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Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company is an investment company following accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies. The Company has consolidated the results of its wholly owned subsidiaries in its consolidated financial statements in accordance with ASC Topic 946. The following is a summary of the significant accounting policies of the Company.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well the reported amounts of revenues and expenses during the reporting periods presented. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates and such differences could be material.

Investment Valuation

Investment Valuation

Pursuant to Rule 2a-5 (the “Rule”) under the 1940 Act, the Board of Directors designated the Advisor as the Company’s valuation designee (the “Valuation Designee”) to perform certain fair value functions, including performing fair value determinations and has approved policies and procedures adopted by the Advisor to seek to ensure compliance with the requirements of the Rule.

The Company’s investments are generally held by the Company's subsidiaries. Investments are recorded at fair value in accordance with GAAP, based upon the principles and methods of valuation set forth in the policies adopted by the Valuation Designee and approved by the Board of Directors. Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.

All investments are valued at least quarterly based on quotations or other affirmative pricing from independent third-party sources, with the exception of investments priced directly by the Valuation Designee which in the aggregate comprise less than 5% of the assets of the Company. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued using the closing price on the date of valuation. Investments not listed on a recognized exchange or market quotation system, but for which reliable market quotations are readily available are valued using prices provided by a nationally recognized pricing service or by using quotations from broker-dealers.

Investments for which market quotations are either not readily available or are determined to be unreliable are priced at fair value using affirmative valuations performed by independent valuation services approved by the Valuation Designee or, for investments aggregating less than 5% of the total assets of the Company, using valuations determined directly by the Valuation Designee. Such valuations are determined under documented valuation policies and procedures reviewed and approved by a committee established by the Valuation Designee (the “Valuation Committee”).

Generally, to increase objectivity in valuing the investments, the Valuation Designee will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Valuation Designee’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future. The values assigned to investments are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. Such circumstances may include macroeconomic, geopolitical and other events and conditions that may significantly impact the profitability or viability of businesses in which the Company is invested, and therefore may significantly impact the return on the Company’s investments. The foregoing policies apply to all investments, including any in companies and groups of affiliated companies aggregating more than 5% of the Company’s assets.

 

2. Summary of Significant Accounting Policies — (continued)

Fair valuations of investments in each asset class are determined using one or more methodologies including market quotations, the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. Such information may include observed multiples of earnings and/or revenues at which transactions in securities of comparable companies occur, with appropriate adjustments for differences in company size, operations or other factors affecting comparability.

The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. The discount rates used for such analyses reflect market yields for comparable investments, considering such factors as relative credit quality, capital structure, and other factors.

In following these approaches, the types of factors that may be taken into account also include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, comparable costs of capital, the principal market in which the investment trades and enterprise values, among other factors.

Investments may be categorized based on the types of inputs used in valuing such investments. The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.

At December 31, 2023, the Company's investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt (1)

 

 

Other
Corporate
Debt
(2)

 

 

Equity
Securities

 

 

Total

 

1

 

Quoted prices in active markets for identical
   assets

 

$

 

 

$

 

 

$

565,860

 

 

$

565,860

 

2

 

Other direct and indirect observable market
   inputs
(3)

 

 

47,284,029

 

 

 

 

 

 

 

 

 

47,284,029

 

3

 

Independent third-party valuation sources
   that employ significant unobservable inputs

 

 

1,289,587,391

 

 

 

52,318,937

 

 

 

164,340,278

 

 

 

1,506,246,606

 

3

 

Valuation Designee valuations with significant unobservable inputs

 

 

 

 

 

 

 

 

844,615

 

 

 

844,615

 

Total

 

 

 

$

1,336,871,420

 

 

$

52,318,937

 

 

$

165,750,753

 

 

$

1,554,941,110

 

 

(1)
Includes senior secured loans
(2)
Includes senior secured notes, unsecured debt and subordinated debt
(3)
For example, quoted prices in inactive markets or quotes for comparable investments

 

2. Summary of Significant Accounting Policies — (continued)

Unobservable inputs used in the fair value measurement of Level 3 investments as of December 31, 2023 included the following:

 

Asset Type

 

Fair Value

 

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Avg.) (1)

Bank Debt

 

$

1,132,856,927

 

 

Income approach

 

Discount rate

 

9.8% - 29.7% (14.3%)

 

 

67,806,880

 

 

Market quotations

 

Indicative bid/ask quotes

 

1 (1)

 

 

81,471,300

 

 

Market comparable companies

 

Revenue multiples

 

0.6x - 3.3x (1.4x)

 

 

1,324,151

 

 

Market comparable companies

 

EBITDA multiples

 

3.8x (3.8x)

 

 

 

4,659,545

 

 

Option Pricing Model

 

EBITDA/Revenue multiples

 

1.9x (1.9x)

 

 

 

 

 

 

Implied volatility

 

65.0% (65.0%)

 

 

 

 

 

 

Term

 

1.3 years (1.3 years)

 

 

 

1,468,588

 

 

Asset approach (2)

 

N/A

 

N/A

Other Corporate Debt

 

 

52,318,937

 

 

Market comparable companies

 

Book value multiples

 

1.6x (1.6x)

Equity

 

 

9,014,890

 

 

Income approach

 

Discount rate

 

13.6% (13.6%)

 

 

 

12,886,826

 

 

Market comparable companies

 

Revenue multiples

 

0.6x - 6.0x (1.8x)

 

 

53,885,683

 

 

Market comparable companies

 

EBITDA multiples

 

3.8x - 13.4x (12.6x)

 

 

66,917,544

 

 

Market comparable companies

 

Book value multiples

 

0.9x - 1.6x (1.4x)

 

 

16,402,713

 

 

Option Pricing Model

 

EBITDA/Revenue multiples

 

1.9x - 15.3x (6.4x)

 

 

 

 

 

 

Implied volatility

 

20.0% - 65.0% (57.2%)

 

 

 

 

 

 

Term

 

0.8 years - 3.5 years (1.2 years)

 

 

2,055,657

 

 

Transaction approach (4)

 

N/A

 

N/A

 

 

4,021,580

 

 

Asset approach (3)

 

N/A

 

N/A

 

$

1,507,091,221

 

 

 

 

 

 

 

 

(1)
Weighted by fair value.
(2)
Fair value was determined using an asset approach and is based on the remaining cash held, net of all liabilities.
(3)
Fair value was determined based on the most recently available net asset value of the issuer adjusted for identified changes in the valuations of the underlying portfolio of the issuer through the measurement date.
(4)
Fair value was determined using the transaction price to acquire the position. There has been no change to the valuation based on the underlying assumptions used at the closing of such transaction.

 

2. Summary of Significant Accounting Policies — (continued)

Certain fair value measurements may employ more than one valuation technique, with each valuation technique receiving a relative weight between 0% and 100%. Generally, a change in an unobservable input may result in a change to the value of an investment as follows:

 

Input

 

Impact to Value if
Input Increases

 

Impact to Value if
Input Decreases

Discount rate

 

Decrease

 

Increase

Revenue multiples

 

Increase

 

Decrease

EBITDA multiples

 

Increase

 

Decrease

Book value multiples

 

Increase

 

Decrease

Implied volatility

 

Increase

 

Decrease

Term

 

Increase

 

Decrease

Yield

 

Increase

 

Decrease

 

 

Changes in investments categorized as Level 3 during the year ended December 31, 2023 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

 

Other
Corporate
Debt

 

 

Equity
Securities

 

 

Total

 

Beginning balance

 

$

1,258,052,376

 

 

$

68,451,437

 

 

$

187,504,790

 

 

$

1,514,008,603

 

Net realized and unrealized gains (losses)

 

 

(14,101,799

)

 

 

1,373,296

 

 

 

(34,070,836

)

 

 

(46,799,339

)

Acquisitions (1)

 

 

221,794,143

 

 

 

2,494,204

 

 

 

13,340,394

 

 

 

237,628,741

 

Dispositions

 

 

(199,873,197

)

 

 

(20,000,000

)

 

 

(1,790,374

)

 

 

(221,663,571

)

Transfers into Level 3 (2)

 

 

23,715,868

 

 

 

 

 

 

 

 

 

23,715,868

 

Reclassifications within Level 3 (3)

 

 

 

 

 

 

 

 

(643,696

)

 

 

(643,696

)

Ending balance

 

$

1,289,587,391

 

 

$

52,318,937

 

 

$

164,340,278

 

 

$

1,506,246,606

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized
appreciation/depreciation during the
period on investments still held at
period end (included in net realized and
unrealized gains/losses, above)

 

$

(22,128,377

)

 

$

 

 

$

(33,951,585

)

 

$

(56,079,962

)

 

(1)
Includes payments received in kind and accretion of original issue and market discounts.
(2)
Comprised of three investments that were transferred from Level 2 due to reduced number of market quotes.
(3)
Comprised of five investments that were reclassified to Valuation Designee Valuation.

 

2. Summary of Significant Accounting Policies — (continued)

 

 

 

Valuation Designee Valuation

 

 

 

Bank Debt

 

 

Other
Corporate
Debt

 

 

Equity
Securities

 

 

Total

 

Beginning balance

 

$

531,024

 

 

$

1,415,738

 

 

$

874,061

 

 

$

2,820,823

 

Net realized and unrealized gains (losses)

 

 

(1,400

)

 

 

(147,734

)

 

 

(67,876

)

 

 

(217,010

)

Acquisitions (1)

 

 

1,400

 

 

 

(148,751

)

 

 

 

 

 

(147,351

)

Dispositions

 

 

(531,024

)

 

 

(1,119,253

)

 

 

(605,266

)

 

 

(2,255,543

)

Reclassifications within Level 3 (2)

 

 

 

 

 

 

 

 

643,696

 

 

 

643,696

 

Ending balance

 

$

 

 

$

 

 

$

844,615

 

 

$

844,615

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized
appreciation/depreciation during the
period on investments still held at
period end (included in net realized and
unrealized gains/losses, above)

 

$

 

 

$

 

 

$

(411,701

)

 

$

(411,701

)

 

(1)
Includes payments received in kind and accretion of original issue and market discounts.
(2)
Comprised of five investments that were reclassified from Independent Third-Party Valuation.

 

 

At December 31, 2022, the Company’s investments were categorized as follows:

 

Level

 

Basis for Determining Fair Value

 

Bank Debt (1)

 

 

Other
Corporate Debt
(2)

 

 

Equity
Securities

 

 

Total

 

 1

 

Quoted prices in active markets for identical
  assets

 

$

 

 

$

 

 

$

781,051

 

 

$

781,051

 

 2

 

Other direct and indirect observable market
  inputs
(3)

 

 

91,977,164

 

 

 

 

 

 

 

 

 

91,977,164

 

 3

 

Independent third-party valuation sources that
  employ significant unobservable inputs

 

 

1,258,052,376

 

 

 

68,451,437

 

 

 

187,504,790

 

 

 

1,514,008,603

 

 3

 

Advisor valuations with significant unobservable inputs

 

 

531,024

 

 

 

1,415,738

 

 

 

874,061

 

 

 

2,820,823

 

Total

 

 

 

$

1,350,560,564

 

 

$

69,867,175

 

 

$

189,159,902

 

 

$

1,609,587,641

 

 

(1)
Includes senior secured loans.
(2)
Includes senior secured notes, unsecured debt and subordinated debt.
(3)
For example, quoted prices in inactive markets or quotes for comparable investments.

 

2. Summary of Significant Accounting Policies — (continued)

Unobservable inputs used in the fair value measurement of Level 3 investments as of December 31, 2022 included the following:

 

Asset Type

 

Fair Value

 

 

Valuation Technique

 

Unobservable Input

 

Range (Weighted Avg.) (1)

Bank Debt

 

$

1,143,846,175

 

 

Income approach

 

Discount rate

 

9.4% - 19.5% (13.8%)

 

 

82,058,774

 

 

Market quotations

 

Indicative bid/ask quotes

 

1 (1)

 

 

26,289,104

 

 

Market comparable companies

 

Revenue multiples

 

1.0x - 1.4x (1.2x)

 

 

1,324,140

 

 

Market comparable companies

 

EBITDA multiples

 

3.8x (3.8x)

 

 

 

5,065,205

 

 

Option Pricing Model

 

EBITDA/Revenue multiples

 

2.8x (2.8x)

 

 

 

 

 

 

Implied volatility

 

20.0% - 65.0% (64.5%)

 

 

 

 

 

 

Term

 

1.8 years - 2.3 years (2.2 years)

Other Corporate Debt

 

 

25,065,719

 

 

Market comparable companies

 

Book value multiples

 

1.5x (1.5x)

 

 

18,320,000

 

 

Income approach

 

Discount rate

 

15.3% (15.3%)

 

 

26,481,456

 

 

Market quotations

 

Indicative bid/ask quotes

 

1 (1)

Equity

 

 

6,752,959

 

 

Income approach

 

Discount rate

 

13.9% (13.9%)

 

 

30,823,071

 

 

Market quotations

 

Indicative bid/ask quotes

 

1 (1)

 

 

19,060,180

 

 

Option Pricing Model

 

EBITDA/Revenue multiples

 

2.5x - 12.5x (5.7x)

 

 

 

 

 

 

Implied volatility

 

40.0% - 70.0% (59.7%)

 

 

 

 

 

 

Term

 

0.3 years - 4.3 years (1.4 years)

 

 

1,878,874

 

 

Market comparable companies

 

Revenue multiples

 

0.8x - 2.8x (1.3x)

 

 

80,651,665

 

 

Market comparable companies

 

EBITDA multiples

 

3.0x - 13.5x (12.0x)

 

 

44,282,544

 

 

Market comparable companies

 

Book value multiples

 

0.9x - 1.5x (1.3x)

 

 

4,929,560

 

 

Other (2)

 

N/A

 

N/A

 

$

1,516,829,426

 

 

 

 

 

 

 

 

(1)
Weighted by fair value.
(2)
Fair value was determined based on the most recently available net asset value of the issuer adjusted for identified changes in the valuations of the underlying portfolio of the issuer through the measurement date.

 

 

2. Summary of Significant Accounting Policies — (continued)

Changes in investments categorized as Level 3 during the year ended December 31, 2022 were as follows:

 

 

 

Independent Third-Party Valuation

 

 

 

Bank Debt

 

 

Other
Corporate
Debt

 

 

Equity
Securities

 

 

Total

 

Beginning balance

 

$

1,453,211,129

 

 

$

61,266,010

 

 

$

201,713,142

 

 

$

1,716,190,281

 

Net realized and unrealized gains (losses)

 

 

(72,703,887

)

 

 

(1,717,980

)

 

 

(791,679

)

 

 

(75,213,546

)

Acquisitions (1)

 

 

316,725,939

 

 

 

8,903,407

 

 

 

6,617,242

 

 

 

332,246,588

 

Dispositions

 

 

(458,402,767

)

 

 

 

 

 

(20,079,058

)

 

 

(478,481,825

)

Transfers into Level 3 (2)

 

 

20,461,019

 

 

 

 

 

 

 

 

 

20,461,019

 

Reclassifications within Level 3 (3)

 

 

(1,239,056

)

 

 

 

 

 

45,143

 

 

 

(1,193,913

)

Ending balance

 

$

1,258,052,376

 

 

$

68,451,437

 

 

$

187,504,790

 

 

$

1,514,008,603

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized
appreciation/depreciation during the
period on investments still held at
period end (included in net realized and
unrealized gains/losses, above)

 

$

(72,087,245

)

 

$

(1,904,916

)

 

$

3,052,240

 

 

$

(70,939,921

)

 

(1)
Includes payments received in kind and accretion of original issue and market discounts
(2)
Comprised of two investments that were transferred from Level 2 due to reduced number of market quotes
(3)
Comprised of one investment that was reclassified to Advisor Valuation and one that was reclassified from Advisor Valuation

 

 

 

 

Valuation Designee Valuation

 

 

 

Bank Debt

 

 

Other
Corporate
Debt

 

 

Equity
Securities

 

 

Total

 

Beginning balance

 

$

 

 

$

2,888,000

 

 

$

2,197,030

 

 

$

5,085,030

 

Net realized and unrealized gains (losses)

 

 

(5,994

)

 

 

(15,342

)

 

 

(1,089,420

)

 

 

(1,110,756

)

Acquisitions (1)

 

 

5,994

 

 

 

 

 

 

 

 

 

5,994

 

Dispositions

 

 

(708,032

)

 

 

(1,456,920

)

 

 

(188,406

)

 

 

(2,353,358

)

Reclassifications within Level 3 (2)

 

 

1,239,056

 

 

 

 

 

 

(45,143

)

 

 

1,193,913

 

Ending balance

 

$

531,024

 

 

$

1,415,738

 

 

$

874,061

 

 

$

2,820,823

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized
appreciation/depreciation during the
period on investments still held at
period end (included in net realized and
unrealized gains/losses, above)

 

$

(5,994

)

 

$

(5,304

)

 

$

(487,476

)

 

$

(498,774

)

 

(1)
Includes payments received in kind and accretion of original issue and market discounts
(2)
Comprised of one investment that was reclassified to Advisor Valuation and one that was reclassified from Advisor Valuation
Investment Transactions

Investment Transactions

Investment transactions are recorded on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the specific identification method, which typically allocates the highest cost inventory to the basis of investments sold.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash consists of amounts held in accounts with the custodian bank. Cash equivalents consist of highly liquid investments with an original maturity of generally 60 days or less and may not be insured by the FDIC or may exceed federally insured limits. Cash equivalents are classified as Level 1 in the GAAP valuation hierarchy. There was no restricted cash at December 31, 2023 or December 31, 2022.

Restricted Investments

Restricted Investments

The Company may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Schedule of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.

Foreign Currency Investments

Foreign Currency Investments

The Company may invest in instruments traded in foreign countries and denominated in foreign currencies. Foreign currency denominated investments comprised approximately 0.5% and 0.5% of total investments at December 31, 2023 and December 31, 2022, respectively. Such positions were converted at the respective closing foreign exchange rates in effect at December 31, 2023 and December 31, 2022 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars based on the foreign exchange rates in effect on the respective dates of such transactions. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.

Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transaction clearance and settlement practices, and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.

Derivatives

Derivatives

In order to mitigate certain currency exchange and interest rate risks, the Company may enter into certain derivative transactions. All derivatives are subject to a master netting agreement and are reported at their gross amounts as either assets or liabilities in the Consolidated Statements of Assets and Liabilities. Transactions entered into are accounted for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currencies relative to the U.S. dollar. Certain derivatives may also require the Company to pledge assets as collateral to secure its obligations.

During the years ended December 31, 2023 and 2022, the Company did not enter into any derivative transactions nor hold any derivative positions.

Valuations of derivatives are determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are generally classified as Level 2 in the GAAP valuation hierarchy.

Deferred Debt Issuance Costs

Deferred Debt Issuance Costs

Certain costs incurred in connection with the issuance and/or extension of debt of the Company and its subsidiaries were capitalized and are being amortized on a straight-line basis over the estimated life of the respective instruments. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Company.

Revenue Recognition

Revenue Recognition

Interest and dividend income, including income paid in kind, is recorded on an accrual basis, when such amounts are considered collectible. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.

Certain debt investments are purchased at a discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. Discounts on the acquisition of corporate bonds are generally amortized using the effective-interest or constant-yield method assuming there are no questions as to collectability. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

Income Taxes

Income Taxes

The Company intends to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required. The income or loss of SVCP, TCPC Funding, TCPC Funding II and the SBIC is reported in the respective members' or partners’ income tax returns, as applicable. In accordance with ASC Topic 740 - Income Taxes, the Company recognizes in its consolidated financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. The tax returns of the Company, SVCP, TCPC Funding, TCPC Funding II and the SBIC remain open for examination by tax authorities for a period of three years from the date they are filed. No such examinations are currently pending. Management has analyzed tax laws and regulations and their application to the Company as of December 31, 2023, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the consolidated financial statements.

 

 

2. Summary of Significant Accounting Policies — (continued)

U.S. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. As of December 31, 2023 and December 31, 2022, the following permanent differences, primarily attributable to treatment of expenses, amortization methods for premiums and discounts on fixed income securities and investments in partnerships, were reclassified as follows:

 

 

 

December 31, 2023

 

 

December 31, 2022

 

Paid-in capital

 

$

(247,315

)

 

$

4,790,255

 

Accumulated Earnings (Loss)

 

 

247,315

 

 

 

(4,790,255

)

The tax character of distributions paid was as follows:

 

 

 

December 31, 2023

 

 

December 31, 2022

 

Ordinary income

 

$

97,626,676

 

 

$

73,364,425

 

 

$

97,626,676

 

 

$

73,364,425

 

As of December 31, 2023 and December 31, 2022, the tax components of accumulated net earnings (losses) were as follows:

 

 

 

December 31, 2023

 

 

December 31, 2022

 

Undistributed Ordinary Income

 

$

6,611,456

 

 

$

3,233,347

 

Non-Expiring Capital Loss Carryforwards (1)

 

 

(206,680,323

)

 

 

(176,325,662

)

Net Unrealized Gains (Losses) (2)

 

 

(80,030,609

)

 

 

(48,102,232

)

Total Accumulated Earnings (Loss)

 

$

(280,099,476

)

 

$

(221,194,547

)

______________

(1) Amount available to offset future realized capital gains.

(2) The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the timing and recognition of partnership income, the timing and recognition of realized gains (losses) for tax purposes and the accrual of income on securities in default.

As of December 31, 2023 and December 31, 2022, gross unrealized appreciation and depreciation based on cost of investments (including short positions and derivatives, if any) for U.S. federal income tax purposes were as follows:

 

 

 

 

December 31, 2023

 

 

December 31, 2022

 

Tax Cost

 

$

1,631,931,217

 

 

$

1,656,032,096

 

 

 

 

 

 

 

Gross Unrealized Appreciation

 

$

65,463,168

 

 

$

100,832,690

 

Gross Unrealized Depreciation

 

 

(142,453,275

)

 

 

(147,277,145

)

Net Unrealized Appreciation (Depreciation)

 

$

(76,990,107

)

 

$

(46,444,455

)

 

 

Important Tax Information (Unaudited)

The fund hereby designates the following amounts, or maximum amounts allowable by law, as interest-related dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations for the fiscal year ended December 31, 2023:

 

 

 

December 31, 2023

 

Interest Related Dividends for Non-U.S. Residents

 

$

79,168,108

 

The Fund hereby designates the following amount, or maximum amount allowable by law, as interest income eligible to be treated as a Section 163(j) interest dividend for the fiscal year ended December 31, 2023:

 

 

 

December 31, 2023

 

Section 163(j) Interest Dividends

 

 

97,582,868

 

 

2. Summary of Significant Accounting Policies — (continued)

The following amount, or maximum amount allowable by law, is hereby designated as qualified dividend income for individuals for the fiscal year ended December 31, 2023:

 

 

 

December 31, 2023

 

Qualified Dividend Income

 

$

89,494

 

 

The following percentage, or maximum percentage allowable by law, of ordinary income distributions paid during the fiscal year ended December 31, 2023 qualified for the dividends-received deduction for corporate shareholders:

 

 

 

December 31, 2023

 

Dividends-Received Deduction

 

 

0.09

%

 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2020 and January 2021, the FASB issued ASU No. 2020-04 and ASU No. 2021-01, respectively, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective and can be adopted by all entities through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which deferred the sunset day of this guidance to December 31, 2024. The Company is currently evaluating the impact of adopting ASU 2020-04 on its consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, after adoption, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or modified retrospective basis. The Company adopted ASU 2020-06 under the modified retrospective basis as of January 1, 2022. The impact of the Company’s adoption under the modified retrospective basis required an adjustment of $0.1 million to opening net assets for the remaining unamortized discount on the 2022 Convertible Notes, an increase to our debt balance in the amount of $0.1 million as a result of the recombination of the equity conversion component of the 2022 Convertible Notes, and $0.1 million lower interest expense on the Consolidated Statements of Operations. The Company’s adoption of this guidance did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”),” which clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. The Company has concluded that this guidance will not have a material impact on its consolidated financial statements.