Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
We are subject to financial
market risks, including changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from
changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income will
be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance
that a significant change in market interest rates will not have a material adverse effect on our net investment income.
Assuming that the consolidated
statement of assets and liabilities as of December 31, 2023 was to remain constant and that we took no actions to alter our existing
interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rate.
Change in Interest Rates
Increase
(Decrease)
in Interest
Income
Increase
(Decrease)
in Interest
Expense
Net
Increase
(Decrease)
in Net
Investment
Income
Down 25 basis points
$ (2,707,525 )
$ (1,600,625 )
$ (1,106,900 )
Up 100 basis points
10,828,317
6,402,500
4,425,817
Up 200 basis points
21,540,626
12,805,000
8,735,626
Up 300 basis points
32,151,029
19,207,500
12,943,529
The data in the table are
based on our current statement of assets and liabilities. As of December 31, 2023, the Company had $14.6 million in net purchases that
had not yet settled and $20.1 million in unfunded commitments. After settlement of these purchases, the change in interest expense will
be larger as a result of the increase in the amount borrowed under the BoA Credit Facility or WF Credit Facility, as applicable. The
table does not include any change in dividend income from our money market investments.
In addition, any investments
we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These
risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign
exchange controls, and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies
involved.
We measure exposure to interest
rate and currency exchange rate fluctuations on an ongoing basis and may hedge against interest rate and currency exchange rate fluctuations
by using standard hedging instruments such as futures, options, swaps and forward contracts and credit hedging contracts, such as credit
default swaps, in each case, subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes
in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of
investments with fixed interest rates.
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