Good day, ladies and gentlemen and welcome to the Hercules Capital Q1 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Michael Hara, Senior Director of Investor Relations. You may begin, sir.

Thank you, Nora. Good afternoon, everyone and welcome to Hercules conference call for the first quarter 2017. With us on the call today from Hercules are Manuel Henriquez, Founder, Chairman and CEO and Mark Harris, Chief Financial Officer. Hercules first quarter 2017 financial results were released just after today’s market close, and can be accessed from Hercules Investor Relations section at htgc.com. We have arranged for a replay of the call at Hercules webpage or by using the telephone number and passcode provided in today’s earnings release. During this call, we may make forward-looking statements based on current expectations. Actual financial results filed with the SEC 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 that 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 and without limitation the risks and uncertainties, including the uncertainties surrounding the current market turbulence and/or 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 our website htgc.com. With that, I will turn the call over to Manuel Henriquez, Hercules Chairman and Chief Executive Officer.

Well, thank you, Michael and good afternoon, everybody and thank you for joining us today for the Hercules first quarter 2017 earnings call. I will be providing a brief overview of our key highlights and accomplishments, followed by a summary of the venture capital industry activities and conclude with a brief outlook for Q2 and the second half of 2017 and then turn the call over to Mark Harris, our CFO for a more detailed overview of our financial results and financial accomplishments in Q1 2017. I will then conclude with a Q&A session related to our Q1 earnings and then of course specifically addressing the questions that maybe related to our recent press release regarding our externalization announcement that we issued yesterday to discuss with our shareholders. I also intend to explain and deeply elaborate why and personally my belief as to the externalization process is in the best interest of our stockholders – or shareholders, I should say and the strategic reasoning behind pursuing the externalization and why it makes sense. Clearly, there has been a lot of confusion related to the announcement. And I will spend as much time on today’s call and later on meeting with investors over the next 3 to 5 weeks to elaborate and expand upon the externalization and explain the merits of why we are doing this for the benefit of our shareholders long-term. Now, for some key highlights and achievements of our accomplishments for Q1 2017. In an environment where growth has become challenging for many of our peers given the tightening credit market and higher levels of prepayment activity seen throughout the industry, Hercules Capital direct private lending platform continues to prove its resiliency in strong brand recognition as Hercules turned another solid quarter to start 2017 with strong new…

Thank you, Manuel and good afternoon or evening ladies and gentlemen. Today I am going to make comments on our core numbers, which means I will be speaking to some numbers and ratios on an adjusted basis that is without the one-time non-recurring expense of $2.1 million, which consists of the acceleration of unamortized fees of the redemption of our $110 million 7% 2019 notes of approximately $1.5 million and the one-time interest expense overlap of approximately $600,000 pertaining to both 2019 notes and the new convertible bond outstanding during the 30-day required redemption notification period. In doing this, it will give you a better sense of the true underlying business performance and better demonstrate our expected performance in the following quarters. I am pleased to report our strong first quarter results of our premium venture lending platform continues to deliver strong financial performance on virtually every meaningful metric. All of this is possible for the growth of our balance sheet, where we achieved another record high investment portfolio of $1.525 billion at cost or growth of approximately 1% over the last quarter. In the first quarter, we raised over $277 million, $46.9 million of net equity issuances at a blended price-to-book multiple of 1.47 under our equity ATM program and the issuance of $230 million 4 3/8% convertible bonds. Hercules further saved $0.03 of NII per share annually on a cost of fund basis and lowered our forward weighted average cost of debt to approximately 5.7% starting in Q2 2017 through the full redemption of our 7.5% 2019 notes. As Manuel commented, we are pleased to report our final 2016 earnings spillover of $34.2 million or approximately $0.42 per share. Board and management will review this spillover within the next couple of quarters and make the appropriate decisions if…

Thank you. [Operator Instructions] Our first question comes from Jonathan Bock of Wells Fargo Securities. Your line is open.

Good afternoon and thank you for taking my questions. And look unfortunately, I don’t want to really – I have a couple follow-ups and my hope is you will give me at least three, because given you didn’t mention the reasoning behind externalization in your prepared remarks, I don’t want to waste a question asking why, so Manuel, Mark, can you tell us why you are doing this and the three major reasons? And then I will start my questions after that.

Sure. Let me take that, because I am the one who is embracing this and strongly encouraging this move. When you look at the business itself, after 14 successful years we are doing, the market has evolved. And the market has evolved where these larger externally managed BDC funds have access to ample tools of capital that we do not have, giving us a disadvantage on the ability to originate different loans with different yields and different product categories that, what I believe in my opinion, would be a detriment in doing so at the existing fund. For example, if we were to be doing significant levels of asset based lending activities at the main fund of Hercules to which I would like to remind shareholders that we did in fact do that in the second quarter of 2011 and 2012 when we started working on ABL to validate this business model and business concept, we have proved that we actually have an ability to do that. However, because of the 1 to 1 BDC yields will leverage, doing so on originating assets that have a significant lower yield spread than we realized today in the market and by commingling those investments in our current core fund today would only dampen our investment performance and lower our overall ROE. By having a related fund by externalizing, we are able to strategically have access to pools of capital, whether they are additional SMA accounts, whether they are senior floating funds or other initiatives that many of the other external managers have, we are then able to better defend and enhance the value that we are realizing for our shareholders by being able to originate lower margin loans that will be complementary and support of our existing term loans at Hercules Capital…

Okay, I appreciate that. And so now I have two questions. The first is Manuel is it’s the competitive disadvantage of not having funds to originate lower yielding loans or effectively grow your platform with different bucks. This can be done through, a), forming joint ventures with partners and using off balance sheet leverage or external funds in that regard, or b) forming an external manager within the BDC, ala, American Capital or another example, Main, to go out and push that endeavor, why not go that route? And then I have one more question.

So I think those are viable solution among others. But I would not call ACAS the pinnacle of the greatest success story of managing that type of initiative and that type of effort as they culminate in the sale to Ares Capital who took advantage of that dislocation and inefficiency in the structures to eventually be able to acquire the assets of ACAS led by Elliott Management. So, I don’t think that ended very well. As to the Main Street, Main Street is always a one sole player that has that. We have looked at that initiative. We are not convinced that is the most viable solution out there and I think creates a lot of confusion by pursuing it that way with having a POCO of an asset manager inside of a BDC. And I would tell you that I am not sure the SEC is 100% necessarily behind such of those initiatives. And so we looked at that. But we still believe that one of the best models to look at out there, believe it or not, is actually Solar Capital. I think Solar Capital – and I am more than happy to compliment good BDC operators out there. I think Solar Capital certainly has a very good business model that I think is one that merits some replication of in terms of the structure. But I think that you wanted my honest opinion, I think it’s in the best interest as I engage as many institutional shareholders to allow the institutional shareholders their ability to select what pools of capital they want to invest in and not simply have the asset manager do the asset diversification on their behalf. And what I have learned from speaking to many institutional investors has been, that at Hercules, a 155 to book or 160 to book has been very attractive, but they question the additional level of growth that you can originate or I should say make an investment at the externalized level – excuse me, at the Hercules level and get returns. However, if we as an asset manager were able to launch new funds, as an example, those institutional investors will be able to buy the same manager they have believed in for the last 14 years or whatever period of time they have held and be able to buy into asset classes at par and be able to benefit from that asset manager’s execution into new asset classes that, that shareholder may not want Hercules Capital to be involved in, because they want Hercules Capital to remain, for example, pure-play venture platform.

I appreciate that. I guess the small rebuttal would be, well, ACAS got a lot of things wrong passing on the benefit of earnings via management or external management of their REITs to shareholders created a lot of value too. Solar actually utilizes the JV platforms to provide the increased economics to their SLRC shareholders, but really it culminates with this question. If we look at the REIT space or even the BDC space, well, looking at REITs in terms of internalization. When a REIT internalizes, the owner of the external manager receives a payment, right or some form of value. Also, if we think about some BDC external managers that have traded over the past, let’s say, 12 months, there is a significant amount of value created for the owner of that external manager there. So in this context, Manuel, can you explain why a shareholder, if the external manager has value, should hand over an external manager to the owners of Hamilton Advisors for free?

Well, I appreciate the question. But last time I checked, Abe Lincoln abolishes indentured slavery. So I am not sure that anybody at the internal adviser – internal manager is subject to having to do what you just advocated. I think that employees and high value employees have the ability to change position and pursue economic issues. This effort is there to hopefully retain and encourage those valuable employees to continue to remain at the asset manager and continue to develop value for our shareholders. But I want to correct the couple things that you said. Number one there has been three BDCs who have externalized as internal BDC managers. Number two, there has been, most recently, [indiscernible], a REIT that converted from internal to external managers, did not do any of the things that you just advocated in consideration on shareholders. So, there are so many multiple different ways of looking at equations and looking at remunerations. But at the end of the day, this is something that the shareholders have the choice. They can vote. They can vote affirmatively on June 29 for or against it and they can decide what they want to do in the judgment of that decision on the impact on the management team and retention of key critical managers who are out there. But it’s their company and they are entitled to that vote. And if they don’t want to do it, they don’t have to vote for it. And whatever happens at that point happens. But I think it’s in the best interest of us to move this forward. I believe very strongly as one of the largest shareholders in this company that this is the right thing to do, but shareholders are entitled to vote as they deem. And this is why I believe very proactively in the democracy process of having shareholders vote their shares whichever which way that they want. I will allocate the next 4 to 5 weeks to spend as much time with analysts and institutional shareholders to address their questions and get into any specifics they like over the next 4 to 5 weeks.

Much appreciate. And you are correct it is a choice and thank you for allowing the investors to make it. That’s all my questions.

Thank you. Our next question comes from John Hecht of Jefferies. Your line is open.

Afternoon, guys. Thanks very much. First of all, the – and I apologize if you referred to this and I have not had a chance to look at the Q yet, but there was some depreciation in the debt portfolio. Did you mention the company or companies that, that was isolated to and do you know what’s the – what’s your, I guess strategy to work those situations through?

Sure. Well, I am happy to report that with continued Hercules performance as a quality asset manager that we have been and are that we continue to execute on behalf of our shareholders and we will intend to continue to do that in the future as well. Specific to your question, that the company you are referring to is Sungevity in our portfolio. Sungevity successfully went through a bankruptcy process to which we were one of the credit bidders along with Northern Pacific Group, which ended up being the winners of the process. At the culmination of that bankruptcy process, Northern Pacific Group or NPG and Hercules Capital become now the equity holders of that new entity that was formed upon exiting of the bankruptcy. The company successfully have retained new talent of management and is recapitalizing itself. And we are encouraged on the hopes and ability over the next 12 months to 24 months to start seeing some recovery of significant portion of our original investment that we wrote down to about $13.5 million carrying value at the end of Q1. We expect to see throughout the fiscal 2017 and 2018 as the new management team and the new capital partner continue to make progress in the turning around of that situation and enhancing the company’s performance to start seeing recoverability of principal from that investment.

Okay. And then well, you have had a lot – well, a reasonable amount of experience of dealing with these situations and I believe a pretty good record of recovery, is there any stats around that like what are typical recovery rates in this type of situation?

When it comes to companies that go through bankruptcy and new management team being injected into the business and new capital being injected into the business, obviously the answer is more encouraging than the sure thing of liquidation. We would not have credit bid, we have joint partnered with Northern, NPG if we didn’t believe that it made a lot of sense for our shareholders. So as we have done in the past in our successful track record that Mark alluded to, that since inception we have done $6.7 billion of capital and over $5 billion of fundings, that our cumulative net losses are positive that almost $1 million throughout our 14-year history. So I think that our track record and our tenacity in working with restructuring companies with both the venture capital sponsor and the new sponsors that are coming in has certainly been encouraging with our history. So I can’t handicap and say that I am going to have full recovery and when. I believe that the expectations for this new co-emerging out of bankruptcy, that we credit bid and having us have a greater probability than not of recovering principal is certainly encouraging at this point. But it’s too early to say because we have only been almost only 45 days or so out of the bankruptcy process with the new management team. So in fairness to them, I got to give them some time to get their sea legs and really get their arms around the situation.

Okay, that’s good color. Thanks. You gave a lot of good stats throughout the VC markets, you guys have had a pretty active – I know repayments are pretty high, but you have had a couple quarters of good deployment activity, can you give us some color around what industries you are focused on, what you might be looking for over the next two or three quarters, based on changes in the market?

We continue to see very strong investment interest in big data, strong investment interest in personalized medicine, immunotherapy, obviously life sciences companies remains a very hallmark of our focus and our interest. I think that we are – I will speak for myself now, not on Hercules. But I will speak on my behalf now. I am actually encouraged by net neutrality being rescinded. I think that that will encourage strong investments and communications. I think it will allow networking companies and telecom companies to start making capital investments in developing their network infrastructures. Everybody knows, unless you have been living under a rock, that cloud computing has become very, very important part of the equation. And in order to have effective cloud computing, you need to have fast networks where you have proprietary traffic, can move quickly. And if you are doing all your applications being hosted on cloud, you want to make sure that your service provider has a network and bandwidth that can give you the performance that you are looking for. Network neutrality certainly gives you that strong ability to ensure that your customers are able to get that premium traffic and throughput. So I am actually maybe a minority in this view, but I actually believe network neutrality is a very positive economic growth engine for this country. And I am encouraged by it.

Alright guys. Thanks very much for the color.

Thank you.

Thank you. Our next question comes from Ryan Lynch of KBW. Your line is open.

Hey, good afternoon and thanks for taking my questions. First one just has to do with quarter-to-date activity, so it looks like so far you guys have a pretty healthy pipeline of pending commitments through the quarter, about $140 million, but quarter-to-date, it looks like closed commitments are only about $1 million, so can you just talk about what is I guess keeping commitments, quarter-to-date, actually made so far so low?

Yes. I think that I mean to be honest, it’s just our slow and steady strategy. I think that we are probably taking a little longer on diligence, probably taking a little longer on ensuring legal documents. We are waiting for clarity on ACA and other aspects of the new administration. But that said, as I indicated in my opening remarks, I am expecting the first half of 2017 to have about $350 million, $375 million. And if you look at Page 12 of our press release, we are well on our way. We are at $332 million of identified commitment in-house that we are processing of that $350 million. So I am $20 million short of hitting my lower mark. So I am quite encouraged about what we are doing and where we are at right now. Am I a little slower on funding than I would like, sure, I am not going to deny that. But I think that was consciously done on our part, awaiting for a better clarity on economic direction. But it does not mean that we are anywhere off the pace that we expected to be for the first half of the year, $350 million of commitments, to $375 million.

Okay. And then can you just talked about, you guys have been accessing the ATM market to grow equity and eventually grow your portfolio, it looks like there was only about $10 million or so, about 750,000 in shares remaining on your ATM program, can you just give any sort of outlook on what you guys are expecting as far as issuing the remainder of that ATM and as far as raising capital going forward to fund your growth?

Sure. As we indicated, with only $340 million of liquidity on balance sheet, the short answer is that in the near-term there is no necessarily a need to rely on the ATM right now. Mark will give you a response as to the remaining shares of the ATM program. But before I get there, the reliance on the ATM right now remains a strategically important product for us. We don’t anticipate, unless we see a lot better clarity on regulatory policy or legislative policy that’s quite favorable and we see GDP growth better than it was in Q1 actually pick up in Q2, I don’t think that you are going to see us materially step on the gas for ATM activities in the second quarter. And we will probably reserve issuance of the ATM program for Q3. And I will let Mark elaborate on the first part of your question.

Yes, absolutely. So you probably missed it, but what we did do is we got approval to up the share count, that is to create a new kind of shares under the ATM program. If you go to Page 6 of our press release, we talk about as of March 31, we have approximately 751,000 shares remaining available for issuance and sale under the equity program, which is just north of $10 million, $11 million worth of shares available under the program.

Right. But the answer is that once we exhaust that, are there other shares and the answer is yes. Yes Ryan, we have other shares that we have authorized. And we will be – we haven’t put the new ATM in place, because we haven’t needed to. But you can see sometime in Q3, probably the new shelf for the ATM program being put forward.

Okay. And then I do have one on the externalization, I mean one question that I have that a lot of investors that I have been talking with have is, basically what happens to expenses and what happens to ROEs under the externally managed structure, I mean if I look at the proxy that you guys put out, you guys generated about a 12.5% roughly, ROE in 2016. And the proxy shows that expenses under the external management agreement would be about 1% higher, expense ratios would be, which would roughly equate to 1% lower ROE. Now, if I look going forward in 2018, most people have your estimates at around a 14% ROE. Now, your incentive fee is beneficial. But as you guys generate a higher pre-incentive fee, that incentive fee increases to a 30% on that incremental income. It remains effective rates lower than 30%, but that incremental is 30%. So to the extent that you guys are generating a 14% type return in 2018 or so, it seems that, that annual expense ratio could increase even higher than what you guys outlined in the proxy of about 1% in 2016, which would mean ROEs would be much lower than that 1% rate. So lot of investors are worried about what if you externalize, what’s going to happen to expense ratio and similarly, what could happen to ROEs?

Well listen, first and foremost, I don’t want shareholders to be concerned about that. And rightfully so, there is not a lot of information that we have put out in the market yet today, because we only have a preliminary proxy. I can assure you and I can assure our shareholders that the intent that what we are doing is not to see elevated expenses. There is certainly no question in everything I have looked at and everything that we have modeled that the intent is to see disproportionately higher expenses. I would not do that if that’s the case. Because I like to remind everybody, not only am I the Founder, I also own 2 million shares outright, plus. And I too suffered a dramatic loss in net worth today. It is not my intent nor is it my interest to see our expenses go up at the cost of our shareholders. I spent 14 years advocating for and arguing for the benefits of an internal manager. I am a strong believer in the internal management structure. However, shareholders who know me and understand this need to hear this very clearly, it is not my intent to see dividends being cut. It is not my intent to see higher operating expenses. It is certainly my intent to ensure that our platform for the benefit of our shareholders, to which I am a large shareholder, continues to see that our platform continues to grow and develop and generate the ROEs that are commensurate of that of emulating an internal BDC structure. I have gone through great lengths with Mark on modeling and analyzing this and we have spent nearly 4 years working on this project that culminated into this proxy. And I can assure you that everything I have seen…

Okay. Thank you for that commentary. And just to add on to that, I would say, to the extent that the SEC allows as much information I think as you can put out as far as future expense ratios and ROEs, I think that would be very helpful to see how they compare and so that investors can get a good idea of what are the impacts. So to the extent you can do that? That’s great.

I absolutely agree with you. And I could assure you, I have been working on investor decks with my team that when we file with the SEC, w e are going to be working very proactively with the SEC on this issue, because I believe very strongly, as I have for 14 years and I am a strong advocate of our institutional shareholders and our shareholders as abroad that I believe that having full transparency, so they can make an educated decision is critical. And if our shareholders have feedback for me on suggestions on tweaks to the proposal that we are doing, I, too, as a manager, will encourage you to provide that to me. It is a company that we have worked together to build and I have no interest whatsoever in disenfranchising our shareholders. And I will say it again I believe I put forward a fee structure that aligns what we have done as an internal manager with an external managed BDC that aligns management and our shareholders as if we were internally managed as an external manager. And if our shareholders feel differently and mathematically have a different computation, I am open to that criticism and having those discussions. I am not going to be a deaf ear to those issues. And I want all of our shareholders to reach out to me and our team to talk about it, because I encourage feedback.

Okay. Those are all the questions for me.

Thank you. Our next question comes from Christopher Nolan of FBR & Company. Your line is open.

FBR & Company. Hey, guys. So, I joined the call late. So please excuse me if whether or not this is answered. Manuel, the look back is only 12 months and it’s only 12 calendar months. So it resets every December 31, if I understand it correctly. Why did you choose that since some of the other externally managed BDCs have a 3-year look back or even back to the IPO?

I am sorry. So the question is why do we not have a total return look-back? Is that your question?

Yes, exactly, for your part two incentive compensation schedule.

Sure. So one of the things that was shocking to me when I analyzed it, I looked at Goldman Sachs, TPG, Golub Capital, Gladstone, TCP, Fidus, Ares, Solar Capital, among many others. As most of you know, there is approximately 55 or so externally managed BDCs in the marketplace. To my surprise, overwhelmingly, very few actually have total return look-backs associated with them. For example, Goldman Sachs is a 3-year, while TPG has none. Golub Capital has an infinite look-back, while Gladstone does not. TCP does and etcetera. And so the answer is and I am looking at the way we structured our mindset of incentive fee compensation, because we don’t participate at the 20% level until we see 22% hurdle rate. So, let me make sure people understand this. This is a very, very critical point. But I am happy to add it if we need to. But I don’t think it’s necessary, because my hurdle rate before I experienced a 20% participation is up to the 23% level. While the vast majority of BDCs in the marketplace today receive an incentive fee participation as low as 7.5% to 8% hurdle rate, which then they get the 20% and they can apply the look-back for those who have it from a total return. So, what that means is, when you look at it mathematically, although I don’t have a total return, and I am happy to add it. Is that’s something that shareholders want us to add, I’m open to that. I am not opposed to it. But because our fee structure it doesn’t really get into the 20% participation level until such a high level of a hurdle rate, the need for that so called total return look-back, I believe and maybe I am wrong, but I believe is embedded in how we derive the incentive fee compensation. And maybe that was just me being too clever, if you will, with our fee structure that most people have lost on it. And so maybe I did a horrible job on explaining it in that press release and the proxy statement. But in essence, to answer your question forthright to me, we didn’t include it because the way the incentive fee works, by the time we get to 20%, we are operating at such a high level of functionality for the benefit of our shareholders, that you don’t need it.

Thank you. My follow-up question, assuming shareholders pass the external management resolution as is, how does this change Hercules, HTGC specifically, let’s say 3 years from now, what do you envision the company to be, I mean what’s the vision here?

Well, what’s the most important thing as the founder of this firm and as one of the largest shareholders and one of the things that I cared about that I believe has established our brand over the 14 years, is to sustain the purity of being that venture lender that is known to be and being the largest venture lender in the asset class. I believe that if Hercules were to embark in new asset classes, I think that it clouds and confuses what we do as a core. And from my conversation with the institutional investors, it is very clear to me that the reason why they have owned Hercules is that they want that pure play. If they want a low to middle market allocation, they can go buy another BDC in the lower middle market area. But if they want a pure venture play, they can buy Hercules Capital as a best-in-class pure venture play. So doing other asset classes with inside the confines of that Hercules Capital umbrella, I believe dilutes the brand and dilutes what the investors have come to believe and expect from this management to execute. However, this management team has the capability and has the depth and breadth to be able to do new asset classes and do new asset classes that can complement what we are doing at Hercules. But I believe strongly in my heart and I could be wrong on this, because I am being very humble here. But I believe that if the investors’ choice for them to decide who want to be in the vehicle. And so what I believe in, that Hercules will be the best-in-class venture lending platform. They have that and they will continue to have that even after externalization. It will remain core…

Final question, do you anticipate this to improve or impact your debt to borrowing cost?

I am sorry, cost of debt overall; is that the question?

Yes. Well, external management, do you think that will affect your cost of capital?

I don’t believe it will, because there are 55 examples of external managers out there. I don’t believe, despite some of these questions, that obviously, we have to do a much better job of articulating and hopefully working with the SEC, putting forward examples of what these pro formas expectations ROEs would look like or at least in arrears, to show that we, with everything that we know, we do not expect, nor anticipate any material degradation or changes in a overall historic ROEs on a prospective basis upon externalization. And the reason why I say that, with that level of conviction and confidence is that we have gone to great lengths to have an incentive fee that is relatively low and almost generates the expenses that we have today at Hercules without taking any income away from our shareholders to ensure that we have a sustained ROE that we have done historically on a go-forward basis. So embedded with that and with the financial models that we have run, I don’t believe that I will see any degradation in our cost of funds that we will get upon externalization. And I actually believe that upon externalization, we may see a benefit to our existing shareholders and potentially a benefit on ROE because we will actually see greater duration, meaning less turnover of our term loans by being able to have complementary senior based loans, asset based loans that are able to keep our term loans outstanding longer, therefore reduce our churn and have assets on the books longer, generating greater interest income and having a lower cost of capital of acquisition of new loans which manifests itself into greater returns for our shareholders. And I truly mean that. That is the main reason why we are doing this.

Great. Thanks for taking my questions.

Thank you.

Thank you. This concludes the Q&A session. I would like to turn the call back over to management for closing remarks. Thank you, operator. And as I said, shareholders and analysts and investors out there, we strongly encourage you and we will actively be seeking out your feedback and conversations regarding externalization. It is your company. It’s your voice. Your vote. It is our responsibility to make sure that we provide you with the necessary information to make an educated decision. If you have suggestions and if you think that we need to make changes and tweaks I encourage you to come forward and provide that information and feedback. We want to do this collaboratively with you and we believe that this is the right decision. With that, Mark and I will be on the road for the next five weeks, meeting with shareholders throughout the country. We will be participating at the JMP Financial Conference and the Real Estate Conference in New York and the Super Return Conference and the Creditflux Conference in Boston. We expect to be doing non-deal road shows regarding externalization. And I will go to great lengths and pangs to meet with as many investors as possibly can. I will encourage you to please come forward with any comments or questions. But please give us the benefit of the doubt in hearing us out and justifying the business model as to why we believe it’s the right thing to do. After which point, if it’s not the right thing to do, please vote the way you consciously then should. But it’s not our interest to see destruction in value in Hercules. And we believe that this is the right thing for long-term sustainability and value for our shareholders. With that, thank you very much. And I greatly appreciate and thank you for your support.

Ladies and gentlemen, thank you for your participation in today’s conference, this does conclude the program. You may disconnect. Have a wonderful day.