ARES CAPITAL CORP

Previous wording

•changes in the general economy, changes in inflation and risk of recession;

Current wording

•changes in the general economy, including those caused by tariffs and trade disputes with other countries, changes in inflation and risk of recession;

Previous wording

•political and regulatory conditions that contribute to uncertainty and market volatility including the impact of the recent U.S. presidential election and legislative, regulatory, trade and policy changes associated with a new administration;

Current wording

•political and regulatory conditions that contribute to uncertainty and market volatility including the impact of any prolonged U.S. government shutdown as well as the legislative, regulatory, trade, immigration and other policies associated with the current U.S. presidential administration;

Previous wording

•ongoing conflicts in the Middle Eastand the Russia-Ukraine war, including the potential for volatility in energy prices and other commodities and their impact on the industries in which we invest;

Current wording

•ongoing conflicts in the Middle East, recent U.S. military action in Venezuela, and the Russia-Ukraine war, including the potential for volatility in energy prices and other commodities and their impact on the industries in which we invest;

Previous wording

We use words such as “anticipates,” “believes,” “expects,” “intends,” “projects,” “estimates,” “will,” “should,” “could,” “would,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and the other information included in this Annual Report.

Current wording

We use words such as “anticipates,” “believes,” “expects,” “intends,” “projects,” “seeks,” “estimates,” “will,” “should,” “could,” “would,” “likely,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. You should not place undue reliance on these forward-looking statements, and our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and the other information included in this Annual Report.

Previous wording

Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first lien senior secured loans (including “unitranche” loans, which are loans that combine both senior and subordinated debt, generally in a first lien position) and second lien senior secured loans. In addition to senior secured loans, we also invest in subordinated loans (sometimes referred to as mezzanine debt) and preferred equity.

Current wording

Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first lien senior secured loans (including “unitranche” loans, which are loans that combine both senior and subordinated loans, generally in a first lien position) and second lien senior secured loans. In addition to senior secured loans, we also invest in subordinated loans (sometimes referred to as mezzanine debt) and preferred equity.

Previous wording

Since our initial public offering (“IPO”) on October 8, 2004 through December 31, 2024, our exited investments resulted in an asset level realized gross internal rate of return to us of approximately 13% (based on original cash invested, net of syndications, of approximately $49.7 billion and total proceeds from such exited investments of approximately $63.7 billion). Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of a debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized.

Current wording

Since our initial public offering (“IPO”) on October 8, 2004 through December 31, 2025, our exited investments resulted in an asset level realized gross internal rate of return to us of approximately 13% (based on original cash invested, net of syndications, of approximately $55.7 billion and total proceeds from such exited investments of approximately $71.7 billion). Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of a debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized.

Previous wording

Additionally, since our IPO on October 8, 2004 through December 31, 2024, our realized gains have exceeded our realized losses by approximately $0.9 billion (excluding a one-time gain on the acquisition of Allied Capital Corporation in April 2010 (the “Allied Acquisition”) and realized gains/losses from the extinguishment of debt and other transactions). For the same time period, our average annualized net realized gain rate was approximately 0.8% (excluding a one-time gain on the Allied Acquisition and realized gains/losses from the extinguishment of debt and other transactions). Net realized gain/loss rates for a particular period are the amount of net realized gains/losses during such period divided by the average quarterly investments at amortized cost in such period.

Current wording

Additionally, since our IPO on October 8, 2004 through December 31, 2025, our realized gains have exceeded our realized losses by approximately $1.0 billion (excluding a one-time gain on the acquisition of Allied Capital Corporation in April 2010 (the “Allied Acquisition”), income tax expense on net realized gains, and realized gains/losses from the extinguishment of debt and other transactions). For the same time period, our average annualized net realized gain rate was approximately 0.8% (excluding a one-time gain on the Allied Acquisition, income tax expense on net realized gains, and realized gains/losses from the extinguishment of debt and other transactions). Net realized gain/loss rates for a particular period are the amount of net realized gains/losses during such period divided by the average quarterly investments at amortized cost in such period.

Previous wording

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies and certain public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. Specifically, as part of this 30% basket, we may invest in entities that are not considered “eligible portfolio companies” (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act.

Current wording

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies and certain public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. Specifically, as part of this 30% basket, we may invest in entities that are not considered “eligible portfolio companies” (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act. In addition, we, our investment adviser and certain of our affiliates have received an order from the SEC that permits us and other BDCs and registered closed-end management investment companies managed by Ares Management to co-invest in portfolio companies with each other and with other affiliated investment entities (the “Co-Investment Exemptive Order”). As required by the Co-Investment Exemptive Order, we have adopted, and our board of directors has approved, policies and procedures reasonably designed to ensure compliance with the terms of the Co-Investment Exemptive Order, and our investment adviser and our Chief Compliance Officer will provide reporting to our board of directors. Co-investments made under the Co-Investment Exemptive Order are subject to compliance with certain conditions and other requirements, which could limit our ability to participate in co-investment transactions. As a result of investments permitted by the Co-Investment Exemptive Order, there could be significant overlap in our investment portfolio and the investment portfolio of affiliated Ares Management entities that can rely on the Co-Investment Exemptive Order and have an investment objective similar to ours. We may also otherwise co-invest with funds managed by Ares Management or any of its downstream affiliates, subject to compliance with existing regulatory guidance, applicable regulations and our investment adviser’s allocation policy.

Previous wording

(2)Includes both funded and unfunded commitments. Of these new investment commitments, we funded $11.8 billion and $4.6 billion for the years ended December 31, 2024 and 2023, respectively.

Current wording

(2)Includes both funded and unfunded commitments. Of these new investment commitments, we funded $11.4 billion and $11.8 billion for the years ended December 31, 2025 and 2024, respectively.

Previous wording

(3)Includes both funded and unfunded commitments. For the years ended December 31, 2024 and 2023, investment commitments exited included exits of unfunded commitments of $1.3 billion and $779 million, respectively.

Current wording

(3)Includes both funded and unfunded commitments. For the years ended December 31, 2025 and 2024, investment commitments exited included exits of unfunded commitments of $1.7 billion and $1.3 billion, respectively.

Previous wording

(4)For the years ended December 31, 2024 and 2023, net repayments of first lien secured revolving loans were $68 million and $327 million, respectively.

Current wording

(4)For the years ended December 31, 2025 and 2024, net fundings (repayments) of first lien secured revolving loans were $20 million and $(68) million, respectively.

Previous wording

(6)Includes our subordinated loan and equity investments in IHAM (as defined below), as applicable. See “Ivy Hill Asset Management, L.P.” below and Note 4 to our consolidated financial statements for the year ended December 31, 2024 for more information on IHAM.

Current wording

(6)Includes our subordinated loan to and equity investments in IHAM (as defined below), as applicable. See “Ivy Hill Asset Management, L.P.” below and Note 4 to our consolidated financial statements for the year ended December 31, 2025 for more information on IHAM.

Previous wording

(2)First lien senior secured loans include certain loans that we classify as “unitranche” loans. The total amortized cost and fair value of the loans that we classified as “unitranche” loans were $8.8 billion and $8.6 billion, respectively, as of December 31, 2024, and $5.8 billion and $5.7 billion, respectively, as of December 31, 2023.

Current wording

(2)First lien senior secured loans include certain loans that we classify as “unitranche” loans. The total amortized cost and fair value of the loans that we classified as “unitranche” loans were $11.3 billion and $11.2 billion, respectively, as of December 31, 2025, and $8.8 billion and $8.6 billion, respectively, as of December 31, 2024.

Previous wording

(3)The proceeds from these certificates were applied to co-investments with Varagon Capital Partners (“Varagon”) and its clients to fund first lien senior secured loans to 20 and 22 different borrowers as of December 31, 2024 and 2023, respectively.

Current wording

(3)The proceeds from these certificates were applied to co-investments with Varagon Capital Partners (“Varagon”) and its clients to fund first lien senior secured loans to 39 and 20 different borrowers as of December 31, 2025 and 2024, respectively.

Previous wording

(4)Includes our subordinated loan and equity investments in IHAM, as applicable.

Current wording

(4)Includes our subordinated loan to and equity investments in IHAM, as applicable.

Previous wording

As of December 31, 2024 and 2023, loans on non-accrual status represented 1.7% of the total investments at amortized cost (or 1.0% at fair value) and 1.3% at amortized cost (or 0.6% at fair value), respectively.

Current wording

As of December 31, 2025 and 2024, loans on non-accrual status represented 1.8% of the total investments at amortized cost (or 1.2% at fair value) and 1.7% at amortized cost (or 1.0% at fair value), respectively.

Previous wording

Ivy Hill Asset Management, L.P. (“IHAM”), our wholly owned portfolio company, is an asset manager and an SEC-registered investment adviser. As of December 31, 2024, IHAM had assets under management of approximately $12.8 billion. As of December 31, 2024, IHAM managed 20 vehicles (the “IHAM Vehicles”). IHAM earns fee income from managing the IHAM Vehicles and has also invested in certain of these vehicles as part of its business strategy. The amortized cost of IHAM’s total investments as of December 31, 2024 and 2023 was $2,237 million and $2,288 million, respectively. For the years ended December 31, 2024 and 2023, IHAM had management and incentive fee income of $53 million and $56 million, respectively, and other investment-related income of $344 million and $328 million, respectively, which included net realized gains or losses on investments and other transactions.

Current wording

Ivy Hill Asset Management, L.P. (“IHAM”), our wholly owned portfolio company, is an asset manager and an SEC-registered investment adviser. As of December 31, 2025, IHAM had assets under management of approximately $14.6 billion. As of December 31, 2025, IHAM managed 23 vehicles (the “IHAM Vehicles”). IHAM earns fee income from managing the IHAM Vehicles and has also invested in certain of these vehicles as part of its business strategy. The amortized cost of IHAM’s total investments as of December 31, 2025 and 2024 was $3,190 million and $2,237 million, respectively. For the years ended December 31, 2025 and 2024, IHAM had management and incentive fee income of $52 million and $53 million, respectively, and other investment-related income of $282 million and $344 million, respectively, which included net realized gains or losses on investments and other transactions.

Previous wording

(1)We have committed to fund up to $500 million to IHAM, the availability of which is solely at our discretion.

Current wording

(1)We have provided a commitment to fund up to $750 million and $500 million, as of December 31, 2025 and 2024, respectively, to IHAM, with availability of funding solely at our discretion.

Previous wording

From time to time, IHAM or certain IHAM Vehicles may purchase investments from, or sell investments to, us. For any such sales or purchases by the IHAM Vehicles to or from us, the IHAM Vehicle must obtain approval from third parties unaffiliated with us or IHAM, as applicable. During the years ended December 31, 2024 and 2023, IHAM or certain of the IHAM Vehicles purchased $759 million and $1.2 billion, respectively, of loans from us. For the years ended December 31, 2024 and 2023, we recognized $1 million and $13 million, respectively, of net realized losses from these sales. During the years ended December 31, 2024 and 2023, IHAM or certain IHAM Vehicles sold $32 million and $85 million, respectively, of investments to us.

Current wording

From time to time, IHAM or certain IHAM Vehicles may purchase investments from, or sell investments to, us. For any such sales or purchases by the IHAM Vehicles to or from us, the IHAM Vehicle must obtain approval from third parties unaffiliated with us or IHAM, as applicable. During the years ended December 31, 2025 and 2024, IHAM or certain of the IHAM Vehicles purchased $3.7 billion and $759 million, respectively, of loans from us. For the years ended December 31, 2025 and 2024, we recognized approximately $0 million and $1 million of net realized losses, respectively, from these sales. During the year ended December 31, 2025, neither IHAM nor any IHAM Vehicles sold any investments to us. During the year ended December 31, 2024, IHAM or certain IHAM vehicles sold $32 million of investments to us.

Previous wording

(2)The determination of such fair value is determined in accordance with IHAM’s valuation process (separate and apart from our valuation process described elsewhere herein). The amortized cost of IHAM’s total investments as of December 31, 2024 and 2023 was $2,237 million and $2,288 million, respectively. The amortized cost of the total investments of IHAM on a consolidated basis as of December 31, 2024 and 2023 was $8,343 million and $9,619 million, respectively.

Current wording

(2)The determination of such fair value is determined in accordance with IHAM’s valuation process (separate and apart from our valuation process described elsewhere herein). The amortized cost of IHAM’s total investments as of December 31, 2025 and 2024 was $3,190 million and $2,237 million, respectively. The amortized cost of the total investments of IHAM on a consolidated basis as of December 31, 2025 and 2024 was $11,766 million and $8,343 million, respectively.

Previous wording

(4)As of December 31, 2024 and 2023, net unrealized losses of $70 million and $13 million, respectively, have been eliminated upon consolidation and the elimination is included in “non-controlling interests in Consolidated IHAM Vehicles” in the selected balance sheet information.

Current wording

(4)As of December 31, 2025 and 2024, net unrealized losses of $85 million and $70 million, respectively, have been eliminated upon consolidation and the elimination is included in “non-controlling interests in Consolidated IHAM Vehicles” in the selected balance sheet information.

Previous wording

(5)Non-controlling interests in Consolidated IHAM Vehicles includes net unrealized depreciation in the Consolidated IHAM Vehicles of $171 million and $221 million as of December 31, 2024 and 2023, respectively.

Current wording

(5)Non-controlling interests in Consolidated IHAM Vehicles includes net unrealized depreciation in the Consolidated IHAM Vehicles of $167 million and $171 million as of December 31, 2025 and 2024, respectively.

Previous wording

We have established a joint venture with Varagon to make certain first lien senior secured loans, including certain stretch senior and unitranche loans, primarily to U.S. middle-market companies. The joint venture is called the Senior Direct Lending Program, LLC (d/b/a the “Senior Direct Lending Program” or the “SDLP”). In July 2016, we and Varagon and its clients completed the initial funding of the SDLP. The SDLP may generally commit and hold individual loans of up to $450 million. The SDLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SDLP must be approved by an investment committee of the SDLP consisting of representatives of ours and Varagon (with approval from a representative of each required).

Current wording

We have established a joint venture with Varagon to make certain first lien senior secured loans, including certain stretch senior and unitranche loans, primarily to U.S. middle-market companies. The joint venture is called the Senior Direct Lending Program, LLC (d/b/a the “Senior Direct Lending Program” or the “SDLP”). In July 2016, we and Varagon and its clients completed the initial funding of the SDLP. We, and other BDCs, registered closed-end management investment companies and other affiliated investment entities managed by our investment adviser or its affiliates, may directly co-invest with the SDLP in accordance with the terms of the Co-Investment Exemptive Order. The SDLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SDLP, including co-investment transactions made by the SDLP in accordance with the terms of the Co-Investment Order, must be approved by an investment committee of the SDLP consisting of representatives of ours and Varagon (with approval from a representative of each required).

Previous wording

The interest income from our investment in the SDLP Certificates and capital structuring service fees and other income earned for the years ended December 31, 2024 and 2023 were as follows:

Current wording

The interest income and capital structuring service fees and other income earned with respect to our investment in the SDLP Certificates for the years ended December 31, 2025 and 2024 were as follows:

Previous wording

As of December 31, 2024 and 2023, the SDLP portfolio was comprised entirely of first lien senior secured loans primarily to U.S. middle-market companies and were in industries similar to the companies in our portfolio. As of

Current wording

As of December 31, 2025 and 2024, the SDLP portfolio was comprised of first lien senior secured loans to primarily U.S. middle-market companies in industries similar to the companies in our portfolio. As of December 31, 2025, none of the loans in the SDLP portfolio were on non-accrual status. As of December 31, 2024, two of the loans in the SDLP portfolio were on non-accrual status. Below is a summary of the SDLP portfolio as of December 31, 2025 and 2024:

Previous wording

(2)First lien senior secured loans include certain loans that the SDLP classifies as “unitranche” loans. As of December 31, 2024 and 2023, the total principal amount of loans in the SDLP portfolio that the SDLP classified as “unitranche” loans was $3,937 million and $4,558 million, respectively.

Current wording

(2)First lien senior secured loans include certain loans that the SDLP classifies as “unitranche” loans. As of December 31, 2025 and 2024, the total principal amount of loans in the SDLP portfolio that the SDLP classified as “unitranche” loans was $2,844 million and $3,937 million, respectively.

Previous wording

Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of the SDLP, in conformity with GAAP, as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023 are presented below:

Current wording

Selected financial information of the SDLP, in conformity with GAAP, as of December 31, 2025 and 2024 and for the years ended December 31, 2025 and 2024 is presented below:

Previous wording

Interest income from investments for the year ended December 31, 2024 increased from the comparable period in 2023 primarily due to the increase in the average size of our portfolio. The average size and weighted average yield of our portfolio at amortized cost for the years ended December 31, 2024 and 2023 were as follows:

Current wording

Interest income from investments for the year ended December 31, 2025 increased from the comparable period in 2024 primarily due to the increase in the average size of our portfolio, which was partially offset by declining base rates. The average size and weighted average yield of our portfolio at amortized cost for the years ended December 31, 2025 and 2024 were as follows:

Previous wording

Capital structuring service fees for the year ended December 31, 2024 increased from the comparable period in 2023 primarily due to an increase in new investment commitments. The lower weighted average capital structuring service fee percentage during the year ended December 31, 2024 was primarily due to a general decline in market fee levels and a higher percentage of new investment commitments to existing portfolio companies, which generally resulted in lower fee opportunities as compared to the comparable period in 2023. The new investment commitments and weighted average capital structuring service fee percentages for the years ended December 31, 2024 and 2023 were as follows:

Current wording

Capital structuring service fees for the year ended December 31, 2025 increased from the comparable period in 2024 primarily due to an increase in new investment commitments. The new investment commitments and weighted average capital structuring service fee percentages for the years ended December 31, 2025 and 2024 were as follows:

Previous wording

(1)Excludes $2,517 million and $580 million of new investment commitments sold to third party lenders during the years ended December 31, 2024 and 2023, respectively. Excludes $412 million and $470 million of investment commitments sold to IHAM for the years ended December 31, 2024 and 2023, respectively.

Current wording

(1)Excludes $1.6 billion and $2.5 billion of new investment commitments sold to third-party lenders during the years ended December 31, 2025 and 2024, respectively. Excludes $812 million and $412 million of investment commitments to IHAM for the years ended December 31, 2025 and 2024, respectively.

Previous wording

Dividend income received from IHAM for the year ended December 31, 2024 increased from the comparable period in 2023 primarily due to the increased earnings from the IHAM Vehicles as a result of higher interest rates. Dividend income received from IHAM for the year ended December 31, 2024 includes a non-recurring special dividend of $10 million. Recurring dividend income for the year ended December 31, 2024 increased from the comparable period in 2023 primarily due to an increase in yielding preferred equity investments.

Current wording

Recurring dividend income for the year ended December 31, 2025 decreased from the comparable period in 2024 primarily due to a decrease in yielding preferred equity investments.

Previous wording

(1)Includes the impact of the interest rate swaps for the years ended December 31, 2024 and 2023.

Current wording

(1)Includes the impact of the interest rate swaps.

Previous wording

Stated interest expense for the year ended December 31, 2024 increased from the comparable period in 2023 primarily due to the increase in the average principal amount of debt outstanding and the impact of higher interest rates on our floating debt obligations. Average debt outstanding and weighted average stated interest rate on our debt outstanding for the years ended December 31, 2024 and 2023 were as follows:

Current wording

Stated interest expense for the year ended December 31, 2025 increased from the comparable period in 2024 primarily due to the increase in the average principal amount of our outstanding debt. Average outstanding debt and weighted average stated interest rate on our outstanding debt for the years ended December 31, 2025 and 2024 were as follows:

Previous wording

(1)The weighted average stated interest rate on our debt outstanding for the years ended December 31, 2024 and 2023 includes the impact of interest rate swaps. See Note 6 to our consolidated financial statements for the year ended December 31, 2024, for more information on the interest rate swaps.

Current wording

(1)The weighted average stated interest rate on our outstanding debt includes the impact of interest rate swaps. See Note 6 to our consolidated financial statements for the year ended December 31, 2025 for more information on the interest rate swaps.

Previous wording

The income based fee for the year ended December 31, 2024 increased from the comparable period in 2023 primarily due to the pre-incentive fee net investment income, as defined in the investment advisory and management agreement, for the year ended December 31, 2024 being higher than in the comparable period in 2023.

Current wording

The income based fee for the year ended December 31, 2025 decreased from the comparable period in 2024 primarily due to the pre-incentive fee net investment income, as defined in the investment advisory and management agreement, for the year ended December 31, 2025 being lower than in the comparable period in 2024.

Previous wording

For the years ended December 31, 2024 and 2023, the capital gains incentive fee calculated in accordance with GAAP was $18 million and $53 million, respectively. The capital gains incentive fee accrual for the year ended December 31, 2024 changed from the comparable period in 2023 primarily due to net gains on investments, foreign currency, other transactions and the extinguishment of debt of $119 million compared to net gains of $256 million for the comparable period in 2023. The capital gains incentive fee accrued under GAAP includes an accrual related to unrealized capital appreciation, whereas the capital gains incentive fee actually payable under our investment advisory and management agreement does not. There can be no assurance that such unrealized capital appreciation will be realized in the future. The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. As of December 31, 2024, there was $105 million of capital gains incentive fee accrued in accordance with GAAP. As of December 31, 2024, there was no capital gains incentive fee actually payable under our investment advisory and management agreement. See Note 3 to our consolidated financial statements for the year ended December 31, 2024 for more information on the base management fee, income based fee and capital gains incentive fee.

Current wording

For the year ended December 31, 2025, the reduction in the capital gains incentive fee accrued in accordance with GAAP was $23 million. For the year ended December 31, 2024, the capital gains incentive fee accrued in accordance with GAAP was $18 million. The capital gains incentive fee accrual for the year ended December 31, 2025 changed from the comparable period in 2024 primarily due to net losses on investments, foreign currency, other transactions and the extinguishment of debt of $116 million compared to net gains of $86 million for the comparable period in 2024. The capital gains incentive fee accrued under GAAP includes an accrual related to unrealized capital appreciation, whereas the capital gains incentive fee actually payable under our investment advisory and management agreement does not. There can be no assurance that such unrealized capital appreciation will be realized in the future. The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. As of December 31, 2025, there was $82 million of capital gains incentive fee accrued in accordance with GAAP. As of December 31, 2025, there was no capital gains incentive fee actually payable under our investment advisory and management agreement. See Note 3 to our consolidated financial statements for the year ended December 31, 2025 for more information on the base management fee, income based fee and capital gains incentive fee.

Previous wording

Income Tax Expense, Including Excise Tax

Current wording

Income Tax Expense, Including Excise Taxes

Previous wording

Depending on the level of taxable income earned in a tax year, we may choose to carry forward such taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year taxable income will be in excess of estimated dividend distributions for the current year from such income, we accrue excise tax, if any, on estimated excess taxable income as such taxable income is earned. For the years ended December 31, 2024 and 2023, the estimated excess taxable income carried forward was approximately $922 million and $631 million, respectively, and as a result, we recorded a net expense of $35 million and $23 million, respectively, for U.S. federal excise tax.

Current wording

Depending on the level of taxable income earned in a tax year, we may choose to carry forward such taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year taxable income will be in excess of estimated dividend distributions for the current year from such income, we accrue excise tax, if any, on estimated excess taxable income as such taxable income is earned. For the years ended December 31, 2025 and 2024, we recorded a net expense of $37 million and $35 million, respectively, for U.S. federal excise taxes.

Previous wording

Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes. For the year ended December 31, 2024, we recorded a net tax expense of $38 million, primarily due to income taxes incurred related to net realized gains on investments held by our taxable subsidiaries. For the year ended December 31, 2023, we recorded a net tax benefit of $3 million as a result of tax refunds resulting from the overpayment of the prior year’s income taxes. The income tax expense for our taxable consolidated subsidiaries will vary depending on the level of realized gains from the exits of investments held by such taxable subsidiaries during the respective periods.

Current wording

Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes. For the years ended December 31, 2025 and 2024, we recorded a net tax expense of $121 million and $38 million, respectively, for such subsidiaries. The income tax expense for our taxable consolidated subsidiaries will vary depending on the level of realized gains from the exits of investments held by such taxable subsidiaries during the respective periods.

Previous wording

(1)Includes $0.8 billion and $1.2 billion of loans sold to IHAM and certain vehicles managed by IHAM during the years ended December 31, 2024 and 2023, respectively. Net realized losses of $1 million and $13 million were recorded on these transactions with IHAM during the years ended December 31, 2024 and 2023, respectively. See Note 4 to our consolidated financial statements for the year ended December 31, 2024 for more information on IHAM and its managed vehicles.

Current wording

(1)Includes $3,707 million and $759 million of loans sold to IHAM or certain IHAM Vehicles during the years ended December 31, 2025 and 2024, respectively. Net realized losses of approximately $0 million and $1 million were recorded on these transactions with IHAM during the years ended December 31, 2025 and 2024, respectively. See Note 4 to our consolidated financial statements for the year ended December 31, 2025 for more information on IHAM and the IHAM Vehicles.