Blue Owl Technology Finance Corp

Previous wording

Blue Owl consists of three investment platforms: (1) Credit, which focuses on direct lending, (2) GP Strategic Capital, which focuses on acquiring equity positions in and providing debt financing to institutional alternative asset managers and (3) Real Estate, which focuses on triple net lease real estate strategies and real estate finance. Blue Owl’s Credit platform is comprised of the Adviser, Blue Owl Credit Advisors LLC (“OCA”), Blue Owl Diversified Credit Advisors LLC (“ODCA”), Blue Owl Technology Credit Advisors II LLC (“OTCA II”), and Blue Owl Credit Private Fund Advisors LLC (“OPFA” and together with the Adviser, OCA, OTCA II, and ODCA, the “Blue Owl Credit Advisers”). As of June 30, 2024, the Adviser and its affiliates had $95.10 billion of assets under management across Blue Owl’s Credit platform.

Current wording

Blue Owl consists of three investment platforms: (1) Credit, which focuses on direct lending, (2) GP Strategic Capital, which focuses on acquiring equity positions in and providing debt financing to institutional alternative asset managers and (3) Real Estate, which focuses on triple net lease real estate strategies and real estate credit. Blue Owl’s Credit platform is comprised of the Adviser, Blue Owl Credit Advisors LLC (“OCA”), Blue Owl Diversified Credit Advisors LLC (“ODCA”), Blue Owl Technology Credit Advisors II LLC (“OTCA II”), and Blue Owl Credit Private Fund Advisors LLC (“OPFA” and together with the Adviser, OCA, OTCA II, and ODCA, the “Blue Owl Credit Advisers”). As of September 30, 2024, the Adviser and its affiliates had $128.44 billion of assets under management across Blue Owl’s Credit platform.

Previous wording

On September 24, 2018, we formed a wholly-owned subsidiary, OR Tech Lending LLC, a Delaware limited liability company, which is intended to hold a California finance lenders license. OR Tech Lending LLC is intended to originate loans to borrowers headquartered in California. From time to time we may form wholly-owned subsidiaries to facilitate the normal course of business.

Current wording

On September 24, 2018, we formed a wholly-owned subsidiary, OR Tech Lending LLC, a Delaware limited liability company, which holds a California finance lenders license. OR Tech Lending LLC originates loans to borrowers headquartered in California. From time to time we may form wholly-owned subsidiaries to facilitate the normal course of business.

Previous wording

We are a Maryland corporation organized primarily to originate and make debt and equity investments in technology-related companies based primarily in the United States. We originate and invest in senior secured or unsecured loans, subordinated loans or mezzanine loans, broadly syndicated loans and equity-related securities including common equity, warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity. Our investment objective is to maximize total return by generating current income from debt investments and other income producing securities, and capital appreciation from our equity and equity-linked investments. We may hold our investments directly or through special purpose vehicles. We generally intend to invest in companies with a low loan-to-value ratio, which we consider to be 50% or below. Since our Adviser’s affiliates began investment activities in April 2016 through June 30, 2024, the Blue Owl Credit Advisers have originated $118.16 billion aggregate principal amount of investments across multiple industries, of which $114.32 billion of aggregate principal amount of investments prior to any subsequent exits or repayments, was retained by either us or a corporation or fund advised by our Adviser or its affiliates.

Current wording

We are a Maryland corporation organized primarily to originate and make debt and equity investments in technology-related companies based primarily in the United States. We originate and invest in senior secured or unsecured loans, subordinated loans or mezzanine loans, broadly syndicated loans and equity-related securities including common equity, warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity. Our investment objective is to maximize total return by generating current income from debt investments and other income producing securities, and capital appreciation from our equity and equity-linked investments. We may hold our investments directly or through special purpose vehicles. We generally intend to invest in companies with a low loan-to-value ratio, which we consider to be 50% or below. Since our Adviser’s affiliates began investment activities in April 2016 through September 30, 2024, the Blue Owl Credit Advisers have originated $128.73 billion aggregate principal amount of investments across multiple industries, of which $124.90 billion of aggregate principal amount of investments prior to any subsequent exits or repayments, was retained by either us or a corporation or fund advised by our Adviser or its affiliates.

Previous wording

We invest in a broad range of established and high growth technology-related companies that are capitalizing on the large and growing demand for technology products and services. These companies use technology extensively to improve business processes, applications and opportunities or seek to grow through technological developments and innovations. These companies operate in technology-related industries or sectors which include, but are not limited to, application software, systems software, healthcare information technology, technology services and infrastructure, financial technology and internet and digital media. Within each industry or sector, we intend to invest in companies that are developing or offering goods and services to businesses and consumers which utilize scientific knowledge, including techniques, skills, methods, devices and processes, to solve problems. We refer to all of these companies as “technology-related” companies and intend, under normal circumstances, to invest at least 80% of the value of our total assets in such businesses and to target portfolio companies that comprise 1-2% of our portfolio. Generally, no individual portfolio company is expected to comprise greater than 5% of our portfolio; however, from time to time certain of our investments may comprise greater than 5% of our portfolio.

Current wording

We invest at least 80% of the value of our total assets in "technology-related" companies. We define technology-related companies as those that operate in the technology industry or sector, or those that are developing or offering goods to businesses and consumers which utilize scientific knowledge, including techniques, skills, methods, devices and processes to solve problems. We specifically focus on software and enterprise software companies within the technology and technology-related universe of companies. We invest in a broad range of established and high growth technology-related companies with a focus on enterprise software companies that are capitalizing on the large and growing demand for enterprise software products and services. These companies use technology extensively to improve business processes, applications and opportunities or seek to grow through technological developments and innovations. These companies operate in technology-related industries or sectors which include, but are not limited to, application software, systems software, healthcare information technology, technology services and infrastructure, financial technology and internet and digital media.

Previous wording

We target portfolio companies where we can structure larger transactions. As of June 30, 2024, our average investment size in each of our portfolio companies was approximately $43.7 million based on fair value. As of June 30, 2024, investments we classify as traditional financing, excluding certain investments that fall outside our typical borrower profile, represented 74.4% of our total portfolio based on fair value and these portfolio companies had weighted average annual revenue of $667 million, weighted average annual EBITDA of $186 million and weighted average enterprise value of $4.01 billion. As of June 30, 2024, investments we classify as growth capital represented 24.6% of our total portfolio based on fair value and these portfolio companies had weighted average annual revenue of $652 million and a weighted average enterprise value of $13.03 billion.

Current wording

We target portfolio companies where we can structure larger transactions. As of September 30, 2024, our average investment size in each of our portfolio companies was approximately $43.8 million based on fair value. As of September 30, 2024, investments we classify as traditional financing, excluding the investment in Blue Owl Credit SLF LLC (“Credit SLF”) and certain investments that fall outside our typical borrower profile, represented 75.1% of our total portfolio based on fair value and these portfolio companies had weighted average annual revenue of $690 million, weighted average annual EBITDA of $201 million and weighted average enterprise value of $3.98 billion. As of September 30, 2024, investments we classify as growth capital represented 23.9% of our total portfolio based on fair value and these portfolio companies had weighted average annual revenue of $724 million and a weighted average enterprise value of $14.80 billion.

Previous wording

We focus primarily on originating and making debt and equity investments in technology-related companies based primarily in the United States.

Current wording

We focus primarily on originating and making debt and equity investments in technology-related (specifically software) companies based primarily in the United States.

Previous wording

We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of three to ten years. As of June 30, 2024, 95.0% of our debt investments based on fair value bear interest at a floating rate, subject to interest rate floors, in certain cases. Interest on our debt investments is generally payable either monthly or quarterly.

Current wording

We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of three to ten years. As of September 30, 2024, 95.9% of our debt investments based on fair value bear interest at a floating rate, subject to interest rate floors, in certain cases. Interest on our debt investments is generally payable either monthly or quarterly.

Previous wording

Limited Availability of Capital for Technology Companies. We believe that technology companies have limited access to capital, driven by a lack of dedicated pools of capital focused on technology companies and a reduction in activity from commercial and investment banks as a result of regulatory and structural factors, industry consolidation and general risk aversion. Traditional lenders, such as commercial and investment banks, generally do not have flexible product offerings that meet the needs of technology-related companies. In recent years, many commercial and investment banks have focused their efforts and resources on lending to large corporate clients and managing capital markets transactions rather than lending to technology-related companies. In addition, these lenders may be constrained in their ability to underwrite and hold loans and high yield securities, as well as their ability to provide equity financing, as they seek to meet existing and future regulatory capital requirements. We also believe that there is a lack of scaled market participants that are willing to provide and hold meaningful amounts of a customized financing solution for technology companies. As a result, we believe our focus on technology-related companies and our ability to invest across the capital structure, coupled with a limited supply of capital providers, presents an attractive opportunity to invest in technology companies.

Current wording

Limited Availability of Capital for Technology Companies Specifically Enterprise Software. We believe that technology companies have limited access to capital, driven by a lack of dedicated pools of capital focused on technology companies and a reduction in activity from commercial and investment banks as a result of regulatory and structural factors, industry consolidation and general risk aversion. Traditional lenders, such as commercial and investment banks, generally do not have flexible product offerings that meet the needs of technology-related companies. In recent years, many commercial and investment banks have focused their efforts and resources on lending to large corporate clients and managing capital markets transactions rather than lending to technology-related companies. In addition, these lenders may be constrained in their ability to underwrite and hold loans and high yield securities, as well as their ability to provide equity financing, as they seek to meet existing and future regulatory capital requirements. We also believe that there is a lack of scaled market participants that are willing to provide and hold meaningful amounts of a customized financing solution for technology companies. As a result, we believe our focus on technology-related companies and our ability to invest across the capital structure, coupled with a limited supply of capital providers, presents an attractive opportunity to invest in technology companies.

Previous wording

Syndicated loans arranged through a bank are done either on a “best efforts” basis or are underwritten with terms plus provisions that permit the underwriters to change certain terms, including pricing, structure, yield and tenor, otherwise known as “flex”, to successfully syndicate the loan, in the event the terms initially marketed are insufficiently attractive to investors. Loans provided by companies such as ours provide certainty to issuers in that we can commit to a given amount of debt on specific terms, at stated coupons and with agreed upon fees. As we are the ultimate holder of the loans, we do not require market “flex” or other arrangements that banks may require when acting on an agency basis. In addition, our Adviser has teams focused on both liquid credit and private credit and these teams are able to collaborate with respect to syndicated loans.

Current wording

Capital Markets Have Been Unable to Fill the Void Left by Banks. Access to underwritten bond and syndicated loan markets is challenging for many technology companies due to loan size and liquidity. For example, high yield bonds are generally purchased by institutional investors such as mutual funds and exchange traded funds (“ETFs”) who, among other things, are highly focused on the liquidity characteristics of the bond being issued in order to fund investor redemptions and/or comply with regulatory requirements. Accordingly, the existence of an active secondary market for bonds is an important consideration in these entities’ initial investment decision. Syndicated loans arranged through a bank are done either on a “best efforts” basis or are underwritten with terms plus provisions that permit the underwriters to change certain terms, including pricing, structure, yield and tenor, otherwise known as “flex”, to successfully syndicate the loan, in the event the terms initially marketed are insufficiently attractive to investors. Loans provided by companies such as ours provide certainty to issuers in that we can commit to a given amount of debt on specific terms, at stated coupons and with agreed upon fees. As we are the ultimate holder of the loans, we do not require market “flex” or other arrangements that banks may require when acting on an agency basis. In addition, our Adviser has teams focused on both liquid credit and private credit and these teams are able to collaborate with respect to syndicated loans.

Previous wording

Secular Trends Supporting Growth for Private Credit. According to Gartner, a research and advisory company, global technology spend was $4.7 trillion in 2023 and is expected to grow to more than $5.1 trillion in 2024. We believe global demand for technology products and services will continue to grow rapidly, and that growth will stimulate demand for capital from technology companies which will continue to require access to capital to refinance existing debt, support growth and finance acquisitions. We believe that periods of market volatility, such as the current period of market volatility caused, in part, by elevated inflation, rising interest rates, and current geopolitical conditions, have accentuated the advantages of private credit. The availability of capital in the liquid credit market is highly sensitive to market conditions whereas we believe private lending has proven to be a stable and reliable source of capital through periods of volatility. We believe the opportunity set for private credit will continue to expand even as the public markets remain open. Financial sponsors and companies today are familiar with direct lending and have seen firsthand the strong value proposition that a private solution can offer. Scale, certainty of execution and flexibility all provide borrowers with a compelling alternative to the syndicated and high yield markets. Based on our experience, there is an emerging trend where higher quality credits that have traditionally been issuers in the syndicated and high yield markets are increasingly seeking private solutions independent of credit market conditions. In our view, this is supported by financial sponsors wanting to work with collaborative financing partners that have scale and breadth of capabilities. We believe the large amount of uninvested capital held by funds of private equity firms, estimated by Preqin Ltd., an alternative assets industry data and research company, to be $2.7 trillion as of December 31, 2023, coupled with a growing focus on technology investing by private equity sponsors, will continue to drive deal activity. We expect that technology companies, private equity sponsors, venture capital firms, and entrepreneurs will continue to seek partners to provide flexible financing for their businesses with debt and equity investments provided by companies such as us.

Current wording

Secular Trends Supporting Growth for Private Credit. According to Gartner, a research and advisory company, global technology spend was $4.7 trillion in 2023 and is expected to grow to more than $5.1 trillion in 2024. We believe global demand for technology products and services will continue to grow rapidly, and that growth will stimulate demand for capital from technology companies which will continue to require access to capital to refinance existing debt, support growth and finance acquisitions. We believe that periods of market volatility, such as the current period of market volatility caused, in part, by elevated inflation and interest rates, and current geopolitical conditions, have accentuated the advantages of private credit. The availability of capital in the liquid credit market is highly sensitive to market conditions whereas we believe private lending has proven to be a stable and reliable source of capital through periods of volatility. We believe the opportunity set for private credit will continue to expand even as the public markets remain open. Financial sponsors and companies today are familiar with direct lending and have seen firsthand the strong value proposition that a private solution can offer. Scale, certainty of execution and flexibility all provide borrowers with a compelling alternative to the syndicated and high yield markets. Based on our experience, there is an emerging trend where higher quality credits that have traditionally been issuers in the syndicated and high yield markets are increasingly seeking private solutions independent of credit market conditions. In our view, this is supported by financial sponsors wanting to work with collaborative financing partners that have scale and breadth of capabilities. We believe the large amount of uninvested capital held by funds of private equity firms, estimated by Preqin Ltd., an alternative assets industry data and research company, to be $2.7 trillion as of December 31, 2023, coupled with a growing focus on technology investing by private equity sponsors, will continue to drive deal activity. We expect that technology companies, private equity sponsors, venture capital firms, and entrepreneurs will continue to seek partners to provide flexible financing for their businesses with debt and equity investments provided by companies such as us.

Previous wording

Compelling Business Models. We believe that the products and services that technology companies provide often have high switching costs and are fundamental to the operations and success of their customers. We generally invest in dominant or growing players in niche markets that are selling products to established customer bases. As a result, technology companies have attributes that make them compelling investments, including strong customer retention rates, and highly recurring and predictable revenue. Further, technology companies are typically highly capital efficient, with limited capital expenditures and high free cash flow conversion. In addition, the replicable nature of technology products creates substantial operating leverage which typically results in strong profitability.

Current wording

Compelling Business Models. We believe that the products and services that enterprise software provide often have high switching costs and are fundamental to the operations and success of their customers. We generally invest in dominant or growing players in niche markets that are selling products to established customer bases. As a result, enterprise software have attributes that make them compelling investments, including strong customer retention rates, and highly recurring and predictable revenue. Further, enterprise software are typically highly capital efficient, with limited capital expenditures and high free cash flow conversion. In addition, the replicable nature of technology products creates substantial operating leverage which typically results in strong profitability.

Previous wording

We believe that software businesses make compelling investments because they are inherently diversified into a variety of sectors due to end market applications and have been one of the more defensive sectors throughout economic cycles.

Current wording

We believe that enterprise software businesses make compelling investments because they are inherently diversified into a variety of sectors due to end market applications and have been one of the more defensive sectors throughout economic cycles.

Previous wording

Attractive Opportunities in Investments in Technology Companies. We invest in the debt and equity of technology companies. We believe that opportunities in the debt of technology companies are significant because of the floating rate structure of most senior secured debt issuances and because of the strong defensive characteristics of these types of investments. We believe that debt issues with floating interest rates offer a superior return profile as compared with fixed-rate investments, since floating rate structures are generally less susceptible to declines in value experienced by fixed-rate securities in a rising interest rate environment. Senior secured debt also provides strong defensive characteristics. Senior secured debt has priority in payment among an issuer’s security holders whereby holders are due to receive payment before junior creditors and equity holders. Further, these investments are generally secured by the issuer’s assets, which may provide protection in the event of a default.

Current wording

Attractive Opportunities in Investments in Technology Companies. We invest in the debt and equity of technology companies. We believe that opportunities in the debt of technology companies are significant because of the floating rate structure of most senior secured debt issuances and because of the strong defensive characteristics of these types of investments. We believe that debt issued with floating interest rates offer a superior return profile as compared with fixed-rate investments, since floating rate structures are generally less susceptible to declines in value experienced by fixed-rate securities in an elevated inflation and interest rates environment. Senior secured debt also provides strong defensive characteristics. Senior secured debt has priority in payment among an issuer’s security holders whereby holders are due to receive payment before junior creditors and equity holders. Further, these investments are generally secured by the issuer’s assets, which may provide protection in the event of a default.

Previous wording

As of June 30, 2024, based on fair value, our portfolio consisted of 68.7% first lien senior secured debt investments (of which 68% we consider to be unitranche debt investments (including “last out” portions of such loans)), 5.6% second lien senior secured debt investments, 5.2% unsecured debt investments, 13.3% preferred equity investments and 7.2% common equity investments.

Current wording

As of September 30, 2024, based on fair value, our portfolio consisted of 69.7% first lien senior secured debt investments (of which 69% we consider to be unitranche debt investments (including “last out” portions of such loans)), 5.0% second lien senior secured debt investments, 5.3% unsecured debt investments, 10.8% preferred equity investments and 9.2% common equity investments.

Previous wording

As of June 30, 2024, our weighted average total yield of the portfolio at fair value and amortized cost was 10.3% and 10.0%, respectively, and our weighted average yield of accruing debt and income producing securities at fair value and amortized cost was 12.0% and 12.0%, respectively(1). As of June 30, 2024, the weighted average spread of total debt investments was 6.4%.

Current wording

As of September 30, 2024, our weighted average total yield of the portfolio at fair value and amortized cost was 10.0% and 9.9%, respectively, and our weighted average yield of accruing debt and income producing securities at fair value and amortized cost was 11.4% and 11.4%, respectively(1). As of September 30, 2024, the weighted average spread of total debt investments was 6.2%.

Previous wording

As of June 30, 2024, we had investments in 141 portfolio companies with an aggregate fair value of $6.16 billion. As of June 30, 2024, we had net leverage of 0.73x debt-to-equity.

Current wording

As of September 30, 2024, we had investments in 146 portfolio companies with an aggregate fair value of $6.40 billion. As of September 30, 2024, we had net leverage of 0.78x debt-to-equity.

Previous wording

The credit quality of our portfolio has been consistent. We continue to focus on investing in industries we view as recession resistant and that we are familiar with, including service-oriented sectors such as software and healthcare, all of which serve diversified and durable end markets. Blue Owl serves as the administrative agent on many of our investments and the majority of our investments are supported by sophisticated financial sponsors who provide operational and financial resources. Our borrowers that we classify as traditional financing, which exclude certain investments that fall outside of our typical borrower profile, have a weighted average EBITDA of $186 million and we believe this scale contributes to the durability of our borrowers and their ability to adapt to different economic environments. In addition, Blue Owl continues to invest in transactions in excess of $1 billion in size, which gives us the ability to structure the terms and spreads of such deals to include wider spreads, lower loan to values, extended call protection, attractive leverage profiles and credit protection. We are continuing to monitor the effect that a continued elevated interest rate environment may have on our portfolio companies and our investment activities.

Current wording

The credit quality of our portfolio has been consistent. We continue to focus on investing in industries we view as recession resistant and that we are familiar with, including service-oriented sectors such as software and healthcare, all of which serve diversified and durable end markets. Blue Owl serves as the administrative agent on many of our investments and the majority of our investments are supported by sophisticated financial sponsors who provide operational and financial resources. Our borrowers that we classify as traditional financing, which exclude certain investments that fall outside of our typical borrower profile, have a weighted average EBITDA of $201 million and we believe this scale contributes to the durability of our borrowers and their ability to adapt to different economic environments. In addition, Blue Owl continues to invest in, and is often the lead lender or administrative agent on, transactions in excess of $1 billion in size, which gives us the ability to structure the terms of such deals to maximize deal economics and credit protection.

Previous wording

Many of the companies in which we invest are continuing to see modest growth in both revenues and EBITDA. However, in the event of further geopolitical, economic and financial market instability, in the U.S. and elsewhere, or in the event of continued high interest rates, it is possible that the results of some of the middle market companies similar to those in which we invest could be challenged. While we are not seeing signs of an overall, broad deterioration in our results or those of our portfolio companies at this time, there can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by economic conditions, which could have a negative impact on our future results.

Current wording

Many of the companies in which we invest are continuing to see modest growth in both revenues and EBITDA. However, in the event of further geopolitical, economic and financial market instability, in the U.S. and elsewhere, it is possible that the results of some of the middle-market companies similar to those in which we invest could be challenged. While we are not seeing signs of an overall, broad deterioration in our results or those of our portfolio companies at this time, there can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by economic conditions, which could have a negative impact on our future results.

Previous wording

We also continue to invest in specialty financing portfolio companies, including Fifth Season Investments LLC (“Fifth Season”), LSI Financing DAC 1 (“LSI Financing”), and AAM Series 1.1 Rail and Domestic Intermodal Feeder, LLC and AAM Series 2.1 Aviation Feeder, LLC (collectively,“Amergin AssetCo”) and in the future may invest through additional specialty finance portfolio companies, joint ventures, partnerships or other special purpose vehicles. These companies may use our capital to support acquisitions which could continue to lead to increased dividend income across well-diversified underlying portfolios. See“Specialty Financing Portfolio Companies.”

Current wording

We also continue to invest in Credit SLF and specialty financing portfolio companies, including Fifth Season Investments LLC (“Fifth Season”), LSI Financing DAC 1 (“LSI Financing”), and AAM Series 1.1 Rail and Domestic Intermodal Feeder, LLC and AAM Series 2.1 Aviation Feeder, LLC (collectively,“Amergin AssetCo”) and in the future may invest through additional specialty finance portfolio companies, joint ventures, partnerships or other special purpose vehicles. These companies may use our capital to support acquisitions which could continue to lead to increased dividend income across well-diversified underlying portfolios. See“Specialty Financing Portfolio Companies.”

Previous wording

(2)Assumes each floating rate commitment is subject to the greater of the interest rate floor (if applicable) or 3-month SOFR, which was 5.27% and 5.32% as of June 30, 2023 and June 30, 2024, respectively.

Current wording

(2)Assumes each floating rate commitment is subject to the greater of the interest rate floor (if applicable) or 3-month SOFR, which was 4.59% and 5.40% as of September 30, 2024 and September 30, 2023, respectively.

Previous wording

(1)68% and 74% of which we consider unitranche loans as of June 30, 2024 and December 31, 2023, respectively.

Current wording

(1)69% and 74% of which we consider unitranche loans as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

The Adviser focuses on downside protection by leveraging existing rights available under our credit documents; however, for investments that are significantly underperforming or which may need to be restructured, the Adviser's workout team partners with the investment team and all material amendments, waivers and restructurings require the approval of a majority of the Technology Lending Investment Committee. As of June 30, 2024, two of our portfolio companies are on non-accrual. Our average annual gain/(loss) ratio is 0.38%.

Current wording

The Adviser focuses on downside protection by leveraging existing rights available under our credit documents; however, for investments that are significantly underperforming or which may need to be restructured, the Adviser's workout team partners with the investment team and all material amendments, waivers and restructurings require the approval of a majority of the Technology Lending Investment Committee. As of September 30, 2024, one of our portfolio companies is on non-accrual. Our average annual gain/(loss) ratio is 0.19%.

Previous wording

Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including the level of new investment commitments, expenses, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. For the three and six months ended June 30, 2024, our net asset value per share decreased, primarily driven by unrealized depreciation in our portfolio.

Current wording

Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including the level of new investment commitments, expenses, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. For the three months ended September 30, 2024, our net asset value per share increased, primarily driven by unrealized appreciation in our portfolio. For the nine months ended September 30, 2024, our net asset value per share decreased, primarily driven by realized losses in our portfolio.

Previous wording

Investment income was $174.2 million for the three months ended June 30, 2024, relatively consistent with $171.2 million for the three months ended June 30, 2023. Included in interest income are other fees such as prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns. Income generated from these fees increased from $2.3 million to $7.2 million for the three months ended June 30, 2023 and 2024, respectively. For the three months ended June 30, 2023 and 2024, there were one-time prepayment fees of $0.5 million and $0.1 million, respectively. Other income increased period-over-period due to an increase in incremental fee income, which are fees that are generally available to us as a result of closing investments and generally paid at the time of closing or as a result of episodic amendments made to terms of our existing debt investments. PIK interest income as a percentage of total investment income decreased from 18.6% for the three months ended June 30, 2023 to 17.9% for the three months ended June 30,

Current wording

Investment income was $170.9 million for the three months ended September 30, 2024, relatively consistent with $173.0 million for the three months ended September 30, 2023. Included in interest income are other fees such as prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns. Income generated from these fees increased from $2.8 million to $3.6 million for the three months ended September 30, 2023 and 2024, respectively. For the three months ended September 30, 2023, there were one-time prepayment fees of $0.6 million. For the three months ended September 30, 2024, there were no one-time prepayment fees. Other income, which is comprised of fees that are generally available to us as a result of closing investments and paid at the time of closing, remained relatively flat period-over-period. PIK interest income as a percentage of total investment income increased from 13.5% for the three months ended September 30, 2023 to 14.9% for the three months ended September 30, 2024, primarily driven by an increase in PIK interest earning investments in our portfolio. PIK dividend income as a percentage of total investment income increased to 6.1% for the three months ended September 30, 2024 from 5.1% for the three months ended September 30, 2023. We expect that investment income will vary based on a variety of factors including the pace of our originations and repayments.

Previous wording

Investment income increased to $346.4 million for the six months ended June 30, 2024 from $332.7 million for the six months ended June 30, 2023 primarily due to an increase in dividends received from certain of our equity investments. Included in interest income are other fees such as prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns. Income generated from these fees increased from $2.3 million to $9.5 million for the six months ended June 30, 2023 and 2024, respectively. For the six months ended June 30, 2023 and 2024, there were one-time prepayment fees of approximately $0.5 million and $0.7 million, respectively. Payment-in-kind income decreased from approximately 23.8% of investment income for the six months ended June 30, 2023 to approximately 22.6% of investment income for the six months ended June 30, 2024. Other income increased period-over-period due to a increase in incremental fee income, which are fees that are generally available to us as a result of closing investments and generally paid at the time of closing. We expect that investment income will vary based on a variety of factors including the pace of our originations and repayments.

Current wording

Investment income increased to $517.3 million for the nine months ended September 30, 2024 from $505.7 million for the nine months ended September 30, 2023 primarily due to an increase in dividends received from certain of our equity investments. Included in interest income are other fees such as prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns. Income generated from these fees increased from $5.1 million to $13.1 million for the nine months ended September 30, 2023 and 2024, respectively. For the nine months ended September 30, 2023 and 2024, there were one-time prepayment fees of approximately $1.1 million and $0.7 million, respectively. Payment-in-kind income was approximately 22.1% of investment income for the nine months ended September 30, 2023, consistent with approximately 22.1% of investment income for the nine months ended September 30, 2024. Other income increased period-over-period due to an increase in incremental fee income, which are fees that are generally available to us as a result of closing investments and generally paid at the time of closing. We expect that investment income will vary based on a variety of factors including the pace of our originations and repayments.

Previous wording

Total expenses decreased to $146.3 million for the six months ended June 30, 2024 from $157.5 million for the six months ended June 30, 2023 primarily due to decreases in management fees and incentive fees, partially offset by an increase in interest expense. The increase in interest expense was mainly driven by an increase in the average interest rate to 6.1% from 5.9% period over period. The decrease in incentive fees was driven by reversals of previously recorded capital gains incentive fees recognized during the period. As a percentage of total assets, professional fees, directors’ fees and other general and administrative expenses remained relatively consistent period over period.

Current wording

Total expenses increased to $75.8 million for the three months ended September 30, 2024 from $73.4 million for the three months ended September 30, 2023 primarily due to increases in incentive fees, partially offset by a decrease in management fees and interest expense. The decrease in interest expense was primarily due to a decrease in the average interest rate to 6.2% from 6.3% period over period and a decrease in average daily borrowings to $2.93 billion from $2.94 billion. The increase in incentive fees was driven by reversals of previously recorded capital gains incentive fees recognized during the prior period. As a percentage of total assets, management fees, professional fees, directors’ fees and other general and administrative expenses remained relatively consistent period over period.

Previous wording

Total expenses decreased to $69.9 million for the three months ended June 30, 2024 from $80.7 million for the three months ended June 30, 2023 primarily due to decreases in management fees, incentive fees, and interest expense. The decrease in interest expense was primarily due to a decrease in average daily borrowings to $2.96 billion from $3.03 billion, partially offset by an increase in the average interest rate to 6.3% from 6.1% period over period. The decrease in incentive fees was driven by reversals of previously recorded capital gains incentive fees recognized during the period. As a percentage of total assets, management fees, professional fees, directors’ fees and other general and administrative expenses remained relatively consistent period over period.

Current wording

Total expenses decreased to $222.1 million for the nine months ended September 30, 2024 from $230.8 million for the nine months ended September 30, 2023 primarily due to decreases in interest expense, management fees and incentive fees. The decrease in interest expense was mainly driven by a decrease in average daily borrowings to $2.96 billion from $3.06 billion, partially offset by an increase in the average interest rate to 6.2% from 6.1% period over period. The decrease in incentive fees was driven by reversals of previously recorded capital gains incentive fees recognized during the period. As a percentage of total assets, professional fees, directors’ fees and other general and administrative expenses remained relatively consistent period over period.

Previous wording

We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our shareholders in each taxable year generally at least 90% of our investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. In addition, a RIC may, in certain cases, satisfy this distribution requirement by distributing dividends relating to a taxable year after the close of such taxable year under the “spillover dividend” provisions of subchapter M. As of June 30, 2024 we have generated undistributed taxable earnings “spillover” of $1.33 per share.To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders, which generally relieves us from U.S. federal income taxes at corporate rates.

Current wording

We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our shareholders in each taxable year generally at least 90% of our investment company taxable income, as defined by the Code, and net tax-exempt income for that taxable year. In addition, a RIC may, in certain cases, satisfy this distribution requirement by distributing dividends relating to a taxable year after the close of such taxable year under the “spillover dividend” provisions of subchapter M. As of September 30, 2024 we have generated undistributed taxable earnings “spillover” of $1.36 per share.To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders, which generally relieves us from U.S. federal income taxes at corporate rates.

Previous wording

For the three and six months ended June 30, 2024, we accrued U.S. federal excise tax of $2.5 million and $5.7 million, respectively. For the three and six months ended June 30, 2023 we accrued U.S. federal excise tax of $3.3 million and $6.4 million, respectively.

Current wording

For the three and nine months ended September 30, 2024, we accrued U.S. federal excise tax of $2.8 million and $8.6 million, respectively. For the three and nine months ended September 30, 2023 we accrued U.S. federal excise tax of $2.6 million and $9.0 million, respectively.

Previous wording

For the six months ended June 30, 2023, the net unrealized gain was primarily driven by an increase in the fair value of our investments as compared to December 31, 2022. As of June 30, 2023, the fair value of our debt investments as a percentage of principal was 98.6%, as compared to 97.9% as of December 31, 2022. The primary drivers of our portfolio’s unrealized gains were current market conditions and reversals of prior period unrealized losses that were realized during the year in connection with the restructuring of certain debt investments. The ten largest contributors to the change in net unrealized gain (loss) on investments during the period consisted of the following:

Current wording

For the three months ended September 30, 2024, the net unrealized gain was primarily driven by an increase in the fair value of our investments as compared to June 30, 2024 and a reversal of a prior period unrealized loss that was realized during the period in connection with the restructuring of a debt investment. As of September 30, 2024, the fair value of our debt investments as a percentage of principal was 99.2%, as compared to 97.6% as of June 30, 2024. The ten largest contributors to the change in net unrealized gain (loss) on investments during the following period consisted of the following:

Previous wording

For the three months ended June 30, 2023, the net unrealized gain was primarily driven by an increase in the fair value of our investments as compared to March 31, 2023. As of June 30, 2023, the fair value of our debt investments as a percentage of principal was 98.6%, as compared to 98.6% as of March 31, 2023. The primary drivers of our portfolio’s unrealized gains were current market conditions and reversals of prior period unrealized losses that were realized during the period. The ten largest contributors to the change in net unrealized gain (loss) on investments during the following period consisted of the following:

Current wording

For the three months ended September 30, 2023, the net unrealized loss was primarily driven by a decrease in the fair value of our investments as compared to June 30, 2023. As of September 30, 2023, the fair value of our debt investments as a percentage of principal was 98.6%, as compared to 98.6% as of June 30, 2023. The primary drivers of our portfolio's unrealized losses were decreases in the fair value of certain equity investments and reversals of prior period unrealized gains that were realized during the period. The ten largest contributors to the change in net unrealized gain (loss) on investments during the following period consisted of the following:

Previous wording

For the six months ended June 30, 2024, the net unrealized loss was primarily driven by a decrease in the fair value of our investments as compared to December 31, 2023. The primary drivers of our portfolio’s unrealized losses were decreases in the fair value of certain debt and equity investments, partially offset by reversals of prior period unrealized losses that were realized during the period and the impact of credit spreads tightening across the broader markets as compared to December 31, 2023. The ten largest contributors to the change in net unrealized gain (loss) on investments during the period consisted of the following:

Current wording

For the nine months ended September 30, 2024, the net unrealized gain was primarily driven by an increase in the fair value of our investments as compared to December 31, 2023. The primary drivers of our portfolio’s unrealized gains were increases in the fair value of certain debt and equity investments and reversals of prior period unrealized losses that were realized during the period. The ten largest contributors to the change in net unrealized gain (loss) on investments during the period consisted of the following:

Previous wording

For the three months ended June 30, 2024, the net unrealized loss was primarily driven by a decrease in the fair value of our investments as compared to March 31, 2024. As of June 30, 2024, the fair value of our debt investments as a percentage of principal was 97.6%, as compared to 99.0% as of March 31, 2024. The primary drivers of our portfolio’s unrealized losses were decreases in the fair value of certain debt and equity investments as compared to March 31, 2024, partially offset by credit spreads tightening across the broader markets and an increase in the fair value of certain equity investments. The ten largest contributors to the change in net unrealized gain (loss) on investments during the following period consisted of the following:

Current wording

For the nine months ended September 30, 2023, the net unrealized loss was primarily driven by a decrease in the fair value of our investments as compared to December 31, 2022. As of September 30, 2023, the fair value of our debt investments as a percentage of principal was 98.6%, as compared to 97.9% as of December 31, 2022. The primary drivers of our portfolio's unrealized losses were decreases in the fair value of certain equity investments and reversals of prior period unrealized gains that were realized during the period, partially offset by reversals of prior period unrealized losses that were realized during the period and the impact of credit spreads tightening across the broader market as compared to December 31, 2022. The ten largest contributors to the change in net unrealized gain (loss) on investments during the period consisted of the following:

Previous wording

Since we began investing in 2018 through June 30, 2024, our exited investments have resulted in an aggregate cash flow realized gross internal rate of return to us of approximately 10.9% (based on total capital invested of $3.94 billion and total proceeds from these exited investments of $4.79 billion).

Current wording

Since we began investing in 2018 through September 30, 2024, our exited investments have resulted in an aggregate cash flow realized gross internal rate of return to us of approximately 10.4% (based on total capital invested of $4.00 billion and total proceeds from these exited investments of $4.84 billion).

Previous wording

We may from time to time enter into additional credit facilities, increase the size of our existing credit facilities or issue additional debt securities. Additional financings could include SPV drop down facilities and unsecured notes. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at least 150%. In addition, from time to time, we may seek to retire, repurchase, or exchange debt securities in open market purchases or by other means, including privately negotiated transactions, in each case dependent on market conditions, liquidity, contractual obligations, and other matters. The amounts involved in any such transactions, individually or in the aggregate, may be material. As of June 30, 2024 and December 31, 2023, our asset coverage ratio was 219% and 217%, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund. Our current target ratio is 0.90x to 1.25x.

Current wording

We may from time to time enter into additional credit facilities, increase the size of our existing credit facilities, enter into additional debt securitization transactions or issue additional debt securities. Additional financings could include SPV drop down facilities and unsecured notes. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at least 150%. In addition, from time to time, we may seek to retire, repurchase, or exchange debt securities in open market purchases or by other means, including privately negotiated transactions, in each case dependent on market conditions, liquidity, contractual obligations, and other matters. The amounts involved in any such transactions, individually or in the aggregate, may be material. As of September 30, 2024 and December 31, 2023, our asset coverage ratio was 218% and 217%, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund. Our current target ratio is 0.90x to 1.25x.

Previous wording

Cash as of June 30, 2024, taken together with our available debt capacity of $844.0 million, is expected to be sufficient for our investing activities and to conduct our operations in the near term. Our long-term cash needs will include principal payments on outstanding indebtedness and funding of additional portfolio investments. Funding for long-term cash needs will come from unused net proceeds from financing activities. We believe that our liquidity and sources of capital are adequate to satisfy our short and long-term cash requirements. We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to us in sufficient amounts in the future.

Current wording

As of September 30, 2024, cash, taken together with our available debt capacity of $763.5 million, is expected to be sufficient for our investing activities and to conduct our operations in the near term. Our long-term cash needs will include principal payments on outstanding indebtedness and funding of additional portfolio investments. Funding for long-term cash needs will come from unused net proceeds from financing activities. We believe that our liquidity and sources of capital are adequate to satisfy our short and long-term cash requirements. We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to us in sufficient amounts in the future.

Previous wording

As of June 30, 2024, we had $331.2 million in cash. During the period ended June 30, 2024, cash provided by operating activities was $56.0 million, primarily as a result of funding portfolio investments of $939.7 million, offset by sales of portfolio investments of $904.3 million and other operating activities of $91.4 million. Lastly, cash used in financing activities was $193.8 million during the period, which was the result of proceeds from borrowings on our credit facilities of $76.8 million, net of repayments and debt issuance costs of $157.7 million and $0.6 million, respectively, and distributions paid of $112.4 million.

Current wording

As of September 30, 2024, we had $186.5 million in cash and restricted cash. During the nine months ended September 30, 2024, $97.6 million in cash was used in operating activities, primarily as a result of funding portfolio investments of $1,430.0 million, offset by sell downs and repayments of $1,235.7 million and other operating activity of $96.7 million. Lastly, cash provided by financing activities was $185.0 million during the period, which was the result of proceeds from borrowings on our credit facilities of $156.8 million, net of repayments and debt issuance costs of $167.7 million and $0.7 million, respectively, and distributions paid of $173.3 million.

Previous wording

(3)Includes the unrealized translation gain (loss) on borrowings denominated in foreign currencies.

Current wording

(2)Includes the unrealized translation gain (loss) on borrowings denominated in foreign currencies.

Previous wording

Rating Agency (or if Kroll Bond Rating Agency ceases to rate the June 2025 Notes or fails to make a rating of the June 2025 Notes publicly available for reasons outside of our control, a “nationally recognized statistical rating organization,” as defined in Section 3(a)(62) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) selected by us as a replacement agency for Kroll Bond Rating Agency) (an “Interest Rate Adjustment Event”), the interest rate on the June 2025 Notes will increase to 7.50% from the date of the Interest Rate Adjustment Event until the date on which the June 2025 Notes next again receive an investment grade rating. The June 2025 Notes are our direct, general unsecured obligations and rank senior in right of payment to all of our future indebtedness or other obligations that are expressly subordinated, or junior, in right of payment to the June 2025 Notes. The June 2025 Notes rank pari passu, or equal, in right of payment with all of our existing and future indebtedness or other obligations that are not so subordinated, or junior. The June 2025 Notes rank effectively subordinated, or junior, to any of our future secured indebtedness or other obligations. The June 2025 Notes rank structurally subordinated, or junior, to all existing and future indebtedness and other obligations (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.

Current wording

The June 2025 Notes were issued pursuant to an Indenture dated as of June 12, 2020 (the “Base Indenture”), between us and Computershare Trust Company, N.A., as successor to Wells Fargo Bank, National Association, as trustee (the “Trustee”), and a First Supplemental Indenture, dated as of June 12, 2020 (the “First Supplemental Indenture” and together with the Base Indenture, the “June 2025 Indenture”), between us and the Trustee. The June 2025 Notes will mature on June 30, 2025 and may be redeemed in whole or in part at our option at any time or from time to time at the redemption prices set forth in the June 2025 Indenture. The June 2025 Notes initially bear interest at a rate of 6.75% per year payable semi-annually on June 30 and December 30 of each year, commencing on December 30, 2020. As described in the First Supplemental Indenture, if the June 2025 Notes cease to have an investment grade rating from Kroll Bond Rating Agency (or if Kroll Bond Rating Agency ceases to rate the June 2025 Notes or fails to make a rating of the June 2025 Notes publicly available for reasons outside of our control, a “nationally recognized statistical rating organization,” as defined in Section 3(a)(62) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) selected by us as a replacement agency for Kroll Bond Rating Agency) (an “Interest Rate Adjustment Event”), the interest rate on the June 2025 Notes will increase to 7.50% from the date of the Interest Rate Adjustment Event until the date on which the June 2025 Notes next again receive an investment grade rating. The June 2025 Notes are our direct, general unsecured obligations and rank senior in right of payment to all of our future indebtedness or other obligations that are expressly subordinated, or junior, in right of payment to the June 2025 Notes. The June 2025 Notes rank pari passu, or equal, in right of payment with all of our existing and future indebtedness or other obligations that are not so subordinated, or junior. The June 2025 Notes rank effectively subordinated, or junior, to any of our future secured indebtedness or other obligations. The June 2025 Notes rank structurally subordinated, or junior, to all existing and future indebtedness and other obligations (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.

Previous wording

The June 2026 Notes were issued pursuant to the Base Indenture and a Third Supplemental Indenture, dated as of December 17, 2020 (the “Third Supplemental Indenture” and together with the Base Indenture, the “June 2026 Indenture”), between us and the Trustee. The June 2026 Notes will mature on June 17, 2026 and may be redeemed in whole or in part at our option at any time or from time to time at the redemption prices set forth in the June 2026 Indenture. The June 2026 Notes bear interest at a rate of 3.75% per year payable semi-annually on June 17 and December 17 of each year, commencing on June 17, 2021. The June 2026 Notes are our direct, general unsecured obligations and rank senior in right of payment to all of our future indebtedness or other obligations that are expressly subordinated, or junior, in right of payment to the June 2026 Notes. The June 2026 Notes rank pari passu, or equal, in right of payment with all of our existing and future indebtedness or other obligations that are not so subordinated, or junior to the June 2026 Notes. The June 2026 Notes rank effectively subordinated, or junior, to any of our future secured indebtedness or other obligations (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness. The June 2026 Notes rank structurally subordinated, or junior, to all existing and future indebtedness and other obligations (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.

Current wording

The June 2026 Notes were issued pursuant to the Base Indenture and a Third Supplemental Indenture, dated as of December 17, 2020 (the “Third Supplemental Indenture” and together with the Base Indenture, the “June 2026 Indenture”), between us and the Trustee. The June 2026 Notes will mature on June 17, 2026 and may be redeemed in whole or in part at our option at any time or from time to time at the redemption prices set forth in the June 2026 Indenture. The June 2026 Notes bear interest at a rate of 3.75% per year payable semi-annually on June 17 and December 17 of each year, commencing on June 17, 2021. The June 2026 Notes are our direct, general unsecured obligations and rank senior in right of payment to all of our future indebtedness or other obligations that are expressly subordinated, or junior, in right of payment to the June 2026 Notes. The June 2026 Notes rank pari passu, or equal, in right of payment with all of our existing and future indebtedness or other obligations that are not so subordinated, or junior to the June 2026 Notes. The June 2026 Notes rank effectively subordinated, or junior, to any of our future secured indebtedness or other obligations (including unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness. The June