of December 31, 2025, our investment portfolio had a weighted average investment grading of 2.20.
In addition, our team members have originated Structured Debt, senior debt, and equity investments in over 600 technology-related companies, representing over $21.0 billion in commitments from inception to December 31, 2024, and have developed a network of industry contacts with investors and other participants within the venture capital and private equity communities.
In addition, our team members have originated Structured Debt, senior debt, and equity investments in over 700 technology-related companies, representing over $25.0 billion in commitments from inception to December 31, 2025, and have developed a network of industry contacts with investors and other participants within the venture capital and private equity communities.
Other 1940 Act Regulations We are periodically examined by the SEC for compliance with the 1940 Act. We are also prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our Board who are not interested persons and, in some cases, prior approval by the SEC.
We are also prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our Board who are not interested persons and, in some cases, prior approval by the SEC.
As of December 31, 2024, approximately 95.5% of our total assets represented investments in portfolio companies whose fair value is determined in good faith by our Valuation Committee, subject to oversight and approval by our Board.
As of December 31, 2025, approximately 97.4% of our total assets represented investments in portfolio companies whose fair value is determined in good faith by our Valuation Committee, subject to oversight and approval by our Board.
Approximately 97.4% of our loans were at floating rates or floating rates with a floor and 2.6% of the loans were at fixed rates as of December 31, 2024.
Approximately 97.9% of our loans were at floating rates or floating rates with a floor and 2.1% of the loans were at fixed rates as of December 31, 2025.
We may incur losses from our investing activities; however, we work with our troubled portfolio companies and their financial sponsors to recover as much of our investments as is practicable, including possibly taking control of the portfolio company.
We develop a workout strategy for workout assets and our investment committee monitors the progress against the strategy. We may incur losses from our investing activities; however, we work with our troubled portfolio companies and their financial sponsors to recover as much of our investments as is practicable, including possibly taking control of the portfolio company.
As a result, effective December 7, 2018, the minimum asset coverage ratio under the 1940 Act applicable to us decreased from 200% to 150%, permitting us to incur additional leverage As a result, we will be permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.
As a result, we will be permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.
Gains or losses realized by us from the sale or exchange of equity or warrants acquired by us, as well as any losses attributable to the lapse of such warrants, generally will be treated as capital gains or losses. Such capital gains or losses will be long-term or short-term, depending on how long we held related equity or warrant instrument.
Gains or losses realized by us from the sale or exchange of equity or warrants acquired by us, as well as any losses attributable to the lapse of such warrants, generally will be treated as capital gains or losses.
Within the life sciences sub-sector, we generally focus on medical devices, bio-pharmaceutical, drug discovery and development, drug delivery, health care services and information systems companies.
Within the life sciences sub-sector, we generally focus on medical devices, bio-pharmaceutical, drug discovery and development, drug delivery, health care services and information systems companies. We refer to such companies in the technology and life sciences sub-sectors described herein as “technology-related” companies.
If we dispose of assets in order to meet the Code Distributions, we may make such dispositions at times that, from an investment standpoint, are not advantageous. If we are prohibited from making distributions or are unable to obtain cash from other sources to make the distributions, we may lose our RIC status.
If we dispose of assets in order to meet the Code Distributions, we may make such dispositions at times that, from an investment standpoint, are not advantageous.
Determinations in Connection with Offerings In connection with each offering of shares of our common stock, the Board or a committee thereof is required to make the determination that we are not selling shares of our common stock at a price below our then current NAV per share at the time at which the sale is made, unless we then have the requisite shareholder authorization to issue our shares at a price below their NAV per share and it is determined by the Board that such sale is in the best interests of our stockholders, certain other conditions are met and we have any requisite approval from our stockholders.
Accordingly, a determination must be made that we are not selling shares of our common stock at a price below the NAV per share of our common stock at the time at which the sale is made, unless we then have the requisite shareholder authorization to issue our shares at a price below their NAV per share and it is determined by the Board that such sale is in the best interests of our stockholders.
The United States has entered into tax treaties with many foreign countries that may entitle us to a reduced rate of tax or exemption from tax on this related income and capital gains.
In this regard, countries with which the United States does not have a tax treaty can result in high withholding tax rates, dependent on each taxpayer's circumstances. The United States has entered into tax treaties with many foreign countries that may entitle us to a reduced rate of tax or exemption from tax on this related income and capital gains.
We aim to attract, motivate, and retain a diverse group of individuals and to create an inclusive community where all individuals are welcomed, valued, respected, and heard. We are proud that our workforce consists of diverse professionals including approximately 50% that are women or people of diverse ethnic backgrounds.
We aim to attract, motivate, and retain a diverse group of individuals and to create an inclusive community where all individuals are welcomed, valued, respected, and heard. We are proud that our workforce consists of diverse professionals. We strive to continue to create a welcoming and inclusive work environment for our employees.
We strive to continue to create a welcoming and inclusive work environment for our employees. Corporate Social Responsibility Hercules encourages and supports our employees to be active participants in our local communities. As a Company, we support local non-profit organizations by hosting annual fundraising, food, supply, and toy drives.
Corporate Social Responsibility Hercules encourages and supports our employees to be active participants in our local communities. As a Company, we support local non-profit organizations by hosting annual fundraising, food, supply, and toy drives. In addition to our Company-sponsored philanthropic initiatives, we also provide employees with paid days off to volunteer at organizations of their choice.
In addition, we support our employees and the causes that are most important to them through our Charitable Donation Matching program, in which we match donations our employees make to qualified 501(c)(3) non-profits (subject to maximum limits per employee). Information on our approach and commitment to social, governance, and environmental (“ESG”) considerations can be found on our website at investor.htgc.com/esg.
Hercules supports a variety of non-profit organizations through corporate sponsorship and donations. In addition, we support our employees and the causes that are most important to them through our Charitable Donation Matching program, in which we match donations our employees make to qualified 501(c)(3) non-profits (subject to maximum limits per employee).
As of December 31, 2024, approximately 85.9% of the fair value of our portfolio was composed of investments in four industries: 29.5% was composed of investments in the "Software" industry, 29.5% was composed of investments in the "Drug Discovery & Development" industry, 16.7% was composed of investments in the "Healthcare Services, Other" industry and 10.2% was composed of investments in the "Consumer & Business Services" industry.
As of December 31, 2025, approximately 87.1% of the fair value of our portfolio was composed of investments in five industries: 24.3% was composed of investments in the "Application Software" industry, 23.3% was composed of investments in the "Drug Discovery & Development" industry, 18.8% was composed of investments in the "Healthcare Services, Other" industry, 10.6% was composed of investments in the "System Software" industry, and 10.1% was composed of investments in the "Consumer & Business Services" industry.
When appropriate, the teams recommend changes to investment grading. Our investment committee reviews and approves the recommendations and/or changes to the investment grading. These approved investment gradings are provided on a quarterly basis to the Audit Committee and our Board, along with valuations for our investments, which are submitted for approval by the Audit Committee and Board.
These approved investment gradings are provided on a quarterly basis to the Audit Committee and our Board, along with valuations for our investments determined by our Valuation Designee (as defined below), which are submitted for approval by the Audit Committee and Board. From time to time, we will identify investments that require closer monitoring or become workout assets.
Investment income received from sources located within foreign countries, or capital gains earned by investing in securities of foreign issuers, may be subject to foreign income taxes and withheld at the source. In this regard, countries with which the United States does not have a tax treaty can result in high withholding tax rates, dependent on each taxpayer's circumstances.
Such capital gains or losses will be long-term or short-term, depending on how long we held the related equity or warrant instrument. Investment income received from sources located within foreign countries, or capital gains earned by investing in securities of foreign issuers, may be subject to foreign income taxes and withheld at the source.
Removed
From time to time, we will identify investments that require closer monitoring or become workout assets. We develop a workout strategy for workout assets and our investment committee monitors the progress against the strategy.
Added
When appropriate, the teams recommend changes to investment grading. Our investment committee reviews and approves the recommendations and/or changes to the investment grading.
Removed
In addition to our Company-sponsored philanthropic initiatives, we also provide employees with paid days off to volunteer at organizations of their choice. Hercules supports a variety of non-profit organizations through corporate sponsorship and donations.
Added
Information on our approach and commitment to social, governance, and environmental (“ESG”) considerations can be found on our website at investor.htgc.com/esg.
Removed
Our stockholders have authorized us to issue common stock at a price below the then-current NAV per share, subject to certain conditions including Board approval, for a twelve-month period expiring on August 15, 2025. We cannot predict whether we will make any such sales.
Added
As a result, effective December 7, 2018, the minimum asset coverage ratio under the 1940 Act applicable to us decreased from 200% to 150%, permitting us to incur additional leverage.
Removed
In addition, if, during an offering pursuant to a prospectus, there is a possibility that we may trigger the undertaking to suspend the offering of shares of our common stock if the NAV per share of common stock fluctuates by certain amounts (as described in the relevant prospectus), the Board or a committee thereof will either (i) comply with such undertaking or (ii) undertake to determine NAV per share of our common stock to ensure that such undertaking has not been triggered.
Added
We do not currently have the authorization from our stockholders to issue common stock at a price below the then-current NAV per share and there is no guarantee that we will obtain such authorization from our stockholders in the future. Other 1940 Act Regulations We are periodically examined by the SEC for compliance with the 1940 Act.
Added
If we are prohibited from making distributions or are unable to obtain cash from other sources to satisfy the Distribution Requirements, we may fail to maintain our qualification for tax treatment as a RIC and become subject to U.S. federal income tax at corporate rates.
Added
Determinations in Connection with Offerings Under the 1940 Act, a BDC is only permitted to sell shares of its common stock at a price below the then current NAV per share of such common stock under certain circumstances.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

102 edited+53 added−24 removed307 unchanged
Biggest changeWe may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company might be. 30 Table of Contents The following table shows the fair value of the investments held in portfolio companies as of December 31, 2024, that represent greater than 5% of our net assets: (in thousands) December 31, 2024 Fair Value Percentage of Net Assets Phathom Pharmaceuticals, Inc. $ 177,348 8.9 % Marathon Health, LLC 166,882 8.4 % Axsome Therapeutics, Inc. 165,220 8.3 % Shield AI, Inc. 113,701 5.7 % SeatGeek, Inc. 110,413 5.5 % Corium, Inc. 109,178 5.5 % • Phathom Pharmaceuticals, Inc. is a biopharmaceutical company focused on the development and commercialization of novel treatments for gastrointestinal diseases and disorders. • Marathon Health, LLC is a provider of employer-sponsored healthcare platform intended to provide convenient and unhurried patient-centered care services. • Axsome Therapeutics, Inc. is a biopharmaceutical company developing novel therapies for the management of central nervous system disorders for which there are limited treatment options. • Shield AI, Inc. is an aerospace and defense technology company that designs and builds AI-powered, autonomous Unmanned Aerial Vehicles (UAVs) for national defense operations and military organizations. • SeatGeek, Inc. is a mobile-focused ticket platform that enables users to buy and sell tickets for live sports, concerts and theater events. • Corium, Inc. develops, engineers, and manufactures drug delivery products and devices that utilize the skin and mucosa as a primary means of transport.
Biggest changeWe may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company might be. 30 Table of Contents The following table shows the fair value of the investments held in portfolio companies as of December 31, 2025, that represent greater than 5% of our net assets: (in thousands) December 31, 2025 Fair Value Percentage of Net Assets Phathom Pharmaceuticals, Inc. $ 182,883 8.3 % Marathon Health, LLC 181,337 8.2 % Armis, Inc. 159,672 7.2 % ChenMed, LLC 128,240 5.8 % Shield AI, Inc. 118,127 5.3 % Tipalti Solutions Ltd. 113,467 5.1 % SeatGeek, Inc. 111,031 5.0 % • Phathom Pharmaceuticals, Inc. is a biopharmaceutical company focused on the development and commercialization of novel treatments for gastrointestinal diseases and disorders. • Marathon Health, LLC is a provider of employer-sponsored healthcare platform intended to provide convenient and unhurried patient-centered care services. • Armis, Inc. is the leading agentless, enterprise-class device security platform designed to address the new threat landscape of unmanaged and IoT devices. • ChenMed, LLC is a healthcare company that delivers value-based, primary care to seniors, focusing on prevention and personalized treatment. • Shield AI, Inc. is an aerospace and defense technology company that designs and builds AI-powered, autonomous Unmanned Aerial Vehicles (UAVs) for national defense operations and military organizations. • Tipalti Solutions Ltd. is a provider of an end-to-end accounts payable automation software platform for mid-market businesses and enterprises. • SeatGeek, Inc. is a mobile-focused ticket platform that enables users to buy and sell tickets for live sports, concerts and theater events.
If healthcare companies are unable to successfully expand their product lines through internal research and development and acquisitions, their business may be materially and adversely affected. In addition, if these companies are unable to successfully grow their businesses through marketing partnerships and acquisitions, their business may be materially and adversely affected.
If healthcare companies are unable to successfully expand their product lines through internal research and development and acquisitions, their business may be materially and adversely affected. In addition, if these companies are unable to successfully grow their businesses through marketing partnerships and acquisitions, their businesses may be materially and adversely affected.
Additionally, some of these securities or other indebtedness may be rated by rating agencies, and in obtaining a rating for such securities and other indebtedness, we may be required to abide by operating and investment guidelines that further restrict operating and financial flexibility. • We and, indirectly, our stockholders will bear the cost of issuing and servicing such securities and other indebtedness. • Preferred stock or any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock, including separate voting rights and could delay or prevent a transaction or a change in control to the detriment of the holders of our common stock. • Any unsecured debt issued by us would generally rank (i) pari passu with our current and future unsecured indebtedness and effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and (ii) structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries.
Additionally, some of these securities or other indebtedness may be rated by rating agencies, and in obtaining a rating for such securities and other indebtedness, we may be required to abide by operating and investment guidelines that further restrict operating and financial flexibility. • We and, indirectly, our stockholders will bear the cost of issuing and servicing such securities and other indebtedness. • Preferred stock or any convertible or exchangeable securities that we have issued or may issue in the future may have rights, preferences and privileges more favorable than those of our common stock, including separate voting rights and could delay or prevent a transaction or a change in control to the detriment of the holders of our common stock. • Any unsecured debt issued by us would generally rank (i) pari passu with our current and future unsecured indebtedness and effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, and (ii) structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries.
These factors include: • significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in regulatory policies, accounting pronouncements or tax guidelines; • the exclusion of BDC common stock from certain market indices, such as what happened with respect to the Russell indices and the Standard and Poor’s indices, could reduce the ability of certain investment funds to own our common stock and limit the number of owners of our common stock and otherwise negatively impact the market price of our common stock; • inability to obtain any exemptive relief that may be required by us in the future from the SEC; • loss of our BDC or RIC status or our wholly owned subsidiaries' statuses as SBICs; • changes in our earnings or variations in our operating results; • changes in the value of our portfolio of investments; • any shortfall in our investment income or net investment income or any increase in losses from levels expected by investors or securities analysts; • loss of a major funding source; • fluctuations in interest rates; • the operating performance of companies comparable to us; • departure of our key personnel; • proposed, or completed, offerings of our securities, including classes other than our common stock; • global or national credit market changes; and • general economic trends and other external factors. 40 Table of Contents We may not be able to pay distributions to our stockholders, our distributions may not grow over time, and a portion of distributions paid to our stockholders may be a return of capital, which is a distribution of the stockholders’ invested capital.
These factors include: • significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in regulatory policies, accounting pronouncements or tax guidelines; • the exclusion of BDC common stock from certain market indices, such as what happened with respect to the Russell indices and the Standard and Poor’s indices, could reduce the ability of certain investment funds to own our common stock and limit the number of owners of our common stock and otherwise negatively impact the market price of our common stock; • inability to obtain any exemptive relief that may be required by us in the future from the SEC; • loss of our BDC or RIC status or our wholly owned subsidiaries' statuses as SBICs; • changes in our earnings or variations in our operating results; • changes in the value of our portfolio of investments; • any shortfall in our investment income or net investment income or any increase in losses from levels expected by investors or securities analysts; • loss of a major funding source; • fluctuations in interest rates; • the operating performance of companies comparable to us; • departure of our key personnel; • proposed, or completed, offerings of our securities, including classes other than our common stock; • global or national credit market changes; and • general economic trends and other external factors. 41 Table of Contents We may not be able to pay distributions to our stockholders, our distributions may not grow over time, and a portion of distributions paid to our stockholders may be a return of capital, which is a distribution of the stockholders’ invested capital.
If our operating performance declines and we are not able to generate sufficient cash flow to service our debt obligations, we may in the future need to refinance or restructure our debt, sell assets, reduce or delay capital investments, seek to raise additional capital or seek to obtain waivers from the required lenders under our senior securities to avoid being in default.
If our operating performance declines and we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, seek to raise additional capital or seek to obtain waivers from the required lenders under our senior securities to avoid being in default.
Because our Credit Facilities have, and any future credit facilities will likely have, customary cross-default and cross-acceleration provisions, if our outstanding Notes are accelerated, we may be unable to repay or finance the amounts due. We may not be able to prepay the Notes upon a change in control.
Because our Credit Facilities have, and any future credit facilities will likely have, customary cross-default and cross-acceleration provisions, if our outstanding Notes are accelerated, we may be unable to repay or finance the amounts due. We may not be able to prepay the Notes upon a change in control or fundamental change.
If a change in control were to occur, we may not have sufficient funds to prepay any such accelerated indebtedness. The terms of the 2033 Notes and 2031 Asset-Backed Notes do not require us to purchase the 2033 Notes or 2031 Asset-Backed Notes, respectively, in connection with a change of control or any other event.
If a change in control or fundamental change event were to occur, we may not have sufficient funds to prepay any such accelerated indebtedness. The terms of the 2033 Notes and 2031 Asset-Backed Notes do not require us to purchase the 2033 Notes or 2031 Asset-Backed Notes, respectively, in connection with a change of control or any other event.
To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash 46 Table of Contents equivalents, U.S. government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one issuer, (ii) 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) of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status.
To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one issuer, (ii) 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) of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status.
Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and there can be no assurance that any such hedging arrangements will achieve the desired effect. During the year ended and as of December 31, 2024, we had entered into and held one outstanding foreign currency forward contract.
Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and there can be no assurance that any such hedging arrangements will achieve the desired effect. During the year ended and as of December 31, 2025, we had entered into and held one outstanding foreign currency forward contract.
The following table illustrates the effect of leverage on returns from an investment in our common stock assuming that we employ (1) our actual asset coverage ratio as of December 31, 2024, and (2) a hypothetical asset coverage ratio of 150% (each excluding our SBA debentures as permitted by our exemptive relief) each at various annual returns on our portfolio as of December 31, 2024, net of expenses.
The following table illustrates the effect of leverage on returns from an investment in our common stock assuming that we employ (1) our actual asset coverage ratio as of December 31, 2025, and (2) a hypothetical asset coverage ratio of 150% (each excluding our SBA debentures as permitted by our exemptive relief) each at various annual returns on our portfolio as of December 31, 2025, net of expenses.
We could experience fluctuations in our operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of portfolio dividend and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.
We could experience fluctuations in our operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of portfolio dividend and fee income, the level of our expenses, variations in and the timing of the 50 Table of Contents recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.
Any failure to do so could subject us to enforcement action by the SEC, cause us to fail to satisfy the tests and requirements associated with our RIC status and subject us to entity-level U.S. federal income taxation, cause us to fail the 70% test described above or otherwise have a material adverse effect on our business, financial condition or results of operations.
Any failure to do so could subject us to enforcement action by the SEC, cause us to fail to satisfy the tests and requirements associated with our RIC status and subject us to entity-level U.S. federal income 39 Table of Contents taxation, cause us to fail the 70% test described above or otherwise have a material adverse effect on our business, financial condition or results of operations.
Any default under such 44 Table of Contents agreements, or other indebtedness to which we may be a party, that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness, could make us unable to pay principal, premium, if any, and interest on any of our indebtedness, including our Notes and Credit Facilities, or other indebtedness and substantially decrease the market value of our outstanding Notes and Credit Facilities debt.
Any default under such agreements, or other indebtedness to which we may be a party, that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness, could make us unable to pay principal, premium, if any, and interest on any of our indebtedness, including our Notes and Credit Facilities, or other indebtedness and substantially decrease the market value of our outstanding Notes and Credit Facilities debt.
We cannot assure you that the SBA will grant such waiver and if HC IV or SBIC V are unable to obtain a waiver, compliance with the SBIC regulations may result in loss of RIC status and a consequent imposition of an entity-level tax on us. Risks Related To Operating As A RIC And U.S.
We cannot assure you that the SBA will grant such waiver and if HC IV or SBIC V are unable to obtain a waiver, compliance with the SBIC regulations may result in loss of RIC status and a consequent imposition of an entity-level tax on us. 47 Table of Contents Risks Related To Operating As A RIC And U.S.
The following table illustrates the reduction to NAV, or NAV, and the dilution 41 Table of Contents experienced by Stockholder A following the sale of 40,000 shares of the common stock of Company XYZ at $9.50 per share, a price below its NAV per share.
The following table illustrates the reduction to NAV, or NAV, and the dilution experienced by Stockholder A following the sale of 40,000 shares of the common stock of Company XYZ at $9.50 per share, a price below its NAV per share.
Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We will be subject to risks associated with “last out” positions in unitranche loans.
Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. 34 Table of Contents We will be subject to risks associated with “last out” positions in unitranche loans.
As a result, unless a stockholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the value of the dividend that they have elected to have reinvested in our common stock. 47 Table of Contents Legislative or regulatory tax changes could adversely affect our stockholders.
As a result, unless a stockholder is a tax-exempt entity, it may have to use funds from other sources to pay its tax liability on the value of the dividend that they have elected to have reinvested in our common stock. Legislative or regulatory tax changes could adversely affect our stockholders.
New approaches could damage our investments, disrupt the market in which we operate and subject us to increased competition, which could materially and adversely affect our business, financial condition and results of investments. 49 Table of Contents We may, subject to internal policies, use artificial intelligence or machine learning in connection with our business activities, including investment activities.
New approaches could damage our investments, disrupt the market in which we operate and subject us to increased competition, which could materially and adversely affect our business, financial condition and results of investments. We may, subject to internal policies, use artificial intelligence or machine learning in connection with our business activities, including investment activities.
Failure of pharmaceutical companies to comply with applicable laws and regulations can result in the imposition of civil and criminal fines, penalties and, in some instances, exclusion of participation in government sponsored programs such as Medicare and Medicaid. Pharmaceutical companies may be adversely affected by government regulation and changes in reimbursement rates.
Failure of pharmaceutical companies to comply with applicable laws and regulations can result in the imposition of civil and criminal fines, penalties and, in some instances, exclusion of participation in government sponsored programs such as Medicare and Medicaid. 29 Table of Contents Pharmaceutical companies may be adversely affected by government regulation and changes in reimbursement rates.
Third-party payors are increasingly challenging the price and cost-effectiveness of medical products. Significant uncertainty exists as to the reimbursement status of health care products, and there can be no 29 Table of Contents assurance that adequate third-party coverage will be available for pharmaceutical companies to obtain satisfactory price levels for their products.
Third-party payors are increasingly challenging the price and cost-effectiveness of medical products. Significant uncertainty exists as to the reimbursement status of health care products, and there can be no assurance that adequate third-party coverage will be available for pharmaceutical companies to obtain satisfactory price levels for their products.
In addition, under the terms of any credit facility or other debt instrument we enter into, in the event of a default, we are likely to be required by its terms to use the net proceeds of any investments 35 Table of Contents that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses.
In addition, under the terms of any credit facility or other debt instrument we enter into, in the event of a default, we are likely to be required by its terms to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses.
Moreover, such deleveraging of our company could significantly impair our ability to effectively operate our business in the manner in which we have historically operated. As a result, we could be forced to curtail or cease new investment activities and lower 36 Table of Contents or eliminate the dividends that we have historically paid to our stockholders.
Moreover, such deleveraging of our company could significantly impair our ability to effectively operate our business in the manner in which we have historically operated. As a result, we could be forced to curtail or cease new investment activities and lower or eliminate the dividends that we have historically paid to our stockholders.
Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income (or as long-term capital gain to the extent such dividend is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes.
Taxable 48 Table of Contents stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income (or as long-term capital gain to the extent such dividend is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes.
Upon a change in control event, holders of the notes may require us to prepay for cash some or all of the notes at a prepayment price equal to 100% of the aggregate principal amount of the notes being prepaid, plus accrued and unpaid interest to, but not including, the date of prepayment.
Upon a change in control or fundamental change event, as applicable, holders of the notes may require us to prepay for cash some or all of the notes at a prepayment price equal to 100% of the aggregate principal amount of the notes being prepaid, plus accrued and unpaid interest to, but not including, the date of prepayment.
Network, system, application and data breaches could result in operational disruptions or information misappropriation, which could have a material adverse effect on our business, results of operations and financial condition. We depend heavily upon computer systems to perform necessary business functions.
Network, system, application and data breaches could result in operational disruptions or information misappropriation, which could have a material adverse effect on our business, results of operations and financial condition. 51 Table of Contents We depend heavily upon computer systems to perform necessary business functions.
In addition, our investment activities subject us to litigation relating to the bankruptcy process and the normal risks of becoming involved in litigation by third parties. This risk is somewhat greater where we exercise control or significant influence over a portfolio company’s direction.
In addition, our investment activities subject us to litigation relating to portfolio company bankruptcy processes and the normal risks of becoming involved in litigation by third parties. This risk is somewhat greater where we exercise control or significant influence over a portfolio company’s direction.
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. Risks Related To Our Securities Investing in our securities may involve a high degree of risk.
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. 40 Table of Contents Risks Related To Our Securities Investing in our securities may involve a high degree of risk.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the 2033 Notes, September 2026 Notes and January 2027 Notes may have important consequences for their holders, including making it more difficult for us to satisfy our obligations with respect to the 2033 Notes, September 2026 Notes and January 2027 Notes or negatively affecting their trading value.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes may have important consequences for their holders, including making it more difficult for us to satisfy our obligations with respect to the 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes or negatively affecting their trading value.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
Due to the inherent 32 Table of Contents uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.
We may seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer; however, we may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
We may seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer; however, we may not be able to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.
Although we will endeavor to allocate investment opportunities in a fair and equitable manner, we may face conflicts in allocating investment opportunities between us, the Adviser Funds and External Parties managed by the Adviser Subsidiary. In addition, we may make investments in the Adviser Funds in the form of loans.
Although we will endeavor to allocate investment opportunities in a fair and equitable manner, we may face conflicts in 38 Table of Contents allocating investment opportunities between us, the Adviser Funds and External Parties managed by the Adviser Subsidiary. In addition, we may make investments in the Adviser Funds in the form of loans.
We may be the target of litigation. We may be the target of securities litigation in the future, particularly if the value of shares of our common stock fluctuates significantly. We could also generally be subject to litigation, including derivative actions by our stockholders or 50 Table of Contents in connection with shareholder activism.
We may be the target of litigation. We may be the target of securities litigation in the future, particularly if the value of shares of our common stock fluctuates significantly. We could also generally be subject to litigation, including derivative actions by our stockholders or in connection with shareholder activism.
(2) Assumes $6.3 billion in total assets including debt issuance costs on a pro forma basis, $4.2 billion in debt outstanding, $2.0 billion in stockholders’ equity, and an average cost of funds of 5.0%, which is the approximate average cost of our Notes and Credit Facilities for the period ended December 31, 2024, along with the hypothetical estimated incremental cost of debt that would be incurred on offering the maximum permissible debt under the 150% asset coverage.
(2) Assumes $7.0 billion in total assets including debt issuance costs on a pro forma basis, $4.7 billion in debt outstanding, $2.2 billion in stockholders’ equity, and an average cost of funds of 5.0%, which is the approximate average cost of our Notes and Credit Facilities for the period ended December 31, 2025, along with the hypothetical estimated incremental cost of debt that would be incurred on offering the maximum permissible debt under the 150% asset coverage.
Investments in “last out” pieces of tranched first lien loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same tranched first lien loan with 34 Table of Contents respect to payment of principal, interest and other amounts.
Investments in “last out” pieces of tranched first lien loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same tranched first lien loan with respect to payment of principal, interest and other amounts.
Lenders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default.
Lenders of these senior securities will have fixed dollar claims on our assets that are superior to 35 Table of Contents the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default.
If we do not successfully manage ESG-related expectations across these varied stakeholder interests, it could erode stakeholder trust, impact our reputation and constrain our business. Risks Related To Our Investments The types of portfolio companies in which we invest involve significant risk, and we could lose all or part of our investment.
If we do not successfully manage corporate social responsibility-related expectations across these varied stakeholder interests, it could erode stakeholder trust, impact our reputation and constrain our business. Risks Related To Our Investments The types of portfolio companies in which we invest involve significant risk, and we could lose all or part of our investment.
The terms of the respective 2033 Notes, September 2026 Notes and January 2027 Notes indentures do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on an investment in such notes.
The terms of the respective 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes indentures do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on an investment in such notes.
However, as an internally managed BDC, our ability to offer more competitive and flexible compensation structures, such as offering both a profit-sharing plan and an equity incentive plan, is subject to the limitations imposed by the 1940 Act, which limits our ability to attract and retain talented investment management professionals.
However, as an internally managed BDC, our ability to offer more competitive and flexible compensation structures is subject to the limitations imposed by the 1940 Act, such as limitations on offering both a profit-sharing plan and an equity incentive plan, which may limit our ability to attract and retain talented investment management professionals.
Quantitative and Qualitative Disclosures about Market Risk.” Inflation could adversely affect the business, results of operations and financial condition of our portfolio companies. Certain of our portfolio companies are in industries that could be impacted by inflation.
Quantitative and Qualitative Disclosures about Market Risk.” 33 Table of Contents Inflation could adversely affect the business, results of operations and financial condition of our portfolio companies. Certain of our portfolio companies are in industries that could be impacted by inflation.
By their terms, such debt instruments may entitle the holders to receive payment of interest or 31 Table of Contents principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest.
By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest.
Our investment objective and investment strategies may be very similar to those of the Adviser Funds and External Parties, and it is likely that an investment appropriate for us, the 37 Table of Contents Adviser Funds, or External Parties would be appropriate for the other entity.
Our investment objective and investment strategies may be very similar to those of the Adviser Funds and External Parties, and it is likely that an investment appropriate for us, the Adviser Funds, or External Parties would be appropriate for the other entity.
Certain of our debt instruments include more protections for their respective lenders than the 2033 Notes, September 2026 Notes and January 2027 Notes, and we may issue or incur additional debt in the future which could contain more protections for its holders, including additional covenants and events of default.
Certain of our debt instruments include more protections for their respective lenders than the 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes, and we may issue or incur additional debt in the future which could contain more protections for its holders, including additional covenants and events of default.
The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. The indentures under which the 2033 Notes, September 2026 Notes and January 2027 Notes were issued contain limited protections for the holders of such notes.
The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future. The indentures under which the 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes were issued contain limited protections for the holders of such notes.
Our secured credit facilities with Sumitomo Mitsui Banking Corporation (the “SMBC Facility”) and MUFG Union Bank, N.A., (the “MUFG Bank Facility”) and our letter of credit facility with Sumitomo Mitsui Banking Corporation (the “SMBC LC Facility” and together with the SMBC Facility and MUFG Bank Facility, our “Credit Facilities”), as well as the February 2025 Notes, June 2025 Notes, June 2025 3-Year Notes, March 2026 A Notes, March 2026 B Notes, September 2026 Notes, January 2027 Notes, 2031 Asset-Backed Notes and 2033 Notes (each term as is individually defined under “Note 5 - Debt” and collectively, the “Notes”), each outstanding as of December 31, 2024, contain financial and operating covenants that could restrict our business activities, including our ability to declare dividend distributions if we default under certain provisions.
Our secured credit facilities with Sumitomo Mitsui Banking Corporation (the “SMBC Facility”) and MUFG Bank, Ltd., (the “MUFG Bank Facility”) and our letter of credit facility with Sumitomo Mitsui Banking Corporation (the “SMBC LC Facility” and together with the SMBC Facility and MUFG Bank Facility, our “Credit Facilities”), as well as the March 2026 A Notes, March 2026 B Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes, June 2030 Notes, 2031 Asset-Backed Notes and 2033 Notes (each term as is individually defined under “Note 5 - Debt” and collectively, the “Notes”), each outstanding as of December 31, 2025, contain financial and operating covenants that could restrict our business activities, including our ability to declare dividend distributions if we default under certain provisions.
U.S. capital markets have experienced volatility and disruption in recent years, including as a result of the COVID-19 pandemic, certain regional bank failures, and an inflationary economic environment.
U.S. capital markets have experienced volatility and disruption in recent years, including as a result of the COVID-19 pandemic, certain regional bank failures, an inflationary economic environment and tariffs and global trade negotiations.
Depending on funding requirements, we may need to raise additional capital to meet our unfunded commitments through additional borrowings. As of December 31, 2024, we had approximately $448.5 million of available unfunded commitments, including undrawn revolving facilities, which were available at the request of the portfolio company and unencumbered by milestones. Our unfunded contractual commitments may be significant.
Depending on funding requirements, we may need to raise additional capital to meet our unfunded commitments through additional borrowings. As of December 31, 2025, we had approximately $385.6 million of available unfunded commitments, including undrawn revolving facilities, which were available at the request of the portfolio company and unencumbered by milestones. Our unfunded contractual commitments may be significant.
These factors could involve financial institutions or financial services industry companies with which we or our portfolio companies have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally. We are subject to risks related to corporate social responsibility.
These factors could involve financial institutions or financial services industry companies with which we or our portfolio companies have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally. We are subject to risks related to corporate social responsibility. Our business faces increasing public scrutiny related to corporate social responsibility activities.
The agreements governing the June 2025 Notes, June 2025 3-Year Notes, March 2026 A Notes, March 2026 B Notes, September 2026 Notes and January 2027 Notes require us to offer to prepay all of the issued and outstanding notes upon a change in control and election by the holders, which could have a material adverse effect on our business, financial condition and results of operations.
The agreements governing the March 2026 A Notes, March 2026 B Notes, September 2026 Notes, January 2027 Notes and June 2030 Notes require us to offer to prepay all of the issued and outstanding notes upon a change in control and election by the holders, which could have a material adverse effect on our business, financial condition and results of 46 Table of Contents operations.
We intend to pay distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to pay a specified level of cash distributions, previously projected distributions for future periods, or year-to-year increases in cash distributions.
We have made, and expect to make, distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to pay a specified level of cash distributions, previously projected distributions for future periods, or year-to-year increases in cash distributions.
In addition, the SMBC LC Facility has a final maturity date ending February 2028. There can be no assurance that we will be able to renew, extend or replace our Credit Facilities upon maturity on terms that are favorable to us, if at all.
The MUFG Bank Facility matures in June 2029 and the SMBC Facility matures in November 2029. In addition, the SMBC LC Facility has a final maturity date ending February 2028. There can be no assurance that we will be able to renew, extend or replace our Credit Facilities upon maturity on terms that are favorable to us, if at all.
During the year ended December 31, 2024, we received early principal payments and early payoffs on our debt investments of approximately $922.0 million. We are subject to the risk that the debt investments we make in our portfolio companies may be repaid prior to maturity.
During the year ended December 31, 2025, we received early principal payments and early payoffs on our debt investments of approximately $811.2 million. We are subject to the risk that the debt investments we make in our portfolio companies may be repaid prior to maturity.
The indentures under which the 2033 Notes, September 2026 Notes and January 2027 Notes were issued offers limited protections to the holders of such notes.
The indentures under which the 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes were issued offers limited protections to the holders of such notes.
As of December 31, 2024, portfolio investments, whose fair value is determined in good faith by our Valuation Committee, subject to oversight and approval by our Board, were approximately 95.5% of our total assets.
As of December 31, 2025, portfolio investments, whose fair value is determined in good faith by our Valuation Committee, subject to oversight and approval by our Board, were approximately 97.4% of our total assets.
In addition, different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG matters will be perceived negatively by at least some stakeholders and may adversely impact our reputation and business.
At the same time, different stakeholder groups have divergent views on corporate social responsibility matters, which increases the risk that any action or lack thereof with respect to corporate social responsibility matters will be perceived negatively by at least some stakeholders and may adversely impact our reputation and business.
Decreases in the market values or fair values of our investments will be recorded as unrealized depreciation. Any unrealized depreciation in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans or potential impairment of the value of affected equity investments.
Any unrealized depreciation in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans or potential impairment of the value of affected equity investments.
In 43 Table of Contents particular, the terms of the respective 2033 Notes, September 2026 Notes and January 2027 Notes indentures do not place any restrictions on our or our subsidiaries’ ability to: • issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to such notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to such notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore would rank structurally senior to such notes and (4) securities, indebtedness or other obligations issued or incurred by our subsidiaries that would be senior in right of payment to our equity interests in our subsidiaries and therefore would rank structurally senior in right of payment to such notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect to any exemptive relief granted to us by the SEC (currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% thereafter after such borrowings); • pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to such notes, including subordinated indebtedness; • sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); • enter into transactions with affiliates; • create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions; • make investments; or • create restrictions on the payment of distributions or other amounts to us from our subsidiaries.
In particular, the terms of the respective 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes indentures do not place any restrictions on our or our subsidiaries’ ability to: • issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to such notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to such notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore would rank structurally senior to such notes and (4) securities, indebtedness or other obligations issued or incurred by our subsidiaries that would be senior in right of payment to our equity interests in our subsidiaries and therefore would rank structurally senior in right of payment to such notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect to any exemptive relief granted to us by the SEC (currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% thereafter after such borrowings); • pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to such notes, including subordinated indebtedness; • sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); • enter into transactions with affiliates; • create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions; • make investments; or • create restrictions on the payment of distributions or other amounts to us from our subsidiaries. 45 Table of Contents Furthermore, the terms of the respective 2033 Notes, September 2026 Notes, January 2027 Notes, 2028 Convertible Notes and June 2030 Notes indentures do not protect their respective holders in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity.
Our business faces increasing public scrutiny related to corporate social responsibility, including ESG activities. We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency and considering ESG factors in our investment processes.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency and considering corporate social responsibility factors in our investment processes.
A downturn in one or more technology-related industry sectors and particularly those in which we are heavily concentrated could materially adversely affect our financial condition more than if we invested in a wider range of industries.
We have invested and intend to continue investing in companies that operate in technology-related industries. A downturn in one or more technology-related industry sectors and particularly those in which we are heavily concentrated could materially adversely affect our financial condition more than if we invested in a wider range of industries.
Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
Companies in technology-related industries are subject to numerous risks, including: • Technology Industry (including Software and Consumer & Business Services Industries) Risk. The market prices and values of companies operating in the technology industry – including software and consumer and business services companies – tend to exhibit a greater degree of risk and volatility than other types of investments.
The market prices and values of companies operating in the technology industry – including application software, system software and consumer and business services companies – tend to exhibit a greater degree of risk and volatility than other types of investments.
Our investments in foreign securities or investments denominated in foreign currencies may involve significant risks in addition to the risks inherent in U.S. and U.S.-denominated investments. Our investment strategy contemplates potential investments in securities of foreign companies. Our total investments at fair value in foreign companies were approximately $371.2 million or 10.1% of total investments as of December 31, 2024.
Our investments in foreign securities or investments denominated in foreign currencies may involve significant risks in addition to the risks inherent in U.S. and U.S.-denominated investments. Our investment strategy contemplates potential investments in securities of foreign companies. Our total investments at fair value in foreign companies were approximately $430.7 million or 9.6% of total investments as of December 31, 2025.
As of December 31, 2024, approximately 97.4% of our debt investments were at floating rates or floating rates with a floor, and 2.6% of our debt investments were at fixed rates.
As of December 31, 2025, approximately 97.9% of our debt investments were at floating rates or floating rates with a floor, and 2.1% of our debt investments were at fixed rates.
Government shutdowns or austerity measures that certain countries may agree to as part of any debt crisis or disruptions to major financial trading markets may adversely affect world economic conditions, our business and the businesses of our portfolio companies. Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations.
Government shutdowns or austerity measures that certain countries may agree to as part of any debt crisis or disruptions to major financial trading markets may adversely affect world economic conditions, our business and the businesses of our portfolio companies.
Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including holders of preferred stock, if any, of our subsidiaries) will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Unsecured Notes) with respect to the assets of such subsidiaries.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition, Liquidity, Capital Resources and Obligations.” Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including holders of preferred stock, if any, of our subsidiaries) will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Unsecured Notes) with respect to the assets of such subsidiaries.
Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted; however, the example below illustrates the effect of dilution to existing stockholders resulting from the sale of common stock at prices below the NAV of such shares.
Any such exercise would be dilutive on the voting power of existing stockholders and could be dilutive with regard to dividends and our NAV, and other economic aspects of the common stock. 42 Table of Contents Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted; however, the example below illustrates the effect of dilution to existing stockholders resulting from the sale of common stock at prices below the NAV of such shares.
Subject to certain exceptions for follow-on investments and distressed companies, an investment in an issuer that has outstanding securities listed on a national securities exchange may be treated as a qualifying asset only if such issuer has a market capitalization that is less than $250.0 million at any point in the 60 days prior to the time of such investment and meets certain other requirements.
Subject to certain exceptions for follow-on investments and distressed companies, an investment in an issuer that has outstanding securities listed on a national securities exchange may be treated as a qualifying asset only if such issuer has a market capitalization that is less than $250.0 million at any point in the 60 days prior to the time of such investment and meets certain other requirements. 28 Table of Contents Our investments are concentrated in certain technology-related industries, which subjects us to the risk of significant loss if any one or more of such industries experiences a downturn.
The 2033 Notes are listed on the NYSE under the symbol “HCXY.” We cannot provide any assurances that an active trading market will be maintained for 2033 Notes, that a holder will be able to sell its 2033 Notes, or that the price a holder may receive when it sells its 2033 Notes will be favorable.
Accordingly, a holder may be required to bear the financial risk of an investment in such notes for an indefinite period of time. 44 Table of Contents The 2033 Notes are listed on the NYSE under the symbol “HCXY.” We cannot provide any assurances that an active trading market will be maintained for 2033 Notes, that a holder will be able to sell its 2033 Notes, or that the price a holder may receive when it sells its 2033 Notes will be favorable.
If we are unable to obtain leverage or renew, extend or replace our current leverage facilities, or if the interest rates of such leverage are not attractive, we could experience diminished returns. The number of leverage providers and the total amount of financing available could decrease or remain static.
If we are unable to obtain leverage or renew, extend or replace our current leverage facilities, or if the interest rates of such leverage are not attractive, we could experience diminished returns.
Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation, may reduce our ability to protect an existing investment or may dilute our equity interest or otherwise reduce the expected yield on the investment.
Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation, may reduce our ability to protect an existing investment or may dilute our equity interest or otherwise reduce the expected yield on the investment. 31 Table of Contents There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
If we default on our obligations under our senior securities, our lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claim.
Certain of our assets are currently pledged as collateral under our senior securities, including our outstanding Credit Facilities and certain Notes. If we default on our obligations under our senior securities, our lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claim.
Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business.
Adverse incidents with respect to such corporate social responsibility activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations.
Technological innovations, including artificial intelligence and machine learning, have disrupted traditional approaches in multiple industries and can permit younger companies to achieve success and in the process disrupt markets and market practices.
Technological innovations, including artificial intelligence and machine learning, have disrupted traditional approaches in multiple industries and younger companies have been able to achieve success and in the process disrupt markets and market practices. Further, the frequency of such disruptions is expected to increase.
Furthermore, it is unclear whether the new U.S. presidential administration will propose or implement significant regulatory or policy changes that may significantly impact the drug discovery and development industry. Such changes could impact the actions or inactions of the FDA or other governmental regulatory authorities with respect to the receipt or continuation of approvals.
Furthermore, regulatory or policy changes may significantly impact the drug discovery and development industry. Such changes could impact the actions or inactions of the FDA or other governmental regulatory authorities with respect to the receipt or continuation of approvals.
Annual Return on Our Portfolio (Net of Expenses) -10% -5% 0% 5% 10% Corresponding return to common stockholder assuming our actual asset coverage of 231.7% as of December 31, 2024 (1) (23.77%) (14.14%) (4.51%) 5.12% 14.75% Corresponding return to common stockholder assuming 150% asset coverage (2) (42.32%) (26.52%) (10.72%) 5.08% 20.89% (1) Assumes $3.8 billion in total assets, $1.8 billion in debt outstanding, $2.0 billion in stockholders’ equity, and an average cost of funds of 5.0%, which is the approximate average cost of our Notes and Credit Facilities for the period ended December 31, 2024.
Annual Return on Our Portfolio (Net of Expenses) (10%) (5%) 0% 5% 10% Corresponding return to common stockholder assuming our actual asset coverage of 212.1% as of December 31, 2025 (1) (25.94%) (15.59%) (5.25%) 5.09% 15.44% Corresponding return to common stockholder assuming 150% asset coverage (2) (42.46%) (26.62%) (10.78%) 5.06% 20.90% (1) Assumes $4.6 billion in total assets, $2.3 billion in debt outstanding, $2.2 billion in stockholders’ equity, and an average cost of funds of 5.0%, which is the approximate average cost of our Notes and Credit Facilities for the period ended December 31, 2025.
Federal Income Taxes We will be subject to U.S. federal income tax if we are unable to qualify as a RIC under Subchapter M Part I of the Code.
Federal Income Taxes We will be subject to U.S. federal income tax if we are unable to qualify for taxation as a RIC under Subchapter M Part I of the Code. To maintain RIC status under Subchapter M Part I of the Code, we must meet the following distribution, income and asset requirements (see “Item 1.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest.
Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest.
If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our 39 Table of Contents common stock, the percentage ownership of our stockholders at that time would decrease, and they may experience dilution.
There is no expiration date on our ability to issue such warrants or convertible debt securities based on this stockholder approval. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time would decrease, and they may experience dilution.
In certain types of derivative transactions, we could lose the entire amount of our investment; in other types of derivative transactions the potential loss is theoretically unlimited. Rule 18f-4 under the 1940 Act (“Rule 18f-4”) requires a BDC that uses derivatives to comply with certain value-at-risk leverage limits, a derivatives risk management program and board oversight and reporting requirements.
Rule 18f-4 under the 1940 Act (“Rule 18f-4”) requires a BDC that uses derivatives to comply with certain value-at-risk leverage limits, a derivatives risk management program and board oversight and reporting requirements.
These events have limited in the past and could continue to limit our investment originations, and limit our ability to grow and could have a material negative impact on our operating results, financial condition, results of operations and cash flows and the value of our debt and equity investments.
These events have limited in the past and could continue to limit our investment originations, and limit our ability to grow and could have a material negative impact on our operating results, financial condition, results of operations and cash flows and the value of our debt and equity investments. 49 Table of Contents In addition, the U.S. and global capital markets have in the past, and may in the future, experience periods of extreme volatility and disruption during economic downturns and recessions.
If we are unable to obtain cash from other sources, we could fail to qualify as a RIC and thus become subject to U.S. federal income tax. • The Income Test will be satisfied if we obtain at least 90% of our gross income for each year from dividends, interest, gains from the sale of stock or securities or similar sources. • The Asset Test will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year.
Business — Certain United States Federal Income Tax Considerations — Taxation as a Regulated Investment Company.” • The Income Test will be satisfied if we obtain at least 90% of our gross income for each year from dividends, interest, gains from the sale of stock or securities or similar sources. • The Asset Test will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur management is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents, including through the receipt of notifications from service providers and reliance on communications with legal, operations, information technology, and/or compliance personnel.
Biggest changeOur management is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents, including through the receipt of notifications from service providers and reliance on communications with legal, operations, information technology, and/or compliance personnel. 52 Table of Contents Assessment of Cybersecurity Risk The potential impact of risks from cybersecurity threats are assessed on an ongoing basis, and how such risks could materially affect our business strategy, operational results, and financial condition are regularly evaluated.
We also lease office space in Boston, MA, New York, NY, Denver, CO, Westport, CT, Chicago, IL, San Dieg o, CA, and London, United Kingdom.
We also lease office space in Boston, MA, New York, NY, Denver, CO, Westport, CT, San Dieg o, CA, and London, United Kingdom.
Removed
Assessment of Cybersecurity Risk The potential impact of risks from cybersecurity threats are assessed on an ongoing basis, and how such risks could materially affect our business strategy, operational results, and financial condition are regularly evaluated.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 4. Mine Safety Disclosures Not applicable. 51 Table of Contents PART II
Biggest changeItem 4. Mine Safety Disclosures Not applicable. 53 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrice Range Premium/ Discount of High Sales Price to NAV Premium/ Discount of Low Sales Price to NAV Cash Distribution per Share (2) NAV (1) High Low Year Ended December 31, 2023 First quarter $ 10.82 $ 16.24 $ 11.56 50.1 % 6.8 % $ 0.47 Second quarter $ 10.96 $ 15.08 $ 12.38 37.6 % 13.0 % $ 0.47 Third quarter $ 10.93 $ 18.02 $ 14.86 64.9 % 36.0 % $ 0.48 Fourth quarter $ 11.43 $ 16.93 $ 15.09 48.2 % 32.1 % $ 0.48 Year Ended December 31, 2024 First quarter $ 11.63 $ 18.77 $ 16.67 61.4 % 43.3 % $ 0.48 Second quarter $ 11.43 $ 19.92 $ 17.07 74.3 % 49.3 % $ 0.48 Third quarter $ 11.40 $ 21.67 $ 17.71 90.1 % 55.4 % $ 0.48 Fourth quarter $ 11.66 $ 20.22 $ 18.53 73.4 % 58.9 % $ 0.48 Year Ending December 31, 2025 First quarter (through February 6, 2025) * $ 21.15 $ 19.73 * * $ 0.47 * Net asset value has not yet been calculated for this period.
Biggest changePrice Range Premium/ Discount of High Sales Price to NAV Premium/ Discount of Low Sales Price to NAV Cash Distribution per Share (2) NAV (1) High Low Year Ended December 31, 2024 First quarter $ 11.63 $ 18.77 $ 16.67 61.4 % 43.3 % $ 0.48 Second quarter $ 11.43 $ 19.92 $ 17.07 74.3 % 49.3 % $ 0.48 Third quarter $ 11.40 $ 21.67 $ 17.71 90.1 % 55.4 % $ 0.48 Fourth quarter $ 11.66 $ 20.22 $ 18.53 73.4 % 58.9 % $ 0.48 Year Ended December 31, 2025 First quarter $ 11.55 $ 22.00 $ 18.01 90.5 % 55.9 % $ 0.47 Second quarter $ 11.84 $ 19.10 $ 16.24 61.3 % 37.2 % $ 0.47 Third quarter $ 12.05 $ 19.53 $ 18.34 62.1 % 52.2 % $ 0.47 Fourth quarter $ 12.13 $ 19.05 $ 16.70 57.0 % 37.7 % $ 0.47 Year Ending December 31, 2026 First quarter (through February 5, 2026) * $ 18.97 $ 16.33 * * $ 0.47 * NAV has not yet been calculated for this period.
The graph measures total stockholder return, which takes into account both changes in stock price and distributions, prior to any tax effect. It assumes that distributions paid are reinvested in like securities. * Assumes $100 invested on December 31, 2019 in Hercules Capital, Inc. or the applicable index, and that all dividends are reinvested.
The graph measures total stockholder return, which takes into account both changes in stock price and distributions, prior to any tax effect. It assumes that distributions paid are reinvested in like securities. * Assumes $100 invested on December 31, 2020 in Hercules Capital, Inc. or the applicable index, and that all dividends are reinvested.
There can be no certainty to stockholders that this determination is representative of what the tax attributes of our 2025 distributions to stockholders will actually be and we cannot assure you that we will achieve results that will permit the payment of any cash distributions.
There can be no certainty to stockholders that this determination is representative of what the tax attributes of our 2026 distributions to stockholders will actually be and we cannot assure you that we will achieve results that will permit the payment of any cash distributions.
Of the distributions declared during the years ended December 31, 2024, 2023, and 2022, 100% were distributions derived from our current and accumulated earnings and profits.
Of the distributions declared during the years ended December 31, 2025, 2024, and 2023, 100% were distributions derived from our current and accumulated earnings and profits.
As a result, if our Board authorizes, and we declare a cash distribution, then our stockholders who have not “opted out” of our distribution reinvestment plan will have their cash distribution automatically reinvested in additional shares of our common stock, rather than receiving the cash distributions.
As a result, if our Board authorizes, and we declare a cash distribution, then our stockholders who have not “opted out” of our distribution reinvestment plan will have their cash distribution (net of applicable withholding tax) automatically reinvested in additional shares of our common stock, rather than receiving the cash distributions.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” 52 Table of Contents ISSUER PURCHASES OF EQUITY SECURITIES The Company did not repurchase common stock on the open market during the years ended 2024, 2023, and 2022.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” 54 Table of Contents ISSUER PURCHASES OF EQUITY SECURITIES The Company did not repurchase common stock on the open market during the years ended 2025, 2024, and 2023.
Business - Certain United States Income Tax Considerations.” Our Board maintains a variable distribution policy with the objective of distributing four quarterly distributions in an amount that approximates 90-100% of our taxable quarterly income or potential annual income for a particular tax year.
Business - Certain United States Income Tax Considerations — Qualifying as a Regulated Investment Company.” Our Board maintains a variable distribution policy with the objective of distributing four quarterly distributions in an amount that approximates 90-100% of our taxable quarterly income or potential annual income for a particular tax year.
The aggregate value of the shares of our common stock issued under our dividend reinvestment plan during the years ended December 31, 2024, 2023, and 2022 were approximately $8.8 million, $4.6 million, and $4.0 million, respectively. EQUITY COMPENSATION PLAN INFORMATION See “Item 12.
The aggregate value of the shares of our common stock issued under our dividend reinvestment plan during the years ended December 31, 2025, 2024, and 2023 were approximately $9.3 million, $8.8 million, and $4.6 million, respectively. EQUITY COMPENSATION PLAN INFORMATION See “Item 12.
SALES OF UNREGISTERED SECURITIES During 2024, 2023, and 2022, we issued 471,949, 303,960, and 259,466 shares, respectively, of common stock to stockholders in connection with the dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended (“the Securities Act”).
SALES OF UNREGISTERED SECURITIES During 2025, 2024, and 2023, we issued 495,631, 471,949, and 303,960 shares, respectively, of common stock to stockholders in connection with the dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended (“the Securities Act”).
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities PRICE RANGE OF COMMON STOCK Our common stock is traded on the NYSE under the symbol “HTGC.” As of February 3, 2025, we had approximately 158,869 stockholders of record, which does not include stockholders for whom shares are held in “nominee” or “street name.” Most of the shares of our common stock are held by brokers and other institutions on behalf of stockholders.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities PRICE RANGE OF COMMON STOCK Our common stock is traded on the NYSE under the symbol “HTGC.” As of February 2, 2026, we had approximately 156,079 stockholders of record, which does not include stockholders for whom shares are held in “nominee” or “street name.” Most of the shares of our common stock are held by brokers and other institutions on behalf of stockholders.
During 2024, 2023, and 2022, we issued 471,949, 303,960 and 259,466 shares, respectively, of common stock to stockholders in connection with the distribution reinvestment plan. 53 Table of Contents PERFORMANCE GRAPH The following stock performance graph compares the cumulative stockholder return assuming that, on December 31, 2019, a person invested $100 in each of our common stock, the S&P 500 Index, the NASDAQ Financial 100 Index, the S&P BDC Index, and the KBW Regional Bank Index.
During 2025, 2024, and 2023, we issued 495,631, 471,949 and 303,960 shares, respectively, of common stock to stockholders in connection with the distribution reinvestment plan. 55 Table of Contents PERFORMANCE GRAPH The following stock performance graph compares the cumulative stockholder return assuming that, on December 31, 2020, a person invested $100 in each of our common stock, the S&P 500 Index, the NASDAQ Financial 100 Index, the S&P BDC Index, and the KBW Regional Bank Index.
This graph and other information furnished under Part II. Item 5 of this Annual Report 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.
This performance graph 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 stock price performance included in the above graph is not necessarily indicative of, or intended to forecast, future stock price performance.
Removed
The stock price performance included in the above graph is not necessarily indicative of, or intended to forecast, future stock price performance. Item 6. [Reserved] 54 Table of Contents

Item 7. Management's Discussion & Analysis

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

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Biggest changeApproximately $31.6 million of the aggregate principal repayments related to scheduled principal payments and approximately $922.0 million were early principal repayments related to 56 portfolio co mpanies. 57 Table of Contents Total portfolio investment activity (inclusive of unearned income and excluding activity related to taxes payable and escrow receivables) as of and for the years ended December 31, 2024 and December 31, 2023 was as follows: (in millions) December 31, 2024 December 31, 2023 Beginning Portfolio $ 3,248.0 $ 2,963.9 New fundings and restructures 1,807.2 1,598.6 Fundings assigned to or directly funded by the Adviser Funds (383.2) (350.7) Warrants not related to current period fundings 0.3 1.3 Principal repayments received on investments (31.6) (50.8) Early payoffs (922.0) (925.1) Proceeds from sale of debt investments — (26.7) Proceeds from sale of equity and warrant investments (49.4) (43.2) Accretion of loan discounts and paid-in-kind interest 87.7 59.5 Net acceleration of loan discounts and loan fees due to early payoffs or restructures (12.3) (14.1) New loan fees (15.2) (13.5) Gain (loss) on investments due to sales or write offs (19.7) 6.0 Net change in unrealized appreciation (depreciation) (49.8) 42.8 Ending Portfolio $ 3,660.0 $ 3,248.0 Additionally, we may hold investments in debt, warrant, or equity positions of portfolio companies that have filed a registration statement with the SEC in contemplation of a potential IPO.
Biggest changeAdditionally, during the year ended December 31, 2025, we received $54.5 million from the partial sale of three debt investments to external parties and sold four debt investments for $20.0 million to the Adviser Funds. 59 Table of Contents Total portfolio investment activity (inclusive of unearned income and excluding activity related to taxes payable and escrow receivables) as of and for the years ended December 31, 2025 and 2024 was as follows: (in millions) December 31, 2025 December 31, 2024 Beginning Portfolio $ 3,660.0 $ 3,248.0 New fundings and restructures 2,275.1 1,807.2 Fundings assigned to or directly funded by the Adviser Funds (579.1) (383.2) Equity and warrants not related to current period fundings 1.2 0.3 Principal repayments received on investments (37.1) (31.6) Early payoffs (811.2) (922.0) Proceeds from the sale of debt investments (74.5) — Proceeds from sale of equity and warrant investments (46.4) (49.4) Paid-in-kind interest 55.7 50.0 Accretion of loan discounts 46.3 37.7 Net acceleration of loan discounts and loan fees due to early payoffs or restructures (13.6) (12.3) New loan fees (19.3) (15.2) Gain (loss) on investments due to sales or write offs (38.1) (19.7) Net change in unrealized appreciation (depreciation) 47.6 (49.8) Ending Portfolio $ 4,466.6 $ 3,660.0 Additionally, we may hold investments in debt, warrant, or equity positions of portfolio companies that have filed a registration statement with the SEC in contemplation of a potential IPO.
Changes in a portfolio company's investment grading may be a result of changes in portfolio company's performance and/or timing of expected liquidity events. For instance, we may downgrade a portfolio company if it is not meeting our financing criteria or are underperforming relative to its respective business plan.
Changes in a portfolio company's investment grading may be a result of changes in portfolio company's performance and/or timing of expected liquidity events. For instance, we may downgrade a portfolio company if it is not meeting our financing criteria or is underperforming relative to its respective business plan.
Additional liquidity is available through accordion provisions within the terms of our Credit Facilities, through which the available borrowing capacity can be increased by an aggregate $400.0 million, subject to certain conditions. Further, the SMBC letter of credit facility may also be increased by an additional $225.0 million (up to $400.0 million), subject to certain conditions.
Additional liquidity is available through accordion provisions within the terms of our Credit Facilities, through which the available borrowing capacity can be increased by an aggregate $360.0 million, subject to certain conditions. Further, the SMBC letter of credit facility may also be increased by an additional $225.0 million (up to $400.0 million), subject to certain conditions.
The Non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies. 55 Table of Contents Overview We are a leading specialty finance company with a focus on providing financing solutions to high-growth and innovative venture capital-backed and institutional-backed companies in a variety of technology and life sciences industries.
The Non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies. 57 Table of Contents Overview We are a leading specialty finance company with a focus on providing financing solutions to high-growth and innovative venture capital-backed and institutional-backed companies in a variety of technology and life sciences industries.
We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we 66 Table of Contents may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.
We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we 68 Table of Contents may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.
See “Note 10 – Financial Highlights” included in the notes to our consolidated financial statements appearing elsewhere in this report. 60 Table of Contents Portfolio Composition Our portfolio companies are primarily privately held companies which are active in sectors characterized by high margins, high growth rates, consolidation, and product and market extension opportunities and, to a lesser extent, public companies active in those sectors.
See “Note 10 – Financial Highlights” included in the notes to our consolidated financial statements appearing elsewhere in this report. 62 Table of Contents Portfolio Composition Our portfolio companies are primarily privately held companies which are active in sectors characterized by high margins, high growth rates, consolidation, and product and market extension opportunities and, to a lesser extent, public companies active in those sectors.
Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. The amounts involved may be material. We had no common stock repurchases during the years ended December 31, 2024, 2023, or 2022. Commitments and Obligations Our significant cash requirements generally relate to our debt obligations.
Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. The amounts involved may be material. We had no common stock repurchases during the years ended December 31, 2025, 2024, or 2023. Commitments and Obligations Our significant cash requirements generally relate to our debt obligations.
This includes information on index rate floors which we have in place on all of our floating rate debt investments.
This includes information on benchmark index rate floors which we have in place on all of our floating rate debt investments.
The net realized losses were generated from a realized loss of $63.1 million from the write-off of our debt investments relating to Convoy, Inc., Gritstone Bio, Inc., Better Therapeutics, Inc., and Eigen Technologies Ltd., which are net of recovered collections of $55.5 million. $44.6 million of the write-off of our debt investments resulted in a reversal of unrealized depreciation previously reported as of December 31, 2023.
The net realized losses were generated from a realized loss of $63.1 million from the write-off of our debt investments relating to Convoy, Inc., 67 Table of Contents Gritstone Bio, Inc., Better Therapeutics, Inc., and Eigen Technologies Ltd., which are net of recovered collections of $55.5 million. $44.6 million of the write-off of our debt investments resulted in a reversal of unrealized depreciation previously reported as of December 31, 2023.
The forward-looking statements contained in this report include statements as to: • our current and future management structure; • our future operating results; • our business prospects and the prospects of our prospective portfolio companies; • the impact of investments that we expect to make; • our informal relationships with third parties including in the venture capital industry; • the expected market for venture capital investments and our addressable market; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • our ability to access debt markets and equity markets; • the occurrence and impact of macro-economic developments (for example, global pandemics, natural disasters, terrorism, international conflicts and war) on us and our portfolio companies; • the ability of our portfolio companies to achieve their objectives; • our expected financings and investments; • our regulatory structure and tax status as a RIC; • our ability to operate as a BDC and our subsidiaries ability to operate as SBICs; • the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies; • the timing, form and amount of any distributions; • the impact of fluctuations in interest rates on our business; • the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and • our ability to recover unrealized depreciation on investments.
The forward-looking statements contained in this report include statements as to: • our current and future management structure; • our future operating results; • our business prospects and the prospects of our prospective portfolio companies; • the impact of investments that we expect to make; • our informal relationships with third parties including in the venture capital industry; • the expected market for venture capital investments and our addressable market; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • our ability to access debt markets and equity markets; • the occurrence and impact of macro-economic developments (for example, tariffs and other trade or sanction issues, government shutdown, global pandemics, natural disasters, terrorism, international conflicts and war) on us and our portfolio companies; • the ability of our portfolio companies to achieve their objectives; • our expected financings and investments; • our regulatory structure and tax status as a RIC; • our ability to operate as a BDC and our subsidiaries ability to operate as SBICs; • the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies; • the timing, form and amount of any distributions; • the impact of fluctuations in interest rates on our business; • the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and • our ability to recover unrealized depreciation on investments.
In particular, we evaluate performance through monitoring the portfolio yields as we consider them to be effective indicators, for both management and stockholders, of 59 Table of Contents the financial performance of our total investment portfolio and total debt portfolio.
In particular, we evaluate performance through monitoring the portfolio yields as we consider them to be effective indicators, for both management and stockholders, of 61 Table of Contents the financial performance of our total investment portfolio and total debt portfolio.
The increa se in interest and dividend income for the year ended December 31, 2024 as compared to the year ended December 31, 2023 is primarily attributable to an increase in the weighted average principal outstanding and dividend income distributions primarily from the Adviser Subsidiary.
The increa se in interest and dividend income for the year ended December 31, 2025 as compared to the year ended December 31, 2024, is primarily attributable to an increase in the weighted average principal outstanding and dividend income distributions primarily from the Adviser Subsidiary.
(3) The core and effective yields represent the weighted average yields for the three month periods ended December 31, 2024 and December 31, 2023. Please refer to the "Portfolio Yield" section below for further discussion of these measures.
(3) The core and effective yields represent the weighted average yields for the three month periods ended December 31, 2025 and December 31, 2024. Please refer to the "Portfolio Yield" section below for further discussion of these measures.
We also generate revenue in the form of capital gains, if any, on warrants or other equity securities that we acquire from our portfolio companies. As of December 31, 2024, our debt investments generally have a term of between two and five years and typically bear interest at a rate ranging from approximately 7.5% to approximately 14.9%.
We also generate revenue in the form of capital gains, if any, on warrants or other equity securities that we acquire from our portfolio companies. As of December 31, 2025, our debt investments generally have a term of between two and five years and typically bear interest at a rate ranging from approximately 7% to approximately 14%.
As a result of the SEC exemptive order, our ratio of total assets on a consolidated basis to outstanding indebtedness may be less than 150%, which while providing increased investment flexibility, also may increase our exposure to risks associated with leverage. Total asset coverage when including our SBA debentures as senior securities was 211.5% as of December 31, 2024.
As a result of the SEC exemptive order, our ratio of total assets on a consolidated basis to outstanding indebtedness may be less than 150%, which while providing increased investment flexibility, also may increase our exposure to risks associated with leverage. Total asset coverage when including our SBA debentures as senior securities was 195.5% as of December 31, 2025.
Given the unpredictability and fluidity of the macroeconomic market, neither our management nor our Board is able to predict the full impact of the macroeconomic events on our business, future results of operations, financial position, or cash flows. For additional information, see "Part I - Item 1A. Risk Factors" in this Annual Report.
Given the unpredictability and fluidity of the macroeconomic market, neither our management nor our Board is able to predict the full impact of the macroeconomic events on our business, future results of operations, financial position, or cash flows. For additional information, see “Part I - Item 1A. Risk Factors” in this Annual Report.
There can be no assurance that companies that have yet to complete their IPO will do so in a timely manner or at all. The following table presents certain additional selected information regarding our debt investment portfolio as of December 31, 2024 and December 31, 2023.
There can be no assurance that companies that have yet to complete their IPOs will do so in a timely manner or at all. The following table presents certain additional selected information regarding our debt investment portfolio as of December 31, 2025 and December 31, 2024.
Partially offsetting income growth was the impact of declining Core Yield due to declining benchmark rates in 2024. 63 Table of Contents Interest income is comprised of recurring interest income from the contractual servicing of loans and non-recurring interest income that is related to the acceleration of income due to early loan repayments and other one-time events during the period.
Partially offsetting income growth was the impact of declining core yield due to declining benchmark rates in 2025. 65 Table of Contents Interest income is comprised of recurring interest income from the contractual servicing of loans and non-recurring interest income that is related to the acceleration of income due to early loan repayments and other one-time events during the period.
In order to draw a portion of the Company's available unfunded commitments, a portfolio company must submit to the Company a formal funding request that complies with the applicable advance notice and other operational requirements.
In order to draw a portion of the our available unfunded commitments, a portfolio company must submit to us a formal funding request that complies with the applicable advance notice and other operational requirements.
Risk Factors,” which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance.
Risk Factors”, which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance.
This ex cludes $139.7 million and $127.7 million of unfunded commitments as of December 31, 2024 and December 31, 2023, respectively, to portfolio companies related to loans assigned to or directly committed by the Adviser Funds. We receive principal payments on our debt investment portfolio based on scheduled amortization of the outstanding balances.
This ex cludes $96.2 million and $139.7 million of unfunded commitments as of December 31, 2025 and December 31, 2024, respectively, to portfolio companies related to loans assigned to or directly committed by the Adviser Funds. We receive principal payments on our debt investment portfolio based on scheduled amortization of the outstanding balances.
Three Months Ended December 31, Year ended December 31, 2024 2023 2024 2023 Total Yield 13.2% 14.6% 13.9% 14.6% Effective Yield (1) 13.7% 15.3% 14.4% 15.4% Core Yield (Non-GAAP) (1) 12.9% 14.3% 13.5% 14.1% (1) Yield calculated using “ Total investment income ” excluding bank interest, dividend income, and investment income from other assets for the three months and year ended December 31, 2024 and December 31, 2023.
Three Months Ended December 31, Year ended December 31, 2025 2024 2025 2024 Total Yield 12.4% 13.2% 12.8% 13.9% Effective Yield (1) 12.9% 13.7% 13.3% 14.4% Core Yield (Non-GAAP) (1) 12.5% 12.9% 12.5% 13.5% (1) Yield calculated using “ Total investment income ” excluding bank interest, dividend income, and investment income from other assets for the three months and year ended December 31, 2025 and December 31, 2024.
As of December 31, 2024 and 2023, unamortized capitalized fee income was recorded as follows: (in millions) As of December 31, 2024 2023 Offset against debt investment cost $ 36.9 $ 32.9 Deferred obligation contingent on funding or other milestone 9.1 9.4 Total Unamortized Fee Income $ 46.0 $ 42.3 Loan exit fees to be paid at the termination of the loan are accreted into interest income over the contractual life of the loan.
As of December 31, 2025 and 2024, unamortized capitalized fee income was recorded as follows: (in millions) As of December 31, 2025 2024 Offset against debt investment cost $ 42.5 $ 36.9 Deferred obligation contingent on funding or other milestone 9.8 9.1 Total Unamortized Fee Income $ 52.3 $ 46.0 Loan exit fees to be paid at the termination of the loan are accreted into interest income over the contractual life of the loan.
This includes being partially insulated from declining interest rates as all of 58 Table of Contents our floating rate debt investments, which represent 97.4% and 95.9% of our debt portfolio as of December 31, 2024 and December 31, 2023, respectively, are subject to interest rate floors.
This includes being partially insulated from declining interest rates as all of 60 Table of Contents our floating rate debt investments, which represent 97.9% and 97.4% of our debt portfolio as of December 31, 2025 and December 31, 2024, respectively, are subject to interest rate floors.
Payments on PIK loans are normally received only in the event of payoffs. The PIK receivable for December 31, 2024 and December 31, 2023 was approximately 2% and 1% of total debt investments, respectively.
Payments on PIK loans are normally received only in the event of payoffs. The PIK receivable for December 31, 2025 and December 31, 2024 was approximately 3% and 2% of total debt investments, respectively.
As of December 31, 2024, we had approximately $448.5 million of available unfunded commitments, including undrawn revolving facilities, which were available at the request of the portfolio company and unencumbered by future or unachieved milestones, as well as uncalled capital commitments to make investments in private equity funds.
As of December 31, 2025, we had approximately $385.6 million of available unfunded commitments, including undrawn revolving facilities, which were available at the request of the portfolio company and unencumbered by future or unachieved milestones, as well as uncalled capital commitments to make investments in private equity funds.
During the year ended December 31, 2024 , we issued and sold 11.7 million shares of our common stock receiving total accumulated net proceeds of approximately $218.3 million. This is a decrease from the year ended December 31, 2023, where we issued and sold 22.7 million shares of our common stock receiving total accumulated net proceeds of approximately $338.2 million.
This is a decrease from the year ended December 31, 2024, where we issued and sold 11.7 million shares of our common stock receiving total accumulated net proceeds of approximately $218.3 million.
In additi on, we receive principal repayments for some of our loans prior to their scheduled maturity date. The frequency or volume of these early principal repayments may fluctuate significantly from period to period. During the year ended December 31, 2024, we received approximately $953.6 million in aggregate principal repayments.
In additi on, we receive principal repayments for some of our loans prior to their scheduled maturity date. The frequency or volume of these early principal repayments may fluctuate significantly from period to period. During the year ended December 31, 2025, we received approximately $848.3 million in aggregate principal repayments.
During the years ended December 31, 2024 and December 31, 2023, we recorded approximately $51.3 million and $24.7 million of PIK income, respectively. Portfolio Yield We report our financial results on a GAAP basis. We monitor the performance of our total investment portfolio and total debt portfolio using both GAAP and Non-GAAP financial measures.
During the years ended December 31, 2025 and December 31, 2024, we recorded approximately $55.9 million and $51.3 million of PIK income, respectively. Portfolio Yield We report our financial results on a GAAP basis. We monitor the performance of our total investment portfolio and total debt portfolio using both GAAP and Non-GAAP financial measures.
Our existing warrant holdings would require us to invest approximately $60.5 million to exercise such warrants as of December 31, 2024. Warrants may appreciate or depreciate in value depending largely upon the underlying portfolio company’s performance and overall market conditions.
Our existing warrant holdings would require us to invest approximately $63.7 million to exercise such warrants as of December 31, 2025. Warrants may appreciate or depreciate in value depending largely upon the underlying portfolio company’s performance and overall market conditions.
As a result, comparison of the net increase (decrease) in net assets resulting from operations may not be meaningful. Investment Income Total investment income for the year ended December 31, 2024 was a pproximately $493.6 million as compared to approximately $460.7 million for the year ended December 31, 2023.
As a result, comparison of the net increase (decrease) in net assets resulting from operations may not be meaningful. Investment Income Total investment income for the year ended December 31, 2025 was a pproximately $532.5 million as compared to approximately $493.6 million for the year ended December 31, 2024.
As of December 31, 2024, our asset coverage ratio under our regulatory requirements as a BDC was 231.7% excluding our SBA debentures. We received an exemptive order from the SEC that allows us to exclude all SBA leverage as senior securities from our asset coverage ratio.
As of December 31, 2025, our asset coverage ratio under our regulatory requirements as a BDC was 212.1% excluding our SBA debentures. We received an exemptive order from the SEC that allows us to exclude all SBA leverage as senior securities from our asset coverage ratio.
During the year ended December 31, 2024, we principally funded our operations from (i) cash receipts from interest, dividend, and fee income from our investment portfolio, (ii) cash proceeds from the realization of portfolio investments through the repayments of debt investments and the sale of debt and equity investments, (iii) debt borrowings on our Credit Facilities, and (iv) equity offerings.
During the year ended December 31, 2025, we principally funded our operations from (i) cash receipts from interest, dividend, and fee income from our investment portfolio, (ii) cash proceeds from the realization of portfolio investments through the repayments of debt investments and the sale of debt and equity investments, (iii) debt borrowings on our Credit Facilities, 2028 Convertible Notes and June 2030 Notes, and (iv) equity offerings.
Performing and Non-accrual Investments The following table shows the amortized cost of our performing and non-accrual investments as of December 31, 2024 and December 31, 2023: (in millions) As of December 31, 2024 2023 Amortized Cost Percentage of Total Portfolio at Amortized Cost Amortized Cost Percentage of Total Portfolio at Amortized Cost Performing $ 3,648 98.3 % $ 3,216 99.0 % Non-accrual 61 1.7 % 31 1.0 % Total Investments $ 3,709 100.0 % $ 3,247 100.0 % Debt investments are placed on non-accrual status when it is probable that principal, interest or fees will not be collected according to contractual terms.
Performing and Non-accrual Investments The following table shows the amortized cost of our performing and non-accrual investments as of December 31, 2025 and December 31, 2024: (in millions) As of December 31, 2025 2024 Amortized Cost Percentage of Total Portfolio at Amortized Cost Amortized Cost Percentage of Total Portfolio at Amortized Cost Performing $ 4,457 99.8 % $ 3,648 98.3 % Non-accrual 11 0.2 % 61 1.7 % Total Investments $ 4,468 100.0 % $ 3,709 100.0 % Debt investments are placed on non-accrual status when it is probable that principal, interest, or fees will not be collected according to contractual terms.
Under the terms of the Sharing Agreement, we allocate the related expenses of shared services to the Adviser Subsidiary. Our total net operating expenses for the years ended December 31, 2024 and 2023, are net of expenses alloc ated to the Adviser Subsidiary of $10.8 million and $9.1 million, respectively.
Under the terms of the Sharing Agreement, we allocate the related expenses of shared services to the Adviser Subsidiary. Our total net operating expenses for the years ended December 31, 2025 and 2024, are net of expenses alloc ated to the Adviser Subsidiary of $15.2 million and $10.8 million, respectively.
As of December 31, 2024, the fair value as a percentage of total portfolio does not exceed 5.0% for any individual industry sector other than “Software”, “Drug Discovery & Development”, “Healthcare Services, Other”, and “Consumer & Business Services.” Industry and sector concentrations vary as new loans are recorded and loans are paid off.
As of December 31, 2025, the fair value as a percentage of total portfolio does not exceed 5.0% for any individual industry sector other than “Application Software”, “Drug Discovery & Development”, “Healthcare Services, Other”, “System Software”, and “Consumer & Business Services”. Industry and sector concentrations vary as new loans are recorded and loans are paid off.
Changes in interest rates, including Prime, SOFR, SONIA, or BSBY rates, may affect the interest income and the value of our investment portfolio for portfolio investments with floating rates. Our investments in Structured Debt generally have detachable equity enhancement features in the form of warrants or other equity securities designed to provide us with an opportunity for capital appreciation.
Changes in these benchmark index rates may affect the interest income and the value of our investment portfolio for portfolio investments with floating rates. Our investments in Structured Debt generally have detachable equity enhancement features in the form of warrants or other equity securities designed to provide us with an opportunity for capital appreciation.
As of December 31, 2024, we, including through our Adviser Subsidiary, actively manage approximately $4.8 billion of assets. We are structured as an internally managed, non-diversified, closed-end investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements.
As of December 31, 2025, we, including through our Adviser Subsidiary, actively manage more than $5.7 billion of assets. We are structured as an internally managed, non-diversified, closed-end investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements.
For the years ended December 31, 2024 and 2023, our ten largest portfolio companies represented approximately 31.6% and 29.7% of the total fair value of our investments in portfolio companies, respectively. As of December 31, 2024 and December 31, 2023, we had six and five investments that represented 5% or more of our net assets, respectively.
For the years ended December 31, 2025 and 2024, our ten largest portfolio companies represented approximately 28.6% and 31.6%, respectively, of the total fair value of our investments in portfolio companies. As of December 31, 2025 and December 31, 2024, we had seven and six investments, respectively, that represented 5% or more of our net assets.
December 31, 2024 December 31, 2023 Number of portfolio companies with debt outstanding 118 125 Percentage of debt bearing a floating rate 97.4 % 95.9 % Percentage of debt bearing a fixed rate 2.6 % 4.1 % Weighted average core yield on debt investments (1)(3) 12.9 % 14.3 % Weighted average effective yield on debt investments (2)(3) 13.7 % 15.3 % Prime rate at the end of the period 7.50 % 8.50 % Percentage of Prime rate linked debt investments 77.5 % 69.2 % Weighted average floor rate bearing a Prime rate 7.2 % 5.7 % Percentage of SOFR, SONIA and BSBY rate linked debt investments 19.9 % 26.7 % Weighted average floor rate bearing a SOFR, SONIA or BSBY rate 1.0 % 1.1 % (1) The core yield is a Non-GAAP financial measure.
December 31, 2025 December 31, 2024 Number of portfolio companies with debt outstanding 127 118 Percentage of debt bearing a floating rate 97.9 % 97.4 % Percentage of debt bearing a fixed rate 2.1 % 2.6 % Weighted average core yield on debt investments (1)(3) 12.5 % 12.9 % Weighted average effective yield on debt investments (2)(3) 12.9 % 13.7 % Prime rate at the end of the period 6.75 % 7.50 % Percentage of Prime rate linked debt investments 84.0 % 77.5 % Weighted average floor rate bearing a Prime rate 7.2 % 7.2 % Percentage of SOFR, SONIA and BSBY rate linked debt investments 13.9 % 19.9 % Weighted average floor rate bearing a SOFR, SONIA or BSBY rate 1.0 % 1.0 % (1) The core yield is a Non-GAAP financial measure.
Another financial measure that we monitor is the total return for our investors, which was approximately 32.8% and 42.0% during the years ended December 31, 2024 and 2023, respectively.
Another financial measure that we monitor is the total return for our investors, which was approximately 3.2% and 32.8% during the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2024 and 2023, loan exit fees receivable were recorded as follows: (in millions) As of December 31, 2024 2023 Included within debt investment cost $ 39.2 $ 35.9 Deferred receivable related to expired commitments 3.0 4.3 Total Exit Fees Receivable $ 42.2 $ 40.2 Additionally, we have debt investments in our portfolio that earn PIK interest.
As of December 31, 2025 and 2024, loan exit fees receivable were recorded as follows: (in millions) As of December 31, 2025 2024 Included within debt investment cost $ 48.6 $ 39.2 Deferred receivable related to expired commitments 4.5 3.0 Total Exit Fees Receivable $ 53.1 $ 42.2 Additionally, we have debt investments in our portfolio that earn PIK interest.
Macroeconomic Market Developments The capital markets are subject to fluctuations caused by various external factors such as changes in the inflationary environment, interest rate movements, concerns over slowing economic growth and possible global recession, changes to U.S. tariff and import/export regulations, uncertainty and disruption caused by geopolitical events, including the conflicts in Ukraine, Russia, and the Middle East, among other factors.
Macroeconomic Market Developments The capital markets are subject to fluctuations caused by various external factors such as changes in the inflationary environment, interest rate movements, concerns over slowing economic growth and possible global recession, changes to U.S. tariff and import/export regulations, uncertainty and disruption caused by geopolitical tensions and disruptions caused by government shutdowns, among other factors.
Portfolio and Investment Activity The total fair value of our investment portfolio as of December 31, 2024 and December 31, 2023 was as follows: (in millions) Fair Value December 31, 2024 December 31, 2023 Debt $ 3,494.6 $ 3,057.3 Equity 128.7 152.2 Warrants 30.5 33.9 Investment Funds & Vehicles 6.2 4.6 Total Investment Portfolio $ 3,660.0 $ 3,248.0 Our investments in portfolio companies take a variety of forms, including unfunded contractual commitments and funded investments.
Portfolio and Investment Activity The total fair value of our investment portfolio as of December 31, 2025 and December 31, 2024 was as follows: (in millions) Fair Value December 31, 2025 December 31, 2024 Debt $ 4,279.4 $ 3,494.6 Equity 139.0 128.7 Warrants 41.1 30.5 Investment Funds & Vehicles 7.1 6.2 Total Investment Portfolio $ 4,466.6 $ 3,660.0 Our investments in portfolio companies take a variety of forms, including unfunded contractual commitments and funded investments.
As of December 31, 2024 and December 31, 2023, we had three and five equity investments, respectively, that represented 5% or more of the total fair value of our equity investments. These equity investments represented approximately 49.7% and 56.5% of the total fair value of our equity investments as of December 31, 2024 and December 31, 2023, respectively.
As of December 31, 2025 and December 31, 2024, we had two and three equity investments, respectively, that represented 5% or more of the total fair value of our equity investments. These equity investments represented approximately 48.4% and 49.7% of the total fair value of our equity investments as of December 31, 2025 and December 31, 2024, respectively.
Total amounts outstanding as of December 31, 2024, were $399.8 million outstanding under our Credit Facilities, which are floating interest rate obligations, and the remaining $1,383.5 million of term debt outstanding, which are all fixed interest rate debt obligations. Not considered above, as of December 31, 2024, we held $3.3 million of cash classified as restricted cash.
Total amounts outstanding as of December 31, 2025, were $445.9 million outstanding under our Credit Facilities, which are floating interest rate obligations, and the remaining $1,867.2 million of term debt outstanding, which are all fixed interest rate debt obligations. Not considered above, as of December 31, 2025, we held $2.5 million of cash classified as restricted cash.
Interest and dividend income for the year ended December 31, 2024 totaled appro ximately $467.2 million as compared to approximately $434.4 million for the year ended December 31, 2023.
Interest and dividend income for the year ended December 31, 2025 totaled appro ximately $507.9 million as compared to approximately $467.2 million for the year ended December 31, 2024.
The following table shows the PIK-related activity for the years ended December 31, 2024 and 2023, at cost: (in thousands) Year Ended December 31, 2024 2023 Beginning PIK interest receivable balance $ 38,030 $ 25,713 PIK interest income during the period 51,270 24,670 PIK capitalized as principal or converted to equity or other assets (1,095) (3,317) Payments received from PIK loans (18,346) (9,036) Realized loss (2,203) — Ending PIK interest receivable balance $ 67,656 $ 38,030 The increase in PIK interest income during the year ended December 31, 2024, as compared to the year ended December 31, 2023 is due to an increase in the weighted average principal outstanding for debt investments which earn PIK interest.
The following table shows the PIK-related activity for the years ended December 31, 2025 and 2024, at cost: (in thousands) Year Ended December 31, 2025 2024 Beginning PIK interest receivable balance $ 67,656 $ 38,030 PIK interest income during the period 55,923 51,270 PIK capitalized as principal or converted to equity or other assets (5,318) (1,095) Payments received from PIK loans (4,894) (18,346) Realized gain (loss) (4,232) (2,203) Ending PIK interest receivable balance $ 109,135 $ 67,656 The increase in PIK interest income during the year ended December 31, 2025, as compared to the year ended December 31, 2024, is due to an increase in the weighted average principal outstanding for debt investments which earn PIK interest.
The following table shows the approximate increase (decrease) to the fair value of our debt investments from hypothetical change to the yield interest rates used for each valuation, assuming no other changes: (in thousands) Change in unrealized appreciation (depreciation) Basis Point Change (100) $ 51,209 (50) $ 27,134 50 $ (29,148) 100 $ (58,584) For a further discussion and disclosure of key inputs and considerations related to this estimate, refer to "Note 3 -Fair Value of Financial Instruments" included in the notes to our consolidated financial statements appearing elsewhere in this report.
The following table shows the approximate increase (decrease) to the fair value of our debt investments from hypothetical change to the yield interest rates used for each valuation, assuming no other changes: (in thousands) Change in unrealized appreciation (depreciation) Basis Point Change (100) $ 64,749 (50) $ 33,990 50 $ (34,650) 100 $ (69,297) For a further discussion and disclosure of key inputs and considerations related to this estimate, refer to “Note 3 - Fair Value of Financial Instruments” included in the notes to our consolidated financial statements appearing elsewhere in this report.
As of December 31, 2024, we had $1,783.3 million of debt outstanding, $170.0 million due within the next year, $891.0 million due within 1 to 3 years, and $722.3 million due beyond 3 years. In addition to our debt obligations, in the normal course of business, we are party to financial instruments with off-balance sheet risk.
As of December 31, 2025, we had $2,313.1 million of debt outstanding, $425.0 million due within the next year, $637.5 million due within 1 to 3 years, and $1,250.6 million due beyond 3 years. In addition to our debt obligations, in the normal course of business, we are party to financial instruments with off-balance sheet risk.
Through generation of current income from our debt investments and capital appreciation from our warrant and equity investments, we aim to maximize our portfolio total return. Since inception through December 31, 2024, we have originated more than $21.0 billion in commitments in over 600 co mpanies.
Through generation of current income from our debt investments and capital appreciation from our warrant and equity investments, we aim to maximize our portfolio total return. Since inception through December 31, 2025, we have originated more than $ 25.0 billio n in commitments in ov er 700 co mpanies.
Interest collected on non-accrual investments are generally applied to principal. 62 Table of Contents Results of Operations Our condensed consolidated operating results for the years ended December 31, 2024 and 2023, were as follows: (in thousands, except per share data) Year Ended December 31, 2024 2023 Total investment income $ 493,591 $ 460,668 Total expenses 167,759 156,631 Net investment income 325,832 304,037 Net realized gain (loss): (31,657) 8,437 Net change in unrealized appreciation (depreciation): (31,209) 25,010 Net increase (decrease) in net assets resulting from operations $ 262,966 $ 337,484 Net investment income before gains and losses per common share: Basic $ 2.00 $ 2.09 Change in net assets resulting from operations per common share: Basic $ 1.61 $ 2.32 Diluted $ 1.61 $ 2.31 Our operating results can vary substantially from period to period due to various factors, including changes in the level of investments held, changes in our investment yields, recognition of realized gains and losses, and changes in net unrealized appreciation and depreciation, among other factors.
Interest collected on non-accrual investments are generally applied to principal. 64 Table of Contents Results of Operations Our condensed consolidated operating results for the years ended December 31, 2025 and 2024, were as follows: (in thousands, except per share data) Year Ended December 31, 2025 2024 Total investment income $ 532,493 $ 493,591 Total expenses 190,773 167,759 Net investment income 341,720 325,832 Net realized gain (loss): (40,795) (31,657) Net change in unrealized appreciation (depreciation): 38,812 (31,209) Net increase (decrease) in net assets resulting from operations $ 339,737 $ 262,966 Net investment income before gains and losses per common share: Basic $ 1.91 $ 2.00 Change in net assets resulting from operations per common share: Basic $ 1.90 $ 1.61 Diluted $ 1.85 $ 1.61 Our operating results can vary substantially from period to period due to various factors, including changes in the level of investments held, changes in our investment yields, recognition of realized gains and losses, and changes in net unrealized appreciation and depreciation, among other factors.
As of December 31, 2024 and 2023, approximately 97.4% and 95.9% of the debt investment portfolio was priced at floating interest rates or floating interest rates with a Prime, SOFR, SONIA, or BSBY-based interest rate floor, respectively.
As of December 31, 2025 and 2024, approximately 97.9% and 97.4%, respectively, of the debt investment portfolio was priced at floating interest rates with a floor. Our interest rates use Prime, SOFR, or SONIA as benchmark index rates.
The reconciliation to calculate “Core investment income” from GAAP basis “Total investment income” are as follows: (in thousands) Three Months Ended December 31, Year ended December 31, 2024 2023 2024 2023 GAAP Basis: Total investment income $ 121,784 $ 122,603 $ 493,591 $ 460,668 Less: fee and income accelerations attributed to early payoffs, restructuring, loan modifications, and other one-time events except income from expired commitments (7,309) (8,138) (32,382) (38,324) Non-GAAP Basis: Core investment income $ 114,475 $ 114,465 $ 461,209 $ 422,344 Less: bank interest income, dividend income, and other investment income from other assets (3,002) (2,269) (11,371) (5,123) Core investment income from debt portfolio $ 111,473 $ 112,196 $ 449,838 $ 417,221 We believe the Core Yield is useful for our investors as it provides the yield at which our debt investments are originated and eliminates one-off items that can fluctuate significantly from period to period, thereby allowing for a more meaningful comparison over time.
The reconciliation to calculate “Core investment income” from GAAP basis “Total investment income” are as follows: (in thousands) Three Months Ended December 31, Year ended December 31, 2025 2024 2025 2024 GAAP Basis: Total investment income $ 137,430 $ 121,784 $ 532,493 $ 493,591 Less: fee and income accelerations attributed to early payoffs, restructuring, loan modifications, and other one-time events except income from expired commitments (4,180) (7,309) (31,232) (32,382) Non-GAAP Basis: Core investment income $ 133,250 $ 114,475 $ 501,261 $ 461,209 Less: bank interest income, dividend income, and other investment income from other assets (2,816) (3,002) (12,091) (11,371) Core investment income from debt portfolio $ 130,434 $ 111,473 $ 489,170 $ 449,838 We believe the Core Yield is useful for our investors as it provides the yield at which our debt investments are originated and eliminates one-off items that can fluctuate significantly from period to period, thereby allowing for a more meaningful comparison over time.
The $182 thousand decrease in cash used in investing activities was due to a decrease in purchases of capital equipment. 67 Table of Contents During the year ended December 31, 2024, our financing activities provided $119.2 million of cash, compared to $22.7 million provided during the year ended December 31, 2023.
The $616 thousand decrease in cash used in investing activities was due to a decrease in purchases of capital equipment. During the year ended December 31, 2025, our financing activities provided $368.9 million of cash, compared to $119.2 million provided during the year ended December 31, 2024.
As the impact of the macro-economic events, potential global recession, acts of terrorism, war, geopolitical events, and the related disruption to markets and business continues to impact the economy, we will continue to evaluate our overall liquidity position and take proactive steps to maintain the appropriate liquidity position based upon the current circumstances. 68 Table of Contents Equity Offerings We may from time-to-time issue and sell shares of our common stock through public or ATM offerings.
As the impact of the macro-economic events, potential global recession, acts of terrorism, war, geopolitical 70 Table of Contents events, and the related disruption to markets and business continues to impact the economy, we will continue to evaluate our overall liquidity position and take proactive steps to maintain the appropriate liquidity position based upon the current circumstances.
Not all non-binding term sheets are expected to close and do not necessarily represent future cash requirements. 56 Table of Contents Our portfolio activity for the years ended December 31, 2024 and 2023 was comprised of the following: (in millions) December 31, 2024 December 31, 2023 Investment Commitments (1) Investment Commitments Originated by Hercules Capital and the Adviser Funds $ 2,692.7 $ 2,174.1 Less: Commitments assigned to or directly committed by the Adviser Funds (562.1) (595.6) Net Total Investment Commitments $ 2,130.6 $ 1,578.5 Gross Debt Commitments Originated by Hercules Capital and the Adviser Funds New portfolio company $ 2,335.4 $ 1,571.0 Existing portfolio company 344.8 589.5 Sub-total 2,680.2 2,160.5 Less: Debt commitments assigned to or directly committed by the Adviser Funds (559.9) (593.7) Net Total Debt Commitments $ 2,120.3 $ 1,566.8 Investment Fundings (2) Gross Debt Fundings by Hercules Capital and the Adviser Funds New portfolio company $ 1,281.7 $ 747.3 Existing portfolio company 513.5 836.5 Sub-total 1,795.2 1,583.8 Less: Debt fundings assigned to or directly funded by the Adviser Funds (381.4) (348.8) Net Total Debt Fundings $ 1,413.8 $ 1,235.0 Equity Investments and Investment Funds and Vehicles Fundings by Hercules Capital and the Adviser Funds New portfolio company $ 2.0 $ 2.0 Existing portfolio company 10.0 12.8 Sub-total $ 12.0 $ 14.8 Less: Equity fundings assigned to or directly funded by the Adviser Funds (1.8) (1.9) Net Total Equity and Investment Funds and Vehicle Fundings $ 10.2 $ 12.9 Total Unfunded Contractual Commitments (3) $ 448.5 $ 335.3 Non-Binding Term Sheets New portfolio company $ 297.6 $ 645.0 Existing portfolio company — 31.8 Total $ 297.6 $ 676.8 (1) Includes restructured loans and renewals in addition to new commitments.
Not all non-binding term sheets are expected to close and do not necessarily represent future cash requirements. 58 Table of Contents Our portfolio activity for the years ended December 31, 2025 and 2024 was comprised of the following: (in millions) December 31, 2025 December 31, 2024 Investment Commitments (1) Investment Commitments Originated by Hercules Capital and the Adviser Funds $ 3,924.3 $ 2,692.7 Less: Commitments assigned to or directly committed by the Adviser Funds (1,028.4) (562.1) Net Total Investment Commitments $ 2,895.9 $ 2,130.6 Gross Debt Commitments Originated by Hercules Capital and the Adviser Funds New portfolio company $ 2,668.1 $ 2,335.4 Existing portfolio company 1,241.9 344.8 Sub-total 3,910.0 2,680.2 Less: Debt commitments assigned to or directly committed by the Adviser Funds (1,024.7) (559.9) Net Total Debt Commitments $ 2,885.3 $ 2,120.3 Investment Fundings (2) Gross Debt Fundings by Hercules Capital and the Adviser Funds New portfolio company $ 1,383.8 $ 1,281.7 Existing portfolio company 876.1 513.5 Sub-total 2,259.9 1,795.2 Less: Debt fundings assigned to or directly funded by the Adviser Funds (575.4) (381.4) Net Total Debt Fundings $ 1,684.5 $ 1,413.8 Equity Investments and Investment Funds and Vehicles Fundings by Hercules Capital and the Adviser Funds New portfolio company $ 4.9 $ 2.0 Existing portfolio company 10.3 10.0 Sub-total $ 15.2 $ 12.0 Less: Equity fundings assigned to or directly funded by the Adviser Funds (3.7) (1.8) Net Total Equity and Investment Funds and Vehicle Fundings $ 11.5 $ 10.2 Total Unfunded Contractual Commitments (3) $ 385.6 $ 448.5 Non-Binding Term Sheets New portfolio company $ 557.1 $ 297.6 Existing portfolio company 257.5 — Total $ 814.6 $ 297.6 (1) Includes restructured loans and renewals in addition to new commitments.
We currently sell shares through our equity distribution agreements (the “2024 Equity Distribution Agreements”) with Citizens JMP Securities LLC and Jefferies LLC (the “Sales Agents”) entered into on December 12, 2024. The 2024 Equity Distribution Agreements provide that we may offer and sell up to 30.0 million shares of our common stock from time to time through the Sales Agents.
Equity Offerings We may from time-to-time issue and sell shares of our common stock through public or ATM offerings. We currently sell shares through our equity distribution agreements (the “2024 Equity Distribution Agreements”) with Citizens JMP Securities LLC and Jefferies LLC (the “Sales Agents”) entered into on December 12, 2024.
A summary of net realized gains and losses for the years ended December 31, 2024 and 2023 is as follows: (in thousands) Year Ended December 31, 2024 2023 Realized gains $ 39,676 $ 29,920 Realized losses (70,175) (21,493) Realized foreign exchange gains (losses) (987) 10 Realized loss on extinguishment of debt (171) — Net realized gains (losses) $ (31,657) $ 8,437 During the year ended December 31, 2024, we recognized a net realized loss of $31.7 million.
A summary of net realized gains and losses for the years ended December 31, 2025 and 2024 is as follows: (in thousands) Year Ended December 31, 2025 2024 Realized gains $ 32,096 $ 39,676 Realized losses (70,553) (70,175) Realized foreign exchange gains (losses) (2,154) (987) Realized loss on debt extinguishment (184) (171) Net realized gains (losses) $ (40,795) $ (31,657) During the year ended December 31, 2025, we recognized a net realized loss of $40.8 million.
The net realized losses were partially offset by gross realized gains of $39.7 million primarily from the sale 65 Table of Contents of our equity and warrant positions in Palantir Technologies, TransMedics Group, Inc., Tarsus Pharmaceuticals, Inc., DoorDash, Inc., and TG Therapeutics, Inc. During the yea r ended December 31, 2023, we recognized a net realized gain of $8.4 million.
The net realized losses were partially offset by gross realized gains of $39.7 million primarily from the sale of our equity and warrant positions in Palantir Technologies, TransMedics Group, Inc., Tarsus Pharmaceuticals, Inc., DoorDash, Inc., and TG Therapeutics, Inc.
Interest and Dividend Income The following table summarizes the components of interest and dividend income for the years ended December 31, 2024 and 2023: (in thousands) Year Ended December 31, 2024 2023 Contractual interest income $ 355,470 $ 351,883 Exit fee interest income 44,448 45,747 PIK interest income 51,270 24,670 Dividend income 7,900 1,400 Other investment income (1) 8,107 10,725 Total interest and dividend income $ 467,195 $ 434,425 (1) Other investment income includes OID interest income and interest recorded on other assets.
Interest and Dividend Income The following table summarizes the components of interest and dividend income for the years ended December 31, 2025 and 2024: (in thousands) Year Ended December 31, 2025 2024 Contractual interest income $ 381,711 $ 355,470 Exit fee interest income 50,991 44,448 PIK interest income 55,923 51,270 Dividend income 8,700 7,900 Other investment income (1) 10,562 8,107 Total interest and dividend income $ 507,887 $ 467,195 (1) Other investment income includes OID interest income and interest recorded on other assets.
The following table summarizes recurring and non-recurring interest income and dividend income for the years ended December 31, 2024 and December 31, 2023: (in thousands) Year Ended December 31, 2024 2023 Recurring interest income $ 441,361 $ 410,414 Non-recurring interest income 17,934 22,611 Dividend income 7,900 1,400 Total interest and dividend income $ 467,195 $ 434,425 A portion of interest income is earned in the form of PIK interest.
The following table summarizes recurring and non-recurring interest income and dividend income for the years ended December 31, 2025 and December 31, 2024: (in thousands) Year Ended December 31, 2025 2024 Recurring interest income $ 478,718 $ 441,361 Non-recurring interest income 20,469 17,934 Dividend income 8,700 7,900 Total interest and dividend income $ 507,887 $ 467,195 A portion of interest income is earned in the form of PIK interest.
Available liquidity and capital resources as of December 31, 2024 As of December 31, 2024, w e had $658.8 million in available liquidity, including $113.1 m illion in cash, cash equivalents and foreign cash, and available borrowing capacity of approximately $16.2 million under the SMBC Facility, $175.0 million under our SMBC letter of credit facility, $284.0 million under the MUFG Bank Facility, and $71.0 million of SBA debentures, subject to certain conditions.
Available liquidity and capital resources as of December 31, 2025 As of December 31, 2025, w e had $525.5 million in available liquidity, including $57.0 m illion in cash, cash equivalents and foreign cash, and available borrowing capacity of approximately $21.5 million (net of $0.5 million of outstanding letter of credits) under the SMBC Facility, $175.0 million under our SMBC letter of credit facility, and $272.0 million under the MUFG Bank Facility, subject to certain conditions.
The following 61 Table of Contents table shows the distribution of our outstanding debt investments on the 1 to 5 investment grading scale at fair value as of December 31, 2024 and 2023, respectively: (in thousands) December 31, 2024 December 31, 2023 Investment Grading Number of Companies Debt Investments at Fair Value Percentage of Total Portfolio Number of Companies Debt Investments at Fair Value Percentage of Total Portfolio 1 19 $ 654,489 18.7 % 20 $ 626,770 20.5 % 2 53 1,649,906 47.2 % 52 1,286,195 42.1 % 3 39 1,012,603 29.0 % 47 1,040,629 34.0 % 4 6 159,372 4.6 % 5 103,705 3.4 % 5 1 18,231 0.5 % 1 — 0.0 % 118 $ 3,494,601 100.0 % 125 $ 3,057,299 100.0 % As of December 31, 2024 and December 31, 2023, our debt investments had a weighted average investment grading of 2.26 and 2.24 on a cost basis, respectively.
The following table shows the distribution of our outstanding debt investments on the 1 to 5 investment grading scale at fair value as of December 31, 2025 and 2024, respectively: (in thousands) December 31, 2025 December 31, 2024 Investment Grading Number of Companies Debt Investments at Fair Value Percentage of Total Portfolio Number of Companies Debt Investments at Fair Value Percentage of Total Portfolio 1 16 $ 681,631 15.9 % 19 $ 654,489 18.7 % 2 69 2,168,985 50.7 % 53 1,649,906 47.2 % 3 39 1,355,528 31.7 % 39 1,012,603 29.0 % 4 3 73,268 1.7 % 6 159,372 4.6 % 5 — — 0.0 % 1 18,231 0.5 % Total 127 $ 4,279,412 100.0 % 118 $ 3,494,601 100.0 % As of December 31, 2025 and December 31, 2024, our debt investments had a weighted average investment grading of 2.20 and 2.26 on a cost basis, respectively.
Portfolio Grading We use an investment grading system, which grades each debt investment on a scale of 1 to 5 to characterize and monitor our expected level of risk on the debt investments in our portfolio with 1 being the highest quality.
We may also experience losses from our warrant portfolio in the event that warrants are terminated or expire unexercised. 63 Table of Contents Portfolio Grading We use an investment grading system, which grades each debt investment on a scale of 1 to 5 to characterize and monitor our expected level of risk on the debt investments in our portfolio with 1 being the highest quality.
The available unfunded commitments excludes unfunded commitments (i) for which, with respect to a portfolio company's agreement, a milestone was achieved after the last day on which the portfolio company could have requested a drawdown funding to be completed within the reporting period; and (ii) $139.7 million of unfunded commitments which represent the portion of portfolio company commitments assigned to or directly committed by the Adviser Funds. 69 Table of Contents Additionally, we had approximately $297.6 million of non-binding term sheets outstanding to five new companies, which generally convert to contractual commitments within approximately 90 days of signing.
The available unfunded commitments excludes unfunded commitments (i) for which, with respect to a portfolio company's agreement, a milestone was achieved after the last day on which the portfolio company could have requested a drawdown funding to be completed 71 Table of Contents within the reporting period; and (ii) $96.2 million of unfunded commitments which represent the portion of portfolio company commitments assigned to or directly committed by the Adviser Funds.
As of December 31, 2024, we held warrants in 98 portfolio companies, with a fair value of approximately $30.5 million. The fair value of our warrant portfolio decreased by approximately $3.4 million, as compared to a fair value of $33.9 million as of December 31, 2023, primarily related to the decrease in fair value of the portfolio companies.
As of December 31, 2025, we held warrants in 108 portfolio companies, with a fair value of approximately $41.1 million. The fair value of our warrant portfolio increased by approximately $10.6 million, as compared to a fair value of $30.5 million as of December 31, 2024, primarily related to the increase in fair value of the portfolio companies.
The following table summarizes the change in net unrealized appreciation or depreciation of investments for the years ended December 31, 2024 and 2023: (in thousands) Year Ended December 31, 2024 2023 Gross unrealized appreciation on portfolio investments $ 111,909 $ 198,322 Gross unrealized depreciation on portfolio investments (163,789) (145,232) Reversal of prior period net changes in unrealized appreciation (depreciation) upon a realization event (2) 3,010 (11,929) Net change in unrealized appreciation (depreciation) on portfolio investments (48,870) 41,161 Other net changes in unrealized appreciation (depreciation) (1) 17,661 (16,151) Total net change in unrealized appreciation (depreciation) on investments $ (31,209) $ 25,010 (1) Includes the net change in unrealized appreciation (depreciation) related to derivative instruments and other assets and liabilities (2) Included in reversals of prior period net changes in unrealized appreciation (depreciation) are $44.6 million of reversed unrealized depreciation, related to the $63.1 million of realized debt loss from the write-off of certain debt investments noted above.
The following table summarizes the change in net unrealized appreciation or depreciation of investments for the years ended December 31, 2025 and 2024: (in thousands) Year Ended December 31, 2025 2024 Gross unrealized appreciation on portfolio investments $ 68,562 $ 111,909 Gross unrealized depreciation on portfolio investments (58,720) (163,789) Reversal of prior period net changes in unrealized appreciation (depreciation) upon a realization event (1) 24,454 3,010 Net change in unrealized appreciation (depreciation) on portfolio investments 34,296 (48,870) Other net changes in unrealized appreciation (depreciation) (2) 4,516 17,661 Total net change in unrealized appreciation (depreciation) on investments $ 38,812 $ (31,209) (1) For the years ended December 31, 2025 and 2024, reversals of prior period net changes in unrealized appreciation (depreciation) include $45.2 million and $44.6 million, respectively, of reversed unrealized depreciation, related to the $57.7 million and $63.1 million, respectively, of realized debt losses from the write-off of certain debt investments noted above.
Employee Compensation Employee compensation and benefi ts totaled approximately $54.2 million for the year ended December 31, 2024, as compared to approximately $50.2 million fo r the year ended December 31, 2023. The increase for the year ended December 31, 2024 was primarily due to fluctuations in variable compensation and increase in headcount.
The increase for the year ended December 31, 2025 was primarily due to fluctuations in variable compensation and increase in headcount. Employee stock-based compensation totaled approximately $14.6 million for the year ended December 31, 2025, as compared to approximately $12.8 million for the year ended December 31, 2024.
(in thousands) As of December 31, Assets Under Management * 2024 2023 Growth % by the Company $ 3,776,399 $ 3,364,059 12.3 % by the Adviser Funds 987,314 808,917 22.1 % Total $ 4,763,713 $ 4,172,976 14.2 % * Assets under management includes investments, at fair value, cash and cash equivalents, foreign cash and restricted cash.
(in thousands) As of December 31, Assets Under Management * 2025 2024 Growth % by the Company $ 4,526,101 $ 3,776,399 19.9 % by the Adviser Funds 1,214,631 987,314 23.0 % Total $ 5,740,732 $ 4,763,713 20.5 % * Assets under management includes investments, at fair value, cash and cash equivalents, foreign cash and restricted cash.
Our primary use of funds will be investments in portfolio companies and cash distributions to holders of our common stock.
We intend to continue to operate in order to generate cash flows from operations, including income earned from investments in our portfolio companies. Our primary use of funds will be investments in portfolio companies and cash distributions to holders of our common stock.
The $96.5 million increase in cash flows from financing activities during the year ended December 31, 2024 was primarily due to an increase in net borrowings of $236.9 million, offset by a $119.9 million decrease in equity issued and a $29.8 million increase in dividend distributions.
The $249.7 million increase in cash flows from financing activities during the year ended December 31, 2025 was primarily due to an increase in net borrowing activity of $289.2 million, partially offset by a decrease of $13.9 million in equity issued.
Interest and fee expense during the year ended December 31, 2024, as compared to the year ended December 31, 2023, increased due to higher weighted average borrowing costs and debt outstanding. Our weighted average cost of debt was approximately 5.0% and 4.8% for the years ended December 31, 2024 and 2023, respectively.
Interest and Fees on our Debt Interest and fees on our debt totaled approx imately $103.2 million and $86.0 million for the years ended December 31, 2025 and 2024, respectively. Interest and fee expense during the year ended December 31, 2025, as compared to the year ended December 31, 2024, increased due to higher weighted average debt outstanding.
The Adviser Subsidiary’s contribution to our net investment income is primarily derived from dividend income declared by the Adviser Subsidiary and interest income earned on loans to the Adviser Subsidiary. For the years ended December 31, 2024 and 2023, $6.8 million and $1.4 million, respectively of dividends were declared by the Adviser Subsidiary.
The Adviser Subsidiary’s contribution to our net investment income is primarily derived from dividend income declared by the Adviser Subsidiary, expenses allocated to the Adviser Subsidiary, and interest income earned on loans to the Adviser Subsidiary.
The following table summarizes the key drivers of change in net unrealized appreciation (depreciation) of investments for the years ended December 31, 2024 and 2023: (in thousands) Year Ended December 31, 2024 2023 Debt Equity, Warrants and Investment Funds (1) Total Debt Equity, Warrants and Investment Funds (1) Total Investment valuation appreciation (depreciation) $ (45,718) $ (6,162) $ (51,880) $ 26,689 $ 26,401 $ 53,090 Reversal of prior period net changes in unrealized appreciation (depreciation) upon a realization event (2) 26,665 (23,655) 3,010 (6,556) (5,373) (11,929) Other net changes in unrealized appreciation (depreciation) (816) 18,477 17,661 (15,612) (539) (16,151) Net change in unrealized appreciation (depreciation) $ (19,869) $ (11,340) $ (31,209) $ 4,521 $ 20,489 $ 25,010 (1) Includes the net change in unrealized appreciation (depreciation) related to derivative instruments and other assets and liabilities.
The following table summarizes the key drivers of change in net unrealized appreciation (depreciation) of investments for the years ended December 31, 2025 and 2024: (in thousands) Year Ended December 31, 2025 2024 Debt Equity, Warrants and Investment Funds (2) Total Debt Equity, Warrants and Investment Funds (2) Total Investment valuation appreciation (depreciation) $ (5,049) $ 14,891 $ 9,842 $ (45,718) $ (6,162) $ (51,880) Reversal of prior period net changes in unrealized appreciation (depreciation) upon a realization event (1) 28,755 (4,301) 24,454 26,665 (23,655) 3,010 Other net changes in unrealized appreciation (depreciation) (2) 12,697 (8,181) 4,516 (816) 18,477 17,661 Net change in unrealized appreciation (depreciation) $ 36,403 $ 2,409 $ 38,812 $ (19,869) $ (11,340) $ (31,209) (1) For the years ended December 31, 2025 and 2024, reversals of prior period net changes in unrealized appreciation (depreciation) include $45.2 million and $44.6 million, respectively, of reversed unrealized depreciation, related to the $57.7 million and $63.1 million, respectively, of realized debt losses from the write-off of certain debt investments noted above.
During the years ended December 31, 2024 and 2023, we recorded approximately $31.2 million of net unrealized depreciation and $25.0 million of net unrealized appreciation on our investments. The decrease in unrealized depreciation was primarily related to depreciation of our equity, warrants, and debt investments during the year ended December 31, 2024.
The increase in unrealized appreciation was primarily related to appreciation on debt and warrant investments which was partially offset by depreciation of our equity investments during the year ended December 31, 2025.
The increase in general and administrative expenses for the year ended December 31, 2024 is primarily attributable to an increase in costs of office and professional fees and expenses. Tax expenses were $5.8 million and $6.1 milli on for the years ended December 31, 2024 and December 31, 2023, respectively. Our t ax expenses primarily relate to excise tax accruals.
Our general and administrative expenses decreased to $19.0 million from $19.7 million for the years ended December 31, 2025 and 2024, respectively. The decrease in general and administrative expenses for the year ended December 31, 2025 is primarily attributable to a decrease in costs of office and professional fees and expenses.
During the years ended December 31, 2024 and 2023, our net operating expenses totaled approximately $167.8 million and $156.6 million, respectively. Interest and Fees on our Debt Interest and fees on our debt totaled approx imately $86.0 million and $77.5 million for the years ended December 31, 2024 and 2023, respectively.
Operating Expenses Our operating expenses are comprised of interest and fees on our debt borrowings, general and administrative expenses, taxes, and employee compensation and benefits. During the years ended December 31, 2025 and 2024, our net operating expenses totaled approximately $190.8 million and $167.8 million, respectively.
The weighted average cost of debt includes interest and fees on our debt, but excludes the impact of fee accelerations due to the extinguishment of debt, as applicable.
The weighted average cost of debt includes interest and fees on our debt, but excludes the impact of fee accelerations due to the extinguishment of debt, as applicable. 66 Table of Contents General and Administrative Expenses and Tax Expenses General and administrative expenses include legal fees, consulting fees, accounting fees, printer fees, insurance premiums, rent, expenses associated with the workout of underperforming investments and various other expenses.
During the year ended December 31, 2024, we distributed dividends of $303.5 million compared to $273.7 million during the year ended December 31, 2023. We also reduced the usage of our overnight offering and ATM program, which provided (net of offering costs) approximately $218.3 million down from $338.2 million, during the years ended December 31, 2024 and 2023 .
W e distributed dividends of $326.0 million compared to $303.5 million, during the years ended December 31, 2025 and 2024, respectively . During the year ended December 31, 2025, our ATM program provided (net of offering costs) approximate ly $204.4 million compared to $218.3 million net proceeds received during the year ended December 31, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−0 removed10 unchanged
Biggest change(in thousands) Basis Point Change Interest Income Interest Expense Net Income EPS (200) $(27,762) $(8,367) $(19,395) $(0.12) (100) $(16,172) $(4,184) $(11,988) $(0.07) (75) $(12,469) $(3,138) $(9,331) $(0.06) (50) $(8,645) $(2,092) $(6,553) $(0.04) (25) $(4,284) $(1,046) $(3,238) $(0.02) 25 $4,582 $1,046 $3,536 $0.02 50 $9,623 $2,092 $7,531 $0.05 75 $15,461 $3,138 $12,323 $0.07 From time-to-time, we may hedge against interest rate fluctuations and foreign currency by using standard hedging instruments such as futures, options, and forward contracts.
Biggest change(in thousands) Basis Point Change Interest Income Interest Expense Net Income EPS (200) $ (19,405) $ (6,728) $ (12,677) $ (0.07) (100) $ (11,487) $ (3,364) $ (8,123) $ (0.04) (75) $ (9,434) $ (2,523) $ (6,911) $ (0.04) (50) $ (6,721) $ (1,682) $ (5,039) $ (0.03) (25) $ (3,955) $ (841) $ (3,114) $ (0.02) 25 $ 4,039 $ 841 $ 3,198 $ 0.02 50 $ 9,439 $ 1,682 $ 7,757 $ 0.04 75 $ 14,960 $ 2,523 $ 12,437 $ 0.07 From time-to-time, we may hedge against interest rate fluctuations and foreign currency by using standard hedging instruments such as futures, options, and forward contracts.
During the year ended December 31, 2024, we have entered into a foreign currency forward contract to limit our foreign currency exposure with respect to the British Pound. For additional information refer to “Note 4 – Investments”, included in the notes to our consolidated financial statements appearing elsewhere in this Annual Report.
During the year ended December 31, 2025, we have entered into a foreign currency forward contract to limit our foreign currency exposure with respect to the British Pound. For additional information refer to “Note 4 – Investments”, included in the notes to our consolidated financial statements appearing elsewhere in this Annual Report.
Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. 70 Table of Contents Based on our Consolidated Statements of Assets and Liabilities as of December 31, 2024, the following table shows the approximate annualized increase (decrease) in components of net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investments and debt.
Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. 72 Table of Contents Based on our Consolidated Statements of Assets and Liabilities as of December 31, 2025, the following table shows the approximate annualized increase (decrease) in components of net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investments and debt.
As of December 31, 2024, approximately 97.4% of the loans in our portfolio had variable rates based on floating Prime, SOFR, or SONIA rates with a floor. The majority of our loans are linked to the Prime rate and comprise 77.5% of the loan portfolio as of December 31, 2024.
As of December 31, 2025, approximately 97.9% of the loans in our portfolio had floating rates with a floor, indexed to Prime, SOFR, or SONIA. The majority of our loans are linked to the Prime rate and comprise 84.0% of the loan portfolio as of December 31, 2025.
For additional information regarding the interest rate associated with each of our debt borrowings, refer to “Note 5 – Debt” included in the notes to our consolidated financial statements in this Annual Report. 71 Table of Contents
For additional information regarding the interest rate associated with each of our debt borrowings, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Resources” in this Annual Report and “Note 5 – Debt” included in the notes to our consolidated financial statements in this Annual Report. 73 Table of Contents
Added
In periods of declining interest rates, our interest income and our net investment income could be reduced as the interest income earned on our floating rate debt investments declines and any new fixed rate debt may be issued at lower coupon rates.

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