First Eagle Alternative Capital BDC, Inc. - Quarter Report: 2016 September (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-Accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number 814-00789

THL CREDIT, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		27-0344947
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

100 Federal St., 31^st Floor, Boston, MA		02110
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: 800-450-4424

Securities registered pursuant to 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding at November 9, 2016 was 33,169,376.

THL CREDIT, INC.

FORM 10-Q FOR THE QUARTER ENDED September 30, 2016

Table of Contents


	INDEX	PAGE NO.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Assets and Liabilities as of September 30, 2016 (unaudited) and December 31, 2015		3

	Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 (unaudited)		4

	Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2016 and 2015 (unaudited)		5

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)		6

	Consolidated Schedules of Investments as of September 30, 2016 (unaudited) and December 31, 2015		8

	Notes to Consolidated Financial Statements (unaudited)		19

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		56

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		96

Item 4.	Controls and Procedures		97

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		98

Item 1A.	Risk Factors		98

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		99

Item 3.	Defaults Upon Senior Securities		99

Item 4.	Mine Safety Disclosures		99

Item 5.	Other Information		99

Item 6.	Exhibits		100

SIGNATURES			101

THL Credit, Inc. and Subsidiaries

Consolidated Statements of Assets and Liabilities

(in thousands, except per share data)

(unaudited)


	September 30, 2016			December 31, 2015
Assets:
Investments at fair value:
Non-controlled, non-affiliated investments (cost of $549,703 and $682,065, respectively)	$	533,204		$	672,333
Controlled investments (cost of $123,519 and $84,773, respectively)		139,554			81,823
Non-controlled, affiliated investments (cost of $4 and $7, respectively)		4			7

Total investments at fair value (cost of $673,226 and $766,845, respectively)	$	672,762		$	754,163
Cash		4,263			3,850
Interest, dividends, and fees receivable		8,334			7,060
Deferred financing costs		2,702			3,224
Deferred tax assets		1,403			1,118
Due from affiliate		489			686
Prepaid expenses and other assets		430			485
Other deferred assets		206			375
Deferred offering costs		118			—
Receivable for paydown of investments		56			330

Total assets	$	690,763		$	771,291

Liabilities:
Loans payable ($203,651 and $258,651 face amounts, respectively, reported net of unamortized debt issuance costs of $1,649 and $1,902, respectively. See Note 7)	$	202,001		$	256,749
Notes payable ($85,000 and $85,000 face amounts, respectively, reported net of unamortized debt issuance costs of $2,833 and $3,190, respectively. See Note 7)		82,167			81,809
Accrued incentive fees		3,918			4,243
Deferred tax liability		4,384			3,881
Base management fees payable		2,678			2,944
Accrued expenses and other payables		1,553			1,665
Accrued interest and fees		965			485
Other deferred liabilities		285			410
Interest rate derivative		102			206

Total liabilities		298,053			352,392
Commitments and contingencies (Notes 3 and 9)
Net Assets:
Common stock, par value $.001 per share, 100,000 common shares authorized, 33,169 and 33,311 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively		33			33
Paid-in capital in excess of par		440,088			441,742
Net unrealized (depreciation) appreciation on investments, net of provision for taxes of $4,384 and $3,791, respectively		(4,848	)		(16,473	)
Net unrealized depreciation on interest rate derivative		(102	)		(206	)
Accumulated undistributed net realized losses		(48,683	)		(14,349	)
Accumulated undistributed net investment income		6,222			8,152

Total net assets		392,710			418,899

Total liabilities and net assets	$	690,763		$	771,291

Net asset value per share	$	11.84		$	12.58

See accompanying notes to these consolidated financial statements.

THL Credit, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	For the three months ended September 30,						For the nine months ended September 30,
	2016			2015			2016			2015
Investment Income:
From non-controlled, non-affiliated investments:
Interest income	$	16,790		$	20,616		$	51,642		$	62,397
Dividend income		73			22			147			315
Other income		443			563			1,499			3,063
From non-controlled, affiliated investments:
Other income		373			501			1,238			1,746
From controlled investments:
Interest income		1,164			235			2,336			712
Dividend income		2,685			1,180			7,641			2,284
Other income		38			—			113			113

Total investment income		21,566			23,117			64,616			70,630
Expenses:
Interest and fees on borrowings		3,484			3,154			10,488			9,394
Base management fees		2,678			2,991			8,390			8,885
Incentive fees		2,624			2,912			2,654			8,873
Administrator expenses		888			912			2,708			2,782
Other general and administrative expenses		542			617			1,720			2,046
Amortization of deferred financing costs		389			703			1,157			1,528
Professional fees		350			328			1,180			1,125
Directors’ fees		168			226			578			662

Total expenses		11,123			11,843			28,875			35,295
Income tax (benefit) provision, excise and other taxes		(52	)		(375	)		184			(156	)

Net investment income		10,495			11,649			35,557			35,491
Realized Gain and Change in Unrealized Appreciation on Investments:
Net realized (loss) gain on investments:
Non-controlled, non-affiliated investments		(25,100	)		196			(27,064	)		273
Controlled investments		120			20			(10,767	)		20

Net realized (loss) gain on investments		(24,980	)		216			(37,831	)		293

Net change in unrealized (depreciation) appreciation on investments:
Non-controlled, non-affiliated investments		20,021			(7,626	)		(6,765	)		(6,621	)
Controlled investments		4,654			(969	)		18,983			4,312

Net change in unrealized (depreciation) appreciation on investments		24,675			(8,595	)		12,218			(2,309	)

Net realized and unrealized loss from investments		(305	)		(8,379	)		(25,613	)		(2,016	)
Provision for taxes on realized gain on investments		—			(9	)		—			(9	)
Provision for taxes on unrealized gain on investments		(381	)		(443	)		(588	)		(659	)
Interest rate derivative periodic interest payments, net		(66	)		(109	)		(232	)		(336	)
Net change in unrealized appreciation (depreciation) on interest rate derivative		144			(114	)		104			(257	)

Net increase in net assets resulting from operations	$	9,887		$	2,595		$	9,228		$	32,214

Net investment income per common share:
Basic and diluted	$	0.32		$	0.35		$	1.07		$	1.05
Net increase in net assets resulting from operations per common share:
Basic and diluted	$	0.30		$	0.08		$	0.28		$	0.95
Dividends declared and paid	$	0.34		$	0.34		$	1.02		$	1.02
Weighted average shares of common stock outstanding:
Basic and diluted		33,169			33,507			33,235			33,739

See accompanying notes to these consolidated financial statements.

THL Credit, Inc. and Subsidiaries

Consolidated Statements of Changes in Net Assets

(in thousands)

(unaudited)


	For the nine months ended September 30,
	2016			2015
Increase in net assets from operations:
Net investment income	$	35,557		$	35,491
Interest rate derivative periodic interest payments, net		(232	)		(336	)
Net realized (loss) gain on investments		(37,831	)		293
Income tax provision, realized gain		—			(9	)
Net change in unrealized (depreciation) appreciation on investments		12,218			(2,309	)
Provision for taxes on unrealized (gain) loss on investments		(588	)		(659	)
Net change in unrealized appreciation (depreciation) on interest rate derivative		104			(257	)

Net increase in net assets resulting from operations		9,228			32,214
Distributions to stockholders:
Distributions to stockholders from net investment income		(33,880	)		(34,316	)

Total distributions to stockholders		(33,880	)		(34,316	)
Capital share transactions:
Repurchase of common stock		(1,537	)		(7,000	)

Net decrease in net assets from capital share transactions		(1,537	)		(7,000	)

Total decrease in net assets		(26,189	)		(9,102	)
Net assets at beginning of period		418,899			443,621

Net assets at end of period	$	392,710		$	434,519

Common shares outstanding at end of period		33,169			33,338

Capital share activity:
Shares repurchased		142			568

See accompanying notes to these consolidated financial statements.

THL Credit, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	For the nine months ended September 30,
	2016			2015
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	9,228		$	32,214
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:
Net change in unrealized (appreciation) depreciation on investments		(12,218	)		2,309
Net change in unrealized (appreciation) depreciation on interest rate derivative		(104	)		257
Net realized loss on investments		37,977			26
Increase in investments due to PIK		(1,501	)		(3,543	)
Amortization of deferred financing costs		1,157			1,528
Accretion of discounts on investments and other fees		(3,393	)		(2,596	)
Changes in operating assets and liabilities:
Purchases of investments		(96,142	)		(111,744	)
Proceeds from sale and paydown of investments		156,804			156,090
Increase in interest, dividends and fees receivable		(1,274	)		(3,513	)
Decrease in income tax receivable		243			—
Decrease in other deferred assets		169			169
Decrease in due from affiliate		197			589
(Increase) decrease in prepaid expenses and other assets		(40	)		115
Increase in deferred tax asset		(285	)		(541	)
Decrease in accrued expenses and other payables		(145	)		(771	)
Increase (decrease) in accrued credit facility fees and interest		480			(285	)
Decrease in income taxes payable		—			(160	)
Increase in deferred tax liability		503			659
(Decrease) increase in base management fees payable		(266	)		181
Decrease in other deferred liabilities		(125	)		(125	)
Decrease in accrued incentive fees payable		(325	)		(124	)

Net cash provided by operating activities		90,940			70,735
Cash flows from financing activities:
Repurchase of common stock		(1,537	)		(7,000	)
Borrowings under credit facility		98,250			120,000
Repayments under credit facility		(153,250	)		(139,500	)
Distributions paid to stockholders		(33,880	)		(34,316	)
Financing and offering costs paid		(110	)		(1,870	)

Net cash used in financing activities		(90,527	)		(62,686	)

Net increase in cash		413			8,049
Cash, beginning of period		3,850			2,656

Cash, end of period	$	4,263		$	10,705

Supplemental Disclosure of Cash Flow Information:
Cash interest paid	$	9,340		$	9,001
Income taxes paid	$	1		$	72

Non-cash Operating Activities:

See Note 5 in the notes to consolidated financial statements for non-cash restructurings.

For the nine months ended September 30, 2016 and 2015, THL Credit recognized PIK income of $1,733 and $3,565, respectively.

See accompanying notes to these consolidated financial statements.

THL Credit, Inc. and Subsidiaries

Consolidated Schedules of Investments

September 30, 2016

(dollar amounts in thousands)

(unaudited)


Type of Investment/Portfolio company^(1)(2)(3)	Industry	Interest Rate⁽⁴⁾	Initial Acquisition Date		Maturity/ Dissolution Date		Principal⁽⁵⁾ No. of Shares / No. of Units		Amortized Cost			Fair Value
Non-controlled/non-affiliated investments—135.77% of net asset value

First lien secured debt
Aerogroup International Inc.	Consumer products	9.5% (LIBOR + 8.5%)		6/9/2014		12/9/2019		13,376		13,213			12,706
Allied Wireline Services, LLC	Energy / Utilities	11.0% (LIBOR + 9.5%) (5.5% Cash and 5.5% PIK)⁽¹¹⁾		2/28/2014		2/28/2019		10,073		10,073			8,764
American Achievement Corporation	Consumer products	8.3% (LIBOR + 7.3%)		10/30/2015		9/30/2020		9,773		9,653			9,626
BeneSys Inc.	Business services	11.3% (LIBOR + 10.3%)		3/31/2014		3/31/2019		11,080		10,976			10,886
BeneSys Inc.⁽⁸⁾	Business services	11.3% (LIBOR + 10.3%)		8/1/2014		3/31/2019		436		430			429
Charming Charlie, LLC.	Retail & grocery	9.0% (LIBOR + 8.0%)		12/18/2013		12/24/2019		24,436		22,972			16,616
Constructive Media, LLC	Media, entertainment and leisure	10.8% (LIBOR +10.0%)		11/23/2015		11/23/2020		14,244		14,007			14,102
Copperweld Bimetallics LLC⁽²⁵⁾	Industrials	18.0% (12.0% Cash + 6.0% PIK)⁽¹¹⁾		12/11/2013		12/11/2018		19,722		19,265			17,750
CRS Reprocessing, LLC	Industrials	10.5% (LIBOR + 9.5%)		6/16/2011		12/31/2016		14,935		14,935			13,591
Dodge Data & Analytics LLC	IT services	9.8% (LIBOR + 8.8%)		11/20/2014		10/31/2019		11,253		11,109			11,196
Duff & Phelps Corporation⁽¹⁰⁾	Financial services	4.8% (LIBOR + 3.8%)		5/15/2013		4/23/2020		242		244			242
Food Processing Holdings, LLC	Food & beverage	10.5% (LIBOR + 9.5%)		10/31/2013		10/31/2018		20,318		20,135			20,318
Hart InterCivic, Inc.	IT services	11.0% (LIBOR + 10.5%)		3/31/2016		3/31/2019		25,600		25,172			25,600
HEALTHCAREfirst, Inc.	Healthcare	13.5%⁽⁷⁾		8/31/2012		8/30/2017		8,599		8,539			8,212
Holland Intermediate Acquisition Corp.	Energy / Utilities	10.0% (LIBOR + 9.0%)		5/29/2013		5/29/2018		21,880		21,706			19,145
Holland Intermediate Acquisition Corp.⁽⁸⁾	Energy / Utilities	10.0% (LIBOR + 9.0%)		5/29/2013		5/29/2018		—		—			—
Igloo Products Corp.	Consumer products	11.3% (LIBOR + 9.8%)		3/28/2014		3/28/2020		24,636		24,276			23,897
It’s Just Lunch International LLC	Media, entertainment and leisure	9.5% (LIBOR + 8.5%)		7/28/2016		7/28/2021		5,500		5,394			5,445
The John Gore Organization, Inc.⁽²³⁾	Media, entertainment and leisure	9.0% (LIBOR + 8.0%)		8/8/2013		6/28/2021		14,734		14,473			14,808
The John Gore Organization, Inc.⁽⁸⁾⁽⁹⁾⁽²³⁾	Media, entertainment and leisure	9.0% (LIBOR + 8.0%)		8/8/2013		6/28/2021		—		(14	)		—
LAI International, Inc.	Industrials	10.3%⁽⁷⁾		10/22/2014		10/22/2019		17,495		17,243			17,495
LAI International, Inc.⁽⁸⁾	Industrials	8.2%⁽⁷⁾		10/22/2014		10/22/2019		4,530		4,530			4,530
Loadmaster Derrick & Equipment, Inc.	Energy / Utilities	11.3% (LIBOR + 10.3%)		7/1/2016		12/31/2020		7,105		7,000			7,105
Loadmaster Derrick & Equipment, Inc.	Energy / Utilities	13% PIK		7/1/2016		12/31/2020		1,500		1,003			1,500
MeriCal, LLC	Consumer products	10.0% (LIBOR + 9.0%)		9/30/2016		9/30/2021		14,950		14,563			14,563
RealD Inc.	Media, entertainment and leisure	8.5% (LIBOR + 7.5%)		3/22/2016		3/22/2021		14,925		14,792			14,925
Virtus Pharmaceuticals, LLC	Healthcare	10.8%⁽⁷⁾		7/17/2014		7/17/2019		24,171		23,785			24,171
Wheels Up Partners, LLC	Transportation	9.6% (LIBOR + 8.6%)		1/31/2014		10/15/2021		8,299		8,224			8,382
Wheels Up Partners, LLC	Transportation	9.6% (LIBOR + 8.6%)		8/27/2014		7/15/2022		9,122		9,122			9,214

Subtotal first lien secured debt							$	352,934	$	346,820		$	335,218

Second lien debt
Alex Toys, LLC	Consumer products	11.0% (LIBOR + 10.0%)		6/30/2014		12/30/2019		30,201		29,803			28,994
Hostway Corporation	IT services	10.0% (LIBOR + 8.8%)		12/27/2013		12/13/2020		17,500		17,306			12,425
Merchants Capital Access, LLC	Financial services	11.5% (LIBOR + 10.5%)		4/20/2015		4/20/2021		12,500		12,309			12,375
Specialty Brands Holdings, LLC	Restaurants	9.8% (8.8% Cash and 1.0% PIK)		7/16/2013		7/16/2018		21,100		20,934			20,467
Synarc-Biocore Holdings, LLC	Healthcare	9.3% (LIBOR + 8.3%)		3/13/2014		3/10/2022		11,000		10,921			11,000
Washington Inventory Service	Business services	10.3% (LIBOR + 9.0%)		12/27/2012		6/20/2019		11,000		10,929			7,480

Subtotal second lien debt							$	103,301	$	102,202		$	92,741

Subordinated debt
A10 Capital, LLC⁽⁸⁾	Financial services	12.0%		8/25/2014		2/25/2021	$	10,634	$	10,552		$	10,635
Aerogroup International Inc.	Consumer products	12.0% PIK		8/5/2015		3/9/2020		296		296			—
Aerogroup International Inc.	Consumer products	10.0% PIK⁽¹¹⁾		1/27/2016		3/9/2020		768		768			430
Dr. Fresh, LLC	Consumer products	14.0% (12.0% Cash and 2.0% PIK)⁽¹¹⁾		5/15/2012		11/15/2017		15,428		15,357			15,428
Gold, Inc.	Consumer products	10.0%		12/31/2012		6/30/2019		9,666		9,666			9,666
Martex Fiber Southern Corp.	Industrials	15.5% (12.0% Cash and 3.5% PIK)⁽¹¹⁾		4/30/2012		9/30/2017		8,272		8,217			8,189

Subtotal subordinated debt							$	45,064	$	44,856		$	44,348

(continued on next page)

See accompanying notes to these consolidated financial statements

THL Credit, Inc. and Subsidiaries

Consolidated Schedules of Investments

September 30, 2016

(dollar amounts in thousands)

(unaudited)


Type of Investment/ Portfolio company^(1)(2)(3)	Industry	Interest Rate⁽⁴⁾	Initial Acquisition Date		Maturity/ Dissolution Date	Principal⁽⁵⁾ No. of Shares / No. of Units		Amortized Cost		Fair Value
Equity investments⁽¹²⁾
A10 Capital, LLC^(12)(14)(21)	Financial services			8/25/2014			17,531.75	$	18,294	$	18,426
Aerogroup International Inc.	Consumer products			6/9/2014			253,616		11		—
Aerogroup International Inc.⁽²¹⁾	Consumer products			6/9/2014			28,180		1,108		—
Alex Toys, LLC^{(12)(13)(15)(22)}	Consumer products			5/22/2015			153.85		1,000		740
Alex Toys, LLC^{(12)(13)(15)(21)(24)}	Consumer products			6/22/2016			121.18		788		814
Allied Wireline Services, LLC^(12)(15)(22)	Energy / Utilities			2/28/2014			618,867.92		619		—
Constructive Media, LLC	Media, entertainment and leisure			11/23/2015			750,000		750		690
Dimont & Associates, Inc.⁽²²⁾	Financial services			3/14/2016			312.51		129		139
Firebirds International, LLC⁽²²⁾	Restaurants			5/17/2011			1,906		191		337
Food Processing Holdings, LLC⁽²²⁾	Food & beverage			4/20/2010			162.44		163		259
Food Processing Holdings, LLC⁽²²⁾	Food & beverage			4/20/2010			406.09		408		820
Hostway Corporation⁽²²⁾	IT services			12/27/2013			20,000		200		—
Hostway Corporation⁽²¹⁾	IT services			12/27/2013			1,800		1,800		—
Igloo Products Corp.^(12)(22)	Consumer products			4/30/2014			1,902.04		1,716		1,670
Loadmaster Derrick & Equipment, Inc.⁽²¹⁾	Energy / Utilities			7/1/2016			1,000		1,114		1,002
MeriCal, LLC^(12)(13)(22)	Consumer products			9/30/2016			5,000		5		5
MeriCal, LLC^(12)(13)(21)	Consumer products			9/30/2016			495		495		495
Virtus Pharmaceuticals, LLC^(15)(22)	Healthcare			3/31/2015			7,720.86		127		—
Virtus Pharmaceuticals, LLC^(15)(22)	Healthcare			3/31/2015			231.82		244		291
Virtus Pharmaceuticals, LLC^(15)(22)	Healthcare			3/31/2015			589.76		590		428
Wheels Up Partners, LLC^(12)(15)(22)	Transportation			1/31/2014			1,000,000		1,000		2,840

Subtotal equity								$	30,752	$	28,956

Warrants
Allied Wireline Services, LLC⁽¹⁵⁾	Energy / Utilities			2/28/2014			501,159.24		175		—
Loadmaster Derrick & Equipment, Inc.	Energy / Utilities			7/1/2016			—		—		—
YP Equity Investors, LLC⁽¹⁵⁾	Media, entertainment and leisure			5/8/2012			—		—		6,209

Subtotal warrants								$	175	$	6,209

CLO residual interests
Flagship VII, Ltd.^(6)(16)	Structured Products	11.3%		12/18/2013					3,144		2,266
Flagship VIII, Ltd.^(6)(16)	Structured Products	10.3%		10/3/2014					6,089		5,079

Subtotal CLO residual interests								$	9,233	$	7,345

Investment in payment rights
Duff & Phelps Corporation^{(10) (16)}	Financial services	17.6%		6/1/2012				$	11,482	$	13,559

Subtotal investment in payment rights								$	11,482	$	13,559

Investments in funds⁽¹⁷⁾
Freeport Financial SBIC Fund LP	Financial services			6/14/2013				$	2,957	$	2,828
Gryphon Partners 3.5, L.P.	Financial services			11/20/2012					1,226		2,000

Subtotal investments in funds								$	4,183	$	4,828

Total non-controlled/non-affiliated investments								$	549,703	$	533,204

—135.77% of net asset value asset value

(continued on next page)

See accompanying notes to these consolidated financial statements.

THL Credit, Inc. and Subsidiaries

Consolidated Schedules of Investments

September 30, 2016

(dollar amounts in thousands)

(unaudited)


Type of Investment/Portfolio company^(1)(2)(3)	Industry	Interest Rate⁽⁴⁾	Initial Acquisition Date		Maturity/ Dissolution Date		Principal⁽⁵⁾ No. of Shares / No. of Units		Amortized Cost		Fair Value
Controlled investments—35.54% of net asset value
First lien secured debt
OEM Group, LLC⁽¹⁸⁾	Industrials	10.0% (LIBOR + 9.5%)		3/16/2016		2/15/2019	$	18,703	$	18,703	$	18,702
OEM Group, LLC⁽¹⁸⁾	Industrials	10.0% (LIBOR + 9.5%)		3/16/2016		6/30/2017		6,510		6,510		6,510
Thibaut, Inc⁽¹⁸⁾	Consumer products	14.0%		6/20/2014		6/19/2019		6,407		6,360		6,407
Tri Starr Management Services, Inc.^(18)(26)	Business services	7.3% (ABR + 3.8%)		7/22/2016		9/30/2017		164		164		164
Tri Starr Management Services, Inc.^(18)(27)	Business services	5.8% (LIBOR + 4.8%)		7/22/2016		9/30/2017		659		324		659
Tri Starr Management Services, Inc.⁽¹⁸⁾	Business services	5.8% (LIBOR + 4.8%)		7/22/2016		9/30/2017		291		124		291
Tri Starr Management Services, Inc.⁽¹⁸⁾	Business services	5.8% (LIBOR + 4.8%)		7/22/2016		9/30/2017		2,545		1,081		2,545
Tri Starr Management Services, Inc.^(18)(25)	Business services	10.0% PIK		7/22/2016		9/30/2017		1,364		480		995
Tri Starr Management Services, Inc.^(18)(25)	Business services	10.0% PIK		7/22/2016		9/30/2017		909		320		—
Tri Starr Management Services, Inc.^(18)(25)	Business services	5.0% PIK		7/22/2016		9/30/2017		3,016		1,062		—

Subtotal first lien secured debt							$	40,568	$	35,128	$	36,273
Equity investments
C&K Market, Inc.^(18)(22)	Retail & grocery			11/3/2010				1,992,365	$	2,271	$	16,175
C&K Market, Inc.^(18)(21)	Retail & grocery			11/3/2010				1,992,365		10,956		9,962
OEM Group, Inc.^(13)(18)(21)	Industrials			3/16/2016				93.51		8,314		8,478
Thibaut, Inc^{(12)(13)(18)(19)(21)}	Consumer products			6/20/2014				4,747		4,714		5,537
Thibaut, Inc^{(12)(13)(18)(22)}	Consumer products			6/20/2014				20,639		—		1,245
Tri Starr Management Services, Inc.^(18)(22)	Business services			7/22/2016				716.772		3,136		3,136

Subtotal equity									$	29,391	$	44,533
Investments in funds
THL Credit Logan JV LLC^{(12)(17)(18)(20)(22)}	Financial services			12/3/2014				—	$	59,000	$	58,748

Subtotal investments in funds									$	59,000	$	58,748

Total controlled investments
—35.54% of net asset value									$	123,519	$	139,554

Non-controlled/affiliated investments
—0.00% of net asset value
Investments in funds
THL Credit Greenway Fund LLC^(12)(17)(22)	Financial services			1/27/2011					$	1	$	1
THL Credit Greenway Fund II LLC^(12)(17)(22)	Financial services			3/1/2013						3		3

Subtotal investments in funds									$	4	$	4

Total non-controlled/affiliated investments
—0.00% of net asset value									$	4	$	4


Total investments									$	673,226	$	672,762

—171.31% of net asset value


Derivative Instruments
Counterparty	Instrument	Interest Rate	Expiration Date		# of Contracts	Notional		Cost		Fair Value
ING Capital Markets, LLC	Interest Rate Swap – Pay Fixed/Receive Floating	1.1425%/LIBOR		05/10/17	1	$	50,000	$	—	$	(102	)

Total derivative instruments—0.03 % of net asset value						$	50,000	$	—	$	(102	)

(1)	All debt investments are income-producing, unless otherwise noted. Equity and member interests are non-income-producing unless otherwise noted.

(2)	All investments are pledged as collateral under the Revolving Facility and Term Loan Facility.

(3)	As of September 30, 2016, 12.5% and 12.6% of the Company’s total investments on a cost and fair value basis, respectively, are in non-qualifying assets.

(4)

Variable interest rate investments bear interest in reference to London Interbank offer rate, or LIBOR, or ABR, which are effective as of September 30, 2016. LIBOR loans are typically indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option, and ABR rates are typically indexed to the current prime rate or federal funds rate. Both LIBOR and ABR rates may be subject to interest floors.

(5)	Principal includes accumulated PIK, or paid-in-kind, interest and is net of repayments.

(6)	Foreign company at the time of investment and, as a result, is not a qualifying asset under Section 55(a) of the 1940 Act.

(7)	Unitranche investment; interest rate reflected represents the implied interest rate earned on the investment for the most recent quarter.

(8)	Issuer pays 0.50% unfunded commitment fee on delayed draw term loan and/or revolving loan facilities.

(9)	The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

(10)	Publicly-traded company with a market capitalization in excess of $250 million at the time of investment and, as a result, is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940.

(11)	At the option of the issuer, interest can be paid in cash or cash and PIK. The percentage of PIK shown is the maximum PIK that can be elected by the company.

(12)	Member interests of limited liability companies are the equity equivalents of the stock of corporations.

(13)	Equity ownership may be held in shares or units of companies related to the portfolio company.

(14)	Preferred stock investment return is income-producing with a stated rate of 12.8% cash and 2% PIK due on a monthly basis

(15)	Interest held by a wholly owned subsidiary of THL Credit, Inc.

(16)	Income-producing security with no stated coupon; interest rate reflects an estimation of the effective yield to expected maturity as of September 30, 2016.

(17)	Non-registered investment company at the time of investment and, as a result, is not a qualifying asset under Section 55(a) of the 1940 Act.

(18)

As defined in Section 2(a)(9) of the 1940 Act, the Company is deemed to control this portfolio company because it owns more than 25% of the portfolio company’s outstanding voting securities. See Schedule 12-14 in the accompanying notes to the consolidated financial statements for transactions for the quarter ended September 30, 2016 in which the issuer was a portfolio company that the Company is deemed to control.

(19)	Part of our preferred stock return is income-producing with a stated rate of 3% due on a quarterly basis.

(20)

On December 3, 2014, the Company entered into an agreement with Perspecta to create THL Credit Logan JV LLC, or Logan JV, a joint venture, which invests primarily in senior secured first lien term loans. All Logan JV investment decisions must be unanimously approved by the Logan JV investment committee consisting of one representative from each of the Company and Perspecta. Although the Company owns more than 25% of the voting securities of Logan JV, the Company does not believe that it has control over Logan JV (other than for purposes of the 1940 Act or otherwise). Funding to Logan JV will only be made pursuant to unanimous approval from the Company and Perspecta.

(21)	Preferred stock

(22)	Common stock and member interest.

(23)	Investment formerly known as Key Brand Entertainment, Inc. The name change was effective May 16, 2016.

(24)	Preferred stock investment return is income-producing with a stated rate of 12.5% PIK capitalized annually.

(25)	Loan was on non-accrual as of September 30, 2016.

(26)	Issuer pays 3.0% weighted average unfunded commitment fee on the revolving loan facility.

(27)	Issuer pays 4.75% unfunded commitment fee on the revolving loan facility.

See accompanying notes to these consolidated financial statements.

THL Credit, Inc. and Subsidiaries

Consolidated Schedules of Investments

December 31, 2015

(dollar amounts in thousands)

Type of Investment/Portfolio company⁽¹⁾⁽²⁾

Industry

Interest Rate⁽³⁾

Initial
Acquisition
Date

Maturity/
Dissolution
Date

Principal⁽⁴⁾
No. of Shares /
No. of Units

Amortized
Cost

Fair Value

Non-controlled/non-affiliated investments—160.50% of net
asset value

First lien secured debt

20-20 Technologies Inc.⁽⁵⁾

IT services

9.8%⁽⁶⁾

9/12/2012

3/29/2019

29,437

29,183

29,436

Aerogroup International
Inc.

Consumer

products

9.5% (LIBOR + 8.5%)

6/9/2014

12/9/2019

13,580

13,377

12,629

Airborne Tactical Advantage Company, LLC

Aerospace &

defense

11.0%

9/7/2011

3/7/2016

2,583

2,577

2,583

Airborne Tactical Advantage Company, LLC

Aerospace &

defense

11.0%

6/24/2014

3/7/2016

1,679

1,675

1,696

Allied Wireline Services, LLC

Energy /

Utilities

11.0% (LIBOR

+ 9.5%) (5.5%

Cash + 5.5%

PIK)⁽¹⁰⁾

2/28/2014

2/28/2019

9,664

9,363

8,408

American Achievement Corporation

Consumer

products

8.3% (LIBOR + 7.3%)

10/30/2015

9/30/2020

10,000

9,855

BeneSys Inc.

Business

services

10.8% (LIBOR

+ 9.8%)

3/31/2014

3/31/2019

10,196

10,079

10,145

BeneSys Inc.⁽⁷⁾

Business

services

10.8% (LIBOR

+ 9.8%)

8/1/2014

3/31/2019

218

210

217

Charming Charlie, LLC.

Retail &

grocery

9.0% (LIBOR + 8.0%)

12/18/2013

12/24/2019

21,870

21,339

20,339

Constructive Media, LLC

Media, entertainment and leisure

10.5%

(LIBOR+

10.0%)

11/23/2015

11/23/2020

15,500

15,196

Copperweld Bimetallics LLC

Industrials

16.0% (12.0%

Cash + 4.0%

PIK)⁽¹⁰⁾

12/11/2013

12/11/2018

19,525

19,026

18,354

CRS Reprocessing, LLC

Industrials

10.5% (LIBOR

+ 9.5%)

6/16/2011

6/16/2016

14,935

14,487

Dodge Data & Analytics LLC

IT services

9.8% (LIBOR + 8.8%)

11/20/2014

10/31/2019

11,496

11,315

11,324

Duff & Phelps Corporation⁽⁹⁾

Financial

services

4.8% (LIBOR + 3.8%)

5/15/2013

4/23/2020

244

246

239

Food Processing Holdings, LLC

Food &

beverage

10.5% (LIBOR

+ 9.5%)

10/31/2013

10/31/2018

22,063

21,794

22,173

Hart InterCivic, Inc.

IT services

13.0% (LIBOR

+ 10.5% Cash + 1.5% PIK)⁽¹⁰⁾

7/1/2011

7/1/2016

8,661

8,640

8,661

Hart InterCivic, Inc.⁽⁷⁾

IT services

11.5% (LIBOR

+ 10.0% Cash)

7/1/2011

7/1/2016

6,000

5,984

6,000

HEALTHCAREfirst, Inc.

Healthcare

13.5%⁽⁶⁾

8/31/2012

8/30/2017

9,016

8,903

8,588

Holland Intermediate Acquisition Corp.

Energy /

Utilities

10.0% (LIBOR

+ 9.0%)

5/29/2013

5/29/2018

22,050

21,797

20,286

Type of Investment/Portfolio company⁽¹⁾⁽²⁾

Industry

Interest Rate⁽³⁾

Initial
Acquisition
Date

Maturity/
Dissolution
Date

Principal⁽⁴⁾
No. of Shares /
No. of Units

Amortized
Cost

Fair Value

Holland Intermediate Acquisition Corp.⁽⁷⁾

Energy /

Utilities

10.0% (LIBOR

+ 9.0%)

5/29/2013

5/29/2018

—

Igloo Products Corp.

Consumer

products

11.3% (LIBOR

+ 9.8%)

3/28/2014

3/28/2020

24,636

24,201

24,144

Key Brand Entertainment, Inc.

Media,

entertainment

and leisure

8.8% (LIBOR

+7.5%)

8/8/2013

8/8/2018

12,025

11,889

12,085

Key Brand Entertainment, Inc.

Media,

entertainment

and leisure

12.5% (LIBOR

+11.3%)

5/29/2014

8/8/2018

2,874

2,836

2,931

Key Brand Entertainment, Inc.⁽⁷⁾⁽⁸⁾

Media,

entertainment

and leisure

8.8% (LIBOR

+7.5%)

8/8/2013

8/8/2018

—

(16

)

—

Key Brand Entertainment, Inc.⁽⁸⁾

Media,

entertainment

and leisure

12.5% (LIBOR

+11.3%)

5/29/2014

8/8/2018

—

(39

)

—

LAI International, Inc.

Industrials

10.6%⁽⁶⁾

10/22/2014

10/22/2019

17,553

17,241

17,202

LAI International, Inc.⁽⁷⁾

Industrials

9.0%⁽⁶⁾

10/22/2014

10/22/2019

4,546

4,455

Loadmaster Derrick &
Equipment, Inc.

Energy /

Utilities

11.3% (LIBOR

+10.3%)

9/28/2012

9/28/2017

7,997

7,913

7,037

Loadmaster Derrick &
Equipment, Inc.⁽⁷⁾

Energy /

Utilities

11.3% (LIBOR

+10.3%)

9/28/2012

9/28/2017

3,623

3,188

(Continued on next page)


Type of Investment/Portfolio company⁽¹⁾⁽²⁾	Industry	Interest Rate⁽³⁾	Initial Acquisition Date		Maturity/ Dissolution Date		Principal⁽⁴⁾ No. of Shares / No. of Units		Amortized Cost		Fair Value
Loadmaster Derrick & Equipment, Inc.⁽⁷⁾	Energy / Utilities	11.3% (LIBOR +10.3%)		7/16/2014		9/28/2017		3,170		3,135		2,790
OEM Group, Inc.	Industrials	15.0%(7.5% Cash + 7.5% PIK)⁽¹⁰⁾		10/7/2010		2/15/2016		29,638		29,638		24,600
OEM Group, Inc.	Industrials	15.0%(7.5% Cash + 7.5% PIK)⁽¹⁰⁾		6/6/2014		2/15/2016		3,158		3,158		2,621
Virtus Pharmaceuticals, LLC	Healthcare	10.7%⁽⁶⁾		7/17/2014		7/17/2019		19,615		19,263		19,615
Wheels Up Partners, LLC	Transportation	9.6% (LIBOR +8.6%)		1/31/2014		10/15/2021		8,929		8,833		9,018
Wheels Up Partners, LLC	Transportation	9.6% (LIBOR +8.6%)		8/27/2014		7/15/2022		9,633		9,633		9,730

Subtotal first lien secured debt							$	376,114	$	371,348	$	360,032
Second lien debt
Alex Toys, LLC	Consumer products	11.0% (LIBOR +10.0%)		6/30/2014		12/30/2019		30,201		29,714		28,993
Allen Edmonds Corporation	Consumer products	10.0% (LIBOR +9.0%)		11/26/2013		5/27/2019		7,333		7,233		7,260
American Covers, Inc.	Consumer products	9.5% (LIBOR +8.5%)		9/1/2015		2/25/2021		10,000		9,859		9,859
Connecture, Inc.	Healthcare	12.0% (LIBOR +11.0%)		3/18/2013		7/15/2018		21,831		21,668		22,049
Granicus, Inc	IT services	10.5% (LIBOR +9.5%)		12/18/2015		12/18/2020		17,000		16,663		16,663
Hostway Corporation	IT services	10.0% (LIBOR +8.8%)		12/27/2013		12/13/2020		17,500		17,273		16,625
Merchants Capital Access, LLC	Financial services	11.5% (LIBOR +10.5%)		4/20/2015		4/20/2021		12,500		12,278		12,250
Oasis Legal Finance Holding Company LLC	Financial services	10.5%		9/30/2013		9/30/2018		12,549		12,400		12,675
Specialty Brands Holdings, LLC	Restaurants	11.3% (LIBOR +9.8%)		7/16/2013		7/16/2018		20,977		20,743		20,558
Synarc-Biocore Holdings, LLC	Healthcare	9.3% (LIBOR +8.3%)		3/13/2014		3/10/2022		11,000		10,911		10,230
Vision Solutions, Inc.	IT services	9.5% (LIBOR +8.0%)		3/31/2011		7/23/2017		9,625		9,601		9,144
Washington Inventory Service	Business services	10.3% (LIBOR +9.0%)		12/27/2012		6/20/2019		11,000		10,910		10,780

Subtotal second lien debt							$	181,516	$	179,253	$	177,086
Subordinated debt
A10 Capital, LLC⁽⁷⁾	Financial services	12.0%		8/25/2014		2/25/2021	$	8,968	$	8,889	$	8,879
Aerogroup International Inc.	Consumer products	12.0% PIK		8/5/2015		3/9/2020		264		264		185
Dr. Fresh, LLC	Consumer products	14.0%(12.0% Cash + 2.0% PIK)⁽¹⁰⁾		5/15/2012		11/15/2017		15,195		15,078		15,043
Gold, Inc.	Consumer products	11.0%		12/31/2012		6/30/2019		16,788		16,788		16,788
Martex Fiber Southern Corp.	Industrials	15.5%(12.0% Cash + 3.5% PIK)⁽¹⁰⁾		4/30/2012		6/30/2016		9,217		9,137		9,032


Type of Investment/Portfolio company⁽¹⁾⁽²⁾	Industry	Interest Rate⁽³⁾	Initial Acquisition Date		Maturity/ Dissolution Date		Principal⁽⁴⁾ No. of Shares / No. of Units		Amortized Cost		Fair Value
Tri Starr Management Services, Inc.⁽²³⁾	Business services	15.8% (2.1% Cash and 13.7% PIK)		3/4/2013		3/4/2019		20,906		20,558		13,589

Subtotal subordinated debt							$	71,338	$	70,714	$	63,516
Equity investments⁽¹¹⁾
A10 Capital, LLC^(11)(13)(20)	Financial services			8/25/2014				5,109.53	$	17,178	$	17,322
Aerogroup International Inc.⁽²²⁾	Consumer products			6/9/2014				253,616		11		—
Aerogroup International Inc.⁽²⁰⁾	Consumer products			6/9/2014				28,180		1,108		—
AIM Media Texas Operating, LLC^(11)(14)(21)	Media, entertainment and leisure			6/21/2012				0.763636		764		727
Airborne Tactical Advantage Company, LLC⁽²¹⁾	Aerospace & defense			9/7/2011				511,812		113		657
Airborne Tactical Advantage Company, LLC⁽²⁰⁾	Aerospace & defense			9/17/2013				225,000		169		489
Alex Toys, LLC^{(11)(12)(14)(21)}	Consumer products			5/22/2015				153.85		1,000		771
Allied Wireline Services, LLC^(11)(14)(21)	Energy / Utilities			2/28/2014				618,867.92		619		—
Allied Wireline Services, LLC^(11)(14)(21)	Energy / Utilities			2/28/2014				501,159.24		175		—
Constructive Media, LLC	Media, entertainment and leisure			11/23/2015				750,000		750		750
Firebirds International, LLC⁽²¹⁾	Restaurants			5/17/2011				1,906		191		310
Food Processing Holdings, LLC⁽²¹⁾	Food & beverage			4/20/2010				162.44		163		244
Food Processing Holdings, LLC⁽²¹⁾	Food & beverage			4/20/2010				406.09		408		1,006
Hostway Corporation⁽²¹⁾	IT services			12/27/2013				20,000		200		—
Hostway Corporation⁽²⁰⁾	IT services			12/27/2013				1,800		1,800		1,254
Igloo Products Corp.^(11)(21)	Consumer products			4/30/2014				1,902.04		1,716		1,625
OEM Group, Inc.^(21)(22)	Industrials			10/7/2010				—		—		—
Surgery Center Holdings, Inc.^(11)(21)	Healthcare			4/20/2013				264,068		—		5,411
Virtus Pharmaceuticals, LLC^(14)(21)	Healthcare			3/31/2015				6,796.47		127		263
Virtus Pharmaceuticals, LLC^(14)(21)	Healthcare			3/31/2015				83.92		94		109
Virtus Pharmaceuticals, LLC^(14)(21)	Healthcare			3/31/2015				589.76		590		626
Wheels Up Partners, LLC^(11)(14)(21)	Transportation			1/31/2014				1,000,000		1,000		2,840
YP Equity Investors, LLC^(11)(14)(21)	Media, entertainment and leisure			5/8/2012				—		—		5,000

Subtotal equity									$	28,176	$	39,404
CLO residual interests
Dryden CLO, Ltd.^(5)(15)	Structured Products	15.8%		9/12/2013				—		6,845		6,205


Type of Investment/Portfolio company⁽¹⁾⁽²⁾	Industry	Interest Rate⁽³⁾		Initial Acquisition Date		Maturity/ Dissolution Date		Principal⁽⁴⁾ No. of Shares / No. of Units		Amortized Cost		Fair Value
Flagship VII, Ltd.^(5)(15)	Structured Products		15.8%		12/18/2013				—		3,517		3,110
Flagship VIII, Ltd.^(5)(15)	Structured Products		13.3%		10/3/2014				—		6,743		5,687

Subtotal CLO residual interests										$	17,105	$	15,002
Investment in payment rights
Duff & Phelps Corporation^(9)(15)	Financial services		17.6%		6/1/2012				—	$	11,482	$	13,307

Subtotal investment in payment rights										$	11,482	$	13,307
Investments in funds⁽¹⁶⁾
Freeport Financial SBIC Fund LP	Financial services				6/14/2013					$	2,957	$	2,987
Gryphon Partners 3.5, L.P.	Financial services				11/20/2012						1,030		999

Subtotal investments in funds										$	3,987	$	3,986

Total non-controlled/non-affiliated investments—160.50% of net asset value										$	682,065	$	672,333

Controlled investments—19.53% of net asset value
First lien secured debt
Thibaut, Inc⁽¹⁷⁾	Consumer products		14.0%		6/19/2014		6/19/2019	$	6,455	$	6,397	$	6,455

Subtotal first lien secured debt
								$	6,455	$	6,397	$	6,455
Subordinated debt
Dimont & Associates, Inc.^(17)(23)	Financial services		11.0% PIK⁽¹⁰⁾		10/20/2014		4/20/2018	$	4,556	$	4,474	$	265

Subtotal subordinated debt								$	4,556	$	4,474	$	265
Equity investments
C&K Market, Inc.^(17)(21)	Retail & grocery				11/3/2010				1,992,365	$	2,271	$	14,168
C&K Market, Inc.^(17)(20)	Retail & grocery				11/3/2010				1,992,365		10,956		9,962
Dimont & Associates, Inc.^(17)(21)	Financial services				10/20/2014				50,004		6,569		—
Thibaut, Inc^{(11)(12)(17)(18)(20)}	Consumer products				6/19/2014				4,747		4,706		5,227
Thibaut, Inc^{(11)(12)(17)(21)}	Consumer products				6/19/2014				20,639		—		964

Subtotal equity										$	24,502	$	30,321

(continued on next page)


Type of Investment/ Portfolio company⁽¹⁾⁽²⁾	Industry	Interest Rate⁽³⁾	Initial Acquisition Date		Maturity/ Dissolution Date	Principal⁽⁴⁾ No. of Shares / No. of Units		Amortized Cost		Fair Value
Investments in funds
THL Credit Logan JV LLC^{(11)(16)(17)(19)(21)}	Financial services			12/3/2014			—	$	49,400	$	44,782

Subtotal investments in funds								$	49,400	$	44,782

Total controlled investments—19.53% of net asset value								$	84,773	$	81,823

Non-controlled/affiliated investments—0.00% of net asset value
Investments in funds
THL Credit Greenway Fund LLC^(11)(16)(21)	Financial services			1/27/2011				$	3	$	3
THL Credit Greenway Fund II LLC^(11)(16)(21)	Financial services			3/1/2013					4		4

Subtotal investments in funds								$	7	$	7

Total non-controlled/affiliated investments—0.00% of net asset value								$	7	$	7

Total investments—180.03% of net asset value								$	766,845	$	754,163


Derivative Instruments
Counterparty	Instrument	Interest Rate			Expiration Date		# of Contracts		Notional		Cost		Fair Value
ING Capital Markets, LLC	Interest Rate Swap – Pay Fixed/Receive Floating		1.1425	%/LIBOR		05/10/17		1	$	50,000	$	—	$	(206	)

Total derivative instruments—0.05% of net asset value									$	50,000	$	—	$	(206	)

(1)	All debt investments are income-producing, unless otherwise noted. Equity and member interests are non-income-producing unless otherwise noted.

(2)	All investments are pledged as collateral under the Revolving Facility and Term Loan Facility.

(3)

Variable interest rate investments bear interest in reference to LIBOR or ABR, which are effective as of December 31, 2015. LIBOR loans are typically indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option, and ABR rates are typically indexed to the current prime rate or federal funds rate. Both LIBOR and ABR rates are subject to interest floors.

(4)	Principal includes accumulated PIK, or paid-in-kind, interest and is net of repayments.

(5)	Foreign company at the time of investment and, as a result, is not a qualifying asset under Section 55(a) of the 1940 Act.

(6)	Unitranche investment; interest rate reflected represents the implied interest rate earned on the investment for the most recent quarter.

(7)	Issuer pays 0.50% unfunded commitment fee on delayed draw term loan and revolving loan facility.

(8)	The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

(9)	Publicly-traded company with a market capitalization in excess of $250 million at the time of investment and, as a result, is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940.

(10)	At the option of the issuer, interest can be paid in cash or cash and PIK. The percentage of PIK shown is the maximum PIK that can be elected by the company.

(11)	Member interests of limited liability companies are the equity equivalents of the stock of corporations.

(12)	Equity ownership may be held in shares or units of companies related to the portfolio company.

(13)	Preferred stock investment return is income-producing with a stated rate of 12% cash and 2% PIK due on a monthly basis

(14)	Interest held by a wholly owned subsidiary of THL Credit, Inc.

(15)	Income-producing security with no stated coupon; interest rate reflects an estimation of the effective yield to expected maturity as of December 31, 2015.

(16)	Non-registered investment company at the time of investment and, as a result, is not a qualifying asset under Section 55(a) of the 1940 Act.

(17)

As defined in Section 2(a)(9) of the 1940 Act, the Company is deemed to control this portfolio company because it owns more than 25% of the portfolio company’s outstanding voting securities. See Schedule 12-14 in the accompanying notes to the consolidated financial statements for transactions during the year ended December 31, 2015 in which the issuer was a portfolio company that the Company is deemed to control.

(18)	Part of our preferred stock investment return is income-producing with a stated rate of 3% due on a quarterly basis.

(19)

(20)	Preferred stock

(21)	Common stock, member interest, and warrants

(22)	Warrants received at initial acquisition date at no cost to the Company

(23)	Loan was on non-accrual as of December 31, 2015.

THL Credit, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

September 30, 2016

(in thousands, except per share data)

(unaudited)

1. Organization

THL Credit, Inc., or the Company, was organized as a Delaware corporation on May 26, 2009. The Company has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or 1940 Act. The Company has elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, or as amended, the Code. In 2009, the Company was treated for tax purposes as a corporation. The Company’s investment objective is to generate both current income and capital appreciation, primarily through privately negotiated investments in debt and equity securities of lower middle market companies.

On April 20, 2010, in anticipation of completing an initial public offering and formally commencing principal operations, the Company entered into a purchase and sale agreement with THL Credit Opportunities, L.P. and THL Credit Partners BDC Holdings, L.P., or BDC Holdings, an affiliate of the Company, to effectuate the sale by THL Credit Opportunities, L.P. to the Company of certain securities valued at $62,107, as determined by the Company’s board of directors, and on the same day issued 4,140 shares of common stock to BDC Holdings valued at $15.00 per share, pursuant to such agreement, in exchange for the aforementioned securities. Subsequently, the Company filed an election to be regulated as a BDC.

In December 2015, the Company completed a public debt offering selling $35,000 of 6.75% Notes due 2022, or the 2022 Notes, including the exercise of the overallotment option, through a group of underwriters, less an underwriting discount, and received net proceeds of $33,950.

The Company has established wholly owned subsidiaries, THL Credit AIM Media Holdings Inc., THL Credit Holdings, Inc. and THL Credit YP Holdings Inc., which are structured as Delaware entities, or tax blockers, to hold equity or equity-like investments in portfolio companies organized as limited liability companies, or LLCs (or other forms of pass-through entities). Corporate subsidiaries are not consolidated for income tax purposes and may incur income tax expense as a result of their ownership of portfolio companies.

The Company has a wholly owned subsidiary, THL Corporate Finance, Inc. and THL Corporate Finance, LLC, its wholly owned subsidiary, serves as the administrative agent on certain investment transactions.

2. Significant Accounting Policies and Recent Accounting Updates

Basis of Presentation

The Company is an investment company following the accounting and reporting guidance under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services Investment Companies.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior period financial statements to conform to current period presentation. In accordance with Article 6 of Regulation S-X under the Securities Act of 1933, as amended, and the Securities and Exchange Act of 1934, as amended, the Company generally will not consolidate its interest in any company other than in investment company subsidiaries and controlled operating companies substantially all of whose business consists of providing services to the Company.

The accompanying consolidated financial statements of the Company have been presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair statement of financial statements for the interim period included herein. The current period’s results of operations are not necessarily indicative of the operating results to be expected for the period ending December 31, 2016.

The information included in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 10, 2016. The financial results of the Company’s portfolio companies are not consolidated in the financial statements.

The accounting records of the Company are maintained in U.S. dollars.

Consolidation

The Company follows the guidance in ASC Topic 946 Financial Services—Investment Companies and will not generally consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. The Company consolidated the results of its wholly owned subsidiaries in its consolidated financial statements. The Company does not consolidate its non-controlling interest in THL Credit Logan JV LLC, or Logan JV. See also the disclosure under the heading, Significant Accounting Policies—THL Credit Logan JV LLC.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ and these differences could be material.

Cash

Cash consists of funds held in demand deposit accounts at several financial institutions and, at certain times, balances may exceed the Federal Deposit Insurance Corporation insured limit and is therefore subject to credit risk. There were no cash equivalents as of September 30, 2016 and December 31, 2015.

Deferred Financing Costs

Deferred financing costs consist of fees and expenses paid in connection with the closing of credit facilities and public debt offering of Notes. These costs are capitalized at the time of payment and are amortized using the straight line and effective yield methods over the term of the credit facilities and Notes, respectively. Capitalized deferred financing costs related to the Term Loan Facility and Notes, as defined in Note 7, Borrowings, are presented net against the respective balances outstanding on the Consolidated Statement of Assets and Liabilities. Capitalized deferred financing costs related to the Revolving Facility, as defined in Note 7, Borrowings, are presented separately on the Company’s Consolidated Statement of Assets and Liabilities. See also the disclosure in Note 7, Borrowings.

Deferred Offering Costs

Deferred offering costs consist of fees and expenses incurred in connection with the offer and sale of the Company’s common stock, including legal, accounting, printing fees and other related expenses, as well as costs incurred in connection with the filing of a shelf registration statement. These costs are capitalized when incurred and recognized as a reduction of offering proceeds when the offering becomes effective.

Deferred Revenue

Deferred revenues consist of proceeds received for interest and other fees for which the earnings process is not yet complete. Such amounts will be recognized into income over such time that the income is earned.

Interest Rate Derivative

The Company recognizes derivatives as either interest rate derivative assets or liabilities at fair value on its Consolidated Statements of Assets and Liabilities with valuation changes and interest rate payments recorded as net change in unrealized appreciation (depreciation) on interest rate derivative and interest rate derivative periodic interest payments, net, respectively, on the Consolidated Statements of Operations. See also the disclosure in Note 8, Interest Rate Derivative.

Partial Loan Sales

The Company follows the guidance in ASC Topic 860 Transfers and Servicing when accounting for loan participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a “participating interest”, as defined in the guidance as a pro-rata ownership interest in an entire financial asset, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on the Company’s Consolidated Statements of Assets and Liabilities and the proceeds are recorded as a secured borrowing until the definition is met.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash, accounts payable and accrued expenses, approximate fair value due to their short-term nature. The carrying amounts and fair values of the Company’s long-term obligations are disclosed in Note 7, Borrowings.

Valuation of Investments

Investments, for which market quotations are readily available, are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers or market makers. Debt and equity securities, for which market quotations are not readily available or are not considered to be the best estimate of fair value, are valued at fair value as determined in good faith by the Company’s board of directors. Because the Company expects that there will not be a readily available market value for many of the investments in the Company’s portfolio, it is expected that many of the Company’s portfolio investments’ values will be determined in good faith by the Company’s board of directors in accordance with a documented valuation policy that has been reviewed and approved by our board of directors and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

With respect to investments for which market quotations are not readily available, the Company’s board of directors undertakes a multi- step valuation process each quarter, as described below:

•

the Company’s quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;

•

preliminary valuation conclusions are then documented and discussed with senior management of THL Credit Advisors LLC, or the Advisor;

•

to the extent determined by the audit committee of the Company’s board of directors, independent valuation firms are used to conduct independent appraisals and review the Advisor’s preliminary valuations in light of their own independent assessment;

•

the audit committee of the Company’s board of directors reviews the preliminary valuations of the Advisor and independent valuation firms and, if necessary, responds and supplements the valuation recommendation of the independent valuation firms to reflect any comments; and

•

the Company’s board of directors discusses valuations and determines the fair value of each investment in the Company’s portfolio in good faith based on the input of the Advisor, the respective independent valuation firms and the audit committee.

The types of factors that the Company may take into account in fair value pricing its investments include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. The Company generally utilizes an income approach to value its debt investments and a combination of income and market approaches to value its equity investments. With respect to unquoted securities, the Advisor and the Company’s board of directors, in consultation with the Company’s independent third party valuation firms, values each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors, which valuation is then approved by the board of directors.

Debt Investments

For debt investments, the Company generally determines the fair value primarily using an income, or yield, approach that analyzes the discounted cash flows of interest and principal for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of each portfolio investments. The Company’s estimate of the expected repayment date is generally the legal maturity date of the instrument. The yield analysis considers changes in leverage levels, credit quality, portfolio company performance and other factors. The enterprise value, a market approach, is used to determine the value of equity and debt investments that are credit impaired, close to maturity or where the Company also holds a controlling equity interest. The method for determining enterprise value uses a multiple analysis, whereby appropriate multiples are applied to the portfolio company’s net income before net interest expense, income tax expense, depreciation and amortization, or EBITDA.

Interest Rate Derivative

The Company values its interest rate derivative agreement using an income approach that analyzes the discounted cash flows associated with the interest rate derivative agreement. Significant inputs to the discounted cash flows methodology include the forward interest rate yield curves in effect as of the end of the measurement period and an evaluation of the counterparty’s credit risk.

Collateralized Loan Obligations

The Company values its residual interest investments in collateralized loan obligations, or CLOs, using an income approach that analyzes the discounted cash flows of its residual interest. The discounted cash flows model utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for similar collateralized loan obligation fund subordinated notes or equity, when available. Specifically, the Company uses Intex cash flow models, or an appropriate substitute to form the basis for the valuation of the Company’s residual interest. The models use a set of assumptions including projected default rates, recovery rates, re-investment rates and prepayment rates in order to arrive at estimated cash flows. The assumptions are based on available market data and projections provided by third parties as well as management estimates.

Payment Rights

The Company values its investment in payment rights using an income approach that analyzes the discounted projected future cash flow streams assuming an appropriate discount rate, which will among other things consider other transactions in the market, the current credit environment, performance of the underlying portfolio company and the length of the remaining payment stream.

Equity

The Company generally uses the market approach to value its equity investments. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company’s investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, the current investment performance rating, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, transaction comparables, the Company’s principal market as the reporting entity and enterprise values, among other factors.

Investment in Funds

In circumstances in which net asset value per share of an investment is determinative of fair value, the Company estimates the fair value of an investment in an investment company using the net asset value per share of the investment (or its equivalent) without further adjustment if the net asset value per share of the investment is determined in accordance with the specialized accounting guidance for investment companies as of the reporting entity’s measurement date.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2—Quoted prices in markets that are not considered to be active or financial instruments for which significant inputs are observable, either directly or indirectly;

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by management.

The Company considers whether the volume and level of activity for the asset or liability have significantly decreased and identifies transactions that are not orderly in determining fair value. Accordingly, if the Company determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate to supplement or replace a market approach in those circumstances.

The Company has adopted the authoritative guidance under GAAP for estimating the fair value of investments in investment companies that have calculated net asset value per share in accordance with the specialized accounting guidance for Investment Companies. Accordingly, in circumstances in which net asset value per share of an investment is determinative of fair value, the Company estimates the fair value of an investment in an investment company using the net asset value per share of the investment (or its equivalent) without further adjustment if the net asset value per share of the investment is determined in accordance with the specialized accounting guidance for investment companies as of the reporting entity’s measurement date. Redemptions are not generally permitted in the Company’s investments in funds. The remaining term of the Company’s investments in funds is expected to be three to seven years.

The following provides quantitative information about Level 3 fair value measurements as of September 30, 2016:


Description	Fair Value		Valuation Technique	Unobservable Inputs	Range (Average) ⁽¹⁾
First lien secured debt	$	316,194	Discounted cash flows (income approach)	Weighted average cost of capital (WACC)	12% - 14% (13%)
		55,297	Market comparable companies (market approach)	EBITDA Multiple	5.4x - 6.1x (5.7x)
Second lien debt		92,741	Discounted cash flows (income approach)	Weighted average cost of capital (WACC)	14% - 16% (15%)
Subordinated debt		44,348	Discounted cash flows (income approach)	Weighted average cost of capital (WACC)	12% - 14% (13%)
Equity investments		55,063	Market comparable companies (market approach)	EBITDA Multiple	4.8x - 5.7x (5.3x)
		18,426	Discounted cash flows (income approach)	Weighted average cost of capital (WACC)	16% - 16% (16%)
Warrants		6,209	Market comparable companies (market approach)	EBITDA Multiple	3.5x - 4.0x (3.8x)
Investment in payment rights		13,559	Discounted cash flows (income approach)	Weighted average cost of capital (WACC)	14% - 15% (15%)
				Federal Tax Rates	35% - 40% (38%)
CLO residual interests		7,345	Discounted cash flows (income approach)	Weighted average cost of capital (WACC)	18% - 23%
				Weighted average prepayment rate	25%
				Weighted average default rate	1%

Total Level 3 Investments	$	609,182

The following provides quantitative information about Level 3 fair value measurements as of December 31, 2015:

Description

Fair Value

Valuation Technique

Unobservable Inputs

Range (Average) ⁽¹⁾

First lien secured debt

332,810

Discounted cash flows (income approach)

Weighted average cost of capital (WACC)

12% - 14% (13%)

33,677

Market comparable companies (market approach)

EBITDA Multiple

4.7x - 5.7x (5.2x)

Second lien debt

177,086

Discounted cash flows (income approach)

Weighted average cost of capital (WACC)

12% - 13% (12%)

Subordinated debt

49,927

Discounted cash flows (income approach)

Weighted average cost of capital (WACC)

15% - 16% (16%)

13,854

Market comparable companies (market approach)

EBITDA Multiple

6.6x - 7.8x (7.1x)

Revenue Multiple

0.3x - 0.5x (0.4x)

Equity investments

46,992

Market comparable companies (market approach)

EBITDA Multiple

5.4x - 6.4x (5.9x)

17,322

Discounted cash flows (income approach)

Weighted average cost of capital (WACC)

16% - 18% (17%)

Investment in payment rights

13,307

Discounted cash flows (income approach)

Weighted average cost of capital (WACC)

15% - 16% (15%)

Federal Tax Rates

35% - 40% (38%)

CLO residual interests

15,002

Discounted cash flows (income approach)

Weighted average cost of capital (WACC)

20% - 25% (23%)

Weighted average prepayment rate

25%

Weighted average default rate

Total Level 3 Investments

699,977

(1)	Averages were determined using a weighted average based upon the fair value of the investments in each investment category.

The primary significant unobservable input used in the fair value measurement of the Company’s debt securities (first lien secured debt, second lien debt and subordinated debt), including income-producing investments in funds and income producing securities, payment rights and CLO residual interests is the weighted average cost of capital, or WACC. Significant increases (decreases) in the WACC in isolation would result in a significantly lower (higher) fair value measurement. In determining the WACC, for the income, or yield approach, the Company considers current market yields and multiples, portfolio company performance, leverage levels, credit quality, among other factors, including U.S. federal tax rates, in its analysis. In the case of CLO residual interests, the Company considers prepayment, re-investment and loss assumptions based upon historical and projected performance as well as comparable yields for other similar structured products. In the case of the tax receivable agreement (“TRA”), the Company considers the risks associated with changes in tax rates, the performance of the portfolio company and the expected term of the investment. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate WACC to use in the income approach.

The primary significant unobservable input used in the fair value measurement of the Company’s equity investments and investments in warrants is the EBITDA multiple adjusted by management for differences between the investment and referenced comparables, or the Multiple. Significant increases (decreases) in the Multiple in isolation would result in a significantly higher (lower) fair value measurement. To determine the Multiple for the market approach, the Company considers current market trading and/or transaction multiples, portfolio company performance (financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate Multiple to use in the market approach.

Investment Risk

The value of investments will generally fluctuate with, among other things, changes in prevailing interest rates, federal tax rates, counterparty risk, general economic conditions, the condition of certain financial markets, developments or trends in any particular industry and the financial condition of the issuer. During periods of limited liquidity and higher price volatility, the Company’s ability to dispose of investments at a price and time that the Company deems advantageous may be impaired. The extent of this exposure is reflected in the carrying value of these financial assets and recorded in the Consolidated Statements of Assets and Liabilities.

Lower-quality debt securities involve greater risk of default or price changes due to changes in the credit quality of the issuer. The value of lower-quality debt securities often fluctuates in response to company, political, or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. Lower-quality debt securities can be thinly traded or have restrictions on resale, making them difficult to sell at an acceptable price. The default rate for lower-quality debt securities is likely to be higher during economic recessions or periods of high interest rates.

Security Transactions, Payment-in-Kind, Income Recognition, Realized/Unrealized Gains or Losses

Security transactions are recorded on a trade-date basis. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method. Net realized gains and losses reflects the impact of investments written off during the period, if any. The Company reports changes in fair value of investments that are measured at fair value as a component of net change in unrealized appreciation on investments in the Consolidated Statements of Operations. The Company reports changes in fair value of the interest rate derivative that is measured at fair value as a component of net change in unrealized appreciation or depreciation on interest rate derivative in the Consolidated Statements of Operations.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that the Company expects to collect such amounts. Dividend income is recognized on the ex-dividend date. Original issue discount, representing the estimated fair value of detachable equity or warrants obtained in conjunction with the acquisition of debt securities and market discount or premium are capitalized and accreted or amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion/amortization of discounts and premiums and upfront loan origination fees.

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or when it is no longer probable that principal or interest will be collected. However, the Company may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. The Company records the reversal of any previously accrued income against the same income category reflected in the Consolidated Statement of Operations. As of September 30, 2016, the Company had four loans from two issuers on non-accrual status with an amortized cost basis of $21,127 and fair value of $18,746. As of December 31, 2015, the Company had two loans from two issuers on non-accrual with an amortized cost basis of $25,032 and fair value of $13,854.

The Company has investments in its portfolio which contain a contractual paid-in-kind, or PIK, interest provision. PIK interest is computed at the contractual rate specified in each investment agreement, is added to the principal balance of the investment, and is recorded as income. The Company will cease accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect amounts to be collectible and will generally only begin to recognize PIK income again when all principal and interest have been paid or upon the restructuring of the investment where the interest is deemed collectable. To maintain the Company’s status as a RIC, PIK interest income, which is considered investment company taxable income, must be paid out to stockholders in the form of dividends even though the Company has not yet collected the cash. Amounts necessary to pay these dividends may come from available cash.

The following shows a rollforward of PIK income activity for the three and nine months ended September 30, 2016 and 2015:


	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Accumulated PIK balance, beginning of period	$	9,997		$	7,568		$	9,302		$	7,041
PIK income capitalized/receivable		641			1,185			1,733			3,565
PIK received in cash from repayments		—			(372	)		(256	)		(2,225	)
PIK reduced through restructurings⁽¹⁾		(6,332	)		—			(6,473	)		—

Accumulated PIK balance, end of period	$	4,306		$	8,381		$	4,306		$	8,381

(1)

Primarily in connection with the restructuring of the Company’s investments in OEM Group, Inc. and Tri-Starr Management Services, Inc. PIK income accrued in connection with the existing loan to each portfolio company was completely reduced and is no longer receivable.

Interest income from the Company’s TRA and CLO residual interests is recorded based upon an estimation of an effective yield to expected maturity using anticipated cash flows. Amounts in excess of income recognized are recorded as a reduction to the cost basis of the investment. The Company monitors the anticipated cash flows from its TRA and CLO residual interests and will adjust its effective yield periodically as needed.

The Company capitalizes and amortizes upfront loan origination fees received in connection with the closing of investments. The unearned income from such fees is accreted into interest income over the contractual life of the loan based on the effective interest method. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees, and unamortized discounts are recorded as interest income.

The Company will recognize any earned exit or back-end fees into income when it believes the amounts will ultimately become collected by using either the beneficial interest model or other appropriate income recognition frameworks.

In certain investment transactions, the Company may provide advisory services. For services that are separately identifiable and external evidence exists to substantiate fair value, income is recognized as earned. The Company had no income from advisory services related to portfolio companies for the three and nine months ended September 30, 2016 and 2015.

The Company may also generate revenue in the form of fees from the management of Greenway and Greenway II, prepayment premiums, commitment, loan origination, structuring or due diligence fees, exit fees, portfolio company administration fees, fees for providing significant managerial assistance and consulting fees.

U.S. Federal Income Taxes, Including Excise Tax

The Company has elected to be taxed as a RIC under Subchapter M of the Code and currently qualifies, and intends to continue to qualify each year, as a RIC under the Code. Accordingly, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed to stockholders.

In order to qualify for favorable tax treatment as a RIC, the Company is required to distribute annually to its stockholders at least 90% of its investment company taxable income, as defined by the Code. To avoid a 4% U.S. federal excise tax on undistributed earnings, the Company is required to distribute each calendar year the sum of (i) 98% of its ordinary income for such calendar year (ii) 98.2% of its net capital gains for the one-year period ending October 31 of that calendar year (iii) any income recognized, but not distributed, in preceding years and on which the Company paid no U.S. federal income tax. The Company, at its discretion, may choose not to distribute all of its taxable income for the calendar year and pay a non-deductible 4% excise tax on this income. If the Company chooses to do so, all other things being equal, this would increase expenses and reduce the amount available to be distributed to stockholders. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, the Company accrues excise taxes on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate.

The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income. See also the disclosure in Note 10, Dividends, for a summary of the dividends paid. For the three months ended September 30, 2016 and 2015, the Company incurred U.S. federal excise tax and other tax (benefit) expenses of $85 and $147, respectively. For the nine months ended September 30, 2016 and 2015, the Company incurred U.S. federal excise tax and other tax expenses of $310 and $476, respectively.

Certain consolidated subsidiaries of the Company are subject to U.S. federal and state income taxes. These taxable entities are not consolidated for income tax purposes and may generate income tax liabilities or assets from permanent and temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries.

The following shows the breakdown of current and deferred income tax provisions for the three and nine months ended September 30, 2016 and 2015:


	For the three months ended September 30,						For the nine months ended September 30,
	2016			2015			2016			2015
Current income tax provision:
Current income tax (provision) benefit	$	(9	)	$	351		$	(245	)	$	85
Current provision for taxes on realized gain on investments		—			(9	)		—			(9	)

Deferred income tax provision:
Deferred income tax benefit		146			171			371			547
Provision for taxes on unrealized gain on investments		(381	)		(443	)		(588	)		(659	)

These current and deferred income taxes are determined from taxable income estimates provided by portfolio companies where the Company holds equity or equity-like investments organized as pass-through entities in its corporate subsidiaries. These tax estimates may be subject to further change once tax information is finalized for the year. As of September 30, 2016 and December 31, 2015, $153 and $396, respectively, of income tax receivable was included in prepaid expenses and other assets on the Consolidated Statements of Assets and Liabilities. As of September 30, 2016 and December 31, 2015, $4,384 and $3,881, respectively, were included in deferred tax liability on the Consolidated Statements of Assets and Liabilities primarily relating to deferred taxes on unrealized gains on investments and other temporary book to tax differences held in its corporate subsidiaries. As of September 30, 2016 and December 31, 2015, $1,403 and $1,118, respectively of deferred tax assets were included in deferred tax assets on the Consolidated Statements of Assets and Liabilities relating to net operating loss carryforwards and unrealized losses on investments and other temporary book to tax differences that are expected to be used in future periods.

Under the RIC Modernization Act (the “RIC Act”), we are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period. However, any losses incurred during post-enactment taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under the rules applicable to pre-enactment capital losses.

Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

The Company follows the provisions under the authoritative guidance on accounting for and disclosure of uncertainty in tax positions. The provisions require management to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions not meeting the more likely than not threshold, the tax amount recognized in the consolidated financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. There are no unrecognized tax benefits or obligations in the accompanying consolidated financial statements. Although the Company files U.S. federal and state tax returns, the Company’s major tax jurisdiction is U.S. federal. The Company’s inception-to-date U.S. federal tax years remain subject to examination by taxing authorities.

Dividends

Dividends and distributions to stockholders are recorded on the applicable record date. The amount to be paid out as a dividend is determined by the Company’s board of directors on a quarterly basis. Net realized capital gains, if any, are generally distributed at least annually out of assets legally available for such distributions, although the Company may decide to retain such capital gains for investment.

Capital transactions in connection with the Company’s dividend reinvestment plan are recorded when shares are issued.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update 2014–15, “Presentation of Financial Statements – Going Concern (Subtopic 205 – 40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 31, 2016 and interim periods thereafter, with early adoption permitted. Since this guidance is primarily around certain disclosures to the financial statements, we anticipate no impact on our financial position, results of operations or cash flows from adopting this standard. We are currently assessing the additional disclosure requirements, if any, of ASU 2014-15.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis,” which amends the current consolidation guidance and ends the deferral granted to investment companies from applying the VIE guidance. ASU 2015-02 changes the manner in which a reporting entity assesses one of the five characteristics that determine if an entity is a variable interest entity. ASU 2015-2 will be effective for annual reporting periods in fiscal years and interim reporting periods beginning after December 15, 2015. The Company adopted this standard effective January 1, 2016. The adoption did not have an impact on the Company’s consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs (Topic 835),” which amends the presentation of debt issuance costs on an entity’s balance sheet. Under ASU 2015-03, an entity would present debt issuance costs as a direct deduction from the carrying value of the associated liability instead of a separate deferred asset. ASU 2015-03 will be effective for annual and interim reporting periods beginning after December 15, 2015. The Company has adopted this standard effective January 1, 2016. The adoption resulted in a change in the presentation and disclosure of deferred financing costs, loans payable and notes payable to the Consolidated Statements of Assets and Liabilities.

In May 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent),” which amends the presentation of investments measured at net asset value, as a practical expedient for fair value, from the fair value hierarchy. Under ASU 2015-07, an entity would remove investments measured using the practical expedient from the fair value hierarchy. ASU 2015-07 is effective for annual and interim reporting periods beginning after December 15, 2015 and early adoption is permitted. The Company adopted the ASU during the quarter ended March 31, 2016, which did not have an impact on the Company’s consolidated financial statements other than updating the required disclosures around fair value measurements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall”, which makes limited amendments to the guidance in U.S. GAAP on the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods therein. Early adoption is permitted specifically for the amendments pertaining to the presentation of certain fair value changes for financial liabilities measured at fair value. Early adoption of all other amendments is not permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-01 on its consolidated financial statements.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606),” which amends the criteria for revenue recognition where an entity enters into contracts with customers to transfer goods or services or where there is a transfer of nonfinancial assets. Under ASU 2016-10, an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2016-10 will be effective for annual and interim reporting periods after December 15, 2018. The Company is currently evaluating the impact of the adoption of ASU 2016-10 on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230)”, which seeks to reduce diversity in how certain cash payments are presented in the Statement of Cash Flows. Under ASU 2016-15, an entity will need to conform to the presentation as prescribed for eight specific cash flow issues. ASU 2016-15 will be effective for annual and interim reporting periods after December 15, 2017. The application of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

3. Investments

The following is a summary of the levels within the fair value hierarchy in which the Company invests as of September 30, 2016:


Description	Fair Value			Level 1		Level 2			Level 3
First lien secured debt	$	371,491		$	—	$	—		$	371,491
Second lien debt		92,741			—		—			92,741
Subordinated debt		44,348			—		—			44,348
Equity investments		73,489			—		—			73,489
Warrants		6,209			—		—			6,209
CLO residual interests		7,345			—		—			7,345
Investment in Logan JV ⁽¹⁾		58,748			—		—			—
Investment in payment rights		13,559			—		—			13,559
Investments in funds⁽¹⁾		4,832			—		—			—

Total investments	$	672,762		$	—	$	—		$	609,182

Interest rate derivative		(102	)		—		(102	)		—

Total liability at fair value	$	(102	)	$	—	$	(102	)	$	—

The following is a summary of the levels within the fair value hierarchy in which the Company invests as of December 31, 2015:


Description	Fair Value			Level 1		Level 2			Level 3
First lien secured debt	$	366,487		$	—	$	—		$	366,487
Second lien debt		177,086			—		—			177,086
Subordinated debt		63,781			—		—			63,781
Equity investments		69,725			5,411		—			64,314
CLO residual interests		15,002			—		—			15,002
Investment in Logan JV⁽¹⁾		44,782			—		—			—
Investment in payment rights		13,307			—		—			13,307
Investments in funds⁽¹⁾		3,993			—		—			—

Total investments	$	754,163		$	5,411	$	—		$	699,977

Interest rate derivative		(206	)		—		(206	)		—

Total liability at fair value	$	(206	)	$	—	$	(206	)	$	—

(1)

Certain investments that are measured at fair value using net asset value have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.

The following is a summary of the industry classification in which the Company invests as of September 30, 2016:


Industry	Amortized Cost		Fair Value		% of Net Assets
Consumer products	$	133,792	$	132,223		33.67	%
Financial services		116,197		118,956		30.29	%
Industrials		97,717		95,245		24.25	%
Media, entertainment and leisure		49,402		56,179		14.31	%
IT services		55,587		49,221		12.53	%
Healthcare		44,206		44,102		11.23	%
Retail & grocery		36,199		42,753		10.89	%
Energy / utilities		41,690		37,516		9.55	%
Business Services		29,026		26,585		6.77	%
Food & beverage		20,706		21,397		5.45	%
Restaurants		21,125		20,804		5.30	%
Transportation		18,346		20,436		5.20	%
Structured products		9,233		7,345		1.87	%

Total Investments	$	673,226	$	672,762		171.31	%

The following is a summary of the industry classification in which the Company invests as of December 31, 2015⁽¹⁾:


Industry	Amortized Cost		Fair Value		% of Net Assets
Consumer products	$	141,307	$	139,798		33.36	%
Financial services		126,910		113,712		27.15	%
IT services		100,659		99,107		23.66	%
Healthcare		61,556		66,891		15.97	%
Industrials		97,681		90,751		21.66	%
Retail & grocery		34,566		44,469		10.62	%
Energy / utilities		46,625		41,709		9.96	%
Media, entertainment and leisure		31,380		36,689		8.76	%
Business Services		41,757		34,731		8.29	%
Food & beverage		22,365		23,423		5.59	%
Transportation		19,466		21,588		5.15	%
Restaurants		20,934		20,868		4.98	%
Structured products		17,105		15,002		3.58	%
Aerospace & defense		4,534		5,425		1.30	%

Total Investments	$	766,845	$	754,163		180.03	%

(1)	Certain portfolio companies were reclassified to conform to current year presentation.

The following is a summary of the geographical concentration of our investment portfolio as of September 30, 2016:


Region	Amortized Cost		Fair Value		% of Net Assets
Northeast	$	244,846	$	246,823		62.84	%
Southwest		186,582		176,098		44.84	%
Southeast		74,025		80,190		20.42	%
Midwest		68,065		59,371		15.12	%
Northwest		42,073		55,198		14.06	%
West		57,635		55,082		14.03	%

Total Investments	$	673,226	$	672,762		171.31	%

The following is a summary of the geographical concentration of our investment portfolio as of December 31, 2015:


Region	Amortized Cost		Fair Value		% of Net Assets
Northeast	$	258,931	$	247,863		59.17	%
Southwest		170,078		149,187		35.61	%
Midwest		108,568		106,517		25.43	%
Southeast		90,720		101,411		24.21	%
West		70,070		69,417		16.57	%
Northwest		39,294		50,331		12.01	%
International		29,184		29,437		7.03	%

Total Investments	$	766,845	$	754,163		180.03	%

The following table rolls forward the changes in fair value during the nine months ended September 30, 2016 for investments classified within Level 3:


	First lien secured debt			Second lien debt			Subordinated debt			Equity investments			Warrants		Investment in payment rights		CLO residual interests			Totals
Beginning balance, January 1, 2016	$	366,487		$	177,086		$	63,781		$	59,314		$	5,000	$	13,307	$	15,002		$	699,977
Purchases⁽²⁾		107,398			—			2,418			14,955			—		—		—			124,771
Sales and repayments⁽²⁾		(93,114	)		(78,338	)		(11,439	)		(1,632	)		—		—		(6,768	)		(191,291	)
Unrealized appreciation (depreciation)⁽¹⁾		800			(7,295	)		10,899			6,535			1,209		252		215			12,615
Realized loss		(12,801	)		—			(21,896	)		(5,983	)		—		—		(1,104	)		(41,784	)
Net amortization of premiums, discounts and fees		2,114			1,165			84			30			—		—		—			3,393
PIK		607			123			501			270			—		—		—			1,501

Ending balance, September 30, 2016	$	371,491		$	92,741		$	44,348		$	73,489		$	6,209	$	13,559	$	7,345		$	609,182

Net change in unrealized appreciation (depreciation) from investments still held as of the reporting date⁽¹⁾	$	(6,070	)	$	(7,069	)	$	(277	)	$	792		$	1,209	$	251	$	(425	)	$	(11,589	)

(1)	All unrealized appreciation (depreciation) in the table above is reflected in the accompanying Consolidated Statements of Operations.

(2)	Includes reorganizations and restructurings of investments.

The following table rolls forward the changes in fair value during the nine months ended September 30, 2015 for investments classified within Level 3:


	First lien secured debt			Second lien debt			Subordinated debt			Equity investments			Warrants			Investment in payment rights			CLO residual interests			Totals
Beginning balance, January 1, 2015	$	393,791		$	168,510		$	100,660		$	48,405		$	4,302		$	13,488		$	34,935		$	764,091
Transfers out of Level 3⁽³⁾		—			—			—			(7,097	)		—			—			—			(7,097	)
Purchases⁽²⁾		23,609			40,491			6,629			7,824			—			—			—			78,553
Sales and repayments⁽²⁾		(77,144	)		(16,955	)		(35,336	)		(717	)		—			—			(16,398	)		(146,550	)
Unrealized appreciation (depreciation)⁽¹⁾		(1,713	)		(582	)		(3,265	)		9,519			(302	)		(21	)		(2,843	)		793
Realized loss		(5	)		(3	)		—			—			—			—			(18	)		(26	)
Net amortization of premiums, discounts and fees		1,902			546			124			24			—			—			—			2,596
PIK		777			3			2,573			190			—			—			—			3,543

Ending balance, September 30, 2015	$	341,217		$	192,010		$	71,385		$	58,148		$	4,000		$	13,467		$	15,676		$	695,903

Net change in unrealized appreciation (depreciation) from investments still held as of the reporting date⁽¹⁾	$	(1,832	)	$	(447	)	$	(3,246	)	$	8,623		$	(302	)	$	(21	)	$	(2,524	)	$	251

(1)	All unrealized appreciation (depreciation) in the table above is reflected in the accompanying Consolidated Statements of Operations.

(2)	Includes reorganizations and restructurings of investments.

(3)	Represents transfer of Surgery Center Holdings, Inc. from Level 3 to Level 2 because of availability of observable inputs at the reporting date. Transfers are assumed to have occurred at the beginning of the period.

Unconsolidated Significant Subsidiaries

In accordance with the SEC’s Regulation S-X and GAAP, the Company is not permitted to consolidate any subsidiary or other entity that is not an investment company or a controlled operating company whose business consists of providing services to the company, including those in which the Company has a controlling interest. The Company had certain unconsolidated subsidiaries, which met at least one of the significance conditions under Rule 1-02(w) of the SEC’s Regulation S-X for the nine months ended September 30, 2016 and 2015. Accordingly, summarized, comparative financial information, is presented below for our significant unconsolidated subsidiaries which include C&K Market, Inc., OEM Group, LLC, THL Credit Logan JV, LLC, Thibaut, Inc. and Tri-Starr Management Services, Inc. for the nine months ended September 30, 2016 and C&K Market, Inc., Dimont & Associates, Inc., THL Credit Logan JV, LLC, and Thibaut, Inc., for the nine months ended September 30, 2015.


	For the nine months ended September 30,
Income Statement	2016			2015
Net Sales	$	410,487		$	536,011
Gross Profit		106,276			129,736
Net (loss) income		(10,754	)		14,219

THL Credit Logan JV LLC

On December 3, 2014, the Company entered into an agreement with Perspecta Trident LLC, an affiliate of Perspecta Trust LLC, or Perspecta, to create THL Credit Logan JV LLC, or Logan JV, a joint venture, which invests primarily in senior secured first lien term loans. All Logan JV investment decisions must be unanimously approved by the Logan JV investment committee consisting of one representative from each of the Company and Perspecta.

The Company has determined that Logan JV is an investment company under ASC 946, however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company does not consolidate its non-controlling interest in Logan JV.

Logan JV is capitalized with capital contributions which are generally called from its members, on a pro-rata basis based on their capital commitments, as transactions are completed. Any decision by the Logan JV to call down on capital commitments requires the explicit authorization of the Company, coupled with that of Perspecta, and the Company may withhold such authorization for any reason in its sole discretion.

As of September 30, 2016 and December 31, 2015, Logan JV had the following commitments, contributions and unfunded commitments from its Members.


	As of September 30, 2016
Member	Total Commitments		Contributed Capital		Unfunded Commitments
THL Credit, Inc.	$	200,000	$	59,000	$	141,000
Perspecta Trident LLC		50,000		14,750		35,250

Total Investments	$	250,000	$	73,750	$	176,250


	As of December 31, 2015
Member	Total Commitments		Contributed Capital		Unfunded Commitments
THL Credit, Inc.	$	200,000	$	49,400	$	150,600
Perspecta Trident LLC		50,000		12,350		37,650

Total Investments	$	250,000	$	61,750	$	188,250

On December 17, 2014, Logan JV entered into a senior credit facility, or the Logan JV Credit Facility, with Deutsche Bank AG which allows Logan JV to borrow up to $50,000 subject to leverage and borrowing base restrictions. Throughout the course of 2015 and 2016, in accordance with the terms of the Logan JV Credit Facility, Deutsche Bank AG and other banks increased the commitment amount to $135,000. The amended revolving loan period ends on February 18, 2018 and the final maturity date is February 18, 2021. As of September 30, 2016 and December 31, 2015, Logan JV had $129,257 and $108,137 outstanding debt under the credit facility, respectively. The Logan JV Credit Facility bears interest at three month LIBOR (with no LIBOR floor) plus 2.50%. As of September 30, 2016, the effective interest rate on the Logan JV Credit Facility was 3.22% per annum.

As of September 30, 2016, and December 31, 2015, Logan JV had total investments at fair value of $203,362 and $161,911, respectively. As of September 30, 2016 and December 31, 2015, Logan JV’s portfolio was comprised of senior secured first lien loans and a second lien loan to 95 and 85 different borrowers, respectively. As of September 30, 2016 and December 31, 2015, none of these loans were on non-accrual status. Additionally, as of September 30, 2016 and December 31, 2015, Logan JV had unfunded commitments to fund revolver and delayed draw loans to its portfolio companies totaling $712 and $342, respectively. The portfolio companies in Logan JV are in industries similar to those in which the Company may invest directly.

Below is a summary of Logan JV’s portfolio, followed by a listing of the individual loans in Logan JV’s portfolio as of September 30, 2016 and December 31, 2015:


	As of September 30, 2016			As of December 31, 2015

First lien secured debt	$	188,700		$	148,463
Second lien debt		20,588			21,976

Total debt investments	$	209,288		$	170,439

Weighted average yield on first lien secured loans ⁽²⁾		6.5	%		6.3	%
Weighted average yield on second lien loans⁽²⁾		9.3	%		9.0	%
Weighted average yield on all loans⁽²⁾		6.8	%		6.7	%
Number of borrowers in Logan JV		95			85
Largest loan to a single borrower ⁽¹⁾	$	5,923		$	4,975
Total of five largest loans to borrowers ⁽¹⁾	$	25,548		$	24,748

(1)	At current principal amount.

(2)	Weighted average yield at their current cost.

For the three months ended September 30, 2016 and 2015, the Company’s share of income from distributions related to its Logan JV LLC equity interest was $2,000 and $1,200, respectively, which amounts are included in dividend income and realized gains from controlled investments in the Consolidated Statement of Operations. For the nine months ended September 30, 2016 and 2015, the Company’s share of income from distributions declared related to its Logan JV LLC equity interest was $5,360 and $2,304, respectively, which amounts are included in dividend income and realized gains from controlled investments in the Consolidated Statement of Operations. As of September 30, 2016 and December 31, 2015, $2,956 and $1,900, respectively, of income related to the Logan JV was included in interest, dividends and fees receivable on the Consolidated Statements of Assets and Liabilities. As of September 30, 2016, dividend income and realized gains of $2,000 was recognized for the quarter ended September 30, 2016 and represented a dividend yield to the Company of 13.6% based upon average equity invested. As of December 31, 2015, dividend income earned of $1,520 for the quarter ended December 31, 2015, represented a dividend yield to the Company of 12.8% based upon average equity invested.

Logan JV Loan Portfolio as of September 30, 2016

(dollar amounts in thousands)

Type of Investment/

Portfolio company

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Senior Secured First Lien Term Loans

Ability Networks Inc.

High Tech Industries

6% (LIBOR +5%)

03/17/2015

05/14/2021

1,474

1,485

1,466

Acrisure, LLC⁽³⁾

Banking, Finance, Insurance & Real Estate

6.5% (LIBOR +5.5%)

07/20/2016

05/19/2022

503

)

Acrisure, LLC

Banking, Finance, Insurance & Real Estate

6.5% (LIBOR +5.5%)

07/20/2016

05/18/2022

994

986

1,000

Advanced Integration Technology LP

Aerospace & Defense

6.5% (LIBOR +5.5%)

07/15/2016

07/22/2021

2,000

1,981

2,007

AgroFresh Inc.

Services: Business

5.75% (LIBOR +4.75%)

12/01/2015

07/31/2021

1,980

1,967

1,975

Alpha Media LLC

Media: Broadcasting & Subscription

7% (LIBOR +6%)

02/24/2016

02/25/2022

1,950

1,862

1,872

AP Gaming I LLC

Hotel, Gaming & Leisure

9.25% (LIBOR +8.25%)

05/27/2015

12/21/2020

4,954

4,852

4,759

Arbor Pharmaceuticals, LLC

Healthcare & Pharmaceuticals

6% (LIBOR +5%)

07/12/2016

07/05/2023

2,500

2,389

2,513

Arctic Glacier U.S.A., Inc

Beverage, Food & Tobacco

6% (LIBOR +5%)

02/12/2015

05/10/2019

2,020

1,986

2,005

Aristotle Corporation

Healthcare & Pharmaceuticals

5.5% (LIBOR +4.5%)

07/13/2015

06/30/2021

4,594

4,576

4,559

Avaya Inc

Telecommunications

6.25% (LIBOR +5.25%)

04/30/2015

05/29/2020

982

975

729

Avaya Inc

Telecommunications

6.5% (LIBOR +5.5%)

12/18/2014

03/31/2018

986

992

754

Bioplan USA

Services: Business

5.75% (LIBOR +4.75%)

05/13/2015

09/23/2021

985

869

926

BioScrip, Inc.

Healthcare & Pharmaceuticals

6.5% (LIBOR +5.25%)

12/22/2014

07/31/2020

898

854

882

BioScrip, Inc.

Healthcare & Pharmaceuticals

6.5% (LIBOR +5.25%)

12/22/2014

07/31/2020

1,496

1,423

1,470

Birch Communications, Inc.

Telecommunications

7.75% (LIBOR

12/05/2014

07/17/2020

1,372

1,358

1,084

+6.75%)

Blount International, Inc.

Capital Equipment

7.25% (LIBOR

04/05/2016

04/12/2023

1,700

1,652

1,726

+6.25%)

BMC Software Finance, Inc

High Tech Industries

5% (LIBOR +4%)

06/02/2016

09/10/2020

1,989

1,808

1,923

CAbi

Retail

5.75% (LIBOR

06/19/2015

06/12/2019

1,166

1,158

1,166

+4.75%)

Caesars Entertainment Resort Properties, LLC

Hotel, Gaming & Leisure

7% (LIBOR +6%)

01/15/2015

10/11/2020

5,923

5,678

5,921

Cengage Learning Acquisitions, Inc.

Media: Advertising, Printing & Publishing

5.25% (LIBOR +4.25%)

12/15/2014

06/07/2023

2,654

2,630

2,657

Clear Balance Holdings, LLC

Banking, Finance, Insurance & Real Estate

6.75% (LIBOR +5.75%)

07/07/2015

06/30/2020

4,753

4,738

4,741

Commercial Barge Line Co

Transportation: Cargo

9.75% (LIBOR +8.75%)

11/06/2015

11/12/2020

1,463

1,402

1,428

Compuware Corp

Services: Business

6.25% (LIBOR +5.25%)

12/11/2014

12/15/2021

2,951

2,878

2,946

Cortes NP Acquisition Corp

Capital Equipment

6% (LIBOR +5%)

09/30/2016

09/29/2023

2,000

1,940

1,960

CPI Acquisition, Inc.

Services: Consumer

5.5% (LIBOR +4.5%)

08/14/2015

08/17/2022

3,875

3,846

3,796

Creative Artists

Media: Diversified & Production

5% (LIBOR +4%)

03/16/2015

12/17/2021

2,456

2,485

2,477

CT Technologies Intermediate Holdings, Inc

Healthcare & Pharmaceuticals

5.25% (LIBOR +4.25%)

02/11/2015

12/01/2021

1,965

1,973

1,945

Cvent Inc

Hotel, Gaming & Leisure

6% (LIBOR +5%)

06/16/2016

06/16/2023

2,000

1,980

2,018

CWGS Group, LLC

Automotive

5.75% (LIBOR +4.75%)

12/22/2014

02/20/2020

2,229

2,235

Cypress Semiconductor Corporation

High Tech Industries

6.5% (LIBOR +5.5%)

06/03/2016

07/05/2021

2,500

2,464

2,536

Eastman Kodak Company

High Tech Industries

7.25% (LIBOR +6.25%)

09/09/2015

09/03/2019

1,953

1,909

1,949

EmployBridge Holding Co.

Services: Business

7.5% (LIBOR +6.5%)

02/04/2015

05/15/2020

2,950

2,941

2,542

Type of Investment/

Portfolio company

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

EnergySolutions, LLC

Environmental Industries

6.75% (LIBOR +5.75%)

03/16/2015

05/29/2020

4,543

4,450

4,537

Evergreen Skills Lux S.á r.l.

High Tech Industries

5.75% (LIBOR +4.75%)

01/15/2015

04/28/2021

1,475

1,452

1,310

FullBeauty Brands LP

Retail

5.75% (LIBOR +4.75%)

03/08/2016

10/14/2022

3,980

3,724

3,788

Getty Images, Inc.

Media: Advertising, Printing & Publishing

4.75% (LIBOR +3.5%)

02/18/2015

10/18/2019

982

932

824

Global Healthcare Exchange LLC

Services: Business

5.25% (LIBOR +4.25%)

08/12/2015

08/15/2022

990

986

996

Gold Standard Baking Inc

Wholesale

5.25% (LIBOR +4.25%)

05/19/2015

04/23/2021

2,963

2,951

2,948

Green Plains Renewable Energy Inc

Energy: Oil & Gas

6.5% (LIBOR +5.5%)

06/09/2015

06/30/2020

3,903

3,741

3,820

GTCR Valor Companies, Inc.

Services: Business

7% (LIBOR +6%)

05/17/2016

06/16/2023

3,990

3,840

3,817

Gulf Finance, LLC

Energy: Oil & Gas

6.25% (LIBOR +5.25%)

08/17/2016

08/25/2023

2,000

1,941

1,951

IMG LLC/William Morris Endeavor Entertainment, LLC

Media: Diversified & Production

5.25% (LIBOR +4.25%)

12/31/2014

05/06/2021

1,470

1,445

1,479

Insurance Technologies ⁽⁴⁾

High Tech Industries

8% (LIBOR +7%)

03/26/2015

12/01/2019

1,586

1,575

1,594

Insurance Technologies

High Tech Industries

0% (LIBOR +0%)

03/26/2015

12/01/2019

209

)

J Jill

Retail

6% (LIBOR +5%)

05/08/2015

05/09/2022

1,040

1,035

1,027

Jackson Hewitt Tax Service Inc

Services: Consumer

8% (LIBOR +7%)

07/24/2015

07/30/2020

980

965

958

Kestra Financial, Inc.

Banking, Finance, Insurance & Real Estate

6.25% (LIBOR +5.25%)

06/10/2016

06/24/2022

3,990

3,933

3,950

Kraton Polymers LLC

Chemicals, Plastics & Rubber

6% (LIBOR +5%)

02/18/2016

01/06/2022

2,000

1,820

2,019

Lannett Company Inc

Healthcare & Pharmaceuticals

5.75% (LIBOR +4.75%)

11/20/2015

11/25/2020

1,444

1,353

1,418

Lannett Company Inc

Healthcare & Pharmaceuticals

6.375% (LIBOR +5.375%)

11/20/2015

11/25/2022

1,444

1,316

1,433

LegalZoom

Services: Business

8% (LIBOR +7%)

06/15/2015

05/13/2020

4,930

4,979

Lindblad Expeditions Inc

Hotel, Gaming & Leisure

5.5% (LIBOR +4.5%)

06/23/2015

05/08/2021

2,624

2,637

2,630

Lindblad Maritime

Hotel, Gaming & Leisure

5.5% (LIBOR +4.5%)

06/23/2015

05/08/2021

339

340

339

Margaritaville Holdings LLC

Beverage, Food & Tobacco

7% (LIBOR +6%)

03/12/2015

03/12/2021

4,739

4,704

4,502

Match Group Inc

Media: Broadcasting & Subscription

5.5% (LIBOR +4.5%)

11/06/2015

11/16/2022

731

729

737

MediArena Acquisition B.V.

Media: Broadcasting & Subscription

6.75% (LIBOR +5.75%)

12/18/2014

08/13/2021

1,470

1,453

1,314

Mediware Information Systems Inc

High Tech Industries

6% (LIBOR +5%)

09/26/2016

09/22/2023

2,000

1,980

2,016

Merrill Communications LLC

Media: Advertising, Printing & Publishing

6.25% (LIBOR +5.25%)

05/29/2015

06/01/2022

1,979

1,968

1,860

Meter Readings Holding, LLC

Utilities: Electric

6.75% (LIBOR +5.75%)

08/17/2016

08/29/2023

2,000

1,970

2,000

Mood Media Corporation

Media: Broadcasting & Subscription

7% (LIBOR +6%)

12/05/2014

05/01/2019

2,965

2,853

2,822

Navistar Inc

Automotive

6.5% (LIBOR +5.5%)

08/06/2015

08/07/2020

1,985

1,974

1,993

NextCare, Inc.

Healthcare & Pharmaceuticals

8.5% (LIBOR +7.5%)

(7.5% Cash

and 1.0%

PIK)⁽⁵⁾

08/21/2015

07/31/2018

2,963

2,953

2,963

Novitex Acquisition, LLC

Consumer goods: Non-Durable

8% (LIBOR +6.75%)

12/05/2014

07/07/2020

961

950

904

Parq Holdings LP

Hotel, Gaming & Leisure

8.5% (LIBOR +7.5%)

12/05/2014

12/17/2020

1,000

988

960

Petrochoice Holdings Inc

Chemicals, Plastics & Rubber

6% (LIBOR +5%)

09/02/2015

08/19/2022

990

969

995

Type of Investment/

Portfolio company

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Pre-Paid Legal Services, Inc

Services: Business

6.5% (LIBOR +5.25%)

05/21/2015

07/01/2019

914

911

916

Quality Care Properties, Inc.

Banking, Finance, Insurance & Real Estate

6.25% (LIBOR +5.25%)

09/30/2016

09/30/2022

2,125

2,082

2,112

Quincy Newspapers Inc

Media: Broadcasting & Subscription

5.5% (LIBOR +4.5%)

11/23/2015

11/02/2022

2,935

2,928

2,953

Redbox Automated Retail LLC

Services: Consumer

8.5% (LIBOR +7.5%)

09/26/2016

09/21/2021

2,000

1,940

1,960

RentPath, Inc.

Media: Diversified & Production

6.25% (LIBOR +5.25%)

12/11/2014

12/17/2021

2,456

2,435

2,327

Riverbed Technology, Inc.

High Tech Industries

5% (LIBOR +4%)

02/25/2015

04/25/2022

975

971

986

SCS Holdings Inc

Services: Business

6% (LIBOR +5%)

11/20/2015

10/30/2022

1,978

1,964

1,996

Seahawk Holding Cayman Ltd

High Tech Industries

7% (LIBOR +6%)

09/27/2016

09/23/2022

2,750

2,724

2,732

Sirva Worldwide, Inc.

Transportation: Cargo

7.5% (LIBOR +6.25%)

12/18/2014

03/27/2019

3,876

3,793

3,854

Smart Start, Inc.

Services: Consumer

5.75% (LIBOR +4.75%)

08/28/2015

02/20/2022

2,481

2,460

2,475

SolarWinds Inc

High Tech Industries

5.5% (LIBOR +4.5%)

02/01/2016

02/05/2023

4,988

4,859

5,042

SourceHOV LLC

Services: Business

7.75% (LIBOR +6.75%)

03/17/2015

10/31/2019

3,836

3,403

3,234

Stonewall Gas Gathering LLC

Energy: Oil & Gas

8.75% (LIBOR +7.75%)

01/26/2015

01/28/2022

572

550

584

TOMS Shoes LLC

Retail

6.5% (LIBOR +5.5%)

12/18/2014

10/31/2020

1,970

1,865

1,458

Travelport Finance Luxembourg Sarl

Services: Business

5% (LIBOR +4%)

09/04/2015

09/02/2021

2,906

2,920

2,922

US Renal Care Inc

Healthcare & Pharmaceuticals

5.25% (LIBOR +4.25%)

11/17/2015

12/30/2022

1,985

1,967

1,911

US Shipping Corp

Utilities: Oil & Gas

5.25% (LIBOR

03/09/2016

06/26/2021

232

220

230

+4.25%)

Varsity Brands

Consumer goods: Durable

5% (LIBOR +4%)

12/10/2014

12/11/2021

983

975

989

Verdesian Life Sciences LLC

Chemicals, Plastics & Rubber

6% (LIBOR +5%)

12/09/2014

07/01/2020

899

898

854

Zep Inc

Chemicals, Plastics & Rubber

5.5% (LIBOR +4.5%)

09/04/2015

06/27/2022

2,963

2,969

2,977

Total Senior Secured First Lien Term Loans

183,949

183,366

Second Lien Term Loans

ABG Intermediate Holdings 2 LLC

Consumer goods: Durable

9.5% (LIBOR +8.5%)

06/19/2015

05/27/2022

2,855

2,786

2,805

AssuredPartners Inc

Banking, Finance, Insurance & Real

10% (LIBOR +9%)

10/16/2015

10/20/2023

1,000

965

996

Estate

Cirque Du Soleil

Hotel, Gaming & Leisure

9.25% (LIBOR +8.25%)

06/25/2015

07/08/2023

1,000

987

978

Confie Seguros Holding II Co.

Banking, Finance, Insurance & Real Estate

10.25% (LIBOR +9%)

06/29/2015

05/09/2019

500

497

505

Duke Finance LLC

Chemicals, Plastics & Rubber

10.75% (LIBOR +9.75%)

05/17/2016

10/28/2022

2,000

1,714

1,795

EagleView Technology Corporation

Services: Business

9.25% (LIBOR +8.25%)

07/29/2015

07/14/2023

2,885

2,891

2,875

Eastman Kodak Company

High Tech Industries

10.75% (LIBOR +9.5%)

03/24/2015

09/03/2020

1,000

997

990

Filtration Group Corporation

Services: Business

8.25% (LIBOR +7.25%)

03/16/2015

11/22/2021

524

526

525

GENEX Services, Inc.

Services: Business

8.75% (LIBOR +7.75%)

06/26/2015

05/30/2022

1,000

990

955

Gruden Acquisition Inc.

Transportation: Cargo

9.5% (LIBOR +8.5%)

07/31/2015

08/18/2023

500

478

387

Hyland Software, Inc.

High Tech Industries

8.25% (LIBOR +7.25%)

06/12/2015

07/03/2023

2,825

2,725

2,850

Type of Investment/

Portfolio company

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Linxens France SA

Telecommunications

9.5% (LIBOR +8.5%)

07/31/2015

10/16/2023

1,000

991

996

MRI Software LLC

Services: Business

9% (LIBOR +8%)

06/19/2015

06/23/2022

1,000

988

970

RentPath, Inc.

Media: Diversified & Production

10% (LIBOR +9%)

12/11/2014

12/17/2022

1,000

930

885

Royal Adhesives and Sealants LLC

Chemicals, Plastics & Rubber

8.5% (LIBOR +7.5%)

06/12/2015

06/19/2023

1,000

994

988

Wash Multifamily Laundry Systems, LLC.

Services: Consumer

8% (LIBOR +7%)

05/04/2015

05/12/2023

Wash Multifamily Laundry Systems, LLC.

Services: Consumer

8% (LIBOR +7%)

05/04/2015

05/15/2023

425

423

422

Total Second Lien Term Loans

19,956

19,996

Total Investments

203,905

203,362

(1)	Variable interest rates indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option. LIBOR rates may be subject to interest rate floors.

(2)	Represents fair value in accordance with ASC Topic 820. The determination of such fair value is not included in our board of director’s valuation process described elsewhere herein.

(3)	Represents a delayed draw commitment of $503, which was unfunded as of September 30, 2016.

(4)	Represents a delayed draw commitment of $209, which was unfunded as of September 30, 2016.

(5)	At the option of the issuer, interest can be paid in cash or cash and PIK. The percentage of PIK shown is the maximum PIK that can be elected by the company.

Logan JV Loan Portfolio as of December 31, 2015

(dollar amounts in thousands)

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Senior Secured First Lien Term Loans

Ability Networks Inc.

Healthcare &
pharmaceuticals

6% (LIBOR

+ 5%)

03/17/2015

05/14/2021

1,485

1,498

1,470

AgroFresh Inc.

Services

5.75% (LIBOR

+ 4.75%)

12/01/2015

07/31/2021

1,995

1,980

1,968

Albertson’s Holdings LLC

Retail

5.5% (LIBOR +

4.5%)

12/05/2014

08/25/2021

1,985

1,988

1,972

Ancestry.com Inc.

Services

5% (LIBOR

+ 4%)

09/04/2015

08/29/2022

2,993

2,974

2,975

AP Gaming I LLC

Hotel, gaming &
leisure

9.25% (LIBOR

+ 8.25%)

05/27/2015

12/21/2020

2,982

2,964

2,885

Arctic Glacier U.S.A., Inc

Beverage, food &
tobacco

6% (LIBOR

+ 5%)

02/12/2015

05/10/2019

2,035

1,991

1,964

Aristotle Corporation

Healthcare &
pharmaceuticals

5.5% (LIBOR

+ 4.5%) 7.0%

(Prime + 3.5%)

07/13/2015

06/30/2021

4,975

4,952

4,950

Avago Technologies Cayman Finance Ltd

High tech industries

4.25% (LIBOR

+ 3.5%)

11/13/2015

02/01/2023

2,000

1,980

1,983

Avaya Inc

Telecommunications

6.25% (LIBOR

+ 5.25%)

04/30/2015

05/29/2020

991

982

695

Avaya Inc

Telecommunications

6.5% (LIBOR

+ 5.5%)

12/18/2014

03/31/2018

986

995

750

Bioplan USA

Services

5.75% (LIBOR

+ 4.75%)

05/13/2015

09/23/2021

993

857

859

BioScrip, Inc.

Healthcare
&pharmaceuticals

6.5% (LIBOR

+ 5.25%)

12/22/2014

07/31/2020

938

939

857

BioScrip, Inc.

Healthcare
&pharmaceuticals

6.5% (LIBOR

+ 5.25%)

12/22/2014

07/31/2020

563

564

514

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Birch Communications, Inc.

Telecommunications

7.75% (LIBOR

+ 6.75%)

12/05/2014

07/17/2020

1,433

1,416

1,380

CAbi

Retail

5.75% (LIBOR

+ 4.75%)

06/19/2015

06/12/2019

1,219

1,208

1,213

Caesars Entertainment Resort Properties, LLC

Hotel, gaming
&leisure

7% (LIBOR

+ 6%)

01/15/2015

10/11/2020

4,968

4,742

4,537

Cengage Learning Acquisitions, Inc.

Media

7% (LIBOR

+ 6%)

12/15/2014

03/31/2020

4,417

4,378

4,318

Clear Balance Holdings, LLC

Banking,
finance,insurance &
realestate

6.75% (LIBOR

+ 5.75%)

07/07/2015

06/30/2020

4,875

4,854

4,851

Commercial Barge Line Co

Transportation

9.75% (LIBOR

+ 8.75%)

11/06/2015

11/12/2020

1,500

1,427

1,403

Communications Sales & Leasing, Inc.

Telecommunications

5% (LIBOR

+ 4%)

05/28/2015

10/24/2022

2,985

2,982

2,768

Compuware Corp

Services

6.25% (LIBOR

+ 5.25%)

12/11/2014

2/15/2021

2,974

2,889

2,782

CPI Acquisition, Inc.

Services

5.5% (LIBOR

+ 4.5%)

08/14/2015

08/17/2022

3,375

3,354

3,343

Creative Artists

Media

5.5% (LIBOR

+ 4.5%)

03/16/2015

12/17/2021

2,475

2,508

2,471

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Crowne Group LLC

Automotive

6% (LIBOR

+ 5%)

01/14/2015

09/30/2020

1,485

1,469

1,455

CT Technologies Intermediate Holdings

Healthcare &

pharmaceuticals

5.25% (LIBOR

+ 4.25%)

02/11/2015

12/01/2021

1,980

1,989

1,918

CWGS Group, LLC

Automotive

5.75% (LIBOR

+ 4.75%)

12/22/2014

02/20/2020

2,375

2,376

2,348

Eastman Kodak Company

High tech industries

7.25% (LIBOR

+ 6.25%)

09/09/2015

09/03/2019

1,990

1,934

1,724

EnergySolutions,
LLC

Environmental

industries

6.75% (LIBOR

+ 5.75%)

03/16/2015

05/29/2020

2,000

2,022

1,550

Evergreen Skills Lux S.á r.l.

High tech industries

5.75% (LIBOR

+ 4.75%)

01/15/2015

04/28/2021

1,486

1,460

1,167

Getty Images, Inc.

Media

4.75% (LIBOR

+ 3.5%)

02/18/2015

10/18/2019

990

927

629

Global Healthcare Exchange LLC

Services

5.5% (LIBOR

+ 4.5%)

08/12/2015

08/15/2022

998

993

992

Gold Standard Baking Inc

Wholesale

5.25% (LIBOR

+4.25%) 6.75%

(Prime + 3.25%)

05/19/2015

04/23/2021

2,985

2,972

2,955

Green Plains Renewable Energy Inc

Energy

6.5% (LIBOR
+ 5.5%)

06/09/2015

06/30/2020

1,956

1,957

1,929

GTCR Valor Companies, Inc.

Services

6% (LIBOR

+ 5%)

12/05/2014

05/30/2021

1,977

1,960

1,968

IMG LLC

Media

5.25% (LIBOR
+ 4.25%)

12/31/2014

05/06/2021

1,481

1,452

1,459

Insurance
Technologies

High tech industries

8% (LIBOR
+ 7%)

03/26/2015

12/01/2019

1,896

1,880

1,896

Insurance Technologies⁽³⁾

High tech industries

0% (LIBOR
+ 0%)

03/26/2015

12/01/2019

209

)

—

J Jill

Retail

6% (LIBOR
+ 5%)

05/08/2015

05/09/2022

1,047

1,043

1,026

Jackson Hewitt Tax Service Inc

Services

8% (LIBOR

+ 7%)

07/24/2015

07/30/2020

1,000

982

963

Koosharem, LLC

Services

7.5% (LIBOR

+ 6.5%)

02/04/2015

05/15/2020

2,972

2,962

2,794

Lannett Company Inc

Healthcare &
pharmaceuticals

5.75% (LIBOR
+ 4.75%)

11/20/2015

11/25/2020

1,500

1,389

1,410

Lannett Company Inc

Healthcare &
pharmaceuticals

6.375% (LIBOR
+ 5.375%)

11/20/2015

11/25/2022

1,500

1,351

1,403

LegalZoom

Services

8% (LIBOR

+ 7%)

06/15/2015

05/13/2020

4,967

Lindblad Expeditions Inc

Hotel, gaming &
leisure

5.5% (LIBOR

+ 4.5%)

06/23/2015

05/08/2021

2,644

2,659

2,631

Lindblad Maritime

Hotel, gaming &
leisure

5.5% (LIBOR

+ 4.5%)

06/23/2015

05/08/2021

341

343

339

Margaritaville Holdings LLC

Beverage, food &
tobacco

7% (LIBOR

+ 6%)

03/12/2015

03/12/2021

4,963

4,920

4,814

Match Group Inc

High tech industries

5.5% (LIBOR

+4.5%)

11/06/2015

11/16/2022

3,000

2,972

2,970

MediArena Acquisition B.V.

Media

6.75% (LIBOR
+ 5.75%)

12/18/2014

08/13/2021

1,481

1,462

1,321

Merrill Communications LLC

Media

6.25% (LIBOR
+ 5.25%)

05/29/2015

06/01/2022

1,988

1,977

1,740

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Mood Media Corporation

Media

7% (LIBOR

+6%)

12/05/2014

05/01/2019

987

976

942

Navistar Inc

Automotive

6.5% (LIBOR

+5.5%)

08/06/2015

08/07/2020

2,000

1,980

1,772

NextCare, Inc.

Healthcare &
pharmaceuticals

7% (LIBOR

+6%)

08/21/2015

07/31/2018

2,985

2,972

2,985

Novitex Acquisition, LLC

Consumer
goods

7.5% (LIBOR

+6.25%)

12/05/2014

07/07/2020

980

966

924

Parq Holdings LP

Hotel, gaming
&
leisure

8.5% (LIBOR

+7.5%)

12/05/2014

12/17/2020

1,000

986

975

Petrochoice Holdings Inc

Chemicals,
plastics
& rubber

6% (LIBOR

+5%)

09/02/2015

08/19/2022

998

974

983

Physiotherapy Associates Inc

Healthcare &
pharmaceuticals

5.75% (LIBOR
+ 4.75%)

06/04/2015

06/04/2021

998

993

995

Pre-Paid Legal Services, Inc

Services

6.5% (LIBOR

+5.25%)

05/21/2015

07/01/2019

966

961

Quincy Newspapers Inc

Media

5.5% (LIBOR

+4.5%)

11/23/2015

11/02/2022

2,988

2,981

2,956

RentPath, Inc.

Media

6.25% (LIBOR
+ 5.25%)

12/11/2014

12/17/2021

2,475

2,450

2,184

Riverbed Technology, Inc.

High tech
industries

6% (LIBOR

+5%)

02/25/2015

04/25/2022

993

988

990

SCS Holdings Inc.

Services

6% (LIBOR

+5%)

11/20/2015

10/30/2022

1,978

1,963

1,950

Sirva Worldwide, Inc.

Transportation

7.5% (LIBOR

+6.25%)

12/18/2014

03/27/2019

1,928

1,924

1,870

Smart Start, Inc.

Services

5.75% (LIBOR
+ 4.75%)

08/28/2015

02/20/2022

2,500

2,476

2,475

SourceHOV LLC

Services

7.75% (LIBOR
+ 6.75%)

03/17/2015

10/31/2019

1,938

1,868

1,724

Stonewall Gas Gathering LLC

Energy

8.75% (LIBOR
+ 7.75%)

01/26/2015

01/28/2022

993

949

990

TOMS Shoes LLC

Retail

6.5% (LIBOR

+5.5%)

12/18/2014

10/31/2020

1,985

1,860

1,355

Travelport Finance Luxembourg Sarl

Services

5.75% (LIBOR
+ 4.75%)

09/04/2015

09/02/2021

2,992

3,007

2,936

TTM Technologies
Inc

High tech
industries

6% (LIBOR

+5%)

05/07/2015

05/31/2021

998

966

905

TWCC Holding Corp.

Media

5.75% (LIBOR
+ 5%)

05/21/2015

02/11/2020

2,516

2,498

2,517

US Renal Care Inc

Healthcare &
pharmaceuticals

5.25% (LIBOR
+ 4.25%)

11/17/2015

12/31/2022

2,000

1,980

1,987

Varsity Brands

Consumer
goods

5% (LIBOR

+4%)

12/10/2014

12/11/2021

990

982

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Verdesian Life Sciences LLC

Chemicals, plastics
& rubber

6% (LIBOR

+ 5%)

12/09/2014

07/01/2020

937

936

903

Zep Inc

Chemicals, plastics
& rubber

5.75% (LIBOR
+ 4.75%)

09/04/2015

06/27/2022

2,985

2,992

2,977

Total Senior Secured First Lien Term Loans

146,466

141,514

Second Lien Term Loans

ABG Intermediate Holdings 2 LLC⁽⁴⁾

Consumer goods

8.50%

07/13/2015

05/27/2022

133

)

ABG Intermediate Holdings 2
LLC

Consumer goods

9.5% (LIBOR

+ 8.5%)

06/19/2015

05/27/2022

867

859

850

AssuredPartners Inc

Banking, finance,
insurance & real
estate

10% (LIBOR

+ 9%)

10/16/2015

10/20/2023

1,000

961

980

Asurion Delivery and Installation Services

Telecommunications

8.5% (LIBOR

+ 7.5%)

02/18/2015

03/03/2021

4,000

3,872

3,442

Cirque Du Soleil

Hotel, gaming &
leisure

9.25% (LIBOR
+ 8.25%)

06/25/2015

07/08/2023

1,000

986

950

Confie Seguros Holding II Co.

Banking, finance,
insurance & real
estate

10.25% (LIBOR
+ 9%)

06/29/2015

05/09/2019

500

496

495

EagleView Technology Corporation

Services

9.25% (LIBOR
+ 8.25%)

07/29/2015

07/14/2023

1,000

986

959

Eastman Kodak Company

High tech industries

10.75% (LIBOR
+ 9.5%)

03/24/2015

09/03/2020

1,000

996

865

Filtration Group Corporation

Services

8.25% (LIBOR
+ 7.25%)

03/16/2015

11/22/2021

524

526

511

GENEX Services, Inc.

Services

8.75% (LIBOR
+ 7.75%)

06/26/2015

05/30/2022

1,000

988

943

Gruden Acquisition Inc.

Transportation

9.5% (LIBOR

+ 8.5%)

07/31/2015

08/18/2023

500

476

Hyland Software, Inc.

High tech industries

8.25% (LIBOR
+ 7.25%)

06/12/2015

07/03/2023

1,500

1,493

1,410

IPC Corp

Telecommunications

10.5% (LIBOR
+ 9.5%)

03/03/2015

02/06/2022

1,500

1,402

1,350

Learfield Communications, Inc.

Media

8.75% (LIBOR
+ 7.75%)

02/18/2015

10/08/2021

952

957

943

Linxens France SA

Telecommunications

9.5% (LIBOR

+ 8.5%)

07/31/2015

10/16/2023

1,000

990

987

MRI Software LLC

High tech industries

9% (LIBOR

+ 8%)

06/19/2015

06/23/2022

1,000

986

970

RentPath, Inc.

Media

10% (LIBOR

+ 9%)

12/11/2014

12/17/2022

1,000

921

813

Royal Adhesives and Sealants LLC

Chemicals, plastics
& rubber

8.5% (LIBOR

+ 7.5%)

06/12/2015

06/19/2023

1,000

993

985

TWCC Holding Corp.

Media

7% (LIBOR

+ 6%)

05/28/2015

06/26/2020

2,000

1,879

1,997

Wash Multifamily Laundry Systems, LLC.

Services

8% (LIBOR

+7%)

05/04/2015

05/12/2023

Wash Multifamily Laundry Systems, LLC.

Services

8% (LIBOR

+7%)

05/04/2015

05/15/2023

425

423

403

Total Second Lien Term Loans

21,263

20,397

Total Investments

167,729

161,911

(1)	Variable interest rates indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option. LIBOR rates are subject to interest rate floors.

(2)	Represents fair value in accordance with ASC Topic 820. The determination of such fair value is not included in our board of director’s valuation process described elsewhere herein.

(3)	Represents a delayed draw commitment of $209, which was unfunded as of December 31, 2015.

(4)	Represents a delayed draw commitment of $133, which was unfunded as of December 31, 2015.

Below is certain summarized financial information for Logan JV as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015:

Selected Balance Sheet Information:


	As of September 30,		As of December 31,
	2016		2015
	(Dollars in thousands)		(Dollars in thousands)
Assets:
Investments at fair value (cost of $203,905 and $167,729, respectively)	$	203,362	$	161,911
Cash		9,058		7,671
Receivable for investments sold		7,097		—
Other assets		2,689		2,091

Total assets	$	222,206	$	171,673


Liabilities:
Loans payable	$	129,257	$	108,137
Payable for investments purchased		14,550		4,367
Distribution payable		3,695		2,375
Other liabilities		1,269		816

Total liabilities	$	148,771	$	115,695


Members’ capital	$	73,435	$	55,978

Total liabilities and members’ capital	$	222,206	$	171,673

Selected Statement of Operations Information:


	For the three months ended September 30, 2016		For the three months ended September 30, 2015			For the nine months ended September 30, 2016		For the nine months ended September 30, 2015
	(Dollars in thousands)		(Dollars in thousands)			(Dollars in thousands)		(Dollars in thousands)
Interest income	$	3,798	$	2,219		$	10,459	$	4,423
Fee income		89		18			167		80

Total investment income		3,887		2,237			10,626		4,503
Credit facility expenses⁽¹⁾		1,298		737			3,579		1,469
Other expenses		105		49			343		166

Total expenses		1,403		786			3,922		1,635

Net investment income		2,484		1,451			6,704		2,868
Net realized gains		166		45			179		45
Net change in unrealized appreciation (depreciation) on investments		3,640		(2,018	)		5,274		(1,911	)

Net increase (decrease) in members’ capital from operations	$	6,290	$	(522	)	$	12,157	$	1,002

(1)	As of September 30, 2016, Logan JV had $129,257 outstanding debt under the credit facility with an effective interest rate of 3.22% per annum. As of September 30, 2015, Logan JV had $91,162 outstanding debt under the credit facility with an effective interest rate of 2.82% per annum.

Investment in Tax Receivable Agreement Payment Rights

In June 2012, the Company invested in a TRA that entitles it to certain payment rights, or TRA Payment Rights, from Duff & Phelps Corporation, or Duff & Phelps. The TRA transfers the economic value of certain tax deductions, or tax benefits, taken by Duff & Phelps to the Company and entitles the Company to a stream of payments to be received. The TRA payment right is, in effect, a subordinated claim on the issuing company which can be valued based on the credit risk of the issuer, which includes projected future earnings, the liquidity of the underlying payment right, risk of tax law changes, the effective tax rate and any other factors which might impact the value of the payment right.

Through the TRA, the Company is entitled to receive an annual tax benefit payment based upon 85% of the savings from certain deductions along with interest. The payments that the Company is entitled to receive result from cash savings, if any, in U.S. federal, state or local income tax that Duff & Phelps realizes (i) from the tax savings derived from the goodwill and other intangibles created in connection with the Duff & Phelps initial public offering and (ii) from other income tax deductions. These tax benefit payments will continue until the relevant deductions are fully utilized, which is projected to be 16 years. Pursuant to the TRA, the Company maintains the right to enforce Duff & Phelps payment obligations as a transferee of the TRA contract. If Duff & Phelps chooses to pre-pay and terminate the TRA, the Company will be entitled to the present value of the expected future TRA payments. If Duff & Phelps breaches any material obligation than all obligations are accelerated and calculated as if an early termination occurred. Failure to make a payment is a breach of a material obligation if the failure occurs for more than three months.

The projected annual tax benefit payment will be accrued on a quarterly basis and paid annually. The payment will be allocated between a reduction in the cost basis of the investment and interest income based upon an amortization schedule. Based upon the characteristics of the investment, the Company has chosen to categorize the investment in the TRA payment rights as investment in payment rights in the fair value hierarchy. The amortized cost basis and fair value of the TRA as of September 30, 2016 was $11,482 and $13,559, respectively. The amortized cost basis and fair value of the TRA as of December 31, 2015 was $11,482 and $13,307, respectively. For the three and nine months ended September 30, 2016, the Company recognized interest income totaling $509 and $1,509, respectively, related to the TRA. For the three and nine months ended September 30, 2015, the Company recognized interest income totaling $508 and $1,509, respectively, related to the TRA.

Managed Funds

The Advisor and its affiliates may also manage other funds in the future that may have investment mandates that are similar, in whole and in part, with ours. For example, the Advisor may serve as investment adviser to one or more private funds, registered closed-end funds and collateralized loan obligations (CLO). In addition, the Company’s officers may serve in similar capacities for one or more private funds, registered closed-end funds and CLOs. The Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, the Advisor or its affiliates may determine that the Company should invest side- by-side with one or more other funds. The Advisor’s policies will also be designed to manage and mitigate the conflicts of interest associated with the allocation of investment opportunities if we are able to co-invest, either pursuant to SEC interpretive positions or an exemptive order, with other funds managed by the Advisor and its affiliates. As a result, the Advisor and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. Although the Advisor and its affiliates will endeavor to allocate investment opportunities in a fair and equitable manner and consistent with applicable allocation procedures, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Advisor or its affiliates.

The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. The SEC staff has granted the Company relief sought in an exemptive application that expands its ability to co-invest in portfolio companies with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, the Company is permitted to co-invest with Affiliated Funds if a “required majority” (as defined in Section 57(o) of the 1940 Act) or the Company’s independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching by the Company or its stockholders on the part of any person concerned (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with its investment objective and strategies.

Greenway

On January 14, 2011, THL Credit Greenway Fund LLC, or Greenway, was formed as a Delaware limited liability company. Greenway is a portfolio company of the Company. Greenway is a closed-end investment fund which provides for no liquidity or redemption options and is not readily marketable. Greenway operates under a limited liability agreement dated January 19, 2011, or the Agreement. Greenway will continue in existence until January 14, 2021, subject to earlier termination pursuant to certain terms of the Agreement. The term may also be extended for up to three additional one-year periods pursuant to certain terms of the Agreement. Greenway had a two year investment period.

Greenway had $150,000 of capital committed by affiliates of a single institutional investor and is managed by the Company. The Company’s capital commitment to Greenway is $15. The Company’s nominal investment in Greenway is reflected in the September 30, 2016 and December 31, 2015 Consolidated Schedules of Investments. As of September 30, 2016, all of Greenway’s committed capital has been fully called.

The Company acts as the investment adviser to Greenway and is entitled to receive certain fees relating to its investment management services provided, including a base management fee, a performance fee and a portion of the closing fees on each investment transaction. As a result, Greenway is classified as an affiliate of the Company. For the three and nine months ended September 30, 2016, the Company earned $70 and $226, respectively, in fees related to Greenway, which are included in other income from non-controlled, affiliated investments in the Consolidated Statements of Operations. For the three and nine months

ended September 30, 2015, the Company earned $101 and $492, respectively, in fees related to Greenway, which are included in other income from non-controlled, affiliated investments in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, $122 and $145 of fees related to Greenway, respectively, were included in due from affiliate on the Consolidated Statements of Assets and Liabilities.

Greenway invested in securities similar to those of the Company pursuant to investment and allocation guidelines which address, among other things, the size of the borrowers, the types of transactions and the concentration and investment ratio amongst Greenway and the Company. However, the Company has the discretion to invest in other securities.

Greenway II

On January 31, 2013, THL Credit Greenway Fund II, LLC, or Greenway II LLC, was formed as a Delaware limited liability company and is a portfolio company of the Company. Greenway II LLC is a closed-end investment fund which provides for no liquidity or redemption options and is not readily marketable. Greenway II LLC operates under a limited liability agreement dated February 11, 2013, as amended, or the Greenway II LLC Agreement. Greenway II LLC will continue until October 10, 2021, subject to earlier termination pursuant to certain terms of the Greenway II LLC Agreement. The term may also be extended for up to three additional one-year periods pursuant to certain terms of the Greenway II LLC Agreement. Greenway II LLC has a two year investment period.

As contemplated in the Greenway II LLC Agreement, the Company has established a related investment vehicle and entered into an investment management agreement with an account set up by an unaffiliated third party investor to invest alongside Greenway II LLC pursuant to similar economic terms. The account is also managed by the Company. References to “Greenway II” herein include Greenway II LLC and the account of the related investment vehicle. Greenway II had $186,500 of capital commitments primarily from institutional investors. The Company’s capital commitment to Greenway II is $5. The Company’s nominal investment in Greenway II LLC is reflected in the September 30, 2016 and December 31, 2015 Consolidated Schedules of Investments. Greenway II LLC is managed by the Company. As of September 30, 2016, all of Greenway II’s committed capital has been fully called.

The Company acts as the investment adviser to Greenway II and is entitled to receive certain fees relating to its investment management services provided, including a base management fee, a performance fee and a portion of the closing fees on each investment transaction. As a result, Greenway II is classified as an affiliate of the Company. For the three and nine months ended September 30, 2016, the Company earned $303 and $1,012, respectively, in fees related to Greenway II, which are included in other income from non-controlled, affiliated investments in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2015, the Company earned $399 and $1,254, respectively, in fees related to Greenway II, which are included in other income from non-controlled, affiliated investments in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, $351 and $448, respectively, of fees related to Greenway II were included in due from affiliate on the Consolidated Statements of Assets and Liabilities. As of September 30, 2016 and December 31, 2015, there was no interest owed to Greenway II.

Other deferred assets consist of placement agent expenses incurred in connection with the offer and sale of partnership interests in Greenway II. These costs are capitalized when the partner signs the Greenway II subscription agreement and are recognized as an expense over the period when the Company expects to collect management fees from Greenway II. For the three and nine months ended September 30, 2016, the Company recognized $56 and $169, respectively, in expenses related to placement agent expenses, which are included in other general and administrative expenses in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2015, the Company recognized $56 and $169, respectively, in expenses related to placement agent expenses, which are included in other general and administrative expenses in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, $206 and $375, respectively, was included in other deferred assets on the Consolidated Statements of Assets and Liabilities.

Greenway II invested in securities similar to those of the Company pursuant to investment and allocation guidelines which address, among other things, the size of the borrowers, the types of transactions and the concentration and investment ratio amongst Greenway II and the Company. However, the Company has the discretion to invest in other securities.

CLO Residual Interests

As of September 30, 2016 and December 31, 2015, the Company had investments in the CLO residual interests, or subordinated notes, which can also be structured as income notes. The subordinated notes are subordinated to the secured notes issued in connection with each CLO. The secured notes in each structure are collateralized by portfolios consisting primarily of broadly syndicated senior secured bank loans.

The following table shows a summary of the Company investments in CLO residual interests:


								As of September 30, 2016				As of December 31, 2015
Issuer	Ownership Interest			Total CLO Amount at initial par		Total CLO Residual Amount		THL Credit Residual Amount at Amortized Cost		THL Credit Residual Amount at Fair Value		THL Credit Residual Amount at Amortized Cost		THL Credit Residual Amount at Fair Value
Dryden CLO, Ltd.		23.1	%	$	516,400	$	10,000	$	—	$	—	$	6,845	$	6,205
Flagship VII, Ltd.		12.6	%	$	441,810	$	5,000		3,144		2,266		3,517		3,110
Flagship VIII, Ltd.		25.1	%	$	470,895	$	10,000		6,089		5,079		6,743		5,687

Total CLO residual interests								$	9,233	$	7,345	$	17,105	$	15,002

The subordinated notes and income notes do not have a stated rate of interest, but are entitled to receive distributions on quarterly payment dates subject to the priority of payments to secured note holders in the structures if and to the extent funds are available for such purpose. The payments on the subordinated notes and income notes are subordinated not only to the interest and principal claims of all secured notes issued, but to certain administrative expenses, taxes, and the base and subordinated fees paid to the collateral manager. Payments to the subordinated notes and income notes may vary significantly quarter to quarter for a variety of reasons and may be subject to 100% loss. Investments in subordinated notes and income notes, due to the structure of the CLO, can be significantly impacted by change in the market value of the assets, the distributions on the assets, defaults and recoveries on the assets, capital gains and losses on the assets along with prices, interest rates and other risks associated with the assets.

For the three and nine months ended September 30, 2016, the Company recognized interest income totaling $485 and $1,676, respectively, related to CLO residual interests. For the three and nine months ended September 30, 2015, the Company recognized interest income totaling $746 and $3,040, respectively, related to CLO residual interests.

Revolving and Unfunded Delayed Draw Loans

For the Company’s investments in revolving and delayed draw loans, the cost basis of the investments purchased is adjusted for the cash received for the discount on the total balance committed. The fair value is also adjusted for price appreciation or depreciation on the unfunded portion. As a result, the purchase of commitments not completely funded may result in a negative value until it is offset by the future amounts called and funded.

4. Related Party Transactions

Investment Management Agreement

On March 8, 2016, the Company’s investment management agreement was re-approved by its board of directors, including a majority of its directors who are not interested persons of the Company. Under the investment management agreement, the Advisor, subject to the overall supervision of the Company’s board of directors, manages the day-to-day operations of, and provides investment advisory services to the Company.

The Advisor receives a fee for investment advisory and management services consisting of a base management fee and a two-part incentive fee.

The base management fee is calculated at an annual rate of 1.5% of the Company’s gross assets payable quarterly in arrears on a calendar quarter basis. For purposes of calculating the base management fee, “gross assets” is determined as the value of the Company’s assets without deduction for any liabilities. The base management fee is calculated based on the value of the Company’s gross assets at the end of the most recently completed calendar quarter, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.

For the three and nine months ended September 30, 2016, the Company incurred base management fees of $2,678 and $8,390, respectively. For the three and nine months ended September 30, 2015, the Company incurred base management fees of $2,991 and $8,885, respectively. As of September 30, 2016 and December 31, 2015, $2,678 and $2,944, respectively, was payable to the Advisor.

The incentive fee has two components, ordinary income and capital gains, as follows:

The ordinary income component is calculated, and payable, quarterly in arrears based on the Company’s preincentive fee net investment income for the immediately preceding calendar quarter, subject to a cumulative total return requirement and to deferral of non-cash amounts. The preincentive fee net investment income, which is expressed as a rate of return on the value of the Company’s net assets attributable to the Company’s common stock, for the immediately preceding calendar quarter, will have a 2.0% (which is 8.0% annualized) hurdle rate (also referred to as “minimum income level”). Preincentive fee net investment income means interest income, amortization of original issue discount, commitment and origination fees, dividend income and any other income (including any other fees, such as, structuring, diligence, managerial assistance and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the Company’s administration agreement (discussed below), and any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee and any offering expenses and other expenses not charged to operations but excluding certain reversals to the extent such reversals have the effect of reducing previously accrued incentive fees based on the deferral of non-cash interest. Preincentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. The Advisor receives no incentive fee for any calendar quarter in which the Company’s preincentive fee net investment income does not exceed the minimum income level. Subject to the cumulative total return requirement described below, the Advisor receives 100% of the Company’s preincentive fee net investment income for any calendar quarter with respect to that portion of the preincentive net investment income for such quarter, if any, that exceeds the minimum income level but is less than 2.5% (which is 10.0% annualized) of net assets (also referred to as the “catch-up” provision) and 20.0% of the Company’s preincentive fee net investment income for such calendar quarter, if any, greater than 2.5% (10.0% annualized) of net assets. The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of the Company’s preincentive fee net investment income is payable except to the extent 20.0% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding quarters. In other words, any ordinary income incentive fee that is payable in a calendar quarter is limited to the lesser of (i) 20% of the amount by which the Company’s preincentive fee net investment income for such calendar quarter exceeds the 2.0% hurdle, subject to the “catch- up” provision, and (ii) (x) 20% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the amount, if positive, of the sum of the Company’s preincentive fee net investment income, base management fees, realized gains and losses and unrealized appreciation and depreciation for the then current and 11 preceding calendar quarters. In addition, the portion of such incentive fee that is attributable to deferred interest (sometimes referred to as payment-in-kind interest, or PIK, or original issue discount, or OID) will be paid to THL Credit Advisors, together with interest thereon from the date of deferral to the date of payment, only if and to the extent we actually receive such interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write-off or similar treatment of the investment giving rise to any deferred interest accrual. There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle rate and there is no delay of payment if prior quarters are below the quarterly hurdle rate.

For the three and nine months ended September 30, 2016, the Company incurred $2,624 and $2,654, respectively, of incentive fees related to ordinary income. For the three and nine months ended September 30, 2015, the Company incurred $2,912 and $8,873, respectively, of incentive fees related to ordinary income. As of September 30, 2016 and December 31, 2015, $2,483 and $2,903, respectively, of such incentive fees are currently payable to the Advisor. As of September 30, 2016 and December 31, 2015, $1,435 and $1,340, respectively of incentive fees incurred by the Company were generated from deferred interest (i.e. PIK, certain discount accretion and deferred interest) and are not payable until such amounts are received in cash.

The second component of the incentive fee (capital gains incentive fee) is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment management agreement, as of the termination date). This component is equal to 20.0% of the cumulative aggregate realized capital gains from inception through the end of that calendar year, computed net of the cumulative aggregate realized capital losses and cumulative aggregate unrealized capital depreciation through the end of such year. The aggregate amount of any previously paid capital gains incentive fees is subtracted from such capital gains incentive fee calculated. There was no capital gains incentive fee payable to our Advisor under the investment management agreement as of September 30, 2016 and December 31, 2015.

GAAP requires that the incentive fee accrual considers the cumulative aggregate realized gains and losses and unrealized capital appreciation or depreciation of investments or other financial instruments, such as an interest rate derivative, in the calculation, as an incentive fee would be payable if such realized gains and losses or unrealized capital appreciation or depreciation were realized, even though such realized gains and losses and unrealized capital appreciation or depreciation is not permitted to be considered in calculating the fee actually payable under the investment management agreement (“GAAP Incentive Fee”). There can be no assurance that such unrealized appreciation or depreciation will be realized in the future. Accordingly, such fee, as calculated and accrued, would not necessarily be payable under the investment management agreement, and may never be paid based upon the computation of incentive fees in subsequent periods. For the three and nine months ended September 30, 2016 and 2015, the Company incurred no incentive fees related to the GAAP Incentive Fee.

Administration Agreement

The Company has also entered into an administration agreement with the Advisor under which the Advisor will provide administrative services to the Company. Under the administration agreement, the Advisor performs, or oversees the performance of administrative services necessary for the operation of the Company, which include, among other things, being responsible for the financial records which the Company is required to maintain and preparing reports to the Company’s stockholders and reports filed with the SEC. In addition, the Advisor assists in determining and publishing the Company’s net asset value, oversees the preparation and filing of the Company’s tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. The Company will reimburse the Advisor for its allocable portion of the costs and expenses incurred by the Advisor for overhead in performance by the Advisor of its duties under the administration agreement and the investment management agreement, including facilities, office equipment and our allocable portion of cost of compensation and related expenses of our chief financial officer and chief compliance officer and their respective staffs, as well as any costs and expenses incurred by the Advisor relating to any administrative or operating services provided by the Advisor to the Company. Such costs are reflected as administrator expenses in the accompanying Consolidated Statements of Operations. Under the administration agreement, the Advisor provides, on behalf of the Company, managerial assistance to those portfolio companies to which the Company is required to provide such assistance. To the extent that our Advisor outsources any of its functions, the Company pays the fees associated with such functions on a direct basis without profit to the Advisor.

For the three and nine months ended September 30, 2016, the Company incurred administrator expenses of $888 and $2,708, respectively. For the three and nine months ended September 30, 2015, the Company incurred administrator expenses of $912 and $2,782, respectively. As of September 30, 2016 and December 31, 2015, $38 and $45, respectively, was due to the Advisor for administrator expenses.

License Agreement

The Company and the Advisor have entered into a license agreement with THL Partners, L.P., or THL Partners, under which THL Partners has granted to the Company and the Advisor a non-exclusive, personal, revocable, worldwide, non-transferable license to use the trade name and service mark THL, which is a proprietary mark of THL Partners, for specified purposes in connection with the Company’s and the Advisor’s respective businesses. This license agreement is royalty-free, which means the Company is not charged a fee for its use of the trade name and service mark THL. The license agreement is terminable either in its entirety or with respect to the Company or the Advisor by THL Partners at any time in its sole discretion upon 60 days prior written notice, and is also terminable with respect to either the Company or the Advisor by THL Partners in the case of certain events of non-compliance. After the expiration of its first one year term, the entire license agreement is terminable by either the Company or the Advisor at the Company or its sole discretion upon 60 days prior written notice. Upon termination of the license agreement, the Company and the Advisor must cease to use the name and mark THL, including any use in the Company’s respective legal names, filings, listings and other uses that may require the Company to withdraw or replace the Company’s names and marks. Other than with respect to the limited rights contained in the license agreement, the Company and the Advisor have no right to use, or other rights in respect of, the THL name and mark. The Company is an entity operated independently from THL Partners, and third parties who deal with the Company have no recourse against THL Partners.

Due To and From Affiliates

The Advisor paid certain other general and administrative expenses on behalf of the Company. As of September 30, 2016 and December 31, 2015, there were $27 and $36, respectively, due to affiliate, which was included in accrued expenses and other payables on the Consolidated Statements of Assets and Liabilities.

As of September 30, 2016 and December 31, 2015, the Company owed $38 and $45, respectively, of Administrator expense to the Advisor, which was included in accrued expenses and other payables on the Consolidated Statements of Assets and Liabilities.

As of September 30, 2016 and December 31, 2015, the Company incurred $14 and $93, respectively, of other general and administrative expense on behalf of the Advisor, which was included in due from affiliates on the Consolidated Statement of Assets and Liabilities.

The Company acts as the investment adviser to Greenway and Greenway II and is entitled to receive certain fees. As a result, Greenway and Greenway II are classified as affiliates of the Company. As of September 30, 2016 and December 31, 2015, $474 and $593 of total fees and expenses related to Greenway and Greenway II, respectively, were included in due from affiliate on the Consolidated Statements of Assets and Liabilities.

5. Realized Gains and Losses on Investments, net of income tax provision

The following shows the breakdown of realized gains and losses for the three and nine months ended September 30, 2016 and 2015:


	For the three months ended September 30,					For the nine months ended September 30,
	2016			2015		2016			2015
AIM Media Texas Operating, LLC	$	—		$	—	$	(78	)	$	—
Airborne Tactical Advantage Company, LLC		—			—		685			—
Dimont & Associates, Inc. ⁽¹⁾		—			—		(10,914	)		—
Dryden CLO, Ltd.		(1,104	)		—		(1,104	)		—
OEM Group, Inc. ⁽²⁾		—			—		(6,226	)		—
Loadmaster Derrick & Equipment, Inc. ⁽³⁾		(6,574	)		—		(6,574	)		—
Surgery Center Holdings, Inc.		—			—		3,655			—
Tri Starr Management Services, Inc. ⁽⁴⁾		(17,422	)		—		(17,422	)		—
Other		120			216		147			293

Net realized (losses)/gains	$	(24,980	)	$	216	$	(37,831	)	$	293

⁽¹⁾

On March 14, 2016, as part of a further restructuring of the business, the cost basis of the Company’s equity interest totaling $6,569 and subordinated term loan totaling $4,474 was converted to an equity interest in an affiliated entity valued at $129. In connection with the restructuring, the Company recognized a realized loss in the amount of $10,914, which was offset by a $10,777 change in unrealized appreciation.

⁽²⁾

On March 17, 2016, as part of a restructuring of the business, the cost basis of the Company’s first lien loans totaling $33,242 was converted to a new first lien senior secured term loan of $18,703 and a controlled equity interest in an affiliated entity valued at $8,313. In connection with the restructuring, the Company recognized a realized loss of $6,226, which was offset by a $5,575 change in unrealized appreciation. Additionally, the Company made a $4,660 investment in a first lien senior secured revolving loan as part of a $7,000 commitment.

⁽³⁾

On July 1, 2016, as part of the restructuring, the Company exchanged the cost basis of its senior secured loans totaling $14,705 for a new senior secured term loan of $7,000, a debt-like preferred equity position, valued at $1,114, and 10% warrants. As result of the restructuring, the Company recognized a $6,574 loss on conversion to preferred equity, which was offset by a $5,074 change in unrealized appreciation. Additionally, the Company made a $1,500 investment in a first lien senior secured term loan.

⁽⁴⁾

On July 22, 2016, as part of the restructuring, the Company exchanged the cost basis of its subordinated debt totaling $20,558 for a controlled equity position of an affiliate of Tri-Starr Management Services, Inc. valued at $3,136. As result of the restructuring, the Company recognized a $17,422 loss on conversion of its subordinated debt investment to common equity, which was offset by a $17,422 change in unrealized appreciation. Additionally, the Company made a $8,807 investment in first lien senior secured term loans.

6. Net Increase in Net Assets Per Share Resulting from Operations

The following information sets forth the computation of basic and diluted net increase in net assets per share resulting from operations:


	For the three months ended September 30,				For the nine months ended September 30,
	2016		2015		2016		2015
Numerator—net increase in net assets resulting from operations:	$	9,887	$	2,595	$	9,228	$	32,214
Denominator—basic and diluted weighted average common shares:		33,169		33,507		33,235		33,739
Basic and diluted net increase in net assets per common share resulting from operations:	$	0.30	$	0.08	$	0.28	$	0.95

Diluted net increase in net assets per share resulting from operations equals basic net increase in net assets per share resulting from operations for each period because there were no common stock equivalents outstanding during the above periods.

7. Borrowings

The following shows a summary of the Company’s borrowings as of September 30, 2016 and December 31, 2015:


	As of
	September 30, 2016							December 31, 2015
Facility	Commitments		Borrowings Outstanding ⁽¹⁾		Weighted Average Interest Rate			Commitments		Borrowings Outstanding ⁽²⁾		Weighted Average Interest Rate
Revolving Facility	$	303,500	$	97,151		3.06	%	$	303,500	$	152,151		2.94	%
Term Loan Facility		106,500		106,500		3.31	%		106,500		106,500		3.19	%
2021 Notes		50,000		50,000		6.75	%		50,000		50,000		6.75	%
2022 Notes		35,000		35,000		6.75	%		35,000		35,000		6.75	%

Total	$	495,000	$	288,651		4.24	%	$	495,000	$	343,651		3.96	%

⁽¹⁾

As of September 30, 2016, excludes deferred financing costs of $1,649 for the Term Loan Facility, $1,557 for the 2021 Notes and $1,276 for the 2022 Notes presented as a reduction to the respective balances outstanding in the Consolidated Statements of Assets and Liabilities.

⁽²⁾

As of December 31, 2015, excludes deferred financing costs of $1,902 for the Term Loan Facility, $1,785 for the 2021 Notes and $1,406 for the 2022 Notes presented as a reduction to the respective balances outstanding in the Consolidated Statements of Assets and Liabilities.

Credit Facility

On August 19, 2015, the Company entered into an amendment, or the Revolving Amendment, to its existing revolving credit agreement, or Revolving Facility, and entered into an amendment, or the Term Loan Amendment, to its Term Loan Facility. The Revolving Facility and Term Loan Facility are collectively referred to as the Facilities.

The Revolving Amendment revised the Facility dated April 30, 2014 to, among other things, extend the maturity date from April 2018 to August 2020 (with a one year term out period beginning in August 2019). The one year term out period is the one year anniversary between the revolver termination date, or the end of the availability period, and the maturity date. During this time, the Company is required to make mandatory prepayments on its loans from the proceeds it receives from the sale of assets, extraordinary receipts, returns of capital or the issuances of equity or debt. The Revolving Facility has an interest rate of LIBOR plus 2.5% (with no LIBOR floor). The non-use fee is 1.0% annually if the Company uses 35% or less of the Revolving Facility and 0.50% annually if the Company uses more than 35% of the Revolving Facility. The Company elects the LIBOR rate on the loans outstanding on its Revolving Facility, which can have a LIBOR period that is one, two, three or nine months. The LIBOR rate on the borrowings outstanding on its Revolving Facility currently has a one month LIBOR period.

The Term Loan Amendment revised the Term Loan Facility dated April 30, 2014 to, among other things, extend the maturity date from April 2019 to August 2021. The Term Loan Amendment also changes the interest rate of the Term Loan Facility to LIBOR plus 2.75% (with no LIBOR Floor) and has substantially similar terms to the existing Revolving Facility (as amended by the Revolving Amendment). The Company elects the LIBOR rate on its Term Loan, which can have a LIBOR period that is one, two, three or nine months. The LIBOR rate on its Term Loan currently has a one month LIBOR period.

Each of the Facilities includes an accordion feature permitting the Company to expand the Facilities if certain conditions are satisfied; provided, however, that the aggregate amount of the Facilities, collectively, is capped at $600,000.

The Facilities generally require payment of interest on a quarterly basis for ABR loans (commonly based on the Prime Rate or the Federal Funds Rate), and at the end of the applicable interest period for Eurocurrency loans bearing interest at LIBOR, the interest rate benchmark used to determine the variable rates paid on the Facilities. LIBOR maturities can range between one and nine months at the election of the Company. All outstanding principal is due upon each maturity date. The Facilities also require a mandatory prepayment of interest and principal upon certain customary triggering events (including, without limitation, the disposition of assets or the issuance of certain securities).

Borrowings under the Facilities are subject to, among other things, a minimum borrowing/collateral base. The Facilities have certain collateral requirements and/or covenants, including, but not limited to covenants related to: (a) limitations on the incurrence of additional indebtedness and liens, (b) limitations on certain investments, (c) limitations on certain restricted payments, (d) limitations on the creation or existence of agreements that prohibit liens on certain properties of the Company and its subsidiaries, and (e) compliance with certain financial maintenance standards including (i) minimum stockholders’ equity, (ii) a ratio of total assets (less total liabilities not represented by senior securities) to the aggregate amount of senior securities representing indebtedness, of the Company and its consolidated subsidiaries, of not less than 2.00, (iii) minimum liquidity, (iv) minimum net worth, and (v) a consolidated interest coverage ratio. In addition to the financial maintenance standards, described in the preceding sentence, borrowings under the Facilities (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that applies different advance rates to different types of assets in the Company’s portfolio.

The credit agreements governing the Facilities also include default provisions such as the failure to make timely payments under the Facilities, the occurrence of a change in control, and the failure by the Company to materially perform under the operative agreements governing the Facilities, which, if not complied with, could, at the option of the lenders under the Facilities, accelerate repayment under the Facilities, thereby materially and adversely affecting the Company’s liquidity, financial condition and results of operations. Each loan originated under the Revolving Facility is subject to the satisfaction of certain conditions. The Company cannot be assured that it will be able to borrow funds under the Revolving Facility at any particular time or at all. The Company is currently in compliance with all financial covenants under the Facilities.

For the nine months ended September 30, 2016, the Company borrowed $98,250 and repaid $153,250 under the Facilities. For the nine months ended September 30, 2015, the Company borrowed $120,000 and repaid $139,500 under the Facilities.

As of September 30, 2016 and December 31, 2015, the carrying amount of the Company’s outstanding Facilities approximated fair value. The fair values of the Company’s Facilities are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company’s Facilities is estimated based upon market interest rates and entities with similar credit risk. As of September 30, 2016 and December 31, 2015, the Facilities would be deemed to be Level 3 of the fair value hierarchy.

Interest expense and related fees, excluding amortization of deferred financing costs, of $2,050 and $2,310, respectively, were incurred in connection with the Facilities for the three months ended September 30, 2016 and 2015. Interest expense and related fees, excluding amortization of deferred financing costs, of $6,198 and $6,872, respectively, were incurred in connection with the Facilities for the nine months ended September 30, 2016 and 2015. Amortization of deferred financing costs of $260 and $627, respectively, were incurred in connection with the Facilities for the three months ended September 30, 2016 and 2015. Amortization of deferred financing costs of $775 and $1,301, respectively, were incurred in connection with the Facilities for the nine months ended September 30, 2016 and 2015. As of September 30, 2016, the Company had $2,702 of deferred financing costs related to the Revolving Facility, which is presented as an asset and $1,649 of deferred financing costs related to the Term Loan Facility as a reduction to loans payable on the Consolidated Statement of Assets and Liabilities. As of December 31, 2015, the Company had $3,224 of deferred financing costs related to the Revolving Facility, which is presented as an asset and $1,902 of deferred financing costs related to the Term Loan Facility as a reduction to loans payable on the Consolidated Statement of Assets and Liabilities.

Notes

In December 2014, the Company completed a public offering of $50,000 in aggregate principal amount of 6.75% notes due 2021, or the 2021 Notes. The 2021 Notes mature on November 15, 2021, and may be redeemed in whole or in part at any time or from time to time at our option on or after November 15, 2017. The 2021 Notes bear interest at a rate of 6.75% per year payable quarterly on March 30, June 30, September 30 and December 30, of each year, beginning December 30, 2014 and trade on the New York Stock Exchange under the trading symbol “TCRX”.

In December 2015, the Company completed a public offering of $35,000 in aggregate principal amount of 6.75% notes due 2022, or the 2022 Notes. The 2022 Notes mature on December 30, 2022, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 30, 2018. The 2022 Notes bear interest at a rate of 6.75% per year payable quarterly on March 30, June 30, September 30 and December 30, of each year, beginning March 30, 2016 and trade on the New York Stock Exchange under the trading symbol “TCRZ”.

The 2021 Notes and the 2022 Notes are referred to collectively as the Notes.

As of September 30, 2016, the carrying amount and fair value of our Notes was $85,000 and $88,340, respectively. As of December 31, 2015, the carrying amount and fair value of Company’s Notes was $85,000 and $84,716, respectively. The fair value of our Notes are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Notes is based on the closing price of the security, which is a Level 2 input under ASC 820 due to the trading volume.

In connection with the issuance of the Notes, the Company incurred $3,565 of fees and expenses. Any of these unamortized fees and expenses are presented as a reduction to the Notes payable balance and are being amortized using the effective yield method over the term of the Notes. For the three and nine months ended September 30, 2016, the Company amortized approximately $129 and $382 of deferred financing costs, respectively, which is reflected in amortization of deferred financing costs on the Consolidated Statements of Operations. For the three and nine months ended September 30, 2015, the Company amortized approximately $76 and $227 of deferred financing costs, respectively, which is reflected in amortization of deferred financing costs on the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, the Company had $2,833 and $3,190 remaining deferred financing costs on the Notes, which reduced the notes payable balance on the Consolidated Statements of Assets and Liabilities.

For the three and nine months ending September 30, 2016, the Company incurred interest expense on the Notes of $1,434 and $4,290, respectively. For the three and nine months ending September 30, 2015, the Company incurred interest expense on the Notes of $844 and $2,522, respectively.

The indenture and supplements thereto relating to the Notes contain certain covenants, including but not limited to (i) an inability to incur additional borrowings, including through the issuance of additional debt or the sale of additional debt securities unless the Company’s asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing and (ii) if we are not subject to the reporting requirements under the Securities and Exchange Act of 1934 to file periodic reports with the SEC we will provide interim and consolidated financial information to the holders of the Notes and the trustee.

8. Interest Rate Derivative

On May 10, 2012, the Company entered into a five-year interest rate swap agreement, or swap agreement, with ING Capital Markets, LLC. Under the swap agreement, with a notional value of $50,000, the Company pays a fixed rate of 1.1425% and receives a floating rate based upon the current three-month LIBOR rate. The Company entered into the swap agreement to manage interest rate risk and not for speculative purposes.

The Company records the change in valuation of the swap agreement in unrealized appreciation (depreciation) as of each measurement period. When the quarterly interest rate swap amounts are paid or received under the swap agreement, the amounts are recorded as a realized gain (loss) through interest rate derivative periodic interest payments, net on the Consolidated Statement of Operations.

The Company recognized a realized loss for three and nine months ended September 30, 2016 of $66 and $232, respectively, which is reflected as interest rate derivative periodic interest payments, net on the Consolidated Statements of Operations. The Company recognized a realized loss for three and nine months ended September 30, 2015 of $109 and $336, respectively, which is reflected as interest rate derivative periodic interest payments, net on the Consolidated Statements of Operations.

For the three and nine months ended September 30, 2016, the Company recognized $144 and $104, respectively, of net change in unrealized appreciation (depreciation) from the swap agreement, which is reflected in net change in unrealized appreciation (depreciation) on interest rate derivative in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2015, the Company recognized ($114) and ($257), respectively, of net change in unrealized appreciation (depreciation) from the swap agreement, which is reflected in net change in unrealized appreciation (depreciation) on interest rate derivative in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, the Company’s fair value of its swap agreement is ($102) and ($206), respectively, which is reflected as an interest rate derivative liability on the Consolidated Statements of Assets and Liabilities.

9. Commitments and Contingencies and Off-Balance Sheet Arrangements

From time to time, the Company, or the Advisor, may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of the Company’s rights under contracts with its portfolio companies. Neither the Company, nor the Advisor, is currently subject to any material legal proceedings.

Unfunded commitments to provide funds to portfolio companies are not reflected on the Company’s Consolidated Statements of Assets and Liabilities. The Company’s unfunded commitments may be significant from time to time. These commitments will be subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that the Company holds. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company intends to use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments.

As of September 30, 2016 and December 31, 2015, the Company has the following unfunded commitments to portfolio companies:


	As of
	September 30, 2016		December 31, 2015
Unfunded delayed draw facilities
A10 Capital, LLC	$	2,500	$	—
BeneSys Inc.		—		218
The John Gore Organization, Inc.⁽¹⁾		—		3,153

	$	2,500	$	3,371
Unfunded revolving commitments
Holland Intermediate Acquisition Corp.	$	3,000	$	3,000
The John Gore Organization, Inc.⁽¹⁾		800		1,478
OEM Group, LLC		490		—
Tri Starr Management Services, Inc.		441		—

	$	4,731	$	4,478
Unfunded commitments to investments in funds
Freeport Financial SBIC Fund LP	$	680	$	680
Gryphon Partners 3.5, L.P.		343		356

	$	1,023	$	1,036

Total unfunded commitments	$	8,254	$	8,885

⁽¹⁾	Investment formerly known as Key Brand Entertainment, Inc. The name change was effective May 16, 2016.

10. Dividends

The Company has elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain its status as a RIC, it is required to distribute annually to its stockholders at least 90% of its investment company taxable income, as defined by the Code. To avoid a 4% excise tax on undistributed earnings, the Company is required to distribute each calendar year the sum of (i) 98% of its ordinary income for such calendar year (ii) 98.2% of its net capital gains for the one-year period ending October 31 of that calendar year (iii) any income recognized, but not distributed, in preceding years and on which the Company paid no federal income tax.

The Company’s quarterly distributions, if any, will be determined by its board of directors. The Company intends to make distributions to stockholders on a quarterly basis of substantially all of its net investment income. In addition, although the Company intends to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, it may in the future decide to retain such capital gains for investment.

In addition, the Company may be limited in its ability to make distributions due to the BDC asset coverage test for borrowings applicable to the Company as a BDC under the 1940 Act.

The following table summarizes the Company’s dividends declared and paid or to be paid on all shares, including dividends reinvested, if any:


Date Declared	Record Date	Payment Date	Amount Per Share
August 5, 2010	September 2, 2010	September 30, 2010	$	0.05
November 4, 2010	November 30, 2010	December 28, 2010	$	0.10
December 14, 2010	December 31, 2010	January 28, 2011	$	0.15
March 10, 2011	March 25, 2011	March 31, 2011	$	0.23
May 5, 2011	June 15, 2011	June 30, 2011	$	0.25
July 28, 2011	September 15, 2011	September 30, 2011	$	0.26
October 27, 2011	December 15, 2011	December 30, 2011	$	0.28
March 6, 2012	March 20, 2012	March 30, 2012	$	0.29
March 6, 2012	March 20, 2012	March 30, 2012	$	0.05
May 2, 2012	June 15, 2012	June 29, 2012	$	0.30
July 26, 2012	September 14, 2012	September 28, 2012	$	0.32
November 2, 2012	December 14, 2012	December 28, 2012	$	0.33
December 20, 2012	December 31, 2012	January 28, 2013	$	0.05
February 27, 2013	March 15, 2013	March 29, 2013	$	0.33
May 2, 2013	June 14, 2013	June 28, 2013	$	0.34
August 2, 2013	September 16, 2013	September 30, 2013	$	0.34
August 2, 2013	September 16, 2013	September 30, 2013	$	0.08
October 30, 2013	December 16, 2013	December 31, 2013	$	0.34
March 4, 2014	March 17, 2014	March 31, 2014	$	0.34
May 7, 2014	June 16, 2014	June 30, 2014	$	0.34
August 7, 2014	September 15, 2014	September 30, 2014	$	0.34
November 4, 2014	December 15, 2014	December 31, 2014	$	0.34
March 6, 2015	March 20, 2015	March 31, 2015	$	0.34
May 5, 2015	June 15, 2015	June 30, 2015	$	0.34
August 4, 2015	September 15, 2015	September 30, 2015	$	0.34
November 3, 2015	December 15, 2015	December 31, 2015	$	0.34
March 8, 2016	March 21, 2016	March 31, 2016	$	0.34
May 3, 2016	June 15, 2016	June 30, 2016	$	0.34
August 2, 2016	September 15, 2016	September 30, 2016	$	0.34
November 8, 2016	December 15, 2016	December 30, 2016	$	0.27

The Company may not be able to achieve operating results that will allow it to make distributions at a specific level or to increase the amount of these distributions from time to time. If the Company does not distribute a certain percentage of its income annually, it will suffer adverse tax consequences, including possible loss of its status as a regulated investment company. The Company cannot assure stockholders that they will receive any distributions at a particular level.

The Company maintains an “opt in” dividend reinvestment plan for our common stockholders. As a result, unless stockholders specifically elect to have their dividends automatically reinvested in additional shares of common stock, stockholders will receive all such dividends in cash. There were no dividends reinvested for the three and nine months ended September 30, 2016 and 2015 under the dividend reinvestment plan.

Under the terms of the Company’s dividend reinvestment plan, dividends will primarily be paid in newly issued shares of common stock. However, the Company reserves the right to purchase shares in the open market in connection with the implementation of the plan. This feature of the plan means that, under certain circumstances, the Company may issue shares of our common stock at a price below net asset value per share, which could cause our stockholders to experience dilution.

Distributions in excess of the Company’s current and accumulated profits and earnings would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of the Company’s distributions will be made annually as of the end of our fiscal year based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company’s distributions for a full year. If the Company had determined the tax attributes of its 2016 distributions as of September 30, 2016, 100% would be from ordinary income, 0% would be from capital gains and 0% would be a return of capital. There can be no certainty to stockholders that this determination is representative of what the tax attributes of the Company’s 2016 distributions to stockholders will actually be.

Each year, a statement on Form 1099-DIV identifying the source of the distribution will be mailed to the Company’s stockholders.

11. Financial Highlights


	For the three months ended September 30,						For the nine months ended September 30,
	2016			2015			2016			2015
Per Share Data:
Net asset value, beginning of period	$	11.88		$	13.29		$	12.58		$	13.08
Net investment income, after taxes⁽¹⁾		0.32			0.35			1.07			1.05
Net change in unrealized appreciation on investments⁽¹⁾		0.74			(0.27	)		0.36			(0.09	)
Provision for taxes on unrealized gain on investments⁽¹⁾		(0.01	)		(0.01	)		(0.01	)		(0.01	)
Net change in unrealized appreciation (depreciation) of interest rate derivative⁽¹⁾		—			—			—			(0.01	)
Net realized (loss) gain on investments⁽¹⁾⁽²⁾		(0.75	)		0.01			(1.14	)		0.01

Net increase in net assets resulting from operations		0.30			0.08			0.28			0.95
Accretive effect of repurchase of common stock		—			—			—			0.02
Distributions to stockholders from net investment income		(0.34	)		(0.34	)		(1.02	)		(1.02	)

Net asset value, end of period	$	11.84		$	13.03		$	11.84		$	13.03

Per share market value at end of period	$	9.53		$	10.92		$	9.53		$	10.92
Total return⁽³⁾⁽⁴⁾		(11.32	%)		(2.51	%)		(1.95	%)		1.29	%
Shares outstanding at end of period		33,169			33,338			33,169			33,338
Ratio/Supplemental Data:
Net assets at end of period	$	392,710		$	434,519		$	392,710		$	434,519
Ratio of total expenses to average net assets ⁽⁵⁾⁽⁶⁾		11.29	%		10.64	%		9.77	%		10.73	%
Ratio of net investment income to average net assets		10.55	%		10.26	%		11.78	%		10.64	%
Portfolio turnover		5.48	%		4.94	%		13.49	%		13.30	%

(1)	Calculated based on weighted average common shares outstanding.

(2)	Includes the cumulative effect of rounding.

(3)	Total return is based on the change in market price per share during the period. Total return takes into account dividends and distributions, if any, reinvested in accordance with the Company’s dividend reinvestment plan.

(4)	Not annualized

(5)	Annualized, except for dividend income, the reversal of previously accrued interest income, taxes and the related impact of incentive fees.

(6)

For the three months ended September 30, 2016, the ratio components included 2.62% of incentive fee, 2.70% of base management fee, 3.91% of the cost of borrowing, 1.96% of other operating expenses, and 0.1% of the impact of all taxes. For the three months ended September 30, 2015, the ratio components included 2.69% of base management fee, 2.57% of incentive fee, 3.47% of the cost of borrowing, 1.88% of other operating expenses, and 0.03% of the impact of all taxes.

For the nine months ended September 30, 2016, the ratio components included 0.88% of incentive fee, 2.78% of base management fee, 3.86% of the cost of borrowing, 2.05% of other operating expenses, and 0.20% of the impact of all taxes. For the nine months ended September 30, 2015, the ratio components included 2.67% of base management fee, 2.66% of incentive fee, 3.29% of the cost of borrowing, 1.99% of other operating expenses, and 0.12% of the impact of all taxes.

12. Stock Repurchase Program

On March 6, 2015, the Company’s board of directors authorized a $25,000 stock repurchase program that was put into effect in May 2015. The timing and amount of any stock repurchases will depend on the terms and conditions of the repurchase program and no assurances can be given that any common stock, or any particular amount, will be purchased. This stock repurchase program terminated on March 6, 2016. On March 8, 2016, the Company’s board of directors authorized a new $25,000 stock repurchase program. Unless extended by the Company’s board of directors, the stock purchase program will terminate on

March 8, 2017 and may be modified or terminated at any time for any reason without prior notice. The Company has provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. The Company will retire immediately all such shares of common stock that the Company purchases in connection with the stock repurchase program.

The following table summarizes our share repurchases under our stock repurchase program for the three and nine months ended September 30, 2016 and 2015:


	For the three months ended September 30,					For the nine months ended September 30,
	2016		2015			2016			2015
Dollar amount repurchased	$	—	$	3,234		$	1,537		$	7,000
Shares repurchased		—		263			142			568
Average price per share (including commission)	$	—	$	12.28		$	10.86		$	12.33
Weighted average discount to net asset value		—		7.56	%		12.22	%		6.83	%

13. Subsequent Events

From October 1, 2016 through November 8, 2016, the Company closed one new and one follow-on first lien investment totaling $13,918 in the financial services and industrials industries. The new floating rate investment and follow on fixed rate investment have a combined weighted average yield based upon cost at the time of the investment of 8.3%.

On October 3, 2016, the Company sold its first lien investment in American Achievement Corporation at cost for net proceeds of $9,626.

On October 5, 2016, the Company restructured its investment in Copperweld Bimetallics LLC, or Copperweld. As part of the restructuring, THL Credit exchanged the cost basis of its senior secured loan totaling $19,265 for a debt-like preferred equity position of $3,385 and a controlled equity position of an affiliate of Copperweld valued at $8,950, with $5,415 remaining as a senior secured term loan. In connection with the restructuring, the Company recognized a $1,515 loss.

On October 20, 2016, the Company received proceeds of $11,000 from the repayment of its second lien investment in Synarc-Biocore Holdings, LLC at par.

On November 8, 2016, the Company’s board of directors declared a dividend of $0.27 per share payable on December 30, 2016 to stockholders of record at the date of business on December 15, 2016.

Schedule 12-14

THL Credit, Inc. and Subsidiaries

Schedule of Investments in and Advances to Affiliates

(dollar amounts in thousands)

(unaudited)


Type of Investment/Portfolio company ⁽¹⁾	Amount of interest or fees credited in income ⁽²⁾		Fair Value at December 31, 2015		Gross Additions ⁽³⁾		Gross Reductions ⁽⁴⁾			Fair Value at September 30, 2016
Control Investments
C&K Market, Inc.
1,992,365 shares of common stock	$	2,540	$	14,168	$	2,007	$	—		$	16,175
1,992,365 shares of preferred stock		—		9,962		—		—			9,962
Dimont & Associates, Inc. ⁽⁵⁾
Subordinated term loan 11.0% PIK due 4/16/2018		—		265		4,208		(4,473	)		—
50,004 shares of common stock		—		—		6,569		(6,569	)		—
OEM Group, LLC⁽⁶⁾
Senior secured term loan LIBOR+9.5% cash due 2/15/2019		1,010		—		18,702		—			18,702
Senior secured revolving term loan LIBOR+9.5% cash due 6/30/2017		320		—		6,510		—			6,510
93.51 shares of common stock		—		—		8,478		—			8,478
Thibaut, Inc
Senior secured term loan 14.0% cash due 6/19/19		689		6,455		13		(61	)		6,407
4,747 shares of series A preferred stock		19		5,227		310		—			5,537
20,639 shares of common stock		—		964		281					1,245
THL Credit Logan JV LLC ⁽⁷⁾
80% economic interest		5,214		44,782		13,966		—			58,748
Tri Starr Management Services, Inc. ⁽⁸⁾
LIFO revolving loan ABR+3.75% due 9/30/2017		—		—		198		(34	)		164
Non LIFO revolving loan LIBOR (1% floor) + 4.75% cash due 9/30/2017		55		—		659		—			659
Tranche 1-A term loan LIBOR (1% floor) + 4.75% cash due 9/30/2017		25		—		291		—			291
Tranche 1-B term loan LIBOR (1% floor) + 4.75% cash due 9/30/2017		218		—		2,545		—			2,545
Tranche 2 term loan 10% PIK due 9/30/2017		—		—		995		—			995
Tranche 3 term loan 10% PIK due 9/30/2017		—		—		320		(320	)		—
Tranche 4 term loan 5% PIK due 9/30/2017		—		—		1,062		(1,062	)		—
716.772 shares of common stock		—		—		3,136		—			3,136

Total Control Investments	$	10,090	$	81,823	$	70,250	$	(12,519	)	$	139,554

Affiliate Investments
THL Credit Greenway Fund LLC ⁽⁹⁾
Investment in fund		226		3		—		(2	)		1
THL Credit Greenway Fund II LLC ⁽⁹⁾
Investment in fund		1,012		4		—		(1	)		3

Total Affiliate Investments	$	1,238	$	7	$	—	$	(3	)	$	4

Total Control and Affiliate Investments	$	11,328	$	81,830	$	70,250	$	(12,522	)	$	139,558

(1)	The principal amount and ownership detail as shown in the Consolidated Schedule of Investments as of December 31, 2015 and September 30, 2016. Common stock and preferred stock, in some cases, are generally non-income producing.

(2)	Represents the total amount of interest and fees credited to income for the portion of the year an investment was included in the Control and Affiliate categories.

(3)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation.

(4)	Gross reductions include decreases in the cost basis of investments resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation.

(5)

On March 14, 2016, THL Credit further restructured its investment in Dimont & Associates, Inc. and affiliated entities. As part of the restructuring, THL Credit exchanged the cost basis of its equity interest totaling $6,569 and a subordinated term loan totaling $4,474 for a non-controlling equity interest in a related entity valued at $129.

(6)

On March 17, 2016, THL Credit restructured its investment in OEM Group, Inc. As part of the restructuring, THL Credit exchanged the cost basis of its first lien loans totaling $33,242 for a new first lien senior secured term loan in OEM Group, LLC of $18,703 and a controlled equity position valued at $8,313 in an affiliated entity.

(7)

Together with Perspecta Trident LLC, or Perspecta, an affiliate of Perspecta Trust LLC, the Company invests in THL Credit Logan JV LLC, of Logan JV. Logan JV is capitalized through equity contributions from its members and investment decisions must be unanimously approved by the Logan JV investment committee consisting of one representative from each of the Company and Perspecta.

(8)

On July 22, 2016, the Company restructured its investment in Tri-Starr Management Services, Inc. As part of the restructuring, THL Credit exchanged the cost basis of its subordinated debt totaling $20,558 for a controlled equity position of an affiliate of Tri-Starr Management Services, Inc. valued at $3,136.

(9)	Income includes certain fees relating to investment management services provided by the Company, including a base management fee, a performance fee and a portion of the closing fees on each investment transaction.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report, and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to factors previously identified elsewhere in this filing, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

•

the introduction, withdrawal, success and timing of business initiatives and strategies;

•

changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

•

the relative and absolute investment performance and operations of our investment adviser;

•

the impact of increased competition;

•

the impact of future acquisitions and divestitures;

•

the unfavorable resolution of legal proceedings;

•

our business prospects and the prospects of our portfolio companies;

•

the impact, extent and timing of technological changes and the adequacy of intellectual property protection;

•

the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or THL Credit Advisors LLC, the Advisor;

•

the ability of the Advisor to identify suitable investments for us and to monitor and administer our investments;

•

our contractual arrangements and relationships with third parties;

•

any future financings by us;

•

the ability of the Advisor to attract and retain highly talented professionals;

•

fluctuations in foreign currency exchange rates; and

•

the impact of changes to tax legislation and, generally, our tax position.

•

our ability to exit a control investment in a timely manner

•

the ability to fund Logan JV’s unfunded commitments to the extent approved by each member of the Logan JV investment committee.

Overview

THL Credit, Inc., or we, us, our or the Company, was organized as a Delaware corporation on May 26, 2009 and initially funded on July 23, 2009. We commenced principal operations on April 21, 2010. Our investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated investments in debt and equity securities of lower middle market companies.

As of September 30, 2016, we, together with our credit-focused affiliates, collectively had $7,545 million of assets under management. This amount included our assets, assets of the managed funds and a separate account managed by us, and assets of the collateralized loan obligations (CLOs), separate accounts and various fund formats, including any uncalled commitments of private funds, as managed by the investment professionals of the Advisor or its consolidated subsidiary.

We are a direct lender to lower middle market companies and invest primarily in directly originated first lien secured loans, including through unitranche investments. In certain instances, we also make second lien, subordinated, or mezzanine, debt investments, which may include an associated equity component such as warrants, preferred stock or other similar securities and direct equity investments. Our first lien secured loans may be structured as traditional first lien loans or as unitranche loans. Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche loans will expose us to the risks associated with second lien and subordinated loans to the extent we invest in the “last-out” tranche or subordinated tranche (or piece) of the unitranche loan. We may also provide advisory services to managed funds.

We are an externally managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940 Act, as amended, or the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. Government securities and high-quality debt investments that mature in one year or less.

As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant U.S. Securities and Exchange Commission, or SEC, rules the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States.

We are also registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act.

Since April 2010, after we completed our initial public offering and commenced principal operations, we have been responsible for making, on behalf of ourselves, managed funds and separately managed account, over approximately $1,792 million in aggregate commitments into 89 separate portfolio investments through a combination of both initial and follow-on investments. Since April 2010, we, along with our managed funds and separately managed account, have received $1,108 million from paydowns and sales of these investments. The Company alone has received $905 million from paydowns and sales of investments.

We have elected to be treated for tax purposes as a regulated investment company, or RIC, under Subchapter M of the Code. To qualify as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. Pursuant to these elections, we generally will not have to pay corporate-level income taxes on any income we distribute to our stockholders.

Portfolio Composition and Investment Activity

Portfolio Composition

As of September 30, 2016, we had $672.8 million of portfolio investments (at fair value), which represents an $81.4 million, or 10.8% decrease from the $754.2 million (at fair value) as of December 31, 2015. The decrease in the size of our portfolios reflects recent restructurings and a decrease to the fair value of our portfolio. Our portfolio consisted of 47 investments, including THL Credit Greenway Fund LLC, or Greenway, and THL Credit Greenway Fund II LLC, or Greenway II, as of September 30, 2016, compared to 55 portfolio investments, including Greenway and Greenway II, as of December 31, 2015.

At September 30, 2016, our average portfolio company investment, excluding Greenway, Greenway II, Logan JV, portfolio investments where we only have an equity investment and restructured investments where we converted debt to a controlling equity interest, at amortized cost and fair value, was approximately $15.6 million and $15.0 million, respectively. Including investments in funds, investments where we hold equity only positions or investments where we converted debt to a controlling equity position would not be representative of our typical portfolio investment size and were therefore excluded from the calculation. Our largest portfolio company investment, excluding the Logan JV, by cost was approximately $31.6 million and by fair value was $30.5 million. At December 31, 2015, our average portfolio company investment at both amortized cost and fair value was approximately $15.5 million and $15.1 million, respectively, and our largest portfolio company investment by both amortized cost and fair value was approximately $32.8 million and $29.8 million, respectively.

At September 30, 2016, based upon fair value, 86.3% of our debt investments bore interest based on floating rates, which may be subject to interest rate floors, such as the London Interbank offer rate, or LIBOR, and 13.7% bore interest at fixed rates. At December 31, 2015, 78.1% of our debt investments bore interest based on floating rates, which may be subject to interest rate floors, such as LIBOR, and 21.9% bore interest at fixed rates.

The following table shows the weighted average yield by investment category at their current cost.


	As of
Description:	September 30, 2016			December 31, 2015
First lien secured debt ⁽¹⁾		10.6	%		11.5	%
Second lien debt		10.7	%		11.0	%
Subordinated debt		13.1	%		8.7	%
Investments in payment rights ⁽²⁾		17.7	%		17.6	%
CLO residual interests ⁽²⁾		10.6	%		14.8	%
Income-producing equity securities		12.0	%		11.4	%
Logan JV ⁽³⁾		13.6	%		12.8	%

Debt and income-producing investments including Logan JV⁽¹⁾⁽³⁾		11.4	%		11.3	%

(1)

Includes all loans on non-accrual status, excluding the impact of those loans that were restructured after the end of each respective period. If such loans were included, the weighted average yields as of September 30, 2016 would have been 10.1% and 11.0% for first lien secured debt and total debt and income-producing investments including Logan JV, respectively. There would be no changes to the weighted average yields as of December 31, 2015.

(2)	Yields from investments in payment rights and CLO residual interests represent an effective yield expected from anticipated cash flows.

(3)

As of September 30, 2016 and December 31, 2015, dividend income and realized gains declared of $2.0 million and $1.5 million for the three months ended September 30, 2016 and December 31, 2015, respectively, represented a yield to us of 13.6% and 12.8%, respectively, based on average equity invested.

As of September 30, 2016 and December 31, 2015, portfolio investments, in which we have debt investments, had a median earnings before interest, taxes, depreciation and amortization, or EBITDA, of approximately $14 million and $16 million, respectively, based on the latest available financial information provided by the portfolio companies for each of these periods. As of September 30, 2016 and December 31, 2015, our median attachment point in the capital structure of our debt investments in portfolio companies is approximately 4.5 times and 4.3 times the portfolio company’s EBITDA, respectively, based on our latest available financial information for each of these periods.

As of September 30, 2016, excluding nominal investments made in Greenway and Greenway II as well as the Logan JV, 84% of our portfolio investments are in sponsored investments and 16% of our portfolio investments are in unsponsored investments. As of September 30, 2016, we have closed portfolio investments with 50 different sponsors since inception. We expect the percent of our portfolio investments in unsponsored investments to decrease significantly over time as we work through restructurings, and ultimately exit our unsponsored investments. Going forward we expect unsponsored investments we make, if any, would only be in first lien senior secured investments. As of September 30, 2016, our portfolio of unsponsored investments included seven investments. Four are performing at or above our expectations and have an Investment Score of 1 or 2. Two other unsponsored investments, OEM Group and Tri-Starr Management, were recently restructured during Q3 2016. We restructured the third, Copperweld Bimetallics LLC, on October 5, 2016. These three investments have Investment Scores ranging from 3 to 5.

As of December 31, 2015, excluding nominal investments made in Greenway and Greenway II as well as the Logan JV, 81% of our portfolio investments are in sponsored investments and 19% of our portfolio investments are in unsponsored investments. As of December 31, 2015, we have closed portfolio investments with 49 different sponsors since inception.

The following table summarizes the amortized cost and fair value of investments as of September 30, 2016 (in millions).


Description	Amortized Cost		Percentage of Total			Fair Value ⁽¹⁾		Percentage of Total
First lien secured debt	$	381.9		56.7	%	$	371.7		55.3	%
Second lien debt		102.2		15.2	%		92.7		13.8	%
Equity investments		60.1		8.9	%		73.5		10.9	%
Investment in Logan JV		59.0		8.8	%		58.7		8.7	%
Subordinated debt		44.9		6.7	%		44.3		6.6	%
Investment in payment rights		11.5		1.7	%		13.6		2.0	%
CLO residual interests		9.2		1.4	%		7.3		1.1	%
Investments in funds		4.2		0.6	%		4.8		0.7	%
Warrants		0.2		0.0	%		6.2		0.9	%

Total investments	$	673.2		100.0	%	$	672.8		100.0	%

(1)	All investments are categorized as Level 3 in the fair value hierarchy, except for investments in funds and the Logan JV, which are excluded from the fair value hierarchy in accordance with ASU 2015-07. These assets are valued at net asset value.

The following table summarizes the amortized cost and fair value of investments as of December 31, 2015 (in millions).


Description	Amortized Cost		Percentage of Total			Fair Value⁽¹⁾		Percentage of Total
First lien secured debt	$	377.6		49.3	%	$	366.5		48.6	%
Second lien debt		179.3		23.4	%		177.1		23.5	%
Equity investments		52.7		6.9	%		69.7		9.2	%
Subordinated debt		75.2		9.8	%		63.8		8.5	%
Investment in Logan JV		49.4		6.4	%		44.8		5.9	%
CLO residual interests		17.1		2.2	%		15.0		2.0	%
Investment in payment rights		11.5		1.5	%		13.3		1.8	%
Investments in funds		4.0		0.5	%		4.0		0.5	%

Total investments	$	766.8		100.0	%	$	754.2		100.0	%

(1)

All investments are categorized as Level 3 in the fair value hierarchy, except for an equity investment in Surgery Center Holdings, Inc., which is Level 1, and investments in funds and the Logan JV, which are excluded from the fair value hierarchy in accordance with ASU 2015-07. These assets are valued at net asset value.

We expect the percent of first lien senior secured loans to continue to increase as a percent of total investments as we are repaid or liquidate our second lien debt, subordinated debt, CLO residual interests and other equity holdings over time and redeploy these proceeds. We intend to continue our efforts to reposition the portfolio towards more senior secured floating rate investments, which we believe will reduce our exposure to portfolio company risks and potential changes in interest rates. Equity interests increased as a result of recently completed restructurings and we expect the percentage of equity interests to increase further temporarily as we complete additional restructurings in the fourth quarter of 2016. We expect equity interests to decrease as we begin to exit certain of these positions in 2017.

The following is a summary of the industry classification in which the Company invests as of September 30, 2016 (in millions).


Industry	Amortized Cost		Fair Value		% of Net Assets
Consumer products	$	133.8	$	132.3		33.67	%
Financial services		116.3		119.0		30.29	%
Industrials		97.7		95.2		24.25	%
Media, entertainment and leisure		49.4		56.2		14.31	%
IT services		55.6		49.2		12.53	%
Healthcare		44.2		44.1		11.23	%
Retail & grocery		36.2		42.8		10.89	%
Energy / utilities		41.7		37.5		9.55	%
Business Services		29.0		26.6		6.77	%
Food & beverage		20.7		21.4		5.45	%
Restaurants		21.1		20.8		5.30	%
Transportation		18.3		20.4		5.20	%
Structured products		9.2		7.3		1.87	%

Total Investments	$	673.2	$	672.8		171.31	%

The following is a summary of the industry classification in which the Company invests as of December 31, 2015 (in millions)⁽¹⁾.


Industry	Amortized Cost		Fair Value		% of Net Assets
Consumer products	$	141.3	$	139.8		33.36	%
Financial services		126.8		113.7		27.15	%
IT services		100.7		99.1		23.66	%
Healthcare		61.6		66.9		15.97	%
Industrials		97.6		90.8		21.66	%
Retail & grocery		34.6		44.5		10.62	%
Energy / utilities		46.6		41.7		9.96	%
Media, entertainment and leisure		31.4		36.7		8.76	%
Business Services		41.8		34.7		8.29	%
Food & beverage		22.4		23.4		5.59	%
Transportation		19.5		21.6		5.15	%
Restaurants		20.9		20.9		4.98	%
Structured products		17.1		15.0		3.58	%
Aerospace & defense		4.5		5.4		1.30	%

Total Investments	$	766.8	$	754.2		180.03	%

⁽¹⁾	Certain portfolio companies were reclassified to conform to current year presentation.

Investment Activity

The following is a summary of our investment activity, presented on a cost basis, for the three and nine months ended September 30, 2016 and 2015 (in millions).


	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
New portfolio investments	$	20.5		$	9.9		$	60.4		$	22.1
Existing portfolio investments:
Follow-on investments		5.4			19.2			29.1			72.3
Delayed draw and revolver investments		0.2			8.3			6.7			12.4

Total existing portfolio investments		5.6			27.5			35.8			84.7

Total portfolio investment activity	$	26.1		$	37.4		$	96.2		$	106.8

Number of new portfolio investments		2			1			4			2
Number of existing portfolio investments		4			10			12			15
First lien secured debt	$	25.5		$	10.1		$	81.7		$	23.7
Second lien debt		—			15.3			—			40.5
Investment in Logan JV		—			8.8			9.6			27.6
Subordinated debt		—			1.7			2.4			6.6
Equity investments		0.5			1.1			2.3			7.8
Investments in funds		0.1			0.4			0.2			0.6

Total portfolio investments	$	26.1		$	37.4		$	96.2		$	106.8

Weighted average yield of new debt investments		11.6	%		10.0	%		10.9	%		11.0	%
Weighted average yield, including all new income-producing investments		11.6	%		10.2	%		10.9	%		11.3	%

New investments in first lien senior secured floating rate debt reflect our continuing efforts to reposition the portfolio towards more floating rate secured investments, which we believe will reduce exposure to portfolio company risks and potential changes in interest rates. See “Portfolio Composition” above for more information about changes to our portfolio.

For the three and nine months ended September 30, 2016, we received proceeds from prepayments and sales of our investments, including any prepayment premiums, totaling $47.3 million and $157.8 million, respectively. For the three and nine months ended September 30, 2015, we received proceeds from prepayments and sales of our investments, including any prepayment premiums, totaling $49.0 million and $146.8 million, respectively.

The following are proceeds received from notable prepayments, sales and other activity related to our investments (in millions):

For the nine months ended September 30, 2016

•

Repayment of a first lien senior secured debt investment in 20-20 Technologies Inc. at par, which resulted in proceeds of $29.0 million;

•

Repayment of a second lien term loan in Connecture, Inc., which resulted in proceeds of $22.3 million, including a prepayment premium and other fees of $0.4 million;

•

Repayment of a first lien senior secured term loan and revolving loan in Hart Intercivic, Inc at par, which resulted in proceeds of $14.7 million. A new investment of $25.6 million was made in the first lien senior secured term loan in connection with a refinancing of the business;

•

Repayment of a second lien debt investment in Granicus, Inc., which resulted in proceeds of $17.3 million, including a prepayment premium of $0.3 million;

•

Repayment of a second lien term loan in Oasis Legal Finance Holding Company LLC, which resulted in proceeds of $12.7 million, including a prepayment premium of $0.1 million;

•

Repayment of a second lien debt investment in American Covers, Inc., which resulted in proceeds of $10.2 million, including a prepayment premium of $0.2 million;

•

Repayment of a second lien term loan Vision Solutions, Inc. at par, which resulted in proceeds of $9.6 million;

•

Repayment of a second lien term loan in Allen Edmonds Corporation at par, which resulted in proceeds of $7.3 million;

•

Repayment of a first lien senior secured term loan at par and sale of our equity investment in Airborne Tactical Advantage Company, LLC, which resulted in proceeds of $5.2 million. These proceeds included a realized gain of $0.7 million and a $0.2 million escrow related to the sale of the business;

•

Sale of a CLO residual interest in Dryden CLO, Ltd., which resulted in proceeds of $4.9 million, of which $1.1 million was recognized as a realized loss;

•

Sale of a common equity position in Surgery Center Holdings, Inc., which resulted in proceeds of $3.7 million, all of which was recognized as a realized gain; and

•

Sale of an equity position in AIM Media Texas Operating, LLC, which resulted in proceeds of $0.7 million.

For the nine months ended September 30, 2015

•

Repayment of a first lien secured debt investment in Harrison Gypsum, LLC, which resulted in proceeds of $31.6 million, which included a prepayment premium of $0.07 million;

•

Repayment of a subordinated debt investment in The Studer Group, L.L.C. at par, resulting in proceeds of $16.9 million;

•

Repayment of a subordinated debt investment in Country Pure Foods, LLC at par, resulting in proceeds of $16.2 million;

•

Partial sale of first lien secured debt and common equity investments in Igloo Products Corp., which resulted in proceeds of $14.1 million and included a nominal realized gain;

•

Repayment of second lien and subordinated debt investments in Sheplers, Inc. at par, resulting in proceeds of $13.5 million;

•

Partial sale of a first lien secured debt investment in Charming Charlie, LLC, which resulted in proceeds of $9.9 million and included a nominal realized gain;

•

Repayment of a first lien secured debt investment in Ingenio Acquisition, LLC, resulting in proceeds of $9.3 million, which included a prepayment premium of $0.2 million;

•

Sale of a CLO residual interest in Adirondack Park CLO Ltd., which resulted in proceeds of $7.8 million, including a nominal realized gain;

•

Sale of a CLO residual interest in Sheridan Square CLO, Ltd., which resulted in proceeds of $5.0 million, including a nominal realized loss;

•

Partial sale of a second lien debt investment in BBB US Industries Holdings, Inc., which resulted in proceeds of $2.8 million and included a nominal realized gain; and

•

Partial sale of a second lien debt investment in Vision Solutions, Inc., which resulted in proceeds of $2.0 million.

Our level of investment activity can vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to lower middle market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make. The frequency and volume of any prepayments may fluctuate significantly from period to period.

Aggregate Cash Flow Realized Gross Internal Rate of Return

Since April 2010, after we completed our initial public offering and commenced principal operations and through September 30, 2016, our fully exited investments have resulted in an aggregate cash flow realized gross internal rate of return to us of 15.3% (based on cash invested of $762.6 million and total proceeds from these exited investments of $952.8 million). 94.5% of these exited investments resulted in an aggregate cash flow realized gross internal rate of return to us of 10% or greater.

Internal rate of return, or IRR, is a measure of our discounted cash flows (inflows and outflows). Specifically, IRR is the discount rate at which the net present value of all cash flows is equal to zero. That is, IRR is the discount rate at which the present value of total capital invested in our investments is equal to the present value of all realized returns from the investments. Our IRR calculations are unaudited.

Cash invested, with respect to an investment, represents our aggregate cash investment in the debt or equity securities we acquire.

Realized returns, with respect to an investment, represents the total cash received with respect to each investment, including all amortization payments, interest, dividends, prepayment fees, upfront fees, original issue discount, amendment fees and other fees and proceeds.

Gross IRR, with respect to an investment, is calculated based on the dates that we invested capital and dates we received distributions, regardless of when we made distributions to our stockholders. Initial investments are assumed to occur at time zero, and all cash flows are deemed to occur on the date in which they did occur.

Gross IRR reflects historical results relating to our past performance and is not necessarily indicative of our future results. In addition, gross IRR does not reflect the effect of management fees, expenses, incentive fees or taxes borne, or to be borne, by us or our stockholders, and would be lower if it did.

Aggregate cash flow realized gross IRR on our exited investments reflects only invested and realized cash amounts as described above, and does not reflect any unrealized gains or losses in our portfolio or non-cash restructuring transactions. Cash flows exclude sales of participations if they were anticipated at the time of the initial investment.

Investment Risk

The value of our investments will generally fluctuate with, among other things, changes in prevailing interest rates, federal tax rates, counterparty risk, general economic conditions, the condition of certain financial markets, developments or trends in any particular industry and the financial condition of the issuer. During periods of limited liquidity and higher price volatility, our ability to dispose of investments at a price and time that we deem advantageous may be impaired.

THL Credit Logan JV LLC

On December 3, 2014, we entered into an agreement with Perspecta Trident LLC, an affiliate of Perspecta Trust LLC, or Perspecta, to create THL Credit Logan JV LLC, or Logan JV, a joint venture, which invests primarily in senior secured first lien term loans. All Logan JV investment decisions must be unanimously approved by the Logan JV investment committee consisting of one representative from each of us and Perspecta.

We have determined that Logan JV is an investment company under ASC 946, however, in accordance with such guidance, we will generally not consolidate our investment in a company other than a wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we do not consolidate our non-controlling interest in Logan JV.

Logan JV is capitalized with equity contributions which are generally called from its members, on a pro-rata basis based on their equity commitments, as transactions are completed. Any decision by the Logan JV to call down on capital commitments requires the explicit authorization of us, coupled with that of Perspecta, and we may withhold such authorization for any reason in our sole discretion. As of September 30, 2016 and December 31, 2015, Logan JV had the following commitments, contributions and unfunded commitments from its Members.


	As of September 30, 2016
Member	Total Commitments		Contributed Capital		Unfunded Commitments
THL Credit, Inc.	$	200.0	$	59.0	$	141.0
Perspecta Trident LLC		50.0		14.8		35.3

Total Investments	$	250.0	$	73.8	$	176.3


	As of December 31, 2015
Member	Total Commitments		Contributed Capital		Unfunded Commitments
THL Credit, Inc.	$	200.0	$	49.4	$	150.6
Perspecta Trident LLC		50.0		12.4		37.6

Total Investments	$	250.0	$	61.8	$	188.2

On December 17, 2014, Logan JV entered into a senior credit facility, or the Logan JV Credit Facility, with Deutsche Bank AG which allows Logan JV to borrow up to $50.0 million subject to leverage and borrowing base restrictions. Throughout the course of 2015 and 2016, in accordance with the terms of the Logan JV Credit Facility, Deutsche Bank AG and other banks increased the commitment amount to $135.0 million. The amended revolving loan period ends on February 18, 2018 and the final maturity date is February 18, 2021. As of September 30, 2016 and December 31, 2015, Logan JV had $129.3 million and $108.1 million of outstanding debt under the credit facility, respectively. The Logan JV Credit Facility bears interest at three month LIBOR (with no LIBOR floor) plus 2.50%. At September 30, 2016, the effective interest rate on the Logan JV Credit Facility was 3.22% per annum.

As of September 30, 2016 and December 31, 2015, Logan JV had total investments at fair value of $203.4 million and $161.9 million, respectively. As of September 30, 2016 and December 31, 2015, Logan JV’s portfolio was comprised of senior secured first lien and second lien loans to 95 and 85 different borrowers, respectively. As of September 30, 2016 and December 31, 2015, none of these loans were on non-accrual status. Additionally, as of September 30, 2016 and December 31, 2015, Logan JV had unfunded commitments to fund revolver and delayed draw loans to its portfolio companies totaling $0.7 million and $0.3 million, respectively. The portfolio companies in Logan JV are in industries similar to those in which we may invest directly.

Below is a summary of Logan JV’s portfolio, followed by a listing of the individual loans in Logan JV’s portfolio as of September 30, 2016 and December 31, 2015 (dollar amounts in thousands):


	As of September 30,			As of December 31,
	2016			2015
First lien secured debt	$	188,700		$	148,463
Second lien debt		20,588			21,976

Total debt investments	$	209,288		$	170,439

Weighted average yield on first lien secured loans ⁽²⁾		6.5	%		6.3	%
Weighted average yield on second lien loans⁽²⁾		9.3	%		9.0	%
Weighted average yield on all loans⁽²⁾		6.8	%		6.7	%
Number of borrowers in Logan JV		95			85
Largest loan to a single borrower ⁽¹⁾	$	5,923		$	4,975
Total of five largest loans to borrowers ⁽¹⁾	$	25,548		$	24,748

(1)	At current principal amount.

(2)	Weighted average yield at their current cost.

For the three and nine months ended September 30, 2016, our share of income from distributions declared related to our Logan JV LLC equity interest was $2.0 million and $5.4 million, respectively, which amounts are included in dividend income and realized gains from controlled investments in the Consolidated Statement of Operations. For the three and nine months ended September 30, 2015, our share of income from distributions declared related to our Logan JV LLC equity interest was $1.2 million and $2.3 million, which amounts are included in dividend income from controlled investments in the Consolidated Statement of Operations. As of September 30, 2016 and December 31, 2015, $3.0 million and $1.9 million, respectively, of income related to the Logan JV was included in Interest, dividends and fees receivable on the Consolidated Statements of Assets and Liabilities. As of September 30, 2016, dividend income and realized gains of $2.0 million was recognized for the quarter ended September 30, 2016 and represented a dividend yield to the Company of 13.6% based upon average equity invested. As of December 31, 2015, dividend income earned of $1.5 million for the quarter ended December 31, 2015, represented a dividend yield to the Company of 12.8% based upon average equity invested.

Logan JV Loan Portfolio as of September 30, 2016

(dollar amounts in thousands)

Type of Investment/

Portfolio company

Industry

Interest Rate ⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value ⁽²⁾

Senior Secured First Lien Term Loans

Ability Networks Inc.

High Tech Industries

6% (LIBOR

+5%)

03/17/2015

05/14/2021

1,474

1,485

1,466

Acrisure, LLC⁽³⁾

Banking, Finance, Insurance & Real Estate

6.5% (LIBOR

+5.5%)

07/20/2016

05/19/2022

503

)

Acrisure, LLC

Banking, Finance, Insurance & Real Estate

6.5% (LIBOR

+5.5%)

07/20/2016

05/18/2022

994

986

1,000

Advanced Integration Technology LP

Aerospace & Defense

6.5% (LIBOR

+5.5%)

07/15/2016

07/22/2021

2,000

1,981

2,007

AgroFresh Inc.

Services: Business

5.75% (LIBOR

+4.75%)

12/01/2015

07/31/2021

1,980

1,967

1,975

Alpha Media LLC

Media: Broadcasting & Subscription

7% (LIBOR

+6%)

02/24/2016

02/25/2022

1,950

1,862

1,872

AP Gaming I LLC

Hotel, Gaming & Leisure

9.25% (LIBOR

+8.25%)

05/27/2015

12/21/2020

4,954

4,852

4,759

Arbor Pharmaceuticals, LLC

Healthcare & Pharmaceuticals

6% (LIBOR

+5%)

07/12/2016

07/05/2023

2,500

2,389

2,513

Arctic Glacier U.S.A., Inc

Beverage, Food & Tobacco

6% (LIBOR

+5%)

02/12/2015

05/10/2019

2,020

1,986

2,005

Aristotle Corporation

Healthcare & Pharmaceuticals

5.5% (LIBOR

+4.5%)

07/13/2015

06/30/2021

4,594

4,576

4,559

Avaya Inc

Telecommunications

6.25% (LIBOR

+5.25%)

04/30/2015

05/29/2020

982

975

729

Avaya Inc

Telecommunications

6.5% (LIBOR

+5.5%)

12/18/2014

03/31/2018

986

992

754

Bioplan USA

Services: Business

5.75% (LIBOR

+4.75%)

05/13/2015

09/23/2021

985

869

926

BioScrip, Inc.

Healthcare & Pharmaceuticals

6.5% (LIBOR

+5.25%)

12/22/2014

07/31/2020

898

854

882

BioScrip, Inc.

Healthcare & Pharmaceuticals

6.5% (LIBOR

+5.25%)

12/22/2014

07/31/2020

1,496

1,423

1,470

Birch Communications, Inc.

Telecommunications

7.75% (LIBOR

+6.75%)

12/05/2014

07/17/2020

1,372

1,358

1,084

Blount International, Inc.

Capital Equipment

7.25% (LIBOR

+6.25%)

04/05/2016

04/12/2023

1,700

1,652

1,726

BMC Software Finance, Inc

High Tech Industries

5% (LIBOR

+4%)

06/02/2016

09/10/2020

1,989

1,808

1,923

CAbi

Retail

5.75% (LIBOR

+4.75%)

06/19/2015

06/12/2019

1,166

1,158

1,166

Caesars Entertainment Resort Properties, LLC

Hotel, Gaming & Leisure

7% (LIBOR

+6%)

01/15/2015

10/11/2020

5,923

5,678

5,921

Cengage Learning Acquisitions, Inc.

Media: Advertising, Printing & Publishing

5.25% (LIBOR

+4.25%)

12/15/2014

06/07/2023

2,654

2,630

2,657

Clear Balance Holdings, LLC

Banking, Finance, Insurance & Real Estate

6.75% (LIBOR

+5.75%)

07/07/2015

06/30/2020

4,753

4,738

4,741

Commercial Barge Line Co

Transportation: Cargo

9.75% (LIBOR

+8.75%)

11/06/2015

11/12/2020

1,463

1,402

1,428

Compuware Corp

Services: Business

6.25% (LIBOR

+5.25%)

12/11/2014

12/15/2021

2,951

2,878

2,946

Cortes NP Acquisition Corp

Capital Equipment

6% (LIBOR

+5%)

09/30/2016

09/29/2023

2,000

1,940

1,960

CPI Acquisition, Inc.

Services: Consumer

5.5% (LIBOR

+4.5%)

08/14/2015

08/17/2022

3,875

3,846

3,796

Creative Artists

Media: Diversified & Production

5% (LIBOR

+4%)

03/16/2015

12/17/2021

2,456

2,485

2,477

CT Technologies Intermediate Holdings, Inc

Healthcare & Pharmaceuticals

5.25% (LIBOR

+4.25%)

02/11/2015

12/01/2021

1,965

1,973

1,945

Cvent Inc

Hotel, Gaming & Leisure

6% (LIBOR

+5%)

06/16/2016

06/16/2023

2,000

1,980

2,018

CWGS Group, LLC

Automotive

5.75% (LIBOR

+4.75%)

12/22/2014

02/20/2020

2,229

2,235

Cypress Semiconductor Corporation

High Tech Industries

6.5% (LIBOR

+5.5%)

06/03/2016

07/05/2021

2,500

2,464

2,536

Eastman Kodak Company

High Tech Industries

7.25% (LIBOR

+6.25%)

09/09/2015

09/03/2019

1,953

1,909

1,949

EmployBridge Holding Co.

Services: Business

7.5% (LIBOR

+6.5%)

02/04/2015

05/15/2020

2,950

2,941

2,542

Type of Investment/

Portfolio company

Industry

Interest Rate ⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value ⁽²⁾

EnergySolutions, LLC

Environmental Industries

6.75% (LIBOR

+5.75%)

03/16/2015

05/29/2020

4,543

4,450

4,537

Evergreen Skills Lux S.á r.l.

High Tech Industries

5.75% (LIBOR

+4.75%)

01/15/2015

04/28/2021

1,475

1,452

1,310

FullBeauty Brands LP

Retail

5.75% (LIBOR

+4.75%)

03/08/2016

10/14/2022

3,980

3,724

3,788

Getty Images, Inc.

Media: Advertising, Printing & Publishing

4.75% (LIBOR

+3.5%)

02/18/2015

10/18/2019

982

932

824

Global Healthcare Exchange LLC

Services: Business

5.25% (LIBOR

+4.25%)

08/12/2015

08/15/2022

990

986

996

Gold Standard Baking Inc

Wholesale

5.25% (LIBOR

+4.25%)

05/19/2015

04/23/2021

2,963

2,951

2,948

Green Plains Renewable Energy Inc

Energy: Oil & Gas

6.5% (LIBOR

+5.5%)

06/09/2015

06/30/2020

3,903

3,741

3,820

GTCR Valor Companies, Inc.

Services: Business

7% (LIBOR

+6%)

05/17/2016

06/16/2023

3,990

3,840

3,817

Gulf Finance, LLC

Energy: Oil & Gas

6.25% (LIBOR

+5.25%)

08/17/2016

08/25/2023

2,000

1,941

1,951

IMG LLC/William Morris Endeavor Entertainment, LLC

Media: Diversified & Production

5.25% (LIBOR

+4.25%)

12/31/2014

05/06/2021

1,470

1,445

1,479

Insurance Technologies ⁽⁴⁾

High Tech Industries

8% (LIBOR

+7%)

03/26/2015

12/01/2019

1,586

1,575

1,594

Insurance Technologies

High Tech Industries

0% (LIBOR

+0%)

03/26/2015

12/01/2019

209

)

J Jill

Retail

6% (LIBOR

+5%)

05/08/2015

05/09/2022

1,040

1,035

1,027

Jackson Hewitt Tax Service Inc

Services: Consumer

8% (LIBOR

+7%)

07/24/2015

07/30/2020

980

965

958

Kestra Financial, Inc.

Banking, Finance, Insurance & Real Estate

6.25% (LIBOR

+5.25%)

06/10/2016

06/24/2022

3,990

3,933

3,950

Kraton Polymers LLC

Chemicals, Plastics & Rubber

6% (LIBOR

+5%)

02/18/2016

01/06/2022

2,000

1,820

2,019

Lannett Company Inc

Healthcare & Pharmaceuticals

5.75% (LIBOR

+4.75%)

11/20/2015

11/25/2020

1,444

1,353

1,418

Lannett Company Inc

Healthcare & Pharmaceuticals

6.375% (LIBOR

+5.375%)

11/20/2015

11/25/2022

1,444

1,316

1,433

LegalZoom

Services: Business

8% (LIBOR

+7%)

06/15/2015

05/13/2020

4,930

4,979

Lindblad Expeditions Inc

Hotel, Gaming & Leisure

5.5% (LIBOR

+4.5%)

06/23/2015

05/08/2021

2,624

2,637

2,630

Lindblad Maritime

Hotel, Gaming & Leisure

5.5% (LIBOR

+4.5%)

06/23/2015

05/08/2021

339

340

339

Margaritaville Holdings LLC

Beverage, Food & Tobacco

7% (LIBOR

+6%)

03/12/2015

03/12/2021

4,739

4,704

4,502

Match Group Inc

Media: Broadcasting & Subscription

5.5% (LIBOR

+4.5%)

11/06/2015

11/16/2022

731

729

737

MediArena Acquisition B.V.

Media: Broadcasting & Subscription

6.75% (LIBOR

+5.75%)

12/18/2014

08/13/2021

1,470

1,453

1,314

Mediware Information Systems Inc

High Tech Industries

6% (LIBOR

+5%)

09/26/2016

09/22/2023

2,000

1,980

2,016

Merrill Communications LLC

Media: Advertising, Printing & Publishing

6.25% (LIBOR

+5.25%)

05/29/2015

06/01/2022

1,979

1,968

1,860

Meter Readings Holding, LLC

Utilities: Electric

6.75% (LIBOR

+5.75%)

08/17/2016

08/29/2023

2,000

1,970

2,000

Mood Media Corporation

Media: Broadcasting & Subscription

7% (LIBOR

+6%)

12/05/2014

05/01/2019

2,965

2,853

2,822

Navistar Inc

Automotive

6.5% (LIBOR

+5.5%)

08/06/2015

08/07/2020

1,985

1,974

1,993

NextCare, Inc.

Healthcare & Pharmaceuticals

8.5% (LIBOR

+7.5%)

(7.5% Cash

and 1.0% PIK)⁽⁵⁾

08/21/2015

07/31/2018

2,963

2,953

2,963

Novitex Acquisition, LLC

Consumer goods: Non-Durable

8% (LIBOR

+6.75%)

12/05/2014

07/07/2020

961

950

904

Parq Holdings LP

Hotel, Gaming & Leisure

8.5% (LIBOR

+7.5%)

12/05/2014

12/17/2020

1,000

988

960

Petrochoice Holdings Inc

Chemicals, Plastics & Rubber

6% (LIBOR

+5%)

09/02/2015

08/19/2022

990

969

995

Pre-Paid Legal Services, Inc

Services: Business

6.5% (LIBOR

+5.25%)

05/21/2015

07/01/2019

914

911

916

Quality Care Properties, Inc.

Banking, Finance, Insurance & Real Estate

6.25% (LIBOR

+5.25%)

09/30/2016

09/30/2022

2,125

2,082

2,112

Quincy Newspapers Inc

Media: Broadcasting & Subscription

5.5% (LIBOR

+4.5%)

11/23/2015

11/02/2022

2,935

2,928

2,953

Redbox Automated Retail LLC

Services: Consumer

8.5% (LIBOR

+7.5%)

09/26/2016

09/21/2021

2,000

1,940

1,960

Type of Investment/

Portfolio company

Industry

Interest Rate ⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value ⁽²⁾

RentPath, Inc.

Media: Diversified & Production

6.25% (LIBOR +5.25%)

12/11/2014

12/17/2021

2,456

2,435

2,327

Riverbed Technology, Inc.

High Tech Industries

5% (LIBOR +4%)

02/25/2015

04/25/2022

975

971

986

SCS Holdings Inc

Services: Business

6% (LIBOR +5%)

11/20/2015

10/30/2022

1,978

1,964

1,996

Seahawk Holding Cayman Ltd

High Tech Industries

7% (LIBOR +6%)

09/27/2016

09/23/2022

2,750

2,724

2,732

Sirva Worldwide, Inc.

Transportation: Cargo

7.5% (LIBOR +6.25%)

12/18/2014

03/27/2019

3,876

3,793

3,854

Smart Start, Inc.

Services: Consumer

5.75% (LIBOR

08/28/2015

02/20/2022

2,481

2,460

2,475

+4.75%)

SolarWinds Inc

High Tech Industries

5.5% (LIBOR +4.5%)

02/01/2016

02/05/2023

4,988

4,859

5,042

SourceHOV LLC

Services: Business

7.75% (LIBOR +6.75%)

03/17/2015

10/31/2019

3,836

3,403

3,234

Stonewall Gas Gathering LLC

Energy: Oil & Gas

8.75% (LIBOR +7.75%)

01/26/2015

01/28/2022

572

550

584

TOMS Shoes LLC

Retail

6.5% (LIBOR +5.5%)

12/18/2014

10/31/2020

1,970

1,865

1,458

Travelport Finance Luxembourg Sarl

Services: Business

5% (LIBOR +4%)

09/04/2015

09/02/2021

2,906

2,920

2,922

US Renal Care Inc

Healthcare & Pharmaceuticals

5.25% (LIBOR +4.25%)

11/17/2015

12/30/2022

1,985

1,967

1,911

US Shipping Corp

Utilities: Oil & Gas

5.25% (LIBOR +4.25%)

03/09/2016

06/26/2021

232

220

230

Varsity Brands

Consumer goods: Durable

5% (LIBOR +4%)

12/10/2014

12/11/2021

983

975

989

Verdesian Life Sciences LLC

Chemicals, Plastics & Rubber

6% (LIBOR +5%)

12/09/2014

07/01/2020

899

898

854

Zep Inc

Chemicals, Plastics & Rubber

5.5% (LIBOR +4.5%)

09/04/2015

06/27/2022

2,963

2,969

2,977

Total Senior Secured First Lien Term Loans

183,949

183,366

Second Lien Term Loans

ABG Intermediate Holdings 2 LLC

Consumer goods: Durable

9.5% (LIBOR +8.5%)

06/19/2015

05/27/2022

2,855

2,786

2,805

AssuredPartners Inc

Banking, Finance, Insurance & Real

10% (LIBOR +9%)

10/16/2015

10/20/2023

1,000

965

996

Estate

Cirque Du Soleil

Hotel, Gaming & Leisure

9.25% (LIBOR +8.25%)

06/25/2015

07/08/2023

1,000

987

978

Confie Seguros Holding II Co.

Banking, Finance, Insurance & Real Estate

10.25% (LIBOR +9%)

06/29/2015

05/09/2019

500

497

505

Duke Finance LLC

Chemicals, Plastics & Rubber

10.75% (LIBOR +9.75%)

05/17/2016

10/28/2022

2,000

1,714

1,795

EagleView Technology Corporation

Services: Business

9.25% (LIBOR +8.25%)

07/29/2015

07/14/2023

2,885

2,891

2,875

Eastman Kodak Company

High Tech Industries

10.75% (LIBOR +9.5%)

03/24/2015

09/03/2020

1,000

997

990

Filtration Group Corporation

Services: Business

8.25% (LIBOR +7.25%)

03/16/2015

11/22/2021

524

526

525

GENEX Services, Inc.

Services: Business

8.75% (LIBOR

06/26/2015

05/30/2022

1,000

990

955

+7.75%)

Gruden Acquisition Inc.

Transportation: Cargo

9.5% (LIBOR +8.5%)

07/31/2015

08/18/2023

500

478

387

Hyland Software, Inc.

High Tech Industries

8.25% (LIBOR +7.25%)

06/12/2015

07/03/2023

2,825

2,725

2,850

Linxens France SA

Telecommunications

9.5% (LIBOR +8.5%)

07/31/2015

10/16/2023

1,000

991

996

MRI Software LLC

Services: Business

9% (LIBOR +8%)

06/19/2015

06/23/2022

1,000

988

970

RentPath, Inc.

Media: Diversified & Production

10% (LIBOR +9%)

12/11/2014

12/17/2022

1,000

930

885

Royal Adhesives and Sealants LLC

Chemicals, Plastics & Rubber

8.5% (LIBOR +7.5%)

06/12/2015

06/19/2023

1,000

994

988

Wash Multifamily Laundry Systems, LLC.

Services: Consumer

8% (LIBOR +7%)

05/04/2015

05/12/2023

Wash Multifamily Laundry Systems, LLC.

Services: Consumer

8% (LIBOR +7%)

05/04/2015

05/15/2023

425

423

422

Total Second Lien Term Loans

19,956

19,996

Total Investments

203,905

203,362

(1)	Variable interest rates indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option. LIBOR rates may be subject to interest rate floors.

(2)	Represents fair value in accordance with ASC Topic 820. The determination of such fair value is not included in our board of director’s valuation process described elsewhere herein.

(3)	Represents a delayed draw commitment of $503, which was unfunded as of September 30, 2016.

(4)	Represents a delayed draw commitment of $209, which was unfunded as of September 30, 2016.

(5)	At the option of the issuer, interest can be paid in cash or cash and PIK. The percentage of PIK shown is the maximum PIK that can be elected by the company.

Logan JV Loan Portfolio as of December 31, 2015

(dollar amounts in thousands)

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Senior Secured First Lien Term Loans

Ability Networks Inc.

Healthcare &
pharmaceuticals

6% (LIBOR
+ 5%)

03/17/2015

05/14/2021

1,485

1,498

1,470

AgroFresh Inc.

Services

5.75% (LIBOR
+ 4.75%)

12/01/2015

07/31/2021

1,995

1,980

1,968

Albertson’s Holdings LLC

Retail

5.5% (LIBOR
+ 4.5%)

12/05/2014

08/25/2021

1,985

1,988

1,972

Ancestry.com Inc.

Services

5% (LIBOR
+ 4%)

09/04/2015

08/29/2022

2,993

2,974

2,975

AP Gaming I LLC

Hotel, gaming &
leisure

9.25% (LIBOR
+ 8.25%)

05/27/2015

12/21/2020

2,982

2,964

2,885

Arctic Glacier U.S.A., Inc

Beverage, food &
tobacco

6% (LIBOR
+ 5%)

02/12/2015

05/10/2019

2,035

1,991

1,964

Aristotle Corporation

Healthcare &
pharmaceuticals

5.5% (LIBOR
+ 4.5%) 7.0%
(Prime + 3.5%)

07/13/2015

06/30/2021

4,975

4,952

4,950

Avago Technologies Cayman Finance Ltd

High tech industries

4.25% (LIBOR
+ 3.5%)

11/13/2015

02/01/2023

2,000

1,980

1,983

Avaya Inc

Telecommunications

6.25% (LIBOR
+ 5.25%)

04/30/2015

05/29/2020

991

982

695

Avaya Inc

Telecommunications

6.5% (LIBOR
+ 5.5%)

12/18/2014

03/31/2018

986

995

750

Bioplan USA

Services

5.75% (LIBOR
+ 4.75%)

05/13/2015

09/23/2021

993

857

859

BioScrip, Inc.

Healthcare &
pharmaceuticals

6.5% (LIBOR
+ 5.25%)

12/22/2014

07/31/2020

938

939

857

BioScrip, Inc.

Healthcare &
pharmaceuticals

6.5% (LIBOR
+ 5.25%)

12/22/2014

07/31/2020

563

564

514

Birch Communications, Inc.

Telecommunications

7.75% (LIBOR
+ 6.75%)

12/05/2014

07/17/2020

1,433

1,416

1,380

CAbi

Retail

5.75% (LIBOR
+ 4.75%)

06/19/2015

06/12/2019

1,219

1,208

1,213

Caesars Entertainment Resort Properties, LLC

Hotel, gaming &
leisure

7% (LIBOR
+ 6%)

01/15/2015

10/11/2020

4,968

4,742

4,537

Cengage Learning Acquisitions, Inc.

Media

7% (LIBOR
+ 6%)

12/15/2014

03/31/2020

4,417

4,378

4,318

Clear Balance Holdings, LLC

Banking, finance,
insurance & real
estate

6.75% (LIBOR
+ 5.75%)

07/07/2015

06/30/2020

4,875

4,854

4,851

Commercial Barge Line Co

Transportation

9.75% (LIBOR
+ 8.75%)

11/06/2015

11/12/2020

1,500

1,427

1,403

Communications Sales & Leasing, Inc.

Telecommunications

5% (LIBOR
+ 4%)

05/28/2015

10/24/2022

2,985

2,982

2,768

Compuware Corp

Services

6.25% (LIBOR
+ 5.25%)

12/11/2014

12/15/2021

2,974

2,889

2,782

CPI Acquisition, Inc.

Services

5.5% (LIBOR
+ 4.5%)

08/14/2015

08/17/2022

3,375

3,354

3,343

Creative Artists

Media

5.5% (LIBOR
+ 4.5%)

03/16/2015

12/17/2021

2,475

2,508

2,471

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Crowne Group LLC

Automotive

6% (LIBOR
+ 5%)

01/14/2015

09/30/2020

1,485

1,469

1,455

CT Technologies Intermediate Holdings

Healthcare &
pharmaceuticals

5.25% (LIBOR
+ 4.25%)

02/11/2015

12/01/2021

1,980

1,989

1,918

CWGS Group, LLC

Automotive

5.75% (LIBOR
+ 4.75%)

12/22/2014

02/20/2020

2,375

2,376

2,348

Eastman Kodak Company

High tech industries

7.25% (LIBOR
+ 6.25%)

09/09/2015

09/03/2019

1,990

1,934

1,724

EnergySolutions, LLC

Environmental
industries

6.75% (LIBOR
+ 5.75%)

03/16/2015

05/29/2020

2,000

2,022

1,550

Evergreen Skills Lux S.á r.l.

High tech industries

5.75% (LIBOR
+ 4.75%)

01/15/2015

04/28/2021

1,486

1,460

1,167

Getty Images, Inc.

Media

4.75% (LIBOR
+ 3.5%)

02/18/2015

10/18/2019

990

927

629

Global Healthcare Exchange LLC

Services

5.5% (LIBOR
+ 4.5%)

08/12/2015

08/15/2022

998

993

992

Gold Standard Baking Inc

Wholesale

5.25% (LIBOR
+ 4.25%) 6.75%
(Prime + 3.25%)

05/19/2015

04/23/2021

2,985

2,972

2,955

Green Plains Renewable Energy Inc

Energy

6.5% (LIBOR
+ 5.5%)

06/09/2015

06/30/2020

1,956

1,957

1,929

GTCR Valor Companies, Inc.

Services

6% (LIBOR
+ 5%)

12/05/2014

05/30/2021

1,977

1,960

1,968

IMG LLC

Media

5.25% (LIBOR
+ 4.25%)

12/31/2014

05/06/2021

1,481

1,452

1,459

Insurance Technologies

High tech industries

8% (LIBOR
+ 7%)

03/26/2015

12/01/2019

1,896

1,880

1,896

Insurance Technologies⁽³⁾

High tech industries

0% (LIBOR
+ 0%)

03/26/2015

12/01/2019

209

)

—

J Jill

Retail

6% (LIBOR
+ 5%)

05/08/2015

05/09/2022

1,047

1,043

1,026

Jackson Hewitt Tax Service Inc

Services

8% (LIBOR
+ 7%)

07/24/2015

07/30/2020

1,000

982

963

Koosharem, LLC

Services

7.5% (LIBOR
+ 6.5%)

02/04/2015

05/15/2020

2,972

2,962

2,794

Lannett Company Inc

Healthcare &
pharmaceuticals

5.75% (LIBOR
+ 4.75%)

11/20/2015

11/25/2020

1,500

1,389

1,410

Lannett Company Inc

Healthcare &
pharmaceuticals

6.375% (LIBOR
+ 5.375%)

11/20/2015

11/25/2022

1,500

1,351

1,403

LegalZoom

Services

8% (LIBOR
+ 7%)

06/15/2015

05/13/2020

4,967

Lindblad Expeditions Inc

Hotel, gaming &
leisure

5.5% (LIBOR
+ 4.5%)

06/23/2015

05/08/2021

2,644

2,659

2,631

Lindblad Maritime

Hotel, gaming &
leisure

5.5% (LIBOR
+ 4.5%)

06/23/2015

05/08/2021

341

343

339

Margaritaville Holdings LLC

Beverage, food &
tobacco

7% (LIBOR
+ 6%)

03/12/2015

03/12/2021

4,963

4,920

4,814

Match Group Inc

High tech industries

5.5% (LIBOR
+ 4.5%)

11/06/2015

11/16/2022

3,000

2,972

2,970

MediArena Acquisition B.V.

Media

6.75% (LIBOR
+ 5.75%)

12/18/2014

08/13/2021

1,481

1,462

1,321

Merrill Communications LLC

Media

6.25% (LIBOR
+ 5.25%)

05/29/2015

06/01/2022

1,988

1,977

1,740

Mood Media Corporation

Media

7% (LIBOR
+ 6%)

12/05/2014

05/01/2019

987

976

942

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Navistar Inc

Automotive

6.5% (LIBOR
+ 5.5%)

08/06/2015

08/07/2020

2,000

1,980

1,772

NextCare, Inc.

Healthcare &
pharmaceuticals

7% (LIBOR
+ 6%)

08/21/2015

07/31/2018

2,985

2,972

2,985

Novitex Acquisition, LLC

Consumer goods

7.5% (LIBOR
+ 6.25%)

12/05/2014

07/07/2020

980

966

924

Parq Holdings LP

Hotel, gaming & leisure

8.5% (LIBOR
+ 7.5%)

12/05/2014

12/17/2020

1,000

986

975

Petrochoice Holdings Inc

Chemicals, plastics
& rubber

6% (LIBOR
+ 5%)

09/02/2015

08/19/2022

998

974

983

Physiotherapy Associates Inc

Healthcare &
pharmaceuticals

5.75% (LIBOR
+ 4.75%)

06/04/2015

06/04/2021

998

993

995

Pre-Paid Legal Services, Inc

Services

6.5% (LIBOR
+ 5.25%)

05/21/2015

07/01/2019

966

961

Quincy Newspapers Inc

Media

5.5% (LIBOR
+ 4.5%)

11/23/2015

11/02/2022

2,988

2,981

2,956

RentPath, Inc.

Media

6.25% (LIBOR
+ 5.25%)

12/11/2014

12/17/2021

2,475

2,450

2,184

Riverbed Technology, Inc.

High tech industries

6% (LIBOR
+ 5%)

02/25/2015

04/25/2022

993

988

990

SCS Holdings Inc.

Services

6% (LIBOR
+ 5%)

11/20/2015

10/30/2022

1,978

1,963

1,950

Sirva Worldwide, Inc.

Transportation

7.5% (LIBOR

+ 6.25%)

12/18/2014

03/27/2019

1,928

1,924

1,870

Smart Start, Inc.

Services

5.75% (LIBOR

+ 4.75%)

08/28/2015

02/20/2022

2,500

2,476

2,475

SourceHOV LLC

Services

7.75% (LIBOR
+ 6.75%)

03/17/2015

10/31/2019

1,938

1,868

1,724

Stonewall Gas Gathering LLC

Energy

8.75% (LIBOR
+ 7.75%)

01/26/2015

01/28/2022

993

949

990

TOMS Shoes LLC

Retail

6.5% (LIBOR
+ 5.5%)

12/18/2014

10/31/2020

1,985

1,860

1,355

Travelport Finance Luxembourg Sarl

Services

5.75% (LIBOR
+ 4.75%)

09/04/2015

09/02/2021

2,992

3,007

2,936

TTM Technologies Inc

High tech industries

6% (LIBOR
+ 5%)

05/07/2015

05/31/2021

998

966

905

TWCC Holding Corp.

Media

5.75% (LIBOR
+ 5%)

05/21/2015

02/11/2020

2,516

2,498

2,517

US Renal Care Inc

Healthcare &

pharmaceuticals

5.25% (LIBOR
+ 4.25%)

11/17/2015

12/31/2022

2,000

1,980

1,987

Varsity Brands

Consumer goods

5% (LIBOR
+ 4%)

12/10/2014

12/11/2021

990

982

Verdesian Life Sciences LLC

Chemicals, plastics

& rubber

6% (LIBOR
+ 5%)

12/09/2014

07/01/2020

937

936

903

Zep Inc

Chemicals, plastics

& rubber

5.75% (LIBOR
+ 4.75%)

09/04/2015

06/27/2022

2,985

2,992

2,977

Total Senior Secured First Lien Term Loans

146,466

141,514

Company/Security

Industry

Interest Rate⁽¹⁾

Initial
Acquisition
Date

Maturity
Date

Principal

Amortized
Cost

Fair
Value⁽²⁾

Second Lien Term Loans

ABG Intermediate Holdings 2
LLC⁽⁴⁾

Consumer goods

8.50%

07/13/2015

05/27/2022

133

)

ABG Intermediate Holdings 2 LLC

Consumer goods

9.5% (LIBOR

+ 8.5%)

06/19/2015

05/27/2022

867

859

850

AssuredPartners Inc

Banking, finance,

insurance & real

estate

10% (LIBOR

+9%)

10/16/2015

10/20/2023

1,000

961

980

Asurion Delivery and Installation Services

Telecommunications

8.5% (LIBOR

+ 7.5%)

02/18/2015

03/03/2021

4,000

3,872

3,442

Cirque Du Soleil

Hotel, gaming &

leisure

9.25% (LIBOR

+8.25%)

06/25/2015

07/08/2023

1,000

986

950

Confie Seguros Holding II Co.

Banking, finance,

insurance & real

estate

10.25% (LIBOR

+ 9%)

06/29/2015

05/09/2019

500

496

495

EagleView Technology Corporation

Services

9.25% (LIBOR

+ 8.25%)

07/29/2015

07/14/2023

1,000

986

959

Eastman Kodak Company

High tech industries

10.75% (LIBOR

+ 9.5%)

03/24/2015

09/03/2020

1,000

996

865

Filtration Group Corporation

Services

8.25% (LIBOR

+ 7.25%)

03/16/2015

11/22/2021

524

526

511

GENEX Services, Inc.

Services

8.75% (LIBOR

+ 7.75%)

06/26/2015

05/30/2022

1,000

988

943

Gruden Acquisition Inc.

Transportation

9.5% (LIBOR

+ 8.5%)

07/31/2015

08/18/2023

500

476

Hyland Software, Inc.

High tech industries

8.25% (LIBOR

+ 7.25%)

06/12/2015

07/03/2023

1,500

1,493

1,410

IPC Corp

Telecommunications

10.5% (LIBOR

+ 9.5%)

03/03/2015

02/06/2022

1,500

1,402

1,350

Learfield Communications, Inc.

Media

8.75% (LIBOR

+ 7.75%)

02/18/2015

10/08/2021

952

957

943

Linxens France SA

Telecommunications

9.5% (LIBOR

+ 8.5%)

07/31/2015

10/16/2023

1,000

990

987

MRI Software LLC

High tech industries

9% (LIBOR

+ 8%)

06/19/2015

06/23/2022

1,000

986

970

RentPath, Inc.

Media

10% (LIBOR

+ 9%)

12/11/2014

12/17/2022

1,000

921

813

Royal Adhesives and Sealants LLC

Chemicals, plastics

& rubber

8.5% (LIBOR

+ 7.5%)

06/12/2015

06/19/2023

1,000

993

985

TWCC Holding Corp.

Media

7% (LIBOR

+6%)

05/28/2015

06/26/2020

2,000

1,879

1,997

Wash Multifamily Laundry Systems, LLC.

Services

8% (LIBOR

+ 7%)

05/04/2015

05/12/2023

Wash Multifamily Laundry Systems, LLC.

Services

8% (LIBOR

+ 7%)

05/04/2015

05/15/2023

425

423

403

Total Second Lien Term Loans

21,263

20,397

Total Investments

167,729

161,911

(1)	Variable interest rates indexed to 30-day, 60-day, 90-day or 180-day LIBOR rates, at the borrower’s option. LIBOR rates are subject to interest rate floors.

(2)	Represents fair value in accordance with ASC Topic 820. The determination of such fair value is not included in our board of director’s valuation process described elsewhere herein.

(3)	Represents a delayed draw commitment of $209, which was unfunded as of December 31, 2015.

(4)	Represents a delayed draw commitment of $133, which was unfunded as of December 31, 2015.

Below is certain summarized financial information for Logan JV as of September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015:

Selected Balance Sheet Information


	As of September 30,		As of December 31,
	2016		2015
	(Dollars in thousands)		(Dollars in thousands)
Assets:
Investments at fair value (cost of $203,905 and $167,729, respectively)	$	203,362	$	161,911
Cash		9,058		7,671
Receivable for investments sold		7,097		—
Other assets		2,689		2,091

Total assets	$	222,206	$	171,673


Liabilities:
Loans payable	$	129,257	$	108,137
Payable for investments purchased		14,550		4,367
Distribution payable		3,695		2,375
Other liabilities		1,269		816

Total liabilities	$	148,771	$	115,695


Members’ capital	$	73,435	$	55,978

Total liabilities and members’ capital	$	222,206	$	171,673

Selected Statement of Operations Information


	For the three months ended September 30, 2016		For the three months ended September 30, 2015			For the nine months ended September 30, 2016		For the nine months ended September 30, 2015
	(Dollars in thousands)		(Dollars in thousands)			(Dollars in thousands)		(Dollars in thousands)
Interest income	$	3,798	$	2,219		$	10,459	$	4,423
Fee income		89		18			167		80

Total investment income		3,887		2,237			10,626		4,503
Credit facility expenses⁽¹⁾		1,298		737			3,579		1,469
Other expenses		105		49			343		166

Total expenses		1,403		786			3,922		1,635

Net investment income		2,484		1,451			6,704		2,868
Net realized gains		166		45			179		45
Net change in unrealized appreciation (depreciation) on investments		3,640		(2,018	)		5,274		(1,911	)

Net increase (decrease) in members’ capital from operations	$	6,290	$	(522	)	$	12,157	$	1,002

⁽¹⁾	As of September 30, 2016, Logan JV had $129,257 outstanding debt under the credit facility with an effective interest rate of 3.22% per annum. As of September 30, 2015, Logan JV had $91,162 outstanding debt under the credit facility with an effective interest rate of 2.82%.

Managed Funds

The 1940 Act generally prohibits BDCs from making certain negotiated co-investments with affiliates absent an order from the SEC permitting the BDC to do so. The SEC staff has granted us relief pursuant to the Order. Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) or our independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching by us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

Greenway

On January 14, 2011, THL Credit Greenway Fund LLC, or Greenway, was formed as a Delaware limited liability company. Greenway is a portfolio company of ours. Greenway is a closed-end investment fund which provides for no liquidity or redemption options and is not readily marketable. Greenway operates under a limited liability agreement dated January 19, 2011, or the Agreement. Greenway will continue in existence until January 14, 2021, subject to earlier termination pursuant to certain terms of the Agreement. The term may also be extended for up to three additional one-year periods pursuant to certain terms of the Agreement. Greenway had a two year investment period.

Greenway had $150 million of capital committed by affiliates of a single institutional investor, and is managed by us. Our capital commitment to Greenway is $0.02 million. As of September 30, 2016, all of Greenway’s committed capital has been fully called. Our nominal investment in Greenway is reflected in the September 30, 2016 and December 31, 2015 Consolidated Schedules of Investments. As of September 30, 2016, distributions representing 122.7% of the committed capital of the investor have been made from Greenway. Distributions from Greenway, including return of capital and earnings, to its members from inception through September 30, 2016 totaled $184.0 million.

We act as the investment adviser to Greenway and are entitled to receive certain fees relating to our investment management services provided, including a base management fee, a performance fee and a portion of the closing fees on each investment transaction. As a result, Greenway is classified as an affiliate of ours. For the three months ended September 30, 2016 and 2015, we earned $0.1 million and $0.1 million in fees related to Greenway, respectively, which are included in other income from non-controlled, affiliated investment in the Consolidated Statements of Operations. For the nine months ended September 30, 2016 and 2015, we earned $0.2 million and $0.5 million in fees related to Greenway, respectively, which are included in other income from non-controlled, affiliated investment in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, $0.1 million and $0.1 million of fees related to Greenway, respectively, were included in due from affiliate on the Consolidated Statements of Assets and Liabilities.

Greenway invested in securities similar to those that we invest in pursuant to investment and allocation guidelines which address, among other things, the size of the borrowers, the types of transactions and the concentration and investment ratio amongst Greenway and us. However, we have the discretion to invest in other securities.

Greenway II

On January 31, 2013, THL Credit Greenway Fund II, LLC, or Greenway II LLC, was formed as a Delaware limited liability company and is a portfolio company of ours. Greenway II LLC is a closed-end investment fund which provides for no liquidity or redemption options and is not readily marketable. Greenway II LLC operates under a limited liability agreement dated February 11, 2013, as amended, or the Greenway II LLC Agreement. Greenway II LLC will continue in existence until October 10, 2021, subject to earlier termination pursuant to certain terms of the Greenway II LLC Agreement. The term may also be extended for up to three additional one-year periods pursuant to certain terms of the Greenway II LLC Agreement. Greenway II LLC has a two year investment period.

As contemplated in the Greenway II LLC Agreement, we have established a related investment vehicle and entered into an investment management agreement with an account set up by an unaffiliated third party investor to invest alongside Greenway II LLC pursuant to similar economic terms. The account is also managed by us. References to “Greenway II” herein include Greenway II LLC and the account of the related investment vehicle. Greenway II had $186.5 million of commitments primarily from institutional investors. As of September 30, 2016, all of Greenway II’s committed capital has been fully called. Our capital commitment to Greenway II is $0.01 million. Our nominal investment in Greenway II LLC is reflected in the September 30, 2016 and December 31, 2015 Consolidated Schedules of Investments. Greenway II LLC is managed by us. As of September 30, 2016, distributions representing 52.6% of the committed capital of the Greenway II investors have been made from Greenway II. Distributions from Greenway II to its members and investors, including return of capital and earnings, from inception through September 30, 2016 totaled $98.3 million.

We act as the investment adviser to Greenway II and are entitled to receive certain fees relating to our investment management services provided, including a base management fee, a performance fee and a portion of the closing fees on each investment transaction. As a result, Greenway II is classified as an affiliate of the Company. For the three months ended September 30, 2016 and 2015, we earned $0.3 million and $0.4 million, respectively, in fees related to Greenway II, which are included in other income from non-controlled, affiliated investment in the Consolidated Statements of Operations. For the nine months ended September 30, 2016 and 2015, we earned $1.0 million and $1.3 million, respectively, in fees related to Greenway II, which are included in other income from non-controlled, affiliated investment in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, $0.4 million and $0.4 million of fees related to Greenway II were included in due from affiliate on the Consolidated Statements of Assets and Liabilities. As of September 30, 2016 and December 31, 2015, there was no interest owed to Greenway II.

Other deferred assets consist of placement agent expenses incurred in connection with the offer and sale of partnership interests in Greenway II. These costs are capitalized when commitments close and are recognized as an expense over the period when the Company expects to collect management fees from Greenway II. For the three months ended September 30, 2016 and 2015, we recognized $0.1 million and $0.1 million, respectively, in expenses related to placement agent expenses, which are included in other general and administrative expenses in the Consolidated Statements of Operations. For the nine months ended September 30, 2016 and 2015, we recognized $0.2 million and $0.2 million, respectively, in expenses related to placement agent expenses, which are included in other general and administrative expenses in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, $0.2 million and $0.4 million, respectively, were included in other deferred assets on the Consolidated Statements of Assets and Liabilities.

Greenway II invested in securities similar to those that we invest in pursuant to investment and allocation guidelines which address, among other things, the size of the borrowers, the types of transactions and the concentration and investment ratio amongst Greenway II and us. However, we have the discretion to invest in other securities.

CLO Residual Interests

As of September 30, 2016 and December 31, 2015, we had investments in the CLO residual interests, or subordinated notes, which can also be structured as income notes. These subordinated notes are subordinate to the secured notes issued in connection with each CLO. The secured notes in each structure are collateralized by portfolios consisting primarily of broadly syndicated senior secured bank loans. The following table shows a summary of our investments in CLO residual interests (in millions):


								As of September 30, 2016				As of December 31, 2015
Issuer	Ownership Interest			Total CLO Amount at initial par		Total CLO Residual Amount		THL Credit Residual Amount at Amortized Cost		THL Credit Residual Amount at Fair Value		THL Credit Residual Amount at Amortized Cost		THL Credit Residual Amount at Fair Value
Dryden CLO, Ltd.		23.1	%	$	516.4	$	10.0	$	—	$	—	$	6.8	$	6.2
Flagship VII, Ltd.		12.6	%	$	441.8	$	5.0		3.1		2.3		3.5		3.1
Flagship VIII, Ltd.		25.1	%	$	470.9	$	10.0		6.1		5.0		6.8		5.7

Total CLO residual interests								$	9.2	$	7.3	$	17.1	$	15.0

For the three months ended September 30, 2016 and 2015, we recognized interest income totaling $0.5 million and $0.7 million, respectively, related to CLO residual interests. For the nine months ended September 30, 2016 and 2015, we recognized interest income totaling $1.7 million and $3.0 million, respectively, related to CLO residual interests.

Investment in Tax Receivable Agreement Payment Rights

In June 2012, we invested in a TRA that entitles us to certain payment rights, or TRA Payment Rights, from Duff & Phelps Corporation, or Duff & Phelps. The TRA transfers the economic value of certain tax deductions, or tax benefits, taken by Duff & Phelps to us and entitles us to a stream of payments to be received. The TRA payment right is, in effect, a subordinated claim on the issuing company which can be valued based on the credit risk of the issuer, which includes projected future earnings, the liquidity of the underlying payment right, risk of tax law changes, the effective tax rate and any other factors which might impact the value of the payment right.

Through the TRA, we are entitled to receive an annual tax benefit payment based upon 85% of the savings from certain deductions along with interest. The payments that we are entitled to receive result from cash savings, if any, in U.S. federal, state or local income tax that Duff & Phelps realizes (i) from the tax savings derived from the goodwill and other intangibles created in connection with the Duff & Phelps initial public offering and (ii) from other income tax deductions. These tax benefit payments will continue until the relevant deductions are fully utilized, which is projected to be 16 years. Pursuant to the TRA, we maintain the right to enforce Duff & Phelps payment obligations as a transferee of the TRA contract. If Duff & Phelps chooses to pre-pay and terminate the TRA, we will be entitled to the present value of the expected future TRA payments. If Duff & Phelps breaches any material obligation then all obligations are accelerated and calculated as if an early termination occurred. Failure to make a payment is a breach of a material obligation if the failure occurs for more than three months.

The projected annual tax benefit payment is accrued on a quarterly basis and paid annually. The payment is allocated between a reduction in the cost basis of the investment and interest income based upon an amortization schedule. Based upon the characteristics of the investment, we have chosen to categorize the investment in the TRA payment rights as an investment in payment rights.

The amortized cost basis and fair value of the TRA as of September 30, 2016 was $11.5 million and $13.6 million, respectively. The amortized cost basis and fair value of the TRA as of December 31, 2015 was $11.5 million and $13.3 million, respectively. For the three months ended September 30, 2016 and 2015, we recognized interest income totaling $0.5 million and $0.5 million, respectively, related to the TRA. For the nine months ended September 30, 2016 and 2015, we recognized interest income totaling $1.5 million and $1.5 million, respectively, related to the TRA.

Asset Quality

We employ the use of board observation and information rights, regular dialogue with company management and sponsors, and detailed internally generated monitoring reports to actively monitor performance. Additionally, THL Credit has developed a monitoring template that promotes compliance with these standards and that is used as a tool to assess investment performance relative to plan.

As part of the monitoring process, the Advisor assesses the risk profile of each of our investments and assigns each portfolio investment a score of a 1, 2, 3, 4 or 5

The investment performance scores, or IPS, are as follows:

1 – The portfolio investment is performing above our underwriting expectations.

2 – The portfolio investment is performing as expected at the time of underwriting. All new investments are initially scored a 2.

3 – The portfolio investment is operating below our underwriting expectations, and requires closer monitoring. The company may be out of compliance with financial covenants, however, principal or interest payments are generally not past due.

4 – The portfolio investment is performing materially below our underwriting expectations and returns on our investment are likely to be impaired. Principal or interest payments may be past due, however, full recovery of principal and interest payments are expected.

5 – The portfolio investment is performing substantially below expectations and the risk of the investment has increased substantially. The company is in payment default and the principal and interest payments are not expected to be repaid in full.

For any investment receiving a score of a 3 or lower THL Credit Advisors will increase their level of focus and prepare regular updates for the investment committee summarizing current operating results, material impending events and recommended actions.

The Advisor monitors and, when appropriate, changes the investment scores assigned to each investment in our portfolio. In connection with our investment valuation process, the Advisor and board of directors review these investment scores on a quarterly basis. Our average investment score was 2.28 and 2.13 at September 30, 2016 and December 31, 2015, respectively. The following is a distribution of the investment scores of our portfolio companies at September 30, 2016 and December 31, 2015 (in millions):


	September 30, 2016					December 31, 2015
Investment Score	Fair Value		% of Total Portfolio			Fair Value		% of Total Portfolio
1^(a)	$	93.9		13.9	%	$	137.6		18.2	%
2^(b)		340.1		50.5	%		417.4		55.4	%
3^(c)		203.6		30.3	%		185.3		24.6	%
4^(d)		27.4		4.1	%		13.6		1.8	%
5^(e)		7.8		1.2	%		0.3		—

Total	$	672.8		100.0	%	$	754.2		100.0	%

(a)	As of September 30, 2016 and December 31, 2015, Investment Score “1” included $20.3 million and $26.5 million, respectively, of loans to companies in which we also hold equity securities.

(b)	As of September 30, 2016 and December 31, 2015, Investment Score “2” included $111.4 million and $122.0 million, respectively, of loans to companies in which we also hold equity securities.

(c)	As of September 30, 2016 and December 31, 2015, Investment Score “3” included $88.5 million and $48.4 million, respectively, of loans to companies in which we also hold equity securities.

(d)	As of September 30, 2016 and December 31, 2015, Investment Score “4” included $8.6 million and $0, respectively, of loans to companies in which we also hold equity securities.

(e)	As of September 30, 2016 and December 31, 2015, Investment Score “5” included $4.7 and $0.3 million, respectively, of loans to companies in which we also hold equity securities.

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or when it is no longer probable that principal or interest will be collected. However, we may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. As of September 30, 2016, we had four loans from two issuers on non-accrual status with an amortized cost basis of $21.1 million and fair value of $18.7 million. As of December 31, 2015, we had two loans from two issuers on non-accrual with an amortized cost basis of $25.0 million and fair value of $13.9 million. For additional information, please refer to the Consolidated Schedules of Investments as of September 30, 2016 and December 31, 2015 as well as Recent Developments. We record the reversal of any previously accrued income against the same income category reflected in the Consolidated Statement of Operations.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2016 and 2015

Investment Income

We generate revenues primarily in the form of interest on the debt and other income-producing securities we hold. Other income-producing securities include investments in funds, investment in payment rights and residual interests, or equity, of collateralized loan obligations, or CLOs. Our investments in fixed income instruments generally have an expected maturity of five to seven years, and typically bear interest at a fixed or floating rate. Interest on our debt securities is generally payable quarterly. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt instruments and preferred stock investments may defer payments of dividends or pay interest in-kind, or PIK. Any outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the maturity date. The level of interest income we receive is directly related to the balance of interest-bearing investments multiplied by the weighted average yield of our investments. In addition to interest income, we may receive dividends and other distributions related to our equity investments. We may also generate revenue in the form of fees from the management of Greenway and Greenway II, prepayment premiums, commitment, loan origination, structuring or due diligence fees, exit fees, amendment fees, portfolio company administration fees, fees for providing significant managerial assistance and consulting fees. These fees may or may not be recurring in nature as part of our normal business operations. We will disclose below what amounts, if any, are material non-recurring fees that have been recorded as income during each respective period.

The following shows the breakdown of investment income for the three and nine months ended September 30, 2016 and 2015 (in millions):


	Three months ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
Interest income on debt securities
Cash interest	$	13.5	$	16.9	$	42.9	$	51.2
PIK interest		0.5		1.1		1.5		3.1
Prepayment premiums		0.6		0.1		0.9		0.3
Net accretion of discounts and other fees		1.6		1.0		3.4		2.6

Total interest on debt securities		16.2		19.1		48.7		57.2
Dividend income		2.8		1.2		7.8		2.6
Interest income on other income-producing securities		1.7		1.7		5.3		6.0
Fees related to Greenway and Greenway II		0.4		0.5		1.2		1.7
Other income		0.5		0.6		1.6		3.1

Total investment income ⁽¹⁾	$	21.6	$	23.1	$	64.6	$	70.6

⁽¹⁾

For the three months ended September 30, 2016 and 2015, we recognized $0 and $0.2 million, respectively, of non-recurring fees from portfolio companies. For the nine months ended September 30, 2016 and 2015, we recognized $0 and $1.3 million, respectively, of non-recurring fees from portfolio companies.

The decrease in investment income between the three month periods was primarily due to the contraction in overall investment portfolio since September 30, 2015, which led to lower interest income, and additional loans that were put on non-accrual status or were restructured into non-income producing securities. This decrease was offset primarily by an increase in dividend income related to the Logan JV, prepayment premiums and accelerated amortization from loans that were repaid during the three months ended September 30, 2016.

The decrease in investment income between the nine month periods was primarily related to the contraction in the overall investment portfolio, additional loans that were put on non-accrual status or were restructured into non-income producing securities and lower other income related to fees on certain portfolio investments. Interest income on both debt and other income securities was lower primarily due to the recycling of proceeds from prepayments and sales of debt and CLO investments into the Logan JV and the impact of additional non-accrual investments or investments that were restructured into non-income producing securities. This decrease was offset by an increase in dividend income related to the Logan JV, prepayment premiums and accelerated amortization from loans that were repaid during the nine months ended September 30, 2016.

The following shows a rollforward of PIK income activity for the three and nine months ended September 30, 2016 and 2015 (in millions):


	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Accumulated PIK balance, beginning of period	$	10.0		$	7.6		$	9.3		$	7.0
PIK income capitalized/receivable		0.6			1.2			1.7			3.6
PIK received in cash from repayments		—			(0.4	)		(0.3	)		(2.2	)
PIK reduced through restructuring⁽¹⁾		(6.3	)		—			(6.4	)		—

Accumulated PIK balance, end of period	$	4.3		$	8.4		$	4.3		$	8.4

(1)	Primarily in connection with the restructuring of our investments in OEM Group, Inc. and Tri-Starr Management Services, Inc. PIK income accrued in connection with the existing loan to each portfolio company was completely reduced and is no longer receivable.

In certain investment transactions, we may provide advisory services. For services that are separately identifiable and external evidence exists to substantiate fair value, income is recognized as earned. We earned no income from advisory services related to portfolio companies for the three and nine months ended September 30, 2016 and 2015.

Expenses

Our primary operating expenses include the payment of base management fees, an incentive fee, borrowing expenses related to our credit facilities, and expenses reimbursable under the investment management agreement and the allocable portion of overhead under the administration and investment management agreements (“administrator expenses”). The base management fee compensates the Advisor for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our investment management agreement and administration agreement provides that we will reimburse the Advisor for costs and expenses incurred by the Advisor for facilities, office equipment and utilities allocable to the performance by the Advisor of its duties under the agreements, as well as any costs and expenses incurred by the Advisor relating to any administrative or operating services provided by the Advisor to us. We bear all other costs and expenses of our operations and transactions.

The following shows the breakdown of expenses for the three and nine months ended September 30, 2016 and 2015 (in millions):


	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016		2015
Expenses
Interest and fees on Borrowings ^(a)	$	3.9		$	3.8		$	11.6	$	10.9
Incentive fees^(b)		2.6			2.9			2.7		8.9
Base management fees		2.7			3.0			8.4		8.9
Other expenses		1.1			1.2			3.5		3.8
Administrator expenses		0.9			0.9			2.7		2.8

Total expenses before taxes		11.2			11.8			28.9		35.3
Income tax provision, excise and other taxes ^(c)		(0.1	)		(0.3	)		0.2		(0.2	)

Total expenses after taxes	$	11.1		$	11.5		$	29.1	$	35.1

(a)	Interest, fees and amortization of deferred financing costs related to our Revolving Facility, Term Loan Facility and Notes.

(b)

For the three months ended September 30, 2016, there was no reduction to the ordinary income incentive fee expense as a result of net realized and unrealized losses in the portfolio. For the nine months ended September 30, 2016, the ordinary income incentive fee expense of $7.6 million was reduced to $2.7 million as a result of net realized and unrealized losses in the portfolio.

(c)	Amounts include the income taxes related to earnings by our consolidated wholly-owned corporate subsidiaries established to hold equity or equity-like portfolio company investments organized as pass-through entities and excise taxes related to our undistributed earnings and other taxes.

The decrease in operating expenses during the three month periods was due primarily to lower management and incentive fees as a result of a decrease in the size of the portfolio. This decrease was offset by lower income tax benefits from our blocker corporation investments for the three months ended September 30, 2016.

The decrease in operating expenses during the nine month periods was due primarily to lower incentive fees as a result of realized and unrealized losses in the portfolio and lower management fees as a result of portfolio contraction. This decrease was offset by an increase in interest and fees on borrowings as a result of higher borrowings outstanding and an increased tax provision from our blocker corporation investments for the nine months ended September 30, 2016.

We expect certain of our operating expenses, including administrator expenses, professional fees and other general and administrative expenses to decline as a percentage of our total assets during periods of growth and increase as a percentage of our total assets during periods of asset declines.

Net Investment Income

Net investment income was $10.5 million, or $0.32 per common share based on a weighted average of 33,169,376 common shares outstanding for the three months ended September 30, 2016, as compared to $11.6 million, or $0.35 per common share based on a weighted average of 33,506,914 common shares outstanding for the three months ended September 30, 2015.

Net investment income was $35.6 million, or $1.07 per common share based on a weighted average of 33,234,994 common shares outstanding for the nine months ended September 30, 2016, as compared to $35.5 million, or $1.05 per common share based on a weighted average of 33,739,279 common shares outstanding for the nine months ended September 30, 2015.

The decrease in net investment income between the three month periods is primarily attributable to a decrease in interest on debt investments. This was offset by lower incentive and management fees and the increase in dividend income related to the Logan JV.

The increase in net investment income between the nine month periods is primarily attributable to the lower incentive fees as a result of net realized and unrealized losses in the portfolio and the increase in dividend income related to the Logan JV. This was partially offset by additional loans put on non-accrual status or restructured, a decrease in interest on debt investments due to portfolio contraction and a decrease in other income related to fees earned on certain portfolio investments.

Net Realized Gains and Losses on Investments, net of income tax provision

The following shows the breakdown of realized gains and losses for the three and nine months ended September 30, 2016 and 2015 (in millions):


	For the three months ended September 30,					For the nine months ended September 30,
	2016			2015		2016			2015
AIM Media Texas Operating, LLC	$	—		$	—	$	(0.1	)	$	—
Airborne Tactical Advantage Company, LLC		—			—		0.7			—
Dimont & Associates, Inc. ⁽¹⁾		—			—		(10.9	)		—
Dryden CLO, Ltd.		(1.1	)		—		(1.1	)		—
OEM Group, Inc. ⁽²⁾		—			—		(6.2	)		—
Loadmaster Derrick & Equipment, Inc. ⁽³⁾		(6.6	)		—		(6.6	)		—
Surgery Center Holdings, Inc.		—			—		3.7			—
Tri Starr Management Services, Inc. ⁽⁴⁾		(17.4	)		—		(17.4	)		—
Other		0.1			0.2		0.1			0.3

Net realized (losses)/gains	$	(25.0	)	$	0.2	$	(37.8	)	$	0.3

(1)

On March 14, 2016, as part of a further restructuring of the business, the cost basis of our equity interest totaling $6.6 million and subordinated term loan totaling $4.5 million was converted to equity interest in an affiliated entity valued at $0.1 million. In connection with the restructuring, we recognized a realized loss in the amount of $10.9 million, which was offset by a $10.8 million change in unrealized appreciation.

(2)

On March 17, 2016, as part of a restructuring of the business, the cost basis of our first lien loans totaling $33.2 million was converted to a new first lien senior secured term loan of $18.7 million and controlled equity interest, valued at $8.3 million. In connection with the restructuring, we recognized a realized loss of $6.2 million, which was offset by a $5.6 million change in unrealized appreciation.

(3)

On July 1, 2016, as part of the restructuring, we exchanged the cost basis of our senior secured loans totaling $14.7 million for a new senior secured term loan of $7.0 million, a debt-like preferred equity position, valued at $1.1 million, and 10% warrants. As result of the restructuring, we recognized a $6.6 million loss on conversion to preferred equity, which was offset by a $5.1 million change in unrealized appreciation.

(4)

On July 22, 2016, as part of the restructuring, we exchanged the cost basis of its subordinated debt totaling $20.6 million for a controlled equity position of an affiliate of Tri-Starr Management Services, Inc. valued at $3.1 million. As result of the restructuring, we recognized a $17.4 million loss on conversion of its subordinated debt investment to common equity, which was offset by a $17.4 million change in unrealized appreciation.

Net Change in Unrealized Appreciation (Depreciation) of Investments

Net change in unrealized appreciation primarily reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded appreciation or depreciation when gains or losses are realized.

The following shows the breakdown in the changes in unrealized appreciation of investments for the three and nine months ended September 30, 2016 and 2015 (in millions):


	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Gross unrealized appreciation on investments	$	10.6		$	5.4		$	15.3		$	15.6
Gross unrealized depreciation on investments		(8.1	)		(13.0	)		(21.9	)		(17.5	)
Reversal of prior period net unrealized depreciation (appreciation) upon a realization		22.2			(1.0	)		18.8			(0.4	)

Total	$	24.7		$	(8.6	)	$	12.2		$	(2.3	)

The net change in unrealized appreciation (depreciation) on our investments for the three months ended September 30, 2016 as compared to the three months ended September 30, 2015 was driven primarily by unrealized depreciation as a result of changes in the capital market conditions and financial performance of certain assets including Charming Charlie, LLC, Hostway Corporation and Washington Inventory Service. This was offset by unrealized appreciation on our investments in Loadmaster Derrick & Equipment, Inc. and Tri-Starr Management Services, Inc. of approximately $22.5 million, which was a reversal of prior period unrealized depreciation, as the result of recognizing $24.0 million in realized losses as part of the restructuring of both businesses.

The net change in unrealized appreciation (depreciation) on our investments for the nine months ended September 30, 2016 as compared to the nine months ended September 30, 2015 was driven primarily by unrealized depreciation as a result of changes in the capital market conditions and the financial performance of certain assets including Charming Charlie, LLC, Hostway Corporation and Washington Inventory Service. This was offset by unrealized appreciation on our investments in Dimont & Associates, Inc., Loadmaster Derrick & Equipment, Inc., OEM Group, Inc. and Tri-Starr Management Services, Inc. of approximately $38.9 million, which was a reversal of prior period unrealized depreciation, as the result of recognizing $41.1 million in realized losses as part of the restructuring of these businesses.

Provision for Taxes on Unrealized Gains on Investments

Certain consolidated subsidiaries of ours are subject to U.S. federal and state income taxes. These taxable entities are not consolidated with the Company for income tax purposes and may generate income tax liabilities or assets from temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries. For the three months ended September 30, 2016 and 2015, the Company recognized a provision for tax on unrealized gains on investments of $0.4 million and $0.4 million for consolidated subsidiaries, respectively. For the nine months ended September 30, 2016 and 2015, the Company recognized a provision for tax on unrealized gains on investments of $0.6 million and $0.7 million for consolidated subsidiaries, respectively. As of September 30, 2016 and December 31, 2015, $4.4 million and $3.9 million, respectively, were included in deferred tax liability on the Consolidated Statements of Assets and Liabilities relating to deferred tax on unrealized gain on investments. The change in provision for tax on unrealized gains on investments relates primarily to changes to the unrealized appreciation (depreciation) of the investments held in these taxable consolidated subsidiaries, other temporary differences and a change in the prior year estimates received from certain portfolio companies.

Realized and Unrealized Appreciation (Depreciation) of Interest Rate Derivative

The interest rate derivative was entered into on May 10, 2012. Unrealized depreciation reflects the value of the interest rate derivative agreement at the end of the reporting period. For the three months ended September 30, 2016 and 2015, the net change of unrealized appreciation (depreciation) on interest rate derivative totaled $0.1 million and ($0.1) million, respectively, which is listed under net change in unrealized appreciation (depreciation) on interest rate derivatives in the Consolidated Statement of Operations. For the nine months ended September 30, 2016 and 2015, the net change of unrealized appreciation (depreciation) on interest rate derivative totaled $0.1 million and ($0.3) million, respectively, which is listed under net change in unrealized appreciation (depreciation) on interest rate derivatives in the Consolidated Statement of Operations. The changes were due to capital market changes impacting swap rates.

We measure realized gains or losses on the interest rate derivative based upon the difference between the proceeds received or the amount paid on the interest rate derivative. For the three months ended September 30, 2016 and 2015, we realized a loss of $0.1 million and $0.1 million, respectively, as interest rate derivative periodic interest payments, net on the Consolidated Statement of Operations. For the nine months ended September 30, 2016 and 2015, we realized a loss of $0.2 million and $0.3 million, respectively, as interest rate derivative periodic interest payments, net on the Consolidated Statement of Operations.

Net Increase in Net Assets Resulting from Operations

Net increase in net assets resulting from operations totaled $9.9 million, or $0.30 per common share based on a weighted average of 33,169,376 common shares for the three months ended September 30, 2016, as compared to $2.6 million, or $0.08 per common share based on a weighted average of 33,506,914 common shares for the three months ended September 30, 2015.

The change in net assets resulting from operations for the three months ended September 30, 2016 is due primarily to net realized and unrealized losses in the portfolio as described above.

Net increase in net assets resulting from operations totaled $9.2 million, or $0.28 per common share based on a weighted average of 33,234,994 common shares for the nine months ended September 30, 2016, as compared to $32.2 million, or $0.95 per common share based on a weighted average of 33,739,279 common shares for the nine months ended September 30, 2015.

The change in net assets resulting from operations for the nine months ended September 30, 2016 is due primarily to net realized and unrealized losses in the portfolio as described above.

Financial condition, liquidity and capital resources

Cash Flows from Operating and Financing Activities

Our liquidity and capital resources are derived from our borrowings, equity raises and cash flows from operations, including investment sales and repayments, and investment income earned. Our primary use of funds from operations includes investments in portfolio companies, payment of dividends to the holders of our common stock and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our borrowings and the proceeds from the turnover in our portfolio and from public and private offerings of securities to finance our investment objectives, to the extent permitted by the 1940 Act.

We may raise additional equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, by securitizing a portion of our investments or borrowings from credit facilities. To the extent we determine to raise additional equity through an offering of our common stock at a price below net asset value, existing investors will experience dilution. During our 2016 Annual Stockholder Meeting held on June 2, 2016, our stockholders authorized us, with the approval of our Board of Directors, to sell up to 25% of our outstanding common stock at a price below our then current net asset value per share and to offer and issue debt with warrants or debt convertible into shares of our common stock at an exercise or conversion price that will not be less than the fair market value per share but may be below the then current net asset value per share. There can be no assurance that these capital resources will be available.

In December 2014, we closed a public debt offering selling $50.0 million of Notes due in 2021, or the 2021 Notes, including the exercise of the over allotment option, through a group of underwriters, less an underwriting discount, and received net proceeds of $48.5 million. In December 2015, we closed a public debt offering selling $35.0 million of Notes due in 2022, or the 2022 Notes, including the exercise of the over allotment option, through a group of underwriters, less an underwriting discount, and received net proceeds of $34.0 million. Collectively, the 2021 Notes and 2022 Notes are referred to as the Notes.

We borrowed $98.3 million under our Revolving Facility for the nine months ended September 30, 2016 and repaid $153.3 million on our Revolving Facility from proceeds received from prepayments and sales and investment income. We borrowed $120.0 million under our Revolving Facility for the nine months ended September 30, 2015 and repaid $139.5 million on our Revolving Facility from proceeds received from prepayments and sales and investment income.

Our operating activities provided cash of $90.9 million and $70.7 million for the nine months ended September 30, 2016 and 2015, respectively, primarily in connection with the prepayments and sales of portfolio investments. For the nine months ended September 30, 2016, our financing activities used $55.0 million to repay borrowings on our facility, $33.9 million for distributions to stockholders, $1.5 million to repurchase common stock and $0.1 million for the payment of financing and offering costs. For the nine months ended September 30, 2015, our financing activities used $19.5 million to repay borrowings on our facility, $34.3 million for distributions to stockholders, $7.0 million to repurchase common stock, and $1.9 million for the payment of financing and offering costs.

As of September 30, 2016 and December 31, 2015, we had cash of $4.3 million and $3.9 million, respectively. We had no cash equivalents as of September 30, 2016 and December 31, 2015.

We believe cash balances, our Revolving Facility capacity and any proceeds generated from the sale or pay down of investments provides us with the liquidity necessary to fund investments in our pipeline in the near future.

Borrowings

The following shows a summary of our Borrowings as of September 30, 2016 and December 31, 2015 (in millions):


	September 30, 2016							December 31, 2015
Facility	Commitments		Borrowings Outstanding ⁽¹⁾		Weighted Average Interest Rate			Commitments		Borrowings Outstanding ⁽²⁾		Weighted Average Interest Rate
Revolving Facility	$	303.5	$	97.2		3.06	%	$	303.5	$	152.2		2.94	%
Term Loan Facility		106.5		106.5		3.31	%		106.5		106.5		3.19	%
2021 Notes		50.0		50.0		6.75	%		50.0		50.0		6.75	%
2022 Notes		35.0		35.0		6.75	%		35.0		35.0		6.75	%

Total	$	495.0	$	288.7		4.24	%	$	495.0	$	343.7		3.96	%

⁽¹⁾	As of September 30, 2016, excludes deferred financing costs of $1.6 million for the Term Loan Facility, $1.6 million for the 2021 Notes and $1.3 million for the 2022 Notes presented as a reduction to the respective balances outstanding in the Consolidated Statements of Assets and Liabilities.

⁽²⁾	As of December 31, 2015, excludes deferred financing costs of $1.9 million for the Term Loan Facility, $1.8 million for the 2021 Notes and $1.4 million for the 2022 Notes presented as a reduction to the respective balances outstanding in the Consolidated Statements of Assets and Liabilities.

Credit Facility

Each of the Facilities includes an accordion feature permitting us to expand the Facilities, if certain conditions are satisfied; provided, however, that the aggregate amount of the Facilities, collectively, is capped at $600.0 million.

Borrowings under the Facilities are subject to, among other things, a minimum borrowing/collateral base. The Facilities have certain collateral requirements and/or covenants, including, but limited to, covenants related to: (a) limitations on the incurrence of additional indebtedness and liens, (b) limitations on certain investments, (c) limitations on certain restricted payments, (d) limitations on the creation or existence of agreements that prohibit liens on certain properties of ours and our subsidiaries, and (e) compliance with certain financial maintenance standards including (i) minimum stockholders’ equity, (ii) a ratio of total assets (less total liabilities not represented by senior securities) to the aggregate amount of senior securities representing indebtedness, of us and our consolidated subsidiaries, of not less than 2.00: 1.0, (iii) minimum liquidity, (iv) minimum net worth, and (v) a consolidated interest coverage ratio. In addition to the financial maintenance standards, described in the preceding sentence, borrowings under the Facilities (and the incurrence of certain other permitted debt) are subject to compliance with a borrowing base that applies different advance rates to different types of assets in our portfolio.

The credit agreements governing the Facilities also include default provisions such as the failure to make timely payments under the Facilities, the occurrence of a change in control, and the failure by us to materially perform under the operative agreements governing the Facilities, which, if not complied with, could, at the option of the lenders under the Facilities, accelerate repayment under the Facilities, thereby materially and adversely affecting our liquidity, financial condition and results of operations. Each loan originated under the Revolving Facility is subject to the satisfaction of certain conditions. We cannot be assured that we will be able to borrow funds under the Revolving Facility at any particular time or at all. We are currently in compliance with all financial covenants under the Facilities.

For the nine months ended September 30, 2016, we borrowed $98.3 million and repaid $153.3 million under the Facilities. For the nine months ended September 30, 2015, we borrowed $120.0 million and repaid $139.5 million under the Facilities.

Interest expense and related fees, excluding amortization of deferred financing costs, of $2.1 million and $2.3 million, respectively, were incurred in connection with the Facilities for the three months ended September 30, 2016 and 2015. Interest expense and related fees, excluding amortization of deferred financing costs, of $6.2 million and $6.9 million, respectively, were incurred in connection with the Facilities for the nine months ended September 30, 2016 and 2015.

In accordance with the 1940 Act, with certain exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing. The Company’s asset coverage as of September 30, 2016 was in excess of 200%. Amortization of deferred financing costs of $0.3 million and $0.6 million, respectively, were incurred in connection with the facilities for the three months ended September 30, 2016 and 2015. Amortization of deferred financing costs of $0.8 million and $1.3 million, respectively, were incurred in connection with the facilities for the nine months ended September 30, 2016 and 2015. As of September 30, 2016, we had $2.7 million of deferred financing costs related to the Revolving Facility, which is presented as an asset and $1.6 million of deferred financing costs related to the Term Loan Facility as a reduction to Loans Payable on the Consolidated Statement of Assets and Liabilities. As of December 31, 2015, we had $3.2 million of deferred financing costs related to the Revolving Facility, which is presented as an asset and $1.9 million of deferred financing costs related to the Term Loan Facility as a reduction to Loans Payable on the Consolidated Statement of Assets and Liabilities.

Notes

In December 2014, we completed a public offering of $50.0 million in aggregate principal amount of 6.75% notes due 2021, or the 2021 Notes. The 2021 Notes mature on November 15, 2021, and may be redeemed in whole or in part at any time or from time to time at our option on or after November 15, 2017. The 2021 Notes bear interest at a rate of 6.75% per year payable quarterly on March 30, June 30, September 30 and December 30, of each year, beginning December 30, 2014 and trade on the New York Stock Exchange under the trading symbol “TCRX”.

In December 2015, we completed a public offering of $35.0 million in aggregate principal amount of 6.75% notes due 2022, or the 2022 Notes. The 2022 Notes mature on December 30, 2022, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 30, 2018. The 2022 Notes bear interest at a rate of 6.75% per year payable quarterly on March 30, June 30, September 30 and December 30, of each year, beginning March 30, 2016 and trade on the New York Stock Exchange under the trading symbol “TCRZ”. We refer to the 2021 Notes and the 2022 Notes collectively as the Notes.

The Notes are our direct unsecured obligations and rank: (i) pari passu with our other outstanding and future senior unsecured indebtedness; (ii) senior to any of our future indebtedness that expressly provides it is subordinated to the Notes; (iii) effectively subordinated to all our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, borrowings under our Revolving Facility and Term Loan Facility; (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries.

The Base Indenture, as supplemented by the First and Second Supplemental Indentures collectively, (the “Indenture”), contains certain covenants including covenants requiring us to comply with (regardless of whether it is subject to) the Section 18 (a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC. Currently these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings. These covenants are subject to important limitations and exceptions that are described in the Indenture. The Indenture provides for customary events of default and further provides that the Trustee or the holders of 25% in aggregate principal amount of the outstanding Notes in a series may declare such Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period. As of September 30, 2016, we were in compliance with the terms of the indenture and the supplemental indenture governing the Notes. See Note 7 to our consolidated financial statements for more detail on the Notes.

As of September 30, 2016, the carrying amount and fair value of our 2021 and 2022 Notes was $85.0 million and $88.3 million, respectively. As of December 31, 2015, the carrying value and fair value of our 2021 and 2022 Notes was $85.0 million and $84.7 million, respectively. The fair value of our Notes is determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Notes is based on the closing price of the security, which is a Level 2 input under ASC 820 due to the trading volume.

In connection with the issuance of the 2021 and 2022 Notes, we incurred $3.6 million of fees and expenses. Any of these unamortized fees and expenses are presented as a reduction to the Notes payable balance and are being amortized using the effective interest method over the term of the Notes. For the three and nine months ended September 30, 2016, we amortized approximately $0.1 million and $0.4 million of deferred financing costs, respectively, which is reflected in amortization of deferred financing costs on the Consolidated Statements of Operations. For the three and nine months ended September 30, 2015, we amortized approximately $0.1 million and $0.2 million of deferred financing costs, respectively, which is reflected in amortization of deferred financing costs on the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, we had approximately $2.8 million and $3.2 million, respectively, of remaining deferred financing costs on the Notes, which reduced the notes payable balance on our Consolidated Statements of Assets and Liabilities.

For the three and nine months ending September 30, 2016, we incurred interest expense on the Notes of approximately $1.4 million and $4.3 million, respectively. For the three and nine months ending September 30, 2015, we incurred interest expense on the Notes of approximately $0.8 million and $2.5 million, respectively.

Interest Rate Derivative

On May 10, 2012, we entered into a five-year interest rate swap agreement, or swap agreement, with ING Capital Markets, LLC. Under the swap agreement, with a notional value of $50 million, we pay a fixed rate of 1.1425% and receive a floating rate based upon the current three-month LIBOR rate. We entered into the swap agreement to manage interest rate risk and not for speculative purposes.

We record the change in valuation of the swap agreement in unrealized appreciation (depreciation) as of each measurement period. When the quarterly swap amounts are paid or received under the swap agreement, the amounts are recorded as a realized gain (loss) as interest rate derivative periodic interest payments, net on the Consolidated Statement of Operations.

For the three months ended September 30, 2016 and 2015, we recognized $0.1 million and $0.1 million, respectively, of realized loss from the swap agreement, which is reflected as interest rate derivative periodic interest payments, net in the Consolidated Statements of Operations. For the nine months ended September 30, 2016 and 2015, we recognized $0.2 million and $0.3 million, respectively, of realized loss from the swap agreement, which is reflected as interest rate derivative periodic interest payments, net in the Consolidated Statements of Operations.

For the three months ended September 30, 2016 and 2015, we recognized $0.1 million and ($0.1) million of net change in unrealized appreciation (depreciation) from the swap agreement, respectively, which is reflected in net change in unrealized depreciation on interest rate derivative in the Consolidated Statements of Operations. For the nine months ended September 30, 2016 and 2015, we recognized $0.1 million and ($0.3) million of net change in unrealized appreciation (depreciation) from the swap agreement, respectively, which is reflected in net change in unrealized depreciation on interest rate derivative in the Consolidated Statements of Operations. As of September 30, 2016 and December 31, 2015, the fair value of our swap agreement is $(0.1) million and $(0.2) million, respectively, which is reflected as an interest rate derivative liability on the Consolidated Statements of Assets and Liabilities.

Commitments and Contingencies and Off-Balance Sheet Arrangements

From time to time, we, or the Advisor, may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of our rights under contracts with our portfolio companies. Neither we, nor the Advisor, are currently subject to any material legal proceedings.

Unfunded commitments to provide funds to portfolio companies are not reflected in our Consolidated Statements of Assets and Liabilities. Our unfunded commitments may be significant from time to time. These commitments will be subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We intend to use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments.

As of September 30, 2016 and December 31, 2015, we have the following unfunded commitments to portfolio companies (in millions):


	As of
	September 30, 2016		December 31, 2015
Unfunded delayed draw facilities
A10 Capital, LLC	$	2.5	$	—
BeneSys Inc.		—		0.2
The John Gore Organization, Inc.⁽¹⁾		—		3.2

	$	2.5	$	3.4

Unfunded revolving commitments
Holland Intermediate Acquisition Corp.	$	3.0	$	3.0
The John Gore Organization, Inc.⁽¹⁾		0.8		1.5
OEM Group, LLC		0.5		—
Tri Starr Management Services, Inc.		0.4		—

	$	4.7	$	4.5

Unfunded commitments to investments in funds
Freeport Financial SBIC Fund LP	$	0.7	$	0.7
Gryphon Partners 3.5, L.P.		0.4		0.3

	$	1.1	$	1.0

Total unfunded commitments	$	8.3	$	8.9

⁽¹⁾	Investment formerly known as Key Brand Entertainment, Inc. The name change was effective May 16, 2016.

Dividends

We have elected to be taxed as a RIC under Subchapter M of the Code. In order to maintain our status as a regulated investment company, we are required to distribute at least 90% of our investment company taxable income. To avoid a 4% excise tax on undistributed earnings, we are required to distribute each calendar year the sum of (i) 98% of our ordinary income for such calendar year (ii) 98.2% of our net capital gains for the one-year period ending October 31 of that calendar year (iii) any income recognized, but not distributed, in preceding years and on which we paid no federal income tax.

Our quarterly distributions, if any, will be determined by our board of directors. We intend to make distributions to stockholders on a quarterly basis of substantially all of our net investment income. Although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In addition, the extent and timing of special dividends, if any, will be determined by our board of directors and will largely be driven by portfolio specific events and tax considerations at the time.

In addition, we may be limited in our ability to make distributions due to the BDC asset coverage test for borrowings applicable to us as a BDC under the 1940 Act.

The following table summarizes our dividends declared and paid or to be paid on all shares including dividends reinvested, if any:


Date Declared	Record Date	Payment Date	Amount Per Share
August 5, 2010	September 2, 2010	September 30, 2010	$	0.05
November 4, 2010	November 30, 2010	December 28, 2010	$	0.10
December 14, 2010	December 31, 2010	January 28, 2011	$	0.15
March 10, 2011	March 25, 2011	March 31, 2011	$	0.23
May 5, 2011	June 15, 2011	June 30, 2011	$	0.25
July 28, 2011	September 15, 2011	September 30, 2011	$	0.26
October 27, 2011	December 15, 2011	December 30, 2011	$	0.28
March 6, 2012	March 20, 2012	March 30, 2012	$	0.29
March 6, 2012	March 20, 2012	March 30, 2012	$	0.05
May 2, 2012	June 15, 2012	June 29, 2012	$	0.30
July 26, 2012	September 14, 2012	September 28, 2012	$	0.32
November 2, 2012	December 14, 2012	December 28, 2012	$	0.33
December 20, 2012	December 31, 2012	January 28, 2013	$	0.05
February 27, 2013	March 15, 2013	March 29, 2013	$	0.33
May 2, 2013	June 14, 2013	June 28, 2013	$	0.34
August 2, 2013	September 16, 2013	September 30, 2013	$	0.34
August 2, 2013	September 16, 2013	September 30, 2013	$	0.08
October 30, 2013	December 16, 2013	December 31, 2013	$	0.34
March 4, 2014	March 17, 2014	March 31, 2014	$	0.34
May 7, 2014	June 16, 2014	June 30, 2014	$	0.34
August 7, 2014	September 15, 2014	September 30, 2014	$	0.34
November 4, 2014	December 15, 2014	December 31, 2014	$	0.34
March 6, 2015	March 20, 2015	March 31, 2015	$	0.34
May 5, 2015	June 15, 2015	June 30, 2015	$	0.34
August 4, 2015	September 15, 2015	September 30, 2015	$	0.34
November 3, 2015	December 15, 2015	December 31, 2015	$	0.34
March 8, 2016	March 21, 2016	March 31, 2016	$	0.34
May 3, 2016	June 15, 2016	June 30, 2016	$	0.34
August 2, 2016	September 15, 2016	September 30, 2016	$	0.34
November 8, 2016	December 15, 2016	December 30, 2016	$	0.27

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our status as a regulated investment company. We cannot assure stockholders that they will receive any distributions at a particular level.

We maintain an “opt in” dividend reinvestment plan for our common stockholders. As a result, unless stockholders specifically elect to have their dividends automatically reinvested in additional shares of common stock, stockholders will receive all such dividends in cash. There were no dividends reinvested for the three and nine months ended September 30, 2016 and 2015 under the dividend reinvestment plan.

Under the terms of our dividend reinvestment plan, dividends will primarily be paid in newly issued shares of common stock. However, we reserve the right to purchase shares in the open market in connection with the implementation of the plan. This feature of the plan means that, under certain circumstances, we may issue shares of our common stock at a price below net asset value per share, which could cause our stockholders to experience dilution.

Distributions in excess of our current and accumulated profits and earnings would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. The determination of the tax attributes of our distributions will be made annually as of the end of our fiscal year based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of our distributions for a full year. If we had determined the tax attributes of our 2016 distributions as of September 30, 2016, 100% would be from ordinary income, 0% would be from capital gains and 0% would be a return of capital. There can be no certainty to stockholders that this determination is representative of what the tax attributes of our 2016 distributions to stockholders will actually be. Each year, a statement on Form 1099-DIV identifying the source of the distribution will be mailed to our stockholders.

Stock Repurchase Program

On March 6, 2015, our board of directors authorized a $25.0 million stock repurchase program that was put into effect in May 2015. The timing and amount of any stock repurchases will depend on the terms and conditions of the repurchase program and no assurances can be given that any particular amount will be purchased. This stock repurchase program terminated on March 6, 2016. On March 8, 2016, our board of directors authorized a new $25.0 million stock repurchase program. Unless extended by our board of directors, the stock repurchase program will terminate on March 8, 2017 and may be modified or terminated at any time for any reason without prior notice. We have provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. We will retire immediately all such shares of common stock that we purchase in connection with the stock repurchase program.

The following table summarizes our share repurchases under our stock repurchase program for the three and nine months ended September 30, 2016 and 2015 (in millions):


	For the three months ended September 30,					For the nine months ended September 30,
	2016		2015			2016			2015
Dollar amount repurchased	$	—	$	3.2		$	1.5		$	7.0
Shares repurchased		—		0.3			0.1			0.6
Average price per share (including commission)	$	—	$	12.28		$	10.86		$	12.33
Weighted average discount to net asset value		—		7.56	%		12.22	%		6.83	%

Related Party Transactions

Investment Management Agreement

On March 8, 2016, our investment management agreement with the Advisor was re-approved by our Board of Directors. Under the investment management agreement, the Advisor, subject to the overall supervision of our board of directors, manages the day-to-day operations of, and provides investment advisory services to us.

The Advisor receives a fee for investment advisory and management services consisting of a base management fee and a two-part incentive fee.

The base management fee is calculated at an annual rate of 1.5% of our gross assets payable quarterly in arrears on a calendar quarter basis. For purposes of calculating the base management fee, “gross assets” is determined as the value of our assets without deduction for any liabilities. The base management fee is calculated based on the value of our gross assets at the end of the most recently completed calendar quarter, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.

For the three months ended September 30, 2016 and 2015, we incurred base management fees payable to the Advisor of $2.7 million and $3.0 million, respectively. For the nine months ended September 30, 2016 and 2015, we incurred base management fees payable to the Advisor of $8.4 million and $8.9 million, respectively. As of September 30, 2016 and December 31, 2015, $2.7 million and $2.9 million, respectively, was payable to the Advisor.

The incentive fee has two components, ordinary income and capital gains, as follows:

The ordinary income component is calculated, and payable, quarterly in arrears based on our preincentive fee net investment income for the immediately preceding calendar quarter, subject to a cumulative total return requirement and to deferral of non-cash amounts. The preincentive fee net investment income, which is expressed as a rate of return on the value of our net assets attributable to our common stock, for the immediately preceding calendar quarter, will have a 2.0% (which is 8.0% annualized) hurdle rate (also referred to as “minimum income level”). Preincentive fee net investment income means interest income, amortization of original issue discount, commitment and origination fees, dividend income and any other income (including any other fees, such as, structuring, diligence, managerial assistance and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under our administration agreement (discussed below), and any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee and any offering expenses and other expenses not charged to operations but excluding certain reversals to the extent such reversals have the effect of reducing previously accrued incentive fees based on the deferral of non-cash interest. Preincentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. The Advisor receives no incentive fee for any calendar quarter in which our preincentive fee net investment income does not exceed the minimum income level. Subject to the cumulative total return requirement described below, the Advisor receives 100% of our preincentive fee net investment income for any calendar quarter with respect to that portion of the preincentive net investment income for such quarter, if any, that exceeds the minimum income level but is less than 2.5% (which is 10.0% annualized) of net assets (also referred to as the “catch-up” provision) and 20.0% of our preincentive fee net investment income for such calendar quarter, if any, greater than 2.5% (10.0% annualized) of net assets. The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of our preincentive fee net investment income is payable except to the extent 20.0% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding quarters. In other words, any ordinary income incentive fee that is payable in a calendar quarter is limited to the lesser of (i) 20% of the amount by which our preincentive fee net investment income for such calendar quarter exceeds the 2.0% hurdle, subject to the “catch-up” provision, and (ii) (x) 20% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the amount, if positive, of the sum of our preincentive fee net

investment income, base management fees, realized gains and losses and unrealized appreciation and depreciation for the then current and 11 preceding calendar quarters. In addition, the portion of such incentive fee that is attributable to deferred interest (sometimes referred to as payment-in-kind interest, or PIK, or original issue discount, or OID) will be paid to THL Credit Advisors, together with interest thereon from the date of deferral to the date of payment, only if and to the extent we actually receive such interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write-off or similar treatment of the investment giving rise to any deferred interest accrual. There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle rate and there is no delay of payment if prior quarters are below the quarterly hurdle rate.

For the three and nine months ended September 30, 2016, we incurred $2.6 million and $2.7 million, respectively, of incentive fees related to ordinary income. For the three and nine months ended September 30, 2015, we incurred $2.9 million and $8.9 million, respectively, of incentive fees related to ordinary income. The lower incentive fee compared to the nine months ended September 30, 2015 was the result of realized and unrealized losses in the portfolio. If we had not incurred these net realized and unrealized losses for the nine month period ending September 30, 2016, we would have incurred an incentive fee related to ordinary income of $7.6 million. As of September 30, 2016 and December 31, 2015, $2.5 million and $2.9 million, respectively, of such incentive fees are currently payable to the Advisor. As of September 30, 2016 and December 31, 2015, $1.4 million and $1.3 million, respectively of incentive fees incurred by us were generated from deferred interest (i.e. PIK, certain discount accretion and deferred interest) and are not payable until such amounts are received in cash.

The second component of the incentive fee (capital gains incentive fee) is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment management agreement, as of the termination date). This component is equal to 20.0% of our cumulative aggregate realized capital gains from inception through the end of that calendar year, computed net of the cumulative aggregate realized capital losses and cumulative aggregate unrealized capital depreciation through the end of such year. The aggregate amount of any previously paid capital gains incentive fees is subtracted from such capital gains incentive fee calculated. There were no capital gains incentive fee payable to our Advisor under the investment management agreement as of September 30, 2016 and December 31, 2015.

GAAP requires that the incentive fee accrual considers the cumulative aggregate realized gains and losses and unrealized capital appreciation or depreciation of investments or other financial instruments, such as an interest rate derivative, in the calculation, as an incentive fee would be payable if such realized gains and losses or unrealized capital appreciation or depreciation were realized, even though such realized gains and losses and unrealized capital appreciation or depreciation is not permitted to be considered in calculating the fee actually payable under the investment management agreement (“GAAP Incentive Fee”). There can be no assurance that such unrealized appreciation or depreciation will be realized in the future. Accordingly, such fee, as calculated and accrued, would not necessarily be payable under the investment management agreement, and may never be paid based upon the computation of incentive fees in subsequent periods. For the three and nine months ended September 30, 2016 and 2015, we incurred no incentive fees related to the GAAP Incentive Fee.

Administration Agreement

We have also entered into an administration agreement with the Advisor under which the Advisor will provide administrative services to us. Under the administration agreement, the Advisor performs, or oversees the performance of administrative services necessary for our operation, which include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, the Advisor assists in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. We will reimburse the Advisor for our allocable portion of the costs and expenses incurred by the Advisor for overhead in performance by the Advisor of its duties under the administration agreement and the investment management agreement, including facilities, office equipment and our allocable portion of cost of compensation and related expenses of our chief financial officer and chief compliance officer and their respective staffs, as well as any costs and expenses incurred by the Advisor relating to any administrative or operating services provided to us by the Advisor. Our board of directors reviews the allocation methodologies with respect to such expenses. Such costs are reflected as Administrator expenses in the accompanying Consolidated Statements of Operations. Under the administration agreement, the Advisor provides, on our behalf, managerial assistance to those portfolio companies to which the Company is required to provide such assistance. To the extent that our Advisor outsources any of its functions, the Company pays the fees associated with such functions on a direct basis without profit to the Advisor.

For the three months ended September 30, 2016 and 2015, we incurred administrator expenses of $0.9 million and $0.9 million, respectively. For the nine months ended September 30, 2016 and 2015, we incurred administrator expenses of $2.7 million and $2.8 million, respectively. As of September 30, 2016 and December 31, 2015, $0.04 million and $0.05 million, respectively, was due to the Advisor for administrator expenses.

License Agreement

We and the Advisor have entered into a license agreement with THL Partners under which THL Partners has granted to us and the Advisor a non-exclusive, personal, revocable worldwide non-transferable license to use the trade name and service mark THL, which is a proprietary mark of THL Partners, for specified purposes in connection with our respective businesses. This license agreement is royalty-free, which means we are not charged a fee for our use of the trade name and service mark THL. The license agreement is terminable either in its entirety or with respect to us or the Advisor by THL Partners at any time in its sole discretion upon 60 days prior written notice, and is also terminable with respect to either us or the Advisor by THL Partners in the case of certain events of non-compliance. After the expiration of its first one year term, the entire license agreement is terminable by either us or the Advisor at our or its sole discretion upon 60 days prior written notice. Upon termination of the license agreement, we and the Advisor must cease to use the name and mark THL, including any use in our respective legal names, filings, listings and other uses that may require us to withdraw or replace our names and marks. Other than with respect to the limited rights contained in the license agreement, we and the Advisor have no right to use, or other rights in respect of, the THL name and mark. We are an entity operated independently from THL Partners, and third parties who deal with us have no recourse against THL Partners.

Due to and from Affiliates

The Advisor paid certain other general and administrative expenses on our behalf. As of September 30, 2016 and December 31, 2015, there was $0.03 million and $0.04 million due to affiliate, which was included in accrued expenses and other payables on the Consolidated Statements of Assets and Liabilities.

As of September 30, 2016 and December 31, 2015, we owed $0.04 million and $0.05 million, respectively, of Administrator expense to the Advisor, which was included in accrued expenses and other payables on the Consolidated Statements of Assets and Liabilities.

As of September 30, 2016 and December 31, 2015, we incurred $0.01 million and $0.1 million, respectively, of other general and administrative expense on behalf of the Advisor, which was included in due from affiliates on the Consolidated Statement of Assets and Liabilities.

We act as the investment adviser to Greenway and Greenway II and are entitled to receive certain fees. As a result, each of Greenway and Greenway II is classified as an affiliate. As of September 30, 2016 and December 31, 2015, $0.5 million and $0.6 million of fees related to Greenway and Greenway II, respectively, were included in due from affiliate on the Consolidated Statements of Assets and Liabilities.

Critical accounting policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, the Company’s significant accounting policies are further described in the notes to the consolidated financial statements.

Valuation of Portfolio Investments

As a BDC, we generally invest in illiquid securities including debt and equity investments of lower middle market companies. Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from an independent pricing service or one or more broker-dealers or market makers. Debt and equity securities for which market quotations are not readily available or are not considered to be the best estimate of fair value are valued at fair value as determined in good faith by our board of directors. Because we expect that there will not be a readily available market value for many of the investments in our portfolio, it is expected that many of our portfolio investments’ values will be determined in good faith by our board of directors in accordance with a documented valuation policy that has been reviewed and approved by our board of directors and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

With respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described below:

•

our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;

•

preliminary valuation conclusions are then documented and discussed with senior management of the Advisor;

•

to the extent determined by the audit committee of our board of directors, independent valuation firms are used to conduct independent appraisals and review the Advisor’s preliminary valuations in light of their own independent assessment;

•

the audit committee of our board of directors reviews the preliminary valuations of the Advisor and independent valuation firms and, if necessary, responds and supplements the valuation recommendation of the independent valuation firms to reflect any comments; and

•

our board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Advisor, the respective independent valuation firms and the audit committee.

The types of factors that we may take into account in fair value pricing our investments include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. We generally utilize an income approach to value our debt investments and a combination of income and market approaches to value our equity investments. With respect to unquoted securities, the Advisor and our board of directors, in consultation with our independent third party valuation firms, values each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors, which valuation is then approved by our board of directors.

Debt Investments

For debt investments, we generally determine the fair value primarily using an income, or yield, approach that analyzes the discounted cash flows of interest and principal for the debt security, as set forth in the associated loan agreements, as well as the financial position and credit risk of each portfolio investments. Our estimate of the expected repayment date is generally the legal maturity date of the instrument. The yield analysis considers changes in leverage levels, credit quality, portfolio company performance and other factors. The enterprise value, a market approach, is used to determine the value of equity and debt investments that are credit impaired, close to maturity or where we also hold a controlling equity interest. The method for determining enterprise value uses a multiple analysis, whereby appropriate multiples are applied to the portfolio company’s net income before net interest expense, income tax expense, depreciation and amortization, or EBITDA.

Interest Rate Derivative

We value our interest rate derivative agreement using an income approach that analyzes the discounted cash flows associated with the interest rate derivative agreement. Significant inputs to the discounted cash flows methodology include the forward interest rate yield curves in effect as of the end of the measurement period and an evaluation of the counterparty’s credit risk.

Collateralized Loan Obligations

We value our residual interest investments in collateralized loan obligations using an income approach that analyzes the discounted cash flows of our residual interest. The discounted cash flows model utilizes prepayment, re-investment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow, and comparable yields for similar collateralized loan obligation fund subordinated notes or equity, when available. Specifically, we use Intex cash flow models, or an appropriate substitute to form the basis for the valuation of our residual interest. The models use a set of assumptions including projected default rates, recovery rates, reinvestment rate and prepayment rates in order to arrive at estimated cash flows. The assumptions are based on available market data and projections provided by third parties as well as management estimates.

Payment Rights

We value our investment in payment rights using an income approach that analyzes the discounted projected future cash flow streams assuming an appropriate discount rate, which will among other things consider other transactions in the market, the current credit environment, performance of the underlying portfolio company and the length of the remaining payment stream.

Equity

We use a combination of the income and market approaches to value our equity investments. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future cash flows or earnings to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, the current investment performance rating, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, transaction comparables, our principal market as the reporting entity, and enterprise values, among other factors.

Investment in Funds

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, we disclose the fair value of our investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level l—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2—Quoted prices in markets that are not considered to be active or financial instruments for which significant inputs are observable, either directly or indirectly;

Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

We consider whether the volume and level of activity for the asset or liability have significantly decreased and identify transactions that are not orderly in determining fair value. Accordingly, if we determine that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate to supplement or replace a market approach in those circumstances.

We have adopted the authoritative guidance under GAAP for estimating the fair value of investments in investment companies that have calculated net asset value per share in accordance with the specialized accounting guidance for Investment Companies. Accordingly, in circumstances in which net asset value per share of an investment is determinative of fair value, we estimate the fair value of an investment in an investment company using the net asset value per share of the investment (or its equivalent) without further adjustment if the net asset value per share of the investment is determined in accordance with the specialized accounting guidance for investment companies as of the reporting entity’s measurement date. Redemptions are not generally permitted in our investments in funds. The remaining term of our investments in funds is expected to be four to eight years.

Revenue Recognition

We record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis to the extent that we expect to collect such amounts. Dividend income is recognized on the ex-dividend date. Original issue discount, principally representing the estimated fair value of detachable equity or warrants obtained in conjunction with the acquisition of debt securities, and market discount or premium are capitalized and accreted or amortized into interest income over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion/amortization of discounts and premiums and upfront loan origination fees.

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or when it is no longer probable that principal or interest will be collected. However, we may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. We record the reversal of any previously accrued income against the same income category reflected in the Consolidated Statement of Operations. As of September 30, 2016, we had four loans from two issuers on non-accrual status with an amortized cost basis of $21.1 million and fair value of $18.7 million. As of December 31, 2015, we had two loans from two issuers on non-accrual status with an amortized cost basis of $25.0 million and fair value of $13.9 million.

We have investments in our portfolio which contain a contractual paid-in-kind, or PIK, interest provision. PIK interest is computed at the contractual rate specified in each investment agreement, is added to the principal balance of the investment, and is recorded as income. We will cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect amounts to be collectible and will generally only begin to recognize PIK income again when all principal and interest have been paid or upon a restructuring of the investment where the interest is deemed collectable. To maintain our status as a RIC, PIK interest income, which is considered investment company taxable income, must be paid out to stockholders in the form of dividends even though we have not yet collected the cash. Amounts necessary to pay these dividends may come from available cash.

We capitalize and amortize upfront loan origination fees received in connection with the closing of investments. The unearned income from such fees is accreted into interest income over the contractual life of the loan based on the effective interest method. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees, and unamortized discounts are recorded as interest income.

Interest income from our investment in TRA and CLO residual interest investments are recorded based upon an estimation of an effective yield to expected maturity using anticipated cash flows with any remaining amount recorded to the cost basis of the investment. We monitor the anticipated cash flows from our TRA and CLO residual interest investments and will adjust our effective yield periodically as needed.

Other income includes commitment fees, fees related to the management of Greenway and Greenway II, fees related to the management of certain controlled equity investments, structuring fees, amendment fees and unused commitment fees associated with investments in portfolio companies. These fees are recognized as income when earned by us in accordance with the terms of the applicable management or credit agreement and may or may not be recurring in nature as part of our normal business operations.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized. We measure realized gains or losses on the interest rate derivative based upon the difference between the proceeds received or the amounts paid on the interest rate derivative. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values or value of the interest rate derivative during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

U.S. Federal Income Taxes, including excise tax

We operate so as to maintain our status as a RIC under Subchapter M of the Code and intend to continue to do so. Accordingly, we are not subject to federal income tax on the portion of our taxable income and gains distributed to stockholders. In order to qualify for favorable tax treatment as a RIC, we are required to distribute annually to our stockholders at least 90% of our investment company taxable income, as defined by the Code. To avoid a 4% federal excise tax, we must distribute each calendar year the sum of (i) 98% of our ordinary income for each such calendar year (ii) 98.2% of our net capital gains for the one-year period ending October 31 of that calendar year, and (iii) any income recognized, but not distributed, in preceding years and on which we paid no federal income tax. We may choose not to distribute all of our taxable income for the calendar year and pay a non-deductible 4% excise tax on this income. If we choose to do so, all other things being equal, this would increase expenses and reduce the amount available to be distributed to stockholders. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, the Company accrues excise taxes on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. We will accrue excise tax on undistributed taxable income as required. Please refer to “Dividends” above for a summary of the distributions. For the three months ended September 30, 2016 and 2015 we incurred U.S. federal excise tax and other tax expenses of $0.1 million and $0.1 million, respectively. For the nine months ended September 30, 2016 and 2015 we incurred U.S. federal excise tax and other tax expenses of $0.3 million and $0.5 million, respectively.

Certain consolidated subsidiaries are subject to U.S. federal and state income taxes. These taxable entities are not consolidated for income tax purposes and may generate income tax liabilities or assets from permanent and temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries.

The following shows the breakdown of current and deferred income tax provisions (benefits) for the three and nine months ended September 30, 2016 and 2015 (in millions):


	For the three months ended September 30,						For the nine months ended September 30,
	2016			2015			2016			2015
Current income tax provision:
Current income tax (provision) benefit	$	(0.0	)	$	0.3		$	(0.2	)	$	0.1
Current provision for taxes on realized gain on investments		—			—			—			—
Deferred income tax provision:
Deferred income tax benefit		0.1			0.2			0.4			0.5
Provision for taxes on unrealized gain on investments		(0.4	)		(0.4	)		(0.6	)		(0.7	)

These current and deferred income taxes are determined from taxable income estimates provided by portfolio companies where we hold equity or equity-like investments organized as pass-through entities in its corporate subsidiaries. These tax estimates may be subject to further change once tax information is finalized for the year. As of September 30, 2016 and December 31, 2015, $0.2 million and $0.4 million, respectively, of income tax receivable was included in prepaid expenses and other assets on the Consolidated Statements of Assets and Liabilities. As of September 30, 2016 and December 31, 2015, $4.4 million and $3.9 million, respectively, were included in deferred tax liability on the Consolidated Statements of Assets and Liabilities primarily relating to deferred taxes on unrealized gains and other temporary book to tax differences related to investments and other book to tax differences held in its corporate subsidiaries. As of September 30, 2016 and December 31, 2015, $1.4 million and $1.1 million, respectively of deferred tax assets were presented on the Consolidated Statements of Assets and Liabilities relating to net operating loss carryforwards and unrealized losses on investments and other temporary book to tax differences that are expected to be used in future periods. The Company believes that it will be able to fully utilize these deferred tax assets against future taxable income and has therefore not recognized an allowance against these deferred tax assets.

We follow the provisions under the authoritative guidance on accounting for and disclosure of uncertainty in tax positions. The provisions require us to determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For tax positions not meeting the more likely than not threshold, the tax amount recognized in the consolidated financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. There are no unrecognized tax benefits or obligations in the accompanying consolidated financial statements. Although we file U.S. federal and state tax returns, our major tax jurisdiction is U.S. federal. Our inception-to-date U.S. federal tax years remain subject to examination by taxing authorities.

Recent Developments

From October 1, 2016 through November 8, 2016, we closed one new and one follow-on first lien investment totaling $13.9 million in the financial services and industrials industries. The new floating rate investment and follow-on fixed rate investment have a combined weighted average yield based upon cost at the time of the investment of 8.3%.

On October 3, 2016, we sold our first lien investment in American Achievement Corporation at cost for net proceeds of $9.6 million.

On October 5, 2016, we restructured our investment in Copperweld Bimetallics LLC, or Copperweld. As part of the restructuring, we exchanged the cost basis of our senior secured loan totaling $19.3 million, for a debt-like preferred equity position of $3.4 million and a controlled equity position of an affiliate of Copperweld valued at $9.0 million, with $5.4 million remaining as a senior secured term loan. In connection with the restructuring, we recognized a $1.5 million loss.

On October 20, 2016, we received proceeds of $11.0 million from the repayment of our second lien investment in Synarc-Biocore Holdings, LLC at par.

On November 8, 2016, our board of directors declared a dividend of $0.27 per share payable on December 30, 2016 to stockholders of record at the date of business on December 15, 2016.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. As of September 30, 2016, 13.7% of the debt investments in our portfolio bore interest at fixed rates based upon fair value. Most of the debt investments in our portfolio have interest rate floors, which have effectively converted the debt investments to fixed rate loans in the current interest rate environment. In the future, we expect other debt investments in our portfolio will have floating rates. Our borrowings as well as the amount we receive under the interest rate derivative agreement are based upon floating rates.

Based on our September 30, 2016 Consolidated Statement of Assets and Liabilities, the following table shows the annual impact on net income of changes in interest rates, which assumes no changes in our investments and borrowings (in millions):


Change in Basis Points	Interest Income		Interest Expense		Net Income⁽¹⁾
Up 300 basis points	$	13.7	$	4.6	$	9.1
Up 200 basis points	$	9.0	$	3.0	$	6.0
Up 100 basis points	$	4.4	$	1.5	$	2.9
Down 300 basis points	$	—	$	—	$	—
Down 200 basis points	$	—	$	—	$	—
Down 100 basis points	$	—	$	—	$	—

1)	Excludes the impact of incentive fees based on pre-incentive fee net investment income. See “Note 4. Related Party Transaction” footnote to our consolidated financial statements for the three and nine months ended September 30, 2016 for more information on the incentive fee.

Based upon the current three month LIBOR rate, a hypothetical decrease in LIBOR would not affect our net income, due to the current rates being lower than 100 basis points. Based upon the current one month LIBOR rates, a hypothetical decrease in LIBOR would not affect interest expense, due to the current rates being lower than 100 basis points. We currently hedge against interest rate fluctuations by using an interest rate swap whereby we pay a fixed rate of 1.1425% and receive three-month LIBOR on a notional amount of $50 million. In the future, we may use other standard hedging instruments such as futures, options and forward contacts 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 the benefits of lower interest rates with respect to our portfolio of investments.

Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase in net assets resulting from operations, or net income.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

Our Co-Chief Executive Officers and Chief Financial Officer, under the supervision and with the participation of our management, conducted an evaluation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of the end of the period covered by this quarterly report on Form 10-Q, our Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal proceedings

We are not a defendant in any material pending legal proceeding, and no such material proceedings are known to be contemplated. However, from time to time, we may be party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under the contracts with our portfolio companies.

Item 1A.

Risk Factors

There have been no changes to the risk factors described in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 10, 2016 other than as described in Part II, Item 1A. “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the Securities and Exchange Commission on August 4, 2016.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Stock Repurchase Program

On March 6, 2015, the Company’s board of directors authorized a $25.0 million stock repurchase program that was put into effect in May 2015. The timing and amount of any stock repurchases will depend on the terms and conditions of the repurchase program and no assurances can be given that any common stock, or any particular amount, will be purchased. This stock repurchase program terminated on March 6, 2016. On March 8, 2016, the Company’s board of directors authorized a new $25.0 million stock repurchase program. Unless extended by the Company’s board of directors, the stock purchase program will terminate on March 8, 2017 and may be modified or terminated at any time for any reason without prior notice. The Company has provided our stockholders with notice of our intention to repurchase shares of our common stock in accordance with 1940 Act requirements. The Company will retire immediately all such shares of common stock that the Company purchases in connection with the stock repurchase program.

During the nine months ended September 30, 2016, we purchased 141,554 shares at a weighted average price per share of $10.86, inclusive of commissions. This represents a discount of approximately 12.22% to average net asset value per share for the nine months ended September 30, 2016. The following table presents information with respect to the Company’s purchases of its common stock during the nine months ended September 30, 2016:


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans
January 1, 2016 through January 31, 2016		—	$	—		—	$	17,709,829.83
February 1, 2016 through February 29, 2016		—	$	—		—	$	17,709,829.83
March 1, 2016 through March 31, 2016⁽¹⁾		50,600	$	10.62		50,600	$	24,462,535.82
April 1, 2016 through April 30, 2016		—	$	—		—	$	24,462,535.82
May 1, 2016 through May 31, 2016		4,266	$	11.03		4,266	$	24,415,492.51
June 1, 2016 through June 30, 2016		86,688	$	10.99		86,688	$	23,462,535.50
July 1, 2016 through July 31, 2016		—	$	—		—	$	23,462,535.50
August 1, 2016 through August 31, 2016		—	$	—		—	$	23,462,535.50
September 1, 2016 through September 30, 2016		—	$	—		—	$	23,462,535.50

		141,554	$	10.86		141,554

⁽¹⁾	Shares repurchased were under the new $25.0 million repurchase program authorized by the Company’s board of directors on March 8, 2016.

The Company’s net asset value per share was increased by approximately $0.00 as a result of the share repurchases.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

On November 7, 2016 we added three members to our investment committee. None of the members of the investment committee are employed by us or receive any direct compensation from us. These individuals receive compensation from THL Credit Advisors LLC that includes an annual base salary, an annual discretionary bonus and a portion of the distributions made by THL Credit Advisors LLC, a portion of which relates to the incentive fee earned by THL Credit Advisors LLC in connection with its services to us.

W. Montgomery Cook. Mr. Cook, 49, is a Managing Director for THL Credit Advisors LLC and serves as a member of the Direct Lending investment committee. He is responsible for transaction origination, underwriting and execution for the New York investment team. Mr. Cook also oversees origination, structuring and execution of investments in the financial services vertical. Prior to joining THL Credit in 2013, Mr. Cook was a Director at Deutsche Bank in the Credit Solutions Group where he was responsible for originating and structuring investment opportunities for the bank’s balance sheet. Mr. Cook’s experience included leveraged loans, middle market CLOs, esoteric asset finance, commercial real estate and premium finance. Prior to Deutsche Bank, Mr. Cook was a Managing Director with a publicly-traded BDC where he was on the investment committee and responsible for sourcing, underwriting, executing and monitoring a portfolio of subordinated loans and equity co-investments to financial sponsor-backed companies. Mr. Cook began his career at Merrill Lynch & Co. where he was a Financial Analyst in the Telecom, Media & Technology Investment Banking group and was subsequently an Associate and a Vice President in the Financial Sponsors Group at J.P. Morgan. Mr. Cook earned his B.S. in Business Administration from Northeastern University.

James R. Fellows. Mr. Fellows, 51, is a Managing Director and Co-Head of the Tradable Credit Platform for THL Credit Advisors LLC. He also serves on the Board of Directors of an affiliate of THL Credit Advisors. He has more than twenty-eight years of investment industry experience, principally in the area of leveraged finance. From April 2004 through June 2012, Mr. Fellows was Co-Head, Alternative Credit Strategies Group of McDonnell Investment Management, LLC, where he helped establish and manage three cash flow CLOs, a leveraged loan opportunity fund and unleveraged fund and a separate account. From 1998 to April 2004, Mr. Fellows was a Senior Vice President at Columbia Advisors, where he served as Co-Portfolio Manager for two continuously offered closed-end funds and four structured product vehicles from their inception, including two CLOs. Prior to joining Columbia Advisors in 1998, Mr. Fellows was a Senior Credit Analyst for Van Kampen Investments in its Bank Loan Investment Group. While at Van Kampen, Mr. Fellows also served as a Credit Analyst for high-yield bonds and privately placed mezzanine bonds. Other responsibilities with Van Kampen included training junior credit analysts for its bank loans and high yield groups. Mr. Fellows brings extensive knowledge of high-yield bank loans and high-yield bonds, as well as in-depth workout, restructuring and distressed investment experience. Mr. Fellows received his B.S. degree in Economics and Finance from the University of Nebraska and is a CFA charterholder and a member of The CFA Institute.

Howard H. Wu. Mr. Wu, 37, is a Managing Director for THL Credit Advisors LLC and serves as a member of the Direct Lending investment committee. He leads transaction origination, underwriting, execution, and portfolio management for the Boston and Los Angeles investment teams. Prior to joining THL Credit in 2007, Mr. Wu worked in the Corporate Finance department at Yahoo! Inc. where he executed mergers & acquisitions and strategic partnerships. He was previously in the Investment Banking Division at Bear, Stearns & Co. in San Francisco and Los Angeles. Mr. Wu earned his B.A. in Economics from the University of California, Berkeley.

Item 6.

Exhibits

Listed below are the exhibits that are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):


11		Computation of Per Share Earnings (included in the notes to the consolidated financial statements contained in this report).

31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.*

31.2		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.*

31.3		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.*

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).*

32.2		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).*

32.3		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).*

(*)	Filed herewith

100

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	THL CREDIT, INC.

Date: November 9, 2016	By:	/S/ SAM W. TILLINGHAST
		Sam W. Tillinghast
		Co-Chief Executive Officer

Date: November 9, 2016	By:	/S/ CHRISTOPHER J. FLYNN
		Christopher J. Flynn
		Co-Chief Executive Officer

Date: November 9, 2016	By:	/S/ TERRENCE W. OLSON
		Terrence W. Olson
		Chief Financial Officer

101