Investor Presentaiton

REGULATION AND STRUCTURE Hercules is an Internally Managed BDC under the 1940 Act and a RIC for Tax Purposes Business Development Company (BDC) Regulated by the SEC under the Investment Company Act of 1940 ■Leverage limited to approximately 2:1 debt/equity, unless an SEC exemptive order exists to exclude SBA debt ■ Investments are required to be carried at fair value Majority of Board of Directors must be independent ■ Offer managerial assistance to portfolio companies Regulated Investment Company (RIC) ■ Distribute taxable income as dividend distributions to shareholders ■Mandates asset diversification ■ Eliminates corporate taxation ■ Allows for the retention of capital gains and/or spillover of taxable income Small Business Investment Company (SBIC) ■ One Small Business Investment Company ("SBIC") license granted through the U.S. Small Business Administration ("SBA") ■ Currently, $99.0 million exemption from SEC leverage restrictions for BDCs, excludes all SBIC debt from BDC 2:1 leverage test Xercules. CAPITAL 47

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