Tax Distributions Information
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Tax Reporting Information
In addition to the letter to stockholders on the tax status of distributions
below, details are provided regarding Hercules' year-end distributions,
and there is a brief description of the various types of taxable income, distributions,
and non-taxable return of capital distributions. These may result and will be reported
as such to US individual taxpayers on Form 1099 DIV in March of the calendar year
following the year of distribution. For tax purposes, Hercules is a regulated investment
company ("RIC") and is designating the types of distributions you receive as a stockholder
in accordance with Subchapter M of the Internal Revenue Code of 1986, as amended
("IRC"), in the following manner:
Ordinary Income:
This type of income arises from the receipt of interest income on debt securities
held by Hercules less expenses. Hercules is considered to be a "pass-through entity"
from a tax perspective, which means that this type of income is the same as if the
interest income was received directly from the borrower. This type of income is
reported in Box 1a of Form 1099.
Distributions:
This type of income arises from the receipt of distribution income on stock held by
Hercules. As with interest income, it is treated as if the individual taxpayer held
the stock directly. This income is considered as "qualified" for the reduced maximum
tax rate (20% maximum rate) on distributions in the United States. This type of income
is reported in Box 1b of Form 1099.
Hercules pays its distribution annually in arrears. Distributions are paid out of the
assets legally available for distribution. Distributions, if any, are determined by
the Hercules board of directors.
The following is a table representing distributions paid by Hercules Capital:
| Year |
Amount Per Share |
Taxable Percentage |
Qualified Distribution Percentage |
Non-Qualified
Distribution Percentage |
Return of Capital Percentage |
Capital Gains |
| 2006
|
$1.20 |
88.51% |
0.00% |
88.51% |
11.49% |
0.00% |
| 2007
|
$1.20 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2008
|
$1.32 |
100.00% |
0.00% |
94.22% |
0.00% |
5.78% |
| 2009
|
$1.26 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2010
|
$0.80 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2011
|
$0.88 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2012
|
$0.95 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2013
|
$1.11 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2014
|
$1.24 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2015
|
$1.24 |
100.00% |
0.00% |
82.50% |
0.00% |
17.50% |
| 2016
|
$1.24 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2017
|
$1.24 |
100.00% |
0.00% |
87.20% |
0.00% |
12.80% |
| 2018
|
$1.24 |
100.00% |
0.00% |
100.00% |
0.00% |
0.00% |
| 2019
|
$1.33 |
100.00% |
0.00% |
91.43% |
0.00% |
8.57% |
In addition, although we currently intend to distribute realized net capital
gains (i.e., net long-term capital gains in excess of short-term capital losses),
if any, at least annually, out of the assets legally available for such distributions,
we may decide in the future to retain such capital gains for investment.
Short Term Capital Gains:
This type of income arises from the sale of a security held for less than one year.
This income is the same as if the tax payer sold a security directly owned. This
type of income is considered ordinary income and is reported in Box 1a of Form 1099.
Long Term Capital Gains:
This type of income arises from the sale of a security held for over one year. This
income is the same as if the tax payer sold a security directly owned. This type
of income is considered a capital gain income and is reported in Box 2a of Form
1099.
Return of Capital:
Sometimes due to tax timing differences or other circumstances, Hercules may make
a distribution that is not sourced from taxable income but represents a return of
your investment or capital. There is no tax liability resulting from a return of
capital. This type of distribution is reported in Box 3 of Form 1099.
This tax information is not intended to constitute tax, legal, investment, or
other professional advice. This is general information and should not be relied
upon for tax purposes. Shareholders should consult their tax advisor for tax guidance
pertinent to specific facts and circumstances.
If you have questions about the tax status of your distributions, please contact
the American Transfer & Trust Company at (718) 921-8200. You may also contact Hercules
Capital's Investor Relations Department directly at (650) 289-3060.