Good day, ladies and gentlemen. And welcome to your Hercules Technology Growth Capital Q4 2012 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-session, and instructions will be given at that time. (Operator Instructions) And as a reminder, today’s conference is being recorded. And now I would like to introduce your host for today, Linda Wells.

Thank you, Operator, and good afternoon, everyone. On the call today we have Manuel Henriquez, Hercules Co-founder, Chairman and CEO; and Jessica Baron, Vice President of Finance and Chief Financial Officer. Hercules fourth quarter and full year 2012 financial results were released just after today’s market close. They can be accessed from the company’s website at www.htgc.com. We’ve arranged a replay of the call at Hercules’ web page or by using the telephone number and pass code provided in today’s earnings release. I would also like to call your attention to the Safe Harbor disclosure in our earnings release regarding forward-looking information. Actual financial results filed with the Securities and Exchange Commission may differ from those contained herein due to timing delays between the date of this release and in the confirmation and final audit results. In addition, the statements contained in this release that are not purely historical are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements including, without limitation, the risks and uncertainties, including the uncertainties surrounding the current market turbulence, and other factors we identified from time-to-time in our filings with the Securities and Exchange Commission. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate and as a result, the forward-looking statements based on those assumptions also can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this release are made as of the date hereof, and Hercules assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of related SEC filings, please visit sec.gov or visit the website www.htgc.com. I would now like to turn the call over to Manuel Henriquez, Hercules Co-founder, Chairman and CEO. Manuel?

Well, thank you, Linda. Good afternoon. And thank you everyone for joining us on the call today. As usual, I want to do a quick outline for today’s call. I want to review the summary of our very strong operating performance and results for Q4 and full year of 2012. Discuss the current market conditions including the venture capital activity during the fourth quarter and 2012. Our outlook for Q1 and 2013 with investment activities and pipeline discussions and then of course, turn the call over to our CFO to review in more detail our financial achievements and results for our shareholders. Overall, 2012 was an exceptional year on many fronts. We are pleased to report very strong December quarterly earnings results capping off a tremendous year for Hercules. During the fourth quarter, we demonstrated our commitment to expand our leverage and continue to access the capital markets, further increasing our financial flexibility and more importantly laddering out our debt maturities. With the earliest debt maturity now being due until April 2016 and this of course excludes our short-term securitization instrumentation which we recently completed and I’ll expand upon. We’ve continue to pursue our strategy of slow and steady, an investment philosophy that seem to have been adopted by other BDCs, as we were adhering to for last few years. In this process of slow and steady, we continue to methodically deploy our excess liquidity into accretive earnings assets for our shareholders and continue to drive our investment portfolio which topped off over $900 million at the end of the year representing over 40% increase year-over-year, our highest level since our inception. We entered into 2013 with a significantly higher level of earning assets than a year ago, which we expect to translates into higher earnings, net investment income for…

Thank you, Manuel, and thank you everyone for listening today. Like to remind everyone that we filed our 10-K, as well as our earnings press release after the market close today and I’ll briefly discus our financial results for the quarter ended December 31, 2012. Turning to our operating results, we delivered $27.4 million in total investment income or revenues, quarterly record, an increase of 29% when compared to the fourth quarter of 2011. This year-over-year growth was driven by higher average outstanding balances of yielding assets during the course of 2012. As Manuel mentioned, the GAAP effective yields on our debt investments during the fourth quarter was 14.3%, excluding the income acceleration impact from early payouts and one-time events. The effective yields for the quarter was 13.6%, down slightly due to the asset mix and timing of the amortization relative to the previous quarter, down by approximately 30 basis points. Interest expense and loan fees were approximately $7.5 million during the fourth quarter of ‘12, as compared to $4.6 million during the fourth quarter of 2011. Our weighted average cost of debt comprised of interest and fees was approximately 6.29% in the fourth quarter of 2012 versus 6.23% during the fourth quarter of ‘11. The slight increase was due to the $170.4 million, 7% senior unsecured notes that we issued in 2012, offset by a lower weighted average cost of SBA debentures, new SBA debentures of 4.3% versus 5% in the fourth quarter of ‘11. Operating expenses for the quarter, totaled $6.9 million as compared to $5.8 million in the fourth quarter of 2011. The increase was primarily due to the increased employee headcount since the end of 2011 and a stock compensation expense. Q4 ‘12 net investment income was $13.3 million compared to $10.8 million in the fourth…

(Operator Instructions) And our first question will come from Greg Mason from KBW. Greg, please go ahead.

Thank you. Manuel, could you talk about your new securitization and in particular, the flexibility of that for the type of assets that you do? Were you able to put existing down the fairway loans that you do in there, or is that going to have to change a little bit in terms of what you need to do on the lending side to have assets fit in that securitization?

It’s a great question by the way. To the credit of Moody’s, the process was anything but easy. It was very, very methodical. We basically had to work with the Moody’s team and work with them to understand the asset class, the unique nature of this asset class. So it’s not like, there’s a lot of folks originating in this asset and therefore, there’s a lot of history and experience here. So the Moody’s team was very methodical and very diligent and really gave a lot around this asset class. So to answer your question is to simply, the answer is what we do today, our bread-and-butter, our core asset is what we intend to continue to put in that securitization conduit, if and when, we do another one.

Okay. Great. And the VC market tends to -- can be impacted by government funding. Does this sequestration potential impact have any impact on your portfolio or the VC industry overall?

The only thing that we can see today that may have some form of impact of sequestration could be that -- potentially staffing comes at the FDA, many delays from FDA processes and trials to progress on a sequential basis, because of just lack of budget. But for FDA, to their defense, it’s been understaffed and under-budgeted for quite some time. So hurting them further could be an issue. IPOs could get delayed with lack of staffing. Yeah, that may happen with some budget cuts that could occur. But there’s nothing systemic that we are aware of as of today that could have any material impairment or impact to the VC industry other than just ongoing government agency delays.

Great. And then one last question, I’ll hop back in the queue. A lot of the middle market BDC lenders have talked about spread compression, increased leverage points, just competition flowing in from the liquid markets in this hunt for yield. Are you seeing any of that trickling down into the VC market where you guys lend?

Not to that extreme. The only thing we left off is dividend recast and cut that light in higher leverage and lower spreads. Yeah, I mean the lowing August is an area that, as we have said historically, we find difficult to really get excited about, because of the things that you just described. The debenture industry on the other hand, what we do, is such a specialty practice that, yeah, credit knowledge is key and fundamental. But also technology understanding is by all means one of the most significant parts. So not everybody can do what we do. And so people may want to try to come in the venture industry to change yields. But it will be very quickly when they start realizing capital losses, because -- just because you’re getting high yields doesn’t mean you’re getting high-quality assets. And you have to make sure you underwrite to that, understand that discipline, which we’re obviously one of the better guys doing that. So we’re not seeing a disproportionate increase in competition. In fact, we’re seeing the other way around. We’re seeing a declining competition, which is continuing to allow us to, in essence, identify the right companies that meet our screens. And as I said, we have a very, very strong pipeline right now of over $1.4 billion. But that does not mean all those companies will meet our credit criteria and underwriting criteria. So we’re able to continue to harvest what the best of the best in that pool.

Great. Thanks, Manuel.

Okay. Thank you. And we’ll take our next question from John Stilmar from JMP Securities. Please go ahead, Sir.

John?

John, your line is open if you would check your mute button.

Okay. Why don’t we move on and operate the next call and he will come back on

Okay. We will try our next question from Robert Dodd from Raymond James. Please go ahead sir.

Hopefully you can hear me. So a question on kind of following on that competitive issue. I mean, you said you’re willing to take a little bit of yield compression obviously to maintain credit quality there has been a theme that you have been on for a better part of the year. It’s one thing to be willing to do it, do you actually expect that compression to continue this year given the comments that you just made about reduction in some of the competitors out there in the space and kind of tied in with that, are you seeing changes in other types of structure like I mean I’m talking about upfront fees, obviously if they were couple like that. But any more color you give us on that?

Sure. As we indicated in 2012 at the beginning of the year, then that we start off the year indicating that we expected to see 170, 200 basis points compression in yield at the beginning of the year. I can tell you as of right now, from what I’m seeing, what we have in the marketplace today, I’m not seeing that level of spread compression at all. I will tell you that on a quarter-by-quarter basis, having a swing of 30 basis points, up or down, is not necessarily unreasonable or unexpected to do that. But I’m not at this point expecting to see a dramatic 100 and 200 basis points, compression in yields. And one of the things, I will say is we are not interested in chasing those yields if that’s even happening. We have a very strong portfolio today. We continue to be very selective in what we’re doing. There is no question we’re seeing some banks being a bit more aggressive out there. And frankly, we are fine with that. Doing $600 billion plus of the new origination activity tells you that we are facing a very strong market and we will continue to do what we do well. And there’s plenty of transaction and deals that we have out there. So chasing yields is not something we’re interested in doing.

Okay. Got it. I appreciate that. Thanks.

Okay. Thank you. And we’ll take our next question from Jonathan Bock from Wells Fargo. Please go ahead.

Yeah. Thank you taking my questions. Manuel, you did mentioned and always have your focus on credit quality. You also pointed out in earlier calls that sometimes you would be more willing to give up on warrant coverage in an effort to either supplement interest income or vice versa depending on where warrants stand in the relative valuation scheme. hat are you seeing today regarding warrants, and where does that fit in terms of placing down the bets that will pay off three years from now in terms of equity upside?

I appreciate the vernaculars, u use the word vest. But I’m working with shareholder’s money, so I would prefer not to use the word vest.

Investments, excuse me.

It’s okay. So it’s a very good question because you will see that appreciation in one area and my concern on another area of that comment. So for example, our legacy warrant portfolio in the technology sector has experienced a pretty handsome increase in valuation in 2012. Which means that -- I think that some of the technology opportunities are quite we’ll valued, which means that when I look at new technology opportunities in these companies that are so well valued, I’m more than willing to give up warrants because I have a lack of belief that the warrants will monetize in significant value. So we are being very controlled in our investment activities in technology companies, which is why you’ll see the technology portion of our portfolio slightly to be under represented in the first half of 2013. As I think that the valuations in the private sector either adjust or catch up to some of the public side. That said, the life sciences side of the equation has experienced some pretty dramatic valuation adjustment. And we think that there are some pretty good opportunities in the life sciences area to make investments and see some good cap appreciation in that area. But you’re absolutely right. The equation on overall yield is a function of what we believe the expectations on the exit -- on some of these warrant instruments that we underwrite to and we think that those warrants are well valued or overvalued. We will forgo warrants in lieu of or a term for fees or just little higher interest income. So we continue to do that -- that mindset, which is why you’ll see a change in yield quarter-to-quarter 20 to 30 basis points, simply attributed to the OID factor on taking more or less warrants.

Okay. Great. Thank you. That’s gray color. And then a question early versus late stage investments of course, where do you see additional dollars flowing in I mean, that competitive dynamic that you referred to? And to the extent that we’re approaching another M&A cycle although from the middle market standpoint with credit spreads where they are and perhaps private equity firms itching to deploy little bit of capital, as they are evidenced by some place some big deals. Only recently, where would you see some opportunity and late stage deals that might be approaching liquidity events?

We have change to be a tricky part because of the valuation issues. So, obviously being a credit shop that we are, we first look to enterprise value and loan to value analysis more than economic returns on equity instrument itself. Because if I can’t get your capital back, who cares about the return of the warrant. So we continue to remain very steadfast and look at the fundamentals of credits and not get hung up on some of these banks that we’re seeing in the market place. We’re more focused on market share and talk about the prowess. We still run an investment shops. So, I don’t understand what market share means when you’re doing a credit underwriting. So we remain very disciplined in that area. That said, there is an interest growing market and the public orphan and public fallen NGO companies that we have historically have not weighed in quite heavily though. We are seeing a disproportionate amount of unlocking of value in some of those public orphan companies that’s free out there. We’re not very keen and very excited about looking at early stage companies. Right now, we think that those companies, more than any other sectors are overvalued and economics are not as attractive as we’d like them to be. And so we’re more than happy to see banks continue to fill that void and continue to go after the early stage companies. It’s an area that we’re not allocating a lot of resources to right now at all.

Okay. Great. Thank you. And we would agree that slow and steady is the proven investment strategy. You demonstrated this past year and we look forward to 2013.

Thank you very much for acknowledgment.

Okay. Our next question is coming from John Stilmar from JMP Securities.

Not again, John?

Really quickly, as we start thinking about your business and the ultimate kind of ROEs or targeted ROEs for you and you’ve obviously not been a company or designed to company that’s been driven by ROEs. But I can help but think you guys delivered on a great securitization. Theoretically, this is the first of several that are probably to come over the next several years. Your internally manage company can drive operating leverage. And absent sort of changing your perspective of risk, shouldn’t we start seeing some moderate ROE expansion over the next two years?

The answer is unequivocally, yeah. And to be very clear, I think we saw ROE expansion just in the third quarter to fourth quarter. And I think you’ll see additional ROE expansion as we deploy the additional liquidity that we have on our balance sheet of $180 million joining assets. I think that you will see an exponential kick to the ROE as that capital is deployed for basically negative spread cash to accretive earnings to our shareholders that that net margin I spoke about earlier in the call will drop straight down the bottom line and driving the E in the ROE.

Perfect. And just another kind of just point of orientation for me. The venture finance business seems to be a relatively underserved segment and it’s sufficiently small given the overall scope of venture finance. So in terms of the macro trends that you are so good about laying out for us, how did those actually kind of feedback into the venture finance base in and of itself? Is venture finance as a whole gaining market share, or given some of these changes, or is it more of the fact that there are these sort of changes out there and each company needs to position themselves appropriately as seemingly you are engineering Hercules. I was wondering if you can put both those comments in context for us.

I can help but to strongly emphasize this issue. What makes Hercules successful is the high caliber of individuals that we have. Those individuals, rightfully so, are highly compensate individuals because they bring a combination of both commercial banking background, venture capital background and technology underwriting and life science underwriting knowledge and experience. In as much as the underwriting credit as your underwriting technology trends and risks, our team has to be intimately familiar with the changes in the technology and life sciences spectrum in world of what’s going on out there. In other words, what we call the disruptive technologies. What we do is that we invest in tomorrow’s companies today. When we look at investment, we have no idea whether or not these companies are going to be ultimately successful in their endeavors or not. These companies typically acquire subsequent round of equity capital investments that typically are done every nine to 14 month intervals. If you tend to underwrite this asset class, purely from a yield point of view in a naïve point of view, you will lose hundreds of millions of dollars. And I have seen it happen throughout my entire lifecycle in this asset class. The asset class is quite large and getting larger, it’s expanding. As the venture capital contracts a bit and IPOs get more elongated from the liquidity timeframe point of view or time horizon point of view, those later stage companies were waiting to get acquired or waiting to go public are less reluctant to do equity capital raises and experienced evaluation dilution or evaluation decline in value and are much more reticent and more willing to take on venture debt to continue to sustain their operations and continue to preserve value for their shareholders and specialty early stage for each shareholder that exist. Third and fourth, not knowing what is going on, on the broader spectrum from competitor point of view, in other words if you simply have business development officers who don’t have a knowledge of the various sectors that they are involved with, which is why we’re purposely divided in four segregated, dispersed operating units or I should say segments of reporting, Cleantech, Technology, Life Science and sequestration. Those four groups fundamentally operate autonomous from each other. They have four unique different underwriting characteristics and are staffed by individuals who have expertise in those particular verticals. That is a very, very difficult thing to replicate and many people could try to venture into the asset class. However, as you see over the years, we’ve grown in size because of expertise and our disciplined approach. And I don’t see any real new threats coming into the asset class. And if anything, I’m seeing our franchise and our brand only getting stronger and expanding further.

Got it. Thank you for that time. And I really appreciate you letting me ask my questions.

Thank you.

Thank you. And we will take our next question from Aaron Deer from Sandler O’Neill. Please go ahead. Aaron Deer - Sandler O’Neill: Manuel, you were just talking about the importance of your lending things. Can you -- on that subject, how many staff do you have that are front-line business development officers today versus say a year ago?

This is all obviously at zero. We have origination teams that are either credit or technologist and they are focused .We have a total headcount in the company last checked at 53 or 56 people. Of which, I think 27 are forward or outward facing origination team whether it’s associate analyst, manager, director, or principal, they are all focused on credit and credit monitoring or credit underwriting or new law originations, if you will. So it’s a pretty -- it’s almost 50% weighted of the company in that outward facing origination activities. Aaron Deer - Sandler O’Neill: And how does that compare to where you were a year ago?

One of the issues to your questions, we got to be careful in trying to imply a straight analysis. We have different people in different levels of maturation as investing professionals or loan officers, if you will. And so our more seasoned individuals have a higher expectation on both credit monitoring, portfolio performance and new asset origination than similar to newer folks. It simply takes six to nine months minimum for somebody to get conditioned to the Hercules underwriting methodologies and to identify investment opportunities and credits that meet our criteria. So we invest quite a bit of time in our people and that six to nine month period of time before that we become or we consider to be productive and accretive on the bottom line. And so on that level, we have probably seven to nine, if I sell in -- yeah, seven to nine is probably the right number of senior people who have the capability of being highly accretive investment officers identifying new investment opportunities. Aaron Deer - Sandler O’Neill: Okay. And then going back to the discussion on the securitization, I’m curious. How do you view your willingness and ability to do more of those? And obviously, it’s a great source of low-cost funding but I guess it seems a little bit of odds with some of your recent efforts to extend into longer-term funding sources. So just kind of curious to get your thoughts on how you view doing more of that type of funding.

I’ll be very blunt. If I can originate cost of capital at 3.2% and I can create a logbook at 13.3, I might be charging at a thousand base point net spread. So yeah, it’s -- the important part of the securitization is that it matches the short-term and short-term financing. As you may or may not remember although we underwrite for 36-month duration on our credits, the average term or the average outstanding is about 22 to 24 months. So the matching of short-term to short-term liabilities to asset side is quite good. Our strong preference still remains to focus on laddering out the maturities. So we are not going to be only a short-term dependent securitization shop. I don’t think that’s prudent. Unlike the long-term capital planning that the baby bonds offer. So it’s really going to be a complementary strategy, not all strategy at the cost of giving up baby bonds or other form of debt financings. Another final point to remember is that a BDC, it inherently has a limitation to debt equity leverages. So even as today, once we fully convert our $180 million of liquidity, we only have optimal available if we go to 144% leverage, only $145 million. However, our preferences, as I have said more than once on these calls, our preference on a GAAP basis is to take leverage up to like 120 to 125 on a GAAP basis, which I talked about that’s confusing in this call, I talked about the net leverage rate, 80 basis points today, sorry, 80% today. So I had basically another 40% of leverage to go after before I start running into that self-imposed glass ceiling of 1.2 to 1.25. So we’re managing our liabilities and our source of fundings quite closely. Aaron Deer - Sandler O’Neill: That’s helpful. And then, lastly, on the credit. Obviously, you had some good credit trends again this quarter, that three collateral based impairment reversals. I’m sorry, I think there was three of those as well. But there were three small impairments, I’m just wondering, are those due to upcoming funding around that approaching for those powers or is there something else that might have driven that?

No. When we have, I think our active borrowers today are, I will say, 85 or 87 companies. We deal with risks all day along. What we do is probably nail-biting for the loan market or asset class. Our expertise is understanding the technology trends and the ebbs and flows that happen there. As I said and to reinforce again, it is not untypical for 90% of our portfolio companies to be cycling through our next equity round of financing and find themselves near a zero cash balance on the balance sheet and need to raise another equity round of financing. There is a normal course of business of what we do. As that happens, we will automatically downgrade the credit from a two to a three and if it warrants it down to level four, if we don’t see much more casual evidence of a term sheet or an equity round or an actual event happening to ensure the mitigation of our downside principal risk that we have. So to answer to your specific question, there is not one of those companies at this point that represents a significant issue other than one larger credit that we may have that is something that we’re monitoring closely but the company is actively engaged with a transaction that just like we saw on the third quarter with some of our life sciences companies. And in the next 60 days or so, it’s probably some day maybe fully mitigated. So at this point, we’re more aware of those small market adjustments or collateral impairments that we’re thinking, are not issues that I’m ultimately concerned about. And I think they will normally cycle through, just like we saw in Q3 to Q4 of these life sciences companies. These two technology companies in particular, I think that we’ll start seeing rays of sunshine at 60 to 90 days. Aaron Deer - Sandler O’Neill: Okay. That’s great. Thanks for taking my questions.

Thank you. And we’ll take our next question from Kyle Joseph from Stephens. Kyle, please go ahead.

Good afternoon, guys. Thanks for taking my questions and congrats on great quarter. Manuel, can you talk a little bit about what drove the accelerated dealer activity in the accelerated credit demand that you guys saw in 4Q ‘12. I don’t imagine you guys had as much of that driven by potential tax changes. Can you -- was there something else driving it or is it just the general recovery of VC markets or can you break that down for me?

No. I actually -- I literally think that a lot of it was a sigh of relief that we got this horrific election behind us. And whether you support the President or you don’t support the President, at least you have some level of confidence that it is the higher taxes or a lack of government or what have you. So I think that there was a bit of relief that we had this issue behind us and capital was able to continue to be deployed and invested. Sequestration still is a bit of an overhang. It is hard to say how that’s going to play out, which is why again as we did in the third quarter going into fourth quarter a little bit, we’re holding back some of that liquidity and not going out and fulfilling all of the opportunities that we see before us. Because we want to preserve some direct account going into sequestration black hole. But I think that they eventually seek a little more confidence when the election issue was resolved whether they support Obama or not and it doesn’t do with that but at least some level of uncertainty was now resolved. And I think more than anything, it’s kind of what led that.

Got you. Thank you there. And then can you give us a little idea of your average investment side and how that has changed as your portfolio has grown so much?

I still think that the average portfolio deal remains pretty static at the $8 million to $10 million level. So I don’t think I’ve seen change in that average number now for probably eight quarters may be longer. We have some outliers but I think that the granularity still remains in a portfolio.

All right. And then I think this one is for Jessica. Could you break down the fee income in the quarter a little bit between origination versus repayment fees?

Well I think you can back into that when you take a look at the effective yield with and without early payoffs or one-time events. But I don’t have the dollar total that I can get to it, but pretty much…

No. I can back into that.

Right.

We can certainly follow up for you on that.

Okay. And then can you -- I haven’t had time to spend through the K yet. Did anything change with non-accruals in the quarter?

No. We still have that one small investment on non-accrual.

So, it’s beyond and significant.

Right. It’s $350,000 cost basis.

Yeah.

And then for the $0.03 spillover, do you guys envision doing something of a special dividend or just contributing that to quarterly dividend this year?

We remain pretty steadfast in our historical response there. We think it’s better to pepper that additional earnings -- in subsequent quarterly earnings and distributing it out at one quarter as a special dividend. So, our philosophy or say the board’s philosophy still remains that we rather simply created over the economic life in 2013.

I guess, that makes sense. And then what was the new coupons on the refinance SBA that you guys have done recently?

Yeah. I think the base interest rate was 2.8% and when you add in the fees costs, it’s around 3.2%.

That’s all I got. Thanks for answering my questions, guys.

You’re welcome.

Thank you. And we’ll take our next question from Douglas Harter from Credit Suisse. Douglas, please go ahead.

Talk about the benefits that you might get from continuing to grow the size of the portfolio and sort of balance it off with the fact that the SBA -- attractive SBA debt check grow anymore and kind of how you think about the pros and cons of those two things?

Sure. As we all know and we’re cynical about this comment, there are two critical bills in front of the Congress. One is to increase the BBC leverage from 101 to 201. That if pass will be highly accretive. And then the second bill, which is more impactful to your question is raising the SBA debt limit from 225 to 350. That actually passed the house, so passed the Republican House. And I find incredibly ironic it’s delayed in the Senate by Democrats. This is baffling to me because it doesn’t add to the debt and actually helps the economy. So the SBA debt ceiling of 225 going to 350, a lot of people still believe that it actually will happen. That said, the issue on spreads, we think are quite attractive when you are borrowing long on SBA at 3.5% to 4% on a weighted basis and lending long at 13, 13.5. And I apologize what was the first part of your question?

I was recognizing that attractiveness of that financing and how you balance that with growth growing the total portfolios absent Congress actually doing something.

Sure. The other part of your question is important to note is that not necessarily all of our assets are well suited or fit the SBA underwriting criteria. So one of the things that we are constantly cognizant of is making sure that we are not overly liquid on the SBA -- SPV, Special Purpose Vehicle that hold the SBA assets. And so today for example, we have a little bit more waiting in cash within the SBA bucket, which means that we need to make sure and we need to optimize which is why the $180 million I talked about earlier may not fully be deployable. Some of that $180 million is actually resident inside the SBA, which means that that capital can’t be used for general corporate purposes but must be used for assets that qualify under the SBA program. And so there could be a timing delay on optimizing the balance sheet to fully deploy the excess cash, some of which may be located in SBA causing a little lag effect. But overall, we see a very robust opportunity to deploy the excess liquidity of the $180 million of cash certainly by the end of first half of 2013 into earning assets, which would equate to about 20% growth in the loan book and could equate to about $0.20 at earnings on an annual basis.

Great. And I appreciate that color, Manuel.

Thank you.

Thank you. And our next question is from Greg Mason from KBW.

Great. Thanks. Manuel, I want to talk a little bit about the securitization. Again you said you had to work a lot with Moody’s to educate them. In this first silo, there’s no reinvestment period. I think you said weighted average life a little over one year. So two years from today, that will be gone. I assume you want to do this securitization again, do you think as Moody’s gets more comfortable with this there can be any potential changes for securitization number two or number three with regards to reinvest periods and length of the securitization debt?

So most of you know me, I’m going to answer everything as much as I can. On day one but to Moody’s credit, they said unequivocably no to me on various occasions on some of these requests. That said, to Moody’s defense, they’re kind of was, let’s crawl before we run. And there’s no question that our intent, working with Moody’s, is to continue to work with them and developing their models and their better understanding as asset class to in fact, ask for reinvestment period in a longer duration of the next securitization. Whether that’s securitization is number two or number three, I don’t know. That’s really subject to Moody’s and Moody’s solely. But there is no question that we are going to ask again and try to seek that out in some of the subsequent securitizations that we do. It is a pivotal part of the equation, just like you recognize it to be.

Okay. Thanks, Manuel. Good quarter.

Thank you very much.

Thank you. And our final question comes from Jonathan Bock from Wells Fargo. Bock?

Jonathan Bock. Thank you. Just one quick follow-up…

In French.

Yeah. We as you probably can say.

Okay.

So we could talk really briefly, you said the use of cash by 2013 but then well you’ve also been very opportunistic in terms of equity capital. And that can accrue to the benefit of the investors because you chose to protect the balance sheet and we do understand that. In light of valuation, can you maybe talk about where you sit on that front? Only because while portfolio growth would occur, also the underlying share-based and then splitting that benefits of additional leverage with new shareholders does dilute earnings. So maybe just a few comments on what you see on the equity capital front in light of the high cash balance?

Sure. My first comment is that, I think there is a timing on equity earnings dilution as you have the equity capital raise. And then equity capital raise is deployed into earning assets. If you look at our discipline, the last seven plus years of our history, a little longer than that, I remain very steadfast whether this philosophy is embraced by others or not. And that is that I believe that you raise capital, whether its debt or equity. When the market affords you that opportunity, however, only if and when you can deploy that capital in the proceeding one to two quarters out. One of the things that makes the internal managed BDC very important is that it has no economic incentives to raise capital -- just to raise capital. And since we are incentivized and aligned with our stakeholders -- our shareholders, we’re highly cognizant of having a significant drag on earnings unnecessarily simply for capital raise. That said, that when you look at our balance sheet today, it’s not a secret that sometime in the next duration of time -- I don’t know what that is, it all depends on when we do end up deploying our cash investments. Because we’re approaching the magical ceiling of 1.2 to 1 debt-to-equity ratio, that if we so choose to continue to grow, because there’s attractive opportunities in market place, then a small equity capital raise maybe imminent. But that’s all entirely judged upon sequestration, the pipeline, where are we on our capital deployment and a lot of different characteristics. But the fact of the matter is that we are approaching that GAAP mythical cap of 1.2 that we place on ourselves that may indicate a propensity to look at doing a small equity raise. In fact, if that’s something we believe we could redeploy in a very short order.

Great. Thank you.

Thank you. That does conclude our Q&A portion for today. I’d like to turn the conference back to Manuel for any concluding remarks.

Thank you, Operator. And thank you everyone for continuing your interest and support in Hercules Technology Growth Capital. I’m very, very happy to report a very, very strong quarter for our shareholders and more importantly, also an increase in dividends to our shareholders as we promised that we will be doing. And I expect to continue to do throughout 2013, certainly through the March, not falling out or some unforeseen events. As always, I want to make sure that our shareholders are aware that we’re more than happy to entertain discussions with you and anybody who would like to engage in additional conversation with us. You’re welcome to contact our Investor Relations department or contact Hercules directly to schedule a follow-up conversation or a meeting with. Thank you much for your time and thank you for being one of the Hercules shareholders. Operator?

Ladies and gentlemen, this does conclude your conference. You may now disconnect. And have a great day.