# Bain Capital Specialty Finance, Inc.: Form 10-Q for the period ended Mar 31, 2018

- Company: [Bain Capital Specialty Finance, Inc.](/companies/bcsf.md) (CIK 1655050)
- Form: 10-Q
- Filed: 2018-05-10
- Accepted by EDGAR: May 10, 2018, 16:03 ET
- Period: 2018-03-31
- Accession: 0001104659-18-032148
- Inline XBRL: no
- Main document: https://www.sec.gov/Archives/edgar/data/1655050/000110465918032148/a18-12571_110q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1655050/000110465918032148/

## Management's discussion and analysis

As filed, 83,723 characters.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing in our Annual Report on Form 10-K (the “Annual Report”) for the year ended December 31, 2017, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2018. The information contained in this section should also be read in conjunction with our unaudited financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

### Overview

Bain Capital Specialty Finance, Inc. (the “Company”, “we”, “our” and “us”) was formed on October 5, 2015 as a Delaware corporation structured as an externally managed, closed-end, non-diversified management investment company. The Company commenced investment operations on October 13, 2016. The Company has elected to be treated and is regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company has elected to be treated for U.S. federal income tax purposes as a regulated investment company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Company will not be subject to tax on its income to the extent that it distributes substantially all of its income each taxable year and satisfies other applicable income tax requirements.

The Company is managed by BCSF Advisors, LP (the “Advisor”), an investment adviser that is registered with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Advisor also provides the administrative services necessary for the Company to operate (in such capacity, the “Administrator”). The Company management consists of investment and administrative professionals from the Advisor and Administrator along with the board of directors (the “Board”). The Advisor directs and executes the investment operations and capital raising activities of the Company subject to oversight from the Board, which sets the broad policies of the Company. The Board has delegated investment management of the Company’s investment assets to the Advisor. The Board consists of five directors, three of whom are independent.

Our primary focus is capitalizing on opportunities within Bain Capital Credit’s senior direct lending strategy which seeks to provide risk-adjusted returns and current income to investors by investing primarily in middle-market companies with between $10.0 million and $150.0 million in annual earnings before interest, taxes, depreciation and amortization (“EBITDA”). We intend to focus on senior investments with a first or second lien on collateral and strong structures and documentation intended to protect the lender. We may also invest in mezzanine debt and other junior securities and in secondary purchases of assets or portfolios, as described below. Investments are likely to include, among other things, (i) senior first lien, stretch senior, senior second lien, unitranche, (ii) mezzanine debt and other junior investments and (iii) secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. We may also invest, from time to time, in equity securities, distressed debt, debtor-in-possession loans, structured products, structurally subordinate loans, investments with deferred interest features, zero-coupon securities and defaulted securities. Our investments are subject to a number of risks. Leverage is expected to be utilized to help us meet our investment objective. Any such leverage, if incurred, would be expected to increase the total capital available for investment by us.

We may invest in debt securities which are either rated below investment grade or not rated by any rating agency but, if they were rated, would be rated below investment grade. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be illiquid and difficult to value.

As a BDC, we may also invest up to 30% of our portfolio opportunistically in “non-qualifying” portfolio investments, such as investments in non-U.S. companies.

We may borrow money from time to time within the levels permitted by the 1940 Act (which generally allows us to incur leverage for up to one-half of our assets). In determining whether to borrow money, we will analyze the maturity, covenant package and rate structure of the proposed borrowings as well as the risks of such borrowings compared to our investment outlook.

#### Investments

We expect that our level of investment activity will 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 level of investment and capital expenditures of 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. During the quarter ended March 31, 2018, the Company’s investment pace was slower than the target. However, the Advisor currently believes that, as the Company continues to ramp up its portfolio, the investment pace will increase towards the target rate over time.

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 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.

#### Market Overview

With respect to returns, while loan spreads have tightened in the past few quarters, yields have remained relatively stable due to upward movement in LIBOR rates. During recent quarters, the Advisor has also noted stable all-in-yields. In addition, as we move later in the credit cycle, the Advisor has observed that sponsors and companies are more frequently utilizing EBITDA add-backs to demonstrate run-rate profitability. In an environment where the Advisor believes corporate profits are nearing cyclical peaks, the Advisor is increasingly skeptical of these add-backs and always incorporates such add-backs into its loan underwriting process. Despite the aforementioned headwinds, the Advisor continues to believe the investment set broadly provides attractive risk/return investment opportunities for the Company although caution is warranted.

#### Revenues

We primarily generate revenue 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”) interest. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts into or against income over the life of the loan. We record contractual prepayment premiums on loans and debt securities as interest income.

Our debt investment portfolio consists of primarily floating rate loans. As of March 31, 2018 and December 31, 2017, 98.1% and 98.4%, respectively, of our debt investments, based on fair value, bear interest at a floating rate, which may be subject to interest rate floors. Trends in base interest rates, such as LIBOR, may affect our net investment income over the long term. In addition, our results may vary from period to period depending on the interest rates of new investments made during the period compared to investments that were sold or repaid during the period; these results reflect the characteristics of the particular portfolio companies that we invested in or exited during the period and not necessarily any trends in our business or macroeconomic trends.

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.

#### Expenses

Our primary operating expenses include the payment of fees to the Advisor under the Investment Advisory Agreement, our allocable portion of overhead expenses under the administration agreement (the “Administration Agreement”) and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and transactions, including:

- our initial organizational costs incurred prior to the commencement of our operations up to a maximum of $1.5 million;
- operating costs incurred prior to the commencement of our operations;
- the cost of calculating our net asset value, including the cost of any third-party valuation services;
- the cost of effecting sales and repurchases of shares of our common stock and other securities;
- fees payable to third parties relating to making investments, including the Advisor’s or its affiliates’ travel expenses, research costs and out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments;
- interest expense and other costs associated with our indebtedness;
- transfer agent and custodial fees;
- out-of-pocket fees and expenses associated with marketing efforts;
- federal and state registration fees and any stock exchange listing fees;
- U.S. federal, state and local taxes;
- independent directors’ fees and expenses;
- brokerage commissions and markups;
- fidelity bond, directors’ and officers’ liability insurance and other insurance premiums;
- direct costs, such as printing, mailing, long distance telephone and staff;
- fees and expenses associated with independent audits, tax compliance and outside legal costs;
- costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws; and
- other expenses incurred by the Administrator or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion (subject to the review and approval of the Board) of overhead.

All of the foregoing expenses are ultimately borne by our stockholders.

From time to time, the Administrator or its affiliates may pay third-party providers of goods or services. We will reimburse the Administrator or such affiliates thereof for any such amounts paid on our behalf. The Administrator will waive its right to be reimbursed in the event that such reimbursements would cause any distributions to our stockholders to constitute a return of capital.

We may also enter into additional credit facilities or other debt arrangements to partially fund our operations, and could incur costs and expenses including commitment, origination, or structuring fees and the related interest costs associated with any amounts borrowed.

### Portfolio and Investment Activity

During the three months ended March 31, 2018, we invested $143.7 million in 25 portfolio companies, including ABCS, and had $65.0 million in aggregate amount of principal repayments and sales, resulting in a net increase in investments of $78.8 million for the period.

During the three months ended March 31, 2017, we invested $89.8 million in 13 portfolio companies and had $4.2 million in aggregate amount of principal repayments and sales, resulting in net investments of $85.6 million for the period.

The following table shows the composition of the investment portfolio and associated yield data as of March 31, 2018:

|  | As of March 31, 2018 Amortized Cost | Percentage of Total Portfolio | Fair Value | Percentage of Total Portfolio | Weighted Average Yield |
| --- | ---: | ---: | ---: | ---: | ---: |
| First Lien Senior Secured Loans (1) | $528,783,860 | 58.7% | $537,573,452 | 58.7% | 6.7% |
| First Lien Last Out Loans (1) | 29,316,405 | 3.3 | 30,778,911 | 3.4 | 8.0 |
| Second Lien Senior Secured Loans (1) | 138,436,768 | 15.4 | 141,190,900 | 15.4 | 9.5 |
| Corporate Bonds (1) | 12,853,894 | 1.4 | 11,725,860 | 1.3 | 7.8 |
| Investment Vehicles (1) (2) | 180,040,535 | 20.0 | 182,263,281 | 19.9 | 13.5 |
| Equity Interest | 9,227,719 | 1.0 | 9,763,094 | 1.1 | N/A |
| Preferred Equity | 1,952,879 | 0.2 | 2,072,792 | 0.2 | N/A |
| Total (1) | $900,612,060 | 100.0% | $915,368,290 | 100.0% | 8.6% |

(1) Computed for debt investments based upon the annual interest rate at March 31, 2018, divided by the total par amount of investments. For investments with floating interest rates, the yield calculation is computed using the contract rate at March 31, 2018. Weighted average yield for Investment Vehicles represents the weighted average levered yield of the Company’s proportionate investment in ABCS at March 31, 2018. Weighted average yield for Investment Vehicles is computed based upon (1) the weighted average of the interest rate of investments held by ABCS less (2) the weighted average interest rate of the ABCS Facility, divided by the Company’s par amount in ABCS. Total weighted average yield is the weighted average of the yields of the debt investments and the Investment Vehicles in ABCS. The weighted average yield does not represent the total return to our stockholders.

(2) Represents equity investment in ABCS.

The following table shows the composition of the investment portfolio and associated yield data as of December 31, 2017:

|  | As of December 31, 2017 Amortized Cost | Percentage of Total Portfolio | Fair Value | Percentage of Total Portfolio | Weighted Average Yield |
| --- | ---: | ---: | ---: | ---: | ---: |
| First Lien Senior Secured Loans (1) | $478,807,128 | 58.3% | $485,319,396 | 58.4% | 6.2% |
| First Lien Last Out Loans (1) | 29,329,934 | 3.6 | 30,515,994 | 3.7 | 7.8 |
| Second Lien Senior Secured Loans (1) | 115,414,976 | 14.1 | 117,467,412 | 14.1 | 9.4 |
| Corporate Bonds (1) | 8,478,000 | 1.0 | 8,138,880 | 1.0 | 7.8 |
| Investment Vehicles (1) (2) | 178,052,288 | 21.7 | 178,409,807 | 21.4 | 13.0 |
| Equity Interest | 9,227,719 | 1.1 | 9,763,092 | 1.2 | N/A |
| Preferred Equity | 1,952,879 | 0.2 | 1,963,490 | 0.2 | N/A |
| Total (1) | $821,262,924 | 100.0% | $831,578,071 | 100.0% | 8.2% |

(1) Computed for debt investments based upon the annual interest rate at December 31, 2017, divided by the total par amount of investments. For investments with floating interest rates, the yield calculation is computed using the contract rate at December 31, 2017. Weighted average yield for Investment Vehicles represents the weighted average levered yield of the Company’s proportionate investment in ABCS at December 31, 2017. Weighted average yield for Investment Vehicles is computed based upon (1) the weighted average of the interest rate of investments held by ABCS less (2) the weighted average interest rate of the ABCS Facility, divided by the Company’s par amount in ABCS. Total weighted average yield is the weighted average of the yields of the debt investments and the Investment Vehicles in ABCS. The weighted average yield does not represent the total return to our stockholders.

(2) Represents equity investment in ABCS.

The following table presents certain selected information regarding our investment portfolio as of March 31, 2018:

|  | As of March 31, 2018 |
| --- | ---: |
| Number of portfolio companies (2) | 92 |
| Percentage of debt bearing a floating rate(1) | 98.1% |
| Percentage of debt bearing a fixed rate (1) | 1.9% |

(1) Measured on a fair value basis.

(2) Includes ABCS as a single portfolio company. For details of portfolio companies held within ABCS, refer to the selected financial data of ABCS.

The following table presents certain selected information regarding our investment portfolio as of December 31, 2017:

|  | As of December 31, 2017 |
| --- | ---: |
| Number of portfolio companies (2) | 85 |
| Percentage of debt bearing a floating rate(1) | 98.4% |
| Percentage of debt bearing a fixed rate (1) | 1.6% |

(1) Measured on a fair value basis.

(2) Includes ABCS as a single portfolio company. For details of portfolio companies held within ABCS, refer to the selected financial data of ABCS.

The following table shows the amortized cost and fair value of our performing and non-accrual investments as of March 31, 2018:

|  | As of March 31, 2018 Amortized Cost | Percentage at Amortized Cost | Fair Value | Percentage at Fair Value |
| --- | ---: | ---: | ---: | ---: |
| Performing | $900,612,060 | 100.0% | $915,368,290 | 100.0% |
| Non-accrual | — | — | — | — |
| Total | $900,612,060 | 100.0% | $915,368,290 | 100.0% |

The following table shows the amortized cost and fair value of our performing and non-accrual investments as of December 31, 2017:

|  | As of December 31, 2017 Amortized Cost | Percentage at Amortized Cost | Fair Value | Percentage at Fair Value |
| --- | ---: | ---: | ---: | ---: |
| Performing | $821,262,924 | 100.0% | $831,578,071 | 100.0% |
| Non-accrual | — | — | — | — |
| Total | $821,262,924 | 100.0% | $831,578,071 | 100.0% |

Loans or debt securities are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Accrued interest generally is reversed when a loan or debt security is placed on non-accrual status. Interest payments received on non-accrual loans or debt securities may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans and debt securities are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection.

The following table shows the amortized cost and fair value of the investment portfolio, cash and cash equivalents and foreign cash as of March 31, 2018:

|  | As of March 31, 2018 Amortized Cost | Percentage of Total | Fair Value | Percentage of Total |
| --- | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | $120,425,021 | 11.8% | $120,425,021 | 11.6% |
| Foreign cash | 2,305,610 | 0.2 | 2,315,865 | 0.2 |
| First Lien Senior Secured Loans | 528,783,860 | 51.7 | 537,573,452 | 51.8 |
| First Lien Last Out Loans | 29,316,405 | 2.9 | 30,778,911 | 3.0 |
| Second Lien Senior Secured Loans | 138,436,768 | 13.5 | 141,190,900 | 13.6 |
| Corporate Bonds | 12,853,894 | 1.2 | 11,725,860 | 1.1 |
| Investment Vehicles (1) | 180,040,535 | 17.6 | 182,263,281 | 17.6 |
| Equity Interest | 9,227,719 | 0.9 | 9,763,094 | 0.9 |
| Preferred Equity | 1,952,879 | 0.2 | 2,072,792 | 0.2 |
| Total | $1,023,342,691 | 100.0% | $1,038,109,176 | 100.0% |

(1) Represents equity investment in ABCS.

The following table shows the amortized cost and fair value of the investment portfolio and cash and cash equivalents and foreign cash as of December 31, 2017:

|  | As of December 31, 2017 Amortized Cost | Percentage of Total | Fair Value | Percentage of Total |
| --- | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | $139,506,289 | 14.5% | $139,506,289 | 14.4% |
| Foreign cash | 1,383,845 | 0.1 | 1,411,855 | 0.1 |
| First Lien Senior Secured Loans | 478,807,128 | 49.8 | 485,319,396 | 49.9 |
| First Lien Last Out Loans | 29,329,934 | 3.0 | 30,515,994 | 3.1 |
| Second Lien Senior Secured Loans | 115,414,976 | 12.0 | 117,467,412 | 12.1 |
| Corporate Bonds | 8,478,000 | 0.9 | 8,138,880 | 0.8 |
| Investment Vehicles (1) | 178,052,288 | 18.5 | 178,409,807 | 18.4 |
| Equity Interest | 9,227,719 | 1.0 | 9,763,092 | 1.0 |
| Preferred Equity | 1,952,879 | 0.2 | 1,963,490 | 0.2 |
| Total | $962,153,058 | 100.0% | $972,496,215 | 100.0% |

(1) Represents equity investment in ABCS.

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of March 31, 2018 (with corresponding percentage of total portfolio investments):

|  | As of March 31, 2018 Amortized Cost | Percentage of Total Portfolio | Fair Value | Percentage of Total Portfolio |
| --- | ---: | ---: | ---: | ---: |
| Investment Vehicles (1) | $180,040,535 | 20.0% | $182,263,281 | 19.9% |
| High Tech Industries | 137,859,394 | 15.3 | 138,725,752 | 15.2 |
| Healthcare & Pharmaceuticals | 78,280,938 | 8.7 | 79,187,106 | 8.6 |
| Services: Business | 57,753,641 | 6.4 | 58,895,315 | 6.4 |
| Energy: Oil & Gas | 57,179,099 | 6.4 | 57,809,836 | 6.3 |
| Aerospace & Defense | 43,905,089 | 4.9 | 44,764,490 | 4.9 |

57

|  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: |
| Hotel, Gaming & Leisure | 35,416,079 | 3.9 | 35,952,504 | 3.9 |
| Capital Equipment | 34,424,393 | 3.8 | 35,037,403 | 3.8 |
| Wholesale | 26,956,533 | 3.0 | 27,288,688 | 3.0 |
| Containers, Packaging & Glass | 25,160,887 | 2.8 | 25,274,027 | 2.8 |
| Automotive | 24,158,168 | 2.7 | 24,523,335 | 2.7 |
| Consumer goods: non-durable | 21,323,757 | 2.4 | 21,725,600 | 2.4 |
| Environmental Industries | 19,069,122 | 2.1 | 20,371,930 | 2.2 |
| Transportation: Cargo | 19,897,571 | 2.2 | 20,236,641 | 2.2 |
| Construction & Building | 15,976,907 | 1.8 | 17,900,221 | 2.0 |
| Retail | 17,346,006 | 1.9 | 17,411,632 | 1.9 |
| Media: Broadcasting & Subscription | 17,033,022 | 1.9 | 17,097,663 | 1.9 |
| Media: Diversified & Production | 14,717,954 | 1.6 | 16,381,262 | 1.8 |
| Telecommunications | 12,104,963 | 1.3 | 12,340,855 | 1.3 |
| Insurance | 12,164,710 | 1.4 | 12,158,155 | 1.3 |
| Utilities: Electric | 12,853,894 | 1.4 | 11,725,860 | 1.3 |
| Real Estate | 10,669,051 | 1.2 | 11,174,787 | 1.2 |
| Chemicals, Plastics & Rubber | 8,422,649 | 0.9 | 9,119,159 | 1.0 |
| Consumer goods: durable | 7,008,334 | 0.8 | 6,980,387 | 0.8 |
| Beverage, Food & Tobacco | 6,875,206 | 0.8 | 6,931,901 | 0.8 |
| Media: Advertising, Printing & Publishing | 4,014,158 | 0.4 | 4,090,500 | 0.4 |
| Banking | — | 0.0 | — | 0.0 |
| Transportation: Consumer | — | 0.0 | — | 0.0 |
| Total | $900,612,060 | 100.0% | $915,368,290 | 100.0% |

(1) Represents equity investment in ABCS.

The following table shows the composition of the investment portfolio by industry, at amortized cost and fair value as of December 31, 2017 (with corresponding percentage of total portfolio investments):

|  | As of December 31, 2017 Amortized Cost | Percentage of Total Portfolio | Fair Value | Percentage of Total Portfolio |
| --- | ---: | ---: | ---: | ---: |
| Investment Vehicles (1) | $178,052,288 | 21.7% | $178,409,807 | 21.4% |
| High Tech Industries | 105,919,464 | 12.9 | 106,185,758 | 12.8 |
| Healthcare & Pharmaceuticals | 68,318,089 | 8.3 | 68,687,910 | 8.3 |
| Services: Business | 60,000,491 | 7.3 | 60,598,544 | 7.3 |
| Aerospace & Defense | 44,021,059 | 5.4 | 44,898,545 | 5.4 |
| Beverage, Food & Tobacco | 35,301,640 | 4.3 | 35,673,127 | 4.3 |
| Capital Equipment | 31,499,131 | 3.8 | 32,104,902 | 3.9 |
| Wholesale | 27,025,660 | 3.3 | 27,187,662 | 3.3 |
| Energy: Oil & Gas | 26,472,225 | 3.2 | 26,957,462 | 3.2 |
| Containers, Packaging & Glass | 25,227,891 | 3.1 | 25,329,872 | 3.0 |
| Automotive | 24,194,235 | 3.0 | 24,512,807 | 2.9 |
| Media: Diversified & Production | 20,524,304 | 2.5 | 21,886,325 | 2.6 |
| Consumer Goods: Non-Durable | 20,925,794 | 2.6 | 21,241,067 | 2.6 |
| Environmental Industries | 19,064,227 | 2.3 | 20,256,052 | 2.4 |
| Construction & Building | 15,970,504 | 1.9 | 17,521,014 | 2.1 |
| Consumer Goods: Durable | 15,105,349 | 1.8 | 15,118,365 | 1.8 |
| Media: Broadcasting & Subscription | 14,927,621 | 1.8 | 15,019,941 | 1.8 |
| Retail | 14,389,584 | 1.8 | 14,416,081 | 1.7 |
| Telecommunications | 13,476,372 | 1.6 | 13,778,898 | 1.7 |
| Insurance | 12,192,503 | 1.5 | 12,238,811 | 1.5 |
| Real Estate | 10,644,272 | 1.3 | 10,863,204 | 1.3 |
| Transportation: Cargo | 10,508,551 | 1.3 | 10,734,350 | 1.3 |
| Chemicals, Plastics & Rubber | 8,441,194 | 1.0 | 8,996,750 | 1.1 |
| Utilities: Electric | 8,478,000 | 1.0 | 8,138,880 | 1.0 |
| Media: Advertising, Printing & Publishing | 5,918,148 | 0.7 | 6,020,680 | 0.7 |
| Hotel, Gaming & Leisure | 4,664,328 | 0.6 | 4,801,257 | 0.6 |

58

|  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: |
| Banking | — | 0.0 | — | 0.0 |
| Transportation: Consumer | — | 0.0 | — | 0.0 |
| Total | $821,262,924 | 100.0% | $831,578,071 | 100.0% |

(1) Represents equity investment in ABCS.

The Advisor monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company. The Advisor 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.

The Advisor rates the investments in our portfolio at least quarterly and it is possible that the rating of a portfolio investment may be reduced or increased over time. For investments rated 3 or 4, the Advisor enhances its level of scrutiny over the monitoring of such portfolio company. Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

- An investment is rated 1 if, in the opinion of the Advisor, it is performing above underwriting expectations, and the business trends and risk factors are generally favorable, which may include the performance of the portfolio company or the likelihood of a potential exit.
- An investment is rated 2 if, in the opinion of the Advisor, it is performing as expected at the time of our underwriting and there are generally no concerns about the portfolio company’s performance or ability to meet covenant requirements, interest payments or principal amortization, if applicable. All new investments or acquired investments in new portfolio companies are initially given a rating of 2.
- An investment is rated 3 if, in the opinion of the Advisor, the investment is performing below underwriting expectations and there may be concerns about the portfolio company’s performance or trends in the industry, including as a result of factors such as declining performance, non-compliance with debt covenants or delinquency in loan payments (but generally not more than 180 days past due).
- An investment is rated 4 if, in the opinion of the Advisor, the investment is performing materially below underwriting expectations. For debt investments, most of or all of the debt covenants are out of compliance and payments are substantially delinquent. Investments rated 4 are not anticipated to be repaid in full, if applicable, and there is significant risk that we may realize a substantial loss on our investment.

The following table shows the composition of our portfolio on the 1 to 4 rating scale as of March 31, 2018:

| Investment Performance Rating | As of March 31, 2018 Fair Value | Percentage of Total | Number of Companies | Percentage of Total |
| ---: | ---: | ---: | ---: | ---: |
| 1 | $— | —% | — | —% |
| 2 | 915,368,290 | 100.0 | 92 | 100.0 |
| 3 | — | — | — | — |
| 4 | — | — | — | — |
| Total | $915,368,290 | 100.0% | 92 | 100.0% |

59

The following table shows the composition of our portfolio on the 1 to 4 rating scale as of December 31, 2017:

| Investment Performance Rating | As of December 31, 2017 Fair Value | Percentage of Total | Number of Companies | Percentage of Total |
| ---: | ---: | ---: | ---: | ---: |
| 1 | $— | —% | — | —% |
| 2 | 831,578,071 | 100.0 | 85 | 100.0 |
| 3 | — | — | — | — |
| 4 | — | — | — | — |
| Total | $831,578,071 | 100.0% | 85 | 100.0% |

### Antares Bain Capital Complete Financing Solution

The Company has entered into a limited liability company agreement with Antares Midco Inc. (“Antares”) to invest in ABC Complete Financing Solution LLC. ABC Complete Financing Solution LLC, an unconsolidated Delaware limited liability company, was formed on September 27, 2017 and commenced operations on November 29, 2017. ABC Complete Financing Solution LLC’s principal purpose is to make investments through its wholly owned subsidiary, Antares Bain Capital Complete Financing Solution LLC (together with ABC Complete Financing Solution LLC, “ABCS”), primarily in senior secured unitranche loans. The Company records its investment in ABCS at fair value. Distributions of income received from ABCS, if any, are recorded as dividend income from controlled investments in the consolidated statements of operations.

The Company and Antares, as members of ABCS, have agreed to contribute capital up to (subject to the terms of their agreement) $950.0 million in aggregate to purchase equity interests in ABCS, with the Company and Antares contributing up to $425.0 million and $525.0 million, respectively. ABCS is capitalized with capital contributions from its members on a pro-rata basis based on their maximum capital contributions as transactions are funded after they have been approved.

Investment decisions of ABCS require the consent of both the Advisor and Antares Credit Opportunities Manager LLC, as representatives of the Company and Antares, respectively. Each of the Advisor and Antares source investments for ABCS. The affairs of the Company are conducted by Antares Credit Opportunities Manager LLC, as manager of ABCS.

The following table shows the ABCS maximum capital contributions, contributions and unfunded capital contributions from its members as of March 31, 2018.

|  | As of March 31, 2018 Maximum Capital Contributions | Contributed Capital | Unfunded Capital Contributions |
| --- | ---: | ---: | ---: |
| Bain Capital Specialty Finance, Inc. | $425,000,000 | $181,045,544 | $243,954,456 |
| Antares Midco Inc. | 525,000,000 | 223,639,397 | 301,360,603 |
| Total Investments | $950,000,000 | $404,684,941 | $545,315,059 |

The following table shows the ABCS maximum capital contributions, contributions and unfunded capital contributions from its members as of December 31, 2017.

|  | As of December 31, 2017 Maximum Capital Contributions | Contributed Capital | Unfunded Capital Contributions |
| --- | ---: | ---: | ---: |
| Bain Capital Specialty Finance, Inc. | $425,000,000 | $178,052,288 | $246,947,712 |
| Antares Midco Inc. | 525,000,000 | 219,941,870 | 305,058,130 |
| Total Investments | $950,000,000 | $397,994,158 | $552,005,842 |

ABCS entered into a senior credit facility with JP Morgan on November 29, 2017 (the “ABCS Facility”). The ABCS Facility allows ABCS to borrow up to $1.5 billion subject to leverage and borrowing base restrictions. The maturity date of the ABCS Facility is November 29, 2022. As of March 31, 2018 and December 31, 2017, the ABCS Facility had $627.4 million and $592.1 million of outstanding debt under the ABCS facility, respectively. As of March 31, 2018 and December 31, 2017, the effective rate on the ABCS Facility was 4.30% and 4.30% per annum, respectively.

As of March 31, 2018 and December 31, 2017, ABCS held total investments at fair value of $1,024.7 million and $956.2 million, respectively. As of March 31, 2018 and December 31, 2017, ABCS’s portfolio was comprised of senior secured unitranche loans of 14 and 14 different borrowers, respectively. As of March 31, 2018 and December 31, 2017, there were no loans on non-accrual status. The portfolio companies in ABCS are in industries similar to those in which the Company may invest directly. Below is a summary of ABCS’s portfolio, followed by a portfolio listing as of March 31, 2018 and December 31, 2017:

|  | As of March 31, 2018 | December 31, 2017 |
| --- | ---: | ---: |
| Total first lien senior secured loans (1) | $1,021,386,949 | $956,536,905 |
| Weighted average yield on first lien unitranche loans (2) | 8.4% | 8.1% |
| Largest loan to a single borrower (1) | $119,485,191 | $106,231,058 |
| Total of five largest loans to borrowers (1) | $515,719,184 | $465,635,606 |
| Number of borrowers in the ABCS | 14 | 14 |
| Commitments to fund delayed draw loans (3) | $20,593,017 | $25,087,777 |

(1) At principal amount.

(2) Based on par amount.

(3) As discussed above, these commitments have been approved by ABCS.

Below is certain summarized financial information for ABCS as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018:

### Selected Balance Sheet Information

|  | As of March 31, 2018 | December 31, 2017 |
| --- | ---: | ---: |
| Loans | $1,019,783,646 | $956,184,609 |
| Cash, restricted cash and other assets | 31,794,271 | 33,348,801 |
| **Total assets** | $1,051,577,917 | $989,533,410 |
| Debt (1) | $623,192,443 | $587,657,029 |
| Other liabilities | 13,416,010 | 3,340,372 |
| **Total liabilities** | $636,608,453 | $590,997,401 |
| Members’ equity | 414,969,464 | 398,536,009 |
| **Total liabilities and members’ equity** | $1,051,577,917 | $989,533,410 |

(1) Net of $4.2 and $4.5 million deferred financing costs for the ABCS Facility, as of March 31, 2018 and December 31, 2017, respectively.

### Selected Statement of Operations Information

|  | For the Three Months Ended March 31, 2018 |
| --- | ---: |
| Interest Income | $19,918,482 |
| Fee income | 79,886 |
| Total revenues | 19,998,368 |
| Credit facility expenses (1) | 8,907,531 |
| Other fees and expenses | 1,348,003 |
| Total expenses | 10,255,534 |
| Net investment income | 9,742,834 |
| Net realized gains | — |
| Net change in unrealized appreciation (depreciation) on investments | — |
| Net increase in members’ capital from operations | $9,742,834 |

(1) As of March 31, 2018 and December 31 2017, the ABCS Facility had $ million and $592.1 million of outstanding debt, respectively.

### Loan Origination and Structuring Fees

ABCS is obligated to pay sourcing fees to the applicable member affiliate which sources the deal. For the three months ended March 31, 2018, the Company did not earn any sourcing fees.

### Schedule of Investments

### As of March 31, 2018

### (Unaudited)

| Portfolio Company Investments Corporate Debt Delayed Draw Term Loan Capital Equipment | Spread Above Index (1) | Interest Rate | Maturity Date | Principal/ Par Amount | Carrying Value | Fair Value (2) |
| --- | --- | ---: | --- | ---: | ---: | ---: |
| Winchester Electronics Corporation | L+ 6.50% | 8.59% | 6/30/2022 | $11,265,912 | $11,218,501 | $11,265,912 |
| **Total Capital Equipment** |  |  |  |  | 11,218,501 | 11,265,912 |
| **Chemicals, Plastics & Rubber** |  |  |  |  |  |  |
| PRCC Holdings, Inc. (6) | L+ 6.50% | 8.39% | 2/1/2021 | $12,128,569 | 12,128,569 | 12,128,569 |
| **Total Chemicals, Plastics & Rubber** |  |  |  |  | 12,128,569 | 12,128,569 |
| **Consumer Goods: Non-Durable** |  |  |  |  |  |  |
| Solaray, LLC (9) | L+ 6.50% | 8.57% | 9/9/2023 | $22,770,893 | 22,770,893 | 23,088,717 |
| **Total Consumer Goods: Non-Durable** |  |  |  |  | 22,770,893 | 23,088,717 |
| **Media: Advertising, Printing & Publishing** |  |  |  |  |  |  |
| Ansira Holdings, Inc. | L+ 6.50% | 8.80% | 12/20/2022 | $6,212,949 | 6,212,949 | 6,325,329 |
| **Total Media: Advertising, Printing & Publishing** |  |  |  |  | 6,212,949 | 6,325,329 |
| **Services: Business** |  |  |  |  |  |  |
| McKissock, LLC | L+ 6.00% | 8.30% | 8/5/2021 | $2,624,768 | 2,624,768 | 2,618,206 |
| **Total Services: Business** |  |  |  |  | 2,624,768 | 2,618,206 |
| **Transportation: Consumer** |  |  |  |  |  |  |
| Direct Travel, Inc. | L+ 6.50% | 8.43% | 12/1/2021 | $— | — | — |
| **Total Transportation: Consumer** |  |  |  |  | — | — |
| **Total Delayed Draw Term Loan** |  |  |  |  | **54,955,680** | **55,426,733** |
| **First lien senior secured loan** |  |  |  |  |  |  |
| **Banking** |  |  |  |  |  |  |
| Tidel Engineering, L.P. | L+ 6.25% | 8.55% | 3/1/2024 | $80,924,185 | 80,924,185 | 80,924,185 |
| **Total Banking** |  |  |  |  | 80,924,185 | 80,924,185 |
| **Capital Equipment** |  |  |  |  |  |  |
| Winchester Electronics Corporation | L+ 6.50% | 8.43% | 6/30/2022 | $75,152,266 | 75,133,165 | 75,152,266 |
| **Total Capital Equipment** |  |  |  |  | 75,133,165 | 75,152,266 |
| **Chemicals, Plastics & Rubber** |  |  |  |  |  |  |
| AP Plastics Group, LLC | L+ 5.25% | 6.94% | 8/1/2022 | $50,843,172 | 50,781,024 | 50,843,172 |
| PRCC Holdings, Inc. (5) | L+ 6.50% | 8.39% | 2/1/2021 | $75,387,252 | 75,605,593 | 75,387,252 |
| **Total Chemicals, Plastics & Rubber** |  |  |  |  | 126,386,617 | 126,230,424 |
| **Construction & Building** |  |  |  |  |  |  |
| Stanton Carpet Corp. | L+ 6.50% | 8.38% | 11/21/2022 | $64,805,183 | 64,805,183 | 64,805,183 |
| **Total Construction & Building** |  |  |  |  | 64,805,183 | 64,805,183 |
| **Consumer Goods: Non-Durable** |  |  |  |  |  |  |
| Solaray, LLC (8) | L+ 6.50% | 8.51% | 9/9/2023 | $86,243,009 | 85,755,817 | 87,105,439 |
| **Total Consumer Goods: Non-Durable** |  |  |  |  | 85,755,817 | 87,105,439 |
| **Media: Advertising, Printing & Publishing** |  |  |  |  |  |  |
| Ansira Holdings, Inc. | L+ 6.50% | 8.80% | 12/20/2022 | $76,415,350 | 76,415,350 | 77,179,503 |
| Cruz Bay Publishing, Inc. (3) | L+ 5.75% | 7.55% | 6/6/2019 | $11,962,715 | 11,962,715 | 11,962,715 |
| Cruz Bay Publishing, Inc. (4) | L+ 6.75% | 9.07% | 6/6/2019 | $3,994,904 | 3,994,904 | 3,994,904 |
| **Total Media: Advertising, Printing & Publishing** |  |  |  |  | 92,372,969 | 93,137,122 |
| **Media: Diversified & Production** |  |  |  |  |  |  |
| Efficient Collaborative Retail Marketing Company, LLC | L+ 6.75% | 9.05% | 6/15/2022 | $34,508,075 | 34,508,075 | 34,508,075 |
| **Total Media: Diversified & Production** |  |  |  |  | 34,508,075 | 34,508,075 |
| **Retail** |  |  |  |  |  |  |
| Batteries Plus Holding Corporation | L+ 6.50% | 8.64% | 7/6/2022 | $68,503,938 | 68,503,938 | 69,188,978 |
| **Total Retail** |  |  |  |  | 68,503,938 | 69,188,978 |
| **Services: Business** |  |  |  |  |  |  |

63

|  |  |  |  |  |  |  |
| --- | --- | ---: | --- | ---: | ---: | ---: |
| McKissock, LLC | L+ 6.00% | 8.30% | 8/5/2021 | $8,132,427 | 8,132,427 | 8,213,752 |
| McKissock, LLC | L+ 6.00% | 8.30% | 8/5/2021 | $17,057,584 | 17,057,584 | 17,014,940 |
| TEI Holdings Inc. | L+ 6.00% | 8.20% | 12/20/2023 | $119,485,191 | 118,819,962 | 119,186,478 |
| **Total Services: Business** |  |  |  |  | 144,009,973 | 144,415,170 |
| **Transportation: Cargo** |  |  |  |  |  |  |
| ENC Holding Corporation | L+ 6.50% | 8.36% | 2/8/2023 | $79,682,514 | 79,603,856 | 80,479,339 |
| **Total Transportation: Cargo** |  |  |  |  | 79,603,856 | 80,479,339 |
| **Transportation: Consumer** |  |  |  |  |  |  |
| Direct Travel, Inc. (7) | L+ 6.50% | 8.65% | 12/1/2021 | $113,286,093 | 112,824,188 | 113,286,093 |
| **Total Transportation: Consumer** |  |  |  |  | 112,824,188 | 113,286,093 |
| **Total First lien senior secured loan** |  |  |  |  | **964,827,966** | **969,232,274** |
| **Total Corporate Debt** |  |  |  |  | **$1,019,783,646** | **$1,024,659,007** |
| **Total Investments** |  |  |  |  | **$1,019,783,646** | **$1,024,659,007** |

(1) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) which reset daily, monthly, quarterly or semiannually. For each, the Company has provided the spread over LIBOR and the current weighted average interest rate in effect at March 31, 2018. Certain investments are subject to a LIBOR interest rate floor.

(2) Fair Value determined by the Advisor.

(3) $158,063 of the total par amount for this security is at P + 4.75%.

(4) $52,785 of the total par amount for this security is at P + 5.75%.

(5) $393,462 of the total par amount for this security is at P + 5.50%.

(6) $62,615 of the total par amount for this security is at P + 5.50%.

(7) $283,215 of the total par amount for this security is at P + 5.50%.

(8) $218,341 of the total par amount for this security is at P + 5.50%.

(9) $38,975 of the total par amount for this security is at P + 5.50%.

### Schedule of Investments

### As of December 31, 2017

| Portfolio Company Investments Corporate Debt Delayed Draw Term Loan Capital Equipment | Spread Above Index (1) | Interest Rate | Maturity Date | Principal/ Par Amount | Amortized Cost | Fair Value (2) |
| --- | --- | ---: | --- | ---: | ---: | ---: |
| Winchester Electronics Corporation | L + 6.50% | 8.17% | 6/30/2022 | $11,294,304 | $11,294,304 | $11,294,304 |
| **Total Capital Equipment** |  |  |  |  | 11,294,304 | 11,294,304 |
| **Chemicals, Plastics & Rubber** |  |  |  |  |  |  |
| PRCC Holdings, Inc. (6) | L + 6.50% | 8.08% | 2/1/2021 | $12,191,184 | 12,191,184 | 12,191,184 |
| **Total Chemicals, Plastics & Rubber** |  |  |  |  | 12,191,184 | 12,191,184 |
| **Consumer Goods: Non-Durable** |  |  |  |  |  |  |
| Solaray, LLC | L + 6.50% | 8.07% | 9/9/2023 | $15,496,531 | 15,496,531 | 15,496,531 |
| **Total Consumer Goods: Non-Durable** |  |  |  |  | 15,496,531 | 15,496,531 |
| **Media: Advertising, Printing & Publishing** |  |  |  |  |  |  |
| Ansira Holdings, Inc. | L + 6.50% | 8.19% | 12/20/2022 | $6,228,599 | 6,228,599 | 6,228,599 |
| **Total Media: Advertising, Printing & Publishing** |  |  |  |  | 6,228,599 | 6,228,599 |
| **Services: Business** |  |  |  |  |  |  |
| McKissock, LLC | L + 6.00% | 7.94% | 8/5/2019 | $2,631,338 | 2,631,338 | 2,631,338 |
| **Total Services: Business** |  |  |  |  | 2,631,338 | 2,631,338 |
| **Transportation: Consumer** |  |  |  |  |  |  |
| Direct Travel, Inc. | L + 6.50% | 8.01% | 12/1/2021 | $7,654,382 | 7,654,382 | 7,654,382 |
| **Total Transportation: Consumer** |  |  |  |  | 7,654,382 | 7,654,382 |
| **Total Delayed Draw Term Loan** |  |  |  |  | **$55,496,338** | **$55,496,338** |
| **First Lien Senior Secured Loan** |  |  |  |  |  |  |
| **Banking** |  |  |  |  |  |  |
| Tidel Engineering, L.P. | L + 6.25% | 7.94% | 3/1/2024 | $80,924,185 | 80,924,185 | 80,924,185 |
| **Total Banking** |  |  |  |  | 80,924,185 | 80,924,185 |
| **Capital Equipment** |  |  |  |  |  |  |
| Winchester Electronics Corporation | L + 6.50% | 8.19% | 6/30/2022 | $75,343,060 | 75,272,510 | 75,272,510 |
| **Total Capital Equipment** |  |  |  |  | 75,272,510 | 75,272,510 |
| **Chemicals, Plastics & Rubber** |  |  |  |  |  |  |
| AP Plastics Group, LLC (3) | L + 6.25% | 7.63% | 8/1/2022 | $50,972,104 | 50,972,104 | 50,972,104 |
| PRCC Holdings, Inc. (5) | L + 6.50% | 8.08% | 2/1/2021 | $75,780,714 | 75,780,714 | 75,780,714 |
| **Total Chemicals, Plastics & Rubber** |  |  |  |  | 126,752,818 | 126,752,818 |

65

| Construction & Building |  |  |  |  |  |  |
| --- | --- | ---: | --- | ---: | ---: | ---: |
| Stanton Carpet Corp. (7) | L + 6.50% | 8.07% | 11/21/2022 | $65,131,658 | 65,131,658 | 65,131,658 |
| **Total Construction & Building** |  |  |  |  | 65,131,658 | 65,131,658 |
| **Consumer Goods: Non-Durable** |  |  |  |  |  |  |
| Solaray, LLC | L + 6.50% | 8.00% | 9/9/2023 | $86,461,350 | 86,179,604 | 86,179,604 |
| **Total Consumer Goods: Non-Durable** |  |  |  |  | 86,179,604 | 86,179,604 |
| **Media: Advertising, Printing & Publishing** |  |  |  |  |  |  |
| Ansira Holdings, Inc. | L + 6.50% | 8.19% | 12/20/2022 | $76,608,806 | 76,608,806 | 76,608,806 |
| Cruz Bay Publishing, Inc. | L + 5.75% | 7.13% | 6/6/2019 | $12,170,869 | 12,170,869 | 12,170,869 |
| Cruz Bay Publishing, Inc. (4) | L + 6.75% | 8.47% | 6/6/2019 | $4,064,416 | 4,064,416 | 4,064,416 |
| **Total Media: Advertising, Printing & Publishing** |  |  |  |  | 92,844,091 | 92,844,091 |
| **Media: Diversified & Production** |  |  |  |  |  |  |
| Efficient Collaborative Retail Marketing Company, LLC | L + 6.75% | 8.44% | 6/15/2022 | $35,840,087 | 35,840,087 | 35,840,087 |
| **Total Media: Diversified & Production** |  |  |  |  | 35,840,087 | 35,840,087 |
| **Retail** |  |  |  |  |  |  |
| Batteries Plus Holding Corporation | L + 6.50% | 8.32% | 7/6/2022 | $68,677,806 | 68,677,806 | 68,677,806 |
| **Total Retail** |  |  |  |  | 68,677,806 | 68,677,806 |
| **Services: Business** |  |  |  |  |  |  |
| McKissock, LLC | L + 6.00% | 7.94% | 8/5/2019 | $8,152,786 | 8,152,786 | 8,152,786 |
| McKissock, LLC | L + 6.00% | 7.94% | 8/5/2019 | $17,100,285 | 17,100,285 | 17,100,285 |
| TEI Holdings Inc. (8) | L + 6.50% | 8.13% | 12/20/2023 | $74,173,614 | 74,173,614 | 74,173,614 |
| **Total Services: Business** |  |  |  |  | 99,426,685 | 99,426,685 |
| **Transportation: Cargo** |  |  |  |  |  |  |
| ENC Holding Corporation | L + 6.50% | 8.05% | 2/8/2023 | $71,062,151 | 71,062,151 | 71,062,151 |
| **Total Transportation: Cargo** |  |  |  |  | 71,062,151 | 71,062,151 |
| **Transportation: Consumer** |  |  |  |  |  |  |
| Direct Travel, Inc. | L + 6.50% | 7.95% | 12/1/2021 | $98,576,676 | 98,576,676 | 98,576,676 |
| **Total Transportation: Consumer** |  |  |  |  | 98,576,676 | 98,576,676 |
| **Total First Lien Senior Secured Loan** |  |  |  |  | **$900,688,271** | **$900,688,271** |
| **Total Corporate Debt** |  |  |  |  | **$956,184,609** | **$956,184,609** |
| **Total Investments** |  |  |  |  | **$956,184,609** | **$956,184,609** |

(1) The investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (‘‘LIBOR’’ or ‘‘L’’) or the Prime Rate (‘‘Prime’’ or ‘‘P’’) which reset daily, monthly, quarterly or semiannually. For each, the Company has provided the spread over LIBOR and the current weighted average interest rate in effect at December 31, 2017. Certain investments are subject to a LIBOR or Prime interest rate floor.

(2) Fair Value determined by the Advisor.

(3) $128,932 of the total par amount for this security is at P + 5.25%.

(4) $52,785 of the total par amount for this security is at P + 5.75%.

(5) $393,462 of the total par amount for this security is at P + 5.50%.

(6) $62,615 of the total par amount for this security is at P + 5.50%.

(7) $163,237 of the total par amount for this security is at P + 5.50%.

(8) $186,836 of the total par amount for this security is at P + 5.50%.

### Results of Operations

Operating results of the Company for the three months ended March 31, 2018 and 2017 were as follows:

|  | For the Three Months Ended March 31, 2018 | 2017 |
| --- | ---: | ---: |
| Total investment income from non-controlled/non-affiliate investments | $12,729,301 | $2,242,416 |
| Total investment income from controlled affiliate investments | 4,729,266 | — |
| Total expenses | 8,683,845 | 1,252,764 |
| Excise tax expense | 309 | — |
| Net investment income after taxes | 8,774,413 | 989,652 |
| Net realized gain on non-controlled/non-affiliate investments | 257,702 | 120,132 |
| Net realized gain on foreign currency transactions | 279,145 | 64,701 |
| Net realized loss on forward currency exchange contracts | (3,317,385) | — |
| Net change in unrealized depreciation on foreign currency translation | (17,344) | (15,064) |
| Net change in unrealized appreciation (depreciation) on forward currency exchange contracts | 941,491 | (261,684) |
| Net change in unrealized appreciation on non-controlled/non-affiliate investments | 2,575,854 | 714,772 |
| Net change in unrealized appreciation on controlled affiliate investments | 1,865,229 | — |
| Net increase in net assets resulting from operations | $11,359,105 | $1,612,509 |

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

### Investment Income

During the three months ended March 31, 2018, the Company’s investment income was comprised of $17.5 million of interest income and other income, which includes $0.3 million from the accretion of discounts and $4.6 million from the distribution from ABCS.

During the three months ended March 31, 2017, the Company’s investment income was comprised of $2.2 million of interest income, which includes $0.2 million from the accretion of discounts.

### Operating Expenses

The composition of our operating expenses for the three months ended March 31, 2018 and 2017 were as follows:

|  | For the Three Months Ended March 31, 2018 | 2017 |
| --- | ---: | ---: |
| Interest and debt financing expenses | $4,288,897 | $195,477 |
| Amortization of deferred offering costs | — | 103,845 |
| Base management fee | 1,623,781 | 266,584 |
| Incentive fee | 2,004,548 | 93,428 |
| Professional fees | 523,677 | 413,539 |
| Directors fees | 68,250 | 67,812 |
| Other general and administrative expenses | 174,692 | 112,079 |
| Total expenses | $8,683,845 | $1,252,764 |

### Interest and Debt Financing Expenses

Interest and debt financing expenses includes interest, amortization of deferred financing costs, upfront commitment fees and fees on the unused portion of the revolving credit facility (the “Revolving Credit Facility”) with Sumitomo Mitsui Banking Corporation (“SMBC”) and the revolving credit agreement (the “BCSF Revolving Credit Facility”, together with the BCSF Revolving Credit Facility, the “Revolving Credit Facilities”) with Goldman Sachs Bank USA. As of March 31, 2018, the Revolving Credit Facilities had an outstanding balance of $389.4 million. As of December 31, 2017, the Revolving Credit Facility had an outstanding balance of $451.0 million. Interest and debt financing expenses for the three months ended March 31, 2018 and March 31, 2017 were approximately

$4.3 million and $0.2 million, respectively. The weighted average interest rate (excluding deferred upfront financing costs and unused fees) on our debt outstanding was 3.76% and 3.40% as of March 31, 2018 and December 31, 2017, respectively.

### Net Change in Unrealized Appreciation (Depreciation) on Investments and Forward Currency Exchange Contracts

For the three months ended March 31, 2018, we had $4.4 million in net unrealized appreciation on 119 investments in 92 portfolio companies. Unrealized appreciation for the three months ended March 31, 2018 resulted from an increase in fair value, primarily due to positive valuation adjustments. During the three months ended March 31, 2018, we entered into forward currency exchange contracts to reduce our exposure to foreign currency exchange rate fluctuations. For the three months ended March 31, 2018, we had $0.9 million in unrealized appreciation on forward currency exchange contracts, which was substantially offset by an increase in the unrealized appreciation on our investments due to foreign currency fluctuations.

For the three months ended March 31, 2017, we had $0.7 million in unrealized appreciation on 37 investments in 25 portfolio companies. Unrealized appreciation for the three months ended March 31, 2017 resulted from an increase in fair value, primarily due to positive valuation adjustments. During the three months ended March 31, 2017, we entered into forward currency exchange contracts to reduce our exposure to foreign currency exchange rate fluctuations. For the three months ended March 31, 2017, we had ($0.3) million in unrealized depreciation on forward currency exchange contracts, which was substantially offset by an increase in the unrealized appreciation on our investments due to foreign currency fluctuations.

### Net Realized Gain (Loss) on Investments

During the three months ended March 31, 2018, we had sales and principal repayments of $65.0 million resulting in $0.3 million of net realized gains. During the three months ended March 31, 2017, we had sales and principal repayments of $4.2 million, resulting in $0.1 million of net realized gains.

### Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended March 31, 2018 and 2017, the net increase in net assets resulting from operations was $11.4 million and $1.6 million, respectively. Based on the weighted average shares of common stock outstanding for the three months ended March 31, 2018 and 2017, our per share net increase in net assets resulting from operations was $0.39 and $0.15, respectively.

### Cash Flows

For the three months ended March 31, 2018, cash, foreign cash and cash equivalents decreased by $18.2 million. During the same period, we used $75.9 million in operating activities, primarily as a result of purchases of investments, slightly offset by proceeds from principal payments of investments. During the three months ended March 31, 2018, we generated $57.4 million from financing activities, primarily from borrowings on our Revolving Credit Facilities and the issuance of common stock, offset by repayments on our Revolving Credit Facilities.

For the three months ended March 31, 2017, cash, foreign cash and cash equivalents increased by $101.4 million. During the same period, we used $67.2 million in operating activities, primarily as a result of purchases of investments, slightly offset by proceeds from principal payments of investments. During the three months ended March 31, 2017, we generated $168.3 million from financing activities, primarily from issuance of common stock reduced by net repayments on our Revolving Credit Facility.

### Financial Condition, Liquidity and Capital Resources

At March 31, 2018 and December 31, 2017, we had $122.7 million and $140.9 million in cash, foreign cash and cash equivalents, respectively. The primary uses of our cash are for (1) investments in portfolio companies and other investments and to comply with certain portfolio diversification requirements; (2) the cost of operations (including payments to the Advisor under the Investment Advisory and Administration Agreements); (3) debt service, repayment, and other financing costs; and, (4) cash distributions to the holders of our common shares.

We expect to generate additional cash from (1) future offerings of our common or preferred shares; (2) borrowings from our Revolving Credit Facilities and from other banks or lenders; and, (3) cash flows from operations.

At March 31, 2018 cash on hand, combined with our uncalled capital commitments of $627.3 million and $250.0 million undrawn amount on our Revolving Credit Facilities, is expected to be sufficient for our investing activities and to conduct our operations for at least the next twelve months.

#### Capital Share Activity

The Company has entered into Subscription Agreements with investors providing for the private placement of our common shares. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase our common shares up to the amount of their respective capital commitments on an as-needed basis with a minimum of 10 business days’ prior notice. As of March 31, 2018 and December 31, 2017, we had received capital commitments of $1.3 billion, of which $10.8 million was from BCSF Advisors, LP. As of March 31, 2018, we had received capital contributions totaling $628.0 million, of which $5.8 million was from BCSF Advisors, LP. As of December 31, 2017, we had received capital contributions totaling $502.6 million, of which $4.8 million was from BCSF Advisors, LP.

During the three months ended March 31, 2018, pursuant to the Subscription Agreements, we delivered capital drawdown notices to our investors relating to the issuance of 6,163,522.52 of our common shares for an aggregate offering of $125.4 million. During the three months ended March 31, 2017, we received additional capital commitments of $295.8 million, and pursuant to the Subscription Agreements, we delivered capital drawdown notices to our investors relating to the issuance of 11,281,229.37 of our common shares for an aggregate offering of $227.5 million. Proceeds from the issuance were used to fund our investing activities and for other general corporate purposes.

As of March 31, 2018 and December 31, 2017, we received all amounts relating to the capital drawdown notices. During the three months ended March 31, 2018, we issued 65,496.52 shares of our common stock to investors who have opted into our dividend reinvestment plan. During the three months ended March 31, 2017, we issued 62.87 shares of our common stock to investors who have opted into our dividend reinvestment plan.

#### Revolving Credit Agreement

On December 22, 2016, we entered into the revolving credit agreement (the “Revolving Credit Agreement”). The maximum commitment amount under the Revolving Credit Facility is $150.0 million, and may be increased up to $350.0 million (“Maximum Commitment”) with the consent of SMBC or reduced upon request of the Company. Proceeds under the Revolving Credit Facility may be used for any purpose permitted under our organizational documents, including general corporate purposes such as the making of investments. The Revolving Credit Agreement contains certain covenants, including, but not limited to maintaining an asset coverage ratio of total assets to total borrowings of at least 2 to 1. As of March 31, 2018 and December 31, 2017, we were in compliance with these covenants. The Company’s obligations under the Revolving Credit Agreement are secured by the capital commitments and capital contributions to the Company.

Borrowings under the Revolving Credit Facility bear interest at the London Interbank Offered Rate (“LIBOR”) plus a margin. We pay an unused commitment fee of: (a) where the Maximum Commitment which is unused on such date is greater than fifty (50) percent of the Maximum Commitment, a rate of 20 basis points (0.20%) per annum; or (b) where the Maximum Commitment which is unused on such date is less than or equal to fifty (50) percent of the Maximum Commitment, a rate of 15 basis points (0.15%) per annum. Interest is payable in arrears either on a one month, two month, three month or six month LIBOR period. Any amounts borrowed under the Revolving Credit Facility, and all accrued and unpaid interest, will be due and payable, on the earliest of: (a) December 22, 2019; (b) the date upon which SMBC declares the obligations, or the obligations become, due and payable after the occurrence of an event of default under the Revolving Credit Facility; (c) the date upon which we terminate the commitments under the Revolving Credit Facility; and (d) 45 days prior to the earlier of (1) the date upon which the commitment period under the subscription agreements terminates and (2) the date upon which the ability to make capital calls and receive capital contributions otherwise terminates.

As of March 31, 2018, we had $139.4 million outstanding on the Revolving Credit Facility and we were in compliance with the terms of the Revolving Credit Facility. As of December 31, 2017, we had $150.0 million outstanding on the Revolving Credit Facility and we were in compliance with the terms of the Revolving Credit Facility. We intend to continue to utilize the Revolving Credit Facility on a revolving basis to fund investments and for other general corporate purposes. See “Note 6. Borrowings” for more detail on the Revolving Credit Facility.

Costs of $1.1 million were incurred in connection with obtaining the Revolving Credit Agreement 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.

For the three months ended March 31, 2018 and 2017, the components of interest expense related to the Revolving Credit Facility were as follows:

|  | For the Three Months Ended March 31, 2018 | 2017 |
| --- | ---: | ---: |
| Borrowing interest expense | $1,056,935 | $33,458 |
| Unused facility fee | 3,533 | 71,791 |
| Amortization of deferred financing costs and upfront commitment fees | 90,228 | 90,228 |
| Total interest and debt financing expenses | $1,150,696 | $195,477 |

### BCSF Revolving Credit Facility

On October 4, 2017, we entered into the revolving credit agreement (the “BCSF Revolving Credit Facility”) with the Company as equity holder, BCSF I, LLC as borrower, and Goldman Sachs Bank USA, as sole lead arranger (“Goldman Sachs”). The maximum commitment amount under the BCSF Revolving Credit Facility is $500.0 million, and may be increased up to $750.0 million. Proceeds of the loans under the BCSF Revolving Credit Facility may be used to acquire certain qualifying loans and such other uses as permitted under the BCSF Revolving Credit Facility. The BCSF Revolving Credit Facility includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature. As of March 31, 2018, the Company was in compliance with these covenants.

Borrowings under the BCSF Revolving Credit Facility bear interest at LIBOR plus a margin. We pay an unused commitment fee of 30 basis points (0.30%) per annum. Interest is payable quarterly in arrears. Any amounts borrowed under the BCSF Revolving Credit Facility, and all accrued and unpaid interest, will be due and payable, on the earliest of: (a) October 5, 2022 and (b) the date upon which all loans shall become due and payable in full, whether by acceleration or otherwise.

As of March 31, 2018 and December 31, 2017, there were $250.0 million and $301.0 million borrowings under the BCSF Revolving Credit Facility, respectively, and were in compliance with the terms of the BCSF Revolving Credit Facility. We intend to continue to utilize the BCSF Revolving Credit Facility on a revolving basis to fund investments and for other general corporate purposes. See “Note 6. Borrowings” for more detail on the BCSF Revolving Credit Facility.

Costs of $5.5 million were incurred in connection with obtaining the BCSF 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 BCSF Revolving Credit Facility using the straight-line method.

For the three months ended March 31, 2018 and 2017, the components of interest expense related to the BCSF Revolving Credit Facility were as follows:

|  | For the Three Months Ended March 31, 2018 | 2017 |
| --- | ---: | ---: |
| Borrowing interest expense | $2,696,109 | $— |
| Unused facility fee | 178,725 | — |
| Amortization of deferred financing costs and upfront commitment fees | 263,367 | — |
| Total interest and debt financing expenses | $3,138,201 | $— |

In accordance with applicable SEC staff guidance and interpretations, as a BDC, with certain limited exceptions, we are currently permitted to borrow amounts such that our asset coverage ratio, as defined in the 1940 Act, is at least 2 to 1 after such borrowing. As of March 31, 2018 and December 31, 2017, our asset coverage ratio was 2.63 to 1 and 2.12 to 1, respectively. We may also refinance or repay any of our indebtedness at any time based on our financial condition and market conditions.

### Distribution Policy

Distributions to common stockholders are recorded on the record date. To the extent that we have income available, we intend to distribute quarterly distributions to our stockholders. Our quarterly distributions, if any, will be determined by the Board. Any distributions to our stockholders will be declared out of assets legally available for distribution.

We have elected to be subject to tax as a RIC under the Code, beginning with our taxable year ended December 31, 2016. To qualify for and maintain RIC tax treatment, among other things, we must distribute dividends to our stockholders in respect of each taxable year of an amount generally at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of our net long-term capital losses. In order to avoid the imposition of certain excise taxes imposed on RICs, we currently intend to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of: (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for such calendar year; (2) 98.2% of our capital gains in excess of capital losses, adjusted for certain ordinary losses, generally for the one-year period ending on October 31 of such calendar year; and (3) any net ordinary income and capital gain net income for preceding years that were not distributed during such years and on which we did not incur any U.S. federal income tax.

We intend to distribute net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, we may decide in the future to retain all or a portion of our net capital gains for investment, incur a corporate-level tax on such capital gains, and elect to treat such capital gains as deemed distributions to our stockholders.

The Company has adopted a dividend reinvestment plan that provides for the reinvestment of cash dividends. Prior to the listing of the Company’s shares on a national securities exchange (a “Listing”), stockholders who “opt in” to the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions. Subsequent to a Listing, stockholders who do not “opt out” of the Company’s dividend reinvestment plan will have their cash dividends and distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving cash dividends and distributions. Stockholders can elect to “opt in” or “opt out” of the Company’s dividend reinvestment plan in their Subscription Agreements, as defined. The elections of stockholders that make an election prior to a Listing shall remain effective after the Listing. Any dividends reinvested through the issuance of shares through our dividend reinvestment plan will increase our gross assets on which the base management fee and the incentive fee are determined and paid to the Advisor.

The following table summarizes distributions declared during the three months ended March 31, 2018:

| Date Declared | Record Date | Payment Date | Amount Per Share | Total Distributions |
| --- | --- | --- | ---: | ---: |
| March 28, 2018 | March 28, 2018 | May 17, 2018 | $0.34 | $10,609,643 |
| Total distributions declared |  |  | $0.34 | $10,609,643 |

There were no distributions declared to stockholders for the three months ended March 31, 2017.

The federal income tax characterization of distributions declared and paid for the fiscal year will be determined at fiscal year-end based upon our investment company taxable income for the full fiscal year and distributions paid during the full year.

### Commitments and Off-Balance Sheet Arrangements

As of March 31, 2018 and December 31, 2017, the Company had unfunded capital commitments related to Subscription Agreements of $627.3 million and $752.6 million, respectively.

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 on the statements of assets and liabilities.

As of March 31, 2018, our unfunded capital commitments consisted of the following:

| First Lien Senior Secured Loans | Expiration Date (1) | Unfunded Commitments (2) (3) |
| --- | --- | ---: |
| Ansira Holdings, Inc. — Revolver | 12/20/2022 | $7,083,500 |
| AP Plastics Group, LLC — Revolver | 8/1/2021 | 7,565,178 |
| Batteries Plus Holding Corporation — Revolver | 7/6/2022 | 3,187,575 |
| Captain D’s LLC — Revolver | 12/15/2023 | 1,334,627 |
| Clinical Innovations — Revolver | 10/17/2022 | 998,161 |
| Cruz Bay Publishing R/C — Revolver | 6/6/2019 | 2,833,400 |
| CST Buyer Company — Revolver | 3/1/2023 | 897,478 |
| Direct Travel, Inc.— Revolver | 12/1/2021 | 4,250,100 |
| Dorner Manufacturing Corp. — Revolver | 3/15/2023 | 769,218 |
| Efficient Collaborative Retail Marketing Company, LLC — Revolver | 6/15/2022 | 3,541,750 |
| ENC Holding Corporation — Revolver | 2/8/2023 | 9,066,880 |
| Endries International, Inc. — Delayed Draw Term Loan | 6/1/2023 | 753,288 |
| Endries International, Inc. — Revolver | 6/1/2022 | 2,018,212 |
| FineLine Technologies, Inc. — Revolver | 11/2/2021 | 2,620,724 |
| Great Expressions Dental Centers PC — Delayed Draw Term Loan | 9/28/2023 | 667,000 |
| Great Expressions Dental Centers PC — Revolver | 9/28/2022 | 200,057 |
| International Entertainment Investments Limited — Delayed Draw Term Loan | 2/28/2022 | 579,154 |
| Lakeland Tours, LLC — Delayed Draw Term Loan | 12/6/2024 | 186,596 |
| McKissock, LLC — Revolver | 8/5/2021 | 2,125,050 |
| PRCC Holdings, Inc. — Revolver | 2/1/2021 | 3,541,750 |
| Solaray, LLC — Revolver | 9/9/2022 | 8,075,190 |
| Sovos Compliance, LLC — Delayed Draw Term Loan | 3/1/2022 | 4,838,710 |
| Sovos Compliance, LLC — Revolver | 3/1/2022 | 1,451,615 |
| Stanton Carpet Corp. — Revolver | 11/21/2022 | 4,250,100 |
| TEI Holdings Inc. — Revolver | 12/20/2022 | 2,408,390 |
| Tidel Engineering, L.P. — Revolver | 3/1/2023 | 5,666,800 |
| Winchester Electronics Corporation — Revolver | 6/30/2021 | 4,250,100 |
| Zywave, Inc. — Revolver | 11/17/2022 | 959,339 |
| **Total First Lien Senior Secured Loans** |  | $86,119,942 |
| **Other Unfunded Commitments** |  |  |
| BCC Jetstream Holdings Aviation (On II), LLC |  | 9,735,064 |
| **Total Other Unfunded Commitments** |  | $9,735,064 |
| **Total** |  | $95,855,006 |

(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) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of March 31, 2018.

(3) Unfunded commitments represent unfunded commitments to fund investments, excluding our investment in ABCS as of March 31, 2018.

As of December 31, 2017, our unfunded capital commitments consisted of the following:

| First Lien Senior Secured Loans | Expiration Date (1) | Unfunded Commitments (2) (3) |
| --- | --- | ---: |
| Ansira Holdings, Inc. — Revolver | 12/20/2022 | $7,083,500 |
| AP Plastics Group, LLC — Revolver | 8/1/2021 | 7,565,178 |
| Batteries Plus Holding Corporation — Revolver | 7/6/2022 | 4,250,100 |
| Captain D’s LLC — Revolver | 12/15/2023 | 843,289 |
| Clinical Innovations — Revolver | 10/17/2022 | 998,161 |
| Cruz Bay Publishing R/C — Revolver | 6/6/2019 | 2,266,720 |
| CST Buyer Company — Revolver | 3/1/2023 | 897,478 |
| Direct Travel, Inc.— Revolver | 12/1/2021 | 4,250,100 |
| Dorner Manufacturing Corp. — Revolver | 3/15/2023 | 659,330 |
| Efficient Collaborative Retail Marketing Company, LLC — Revolver | 6/15/2022 | 3,541,750 |
| ENC Holding Corporation — Revolver | 2/8/2023 | 9,811,825 |
| Endries International, Inc. — Delayed Draw Term Loan | 6/1/2023 | 3,278,355 |
| Endries International, Inc. — Revolver | 6/1/2022 | 2,576,787 |
| FineLine Technologies, Inc. — Revolver | 11/2/2021 | 2,620,724 |
| Great Expressions Dental Centers PC — Delayed Draw Term Loan | 9/28/2023 | 667,000 |
| Great Expressions Dental Centers PC — Revolver | 9/28/2022 | 183,386 |
| International Entertainment Investments Limited — Delayed Draw Term Loan | 2/28/2022 | 558,414 |
| K-Mac Holdings Corp. — Revolver | 12/20/2021 | 1,440,000 |
| Lakeland Tours, LLC — Delayed Draw Term Loan | 12/8/2024 | 186,596 |
| McKissock, LLC — Revolver | 8/5/2019 | 2,125,050 |
| PRCC Holdings, Inc. — Revolver | 2/1/2021 | 3,541,750 |
| Solaray, LLC — Revolver | 9/9/2022 | 8,500,200 |
| Sovos Compliance, LLC — Delayed Draw Term Loan | 3/1/2022 | 4,838,710 |
| Sovos Compliance, LLC — Revolver | 3/1/2022 | 1,451,615 |
| Stanton Carpet Corp. — Revolver | 11/21/2022 | 4,250,100 |
| TEI Holdings Inc. — Revolver | 12/20/2022 | 4,250,100 |
| Tidel Engineering, L.P. — Revolver | 3/1/2023 | 5,666,800 |
| Winchester Electronics Corporation — Revolver | 6/30/2021 | 4,250,100 |
| Zywave, Inc. — Revolver | 11/17/2022 | 991,316 |
| **Total First Lien Senior Secured Loans** |  | $93,544,434 |
| **Second Lien Senior Secured Loans** |  |  |
| NPC International, Inc. — Delayed Draw Term Loan | 4/18/2025 | 8,000,716 |
| **Total Second Lien Senior Secured Loans** |  | $8,000,716 |
| **Other Unfunded Commitments** |  |  |
| BCC Jetstream Holdings Aviation (On II), LLC |  | 9,735,064 |
| **Total Other Unfunded Commitments** |  | $9,735,064 |
| **Total** |  | $111,280,214 |

(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) Unfunded commitments denominated in currencies other than U.S. dollars have been converted to U.S. dollars using the applicable foreign currency exchange rate as of December 31, 2017.

(3) Unfunded commitments represent unfunded commitments to fund investments.

### Significant Accounting Estimates and Critical Accounting Policies

### Basis of Presentation

The Company’s unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Company’s consolidated financial statements and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 1, 6, 10 and 12 of Regulation S-X. These consolidated financial statements reflect adjustments that in the opinion of the Company are necessary for the fair statement of the financial position and results of operations for the periods presented herein and are not necessarily indication of the full fiscal year. The Company has determined it meets the definition of an investment company and follows the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — *Financial Services — Investment Companies*. The functional currency of the Company is U.S. dollars and these consolidated financial statements have been prepared in that currency.

### Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.

### Revenue Recognition

We record our 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. Discount and premium to par value on investments acquired 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 and market discount or premium are capitalized and amortized into or against interest income using the effective interest method or straight-line method, as applicable. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income.

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 such distributions in the case of private portfolio companies, and on the ex-dividend date for publicly traded portfolio companies. Distributions received from a limited liability company or limited partnership investment are evaluated to determine if the distribution should be recorded as dividend income or a return of capital.

Certain investments may have contractual PIK interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the loan principal 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 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. Accrued PIK interest or dividends are generally reversed through interest or dividend income, respectively, when an investment is placed on non-accrual status.

Certain structuring fees and amendment fees are recorded as other income when earned. Administrative agent fees received by us are recorded as other income when the services are rendered.

### Valuation of Portfolio Investments

Investments for which market quotations are readily available are typically valued at such market quotations. Market quotations are obtained from an independent pricing service, where available. If a price cannot be obtained from an independent pricing service or if the independent pricing service is not deemed to be representative with the market, certain investments held by the Company will be valued on the basis of prices provided by principal market makers. Generally investments marked in this manner will be marked at the mean of the bid and ask of the independent broker quotes obtained, in some cases, primarily illiquid securities, multiple quotes may not be available and the mid of the bid/ask from one broker will be used. To validate market quotations, the Company utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value, subject at all times to the oversight and approval of the Board, based on, among other things, the input of the Advisor, the Company’s Audit Committee and one or more independent third party firms engaged by the Board.

With respect to unquoted securities, the Company will value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will use the pricing indicated by the external event to corroborate and/or assist us in our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

With respect to investments for which market quotations are not readily available, the Advisor will undertake a multi-step valuation process, which includes among other things, the below:

- The Company’s quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Advisor responsible for the portfolio investment or by an independent valuation firm.
- Preliminary valuation conclusions are then documented and discussed with the Company’s senior management and the Advisor. Agreed upon valuation recommendations are presented to the Audit Committee.
- The Audit Committee of the Board reviews the valuations presented and recommends values for each of the investments to the Board: and
- The Board will discuss valuations and determine the fair value of each investment in good faith based upon, among other things, the input of the Advisor, independent valuation firms, where applicable, and the Audit Committee.

In following this approach, the types of factors that are taken into account in the fair value pricing investments include, as relevant, but not limited to: comparison to publicly traded securities, including factors such as yield, maturity and measures of credit quality; the enterprise value of a portfolio company; the nature and realizable value of any collateral; the portfolio companies ability to make payments and its earnings and discounted cash flows; and the markets in which the portfolio company does business. In cases where an independent valuation firm provides fair valuations for investments, the independent valuation firm provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion. The Company determines the fair value of its investment in ABCS giving consideration to the assets and liabilities of ABCS, at fair value, including consideration of any necessary adjustments. The Company currently conducts this valuation process on a quarterly basis.

### Recent Accounting Pronouncements

In March 2017, the FASB issued ASU 2017-08, “*Receivables — Nonrefundable Fees and Other Costs* (Subtopic 310-20): *Premium Amortization on Purchased Callable Debt Securities.”* ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium by requiring the premium to be amortized to the earliest call date. This new guidance is effective prospectively for fiscal years beginning after December 15, 2018, as well as for interim periods within those fiscal years. Early adoption is permitted for certain types of transactions. The Company is currently evaluating the impact this change will have on its consolidated financial statements and disclosures.

## Market risk

As filed, 2,491 characters.

We are subject to financial market risks, including changes in interest rates. We will generally invest in illiquid loans and securities including debt and equity securities of middle-market companies. Because we expect that there will not be a readily available market for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by the Board using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

Assuming that the statement of financial condition as of March 31, 2018 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates.

| Change in Interest Rates | Increase (Decrease) in Interest Income | Increase (Decrease) in Interest Expense | Net Increase (Decrease) in Net Investment Income |
| --- | ---: | ---: | ---: |
| Down 25 basis points | $(1,610,187) | $(973,497) | $(636,690) |
| Up 100 basis points | 6,807,353 | 3,893,988 | 2,913,365 |
| Up 200 basis points | 14,787,369 | 7,787,975 | 6,999,394 |
| Up 300 basis points | 22,816,153 | 11,681,963 | 11,134,190 |

From time to time, we may make investments that are denominated in a foreign currency. These investments are translated into U.S. dollars at the balance sheet date, exposing us to movements in foreign exchange rates. We may employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us. We may seek to utilize instruments such as, but not limited to, forward contracts to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates. We also have the ability to borrow in certain foreign currencies under our Revolving Credit Agreement. Instead of entering into a foreign exchange forward contract in connection with loans or other investments we have made that are denominated in a foreign currency, we may borrow in that currency to establish a natural hedge against our loan or investment.

## Controls and procedures

As filed, 1,440 characters.

As of March 31, 2018 (the end of the period covered by this report), our management has carried out an evaluation, under the supervision 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 Rule 13a-15 under the Exchange Act). Based on that evaluation our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, to material information relating to us that is required to be disclosed by us in the reports we file or submit under the Exchange Act. 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.

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

## Risk factors

As filed, 795 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties are not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. During the three months ended March 31, 2018, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2017.

Filed May 10, 2018.
Source: SEC EDGAR, the filing index for accession 0001104659-18-032148. Last ingested by Listed: Nov 10, 2026, 04:19 ET. No prices; not investment advice.