Goldman Sachs BDC, Inc. - Quarter Report: 2018 September (Form 10-Q)

Goldman Sachs BDC, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2018

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

Commission file number 814-00998

Goldman Sachs BDC, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		46-2176593
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

200 West Street, New York, New York		10282
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (212) 902-0300

Not Applicable

Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report.

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 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 every Interactive Data File required to be submitted 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 such files). YES ☐ NO ☐

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

Large accelerated filer:

Accelerated filer:

☐

Non-accelerated filer:

☐

Smaller reporting company:

☐

Emerging growth company:

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO X

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of November 1, 2018 was 40,227,625.

GOLDMAN SACHS BDC, INC.


	INDEX	PAGE
PART I	FINANCIAL INFORMATION		4
ITEM 1.	Financial Statements		4
	Consolidated Statements of Assets and Liabilities as of September 30, 2018 (Unaudited) and December 31, 2017		4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2018 (Unaudited) and 2017 (Unaudited)		5
	Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2018 (Unaudited) and 2017 (Unaudited)		6
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 (Unaudited) and 2017 (Unaudited)		7
	Consolidated Schedules of Investments as of September 30, 2018 (Unaudited) and December 31, 2017		8
	Notes to the Consolidated Financial Statements (Unaudited)		17
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		47
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		72
ITEM 4.	Controls and Procedures		73

PART II	OTHER INFORMATION		73
ITEM 1.	Legal Proceedings		73
ITEM 1A.	Risk Factors		73
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		76
ITEM 3.	Defaults Upon Senior Securities		76
ITEM 4.	Mine Safety Disclosures		76
ITEM 5.	Other Information		76
ITEM 6.	Exhibits		76

SIGNATURES			78

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “target,” “estimate,” “intend,” “continue” or “believe” or the negatives of, or other variations on, these terms or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include information in this report regarding general domestic and global economic conditions, our future financing plans, our ability to operate as a business development company (“BDC”) and the expected performance of, and the yield on, our portfolio companies. There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 and in this report, as well as any cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, results of operations and financial position. Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause our actual results to differ from our forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the U.S. Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K. Under Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in periodic reports we file under the Exchange Act, such as this quarterly report on Form 10-Q.

The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

•

our future operating results;

•

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets;

•

uncertainty surrounding the financial and political stability of the United States, the United Kingdom, the European Union and China;

•

our business prospects and the prospects of our portfolio companies;

•

the impact of investments that we expect to make;

•

the impact of increased competition;

•

our contractual arrangements and relationships with third parties;

•

the dependence of our future success on the general economy and its impact on the industries in which we invest;

•

the ability of our current and prospective portfolio companies to achieve their objectives;

•

the relative and absolute performance of our investment adviser;

•

our expected financings and investments;

•

the use of borrowed money to finance a portion of our investments;

•

our ability to make distributions;

•

the adequacy of our cash resources and working capital;

•

the timing of cash flows, if any, from the operations of our portfolio companies;

•

the impact of future acquisitions and divestitures;

•

the effect of changes in tax laws and regulations and interpretations thereof;

•

our ability to maintain our status as a BDC and a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”);

•

actual and potential conflicts of interest with Goldman Sachs Asset Management, L.P. and its affiliates;

•

general price and volume fluctuations in the stock market;

•

the ability of our investment adviser to attract and retain highly talented professionals;

•

the impact on our business from new or amended legislation or regulations;

•

the availability of credit and/or our ability to access the equity and capital markets; and

•

currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars.

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Goldman Sachs BDC, Inc.

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share amounts)


	September 30, 2018 (Unaudited)			December 31, 2017
Assets

Investments, at fair value
Non-controlled/non-affiliated investments (cost of $1,082,170 and $1,053,226, respectively)	$	1,076,354		$	1,050,179
Non-controlled affiliated investments (cost of $143,138 and $109,528, respectively)		126,676			95,468
Controlled affiliated investments (cost of $119,065 and $114,911, respectively)		115,290			112,666
Investments in affiliated money market fund (cost of $4 and $11,539, respectively)		4			11,539
Cash		4,648			11,606
Receivable for investments sold		268			–
Unrealized appreciation on foreign currency forward contracts		2			–
Interest and dividends receivable from non-controlled/affiliated investments and non-controlled/non-affiliated investments		10,815			8,302
Dividend receivable from controlled affiliated investments		3,000			2,400
Other income receivable from controlled affiliated investments		–			1,308
Deferred financing costs		5,773			4,847
Deferred offering costs		145			275
Other assets		228			2

Total assets	$	1,343,203		$	1,298,592


Liabilities

Debt (net of debt issuance costs of $5,644 and $3,724, respectively)	$	573,292		$	542,526
Interest and other debt expenses payable		4,594			1,688
Management fees payable		3,255			4,647
Incentive fees payable		4,962			3,180
Distribution payable		18,088			18,059
Payable for investments purchased		5,465			–
Directors’ fees payable		107			–
Accrued offering costs		362			289
Accrued expenses and other liabilities		4,438			2,373

Total liabilities	$	614,563		$	572,762

Commitments and Contingencies (Note 8)

Net Assets

Preferred stock, par value $0.001 per share (1,000,000 shares authorized, no shares issued and outstanding)	$	_		$	–
Common stock, par value $0.001 per share (200,000,000 shares authorized, 40,196,049 and 40,130,665 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively)		40			40
Paid-in capital in excess of par		802,046			799,936
Accumulated net realized gain (loss)		(84,304	)		(85,451	)
Accumulated undistributed net investment income		38,305			32,078
Net unrealized appreciation (depreciation)		(26,026	)		(19,352	)
Allocated income tax expense		(1,421	)		(1,421	)

TOTAL NET ASSETS	$	728,640		$	725,830

TOTAL LIABILITIES AND NET ASSETS	$	1,343,203		$	1,298,592


Net asset value per share	$	18.13		$	18.09

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)


	For the three months ended September 30,						For the nine months ended September 30,
	2018			2017			2018			2017
Investment Income:
From non-controlled/non-affiliated investments:
Interest income	$	30,322		$	28,204		$	91,340		$	85,383
Payment-in-kind		672			–			672			–
Other income		508			1,255			1,481			2,090

Total investment income from non-controlled/non-affiliated investments		31,502			29,459			93,493			87,473
From non-controlled affiliated investments:
Payment-in-kind		2,028			1,885			5,931			5,287
Interest income		889			354			1,936			1,476
Dividend income		86			7			103			20
Other income		11			7			26			19

Total investment income from non-controlled affiliated investments		3,014			2,253			7,996			6,802
From controlled affiliated investments:
Payment-in-kind		467			–			1,273			–
Dividend income		3,000			2,350			8,000			7,250
Other income		–			350			–			1,096

Total investment income from controlled affiliated investments		3,467			2,700			9,273			8,346

Total investment income	$	37,983		$	34,412		$	110,762		$	102,621

Expenses:
Interest and other debt expenses	$	6,432		$	4,884		$	18,328		$	14,235
Management fees		3,255			4,369			12,537			13,181
Incentive fees		4,962			4,624			13,988			9,595
Professional fees		580			509			2,308			1,443
Administration, custodian and transfer agent fees		230			219			693			608
Directors’ fees		118			177			336			525
Other expenses		412			302			1,091			925

Total expenses	$	15,989		$	15,084		$	49,281		$	40,512

NET INVESTMENT INCOME (LOSS) BEFORE TAXES	$	21,994		$	19,328		$	61,481		$	62,109

Excise tax	$	428		$	383		$	1,017		$	1,116

NET INVESTMENT INCOME (LOSS) AFTER TAXES	$	21,566		$	18,945		$	60,464		$	60,993


Net realized and unrealized gains (losses):
Net realized gain (loss) from:
Non-controlled/non-affiliated investments	$	(1	)	$	138		$	1,766		$	(38,138	)
Non-controlled affiliated investments		–			(2,495	)		9			(2,495	)
Foreign currency transactions		(182	)		–			(182	)		–
Net change in unrealized appreciation (depreciation) from:
Non controlled/non-affiliated investments		(1,985	)		(341	)		(2,769	)		24,874
Non-controlled affiliated investments		75			1,574			(2,402	)		(7,942	)
Controlled affiliated investments		(481	)		291			(1,530	)		(30	)
Foreign currency forward contracts		2			–			2			–
Foreign currency translations		171			–			171			–

Net realized and unrealized gains (losses)	$	(2,401	)	$	(833	)	$	(4,935	)	$	(23,731	)

(Provision) benefit for taxes on realized gain/loss on investments	$	–		$	–		$	(446	)	$	–
(Provision) benefit for taxes on unrealized appreciation/depreciation on investments		(146	)		–			(146	)		–

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	19,019		$	18,112		$	54,937		$	37,262


Net investment income (loss) per share (basic and diluted)	$	0.54		$	0.47		$	1.51		$	1.60
Earnings per share (basic and diluted)	$	0.47		$	0.45		$	1.37		$	0.98
Weighted average shares outstanding		40,192,683			40,106,702			40,171,874			38,130,304
Distributions declared per share	$	0.45		$	0.45		$	1.35		$	1.35

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Statements of Changes in Net Assets

(in thousands, except share and per share amounts)

(Unaudited)


	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017
Increase (decrease) in net assets resulting from operations:
Net investment income	$	60,464		$	60,993
Net realized gain (loss)		1,593			(40,633	)
Net change in unrealized appreciation (depreciation)		(6,528	)		16,902
(Provision) benefit for taxes on realized gain/loss on investments		(446	)		–
(Provision) benefit for taxes on unrealized appreciation/depreciation on investments		(146	)		–

Net increase (decrease) in net assets resulting from operations	$	54,937		$	37,262


Distributions to stockholders from:
Net investment income	$	(54,237	)	$	(52,445	)

Total distributions to stockholders	$	(54,237	)	$	(52,445	)


Capital transactions:
Issuance of common stock (0 and 3,737,500 shares, respectively)	$	–		$	80,288
Equity component of convertible notes		801			–
Reinvestment of stockholder distributions (65,384 and 40,743 shares, respectively)		1,309			917

Net increase (decrease) in net assets resulting from capital transactions	$	2,110		$	81,205


TOTAL INCREASE (DECREASE) IN NET ASSETS	$	2,810		$	66,022


Net assets at beginning of period	$	725,830		$	665,137

Net assets at end of period	$	728,640		$	731,159

Accumulated undistributed net investment income	$	38,305		$	34,172

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Statements of Cash Flows

(in thousands, except share and per share amounts)

(Unaudited)


	For the nine months ended September 30, 2018			For the nine months ended September 30, 2017

Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations:	$	54,937		$	37,262
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used for) operating activities:
Purchases of investments		(319,846	)		(494,609	)
Payment-in-kind interest capitalized		(7,020	)		(5,177	)
Investments in affiliated money market fund, net		11,535			(2	)
Proceeds from sales of investments and principal repayments		268,624			472,443
Net realized (gain) loss on investments		(1,775	)		40,633
Net change in unrealized (appreciation) depreciation on investments		6,701			(16,902	)
Net change in unrealized (appreciation) depreciation) on foreign currency forward contracts		(2	)		–
Amortization of premium and accretion of discount, net		(6,691	)		(7,785	)
Amortization of deferred financing and debt issuance costs		1,653			1,484
Amortization of original issue discount on convertible notes		164			92
Increase (decrease) in operating assets and liabilities:
(Increase) decrease in receivable for investments sold		(268	)		–
(Increase) decrease in interest and dividends receivable		(3,113	)		(201	)
(Increase) decrease in other income receivable		1,308			1,116
(Increase) decrease in other assets		(226	)		(623	)
Increase (decrease) in interest and other debt expenses payable		2,491			1,282
Increase (decrease) in management fees payable		(1,392	)		(37	)
Increase (decrease) in incentive fees payable		1,782			3,150
Increase (decrease) in investments purchased payable		5,465			–
-Increase (decrease) in directors’ fees payable		107			167
Increase (decrease) in accrued expenses and other liabilities		2,065			(784	)

Net cash provided by (used for) operating activities	$	16,499		$	31,509


Cash flows from financing activities:
Proceeds from issuance of common stock (net of underwriting costs)	$	–		$	81,571
Offering costs paid		203			(829	)
Distributions paid		(52,899	)		(49,828	)
Deferred financing and debt issuance costs paid		(3,447	)		(21	)
Borrowings on debt		347,436			405,350
Repayments of debt		(314,750	)		(460,350	)

Net cash provided by (used for) financing activities	$	(23,457	)	$	(24,107	)


Net increase (decrease) in cash		(6,958	)		7,402
Cash, beginning of period		11,606			4,565

Cash, end of period	$	4,648		$	11,967


Supplemental and non-cash financing activities
Interest expense paid	$	13,467		$	10,601
Accrued but unpaid excise tax expense	$	1,215		$	1,079
Accrued but unpaid deferred financing and debt issuance costs	$	415		$	52
Accrued but unpaid offering costs	$	362		$	527
Accrued but unpaid distributions	$	18,088		$	18,049
Reinvestment of stockholder distributions	$	1,309		$	917
Exchange of Investments	$	19,583		$	–

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of September 30, 2018

(in thousands, except share and per share amounts)

(Unaudited)


Portfolio Company	Industry	Interest Rate ⁽⁺⁾	Reference Rate and Spread ⁽⁺⁾	Maturity		Par Amount⁽⁺⁺⁾		Cost			Fair Value

Investments at Fair Value– 180.93% #

Corporate Debt⁽¹⁾ – 162.87%

1st Lien/Senior Secured Debt– 83.69%
Accuity Delivery Systems, LLC^{^ (2) (3)}	Health Care Providers & Services	9.34%	L + 7.00%; 1.00% Floor		06/13/2023	$	10,170	$	9,879		$	9,865
Artesyn Embedded Technologies, Inc.⁽⁴⁾	Electronic Equipment, Instruments & Components	9.75%			10/15/2020		20,000		20,000			19,150
Associations, Inc.⁽²⁾	Real Estate Management & Development	11.25%	P + 6.00% (incl. 3.00% PIK); 2.00% Floor		07/30/2024		11,785		11,641			11,637
Associations, Inc.^{(2) (5) (6)}	Real Estate Management & Development		P + 5.00%; 2.00% Floor		07/30/2024		587		(7	)		(7	)
Associations, Inc.^{(2) (5)}	Real Estate Management & Development	11.25%	P + 6.00% (incl. 3.00% PIK); 2.00% Floor		07/30/2024		2,937		1,010			1,009
Businessolver.com, Inc.^{(2) (3)}	Health Care Technology	9.81%	L + 7.50%; 1.00% Floor		05/15/2023		12,549		12,313			12,298
Businessolver.com, Inc.^{(2) (3) (5) (6)}	Health Care Technology		L + 7.50%; 1.00% Floor		05/15/2023		1,569		(29	)		(31	)
Businessolver.com, Inc.^{(2) (3) (5)}	Health Care Technology	9.81%	L + 7.50%; 1.00% Floor		05/15/2023		1,882		293			276
Collaborative Imaging, LLC^{^^^ (2) (3)}	Health Care Providers & Services	8.85%	L + 6.50%; 1.00% Floor		03/28/2025		7,600		7,492			7,448
Collaborative Imaging, LLC^{^^^ (2) (3)}	Health Care Providers & Services	8.85%	L + 6.50%; 1.00% Floor		03/28/2025		1,300		1,282			1,274
Continuum Managed Services LLC^{(2) (3)}	IT Services	8.25%	L + 6.00%; 1.00% Floor		06/08/2023		21,389		20,902			20,961
Continuum Managed Services LLC^{(2) (3) (5) (6)}	IT Services		L + 6.00%; 1.00% Floor		06/08/2023		1,800		(38	)		(36	)
Continuum Managed Services LLC^{(2) (3) (5) (6)}	IT Services		L + 6.00%; 1.00% Floor		06/08/2022		2,220		(45	)		(44	)
Dade Paper & Bag, LLC^{(2) (3)}	Distributors	9.74%	L + 7.50%; 1.00% Floor		06/10/2024		10,961		10,773			10,824
Dade Paper & Bag, LLC^{(2) (3)}	Distributors	9.24%	L + 7.00%; 1.00% Floor		06/10/2024		1,398		1,385			1,346
Datto, Inc.^{(2) (3)}	IT Services	10.15%	L + 8.00%; 1.00% Floor		12/07/2022		35,750		35,132			35,124
Datto, Inc.^{(2) (3) (5) (6)}	IT Services		L + 8.00%; 1.00% Floor		12/07/2022		2,406		(40	)		(42	)
Diligent Corporation⁽²⁾	Professional Services	8.03%	L + 5.50%; 1.00% Floor		04/14/2022	€	16,219		18,526			18,549
Diligent Corporation^{(2) (5)}	Professional Services	8.03%	L + 5.50%; 1.00% Floor		04/14/2022		760		502			502
Elemica, Inc.⁽³⁾	Software	9.24%	L + 7.00%; 1.00% Floor		07/07/2021		41,544		40,896			40,921
Elemica, Inc.^{(3) (5) (6)}	Software		L + 7.00%; 1.00% Floor		07/07/2021		6,000		(88	)		(90	)
Empirix, Inc.⁽²⁾	Diversified Telecommunication Services	8.47%	L + 6.25%; 1.00% Floor		09/25/2024		22,300		21,911			21,910
Empirix, Inc.^{(2) (5) (6)}	Diversified Telecommunication Services		L + 6.25%; 1.00% Floor		09/25/2023		1,300		(23	)		(23	)
Fenergo Finance 3 Limited^{(2) (7)}	Diversified Financial Services	8.64%	L + 6.25%; 1.00% Floor		09/05/2024	€	17,800		20,332			20,305
Fenergo Finance 3 Limited^{(2) (5) (6) (7)}	Diversified Financial Services		L + 6.25%; 1.00% Floor		09/05/2024		1,182		(20	)		(21	)
Fenergo Finance 3 Limited^{(2) (5) (6) (7)}	Diversified Financial Services		L + 6.25%; 1.00% Floor		09/05/2024	€	1,500		(30	)		(33	)
Gastro Health Holdco, LLC⁽²⁾	Health Care Providers & Services	8.32%	L + 6.00%; 1.00% Floor		09/04/2024		10,200		9,998			9,996
Gastro Health Holdco, LLC^{(2) (5) (6)}	Health Care Providers & Services		L + 6.00%; 1.00% Floor		09/04/2023		2,000		(39	)		(40	)
Gastro Health Holdco, LLC^{(2) (5) (6)}	Health Care Providers & Services		L + 6.00%; 1.00% Floor		09/04/2024		5,100		(63	)		(64	)
Heligear Acquisition Co.^{(3) (4)}	Aerospace & Defense	10.25%			10/15/2019		17,500		17,418			17,150
Hygiena Borrower LLC⁽³⁾	Life Sciences Tools & Services	6.38%	L + 4.00%; 1.00% Floor		08/26/2022		3,779		3,725			3,703
Hygiena Borrower LLC^{(3) (5) (6)}	Life Sciences Tools & Services		L + 4.00%; 1.00% Floor		08/26/2022		571		(4	)		(12	)
Hygiena Borrower LLC ^{(3) (5) (6)}	Life Sciences Tools & Services		L + 4.00%; 1.00% Floor		08/26/2022		380		(5	)		(8	)
iCIMS, Inc.⁽²⁾	Software	8.64%	L + 6.50%; 1.00% Floor		09/12/2024		29,895		29,301			29,297
iCIMS, Inc.^{(2) (5) (6)}	Software		L + 6.50%; 1.00% Floor		09/12/2024		1,868		(37	)		(37	)
Infinity Sales Group^{(3) (8)}	Media	12.89%	L + 10.50%; 1.00% Floor		11/23/2020		29,529		29,853			29,529
Integral Ad Science, Inc.^{(2) (3)}	Media	9.50%	L + 7.25% (incl. 1.25% PIK); 1.00% Floor		07/19/2024		23,656		23,197			23,183
Integral Ad Science, Inc.^{(2) (3) (5) (6)}	Media		L + 6.00%; 1.00% Floor		07/19/2023		1,815		(35	)		(36	)
Iracore International Holdings, Inc.^{^ (3)}	Energy Equipment & Services	11.50%	L + 9.00%; 1.00% Floor		04/12/2021		3,389		3,389			3,389
Kawa Solar Holdings Limited^{^} ^{(3) (7) (9)}	Construction & Engineering		L + 8.00% PIK		05/26/2020		8,562		8,482			8,006

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of September 30, 2018 (continued)

(in thousands, except share and per share amounts)

(Unaudited)


Portfolio Company	Industry	Interest Rate ⁽⁺⁾	Reference Rate and Spread ⁽⁺⁾	Maturity		Par Amount⁽⁺⁺⁾		Cost			Fair Value

Kawa Solar Holdings Limited^{^ (3) (7) (10)}	Construction & Engineering				05/26/2020	$	4,869	$	2,351		$	—
Legacy Buyer Corp.⁽³⁾	Health Care Providers & Services	10.39%	L + 8.00%; 1.00% Floor		10/24/2019		23,034		22,910			23,034
Legacy Buyer Corp.^{(3) (5) (6)}	Health Care Providers & Services		L + 8.00%; 1.00% Floor		10/24/2019		2,500		(13	)		—
Lithium Technologies, Inc.^{(2) (3) (5)}	Internet Software & Services	10.35%	L + 8.00%; 1.00% Floor		10/03/2022		38,966		20,701			20,820
Lithium Technologies, Inc ^{(2) (3) (5) (6)}	Internet Software & Services		L + 8.00%; 1.00% Floor		10/03/2022		2,684		(28	)		(21	)
Madison-Kipp Corporation⁽³⁾	Machinery	11.25%	L + 9.00%; 1.00% Floor		05/26/2020		29,972		29,734			29,897
Netvoyage Corporation^{(2) (3)}	Software	11.25%	L + 9.00%; 1.00% Floor		03/24/2022		8,623		8,491			8,515
Netvoyage Corporation^{(2) (3) (5) (6)}	Software		L + 9.00%; 1.00% Floor		03/24/2022		654		(9	)		(8	)
Picture Head Midco LLC⁽²⁾	Media	8.99%	L + 6.75%; 1.00% Floor		08/31/2023		23,120		22,664			22,658
Picture Head Midco LLC^{(2) (5) (6)}	Media		L + 6.75%; 1.00% Floor		08/31/2023		2,540		(25	)		(25	)
Picture Head Midco LLC^{(2) (5) (6)}	Media		L + 6.75%; 1.00% Floor		08/31/2023		2,540		(50	)		(51	)
SF Home Décor, LLC⁽²⁾	Household Products	11.89%	L + 9.50%; 1.00% Floor		07/13/2022		20,063		19,575			19,461
SPay, Inc.^{(2) (3)}	Internet Software & Services	7.91%	L + 5.75%; 1.00% Floor		06/17/2024		10,300		10,102			10,094
SPay, Inc.^{(2) (3) (5) (6)}	Internet Software & Services		L + 5.75%; 1.00% Floor		06/17/2024		5,720		(54	)		(114	)
SPay, Inc.^{(2) (3) (5)}	Internet Software & Services	8.02%	L + 5.75%; 1.00% Floor		06/17/2024		1,140		814			813
The Merit Distribution Group, LLC⁽³⁾	Distributors	13.64%	L + 11.25%; 0.50% Floor		04/08/2021		22,750		22,411			22,750
US Med Acquisition, Inc.⁽³⁾	Health Care Equipment & Supplies	11.39%	L + 9.00%; 1.00% Floor		08/13/2021		30,031		29,694			27,704
Vexos, Inc.⁽³⁾	Electronic Equipment, Instruments & Components	11.84%	L + 9.50%; 1.00% Floor		10/09/2019		36,547		36,353			35,999
Xactly Corporation^{(2) (3)}	Internet Software & Services	9.50%	L + 7.25%; 1.00% Floor		07/29/2022		22,860		22,483			22,574
Xactly Corporation^{(2) (3) (5) (6)}	Internet Software & Services		L + 7.25%; 1.00% Floor		07/29/2022		1,697		(26	)		(21	)
Yasso, Inc.^{(2) (3)}	Food Products	9.99%	L + 7.75%; 1.00% Floor		03/23/2022		8,964		8,830			8,605

Total 1st Lien/Senior Secured Debt									616,037			609,812

1st Lien/Last-Out Unitranche⁽¹¹⁾ – 18.13%
Avenue Stores, LLC⁽³⁾	Specialty Retail	10.24%	L + 8.00%; 1.00% Floor		09/19/2019		30,000		29,823			29,100
Intelligent Document Solutions, Inc.^{(2) (3)}	Diversified Financial Services	8.39%	L + 6.00%; 1.00% Floor		02/28/2024		11,900		11,542			11,513
Mervin Manufacturing, Inc.⁽³⁾	Leisure Equipment & Products	9.84%	L + 7.50%; 1.00% Floor		10/10/2019		11,165		11,106			10,606
NTS Communications, Inc.^{^ (3)}	Diversified Telecommunication Services	11.39% PIK	L + 9.00%; 1.25% Floor		06/06/2019		6,317		6,085			6,317
NTS Communications, Inc.^{^ (3)}	Diversified Telecommunication Services	11.39% PIK	L + 9.00%; 1.25% Floor		06/06/2019		57,068		55,968			51,363
RugsUSA, LLC^{(2) (3)}	Household Products	8.89%	L + 6.50%; 1.00% Floor		04/30/2023		5,840		5,785			5,782
Smarsh, Inc.^{(2) (3)}	Software	10.13%	L + 7.88%; 1.00% Floor		03/31/2021		17,622		17,405			17,402

Total 1st Lien/Last-Out Unitranche									137,714			132,083

2nd Lien/Senior Secured Debt– 60.17%
American Dental Partners, Inc.^{(2) (3)}	Health Care Providers & Services	10.89%	L + 8.50%; 1.00% Floor		09/25/2023		8,500		8,325			8,330
ASC Acquisition Holdings, LLC⁽³⁾	Distributors	19.34%	L + 17.00% (incl. 4.00% PIK); 1.00% Floor		12/15/2022		30,000		29,354			29,400
ASC Acquisition Holdings, LLC⁽³⁾	Distributors	19.34%	L + 17.00% (incl. 4.00% PIK); 1.00% Floor		12/15/2022		24,600		24,151			24,108
Bolttech Mannings, Inc.^{^^}	Commercial Services & Supplies	10.32%	L + 8.00%		11/19/2021		18,132		18,132			18,132
Country Fresh Holdings, LLC^{(2) (3)}	Food Products	11.09%	L + 8.75%; 1.00% Floor		10/02/2023		9,400		9,240			8,742
DiscoverOrg, LLC⁽³⁾	Software	10.75%	L + 8.50%; 1.00% Floor		02/23/2024		59,500		58,505			59,054
DuBois Chemicals, Inc.^{(2) (12)}	Chemicals	10.21%	L + 8.00%; 1.00% Floor		03/15/2025		26,220		25,762			25,958
ERC Finance, LLC^{(2) (3)}	Health Care Providers & Services	10.46%	L + 8.22%; 1.00% Floor		09/22/2025		19,800		19,394			19,404

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of September 30, 2018 (continued)

(in thousands, except share and per share amounts)

(Unaudited)


Portfolio Company	Industry	Interest Rate ⁽⁺⁾	Reference Rate and Spread ⁽⁺⁾	Maturity		Par Amount⁽⁺⁺⁾		Cost			Fair Value

Genesis Acquisition Co.⁽²⁾	Diversified Financial Services	9.74%	L + 7.50%;		07/31/2025	$	7,000	$	6,828		$	6,825
Genesis Acquisition Co.^{(2) (5) (6)}	Diversified Financial Services		L + 7.50%;		07/31/2025		1,800		(22	)		(23	)
Hygiena Borrower LLC⁽³⁾	Life Sciences Tools & Services	10.14%	L + 7.75%; 1.00% Floor		08/26/2023		1,860		1,824			1,823
Hygiena Borrower LLC^{(3) (5)}	Life Sciences Tools & Services	10.06%	L + 7.75%; 1.00% Floor		08/26/2023		680		90			84
ICP Industrial, Inc.^{(2) (3)}	Chemicals	10.38%	L + 8.25%; 1.00% Floor		05/03/2024		16,600		16,229			16,227
ICP Industrial, Inc.^{(2) (3)}	Chemicals	10.48%	L + 8.25%; 1.00% Floor		05/03/2024		3,800		3,716			3,715
IHS Intermediate Inc.⁽³⁾	Health Care Providers & Services	10.59%	L + 8.25%; 1.00% Floor		07/20/2022		10,000		9,873			9,625
Institutional Shareholder Services Inc.⁽²⁾	Diversified Financial Services	10.14%	L + 7.75%; 1.00% Floor		10/16/2025		5,100		5,077			5,126
Market Track, LLC^{(2) (3)}	Internet Catalog & Retail	9.94%	L + 7.75%; 1.00% Floor		06/05/2025		22,200		21,612			21,312
MedPlast Holdings, Inc.⁽²⁾	Health Care Equipment & Supplies	10.09%	L + 7.75%		07/02/2026		8,260		8,179			8,363
MPI Products LLC⁽³⁾	Auto Components	11.34%	L + 9.00%; 1.00% Floor		01/30/2020		20,000		19,907			19,900
National Spine and Pain Centers, LLC^{(2) (3)}	Health Care Providers & Services	10.49%	L + 8.25%; 1.00% Floor		12/02/2024		19,100		18,600			18,623
Oasis Outsourcing Holdings, Inc.^{(2) (3)}	Diversified Financial Services	9.64%	L + 7.25%; 1.00% Floor		07/01/2024		22,760		22,465			22,475
Odyssey Logistics & Technology Corporation^{(2) (3)}	Road & Rail	10.24%	L + 8.00%; 1.00% Floor		10/12/2025		18,722		18,330			18,441
P2 Upstream Acquisition Co.	Software	10.35%	L + 8.00%; 1.00% Floor		04/30/2021		4,500		4,481			4,179
Pathway Partners Vet Management Company, LLC	Health Care Providers & Services	10.24%	L + 8.00%; 1.00% Floor		10/10/2025		18,993		18,820			18,803
Pathway Partners Vet Management Company, LLC⁽⁵⁾	Health Care Providers & Services	10.24%	L + 8.00%; 1.00% Floor		10/10/2025		643		385			385
Pathway Partners Vet Management Company, LLC	Health Care Providers & Services	10.24%	L + 8.00%; 1.00% Floor		10/10/2025		1,007		998			997
SMB Shipping Logistics, LLC^{(2) (3)}	Air Freight & Logistics	11.10%	L + 8.75%; 1.00% Floor		02/03/2025		25,000		24,680			24,687
Spectrum Plastics Group, Inc.⁽²⁾	Containers & Packaging	9.24%	L + 7.00%; 1.00% Floor		01/31/2026		6,248		6,218			6,154
Young Innovations, Inc.^{(2) (3)}	Health Care Equipment & Supplies	10.14%	L + 7.75%; 1.00% Floor		11/07/2025		15,300		14,877			14,879
Zep Inc.⁽²⁾	Chemicals	10.64%	L + 8.25%; 1.00% Floor		08/11/2025		23,800		23,260			22,669

Total 2nd Lien/Senior Secured Debt									439,290			438,397

Unsecured Debt- 0.88%
CB-HDT Holdings, Inc.^{^ (3)}	Aerospace & Defense	12.00% PIK			12/15/2019		3,707		3,707			3,707
CB-HDT Holdings, Inc.^{^ (3)}	Aerospace & Defense	12.00% PIK			03/05/2021		1,618		1,618			1,618
Conergy Asia & ME Pte. LTD.^{^ (3) (7)}	Construction & Engineering	10.00%			05/26/2020		1,064		1,064			1,064

Total Unsecured Debt									6,389			6,389

Total Corporate Debt									1,199,430			1,186,681

Portfolio Company	Industry		Coupon			Shares		Cost			Fair Value

Preferred Stock⁽¹⁾ – 2.41%
Accuity Delivery Systems, LLC^{^ (2) (3) (4) (10)}	Health Care Providers & Services						97,130	$	3,200		$	3,520
CB-HDT Holdings, Inc.^{^ (3) (4) (10)}	Aerospace & Defense						1,108,333		10,186			14,087
Conergy Asia Holdings, Ltd.^{^ (3) (4) (7) (10)}	Construction & Engineering						600,000		600			–
Kawa Solar Holdings Limited^{^ (3) (4) (7) (9)}	Construction & Engineering		8.00% PIK				57,272		778			–
NTS Communications, Inc.^{^ (3) (4) (10)}	Diversified Telecommunication Services						263		187			–

Total Preferred Stock									14,951			17,607

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of September 30, 2018 (continued)

(in thousands, except share and per share amounts)

(Unaudited)


Portfolio Company	Industry	Coupon	Shares		Cost		Fair Value

Common Stock⁽¹⁾ – 2.94%
Bolttech Mannings, Inc.^{^^ (3) (4) (10)}	Commercial Services & Supplies			8,000	$	6,591	$	4,570
CB-HDT Holdings, Inc.^{^ (3) (4) (10)}	Aerospace & Defense			453,383		2,393		4,579
Collaborative Imaging Holdco, LLC – Class B^{^^^ (2) (3) (4)}	Health Care Providers & Services			8,464		1,141		1,264
Collaborative Imaging Holdco, LLC – Class C^{^^^ (2) (3) (4) (7) (10)}	Health Care Providers & Services			7,988	$	159		180
Conergy Asia Holdings, Ltd.^{^ (3) (4) (7) (10)}	Construction & Engineering			2,000		4,700		—
Continuum Managed Services LLC – Class A^{(2) (3) (4) (10)}	IT Services			733		732		823
Continuum Managed Services LLC – Class B^{(2) (3) (4) (10)}	IT Services			496,698		7		387
Elah Holdings, Inc.^{^ (2) (3) (4) (10)}	Capital Markets			46,214		2,234		2,234
Iracore International Holdings, Inc.^{^ (3) (4) (10)}	Energy Equipment & Services			28,898		7,003		5,705
Kawa Solar Holdings Limited^{^} ^{(3) (4) (7) (10)}	Construction & Engineering			1,399,556		—		—
National Spine and Pain Centers, LLC^{(2) (3) (4) (10)}	Health Care Providers & Services			600		600		372
NTS Communications, Inc.^{^ (3) (4) (10)}	Diversified Telecommunication Services			595,215		3		—
Prairie Provident Resources, Inc.^{^^^ (7) (10)}	Oil, Gas & Consumable Fuels			3,579,988		9,237		1,056
Yasso, Inc.^{(2) (3) (4) (10)}	Food Products			850		850		274

Total Common Stock						35,650		21,444

Portfolio Company			LLC Interest		Cost		Fair Value

Investment Funds & Vehicles⁽¹⁾ – 12.71%
Senior Credit Fund, LLC^{^^ (7)}			$	94,342	$	94,342	$	92,588

Total Investment Funds & Vehicles						94,342		92,588

		Yield	Shares		Cost		Fair Value

Investments in Affiliated Money Market Fund⁽¹⁾ – 0.00% #
Goldman Sachs Financial Square Government Fund – Institutional Shares^{^^^}		1.98%⁽¹³⁾		3,675	$	4	$	4

Total Investments in Affiliated Money Market Fund						4		4

TOTAL INVESTMENTS – 180.93%					$	1,344,377	$	1,318,324

LIABILITIES IN EXCESS OF OTHER ASSETS – (80.93%)							$	(589,684	)

NET ASSETS – 100.00%							$	728,640

⁽⁺⁾

The Consolidated Schedule of Investments discloses the actual interest rate for partially or fully funded debt in effect as of the reporting date. Variable rate loans bear interest at a rate that may be determined by reference to either LIBOR (“L”) or alternate base rate (commonly based on the Prime Rate (“P”)), at the borrower’s option, which reset periodically based on the terms of the credit agreement. L loans are typically indexed to 12 month, 6 month, 3 month, 2 month, 1 month or 1 week L rates. As of September 30, 2018, rates for the 12 month, 6 month, 3 month, 2 month, 1 month and 1 week L are 2.92%, 2.60%, 2.40%, 2.31%, 2.26% and 2.20%, respectively. As of September 30, 2018, P was 5.25%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at September 30, 2018.

⁽⁺⁺⁾

Par amount is denominated in U.S. Dollars (“$”) unless noted as denominated in Euro (“€”).

Percentages are based on net assets.

^{^}

As defined in the Investment Company Act of 1940, the portfolio company is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, 5% or more of the portfolio company’s outstanding voting securities. See Note 3 “ Significant Agreements and Related Party Transactions”.

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of September 30, 2018 (continued)

(in thousands, except share and per share amounts)

(Unaudited)

As defined in the Investment Company Act of 1940, the portfolio company is deemed to be a “controlled affiliated person” of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. See Note 3 “Significant Agreements and Related Party Transactions”.

^{^^^}

The portfolio company is otherwise deemed to be an “affiliated person” of the Company under the Investment Company Act of 1940. See Note 3 “Significant Agreements and Related Party Transactions”.

⁽¹⁾

Assets are pledged as collateral for the Revolving Credit Facility. See Note 6 “Debt”.

⁽²⁾

Represent co-investments made with the Company’s affiliates in accordance with the terms of the exemptive relief that the Company received from the U.S. Securities and Exchange Commission. See Note 3 “Significant Agreements and Related Party Transactions”.

⁽³⁾

The fair value of the investment was determined using significant unobservable inputs. See Note 5 “Fair Value Measurement”.

⁽⁴⁾

Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act. As of September 30, 2018, the aggregate fair value of these securities is $74,295 or 10.20% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:


Investment								Acquisition Date
Accuity Delivery Systems, LLC – Preferred Stock								06/13/2018
Artesyn Embedded Technologies, Inc. – 1st Lien/Senior Secured Debt								09/26/2013
Bolttech Mannings, Inc. – Common Stock								12/22/2017
CB-HDT Holdings, Inc. – Preferred Stock								07/01/2016
CB-HDT Holdings, Inc. – Common Stock								07/01/2016
Collaborative Imaging Holdco, LLC – Class B – Common Stock								03/30/2018
Collaborative Imaging Holdco, LLC – Class C – Common Stock								03/30/2018
Conergy Asia Holdings, Ltd. – Common Stock								07/31/2017
Conergy Asia Holdings, Ltd. – Preferred Stock								08/23/2017
Continuum Managed Services LLC – Class A – Common Stock								06/08/2017
Continuum Managed Services LLC – Class B – Common Stock								06/08/2017
Elah Holdings, Inc. – Common Stock								05/09/2018
Heligear Acquisition Co. – 1st Lien/Senior Secured Debt								09/30/2014
Iracore International Holdings, Inc. – Common Stock								04/13/2017
Kawa Solar Holdings Limited – Common Stock								08/17/2016
Kawa Solar Holdings Limited – Preferred Stock								10/25/2016
NTS Communications, Inc. – Preferred Stock								07/22/2016
NTS Communications, Inc. – Common Stock								07/22/2016
National Spine and Pain Centers, LLC – Common Stock								06/02/2017
Yasso, Inc. – Common Stock								03/23/2017

⁽⁵⁾

Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. See Note 7 “Commitments and Contingencies”.

⁽⁶⁾

The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value is the result of the capitalized discount on the loan.

⁽⁷⁾

The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of September 30, 2018 the aggregate fair value of these securities is $123,145 or 9.17% of the Company’s total assets.

⁽⁸⁾

The investment includes an exit fee that is receivable upon repayment of the loan. See Note 2 “Significant Accounting Policies”.

⁽⁹⁾

The investment is on non-accrual status as of September 30, 2018.

⁽¹⁰⁾

Non-income producing security.

⁽¹¹⁾

In exchange for the greater risk of loss, the “last-out” portion of the Company’s unitranche loan investment generally earns a higher interest rate than the “first-out” portions. The “first-out” portion of the loan would generally receive priority with respect to payment of principal, interest and any other amounts due thereunder over the “last-out” portion that the Company would continue to hold.

⁽¹²⁾

Position or portion thereof unsettled as of September 30, 2018.

⁽¹³⁾

The rate shown is the annualized seven-day yield as of September 30, 2018.

PIK – Payment-In-Kind

ADDITIONAL INFORMATION

Foreign currency forward contracts

Counterparty

Currency Purchased

Currency Sold

Settlement

Unrealized Appreciation
(Depreciation)

Bank of America, N.A.

USD 81

EUR 70

10/03/2018

–

Bank of America, N.A.

USD 285

EUR 245

11/05/2018

Bank of America, N.A.

USD 352

EUR 300

01/04/2019

–

Bank of America, N.A.

USD 288

EUR 245

02/05/2019

Bank of America, N.A.

USD 355

EUR 301

04/03/2019

–

Bank of America, N.A.

USD 308

EUR 260

05/06/2019

–

Bank of America, N.A.

USD 375

EUR 315

07/03/2019

–

Bank of America, N.A.

USD 311

EUR 260

08/05/2019

–

Bank of America, N.A.

USD 394

EUR 329

10/04/2019

–

Bank of America, N.A.

USD 324

EUR 269

11/05/2019

–

Bank of America, N.A.

USD 393

EUR 325

01/06/2020

–

Bank of America, N.A.

USD 399

EUR 327

04/06/2020

–

Bank of America, N.A.

USD 400

EUR 325

07/06/2020

–

Currency Abbreviations:

EUR – EURO

USD – U.S. Dollar

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of December 31, 2017

(in thousands, except share and per share amounts)


Portfolio Company	Industry	Interest⁽⁺⁾	Maturity		Par Amount		Cost			Fair Value

Investments at Fair Value – 173.36% #

Corporate Debt ⁽¹⁾– 155.62%

1st Lien/Senior Secured Debt – 56.08%
Artesyn Embedded Technologies, Inc.⁽²⁾	Electronic Equipment, Instruments & Components	9.75%		10/15/2020	$	20,000	$	20,000		$	19,600
Continuum Managed Services LLC⁽³⁾⁽⁴⁾	IT Services	10.32% (L + 8.75%; 1.00% Floor)		06/08/2023		21,552		20,999			21,013
Continuum Managed Services LLC^(3)(4)(5)(6)	IT Services	(L + 8.75%; 1.00% Floor)		06/08/2023		1,800		(44	)		(45	)
Continuum Managed Services LLC^(3)(4)(5)(6)	IT Services	(L + 8.75%; 1.00% Floor)		06/08/2022		2,220		(54	)		(56	)
Dade Paper & Bag, LLC⁽³⁾⁽⁴⁾	Distributors	8.93% (L + 7.50%; 1.00% Floor)		06/10/2024		11,045		10,836			10,851
Datto, Inc.⁽³⁾	IT Services	9.41% (L + 8.00%; 1.00% Floor)		12/07/2022		35,750		35,044			35,035
Datto, Inc.^(3)(5)(6)	IT Services	(L + 8.00%; 1.00% Floor)		12/07/2022		2,406		(48	)		(48	)
Elemica, Inc.⁽⁴⁾	Software	9.57% (L + 8.00%; 1.00% Floor)		07/07/2021		41,863		41,059			41,130
Elemica, Inc.^(4)(5)(6)	Software	(L + 8.00%; 1.00% Floor)		07/07/2021		6,000		(111	)		(105	)
Heligear Acquisition Co.⁽²⁾⁽⁴⁾	Aerospace & Defense	10.25%		10/15/2019		17,500		17,365			17,719
Infinity Sales Group⁽⁴⁾	Media	12.20% (L + 10.50%; 1.00% Floor)		11/21/2018		28,277		28,137			27,146
Iracore International Holdings, Inc.^{^(4)}	Energy Equipment & Services	10.63% (L + 9.00%; 1.00% Floor)		04/12/2021		3,389		3,389			3,389
Kawa Solar Holdings Limited^{^(4)(7)}	Construction & Engineering	9.69% PIK (L + 8.00%)		07/02/2018		9,720		9,624			8,918
Kawa Solar Holdings Limited^{^(4)(7)(8)}	Construction & Engineering			07/02/2018		4,229		1,711			—
Legacy Buyer Corp.⁽⁴⁾	Health Care Providers & Services	9.70% (L + 8.00%; 1.00% Floor)		10/24/2019		24,495		24,276			24,127
Legacy Buyer Corp.^(4)(5)(6)	Health Care Providers & Services	(L + 8.00%; 1.00% Floor)		10/24/2019		2,500		(22	)		(37	)
Lithium Technologies, Inc.⁽³⁾	Internet Software & Services	9.39% (L + 8.00%; 1.00% Floor)		10/03/2022		21,100		20,642			20,625
Lithium Technologies, Inc.^(3)(5)(6)	Internet Software & Services	(L + 8.00%; 1.00% Floor)		10/03/2022		1,544		(33	)		(35	)
Madison-Kipp Corporation⁽⁴⁾	Machinery	10.57% (L + 9.00%; 1.00% Floor)		05/26/2020		33,447		33,075			33,280
Netvoyage Corporation⁽³⁾⁽⁴⁾	Software	11.07% (L + 9.50%; 1.00% Floor)		03/24/2022		7,849		7,710			7,711
Netvoyage Corporation^(3)(4)(5)(6)	Software	(L + 9.50%; 1.00% Floor)		03/24/2022		654		(11	)		(11	)
SF Home Décor, LLC⁽³⁾⁽⁴⁾	Household Products	11.20% (L + 9.50%; 1.00% Floor)		07/13/2022		20,865		20,281			20,239
The Merit Distribution Group, LLC⁽⁴⁾	Distributors	12.95% (L + 11.25%; 0.50% Floor)		04/08/2021		23,875		23,433			23,875
US Med Acquisition, Inc.⁽⁴⁾	Health Care Equipment & Supplies	10.69% (L + 9.00%; 1.00% Floor)		08/13/2021		30,264		29,850			28,448
Vexos, Inc.⁽⁴⁾	Electronic Equipment, Instruments & Components	10.84% (L + 9.50%; 1.00% Floor)		10/09/2019		37,485		37,153			36,173
Xactly Corporation⁽³⁾⁽⁴⁾	Internet Software & Services	8.82% (L + 7.25%; 1.00% Floor)		07/29/2022		19,800		19,430			19,404
Xactly Corporation^(3)(4)(5)(6)	Internet Software & Services	(L + 7.25%; 1.00% Floor)		07/29/2022		1,697		(31	)		(34	)
Yasso, Inc.⁽³⁾⁽⁴⁾	Food Products	9.44% (L + 7.75%; 1.00% Floor)		03/23/2022		9,032		8,874			8,761

Total 1st Lien/Senior Secured Debt								412,534			407,073

1st Lien/Last-Out Unitranche⁽⁹⁾ – 37.75%
Associations, Inc.⁽⁴⁾	Real Estate Management & Development	8.69% (L + 7.00%; 1.00% Floor)		12/23/2019		57,541		57,019			57,253
Avenue Stores, LLC⁽⁴⁾	Specialty Retail	11.50% (P + 7.00%)		09/19/2019		30,000		29,696			29,550
Bolttech Mannings, Inc.^{^^(4)}	Commercial Services & Supplies	9.66% PIK (L + 8.00%; 1.00% Floor)		12/22/2022		8,087		8,087			8,087
Bolttech Mannings, Inc.^{^^}	Commercial Services & Supplies	9.66% PIK (L + 8.00%; 1.00% Floor)		12/22/2022		5,891		5,891			5,891
Bolttech Mannings, Inc.^{^^(5)}	Commercial Services & Supplies	(L + 8.00%; 1.00% Floor)		12/21/2018		1,500		—			—
Intelligent Document Solutions, Inc.⁽³⁾⁽⁴⁾	Diversified Financial Services	9.95% (L + 8.25%; 1.00% Floor)		08/31/2022		11,900		11,618			11,722
Mervin Manufacturing, Inc.⁽⁴⁾	Leisure Equipment & Products	8.86% (L + 7.50%; 1.00% Floor)		10/10/2019		11,165		11,066			10,327
myON, LLC⁽³⁾⁽⁴⁾	Internet Software & Services	10.07% (L + 8.50%; 1.00% Floor)		02/17/2022		7,100		6,977			6,976
NTS Communications, Inc.^{^(4)}	Diversified Telecommunication Services	10.70% PIK (L + 9.00%; 1.25% Floor)		06/06/2019		58,400		55,818			51,538
Pro-Pet, LLC⁽⁴⁾	Household Products	8.88% (L + 7.25%; 0.75% Floor)		11/21/2019		31,600		31,253			31,284

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of December 31, 2017 (continued)

(in thousands, except share and per share amounts)


Portfolio Company	Industry	Interest⁽⁺⁾	Maturity		Par Amount		Cost			Fair Value

Smarsh, Inc.^{(3) (4)}	Software	9.45% (L + 7.88%; 1.00% Floor)		03/31/2021	$	17,711	$	17,437		$	17,445
The Service Companies Inc.⁽⁴⁾	Professional Services	11.95% (L + 10.25%; 1.00% Floor)		03/26/2019		44,448		44,169			43,892

Total 1st Lien/Last-Out Unitranche								279,031			273,965

2nd Lien/Senior Secured Debt – 61.25%
American Dental Partners, Inc.⁽³⁾⁽⁴⁾	Health Care Providers & Services	10.19% (L + 8.50%; 1.00% Floor)		09/25/2023		8,500		8,306			8,309
ASC Acquisition Holdings, LLC⁽⁴⁾	Distributors	14.34% (L + 13.00%; 1.00% Floor)		12/15/2022		30,000		29,275			29,700
Country Fresh Holdings, LLC⁽³⁾⁽⁴⁾	Food Products	10.11% (L + 8.75%; 1.00% Floor)		10/02/2023		9,400		9,222			9,118
DiscoverOrg, LLC⁽⁴⁾	Software	10.07% (L + 8.50%; 1.00% Floor)		02/23/2024		59,500		58,404			58,905
DuBois Chemicals, Inc.⁽³⁾⁽⁴⁾	Chemicals	9.49% (L + 8.00%; 1.00% Floor)		03/15/2025		20,700		20,265			20,493
ERC Finance, LLC⁽³⁾⁽⁴⁾	Health Care Providers & Services	9.58% (L + 8.22%; 1.00% Floor)		09/21/2025		19,800		19,365			19,354
Global Tel*Link Corporation	Diversified Telecommunication Services	9.94% (L + 8.25%; 1.25% Floor)		11/23/2020		23,000		22,778			22,971
ICP Industrial, Inc.⁽³⁾	Chemicals	9.62% (L + 8.25%; 1.00% Floor)		05/03/2024		16,600		16,193			16,185
ICP Industrial, Inc.^(3)(5)(6)	Chemicals	(L + 8.25%; 1.00% Floor)		05/03/2024		3,800		(93	)		(95	)
IHS Intermediate Inc.⁽⁴⁾	Health Care Providers & Services	9.62% (L + 8.25%; 1.00% Floor)		07/20/2022		10,000		9,853			9,550
Institutional Shareholder Services Inc.⁽³⁾	Diversified Financial Services	9.11% (L + 7.75%; 1.00% Floor)		10/16/2025		5,100		5,075			5,113
Market Track, LLC⁽³⁾⁽⁴⁾	Internet Catalog & Retail	9.10% (L + 7.75%; 1.00% Floor)		06/05/2025		22,200		21,567			21,534
MedPlast Holdings, Inc.⁽⁴⁾	Health Care Equipment & Supplies	10.23% (L + 8.75%; 1.00% Floor)		06/06/2023		46,500		45,452			45,453
MPI Products LLC⁽⁴⁾	Auto Components	10.38% (L + 9.00%; 1.00% Floor)		01/30/2020		20,000		19,860			19,900
National Spine and Pain Centers, LLC⁽³⁾⁽⁴⁾	Health Care Providers & Services	9.94% (L + 8.25%; 1.00% Floor)		12/02/2024		19,100		18,558			18,575
Oasis Outsourcing Holdings, Inc.⁽³⁾⁽⁴⁾	Diversified Financial Services	8.82% (L + 7.25%; 1.00% Floor)		07/01/2024		22,760		22,436			22,419
Odyssey Logistics & Technology Corporation⁽³⁾	Road & Rail	9.57% (L + 8.00%; 1.00% Floor)		10/12/2025		13,500		13,168			13,433
P2 Upstream Acquisition Co.	Software	9.40% (L + 8.00%; 1.00% Floor)		04/30/2021		5,000		4,973			4,550
Pathway Partners Vet Management Company, LLC	Health Care Providers & Services	9.57% (L + 8.00%; 1.00% Floor)		10/10/2025		13,889		13,753			13,750
Pathway Partners Vet Management Company, LLC⁽⁵⁾⁽⁶⁾	Health Care Providers & Services	(L + 8.00%; 1.00% Floor)		10/10/2025		6,111		(60	)		(61	)
PPC Industries Inc.⁽³⁾	Containers & Packaging	9.33% (L + 8.00%; 1.00% Floor)		05/08/2025		8,330		8,252			8,309
SMB Shipping Logistics, LLC⁽³⁾⁽⁴⁾	Air Freight & Logistics	10.20% (L + 8.75%; 1.00% Floor)		02/03/2025		25,000		24,655			24,625
SW Holdings, LLC⁽⁴⁾	Media	10.44% (L + 8.75%; 1.00% Floor)		12/30/2021		14,265		14,067			14,051
Young Innovations, Inc.⁽³⁾	Health Care Equipment & Supplies	9.44% (L + 7.75%; 1.00% Floor)		11/07/2025		15,300		14,847			14,841
Zep Inc.⁽³⁾	Chemicals	9.63% (L + 8.25%; 1.00% Floor)		08/11/2025		23,800		23,220			23,621

Total 2nd Lien/Senior Secured Debt								443,391			444,603

Unsecured Debt – 0.54%
CB-HDT Holdings, Inc.^{^(4)}	Aerospace & Defense	12.00% PIK		12/15/2019		3,500		3,500			3,500
Conergy Asia & ME Pte. LTD.^{^(7)}	Construction & Engineering	10.00%		06/30/2018		400		400			400

Total Unsecured Debt								3,900			3,900

Total Corporate Debt								1,138,856			1,129,541

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of December 31, 2017 (continued)

(in thousands, except share and per share amounts)


Portfolio Company	Industry	Coupon	Shares		Cost		Fair Value

Preferred Stock⁽¹⁾ – 1.77%
CB-HDT Holdings, Inc.^{^ (2) (4)(8)}	Aerospace & Defense			1,108,333	$	10,185	$	12,236
Conergy Asia Holdings, Ltd.^{^ (2) (4)(7)(8)}	Construction & Engineering			600,000		600		600
Kawa Solar Holdings Limited^{^(2) (4)(7)(10)}	Construction & Engineering	8.00% PIK		53,968		778		—
NTS Communications, Inc.^{^ (2) (4)(8)}	Diversified Telecommunication Services			263		187		—

Total Preferred Stock						11,750		12,836

Common Stock⁽¹⁾ – 3.28%
Bolttech Mannings, Inc.^{^^ (2) (4)(8)}	Commercial Services & Supplies			8,000	$	6,591	$	6,591
CB-HDT Holdings, Inc.^{^ (2) (4)(8)}	Aerospace & Defense			453,383		2,393		3,609
Conergy Asia Holdings, Ltd.^{^ (2) (4)(7)(8)}	Construction & Engineering			2,000		4,700		3,832
Continuum Managed Services LLC – Class A^{(2) (3)(4)(8)}	IT Services			733		733		733
Continuum Managed Services LLC – Class B^{(2) (3)(4)(8)}	IT Services			496,698		7		7
Iracore International Holdings, Inc.^{^ (2) (4) (8)}	Energy Equipment & Services			28,898		7,003		6,213
Kawa Solar Holdings Limited^{^ (2) (4) (7) (8)}	Construction & Engineering			1,399,556		—		—
myON, LLC^{(2) (3) (4) (8)}	Internet Software & Services			16,087		600		600
National Spine and Pain Centers, LLC^{(2) (3) (4) (8)}	Health Care Providers & Services			600		600		510
NTS Communications, Inc.^{^ (2) (4) (8)}	Diversified Telecommunication Services			595,215		3		—
Prairie Provident Resources, Inc.^{^^^ (7) (8)}	Oil, Gas & Consumable Fuels			3,579,988		9,237		1,233
Yasso, Inc.^{(2) (3) (4) (8)}	Food Products			850		850		511

Total Common Stock						32,717		23,839

Portfolio Company			LLC Interest		Cost		Fair Value

Investment Funds & Vehicles⁽¹⁾ – 12.69%
Senior Credit Fund, LLC^{^^ (7)}			$	94,342	$	94,342	$	92,097

Total Investment Funds & Vehicles						94,342		92,097

	Yield		Shares		Cost		Fair Value

Investments in Affiliated Money Market Fund⁽¹⁾ – 1.59% #
Goldman Sachs Financial Square Government Fund – Institutional Shares	1.21%⁽¹¹⁾			11,539,321	$	11,539	$	11,539

Total Investments in Affiliated Money Market Fund						11,539		11,539

TOTAL INVESTMENTS – 174.95%					$	1,289,204	$	1,269,852

LIABILITIES IN EXCESS OF OTHER ASSETS – (74.95%)							$	(544,022	)

NET ASSETS – 100.00%							$	725,830

⁽⁺⁾

The Consolidated Schedule of Investments discloses the actual interest rate for partially or fully funded debt in effect as of the reporting date. Variable rate loans bear interest at a rate that may be determined by reference to either L or alternate base rate (commonly based on P), at the borrower’s option, which reset periodically based on the terms of the credit agreement. L loans are typically indexed to 12 month, 6 month, 3 month, 2 month, 1 month or 1 week L rates. As of December 31, 2017, rates for the 12 month, 6 month, 3 month, 2 month, 1 month and 1 week L were 2.11%, 1.84%, 1.69%, 1.62%, 1.56% and 1.48%, respectively. As of December 31, 2017, P was 4.50%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2017.

Percentages are based on net assets.

^{^}

As defined in the Investment Company Act of 1940, the portfolio company is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, 5% or more of the portfolio company’s outstanding voting securities. See Note 3 “Significant Agreements and Related Party Transactions”.

^{^^}

^{^^^}

The portfolio company is deemed to be an “affiliated person” of the Company because it falls under the definition of “affiliated person” in the Investment Company Act of 1940 with respect to the Company.

⁽¹⁾

Assets are pledged as collateral for the Revolving Credit Facility. See Note 6 “Debt”.

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Consolidated Schedule of Investments as of December 31, 2017 (continued)

(in thousands, except share and per share amounts)

⁽²⁾

Security exempt from registration under the Securities Act, and may be deemed to be “restricted securities” under the Securities Act. As of December 31, 2017, the aggregate fair value of these securities is $72,761 or 10.02% of the Company’s net assets. The acquisition dates of the restricted securities are as follows:


Investment	Acquisition Date
Artesyn Embedded Technologies, Inc.		9/26/2013
Bolttech Mannings, Inc.		12/22/2017
CB-HDT Holdings – Common		7/1/2016
CB-HDT Holdings – Preferred		7/1/2016
Conergy Asia Holdings, Ltd. – Common		7/31/2017
Conergy Asia Holdings, Ltd. – Preferred		8/23/2017
Continuum Managed Services LLC – Class A		6/8/2017
Continuum Managed Services LLC – Class B		6/8/2017
Heligear Acquisition Co.		9/30/2014
Iracore International Holdings, Inc.		4/13/2017
Kawa Solar Holdings Limited – Common		8/17/2016
Kawa Solar Holdings Limited – Preferred		10/25/2016
myOn Holdings		2/17/2017
National Spine and Pain Centers, LLC		6/2/2017
NTS Communications – Common		7/22/2016
NTS Communications – Preferred		7/22/2016
Yasso, Inc.		3/23/2017

⁽³⁾

⁽⁴⁾

The fair value of the investment was determined using significant unobservable inputs. See Note 5 “Fair Value Measurement”.

⁽⁵⁾

⁽⁶⁾

⁽⁷⁾

The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2017 the aggregate fair value of non-qualifying assets was $107,080 or 8.25% of the Company’s total assets.

⁽⁸⁾

Non-income producing security.

⁽⁹⁾

⁽¹⁰⁾

The investment was on non-accrual status as of December 31, 2017.

⁽¹¹⁾

The rate shown is the annualized seven-day yield as of December 31, 2017.

PIK – Payment-In-Kind

The accompanying notes are part of these unaudited consolidated financial statements.

Goldman Sachs BDC, Inc.

Notes to the Consolidated Financial Statements

(in thousands, except share and per share amounts)

(Unaudited)

1.	ORGANIZATION

Goldman Sachs BDC, Inc. (the “Company,” which term refers to either Goldman Sachs BDC, Inc. or Goldman Sachs BDC, Inc. together with its consolidated subsidiaries, as the context may require) was initially established as Goldman Sachs Liberty Harbor Capital, LLC, a single member Delaware limited liability company (“SMLLC”), on September 26, 2012 and commenced operations on November 15, 2012 with The Goldman Sachs Group, Inc. (“Group Inc.”) as its sole member. On March 29, 2013, the Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Effective April 1, 2013, the Company converted from a SMLLC to a Delaware corporation. In addition, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2013.

The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through direct originations of secured debt, including first lien, unitranche, including last-out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments.

Goldman Sachs Asset Management, L.P. (“GSAM”), a Delaware limited partnership and an affiliate of Goldman Sachs & Co. LLC (including its predecessors, “GS & Co.”), is the investment adviser (the “Investment Adviser”) of the Company. The term “Goldman Sachs” refers to Group Inc., together with GS & Co., GSAM and its other subsidiaries.

On March 23, 2015, the Company completed its initial public offering (“IPO”) and the Company’s common stock began trading on the New York Stock Exchange (“NYSE”) under the symbol “GSBD”.

The Company has formed wholly owned subsidiaries, which are structured as Delaware limited liability companies, to hold certain equity or equity-like investments in portfolio companies.

2.	SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company’s functional currency is U.S. dollars (“USD”) and these consolidated financial statements have been prepared in that currency. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to Regulation S-X. This requires the Company to make certain estimates and assumptions that may affect the amounts reported in the consolidated financial statements and accompanying notes. These consolidated financial statements reflect normal and recurring adjustments that in the opinion of the Company are necessary for the fair statement of the results for the periods presented. Actual results may differ from the estimates and assumptions included in the consolidated financial statements.

Certain financial information that is included in annual consolidated financial statements, including certain financial statement disclosures, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 22, 2018. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full fiscal year, any other interim period or any future year or period.

Certain prior period information has been reclassified to conform to the current period presentation. The reclassification has no effect on the Company’s consolidated financial position or the consolidated results of operations as previously reported.

As an investment company, the Company applies the accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”).

Basis of Consolidation

As provided under ASC 946, the Company will not 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. Accordingly, the Company consolidated the financial position and results of operations of its wholly owned subsidiaries, BDC Blocker I, LLC (formerly known as My-On BDC Blocker, LLC) and GSBD Blocker II, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.

The Company does not consolidate its equity interest in Senior Credit Fund, LLC (the “Senior Credit Fund”). For further description of the Company’s investment in the Senior Credit Fund, see Note 4 “Investments”.

Revenue Recognition

The Company records its investment transactions on a trade date basis. Realized gains and losses are based on the specific identification method.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discounts and premiums to par value on investments purchased are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Loan origination fees, original issue discount (“OID”) and market discounts or premiums are capitalized and amortized into interest income using the effective interest method or straight-line method, as applicable. Exit fees that are receivable upon repayment of a loan or debt security are amortized into interest income over the life of the respective investment. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income. For the three and nine months ended September 30, 2018, the Company earned $545 and $2,411, respectively, in prepayment premiums and $1,371 and $2,712, respectively, in accelerated accretion of upfront loan origination fees and unamortized discounts. For the three and nine months ended September 30, 2017, the Company earned $726 and $2,538, respectively, in prepayment premiums and $696 and $4,364, respectively, in accelerated accretion of upfront loan origination fees and unamortized discounts.

Fees received from portfolio companies (directors’ fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) are paid to the Company, unless, to the extent required by applicable law or exemptive relief, if any, therefrom, the Company only receives its allocable portion of such fees when invested in the same portfolio company as another account managed by the Investment Adviser.

Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Interest and dividend income are presented net of withholding tax, if any.

Certain investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the principal amount or shares (if equity) of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon the investment being called by the issuer. PIK is recorded as interest or dividend income, as applicable. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, respectively.

Certain structuring fees, amendment fees and syndication fees are recorded as other income when earned. Administrative agent fees received by the Company are recorded as other income when the services are rendered over time.

Non-Accrual Investments

Investments are placed on non-accrual status when it is probable that principal, interest or dividends will not be collected according to the contractual terms. Accrued interest or dividends generally are reversed when an investment is placed on non-accrual status. Interest or dividend payments received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual investments are restored to accrual status when past due principal and interest or dividends are paid and, in management’s judgment, principal and interest or dividend payments are likely to remain current. The Company may make exceptions to this treatment if an investment has sufficient collateral value and is in the process of collection. As of September 30, 2018, the Company had two investments on non-accrual status, which represented 0.7% and 0.6% of the total investments (excluding an investment in a money market fund managed by an affiliate of Group Inc. of $4) at amortized cost and at fair value, respectively. As of December 31, 2017, the Company had one investment on non-accrual status, which represented 0.1% and 0.0% of the total investments (excluding an investment in a money market fund managed by an affiliate of Group Inc. of $11,539) at amortized cost and at fair value, respectively.

Investments

The Company carries its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the FASB, which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent pricing services, broker or dealer quotations or alternative price sources. In the absence of quoted market prices, broker or dealer quotations or alternative price sources, investments are measured at fair value as determined by the board of directors (the “Board of Directors”) within the meaning of the Investment Company Act.

Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See Note 5 “Fair Value Measurement”.

The Company generally invests in illiquid securities, including debt and equity investments, of middle-market companies. The Board of Directors has delegated to the Investment Adviser day-to-day responsibility for implementing and maintaining internal controls and procedures related to the valuation of the Company’s portfolio investments. Under valuation procedures adopted by the Board of Directors, market quotations are generally used to assess the value of the investments for which market quotations are readily available. The Investment Adviser obtains these market quotations from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available; otherwise from a principal market maker or a primary market dealer. To assess the continuing appropriateness of pricing sources and methodologies, the Investment Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing services or brokers, and any differences are reviewed in accordance with the valuation procedures. If the Board of Directors or Investment Adviser has a bona fide reason to believe any such market quotation does not reflect the fair value of an investment, it may independently value such investment in accordance with valuation procedures for investments for which market quotations are not readily available.

With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, the valuation procedures adopted by the Board of Directors contemplate a multi-step valuation process each quarter, as described below:

(1)

The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Investment Adviser responsible for the portfolio investment;

(2)

The Board of Directors also engages independent valuation firms (the “Independent Valuation Advisors”) to provide independent valuations of the investments for which market quotations are not readily available, or are readily available but deemed not reflective of the fair value of an investment. The Independent Valuation Advisors independently value such investments using quantitative and qualitative information provided by the investment professionals of the Investment Adviser and the portfolio companies as well as any market quotations obtained from independent pricing services, brokers, dealers or market dealers. The Independent Valuation Advisors also provide analyses to support their valuation methodology and calculations. The Independent Valuation Advisors provide an opinion on a final range of values on such investments to the Board of Directors or the Audit Committee. The Independent Valuation Advisors define fair value in accordance with ASC 820 and utilize valuation approaches including the market approach, the income approach or both. A portion of the portfolio is reviewed on a quarterly basis, and all investments in the portfolio for which market quotations are not readily available, or are readily available, but deemed not reflective of the fair value of an investment, are reviewed at least annually by an Independent Valuation Advisor;

(3)

The Independent Valuation Advisors’ preliminary valuations are reviewed by the Investment Adviser and the Valuation Oversight Group (“VOG”), a team that is part of the Controllers Department within the Finance Division of Goldman Sachs. The Independent Valuation Advisors’ valuation ranges are compared to the Investment Adviser’s valuations to ensure the Investment Adviser’s valuations are reasonable. VOG presents the valuations to the Private Investment Valuation and Side Pocket Sub-Committee of the Investment Management Division Valuation Committee, which is comprised of representatives from GSAM who are independent of the investment decision making process;

(4)

The Investment Management Division Valuation Committee ratifies fair valuations and makes recommendations to the Audit Committee of the Board of Directors;

(5)

The Audit Committee of the Board of Directors reviews valuation information provided by the Investment Management Division Valuation Committee, the Investment Adviser and the Independent Valuation Advisors. The Audit Committee then assesses such valuation recommendations; and

(6)

The Board of Directors discusses the valuations and, within the meaning of the Investment Company Act, determines the fair value of the investments in good faith, based on the inputs of the Investment Adviser, the Independent Valuation Advisors and the Audit Committee.

Money Market Funds

Investments in money market funds are valued at net asset value (“NAV”) per share. See Note 3 “Significant Agreements and Related Party Transactions”.

Cash

Cash consists of deposits held at a custodian bank. As of September 30, 2018 and December 31, 2017, the Company held an aggregate cash balance of $4,648 and $11,606, respectively. Foreign currency of $340 (acquisition cost of $340) and $0 is included in cash as of September 30, 2018 and December 31, 2017, respectively.

Foreign Currency Translation

Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the last business day of the period; and (ii) purchases and sales of investments, borrowings and repayments of such borrowings, income, and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates.

The Company does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included within the net realized and unrealized gains or losses on investments. Fluctuations arising from the translation of non-investment assets and liabilities are included with the net change in unrealized gains (losses) on foreign currency translations on the Consolidated Statements of Operations.

Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Derivatives

Foreign currency forward contracts

The Company may enter into foreign currency forward contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations in the value of foreign currencies. In a foreign currency forward contract, the Company agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. Forward foreign currency contracts are marked-to-market at the applicable forward rate. Unrealized appreciation (depreciation) on foreign currency forward contracts are recorded on the Consolidated Statements of Assets and Liabilities by counterparty on a net basis, not taking into account collateral posted which is recorded separately, if applicable. Notional amounts and the gross fair value of foreign currency forward contract assets and liabilities are presented separately on the Consolidated Schedules of Investments. Purchases and sales of foreign currency forward contracts having the same notional value, settlement date and counterparty are generally settled net (which results in a net foreign currency position of zero with the counterparty) and any realized gains or losses are recognized on the settlement date.

The Company does not utilize hedge accounting and as such, the Company recognizes its derivatives at fair value with changes in the net unrealized appreciation (depreciation) on foreign currency forward contracts recorded on the Consolidated Statements of Operations.

Income Taxes

The Company recognizes tax positions in its consolidated financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. The Company reports any interest expense related to income tax matters in income tax expense, and any income tax penalties under expenses in the Consolidated Statements of Operations.

The Company’s tax positions have been reviewed based on applicable statutes of limitation for tax assessments, which may vary by jurisdiction, and based on such review, the Company has concluded that no additional provision for income tax is required in the consolidated financial statements. The Company is subject to potential examination by certain taxing authorities in various jurisdictions. The Company’s tax positions are subject to ongoing interpretation of laws and regulations by taxing authorities.

The Company has elected to be treated as a RIC commencing with its taxable year ended December 31, 2013. So long as the Company maintains its status as a RIC, it will generally not be subject to corporate-level U.S. federal income tax on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. As a result, any U.S. federal income tax liability related to income earned and distributed by the Company represents obligations of the Company’s stockholders and will not be reflected in the consolidated financial statements of the Company.

To maintain its status as a RIC, the Company must meet specified source-of-income and asset diversification requirements and timely distribute to its stockholders for each taxable year at least 90% of its investment company taxable income (generally, its net ordinary income plus the excess of its realized net short-term capital gains over realized net long-term capital losses, determined without regard to the dividends paid deduction). In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income. If the Company chooses to do so, this generally would increase expenses and reduce the amount available to be distributed to stockholders. The Company will accrue excise tax on estimated undistributed taxable income as required. For the three and nine months ended September 30, 2018, the Company accrued excise taxes of $428 and $1,017, respectively. As of September 30, 2018, $1,215 of accrued excise taxes remained payable. For the three and nine months ended September 30, 2017, the Company accrued excise taxes of $383 and $1,116, respectively.

Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state corporate-level income taxes. Income tax expense, if any, is included under the income category for which it applies in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2018, the Company accrued provision for taxes on realized gains on investments of $0 and $446, respectively. For the three and nine months ended September 30, 2018, the Company accrued provision for taxes on unrealized gains on investments of $146 and $146, respectively. As of September 30, 2018, $592 of income taxes remained payable. For the three and nine months ended September 30, 2017, the Company did not accrue any income taxes.

Distributions

Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with GAAP. The Company may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce the stockholder’s tax basis in its shares. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent they are charged or credited to paid-in capital in excess of par, accumulated undistributed net investment income or accumulated net realized gain (loss), as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Company’s annual RIC tax return. Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a distribution is determined by the Board of Directors each quarter and is generally based upon the earnings estimated by the Investment Adviser. The Company may pay distributions to its stockholders in a year in excess of its net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. The Company intends to timely distribute to its stockholders substantially all of its annual taxable income for each year, except that the Company may retain certain net capital gains for reinvestment and, depending upon the level of the Company’s taxable income earned in a year, the Company may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. The specific tax characteristics of the Company’s distributions will be reported to stockholders after the end of the calendar year. All distributions will be subject to available funds, and no assurance can be given that the Company will be able to declare such distributions in future periods.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of all cash distributions declared by the Board of Directors unless a stockholder elects to “opt out” of the plan. As a result, if the Board of Directors declares a cash distribution, then the stockholders who have not “opted out” of the dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of common stock, rather than receiving the cash distribution. Stockholders who receive distributions in the form of shares of common stock will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions and, for this purpose, stockholders receiving distributions in the form of stock will generally be treated as receiving distributions equal to the fair market value of the stock received through the plan; however, since their cash distributions will be reinvested, those stockholders will not receive cash with which to pay any applicable taxes. Due to regulatory considerations, Group Inc. has opted out of the dividend reinvestment plan, and GS & Co. has opted out of the dividend reinvestment plan in respect of shares of the Company’s common stock acquired through its 10b5-1 plan.

Deferred Financing and Debt Issuance Costs

Deferred financing and debt issuance costs consist of fees and expenses paid in connection with the closing of and amendments to the Company’s senior secured revolving credit agreement (as amended, the “Revolving Credit Facility”) with SunTrust Bank, as administrative agent, and Bank of America, N.A., as syndication agent, and the offering of the Company’s 4.50% Convertible Notes due 2022 (the “Convertible Notes”). These costs are amortized using the straight-line method over the respective term of the Revolving Credit Facility and Convertible Notes. Deferred financing costs related to the Revolving Credit Facility are presented separately as an asset on the Company’s Consolidated Statements of Assets and Liabilities. Deferred debt issuance costs related to the Convertible Notes are presented net against the outstanding debt balance on the Consolidated Statements of Assets and Liabilities.

Deferred Offering Costs

The Company records expenses related to registration statement filings and applicable offering costs as deferred offering costs. To the extent such expenses relate to equity offerings, these expenses are charged as a reduction of paid-in-capital upon each such offering.

3.	SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS

Investment Management Agreement

The Company has entered into an investment management agreement (as amended and restated as of June 15, 2018, the “Investment Management Agreement”) with the Investment Adviser, pursuant to which the Investment Adviser manages the Company’s investment program and related activities.

Management Fee

The Company pays the Investment Adviser a management fee (the “Management Fee”), accrued and payable quarterly in arrears. The Management Fee is calculated at (i) an annual rate of 1.50% (0.375% per quarter) (the “Original Rate”) through June 14, 2018 and (ii) an annual rate of 1.00% (0.25% per quarter) (the “New Rate”) thereafter, in each case, of the average value of the Company’s gross assets (excluding cash or cash equivalents but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters. The Management Fee for any partial quarter (including any quarter during which both the Original Rate and the New Rate were in effect) will be appropriately prorated based on the actual number of days elapsed relative to the total number of days in such calendar quarter.

For the three and nine months ended September 30, 2018, Management Fees amounted to $3,255 and $12,537, respectively. As of September 30, 2018, $3,255 remained payable. For the three and nine months ended September 30, 2017, Management Fees amounted to $4,369 and $13,181, respectively.

Incentive Fee

The incentive fee (the “Incentive Fee”) consists of two components that are determined independent of each other, with the result that one component may be payable even if the other is not. Effective as of January 1, 2015, the Incentive Fee is calculated as follows:

A portion of the Incentive Fee is based on income and a portion is based on capital gains, each as described below. The Investment Adviser is entitled to receive the Incentive Fee based on income if Ordinary Income (as defined below) exceeds a quarterly “hurdle rate” of 1.75%. For this purpose, the hurdle is computed by reference to the Company’s NAV and does not take into account changes in the market price of the Company’s common stock.

Beginning with the calendar quarter that commenced on January 1, 2015, the Incentive Fee based on income is determined and paid quarterly in arrears at the end of each calendar quarter by reference to the Company’s aggregate net investment income, as adjusted as described below, from the calendar quarter then ending and the eleven preceding calendar quarters (or if shorter, the number of quarters that have occurred since January 1, 2015) (such period the “Trailing Twelve Quarters”). The Incentive Fee based on capital gains is determined and paid annually in arrears at the end of each calendar year by reference to an “Annual Period,” which means the period beginning on January 1 of each calendar year and ending on December 31 of such calendar year or, in the case of the first and last year, the appropriate portion thereof.

The hurdle amount for the Incentive Fee based on income is determined on a quarterly basis and is equal to 1.75% multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The hurdle amount is calculated after making appropriate adjustments for subscriptions (which includes all of the Company’s issuances of shares of its common stock, including issuances pursuant to its dividend reinvestment plan) and distributions that occurred during the relevant Trailing Twelve Quarters. The Incentive Fee for any partial period will be appropriately prorated.

i. Quarterly Incentive Fee Based on Income

For the portion of the Incentive Fee based on income, the Company pays the Investment Adviser a quarterly Incentive Fee based on the amount by which (A) aggregate net investment income (“Ordinary Income”) in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters. The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “Excess Income Amount”. Ordinary Income is net of all fees and expenses, including the Management Fee but excluding any Incentive Fee.

The Incentive Fee based on income for each quarter is determined as follows:

•

No Incentive Fee based on income is payable to the Investment Adviser for any calendar quarter for which there is no Excess Income Amount;

•

100% of the Ordinary Income, if any, that exceeds the hurdle amount, but is less than or equal to an amount, referred to as the “Catch-up Amount,” determined as the sum of 2.1875% multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters is included in the calculation of the Incentive Fee based on income; and

•

20% of the Ordinary Income that exceeds the Catch-up Amount is included in the calculation of the Incentive Fee based on income.

The amount of the Incentive Fee based on income that is paid to the Investment Adviser for a particular quarter equals the excess of the Incentive Fee so calculated minus the aggregate Incentive Fees based on income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters but not in excess of the Incentive Fee Cap (as described below).

The Incentive Fee based on income that is paid to the Investment Adviser for a particular quarter is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap for any quarter is an amount equal to (a) 20% of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate Incentive Fees based on income that were paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.

“Cumulative Net Return” means (x) the Ordinary Income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss, if any, in respect of the relevant Trailing Twelve Quarters. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company pays no Incentive Fee based on income to the Investment Adviser for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the Incentive Fee based on income that is payable to the Investment Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company pays an Incentive Fee based on income to the Investment Adviser equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the Incentive Fee based on income that is payable to the Investment Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company pays an Incentive Fee based on income to the Investment Adviser equal to the Incentive Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.

“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.

ii. Annual Incentive Fee Based on Capital Gains.

The portion of the Incentive Fee based on capital gains is calculated on an annual basis. For each Annual Period, the Company pays the Investment Adviser an amount equal to (A) 20% of the difference, if positive, of the sum of the Company’s aggregate realized capital gains, if any, computed net of the Company’s aggregate realized capital losses, if any, and the Company’s aggregate unrealized capital depreciation, in each case from April 1, 2013 until the end of such Annual Period minus (B) the cumulative amount of Incentive Fees based on capital gains previously paid to the Investment Adviser from April 1, 2013. For the avoidance of doubt, unrealized capital appreciation is excluded from the calculation in clause (A) above.

The Company accrues, but does not pay, a portion of the Incentive Fee based on capital gains with respect to net unrealized appreciation. Under GAAP, the Company is required to accrue an Incentive Fee based on capital gains that includes net realized capital gains and losses and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the accrual for the Incentive Fee based on capital gains, the Company considers the cumulative aggregate unrealized capital appreciation in the calculation, since an Incentive Fee based on capital gains would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then the Company records a capital gains incentive fee equal to 20% of such amount, minus the aggregate amount of actual Incentive Fees based on capital gains paid in all prior periods. If such amount is negative, then there is no accrual for such period. There can be no assurance that such unrealized capital appreciation will be realized in the future.

For the three and nine months ended September 30, 2018, the Company incurred Incentive Fees based on income of $4,962 and $13,988, respectively. As of September 30, 2018, $4,962 remained payable. For the three and nine months ended September 30, 2017, the Company incurred Incentive Fees based on income of $4,624 and $9,595, respectively. For the three and nine months ended September 30, 2018 and 2017, the Company did not accrue or pay any Incentive Fees based on capital gains.

Administration and Custodian Fees

The Company has entered into an administration agreement with State Street Bank and Trust Company (the “Administrator”) under which the Administrator provides various accounting and administrative services to the Company. The Company pays the Administrator fees for its services as it determines to be commercially reasonable in its sole discretion. The Company also reimburses the Administrator for all reasonable expenses. To the extent that the Administrator outsources any of its functions, the Administrator pays any compensation associated with such functions. The Administrator also serves as the Company’s custodian (the “Custodian”).

For the three and nine months ended September 30, 2018, the Company incurred expenses for services provided by the Administrator and the Custodian of $227 and $682, respectively. As of September 30, 2018, $151 remained payable. For the three and nine months ended September 30, 2017, the Company incurred expenses for services provided by the Administrator and the Custodian of $213 and $594, respectively.

Transfer Agent Fees

Effective May 2, 2016, the Company entered into a transfer agency and services agreement pursuant to which Computershare Trust Company, N.A. serves as the Company’s transfer agent (the “Transfer Agent”), dividend agent and registrar. From the IPO to May 1, 2016, State Street Bank and Trust Company served as the Transfer Agent and dividend agent. Prior to the IPO, GS & Co. was the Transfer Agent. For the three and nine months ended September 30, 2018, the Company incurred expenses for services provided by the Transfer Agent of $3 and $11, respectively. As of September 30, 2018, $1 remained payable. For the three and nine months ended September 30, 2017, the Company incurred expenses for services provided by the Transfer Agent of $6 and $14, respectively.

Common Stock Repurchase Plan

In February 2016, the Board of Directors authorized the Company to repurchase up to $25,000 of the Company’s common stock if the stock trades below the most recently announced NAV per share (including any updates, corrections or adjustments publicly announced by the Company to any previously announced NAV per share), from March 18, 2016 to March 18, 2017, subject to certain limitations. In February 2017, the Company’s Board of Directors renewed its authorization of the stock repurchase plan to extend the expiration to March 18, 2018 and, in February 2018, again renewed its authorization of the stock repurchase plan to extend the expiration to March 18, 2019.

In connection with this authorization, the Company entered into a 10b5-1 plan (the “Company 10b5-1 Plan”). The Company 10b5-1 Plan provides that purchases will be conducted on the open market on a programmatic basis in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances. No purchases will be effected pursuant to the Company 10b5-1 Plan if such purchase would (i) cause the aggregate ownership of the Company’s outstanding common stock by Group Inc. and GS & Co. to equal or exceed 25.0% (due to the reduction in outstanding shares of stock as a result of such purchase) or (ii) cause the Company’s debt/equity ratio to exceed 0.75. The Company 10b5-1 Plan initially took effect on March 18, 2016 (with any purchases to commence after the opening of NYSE trading on March 21, 2016), was subsequently renewed and expired on March 18, 2018. The Company entered into an agreement to renew the Company 10b5-1 Plan on May 14, 2018, which was terminated on June 27, 2018 in connection with the Company’s offering of Convertible Notes. See Notes 6 “Debt”. On June 27, 2018, the Company entered into an agreement to renew the Company 10b5-1 Plan with any purchases pursuant to the agreement to commence on September 25, 2018. The Company 10b5-1 Plan is scheduled to expire on March 18, 2019. Further, no purchases will be effected during the applicable restricted period under Regulation M as a result of an offering of securities by the Company or for a period of 60 days after the expiration of any overallotment option included in any common equity offering.

The Company’s repurchase of its common stock under the Company 10b5-1 Plan or otherwise may result in the price of the Company’s common stock being higher than the price that otherwise might exist in the open market. For the three and nine months ended September 30, 2018, the Company did not repurchase any of its common stock pursuant to the Company 10b5-1 Plan or otherwise.

Affiliates

As of September 30, 2018 and December 31, 2017, Group Inc. owned 16.13% and 16.16%, respectively, of the outstanding shares of the Company’s common stock.

The Company’s investments in affiliates for the nine months ended September 30, 2018 were as follows:


	Fair Value as of December 31, 2017		Gross Additions⁽³⁾		Gross Reductions⁽⁴⁾			Net Realized Gains/(Losses)		Change in Unrealized Gains/(Losses)			Fair Value as of September 30, 2018		Dividend, Interest, PIK and Other Income
Controlled Affiliates

Bolttech Mannings, Inc.	$	20,569	$	4,154	$	–		$	–	$	(2,021	)	$	22,702	$	1,273
Senior Credit Fund, LLC⁽¹⁾		92,097		–		–			–		491			92,588		8,000
Total Controlled Affiliates	$	112,666	$	4,154	$	–		$	–	$	(1,530	)	$	115,290	$	9,273
Non-Controlled Affiliates
Goldman Sachs Financial Square Government Fund⁽²⁾	$	11,539	$	181,280	$	(192,815	)	$	–	$	–		$	4	$	37
Accuity Delivery Systems, LLC		–		13,079		–			–		306			13,385		309
CB-HDT Holdings, Inc.		19,345		1,826		–			–		2,820			23,991		428
Collaborative Imaging Holdco, LLC		–		10,074		–			–		92			10,166		468
Conergy Asia Holdings, Ltd		4,832		664		–			–		(4,432	)		1,064		41
Elah Holdings, Inc.		–		2,234		–			–		–			2,234		–
Iracore International Holdings, Ltd		9,602		–		–			–		(508	)		9,094		281
Kawa Solar Holdings Limited		8,918		153		(664	)		9		(410	)		8,006		151
NTS Communications, Inc.		51,538		6,235		–			–		(93	)		57,680		6,281
Prairie Provident Resources, Inc.		1,233		–		–			–		(177	)		1,056		–
Total Non-Controlled Affiliates	$	107,007	$	215,545	$	(193,479	)	$	9	$	(2,402	)	$	126,680	$	7,996
Total Affiliates	$	219,673	$	219,699	$	(193,479	)	$	9	$	(3,932	)	$	241,970	$	17,269

⁽¹⁾

Together with The Regents of the University of California (“Cal Regents”, and collectively with the Company, the “Members”), the Company invests through the Senior Credit Fund. Although the Company owns more than 25% of the voting securities of the Senior Credit Fund, the Company does not believe that it has control over the Senior Credit Fund (other than for purposes of the Investment Company Act). See Note 4 “Investments”.

⁽²⁾

Fund advised by an affiliate of Goldman Sachs.

⁽³⁾

Gross additions may include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the accretion of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.

⁽⁴⁾

Gross reductions may include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

The Company’s investments in affiliates for the year ended December 31, 2017 were as follows:


	Fair Value as of December 31, 2016		Gross Additions⁽³⁾		Gross Reductions⁽⁴⁾			Net Realized Gains/(Losses)			Change in Unrealized Gains/(Losses)			Fair Value as of December 31, 2017		Dividend, Interest, PIK and Other Income
Controlled Affiliates

Bolttech Mannings, Inc.	$	–	$	20,569	$	–		$	–		$	–		$	20,569	$	37
Senior Credit Fund, LLC⁽¹⁾		78,394		16,750		–			–			(3,047	)		92,097		10,958
Total Controlled Affiliates	$	78,394	$	37,319	$	–		$	–		$	(3,047	)	$	112,666	$	10,995
Non-Controlled Affiliates
Goldman Sachs Financial Square Government Fund⁽²⁾	$	1	$	302,380	$	(290,842	)	$	–		$	–		$	11,539	$	27
CB-HDT Holdings, Inc.		18,510		384		–			–			451			19,345		384
Conergy Asia Holdings, Ltd		–		5,700		–			–			(868	)		4,832		1
Iracore International Holdings, Ltd		–		10,392		–			–			(790	)		9,602		253
Kawa Solar Holdings Limited		15,917		4,161		(5,425	)		(2,492	)		(3,243	)		8,918		1,307
NTS Communications, Inc.		47,498		7,093		–			–			(3,053	)		51,538		7,139
Prairie Provident Resources, Inc.		2,178		–		–			–			(945	)		1,233		–
Total Non-Controlled Affiliates	$	84,104	$	330,110	$	(296,267	)	$	(2,492	)	$	(8,448	)	$	107,007	$	9,111
Total Affiliates	$	162,498	$	367,429	$	(296,267	)	$	(2,492	)	$	(11,495	)	$	219,673	$	20,106

⁽¹⁾

Together with Cal Regents, the Company invests through the Senior Credit Fund. Although the Company owns more than 25% of the voting securities of the Senior Credit Fund, the Company does not believe that it has control over the Senior Credit Fund (other than for purposes of the Investment Company Act). See Note 4 “Investments”.

⁽²⁾

Fund advised by an affiliate of Goldman Sachs.

⁽³⁾

⁽⁴⁾

Due to Affiliates

The Investment Adviser pays certain general and administrative expenses, including legal expenses, on behalf of the Company in the ordinary course of business. As of September 30, 2018 and December 31, 2017, there were $801 and $39, respectively, included within Accrued expenses and other liabilities paid by the Investment Adviser and its affiliates on behalf of the Company.

Co-investment Activity

In certain circumstances, negotiated co-investments by the Company and other funds managed by the Investment Adviser may be made only pursuant to an order from the SEC permitting the Company to do so. On January 4, 2017, the SEC granted GSAM, Goldman Sachs Private Middle Market Credit LLC (“GS PMMC”), Goldman Sachs Middle Market Lending Corp. (“GS MMLC”) and the Company exemptive relief (“Exemptive Relief”) that permits the Company to co-invest with GS PMMC, GS MMLC and certain other funds that may be managed by GSAM, including the GSAM Credit Alternatives Team, in the future, subject to certain terms and conditions in the Exemptive Relief. The GSAM Credit Alternatives Team is comprised of investment professionals dedicated to the Company’s investment strategy and other funds that share a similar investment strategy with the Company, who are responsible for identifying investment opportunities, conducting research and due diligence on prospective investments, negotiating and structuring the Company’s investments and monitoring and servicing the Company’s investments, together with investment professionals who are primarily focused on investment strategies in syndicated, liquid credit. Under the terms of the Exemptive Relief, a “required majority” (as defined in Section 57(o) of the Investment Company Act) of the Company’s independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to the Company and the Company’s stockholders and do not involve overreaching in respect of the Company or its stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with the then-current investment objectives and strategies of the Company. As a result of the Exemptive Relief, there could be significant overlap in the Company’s investment portfolio and the investment portfolios of GS PMMC, GS MMLC and/or other funds established by the GSAM Credit Alternatives Team that could avail themselves of the Exemptive Relief.

4.	INVESTMENTS

As of the dates indicated, the Company’s investments (excluding an investment in a money market fund managed by an affiliate of Group Inc. of $4 and $11,539, respectively) consisted of the following:


	September 30, 2018				December 31, 2017
Investment Type	Cost		Fair Value		Cost		Fair Value
1st Lien/Senior Secured Debt	$	616,037	$	609,812	$	412,534	$	407,073
1st Lien/Last-Out Unitranche		137,714		132,083		279,031		273,965
2nd Lien/Senior Secured Debt		439,290		438,397		443,391		444,603
Unsecured Debt		6,389		6,389		3,900		3,900
Preferred Stock		14,951		17,607		11,750		12,836
Common Stock		35,650		21,444		32,717		23,839
Investment Funds & Vehicles⁽¹⁾		94,342		92,588		94,342		92,097
Total Investments	$	1,344,373	$	1,318,320	$	1,277,665	$	1,258,313

⁽¹⁾

Includes equity investment in the Senior Credit Fund.

As of the dates indicated, the industry composition of the Company’s portfolio at fair value and net assets was as follows:


	September 30, 2018						December 31, 2017
Industry	Fair Value			Net Assets			Fair Value			Net Assets
Software		12.1	%		21.9	%		10.3	%		17.9	%
Health Care Providers & Services		10.1			18.3			7.5			13.0
Investment Funds & Vehicles		7.0			12.7			7.3			12.7
Distributors		6.7			12.1			5.1			8.9
Diversified Telecommunication Services		6.0			10.9			5.9			10.3
Media		5.7			10.3			3.3			5.7
Chemicals		5.2			9.4			4.8			8.3
Diversified Financial Services		5.0			9.1			3.1			5.4
IT Services		4.3			7.8			4.5			7.8
Electronic Equipment, Instruments & Components		4.2			7.6			4.4			7.7
Internet Software & Services		4.1			7.4			3.8			6.5
Health Care Equipment & Supplies		3.9			7.0			7.1			12.2
Aerospace & Defense		3.1			5.6			2.9			5.1
Machinery		2.3			4.1			2.6			4.6
Specialty Retail		2.2			4.0			2.3			4.1
Household Products		1.9			3.5			4.1			7.1
Air Freight & Logistics		1.9			3.4			2.0			3.4
Commercial Services & Supplies		1.7			3.1			1.6			2.8
Internet Catalog & Retail		1.6			2.9			1.7			3.0
Auto Components		1.5			2.7			1.6			2.7
Road & Rail		1.4			2.5			1.1			1.9
Professional Services		1.4			2.6			3.5			6.0
Food Products		1.3			2.4			1.5			2.5
Real Estate Management & Development		1.0			1.7			4.5			7.9
Health Care Technology		1.0			1.7			–			–
Leisure Equipment & Products		0.8			1.5			0.8			1.4
Energy Equipment & Services		0.7			1.2			0.8			1.3
Construction & Engineering		0.7			1.2			1.1			1.9
Containers & Packaging		0.5			0.8			0.7			1.1
Life Sciences Tools & Services		0.4			0.8			–			–
Capital Markets		0.2			0.3			–			–
Oil, Gas & Consumable Fuels		0.1			0.1			0.1			0.2
Total		100.0	%		180.6	%		100.0	%		173.4	%

As of the dates indicated, the geographic composition of the Company’s portfolio at fair value was as follows:


Geographic	September 30, 2018			December 31, 2017
United States		97.7	%		98.8	%
Ireland		1.5			–
Germany		0.6			0.7
Singapore		0.1			0.4
Canada		0.1			0.1
Total		100.0	%		100.0	%

Senior Credit Fund, LLC

The Senior Credit Fund, an unconsolidated Delaware limited liability company, was formed on May 7, 2014 and commenced operations on October 1, 2014. The Company invests together with Cal Regents through the Senior Credit Fund. The Senior Credit Fund’s principal purpose is to make investments, either directly or indirectly through its wholly owned subsidiary, Senior Credit Fund SPV I, LLC (“SPV I”), primarily in senior secured loans to middle-market companies. Each of the Company and Cal Regents are responsible for sourcing the Senior Credit Fund’s investments. Each of the Company and Cal Regents has a 50% economic ownership in the Senior Credit Fund and each has subscribed to fund $100,000. Except under certain circumstances, contributions to the Senior Credit Fund cannot be redeemed. The Senior Credit Fund is managed by a six member board of managers, on which the Company and Cal Regents have equal representation. Investment decisions generally must be unanimously approved by a quorum of the board of managers. On August 24, 2018, the Company and Cal Regents, as the Members of the Senior Credit Fund, entered into an amendment to the amended and restated limited liability company agreement of the Senior Credit Fund to extend the investment period to December 19, 2018.

On December 19, 2016, SPV I entered into an amended and restated credit facility (as amended, the “Asset Based Facility”), which consists of a revolving credit facility (the “SPV I Revolving Credit Facility”), a term loan facility (the “SPV I Term Loan Facility”) and a Class B loan facility (the “SPV I Class B Facility”), with various lenders. For the Asset Based Facility, Natixis, New York Branch (“Natixis”) serves as the facility agent, and State Street Bank and Trust Company serves as the collateral agent. The Asset Based Facility includes a maximum borrowing capacity of $400,000. The SPV I Revolving Credit Facility provided for borrowings in an aggregate amount up to $120,000 on a committed basis as of September 30, 2018. Borrowings under the SPV I Revolving Credit Facility bear interest at LIBOR plus 2.30%. As of September 30, 2018, the SPV I Term Loan Facility consisted of a $240,000 fully drawn term loan and the SPV I Class B Facility consisted of a $40,000 fully drawn Class B loan. Borrowings under the SPV I Term Loan Facility and SPV I Class B Facility bear interest at LIBOR plus 2.30% and LIBOR plus 3.50%, respectively. Any amounts borrowed under the Asset Based Facility will mature, and all accrued and unpaid interest will be due and payable, on December 19, 2025. As of September 30, 2018 and December 31, 2017, the SPV I’s outstanding borrowings under the Asset Based Facility were $320,000 and $294,000, respectively.

As of September 30, 2018 and December 31, 2017, the Company and Cal Regents had subscribed to fund and contributed the following to the Senior Credit Fund:


	September 30, 2018				December 31, 2017
Member	Subscribed to fund		Contributed		Subscribed to fund		Contributed
Company	$	100,000	$	94,342	$	100,000	$	94,342
Cal Regents		100,000		94,342		100,000		94,342
Total	$	200,000	$	188,684	$	200,000	$	188,684

As of September 30, 2018 and December 31, 2017, the Senior Credit Fund had total investments in senior secured debt at fair value of $487,967 and $467,071, respectively. As of September 30, 2018, the Senior Credit Fund had one investment on non-accrual status. As of December 31, 2017, the Senior Credit Fund had no investments on non-accrual status. As of September 30, 2018 and December 31, 2017, the Senior Credit Fund had an investment in a money market fund managed by an affiliate of Group Inc. with a total fair value of $5,930 and $5,840, respectively. In addition, as of September 30, 2018, the Senior Credit Fund had twelve portfolio companies with unfunded commitments totaling $24,723 and as of December 31, 2017, the Senior Credit Fund had eight portfolio companies with unfunded commitments totaling $17,138.

Below is a summary of the Senior Credit Fund’s portfolio, excluding an investment in a money market fund managed by an affiliate of Group Inc., followed by a listing of the individual loans in the Senior Credit Fund’s portfolio as of September 30, 2018 and December 31, 2017:


	As of
	September 30, 2018		December 31, 2017
Total senior secured debt⁽¹⁾	$	524,582	$	496,582
Weighted average current interest rate on senior secured debt⁽²⁾		7.5%		7.3%
Number of borrowers in the Senior Credit Fund		35		34
Largest loan to a single borrower⁽¹⁾	$	29,924	$	29,041

⁽¹⁾

At par amount, including fully unfunded commitments.

⁽²⁾

Computed as (a) the annual stated interest rate on accruing senior secured debt, divided by (b) total senior secured debt at par amount, excluding fully unfunded commitments.

Senior Credit Fund Portfolio as of September 30, 2018


Portfolio Company	Industry	Interest Rate ⁽⁺⁾	Reference Rate and Spread ⁽⁺⁾	Maturity		Par Amount		Cost			Fair Value

1st Lien/Senior Secured Debt⁽⁺⁾
3SI Security Systems, Inc.	Commercial Services & Supplies	8.08%	L + 5.75%; 1.00% Floor		06/16/2023	$	29,924	$	29,593		$	29,625
A Place For Mom, Inc.	Diversified Consumer Services	5.99%	L + 3.75%; 1.00% Floor		08/10/2024		17,910		17,893			17,888
AMCP Clean Acquisition Company, LLC	Commercial Services & Supplies	6.64%	L + 4.25%		06/16/2025		8,849		8,806			8,849
AMCP Clean Acquisition Company, LLC^{(1) (2)}	Commercial Services & Supplies		L + 4.25%		06/16/2025		2,129		(5	)		—
Ansira Partners, Inc.	Media	7.99%	L + 5.75%; 1.00% Floor		12/20/2022		9,272		9,202			9,226
Ansira Partners, Inc.⁽¹⁾	Media	7.99%	L + 5.75%; 1.00% Floor		12/20/2022		566		136			138
ASC Acquisition Holdings, LLC⁽³⁾	Distributors	9.85%	L + 7.50%; 1.00% Floor		12/15/2021		8,063		8,006			7,942
ASC Acquisition Holdings, LLC^{(1) (2) (3)}	Distributors		L + 7.50%; 1.00% Floor		12/15/2021		3,750		(38	)		(56	)
ATX Networks Corp.	Communications Equipment	9.39% (8.39% Cash and 1.00% PIK)	L + 7.00% (Incl. 1.00% PIK); 1.00% Floor		06/11/2021		15,098		15,017			14,192
ATX Networks Corp.	Communications Equipment	9.39% (8.39% Cash and 1.00% PIK)	L + 7.00% (Incl. 1.00% PIK); 1.00% Floor		06/11/2021		952		934			894
Badger Sportswear, Inc.	Textiles, Apparel & Luxury Goods	6.74%	L + 4.50%; 1.00% Floor		09/11/2023		14,699		14,588			14,405
Barbri, Inc.	Media	6.35%	L + 4.25%; 1.00% Floor		12/01/2023		12,795		12,738			12,747
CST Buyer Company	Diversified Consumer Services	7.24%	L + 5.00%; 1.00% Floor		03/01/2023		18,967		18,559			18,588
CST Buyer Company^{(1) (2)}	Diversified Consumer Services		L + 5.00%; 1.00% Floor		03/01/2023		1,800		(37	)		(36	)
DBRS Limited	Capital Markets	7.56%	L + 5.25%; 1.00% Floor		03/04/2022		11,580		11,516			11,594
DiscoverOrg, LLC⁽³⁾	Software	6.75%	L + 4.50%; 1.00% Floor		08/25/2023		7,920		7,887			7,880
Drilling Info Holdings, Inc.	Oil & Gas	6.54%	L + 4.25%		07/30/2025		15,830		15,752			15,751
Drilling Info Holdings, Inc.^{(1) (2)}	Oil & Gas		L + 4.25%		07/30/2025		2,670		(13	)		(13	)
FWR Holding Corporation	Hotels, Restaurants & Leisure	7.99%	L + 5.75%; 1.00% Floor		08/21/2023		9,012		8,820			8,809
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	7.99%	L + 5.75%; 1.00% Floor		08/21/2023		2,930		1,077			1,072
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	8.80%	L + 5.75%; 1.00% Floor		08/21/2023		1,175		710			708
GH Holding Company	Real Estate Management & Development	6.74%	L + 4.50%		02/28/2023		14,925		14,858			14,850
GI Revelation Acquisition LLC	Internet Software & Services	7.24%	L + 5.00%		04/16/2025		6,983		6,950			6,991
GK Holdings, Inc.	IT Services	8.39%	L + 6.00%; 1.00% Floor		01/20/2021		17,325		17,272			15,953
GlobalTranz Enterprises, Inc.	Road & Rail	6.49%	L + 4.25%		06/29/2025		17,646		17,560			17,558
GlobalTranz Enterprises, Inc.^{(1) (2)}	Road & Rail		L + 4.25%		06/29/2025		4,354		—			(22	)
Halo Branded Solutions, Inc.	Commercial Services & Supplies	6.74%	L + 4.50%; 1.00% Floor		06/30/2025		10,529		10,427			10,424
Halo Branded Solutions, Inc.⁽¹⁾	Commercial Services & Supplies	6.78%	L + 4.50%; 1.00% Floor		06/30/2025		4,434		4,077			4,076
HC Group Holdings III, Inc.	Health Care Providers & Services	5.99%	L + 3.75%		04/07/2022		8,730		8,705			8,763
Hygiena Borrower LLC⁽³⁾	Life Sciences Tools & Services	6.38%	L + 4.00%; 1.00% Floor		08/26/2022		17,807		17,660			17,451
Hygiena Borrower LLC⁽¹⁾⁽²⁾⁽³⁾	Life Sciences Tools & Services		L + 4.00%; 1.00% Floor		08/26/2022		288		(2	)		(6	)
Hygiena Borrower LLC⁽¹⁾⁽²⁾⁽³⁾	Life Sciences Tools & Services		L + 4.00%; 1.00% Floor		08/26/2022		1,867		(21	)		(37	)
Jill Acquisition LLC	Textiles, Apparel & Luxury Goods	7.35%	L + 5.00%; 1.00% Floor		05/08/2022		13,879		13,809			13,636
Lattice Semiconductor Corporation	Semiconductors & Semiconductor Equipment	6.37%	L + 4.25%; 1.00% Floor		03/10/2021		9,768		9,666			9,805
Output Services Group, Inc.⁽⁴⁾	Diversified Consumer Services	6.49%	L + 4.25%; 1.00% Floor		03/27/2024		7,013		6,985			7,031
Output Services Group, Inc.⁽¹⁾	Diversified Consumer Services		L + 4.25%; 1.00% Floor		03/27/2024		1,026		—			3

Senior Credit Fund Portfolio as of September 30, 2018 (Continued)


Portfolio Company	Industry	Interest Rate ⁽⁺⁾	Reference Rate and Spread ⁽⁺⁾	Maturity		Par Amount		Cost			Fair Value

Pathway Partners Vet Management Company, LLC	Health Care Providers & Services	6.49%	L + 4.25%; 1.00% Floor		10/10/2024	$	9,630	$	9,587		$	9,630
Pathway Partners Vet Management Company, LLC	Health Care Providers & Services	6.49%	L + 4.25%; 1.00% Floor		10/10/2024		286		284			286
Pharmalogic Holdings Corp.	Health Care Equipment & Supplies	6.24%	L + 4.00%		06/11/2023		6,559		6,543			6,542
Pharmalogic Holdings Corp.^{(1) (2)}	Health Care Equipment & Supplies		L + 4.00%		06/11/2023		3,537		(8	)		(9	)
Pharmalogic Holdings Corp.	Health Care Equipment & Supplies	6.24%	L + 4.00%		06/11/2023		1,883		1,879			1,878
Professional Physical Therapy⁽⁵⁾	Health Care Providers & Services		L + 7.50% PIK; 1.00% Floor		12/16/2022		10,921		10,283			9,065
RealD, Inc.	Media	9.74%	L + 7.50%; 1.00% Floor		03/22/2021		16,320		16,225			16,238
Regulatory DataCorp, Inc.	Diversified Financial Services	6.74%	L + 4.50%; 1.00% Floor		09/21/2022		4,975		4,975			4,875
SciQuest, Inc.	Internet Software & Services	6.24%	L + 4.00%; 1.00% Floor		12/28/2024		19,850		19,760			19,800
SMS Systems Maintenance Services, Inc.	IT Services	7.24%	L + 5.00%; 1.00% Floor		10/30/2023		14,738		14,679			11,888
Stackpath, LLC	Internet Software & Services	7.51%	L + 5.00%; 1.00% Floor		02/03/2023		16,788		16,657			16,620
Tronair Parent Inc.	Air Freight & Logistics	7.56%	L + 4.75%; 1.00% Floor		09/08/2023		13,720		13,619			13,514
U.S. Acute Care Solutions, LLC	Health Care Providers & Services	7.24%	L + 5.00%; 1.00% Floor		05/14/2021		12,757		12,674			12,662
United Seating and Mobility, LLC	Health Care Equipment & Supplies	6.99%	L + 4.75%; 1.00% Floor		05/10/2019		14,813		14,768			14,738
VRC Companies, LLC	Commercial Services & Supplies	8.74%	L + 6.50%; 1.00% Floor		03/31/2023		27,428		27,012			27,154
VRC Companies, LLC⁽¹⁾	Commercial Services & Supplies	8.74%	L + 6.50%; 1.00% Floor		03/31/2022		1,412		1,057			1,066

Total 1st Lien/Senior Secured Debt									479,081			472,626

2nd Lien/Senior Secured Debt
DiscoverOrg, LLC⁽³⁾	Software	10.75%	L + 8.50%; 1.00% Floor		02/23/2024		10,500		10,365			10,421
GK Holdings, Inc.	IT Services	12.64%	L + 10.25%; 1.00% Floor		01/20/2022		6,000		5,930			4,920

Total 2nd Lien/Senior Secured Debt									16,295			15,341

Total Corporate Debt									495,376			487,967


			Yield			Shares		Cost			Fair Value

Investments in Affiliated Money Market Fund
Goldman Sachs Financial Square Government Fund – Institutional Shares ^{^^^}			1.98%⁽⁶⁾				5,929,536	$	5,930		$	5,930

Total Investments in Affiliated Money Market Fund									5,930			5,930


TOTAL INVESTMENTS								$	501,306		$	493,897

^{^^^}

While representing less than 5% of the portfolio company’s outstanding voting securities, the portfolio company is otherwise deemed to be an “affiliated person” of the Company under the Investment Company Act of 1940.

⁽⁺⁾

The terms in the Schedule above disclose the actual interest rate for partially or fully funded debt in effect as of the reporting date. Variable rate loans bear interest at a rate that may be determined by reference to either LIBOR (“L”) or alternate base rate (commonly based on the Prime Rate (“P”)), at the borrower’s option, which reset periodically based on the terms of the credit agreement. L loans are typically indexed to 12 month, 6 month, 3 month, 2 month, 1 month or 1 week L rates. As of September 30, 2018, rates for the 12 month, 6 month, 3 month, 2 month, 1 month and 1 week L are 2.92%, 2.60%, 2.40%, 2.31%, 2.26% and 2.20%, respectively. As of September 30, 2018, P was 5.25%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at September 30, 2018.

⁽¹⁾

⁽²⁾

⁽³⁾

The Company also holds a portion of the senior secured debt in this portfolio company.

⁽⁴⁾

Position or portion thereof unsettled as of September 30, 2018.

⁽⁵⁾

The investment is on non-accrual status as of September 30, 2018.

⁽⁶⁾

The rate shown is the annualized seven-day yield as of September 30, 2018.

PIK – Payment-In-Kind

Senior Credit Fund Portfolio as of December 31, 2017


Portfolio Company	Industry	Interest⁽⁺⁾	Maturity	Par Amount		Cost			Fair Value

1st Lien/Senior Secured Debt⁽⁺⁾
3SI Security Systems, Inc.	Commercial Services & Supplies	7.87% (L + 6.25%; 1.00% Floor)	06/16/2023	$	14,963	$	14,754		$	14,738
A Place For Mom, Inc.	Diversified Consumer Services	5.69% (L + 4.00%; 1.00% Floor)	08/10/2024		3,990		3,971			3,985
Ansira Partners, Inc.	Media	8.19% (L + 6.50%; 1.00% Floor)	12/20/2022		8,640		8,564			8,575
Ansira Partners, Inc. ⁽¹⁾	Media	8.19% (L + 6.50%; 1.00% Floor)	12/20/2022		1,269		692			693
ASC Acquisition Holdings, LLC⁽²⁾	Distributors	8.89% (L + 7.50%; 1.00% Floor)	12/15/2021		10,688		10,599			10,474
ASC Acquisition Holdings, LLC ^{(1) (2) (3)}	Distributors	(L + 7.50%; 1.00% Floor)	12/15/2021		3,750		(37	)		(75	)
ATX Networks Corp.	Communications Equipment	8.69% (L + 6.00%; 1.00% Floor) (7.69% Cash and 1.00% PIK)	06/11/2021		16,426		16,299			16,179
Badger Sportswear, Inc.	Textiles, Apparel & Luxury Goods	6.07% (L + 4.50%; 1.00% Floor)	09/11/2023		14,812		14,687			14,535
Barbri, Inc.	Media	5.73% (L + 4.25%; 1.00% Floor)	12/01/2023		14,000		13,931			13,965
Crowne Group, LLC	Auto Components	10.73% (L + 9.25%; 1.00% Floor)	05/26/2021		16,363		16,239			16,526
CST Buyer Company	Diversified Consumer Services	7.75% (L + 6.25%; 1.00% Floor)	03/01/2023		19,658		19,176			19,265
CST Buyer Company ^{(1) (3)}	Diversified Consumer Services	(L + 6.25%; 1.00% Floor)	03/01/2023		1,800		(43	)		(36	)
DBRS Limited	Capital Markets	6.73% (L + 5.25%; 1.00% Floor)	03/04/2022		11,670		11,593			11,670
DiscoverOrg, LLC ⁽²⁾	Software	6.07% (L + 4.50%; 1.00% Floor)	08/25/2023		7,980		7,942			7,900
FWR Holding Corporation	Hotels, Restaurants & Leisure	7.66% (L + 6.00%; 1.00% Floor)	08/21/2023		9,080		8,863			8,853
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	7.60% (L + 6.00%; 1.00% Floor)	08/21/2023		2,936		400			396
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	7.57% (L + 6.00%; 1.00% Floor)	08/21/2023		1,175		119			118
GK Holdings, Inc.	IT Services	7.69% (L + 6.00%; 1.00% Floor)	01/20/2021		17,460		17,392			13,628
HC Group Holdings III, Inc.	Health Care Providers & Services	6.57% (L + 5.00%; 1.00% Floor)	04/07/2022		8,798		8,768			8,875
Help/Systems, LLC	Software	6.19% (L + 4.50%; 1.00% Floor)	10/08/2021		17,721		17,300			17,765
Hygiena Borrower LLC	Life Sciences Tools & Services	6.44% (L + 4.75%; 1.00% Floor)	08/26/2022		15,880		15,741			15,562
Hygiena Borrower LLC^{(1) (3)}	Life Sciences Tools & Services	(L + 4.75%; 1.00% Floor)	08/26/2022		1,667		(21	)		(33	)
Jill Acquisition LLC	Textiles, Apparel & Luxury Goods	6.38% (L + 5.00%; 1.00% Floor)	05/08/2022		13,997		13,914			13,183
Lattice Semiconductor Corporation	Semiconductors & Semiconductor Equipment	5.65% (L + 4.25%; 1.00% Floor)	03/10/2021		10,745		10,608			10,852
Liquidnet Holdings, Inc.	Capital Markets	5.82% (L + 4.25%; 1.00% Floor)	07/15/2024		9,750		9,658			9,774
MB Aerospace Holdings Inc.	Aerospace & Defense	7.13% (L + 5.50%; 1.00% Floor)	12/15/2022		15,689		15,568			15,649
Netsmart Technologies, Inc.	Health Care Technology	6.19% (L + 4.50%; 1.00% Floor)	04/19/2023		18,747		18,696			18,935
Pathway Partners Vet Management Company, LLC⁽²⁾	Health Care Providers & Services	5.82% (L + 4.25%; 1.00% Floor)	10/10/2024		6,963		6,929			6,963
Pathway Partners Vet Management Company, LLC⁽¹⁾⁽²⁾	Health Care Providers & Services	5.82% (L + 4.25%; 1.00% Floor)	10/10/2024		3,020		277			291
Pomeroy Group LLC	IT Services	7.51% (L + 6.00%; 1.00% Floor)	11/30/2021		15,759		15,390			15,404
Professional Physical Therapy	Health Care Providers & Services	9.50% (P + 5.00%)	12/16/2022		10,395		10,306			10,187
Radiology Partners Holdings, LLC	Health Care Providers & Services	7.59% (L + 5.75%; 1.00% Floor)	12/04/2023		7,710		7,634			7,710
Radiology Partners Holdings, LLC⁽¹⁾	Health Care Providers & Services	7.59% (L + 5.75%; 1.00% Floor)	12/04/2023		2,290		1,389			1,412
RealD, Inc.	Media	8.98% (L + 7.50%; 1.00% Floor)	03/22/2021		16,639		16,516			16,431
SciQuest, Inc.⁽⁴⁾	Internet Software & Services	5.56% (L + 4.00%; 1.00% Floor)	12/28/2024		20,000		19,900			19,900
Smarte Carte, Inc.	Air Freight & Logistics	7.20% (L + 5.50%; 1.00% Floor)	08/30/2021		10,558		10,477			10,479
SMS Systems Maintenance Services, Inc.	IT Services	6.57% (L + 5.00%; 1.00% Floor)	10/30/2023		14,850		14,784			12,474
Stackpath, LLC	Internet Software & Services	6.38% (L + 5.00%; 1.00% Floor)	02/03/2023		16,915		16,765			16,746
Tronair Parent Inc.	Air Freight & Logistics	6.16% (L + 4.75%; 1.00% Floor)	09/08/2023		13,825		13,710			13,652
U.S. Acute Care Solutions, LLC	Health Care Providers & Services	6.69% (L + 5.00%; 1.00% Floor)	05/14/2021		12,870		12,765			12,741
VRC Companies, LLC	Commercial Services & Supplies	8.12% (L + 6.50%; 1.00% Floor)	03/31/2023		19,906		19,501			19,657
VRC Companies, LLC	Commercial Services & Supplies	7.85% (L + 6.50%; 1.00% Floor)	03/31/2023		3,523		3,452			3,480
VRC Companies, LLC⁽¹⁾	Commercial Services & Supplies	7.97% (L + 6.50%; 1.00% Floor)	03/31/2023		4,200		2,179			2,177
VRC Companies, LLC⁽¹⁾	Commercial Services & Supplies	10.00% (P + 5.50%)	03/31/2022		1,412		1,102			1,112

Total 1st Lien/Senior Secured Debt							448,449			442,767

1st Lien/First-Out Unitranche
Infogix, Inc.	Software	6.69% (L + 5.00%; 1.00% Floor)	12/31/2021		9,593		9,524			9,569

Total 1st Lien/First-Out Unitranche							9,524			9,569

Portfolio Company

Industry

Interest⁽⁺⁾

Maturity

Par

Amount

Cost

Fair

Value

2nd Lien/Senior Secured Debt

DiscoverOrg, LLC⁽²⁾

Software

10.07% (L + 8.50%; 1.00% Floor)

02/23/2024

10,500

10,350

10,395

GK Holdings, Inc.

IT Services

11.94% (L + 10.25%; 1.00% Floor)

01/20/2022

6,000

5,918

4,340

Total 2nd Lien/Senior Secured Debt

16,268

14,735

Total Corporate Debt

474,241

467,071

Yield

Shares

Cost

Fair

Value

Investments in Affiliated Money Market Fund

Goldman Sachs Financial Square Government Fund – Institutional Shares

1.21%⁽⁵⁾

5,839,827

5,840

Total Investments in Affiliated Money Market Fund

5,840

TOTAL INVESTMENTS

480,081

472,911

⁽⁺⁾

The schedule above discloses the actual interest rate for partially or fully funded debt in effect as of the reporting date. Variable rate loans bear interest at a rate that may be determined by reference to either LIBOR (“L”) or alternate base rate (commonly based on the Prime Rate (“P”)), at the borrower’s option, which reset periodically based on the terms of the credit agreement. L loans are typically indexed to 12 month, 6 month, 3 month, 2 month, 1 month or 1 week L rates. As of December 31, 2017, rates for the 12 month, 6 month, 3 month, 2 month, 1 month and 1 week L are 2.11%, 1.84%, 1.69%, 1.62%, 1.56% and 1.48%, respectively. As of December 31, 2017, P was 4.50%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2017.

⁽¹⁾

⁽²⁾

The Company also holds a portion of the 2nd lien/senior secured debt in this portfolio company.

⁽³⁾

⁽⁴⁾

Position or portion thereof unsettled as of December 31, 2017.

⁽⁵⁾

The rate shown is the annualized seven-day yield as of December 31, 2017.

Below is selected balance sheet information for the Senior Credit Fund as of September 30, 2018 and December 31, 2017:


	As of September 30, 2018		As of December 31, 2017
Selected Balance Sheet Information
Total investments, at fair value	$	493,897	$	472,911
Cash and other assets		19,829		31,826
Total assets	$	513,726	$	504,737

Debt ⁽¹⁾	$	317,761	$	291,515
Other liabilities		10,789		29,028
Total liabilities	$	328,550	$	320,543
Members’ equity		185,176		184,194
Total liabilities and members’ equity	$	513,726	$	504,737

⁽¹⁾	Net of deferred financing costs for the SPV I Term Loan Facility, which were in the amount of $2,239 and $2,485 as of September 30, 2018 and December 31, 2017, respectively.

Below is selected statements of operations information for the Senior Credit Fund for the three and nine months ended September 30, 2018 and 2017:


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2018		2017			2018			2017
Selected Statements of Operations Information:
Total investment income	$	10,299	$	9,535		$	29,469		$	28,140

Expenses
Interest and other debt expense		4,112		3,482			11,362			10,132
Excess loan origination and structuring fees		–		350			–			1,096
Professional fees		126		176			538			485
Administration and custodian fees		100		103			295			299
Other expenses		24		36			53			88
Total expenses	$	4,362	$	4,147		$	12,248		$	12,100
Total net income		5,937		5,388			17,221			16,040
Net realized gain (loss) on investments		–		29			–			106
Net change in unrealized appreciation (depreciation) on investments		558		(135	)		(239	)		(1,706	)
Net increase (decrease) in members’ equity	$	6,495	$	5,282		$	16,982		$	14,440

Loan Origination and Structuring Fees

If the loan origination and structuring fees earned by the Senior Credit Fund (including directly or indirectly through SPV I or another vehicle) during a period exceed the Senior Credit Fund’s expenses (excluding interest and other debt expenses), such excess is paid as a fee to the Member(s) responsible for the origination of the loans pro rata in accordance with the total loan origination and structuring fees earned by the Senior Credit Fund with respect to the loans originated by such Member. The loan origination and structuring fee is accrued quarterly and included in other income from controlled affiliated investments on the Consolidated Statements of Operations and paid annually. For the three and nine months ended September 30, 2018, the Company did not accrue income based on loan origination and structuring fees. For the three and nine months ended September 30, 2017, the Company accrued income based on loan origination and structuring fees of $350 and $1,096, respectively.

5.	FAIR VALUE MEASUREMENT

The fair value of a financial instrument is the amount that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).

The fair value hierarchy under ASC 820 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 levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:

Basis of Fair Value Measurement

Level 1 – Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets.

Level 2 – Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs.

Level 3 – Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Note 2 “Significant Accounting Policies” should be read in conjunction with the information outlined below.

The table below presents the valuation techniques and the nature of significant inputs generally used in determining the fair value of Level 2 Instruments.


Level 2 Instruments		Valuation Techniques and Significant Inputs
Equity and Fixed Income		The types of instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency include commercial paper, most government agency obligations, most corporate debt securities, certain mortgage-backed securities, certain bank loans, less liquid publicly listed equities, certain state and municipal obligations, certain money market instruments and certain loan commitments. Valuations of Level 2 Equity and Fixed Income instruments can be verified to quoted prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Consideration is given to the nature of the quotations (e.g. indicative or firm) and the relationship of recent market activity to the prices provided from alternative pricing sources.
Derivative Contracts		OTC derivatives (both centrally cleared and bilateral) are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.

The table below presents the valuation techniques and the nature of significant inputs generally used in determining the fair value of Level 3 Instruments.


Level 3 Instruments		Valuation Techniques and Significant Inputs
Bank Loans, Corporate Debt, and Other Debt Obligations		Valuations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available. Other valuation methodologies are used as appropriate including market comparables, transactions in similar instruments and recovery/liquidation analysis.
Equity		Recent third-party investments or pending transactions are considered to be the best evidence for any change in fair value. When these are not available, the following valuation methodologies are used, as appropriate and available: • Transactions in similar instruments; • Discounted cash flow techniques; • Third party appraisals; and • Industry multiples and public comparables. Evidence includes recent or pending reorganizations (for example, merger proposals, tender offers and debt restructurings) and significant changes in financial metrics, including: • Current financial performance as compared to projected performance; • Capitalization rates and multiples; and • Market yields implied by transactions of similar or related assets.

The tables below present the ranges of significant unobservable inputs used to value the Company’s Level 3 assets and liabilities as of September 30, 2018 and December 31, 2017. These ranges represent the significant unobservable inputs that were used in the valuation of each type of instrument, but they do not represent a range of values for any one instrument. For example, the lowest yield in 1st Lien/Senior Secured Debt is appropriate for valuing that specific debt investment, but may not be appropriate for valuing any other debt investments in this asset class. Accordingly, the ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of the Company’s Level 3 assets and liabilities.


Level 3 Instruments	Level 3 Assets as of September 30, 2018⁽¹⁾	Significant Unobservable Inputs by Valuation Techniques⁽²⁾	Range⁽³⁾ of Significant Unobservable Inputs (Weighted Average⁽⁴⁾) as of September 30, 2018
Bank Loans, Corporate Debt, and Other Debt Obligations	1st Lien/Senior Secured	Discounted cash flows:
	$431,956	• Discount Rate	9.1% – 23.4% (12.4%)
		Collateral analysis:
		• Recovery Rate	93.5%
	1st Lien/Last-Out Unitranche	Discounted cash flows:
	$132,083	• Discount Rate	9.7% -–16.4% (13.2%)
		Collateral analysis:
		• Recovery Rate	90.0% – 100.0% (98.9%)
		Comparable multiples:
		• EV/EBITDA⁽⁵⁾	7.8x
	2nd Lien/Senior Secured	Discounted cash flows:
	$338,961	• Discount Rate	10.4% – 18.9% (12.8%)
	Unsecured Debt	Discounted cash flows:
	$6,389	• Discount Rate	12.0%
		Collateral analysis:
		• Recovery Rate	100.0%
Equity	Preferred Stock	Comparable multiples:
	$17,607	• EV/EBITDA⁽⁵⁾	6.8x – 11.4x (7.7x)
	Common Stock	Discounted cash flows:
	$18,154	• Discount Rate	13.8% – 16.3% (14.1%)
		Comparable multiples:
		• EV/Revenue	0.5x – 1.0x (0.7x)
		Comparable multiples:
		• EV/EBITDA⁽⁵⁾	3.6x – 15.0x (6.2x)

⁽¹⁾

Included within Level 3 Assets of $1,178,678 is an amount of $233,528 for which the Investment Adviser did not develop the unobservable inputs (examples include single source broker quotations, third party pricing, and prior transactions).

⁽²⁾

The fair value of any one instrument may be determined using multiple valuation techniques. For example, market comparable and discounted cash flows may be used together to determine fair value. Therefore, the Level 3 balance encompasses both of these techniques.

⁽³⁾

The range for an asset category consisting of a single investment represents the relevant market data considered in determining the fair value of the investment.

⁽⁴⁾

Weighted average for an asset category consisting of multiple investments is calculated by weighting the significant unobservable input by the relative fair value of the investment. Weighted average for an asset category consisting of a single investment represents the significant unobservable input used in the fair value of the investment.

⁽⁵⁾

Enterprise value of portfolio company as a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”).


Level 3 Instruments	Level 3 Assets as of December 31, 2017⁽¹⁾	Significant Unobservable Inputs by Valuation Techniques⁽²⁾	Range⁽³⁾ of Significant Unobservable Inputs (Weighted Average⁽⁴⁾) as of December 31, 2017
Bank Loans, Corporate Debt, and Other Debt Obligations	1st Lien/Senior Secured Debt	Discounted cash flows:
	$331,896	• Discount Rate	9.4% – 17.3% (12.3%)
		Collateral analysis:
		• Recovery Rate	91.8%
	1st Lien/Last-Out Unitranche	Discounted cash flows:
	$268,074	• Discount Rate	10.5% – 15.3% (11.8%)

		Comparable multiples:
		• EV/Revenue	0.4x – 0.9x (0.6x)

		Comparable multiples:
		• EV/EBITDA⁽⁵⁾	7.0x – 7.0x (7.0x)
	2nd Lien/Senior Secured Debt	Discounted cash flows:
	$321,986	• Discount Rate	9.9% – 15.6% (11.6%)
	Unsecured Debt	Discounted cash flows:
	$3,500	• Discount Rate	4.3% – 5.7% (12.0%)
Equity	Preferred Stock	Comparable multiples:
	$12,836	• EV/EBITDA⁽⁵⁾	5.1x – 16.6x (6.5x)


Level 3 Instruments	Level 3 Assets as of December 31, 2017⁽¹⁾	Significant Unobservable Inputs by Valuation Techniques⁽²⁾	Range⁽³⁾ of Significant Unobservable Inputs (Weighted Average⁽⁴⁾) as of December 31, 2017
	Common Stock	Collateral analysis:
	$22,606	• Recovery Rate	100.0%

		Comparable multiples:
		• EV/Revenue	0.6x – 2.7x (0.9x)

		Comparable multiples:
		• EV/EBITDA⁽⁵⁾	5.8x – 15.3x (7.0x)

		Collateral analysis:
		• Recovery Rate	81.9%

⁽¹⁾

Included within Level 3 Assets of $1,075,695 is an amount of $114,797 for which the Investment Adviser did not develop the unobservable inputs (examples include single source broker quotations, third party pricing, and prior transactions).

⁽²⁾

⁽³⁾

The range for an asset category consisting of a single investment represents the relevant market data considered in determining the fair value of the investment.

⁽⁴⁾

⁽⁵⁾

Enterprise value of portfolio company as a multiple of EBITDA.

As noted above, the income and market approaches were used in the determination of fair value of certain Level 3 assets as of September 30, 2018 and December 31, 2017. The significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments. An increase in the discount rate or market yield would result in a decrease in the fair value. Included in the consideration and selection of discount rates is risk of default, rating of the investment, call provisions and comparable company investments. The significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies. Increases or decreases in market comparable transactions or market multiples would result in an increase or decrease, respectively, in the fair value.

The following is a summary of the Company’s assets and liabilities categorized within the fair value hierarchy as of September 30, 2018:


Investments – Assets	Level 1		Level 2		Level 3		Total
1st Lien/Senior Secured Debt	$	–	$	19,150	$	590,662	$	609,812
1st Lien/Last-Out Unitranche		–		–		132,083		132,083
2nd Lien/Senior Secured Debt		–		26,848		411,549		438,397
Unsecured Debt		–		–		6,389		6,389
Preferred Stock		–		–		17,607		17,607
Common Stock		–		1,056		20,388		21,444
Affiliated Money Market Fund		4		–		–		4
Subtotal	$	4	$	47,054	$	1,178,678	$	1,225,736
Investments measured at NAV⁽¹⁾								92,588
Total							$	1,318,324

⁽¹⁾

Includes equity investment in the Senior Credit Fund.


Derivatives	Level 1		Level 2		Level 3		Total
Foreign currency forward contracts (asset)⁽¹⁾	$	–	$	2	$	–	$	2
Total	$	–	$	2	$	–	$	2

⁽¹⁾

Amounts disclosed represent the unrealized appreciation on the foreign currency forward contracts.

The following is a summary of the Company’s assets categorized within the fair value hierarchy as of December 31, 2017:


Assets	Level 1		Level 2		Level 3		Total
1st Lien/Senior Secured Debt	$	–	$	19,600	$	387,473	$	407,073
1st Lien/Last-Out Unitranche		–		–		273,965		273,965
2nd Lien/Senior Secured Debt		–		69,688		374,915		444,603
Unsecured Debt		–		–		3,900		3,900
Preferred Stock		–		–		12,836		12,836
Common Stock		–		1,233		22,606		23,839
Affiliated Money Market Fund		11,539		–		–		11,539
Subtotal	$	11,539	$	90,521	$	1,075,695	$	1,177,755
Investments measured at NAV⁽¹⁾								92,097
Total assets							$	1,269,852

⁽¹⁾

Includes equity investment in the Senior Credit Fund.

The Company did not hold any derivative instruments as of December 31, 2017.

The following is a reconciliation of Level 3 assets for the nine months ended September 30, 2018:


Level 3	Beginning Balance as of January 1, 2018		Purchases⁽¹⁾		Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)⁽²⁾			Sales and Settlements⁽¹⁾			Net Amortization of Premium/ Discount		Transfers In		Transfers Out		Ending Balance as of September 30, 2018
1st Lien/Senior Secured Debt	$	387,473	$	219,622	$	4	$	(314	)	$	(17,959	)	$	1,836	$	–	$	–	$	590,662
1st Lien/Last-Out Unitranche		273,965		26,224		–		(565	)		(170,254	)		2,713		–		–		132,083
2nd Lien/Senior Secured Debt		374,915		90,064		–		(1,041	)		(72,990	)		2,056		18,545		–		411,549
Unsecured Debt		3,900		2,489		–		–			–			–		–		–		6,389
Preferred Stock		12,836		3,200		–		1,571			–			–		–		–		17,607
Common Stock		22,606		3,533		1,550		(5,151	)		(2,150	)		–		–		–		20,388
Total assets	$	1,075,695	$	345,132	$	1,554	$	(5,500	)	$	(263,353	)	$	6,605	$	18,545	$	–	$	1,178,678

⁽¹⁾

Purchases may include PIK and securities received in corporate actions and restructurings. Sales and Settlements may include securities delivered in corporate actions and restructuring of investments.

⁽²⁾

Change in unrealized appreciation (depreciation) relating to assets still held at September 30, 2018 totaled $(5,367) consisting of the following: 1st Lien/Senior Secured Debt $(314), 1st Lien/Last-Out Unitranche $(475) 2nd Lien/Senior Secured Debt $(998), Unsecured Debt $0, Preferred Stock $1,571 and Common Stock $(5,151).

The following is a reconciliation of Level 3 assets for the nine months ended September 30, 2017:


Level 3	Beginning Balance as of January 1, 2017		Purchases⁽¹⁾		Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)⁽²⁾			Sales and Settlements⁽¹⁾			Net Amortization of Premium/ Discount		Transfers In		Transfers Out		Ending Balance as of September 30, 2017
1st Lien/Senior Secured Debt	$	379,181	$	109,367	$	(16,900	)	$	9,714		$	(149,519	)	$	3,784	$	–	$	–	$	335,627
1st Lien/Last-Out Unitranche		310,254		44,550		–			(10,265	)		(72,425	)		2,295		–		–		274,409
2nd Lien/Senior Secured Debt		269,018		290,608		(23,565	)		14,295			(221,699	)		1,910		–		–		330,567
Unsecured Debt		3,115		185		–			–			–			–		–		–		3,300
Preferred Stock		11,833		628		–			(46	)		–			–		–		–		12,415
Common Stock		4,312		14,493		–			(1,574	)		–			–		–		–		17,231
Total assets	$	977,713	$	459,831	$	(40,465	)	$	12,124		$	(443,643	)	$	7,989	$	–	$	–	$	973,549

⁽¹⁾

Purchases may include securities received in corporate actions and PIK. Sales and Settlements may include securities delivered in corporate actions.

⁽²⁾

Change in unrealized appreciation (depreciation) relating to assets still held at September 30, 2017 totaled $1,499 consisting of the following: 1st Lien/Senior Secured Debt $12,588, 1st Lien/Last-Out Unitranche $(10,173), 2nd Lien/Senior Secured Debt $704, Unsecured Debt $0, Preferred Stock $(46) and Common Stock $(1,574).

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. For the nine months ended September 30, 2018, transfers from Level 2 to Level 3 were primarily due to decreased price transparency. For the nine months ended September 30, 2017, there were no transfers between levels.

Debt Not Carried at Fair Value

The fair value of the Revolving Credit Facility, which would be categorized as Level 3 within the fair value hierarchy as of September 30, 2018 and December 31, 2017, approximates its carrying value. The fair value of the Company’s Convertible Notes, which would be categorized as Level 2 within the fair value hierarchy, as of September 30, 2018 and December 31, 2017 was $157,310 and $119,959, respectively, based on broker quotes received by the Company.

DEBT

On June 15, 2018, the Company’s stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to the Company. As a result of this approval, the Company is now permitted to borrow amounts such that its asset coverage ratio, as defined in the Investment Company Act, is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. As of September 30, 2018 and December 31, 2017, the Company’s asset coverage ratio based on the aggregate amount outstanding of senior securities was 225% and 233%, respectively.

The Company’s outstanding debt as of September 30, 2018 and December 31, 2017 was as follows:


	As of
	September 30, 2018								December 31, 2017
	Aggregate Borrowing Amount Committed		Outstanding Borrowing		Amount Available		Carrying Value		Aggregate Borrowing Amount Committed		Outstanding Borrowing		Amount Available		Carrying Value
Revolving Credit Facility⁽¹⁾⁽²⁾	$	695,000	$	423,936	$	271,064	$	423,936	$	620,000	$	431,250	$	188,750	$	431,250
Convertible Notes⁽³⁾		155,000		155,000		–		149,356		115,000		115,000		–		111,276
Total Debt	$	850,000	$	578,936	$	271,064	$	573,292	$	735,000	$	546,250	$	188,750	$	542,526

⁽¹⁾

Provides, under certain circumstances, a total borrowing capacity of $1,000,000.

⁽²⁾

The Company may borrow amounts in U.S. dollar or certain other permitted currencies. As of September 30, 2018, the Company had outstanding borrowings denominated in Euros (EUR) of EUR 33,750. As of December 31, 2017, all outstanding borrowings were in USD.

⁽³⁾

The carrying value of the Company’s Convertible Notes is presented net of unamortized debt issuance costs of $4,085 and OID net of accretion of $1,559 as of September 30, 2018, and net of unamortized debt issuance costs of $3,133 and OID net of accretion of $591 as of December 31, 2017.

The combined weighted average interest rate of the aggregate borrowings outstanding for the nine months ended September 30, 2018 and the year ended December 31, 2017 was 4.03% and 3.47%, respectively.

Revolving Credit Facility

On September 19, 2013, the Company entered into a Revolving Credit Facility with various lenders. SunTrust Bank serves as administrative agent and Bank of America, N.A. serves as syndication agent under the Revolving Credit Facility. The Company has amended and restated the Revolving Credit Facility on October 3, 2014, November 3, 2015, December 16, 2016, February 21, 2018, and September 17, 2018.

The aggregate committed borrowing amount under the Revolving Credit Facility is $695,000. The Revolving Credit Facility includes an uncommitted accordion feature that allows the Company, under certain circumstances, to increase the borrowing capacity of the Revolving Credit Facility up to $1,000,000.

Borrowings denominated in USD, including amounts drawn in respect of letters of credit, bear interest (at the Company’s election) of either (i) LIBOR plus a margin of either 1.75% or 2.00%, subject to borrowing base conditions or (ii) an alternative base rate, which is the higher of the Prime Rate, Federal Funds Rate plus 0.50% or overnight LIBOR plus 1.00%, plus either 0.75% or 1.00%, subject to borrowing base conditions. Borrowings denominated in EUR bear interest (at the company’s election) of EUR LIBOR plus a margin of either 1.75% or 2.00%, subject to borrowing base conditions. The Company may elect either the LIBOR, EUR LIBOR, or an alternative base rate at the time of borrowing, and borrowings may be converted from one rate to another at any time, subject to certain conditions. Interest is payable quarterly in arrears. The Company pays a fee of 0.375% per annum on committed but undrawn amounts under the Revolving Credit Facility, payable quarterly in arrears. Any amounts borrowed under the Revolving Credit Facility will mature, and all accrued and unpaid interest will be due and payable, on February 21, 2023.

The Revolving Credit Facility may be guaranteed by certain of the Company’s domestic subsidiaries, including any that are formed or acquired by the Company in the future (collectively, the “Guarantors”). The Senior Credit Fund is not a Guarantor of the Revolving Credit Facility. Proceeds from borrowings may be used for general corporate purposes, including the funding of portfolio investments.

The Company’s obligations to the lenders under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the Company’s portfolio of investments and cash, with certain exceptions. The Revolving Credit Facility contains certain covenants, including: (i) maintaining a minimum stockholder’s equity of $500,000 plus 25% of net proceeds of the sale of equity interests after February 21, 2018, (ii) maintaining a minimum asset coverage ratio of at least 150%, (iii) maintaining a minimum asset coverage ratio of 200% with respect to the consolidated assets (with certain limitations on the contribution of equity in financing subsidiaries as specified therein) of the Company and its subsidiary guarantors to the secured debt of the Company and its subsidiary guarantors, (iv) maintaining a minimum Company net worth of at least $350,000, (v) maintaining a minimum liquidity test of at least 10% of the covered debt amount during any period when the adjusted covered debt balance is greater than 90% of the adjusted borrowing base, as defined in the Revolving Credit Facility, and (vi) complying with restrictions on industry concentrations in the Company’s investment portfolio. The Company is in compliance with these covenants.

Costs of $11,678 were incurred in connection with obtaining and amending the Revolving Credit Facility, which have been recorded as deferred financing costs on the Consolidated Statements of Assets and Liabilities and are being amortized over the life of the Revolving Credit Facility using the straight-line method. As of September 30, 2018 and December 31, 2017, deferred financing costs were $5,773 and $4,847, respectively.

The summary information of the Revolving Credit Facility for the three and nine months ended September 30, 2018 and 2017 is as follows:


	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Borrowing interest expense	$	3,578		$	2,746		$	11,307		$	7,997
Facility fees		379			313			878			780
Amortization of financing costs		337			311			982			923
Total	$	4,294		$	3,370		$	13,167		$	9,700
Weighted average interest rate		4.04	%		3.30	%		3.88	%		3.06	%
Average outstanding balance	$	351,357		$	330,265		$	389,819		$	349,395

Convertible Notes

On October 3, 2016, the Company closed an offering of $115,000 aggregate principal amount of unsecured Convertible Notes, which includes $15,000 aggregate principal amount issued pursuant to the initial purchasers’ exercise in full of an over-allotment option (the “Initial Convertible Notes”). The sale of the Initial Convertible Notes generated net proceeds of approximately $110,900. The Company used the net proceeds of the offering to pay down debt under the Revolving Credit Facility.

On July 2, 2018, the Company closed an additional offering of $40,000 aggregate principal amount of Convertible Notes (the “Additional Convertible Notes” and together with Initial Convertible Notes, the “Convertible Notes”). The Additional Convertible Notes have identical terms, are fungible with and are part of the Initial Convertible Notes. The sale of the Additional Convertible Notes generated net proceeds of approximately $38,569. The Company used the net proceeds of the offering to pay down debt under the Revolving Credit Facility.

The Convertible Notes were issued pursuant to an indenture between the Company and Wells Fargo Bank, National Association, as Trustee. Wells Fargo Bank, National Association and/or its affiliates provide bank lending and distribution services to certain Goldman Sachs funds. The Convertible Notes bear interest at a rate of 4.50% per year, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2017. The Convertible Notes will mature on April 1, 2022, unless repurchased or converted in accordance with their terms prior to such date. In certain circumstances, the Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, based on an initial conversion rate of 40.8397 shares of the Company’s common stock per one thousand dollars principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $24.49 per share of common stock, subject to customary anti-dilution adjustments and the other terms of the indenture governing the Convertible Notes. The conversion price is approximately 10.0% above the $22.26 per share closing price of the Company’s common stock on September 27, 2016 and 16.7% above the $20.99 per share closing price of our common stock on June 26, 2018. The Company will not have the right to redeem the Convertible Notes prior to maturity.

Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding October 1, 2021 only under the following circumstances: (1) during any calendar quarter, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per one thousand dollars principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after October 1, 2021, until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the occurrence or nonoccurrence of any of the foregoing circumstances.

The Convertible Notes are accounted for in accordance with ASC Topic 470-20, Debt with Conversion and Other Options. Upon conversion of any of the Convertible Notes, the Company intends to pay the outstanding principal amount in cash and, to the extent that the conversion value exceeds the principal amount, has the option to pay the excess amount in cash or shares of the Company’s common stock (or a combination of cash and shares), subject to the requirements of the indenture governing the Convertible Notes. The Company has determined that the embedded conversion options in the Convertible Notes are not required to be separately accounted for as derivatives under ASC Topic 815, Derivatives and Hedging. At the time of issuance the values of the debt and equity components of the Initial Convertible Notes and Additional Convertible Notes were approximately 99.4% and 0.6%, and 97.9% and 2.1%, respectively.

Additional Convertible Notes were $743 and $836, respectively. Additionally, the issuance costs associated with the Convertible Notes were allocated to the debt and equity components in proportion to the allocation of the values at the time of issuance and accounted for as debt issuance costs and equity issuance costs, respectively.

As of September 30, 2018 and December 31, 2017, the components of the carrying value of the Convertible Notes were as follows:


	September 30, 2018			December 31, 2017
Principal amount of debt	$	155,000		$	115,000
OID, net of accretion		1,559			591
Unamortized debt issuance costs		4,085			3,133
Carrying value	$	149,356		$	111,276
Stated interest rate		4.50	%		4.50	%
Effective interest rate (stated interest rate plus accretion of OID)		4.75	%		4.60	%

For the three and nine months ended September 30, 2018 and 2017, the components of interest and other debt expenses related to the Convertible Notes were as follows:


	Three Months Ended September 30, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
Borrowing interest expense	$	1,739	$	1,294	$	4,326	$	3,881
Accretion of OID		101		31		164		92
Amortization of debt issuance costs		299		189		671		562
Total	$	2,139	$	1,514	$	5,161	$	4,535

7.	DERIVATIVES

The Company enters into foreign currency forward contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies.

In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or a similar agreement with its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Company and a counterparty that governs OTC derivatives, including foreign currency forward contracts, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.

For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Company and cash collateral received from the counterparty, if any, is included in the Consolidated Statement of Assets and Liabilities as due to/due from broker. The Company minimizes counterparty credit risk by only entering into agreements with counterparties that they believe to be of good standing and by monitoring the financial stability of those counterparties.

For the period from August 8, 2018 to September 30, 2018, the Company’s average USD notional exposure to foreign currency forward contracts was $2,434. The Company did not hold any derivative instruments prior to August 8, 2018.

The following table sets forth the Company’s net exposure to foreign currency forward contracts that are subject to ISDA Master Agreements or similar agreements as of September 30, 2018.


Counterparty	Gross Amount of Assets on the Consolidated Statements of Assets and Liabilities		Gross Amount of (Liabilities) on the Consolidated Statements of Assets and Liabilities		Net Amount of Assets or (Liabilities) Presented on the Consolidated Statements of Assets and Liabilities		Collateral (Received) Pledged ⁽¹⁾		Net Amounts ⁽²⁾
Bank of America, N.A.	$	2	$	–	$	2	$	–	$	2
Total	$	2	$	–	$	2	$	–	$	2

⁽¹⁾

Amount excludes excess cash collateral paid.

⁽²⁾

Net amount represents the net amount due (to) from counterparty in the event of a default based on the contractual setoff rights under the agreement. Net amount excludes any over-collateralized amounts.

The Company did not hold any derivative instruments as of December 31, 2017.

The effect of transactions in derivative instruments to the Consolidated Statements of Operations during the three and nine months ended September 30, 2018 was as follows:


	For the three months ended September 30, 2018		For the nine months ended September 30, 2018
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts	$	2	$	2
Total net realized and unrealized gains (losses) on foreign currency forward contracts	$	2	$	2

The Company did not hold any derivative instruments during the three and nine months ended September 30, 2017.

8.	COMMITMENTS AND CONTINGENCIES

Commitments

The Company may enter into commitments to fund investments. As of September 30, 2018, the Company believed that it had adequate financial resources to satisfy its unfunded commitments. The Company had the following unfunded commitments by investment types as of the dates indicated:


	September 30, 2018							December 31, 2017
	Commitment Expiration Date ⁽¹⁾		Unfunded Commitment		Fair Value⁽²⁾⁽³⁾			Commitment Expiration Date ⁽¹⁾		Unfunded Commitment		Fair Value⁽²⁾⁽³⁾
1st Lien/Senior Secured Debt
Picture Head Midco LLC		03/31/2019	$	2,540	$	(51	)		–	$	–	$	–
Continuum Managed Services LLC		06/08/2019		1,800		(36	)		06/08/2019		1,800		(45	)
Legacy Buyer Corp.		10/24/2019		2,500		–			10/24/2019		2,500		(37	)
Businessolver.com, Inc.		05/15/2020		1,553		(31	)		–		–		–
SPay, Inc.		06/15/2020		5,663		(114	)		–		–		–
Hygiena Borrower LLC		06/29/2020		566		(12	)		–		–		–
Diligent Corporation		08/03/2020		247		(4	)		–		–		–
Gastro Health Holdco, LLC		09/04/2020		5,062		(64	)		–		–		–
Elemica, Inc.		07/07/2021		6,000		(90	)		07/07/2021		6,000		(105	)
Associations, Inc.		07/30/2021		1,891		(24	)		–		–		–
Netvoyage Corporation		03/24/2022		654		(8	)		03/24/2022		654		(11	)
Continuum Managed Services LLC		06/08/2022		2,220		(44	)		06/08/2022		2,220		(56	)
Xactly Corporation		07/29/2022		1,697		(21	)		07/29/2022		1,697		(34	)
Hygiena Borrower LLC		08/26/2022		380		(8	)		–		–		–
Lithium Technologies, Inc.		10/03/2022		2,659		(21	)		10/03/2022		1,544		(35	)
Lithium Technologies, Inc.		10/03/2022		17,464		89			–		–		–
Datto, Inc.		12/07/2022		2,406		(42	)		12/07/2022		2,406		(48	)
Businessolver.com, Inc.		05/15/2023		1,569		(31	)		–		–		–
Integral Ad Science, Inc.		07/19/2023		1,815		(36	)		–		–		–
Picture Head Midco LLC		08/31/2023		2,515		(25	)		–		–		–
Gastro Health Holdco, LLC		09/04/2023		2,000		(40	)		–		–		–
Empirix, Inc.		09/25/2023		1,300		(23	)		–		–		–
SPay, Inc.		06/17/2024		304		(6	)		–		–		–
Associations, Inc.		07/30/2024		587		(7	)		–		–		–
Fenergo Finance 3 Limited⁽³⁾		09/05/2024		1,742		(33	)		–		–		–
Fenergo Finance 3 Limited		09/05/2024		1,182		(21	)		–		–		–
iCIMS, Inc.		09/12/2024		1,868		(37	)		–		–		–
Total 1st Lien/Senior Secured Debt				70,184		(740	)				18,821		(371	)
1st Lien/Last-Out Unitranche
Bolttech Mannings, Inc.		–		–		–			12/21/2018		1,500		–
Total 1st Lien/Last-Out Unitranche				–		–					1,500		–
2nd Lien/Senior Secured Debt
Pathway Partners Vet Management Company, LLC		05/26/2020	$	252	$	(3	)		–	$	–	$	–
Hygiena Borrower LLC		06/29/2020		577		(12	)		–		–		–
Genesis Acquisition Co.		07/31/2020		1,777		(23	)		–		–		–
Pathway Partners Vet Management Company, LLC		–		–		–			10/10/2019		6,111		(61	)
ICP Industrial, Inc.		–		–		–			11/04/2019		3,800		(95	)
Total 2nd Lien/Senior Secured Debt				2,606		(38	)				9,911		(156	)
Total			$	72,790	$	(778	)			$	30,232	$	(527	)

⁽¹⁾

Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.

⁽²⁾

A negative fair value was reflected as investments, at fair value in the Consolidated Statements of Assets and Liabilities. The negative fair value is the result of the capitalized discount on the loan.

⁽³⁾

Unfunded commitments denominated in currencies other than USD have been converted to U.S. dollars using the applicable foreign currency exchange rate as of September 30, 2018.

Contingencies

In the normal course of business, the Company enters into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.

9.	NET ASSETS

Equity Issuances

On May 24, 2017, the Company completed a follow-on offering under its shelf registration statement, issuing 3,250,000 shares of its common stock at a public offering price of $22.50 per share. Net of offering and underwriting costs, the Company received cash proceeds of $69,648.

On May 26, 2017, the Company sold an additional 487,500 shares of its common stock pursuant to the underwriters’ exercise of the option to purchase additional shares the Company granted in connection with the aforementioned offering. Net of underwriting costs, the Company received additional cash proceeds of $10,640.

There were no sales of the Company’s common stock during the nine months ended September 30, 2018.

Distributions

The following table reflects the distributions declared on shares of the Company’s common stock during the nine months ended September 30, 2018:


Date Declared	Record Date	Payment Date	Amount Per Share
February 21, 2018	March 30, 2018	April 16, 2018	$0.45
May 1, 2018	June 29, 2018	July 16, 2018	$0.45
July 31, 2018	September 28, 2018	October 15, 2018	$0.45

The following table reflects the distributions declared on shares of the Company’s common stock during the nine months ended September 30, 2017:


Date Declared	Record Date	Payment Date	Amount Per Share
February 22, 2017	March 31, 2017	April 17, 2017	$0.45
May 1, 2017	June 30, 2017	July 17, 2017	$0.45
August 1, 2017	September 29, 2017	October 16, 2017	$0.45

Dividend Reinvestment Plan

Concurrent with the IPO, the Company adopted a dividend reinvestment plan that provides for reinvestment of all cash distributions declared by the Board of Directors, unless a stockholder elects to “opt out” of the plan. As a result, if the Board of Directors declares a cash distribution, then the stockholders who have not “opted out” of the dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of common stock, rather than receiving the cash distribution.

The following table summarizes shares distributed pursuant to the dividend reinvestment plan during the nine months ended September 30, 2018 to stockholders who had not opted out of the dividend reinvestment plan:


Date Declared	Record Date	Payment Date	Shares
October 31, 2017	December 29, 2017	January 16, 2018	23,824
February 21, 2018	March 30, 2018	April 16, 2018	20,916
May 1, 2018	June 29, 2018	July 16, 2018	20,644

The following table summarizes shares distributed pursuant to the dividend reinvestment plan during the nine months ended September 30, 2017 to stockholders who had not opted out of the dividend reinvestment plan:


Date Declared	Record Date	Payment Date	Shares
November 1, 2016	December 31, 2016	January 17, 2017	11,124
February 22, 2017	March 31, 2017	April 17, 2017	11,202
May 1, 2017	June 30, 2017	July 17, 2017	18,417

10.

EARNINGS PER SHARE

The following information sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2018 and 2017:


	Three Months Ended September 30, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
Numerator for basic and diluted earnings per share - increase in net assets resulting from operations	$	19,019	$	18,112	$	54,937	$	37,262
Denominator for basic and diluted earnings per share - weighted average shares outstanding		40,192,683		40,106,702		40,171,874		38,130,304
Basic and diluted earnings per share	$	0.47	$	0.45	$	1.37	$	0.98

For the purpose of calculating diluted earnings per common share, the average closing price of the Company’s common stock for the three and nine months ended September 30, 2018 was less than the conversion price for the Convertible Notes outstanding as of September 30, 2018. Therefore, for the three and nine months ended September 30, 2018, diluted earnings per share equals basic earnings per share because the underlying shares for the intrinsic value of the embedded options in the Convertible Notes were not dilutive. For the three and nine months ended September 30, 2017, diluted earnings per share equals basic earnings per share because the underlying shares for the intrinsic value of the embedded options in the Convertible Notes were not dilutive.

11.

FINANCIAL HIGHLIGHTS

Below is the schedule of financial highlights of the Company for the nine months ended September 30, 2018 and 2017:


	For the Nine Months Ended September 30, 2018			For the Nine Months Ended September 30, 2017
Per Share Data:⁽¹⁾
NAV, beginning of period	$	18.09		$	18.31
Net investment income (loss)		1.51			1.60
Net realized and unrealized gains (losses)		(0.13	)		(0.65	)
Income tax provision, realized and unrealized gain		(0.01	)		–

Net increase (decrease) in net assets resulting from operations		1.37			0.95

Issuance of common stock, net of underwriting and offering costs		–			0.32
Equity component of convertible notes		0.02			–
Distributions declared from net investment income⁽²⁾		(1.35	)		(1.35	)

Total increase (decrease) in net assets		0.04			(0.08	)

NAV, end of period		18.13		$	18.23


Market price, end of period	$	22.18		$	22.82
Shares outstanding, end of period		40,196,049			40,109,905
Weighted average shares outstanding		40,171,874			38,130,304
Total return based on NAV⁽³⁾		7.35	%		5.74	%
Total return based on market value⁽⁴⁾		7.11	%		3.04	%

Ratio/Supplemental Data (all amounts in thousands except ratios):
Net assets, end of period		728,640		$	731,159
Ratio of net expenses to average net assets⁽⁵⁾		9.19	%		7.98	%
Ratio of expenses (without incentive fees and interest and other debt expenses) to average net assets⁽⁵⁾		3.25	%		3.40	%
Ratio of interest and other debt expenses to average net assets⁽⁶⁾		3.37	%		2.74	%
Ratio of incentive fees to average net assets⁽⁶⁾		2.57	%		1.84	%
Ratio of total expenses to average net assets⁽⁵⁾		9.19	%		7.98	%
Ratio of net investment income (loss) to average net assets⁽⁵⁾⁽⁷⁾		11.18	%		11.69	%
Average debt outstanding		518,152		$	464,395
Average debt per share⁽⁸⁾		12.90		$	12.18
Portfolio turnover		23	%		41	%

⁽¹⁾

The per share data was derived by using the weighted average shares outstanding during the applicable period.

⁽²⁾

The per share data for distributions declared reflects the actual amount of distributions declared per share for the applicable period.

⁽³⁾

Total return based on NAV is calculated as the change in NAV per share during the respective periods, assuming dividends and distributions, if any, are reinvested in accordance with the Company’s dividend reinvestment plan.

⁽⁴⁾

Total return based on market value is calculated as the change in market value per share during the respective periods, assuming dividends and distributions, if any, are reinvested in accordance with the Company’s dividend reinvestment plan.

⁽⁵⁾

Annualized except for certain operating expenses.

⁽⁶⁾

Annualized.

⁽⁷⁾

For the nine months ended September 30, 2018 and 2017, annualized except for certain components of other income.

⁽⁸⁾

Average debt per share is calculated as average debt outstanding divided by the weighted average shares outstanding during the applicable period.

12.

SUBSEQUENT EVENTS

Subsequent events after the Consolidated Statements of Assets and Liabilities date have been evaluated through the date the unaudited consolidated financial statements were issued. Other than the items discussed below, the Company has concluded that there is no impact requiring adjustment or disclosure in the consolidated financial statements.

On October 30, 2018, the Board of Directors declared a quarterly distribution of $0.45 per share payable on January 15, 2019 to stockholders of record as of December 31, 2018.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. References to “we,” “us,” “our,” and the “Company,” mean Goldman Sachs BDC, Inc. or Goldman Sachs BDC, Inc. together with its consolidated subsidiaries, as the context may require. The terms “GSAM,” our “Adviser” or our “Investment Adviser” refer to Goldman Sachs Asset Management, L.P., a Delaware limited partnership. The term “Group Inc.” refers to The Goldman Sachs Group, Inc. “GS & Co.” refers to Goldman Sachs & Co. LLC and its predecessors. The term “Goldman Sachs” refers to Group Inc., together with GS & Co., GSAM and its other subsidiaries and affiliates. The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. Please see “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with this discussion and analysis. Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this report.

OVERVIEW

We are a specialty finance company focused on lending to middle-market companies. We are a closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). In addition, we have elected to be treated, and expect to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2013. From our formation in 2012 through September 30, 2018, we originated more than $2.94 billion in aggregate principal amount of debt and equity investments prior to any subsequent exits and repayments. We seek to generate current income and, to a lesser extent, capital appreciation primarily through direct originations of secured debt, including first lien, unitranche, including last-out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments.

“Unitranche” loans are first lien loans that may extend deeper in a company’s capital structure than traditional first lien debt and may provide for a waterfall of cash flow priority between different lenders in the unitranche loan. In a number of instances, we may find another lender to provide the “first-out” portion of such loan and retain the “last-out” portion of such loan, in which case, the “first-out” portion of the loan would generally receive priority with respect to payment of principal, interest and any other amounts due thereunder over the “last-out” portion that we would continue to hold. In exchange for the greater risk of loss, the “last-out” portion generally earns a higher interest rate than the “first-out” portion. We use the term “mezzanine” to refer to debt that ranks senior only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness. We may make multiple investments in the same portfolio company.

We invest primarily in U.S. middle-market companies, which we believe are underserved by traditional providers of capital such as banks and the public debt markets. In this report, we generally use the term “middle market companies” to refer to companies with between $5 million and $125 million of annual earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”) excluding certain one-time, and non-recurring items that are outside the operations of these companies. However, we may from time to time invest in larger or smaller companies. We generate revenues primarily through receipt of interest income from the investments we hold. In addition, we may generate income from various loan origination and other fees, dividends on direct equity investments and capital gains on the sales of investments. Fees received from portfolio companies (directors’ fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) are paid to us, unless, to the extent required by applicable law or exemptive relief therefrom, we only receive our allocable portion of such fees when invested in the same portfolio company as another client account managed by our Investment Adviser (including Goldman Sachs Private Middle Market Credit LLC (“GS PMMC”) and Goldman Sachs Middle Market Lending Corp. (“GS MMLC”), collectively with other client accounts managed by our Investment Adviser, the “Accounts”). The companies in which we invest use our capital for a variety of purposes, including to support organic growth, fund acquisitions, make capital investments or refinance indebtedness.

Our origination strategy focuses on leading the negotiation and structuring of the loans or securities in which we invest and holding the investments in our portfolio to maturity. In many cases, we are the sole investor in the loan or security in our portfolio. Where there are multiple investors, we generally seek to control or obtain significant influence over the rights of investors in the loan or security. We generally seek to make investments that have maturities between three and ten years and range in size between $10 million and $75 million, although we may make larger or smaller investments on occasion. In addition, part of our strategy involves a joint venture with the Regents of the University of California (“Cal Regents”, and collectively with us, the “Members”) through the Senior Credit Fund, LLC (the “Senior Credit Fund”). The Senior Credit Fund’s principal purpose is to make investments, either directly or indirectly through its wholly owned subsidiary, Senior Credit Fund SPV I, LLC (“SPV I”), primarily in senior secured loans to middle-market companies.

For a discussion of the competitive landscape we face, please see “Item 1A. Risk Factors – Risks Relating to Our Business and Structure – We operate in a highly competitive market for investment opportunities” and “Item 1. Business – Competitive Advantages” in our annual report on Form 10-K for the year ended December 31, 2017.

KEY COMPONENTS OF OPERATIONS

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make.

As a BDC, we may not acquire any assets other than “qualifying assets” specified in the Investment Company 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.” Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), “eligible portfolio companies” include certain companies that do not have any securities listed on a national securities exchange and public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million.

Revenues

We generate revenues in the form of interest income on debt investments and, to a lesser extent, capital gains and distributions, if any, on equity securities that we may acquire in portfolio companies. Some of our investments may provide for deferred interest payments or payment-in-kind (“PIK”) income. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date.

We generate revenues primarily through receipt of interest income from the investments we hold. In addition, we may generate revenue in the form of commitment, origination, structuring, syndication or diligence fees, fees for providing managerial assistance and consulting fees. Portfolio company fees (directors’ fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) will be paid to us, unless, to the extent required by applicable law or exemptive relief, if any, therefrom, we receive our allocable portion of such fees when invested in the same portfolio company as other Accounts, which other Accounts could receive their allocable portion of such fee. We do not expect to receive material fees as it is not our principal investment strategy. We record contractual prepayment premiums on loans and debt securities as interest income.

Expenses

Our primary operating expenses include the payment of the Management Fee and the Incentive Fee to the Investment Adviser, legal and professional fees, interest and other debt expenses and other operating and overhead related expenses. The Management Fee and Incentive Fee compensate our Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions in accordance with our investment management agreement (as amended and restated as of June 15, 2018, the “Investment Management Agreement”) and administration agreement (“Administration Agreement”), including those relating to:

•

our operational and organizational expenses;

•

fees and expenses, including travel expenses, incurred by our Investment Adviser or payable to third parties related to our investments, including, among others, professional fees (including the fees and expenses of consultants and experts) and fees and expenses from evaluating, monitoring, researching and performing due diligence on investments and prospective investments;

•

interest payable on debt, if any, incurred to finance our investments;

•

fees and expenses incurred by us in connection with membership in investment company organizations;

•

brokers’ commissions;

•

the expenses of and fees for registering or qualifying our shares for sale and of maintaining our registration and registering us as a broker or a dealer;

•

fees and expenses associated with calculating our net asset value (“NAV”) (including the costs and expenses of any independent valuation firm);

•

legal, auditing or accounting expenses;

•

taxes or governmental fees;

•

the fees and expenses of our administrator, transfer agent or sub-transfer agent;

•

the cost of preparing stock certificates or any other expenses, including clerical expenses of issue, redemption or repurchase of our shares;

•

the fees and expenses of our directors who are not affiliated with our Investment Adviser;

•

the cost of preparing and distributing reports, proxy statements and notices to our stockholders, the SEC and other regulatory authorities;

•

costs of holding stockholder meetings;

•

listing fees;

•

the fees or disbursements of custodians of our assets, including expenses incurred in the performance of any obligations enumerated by our certificate of incorporation or bylaws insofar as they govern agreements with any such custodian;

•

insurance premiums; and

•

costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or dispute in connection with our business and the amount of any judgment or settlement paid in connection therewith, or the enforcement of our rights against any person and indemnification or contribution expenses payable by us to any person and other extraordinary expenses not incurred in the ordinary course of our business.

We expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines. Costs relating to future offerings of securities would be incremental.

Leverage

Our senior secured revolving credit agreement (as amended, the “Revolving Credit Facility”) with SunTrust Bank, as administrative agent, and Bank of America, N.A., as syndication agent, and our 4.50% Convertible Notes due 2022 (the “Convertible Notes”) allow us to borrow money and lever our investment portfolio, subject to the limitations of the Investment Company Act, with the objective of increasing our yield. This is known as “leverage” and could increase or decrease returns to our stockholders. The use of leverage involves significant risks. On June 15, 2018, our stockholders approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us. As a result of this approval, we are now permitted to borrow amounts such that our asset coverage ratio, as defined in the Investment Company Act, is at least 150% after such borrowing (if certain requirements are met), rather than 200%, as previously required. As of September 30, 2018 and December 31, 2017, our asset coverage ratio based on the aggregate amount outstanding of our senior securities was 225% and 233%, respectively.

Certain trading practices and investments, such as reverse repurchase agreements, may be considered borrowings or involve leverage and thus may be subject to Investment Company Act restrictions. In accordance with applicable SEC staff guidance and interpretations, when we engage in such transactions, instead of maintaining an asset coverage ratio of at least 150% (if certain requirements are met), we may segregate or earmark liquid assets, or enter into an offsetting position, in an amount at least equal to our exposure, on a mark-to-market basis, to such transactions (as calculated pursuant to requirements of the SEC). Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered borrowings for these purposes. Practices and investments that may involve leverage but are not considered borrowings are not subject to the Investment Company Act’s asset coverage requirement, and we will not otherwise segregate or earmark liquid assets or enter into offsetting positions for such transactions. The amount of leverage that we employ will depend on our Investment Adviser’s and our Board of Directors’ assessment of market conditions and other factors at the time of any proposed borrowing.

PORTFOLIO AND INVESTMENT ACTIVITY

As of September 30, 2018 and December 31, 2017, our portfolio (excluding our investment in a money market fund managed by an affiliate of Group, Inc. of $0.00 million and $11.54 million, respectively) consisted of the following:


	As of
	September 30, 2018							December 31, 2017
	Amortized Cost		Fair Value		Percentage of Total Portfolio at Fair Value			Amortized Cost		Fair Value		Percentage of Total Portfolio at Fair Value
	*(in millions)*							*(in millions)*
First Lien/Senior Secured Debt	$	616.04	$	609.81		46.3	%	$	412.53	$	407.07		32.4	%
First Lien/Last-Out Unitranche		137.71		132.08		10.0			279.03		273.96		21.8
Second Lien/Senior Secured Debt		439.29		438.40		33.3			443.39		444.60		35.3
Unsecured Debt		6.39		6.39		0.5			3.90		3.90		0.3
Preferred Stock		14.95		17.61		1.3			11.75		12.84		1.0
Common Stock		35.65		21.44		1.6			32.72		23.84		1.9
Investment Funds & Vehicles		94.34		92.59		7.0			94.34		92.10		7.3

Total Investments	$	1,344.37	$	1,318.32		100.0	%	$	1,277.66	$	1,258.31		100.0	%

As of September 30, 2018 and December 31, 2017, the weighted average yield by asset type of our total portfolio (excluding our investment in a money market fund managed by an affiliate of Group Inc.), at amortized cost and fair value, was as follows:


	As of
	September 30, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Weighted Average Yield⁽¹⁾
First Lien/Senior Secured Debt⁽²⁾		10.4%		10.7%		10.9%		11.8%
First Lien/Last-Out Unitranche^{(2) (3)}		12.7		18.6		11.7		13.1
Second Lien/Senior Secured Debt⁽²⁾		12.0		12.0		10.5		10.5
Unsecured Debt⁽²⁾		11.6		11.6		11.8		11.8
Preferred Stock⁽⁴⁾		-		-		–		–
Common Stock⁽⁴⁾		-		-		–		–
Investment Funds & Vehicles⁽⁵⁾		11.2		11.4		12.0		11.9
Total Portfolio		10.8%		11.7%		10.6%		11.3%

⁽¹⁾

The weighted average yield of our portfolio does not represent the total return to our stockholders.

⁽²⁾

Computed based on (a) the annual actual interest rate or yield earned plus amortization of fees and discounts on the performing debt and other income producing investments as of the reporting date, divided by (b) the total investments (including investments on non-accrual and non-income producing investments) at amortized cost or fair value, respectively.

⁽³⁾

The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments.

⁽⁴⁾

Computed based on (a) the stated coupon rate, if any, for each income-producing investment, divided by (b) the total investments (including investments on non-accrual and non-income producing investments) at amortized cost or fair value, respectively.

⁽⁵⁾

Computed based on (a) the net investment income earned from the Senior Credit Fund for the respective trailing twelve months ended on the measurement date, which may include dividend income and loan origination and structuring fees, divided by (b) our average member’s equity at cost and fair value, adjusted for equity contributions.

As of September 30, 2018 the total portfolio weighted average yield measured at amortized cost and fair value was 10.8% and 11.7% respectively, which increased from 10.6% and 11.3%, respectively, at December 31, 2017. Within First Lien/Senior Secured Debt, the decrease in weighted average yield at amortized cost and fair value was primarily driven by portfolio composition, borrower refinancing and one investment placed on non-accrual status, partially offset by the increase in LIBOR on our variable rate secured debt investments. Within First Lien/Last-Out Unitranche, the increase in weighted average yield at amortized cost and fair value was primarily driven by repayments and borrower refinancing. Within Second Lien/Senior Secured Debt, the increase in weighted average yield at amortized cost and fair value was primarily driven by a higher yielding investment and the increase in LIBOR on our variable rate secured debt investments.

The following table presents certain selected information regarding our investment portfolio (excluding our investment in a money market fund managed by an affiliate of Group Inc.) as of September 30, 2018 and December 31, 2017:


	As of
	September 30, 2018		December 31, 2017
Number of portfolio companies⁽¹⁾		66		56
Percentage of performing debt bearing a floating rate⁽²⁾		96.4%		96.4%
Percentage of performing debt bearing a fixed rate⁽²⁾⁽³⁾		3.6%		3.6%
Weighted average yield on debt and income producing investments, at amortized cost⁽⁴⁾		11.3%		11.0%
Weighted average yield on debt and income producing investments, at fair value⁽⁴⁾		12.1%		11.6%
Weighted average leverage (net debt/EBITDA)⁽⁵⁾		5.3x		5.3x
Weighted average interest coverage⁽⁵⁾		2.2x		2.3x
Median EBITDA⁽⁵⁾	$	36.50 million	$	40.06 million

⁽¹⁾

Includes the Senior Credit Fund as a single portfolio company. For details on the portfolio companies held within the Senior Credit Fund, refer to “Senior Credit Fund, LLC – Selected Financial Data.”

⁽²⁾

Measured on a fair value basis. Excludes investments, if any, placed on non-accrual.

⁽³⁾

Includes income producing preferred stock investments.

⁽⁴⁾

Computed based on (a) the annual actual interest rate or yield earned plus amortization of fees and discounts on the performing debt and other income producing investments as of the reporting date, divided by (b) the total performing debt and other income producing investments (excluding investments on non-accrual).

⁽⁵⁾

For a particular portfolio company, we calculate the level of contractual indebtedness net of cash (“net debt”) owed by the portfolio company and compare that amount to measures of cash flow available to service the net debt. To calculate net debt, we include debt that is both senior and pari passu to the tranche of debt owned by us but exclude debt that is legally and contractually subordinated in ranking to the debt owned by us. We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual rights of repayment of the tranche of debt owned by us relative to other senior and junior creditors of a portfolio company. We typically calculate cash flow available for debt service at a portfolio company by taking EBITDA for the trailing twelve month period. Weighted average net debt to EBITDA is weighted based on the fair value of our debt investments, including our exposure to underlying debt investments in the Senior Credit Fund and excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.

For a particular portfolio company, we also calculate the level of contractual interest expense owed by the portfolio company, and compare that amount to EBITDA (“interest coverage ratio”). We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual interest obligations of the portfolio company. Weighted average interest coverage is weighted based on the fair value of our performing debt investments, including our exposure to underlying debt investments in the Senior Credit Fund and excluding investments where interest coverage may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.

Median EBITDA is based on our debt investments, including our exposure to underlying debt investments in the Senior Credit Fund and excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.

Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount. As of September 30, 2018 and December 31, 2017, investments where net debt to EBITDA may not be the appropriate measure of credit risk represented 15.5% and 11.3%, respectively, of total debt investments, including our investment in the Senior Credit Fund, at fair value. Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the respective reported end date. Portfolio company statistics have not been independently verified by us and may reflect a normalized or adjusted amount.

Floating rates are primarily London InterBank Offered Rate (“LIBOR”) plus a spread.

Our Investment Adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if it is meeting its respective business plan and to assess the appropriate course of action for each company. Our Investment Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

•

assessment of success in adhering to the portfolio company’s business plan and compliance with covenants;

•

periodic or regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor to discuss financial position, requirements and accomplishments;

•

comparisons to our other portfolio companies in the industry, if any;

•

attendance at and participation in board meetings or presentations by portfolio companies; and

•

review of monthly and quarterly financial statements and financial projections of portfolio companies.

As part of the monitoring process, our Investment Adviser also employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Investment Adviser grades the credit risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (e.g., at the time of origination or acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. The grading system is as follows:

•

investments with a grade of 1 involve the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit;

•

investments with a grade of 2 involve a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 2;

•

investments with a grade of 3 indicate that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 120 days past due; and

•

investments with a grade of 4 indicate that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 4, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 4, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit.

Our Investment Adviser grades the investments in our portfolio at least quarterly and it is possible that the grade of a portfolio investment may be reduced or increased over time. For investments graded 3 or 4, our Investment Adviser enhances its level of scrutiny over the monitoring of such portfolio company. The following table shows the composition of our portfolio (excluding our investment in a money market fund managed by an affiliate of Group Inc.) on the 1 to 4 grading scale as of September 30, 2018 and December 31, 2017:


	As of
	September 30, 2018					December 31, 2017
Investment Performance Rating	Fair Value		Percentage of Total Portfolio at Fair Value			Fair Value		Percentage of Total Portfolio at Fair Value
	*(in* *millions)*					*(in* *millions)*
Grade 1	$	29.90		2.3	%	$	31.28		2.5	%
Grade 2		1,180.67		89.5			1,135.48		90.2
Grade 3		99.74		7.6			91.55		7.3
Grade 4		8.01		0.6			–		–

Total Investments	$	1,318.32		100.0	%	$	1,258.31		100.0	%

The decrease in investments with a grade 1 investment performance rating as of September 30, 2018 compared to December 31, 2017 was driven by the repayment of an investment with a fair value of $31.28 million as of December 31, 2017, partially offset by an investment with a fair value of $29.90 million being upgraded due to a potential exit. The increase in investments with a grade 3 investment performance rating as of September 30, 2018 compared to December 31, 2017 was driven by investments with an aggregate fair value of $9.02 million being downgraded due to declining financial performance. The increase in investments with a grade 4 investment performance rating as of September 30, 2018 compared to December 31, 2017 was driven by an investment with a fair value of $8.01 million being placed on non-accrual status.

The following table shows the amortized cost of our performing and non-accrual investments (excluding our investment in a money market fund managed by an affiliate of Group Inc.) as of September 30, 2018 and December 31, 2017:


	As of
	September 30, 2018					December 31, 2017
	Amortized Cost		Percentage of Total Portfolio at Amortized Cost			Amortized Cost		Percentage of Total Portfolio at Amortized Cost
	*(in* *millions)*					*(in* *millions)*
Performing	$	1,335.11		99.3	%	$	1,276.88		99.9	%
Non-accrual		9.26		0.7			0.78		0.1

Total Investments	$	1,344.37		100.0	%	$	1,277.66		100.0	%

The following table shows our investment activity for the three months ended September 30, 2018 and 2017 by investment type:


	For the Three Months Ended
	September 30, 2018			September 30, 2017
	*(in millions)*
New investment commitments at cost:
Gross originations	$	205.61		$	254.42
Less: Syndications⁽¹⁾		–			–

Net amount of new investments committed at cost:	$	205.61		$	254.42
Amount of investments committed at cost⁽²⁾:
First Lien/Senior Secured Debt	$	182.30		$	43.02
First Lien/Last-Out Unitranche		–			11.60
Second Lien/Senior Secured Debt		22.75			199.20
Unsecured Debt		0.56			–
Preferred Stock		–			0.60
Common Stock		–			–
Investment Funds & Vehicles		–			–

Total	$	205.61		$	254.42

Proceeds from investments sold or repaid⁽¹⁴⁾:
First Lien/Senior Secured Debt	$	7.88		$	46.53
First Lien/Last-Out Unitranche		57.30			45.49
Second Lien/Senior Secured Debt		46.50			98.41
Unsecured Debt		–			–
Preferred Stock		–			–
Common Stock		–			–
Investment Funds & Vehicles		–			–

Total	$	111.68		$	190.43

Net increase (decrease) in portfolio	$	93.93		$	63.99

Number of new portfolio companies with new investment commitments⁽³⁾		7			8
Total new investment commitment amount in new portfolio companies⁽³⁾	$	152.56		$	128.22
Average new investment commitment amount in new portfolio companies⁽³⁾	$	21.79		$	16.03
Number of existing portfolio companies with new investment commitments⁽³⁾		8			3
Total new investment commitment amount in existing portfolio companies⁽³⁾	$	53.06		$	126.21
Weighted average remaining term for new investment commitments (in years)⁽³⁾⁽⁴⁾		5.5			6.3
Percentage of new debt investment commitments at floating interest rates⁽³⁾⁽¹⁵⁾		99.7	%		100.0	%
Percentage of new debt investment commitments at fixed interest rates⁽³⁾⁽⁵⁾⁽¹⁵⁾		0.3	%		–	%
Weighted average yield on new debt and income producing investment commitments ⁽²⁾⁽³⁾		9.6	%⁽⁶⁾		10.1	%⁽¹⁰⁾
Weighted average yield on new investment commitments ⁽²⁾⁽³⁾		9.6	%⁽⁷⁾		10.0	%⁽¹¹⁾
Weighted average yield on debt and income producing investments sold or paid down⁽¹⁴⁾		11.3	%⁽⁸⁾		10.7	%⁽¹²⁾
Weighted average yield on investments sold or paid down⁽¹⁴⁾		11.2	%⁽⁹⁾		10.7	%⁽¹³⁾

⁽¹⁾

Only includes syndications that occurred at the initial close of the investment.

⁽²⁾

Net of capitalized fees, expenses and original issue discount (“OID”).

⁽³⁾

May include positions originated during the period but not held at the reporting date.

⁽⁴⁾

Calculated as of the end of the relevant period and the maturity date of the individual investments.

⁽⁵⁾

May include preferred stock investments.

⁽⁶⁾

Computed based on (a) the annual actual interest rate on new debt and income producing investment commitments as of the reporting date, divided by (b) the total new debt and income producing investment commitments. The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes investments that are non-accrual.

⁽⁷⁾

Computed based on (a) the annual actual interest rate on new investment commitments as of the reporting date, divided by (b) the total new investment commitments (including investments on non-accrual and non-income producing investments). The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments.

⁽⁸⁾

Computed based on (a) the annual actual interest rate on debt and income producing investments sold or paid down, divided by (b) the total debt and income producing investments sold or paid down. The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes prepayment premiums earned on exited investments and investments that are on non-accrual.

⁽⁹⁾

Computed based on (a) the annual actual interest rate on investments sold or paid down, divided by (b) the total investments sold or paid down (including investments on non-accrual and non-income producing investments). The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes prepayment premiums earned on exited investments.

⁽¹⁰⁾

Computed based on (a) the annual stated interest rate on new debt and income producing investment commitments, divided by (b) the total new debt and income producing investment commitments. The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes investments that are non-accrual. For investments that are subject to a LIBOR floor, the calculation assumes the greater of the applicable LIBOR floor or 3 month LIBOR as of the respective period end date. The actual interest rate may vary.

⁽¹¹⁾

Computed based on (a) the annual stated interest rate on new investment commitments, divided by (b) the total new investment commitments (including investments on non-accrual and non-income producing investments). The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments. For investments that are subject to a LIBOR floor, the calculation assumes the greater of the applicable LIBOR floor or 3 month LIBOR as of the respective period end date. The actual interest rate may vary.

⁽¹²⁾

Computed based on (a) the annual stated interest rate on debt and income producing investments sold or paid down, divided by (b) the total debt and income producing investments sold or paid down. The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes prepayment premiums earned on exited investments and investments that are non-accrual. For investments that are subject to a LIBOR floor, the calculation assumes the greater of the applicable LIBOR floor or 3 month LIBOR as of the respective period end date. The actual interest rate may vary.

⁽¹³⁾

Computed based on (a) the annual stated interest rate on investments sold or paid down, divided by (b) the total investments sold or paid down (including investments on non-accrual and non-income producing investments). The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes prepayment premiums earned on exited investments. For investments that are subject to a LIBOR floor, the calculation assumes the greater of the applicable LIBOR floor or 3 month LIBOR as of the respective period end date. The actual interest rate may vary.

⁽¹⁴⁾

Excludes unfunded commitments that may have expired or otherwise been terminated without receipt of cash proceeds or other consideration.

⁽¹⁵⁾

Computed based on amount of investments committed at cost.

RESULTS OF OPERATIONS

Our operating results for the three and nine months ended September 30, 2018 and 2017 were as follows:


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
	*($ in millions)*
Total investment income	$	37.98		$	34.41		$	110.76		$	102.62
Net expenses		(15.99	)		(15.08	)		(49.28	)		(40.51	)

Net investment income (loss) before taxes		21.99			19.33			61.48			62.11
Income tax expense, including excise tax		(0.43	)		(0.38	)		(1.02	)		(1.12	)

Net investment income (loss) after taxes		21.56			18.95			60.46			60.99
Net realized gain (loss) on investments		–			(2.36	)		1.78			(40.63	)
Net realized gain (loss) on foreign currency transactions		(0.18	)		–			(0.18	)		–
Net unrealized appreciation (depreciation) on investments		(2.39	)		1.52			(6.70	)		16.90
Net unrealized appreciation (depreciation) on foreign currency forward contracts and translations		0.17			–			0.17			–
Income tax provision, realized gain		–			–			(0.45	)		–
Income tax provision, unrealized gain		(0.14	)		–			(0.14	)		–

Net increase in net assets resulting from operations	$	19.02		$	18.11		$	54.94		$	37.26

Net increase in net assets resulting from operations can vary from period to period as a result of various factors, including acquisitions, the level of new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. As a result, comparisons may not be meaningful.

Investment Income


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
	*($ in millions)*
Interest	$	31.20	$	28.56	$	93.28	$	86.86
Dividend income		3.09		2.35		8.10		7.27
Payment-in-kind		3.17		1.89		7.87		5.29
Other income		0.52		1.61		1.51		3.20

Total investment income	$	37.98	$	34.41	$	110.76	$	102.62

Interest

Interest from investments, which includes prepayment premiums and accelerated accretion of upfront loan origination fees and unamortized discounts, increased from $28.56 million for the three months ended September 30, 2017 to $31.20 million for the three months ended September 30, 2018. The increase is primarily driven by the increase in LIBOR on our variable rate secured debt investments and the increase in total investments. Included in interest for the three months ended September 30, 2018 and 2017 is $0.55 million and $0.73 million, respectively, in prepayment premiums, $1.37 million and $0.70 million, respectively, in accelerated accretion of upfront loan origination fees and unamortized discounts, and $0.43 million and $0.00 million, respectively, for exit fees on investments.

Interest from investments, which includes prepayment premiums and accelerated accretion of upfront loan origination fees and unamortized discounts, increased from $86.86 million for the nine months ended September 30, 2017 to $93.28 million for the nine months ended September 30, 2018. The increase is primarily driven by the increase in LIBOR on our variable rate secured debt investments and the increase in total investments. Included in interest for the nine months ended September 30, 2018 and 2017 is $2.41 million and $2.54 million, respectively, in prepayment premiums, $2.71 million and $4.36 million, respectively, in accelerated accretion of upfront loan origination fees and unamortized discounts, and $0.43 million and $0.00 million, respectively, for exit fees on investments.

Dividend income

Dividend income increased from $2.35 million for the three months ended September 30, 2017 to $3.09 million for the three months ended September 30, 2018. The increase is primarily driven by the increase in dividend income earned from the Senior Credit Fund.

Dividend income increased from $7.27 million for the nine months ended September 30, 2017 to $8.10 million for the nine months ended September 30, 2018. The increase is primarily driven by the increase in dividend income earned from the Senior Credit Fund.

Payment-in-kind

Payment-in-kind income from investments increased from $1.89 million for the three months ended September 30, 2017 to $3.17 million for the three months ended September 30, 2018 primarily as a result of an increase in the number of investments earning PIK income for the three months ended September 30, 2018.

Payment-in-kind income from investments increased from $5.29 million for the nine months ended September 30, 2017 to $7.87 million for the nine months ended September 30, 2018 primarily as a result of an increase in the number of investments earning PIK income for the nine months ended September 30, 2018.

Other income

Other income decreased from $1.61 million for the three months ended September 30, 2017 to $0.52 million for the three months ended September 30, 2018 primarily as a result of the decrease in syndication income and loan origination fee income earned from the Senior Credit Fund.

Other income decreased from $3.20 million for the nine months ended September 30, 2017 to $1.51 million for the nine months ended September 30, 2018 primarily as a result of the decrease in loan origination fee income earned from the Senior Credit Fund and syndication income.

Expenses


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
	*($ in millions)*
Interest and other debt expenses	$	6.43	$	4.88	$	18.33	$	14.24
Management fees		3.26		4.37		12.54		13.18
Incentive fees		4.96		4.62		13.99		9.60
Professional fees		0.58		0.51		2.31		1.44
Administration, custodian and transfer agent fees		0.23		0.22		0.69		0.61
Directors’ fees		0.12		0.18		0.33		0.52
Other expenses		0.41		0.30		1.09		0.92

Total Expenses	$	15.99	$	15.08	$	49.28	$	40.51

Interest and other debt expenses

Interest and other debt expenses increased from $4.88 million for the three months ended September 30, 2017 to $6.43 million for the three months ended September 30, 2018 primarily due to the increase in weighted average interest rate for the Revolving Credit Facility from 3.30% to 4.04% and the increase in average daily borrowings under the Revolving Credit Facility from $330.27 million to $351.36 million. In addition, costs associated with the Convertible Notes increased from $1.51 million for the three months ended September 30, 2017 to $2.14 million for the three months ended September 30, 2018 due to the incremental issuance of $40.00 million aggregate principal amount of Convertible Notes on July 2, 2018.

Interest and other debt expenses increased from $14.24 million for the nine months ended September 30, 2017 to $18.33 million for the nine months ended September 30, 2018 primarily due to the increase in weighted average interest rate for the Revolving Credit Facility from 3.06% to 3.88% and the increase in average daily borrowings under the Revolving Credit Facility from $349.40 million to $389.82 million. In addition, costs associated with the Convertible Notes increased from $4.53 million for the nine months ended September 30, 2017 to $5.16 million for the nine months ended September 30, 2018 due to the incremental issuance of $40.00 million aggregate principal amount of Convertible Notes on July 2, 2018.

Management Fees and Incentive Fees

Management Fees decreased from $4.37 million for the three months ended September 30, 2017 to $3.26 million for the three months ended September 30, 2018 primarily as a result of the reduction in the Management Fee from an annual rate of 1.50% to an annual rate of 1.00% effective on June 15, 2018. Incentive Fees for the three months ended September 30, 2018 remained relatively consistent as compared to the three months ended September 30, 2017.

Management Fees decreased from $13.18 million for the nine months ended September 30, 2017 to $12.54 million for the nine months ended September 30, 2018 primarily as a result of the reduction in the Management Fee from an annual rate of 1.50% to an annual rate of 1.00% effective on June 15, 2018, partially offset by an increase in gross assets, excluding cash or cash equivalents. Incentive Fees increased from $9.60 million for the nine months ended September 30, 2017 to $13.99 million for the nine months ended September 30, 2018 as a result of an increase in the Incentive Fee Cap, which was primarily due to a decrease in net capital losses on our investments.

Professional fees and other general and administrative expenses

Professional fees and other general and administrative expenses for the three months ended September 30, 2018 remained relatively consistent as compared to the three months ended September 30, 2017.

Professional fees and other general administrative expenses increased from $3.49 million for the nine months ended September 30, 2017 to $4.42 million for the nine months ended September 30, 2018 primarily due to an increase in legal fees.

Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation) on Investments

The realized gains and losses on fully exited and partially exited portfolio companies for the three and nine months ended September 30, 2018 and 2017 consisted of the following:


	For the Three Months Ended					For the Nine Months Ended
	September 30, 2018		September 30, 2017			September 30, 2018			September 30, 2017
	*($ in millions)*
Global Tel*Link Corporation	$	–	$	–		$	0.24		$	–
Iracore International Holdings, Inc.		–		–			–			(14.40	)
Discover Org		–		0.14			–			0.14
P2 Upstream Acquisition Co.		–		–			(0.02	)		(0.17	)
Kawa Solar Holdings Limited		–		(2.49	)		0.01			(2.49	)
myON, LLC		–		–			1.55			–
Washington Inventory Service		–		–			–			(23.71	)
Other, net		–		(0.01	)		–			–

Net realized gain (loss)	$	–	$	(2.36	)	$	1.78		$	(40.63	)

In connection with the proceeds received from the exit of our equity investment in myON, LLC, we recorded an income tax provision on realized gains of $0.45 million for the nine months ended September 30, 2018.

For the nine months ended September 30, 2017, net realized losses were primarily driven by two portfolio companies. Effective April 13, 2017, we entered into an exchange agreement with Iracore International Holdings, Inc. whereby the first lien debt held by us was exchanged for non-income producing common equity. As a result, $13.62 million of unrealized depreciation was reversed, and we realized a loss of $14.40 million. In addition, effective June 6, 2017, we fully exited Washington Inventory Service. As a result, $15.03 million of unrealized depreciation was reversed, and we realized a loss of $23.71 million.

Any changes in fair value are recorded as a change in unrealized appreciation (depreciation) on investments. For further details on the valuation process, refer to “Critical Accounting Policies – Valuation of Portfolio Investments.” Net change in unrealized appreciation (depreciation) on investments for the three and nine months ended September 30, 2018 and 2017 were as follows:


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
	*($ in millions)*
Change in unrealized appreciation	$	3.21		$	6.41		$	7.25		$	38.84
Change in unrealized depreciation		(5.60	)		(4.89	)		(13.95	)		(21.94	)

Net change in unrealized appreciation (depreciation) on investments	$	(2.39	)	$	1.52		$	(6.70	)	$	16.90

The change in unrealized appreciation (depreciation) on investments for the three and nine months ended September 30, 2018 and 2017 consisted of the following:


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
	*($ in millions)*
Portfolio Company:
Artesyn Embedded Technologies, Inc.	$	(0.05	)	$	0.75		$	(0.45	)	$	1.78
ASC Acquisition Holdings, LLC		(0.05	)		(0.02	)		(0.42	)		(0.07	)
Avenue Stores, LLC		(0.04	)		(0.04	)		(0.58	)		(0.11	)
Bolttech Mannings, Inc.		(0.73	)		(0.85	)		(2.02	)		(6.86	)
CB-HDT Holdings, Inc.		0.71			0.81			2.82			1.25
Conergy Asia Holdings, Ltd.		–			(1.23	)		(4.43	)		(1.23	)
Continuum Managed Services LLC – Class B		0.15			–			0.38			–


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
	*($ in millions)*
Country Fresh Holdings, LLC		(0.20	)		(0.01	)		(0.39	)		–
Data Driven Delivery Systems, LLC		–			–			–			(2.01	)
DiscoverOrg, LLC		(0.04	)		0.38			0.05			0.52
Dispensing Dynamics International		–			–			–			0.84
DiversiTech Corporation		–			–			–			(0.38	)
Global Tel*Link Corporation		–			(0.04	)		(0.19	)		0.68
Heligear Acquisition Co.		(0.19	)		(0.11	)		(0.62	)		(0.20	)
Highwinds Capital, Inc.		–			–			–			(1.05	)
Infinity Sales Group		0.46			0.32			0.67			0.51
Integrated Practice Solutions, Inc.		–			–			–			(0.54	)
Iracore International Holdings, Inc.		(0.51	)		–			(0.51	)		13.62
Kawa Solar Holdings Limited		0.16			2.81			(0.41	)		(2.65	)
Legacy Buyer Corp.		(0.03	)		(0.02	)		0.30			0.39
MedPlast Holdings, Inc.		(0.79	)		(0.01	)		0.18			0.04
Mervin Manufacturing, Inc.		0.10			(0.01	)		0.24			0.36
NTS Communications, Inc.		(0.90	)		(0.56	)		(0.09	)		(3.48	)
P2 Upstream Acquisition Co.		0.02			(0.03	)		0.12			0.65
Perfect Commerce, LLC		–			(0.94	)		–			(0.87	)
Prairie Provident Resources, Inc.		0.11			(0.27	)		(0.18	)		(1.05	)
Reddy Ice Corporation		–			(0.06	)		–			0.97
Securus Technologies Holdings, Inc.		–			(0.02	)		–			0.65
Senior Credit Fund, LLC		0.25			0.29			0.49			(0.03	)
United Road Services, Inc.		–			0.33			–			0.45
US Med Acquisition, Inc.		(0.02	)		(0.32	)		(0.59	)		(0.98	)
Vexos, Inc.		0.33			0.17			0.62			0.31
Washington Inventory Service		–			–			–			15.03
Yasso, Inc.		(0.17	)		(0.08	)		(0.35	)		(0.10	)
Zep Inc.		(0.67	)		0.29			(0.99	)		0.29
Other, net⁽³⁾		(0.29	)		(0.01	)		(0.35	)		0.17

Total	$	(2.39	)	$	1.52		$	(6.70	)	$	16.90

⁽³⁾

For the three and nine months ended September 30, 2018, other, net includes gross unrealized appreciation of $0.92 million and $1.38 million, respectively, and gross unrealized depreciation of $(1.21) million and $(1.73) million, respectively. For the three and nine months ended September 30, 2017, other, net includes gross unrealized appreciation of $0.26 million and $0.50 million, respectively, and gross unrealized depreciation of $(0.27) million and $(0.33) million, respectively.

Net change in unrealized appreciation (depreciation) in our investments for the three and nine months ended September 30, 2018 was primarily driven by the unrealized depreciation in Conergy Asia Holdings, Ltd. due to its capital condition.

Net change in unrealized appreciation (depreciation) in our investments for the nine months ended September 30, 2017 was primarily driven by the reversal of unrealized depreciation in connection with the exchange agreement with Iracore International Holdings, Inc. and the exit of Washington Inventory Service, each as described above, and unrealized depreciation in Bolttech Mannings, Inc., due to continued pressure on the company’s margins and financial underperformance.

SENIOR CREDIT FUND, LLC

Overview

The Senior Credit Fund, an unconsolidated Delaware limited liability company, was formed on May 7, 2014 and commenced operations on October 1, 2014. We invest together with Cal Regents through the Senior Credit Fund. The Senior Credit Fund’s principal purpose is to make investments, either directly or indirectly through SPV I, primarily in senior secured loans to middle-market companies. Each of us and Cal Regents has a 50% economic ownership in the Senior Credit Fund and each has subscribed to fund $100.00 million. Except under certain circumstances, contributions to the Senior Credit Fund cannot be redeemed. The Senior Credit Fund is managed by a six member board of managers, on which we and Cal Regents have equal representation. Investment decisions generally must be unanimously approved by a quorum of the board of managers. Establishing a quorum for the Senior Credit Fund’s board of managers requires at least four members to be present at a meeting, including at least two of our representatives and two of Cal Regents’ representatives. If there are five members present at a meeting, all three representatives of Cal Regents must be present to constitute a quorum. On August 24, 2018, we and Cal Regents, as the Members of the Senior Credit Fund, entered into an amendment to the amended and restated limited liability company agreement of the Senior Credit Fund to extend the investment period to December 19, 2018.

We and Cal Regents are each responsible for sourcing the Senior Credit Fund’s investments. If the loan origination and structuring fees earned by the Senior Credit Fund (including directly or indirectly through SPV I or another vehicle) during a period exceed the Senior Credit Fund’s expenses (excluding interest and other debt expenses), such excess is paid as a fee to the Member(s) responsible for the origination of the loans pro rata in accordance with the total loan origination and structuring fees earned by the Senior Credit Fund with respect to the loans originated by such Member.

Selected Financial Data

As of September 30, 2018 and December 31, 2017, we and Cal Regents had subscribed to fund and contributed the following in the Senior Credit Fund:


	September 30, 2018				December 31, 2017
	Subscribed to fund		Contributed		Subscribed to fund		Contributed
	*(in millions)*				*(in millions)*
Company	$	100.00	$	94.34	$	100.00	$	94.34
Cal Regents		100.00		94.34		100.00		94.34

Total	$	200.00	$	188.68	$	200.00	$	188.68

As of September 30, 2018 and December 31, 2017, the Senior Credit Fund had total investments in senior secured debt at fair value of $487.97 million and $467.07 million, respectively. As of September 30, 2018, the Senior Credit Fund had one investment on non-accrual status. As of December 31, 2017, the Senior Credit Fund had no investments on non-accrual status. As of September 30, 2018 and December 31, 2017, the Senior Credit Fund had an investment in a money market fund managed by an affiliate of Group Inc. with a total fair value of $5.93 million and $5.84 million, respectively. In addition, the Senior Credit Fund had twelve portfolio companies with unfunded commitments totaling $24.72 million as of September 30, 2018 and eight portfolio companies with unfunded commitments totaling $17.14 million as of December 31, 2017.

Below is a summary of the Senior Credit Fund’s portfolio (excluding an investment in a money market fund managed by an affiliate of Group Inc.) followed by a listing of the individual loans in the Senior Credit Fund’s portfolio as of September 30, 2018 and December 31, 2017:


	As of
	September 30, 2018		December 31, 2017
Number of portfolio companies		35		34
Total senior secured debt⁽¹⁾	$	524.58 million	$	496.58 million
Largest loan to a single borrower⁽¹⁾	$	29.92 million	$	29.04 million
Weighted average current interest rate on senior secured debt⁽²⁾		7.5%		7.3%
Percentage of performing debt bearing a floating rate⁽³⁾		100.0%		100.0%
Percentage of performing debt bearing a fixed rate⁽³⁾		–%		–%
Weighted average leverage (net debt/EBITDA)⁽⁴⁾		4.8x		4.5x
Weighted average interest coverage⁽⁴⁾		2.5x		2.7x
Median EBITDA⁽⁴⁾	$	50.55 million	$	45.53 million

⁽¹⁾

At par amount, including fully unfunded commitments.

⁽²⁾

Computed as (a) the annual stated interest rate on accruing senior secured debt divided by (b) total senior secured debt at par amount, excluding fully unfunded commitments.

⁽³⁾

Measured on a fair value basis.

⁽⁴⁾

For a particular portfolio company of the Senior Credit Fund, we calculate the level of contractual indebtedness net of cash (“net debt”) owed by the portfolio company, and compare that amount to measures of cash flow available to service the net debt. To calculate net debt, we include debt that is both senior and pari passu to the tranche of debt owned by the Senior Credit Fund, but exclude debt that is legally and contractually subordinated in ranking to the debt owned by the Senior Credit Fund. We believe this calculation method assists in describing the risk of the Senior Credit Fund’s portfolio investments, as it takes into consideration contractual rights of repayment of the tranche of debt owned by the Senior Credit Fund relative to other senior and junior creditors of a portfolio company. We typically calculate cash flow available for debt service at a portfolio company by taking EBITDA for the trailing twelve month period.

For a particular portfolio company of the Senior Credit Fund, we also calculate the level of contractual interest expense owed by the portfolio company, and compare that amount to EBITDA (“interest coverage ratio”). We believe this calculation method assists in describing the risk of the Senior Credit Fund’s portfolio investments, as it takes into consideration contractual interest obligations of the portfolio company.

Median EBITDA is based on the Senior Credit Fund’s debt investments.

Portfolio company statistics are derived from the most recently available financial statements of each portfolio company of the Senior Credit Fund as of the respective reported end date. Statistics of the Senior Credit Fund’s portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.

Senior Credit Fund Portfolio as of September 30, 2018


Portfolio Company	Industry	Interest Rate (+)	Reference Rate and Spread (+)	Maturity		Par Amount		Cost			Fair Value
						*(in millions)*

1st Lien/Senior Secured Debt⁽⁺⁾
3SI Security Systems, Inc.	Commercial Services & Supplies	8.08%	L + 5.75%; 1.00% Floor		06/16/2023	$	29.92	$	29.59		$	29.63
A Place For Mom, Inc.	Diversified Consumer Services	5.99%	L + 3.75%; 1.00% Floor		08/10/2024		17.91		17.89			17.89
AMCP Clean Acquisition Company, LLC	Commercial Services & Supplies	6.64%	L + 4.25%		06/16/2025		8.85		8.81			8.85
AMCP Clean Acquisition Company, LLC^{(1) (2)}	Commercial Services & Supplies		L + 4.25%		06/16/2025		2.13		(0.01	)		–
Ansira Partners, Inc.	Media	7.99%	L + 5.75%; 1.00% Floor		12/20/2022		9.27		9.20			9.23
Ansira Partners, Inc.⁽¹⁾	Media	7.99%	L + 5.75%; 1.00% Floor		12/20/2022		0.57		0.14			0.14
ASC Acquisition Holdings, LLC⁽³⁾	Distributors	9.85%	L + 7.50%; 1.00% Floor		12/15/2021		8.06		8.01			7.94
ASC Acquisition Holdings, LLC^{(1) (2) (3)}	Distributors		L + 7.50%; 1.00% Floor		12/15/2021		3.75		(0.04	)		(0.06	)
ATX Networks Corp.	Communications Equipment	9.39% (8.39% Cash and 1.00% PIK)	L + 7.00% (Incl. 1.00% PIK); 1.00% Floor		06/11/2021		0.95		0.93			0.89
ATX Networks Corp.	Communications Equipment	9.39% (8.39% Cash and 1.00% PIK)	L + 7.00% (Incl. 1.00% PIK); 1.00% Floor		06/11/2021		15.10		15.02			14.19
Badger Sportswear, Inc.	Textiles, Apparel & Luxury Goods	6.74%	L + 4.50%; 1.00% Floor		09/11/2023		14.70		14.59			14.41
Barbri, Inc.	Media	6.35%	L + 4.25%; 1.00% Floor		12/01/2023		12.79		12.74			12.75
CST Buyer Company	Diversified Consumer Services	7.24%	L + 5.00%; 1.00% Floor		03/01/2023		18.97		18.56			18.59
CST Buyer Company^{(1) (2)}	Diversified Consumer Services		L + 5.00%; 1.00% Floor		03/01/2023		1.80		(0.04	)		(0.04	)
DBRS Limited	Capital Markets	7.56%	L + 5.25%; 1.00% Floor		03/04/2022		11.58		11.52			11.59
DiscoverOrg, LLC⁽³⁾	Software	6.75%	L + 4.50%; 1.00% Floor		08/25/2023		7.92		7.89			7.88
Drilling Info Holdings, Inc.	Oil & Gas	6.54%	L + 4.25%		07/30/2025		15.83		15.75			15.75
Drilling Info Holdings, Inc.^{(1) (2)}	Oil & Gas		L + 4.25%		07/30/2025		2.67		(0.01	)		(0.01	)
FWR Holding Corporation	Hotels, Restaurants & Leisure	7.99%	L + 5.75%; 1.00% Floor		08/21/2023		9.01		8.82			8.81
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	7.99%	L + 5.75%; 1.00% Floor		08/21/2023		1.17		0.71			0.71
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	8.80%	L + 5.75%; 1.00% Floor		08/21/2023		2.93		1.08			1.07
GH Holding Company	Real Estate Management & Development	6.74%	L + 4.50%		02/28/2023		14.92		14.86			14.85
GI Revelation Acquisition LLC	Internet Software & Services	7.24%	L + 5.00%		04/16/2025		6.98		6.95			6.99
GK Holdings, Inc.	IT Services	8.39%	L + 6.00%; 1.00% Floor		01/20/2021		17.33		17.27			15.95
GlobalTranz Enterprises, Inc.	Road & Rail	6.49%	L + 4.25%		06/29/2025		17.65		17.56			17.56
GlobalTranz Enterprises, Inc.^{(1) (2)}	Road & Rail		L + 4.25%		06/29/2025		4.35		–			(0.02	)
Halo Branded Solutions, Inc.	Commercial Services & Supplies	6.74%	L + 4.50%; 1.00% Floor		06/30/2025		10.53		10.43			10.42
Halo Branded Solutions, Inc.⁽¹⁾	Commercial Services & Supplies	6.78%	L + 4.50%; 1.00% Floor		06/30/2025		4.43		4.08			4.08
HC Group Holdings III, Inc.	Health Care Providers & Services	5.99%	L + 3.75%		04/07/2022		8.73		8.70			8.76
Hygiena Borrower LLC⁽³⁾	Life Sciences Tools & Services	6.38%	L + 4.00%; 1.00% Floor		08/26/2022		17.81		17.66			17.45
Hygiena Borrower LLC^{(1) (2)}⁽³⁾	Life Sciences Tools & Services		L + 4.00%; 1.00% Floor		08/26/2022		1.87		(0.02	)		(0.04	)
Hygiena Borrower LLC^{(1) (2)}⁽³⁾	Life Sciences Tools & Services		L + 4.00%; 1.00% Floor		08/26/2022		0.29		(0.00	)		(0.01	)
Jill Acquisition LLC	Textiles, Apparel & Luxury Goods	7.35%	L + 5.00%; 1.00% Floor		05/08/2022		13.88		13.81			13.64
Lattice Semiconductor Corporation	Semiconductors & Semiconductor Equipment	6.37%	L + 4.25%; 1.00% Floor		03/10/2021		9.77		9.67			9.81
Output Services Group, Inc.⁽⁴⁾	Diversified Consumer Services	6.49%	L + 4.25%; 1.00% Floor		03/27/2024		7.01		6.98			7.03
Output Services Group, Inc.⁽¹⁾	Diversified Consumer Services		L + 4.25%; 1.00% Floor		03/27/2024		1.03		–			0.00
Pathway Partners Vet Management Company, LLC	Health Care Providers & Services	6.49%	L + 4.25%; 1.00% Floor		10/10/2024		9.63		9.59			9.63

Senior Credit Fund Portfolio as of September 30, 2018 (Continued)


Portfolio Company	Industry	Interest Rate (+)	Reference Rate and Spread (+)	Maturity		Par Amount		Cost			Fair Value
						*(in millions)*
Pathway Partners Vet Management Company, LLC	Health Care Providers & Services	6.49%	L + 4.25%; 1.00% Floor		10/10/2024	$	0.29	$	0.28		$	0.29
Pharmalogic Holdings Corp.	Health Care Equipment & Supplies	6.24%	L + 4.00%		06/11/2023		1.88		1.88			1.88
Pharmalogic Holdings Corp.^{(1) (2)}	Health Care Equipment & Supplies		L + 4.00%		06/11/2023		3.54		(0.01	)		(0.01	)
Pharmalogic Holdings Corp.	Health Care Equipment & Supplies	6.24%	L + 4.00%		06/11/2023		6.56		6.54			6.54
Professional Physical Therapy⁽⁵⁾	Health Care Providers & Services		L + 7.50% PIK; 1.00% Floor		12/16/2022		10.92		10.28			9.07
RealD, Inc.	Media	9.74%	L + 7.50%; 1.00% Floor		03/22/2021		16.32		16.22			16.24
Regulatory DataCorp, Inc.	Diversified Financial Services	6.74%	L + 4.50%; 1.00% Floor		09/21/2022		4.97		4.97			4.87
SciQuest, Inc.	Internet Software & Services	6.24%	L + 4.00%; 1.00% Floor		12/28/2024		19.85		19.76			19.80
SMS Systems Maintenance Services, Inc.	IT Services	7.24%	L + 5.00%; 1.00% Floor		10/30/2023		14.74		14.68			11.89
Stackpath, LLC	Internet Software & Services	7.51%	L + 5.00%; 1.00% Floor		02/03/2023		16.79		16.66			16.62
Tronair Parent Inc.	Air Freight & Logistics	7.56%	L + 4.75%; 1.00% Floor		09/08/2023		13.72		13.62			13.51
U.S. Acute Care Solutions, LLC	Health Care Providers & Services	7.24%	L + 5.00%; 1.00% Floor		05/14/2021		12.76		12.67			12.66
United Seating and Mobility, LLC	Health Care Equipment & Supplies	6.99%	L + 4.75%; 1.00% Floor		05/10/2019		14.81		14.77			14.74
VRC Companies, LLC	Commercial Services & Supplies	8.74%	L + 6.50%; 1.00% Floor		03/31/2023		27.43		27.01			27.15
VRC Companies, LLC⁽¹⁾	Commercial Services & Supplies	8.74%	L + 6.50%; 1.00% Floor		03/31/2022		1.41		1.06			1.07

Total 1st Lien/Senior Secured Debt									479.08			472.63

2nd Lien/Senior Secured Debt
DiscoverOrg, LLC⁽³⁾	Software	10.75%	L + 8.50%; 1.00% Floor		02/23/2024		10.50		10.37			10.42
GK Holdings, Inc.	IT Services	12.64%	L + 10.25%; 1.00% Floor		01/20/2022		6.00		5.93			4.92

Total 2nd Lien/Senior Secured Debt									16.30			15.34

Total Corporate Debt									495.38			487.97

^{^^^}

⁽⁺⁾

⁽¹⁾

⁽²⁾

⁽³⁾

The Company also holds a portion of the senior secured debt in this portfolio company.

⁽⁴⁾

Position or portion thereof unsettled as of September 30, 2018.

⁽⁵⁾

The investment is on non-accrual status as of September 30, 2018.

⁽⁶⁾

The rate shown is the annualized seven-day yield as of September 30, 2018.

PIK – Payment-in-kind

Senior Credit Fund Portfolio as of December 31, 2017


Portfolio Company	Industry	Interest (+)	Maturity	Par Amount		Cost			Fair Value
				*(in millions)*
1st Lien/Senior Secured Debt
3SI Security Systems, Inc.	Commercial Services & Supplies	7.87% (L + 6.25%; 1.00% Floor)	06/16/2023	$	14.96	$	14.75		$	14.74
A Place For Mom, Inc.	Diversified Consumer Services	5.69% (L + 4.00%; 1.00% Floor)	08/10/2024		3.99		3.97			3.99
Ansira Partners, Inc.	Media	8.19% (L + 6.50%; 1.00% Floor)	12/20/2022		8.64		8.56			8.57
Ansira Partners, Inc.⁽¹⁾	Media	8.19% (L + 6.50%; 1.00% Floor)	12/20/2022		1.27		0.69			0.69
ASC Acquisition Holdings, LLC⁽²⁾	Distributors	8.89% (L + 7.50%; 1.00% Floor)	12/15/2021		10.69		10.60			10.47
ASC Acquisition Holdings, LLC^(1)(2)(3)	Distributors	(L + 7.50%; 1.00% Floor)	12/15/2021		3.75		(0.04	)		(0.08	)
ATX Networks Corp.	Communications Equipment	8.69% (L + 6.00%; 1.00% Floor) (7.69% Cash and 1.00% PIK)	06/11/2021		16.42		16.30			16.18
Badger Sportswear, Inc.	Textiles, Apparel & Luxury Goods	6.07% (L + 4.50%; 1.00% Floor)	09/11/2023		14.81		14.69			14.54
Barbri, Inc.	Media	5.73% (L + 4.25%; 1.00% Floor)	12/01/2023		14.00		13.93			13.97
Crowne Group, LLC	Auto Components	10.73% (L + 9.25%; 1.00% Floor)	05/26/2021		16.36		16.24			16.53
CST Buyer Company	Diversified Consumer Services	7.75% (L + 6.25%; 1.00% Floor)	03/01/2023		19.66		19.18			19.27
CST Buyer Company⁽¹⁾⁽³⁾	Diversified Consumer Services	(L + 6.25%; 1.00% Floor)	03/01/2023		1.80		(0.04	)		(0.04	)
DBRS Limited	Capital Markets	6.73% (L + 5.25%; 1.00% Floor)	03/04/2022		11.67		11.59			11.67
DiscoverOrg, LLC⁽²⁾	Software	6.07% (L + 4.50%; 1.00% Floor)	08/25/2023		7.98		7.94			7.90
FWR Holding Corporation	Hotels, Restaurants & Leisure	7.66% (L + 6.00%; 1.00% Floor)	08/21/2023		9.08		8.86			8.85
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	7.57% (L + 6.00%; 1.00% Floor)	08/21/2023		1.18		0.12			0.12
FWR Holding Corporation⁽¹⁾	Hotels, Restaurants & Leisure	7.60% (L + 6.00%; 1.00% Floor)	08/21/2023		2.93		0.40			0.40
GK Holdings, Inc.	IT Services	7.69% (L + 6.00%; 1.00% Floor)	01/20/2021		17.46		17.39			13.63
HC Group Holdings III, Inc.	Health Care Providers & Services	6.57% (L + 5.00%; 1.00% Floor)	04/07/2022		8.80		8.77			8.87
Help/Systems, LLC	Software	6.19% (L + 4.50%; 1.00% Floor)	10/08/2021		17.72		17.30			17.77
Hygiena Borrower LLC	Life Sciences Tools & Services	6.44% (L + 4.75%; 1.00% Floor)	08/26/2022		15.88		15.74			15.56
Hygiena Borrower LLC⁽¹⁾⁽³⁾	Life Sciences Tools & Services	(L + 4.75%; 1.00% Floor)	08/26/2022		1.67		(0.02	)		(0.03	)
Jill Acquisition LLC	Textiles, Apparel & Luxury Goods	6.38% (L + 5.00%; 1.00% Floor)	05/08/2022		14.00		13.91			13.18
Lattice Semiconductor Corporation	Semiconductors & Semiconductor Equipment	5.65% (L + 4.25%; 1.00% Floor)	03/10/2021		10.75		10.61			10.85
Liquidnet Holdings, Inc.	Capital Markets	5.82% (L + 4.25%; 1.00% Floor)	07/15/2024		9.75		9.66			9.77
MB Aerospace Holdings Inc.	Aerospace & Defense	7.13% (L + 5.50%; 1.00% Floor)	12/15/2022		15.69		15.57			15.65
Netsmart Technologies, Inc.	Health Care Technology	6.19% (L + 4.50%; 1.00% Floor)	04/19/2023		18.75		18.70			18.94
Pathway Partners Vet Management Company, LLC⁽²⁾	Health Care Providers & Services	5.82% (L + 4.25%; 1.00% Floor)	10/10/2024		6.96		6.93			6.96
Pathway Partners Vet Management Company, LLC⁽¹⁾⁽²⁾	Health Care Providers & Services	5.82% (L + 4.25%; 1.00% Floor)	10/10/2024		3.02		0.28			0.29
Pomeroy Group LLC	IT Services	7.51% (L + 6.00%; 1.00% Floor)	11/30/2021		15.76		15.39			15.40
Professional Physical Therapy	Health Care Providers & Services	9.50% (P + 5.00%)	12/16/2022		10.40		10.31			10.19
Radiology Partners Holdings, LLC	Health Care Providers & Services	7.59% (L + 5.75%; 1.00% Floor)	12/04/2023		7.71		7.63			7.71
Radiology Partners Holdings, LLC⁽¹⁾	Health Care Providers & Services	7.59% (L + 5.75%; 1.00% Floor)	12/04/2023		2.29		1.39			1.41
RealD, Inc.	Media	8.98% (L + 7.50%; 1.00% Floor)	03/22/2021		16.64		16.52			16.43
SciQuest, Inc.⁽⁴⁾	Internet Software & Services	5.56% (L + 4.00%; 1.00% Floor)	12/28/2024		20.00		19.90			19.90
Smarte Carte, Inc.	Air Freight & Logistics	7.20% (L + 5.50%; 1.00% Floor)	08/30/2021		10.56		10.48			10.48
SMS Systems Maintenance Services, Inc.	IT Services	6.57% (L + 5.00%; 1.00% Floor)	10/30/2023		14.85		14.78			12.47
Stackpath, LLC	Internet Software & Services	6.38% (L + 5.00%; 1.00% Floor)	02/03/2023		16.91		16.77			16.75
Tronair Parent Inc.	Air Freight & Logistics	6.16% (L + 4.75%; 1.00% Floor)	09/08/2023		13.82		13.71			13.65
U.S. Acute Care Solutions, LLC	Health Care Providers & Services	6.69% (L + 5.00%; 1.00% Floor)	05/14/2021		12.87		12.76			12.74

Senior Credit Fund Portfolio as of December 31, 2017 (Continued)

Portfolio Company

Industry

Interest (+)

Maturity

Par

Amount

Cost

Fair

Value

VRC Companies, LLC

Commercial Services & Supplies

8.12% (L + 6.50%; 1.00% Floor)

03/31/2023

19.91

19.50

19.66

VRC Companies, LLC

Commercial Services & Supplies

7.85% (L + 6.50%; 1.00% Floor)

03/31/2023

3.52

3.45

3.48

VRC Companies, LLC⁽¹⁾

Commercial Services & Supplies

7.97% (L + 6.50%; 1.00% Floor)

03/31/2023

4.20

2.18

VRC Companies, LLC⁽¹⁾

Commercial Services & Supplies

10.00% (P + 5.50%)

03/31/2022

1.41

1.10

1.11

Total 1st Lien/Senior Secured Debt

448.45

442.77

1st Lien/First-Out Unitranche

Infogix, Inc.

Software

6.69% (L + 5.00%; 1.00% Floor)

12/31/2021

9.59

9.52

9.57

Total 1st Lien/First-Out Unitranche

9.52

9.57

2nd Lien/Senior Secured Debt

DiscoverOrg, LLC ⁽²⁾

Software

10.07% (L + 8.50%; 1.00% Floor)

02/23/2024

10.50

10.35

10.39

GK Holdings, Inc.

IT Services

11.94% (L + 10.25%; 1.00% Floor)

01/20/2022

6.00

5.92

4.34

Total 2nd Lien/Senior Secured Debt

16.27

14.73

Total Corporate Debt

474.24

467.07

⁽⁺⁾

⁽¹⁾

⁽²⁾

We also hold a portion of the 2nd lien/senior secured debt in this portfolio company.

⁽³⁾

⁽⁴⁾

Position or portion thereof unsettled as of December 31, 2017.

Below is certain summarized balance sheet information for the Senior Credit Fund as of September 30, 2018 and December 31, 2017:


	As of
	September 30, 2018		December 31, 2017
	*(in millions)*
Selected Balance Sheet Information
Total investments, at fair value	$	493.90	$	472.91
Cash and other assets		19.83		31.83

Total assets	$	513.73	$	504.74

Debt⁽¹⁾	$	317.76	$	291.52
Other liabilities		10.79		29.03

Total liabilities	$	328.55	$	320.55

Members’ equity	$	185.18	$	184.19

Total liabilities and members’ equity	$	513.73	$	504.74

⁽¹⁾

Net of deferred financing costs for the SPV I Term Loan Facility (as defined below) as of September 30, 2018 and December 31, 2017, which were in the amount of $2.24 million and $2.49 million, respectively.

Below is certain summarized Statement of Operations information for the Senior Credit Fund for the three and nine months ended September 30, 2018 and 2017:


	For the Three Months Ended					For the Nine Months Ended
	September 30, 2018		September 30, 2017			September 30, 2018			September 30, 2017
	*(in millions)*
Selected Statement of Operations Information:
Total investment income	$	10.30	$	9.54		$	29.47		$	28.14

Expenses
Interest and other debt expenses		4.11		3.48			11.36			10.13
Excess loan origination and structuring fees		–		0.35			–			1.10
Professional fees		0.13		0.18			0.54			0.48
Administration and custodian fees		0.10		0.10			0.30			0.30
Other expenses		0.02		0.04			0.05			0.09

Total expenses		4.36		4.15			12.25			12.10

Net investment income (loss)		5.94		5.39			17.22			16.04

Net realized gain (loss) on investments		–		0.03			–			0.11
Net change in unrealized appreciation (depreciation) on investments		0.56		(0.14	)		(0.24	)		(1.71	)

Net increase (decrease) in members’ equity	$	6.50	$	5.28		$	16.98		$	14.44

Debt

On December 19, 2016, SPV I entered into an amended and restated credit facility (as amended, the “Asset Based Facility”), which consists of a revolving credit facility (the “SPV I Revolving Credit Facility”), a term loan facility (the “SPV I Term Loan Facility”) and a Class B loan facility (the “SPV I Class B Facility”), with various lenders. For the Asset Based Facility, Natixis, New York Branch (“Natixis”) serves as the facility agent, and State Street Bank and Trust Company serves as the collateral agent. The Asset Based Facility includes a maximum borrowing capacity of $400.00 million. The SPV I Revolving Credit Facility provided for borrowings in an aggregate amount up to $120.00 million on a committed basis as of September 30, 2018. Borrowings under the SPV I Revolving Credit Facility bear interest at LIBOR plus 2.30%. As of September 30, 2018, the SPV I Term Loan Facility consisted of a $240.00 million fully drawn term loan and the SPV I Class B Facility consisted of a $40.00 million fully drawn Class B loan. Borrowings under the SPV I Term Loan Facility and SPV I Class B Facility bear interest at LIBOR plus 2.30% and LIBOR plus 3.50%, respectively. Any amounts borrowed under the Asset Based Facility will mature, and all accrued and unpaid interest will be due and payable, on December 19, 2025.

As of September 30, 2018 and December 31, 2017, the SPV I’s outstanding borrowings under the Asset Based Facility were $320.00 million and $294.00 million, respectively. The summary information of the Asset Based Facility for the three and nine months ended September 30, 2018 and 2017 is as follows:


	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
	*($ in millions)*
Borrowing interest expense	$	3.69		$	3.09		$	10.04		$	9.05
Facility fees		0.23			0.20			0.75			0.51
Amortization of financing costs		0.19			0.19			0.57			0.57
Total	$	4.11		$	3.48		$	11.36		$	10.13
Weighted average interest rate		4.9	%		3.8	%		4.6	%		3.6	%
Average outstanding balance	$	301.21		$	324.66		$	291.51		$	334.16

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The primary use of existing funds and any funds raised in the future is expected to be for our investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes, including paying for operating expenses or debt service to the extent we borrow or issue senior securities.

We expect to generate cash primarily from the net proceeds of any future offerings of securities, future borrowings and cash flows from operations. To the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our Board of Directors otherwise determines that leveraging our portfolio would be in our best interest and the best interests of our stockholders, we may enter into credit facilities in addition to our existing credit facilities as discussed below, or issue other senior securities. We would expect any such credit facilities may be secured by certain of our assets and may contain advance rates based upon pledged collateral. The pricing and other terms of any such facilities would depend upon market conditions when we enter into any such facilities as well as the performance of our business, among other factors. As a BDC, with certain limited exceptions, we are only permitted to borrow amounts such that our asset coverage ratio, as defined in the Investment Company Act, is at least 150% after such borrowing (if certain requirements are met). See “–Key Components of Operations – Leverage.” As of September 30, 2018 and December 31, 2017, our asset coverage ratio based on the aggregate amount outstanding of our senior securities was 225% and 233%, respectively. We may also refinance or repay any of our indebtedness at any time based on our financial condition and market conditions.

As of September 30, 2018, we had cash of approximately $4.65 million, a decrease of $6.96 million from December 31, 2017. Cash provided by operating activities for the nine months ended September 30, 2018 was approximately $16.50 million, primarily driven by an increase in net assets resulting from operations of $54.94 million, proceeds from sales and principal repayments of $268.62 million, net proceeds from investment in affiliated money market of $11.54 million, and proceeds from other operating activities of $1.25, offset by purchases of investments of $319.85 million. Cash used for financing activities for the nine months ended September 30, 2018 was approximately $23.46 million, primarily driven by repayments on debt of $314.75 million, distributions paid of $52.90 million and other financing activities of $3.25 million, offset by borrowings on debt of $347.44 million.

As of September 30, 2017, we had cash of approximately $11.97 million, an increase of $7.40 million from December 31, 2016. Cash provided by operating activities for the nine months ended September 30, 2017 was approximately $31.51 million, primarily driven by an increase in net assets resulting from operations of $37.26 million, proceeds from sales and principal repayments of $472.44 million and proceeds from other operating activities of $16.42 million, offset by purchases of investments of $494.61 million. Cash used by financing activities for the nine months ended September 30, 2017 was approximately $24.11 million, primarily driven by repayments on debt of $460.35 million, distributions paid of $49.83 million and other financing activities of $0.85 million, partially offset by borrowings on debt of $405.35 million and proceeds from the issuance of common stock (net of underwriting and offering costs) of $81.57 million.

To the extent permissible under the risk retention rules and applicable provisions of the Investment Company Act, we may raise capital by securitizing certain of our investments, including through the formation of one or more CLOs or asset based facilities, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers. We may also pursue other forms of debt financing, including potentially from the Small Business Administration through a future small business investment company subsidiary (subject to regulatory approvals).

Equity Issuances

There were no sales of our common stock during the nine months ended September 30, 2018.

On May 24, 2017, we completed a follow-on offering under our shelf registration statement, issuing 3,250,000 shares of our common stock at a public offering price of $22.50 per share. Net of offering and underwriting costs, we received cash proceeds of $69.65 million.

On May 26, 2017, we sold an additional 487,500 shares of our common stock pursuant to the underwriters’ exercise of the option to purchase additional shares we granted in connection with the aforementioned offering. Net of underwriting costs, we received additional cash proceeds of $10.64 million.

Common Stock Repurchase Plan

In February 2016, our Board of Directors authorized us to repurchase up to $25.00 million of our common stock if the stock trades below the most recently announced NAV per share (including any updates, corrections or adjustments publicly announced by us to any previously announced NAV per share), from March 18, 2016 to March 18, 2017, subject to certain limitations. In February 2017, our Board of Directors renewed its authorization of the stock repurchase plan to extend the expiration to March 18, 2018 and, in February 2018, again renewed its authorization of the stock repurchase plan to extend the expiration to March 18, 2019.

In connection with this authorization, we entered into a 10b5-1 plan (the “Company 10b5-1 Plan”). The Company 10b5-1 Plan provides that purchases will be conducted on the open market on a programmatic basis in accordance with Rules 10b5-1 and 10b-18 under the Exchange Act and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances. No purchases will be effected pursuant to the Company 10b5-1 Plan if such purchase would (i) cause the aggregate ownership of our outstanding stock by Group Inc. and GS & Co. to equal or exceed 25.0% (due to the reduction in outstanding shares of stock as a result of purchase) or (ii) cause our debt/equity ratio to exceed 0.75. The Company 10b5-1 Plan initially took effect on March 18, 2016 (with any purchases to commence after the opening of NYSE trading on March 21, 2016), was subsequently renewed and expired on March 18, 2018. We entered into an agreement to renew the Company 10b5-1 Plan on May 14, 2018, which was terminated on June 27, 2018 in connection with our offering of Convertible Notes described below in “—Convertible Notes.” On June 27, 2018, we entered into an agreement to renew the Company 10b5-1 Plan with any purchases pursuant to the agreement to commence on September 25, 2018. The Company 10b5-1 Plan is scheduled to expire on March 18, 2019. Further, no purchases will be effected during the applicable restricted period under Regulation M as a result of an offering of securities by us or for a period of 60 days after the expiration of any overallotment option included in any common equity offering.

Repurchases of our common stock under the Company 10b5-1 Plan or otherwise may result in the price of our common stock being higher than the price that otherwise might exist in the open market. For the three and nine months ended September 30, 2018 and 2017, we did not repurchase any of our common stock pursuant to the Company 10b5-1 Plan or otherwise.

Dividend Reinvestment Plan

Concurrent with the IPO, we adopted a dividend reinvestment plan that provides for reinvestment of all cash distributions declared by the Board of Directors unless a stockholder elects to “opt out” of the plan. As a result, if the Board of Directors declares a cash distribution, then the stockholders who have not “opted out” of the dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of common stock, rather than receiving the cash distribution. Due to regulatory considerations, Group Inc. has opted out of the dividend reinvestment plan, and GS & Co. has opted out of the dividend reinvestment plan in respect of any shares of our common stock acquired through the GS 10b5-1 Plan.


Date Declared	Record Date	Payment Date	Shares

October 31, 2017	December 29, 2017	January 16, 2018		23,824
February 21, 2018	March 30, 2018	April 16, 2018		20,916
May 1, 2018	June 29, 2018	July 16, 2018		20,644


Date Declared	Record Date	Payment Date	Shares

November 1, 2016	December 31, 2016	January 17, 2017		11,124
February 22, 2017	March 31, 2017	April 17, 2017		11,202
May 1, 2017	June 30, 2017	July 17, 2017		18,417

Contractual Obligations

We have entered into certain contracts under which we have future commitments. Payments under the Investment Management Agreement, pursuant to which GSAM has agreed to serve as our Investment Adviser, are equal to (1) a percentage of value of our average gross assets and (2) a two-part Incentive Fee. Under the Administration Agreement, pursuant to which State Street Bank and Trust Company has agreed to furnish us with the administrative services necessary to conduct our day-to-day operations, we pay our administrator such fees as may be agreed between us and our administrator that we determine are commercially reasonable in our sole discretion. Either party or the stockholders, by a vote of a majority of our outstanding voting securities, may terminate the Investment Management Agreement without penalty on at least 60 days’ written notice to the other party. Either party may terminate the Administration Agreement without penalty upon at least 30 days’ written notice to the other party.

The following table shows our contractual obligations as of September 30, 2018:


	Payments Due by Period (in millions)
	Total		Less Than 1 Year		1 – 3 Years		3 – 5 Years		More Than 5 Years
Revolving Credit Facility	$	423.94	$	–	$	–	$	423.94	$	–
Convertible Notes	$	155.00	$	–	$	–	$	155.00	$	–

Revolving Credit Facility

On September 19, 2013, we entered into the Revolving Credit Facility with various lenders. SunTrust Bank serves as administrative agent and Bank of America N.A. serves as syndication agent. We amended and restated the Revolving Credit Facility on October 3, 2014, November 3, 2015, December 16, 2016, February 21, 2018, and September 17, 2018.

The aggregate committed borrowing amount under the Revolving Credit Facility is $695.00 million. The Revolving Credit Facility includes an uncommitted accordion feature that allows us, under certain circumstances, to increase the borrowing capacity of the Revolving Credit Facility up to $1,000.00 million.

Borrowings denominated in USD, including amounts drawn in respect of letters of credit, bear interest (at our election) of either (i) LIBOR plus a margin of either 1.75% or 2.00%, subject to borrowing base conditions or (ii) an alternative base rate, which is the higher of the Prime Rate, Federal Funds Rate plus 0.50% or overnight LIBOR plus 1.00%, plus either 0.75% or 1.00%, subject to borrowing base conditions. Borrowings denominated in EUR bear interest (at our election) or EUR LIBOR plus a margin of either 1.75% or 2.00%, subject to borrowing base conditions. We may elect either the LIBOR, EUR LIBOR, or an alternative base rate at the time of borrowing, and borrowings may be converted from one rate to another at any time, subject to certain conditions. Interest is payable quarterly in arrears. We pay a fee of 0.375% per annum on committed but undrawn amounts under the Revolving Credit Facility, payable quarterly in arrears. Any amounts borrowed under the Revolving Credit Facility will mature, and all accrued and unpaid interest will be due and payable, on February 21, 2023.

The Revolving Credit Facility may be guaranteed by certain of our domestic subsidiaries, including any that are formed or acquired by us in the future (collectively, the “Guarantors”). The Senior Credit Fund is not a Guarantor of the Revolving Credit Facility. Proceeds from borrowings may be used for general corporate purposes, including the funding of portfolio investments.

Our obligations to the lenders under the Revolving Credit Facility are secured by a first priority security interest in substantially all of our portfolio of investments and cash, with certain exceptions. The Revolving Credit Facility contains certain covenants, including: (i) maintaining a minimum shareholder’s equity of $500.00 million plus 25% of net proceeds of the sale of equity interests after February 21, 2018, (ii) maintaining a minimum asset coverage ratio of at least 150%, (iii) maintaining a minimum asset coverage ratio of 200% with respect to consolidated assets (with certain limitations on the contribution of equity in financing subsidiaries as specified therein) of us and our subsidiary guarantors to the secured debt of us and our subsidiary guarantors, (iv) maintaining a minimum Company net worth of at least $350.00 million, (v) maintaining a minimum liquidity test of at least 10% of the covered debt amount during any period when the adjusted covered debt balance is greater than 90% of the adjusted borrowing base, as defined in the Revolving Credit Facility, and (vi) complying with restrictions on industry concentrations in our investment portfolio. We are in compliance with these covenants.

The Revolving Credit Facility also includes customary representations and warranties, conditions precedent to funding of draws and events of default.

Convertible Notes

On October 3, 2016, we closed an offering of $115.00 million aggregate principal amount of unsecured Convertible Notes, which included $15.00 million aggregate principal amount issued pursuant to the initial purchasers’ exercise in full of an over-allotment option (the “Initial Convertible Notes”). The sale of the Initial Convertible Notes generated net proceeds of approximately $110.90 million. We used the net proceeds of the offering to pay down debt under the Revolving Credit Facility.

On July 2, 2018, we closed an offering of $40.00 million aggregate additional principal amount (the “Additional Convertible Notes” and, together with the Initial Convertible Notes, the “Convertible Notes”). The Additional Convertible Notes have identical terms, are fungible and are part of the Initial Convertible Notes. The sale of the Additional Convertible Notes generated net proceeds of approximately $38.57 million. We used the net proceeds of the offering to pay down debt under the Revolving Credit Facility.

The Convertible Notes were issued pursuant to an indenture between us and Wells Fargo Bank, National Association, as Trustee. Wells Fargo Bank, National Association and/or its affiliates provide bank lending and distribution services to certain Goldman Sachs funds. The Convertible Notes bear interest at a rate of 4.50% per year, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2017. The Convertible Notes will mature on April 1, 2022, unless repurchased or converted in accordance with their terms prior to such date. In certain circumstances, the Convertible Notes will be convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, based on an initial conversion rate of 40.8397 shares of our common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $24.49 per share of common stock, subject to customary anti-dilution adjustments and the other terms of the indenture governing the Convertible Notes. The conversion price is approximately 10.0% above the $22.26 per share closing price of our common stock on September 27, 2016 and 16.7% above the $20.99 per share closing price of our common stock on June 26, 2018. We will not have the right to redeem the Convertible Notes prior to maturity.

Holders may convert their notes at their option at any time prior to the close of business on the business day immediately preceding October 1, 2021 only under the following circumstances: (1) during any calendar quarter, if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events. On or after October 1, 2021, until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the occurrence or nonoccurrence of any of the foregoing circumstances.

The Convertible Notes are accounted for in accordance with Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options. Upon conversion of any of the Convertible Notes, we intend to pay the outstanding principal amount in cash and, to the extent that the conversion value exceeds the principal amount, we have the option to pay the excess amount in cash or shares of our common stock (or a combination of cash and shares), subject to the requirements of the indenture governing the Convertible Notes. We have determined that the embedded conversion options in the Convertible Notes are not required to be separately accounted for as derivatives under ASC 815, Derivatives and Hedging. At the time of issuance the values of the debt and equity components of the Initial Convertible Notes and Additional Convertible Notes were approximately 99.4% and 0.6%, and 97.9% and 2.1%, respectively.

The OID equal to the equity component of the Convertible Notes was recorded in “paid-in capital in excess of par” in the accompanying Consolidated Statements of Assets and Liabilities. We record interest expense comprised of both stated interest and amortization of the OID. At the time of issuance, the equity component of the Initial Convertible Notes and the Additional Convertible Notes were $0.74 million and $0.84 million, respectively. Additionally, the issuance costs associated with the Convertible Notes were allocated to the debt and equity components in proportion to the allocation of the values at the time of issuance and accounted for as debt issuance costs and equity issuance costs, respectively.

HEDGING

Subject to applicable provisions of the Investment Company Act and applicable Commodity Futures Trading Commission (“CFTC”) regulations, we may enter into hedging transactions in a manner consistent with SEC guidance. To the extent that any of our loans are denominated in a currency other than U.S. dollars, we may enter into currency hedging contracts to reduce our exposure to fluctuations in currency exchange rates. We may also enter into interest rate hedging agreements. Such hedging activities, which will be subject to compliance with applicable legal requirements, may include the use of futures, options, swaps and forward contracts. Costs incurred in entering into such contracts or in settling them, if any, will be borne by us. The Investment Adviser has claimed no-action relief from CFTC registration and regulation as a commodity pool operator pursuant to a CFTC staff no-action letter (the “BDC CFTC No-Action Letter”) with respect to our operations, with the result that we will be limited in our ability to use futures contracts or options on futures contracts or engage in swap transactions. Specifically, the BDC CFTC No-Action Letter imposes strict limitations on using such derivatives other than for hedging purposes, whereby the use of derivatives not used solely for hedging purposes is generally limited to situations where (i) the aggregate initial margin and premiums required to establish such positions does not exceed five percent of the liquidation value of our portfolio, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; or (ii) the aggregate net notional value of such derivatives does not exceed 100% of the liquidation value of our portfolio. Moreover, we anticipate entering into transactions involving such derivatives to a very limited extent solely for hedging purposes or otherwise within the limitations of the BDC CFTC No-Action Letter.

OFF-BALANCE SHEET ARRANGEMENTS

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to fund investments and to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of September 30, 2018, we believed that we had adequate financial resources to satisfy our unfunded commitments. As of September 30, 2018 and December 31, 2017, our unfunded commitments to provide funds to portfolio companies were as follows:


	As of
	September 30, 2018		December 31, 2017
	*(in millions)*
Unfunded Commitments
First Lien/Senior Secured Debt	$	70.18	$	18.82
First Lien/Last-Out Unitranche		–		1.50
Second Lien/Senior Secured Debt		2.61		9.91

Total	$	72.79	$	30.23

RECENT DEVELOPMENTS

On October 30, 2018, our Board of Directors declared a quarterly distribution of $0.45 per share payable on January 15, 2019 to stockholders of record as of December 31, 2018.

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 accounting principles generally accepted in the United States of America (“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 materially. In addition to the discussion below, our critical accounting policies are further described in the notes to the consolidated financial statements.

Valuation of Portfolio Investments

As a BDC, we conduct the valuation of our assets, pursuant to which our NAV is determined, consistent with GAAP and the Investment Company Act. Our Board of Directors, with the assistance of our Audit Committee, determines the fair value of our assets within the meaning of the Investment Company Act, on at least a quarterly basis, in accordance with the terms of Financial Accounting Standards Board ASC Topic 820, Fair Value Measurement and Disclosures (“ASC 820”).

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value. The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities.

The three-level hierarchy for fair value measurement is defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets.

Level 2 – inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The type of financial instruments in this category includes less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

Level 3 – inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the financial instrument.

Currently, the majority of our investments fall within Level 3 of the fair value hierarchy. We do not expect that there will be readily available market values for most of the investments which are in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our Board of Directors using a documented valuation policy, described below, and a consistently applied valuation process. The factors that may be taken into account in pricing our investments at fair value 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 flow, and the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. Available current market data are considered such as applicable market yields and multiples of publicly traded securities, comparison of financial ratios of peer companies, and changes in the interest rate environment and the credit markets that may affect the price at which similar investments would trade in their principal market, and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation.

With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, the valuation procedures adopted by our Board of Directors contemplates a multi-step valuation process each quarter, as described below:

(1)

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

(2)

Our Board of Directors also engages independent valuation firms (the “Independent Valuation Advisors”) to provide independent valuations of the investments for which market quotations are not readily available, or are readily available but deemed not reflective of the fair value of an investment. The Independent Valuation Advisors independently value such investments using quantitative and qualitative information provided by the investment professionals of the Investment Adviser as well as any market quotations obtained from independent pricing services, brokers, dealers or market dealers. The Independent Valuation Advisors also provide analyses to support their valuation methodology and calculations. The Independent Valuation Advisors provide an opinion on a final range of values on such investments to our Board of Directors or the Audit Committee. The Independent Valuation Advisors define fair value in accordance with ASC 820 and utilize valuation approaches including the market approach, the income approach or both. A portion of the portfolio is reviewed on a quarterly basis, and all investments in the portfolio for which market quotations are not readily available, or are readily available, but deemed not reflective of the fair value of an investment, are reviewed at least annually by an Independent Valuation Advisor;

(3)

The Independent Valuation Advisors’ preliminary valuations are reviewed by our Investment Adviser and the Valuation Oversight Group (“VOG”), a team that is part of the Controllers Department within the Finance Division of Goldman Sachs. The Independent Valuation Advisors’ ranges are compared to our Investment Adviser’s valuations to ensure our Investment Adviser’s valuations are reasonable. VOG presents the valuations to the Private Investment Valuation and Side Pocket Sub-Committee of the Investment Management Division Valuation Committee, which is comprised of representatives from GSAM who are independent of the investment making decision process;

(4)

The Investment Management Division Valuation Committee ratifies fair valuations and makes recommendations to the Audit Committee of the Board of Directors;

(5)

The Audit Committee of our Board of Directors reviews valuation information provided by the Investment Management Division Valuation Committee, our Investment Adviser and the Independent Valuation Advisors. The Audit Committee then assesses such valuation recommendations; and

(6)

Our Board of Directors discusses the valuations and, within the meaning of the Investment Company Act, determines the fair value of our investments in good faith, based on the input of our Investment Adviser, the Independent Valuation Advisors and the Audit Committee.

Investment Transactions and Related Investment Income

We record our investment transactions on a trade date basis. Realized gains and losses are based on the specific identification method. Dividend income on common equity investments is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Interest income and dividend income are presented net of withholding tax, if any. Accretion of discounts and amortization of premiums, which are included in interest income and expense, are recorded over the life of the underlying instrument using the effective interest method.

Fair value generally is based on quoted market prices, broker or dealer quotations, or alternative price sources. In the absence of quoted market prices, broker or dealer quotations, or alternative price sources, investments in securities are measured at fair value as determined by our Investment Adviser and/or by one or more independent third parties.

Non-Accrual Status

Investments are placed on non-accrual status when it is probable that principal, interest or dividends will not be collected according to the contractual terms. Accrued interest or dividends generally are reversed when an investment is placed on non-accrual status. Interest or dividend payments received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual investments are restored to accrual status when past due principal and interest or dividends are paid and, in management’s judgment, principal and interest or dividend payments are likely to remain current. We may make exceptions to this treatment if the investment has sufficient collateral value and is in the process of collection. As of September 30, 2018, we had two investments on non-accrual status, which represented 0.7% and 0.6% of the total investments (excluding an investment in a money market fund managed by an affiliate of Group Inc. of $0.00 million) at amortized cost and at fair value, respectively. As of December 31, 2017, we had one investment on non-accrual status, which represented 0.1% and 0.0% of the total investments (excluding an investment in a money market fund managed by an affiliate of Group Inc. of $11.54 million) at amortized cost and at fair value, respectively.

Distribution Policy

We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution. Future quarterly distributions, if any, will be determined by our Board of Directors. All distributions will be subject to lawfully available funds therefor, and no assurance can be given that we will be able to declare distributions in future periods.

We have elected to be treated, and expect to qualify annually, as a RIC under Subchapter M of the Code, commencing with our taxable year ended December 31, 2013. To obtain and maintain RIC status, we must, among other things, timely distribute to our stockholders at least 90% of our investment company taxable income for each taxable year. We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. The distributions we pay to our stockholders in a year may exceed our net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. The specific tax characteristics of our distributions will be reported to stockholders after the end of the calendar year. Stockholders should read carefully any written disclosure regarding a distribution from us and should not assume that the source of any distribution is our net ordinary income or capital gains.

We have adopted an “opt out” dividend reinvestment plan for our common stockholders. As a result, if our Board of Directors declares a cash distribution, each stockholder that has not “opted out” of our dividend reinvestment plan will have its distribution automatically reinvested in additional shares of our common stock rather than receiving the cash distribution. Stockholders who receive distributions in the form of shares of common stock will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, since their cash distributions will be reinvested, those stockholders will not receive cash with which to pay any applicable taxes. Due to regulatory considerations, Group Inc. has opted out of the dividend reinvestment plan, and GS & Co. has opted out of the dividend reinvestment plan in respect of any shares of our common stock acquired through the GS 10b5-1 Plan.

Federal Income Taxes

As a RIC, we generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends. To maintain our RIC status, we must meet specified source-of-income and asset diversification requirements and timely distribute to our stockholders at least 90% of our investment company taxable income for each year. Depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax. We generally will be required to pay such U.S. federal excise tax if our distributions during a calendar year do not exceed the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years.

Because 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.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, most significantly changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we expect to fund a portion of our investments with borrowings, our net investment income is expected to be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

As of September 30, 2018 and December 31, 2017, on a fair value basis, approximately 3.6% and 3.6%, respectively, of our performing debt investments bore interest at a fixed rate (including income producing preferred stock investments), and approximately 96.4% and 96.4%, respectively, of our performing debt investments bore interest at a floating rate. Our borrowings under the Revolving Credit Facility bear interest at a floating rate and the Convertible Notes bear interest at a fixed rate.

We regularly measure our exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities.

Based on our September 30, 2018 balance sheet, the following table shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:


As of September 30, 2018 Basis Point Change	Interest Income			Interest Expense			Net Income
*(in millions)*
Up 300 basis points	$	30.98		$	(12.81	)	$	18.17
Up 200 basis points		20.65			(8.54	)		12.11
Up 100 basis points		10.33			(4.27	)		6.06
Up 75 basis points		7.74			(3.20	)		4.54
Up 50 basis points		5.16			(2.13	)		3.03
Up 25 basis points		2.58			(1.07	)		1.51
Down 25 basis points		(2.58	)		1.07			(1.51	)
Down 50 basis points		(5.16	)		2.13			(3.03	)
Down 75 basis points		(7.74	)		3.20			(4.54	)
Down 100 basis points		(10.33	)		4.27			(6.06	)
Down 200 basis points		(13.92	)		8.54			(5.38	)
Down 300 basis points		(14.16	)		9.65			(4.51	)

We may, in the future, hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the Investment Company Act, applicable CFTC regulations and in a manner consistent with SEC guidance. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2018. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter ended September 30, 2018 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.

From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.

Item 1A. Risk Factors.

An investment in our securities involves a high degree of risk. Except as set forth below, there have been no material changes to the risk factors previously reported under Item 1A: “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 22, 2018. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial may materially affect its business, financial condition and/or operating results.

Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. These constraints may hinder our Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.

Regulations governing our operation as a BDC affect our ability to raise additional capital, and the ways in which we can do so. Raising additional capital may expose us to risks, including the typical risks associated with leverage, and may result in dilution to our current stockholders. The Investment Company Act limits our ability to borrow amounts or issue debt securities or preferred stock, which we refer to collectively as “senior securities,” to amounts such that our asset coverage ratio, as defined under the Investment Company Act, equals at least 150% immediately after such borrowing or issuance if certain requirements are met (except in connection with certain trading practices or investments), rather than 200%, as previously required and as described below. Consequently, if the value of our assets declines, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when this may be disadvantageous to us and, as a result, our stockholders. The Small Business Credit Availability Act modified the applicable provisions of the Investment Company Act to reduce the required asset coverage ratio applicable to BDCs to 150%, subject to certain approval and disclosure requirements. Under the legislation, BDCs are able to increase their leverage capacity if stockholders approve a proposal to do so. At our 2018 annual meeting of stockholders held on June 15, 2018, our stockholders approved the proposal to apply the modified asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us. As a result of this approval, (1) we are now required to maintain asset coverage for our senior securities of 150% rather than 200% and (2) we and GSAM have reduced the Management Fee from 1.50% (0.375% per quarter) to 1.00% (0.25% per quarter) on the average value of our gross assets, excluding cash and cash equivalents, but including assets purchased with borrowed amounts, at the end of the two most recently completed calendar quarters. Considerations and risks related to increased leverage include: (a) the potential for magnified gains and losses on amounts invested, (b) increased debt service costs, (c) the potential for increased Incentive Fees for GSAM and (d) fewer proceeds remaining for distributions for stockholders in the case of a liquidation event. On September 17, 2018, we entered into an amendment to the Revolving Credit Facility to, among other things, reduce the existing minimum asset coverage ratio covenant from 200% to 150%.

We are generally not able to issue and sell our common stock at a price per share below NAV per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV per share of our common stock (i) with the consent of a majority of our common stockholders (and a majority of our common stockholders who are not affiliates of ours) and (ii) if, among other things, a majority of our Independent Directors and a majority of our directors who have no financial interest in the transaction determine that a sale is in the best interests of us and our stockholders. If our common stock trades at a discount to NAV, this restriction could adversely affect our ability to raise capital.

We borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.

As part of our business strategy, we may borrow from and issue senior debt securities to banks, insurance companies and other lenders or investors. Holders of these senior securities will have fixed-dollar claims on our assets that are superior to the claims of our common stockholders. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have if we did not employ leverage. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make distributions to our common stockholders. In addition, we would have to service any additional debt that we incur, including interest expense on debt and dividends on preferred stock that we may issue, as well as the fees and costs related to the entry into or amendments to debt facilities. These expenses (which may be higher than the expenses on our current borrowings due to the rising interest rate environment) would decrease net investment income, and our ability to pay such expenses will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, leverage will increase the Management Fee payable to our Investment Adviser, which is based on our gross assets, including those assets acquired through the use of leverage but excluding cash and cash equivalents. Additionally, we will be able to incur additional leverage if we are able to obtain exemptive relief from the SEC to exclude the debt of any small business investment company (“SBIC”) subsidiary we may form in the future from the leverage requirements otherwise applicable to BDCs. We have not yet applied to the Small Business Administration (the “SBA”) for approval to form a SBIC and have not yet applied for exemptive relief from the SEC. We can offer no assurances as to whether or when we will be able to form a SBIC subsidiary or obtain such exemptive relief.

In addition to having fixed-dollar claims on our assets that are superior to the claims of our common stockholders, any obligations to the lenders will be secured by a first priority security interest in our portfolio of investments and cash. In the case of a liquidation event, those lenders would receive proceeds to the extent of their security interest before any distributions are made to our stockholders. Furthermore, our Revolving Credit Facility imposes, and any credit agreement or other debt financing agreement into which we may enter may impose, financial and operating covenants that restrict our investment activities (including restrictions on industry concentrations), remedies on default and similar matters. In connection with borrowings, our lenders may also require us to pledge assets.

Lastly, we may be unable to obtain our desired leverage, which would, in turn, affect your return on investment.

At our 2018 annual meeting of stockholders held on June 15, 2018, our stockholders approved the proposal to apply the modified asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us. As a result of this approval, (1) we are now required to maintain asset coverage for our senior securities of 150% (if certain requirements are met) rather than 200% and (2) we and GSAM have reduced the Management Fee from 1.50% (0.375% per quarter) to 1.00% (0.25% per quarter) on the average value of our gross assets, excluding cash and cash equivalents, but including assets purchased with borrowed amounts, at the end of the two most recently completed calendar quarters. In addition, on September 17, 2018, we amended the Revolving Credit Facility to, among other things, reduce the existing minimum asset coverage ratio financial covenant from 200% to 150%.

The following table illustrates the effect of leverage on returns from an investment in our common stock assuming that we employ (1) our actual asset coverage ratio as of September 30, 2018 and (2) a hypothetical asset coverage ratio of 150%, each at various annual returns on our portfolio as of September 30, 2018, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.


Assumed Return on our Portfolio (Net of Expenses)	(10.00	)%	(5.00	)%	0.00	%	5.00	%	10.00	%
Corresponding return to common stockholder assuming actual asset coverage as of September 30, 2018 (225%)⁽¹⁾	(21.64	)%	(12.42	)%	(3.20	)%	6.02	%	15.23	%
Corresponding return to common stockholder assuming 150% asset coverage⁽²⁾	(38.55	)%	(23.30	)%	(8.06	)%	7.18	%	22.43	%

⁽¹⁾

Based on (i) $1,343.20 million in total assets including debt issuance costs as of September 30, 2018, (ii) $578.94 million in outstanding indebtedness as of September 30, 2018, (iii) $728.64 million in net assets as of September 30, 2018, and (iv) an annualized average interest rate on our indebtedness, as of September 30, 2018, excluding fees (such as fees on undrawn amounts and amortization of financing costs) of 4.03%.

⁽²⁾

Based on (i) $2,221.55 million in total assets including debt issuance costs on a pro forma basis as of September 30, 2018, after giving effect of a hypothetical asset coverage ratio of 150%, (ii) $1,457.28 million in outstanding indebtedness on a pro forma basis as of September 30, 2018, after giving effect of a hypothetical asset coverage ratio of 150%, (iii) $728.64 million in net assets as of September 30, 2018, and (iv) an annualized average interest rate on our indebtedness, as of September 30, 2018, excluding fees (such as fees on undrawn amounts and amortization of financing costs) of 4.03%.

Changes in laws or regulations governing our operations or the operations of our portfolio companies, changes in the interpretation thereof or newly enacted laws or regulations, or any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

We and our portfolio companies are subject to regulation at the local, state, federal and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, are likely to change from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations, or any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. In addition to the legal, tax and regulatory changes that are expected to occur, there may be unanticipated changes and uncertainty regarding any such changes. The legal, tax and regulatory environment for BDCs, investment advisers and the instruments that they utilize (including derivative instruments) is continuously evolving. In addition, there is significant uncertainty regarding certain legislation and the regulations that have been adopted and future regulations that will need to be adopted pursuant to such legislation) and, consequently, the full impact that such legislation will ultimately have on us and the markets in which we trade and invest is not fully known. Such uncertainty and any resulting confusion may itself be detrimental to the efficient functioning of the markets and the success of certain investment strategies.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which impacts many aspects of the financial services industry. Many of the provisions of the Dodd-Frank Act have been implemented, while others will still require final rulemaking by regulatory authorities. While the full impact of the Dodd-Frank Act on us and our portfolio companies may not be known for an extended period of time, the Dodd-Frank Act, including current rules and regulations and proposed rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry that are proposed or pending in the U.S. Congress, may negatively impact the operations, cash flows or financial condition of us and our portfolio companies, impose additional costs on us and our portfolio companies, intensify the regulatory supervision of us and our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.

Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.

On March 23, 2018, President Trump signed into law the Small Business Credit Availability Act, which modified the applicable provisions of the Investment Company Act to reduce the required asset coverage ratio applicable to BDCs from 200% to 150%, subject to certain approval and disclosure requirements (including either stockholder approval or approval of both a majority of the directors who have no financial interest in the matter and a majority of the directors who are not “interested persons,” as defined in the Investment Company Act, of the BDC). On May 1, 2018, our Board of Directors approved the submission to stockholders of a proposal to approve the application of the modified asset coverage requirements at the Company’s 2018 annual meeting of stockholders. On June 15, 2018, our stockholders approved the application of the modified asset coverage requirements in Section 61(a)(2) of the Investment Company Act to us. See “—Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. These constraints may hinder our Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective”.

Our Investment Adviser will be paid the Management Fee even if the value of your investment declines and our Investment Adviser’s Incentive Fee may create incentives for it to make certain kinds of investments.

The Management Fee is payable even in the event the value of your investment declines. The Management Fee is calculated as a percentage of the average value of our gross assets including borrowed funds (excluding cash or cash equivalents) at the end of the prior two completed calendar quarters. Accordingly, the Management Fee is payable regardless of whether the value of our gross assets and/or your investment has decreased during the then-current quarter and creates an incentive for the Investment Adviser to incur leverage.

In addition, the Incentive Fee payable by us to our Investment Adviser may create an incentive for our Investment Adviser to make investments on our behalf that are risky or more speculative than would be the case in the absence of such a compensation arrangement and also to incur leverage, which will tend to enhance returns where our portfolio has positive returns. Our Investment Adviser receives the Incentive Fee based, in part, upon capital gains realized on our investments. As a result, our Investment Adviser may have an incentive to invest more in companies whose securities are likely to yield capital gains, as compared to income-producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during cyclical economic downturns.

The Incentive Fee payable by us to our Investment Adviser also may create an incentive for our Investment Adviser to invest on our behalf in instruments that have a deferred interest feature. Under these investments, we accrue the interest over the life of the investment but do not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our Incentive Fee, however, includes accrued interest. Thus, a portion of this Incentive Fee is based on income that we have not yet received in cash. This risk could be increased because our Investment Adviser is not obligated to reimburse us for any Incentive Fees received even if we subsequently incur losses or never receive in cash the accrued income (including accrued income with respect to OID, PIK interest and zero coupon securities).

If we increase leverage as permitted pursuant to the modified asset coverage requirements approved by our stockholders on June 15, 2018, aggregate fees payable to our Investment Adviser may increase depending on the amount of additional leverage incurred, irrespective of the return on the incremental assets. In addition, as additional leverage would magnify positive returns, if any, on our portfolio, as noted above, our net investment income may exceed the quarterly hurdle rate for the Incentive Fee on income payable to our Investment Adviser at a lower average return on our portfolio. Thus, if we incur additional leverage, our Investment Adviser may receive additional Incentive Fees without any corresponding increase (and potentially with a decrease) in our performance.

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

None.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Index to Exhibits, which is incorporated herein by reference.

INDEX TO EXHIBITS


EXHIBIT No		DESCRIPTION OF EXHIBITS

3.1		Certificate of Incorporation (incorporated by reference to Exhibit (a) to pre-effective Amendment No. 7 to the Company’s Registration Statement on Form N-2 (file no. 333-187642), filed on March 3, 2015).

3.2		Bylaws (incorporated by reference to Exhibit (b) to pre-effective Amendment No. 7 to the Company’s Registration Statement on Form N-2 (file no. 333-187642), filed on March 3, 2015).

10.1		Fifth Amendment to Senior Secured Revolving Credit Agreement, dated as of September 17, 2018, among the Company, as Borrower, the Lenders party thereto and SunTrust Bank, as Administrative Agent and as Collateral Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (file no. 814-00998), filed on September 17, 2018).

10.2		Sixth Amendment to Senior Credit Fund, LLC Limited Liability Company Agreement, dated as of August 24, 2018, between Goldman Sachs BDC, Inc. and Regents of the University of California (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (file no. 814-00998), filed on August 24, 2018).

31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements 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.


						GOLDMAN SACHS BDC, INC.

Date: November 1, 2018						/s/ Brendan McGovern
						Brendan McGovern Chief Executive Officer and President (Principal Executive Officer)

Date: November 1, 2018						/s/ Jonathan Lamm
						Jonathan Lamm Chief Financial Officer and Treasurer (Principal Financial Officer)