R
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Maryland
|
20-8700615
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
Number)
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer R
|
Smaller
reporting company ¨
|
(Do
not check if a smaller reporting company)
|
Page
|
||
PART
I. FINANCIAL INFORMATION
|
||
Item
1.
|
Financial
Statements
|
|
•
|
Consolidated
Statement of Assets and Liabilities as of May 31, 2010 (unaudited) and
February 28, 2010
|
3
|
•
|
Consolidated
Statements of Operations for the three months ended May 31, 2010 and 2009
(unaudited)
|
4
|
•
|
Consolidated
Schedules of Investments as of May 31, 2010 (unaudited) and February 28,
2010
|
5
|
•
|
Consolidated
Statements of Changes in Net Assets for the three months ended May 31,
2010 and 2009 (unaudited)
|
10
|
•
|
Consolidated
Statements of Cash Flows for the three months ended May 31, 2010 and 2009
(unaudited)
|
11
|
•
|
Notes
to Consolidated Financial Statements as of May 31, 2010
(unaudited)
|
12
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
26
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
39
|
Item
4.
|
Controls
and Procedures
|
41
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PART
II. OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
42
|
Item
1A.
|
Risk
Factors
|
42
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
42
|
Item
3.
|
Defaults
Upon Senior Securities
|
42
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
42
|
Item
5.
|
Other
Information
|
42
|
Item
6.
|
Exhibits
|
42
|
SIGNATURES
|
43
|
As
of
|
||||||||
May
31, 2010
|
February
28, 2010
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Investments
at fair value
|
||||||||
Non-control/non-affiliate
investments (amortized cost of $113,009,708 and $117,678,275,
respectively)
|
$ | 71,719,742 | $ | 72,674,847 | ||||
Control
investments (cost of $29,233,097 and $29,233,097,
respectively)
|
18,208,657 | 16,698,303 | ||||||
Total
investments at fair value (amortized cost of $142,242,805 and
$146,911,372, respectively)
|
89,928,399 | 89,373,150 | ||||||
Cash
and cash equivalents
|
2,928,017 | 3,352,434 | ||||||
Cash
and cash equivalents, securitization accounts
|
378,728 | 225,424 | ||||||
Outstanding
interest rate cap at fair value (cost of $131,000 and $131,000,
respectively)
|
22,278 | 42,147 | ||||||
Interest
receivable, net of reserve of $3,269,723 and $2,120,309,
respectively
|
2,589,212 | 3,473,961 | ||||||
Management
fee receivable
|
231,300 | 327,928 | ||||||
Other
assets
|
401,636 | 140,272 | ||||||
Total
assets
|
$ | 96,479,570 | $ | 96,935,316 | ||||
LIABILITIES
|
||||||||
Revolving
credit facility
|
$ | 33,807,431 | $ | 36,992,222 | ||||
Management
and incentive fees payable
|
3,482,482 | 3,071,093 | ||||||
Accounts
payable and accrued expenses
|
779,972 | 1,111,081 | ||||||
Interest
and credit facility fees payable
|
270,246 | 267,166 | ||||||
Due
to manager
|
6,549 | 15,602 | ||||||
Total
liabilities
|
$ | 38,346,680 | $ | 41,457,164 | ||||
NET
ASSETS
|
||||||||
Common
stock, par value $.0001 per share, 100,000,000 common
shares
|
||||||||
authorized,
16,940,109 common shares issued and outstanding
|
$ | 1,694 | $ | 1,694 | ||||
Capital
in excess of par value
|
128,339,497 | 128,339,497 | ||||||
Accumulated
undistributed net investment loss
|
(2,843,933 | ) | (2,846,135 | ) | ||||
Accumulated
net realized loss from investments and derivatives
|
(14,941,240 | ) | (12,389,830 | ) | ||||
Net
unrealized depreciation on investments and derivatives
|
(52,423,128 | ) | (57,627,074 | ) | ||||
Total
Net Assets
|
58,132,890 | 55,478,152 | ||||||
Total
liabilities and Net Assets
|
$ | 96,479,570 | $ | 96,935,316 | ||||
NET
ASSET VALUE PER SHARE
|
$ | 3.43 | $ | 3.27 |
For the three months ended
May 31, 2010
|
For the three months ended
May 31, 2009
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
INVESTMENT
INCOME
|
||||||||
Interest
from investments
|
||||||||
Non-control/Non-affiliate
investments
|
$ | 1,617,267 | $ | 3,318,840 | ||||
Control
investments
|
652,720 | 868,229 | ||||||
Total
interest income
|
2,269,987 | 4,187,069 | ||||||
Interest
from cash and cash equivalents
|
319 | 13,191 | ||||||
Management
fee income
|
506,785 | 520,992 | ||||||
Other
income
|
33,559 | 43,134 | ||||||
Total
investment income
|
2,810,650 | 4,764,386 | ||||||
EXPENSES
|
||||||||
Interest
and credit facility financing expenses
|
831,121 | 642,893 | ||||||
Base
management fees
|
411,389 | 547,744 | ||||||
Professional
fees
|
1,142,537 | 339,780 | ||||||
Administrator
expenses
|
155,137 | 171,861 | ||||||
Incentive
management fees
|
- | 322,183 | ||||||
Insurance
|
194,654 | 206,017 | ||||||
Directors
fees and expenses
|
164,611 | 82,000 | ||||||
General
& administrative
|
64,136 | 59,780 | ||||||
Expenses
before expense waiver and reimbursement
|
2,963,585 | 2,372,258 | ||||||
Expense
reimbursement
|
(155,137 | ) | (171,861 | ) | ||||
Total
expenses net of expense waiver and reimbursement
|
2,808,448 | 2,200,397 | ||||||
NET
INVESTMENT INCOME
|
2,202 | 2,563,989 | ||||||
REALIZED
AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
|
||||||||
Net
realized loss from investments
|
(2,551,410 | ) | (5,152 | ) | ||||
Net
unrealized appreciation on investments
|
5,223,815 | 2,769,292 | ||||||
Net
unrealized appreciation/(depreciation) on derivatives
|
(19,869 | ) | 35,687 | |||||
Net
gain on investments
|
2,652,536 | 2,799,827 | ||||||
NET
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$ | 2,654,738 | $ | 5,363,816 | ||||
WEIGHTED
AVERAGE - BASIC AND DILUTED EARNINGS PER COMMON SHARE
|
$ | 0.16 | $ | 0.65 | ||||
WEIGHTED
AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED
|
16,940,109 | 8,291,384 |
Company (a, c)
|
Industry
|
Investment Interest
Rate/Maturity
|
Principal/
Number of Shares
|
Cost
|
Fair Value
|
% of
Net
Assets
|
||||||||||||||
Non-control/Non-affiliated
investments - 123.4% (b)
|
||||||||||||||||||||
GFSI
Inc (d)
|
Apparel
|
Senior
Secured Notes
10.50%,
6/1/2011
|
$ | 7,082,000 | $ | 7,082,000 | $ | 7,082,000 | 12.2 | % | ||||||||||
Legacy
Cabinets Holdings (d, i)
|
Building
Products
|
Common
Voting A-1
|
2,535 | 220,900 | 220,900 | 0.4 | % | |||||||||||||
Legacy
Cabinets Holdings (d, i)
|
Building
Products
|
Common
Voting B-1
|
1,600 | 139,424 | 139,424 | 0.2 | % | |||||||||||||
Legacy
Cabinets, Inc. (d, i)
|
Building
Products
|
First
Lien Term Loan
7.25%,
5/3/2014
|
281,644 | 281,644 | 192,926 | 0.3 | % | |||||||||||||
Total
Building Products
|
285,779 | 641,968 | 553,250 | 0.9 | % | |||||||||||||||
Hopkins
Manufacturing Corporation (d)
|
Consumer
Products
|
Second
Lien Term Loan
7.61%,
1/26/2012
|
3,250,000 | 3,248,218 | 3,120,000 | 5.4 | % | |||||||||||||
Targus
Group International, Inc. (d)
|
Consumer
Products
|
First
Lien Term Loan
10.25%,
11/22/2012
|
3,128,814 | 2,969,724 | 2,753,356 | 4.7 | % | |||||||||||||
Targus
Holdings, Inc. (d)
|
Consumer
Products
|
Unsecured
Notes
10.00%,
12/14/2015
|
1,538,235 | 1,538,235 | 799,882 | 1.4 | % | |||||||||||||
Targus
Holdings, Inc. (d, i)
|
Consumer
Products
|
Common
|
62,413 | 566,765 | 686,543 | 1.2 | % | |||||||||||||
Total
Consumer Products
|
7,979,462 | 8,322,942 | 7,359,781 | 12.7 | % | |||||||||||||||
CFF
Acquisition LLC (d)
|
Consumer
Services
|
First
Lien Term Loan
7.50%,
7/31/2013
|
305,973 | 305,973 | 264,667 | 0.5 | % | |||||||||||||
M/C
Communications, LLC (d)
|
Education
|
First
Lien Term Loan
6.75%,
12/31/2012
|
834,131 | 834,131 | 554,697 | 1.0 | % | |||||||||||||
M/C
Communications, LLC (d, i)
|
Education
|
Class
A Common Stock
|
166,327 | 30,241 | 13,306 | 0.0 | % | |||||||||||||
Total
Education
|
1,000,458 | 864,372 | 568,003 | 1.0 | % | |||||||||||||||
Advanced
Lighting Technologies, Inc. (d)
|
Electronics
|
Second
Lien Term Loan
6.28%,
6/1/2014
|
2,000,000 | 1,825,912 | 1,630,000 | 2.8 | % | |||||||||||||
Group
Dekko (d)
|
Electronics
|
Second
Lien Term Loan
10.50%,
1/20/2012
|
6,983,429 | 6,983,429 | 5,097,903 | 8.8 | % | |||||||||||||
Total
Electronics
|
8,983,429 | 8,809,341 | 6,727,903 | 11.6 | % | |||||||||||||||
USS
Parent Holding Corp. (d, i)
|
Environmental
|
Non
Voting Common Stock
|
765 | 133,002 | 99,141 | 0.2 | % | |||||||||||||
USS
Parent Holding Corp. (d, i)
|
Environmental
|
Voting
Common Stock
|
17,396 | 3,025,798 | 2,255,450 | 3.9 | % | |||||||||||||
Total
Environmental
|
18,161 | 3,158,800 | 2,354,591 | 4.1 | % | |||||||||||||||
Bankruptcy
Management Solutions, Inc. (d)
|
Financial
Services
|
Second
Lien Term Loan
6.60%,
7/31/2013
|
4,825,000 | 4,803,746 | 1,206,250 | 2.1 | % | |||||||||||||
Big
Train, Inc. (d)
|
Food
and Beverage
|
First
Lien Term Loan
7.75%,
3/31/2012
|
1,876,873 | 1,442,978 | 1,717,339 | 3.0 | % | |||||||||||||
IDI
Acquisition Corp. (d)
|
Healthcare
Services
|
Senior
Secured Notes
10.75%,
12/15/2011
|
3,800,000 | 3,695,657 | 3,724,000 | 6.4 | % | |||||||||||||
PRACS
Institute, LTD (d)
|
Healthcare
Services
|
Second
Lien Term Loan
10.00%,
4/17/2013
|
4,093,750 | 4,061,460 | 3,622,969 | 6.2 | % | |||||||||||||
Total
Healthcare Services
|
7,893,750 | 7,757,117 | 7,346,969 | 12.6 | % | |||||||||||||||
McMillin
Companies LLC (d)
|
Homebuilding
|
Senior
Secured Notes
9.53%,
10/31/2013
|
7,700,000 | 7,356,428 | 4,466,000 | 7.7 | % | |||||||||||||
Worldwide
Express Operations, LLC (d)
|
Logistics
|
First
Lien Term Loan
10.00%,
6/30/2013
|
2,835,072 | 2,831,452 | 2,069,603 | 3.6 | % | |||||||||||||
Jason
Incorporated (d, i)
|
Manufacturing
|
Unsecured
Notes
13.00%,
11/1/2010
|
12,000,000 | 12,000,000 | 960,000 | 1.7 | % | |||||||||||||
Jason
Incorporated (d, i)
|
Manufacturing
|
Unsecured
Notes
13.00%,
11/1/2010
|
1,700,000 | 1,700,000 | 136,000 | 0.2 | % | |||||||||||||
Specialized
Technology Resources, Inc. (d)
|
Manufacturing
|
Second
Lien Term Loan
7.35%,
12/15/2014
|
5,000,000 | 4,807,843 | 4,900,000 | 8.4 | % | |||||||||||||
Total
Manufacturing
|
18,700,000 | 18,507,843 | 5,996,000 | 10.3 | % | |||||||||||||||
Elyria
Foundry Company, LLC (d)
|
Metals
|
Senior
Secured Notes
13.00%,
3/1/2013
|
5,000,000 | 4,888,653 | 4,550,000 | 7.8 | % | |||||||||||||
Elyria
Foundry Company, LLC (d, i)
|
Metals
|
Warrants
|
3,000 | - | - | 0.0 | % | |||||||||||||
Total
Metals
|
5,003,000 | 4,888,653 | 4,550,000 | 7.8 | % |
Company (a, c)
|
Industry
|
Investment Interest
Rate/Maturity
|
Principal/
Number of Shares
|
Cost
|
Fair Value
|
% of
Net
Assets
|
||||||||||||||
Abitibi-Consolidated
Company of Canada (d,
e)
|
Natural
Resources
|
First
Lien Term Loan
11.00%,
3/30/2009
|
$ | 2,948,640 | $ | 2,948,640 | $ | 2,828,925 | 4.9 | % | ||||||||||
Grant
U.S. Holdings LLP (d, e, i)
|
Natural
Resources
|
Second
Lien Term Loan
10.75%,
9/20/2013
|
6,349,512 | 6,349,348 | 592,409 | 1.0 | % | |||||||||||||
Total
Natural Resources
|
9,298,152 | 9,297,988 | 3,421,334 | 5.9 | % | |||||||||||||||
Energy
Alloys, LLC (d)
|
Oil
and Gas
|
Second
Lien Term Loan
3.00%,
6/30/2015
|
6,285,070 | 6,285,070 | 609,652 | 1.0 | % | |||||||||||||
Energy
Alloys, LLC (d, i)
|
Oil
and Gas
|
Warrants
|
3 | - | - | 0.0 | % | |||||||||||||
Total
Oil and Gas
|
6,285,073 | 6,285,070 | 609,652 | 1.0 | % | |||||||||||||||
Terphane
Holdings Corp. (d, e, i)
|
Packaging
|
Senior
Secured Notes
12.50%,
6/15/2010
|
4,850,000 | 4,850,000 | 4,437,750 | 7.6 | % | |||||||||||||
Terphane
Holdings Corp. (d, e, i)
|
Packaging
|
Senior
Secured Notes
12.50%,
6/15/2010
|
5,087,250 | 5,087,250 | 4,654,834 | 8.0 | % | |||||||||||||
Terphane
Holdings Corp. (d, e, i)
|
Packaging
|
Senior
Secured Notes
11.92%,
6/15/2010
|
500,000 | 500,000 | 457,500 | 0.8 | % | |||||||||||||
Total
Packaging
|
10,437,250 | 10,437,250 | 9,550,084 | 16.4 | % | |||||||||||||||
Brown
Publishing Company (d, i)
|
Publishing
|
Second
Lien Term Loan
8.76%,
9/19/2014
|
1,203,226 | 1,198,390 | 15,040 | 0.0 | % | |||||||||||||
Network
Communications, Inc. (d, i)
|
Publishing
|
Unsecured
Notes
10.75%,
12/1/2013
|
5,000,000 | 5,065,452 | 2,412,500 | 4.1 | % | |||||||||||||
Penton
Media, Inc. (d)
|
Publishing
|
First
Lien Term Loan
5.00%,
8/1/2014
|
4,840,388 | 3,951,945 | 3,448,776 | 5.9 | % | |||||||||||||
Total
Publishing
|
11,043,614 | 10,215,787 | 5,876,316 | 10.0 | % | |||||||||||||||
Sub
Total Non-control/Non-affiliated investments
|
113,009,708 | 71,719,742 | 123.4 | % | ||||||||||||||||
Control
investments - 31.3% (b)
|
||||||||||||||||||||
GSC
Partners CDO GP III, LP (h, i)
|
Financial
Services
|
100%
General
Partnership
Interest
|
- | - | - | 0.0 | % | |||||||||||||
GSC
Investment Corp. CLO 2007 LTD. (f,
h)
|
Structured
Finance Securities
|
Other/Structured
Finance
Securities
9.73%,
1/21/2020
|
30,000,000 | 29,233,097 | 18,208,657 | 31.3 | % | |||||||||||||
Sub
Total Control investments
|
29,233,097 | 18,208,657 | 31.3 | % | ||||||||||||||||
Affiliate
investments - 0.0% (b)
|
||||||||||||||||||||
GSC
Partners CDO GP III, LP (g, i)
|
Financial
Services
|
6.24%
Limited
Partnership
Interest
|
- | - | - | 0.0 | % | |||||||||||||
Sub
Total Affiliate investments
|
- | - | 0.0 | % | ||||||||||||||||
TOTAL
INVESTMENT ASSETS - 154.7% (b)
|
$ | 142,242,805 | $ | 89,928,399 | 154.7 | % |
Outstanding
interest rate cap
|
Interest
rate
|
Maturity
|
Notional
|
Cost
|
Fair
Value
|
%
of
Net
Assets
|
|||||||||||||||
Interest
rate cap
|
8.0 | % |
2/9/2014
|
$ | 36,734,694 | $ | 87,000 | $ | 15,812 | 0.0 | % | ||||||||||
Interest
rate cap
|
8.0 | % |
11/30/2013
|
26,433,408 | 44,000 | 6,466 | 0.0 | % | |||||||||||||
Sub
Total Outstanding interest rate cap
|
$ | 131,000 | $ | 22,278 | 0.0 | % |
Interest
|
Management
|
Net
Realized
|
Net
unrealized
|
|||||||||||||||||||||||||
Company
|
Purchases
|
Redemptions
|
Sales
(cost)
|
Income
|
fee
income
|
gains/(losses)
|
gains/(losses)
|
|||||||||||||||||||||
GSC
Partners CDO GP III, LP
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
Interest
|
Management
|
Net
Realized
|
Net
unrealized
|
|||||||||||||||||||||||||
Company
|
Purchases
|
Redemptions
|
Sales
(cost)
|
Income
|
fee
income
|
gains/(losses)
|
gains/(losses)
|
|||||||||||||||||||||
GSC
Investment Corp. CLO 2007 LTD.
|
$ | - | $ | - | $ | - | $ | 652,720 | $ | 506,785 | $ | - | $ | 1,510,354 | ||||||||||||||
GSC
Partners CDO GP III, LP
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - |
Company (a, c)
|
Industry
|
Investment Interest
Rate/Maturity
|
Principal/
Number of Shares
|
Cost
|
Fair Value
|
% of
Net
Assets
|
||||||||||||||
Non-control/Non-affiliated
investments - 131.0% (b)
|
||||||||||||||||||||
GFSI
Inc (d)
|
Apparel
|
Senior
Secured Notes
10.50%,
6/1/2011
|
$ | 7,082,000 | $ | 7,082,000 | $ | 6,909,907 | 11.9 | % | ||||||||||
Legacy
Cabinets, Inc. (d, i)
|
Building
Products
|
First
Lien Term Loan
6.58%,
8/18/2012
|
1,479,842 | 1,463,159 | 444,841 | 0.8 | % | |||||||||||||
Legacy
Cabinets, Inc. (d, i)
|
Building
Products
|
Second
Lien Term Loan
12.50%,
8/18/2013
|
1,862,420 | 1,828,197 | 85,113 | 0.1 | % | |||||||||||||
Total
Building Products
|
3,342,262 | 3,291,356 | 529,954 | 0.9 | % | |||||||||||||||
Hopkins
Manufacturing Corporation (d)
|
Consumer
Products
|
Second
Lien Term Loan
7.50%,
1/26/2012
|
3,250,000 | 3,247,947 | 3,003,650 | 5.2 | % | |||||||||||||
Targus
Group International, Inc. (d)
|
Consumer
Products
|
First
Lien Term Loan
10.25%,
11/22/2012
|
3,109,712 | 2,936,092 | 2,738,101 | 4.7 | % | |||||||||||||
Targus
Holdings, Inc. (d)
|
Consumer
Products
|
Unsecured
Notes
10.00%,
12/14/2015
|
1,538,235 | 1,538,235 | 1,529,467 | 2.6 | % | |||||||||||||
Targus
Holdings, Inc. (d, i)
|
Consumer
Products
|
Common
|
62,413 | 566,765 | 237,169 | 0.4 | % | |||||||||||||
Total
Consumer Products
|
7,960,360 | 8,289,039 | 7,508,387 | 12.9 | % | |||||||||||||||
CFF
Acquisition LLC (d)
|
Consumer
Services
|
First
Lien Term Loan
7.50%,
7/31/2013
|
306,855 | 306,855 | 255,242 | 0.4 | % | |||||||||||||
M/C
Communications, LLC (d)
|
Education
|
First
Lien Term Loan
6.75%,
12/31/2012
|
831,174 | 831,174 | 616,897 | 1.1 | % | |||||||||||||
M/C
Communications, LLC (d, i)
|
Education
|
Class
A Common Stock
|
166,327 | 30,241 | 16,633 | 0.0 | % | |||||||||||||
Total
Education
|
997,501 | 861,415 | 633,530 | 1.1 | % | |||||||||||||||
Advanced
Lighting Technologies, Inc. (d)
|
Electronics
|
Second
Lien Term Loan
6.23%,
6/1/2014
|
2,000,000 | 1,814,950 | 1,764,600 | 3.0 | % | |||||||||||||
Group
Dekko (d)
|
Electronics
|
Second
Lien Term Loan
10.50%,
1/20/2012
|
6,913,293 | 6,913,293 | 4,852,440 | 8.3 | % | |||||||||||||
Total
Electronics
|
8,913,293 | 8,728,243 | 6,617,040 | 11.4 | % | |||||||||||||||
USS
Parent Holding Corp. (d, i)
|
Environmental
|
Non
Voting Common Stock
|
765 | 133,002 | 86,745 | 0.1 | % | |||||||||||||
USS
Parent Holding Corp. (d, i)
|
Environmental
|
Voting
Common Stock
|
17,396 | 3,025,798 | 1,973,453 | 3.3 | % | |||||||||||||
Total
Environmental
|
18,161 | 3,158,800 | 2,060,198 | 3.5 | % | |||||||||||||||
Bankruptcy
Management Solutions, Inc. (d)
|
Financial
Services
|
Second
Lien Term Loan
6.48%,
7/31/2013
|
4,837,500 | 4,814,623 | 983,464 | 1.7 | % | |||||||||||||
Big
Train, Inc. (d)
|
Food
and Beverage
|
First
Lien Term Loan
7.75%,
3/31/2012
|
1,931,121 | 1,451,316 | 1,696,876 | 2.9 | % | |||||||||||||
IDI
Acquisition Corp. (d)
|
Healthcare
Services
|
Senior
Secured Notes
10.75%,
12/15/2011
|
3,800,000 | 3,679,489 | 3,620,640 | 6.2 | % | |||||||||||||
PRACS
Institute, LTD (d)
|
Healthcare
Services
|
Second
Lien Term Loan
8.26%,
4/17/2013
|
4,093,750 | 4,058,633 | 3,568,931 | 6.2 | % | |||||||||||||
Total
Healthcare Services
|
7,893,750 | 7,738,122 | 7,189,571 | 12.4 | % | |||||||||||||||
McMillin
Companies LLC (d)
|
Homebuilding
|
Senior
Secured Notes
9.53%,
10/31/2013
|
7,700,000 | 7,334,121 | 3,634,400 | 6.3 | % | |||||||||||||
Worldwide
Express Operations, LLC (d)
|
Logistics
|
First
Lien Term Loan
10.00%,
6/30/2013
|
2,820,467 | 2,816,547 | 2,230,143 | 3.9 | % | |||||||||||||
Jason
Incorporated (d, i)
|
Manufacturing
|
Unsecured
Notes
13.00%,
11/1/2010
|
12,000,000 | 12,000,000 | 1,478,400 | 2.5 | % | |||||||||||||
Jason
Incorporated (d, i)
|
Manufacturing
|
Unsecured
Notes
13.00%,
11/1/2010
|
1,700,000 | 1,700,000 | 209,440 | 0.4 | % | |||||||||||||
Specialized
Technology Resources, Inc. (d)
|
Manufacturing
|
Second
Lien Term Loan
7.23%,
12/15/2014
|
5,000,000 | 4,799,666 | 4,711,000 | 8.0 | % | |||||||||||||
Total
Manufacturing
|
18,700,000 | 18,499,666 | 6,398,840 | 11.0 | % | |||||||||||||||
Elyria
Foundry Company, LLC (d)
|
Metals
|
Senior
Secured Notes
13.00%,
3/1/2013
|
5,000,000 | 4,883,382 | 3,785,500 | 6.5 | % | |||||||||||||
Elyria
Foundry Company, LLC (d, i)
|
Metals
|
Warrants
|
3,000 | - | 8,610 | 0.0 | % | |||||||||||||
Total
Metals
|
5,003,000 | 4,883,382 | 3,794,110 | 6.5 | % |
Company (a, c)
|
Industry
|
Investment Interest
Rate/Maturity
|
Principal/
Number of Shares
|
Cost
|
Fair Value
|
% of
Net
Assets
|
||||||||||||||
Abitibi-Consolidated
Company of Canada (d,
e)
|
Natural
Resources
|
First
Lien Term Loan
11.00%,
3/30/2009
|
$ | 2,948,639 | $ | 2,948,639 | $ | 2,830,694 | 4.9 | % | ||||||||||
Grant
U.S. Holdings LLP (d, e, i)
|
Natural
Resources
|
Second
Lien Term Loan
10.75%,
9/20/2013
|
6,349,512 | 6,349,348 | 158,738 | 0.3 | % | |||||||||||||
Total
Natural Resources
|
9,298,151 | 9,297,987 | 2,989,432 | 5.1 | % | |||||||||||||||
Energy
Alloys, LLC (d)
|
Oil
and Gas
|
Second
Lien Term Loan
3.00%,
6/30/2015
|
6,239,318 | 6,239,318 | 1,128,693 | 1.9 | % | |||||||||||||
Energy
Alloys, LLC (d, i)
|
Oil
and Gas
|
Warrants
|
3 | - | - | 0.0 | % | |||||||||||||
Total
Oil and Gas
|
6,239,321 | 6,239,318 | 1,128,693 | 1.9 | % | |||||||||||||||
Terphane
Holdings Corp. (d, e)
|
Packaging
|
Senior
Secured Notes
12.50%,
6/15/2010
|
4,850,000 | 4,850,000 | 4,549,785 | 7.8 | % | |||||||||||||
Terphane
Holdings Corp. (d, e)
|
Packaging
|
Senior
Secured Notes
12.50%,
6/15/2010
|
5,087,250 | 5,087,250 | 4,772,349 | 8.2 | % | |||||||||||||
Terphane
Holdings Corp. (d, e)
|
Packaging
|
Senior
Secured Notes
10.92%,
6/15/2010
|
500,000 | 500,000 | 469,050 | 0.8 | % | |||||||||||||
Total
Packaging
|
10,437,250 | 10,437,250 | 9,791,184 | 16.8 | % | |||||||||||||||
Custom
Direct, Inc. (d)
|
Printing
|
First
Lien Term Loan
3.06%,
12/31/2013
|
1,832,053 | 1,527,103 | 1,614,222 | 2.7 | % | |||||||||||||
Affinity
Group, Inc. (d)
|
Publishing
|
First
Lien Term Loan
12.75%,
3/31/2010
|
361,020 | 360,554 | 361,020 | 0.6 | % | |||||||||||||
Affinity
Group, Inc. (d)
|
Publishing
|
First
Lien Term Loan
12.75%,
3/31/2010
|
386,625 | 386,129 | 386,626 | 0.7 | % | |||||||||||||
Brown
Publishing Company (d, i)
|
Publishing
|
Second
Lien Term Loan
8.76%,
9/19/2014
|
1,203,226 | 1,198,390 | 10,709 | 0.0 | % | |||||||||||||
Network
Communications, Inc. (d)
|
Publishing
|
Unsecured
Notes
10.75%,
12/1/2013
|
5,000,000 | 5,067,619 | 2,473,000 | 4.3 | % | |||||||||||||
Penton
Media, Inc. (d)
|
Publishing
|
First
Lien Term Loan
2.50%,
2/1/2013
|
4,847,802 | 3,908,440 | 3,478,299 | 5.9 | % | |||||||||||||
Total
Publishing
|
11,798,673 | 10,921,132 | 6,709,654 | 11.5 | % | |||||||||||||||
Sub
Total Non-control/Non-affiliated investments
|
117,678,275 | 72,674,847 | 125.0 | % | ||||||||||||||||
Control
investments - 30.1% (b)
|
||||||||||||||||||||
GSC
Partners CDO GP III, LP (h, i)
|
Financial
Services
|
100%
General
Partnership
Interest
|
- | - | - | 0.0 | % | |||||||||||||
GSC
Investment Corp. CLO 2007 LTD. (f,
h)
|
Structured
Finance Securities
|
Other/Structured
Finance
Securities
8.27%,
1/21/2020
|
30,000,000 | 29,233,097 | 16,698,303 | 28.7 | % | |||||||||||||
Sub
Total Control investments
|
29,233,097 | 16,698,303 | 28.7 | % |
Company (a, c)
|
Industry
|
Investment Interest
Rate/Maturity
|
Principal/
Number of Shares
|
Cost
|
Fair Value
|
% of
Net
Assets
|
||||||||||||||
Affiliate
investments - 0.0% (b)
|
||||||||||||||||||||
GSC
Partners CDO GP III, LP (g, i)
|
Financial
Services
|
6.24%
Limited
Partnership
Interest
|
- | - | - | 0.0 | % | |||||||||||||
Sub
Total Affiliate investments
|
- | - | 0.0 | % | ||||||||||||||||
TOTAL
INVESTMENT ASSETS - 161.1% (b)
|
$ | 146,911,372 | $ | 89,373,150 | 153.7 | % |
Outstanding
interest rate cap
|
Interest
rate
|
Maturity
|
Notional
|
Cost
|
Fair
Value
|
%
of
Net
Assets
|
|||||||||||||||
Interest
rate cap
|
8.0 | % |
2/9/2014
|
$ | 39,183,673 | $ | 87,000 | $ | 30,097 | 0.1 | % | ||||||||||
Interest
rate cap
|
8.0 | % |
11/30/2013
|
26,433,408 | 44,000 | 12,050 | 0.0 | % | |||||||||||||
Sub
Total Outstanding interest rate cap
|
$ | 131,000 | $ | 42,147 | 0.1 | % |
Interest
|
Management
|
Net Realized
|
Net unrealized
|
|||||||||||||||||||||||||
Company
|
Purchases
|
Redemptions
|
Sales (cost)
|
Income
|
fee income
|
gains/(losses)
|
gains/(losses)
|
|||||||||||||||||||||
GSC
Partners CDO GP III, LP
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | (10,527 | ) |
Interest
|
Management
|
Net Realized
|
Net unrealized
|
|||||||||||||||||||||||||
Company
|
Purchases
|
Redemptions
|
Sales (cost)
|
Income
|
fee income
|
gains/(losses)
|
gains/(losses)
|
|||||||||||||||||||||
GSC
Investment Corp. CLO 2007 LTD.
|
$ | - | $ | - | $ | - | $ | 2,397,514 | $ | 2,057,397 | $ | - | $ | (4,970,217 | ) | |||||||||||||
GSC
Partners CDO GP III, LP
|
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | (98,412 | ) |
For the three months ended
May 31, 2010
|
For the three months ended
May 31, 2009
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
INCREASE
FROM OPERATIONS:
|
||||||||
Net
investment income
|
$ | 2,202 | $ | 2,563,989 | ||||
Net
realized loss from investments
|
(2,551,410 | ) | (5,152 | ) | ||||
Net
unrealized appreciation on investments
|
5,223,815 | 2,769,292 | ||||||
Net
unrealized appreciation/(depreciation) on derivatives
|
(19,869 | ) | 35,687 | |||||
Net increase
in net assets from operations
|
2,654,738 | 5,363,816 | ||||||
Total
increase in net assets
|
2,654,738 | 5,363,816 | ||||||
Net
assets at beginning of period
|
55,478,152 | 68,013,777 | ||||||
Net
assets at end of period
|
$ | 58,132,890 | $ | 73,377,593 | ||||
Net
asset value per common share
|
$ | 3.43 | $ | 8.85 | ||||
Common
shares outstanding at end of period
|
16,940,109 | 8,291,384 | ||||||
Accumulated
undistributed net investment income (loss)
|
$ | (2,843,933 | ) | $ | 8,686,481 |
For the three months ended
May 31, 2010
|
For the three months ended
May 31, 2009
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Operating
activities
|
||||||||
NET
INCREASE IN NET ASSETS FROM OPERATIONS
|
$ | 2,654,738 | $ | 5,363,816 | ||||
ADJUSTMENTS
TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
|
||||||||
Paid-in-kind
interest income
|
(377,030 | ) | (193,771 | ) | ||||
Net
accretion of discount on investments
|
(182,648 | ) | (274,406 | ) | ||||
Amortization
of deferred credit facility financing costs
|
- | 71,320 | ||||||
Net
realized loss from investments
|
2,551,410 | 5,152 | ||||||
Net
unrealized appreciation on investments
|
(5,223,815 | ) | (2,769,292 | ) | ||||
Unrealized
(appreciation) depreciation on derivatives
|
19,869 | (35,687 | ) | |||||
Proceeds
from sale and redemption of investments
|
2,676,834 | 921,553 | ||||||
(Increase)
decrease in operating assets:
|
||||||||
Cash
and cash equivalents, securitization accounts
|
(153,304 | ) | (850,750 | ) | ||||
Interest
receivable
|
884,749 | 19,713 | ||||||
Management
fee receivable
|
96,628 | 64 | ||||||
Other
assets
|
(261,364 | ) | 180,268 | |||||
Increase
(decrease) in operating liabilities:
|
||||||||
Management
and incentive fees payable
|
411,389 | 869,927 | ||||||
Accounts
payable and accrued expenses
|
(331,109 | ) | (9,891 | ) | ||||
Interest
and credit facility fees payable
|
3,080 | 154,175 | ||||||
Due
to manager
|
(9,053 | ) | - | |||||
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
2,760,374 | 3,452,191 | ||||||
Financing
activities
|
||||||||
Paydowns
on debt
|
(3,184,791 | ) | (1,239,416 | ) | ||||
Credit
facility financing cost
|
- | (25,000 | ) | |||||
NET
CASH USED BY FINANCING ACTIVITIES
|
(3,184,791 | ) | (1,264,416 | ) | ||||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(424,417 | ) | 2,187,775 | |||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
3,352,434 | 6,356,225 | ||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 2,928,017 | $ | 8,544,000 | ||||
Supplemental
Information:
|
||||||||
Interest
paid during the period
|
$ | 828,040 | $ | 417,398 | ||||
Supplemental
non-cash information
|
||||||||
Paid-in-kind
interest income
|
$ | 377,030 | $ | 193,771 | ||||
Net
accretion of discount on investments
|
$ | 182,648 | $ | 274,406 | ||||
Amortization
of deferred credit facility financing costs
|
$ | - | $ | 71,320 |
|
•
|
Each investment is initially
valued by the responsible investment professionals and preliminary
valuation conclusions are documented and discussed with our senior
management; and
|
|
•
|
An independent valuation firm
engaged by our board of directors reviews at least one quarter of these
preliminary valuations each quarter so that the valuation of each
investment for which market quotes are not readily available is reviewed
by the independent valuation firm at least
annually.
|
|
•
|
The audit committee of our board
of directors reviews each preliminary valuation and our investment adviser
and independent valuation firm (if applicable) will supplement the
preliminary valuation to reflect any comments provided by the audit
committee; and
|
|
•
|
Our board of directors discuss
the valuations and determine the fair value of each investment, in good
faith, based on the input of our investment adviser, independent valuation
firm (if applicable) and audit
committee.
|
|
•
|
Level 1 – Valuations based on
quoted prices in active markets for identical assets or liabilities that
the Company has the ability to
access.
|
|
•
|
Level 2 – Valuations based on
inputs other than quoted prices in active markets, which are either
directly or indirectly
observable.
|
|
•
|
Level 3 – Valuations based on
inputs that are unobservable and significant to the overall fair value
measurement. The inputs into the determination of fair value may require
significant management judgment or estimation. Such information may be the
result of consensus pricing information or broker quotes which include a
disclaimer that the broker would not be held to such a price in an actual
transaction. The non-binding nature of consensus pricing and/or quotes
accompanied by disclaimer would result in classification as Level 3
information, assuming no additional corroborating
evidence.
|
Fair
Value Measurments Using
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
First
lien term loans
|
$ | – | $ | – | $ | 13,830 | $ | 13,830 | ||||||||
Second
lien term loans
|
– | – | 20,794 | 20,794 | ||||||||||||
Senior
secured notes
|
– | – | 29,372 | 29,372 | ||||||||||||
Unsecured
notes
|
– | – | 4,308 | 4,308 | ||||||||||||
Structured
finance securities
|
– | – | 18,209 | 18,209 | ||||||||||||
Common
stock/equities
|
– | – | 3,415 | 3,415 | ||||||||||||
Limited
partnership interest
|
– | – | – | – | ||||||||||||
Total
|
$ | – | $ | – | $ | 89,928 | $ | 89,928 |
Fair
Value Measurments Using
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
First
lien term loans
|
$ | – | $ | – | $ | 16,653 | $ | 16,653 | ||||||||
Second
lien term loans
|
– | – | 20,267 | 20,267 | ||||||||||||
Senior
secured notes
|
– | – | 27,742 | 27,742 | ||||||||||||
Unsecured
notes
|
– | – | 5,690 | 5,690 | ||||||||||||
Structured
finance securities
|
– | – | 16,698 | 16,698 | ||||||||||||
Common
stock/equities
|
– | – | 2,323 | 2,323 | ||||||||||||
Limited
partnership interest
|
– | – | – | – | ||||||||||||
Total
|
$ | – | $ | – | $ | 89,373 | $ | 89,373 |
First
lien
term
loans
|
Second
lien
term
loans
|
Senior
secured
notes
|
Unsecured
notes
|
Structured
finance
securities
|
Common
stock/equities
|
Total
|
||||||||||||||||||||||
Balance
as of February 28, 2010
|
$ | 16,653 | $ | 20,267 | $ | 27,742 | $ | 5,690 | $ | 16,698 | $ | 2,323 | $ | 89,373 | ||||||||||||||
Net
unrealized gains (losses)
|
547 | 2,228 | 1,586 | (1,380 | ) | 1,511 | 732 | 5,224 | ||||||||||||||||||||
Purchases
and other adjustments to cost
|
308 | 210 | 44 | (2 | ) | - | - | 560 | ||||||||||||||||||||
Sales
and redemptions
|
(2,664 | ) | (13 | ) | - | - | - | - | (2,677 | ) | ||||||||||||||||||
Net
realized loss from investments
|
(689 | ) | (1,863 | ) | - | - | - | - | (2,552 | ) | ||||||||||||||||||
Transfers
in/out
|
(325 | ) | (35 | ) | - | - | - | 360 | - | |||||||||||||||||||
Balance
as of May 31, 2010
|
$ | 13,830 | $ | 20,794 | $ | 29,372 | $ | 4,308 | $ | 18,209 | $ | 3,415 | $ | 89,928 |
Investments at
Amortized
Cost
|
Investments
at Fair Value
|
Fair Value
Percentage of
Total Portfolio
|
||||||||||
First
lien term loans
|
$
|
15,567
|
$
|
13,830
|
15.4
|
%
|
||||||
Second
lien term loans
|
39,563
|
20,794
|
23.1
|
|||||||||
Senior
secured notes
|
33,460
|
29,372
|
32.7
|
|||||||||
Unsecured
notes
|
20,304
|
4,308
|
4.8
|
|||||||||
Structured
finance securities
|
29,233
|
18,209
|
20.2
|
|||||||||
Common
stock/equities
|
4,116
|
3,415
|
3.8
|
|||||||||
Limited
partnership interest
|
–
|
–
|
–
|
|||||||||
Total
|
$
|
142,243
|
$
|
89,928
|
100.0
|
%
|
Investments at
Amortized
Cost
|
Investments
at Fair Value
|
Fair Value
Percentage of
Total Portfolio
|
||||||||||
First
lien term loans
|
$
|
18,936
|
$
|
16,653
|
18.6
|
%
|
||||||
Second
lien term loans
|
41,264
|
20,267
|
22.7
|
|||||||||
Senior
secured notes
|
33,416
|
27,742
|
31.0
|
|||||||||
Unsecured
notes
|
20,306
|
5,690
|
6.4
|
|||||||||
Structured
finance securities
|
29,233
|
16,698
|
18.7
|
|||||||||
Common
stock/equities
|
3,756
|
2,323
|
2.6
|
|||||||||
Limited
partnership interest
|
–
|
–
|
–
|
|||||||||
Total
|
$
|
146,911
|
$
|
89,373
|
100.0
|
%
|
Instrument
|
Type
|
Notional
|
Interest
Rate
|
Maturity
|
Fair Value
|
||||||||||
Interest
Rate Cap
|
Free
Standing Derivative
|
$
|
36,735
|
8.0
|
%
|
Feb
2014
|
$
|
16
|
|||||||
Interest
Rate Cap
|
Free
Standing Derivative
|
26,433
|
8.0
|
Nov
2013
|
6
|
||||||||||
Net
fair value
|
$
|
22
|
Instrument
|
Type
|
Notional
|
Interest
Rate
|
Maturity
|
Fair Value
|
||||||||||
Interest
Rate Cap
|
Free
Standing Derivative
|
$
|
39,184
|
8.0
|
%
|
Feb
2014
|
$
|
30
|
|||||||
Interest
Rate Cap
|
Free
Standing Derivative
|
26,433
|
8.0
|
Nov
2013
|
12
|
||||||||||
Net
fair value
|
$
|
42
|
Basic and diluted
|
May 31, 2010
|
May 31, 2009
|
||||||
Net
increase in net assets from operations
|
$
|
2,655
|
$
|
5,364
|
||||
Weighted
average common shares outstanding
|
16,940,109
|
8,291,384
|
||||||
Earnings
per common share-basic and diluted
|
$
|
0.16
|
$
|
0.65
|
Per share data:
|
May 31, 2010
|
May 31, 2009
|
||||||
Net
asset value at beginning of period
|
$
|
3.27
|
$
|
8.20
|
||||
Net
investment income (1) (5)
|
0.00
|
0.31
|
||||||
Net
realized losses on investments and derivatives
|
(0.15
|
)
|
-
|
|||||
Net
unrealized appreciation on investments and
derivatives
|
0.31
|
0.34
|
||||||
Net increase
in stockholders’ equity
|
0.16
|
0.65
|
||||||
Net
asset value at end of period
|
$
|
3.43
|
$
|
8.85
|
||||
Net
assets at end of period
|
$
|
58,132,890
|
$
|
73,377,593
|
||||
Shares
outstanding at end of period
|
16,940,109
|
8,291,384
|
||||||
Per
share market value at end of period
|
$
|
1.71
|
$
|
2.90
|
||||
Total
return based on market value (2)
|
(10.94
|
)%
|
45.73
|
%
|
||||
Total
return based on net asset value (3)
|
4.79
|
%
|
7.93
|
%
|
||||
Ratio/Supplemental
data: (6)
|
||||||||
Ratio
of net investment income net of expense waiver
and reimbursement to average net assets (4)
|
0.01
|
%
|
12.83
|
%
|
||||
Ratio
of operating expenses net of expense waiver and reimbursement to
average net assets (4)
|
13.34
|
%
|
6.18
|
%
|
||||
Ratio
of incentive management fees to average net assets
|
0.00
|
%
|
1.61
|
%
|
||||
Ratio
of credit facility related expenses to average net assets
|
5.61
|
%
|
3.22
|
%
|
||||
Ratio
of total expenses net of expense waiver and reimbursement to
average net assets (4)
|
18.95
|
%
|
11.01
|
%
|
(1)
|
Net investment (loss) income
excluding expense waiver and reimbursement equals ($0.01) and $0.29 per
share for the quarters ended May 31, 2010 and May 31, 2009,
respectively.
|
(2)
|
Total annual return is historical
and assumes changes in share price, reinvestments of all dividends
and distributions, and no sales change for the
year.
|
(3)
|
Total annual return is historical
and assumes changes in net assets value, reinvestments of all dividends
and distributions, and no sales change for the
year.
|
(4)
|
For the quarter ended May 31,
2010, excluding the expense waiver and reimbursement arrangement, the
ratio of net investment income, operating expenses, total expenses to
average net assets is (1.03%), 14.39% and 19.99%, respectively. For the
quarter ended May 31, 2009, excluding the expense waiver and reimbursement
arrangement, the ratio of net investment income, operating expenses, total
expenses to average net assets is 11.97%, 7.04% and 11.87%,
respectively.
|
(5)
|
Amount
is less than $0.005 for the quarter end May 31,
2010.
|
(6)
|
Ratios
are annualized.
|
•
|
our future operating
results;
|
•
|
our business prospects and the
prospects of our portfolio
companies;
|
•
|
the impact of investments that we
expect to make;
|
•
|
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 portfolio
companies to achieve their
objectives;
|
•
|
our expected financings and
investments;
|
•
|
our regulatory structure and tax
treatment, including our ability to operate as a business development
company and a regulated investment
company;
|
•
|
the adequacy of our cash
resources and working
capital;
|
•
|
the timing of cash flows, if any,
from the operations of our portfolio
companies;
|
•
|
the ability of our investment
adviser to locate suitable investments for us and to monitor and
effectively administer our investments;
and
|
•
|
continued access to our Revolving
Facility.
|
|
•
|
organization;
|
|
•
|
calculating our net asset value
(including the cost and expenses of any independent valuation
firm);
|
|
•
|
expenses incurred by our
investment adviser payable to third parties, including agents, consultants
or other advisers, in monitoring our financial and legal affairs and in
monitoring our investments and performing due diligence on our prospective
portfolio companies;
|
|
•
|
interest payable on debt, if any,
incurred to finance our
investments;
|
|
•
|
offerings of our common stock and
other securities;
|
|
•
|
investment advisory and
management fees;
|
|
•
|
administration
fees;
|
|
•
|
fees payable to third parties,
including agents, consultants or other advisers, relating to, or
associated with, evaluating and making
investments;
|
|
•
|
transfer agent and custodial
fees;
|
|
•
|
registration
fees;
|
|
•
|
listing
fees;
|
|
•
|
taxes;
|
|
•
|
independent directors’ fees and
expenses;
|
|
•
|
costs of preparing and filing
reports or other documents of the
SEC;
|
|
•
|
the costs of any
reports;
|
|
•
|
proxy statements or other notices
to stockholders, including printing
costs;
|
|
•
|
to the extent we are covered by
any joint insurance policies, our allocable portion of the insurance
premiums for such joint
policies;
|
|
•
|
direct costs and expenses of
administration, including auditor and legal costs;
and
|
|
•
|
all other expenses incurred by us
or our administrator in connection with administering our
business.
|
|
•
|
A fee, payable quarterly in
arrears, equal to 20% of our pre-incentive fee net investment income,
expressed as a rate of return on the value of the net assets at the end of
the immediately preceding quarter, that exceeds a 1.875% quarterly (7.5%
annualized) hurdle rate measured as of the end of each fiscal quarter.
Under this provision, in any fiscal quarter, our investment adviser
receives no incentive fee unless our pre-incentive fee net investment
income exceeds the hurdle rate of 1.875%. Amounts received as a return of
capital are not included in calculating this portion of the incentive fee.
Since the hurdle rate is based on net assets, a return of less than the
hurdle rate on total assets may still result in an incentive
fee.
|
|
•
|
A fee, payable at the end of each
fiscal year, equal to 20% of our net realized capital gains, if any,
computed net of all realized capital losses and unrealized capital
depreciation, in each case on a cumulative basis, less the aggregate
amount of capital gains incentive fees paid to the investment adviser
through such date.
|
At May 31, 2010
|
At February 28, 2010
|
|||||||
($
in millions)
|
||||||||
Number
of investments
|
36 | 38 | ||||||
Number
of portfolio companies
|
25 | 27 | ||||||
Average
investment size
|
$ | 2.0 | $ | 1.9 | ||||
Weighted
average maturity
|
2.3 years
|
2.5 years
|
||||||
Number
of industries
|
18 | 19 | ||||||
Average
investment per portfolio company
|
$ | 2.9 | $ | 2.7 | ||||
Non-Performing
or delinquent investments
|
$ | 14.3 | $ | 18.5 | ||||
Fixed
rate debt (% of interest bearing portfolio)
|
$ | 33.2 (48.6 | )% | $ | 33.0 (46.9 | )% | ||
Weighted
average current coupon
|
11.6 | % | 11.6 | % | ||||
Floating
rate debt (% of interest bearing portfolio)
|
$ | 35.1 (51.4 | )% | $ | 37.4 (53.1 | )% | ||
Weighted
average current spread over LIBOR
|
7.8 | % | 7.6 | % |
(1)
|
Excludes our investment in the
subordinated notes of GSCIC CLO and investments in common stocks and
limited partnership
interests.
|
At May 31, 2010
|
At February 28, 2010
|
|||||||||||||||
Percentage of
Total Portfolio
|
Weighted
Average
Current
Yield
|
Percentage of
Total Portfolio
|
Weighted
Average
Current
Yield
|
|||||||||||||
First
lien term loans
|
15.4
|
%
|
9.7
|
%
|
18.6
|
%
|
8.6
|
%
|
||||||||
Second
lien term loans
|
23.1
|
8.1
|
22.7
|
8.1
|
||||||||||||
Senior
secured notes
|
32.7
|
11.6
|
31.0
|
11.6
|
||||||||||||
Unsecured
notes
|
4.8
|
12.2
|
6.4
|
12.2
|
||||||||||||
GSCIC
CLO subordinated notes
|
20.2
|
9.7
|
18.7
|
8.3
|
||||||||||||
Equity
interests
|
3.8
|
N/A
|
2.6
|
N/A
|
||||||||||||
Limited
partnership interests
|
—
|
N/A
|
—
|
N/A
|
||||||||||||
Total
|
100.0
|
%
|
9.8
|
%
|
100.0
|
%
|
9.3
|
%
|
At
May 31, 2010
|
At
February 28, 2010
|
|||||||||||||||
Investments
at
Fair Value
|
Percentage
of
Total Portfolio
|
Investments
at
Fair Value
|
Percentage
of
Total
Portfolio
|
|||||||||||||
($ in
thousands)
|
||||||||||||||||
Green
|
$ | 9,650 | 10.7 | % | $ | 9,479 | 10.6 | % | ||||||||
Yellow
|
23,714 | 26.4 | 27,763 | 31.1 | ||||||||||||
Red
|
34,941 | 38.9 | 33,222 | 37.2 | ||||||||||||
N/A(1)
|
21,623 | 24.0 | 18,909 | 21.1 | ||||||||||||
Total
|
$ | 89,928 | 100.0 | % | $ | 89,373 | 100.0 | % |
(1)
|
Comprised of our investments in
the subordinated notes of GSCIC CLO, equity interests, and limited
partnership interests.
|
At
May 31, 2010
|
At
February 28, 2010
|
|||||||||||||||
Investments at
Fair Value
|
Percentage of
Total Portfolio
|
Investments at
Fair Value
|
Percentage of
Total Portfolio
|
|||||||||||||
($
in thousands)
|
||||||||||||||||
Structured
Finance Securities (1)
|
$
|
18,209
|
20.2
|
%
|
$
|
16,698
|
18.7
|
%
|
||||||||
Packaging
|
9,550
|
10.6
|
9,791
|
11.0
|
||||||||||||
Consumer
Products
|
7,360
|
8.2
|
7,508
|
8.4
|
||||||||||||
Healthcare
Services
|
7,347
|
8.2
|
7,190
|
8.0
|
||||||||||||
Apparel
|
7,082
|
7.9
|
6,910
|
7.7
|
||||||||||||
Electronics
|
6,728
|
7.5
|
6,617
|
7.4
|
||||||||||||
Manufacturing
|
5,996
|
6.7
|
6,399
|
7.2
|
||||||||||||
Publishing
|
5,876
|
6.5
|
6,710
|
7.5
|
||||||||||||
Metals
|
4,550
|
5.1
|
3,794
|
4.3
|
||||||||||||
Homebuilding
|
4,466
|
5.0
|
3,634
|
4.1
|
||||||||||||
Natural
Resources
|
3,421
|
3.8
|
2,989
|
3.3
|
||||||||||||
Environmental
|
2,354
|
2.6
|
2,060
|
2.3
|
||||||||||||
Logistics
|
2,070
|
2.3
|
2,230
|
2.5
|
||||||||||||
Food
and Beverage
|
1,717
|
1.9
|
1,697
|
1.9
|
||||||||||||
Financial
Services
|
1,206
|
1.3
|
984
|
1.1
|
||||||||||||
Oil
and Gas
|
610
|
0.7
|
1,129
|
1.2
|
||||||||||||
Education
|
568
|
0.6
|
634
|
0.7
|
||||||||||||
Building
Products
|
553
|
0.6
|
530
|
0.6
|
||||||||||||
Consumer
Services
|
265
|
0.3
|
255
|
0.3
|
||||||||||||
Printing
|
—
|
—
|
1,614
|
1.8
|
||||||||||||
Total
|
$
|
89,928
|
100.0
|
%
|
$
|
89,373
|
100.0
|
%
|
(1)
|
Comprised of our investment in
the subordinated notes of GSCIC
CLO.
|
At
May 31, 2010
|
At
February 28, 2010
|
|||||||||||||||
Investments at
Fair Value
|
Percentage of
Total Portfolio
|
Investments at
Fair Value
|
Percentage of
Total Portfolio
|
|||||||||||||
($
in thousands)
|
||||||||||||||||
Midwest
|
$
|
22,591
|
25.1
|
%
|
$
|
23,637
|
26.5
|
%
|
||||||||
Other(1)
|
18,209
|
20.2
|
16,698
|
18.7
|
||||||||||||
West
|
15,618
|
17.4
|
14,695
|
16.4
|
||||||||||||
International
|
12,971
|
14.4
|
12,781
|
14.3
|
||||||||||||
Northeast
|
11,271
|
12.6
|
11,631
|
13.0
|
||||||||||||
Southeast
|
9,268
|
10.3
|
9,931
|
11.1
|
||||||||||||
Total
|
$
|
89,928
|
100.0
|
%
|
$
|
89,373
|
100.0
|
%
|
(1)
|
Comprised of our investment in
the subordinated notes of GSCIC
CLO.
|
For the three months ended
|
||||||||
May 31, 2010
|
May 31, 2009
|
|||||||
($
in thousands)
|
||||||||
Total
investment income
|
$ | 2,811 | $ | 4,764 | ||||
Total
expenses before waiver and reimbursement
|
2,964 | 2,372 | ||||||
Total
expense waiver and reimbursement
|
(155 | ) | (172 | ) | ||||
Total
expenses net of expense waiver and reimbursement
|
2,808 | 2,200 | ||||||
Net
investment income
|
2 | 2,564 | ||||||
Net
realized losses
|
(2,551 | ) | (5 | ) | ||||
Net
unrealized gains
|
5,204 | 2,805 | ||||||
Net
increase in net assets resulting from operations
|
$ | 2,655 | $ | 5,364 |
For the three months ended
|
||||||||
May 31, 2010
|
May 31, 2009
|
|||||||
($
in thousands)
|
||||||||
Interest
from investments
|
$ | 2,270 | $ | 4,187 | ||||
Management
of GSCIC CLO
|
507 | 521 | ||||||
Interest
from cash and cash equivalents and other income
|
34 | 56 | ||||||
Total
|
$ | 2,811 | $ | 4,764 |
For the three months ended
|
||||||||
May 31, 2010
|
May 31, 2009
|
|||||||
($ in
thousand)
|
||||||||
Interest
and credit facility expense
|
$
|
831
|
$
|
643
|
||||
Base
management fees
|
411
|
548
|
||||||
Professional
fees
|
1,143
|
340
|
||||||
Incentive
management fees
|
—
|
322
|
||||||
Administrator
expenses
|
155
|
172
|
||||||
Insurance
expenses
|
195
|
206
|
||||||
Directors
fees
|
165
|
82
|
||||||
General
and administrative expenses
|
64
|
59
|
||||||
Total
operating expenses before manager waiver and reimbursement
|
$
|
2,964
|
$
|
2,372
|
Issuer
|
Asset Type
|
Gross
Proceeds
|
Cost
|
Net Realized
Gain/(Loss)
|
||||||||||
($
in thousands)
|
||||||||||||||
Custom
Direct, Inc.
|
First
Lien Term Loan
|
$
|
1,832
|
$
|
(1,535
|
) |
$
|
297
|
||||||
Legacy
Cabinets, Inc.
|
Second
Lien Term Loan
|
139
|
(2,002
|
) |
(1,863
|
)
|
||||||||
Legacy
Cabinets, Inc.
|
First
Lien Term Loan
|
502
|
(1,496
|
) |
(994
|
)
|
Issuer
|
Asset Type
|
Gross
Proceeds
|
Cost
|
Net Realized
Loss
|
||||||||||
($ in thousands)
|
||||||||||||||
IPC
Systems, Inc.
|
First
Lien Term Loan
|
$
|
14
|
$
|
(19
|
) |
$
|
(5
|
) |
Issuer
|
Asset Type
|
Cost
|
Fair Value
|
Total
Unrealized
Depreciation
|
Quarterly
Change in
Unrealized
Appreciation/
(Depreciation)
|
|||||||||||||
($ in thousands)
|
||||||||||||||||||
GSCIC
CLO
|
Other/Structured
Finance Securities
|
$
|
29,233
|
$
|
18,209
|
$
|
(11,024
|
)
|
$
|
1,510
|
||||||||
McMillin
Companies, LLC
|
Senior
Secured Notes
|
7,356
|
4,466
|
(2,890
|
)
|
809
|
||||||||||||
Elyria
Foundry Company, LLC
|
Senior
Secured Notes
|
4,889
|
4,550
|
(339
|
)
|
751
|
||||||||||||
Grant
U.S. Holdings, LLP
|
Second
Lien Term Loan
|
6,349
|
592
|
(5,757
|
)
|
434
|
||||||||||||
USS
Mergerco, Inc.
|
Common
stock
|
3,159
|
2,355
|
(804
|
)
|
294
|
||||||||||||
Jason
Incorporated
|
Unsecured
Notes
|
13,700
|
1,096
|
(12,604
|
)
|
(592
|
)
|
|||||||||||
Energy
Alloys, LLC
|
Second
Lien Term Loan
|
6,285
|
610
|
(5,675
|
)
|
(565
|
)
|
|||||||||||
Penton
Media, Inc.
|
First
Lien Term Loan
|
3,952
|
3,449
|
(503
|
)
|
(503
|
)
|
Three months ended May 31, 2009
|
||||||||||||||||||
Issuer
|
Asset Type
|
Cost
|
Fair Value
|
Total
Unrealized
Depreciation
|
Quarterly
Change in
Unrealized
Appreciation/
(Depreciation)
|
|||||||||||||
($
in thousands)
|
||||||||||||||||||
Terphane
Holdings Corp.
|
Senior
Secured Notes
|
$ |
10,435
|
$ |
8,568
|
$ |
(1,867
|
)
|
$ |
870
|
|
|||||||
Penton
Media, Inc.
|
First
Lien Term Loan
|
3,770
|
2,915
|
(855
|
)
|
861
|
|
|||||||||||
IDI
Acquisition Corp.
|
Senior
Secured Notes
|
3,638
|
3,207
|
(431
|
)
|
764
|
|
|||||||||||
USS
Mergerco, Inc.
|
Second
Lien Term Loan
|
5,852
|
4,328
|
(1,524
|
)
|
731
|
||||||||||||
GSCIC
CLO
|
Other/Structured
Finance Securities
|
|
29,233
|
|
19,208
|
|
(10,025
|
)
|
|
(2,461
|
) | |||||||
Grant
U.S. Holdings LLP
|
Second
Lien Term Loan
|
6,189
|
795
|
(5,394
|
)
|
(1,643
|
) | |||||||||||
Targus
Holdings Corp
|
Second
Lien Term Loan
|
4,786
|
2,573
|
(2,213
|
)
|
(563
|
) |
At
May 31, 2010
|
At
February 28, 2010
|
|||||||||||||||
Fair
Value
|
Percent
of Total
|
Fair
Value
|
Percent
of Total
|
|||||||||||||
($
in thousands)
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
2,928
|
3.2
|
%
|
$
|
3,352
|
3.6
|
%
|
||||||||
Cash
and cash equivalents, securitization accounts
|
379
|
0.4
|
225
|
0.2
|
||||||||||||
First
lien term loans
|
13,830
|
14.8
|
16,653
|
17.9
|
||||||||||||
Second
lien term loans
|
20,794
|
22.3
|
20,267
|
21.8
|
||||||||||||
Senior
secured notes
|
29,372
|
31.5
|
27,742
|
29.9
|
||||||||||||
Unsecured
notes
|
4,308
|
4.6
|
5,690
|
6.1
|
||||||||||||
Structured
finance securities
|
18,209
|
19.5
|
16,698
|
18.0
|
||||||||||||
Common
stock
|
3,415
|
3.7
|
2,323
|
2.5
|
||||||||||||
Other/limited
partnership interests
|
–
|
-
|
-
|
-
|
||||||||||||
Total
|
$
|
93,235
|
100.0
|
%
|
$
|
92,950
|
100.0
|
%
|
Fair Value
|
Percent of Total
Investments
|
|||||||
($
in thousands)
|
||||||||
Third
party independent valuation firm
|
$
|
63,220
|
70.3
|
%
|
||||
Discounted
cash flow model
|
18,208
|
20.2
|
||||||
Readily
available market maker, broker quotes
|
8,500
|
9.5
|
||||||
Total
fair valued investments
|
$
|
89,928
|
100.0
|
%
|
Exhibit
Number
|
Description
|
|
31.1
|
Chief
Executive Officer Certification Pursuant to Rule 13a-14 of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Chief
Financial Officer Certification Pursuant to Rule 13a-14 of the Securities
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
32.1
|
|
Chief
Executive Officer and Chief Financial Officer Certification pursuant to
Section 1350, Chapter 63 of Title 18, United States Code, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
GSC
Investment
CORP.
|
|||
Date:
July 15, 2010
|
By
|
/s/ Seth M.
Katzenstein
|
|
Seth M.
Katzenstein
|
|||
Chief Executive Officer
and President,
GSC
|
|||
Investment Corp.
|
|||
By
|
/s/ richard t. allorto,
jr.
|
||
Richard T. Allorto,
Jr.
|
|||
Chief Financial Officer,
GSC Investment
Corp.
|
/s/ Seth M. Katzenstein
|
||
Seth
M. Katzenstein
|
||
Chief
Executive Officer and President
|
/s/ Richard T. Allorto, Jr.
|
||
Richard
T. Allorto, Jr.
|
||
Chief
Financial Officer
|
1.
|
the
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Exchange Act; and
|
2.
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of GSC
Investment Corp.
|
/s/ Seth M. Katzenstein
|
||
Seth
M. Katzenstein
|
||
Chief
Executive Officer and President
|
||
/s/ Richard T. Allorto, Jr.
|
||
Richard
T. Allorto, Jr.
|
||
Chief
Financial Officer
|