GOLUB CAPITAL BDC, INC. Management’s Discussion and Analysis of Financial Position and Operating Results (Form 10-K)

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The information contained in this section should be read in conjunction with our
consolidated financial statements and related notes thereto appearing elsewhere
in this annual report on Form 10-K. In this report, "we," "us," "our" and "Golub
Capital BDC" refer to Golub Capital BDC, Inc. and its consolidated subsidiaries.

Forward-looking statements

Certain of the statements contained in this annual report on Form 10-K constitute forward-looking statements, which relate to future events or our future financial performance or condition. The forward-looking statements contained in this annual report on Form 10-K involve risks and uncertainties, including statements regarding:

•our future operating results;
•our business prospects and the prospects of our portfolio companies, including
our and their ability to achieve our respective objectives as a result of the
COVID-19 pandemic;
•the effect of investments that we expect to make and the competition for those
investments;
•our contractual arrangements and relationships with third parties;
•actual and potential conflicts of interest with GC Advisors and other
affiliates of Golub Capital;
•the dependence of our future success on the general economy and its effect on
the industries in which we invest;
•the ability of our portfolio companies to achieve their objectives;
•the use of borrowed money to finance a portion of our investments and the
effect of the COVID-19 pandemic on the availability of equity and debt capital
and our use of borrowed funds to finance a portion of our investments;
•the adequacy of our financing sources and working capital;
•the timing of cash flows, if any, from the operations of our portfolio
companies;
•general economic and political trends and other external factors, including the
COVID-19 pandemic;
•changes in political, economic or industry conditions, the interest rate
environment or conditions affecting the financial and capital markets that could
result in changes to the value of our assets, including changes from the impact
of the COVID-19 pandemic;
•the ability of GC Advisors to locate suitable investments for us and to monitor
and administer our investments;
•the ability of GC Advisors or its affiliates to attract and retain highly
talented professionals;
•the ability of GC Advisors to continue to effectively manage our business due
to the disruptions caused by the COVID-19 pandemic;
•our ability to qualify and maintain our qualification as a RIC and as a
business development company;
•general price and volume fluctuations in the stock markets;
•the impact on our business of Dodd-Frank and the rules and regulations issued
thereunder and any actions toward repeal thereof; and
•the effect of changes to tax legislation and our tax position.

Such forward-looking statements may include statements preceded by, followed by
or that otherwise include the words "may," "might," "will," "intend," "should,"
"could," "can," "would," "expect," "believe," "estimate," "anticipate,"
"predict," "potential," "plan" or similar words. The forward looking statements
contained in this annual report on Form 10-K involve risks and uncertainties.
Our actual results could differ materially from those implied or expressed in
the forward-looking statements for any reason, including the factors set forth
as "Risk Factors" in this annual report on Form 10-K.

We have based the forward-looking statements included in this report on
information available to us on the date of this report. Actual results could
differ materially from those anticipated in our forward-looking statements and
future results could differ materially from historical performance. You are
advised to consult any additional disclosures
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that we make directly to you or through reports that we have filed or in the
future file with the SEC including annual reports on Form 10-K, registration
statements on Form N-2, quarterly reports on Form 10-Q and current reports on
Form 8-K. This annual report on Form 10-K contains statistics and other data
that have been obtained from or compiled from information made available by
third-party service providers. We have not independently verified such
statistics or data.

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Overview

We are an externally managed, closed-end, non-diversified management investment
company that has elected to be regulated as a business development company under
the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected
to be treated as a RIC under Subchapter M of the Code. As a business development
company and a RIC, we are also subject to certain constraints, including
limitations imposed by the 1940 Act and the Code.

Our shares are currently listed on the Nasdaq Global Select Market under the symbol “GBDC”.

Our investment objective is to generate current income and capital appreciation
by investing primarily in one stop (a loan that combines characteristics of
traditional first lien senior secured loans and second lien or subordinated
loans and that are often referred to by other middle-market lenders as
unitranche loans) and other senior secured loans of U.S. middle-market
companies. We also selectively invest in second lien and subordinated loans of,
and warrants and minority equity securities in U.S. middle-market companies. We
intend to achieve our investment objective by (1) accessing the established loan
origination channels developed by Golub Capital, a leading lender to U.S.
middle-market companies with over $40.0 billion in capital under management as
of September 30, 2021, (2) selecting investments within our core middle-market
company focus, (3) partnering with experienced private equity firms, or
sponsors, in many cases with whom Golub Capital has invested alongside in the
past, (4) implementing the disciplined underwriting standards of Golub Capital
and (5) drawing upon the aggregate experience and resources of Golub Capital.

Our investment activities are managed by GC Advisors and supervised by our board of directors, the majority of whose members are independent from us, GC Advisors and its subsidiaries.

Under the Investment Advisory Agreement, we have agreed to pay GC Advisors an
annual base management fee based on our average adjusted gross assets as well as
an incentive fee based on our investment performance. The Investment Advisory
Agreement was approved by our board of directors in May 2021. Under the
Administration Agreement, we are provided with certain administrative services
by the Administrator, which is currently Golub Capital LLC. Under the
Administration Agreement, we have agreed to reimburse the Administrator for our
allocable portion (subject to the review and approval of our independent
directors) of overhead and other expenses incurred by the Administrator in
performing its obligations under the Administration Agreement.

We seek to create a portfolio that includes primarily one stop and other senior
secured loans by primarily investing approximately $10.0 million to $75.0
million of capital, on average, in the securities of U.S. middle-market
companies. We also selectively invest more than $75.0 million in some of our
portfolio companies and generally expect that the size of our individual
investments will vary proportionately with the size of our capital base.

We generally invest in securities that have been rated below investment grade by
independent rating agencies or that would be rated below investment grade if
they were rated. These 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. In addition, many of our debt investments
have floating interest rates that reset on a periodic basis and typically do not
fully pay down principal prior to maturity, which may increase our risk of
losing part or all of our investment.

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As of September 30, 2021 and 2020, our portfolio at fair value was comprised of
the following:
                                                          As of September 30, 2021                             As of September 30, 2020
                                               Investments at             Percentage of             Investments at             Percentage of
                                                  Fair Value                  Total                    Fair Value                  Total
Investment Type                                (In thousands)              Investments              (In thousands)              Investments
Senior secured                                 $    784,805                           16.0  %       $    640,213                           15.1  %
One stop                                          3,882,314                           79.3             3,485,585                           82.2
Second lien                                          41,857                            0.9                19,640                            0.5
Subordinated debt                                       172                            0.0  *                575                            0.0  *

Equity                                              185,738                            3.8                92,197                            2.2
Total                                          $  4,894,886                          100.0  %       $  4,238,210                          100.0  %




*   Represents an amount less than 0.1%.


One stop loans include loans to technology companies undergoing strong growth
due to new services, increased adoption and/or entry into new markets. We refer
to loans to these companies as late stage lending loans or recurring revenue
loans. Other targeted characteristics of late stage lending businesses include
strong customer revenue retention rates, a diversified customer base and backing
from growth equity or venture capital firms. In some cases, the borrower's high
revenue growth is supported by a high level of discretionary spending. As part
of the underwriting of such loans and consistent with industry practice, we
adjust our characterization of the earnings of such borrowers for a reduction or
elimination of such discretionary expenses, if appropriate. As of September 30,
2021 and 2020, one stop loans included $527.8 million and $430.2 million,
respectively, of late stage lending loans at fair value.

From September 30, 2021 and 2020, we held debt securities and equity interests in 296 and 254 holding companies, respectively.

The following table shows the weighted average income yield and weighted average
investment income yield of our earning portfolio company investments, which
represented nearly 100% of our debt investments, as well as the total return
based on our average net asset value, and the total return based on the change
in the quoted market price of our stock and assuming distributions were
reinvested in accordance with our dividend reinvestment plan, or DRIP, in each
case for the years ended September 30, 2021 and 2020:
                                                                            

Year ended

                                                                                       September 30, 2021             September 30, 2020
Weighted average income yield (1)                                                             7.4%                           7.6%
Weighted average investment income yield (2)                                                  7.9%                           8.0%
Total return based on average net asset value (3)                                            13.7%                           2.5%
Total return based on market value (4)                                                       28.9%                         (22.8)%





(1)Represents income from interest and fees, excluding amortization of
capitalized fees, discounts and purchase premium (as described in Note 2 of the
consolidated financial statements), divided by the average fair value of earning
portfolio company investments, and does not represent a return to any investor
in us.
(2)Represents income from interest, fees and amortization of capitalized fees
and discounts, excluding amortization of purchase premium (as described in Note
2 of the consolidated financial statements), divided by the average fair value
of earning portfolio investments, and does not represent a return to any
investor in us.
(3)Total return based on average net asset value is calculated as (a) the net
increase/(decrease) in net assets resulting from operations divided by (b) the
daily average of total net assets. Total return does not include sales load.
(4)Total return based on market value assumes distributions are reinvested in
accordance with the DRIP. Total return does not include sales load.
Revenues: We generate revenue in the form of interest and fee income on debt
investments and capital gains and distributions, if any, on portfolio company
investments that we originate or acquire. Our debt investments, whether in the
form of senior secured, one stop, second lien or subordinated loans, typically
have a term of three to seven years and bear interest at a fixed or floating
rate. In some instances, we receive payments on our debt investments based on
scheduled amortization of the outstanding balances. In addition, we receive
repayments of some of our debt investments prior to their scheduled maturity
date. The frequency or volume of these repayments fluctuates
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significantly from period to period. Our portfolio activity also reflects the
proceeds of sales of securities. In some cases, our investments provide for
deferred interest payments or PIK interest. The principal amount of loans and
any accrued but unpaid interest generally become due at the maturity date. In
addition, we generate revenue in the form of commitment, origination, amendment,
structuring or due 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 as
interest income. We record prepayment premiums on loans as fee income. For
additional details on revenues, see "Critical Accounting Policies-Revenue
Recognition."

We recognize realized gains or losses on investments based on the difference
between the net proceeds from the disposition and the amortized cost basis of
the investment or derivative instrument, without regard to unrealized gains or
losses previously recognized. We record current period changes in fair value of
investments and derivative instruments that are measured at fair value as a
component of the net change in unrealized appreciation (depreciation) on
investment transactions in the Consolidated Statements of Operations.

Expenses: Our main operating expenses include the payment of fees to GC Advisors under the Investment Advisory Agreement and interest expense on our outstanding debt. We bear all other costs and expenses of our operations and transactions, including:

•calculating our NAV (including the cost and expenses of any independent
valuation firm);
•fees and expenses incurred by GC Advisors payable to third parties, including
agents, consultants or other advisors, in monitoring financial and legal affairs
for us and in monitoring our investments and performing due diligence on our
prospective portfolio companies or otherwise relating to, or associated with,
evaluating and making investments, which fees and expenses include, among other
items, due diligence reports, appraisal reports, any studies commissioned by GC
Advisors and travel and lodging expenses;
•expenses related to unsuccessful portfolio acquisition efforts;
•offerings of our common stock and other securities;
•administration fees and expenses, if any, payable under the Administration
Agreement (including payments based upon our allocable portion of the
Administrator's overhead in performing its obligations under the Administration
Agreement, including rent and the allocable portion of the cost of our chief
compliance officer, chief financial officer and their respective staffs);
•fees payable to third parties, including agents, consultants or other advisors,
relating to, or associated with, evaluating and making investments in portfolio
companies, including costs associated with meeting financial sponsors;
•transfer agent, dividend agent and custodial fees and expenses;
•U.S. federal and state registration and franchise fees;
•all costs of registration and listing our shares on any securities exchange;
•U.S. federal, state and local taxes;
•independent directors' fees and expenses;
•costs of preparing and filing reports or other documents required by the SEC or
other regulators;
•costs of any reports, proxy statements or other notices to stockholders,
including printing costs;
•costs associated with individual or group stockholders;
•costs associated with compliance under the Sarbanes-Oxley Act;
•our allocable portion of any fidelity bond, directors and officers/errors and
omissions liability insurance, and any other insurance premiums;
•direct costs and expenses of administration, including printing, mailing, long
distance telephone, copying, secretarial and other staff, independent auditors
and outside legal costs;
•proxy voting expenses; and
•all other expenses incurred by us or the Administrator in connection with
administering our business.

We expect our general and administrative expenses to be relatively stable or
decline as a percentage of total assets during periods of asset growth and to
increase during periods of asset declines.

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Prior to the redemption of the 2014 Notes and termination of the documents
governing the 2014 Debt Securitization on August 26, 2020, GC Advisors served as
collateral manager for the 2014 Issuer, our wholly-owned subsidiary, under the
2014 Collateral Management Agreement and was entitled to receive an annual fee
in an amount equal to 0.25% of the principal balance of the portfolio loans held
by the 2014 Issuer at the beginning of the collection period relating to each
payment date, which was payable in arrears on each payment date. Under the 2014
Collateral Management Agreement, the term ''collection period'' referred to a
quarterly period running from the day after the end of the prior collection
period to the tenth business day prior to the payment date.

GC Advisors, as collateral manager for the 2018 Issuer under the 2018 Collateral
Management Agreement, is entitled to receive an annual fee in an amount equal to
0.25% of the principal balance of the portfolio loans held by the 2018 Issuer at
the beginning of the collection period relating to each payment date, which is
payable in arrears on each payment date. Under the 2018 Collateral Management
Agreement, the term "collection period" refers to the period commencing on the
third business day prior to the preceding payment date and ending on (but
excluding) the third business day prior to such payment date.

GC Advisors, as collateral manager for the GCIC 2018 Issuer under the GCIC 2018
Collateral Management Agreement is entitled to receive an annual fee in an
amount equal to 0.35% of the principal balance of the portfolio loans held by
the GCIC 2018 Issuer at the beginning of the collection period relating to each
payment date, which is payable in arrears on each payment date. Under the 2018
GCIC Collateral Management Agreement, the term "collection period" generally
refers to a quarterly period commencing on the day after the end of the prior
collection period to the tenth business day prior to the payment date.

Prior to the redemption of the 2020 Notes and the termination of the documents
governing the 2020 Debt Securitization on August 26, 2021, GC Advisors served as
collateral manager for the 2020 Issuer under the 2020 Collateral Management
Agreement and was entitled to receive an annual fee in an amount equal to 0.35%
of the principal balance of the portfolio loans held by the 2020 Issuer at the
beginning of the collection period relating to each payment date, which is
payable in arrears on each payment date. Under the 2020 Collateral Management
Agreement, the term "collection period" generally referred to a quarterly period
commencing on the day after the end of the prior collection period to the tenth
business day prior to the payment date.

Collateral management fees were paid directly by the 2014 Issuer and 2020 Issuer
and are paid directly by the 2018 Issuer and GCIC 2018 Issuer to GC Advisors and
are offset against the management fees payable under the Investment Advisory
Agreement. In addition, the 2014 Issuer paid Wells Fargo Securities, LLC
structuring and placement fees for its services in connection with the initial
structuring and subsequent amendments to the initial structuring of the 2014
Debt Securitization. The 2018 Issuer paid Morgan Stanley & Co. LLC structuring
and placement fees for its services in connection with the structuring of the
2018 Debt Securitization. Before we acquired the GCIC 2018 Issuer as part of our
acquisition of GCIC (as defined in the "GCIC Acquisition" section below), the
GCIC 2018 Issuer paid Wells Fargo Securities, LLC structuring and placement fees
for its services in connection with the initial structuring of the GCIC 2018
Debt Securitization. The 2020 Issuer paid Wells Fargo Securities, LLC
structuring and placement fees for its services in connection with the
structuring of the 2020 Debt Securitization. Term debt securitizations are also
known as CLOs and are a form of secured financing incurred by us, which are
consolidated by us and subject to our overall asset coverage requirement. The
2018 Issuer and GCIC 2018 Issuer also agreed to pay ongoing administrative
expenses to the trustee, collateral manager, independent accountants, legal
counsel, rating agencies and independent managers in connection with developing
and maintaining reports, and providing required services in connection with the
administration of the 2018 Debt Securitization and GCIC 2018 Debt Securitization
and collectively the Debt Securitizations, as applicable.

We believe that these administrative expenses approximate the amount of ongoing
fees and expenses that we would be required to pay in connection with a
traditional secured credit facility. Our common stockholders indirectly bear all
of these expenses.

GCIC Acquisition

On September 16, 2019, we completed our acquisition of GCIC pursuant to the
Merger Agreement. Pursuant to the Merger Agreement, Merger Sub was first merged
with and into GCIC, with GCIC as the surviving company, and, immediately
following the Initial Merger, GCIC was then merged with and into us, with us as
the surviving company.

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In accordance with the terms of the Merger Agreement, at the effective time of
the Merger, each outstanding share of GCIC's common stock was converted into the
right to receive 0.865 shares of our common stock (with GCIC's stockholders
receiving cash in lieu of fractional shares of our common stock). As a result of
the Merger, we issued an aggregate of 71,779,964 shares of our common stock to
former stockholders of GCIC.

Rights offer

On May 15, 2020, we completed a transferable rights offering, or the Rights
Offering. We issued to stockholders of record on April 8, 2020 one transferable
right for each four shares of our common stock held on the record date. Each
holder of rights was entitled to subscribe for one share of common stock for
every right held at a subscription price of $9.17 per share. On May 15, 2020, we
issued a total of 33,451,902 shares. Net proceeds after deducting the dealer
manager fees and other offering expenses were approximately $300.4 million.
3,191,448 shares were purchased in the rights offering by affiliates of GC
Advisors.

Covid-19 pandemic

The rapid spread of COVID-19, which was identified as a global pandemic by the
World Health Organization in 2020, resulted in governmental authorities imposing
restrictions on travel and the temporary closure of many corporate offices,
retail stores, restaurants, healthcare facilities, fitness clubs and
manufacturing facilities and factories in affected jurisdictions. While several
countries, as well as certain states in the United States, have lifted or
reduced certain travel restrictions, business closures and other quarantine
measures and recurring COVID-19 outbreaks have led to the re-introduction of
such restrictions in certain states in the United States and globally and could
continue to lead to the re-introduction of such restrictions elsewhere. In early
2021, COVID-19 vaccines started to be administered to high-risk adults and
essential workers across the United States and eligibility to receive the
vaccine has since expanded to all adults and children of certain ages. Although
we believe the number of vaccinated adults and children in the United States is
promising for continued reductions of travel restrictions and other quarantine
measures, we are unable to predict the duration of business and supply chain
disruptions, the extent to which COVID-19 will continue to affect our portfolio
companies' operating results or the impact COVID-19 may have on our results of
operations and financial condition.

We continue to experience reversal of the unrealized depreciation recognized
during the three months ended March 31, 2020 as portfolio companies generally
performed better than expected, especially those in COVID-impacted sub-sectors,
and private equity sponsors have generally stepped up to support their portfolio
companies. We and GC Advisors continue to monitor the rapidly evolving situation
relating to the COVID-19 pandemic and guidance from U.S. and international
authorities, including federal, state and local public health authorities and
future recommendations from such authorities may further impact our business
operations and financial results. Due to the resurgence of COVID-19 and the
threat of new variants of COVID-19, we remain cautious and concerned about the
on-going impacts to the U.S. economy from COVID-19, but the positive trends
identified above contributed to strong financial results for the year ended
September 30, 2021.

Recent developments

On October 13, 2021, we issued an additional $200.0 million aggregate principal
amount of our 2026 Notes (as defined in Note 7 of our consolidated financial
statements), or the New 2026 Notes. Upon issuance of the New 2026 Notes, the
outstanding aggregate principal amount of the 2026 Notes is $600.0 million.

On October 14, 2021, we entered into an agreement with Signature Bank, Wells
Fargo Bank, National Association and Regions Bank, pursuant to which, through
the accordion feature in the JPM Credit Facility (as defined in Note 7 of our
consolidated financial statements), the aggregate commitments under the JPM
Credit Facility increased from $475.0 million to $687.5 million.

On October 15, 2021, we issued an additional $100.0 million aggregate principal
amount of our 2024 Notes (as defined in Note 7 of our consolidated financial
statements), or the New 2024 Notes. Upon issuance of the New 2024 Notes, the
outstanding aggregate principal amount of the 2024 Notes is $500.0 million.


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On November 19, 2021, our board of directors declared a quarterly distribution
of $0.30 per share, which is payable on December 30, 2021 to holders of record
as of December 10, 2021.

On November 19, 2021, we entered into an amendment, or the JPM Credit Facility
Amendment, to the JPM Credit Facility to amend the JPM Credit Facility to, among
other things, (x) increase the accordion feature, which allows the Company,
under certain circumstances, to increase the total size of the facility, to a
total facility size of $1.5 billion from $712.5 million, and (y) replace the
LIBOR benchmark and interest rate for loans denominated in Pounds Sterling and
Swiss Francs. Upon effectiveness of the JPM Credit Facility Amendment on
November 19, 2021, borrowings under the JPM Credit Facility remain subject to
compliance with a borrowing base test. In connection with the JPM Credit
Facility Amendment, interest under the JPM Credit Facility for loans denominated
in Pounds Sterling or Swiss Francs, (A) if the value of the gross borrowing base
is equal to or greater than 1.60 times the aggregate amount of certain
outstanding indebtedness of the Company, or the Combined Debt Amount, is payable
at a rate equal to one month SONIA plus 1.7826% per annum or one month Swiss
Average Overnight Rate, or SARON, plus 1.6929% per annum, respectively and, (B)
if the value of the gross borrowing base is less than 1.60 times the Combined
Debt Amount, is payable at a rate equal to one month SONIA plus 1.9076% per
annum or one month SARON plus 1.8179% per annum, respectively.

On November 23, 2021, we entered into an agreement with First National Bank of
Pennsylvania, JPMorgan Chase Bank, N.A., MUFG Union Bank, N.A., CIBC Bank USA,
and Sumitomo Mitsui Banking Corporation, pursuant to which, through the
accordion feature in the JPM Credit Facility, the aggregate commitments under
the JPM Credit Facility increased from $687.5 million to $1.0 billion.


Consolidated operating results

Comparison of closed financial years September 30, 2020 and 2019 can be found in our Form 10-K for the fiscal year ended September 30, 2020 located in Item 7. Management’s Discussion and Analysis of the Financial Position and Results of Operations.

Consolidated operating results for the years ended September 30, 2021 and 2020
are as follows:

                                                                                                  Year ended                 Variances
                                                                                                     September 30,         September 30,          2021 vs. 2020
                                                                                                         2021                  2020
                                                                           (In thousands)
Interest income                                                                                     $    309,832          $    318,480          $       (8,648)
Accretion of discounts and amortization of premiums                                                       21,399                16,437                  

4 962

GCIC acquisition purchase premium amortization                                                           (30,793)              (39,920)                 

9,127

Dividend income from LLC equity interests in SLF and                                                           -                 1,905                  (1,905)
GCIC SLF(1)
Dividend income                                                                                            1,720                   291                   1,429
Fee income                                                                                                 4,967                 1,760                   3,207
Total investment income                                                                                  307,125               298,953                   8,172
Total net expenses                                                                                       139,453               159,894                 (20,441)

Net investment income                                                                                    167,672               139,059                  28,613
Net realized gain (loss) on investment transactions                                                        8,297               (16,277)                 

24,574

Net realized gain (loss) on investment transactions due                                                     (392)               (2,383)                 

1,991

to purchase premium
Net change in unrealized appreciation (depreciation) on                                                  134,061              (107,830)                

241,891

investment transactions excluding purchase premium Net change in unrealized capital gains on investments

                                                       31,185                42,303                 

(11 118)

transactions due to purchase premium
Net gain (loss) on investment transactions                                                               173,151               (84,187)                

257,338

Provision for taxes on unrealized appreciation on                                                           (543)                    -                  

(543)

investments

Net increase in net assets resulting from operations                                                $    340,280          $     54,872          $      

285,408

Average earning debt investments, at fair value(2)                                                  $  4,236,042          $  4,209,837          $       26,205




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(1)For periods ending on or after January 1, 2020, the assets and liabilities of
SLF and GCIC SLF are consolidated into our financial statements and notes
thereto.
(2)Does not include our investments in LLC equity interests in SLF and GCIC SLF.

Net income can vary significantly from period to period for a variety of reasons, including the recognition of realized gains and losses and unrealized gains and impairments. Therefore, cumulative net income comparisons may not be meaningful.

On September 16, 2019, we completed our acquisition of GCIC. The acquisition was
accounted for under the asset acquisition method of accounting in accordance
with ASC 805-50, Business Combinations - Related Issues. Under asset acquisition
accounting, where the consideration paid to GCIC's stockholders exceeded the
relative fair values of the assets acquired and liabilities assumed, the premium
paid by us was allocated to the cost of the GCIC assets acquired by us pro-rata
based on their relative fair value. Immediately following the acquisition of
GCIC, we recorded its assets at their respective fair values and, as a result,
the purchase premium allocated to the cost basis of the GCIC assets acquired was
immediately recognized as unrealized depreciation on our Consolidated Statement
of Operations. The purchase premium allocated to investments in loan securities
will amortize over the life of the loans through interest income with a
corresponding reversal of the unrealized depreciation on such loans acquired
through their ultimate disposition. The purchase premium allocated to
investments in equity securities will not amortize over the life of the equity
securities through interest income and, assuming no subsequent change to the
fair value of the equity securities acquired from GCIC and disposition of such
equity securities at fair value, we will recognize a realized loss with a
corresponding reversal of the unrealized depreciation upon disposition of the
equity securities acquired.

As a supplement to our GAAP financial measures, we have provided the following
non-GAAP financial measures that we believe are useful for the reasons described
below:
•"Adjusted Net Investment Income" - excludes the amortization of the purchase
price premium and the accrual for the capital gain incentive fee (including the
portion of such accrual that is not payable under the Investment Advisory
Agreement) from net investment income calculated in accordance with GAAP;
•"Adjusted Net Realized and Unrealized Gain/(Loss)" - excludes the unrealized
loss resulting from the purchase premium write-down and the corresponding
reversal of the unrealized loss resulting from the amortization of the premium
on loans or from the sale of equity investments from the determination of
realized and unrealized gain/(loss) determined in accordance with GAAP; and
•"Adjusted Net Income/(Loss)" - calculates net income and earnings per share
based on Adjusted Net Investment Income and Adjusted Net Realized and Unrealized
Gain/(Loss).
                                                                                Year ended September
                                                                                        30,
                                                                                           2021                  2020
                                                                                   (In thousands)
Net investment income                                                                 $    167,672          $    139,059
Add: GCIC acquisition purchase premium amortization                                         30,793                39,920

Adjusted net investment income                                              

$ 198,465 $ 178,979

Net gain (loss) on investment transactions                                            $    173,151          $    (84,187)
Add: Realized (gain) loss on investment transactions due to                                    392                 2,383
purchase premium
Less: Net change in unrealized appreciation on investment                                  (31,185)              (42,303)
transactions due to purchase premium
Adjusted net realized and unrealized gain/(loss)                            

$ 142,358 $ (124,107)

Net increase in net assets resulting from operations                                  $    340,280          $     54,872
Add: GCIC acquisition purchase premium amortization                                         30,793                39,920

Add: Realized (gain) loss on investment transactions due to                                    392                 2,383
purchase premium
Less: Net change in unrealized appreciation on investment                                  (31,185)              (42,303)
transactions due to purchase premium
Adjusted net income                                                                   $    340,280          $     54,872



We believe that excluding the financial impact of the purchase premium in the
above non-GAAP financial measures is useful for investors as this is a non-cash
expense/loss and is one method we use to measure our results of operations.

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Although these non-GAAP financial measures are intended to enhance investors'
understanding of our business and performance, these non-GAAP financial measures
should not be considered an alternative to GAAP.

Investment income

Investment income increased from the year ended September 30, 2020 to the year
ended September 30, 2021 by $8.2 million, primarily due to a reduction in GCIC
acquisition purchase price premium amortization, an increase in fee income of
$3.2 million primarily driven by an increase in prepayment fees and an increase
in accretion income of $5.0 million resulting from increased payoffs of
portfolio company investments. These increases were partially offset by a
decrease in interest income that was driven primarily by a lower average LIBOR
rate for the year ended September 30, 2021 as compared to the average LIBOR rate
for the year ended September 30, 2020 and interest rate compression on new one
stop and senior secured loans during the year ended September 30, 2021.

The income yield by debt security type for the years ended September 30, 2021
and 2020 was as follows:
                                    Year ended September 30,
                                                          2021       2020
Senior secured                                            6.1%       6.5%
One stop                                                  7.7%       7.8%
Second lien                                              11.5%       10.2%
Subordinated debt                                        12.0%       11.2%




Income yields on one stop and senior secured loans decreased for the year ended
September 30, 2021 as compared to the year ended September 30, 2020 primarily
due to a decrease in the average LIBOR for the year ended September 30, 2021
compared to the year ended September 30, 2020. Our loan portfolio is insulated
from a drop in LIBOR below approximately 1.0% as over 90.0% of the loan
portfolio at fair value as of September 30, 2021 is subject to a LIBOR floor. As
of September 30, 2021, the weighted average LIBOR floor of our loans at fair
value was 0.99%.
Income yields on one stop and senior secured loans also decreased for the year
ended September 30, 2021 as compared to the year ended September 30, 2020
primarily due to a general trend of interest rate compression on new
investments.

As of September 30, 2021, we have six second lien investments and two
subordinated debt investments as shown in the Consolidated Schedule of
Investments. Due to the limited number of second lien and subordinated debt
investments, income yields on second lien and subordinated debt investments can
be significantly impacted by the addition, subtraction or refinancing of one
investment.

For more details on investment returns and asset mix, see “Liquidity and Capital Resources – Portfolio Composition, Investment Activities and Yield” below.

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Expenses

The following table summarizes our expenses for the years ended. September 30, 2021 and 2020:

                                                                                           Year ended September
                                                                                                   30,                  Variances
                                                                                                      2021                 2020              2021 vs. 2020
                                                                          (In thousands)
Interest and other debt financing expenses                                                       $    55,536          $    71,324          $      

(15 788)

Amortization of debt issuance costs                                                                   10,203                3,534                   

6 669

Base management fee, net of waiver                                                                    57,858               59,243                  

(1,385)

Income incentive fee                                                                                   3,214               13,831                 (10,617)
Capital gain incentive fee                                                                                 -                    -                       -
Professional fees                                                                                      3,992                4,727                    

(735)

Administrative service fee                                                                             7,227                6,037                   

1 190

General and administrative expenses                                                                    1,423                1,198                     225
Net expenses                                                                                     $   139,453          $   159,894          $      (20,441)
Average debt outstanding                                                                         $ 2,184,010          $ 2,200,950          $      (16,940)



Interest Expense

Interest and other debt financing expenses, including amortization of debt
issuance costs, decreased for the year ended September 30, 2021 compared to the
year ended September 30, 2020 by $9.1 million, primarily due to a decrease in
LIBOR on our floating rate facilities and a decrease in average debt
outstanding, partially offset by the acceleration of amortization of deferred
issuance costs for terminated facilities during the year ended September 30,
2021. For more information about our outstanding borrowings for the years ended
September 30, 2021 and 2020, including the terms thereof, see Note 7. Borrowings
in the notes to our consolidated financial statements and the "Liquidity and
Capital Resources" section below.

For the years ended September 30, 2021 and 2020, the effective average interest
rate, which includes amortization of debt financing costs, amortization of
discounts on notes issued and non-usage facility fees, on our total debt was
3.0% and 3.4%, respectively. The decrease in the effective average interest rate
for the year ended September 30, 2021 compared to the year ended September 30,
2020 was primarily due to a lower average LIBOR on our borrowings, the issuance
of the 2026 Unsecured Notes (as defined in Note 7 of our consolidated financial
statements) that bear interest at a fixed rate of 2.500% and the issuance of the
2027 Unsecured Notes (as defined in Note 7 of our consolidated financial
statements) that bear interest at a fixed rate of 2.050%, partially offset by
the issuance of the 2024 Unsecured Notes (as defined in Note 7 of our
consolidated financial statements) that bear interest at a fixed rate of 3.375%.

Management fees

The base management fee, net of waiver, decreased from the year ended September
30, 2020 to the year ended September 30, 2021, primarily due to $4.0 million of
base management fees irrevocably waived by GC Advisors to offset the one-time
costs associated with the accelerated amortization of debt issuance costs on the
early redemption of the 2020 Debt Securitization and debentures outstanding at
SBIC VI during the fiscal year 2021 fourth quarter. The irrevocable waiver
partially offset an increase in gross base management fees from the year ended
September 30, 2020 to the year ended September 30, 2021 as a result of an
increase in average adjusted gross assets from 2020 to 2021.

Incentive fees

The incentive fee payable under the Investment Advisory Agreement consists of
two parts: (1) the Income Incentive Fee and (2) the Capital Gain Incentive Fee.
The Income Incentive Fee decreased by $10.6 million from the year ended
September 30, 2020 to the year ended September 30, 2021 primarily due to a lower
rate of return on the value of our net assets driven by modest net funds growth
through the third quarter of fiscal year 2021 and general interest rate
compression on new investments, which was partially offset by an increase in
Pre-Incentive Fee Net Investment Income (as defined in Note 3 of our
consolidated financial statements). As we remain in the "catch-up" provision of
the calculation of the Income Incentive Fee, an increase in net investment
income causes a corresponding increase in the Income Incentive fee until we are
fully through the catch up. For the year ended September 30, 2021, while still
not fully through the "catch-up" provision of the Income Incentive Fee
calculation, the Income Incentive Fee as a
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percentage of Pre-Incentive Fee Net Investment Income decreased to 1.9% from
9.0% for the year ended September 30, 2020.

For each of the years ended September 30, 2021 and 2020, there was no Capital
Gain Incentive Fee payable as calculated under the Investment Advisory
Agreement. In accordance with GAAP, we are required to include the aggregate
unrealized capital appreciation on investments in the calculation and accrue a
capital gain incentive fee as if such unrealized capital appreciation were
realized, even though such unrealized capital appreciation is not permitted to
be considered in calculating the fee actually payable under the Investment
Advisory Agreement. There was no capital gain incentive fee accrual calculated
in accordance with GAAP as of September 30, 2021 and 2020. Any payment due under
the terms of the Investment Advisory Agreement is calculated in arrears at the
end of each calendar year. No Capital Gain Incentive Fees as calculated under
the Investment Advisory Agreement or any prior investment advisory agreements,
as applicable, have been payable since December 31, 2018.

For more details on unrealized appreciation and depreciation of investments, see “Net Realized and Unrealized Gains and Losses” below.

Professional fees, administrative service costs and general and administrative costs

In total, professional fees, the administrative service fee, and general and
administrative expenses increased by $0.7 million from the year ended September
30, 2020 to the year ended September 30, 2021. This increase was primarily due
to an increase in the administrative service fee due to investments in
information technology and human capital that was partially offset by reduced
professional fees driven by operational synergies resulting from the Merger. In
general, we expect certain of our operating expenses, including professional
fees, the administrative service fee, and other general and administrative
expenses to decline as a percentage of our total assets during periods of growth
and increase as a percentage of our total assets during periods of asset
declines.

The Administrator pays for certain expenses incurred by us. These expenses are
subsequently reimbursed in cash. Total expenses reimbursed to the Administrator
during the years ended September 30, 2021 and 2020 were $7.0 million and $6.4
million, respectively.

From September 30, 2021 and 2020, included in accounts payable and other liabilities were $ 2.5 million and $ 1.6 million, respectively, for expenses paid on our behalf by the Administrator.

Net realized and unrealized gains and losses

The following table summarizes our net realized and unrealized gains (losses)
for the periods presented:
                                                                                          Year ended             Variances
                                                                                         September 30,
                                                                                                 2021               2020             2021 vs. 2020
                                                                         (In thousands)
Net realized gain (loss) on investments                                                      $  13,324          $ (18,680)         $       32,004
Foreign currency transactions                                                                   (5,419)                20                  (5,439)
Net realized gain (loss) on investment transactions                                          $   7,905          $ (18,660)         $       26,565
Unrealized appreciation on investments                                                         183,514             53,225                 130,289
Unrealized (depreciation) on investments                                                       (23,339)          (118,918)                 95,579
Unrealized appreciation (depreciation) on investments                                                -              3,843                  (3,843)
in SLF and GCIC SLF(1)
Unrealized appreciation (depreciation) on translation                                            3,917             (2,728)                  6,645
of assets and liabilities in foreign currencies
Unrealized appreciation (depreciation) on forward                                                1,154               (949)                  2,103
currency contracts
Net change in unrealized appreciation (depreciation) on                                      $ 165,246          $ (65,527)         $      230,773
investment transactions
Provision for taxes on unrealized appreciation on                                            $    (543)         $       -          $         (543)
investments




(1)Unrealized appreciation (depreciation) on investments in SLF and GCIC SLF
includes our investments in LLC equity interests in SLF and GCIC SLF. The
investment in GCIC SLF was acquired by us in the Merger. On January 1, 2020, SLF
and GCIC SLF became our wholly-owned subsidiaries and the assets and liabilities
were consolidated into us.

During the year ended September 30, 2021, we had a net realized gain of $7.9
million, primarily attributable to net realized gains from the sale of equity
investments in multiple portfolio companies, that was partially offset by
recognized realized losses on the restructure, sale, or write-off on multiple
portfolio companies and net realized losses recognized on the repayment of
non-U.S. dollar dominated debt.

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For the year ended September 30, 2020, we had a net realized loss of $18.7
million primarily attributable to recognized realized losses on the restructure,
sale, or write-off on multiple portfolio companies and $4.0 million in realized
loss that resulted from the consolidation of SLF and GCIC SLF, partially offset
by net realized gains from the sale of equity investments in multiple portfolio
companies.

For the year ended September 30, 2021, we had $183.5 million in unrealized
appreciation on 272 portfolio company investments, which was offset by $23.3
million in unrealized depreciation on 79 portfolio company investments.
Unrealized appreciation for the year ended September 30, 2021 primarily resulted
from better than expected performance of our portfolio companies and continued
reversal of depreciation recognized during the three months ended March 31, 2020
due to the COVID-19 pandemic. Unrealized depreciation for the year ended
September 30, 2021 primarily resulted from the amortization of discounts,
negative credit related adjustments that caused a reduction in fair value and
the reversal of the net unrealized appreciation associated with the sale of
portfolio company investments during the year ended September 30, 2021.

For the year ended September 30, 2020, we had $53.2 million in unrealized
appreciation on 140 portfolio company investments, which was offset by $118.9
million in unrealized depreciation on 136 portfolio company investments.
Unrealized appreciation for the year ended September 30, 2020 primarily resulted
from better than expected performance of our portfolio companies and credit
market conditions beginning to recover. Unrealized depreciation for the year
ended September 30, 2020 primarily resulted from decreases in the fair value in
the majority of our portfolio company investments due to the immediate adverse
economic effects of the COVID-19 pandemic, the uncertainty surrounding its
long-term impact and increases in the spread between the yields realized on
risk-free and higher risk securities. The unrealized appreciation on our
investments in SLF and GCIC SLF of $3.8 million was
due to the reversal of unrealized depreciation as a result of the consolidation
of SLF and GCIC SLF.

For the year ended September 30, 2021, we had $0.5 million of income tax expense
related to unrealized appreciation on investments held in consolidated
subsidiaries that are subject to U.S. federal and state corporate-level income
taxes.

Liquidity and capital resources

For the year ended September 30, 2021, we experienced a net increase in cash and
cash equivalents, foreign currencies, restricted cash and cash equivalents and
restricted foreign currencies of $60.8 million. During the period, cash used in
operating activities was $306.0 million, primarily driven by fundings of
portfolio investments of $2,082.1 million, offset by proceeds from principal
payments and sales of portfolio investments of $1,593.5 million and net
investment income of $167.7 million. Lastly, cash provided by financing
activities was $366.9 million, primarily driven by borrowings on debt of
$3,358.8 million, offset by repayments of debt of $2,816.1 million,
distributions paid of $139.1 million, and purchases of common stock under the
DRIP of $14.7 million.

For the year ended September 30, 2020, we experienced a net increase in cash,
cash equivalents, foreign currencies, restricted cash and cash equivalents and
restricted foreign currencies of $99.9 million. During the period, cash provided
by operating activities was $187.7 million, primarily as a result of proceeds
from principal payments and sales of portfolio investments of $706.0 million and
net investment income of $139.1 million, partially offset by fundings of
portfolio investments of $643.2 million. Lastly, cash used in financing
activities was $87.8 million, primarily driven by repayments of debt of $1,255.1
million, distributions paid of $136.4 million, and purchases of common stock
under the DRIP of $45.5 million, partially offset by borrowings on debt of
$1,053.6 million and $300.4 million of proceeds from stock issuances.

As of September 30, 2021 and 2020, we had cash and cash equivalents of $175.6
million and $24.6 million, respectively. In addition, we had foreign currencies
of $5.5 million and $0.6 million as of September 30, 2021 and 2020,
respectively, restricted cash and cash equivalents of $61.8 million and $157.6
million as of September 30, 2021 and 2020, respectively, and restricted foreign
currencies of $1.4 million and $1.7 million as of September 30, 2021 and 2020,
respectively. Cash and cash equivalents and foreign currencies are available to
fund new investments, pay operating expenses and pay distributions. Restricted
cash and cash equivalents and restricted foreign currencies can be used to pay
principal and interest on borrowings and to fund new investments that meet the
guidelines under our debt securitizations or credit facilities, as applicable.

This “Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

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Revolving credit facilities

MS Credit Facility II - As of September 30, 2021 and 2020, we had $0.0 million
and $313.3 million outstanding under the MS Credit Facility II, respectively. As
of September 30, 2021, the MS Credit Facility II allowed Funding II as amended,
to borrow up to $75.0 million at any one time outstanding, subject to leverage
and borrowing base restrictions. As of September 30, 2021 and 2020, subject to
leverage and borrowing base restrictions, we had approximately $75.0 million and
$86.7 million of remaining commitments, respectively, and $75.0 million and $8.0
million of availability, respectively, on the MS Credit Facility II.

WF Credit Facility - On February 12, 2021, we repaid all outstanding borrowings
under the WF Credit Facility, following which the WF Credit Facility was
terminated. As of September 30, 2020, we had outstanding debt under the WF
Credit Facility of $199.6 million. Prior to termination, the WF Credit Facility
allowed GCIC Funding, to borrow up to $300.0 million at any one time
outstanding, subject to leverage and borrowing base restrictions.

DB Credit Facility - On October 9, 2020, all outstanding borrowings under the DB
Credit Facility were repaid following which the DB Credit Facility was
terminated. As of September 30, 2020, we had outstanding debt under the DB
Credit Facility of $153.5 million. As of September 30, 2020, subject to leverage
and borrowing base restrictions, we had approximately $96.5 million of remaining
commitments and $82.7 million of availability on the DB Credit Facility.

JPM Credit Facility - On February 11, 2021, we entered into the JPM Credit
Facility, which allowed us to borrow up to $475.0 million at any one time
outstanding, subject to leverage and borrowing base restrictions. As of
September 30, 2021, we had outstanding debt under the JPM Credit Facility of
$472.1 million. As of September 30, 2021, subject to leverage and borrowing base
restrictions, we had $2.9 million of remaining commitments and $2.9 million of
availability on the JPM Credit Facility. Effective October 14, 2021 and November
23, 2021, we increased commitments on the JPM Credit Facility to $687.5 million
and $1,037.5 million, respectively.

Adviser Revolver - On June 22, 2016, we entered into the Adviser Revolver,
which, as amended, permitted us to borrow up to $100.0 million at any one time
outstanding as of September 30, 2021. We entered into the Adviser Revolver in
order to have the ability to borrow funds on a short-term basis and have in the
past repaid, and generally intend in the future to repay, borrowings under the
Adviser Revolver within 30 to 45 days from which they are drawn. As of each of
September 30, 2021 and 2020, we had no amounts outstanding on the Adviser
Revolver.

Debt securitizations

2018 Debt Securitization - On November 16, 2018, we completed the 2018 Debt
Securitization. The Class A, Class B and Class C-1 2018 Notes are included in
the September 30, 2021 and 2020 Consolidated Statements of Financial Condition
as our debt and the Class C-2, Class D and Subordinated 2018 Notes were
eliminated in consolidation. As of September 30, 2021 and 2020, we had
outstanding debt under the 2018 Debt Securitization of $408.2 million and $408.2
million, respectively.

GCIC 2018 Debt Securitization - Effective September 16, 2019, we assumed as a
result of the Merger, the GCIC 2018 Debt Securitization. The Class A-1, Class
A-2 (Class A-2-R GCIC 2018 Notes after refinancing on December 21, 2020) and
Class B-1 GCIC 2018 Notes are included in the September 30, 2021 and 2020
Consolidated Statements of Financial Condition as our debt. As of September 30,
2021 and 2020 the Class B-2, Class C and Class D GCIC 2018 Notes and the
Subordinated GCIC 2018 Notes were eliminated in consolidation. As of September
30, 2021 and 2020, we had outstanding debt under the GCIC 2018 Debt
Securitization of $544.2 million and $542.4 million, respectively.

2020 Debt Securitization - On August 26, 2021, the 2020 Notes were redeemed and
following such redemption, the agreements governing the 2020 Debt Securitization
were terminated. The Class A-1, Class A-2, and Class B Notes are included in the
September 30, 2020 Consolidated Statements of Financial Condition as our debt.
As of September 30, 2020, the Class C 2020 Notes and the Subordinated 2020 Notes
were eliminated in consolidation. As of September 30, 2020, we had outstanding
debt under the 2020 Debt Securitization of $189.0 million.

Due to the interplay of the restrictions of the Principal and Joint Transactions Act 1940 and the we risk retention rules adopted in accordance with section 941 of Dodd-Frank, as a business development company we requested and obtained no

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action relief from the SEC to ensure we could engage in CLO financings in which
assets are transferred through GC Advisors.

SBA bonds

Under present SBIC regulations, the maximum amount of debentures guaranteed by
the SBA, issued by multiple licensees under common management is $350.0 million
and the maximum amount issued by a single SBIC licensee is $175.0 million. As of
September 30, 2021, each of SBIC IV, SBIC V and SBIC VI, had no outstanding
SBA-guaranteed debentures. As of September 30, 2020, SBIC IV, SBIC V and SBIC
VI, had $0.0, $151.8 million and $66.0 million, respectively, of outstanding
SBA-guaranteed debentures that would have matured between March 2024 and March
2030. The original amount of debentures committed to SBIC IV, SBIC V, and SBIC
VI by the SBA were $150.0 million, $175.0 million, and $175.0 million
respectively. Through September 30, 2021, SBIC IV, SBIC V, SBIC VI have repaid
$150.0 million, $175.0 million, and $110.0 million of outstanding debentures,
respectively, and these commitments have effectively been terminated. Upon
approval by the SBA, we surrendered and terminated our licenses to operate SBIC
IV, SBIC V, and SBIC VI on November 4, 2020, May 4, 2021, and September 21,
2021, respectively, as SBICs.

2024 Tickets

On October 2, 2020, we issued $400.0 million in aggregate principal amount of
the 2024 Unsecured Notes, all of which remained outstanding as our debt as of
September 30, 2021. On October 15, 2021, we issued an additional $100.0 million
in aggregate principal of the 2024 Notes. Upon issuance of the New 2024 Notes,
the outstanding aggregate principal amount of the 2024 Notes is $500.0 million.

2026 Tickets

On February 24, 2021, we issued $400.0 million in aggregate principal amount of
the 2026 Unsecured Notes, all of which remained outstanding as our debt as of
September 30, 2021. On October 13, 2021, we issued an additional $200.0 million
in aggregate principal of the 2026 Notes. Upon issuance of the New 2026 Notes,
the outstanding aggregate principal amount of the 2026 Notes is $600.0 million.

Ticket 2027

At July 27, 2021, we issued $ 350.0 million total principal amount of the 2027 Unsecured Notes, all of which remained unpaid as debt at
September 30, 2021.

Share distribution agreement

On May 28, 2021, we entered into an equity distribution agreement in connection
with the launch of an at the market program to sell up to $250.0 million of
shares of our common stock. An at the market offering is a registered offering
by a publicly traded issuer of its listed equity securities that allows the
issuer to sell shares directly into the market at market prices.

Asset coverage, contractual obligations, off-balance sheet arrangements and other liquidity considerations

As of September 30, 2021, in accordance with the 1940 Act, with certain limited
exceptions, we were allowed to borrow amounts such that our asset coverage, as
defined in the 1940 Act, is at least 150% after such borrowing. Prior to
February 6, 2019, in accordance with the 1940 Act, with certain limited
exceptions, we were allowed to borrow amounts such that our asset coverage, as
defined in the 1940 Act, was at least 200% after such borrowing. We currently
intend to continue to target a GAAP debt-to-equity ratio between 0.85x to 1.25x.
As of September 30, 2021, our asset coverage for borrowed amounts was 200.0%.

In August 2021, our board of directors reapproved a share repurchase program, or
the Program, which allows us
to repurchase up to $150.0 million of our outstanding common stock on the open
market at prices below the NAV per share as reported in our then most recently
published consolidated financial statements. The Program is implemented at the
discretion of management with shares to be purchased from time to time at
prevailing market
prices, through open market transactions, including block transactions. We did
not make any repurchases of our common stock during the years ended September
30, 2021 and 2020.
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As of September 30, 2021 and 2020, we had outstanding commitments to fund
investments totaling $340.7 million and $141.8 million, respectively. As of
September 30, 2021, total commitments of $340.7 million included $42.2 million
of unfunded commitments on revolvers. There is no guarantee that these amounts
will be funded to the borrowing party now or in the future. The unfunded
commitments relate to loans with various maturity dates, but the entire amount
was eligible for funding to the borrowers, subject to the terms of each loan's
respective credit agreement. A summary of maturity requirements for our
principal borrowings as of September 30, 2021 is included in Note 7 of our
consolidated financial statements. We did not have any other material
contractual payment obligations as of September 30, 2021. As of September 30,
2021, we believe that we had sufficient assets and liquidity to adequately cover
future obligations under our unfunded commitments based on historical rates of
drawings upon unfunded commitments, cash and restricted cash balances that we
maintain, availability under the Adviser Revolver, JPM Credit Facility and MS
Credit Facility II, as well as ongoing principal repayments on debt investments.
In addition, we generally hold some syndicated loans in larger portfolio
companies that are saleable over a relatively short period to generate cash.

In addition, we have entered and, in the future, may again enter into derivative
instruments that contain elements of off-balance sheet market and credit risk.
Refer to Note 5 of our consolidated financial statements for outstanding forward
currency contracts as of September 30, 2021 and 2020. Derivative instruments can
be affected by market conditions, such as interest rate volatility, which could
impact the fair value of the derivative instruments. If market conditions move
against us, we may not achieve the anticipated benefits of the derivative
instruments and may realize a loss. We minimize market risk through monitoring
its investments and borrowings.

Although we expect to fund the growth of our investment portfolio through the
net proceeds from future securities offerings and future borrowings, to the
extent permitted by the 1940 Act, we cannot assure you that our efforts to raise
capital will be successful. In addition, from time to time, we can amend or
refinance our leverage facilities and securitization financings, to the extent
permitted by applicable law. In addition to capital not being available, it also
may not be available on favorable terms. To the extent we are not able to raise
capital on what we believe are favorable terms, we will focus on optimizing
returns by investing capital generated from repayments into new investments we
believe are attractive from a risk/reward perspective. Furthermore, to the
extent we are not able to raise capital and are at or near our targeted leverage
ratios, we expect to receive smaller allocations, if any, on new investment
opportunities under GC Advisors' allocation policy and have, in the past,
received such smaller allocations under similar circumstances.

Portfolio composition, investment activity and yield

From September 30, 2021 and 2020, we had investments in 296 and 254 holding companies, respectively, with a total fair value of $ 4.9 billion and $ 4.2 billion, respectively.

The following table presents the composition of the assets of our new investment commitments for the years ended. September 30, 2021 and 2020:

                                                                                 Years ended September 30,
                                                                              2021                   2020
                                                                                                   (In thousands)            Percentage             (In thousands)            Percentage
Senior secured                                                                                   $       398,734                   17.0   %       $       106,268                   17.9   %
One stop                                                                                               1,850,769                   78.8                   481,662                   80.9
Second lien                                                                                               29,899                    1.3                         -                      -
Subordinated debt                                                                                            377                    0.0   *                   138                    0.0   *

Equity                                                                                                    67,901                    2.9                     7,010                    1.2
Total new investment commitments                                                                 $     2,347,680                  100.0   %       $       595,078                  100.0   %



* Represents an amount less than 0.1%.

Due to a significant increase in merger and acquisition activity as a result of
improvements in market conditions from the COVID-19 pandemic, new commitments
increased from the year ended September 30, 2020 to the year ended September 30,
2021.

For the year ended September 30, 2021, we had about $ 1,593.5 million proceeds from principal payments and sales of portfolio investments.

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For the year ended September 30, 2020, we had about $ 706.0 million proceeds from principal payments and sales of portfolio investments.

The following table shows the principal, amortized cost and fair value of our investment portfolio by asset class:

                                               As of September 30, 2021(1)                                    As of September 30, 2020(2)
                                                        Amortized               Fair                                   Amortized               Fair
                                   Principal               Cost                Value              Principal               Cost                Value
                                                      (In thousands)                                                 (In thousands)
Senior secured:
Performing                       $   796,269          $   793,707          $   781,962          $   645,886          $   649,259          $   627,471
Non-accrual(3)                        20,047                9,813                2,843               37,849               27,026               12,742
One stop:
Performing                         3,876,907            3,860,525            3,839,053            3,518,814            3,540,446            3,429,012
Non-accrual(3)                        59,699               52,806               43,261               81,897               75,239               56,573
Second lien:
Performing                            42,571               41,946               41,857               19,640               19,886               19,640
Non-accrual(3)                             -                    -                    -                    -                    -                    -
Subordinated debt:
Performing                               172                  171                  172                  537                  541                  575
Non-accrual(3)                             -                    -                    -                    -                    -                    -

Equity                                      N/A           136,429              185,738                     N/A            86,503               92,197
Total                            $ 4,795,665          $ 4,895,397          $ 4,894,886          $ 4,304,623          $ 4,398,900          $ 4,238,210




(1)As of September 30, 2021, $502.1 million and $476.1 million of our loans at
amortized cost and fair value, respectively, included a feature permitting a
portion of the interest due on such loan to be PIK interest.
(2)As of September 30, 2020, $488.1 million and $454.9 million of our loans at
amortized cost and fair value, respectively, included a feature permitting a
portion of the interest due on such loan to be PIK interest.
(3)We refer to a loan as non-accrual when we cease recognizing interest income
on the loan because we have stopped pursuing repayment of the loan or, in
certain circumstances, it is past due 90 days or more on principal and interest
or our management has reasonable doubt that principal or interest will be
collected. See "- Critical Accounting Policies - Revenue Recognition."
As of September 30, 2021, we had loans in six portfolio companies on non-accrual
status, and non-accrual
investments as a percentage of total debt investments at cost and fair value
were 1.3% and 1.0%, respectively.
As of September 30, 2020, we had loans in nine portfolio companies on
non-accrual status, and non-accrual investments as a percentage of total
investments at cost and fair value were 2.4% and 1.7%, respectively. As of
September 30, 2021 and 2020, the fair value of our debt investments as a
percentage of the outstanding principal value was 98.2% and 96.3%, respectively.

The following table shows the weighted average rate, spread over LIBOR of
floating rate and fees of investments originated and the weighted average rate
of sales and payoffs of portfolio companies during the years ended September 30,
2021 and 2020:
                                                                            

Year ended September 30,

                                                                                                           2021                2020
Weighted average rate of new investment fundings                                                           6.7%                7.4%

Weighted average spread over LIBOR of new variable rate investment financing

                                                                                        5.8%                5.7%
Weighted average fees of new investment fundings                                                           1.2%                1.4%
Weighted average rate of sales and payoffs of portfolio
investments                                                                                                6.9%                7.2%





As of September 30, 2021, 92.4% and 92.4% of our debt portfolio at fair value
and at amortized cost, respectively, had interest rate floors that limit the
minimum applicable interest rates on such loans. As of September 30, 2020, 91.2%
and 91.3% of our debt portfolio at fair value and at amortized cost,
respectively, had interest rate floors that limit the minimum applicable
interest rates on such loans.
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As of September 30, 2021 and 2020, the portfolio median earnings before
interest, taxes, depreciation and amortization, or EBITDA, for our portfolio
companies was $41.1 million and $31.4 million, respectively. The portfolio
median EBITDA is based on the most recently reported trailing twelve-month
EBITDA received from the portfolio company.

As part of the monitoring process, GC Advisors regularly assesses the risk
profile of each of our investments and rates each of them based on an internal
system developed by Golub Capital and its affiliates. This system is not
generally accepted in our industry or used by our competitors. It is based on
the following categories, which we refer to as GC Advisors' internal performance
ratings:

Internal Performance Ratings
Rating                   Definition
        5                Involves the least amount of risk in our 

wallet. The borrower executes

                         above expectations, and the trends and risk 

factors are generally favorable.

                         Involves an acceptable level of risk that is 

similar to the risk at the time of

        4                origination. The borrower is generally performing 

as expected, and the risk

                         factors are neutral to favorable.
                         Involves a borrower performing below expectations 

and indicates that the loan

        3                risk has increased somewhat since origination. The 

the borrower might be out of

                         compliance with debt covenants; however, loan 

payments are usually not made

                         due.
                         Involves a borrower performing materially below 

expectations and indicates that

        2                the loan's risk has increased materially since

creation. In addition to

                         borrower being generally out of compliance with 

restrictive covenants, loan repayments

                         could be past due (but generally not more than 180 

days late).

                         Involves a borrower performing substantially below 

expectations and indicates

                         that the loan's risk has substantially increased 

from the beginning. Most or all

        1                of the debt covenants are out of compliance and

payments are noticeably

                         delinquent. Loans rated 1 are not anticipated to 

be reimbursed in full and we

                         reduce the fair market value of the loan to the 

the amount we plan will be

                         recovered.



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.

For any investment rated 1, 2 or 3, GC Advisors will increase its monitoring
intensity and prepare regular updates for the investment committee, summarizing
current operating results and material impending events and suggesting
recommended actions.

GC Advisors monitors and, when appropriate, changes the internal performance
ratings assigned to each investment in our portfolio. In connection with our
valuation process, GC Advisors and our board of directors review these internal
performance ratings on a quarterly basis.

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The following table shows the distribution of our investments on the 1 to 5
internal performance rating scale at fair value as of September 30, 2021 and
2020:
                                                   As of September 30, 2021                           As of September 30, 2020
             Internal                      Investments              Percentage of             Investments              Percentage of
           Performance                    at Fair Value                
Total                at Fair Value                 Total
              Rating                      (In thousands)             Investments             (In thousands)             Investments
                5                        $     499,241                  10.2%               $     257,409                  6.1%
                4                            3,951,870                  80.7                    3,085,610                  72.8
                3                              395,208                   8.1                      836,560                  19.7
                2                               47,836                   1.0                       57,754                   1.4
                1                                  731                  0.0*                          877                  0.0*
              Total                      $   4,894,886                 100.0%               $   4,238,210                 100.0%




*   Represents an amount less than 0.1%.



Division

We intend to make quarterly distributions to our stockholders as determined by
our board of directors. For additional details on distributions, see "Income
taxes" in Note 2 to our consolidated financial statements.

We may not be able to achieve operating results that will allow us to make
distributions at a specific level or to increase the amount of our distributions
from time to time. In addition, the asset coverage requirements applicable to us
as a business development company under the 1940 Act could limit our ability to
make distributions. If we do not distribute a certain percentage of our income
annually, we will suffer adverse U.S. federal income tax consequences, including
the possible loss of our ability to be subject to tax as a RIC. We cannot assure
stockholders that they will receive any distributions.

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

To the extent our taxable earnings fall below the total amount of our
distributions for any tax year, a portion of those distributions could be deemed
a return of capital to our stockholders for U.S. federal income tax purposes.
Thus, the source of a distribution to our stockholders could be the original
capital invested by the stockholder rather than our income or gains.
Stockholders should read any written disclosure accompanying a distribution
payment carefully and should not assume that the source of any distribution is
our ordinary income or gains.

We have adopted an "opt out" dividend reinvestment plan for our common
stockholders. As a result, if we declare a distribution, our stockholders' cash
distributions will be automatically reinvested in additional shares of our
common stock unless a stockholder specifically "opts out" of our dividend
reinvestment plan. If a stockholder opts out, that stockholder will receive cash
distributions. Although distributions paid in the form of additional shares of
our common stock will generally be subject to U.S. federal, state and local
taxes in the same manner as cash distributions, stockholders participating in
our dividend reinvestment plan will not receive any corresponding cash
distributions with which to pay any such applicable taxes.

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Related Party Transactions

We have entered into a number of business relationships with affiliated and related parties, including the following:

•We entered into the Investment Advisory Agreement with GC Advisors. Mr.
Lawrence Golub, our chairman, is a manager of GC Advisors, and Mr. David Golub,
our chief executive officer, is a manager of GC Advisors, and each of Messrs.
Lawrence Golub and David Golub owns an indirect pecuniary interest in GC
Advisors.

• Golub Capital LLC provides, and other affiliates of Capital of Golub have historically provided us with the office facilities and administrative services necessary to conduct day-to-day operations in accordance with our Administration Agreement.

•We have entered into a license agreement with Golub Capital LLC, pursuant to
which Golub Capital LLC has granted us a non-exclusive, royalty-free license to
use the name "Golub Capital."

•Under the Staffing Agreement, Golub Capital LLC has agreed to provide GC
Advisors with the resources necessary to fulfill its obligations under the
Investment Advisory Agreement. The Staffing Agreement provides that Golub
Capital LLC will make available to GC Advisors experienced investment
professionals and provide access to the senior investment personnel of Golub
Capital LLC for purposes of evaluating, negotiating, structuring, closing and
monitoring our investments. The Staffing Agreement also includes a commitment
that the members of GC Advisors' investment committee will serve in such
capacity. Services under the Staffing Agreement are provided on a direct cost
reimbursement basis. We are not a party to the Staffing Agreement.

•GC Advisors served as collateral manager to the 2014 Issuer under the 2014
Collateral Management Agreement and the 2020 Issuer under the 2020 Collateral
Management Agreement and serves as collateral manager to the 2018 Issuer and the
GCIC 2018 Issuer under the 2018 Collateral Management Agreement and the GCIC
2018 Collateral Management Agreement, respectively. Fees payable to GC Advisors
for providing these services offset against the base management fee payable by
us under the Investment Advisory Agreement.

• We entered into the Revolver Advisor with GC Advisors in order to have the capacity to borrow funds in the short term.

•Through the first three calendar quarters of 2021, the Golub Capital Employee
Grant Program Rabbi Trust, or the Trust, purchased approximately $3.7 million,
or 235,443 shares of our common stock for the purpose of awarding incentive
compensation to employees of Golub Capital. During calendar year 2020, the
Trust, purchased approximately $54.7 million, or 4,103,225 shares of our common
stock for the purpose of awarding incentive compensation to employees of Golub
Capital.

•At September 16, 2019, we completed our acquisition of GCIC pursuant to the merger agreement.

•At January 1, 2020, we purchased the interests held by RGA and Aurora in the senior loan funds in accordance with the purchase agreement.

• In the transferable rights offer made on May 15, 2020, 3,191,448 ordinary shares were purchased by companies affiliated with GC Advisors.

•On October 2, 2020, an affiliate of GC Advisors purchased $40.0 million of the
2024 Unsecured Notes. On October 8, 2020, the affiliate sold $15.0 million of
the 2024 Unsecured Notes to an unaffiliated party. On May 21, 2021, the
affiliate sold $25.0 million of the 2024 Unsecured Notes to an unaffiliated
party which closed its position.

GC Advisors also sponsors or manages, and expects in the future to sponsor or
manage, other investment funds, accounts or investment vehicles (together
referred to as "accounts") that have investment mandates that are similar, in
whole and in part, with ours. For example, GC Advisors presently serves as the
investment adviser to Golub Capital BDC 3, Inc. and Golub Capital Direct Lending
Corporation, both unlisted business development companies
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that primarily focus on investing in one stop and other senior secured loans. In
addition, our officers and directors serve in similar capacity for Golub Capital
BDC 3, Inc. and Golub Capital Direct Lending Corporation. If GC Advisors and its
affiliates determine that an investment is appropriate for us, Golub Capital BDC
3, Inc., Golub Capital Direct Lending Corporation and other accounts, depending
on the availability of such investment and other appropriate factors, and
pursuant to GC Advisors' allocation policy, GC Advisors or its affiliates could
determine that we should invest side-by-side with one or more other accounts. We
do not intend to make any investments if they are not permitted by applicable
law and interpretive positions of the SEC and its staff, or if they are
inconsistent with GC Advisors' allocation procedures.

In addition, we have adopted a formal code of ethics that governs the conduct of
our and GC Advisors' officers, directors and employees. Our officers and
directors also remain subject to the duties imposed by both the 1940 Act and the
General Corporation Law of the State of Delaware.

Critical accounting policies

The preparation of financial statements and related disclosures in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following items as critical accounting
policies.

Fair value assessments

We value investments for which market quotations are readily available at their
market quotations. However, a readily available market value is not expected to
exist for many of the investments in our portfolio, and we value these portfolio
investments at fair value as determined in good faith by our board of directors
under our valuation policy and process.

Valuation methods include comparisons of the portfolio companies to peer
companies that are public, determination of the enterprise value of a portfolio
company, discounted cash flow analysis and a market interest rate approach. The
factors that are taken into account in fair value pricing investments include:
available current market data, including relevant and applicable market trading
and transaction comparables; applicable market yields and multiples; security
covenants; call protection provisions; information rights; the nature and
realizable value of any collateral; the portfolio company's ability to make
payments, its earnings and discounted cash flows and the markets in which it
does business; comparisons of financial ratios of peer companies that are
public; comparable merger and acquisition transactions; and the principal market
and enterprise values. When an external event such as a purchase transaction,
public offering or subsequent equity sale occurs, we will consider the pricing
indicated by the external event to corroborate the private equity 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 the investments can
differ significantly from the values that would have been used had a readily
available market value existed for such investments and differ materially from
values that are ultimately received or settled.

Our board of directors is ultimately and solely responsible for determining, in
good faith, the fair value of investments that are not publicly traded, whose
market prices are not readily available on a quarterly basis or any other
situation where portfolio investments require a fair value determination.

For investments for which market quotes are not readily available, our Board of Directors undertakes a multi-step valuation process on a quarterly basis, as described below:

Our quarterly valuation process begins with each portfolio company investment
being initially valued by the investment professionals of GC Advisors
responsible for credit monitoring. Preliminary valuation conclusions are then
documented and discussed with our senior management and GC Advisors. The audit
committee of our board of directors reviews these preliminary valuations. At
least once annually the valuation for each portfolio investment, subject to a de
minimis threshold, is reviewed by an independent valuation firm. The board of
directors discusses valuations and determines the fair value of each investment
in our portfolio in good faith.

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Determination of fair values involves subjective judgments and estimates. Under
current accounting standards, the notes to our consolidated financial statements
refer to the uncertainty with respect to the possible effect of such valuations,
and any change in such valuations, on our consolidated financial statements.

We follow ASC Topic 820 for measuring fair value. Fair value is the price that
would be received in the sale of an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Where
available, fair value is based on observable market prices or parameters, or
derived from such prices or parameters. Where observable prices or inputs are
not available, valuation models are applied. These valuation models involve some
level of management estimation and judgment, the degree of which is dependent on
the price transparency for the assets or liabilities or market and the assets'
or liabilities' complexity. Our fair value analysis includes an analysis of the
value of any unfunded loan commitments. Assets and liabilities are categorized
for disclosure purposes based upon the level of judgment associated with the
inputs used to measure their value. The valuation hierarchical levels are based
upon the transparency of the inputs to the valuation of the asset or liability
as of the measurement date. The three levels are defined as follows:

Level 1: Inputs are unadjusted, quoted prices in active markets for identical
assets or liabilities at the measurement date.
Level 2: Inputs include quoted prices for similar assets or liabilities in
active markets and inputs that are observable for the assets or liabilities,
either directly or indirectly, for substantially the full term of the assets or
liabilities.
Level 3: Inputs include significant unobservable inputs for the assets or
liabilities and include situations where there is little, if any, market
activity for the assets or liabilities. The inputs into the determination of
fair value are based upon the best information available and may require
significant management judgment or estimation.
In certain cases, the inputs used to measure fair value may fall into different
levels of the fair value hierarchy. In such cases, an asset's or a liability's
categorization within the fair value hierarchy is based on the lowest level of
input that is significant to the fair value measurement. Our assessment of the
significance of a particular input to the fair value measurement in its entirety
requires judgment, and we consider factors specific to the asset or liability.
We assess the levels of assets and liabilities at each measurement date, and
transfers between levels are recognized on the actual date of the event or
change in circumstances that caused the transfers. There were no transfers among
Level 1, 2 and 3 of the fair value hierarchy for assets and liabilities during
the years ended September 30, 2021, 2020 and 2019. The following section
describes the valuation techniques used by us to measure different assets and
liabilities at fair value and includes the level within the fair value hierarchy
in which the assets and liabilities are categorized.

Investment valuation

Level 1 investments are valued using quoted market prices. Level 2 investments
are valued using market consensus prices that are corroborated by observable
market data and quoted market prices for similar assets and liabilities. Level 3
investments are valued at fair value as determined in good faith by our board of
directors, based on input of management, the audit committee and independent
valuation firms that have been engaged at the direction of our board of
directors to assist in the valuation of each portfolio investment without a
readily available market quotation at least once during a trailing twelve-month
period under a valuation policy and a consistently applied valuation process.
This valuation process is conducted at the end of each fiscal quarter, with
approximately 25% (based on the number of portfolio companies) of our valuations
of debt and equity investments without readily available market quotations
subject to review by an independent valuation firm. All investments as of
September 30, 2021, with the exception of money market funds included in cash,
cash equivalents and restricted cash and cash equivalents and one portfolio
company equity investment (Level 1 investments) and forward currency contracts
(Level 2 investments), were valued using Level 3 inputs. All investments as of
September 30, 2020, with the exception of money market funds included in cash,
cash equivalents and restricted cash and cash equivalents (Level 1 investments)
and forward currency contracts (Level 2 investments), were valued using Level 3
inputs.

When determining fair value of Level 3 debt and equity investments, we may take
into account the following factors, where relevant: the enterprise value of a
portfolio company, the nature and realizable value of any collateral, the
portfolio company's ability to make payments and its earnings and discounted
cash flows, the markets in which the portfolio company does business,
comparisons to publicly traded securities, and changes in the interest rate
environment and the credit markets generally that may affect the price at which
similar investments may be made and other relevant factors. The primary method
for determining enterprise value uses a multiple analysis whereby
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appropriate multiples are applied to the portfolio company's EBITDA. A portfolio
company's EBITDA may include pro-forma adjustments for items such as
acquisitions, divestitures, or expense reductions. The enterprise value analysis
is performed to determine the value of equity investments and to determine if
debt investments are credit impaired. If debt investments are credit impaired,
we will use the enterprise value analysis or a liquidation basis analysis to
determine fair value. For debt investments that are not determined to be credit
impaired, we use a market interest rate yield analysis to determine fair value.

In addition, for certain debt investments, we may base our valuation on
indicative bid and ask prices provided by an independent third party pricing
service. Bid prices reflect the highest price that we and others may be willing
to pay. Ask prices represent the lowest price that we and others may be willing
to accept. We generally use the midpoint of the bid/ask range as our best
estimate of fair value of such investment.

Due to the inherent uncertainty of determining the fair value of Level 3
investments that do not have a readily available market value, the fair value of
the investments may differ significantly from the values that would have been
used had a market existed for such investments and may differ materially from
the values that may ultimately be received or settled. Further, such investments
are generally subject to legal and other restrictions or otherwise are less
liquid than publicly traded instruments. If we were required to liquidate a
portfolio investment in a forced or liquidation sale, we may realize
significantly less than the value at which such investment had previously been
recorded.

Our investments are subject to market risk. Market risk is the potential for
changes in the value due to market changes. Market risk is directly impacted by
the volatility and liquidity in the markets in which the investments are traded.

Measurement of other financial assets and liabilities

The fair value of the 2024 Notes, 2026 Notes and 2027 Notes is based on vendor
pricing received by the Company, which is considered a Level 2 input. The fair
value of our remaining debt is estimated using Level 3 inputs by discounting
remaining payments using comparable market rates or market quotes for similar
instruments at the measurement date, if available.

Revenue recognition:

Our revenue recognition policies are as follows:

Investments and Related Investment Income: Interest income is accrued based upon
the outstanding principal amount and contractual interest terms of debt
investments. Premiums, discounts, and origination fees are amortized or accreted
into interest income over the life of the respective debt investment. For
investments with contractual PIK interest, which represents contractual interest
accrued and added to the principal balance that generally becomes due at
maturity, we do not accrue PIK interest if the portfolio company valuation
indicates that the PIK interest is not likely to be collectible. In addition, we
may generate revenue in the form of amendment, structuring or due diligence
fees, fees for providing managerial assistance, consulting fees and prepayment
premiums on loans and record these fees as fee income when received. Loan
origination fees, original issue discount and market discount or premium are
capitalized, and we accrete or amortize such amounts as interest income. We
record prepayment premiums on loans as fee income. Dividend income on preferred
equity securities is recorded as dividend income 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 securities is recorded on the
record date for private portfolio companies or on the ex-dividend date for
publicly traded portfolio companies. Distributions received from LLC and limited
partnership, or LP, investments are evaluated to determine if the distribution
should be recorded as dividend income or a return of capital. Generally, we will
not record distributions from equity investments in LLCs and LPs as dividend
income unless there are sufficient accumulated tax-basis earnings and profits in
the LLC or LP prior to the distribution. Distributions that are classified as a
return of capital are recorded as a reduction in the cost basis of the
investment.

We account for investment transactions on a trade-date basis. Realized gains or
losses on investments are measured by the difference between the net proceeds
from the disposition and the cost basis of investment, without regard to
unrealized gains or losses previously recognized. We report changes in fair
value of investments from the prior period that is measured at fair value as a
component of the net change in unrealized appreciation (depreciation) on
investments in our Consolidated Statements of Operations.
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Non-accrual: Loans may be left on accrual status during the period we are
pursuing repayment of the loan. Management reviews all loans that become past
due 90 days or more on principal and interest or when there is reasonable doubt
that principal or interest will be collected for possible placement on
non-accrual status. We generally reverse accrued interest when a loan is placed
on non-accrual. Additionally, any original issue discount and market discount
are no longer accreted to interest income as of the date the loan is placed on
non-accrual status. Interest payments received on non-accrual loans may be
recognized as income or applied to principal depending upon management's
judgment. We restore non-accrual loans to accrual status when past due principal
and interest is paid and, in our management's judgment, are likely to remain
current. The total fair value of our non-accrual loans was $46.1 million and
$69.3 million as of September 30, 2021 and 2020, respectively.

Income taxes: We have elected to be treated as a RIC under Subchapter M of the
Code and operate in a manner so as to qualify for the tax treatment applicable
to RICs. In order to be subject to tax as a RIC, we are required to meet certain
source of income and asset diversification requirements, as well as timely
distribute to our stockholders dividends for U.S. federal income tax purposes of
an amount generally at least equal to 90% of investment company taxable income,
as defined by the Code and determined without regard to any deduction for
dividends paid, for each tax year. We have made and intend to continue to make
the requisite distributions to our stockholders, which will generally relieve us
from U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, we may choose to
retain taxable income in excess of current year dividend distributions and would
distribute such taxable income in the next tax year. We may then be required to
incur a 4% excise tax on such income. To the extent that we determine that our
estimated current year annual taxable income, determined on a calendar year
basis, could exceed estimated current calendar year dividend distributions, we
accrue excise tax, if any, on estimated excess taxable income as taxable income
is earned. For each of the years ended September 30, 2021, 2020 and 2019, we did
not incur any U.S federal excise tax.

We have consolidated subsidiaries that are subject to U.S. federal and state
corporate-level income taxes. For the year ended September 30, 2021, we recorded
a net tax expense of $0.5 million for taxable subsidiaries. For the years ended
September 30, 2020 and 2019, we did not record a net tax expense for taxable
subsidiaries. As of September 30, 2021, we recorded a net deferred tax liability
on the Consolidated Statement of Financial Condition of $0.5 million for taxable
subsidiaries, primarily due to unrealized appreciation on the investments held
at the taxable subsidiaries. As of September 30, 2020, there was no deferred tax
asset or liability recorded on the Consolidated Statement of Financial
Condition.

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

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