UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 
 Form 10-K 
  (Mark One)þ

          

          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2015 OR  o

          

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER: 814-00809 
 Full Circle Capital Corporation (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 
  MARYLAND

          

          27-2411476(State or jurisdiction of incorporation or organization)

          

          (I.R.S. Employer Identification No.)
  102 Greenwich Avenue, 2nd Floor Greenwich, CT

          

          06830(Address of principal executive office)

          

          (Zip Code)
 REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 900-2100 
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  Title of Each Class

          

          Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share 8.25% Notes due 2020

          

          NASDAQ Global Market NASDAQ Global Market
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):  Large accelerated filer o

          

          Accelerated filer o

          

          Non-accelerated filer þ

          

          Smaller reporting company o(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No þ The aggregate market value of common stock beneficially owned by non-affiliates of the Registrant on December 31, 2014, based on the closing price on that date of $4.52 on the NASDAQ Stock Market, was $51,951,452. For the purposes of calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 23,235,430 shares of the Registrants common stock outstanding as of September 14, 2015. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrants definitive Proxy Statement relating to the registrants 2016 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Companys fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.
     TABLE OF CONTENTS TABLE OF CONTENTS  PagePART IItem 1.Business





1Item 1A.Risk Factors





33Item 1B.Unresolved Staff Comments





58Item 2.Properties





58Item 3.Legal Proceedings





58Item 4.Reserved





58PART IIItem 5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities





59Item 6.Selected Financial Data





62Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations





62Item 7A.Quantitative and Qualitative Disclosures about Market Risk





89Item 8.Consolidated Financial Statements and Supplementary Data





90Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure





138Item 9A.Controls and Procedures





138Item 9B.Other Information





139PART IIIItem 10.Directors, Executive Officers and Corporate Governance





140Item 11.Executive Compensation





140Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters





140Item 13.Certain Relationships and Related Transactions, and Director Independence





140Item 14.Principal Accounting Fees and Services





140PART IVItem 15.Exhibits and Financial Statement Schedules





141Exhibit Index





142Signatures





144
 i    TABLE OF CONTENTS PART I Item 1.  Business Full Circle Capital Corporation (Full Circle Capital, the Company, or we), a Maryland corporation formed in April 2010, is an externally managed non-diversified closed-end management investment company that has elected to be regulated as a business development company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We are managed by Full Circle Advisors, LLC (Full Circle Advisors or our investment
adviser) and Full Circle Service Company, LLC (Full Circle Service Company or our administrator) provides the administrative services necessary for us to operate. We invest primarily in senior secured loans and, to a lesser extent, second lien loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies that operate in a diverse range of industries. In our lending activities, we focus primarily on portfolio companies with both (i) tangible and intangible assets available as collateral and security against our loan to help mitigate our risk of loss, and (ii) cash flow to cover debt service. We believe this provides us with a more attractive risk adjusted return profile, with greater principal protection and likelihood of repayment. Our investments generally range in size from $3 million to $10 million; however, we may make larger or smaller investments from time to time on an opportunistic basis. We focus primarily on senior secured loans and stretch senior secured loans, also referred to as unitranche loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans. We believe that having a first lien, senior secured position provides us with greater control and security in the primary collateral of a borrower and helps mitigate risk against loss of principal should a
borrower default. Our stretch senior secured loans typically possess a greater advance rate against the borrowers assets and cash flow, and accordingly carry a higher interest rate and/or greater equity participation, than traditional senior secured loans. Stretch senior secured loan instruments can provide borrowers with a more efficient and desirable solution than a senior bank line combined with a separate second lien or mezzanine loan obtained from another source. We also may invest in mezzanine, subordinated or unsecured loans. In addition, we may acquire equity or equity related interests from a borrower along with our debt investment. We attempt to protect against risk of loss on our debt investments by investing in borrowers with sufficient cash flows to service debt, while frequently securing most of our loans against a significant level of tangible or intangible assets of our borrowers, which may include accounts receivable and contracts for services, and obtaining a
favorable loan-to-value ratio, and in many cases, securing other financial protections or credit enhancements, such as personal guarantees from the principals of our borrowers, make well agreements and other forms of collateral, rather than lending predominantly against anticipated cash flows of our borrowers. We believe this allows us more options and greater likelihood of repayment from refinancing, asset sales of our borrowers and/or amortization. We generally seek to invest in lower middle-market and middle-market companies in areas that we believe have been historically under-serviced, especially during and after the 2008/2009 credit crisis. These areas can include industries that are outside the focus of mainstream institutions or investors due to required industry-specific knowledge or are too small to attract interest from larger investment funds or other financial institutions. Because we believe there are fewer banks and specialty finance companies focused on lending to these lower middle-market and middle-market companies, we believe we can negotiate more
favorable terms on our debt investments in these companies than those that would be available for debt investments in comparable larger, more mainstream borrowers. Such favorable terms may include higher debt yields, lower leverage levels, more significant covenant protection and/or greater equity grants than typical of other transactions. We generally seek to avoid competing directly with other capital providers with respect to specific transactions in order to avoid the less favorable terms we believe are typically associated with such competitive bidding processes. As a business development company, we are required to meet regulatory tests, including the requirement to invest at least 70% of our gross assets in qualifying assets. Qualifying assets generally include, among other things, securities of eligible portfolio companies. Eligible portfolio companies generally include
 1    TABLE OF CONTENTS U.S. companies that are not investment companies and that do not have securities listed on a national exchange. We may also borrow funds to make investments. In addition, we have elected to be treated for federal income tax purposes as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, which we refer to as the Code. Our headquarters are located at 102 Greenwich Avenue, 2nd Floor, Greenwich, CT 06830 and our telephone number is 203-900-2100. The Investment Adviser and Administrator We are managed by Full Circle Advisors, whose investment committee members each have approximately 20 years of experience financing and investing in lower middle-market and middle-market companies. Full Circle Advisors is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the Advisers Act). Certain members of Full Circle Advisors investment committee also presently manage Full Circle Funding, LP, a specialty lender serving lower middle-market companies. The existing investment funds managed by Full Circle Funding, LP, which currently consist of Full Circle Partners, LP and
Full Circle Fund, Ltd. (collectively, the Legacy Funds), have been fully committed and are no longer making investments in new opportunities. The Legacy Funds are expected to be wound down as their remaining investments mature. Full Circle Funding, LP and other affiliates of our investment adviser may manage other funds and accounts in the future. We benefit from the proven ability of our investment advisers investment committee to identify attractive investment opportunities, conduct diligence on and value prospective investments, negotiate terms, secure collateral against our loans and manage and monitor a diversified portfolio of those investments. Our investment advisers investment committee members have broad investment backgrounds, with prior experience at investment banks, commercial banks, unregistered investment funds and other financial services companies, and have collectively developed a broad network of contacts to provide us with our principal
source of investment opportunities. Our investment adviser is controlled and led by John E. Stuart, our Chairman, and Gregg J. Felton, our Chief Executive Officer and President. Mr. Stuart and Mr. Felton, who serves as Chief Investment Officer of Full Circle Advisors, are assisted by Lawrence Chua and Crandall Deery, who each serve as a Senior Vice President of Full Circle Advisors. Full Circle Advisors investment committee consists of Messrs. Stuart, Felton, Chua and Deery. Under our investment advisory agreement with Full Circle Advisors, we have agreed to pay Full Circle Advisors an annual base management fee based on our gross assets as well as an
incentive fee based on our net investment income and realized gains. We have also entered into an administration agreement, under which we have agreed to reimburse Full Circle Service Company for our allocable portion of overhead and other expenses incurred by Full Circle Service Company in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services. Full Circle Service Company is controlled by Messrs. Stuart and Felton.
 2    TABLE OF CONTENTS Business Strategy Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We have adopted the following business strategies to achieve our investment objective: 

          Deliver Flexible Financing Solutions.  We believe our ability to provide a broad range of flexible debt financing solutions to lower middle-market and middle-market companies sets us apart from other capital providers. We offer to our portfolio companies debt financing facilities that, combined with our ability to recognize the underlying value and security of diverse types of traditional and non-traditional asset based collateral, we believe allows us to provide flexible facilities to fit the capital requirements of each borrower. We believe that our focus on providing senior secured and stretch senior loans provides a more efficient and less complicated capital structure and source of capital for borrowers. We also believe that it maximizes our control of and exposure to asset-based collateral coverage as security for our loans, thereby greatly reducing our risk of possible losses due to deterioration in a
borrowers performance. 

          Target Lower Middle-Market and Middle-Market Companies.  We generally provide capital to our portfolio companies for growth capital, acquisition financing and refinancing of existing debt facilities. We believe our target portfolio companies are generally involved in industries or markets that are under-followed or serviced because they are either less visible to mainstream institutions or investors, or are too small or localized for larger financial institutions or larger funds, particularly those that lack the requisite industry-specific knowledge and expertise. We believe there have historically been fewer banks and finance companies focused on lending to these types of lower middle-market and middle-market companies. As a result, we believe we can negotiate terms on loans to these types of companies that generally possess better risk-adjusted return profiles than terms on loans to larger, more mainstream companies.
Such favorable terms may include higher debt yields, lower leverage levels, more significant covenant protection and/or greater equity grants than typical of transactions involving larger companies. We generally seek to avoid competing directly with other capital providers with respect to specific transactions in order to avoid the less favorable terms we believe are typically associated with such competitive bidding processes. 

          Focus on Senior Secured Lending and Structuring of Investments to Minimize Risk of Loss.  We seek to structure our loan investments on a favorable loan-to-value (LTV) exposure based on underlying collateral or enterprise value with high cash yields, cash origination fees, low leverage levels and strong investment protections. We generally seek to protect against risk of loss on our debt investments by securing most of our loans against a significant level of tangible or intangible assets of our borrowers, obtaining a favorable LTV ratio or other financial protections or credit enhancements, rather than lending predominantly against anticipated cash flows of borrowers. We believe this provides us with more options and a greater likelihood of repayment from both cash flow and/or asset sales. 

          Structure Loans with Superior Security and Asset Protection.  Our loan instruments and documentation focus on favorable lender protections with security over the collateral, financial and other covenants and rigorous reporting requirements on behalf of our borrowers. We monitor covenant and other loan compliance on a monthly and quarterly basis and personnel from our investment adviser have periodic field exams performed at the borrower level. We utilize both term debt and revolving loan structures and, accordingly, often seek to maintain control of our borrowers cash receipts from revenues as additional security for our positions. In addition, we may seek credit enhancements, such as personal guarantees from a borrowers principal owners or make well features to provide us with additional equity in the event of underperformance. We may also seek a pledge of stock or other assets from a borrower or
its operating subsidiaries. 

          Pursue Attractive Risk Adjusted Returns.  As of June 30, 2015, the weighted average annualized yield of the debt investments comprising our portfolio was approximately 9.99%. Weighted average annual yields are determined before, and therefore do not take into account, the payment of all the Companys and its consolidated subsidiaries expenses and the payment by an investor of any stockholder transaction expenses, and do not represent the return on investment for the Companys
 3    TABLE OF CONTENTS stockholders. Debt securities on non-accrual status are included in the weighted average interest rate calculation and are treated as having 0.00% as their applicable interest rate for purposes of the calculation. Debt securities on non-accrual status are typically not generating the stated interest rate because of nonpayment from the borrower typically due to financial difficulties. As of June 30, 2015, the total amount of our debt securities on non-accrual status at fair value was $7,673,679. During the year ended June 30, 2015, 3% of the interest income earned was in the form of payment-in-kind, or PIK interest and 9% was amortization of original issue discount and market discounts and premiums. In the future, a component of our interest may continue to be in the form of PIK interest. PIK interest represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term and recorded as
interest income on an accrual basis to the extent such amounts are expected to be collected. For additional information regarding PIK interest and related risks, see Risk Factors  Risks Relating to Our Business and Structure  We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income. As of June 30, 2015, 52% of our debt portfolio at fair value consisted of debt securities and asset-based revolving lines of credit for which issuers were not required to make principal payments until the maturity of such debt securities, which could result in a substantial loss to us if such issuers are unable to refinance or repay their debt at maturity. In addition, a substantial portion of our debt investments have variable interest rates that reset periodically based on benchmarks such as the London-Interbank Offered Rate and the Prime rate. As a result, significant increases in
such benchmarks in the future would make it more difficult for these borrowers to service their obligations under the debt investments that we hold. The 43 individual debt investments, from 32 distinct borrowers, included in our portfolio averaged a LTV ratio of approximately 59% as of June 30, 2015 (i.e., each $59 of loan value outstanding is secured by $100 of collateral value). Although it is subject to fluctuation, we believe this LTV ratio, which measures the aggregate amount of our loan positions against the aggregate amount of primary collateral value or enterprise value pledged by our borrowers as security against our loans, reflects the relative strength of the debt investments comprising our portfolio. Finally, our debt investments are designed to have strong protections beyond repayment from cash flow and asset liquidation coverage, including default penalties, information rights, and affirmative, negative and financial covenants, such as lien protection and prohibitions
against change of control. We believe this level of collateral protection helps minimize against the risk of loss, even if a loan goes into default. 

          Leveraging the Skill, Experience and Resources of Full Circle Advisors Investment Committee.  Full Circle Advisors investment committee members each have approximately 20 years of experience financing and investing in lower middle-market and middle-market companies. The investment committee members have broad investment and operational backgrounds, with prior experience at specialty finance companies, investment management firms, private equity investment funds, investment banks and other financial services companies. We believe their expertise in analyzing, valuing, structuring, negotiating, closing, monitoring and restructuring transactions should provide us with a competitive advantage by allowing us to consider customized financing solutions and non-traditional and complex structures. We believe this experience will also be valuable if we have to work with stressed and distressed credits. 

          Balanced Investing Across Industries with Expertise.  While we seek to maintain a portfolio of investments that is appropriately balanced among various companies, industries, geographic regions and end markets, we focus our investing activities on certain areas that we believe maintain favorable asset coverage positions.. We believe that the stable, long term asset values that may be found in many of the industries in which we invest can provide us with significant collateral protection on our loans, in contrast to taking some of the risks of repayment attendant to relying exclusively on a borrowers current cash flows. Going forward, we intend to seek to maintain a balanced portfolio to mitigate the potential effects of negative economic events for particular companies, regions and industries.
 4    TABLE OF CONTENTS 

          Capitalize on Strong Transaction Sourcing Network.  Our investment advisers investment committee seeks to leverage their extensive network of referral sources for investments in lower middle-market and middle-market companies. We believe through their prior investment experience, the investment committee members have collectively developed a reputation in our target market and in the industries in which we invest as a responsive, efficient and reliable source of flexible financing. 

          Employ Disciplined Underwriting Policies and Rigorous Portfolio Management.  We directly originate most of our investments, which, in our experience, generally allows us to pursue a more rigorous due diligence examination of the investments than if we invest as part of a lending syndicate led by others. Our investment advisers investment committee has developed an extensive underwriting due diligence process which includes a review of the prospects, competitive position, financial performance and industry dynamics of each potential portfolio company. In underwriting a potential borrower, we engage in a variety of quantitative and qualitative stress tests, and analyze our ability to successfully liquidate a favorable collateral package underlying a loan in the event of default. These processes continue during the portfolio monitoring process, when our investment adviser will, depending on the borrower, analyze
monthly and/or quarterly financial statements versus the previous periods and year, review financial projections, conduct field examinations, meet with management, attend board meetings, review all compliance certificates and covenants and regularly assess the financial and business conditions and prospects of borrowers. Market Opportunity We believe that the current credit environment provides favorable opportunities to achieve attractive risk-adjusted returns on the types of senior secured loans and other investments we may target. In particular, we believe that, despite a recent trend of slowing growth in loan demand, demand for financing from lower middle-market and middle-market companies is largely outpacing the availability of lenders that have traditionally served this market. While this has traditionally been an underserved market, we believe the supply-demand imbalance of loans to smaller borrowers was exacerbated by the credit crisis in 2008/2009, and
has not fully recovered. We believe that bank consolidations and regulations, the failure of a number of alternative lending vehicles due to poor underwriting practices and an overall tightening of underwriting standards has significantly reduced the number and activity level of potential lenders. Thus we believe that the current credit markets combined with certain long term trends associated with lending to lower middle-market and middle-market companies provide an attractive market environment for our strategy. 

          Competitive Edge and Skill Set.  Our core strength in providing efficient and flexible lending solutions to lower middle-market and middle-market companies requires a market approach and skill set that we believe is generally not found in larger or more localized regional lenders. We believe that many of the companies we target operate in industries that are less visible or too specialized for larger mainstream institutions or investors, or alternatively, require too little funding or are too localized for large financial institutions to consider, particularly in cases where those institutions lack the requisite industry-specific knowledge and expertise. From 1992 through 2014, the number of FDIC-insured commercial banks dropped by 51%, from 11,463 to 5,643, while total assets at these banks grew more than fourfold, from $3.5 trillion to $14.5 trillion. Coupled with a shift in the asset base of competitive bank lenders
towards real estate loans, at the expense of commercial and industrial (C&I) loans, we believe that many potential competitive bank lenders lack the personnel or lending experience required to address the very strong market demand for commercial and industrial lending In 2015, banks reported having experienced stronger demand for debt capital during the second quarter of 2015, according to the Federal Reserves July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices, although the net fractions of banks reporting stronger demand were modest for firms of all sizes. Among those banks reporting weaker loan demand, a shift of borrowing away from such banks to other bank or nonbank sources was the most commonly cited reason.
 5    TABLE OF CONTENTS In the same senior loan officer survey, domestic banks reported little change in their standards for C&I loans to firms of all sizes during the second calendar quarter of 2015; however, bankers underwriting standards continue to favor larger clients to a greater degree than their smaller ones. While 12% of large banks reported easing of standards for large and middle market firms (defined as firms with annual sales of $50 million or more), only 3% reported easing of standards for small firms (defined as those with annual sales of less than $50 million). Similarly, while 27% of large banks said they were easing terms
on the maximum size of credit lines to large and middle-market firms, only 3% reported making the same accommodation for small firms. Importantly, regarding spreads of loan rates over banks cost of funds, 51% of large banks said they had narrowed spreads to large and middle-market firms, while only 41% offered lower spreads to smaller firms during the second quarter of 2015. Regarding premiums charged on higher risk loans, 10% of respondents reported easing terms to large and middle-market firms, while only 6% of respondents reported doing the same for small firms and the remaining respondents reported no change or tightening of pricing terms on riskier loans. As evidenced by the survey, large banks in particular are beginning to demand premium pricing
for riskier loans to small firms, with 17% reporting easing terms on pricing premiums for riskier large and middle-market borrowers and just 10% reporting tightening for higher risk smaller borrowers. Regarding loan covenants, while 24% of large banks said they eased loan covenant terms during the second quarter for their larger clients, only 13% offered more accommodative covenant packages to smaller borrowers. We believe these bank lending market conditions will continue to exacerbate existing funding gaps for firms comprising our target market. Additionally, we believe our strengths include the ability to originate, underwrite and manage a more labor intensive portfolio consisting of debt investments in lower middle market companies, and to perform due diligence and manage portfolio activities on an ongoing basis. 

          Strong Demand For Capital Coupled with Fewer Providers.  We believe there has long been a combination of demand for capital and an underserved market for capital addressing lower middle-market and middle-market borrowers. Further, we believe the supply-demand imbalance of smaller borrowers to lenders serving that market was exacerbated by the credit crisis in 2008/2009, and has not fully recovered. We believe there is robust demand for continued growth capital as well as demand from very significant refinancing requirements of many borrowers as debt facilities come due, given the lack of willing and qualified capital providers. We believe these market conditions have been further exacerbated in the current environment due to: o

          larger lenders exiting this market to focus on larger investment opportunities which are more appropriate for their operating cost structures; o

          the elimination of many specialized lenders from the market due to lack of capital as a result of, for instance, the contraction of the securitization market or their own poor performance; and o

          the need for certain capital providers to reduce lending activities due to their reduced access to capital and the overall deleveraging of the financial market. With the decreased availability of debt capital for lower middle-market and middle-market borrowers, combined with the significant demand for refinancing, we believe there are increased lending opportunities for us. 

          More Conservative Deal Structures.  As a result of, and in the aftermath of, the 2008/2009 credit crisis, we believe lenders are mandating less leverage, more equity and tighter loan covenants than what had previously been customary. We believe that lower purchase prices for assets and lower debt multiples, combined with greater equity cushions beneath loans, allows for greater cash flow for debt service, creating faster loan repayments despite overall higher debt costs to borrowers. We believe this aspect provides considerable cushion against underperformance and default of borrowers as well as faster de-risking of loan positions as credit statistics improve over the term of the loan facilities.
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          Attractive Return Profile.  We believe the reduced access to, and reduced availability of, debt capital has decreased competition in lower middle-market and middle-market lending which had already become less competitive and more fragmented prior to the credit crisis, resulting in a better market for loan pricing. We believe that the withdrawal of many traditional senior lenders from the market, combined with reduced advance rates and leverage levels, allows for stretch senior lenders to charge rates that typically reflect mezzanine or subordinated structures for entire facilities, while maintaining first lien senior secured positions over the loan collateral provided by the borrowers. Our investment advisers investment committee has experienced this attractive return environment since the onset of the credit crisis in the second half of 2008, when transactions originated by them saw increased returns from interest
and fees charged, as well as more meaningful warrant participations. Investments We engage in various investment strategies in order to achieve our overall lending and investment objectives. The strategy we select depends upon, among other things, market opportunities, the skills and experience of our investment advisers investment committee and our overall portfolio composition. Our strategies generally seek to provide current cash yields and favorable loan-to-value ratios, or other financial guarantees or credit enhancements with respect to loan collateral. Many of our debt investments offer the opportunity to participate in a borrowers equity performance through warrants, equity related
success fees, direct equity ownership or otherwise, and many notes that we own require the borrower to pay an early termination fee. Collectively, these attributes have been, and are expected to be, an important contributor to the returns generated by our investment advisers investment committee. Full Circle Advisors investment committee uses a disciplined investment, portfolio monitoring and risk management process which emphasizes strict underwriting standards and guidelines, strong due diligence investigation, regular position review and analysis, and proper investment diversification. They allocate capital among different investment sectors on the basis of relative risk/reward profiles as a function of their associated downside risk, volatility, perceived fundamental risk and liquidity. Types of Investments We target debt investments that yield meaningful current income and, in many cases, provide the opportunity for capital appreciation through equity securities. Debt Investments Full Circle Advisors investment committee tailors the terms of each debt investment to the facts and circumstances of the transaction and prospective portfolio company, negotiating a structure that seeks to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its business plan. As of June 30, 2015, our debt investments were primarily secured by first, and in some cases second, priority liens on the assets of the portfolio company. Our primary source of return is the monthly cash interest we collect on our debt investments. 

          First Lien Loans.  Our first lien loans generally have terms of two to five years and generally provide a variable interest rate, subject to a floor to protect against return compression in a falling interest rate environment. These loans generally do not have interest rate ceilings. Such facilities contain prepayment penalties and are secured by a first priority security interest in all existing and future assets of the borrower. Our first lien loans may take many forms, including revolving lines of credit, term loans, multi-draw term loans and other lines of credit. We may seek to employ a lockbox to collect payment receipts, as we believe it protects us against payment delinquencies and provides increased security and protection in the event of a default or underperformance. A focus within our first lien loans is senior secured stretch loans which, along with most of the attributes of our first lien loans,
include a greater advance rate against the borrower and accordingly carry a higher interest rate or greater equity participation. 

          Second Lien Loans.  Our second lien loans generally have terms of five to seven years, provide for a fixed or floating interest rate, contain prepayment penalties and are secured by a second priority security interest in all existing and future assets of the borrower. Our second lien loans may to a
 7    TABLE OF CONTENTS lesser extent include payment-in-kind, or PIK, interest for a portion of the interest, which represents contractual interest accrued and added to the principal that generally becomes due at maturity. 

          Unsecured Loans.  Our unsecured investments generally have terms of five to seven years and typically provide for a fixed interest rate. We may make unsecured investments on a stand-alone basis, or in conjunction with a senior secured loan, a junior secured loan or a one-stop financing. Our unsecured investments may include payment-in-kind, or PIK, interest, which represents contractual interest accrued and added to the principal that generally becomes due at maturity, and an equity component, such as warrants to purchase common stock in the portfolio company. Full Circle Advisors investment committee typically structures debt investments to include covenants that seek to minimize the risk of capital loss. These debt investments generally have strong protections, including default penalties, information rights, board observation rights, and affirmative, negative and financial covenants, such as lien protection and prohibitions against change of control. These debt investments also have substantial prepayment penalties designed to extend the average life of the loans, which we believe will help to grow our portfolio. Equity Investments When we make a debt investment, we may be granted equity participation in the form of warrants to purchase common equity in the company in the same class of security that the owners or equity sponsors receive upon funding. In addition, we may make equity investments or structure a profit sharing arrangement in conjunction with a loan transaction with a borrower. Full Circle Advisors investment committee generally seeks to structure our equity investments, such as direct equity co-investments, to provide us with minority rights provisions and event-driven put rights. They also seek to obtain limited registration rights in
connection with these investments, which may include piggyback registration rights. Senior Secured Lending Focus In most cases, our investment advisers investment committee attempts to protect against risk of loss on our debt investments by making senior loans secured by the assets of our borrowers, and obtaining favorable loan-to-value ratios or other financial protections or credit enhancements, rather than lending exclusively against cash flows. Loans may be backed by a variety of types of tangible and intangible assets, including, but not limited to, lease obligations, royalty interests, commercial account receivables, contractual revenue and payment rights (including contacts providing for recurring monthly revenue streams),
settlements, franchise rights, licenses, permits, mortgages, easements and other real property interests, and other tangible personal property, and intangible property such as intellectual property and patents. Our debt investments typically have a first, and in some cases a second, priority senior security interest in the operative assets of the borrower and collateral assignment of rights and contracts, though we also may make mezzanine and equity investments where we believe the risk and reward, and level of security, warrants such an investment. As a lender, we seek to provide working capital lines to borrowers secured by accounts receivable, inventory, machinery and equipment, real estate and in some cases, intellectual property or brand values. These facilities will typically be comprised of a borrowing base formula and include revolving loans and term loans as part of their structures. Our investment focus may shift over time, consistent with our overall lending and investment objectives, and desire for senior secured loans with some level of collateral protection. Invested Industries Our portfolio contains investments in a variety of industries where some aspect of tangible or intangible asset is available for collateral protection. Our portfolio may contain a number of investments in the business services industries, communications and media industries, as a result of the Legacy Portfolios emphasis, and the focus and prior investing experience of our investment advisers investment committee, in those sectors. However, these industries are not our only focus, and we seek prospective investments in other commercial and industrial sectors, including industrial manufacturing. As a result, we
expect that the relative portion of our portfolio invested in the media and communications and business services industries may decrease over time.
 8    TABLE OF CONTENTS As of June 30, 2015, approximately 35% of our portfolio consists of loans to and investments in companies involved in the broader business services industry (such as companies that provide services related to data and information, information retrieval and asset recovery, and energy efficiency services). These companies typically provide a range of services to customers and such services are generally characterized by their non-discretionary spending nature, contracts of varying length that provide recurring monthly revenues and contracts or services that can be sold or assigned to another provider upon liquidation or sale of
a business. As of June 30, 2015, approximately 14% of our portfolio consists of loans to and investments in companies involved in the media industry (such as outdoor advertising and radio broadcasting companies). We believe that these sectors present significant investment opportunities that possess attractive loan attributes. These include, but are not limited to, long-term tangible and intangible assets, the ability to perfect our security interest in the collateral, relatively stable revenue and cash flow profile, the ability to foreclose on and transport the underlying collateral should we need to take control of it, and a broad
market of participants to purchase or operate the business and assets in the event of foreclosure. Investment Selection Our investment advisers investment committee is responsible for all aspects of our investment process. The current members of the investment committee are John Stuart, our Chairman, Gregg Felton, our Chief Executive Officer and President, and Lawrence Chua and Crandall Deery, who each serve as a Senior Vice President of Full Circle Advisors. While the investment strategy involves a team approach, whereby potential transactions are screened by various members of the investment committee, Mr. Stuart and Mr. Felton, who serves as Chief Investment Officer of Full Circle Advisors, must approve of all investments in order for
them to proceed. The stages of our investment selection process are as follows: Deal Generation/Origination Deal generation and origination is maximized through long-standing and extensive relationships with industry contacts, brokers, commercial and investment bankers, entrepreneurs, services providers such as lawyers and accountants, as well as current and former clients, portfolio companies and investors. Our investment advisers investment committee supplements these lead generators by also utilizing broader marketing efforts, such as attendance at prospective borrower industry conventions, an active calling effort to smaller private equity firms and sponsors, and through web presence and search tool optimizations. They
also focus their deal generation and origination efforts on lower middle-market and middle-market companies. Our investment advisers investment committee has developed a reputation as a knowledgeable and reliable source of capital, providing value-added industry advice and financing assistance to borrowers businesses. Screening In screening potential investments, our investment advisers investment committee utilizes the same value-oriented investment philosophy they have employed historically with analytics and resources focused on managing downside exposure. Portfolio Company Characteristics We have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for our investment advisers investment committees decisions; however, not all of these criteria will be met by each prospective portfolio company in which they choose to invest. Generally, our investment adviser seeks to utilize its access to information generated by its investment committee to identify investment candidates and to structure investments quickly and effectively. Established Companies.  We primarily seek to invest in established companies with sound historical financial and operating performance. We typically focus on companies with an operating cash flow profile. We generally do not intend to invest in start-up companies or companies with highly speculative business plans.
 9    TABLE OF CONTENTS Defensible and Sustainable Business or Asset Values.  We seek to invest in companies with proven products and/or services and strong regional or national operations and assets that cannot be easily replicated or substituted, and generally hold value through economic downturns, industry consolidation, changing business preferences and other factors that may negatively impact their customers, suppliers and competitors. Exit Strategy.  We predominantly invest in companies that provide multiple alternatives for an eventual exit. We seek companies that we believe will provide a stable underlying asset value and a steady stream of cash flow that will allow for repayment from refinancing, asset or business sales and principal amortization. We believe that such asset coverage combined with internally generated cash flow, which primarily provides for the payment of interest on, and the repayment of the principal of, our investments in portfolio companies represents a key means by which we will be able to service our loans
and eventually exit from our investments over time. In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities due to strong asset values and unique or difficult to aggregate assets. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock or another capital market transaction. Liquidation Value of Assets.  The prospective liquidation value of the assets, if any, collateralizing loans in which we invest is an important factor in our credit analysis. Our analysis emphasizes both tangible assets, such as accounts receivable, inventory, equipment and real estate, and intangible assets, such as intellectual property, customer lists, networks and databases. Experienced and Committed Management.  We generally require that portfolio companies have an experienced management team. We also generally require portfolio companies have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests. Due Diligence.  Our investment adviser conducts diligence on prospective portfolio companies consistent with the approach its investment committee has historically adopted. We believe that the investment committee has a reputation for conducting extensive due diligence investigations in their investment activities. In conducting due diligence, our investment adviser uses publicly available information as well as information from its relationships with former and current management teams, consultants, competitors and investment bankers. Our investment advisers due diligence typically includes: 

          review of historical and prospective financial information; 

          research relating to the companys management, industry, markets, products and services and competitors; 

          on-site visits and verification of collateral; 

          interviews with management, employees, customers and vendors of the potential portfolio company; 

          review of loan documents; 

          asset and business value appraisals by third party advisors; and 

          background checks.
 10    TABLE OF CONTENTS Upon the completion of due diligence and a decision to proceed with an investment in a company, the investment professionals leading the investment present the investment opportunity to our investment advisers investment committee, which then determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants prior to the closing of the investment, as well as other outside third-party advisers, as appropriate. Any fees and expenses incurred by Full Circle Advisors in connection with due diligence
investigations undertaken by third parties are subject to reimbursement by Full Circle Capital, if not otherwise reimbursed by the prospective borrower, which reimbursements are in addition to any management or incentive fees payable under our Investment Advisory Agreement to Full Circle Advisors. While the investment strategy involves a committee approach, Full Circle Capital may not enter into a transaction without the prior approval of Messrs. Stuart and Felton. Ongoing Relationship with Portfolio Companies Managerial Assistance As a business development company, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. We may also receive fees for these services. Full Circle Service Company provides such managerial assistance on our behalf to portfolio companies that request guidance. With regard to the Control Investments in Texas
Westchester Financial, LLC, TransAmerican Asset Servicing Group, LLC, Takoda Resources Inc., and The Finance Company, LLC, the Company has provided managerial assistance during the year ended June 30, 2015 for which no fees were charged. Our Chairman, John Stuart, currently serves as a director of The Finance Company, LLC, New Media West, LLC and Takoda Resources Inc. Lawrence Chua, a Senior Vice President of Full Circle Advisors, serves on the board of Takoda Resources Inc. As of June 30, 2015, only one non-control investment, JN Medical Corporation, had accepted our offer for managerial services during the fiscal year ended June 30, 2015. No fees have been charged to JN Medical Corporation for such services. Monitoring Our investment adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company. Our investment adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following: 

          assessment of success in adhering to each portfolio companys business plan and compliance with covenants; 

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

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

          attendance at and participation in board meetings; and 

          review of monthly and quarterly financial statements and financial projections for portfolio companies. In addition to various risk management and monitoring tools, our investment adviser also uses an investment rating system to characterize and monitor each debt investment in our portfolio.
 11    TABLE OF CONTENTS We use an investment rating scale of 1 to 5. The following is a description of the conditions associated with each debt investment rating:  Investment Rating

          

          Summary Description1

          

          Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit)2

          

          The portfolio company is performing above expectations and the risk profile is generally favorable3

          

          Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 34

          

          The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable5

          

          The investment is performing well below expectations and is not anticipated to be repaid in full
 Our investment adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. As of June 30, 2015, the weighted average investment rating on the fair market value of our portfolio was 2.96. In connection with our valuation process, our investment adviser reviews these debt investment ratings on a quarterly basis and reports any changes to the debt investment rating of a portfolio company quarterly. The investment rating of a particular debt investment should not, however, be deemed to be a guarantee of the investments future performance. Valuation Procedures We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with generally accepted accounting principles in the United States (GAAP) and the 1940 Act. Our valuation procedures are set forth in more detail below: Securities for which market quotations are readily available on an exchange are valued at such price as of the closing price on the day of valuation. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained. Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our investment adviser or Board of Directors, does not represent fair value, which currently represents the majority of the investments in our portfolio each be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with the senior management of our
investment adviser; and (iii) independent third-party valuation firms engaged by, or on behalf of, the Board of Directors will conduct independent appraisals and review managements preliminary valuations or make their own assessment for all material assets; (iv) the Board of Directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the investment adviser and, where appropriate, the respective third-party valuation firms. Our investment advisers recommendation of fair value is generally based on the following factors, as relevant: 

          the nature and realizable value of any collateral; 

          the portfolio companys ability to make payments;
 12    TABLE OF CONTENTS 

          the portfolio companys earnings and discounted cash flow; 

          the markets in which the issuer does business; and 

          comparisons to publicly traded securities. Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include, but are not limited to, the following: 

          private placements and restricted securities that do not have an active trading market; 

          securities whose trading has been suspended or for which market quotes are no longer available; 

          debt securities that have recently gone into default and for which there is no current market; 

          securities whose prices are stale; 

          securities affected by significant events; and 

          securities that the investment adviser believes were priced incorrectly. The good faith determination of fair value by our Board of Directors involves subjective judgments and estimates. Portfolio Overview Our investments generally range in size from $3 million to $10 million; however, we may make larger investments from time to time on an opportunistic basis. We focus primarily on senior secured loans and stretch senior secured loans, also referred to as unitranche loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans. The following is a representative list of the industries in which we have invested:  Asset Recovery Services          

          Beverages          

          Cable TV/Broadband ServicesConsumer Financing          

          Equipment Rental Services          

          Healthcare ServicesIndustrial Metal Treatings          

          Information and Data Services          

          Information Retrieval ServicesOutdoor Advertising Services          

          Radio Broadcasting          

          Geophysical Surveying and Mapping ServicesEnergy Efficiency Services          

          Munitions          

          Food Distributors and WholesalersAerospace Parts Plating and Finishing          

          Staffing Services          

          Medical Transcription ServicesStationary, Tablets, and Related Products          

          Art Dealers          

          Real Estate Management ServicesFinancial Services          

          Maritime Security Services          

          Healthcare Billing and CollectionsWireless Communications          

          Television Programming          

          Electric ServicesOil and Gas Field Services          

          Biological Products          

          Industrial Molded ProductsNon-Residential Property          

          Specialty Pharmaceuticals          

          Building Cleaning and Maintenance ServicesInternet Advertising          

          Gambling Machine Manufacturer          

          Data Connectivity Service CompanyIT and Business Skill Training          

          Mobile Device Management          

          Daily and Weekly Newspaper PublisherHotel Operator          

          Medical Liability Claims Factoring          

          Power GenerationAppliance Parts Distributor          

          Grain Mill Products          

          Residential Property
 13    TABLE OF CONTENTS At June 30, 2015, our portfolio was invested approximately 80.7% in senior secured loans, 5.2% in subordinated secured loans, 2.1% in unsecured notes and the remaining 12.0% in limited liability companies, common stock, and equity warrants. While gross exposure to equity investments is 12.0%, net exposure to equity investments is 5.5% as the net exposure to Granite Ridge, LLC is $2.6 million when taking the deposit on the swap contract into account. This is comprised of the common stock investment of $13.0 million netted against the Deposit from Swap Counterparty of $10.4 million, as shown on the Consolidated Statements of Assets and Liabilities. TEN LARGEST PORTFOLIO INVESTMENTS AS OF JUNE 30, 2015 Our ten largest portfolio company investments at June 30, 2015, based on the combined fair value of the debt and equity securities we hold in each portfolio company, were as follows:  At June 30, 2015Portfolio Company

          

          Industry

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueGranite Ridge Energy, LLC

          

          

          Power Generation

          

          

          $

          12,975,000

          

          

          $

          12,975,000

          

          

          

          12.98

          %Good Technology Corporation

          

          

          Mobile Device Management

          

          

          

          10,490,573

          

          

          

          11,135,067

          

          

          

          11.14Pristine Environments, Inc.

          

          

          Building Cleaning and Maintenance Services

          

          

          

          10,196,273

          

          

          

          10,720,287

          

          

          

          10.73Davidzon Radio, Inc.

          

          

          Radio Broadcasting

          

          

          

          8,991,089

          

          

          

          9,262,098

          

          

          

          9.27Butler Burgher Group, LLC

          

          

          Real Estate Management Services

          

          

          

          8,047,752

          

          

          

          8,516,728

          

          

          

          8.52Sundberg America, LLC et al

          

          

          Appliance Parts Distributor

          

          

          

          7,960,112

          

          

          

          7,960,112

          

          

          

          7.97PR Wireless, Inc.

          

          

          Wireless Communications

          

          

          

          8,253,042

          

          

          

          7,952,175

          

          

          

          7.96Bioventus, LLC

          

          

          Specialty Pharmaceuticals

          

          

          

          5,944,426

          

          

          

          5,970,000

          

          

          

          5.97OPS Acquisitions Limited and Ocean Protection Services Limited

          

          

          Maritime Security Services

          

          

          

          5,913,412

          

          

          

          5,968,246

          

          

          

          5.97Fuse, LLC

          

          

          Television Programming

          

          

          

          7,041,962

          

          

          

          5,775,000

          

          

          

          5.78Total

          

          

          

          

          

          $

          85,813,641

          

          

          $

          86,234,713

          

          

          

          86.29

          %
 For a description of the factors relevant to the values of the above portfolio investments for the year ended June 30, 2015, see Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policies. Set forth below are descriptions of the ten largest portfolio investments as of June 30, 2015: Granite Ridge Energy, LLC Granite Ridge Energy, LLC is an independent power producer that owns and operations a 720-megawatt gas-fired, combined cycle electric generating facility, located in Londonderry, New Hampshire. Good Technology Corporation Good Technology produces products for managing and securing apps and data on mobile devices in a business environment. Good Technology is headquartered in Sunnyvale, California. More than 6,200 organizations in over 190 countries use Good Technology solutions, including leaders in commercial banking, insurance, healthcare, aerospace and defense. Pristine Environments, Inc. Pristine Environments, Inc. provides facilities maintenance services to large commercial and government clients. Pristine Environments, Inc. manages, maintains and optimizes the performance of mission critical facilities for corporate real estate owners in nearly 100 million square feet of specialized buildings through North America. Pristine Environments, Inc. is headquartered in McLean, Virginia and has operations nationwide.
 14    TABLE OF CONTENTS Davidzon Radio, Inc. Davidzon Radio, Inc. engages in radio broadcasting activities through its ownership and operation of an AM radio station in the New York, New York market. Davidzons station is operated on a brokered time model whereby blocks of broadcast time are sold under fixed price, multi-year contracts to independent programmers. Butler Burgher Group, LLC Butler Burgher Group, LLC is a national provider of commercial real estate appraisals. Butler Burgher Group, LLC is headquartered in Dallas, Texas and has 21 offices nationwide. Sundberg America, LLC et, al. Sundberg America, LLC is a wholesale distributor of replacement parts for household appliance parts, heating, ventilation, and air conditioning HVAC parts, water filters, ice makers, and specialty cleaning products to repairmen and dealers, primarily in the Midwest. Sundberg America, LLC is headquartered in Chicago, Illinois. PR Wireless, Inc. PR Wireless, Inc. operates under the OpenMobile brand name and is a mobile network operator that provides wireless telephony services throughout Puerto Rico. Bioventus, LLC Bioventus, LLC manufactures and distributes bone stimulation devices for customers in the United States and internationally. Bioventus, LLC is headquartered in Durham, North Carolina. OPS Acquisitions Limited and Ocean Protection Services Limited Ocean Protection Services, Ltd. based in London, United Kingdom, is a leading maritime security services provider to the global shipping industry. Fuse, LLC Fuse, LLC, (formerly known as SiTV, LLC), does business as NUVOtv and provides a mixture of original and acquired English language entertainment and lifestyle content targeted at Hispanic Americans. The company maintains headquarters in Los Angeles, California. Investment Advisory Agreement Management Services Full Circle Advisors serves as our investment adviser. Full Circle Advisors is an investment adviser that is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our Board of Directors, our investment adviser manages the day-to-day operations of, and provides investment advisory and management services to, Full Circle Capital. Under the terms of our Investment Advisory Agreement, Full Circle Advisors: 

          determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes; 

          identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); 

          closes and monitors the investments we make; and 

          provides us with other investment advisory, research and related services as we may from time to time require. Full Circle Advisors services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.
 15    TABLE OF CONTENTS Management Fee Pursuant to the Investment Advisory Agreement, we have agreed to pay Full Circle Advisors a fee for investment advisory and management services consisting of two components  a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% of our gross assets, as adjusted. For services rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets, as adjusted, at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be appropriately pro-rated. Our investment adviser waived the portion of the base
management fee that exceeded 1.50% of Full Circle Capitals gross assets, as adjusted, from the time we commenced operations to August 31, 2011, when such waiver expired. For the periods commencing on April 1, 2015 and ending on June 30, 2015 and commencing on July 1, 2015 and ending on June 30, 2016, Full Circle Advisors has agreed to waive the portion of the base management fees and incentive fees that Full Circle Advisors would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for Full Circle Capital to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then declared by our board of directors. The
determination of the amount to be waived will be finalized as of the end of the fiscal year for each period, with such amounts being accrued on a quarterly basis. Net investment income is defined as net income before net realized gains (losses) and unrealized gains (losses), in each case, as determined in accordance with GAAP. Full Circle Advisors will not be entitled to recoup any amount of base management fees that it waives pursuant to this agreement. There can be no assurance that Full Circle Advisors will extend the waiver beyond June 30, 2016. The incentive fee has two parts. The first part of the incentive fee is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter
(including the base management fee, expenses payable under the Administration Agreement to Full Circle Service Company, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investment income used to calculate this part of the incentive fee is
also included in the amount of our gross assets used to calculate the 1.75% base management fee. We pay Full Circle Advisors an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows: 

          no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle of 1.75%; 

          100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized). We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle but is less than 2.1875%) as the catch-up. The catch-up is meant to provide our investment adviser with 20% of our pre-incentive fee net investment income as if a hurdle did not apply if this net investment income exceeds 2.1875% in any calendar quarter; and
 16    TABLE OF CONTENTS 

          20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to Full Circle Advisors (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated to Full Circle Advisors). The following is a graphical representation of the calculation of the income-related portion of the incentive fee: Quarterly Incentive Fee Based on Net Investment Income  Pre-incentive fee net investment income  (expressed as a percentage of the value of net assets) [GRAPHIC MISSING] Percentage of pre-incentive fee net investment income allocated to Full Circle Advisors These calculations are appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. You should be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to our investment adviser with respect to pre-incentive fee net investment income. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees with respect to each of the investments in our portfolio. For accounting purposes only, in order to reflect the theoretical
capital gains incentive fee that would be payable for a given period as if all unrealized gains were realized, we will accrue a capital gains incentive fee based upon realized capital gains and losses during the current calendar year through the end of the period, plus any unrealized capital appreciation and depreciation as of the end of the period. It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of capital gains incentive fees in subsequent periods. The Company may enter into swap agreements to sell all or a portion of the economics, such as the right to receive all or a portion of the dividends, interest, capital appreciation or principal payments to which we may be entitled, with respect to certain debt or equity investments if we believe it may be appropriate to reduce our risk exposure to a specific portfolio company or we can achieve a higher overall return on our invested capital. For example, on June 30, 2015, we funded a $2.6 million synthetic secured loan in the form of a total return swap. More specifically, we purchased 60,000 shares of Granite Ridge Holdings,
LLC, a power generation company, for approximately $13 million. We contemporaneously entered into a collateralized swap agreement with another private fund, which posted approximately $10.4 million of cash collateral, whereby we swapped the returns on the shares for a fixed rate of 15.0% on the net loan amount. Under the terms of the swap, the Company expects to receive periodic payments from the counterparty. These periodic payments will be recorded as realized capital gains for accounting purposes in accordance with accounting principles generally accepted in the United States of America (GAAP).
 17    TABLE OF CONTENTS The Companys aggregate payments to the counterparty during the term of the swap, the amounts of which are determined and based on the dividends received on, and the changes in fair value of, the underlying common stock, will be recorded by the Company as capital gains or losses for GAAP purposes, depending upon the performance of the underlying common stock. All payments made by the Company to the counterparty during the term of the swap will be recorded as realized capital losses. Notwithstanding GAAP treatment of interim payments, Full Circle Advisors has agreed to determine any capital gains incentive fee resulting from the swap upon the termination of the swap. Any amounts received from the swap by the Company will be evaluated under the capital gains incentive fee portion of the investment advisory agreement with Full Circle Advisors at such time. Full Circle Advisors will not be entitled to any income incentive fees under its investment advisory agreement with the Company as a result of the swap. In addition, Full Circle Advisors has agreed to waive its base management fee with respect to the
portion of the swap that is covered by collateral received from the counterparty. Similarly, Full Circle Advisors has agreed to waive any income incentive fees attributable to dividends paid on the common stock underlying the swap during the term of the swap. In addition, any gain the Company might realize from the disposition of the underlying common stock will be offset against the capital loss resulting from the Companys payment to the counterparty upon termination of the Agreement. Notably, the Company intends to dispose of the underlying common stock upon termination of the swap. The Company has determined that the swap will be treated as a bad asset for purposes of the 1940 Act in view of the counterparty involved and that the underlying common stock will be treated as a good asset for purposes of the 1940 Act. For purposes of computing the capital gains incentive fee, Full Circle Advisors will become entitled to a capital gains incentive fee upon the termination or disposition of any swaps or derivatives, at which point all net gains and losses of the underlying securities constituting the reference assets of the swaps or derivatives, as well as any payments received from the
counterparty to the swap, will be realized. For purposes of computing our income incentive fee, Full Circle Advisors will not be entitled to an income incentive fee with respect to swaps or derivatives. Any unrealized appreciation on such investments, if any, will be reflected in total assets in our consolidated balance sheet and included in the computation of our base management fee. All such swaps or derivatives will be reflected as portfolio investments and any resulting gain or loss will be reflected in Full Circle Capitals income statements. While the investment advisory agreement with Full Circle Advisors neither includes nor contemplates the inclusion of net unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of the AICPA Technical Practice Aid for investment companies, we will accrue capital gains incentive fees on unrealized gains. This accrual will reflect the incentive fees that would be payable to Full Circle Advisors if our entire
investment portfolio was liquidated at its fair value as of the balance sheet date even though Full Circle Advisors will not be entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized. For purposes of the asset coverage ratio test applicable to us as a BDC, we will treat the outstanding notional amount of any swaps or derivatives, less the total amount of cash collateral posted under any swaps or derivatives we hold (if any), as a senior security for the life of that instrument. We may, however, accord different treatment to any such swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC. Further, for purposes of Section 55(a) under the 1940 Act, we will treat each loan underlying any swaps or derivatives as a qualifying asset if the obligor on such loan is an eligible portfolio company and as a non-qualifying asset if the obligor is not an eligible portfolio company. We may, however, accord different treatment to any swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC. Incentive fees would increase if, and to the extent that, we earn greater interest income through our investments in portfolio companies or realize additional capital
gains upon the sale of warrants or other equity investments in such companies.
 18    TABLE OF CONTENTS Examples of Quarterly Incentive Fee Calculation Example 1: Income Related Portion of Incentive Fee*: Alternative 1: Assumptions Investment income (including interest, dividends, fees, etc.) = 1.25% Hurdle rate(1) = 1.75% Management fee(2) = 0.4375% Other expenses (legal, accounting, transfer agent, etc.)(3) = 0.20% Pre-incentive fee net investment income   (investment income  (management fee + other expenses)) = 0.6125% Pre-incentive net investment income does not exceed hurdle rate, therefore there is no incentive fee. Alternative 2: Assumptions Investment income (including interest, dividends, fees, etc.) = 2.70% Hurdle rate(1) = 1.75% Management fee(2) = 0.4375% Other expenses (legal, accounting, transfer agent, etc.)(3)= 0.20% Pre-incentive fee net investment income   (investment income  (management fee + other expenses)) = 2.0625% Incentive fee = 100% × pre-incentive fee net investment income, subject to the catch-up(4) = 100% × (2.0625%  1.75%) = 0.3125% Alternative 3: Assumptions Investment income (including interest, dividends, fees, etc.) = 3.00% Hurdle rate(1) = 1.75% Management fee(2) = 0.4375% Other expenses (legal, accounting, transfer agent, etc.)(3)= 0.20% Pre-incentive fee net investment income   (investment income  (management fee + other expenses)) = 2.3625% Incentive fee = 20% × pre-incentive fee net investment income, subject to catch-up(4) Incentive fee = 100% × catch-up + (20% × (pre-incentive fee net investment income  2.1875%)) Catch-up = 2.1875%  1.75% = 0.4375% Incentive fee = (100% × 0.4375%) + (20% × (2.3625%  2.1875%)) = 0.4375% + (20% × 0. 175%) = 0.4375% + 0.035% = 0.4725%  *

          The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets. (1)

          Represents 7% annualized hurdle rate.
 19    TABLE OF CONTENTS (2)

          Represents 1.75% annualized management fee. (3)

          Excludes organizational and offering expenses. (4)

          The catch-up provision is intended to provide the investment adviser with an incentive fee of 20% on all of Full Circle Capitals pre-incentive fee net investment income as if a hurdle rate did not apply when its net investment income exceeds 2.1875% in any calendar quarter. Example 2: Capital Gains Portion of Incentive Fee: Alternative 1: Assumptions 

          Year 1: $20 million investment made in Company A (Investment A), and $30 million investment made in Company B (Investment B) 

          Year 2: Investment A sold for $50 million and fair market value (FMV) of Investment B determined to be $32 million 

          Year 3: FMV of Investment B determined to be $25 million 

          Year 4: Investment B sold for $31 million The capital gains portion of the incentive fee would be: 

          Year 1: None 

          Year 2: $6 million capital gains incentive fee ($30 million realized capital gains on sale of Investment A multiplied by 20%) 

          Year 3: None ($5 million (20% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6 million (previous capital gains fee paid in Year 2)) 

          Year 4: $200,000 capital gains incentive fee ($6.2 million ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (capital gains fee taken in Year 2)) Alternative 2: Assumptions 

          Year 1: $20 million investment made in Company A (Investment A), $30 million investment made in Company B (Investment B) and $25 million investment made in Company C (Investment C) 

          Year 2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million 

          Year 3: FMV of Investment B determined to be $27 million and Investment C sold for $30 million 

          Year 4: FMV of Investment B determined to be $35 million 

          Year 5: Investment B sold for $20 million The capital gains incentive fee, if any, would be: 

          Year 1: None 

          Year 2: $5 million capital gains incentive fee (20% multiplied by $25 million ($30 million realized capital gains on Investment A less unrealized capital depreciation on Investment B)) 

          Year 3: $1.4 million capital gains incentive fee(1) ($6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less $5 million capital gains fee received in Year 2) 

          Year 4: $0.6 million capital gains incentive fee ($7.0 million (20% multiplied by $35 million ($35 million cumulative realized capital gains)) less $6.4 million cumulative capital gains fee paid in Year 2 and Year 3)
 20    TABLE OF CONTENTS 

          Year 5: None ($5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less $7.0 million cumulative capital gains fee paid in Year 2, Year 3, and Year 4)  (1)

          As illustrated in Year 3 of Alternative 1 above, if the Company were to be wound up on a date other than December 31 of any year, the Company may have paid aggregate capital gain incentive fees that are more than the amount of such fees that would be payable if the Company had been wound up on December 31 of such year. Payment of Our Expenses The investment committee of our investment adviser and their respective staffs, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by Full Circle Advisors. We bear all other costs and expenses of our operations and transactions, including (without limitation): 

          the cost of our organization and initial public offering; 

          the cost of calculating our net asset value, including the cost of any third-party valuation services; 

          the cost of effecting sales and repurchases of our shares and other securities; 

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

          fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and third-party advisory fees; 

          transfer agent and safekeeping fees; 

          fees and expenses associated with marketing efforts; 

          federal and state registration fees, any stock exchange listing fees; 

          federal, state and local taxes; 

          independent directors fees and expenses; 

          brokerage commissions; 

          fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums; 

          direct costs and expenses of administration and sub-administration, including printing, mailing, long distance telephone and staff; 

          fees and expenses associated with independent audits and outside legal costs; 

          costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; and 

          all other expenses incurred by either Full Circle Service Company or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion of overhead and other expenses incurred by Full Circle Service Company in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer and our Chief Financial Officer and any administrative support staff. Our investment adviser had agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and organizational and offering expenses, in excess of
 21    TABLE OF CONTENTS 2% of our net assets for the first twelve months following the completion of the initial public offering, which occurred on August 31, 2010. This agreement was extended through September 30, 2011 and expired on such date. Our investment adviser has agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.5% of our net assets, beginning with our fiscal quarter ending September 30, 2014 through the end of our fiscal year 2015. For our fiscal year 2016 and beyond, our investment adviser had agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.75% of our net assets. Duration and Termination Our Board of Directors initially approved the Investment Advisory Agreement on July 8, 2010 and most recently re-approved such agreement on June 22, 2015. Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect from year to year if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not parties to such agreement or who are not interested persons of any such party, as such term is defined in Section 2(a)(19) of
the 1940 Act. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may also be terminated by either party without penalty upon not more than 60 days written notice to the other party. See Risk Factors  Risks Relating to Our Business and Structure  Our investment adviser has the right to resign on 60 days notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations. Indemnification The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Full Circle Advisors and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Full Circle Capital for any damages, liabilities, costs and expenses (including reasonable attorneys fees and amounts reasonably paid in settlement) arising from the rendering of Full Circle Advisors services under the
Investment Advisory Agreement or otherwise as an investment adviser of Full Circle Capital. Organization of our Investment Adviser Full Circle Advisors is a Delaware limited liability company. The principal executive offices of Full Circle Advisors are located at 102 Greenwich Avenue, 2nd Floor, Greenwich, CT 06830. Board Approval of the Investment Advisory Agreement Our Board of Directors determined at a meeting held on June 22, 2015 to re-approve the Investment Advisory Agreement. In its consideration of the re-approval of the Investment Advisory Agreement, the Board of Directors focused on current, historical and projected information it had received relating to, among other things: 

          the nature, quality and extent of the advisory and other services to be provided to us by Full Circle Advisors over the term of the Investment Advisory Agreement, including our performance relative to other business development companies during the prior year; 

          comparative data with respect to advisory fees or similar expenses currently paid by other business development companies with similar investment objectives; 

          our historical and projected operating expenses and expense ratio compared to business development companies with similar investment objectives; 

          any existing and potential sources of indirect income to Full Circle Advisors or Full Circle Service Company from their relationships with us and the profitability of those relationships, including through the Investment Advisory Agreement and the Administration Agreement;
 22    TABLE OF CONTENTS 

          information about the services to be performed and the personnel performing such services under the Investment Advisory Agreement, including the capacity of Full Circle Advisors to handle the anticipated size and nature of our portfolio in the future; 

          the organizational capability and financial condition of Full Circle Advisors and its affiliates; 

          Full Circle Advisors practices regarding the selection and compensation of brokers that may execute our portfolio transactions and the brokers provision of brokerage and research services to Full Circle Advisors; and 

          the possibility of obtaining similar services from other third party service providers or through an internally managed structure, including both the potential benefits and relative costs and expenses involved. Based on the information reviewed and related discussions, the Board of Directors, including a majority of the non-interested directors, concluded that fees payable to Full Circle Advisors pursuant to the Investment Advisory Agreement were reasonable in relation to the services to be provided. The Board of Directors did not assign relative weights to the above factors or the other factors considered by it. In addition, the Board of Directors did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the Board of Directors may have given different
weights to different factors. For purposes of computing the capital gains incentive fee, Full Circle Advisors will become entitled to a capital gains incentive fee upon the termination or disposition of any swaps or derivatives, at which point all net gains and losses of the underlying securities constituting the reference assets of the swaps or derivatives, as well as any payments received from the counterparty to the swap will be realized. For purposes of computing our income incentive fee, Full Circle Advisors will not be entitled to an income incentive fee with respect to swaps or derivatives. Any unrealized appreciation on such investments, if any,
will be reflected in total assets in our consolidated balance sheet and included in the computation of our base management fee. All such swaps or derivatives will be reflected as portfolio investments and any resulting gain or loss will be reflected in Full Circle Capitals income statements. While the investment advisory agreement with Full Circle Advisors neither includes nor contemplates the inclusion of net unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of the AICPA Technical Practice Aid for investment companies, we will accrue capital gains incentive fees on unrealized gains. This accrual will reflect the incentive fees that would be payable to Full Circle Advisors if our entire
investment portfolio was liquidated at its fair value as of the balance sheet date even though Full Circle Advisors will not be entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized. For purposes of the asset coverage ratio test applicable to us as a BDC, we will treat the outstanding notional amount of any swaps or derivatives, less the total amount of cash collateral posted under any swaps or derivatives we hold (if any), as a senior security for the life of that instrument. We may, however, accord different treatment to any such swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC. Further, for purposes of Section 55(a) under the 1940 Act, we will treat each loan underlying any swaps or derivatives as a qualifying asset if the
obligor on such loan is an eligible portfolio company and as a non-qualifying asset if the obligor is not an eligible portfolio company. We may, however, accord different treatment to any swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC. Incentive fees would increase if, and to the extent that, we earn greater interest income through our investments in portfolio companies or realize additional capital gains upon the sale of warrants or other equity investments in such companies.
 23    TABLE OF CONTENTS Administration Agreement Full Circle Service Company, a Delaware limited liability company, serves as our administrator. The principal executive offices of Full Circle Service Company are located at 102 Greenwich Avenue, 2nd Floor, Greenwich, CT 06830. Pursuant to an Administration Agreement most recently ratified by our Board of Directors on June 22, 2015, Full Circle Service Company furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, Full Circle Service Company also performs, or oversees the performance of, our required administrative
services, which include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our stockholders. In addition, Full Circle Service Company assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Full Circle Service Companys overhead in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the compensation of our Chief Financial Officer and our allocable portion of the compensation of any administrative support staff employed
by the Administrator, directly or indirectly. Under the Administration Agreement, Full Circle Service Company will also provide on our behalf managerial assistance to those portfolio companies that request such assistance. The Administration Agreement may be terminated by either party without penalty upon 60 days written notice to the other party. Full Circle Service Company also may provide administrative services to our investment adviser, Full Circle Advisors. As a result, Full Circle Advisors would reimburse Full Circle Service Company for its allocable portion of Full Circle Service Companys overhead, including rent, the fees and expenses associated with performing compliance functions for Full Circle Advisors, and its allocable portion of the compensation of any administrative support staff. To the extent Full Circle Advisors or any of its affiliates manage other investment vehicles in the future, no portion of any administrative services provided by Full
Circle Service Company to such other investment vehicles will be charged to us. The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Full Circle Service Company and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Full Circle Capital for any damages, liabilities, costs and expenses (including reasonable attorneys fees and amounts reasonably paid in settlement) arising from the rendering of Full Circle Service Companys services under
the Administration Agreement or otherwise as administrator for Full Circle Capital. Our former Chief Financial Officer, William E. Vastardis, is the Chairman of Conifer Financial Services, LLC (Conifer), f/k/a Vastardis Fund Services, LLC. Full Circle Service Company has engaged Conifer to provide certain administrative services to us. In exchange for providing such services, Full Circle Service Company pays Conifer an asset-based fee with a $200,000 annual minimum. This asset-based fee varies depending upon our gross assets as follows:  Gross Assets

          

          Feefirst $150 million of gross assets

          

          20 basis points (0.20%)next $150 million of gross assets

          

          15 basis points (0.15%)next $200 million of gross assets

          

          10 basis points (0.10%)in excess of $500 million of gross assets

          

          5 basis points (0.05%)
 Additionally, prior to September 30, 2013, we reimbursed Full Circle Service Company for the fees charged by Conifer for the service of Mr. Vastardis as our Chief Financial Officer, Treasurer and Secretary at an annual rate of up to $250,000. Conifer agreed to cap its first year fees at $200,000 for administrative services to us, and at $100,000 for the service of Mr. Vastardis as our Chief Financial Officer, Treasurer and Secretary. These caps expired on August 31, 2011. As of September 30, 2013, Michael J. Sell is our Chief Financial Officer, Treasurer and Secretary and Mr. Vastardis no longer receives fees for such
services.
 24    TABLE OF CONTENTS License Agreement We have entered into a license agreement with Full Circle Advisors pursuant to which Full Circle Advisors has agreed to grant us a non-exclusive, royalty-free license to use the name Full Circle. Under this agreement, we have a right to use the Full Circle name for so long as the Investment Advisory Agreement with Full Circle Advisors is in effect. Other than with respect to this limited license, we will have no legal right to the Full Circle name. Staffing We do not currently have any employees. Mr. Stuart, our Chairman, and Mr. Felton, our Chief Executive Officer and President, currently serve as managing members of our investment adviser, Full Circle Advisors. The services of Mr. Sell, our Chief Financial Officer, Secretary, and Treasurer, are provided by Full Circle Service Company in accordance with the terms of the Administration Agreement. Salvatore Faia, our Chief Compliance Officer, is the President of Vigilant Compliance Services and performs his function under the terms of an agreement between Full Circle Service Company and Vigilant Compliance Services. Our day-to-day investment operations are managed by Full Circle Advisors. Full Circle Advisors investment committee currently consists of Messrs. Stuart, Felton, Chua and Deery, its experienced senior investment professionals. Full Circle Advisors may hire additional investment professionals, based upon its needs. See Business  Investment Advisory Agreement. Competition We compete for investments with other business development companies and investment funds (including private equity funds, mezzanine funds and small business investment companies), as well as traditional financial services companies such as commercial banks and other sources of funding. Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles, such as hedge funds, those entities have begun to invest in areas they have not traditionally invested in, including making investments in lower mid-sized companies. As a result of these new entrants, competition for
investment opportunities in lower mid-sized companies may intensify. Many of these entities have greater financial and managerial resources than we do. We believe we are able to compete with these entities primarily on the basis of the experience and contacts of our investment adviser, our responsive and efficient investment analysis and decision-making processes, the investment terms we offer, and our willingness to make smaller investments. We believe that certain of our competitors will make first and second lien loans with interest rates and returns that are comparable to or lower than the rates and returns that we target. Therefore, we do not seek to compete solely on the interest rates and returns that we offer to potential portfolio companies. For additional information concerning the competitive risks we face, see Risk Factors  Risk Relating to Our Business and Structure  We may face increasing competition for investment opportunities. Securities Exchange Act Reports We maintain a website at www.fccapital.com. The information on our website is not incorporated by reference in this annual report on Form 10-K. We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission (the SEC) in accordance with the Securities Exchange Act of 1934, as amended (the Exchange Act). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
 25    TABLE OF CONTENTS Regulation As a business development company, we are regulated by the 1940 Act. A business development company must be organized in the United States for the purpose of investing in or lending to primarily private companies and making managerial assistance available to them. A business development company may use capital provided by public stockholders and from other sources to make long-term, private investments in businesses. A business development company provides stockholders the ability to retain the liquidity of a publicly traded stock while sharing in the possible benefits, if any, of investing in primarily privately owned
companies. We may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company unless authorized by vote of a majority of the outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such companys voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipate any
substantial change in the nature of our business. As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the business development company. Furthermore, as a business development company, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such persons office. As a business development company, we are generally required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 200% after each issuance of senior securities. We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC. As a business development company, we are not generally permitted to invest in any portfolio company in which our investment adviser or any of its affiliates currently have an investment or to make any co-investments with our investment adviser or its affiliates without an exemptive order from the SEC, subject to certain exceptions. We are not generally able to sell our common stock at a price below net asset value per share. See Risk Factors  Risks Relating to our Business and Structure  Regulations governing our operation as a business development company affect our ability to raise additional capital and the way in which we do so. As a business development company, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage. We may, however, sell our common stock at a price below net asset value per share (i) in connection with a rights offering to
our existing stockholders, (ii) with the consent of the majority of our common stockholders, or (iii) under such other circumstances as the SEC may permit. For example, we may sell our common stock at a price below the then current net asset value of our common stock if our Board of Directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve our policy and practice of making such sales. In this regard, at our most recent Annual Stockholders Meeting, our common stockholders voted to allow us to issue common stock at a price below net asset value per share for a period of one year ending on the earlier of January 16, 2016 or our next Annual Stockholders Meeting, which we expect to be held in January 2016. The maximum number of shares issuable below net asset value in each offering is limited to 25% of our then outstanding common stock. Any such offering is subject to approval by our Board of Directors and its
determination that the price at which our common stock to be issued and sold is not less than a price which closely approximates the market value of such common stock. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.
 26    TABLE OF CONTENTS We may be examined by the SEC for compliance with the 1940 Act. As a business development company, we are subject to certain risks and uncertainties. See Risk Factors  Risks Relating to our Business and Structure. Qualifying Assets Under the 1940 Act, a business development company may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development companys gross assets. The principal categories of qualifying assets relevant to our proposed business are the following: (1)

          Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which: (a)

          is organized under the laws of, and has its principal place of business in, the United States; (b)

          is not an investment company (other than a small business investment company wholly owned by the business development company) or a company that would be an investment company but for certain exclusions under the 1940 Act; and (c)

          satisfies any of the following: i.

          does not have any class of securities that is traded on a national securities exchange; ii.

          has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million; iii.

          is controlled by a business development company or a group of companies including a business development company and the business development company has an affiliated person who is a director of the eligible portfolio company; or iv.

          is a small and solvent company having gross assets of not more than $4.0 million and capital and surplus of not less than $2.0 million. (2)

          Securities of any eligible portfolio company which we control. (3)

          Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements. (4)

          Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company. (5)

          Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. (6)

          Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
 27    TABLE OF CONTENTS Managerial Assistance to Portfolio Companies In addition, a business development company must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the business development company must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the business
development company purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the business development company, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company. We offer to provide managerial assistance to our portfolio companies. Temporary Investments Pending investment in other types of qualifying assets, as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor,
such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our gross assets constitute repurchase agreements from a single counterparty, we would not meet the diversification tests in order to qualify as a RIC for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our investment adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions. Senior Securities We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our gross assets for temporary or emergency
purposes without regard to asset coverage. See Risk Factors  We borrow money, which magnifies the potential for gain or loss on amounts invested and increases the risk of investing in us. Code of Ethics We and Full Circle Advisors have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain transactions by our personnel. Our codes of ethics generally do not permit investments by our employees in securities that may be purchased or held by us. You may read and copy these codes of ethics at the SECs Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. In addition, each code of
ethics is available on the EDGAR Database on the SECs Internet site at http://www.sec.gov. You may also obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SECs Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.
 28    TABLE OF CONTENTS Compliance Policies and Procedures We and our investment adviser have adopted and implemented written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and designate a chief compliance officer to be responsible for administering the policies and procedures. Salvatore Faia currently serves as our Chief Compliance Officer. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example: 

          pursuant to Rule 13a-14 of the Exchange Act, our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the financial statements contained in our periodic reports; 

          pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; 

          pursuant to Rule 13a-15 of the Exchange Act, our management must prepare an annual report regarding its assessment of our internal control over financial reporting; and 

          pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the 1934 Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith. Proxy Voting Policies and Procedures We have delegated our proxy voting responsibility to Full Circle Advisors. The Proxy Voting Policies and Procedures of Full Circle Advisors are set forth below. The guidelines will be reviewed periodically by Full Circle Advisors and our non-interested directors, and, accordingly, are subject to change. For purposes of these Proxy Voting Policies and Procedures described below, we, our and us refers to Full Circle Advisors. Introduction An investment adviser registered under the Advisers Act has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, we recognize that we must vote client securities in a timely manner free of conflicts of interest and in the best interests of our clients. These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act. Proxy Policies We will vote proxies relating to our portfolio securities in what we perceive to be the best interest of our clients stockholders. We will review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by our clients. Although we will generally vote against proposals that may have a negative impact on our clients portfolio securities, we may vote for such a proposal if there exist compelling long-term reasons to do so. Our proxy voting decisions will be made by the senior officers who are responsible for monitoring each of our clients investments. To ensure that our vote is not the product of a conflict of interest, we will require that: (1) anyone involved in the decision making process disclose to our manager any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence
from interested parties.
 29    TABLE OF CONTENTS Proxy Voting Records You may obtain information about how we voted proxies by making a written request for proxy voting information to: Full Circle Advisors, LLC, 102 Greenwich Avenue, 2nd floor, Greenwich, CT 06830. Privacy Principles We are committed to maintaining the privacy of our stockholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties. Generally, we do not receive any non-public personal information relating to our stockholders, although certain non-public personal information of our stockholders may become available to us. We do not disclose any non-public personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator). We restrict access to non-public personal information about our stockholders to employees of our investment adviser and its affiliates with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of our stockholders. Material U.S. Federal Income Tax Considerations We have elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any income that we distribute to our stockholders as dividends. To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to qualify for RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our investment company taxable income, which is generally our ordinary income plus the
excess of our realized net short-term capital gains over our realized net long-term capital losses (the Annual Distribution Requirement). Taxation as a Regulated Investment Company If we: 

          qualify as a RIC; and 

          satisfy the Annual Distribution Requirement, then we will not be subject to U.S. federal income tax on the portion of our income we distribute (or are deemed to distribute) to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) to our stockholders. We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the Excise Tax Avoidance Requirement). We generally will endeavor in each taxable year to make sufficient distributions to our stockholders to avoid any U.S. federal excise tax on our earnings. In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: 

          continue to qualify as a business development company under the 1940 Act at all times during each taxable year; 

          derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income from certain qualified publicly traded partnerships, or other income derived with respect to our business of investing in such stock or securities (the 90% Income Test); and
 30    TABLE OF CONTENTS 

          diversify our holdings so that at the end of each quarter of the taxable year: 

          at least 50% of the value of our assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and 

          no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses, or of certain qualified publicly traded partnerships (the Diversification Tests). We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants, or carrying PIK interest or, in certain cases, increasing interest rates), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation (assuming we believe such amounts are ultimately collectable), regardless of whether cash representing such income is received by us in the same taxable year. We may also
have to include in income other amounts that we have not yet received in cash (assuming we believe such amounts are ultimately collectable), such as contractual PIK interest and deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain asset coverage tests are met. See Regulation  Senior Securities. Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC,
including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous. Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things: (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (iv) cause us to recognize income or gain without a corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of securities is deemed to occur; (vi)
adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will not be qualifying income for purposes of the 90% gross income test described above. We will monitor its transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions. Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. The treatment of such gain or loss as long-term or short-term will depend on how long we held a particular warrant. Upon the exercise of a warrant acquired by us, our tax basis in the stock purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise of the warrant.
 31    TABLE OF CONTENTS Failure to Qualify as a Regulated Investment Company If we were unable to qualify for treatment as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates, regardless of whether we make any distributions to our stockholders. Distributions would not be required, and any distributions made in taxable years beginning before January 1, 2014 would be taxable to our stockholders as ordinary dividend income that, subject to certain limitations, may be eligible for the 15% maximum rate to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributes would be eligible for the
dividends-received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholders tax basis, and any remaining distributions would be treated as a capital gain.
 32    TABLE OF CONTENTS Item 1A.  Risk Factors RISK FACTORS Investing in our securities involves a number of significant risks. In addition to the other information contained in this annual report on Form 10-K, you should consider carefully the following information before making an investment in our securities. The risks set out below are the principal risks with respect to an investment in our securities, and with respect to business development companies. They may not be the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us might also impair our operations and performance. If any of the following events occur,
our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your investment. Risks Relating to Our Business and Structure Our investment portfolio is recorded at fair value, with our Board of Directors having final responsibility for overseeing, reviewing and determining, in good faith, its estimate of fair value and, as a result, there is uncertainty as to the value of our portfolio investments. Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by us in accordance with our written valuation policy, with our Board of Directors having final responsibility for overseeing, reviewing and determining, in good faith, our estimate of fair value. Typically, there will not be a public market for the securities of the privately held companies in which we invest. As a result, we value these securities quarterly at fair value based on input from management, third party independent valuation firms and our audit
committee, with the oversight, review and approval of our Board of Directors. The determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are to a certain degree, subjective and dependent on a valuation process approved by our Board of Directors. Certain factors that may be considered in determining the fair value of our investments include estimates of the collectability of the principal and interest on our debt investments and expected realization on our equity investments, as well as external events, such as private mergers, sales and acquisitions involving comparable companies. Because such valuations, and particularly valuations of private
securities and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. Our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our investments. As a result, investors purchasing our securities based on an overstated net asset value would pay a higher price than the value of our investments might warrant. Conversely, investors selling securities during a period in which the net asset value understates the value of our investments will receive a lower price for their securities than the value of our investments might warrant. Our financial condition and results of operations depend on our ability to effectively manage and deploy capital. Our ability to achieve our investment objective depends on our ability to effectively manage and deploy capital, which depends, in turn, on our investment advisers ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria. Accomplishing our investment objective on a cost-effective basis is largely a function of our investment advisers handling of the investment process, its ability to provide competent, attentive and efficient services and our access to investments offering acceptable terms. In addition to monitoring the performance of our existing investments, our investment advisers investment committee may also be called upon, from time to time, to provide managerial assistance to some of our portfolio companies. These demands on their time may distract them or slow the rate of investment.
 33    TABLE OF CONTENTS Even if we are able to grow and build upon our investment operations, any failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations will depend on many factors, including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial markets and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment policies and strategies as described herein, it could negatively impact our ability to pay
dividends. We may face increasing competition for investment opportunities. We compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds and small business investment companies), as well as traditional financial services companies such as commercial banks and other sources of funding. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than us. For example, some competitors have a lower cost of capital and access to funding sources that are not available to us, including from federal government agencies through federal rescue programs such as the U.S. Department of
Treasurys Financial Stability Plan (formerly known as the Troubled Asset Relief Program) or the Small Business Administration. In addition, some of our competitors have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to offer. We may lose investment opportunities if we do not match our competitors pricing, terms and structure. If we are forced to match our competitors pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in lower middle-market and middle-market companies is underserved by traditional commercial banks and other financing sources. A significant increase in
the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC. We believe that certain of our competitors will make first and second lien loans with interest rates and returns that are comparable to or lower than the rates and returns that we target. Therefore, we do not seek to compete solely on the interest rates and returns that we offer to potential portfolio companies. We are dependent upon Full Circle Advisors key personnel for our future success. We depend on the diligence, skill and network of business contacts of Messrs. Stuart and Felton, who serve with Messrs. Chua and Deery as members of the investment committee of Full Circle Advisors. Messrs. Stuart and Felton, together with the other dedicated senior investment professionals available to Full Circle Advisors, evaluate, negotiate, structure, close and monitor our investments. Our future success depends on the continued service of Messrs. Stuart and Felton and the other senior investment professionals available to Full Circle Advisors. We cannot assure you that unforeseen business, medical, personal or other
circumstances would not lead Messrs. Stuart or Felton or any other such individual to terminate his relationship with us. The loss of Mr. Stuart, Mr. Felton or any of the other senior investment professionals who serve on Full Circle Advisors investment committee, could have a material adverse effect on our ability to achieve our investment objective as well as on our financial condition and results of operations. In addition, we can offer no assurance that Full Circle Advisors will continue indefinitely as our investment adviser. The members of Full Circle Advisors investment committee are and may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us, and may have conflicts of interest in allocating their time. We expect that Messrs. Stuart and Felton will dedicate a significant portion of their time to the activities of Full Circle Capital; however, they may be engaged in other business activities which could divert their time and attention in the future. Our success depends on the ability of Full Circle Advisors to attract and retain qualified personnel in a competitive environment. Our growth requires that Full Circle Advisors retain and attract new investment and administrative personnel in a competitive market. Its ability to attract and retain personnel with the requisite credentials, experience and skills depends on several factors including, but not limited to, its ability to offer competitive
 34    TABLE OF CONTENTS wages, benefits and professional growth opportunities. Many of the entities, including investment funds (such as private equity funds and mezzanine funds) and traditional financial services companies, with which it competes for experienced personnel have greater resources than it has. There are significant potential conflicts of interest which could impact our investment returns. Our executive officers and directors, as well as the current and any future members of our investment adviser, Full Circle Advisors, may serve as officers, directors or principals of other entities that operate in the same or a related line of business as we do. Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations may not be in the best interests of us or our stockholders. In addition, certain members of Full Circle Advisors investment committee presently manage Full Circle Funding, LP, a specialty lender serving lower middle-market companies. Although the existing
investment funds managed by Full Circle Funding, LP, which currently consist of the Legacy Funds, are no longer making new investments, any affiliated investment vehicle formed in the future and managed by our investment adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, Full Circle Advisors may face conflicts in allocating investment opportunities between us and such other entities. Although Full Circle Advisors will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by our investment adviser or an investment manager affiliated with our investment adviser. In any such case, when Full Circle Advisors identifies an investment, it will be forced to
choose which investment fund should make the investment. Full Circle Advisors has implemented an allocation policy to ensure the equitable distribution of such investment opportunities consistent with the requirements of the 1940 Act. If our investment adviser forms other affiliates in the future, we may co-invest on a concurrent basis with such other affiliates, subject to compliance with applicable regulations and regulatory guidance and our allocation procedures. While we may co-invest with investment entities managed by Full Circle Advisors or its affiliates, to the extent permitted by the 1940 Act and the rules and regulations thereunder, the 1940 Act imposes significant limits on co-investment. As a result, we and Full Circle Advisors have applied for exemptive relief from the SEC under the 1940 Act, which, if granted, would allow additional latitude
to co-invest. However, there is no assurance when, or even if, we will obtain such relief. In the event the SEC does not grant us relief, we will be limited in our ability to invest in certain portfolio companies in which Full Circle Advisors or any of its respective affiliates are investing or are invested. Even if we are able to obtain exemptive relief, we will be unable to participate in certain transactions originated by Full Circle Advisors or its respective affiliates prior to receipt of such relief. In the course of our investing activities, we pay management and incentive fees to Full Circle Advisors and reimburse Full Circle Advisors for certain expenses it incurs. As a result, investors in our common stock invest on a gross basis and receive distributions on a net basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of Full Circle Advisors will have interests that differ from those of our stockholders, giving rise to a conflict. Full Circle Advisors is not reimbursed for any
performance-related compensation for its employees. We have entered into a royalty-free license agreement with our investment adviser, pursuant to which Full Circle Advisors grants us a non-exclusive royalty-free license to use the name Full Circle. Under the license agreement, we have the right to use the Full Circle name for so long as Full Circle Advisors or one of its affiliates remains our investment adviser. In addition, we will pay Full Circle Service Company, an affiliate of Full Circle Advisors, our allocable portion of overhead and other expenses incurred by Full Circle Service Company in performing its obligations under the Administration
Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the compensation of our Chief Financial Officer and any administrative support staff. These arrangements create conflicts of interest that our Board of Directors must monitor.
 35    TABLE OF CONTENTS In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented certain written policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our executive officers and directors. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns
under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transaction. Our Board of Directors reviews these procedures on an annual basis. We have also adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer, Chairman and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individuals personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged
with approving any waivers under our Code of Ethics. As required by the NASDAQ corporate governance listing standards, the Audit Committee of our Board of Directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K). There are potential conflicts of interest between us and FC Capital Investment Partners (FCCIP) which could impact our investment returns. FCCIP is a multiple series private fund for which we serve as the managing member and investment adviser. Certain of our officers serve or may serve in an investment management capacity to FCCIP. As a result, investment professionals may allocate such time and attention as is deemed appropriate and necessary to carry out operations of FCCIP. In this respect, they may experience diversions of their attention from us and potential conflicts of interest between their work for us and their work for FCCIP in the event that the interests of FCCIP run counter to our interests. FCCIP invests in the same or similar asset classes that we target. These investments may be made at the direction of the same individuals acting in their capacity on behalf of us and FCCIP. As a result, there may be conflicts in the allocation of investment opportunities between us and FCCIP. We may or may not participate in investments made by funds managed by us or one of our affiliates. If FCCIP grows, we may have to register as a registered investment adviser, which would subject us to increased regulatory burdens. Our incentive fee structure and the formula for calculating the management fee may incentivize Full Circle Advisors to pursue speculative investments, use leverage when it may be unwise to do so, or refrain from delevering when it would otherwise be appropriate to do so. The incentive fee payable by us to Full Circle Advisors may create an incentive for Full Circle Advisors to pursue investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to our investment adviser is calculated based on a percentage of our return on invested capital. In addition, our base management fee is calculated on the basis of our gross assets, including assets acquired through the use of leverage. This may encourage our investment adviser to use leverage to increase the aggregate amount of and the return on our
investments, even when it may not be appropriate to do so, and to refrain from delevering when it would otherwise be appropriate to do so. Under certain circumstances, the use of leverage may increase the Companys likelihood of default, which would impair the value of our securities. In addition, the investment adviser will receive the incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive fee based on income, there will be no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result, the investment adviser may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.
 36    TABLE OF CONTENTS The incentive fee payable by us to our investment adviser also may induce Full Circle Advisors to invest on our behalf in instruments that have a deferred interest feature, even if such deferred payments would not provide cash necessary to enable us to pay current distributions to our stockholders. Under these investments, we would accrue interest over the life of the investment but would not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, will include accrued interest. Thus, a portion of this incentive fee
would be based on income that we have not yet received in cash. In addition, the catch-up portion of the incentive fee may encourage Full Circle Advisors to accelerate or defer interest payable by portfolio companies from one calendar quarter to another, potentially resulting in fluctuations in timing and distribution amounts. We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, will bear our ratable share of any such investment companys expenses, including management and performance fees. We will also remain obligated to pay management and incentive fees to Full Circle Advisors with respect to the assets invested in the securities and instruments of other investment companies. With respect to each of these investments, each of our stockholders will bear his or her share of the management and incentive fee of Full Circle
Advisors as well as indirectly bearing the management and performance fees and other expenses of any investment companies in which we invest. In addition, if we repurchase our debt securities that are outstanding and such repurchase results in our recording a net gain on the extinguishment of debt for financial reporting and tax purposes, such net gain will be included in our pre-incentive fee net investment income for purposes of determining the income incentive fee payable to our investment adviser under the Investment Advisory Agreement. A general increase in interest rates will likely have the effect of making it easier for our investment adviser to receive incentive fees, without necessarily resulting in an increase in our net earnings. Given the structure of our Investment Advisory Agreement with Full Circle Advisors, any general increase in interest rates will likely have the effect of making it easier for Full Circle Advisors to meet the quarterly hurdle rate for payment of income incentive fees under the Investment Advisory Agreement without any additional increase in relative performance on the part of our investment adviser. In addition, in view of the catch-up provision applicable to income incentive fees under the Investment Advisory Agreement, our investment adviser could potentially receive a significant portion of the increase in our investment
income attributable to such a general increase in interest rates. If that were to occur, our increase in net earnings, if any, would likely be significantly smaller than the relative increase in our investment advisers income incentive fee resulting from such a general increase in interest rates. Our investment adviser has the right to resign on 60 days notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations. Our investment adviser has the right, under the Investment Advisory Agreement, to resign at any time upon not more than 60 days written notice, whether we have found a replacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are
likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.
 37    TABLE OF CONTENTS Our investment adviser may not be able to achieve the same or similar returns as those achieved by Messrs. Stuart and Felton while they were employed at prior positions. Although in the past Messrs. Stuart and Felton held senior positions at a number of investment firms, their track record and achievements are not necessarily indicative of future results that will be achieved by our investment adviser. We cannot assure you that we will be able to achieve the results realized by prior vehicles managed by Messrs. Stuart or Felton. Any failure on our part to maintain our status as a BDC would reduce our operating flexibility. We have elected to be treated as a BDC under the 1940 Act. The 1940 Act imposes numerous constraints on the operations of BDCs. For example, BDCs are required to invest at least 70% of their gross assets in specified types of securities, primarily in private companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants.
In addition, upon approval of a majority of our stockholders, we may elect to withdraw our status as a BDC. If we decide to withdraw our election, or if we otherwise fail to qualify, or maintain our qualification, as a BDC, we may be subject to the substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with such regulations would significantly decrease our operating flexibility, and could significantly increase our costs of doing business. Regulations governing our operation as a BDC affect our ability to raise additional capital and the way in which we do so. As a business development company, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage. We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as senior securities, up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If
that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. As of September 14, 2015, we had approximately $33.6 million principal amount of 8.25% Notes due 2020 (the Notes) outstanding. As of September 14, 2015, we had approximately $9.9 million of outstanding borrowings under our $45 million senior secured credit facility (the Credit Facility) with Santander Bank, N.A. f/k/a Sovereign Bank, N.A. (Santander Bank), subject to borrowing base requirements. If we issue preferred stock, the preferred stock would rank
senior to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest. We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our Board of Directors determines that such sale is in the best interests of Full Circle Capital and its stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the
market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and you may experience dilution.
 38    TABLE OF CONTENTS We borrow money, which magnifies the potential for gain or loss on amounts invested and increases the risk of investing in us. The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our securities. We borrow from and issue senior debt securities to banks, insurance companies and/or other lenders. Holders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we
not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affect our ability to make dividend payments on our common stock. We may enter into swap agreements to sell all or a portion of the economics with respect to certain investments from time to time, which may be viewed as leverage under the 1940 Act. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to our investment adviser, Full Circle Advisors, is payable based on our gross assets, including those assets acquired through the use of leverage, Full Circle Advisors has a financial incentive to incur leverage which may not be consistent with our stockholders interests. In
addition, our common stockholders bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to Full Circle Advisors. As a business development company, we are generally required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 200% after each issuance of senior securities. If this ratio declines below 200%, we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make
distributions. The amount of leverage that we employ depends on our investment advisers and our Board of Directors assessment of market and other factors at the time of any proposed borrowing. In addition, the Credit Facility and Notes impose, and any other debt facility into which we may enter would likely impose, financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code. For example, the Credit Facility requires us to maintain a minimum balance sheet leverage ratio and subjects us to prepayment fees in certain circumstances. Illustration.  The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. Assumed Return on Our Portfolio(1)(2) (net of expenses)  -10.0%

          

          -5.0%

          

          0.0%

          

          5.0%

          

          10.0%Corresponding net return to common stockholder

          

          

          -17.88

          %

          

          

          -10.27

          %

          

          

          -2.66

          %

          

          

          4.95

          %

          

          

          12.56

          %
  (1)

          Assumes $152.1 million in total portfolio assets, $33.6 million in senior securities, $99.9 million in net assets, and an average cost of funds of 7.90%. Actual interest payments may be different. (2)

          In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our June 30, 2015 total assets of at least 1.75%.
 39    TABLE OF CONTENTS Pending legislation may allow us to incur additional leverage. As a BDC, under the 1940 Act we generally are not permitted to incur indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). Recent legislation introduced in the U.S. House of Representatives, if passed, would modify this section of the 1940 Act and increase the amount of debt that BDCs may incur by modifying the asset coverage percentage from 200% to 150%. As a result, we may be able to incur additional indebtedness in the future and therefore your risk of an investment may increase. An inability to raise capital or access debt financing could negatively affect our business. We will need to periodically access the capital markets to raise cash to fund new investments. We have elected to be treated as a RIC and operate in a manner so as to qualify for the U.S. federal income tax treatment applicable to RICs. Among other things, in order to maintain our RIC status, we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of our investment company taxable income (as defined by the Code), and, as a result, such distributions will not be available to fund investment originations. As a result, we must continue to borrow from financial institutions and issue
additional securities to fund our growth. Unfavorable economic or capital market conditions may increase our funding costs, limit our access to the capital markets or could result in a decision by lenders not to extend credit to us. Over the past several years, the capital markets and the credit markets have been experiencing extreme volatility and disruption and, accordingly, there has been and will continue to be uncertainty in the financial markets in general. An inability to successfully access the capital or credit markets for either equity or debt could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any. If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the 1940 Act. Any such failure, or a tightening or general disruption of the credit markets, would affect our ability to issue senior securities, including borrowings, and pay dividends,
which could materially impair our business operations. We may experience fluctuations in our quarterly results. We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of portfolio dividend and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance
in future periods. Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners. Under Maryland General Corporation Law and our charter, our Board of Directors is authorized to classify and reclassify any authorized but unissued shares of stock into one or more classes of stock, including preferred stock. Prior to issuance of shares of each class or series, the Board of Directors will be required by Maryland law and our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the Board of Directors could authorize the issuance of
shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. The cost of any such reclassification would be borne by our common stockholders. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote as a separate class from the holders of common stock on a proposal to cease operations as a business development company. In addition, the 1940 Act provides that holders of preferred stock are entitled to vote separately from holders of common stock to elect two preferred stock directors. We currently have no plans to issue preferred stock. The issuance of preferred shares convertible into shares of common stock may also reduce the net income and net asset value per share of our
common stock upon conversion, provided, that we will only be permitted to issue such convertible preferred stock to the extent we comply with the requirements of Section 61 of the 1940 Act,
 40    TABLE OF CONTENTS including obtaining common stockholder approval. These effects, among others, could have an adverse effect on your investment in our common stock. Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse. Our Board of Directors has the authority to modify or waive our investment objective, current operating policies, investment criteria and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay you dividends and cause you to lose all or part of your investment. We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code. Although we have elected to be treated as a RIC under Subchapter M of the Code, no assurance can be given that we will be able to continue to qualify for and maintain RIC status. To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements. The annual distribution requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to make the required distributions, we could fail to
qualify for RIC tax treatment and thus become subject to corporate-level income tax. The income source requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from the sale of stock or securities or similar sources. The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. Failure to meet those requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses. Further, the illiquidity of our investments may make them difficult or impossible to dispose in a timely manner. If we fail to qualify for RIC tax treatment for any reason and become subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. There is a risk that our stockholders may not receive distributions or that our distributions may not grow over time. We intend to make distributions on a monthly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. In addition, due to the asset coverage test applicable to us as a business development company, we may be limited in our ability to make distributions. See Business  Regulation. Any amounts that we use to service our indebtedness will not be available for distributions to our common stockholders. Although we have no current intention to do so, we may in the future issue debt securities and/or borrow money from banks or other financial institutions, which we refer to collectively as senior securities, up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a registered closed-end management investment company, to issue senior securities
 41    TABLE OF CONTENTS representing indebtedness so long as our asset coverage ratio with respect thereto, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities representing indebtedness, is at least 200% after each issuance of such senior securities. If the value of our assets declines, we may be unable to satisfy these tests. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when doing so may be disadvantageous. Any
amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income. For federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the origination of a loan or possibly in other circumstances, or contractual PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discounts or increases in loan balances as a result of contractual PIK arrangements will be included in income before we receive any corresponding cash payments. We are also required to include in income certain other
amounts that we do not receive in cash. Since, in certain cases, we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the annual distribution requirement necessary to maintain RIC tax treatment under the Code. In addition, since our incentive fee is payable on our income recognized, rather than cash received, we may be required to pay advisory fees on income before or without receiving cash representing such income. The base management fee we pay to our adviser may also increase in the event that the accrual of non-cash income results in an increase to the fair value of our investments. Accordingly, we may
have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities in order to pay advisory fees. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax. For additional discussion regarding the tax implications of a RIC, please see Business  Material U.S. Federal Income Tax Considerations. We may in the future choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive. We may distribute taxable dividends that are payable in part in our stock. Under certain applicable provision of the Code and the Treasury regulations, distributions payable in cash or in shares of stock at the election of shareholders are treated as taxable dividends. The Internal Revenue Service has issued private rulings indicating that this rule will apply even if the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. Under these rulings, if too many shareholders elect to receive their distributions in cash, each such shareholder would receive a pro rata share of the
total cash to be distributed and would receive the remainder of their distribution in shares of stock. If we decide to make any distributions consistent with these rulings that are payable in part in our stock, taxable stockholders receiving such dividends will be required to include the full amount of the dividend (whether received in cash, our stock, or combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly designated as a capital gain dividend) to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale.
Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our stock.
 42    TABLE OF CONTENTS Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy. We and our portfolio companies are subject to applicable local, state and federal laws and regulations, including, without limitation, federal immigration laws and regulations. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or
different opportunities. Such changes could result in material differences to the strategies and plans set forth herein and may result in our investment focus shifting from the areas of expertise of our investment advisers investment committee to other types of investments in which the investment committee may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment. We incur significant costs as a result of being a publicly traded company. As a publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, and other rules implemented by the Securities and Exchange Commission. Terrorist attacks, acts of war or natural disasters may affect any market for our common stock, impact the businesses in which we invest and harm our business, operating results and financial condition. Terrorist acts, acts of war or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial
condition. Losses from terrorist attacks and natural disasters are generally uninsurable. Further downgrades of the U.S. credit rating, impending automatic spending cuts or another government shutdown could negatively impact our liquidity, financial condition and earnings. Recent U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the U.S. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any further downgrades to the U.S. governments sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. Absent further quantitative
easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations. Global economic, political and market conditions may adversely affect our business, results of operations and financial condition, including our revenue growth and profitability. The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world, may contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide. Since 2010, several European Union (EU) countries, including Greece, Ireland, Italy, Spain, and Portugal, have faced budget issues, some of which may have negative long-term
 43    TABLE OF CONTENTS effects for the economies of those countries and other EU countries. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as China, may have a severe impact on the worldwide and United States financial markets. We cannot predict the effects of these or similar events in the future on the United States economy and securities markets or on our investments. We monitor developments and seek to manage our investments in a manner consistent
with achieving our investment objective, but there can be no assurance that we will be successful in doing so. In October 2014, the U.S. Federal Reserve announced that it has terminated its bond-buying program, or quantitative easing, which was designed to stimulate the economy and expand the Federal Reserves holdings of long-term securities until key economic indicators, such as the unemployment rate, showed signs of improvement. It is unclear what effect, if any, the Federal Reserves termination of quantitative easing will have on the value of our investments. However, it is possible that without quantitative easing by the Federal Reserve, these developments, along with the European sovereign debt crisis, could cause
interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. The failure in cyber security systems, as well as the occurrence of events unanticipated in the Companys disaster recovery systems and management continuity planning could impair the Companys ability to conduct business effectively. The occurrence of a disaster such as a cyber attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in the Companys disaster recovery systems, or a support failure from external providers, could have an adverse effect on the Companys ability to conduct business and on the Companys results of operations and financial condition, particularly if those events affect the Companys computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of the Companys managers were unavailable in the event of a
disaster, the Companys ability to effectively conduct its business could be severely compromised. We depend heavily upon computer systems to perform necessary business functions. Despite the Companys implementation of a variety of security measures, its computer systems could be subject to cyber attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, the Company may experience threats to its data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored
in, and transmitted through, the Companys computer systems and networks, or otherwise cause interruptions or malfunctions in its operations, which could result in damage to the Companys reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss. Risks Relating to Our Investments Our investments are very risky and highly speculative, and the lower middle-market and middle-market companies we target may have difficulty accessing the capital markets to meet their future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. We invest primarily in senior secured term loans, mezzanine debt and select equity investments issued by leveraged companies. Senior Secured Loans.  There is a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital, and, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio companys financial condition and prospects, including its inability to raise additional capital, may be
accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loans terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.
 44    TABLE OF CONTENTS Mezzanine Loans.  Our mezzanine debt investments are generally subordinated to senior loans and are generally unsecured. As such, other creditors may rank senior to us in the event of an insolvency, which could likely in many cases result in a substantial or complete loss on such investment in the case of such insolvency. This may result in an above average amount of risk and loss of principal. Equity Investments.  When we invest in senior secured loans or mezzanine loans, we may acquire equity securities, including warrants, as well. In addition, we may invest directly in the equity securities of portfolio companies. The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. In addition, investing in lower middle-market and middle-market companies involves a number of significant risks, including: 

          these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment; 

          they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors actions and market conditions, as well as general economic downturns; 

          they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; 

          they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and our investment adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; 

          they may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity; and 

          a portion of our income may be non-cash income, such as contractual PIK interest, which represents interest added to the loan balance and due at the end of the loan term. Instruments bearing PIK interest typically carry higher interest rates as a result of their payment deferral and increased credit risk. When we recognize income in connection with PIK interest, there is a risk that such income may become uncollectable if the borrower defaults. Investing in lower middle-market and middle-market companies involves a high degree of risk and our financial results may be affected adversely if one or more of our significant portfolio investments defaults on its loans or fails to perform as we expect. Our portfolio consists primarily of debt and equity investments in privately owned lower middle-market and middle-market companies. Investing in lower middle-market and middle-market companies involves a number of significant risks. Typically, the debt in which we invest is not initially rated by any rating agency; however, we believe that if such investments were rated, they would be below investment grade. Compared to larger publicly owned companies, these lower middle-market and middle-market companies may be in a weaker financial position and experience wider variations in their operating results, which may make them more
vulnerable to economic downturns and other business disruptions. Typically, these companies need more capital to compete; however, their access to capital is limited and their cost of capital is often higher than that of their competitors. Our portfolio companies face intense competition from larger companies with greater financial, technical and marketing resources and their success typically depends on the managerial talents and efforts of an individual or a small group of persons. Therefore, the loss of any of their key employees could affect a portfolio companys ability to compete effectively and harm its financial condition. Further, some of
 45    TABLE OF CONTENTS these companies conduct business in regulated industries that are susceptible to regulatory changes. These factors could impair the cash flow of our portfolio companies and result in other events, such as bankruptcy. These events could limit a portfolio companys ability to repay its obligations to us, which may have an adverse effect on the return on, or the recovery of, our investment in these businesses. Deterioration in a borrowers financial condition and prospects may be accompanied by deterioration in the value of the loans collateral and the fair market value of the loan. Most of the loans in which we invest are not structured to fully amortize during their lifetime. Accordingly, if a borrower has not previously pre-paid its loan to us, a significant portion of the principal amount due on such a loan may be due at maturity. As of June 30, 2015, none of the Level 3 debt instruments in our portfolio, on a fair value basis, will fully amortize prior to maturity and 48% of the Level 3 debt instruments in our portfolio, on a fair value basis, will partially amortize prior to maturity. In order to create liquidity to pay the final principal payment, borrowers typically must raise additional capital
or sell their assets, which could potentially result in the collateral being sold for less than its fair market value. If they are unable to raise sufficient funds to repay us or we have not elected to enter into a new loan agreement providing for an extended maturity, the loan will go into default, which will require Full Circle Capital to foreclose on the borrowers assets, even if the loan was otherwise performing prior to maturity. This will deprive Full Circle Capital from immediately obtaining full recovery on the loan and prevent or delay the reinvestment of the loan proceeds in other, more profitable investments. Moreover, there are no assurances that any recovery on such loan will be obtained. Some of these companies cannot obtain financing from public capital markets or from traditional credit sources, such as commercial banks. Accordingly, loans made to these types of companies pose a higher default risk than loans made to companies that have access to traditional credit sources. An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns. We invest primarily in privately held companies. Generally, little public information exists about these companies, and we are required to rely on the ability of Full Circle Advisors investment committee to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. Also, privately held companies frequently have less diverse product lines and smaller market presence than larger competitors. These factors could
adversely affect our investment returns as compared to companies investing primarily in the securities of public companies. Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies. We invest primarily in senior secured term debt issued by lower middle-market and middle-market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or in some cases senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt
instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims. Even though we may have structured most of our investments as secured loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, and based upon principles of
 46    TABLE OF CONTENTS equitable subordination as defined by existing case law, a bankruptcy court could subordinate all or a portion of our claim to that of other creditors and transfer any lien securing such subordinated claim to the bankruptcy estate. The principles of equitable subordination defined by case law have generally indicated that a claim may be subordinated only if its holder is guilty of misconduct or where the senior loan is re-characterized as an equity investment and the senior lender has actually provided significant managerial assistance to the bankrupt debtor. We may also be subject to lender liability claims for actions taken
by us with respect to a borrowers business or instances where we exercise control over the borrower. It is possible that we could become subject to a lenders liability claim, including as a result of actions taken in rendering significant managerial assistance or actions to compel and collect payments from the borrower outside the ordinary course of business. Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us. Certain loans that we make are secured by a second priority security interest in the same collateral pledged by a portfolio company to secure senior debt owed by the portfolio company to commercial banks or other traditional lenders. Often the senior lender has procured covenants from the portfolio company prohibiting the incurrence of additional secured debt without the senior lenders consent. Prior to and as a condition of permitting the portfolio company to borrow money from us secured by the same collateral pledged to the senior lender, the senior lender will require assurances that it will control the disposition of
any collateral in the event of bankruptcy or other default. In many such cases, the senior lender will require us to enter into an intercreditor agreement prior to permitting the portfolio company to borrow from us. Typically the intercreditor agreements we will be requested to execute expressly subordinate our debt instruments to those held by the senior lender and further provide that the senior lender shall control: (1) the commencement of foreclosure or other proceedings to liquidate and collect on the collateral; (2) the nature, timing and conduct of foreclosure or other collection proceedings; (3) the amendment of any collateral document; (4) the release of the security interests in respect of any collateral; and (5) the waiver of defaults under any security agreement. Because of the control we may cede to senior lenders under intercreditor agreements we may enter, we may be unable to realize the proceeds of any collateral securing some of our loans. Capital markets have recently been in a period of disruption and instability. These market conditions have materially and adversely affected debt and equity capital markets in the United States and abroad, which had, and may in the future have, a negative impact on our business and operations. The global capital markets have recently been in a period of disruption as evidenced by a lack of liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of certain major financial institutions. Despite actions of the United States federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and
financial services firms in particular. While recent indicators suggest improvement in the capital markets, we cannot provide any assurance that these conditions will not worsen. Under current conditions, we and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital. Equity capital may be difficult to raise because as a business development company we are generally not able to issue additional shares of our common stock at a price less than net asset value. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 200% immediately after each time we incur indebtedness. The debt capital that will be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our
business, financial condition and results of operations. The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments. In addition, significant changes in the capital markets, including the recent extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential
 47    TABLE OF CONTENTS for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations. Uncertainty relating to the LIBOR calculation process may adversely affect the value of our portfolio of the LIBOR-indexed, floating-rate debt securities. Concerns have been publicized that some of the member banks surveyed by the British Bankers Association (BBA) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements
with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing. Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities. Economic recessions or downturns could impair our portfolio companies and harm our operating results. In recent years, the economy was in the midst of a recession and in a difficult part of a credit cycle. Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record the values of our investments. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments at fair value. Economic slowdowns or recessions could lead to financial
losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results. A portfolio companys failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio companys ability to meet its obligations under the debt that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, depending on
the facts and circumstances, including the extent to which we actually provided significant managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors. The lack of liquidity in our investments may adversely affect our business. Generally, we invest in companies whose securities are not publicly traded, and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. Our investments will
usually be subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.
 48    TABLE OF CONTENTS Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio. Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as follow-on investments, in order to: (i) increase or maintain in whole or in part our equity ownership percentage; (ii) exercise warrants, options or convertible securities that were acquired in the original or a subsequent financing; or (iii) attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. We will have the discretion to make any follow-on investments, subject to the availability
of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we do not want to increase our concentration of risk, we prefer other opportunities, we are subject to business development company requirements that would prevent such follow-on investments, or the follow-on investment would affect our RIC tax status. Our portfolio may lack diversification among portfolio companies which may subject us to a risk of significant loss if one or more of these companies defaults on its obligations under any of its debt instruments. Our portfolio may hold a limited number of portfolio companies. For example, the 5 largest investments in our portfolio as of June 30, 2015 represented 35% of the portfolio assets of the Company. Beyond the asset diversification requirements associated with our qualification as a RIC under the Code, we do not have fixed guidelines for diversification, and our investments may be concentrated in relatively few companies. As our portfolio is less diversified than the portfolios of some larger funds, we are more susceptible to failure if a single loan fails. Similarly, the aggregate returns we realize may be significantly
adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Our portfolio may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated. Our portfolio may be concentrated in a limited number of industries. A downturn in any particular industry in which we are invested could significantly impact the aggregate returns we realize. As of June 30, 2015, our investments in the business services industry (such as companies that provide services related to data and information, information retrieval, asset recovery, and energy efficiency services) represented approximately 35% of the fair value of our portfolio, our investments in the media industry represented approximately 14% of the fair value of our portfolio, and our investments in the healthcare industry represented approximately 6% of the fair value of our portfolio. In addition, we may from time to time invest a relatively significant percentage of our portfolio in industries we do not necessarily
target. If an industry in which we have significant investments suffers from adverse business or economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financial position and results of operations. Because we generally do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments. We generally do not hold controlling equity positions in our portfolio companies. As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our
investments.
 49    TABLE OF CONTENTS Defaults by our portfolio companies will harm our operating results. A portfolio companys failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio companys ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. If any of these occur, it could
materially and adversely affect our operating results and cash flows. Any unrealized losses we experience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution. As a business development company, we are required to carry our investments at fair value as determined in good faith by our Board of Directors. Decreases in the fair values of our investments are recorded as unrealized depreciation. Any unrealized losses in our loan portfolio could be an indication of a portfolio companys inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods. Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity. We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments or repay our Credit Facility, depending on future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially
adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock. The investments in our portfolio have historically experienced limited prepayments. Because we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income. Because we borrow money to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in the event we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and long-term
debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Our investment adviser does not have significant experience with utilizing these techniques and did not implement these techniques to any significant extent with the Legacy Portfolio. If we do not implement these techniques properly, we could experience losses on our hedging positions, which could be material. You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase in the amount of incentive fees payable to our investment adviser with respect to our pre-incentive fee net investment income.
 50    TABLE OF CONTENTS We may not realize gains from our equity investments. Certain investments that we may make include warrants or other equity securities. Investments in equity securities involve a number of significant risks, including the risk of further dilution as a result of additional issuances, inability to access additional capital and failure to pay current distributions. Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited voting rights. In addition, we may from time to time make non-control, equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such
equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We often seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these puts rights for the consideration provided in our investment documents if the issuer is in financial distress. Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments. Our investment strategy contemplates possible investments in debt securities of foreign companies. Our investment adviser does not have significant experience with investments in foreign securities and did not acquire such investments to any significant extent in connection with its management of the Legacy Portfolio. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information
than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Although all of our investments are U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge
currency risk, or that if we do, such strategies will be effective. We may expose ourselves to risks if we engage in hedging transactions. If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other
positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency
fluctuations.
 51    TABLE OF CONTENTS We may enter into swap agreements which expose us to certain risks, including the risk that we may incur expenses seeking payments from a portfolio company on behalf of a counterparty to a swap agreement. We may enter into swap agreements to sell all or a portion of the economics, such as the right to receive all or a portion of the dividends, interest, capital appreciation or principal payments to which we may be entitled, with respect to certain debt or equity investments if we believe we can achieve a higher overall return on our invested capital or where we believe it may be appropriate to reduce our risk exposure to a specific portfolio company. For example, we have entered into a swap agreement to transfer the right to receive any capital appreciation and dividend income from one of our equity investments to a third party in exchange for periodic fixed payments. We will be required to maintain a proportionate liability on our balance sheet, which will have the effect of increasing our gross assets, and therefore the amount of our base management fee payable to our adviser. In addition, our adviser has agreed to waive any applicable incentive fees based upon realized capital gains or dividend income from the underlying equity investment during the term of the swap to
the extent such amounts are not offset by payments required pursuant to the terms of our swap agreement. If we enter into additional swap agreements with respect to our investments, we may be obligated to seek enforcement of the rights of counterparties to such swap agreements to recover payments due to other parties from the portfolio company, even though we may not be entitled to such payments. As a result, we may incur expenses seeking recovery of payments from a portfolio company or others even though we may not be entitled to retain those payments. Risks Relating to Our Common Stock Shares of closed-end investment companies, including BDCs, may trade at a discount to their net asset value. Shares of closed-end investment companies, including BDCs, may trade at a discount from net asset value. This characteristic of closed-end investment companies and business development companies is separate and distinct from the risk that our net asset value per share may decline. Our common stock is currently trading below net asset value and we cannot predict whether, in the future, our common stock will trade at, above, or below net asset value. Our common stock price may be volatile and may decrease substantially, and our stockholders may lose money in connection with an investment in our shares. The trading price of our common stock may fluctuate substantially. The price of our common stock may increase or decrease, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following: 

          price and volume fluctuations in the overall stock market from time to time; 

          investor demand for our shares; 

          significant volatility in the market price and trading volume of securities of business development companies or other companies in our sector, which are not necessarily related to the operating performance of these companies; 

          exclusion of our common stock from certain market indices, such as the Russell 2000 Financial Services Index, which could reduce the ability of certain investment funds to own our common stock and put short-term selling pressure on our common stock; 

          changes in regulatory policies or tax guidelines with respect to RICs or business development companies; 

          failure to qualify as a RIC, or the loss of RIC status; 

          any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; 

          changes, or perceived changes, in the value of our portfolio investments;
 52    TABLE OF CONTENTS 

          departures of Full Circle Advisors key personnel; 

          operating performance of companies comparable to us; or 

          general economic conditions and trends and other external factors. In the event our common stock price decreases, our stockholders may lose money. In addition, following periods of volatility in the market price of a companys securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price once a market for our stock is established, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert managements attention and resources from our business. Existing stockholders may incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock or issue securities to subscribe to, convert to or purchase shares of our common stock. The 1940 Act prohibits us from selling shares of our common stock at a price below the current net asset value per share of such stock, with certain exceptions. One such exception is prior stockholder approval of issuances below net asset value provided that our Board of Directors makes certain determinations. At our most recent Special Meeting of Stockholders, our stockholders approved a proposal that authorizes us to sell shares of our common stock below the then current net asset value per share of our common stock in one or more offerings for a period of approximately one year ending on the earlier of January 16, 2016 or
our next Annual Stockholders Meeting, which we expect to be held in January 2016. Continued access to this exception will require approval of similar proposals at future stockholder meetings. Any decision to sell shares of our common stock below the then current net asset value per share of our common stock would be subject to the determination by our Board of Directors that such issuance is in our and our stockholders best interests. If we were to sell shares of our common stock below net asset value per share, such sales would result in an immediate dilution to the net asset value per share held by our existing stockholders. This dilution would occur as a result of the sale of shares at a price below the then current net asset value per share of our common stock and a proportionately greater decrease in a stockholders interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. In addition, if we issue securities to subscribe to, convert to or purchase shares of common stock, the
exercise or conversion of such securities would increase the number of outstanding shares of our common stock. Any such exercise would be dilutive on the voting power of existing stockholders, and could be dilutive with regard to dividends and our net asset value, and other economic aspects of the common stock. Because the number of shares of common stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted; however, the example below illustrates the effect of dilution to existing stockholders resulting from the sale of common stock at prices below the net asset value of such shares.
 53    TABLE OF CONTENTS Illustration:  Example of Dilutive Effect of the Issuance of Shares Below Net Asset Value. Assume that Company XYZ has 1,000,000 total shares outstanding, $15,000,000 in total assets and $5,000,000 in total liabilities. The net asset value per share of the common stock of Company XYZ is $4.00. The following table illustrates the reduction to net asset value, or NAV, and the dilution experienced by Stockholder A following the sale of 40,000 shares of the common stock of Company XYZ at $3.00 per share, a price below its NAV per share.  Prior to Sale Below NAV

          

          Following Sale Below NAV

          

          Percentage ChangeReduction to NAVTotal Shares Outstanding

          

          

          1,000,000

          

          

          

          1,040,000

          

          

          

          4.0

          %NAV per share

          

          $

          4.00

          

          

          $

          3.96

          

          

          

          (1.0

          )%Dilution to Existing StockholderShares Held by Stockholder A

          

          

          10,000

          

          

          

          10,000

          (1)

          

          

          0.0

          %Percentage Held by Stockholder A

          

          

          1.00

          %

          

          

          0.96

          %

          

          

          (3.8

          )%Total Interest of Stockholder A in NAV

          

          $

          40,000

          

          

          $

          39,615

          

          

          

          (1.0

          )%
  (1)

          Assumes that Stockholder A does not purchase additional shares in the sale of shares below NAV. Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock. The Maryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficult a change in control of Full Circle Capital or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicable requirements of the 1940 Act. Our Board of Directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our board, including approval by a majority of our independent directors. If the resolution exempting
business combinations is repealed or our board does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws provide that the Maryland Control Share Acquisition Act shall not restrict acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board of Directors in three classes serving staggered three-year terms, and authorizing our Board of Directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, to amend our charter without stockholder approval and to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or
prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders. If we issue preferred stock, the net asset value and market value of our common stock will likely become more volatile. We cannot assure you that the issuance of preferred stock would result in a higher yield or return to the holders of the common stock. The issuance of preferred stock would likely cause the net asset value and market value of the common stock to become more volatile. If the dividend rate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of the common stock would be reduced. If the dividend rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the holders of common
stock than if we had not issued preferred stock. Any decline in the net asset value of our investments would be borne entirely by the holders of common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greater net asset value decrease would
 54    TABLE OF CONTENTS also tend to cause a greater decline in the market price for the common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings, if any, on the preferred stock or, in an extreme case, our current investment income might not be sufficient to meet the dividend requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of common stock would bear) all costs and expenses relating to the issuance
and ongoing maintenance of the preferred stock, including higher advisory fees if our total return exceeds the dividend rate on the preferred stock. Holders of preferred stock may have different interests than holders of common stock and may at times have disproportionate influence over our affairs. Holders of any preferred stock we might issue would have the right to elect members of our Board of Directors and class voting rights on certain matters. Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of our Board of Directors at all times and in the event dividends become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred stockholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions
to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, if any, or the terms of our credit facilities, if any, might impair our ability to maintain our qualification as a RIC for federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements. Risks Relating to our Notes Our Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future. Our Notes are not secured by any of our assets or any of the assets of our subsidiaries. As a result, our Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred, such as indebtedness under the Credit Facility, and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security). In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that
indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of our Notes. As of June 30, 2015, we did not have any outstanding borrowings under the Credit Facility. Our Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries. Our Notes are obligations exclusively of Full Circle Capital Corporation and not of any of our subsidiaries. None of our subsidiaries is a guarantor of our Notes and our Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of our Notes. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of our Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any
such subsidiary senior to our claims. Consequently, our Notes are structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise. As of June 30, 2015, none of our subsidiaries had outstanding borrowings to third parties. However, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to our Notes.
 55    TABLE OF CONTENTS The indenture under which our Notes are issued contains limited protection for holders of our Notes. The indenture under which our Notes are issued offers limited protection to holders of our Notes. The terms of the indenture and our Notes do not restrict our or any of our subsidiaries ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on investments in our Notes. In particular, the terms of the indenture and our Notes do not place any restrictions on our or our subsidiaries ability to: 

          issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to our Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to our Notes, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to our Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to our Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to
such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC (currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings); 

          pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to our Notes; 

          sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); 

          enter into transactions with affiliates; 

          create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions; 

          make investments; or 

          create restrictions on the payment of dividends or other amounts to us from our subsidiaries. In addition, the indenture does not require us to offer to purchase our Notes in connection with a change of control or any other event. Furthermore, the terms of the indenture and our Notes do not protect holders of our Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity. Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of our Notes may have important consequences for you as a holder of our Notes, including making it more difficult for us to satisfy our obligations with respect to our Notes or negatively affecting the trading value of our Notes. Certain of our current debt instruments include more protections for their holders than the indenture and our Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and our Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of our Notes.
 56    TABLE OF CONTENTS An active trading market for the Notes may not exist, which could limit your ability to sell the Notes or affect the market price of the Notes. The Notes are listed on the Nasdaq Global Market under the symbol FULLL. However, we cannot provide any assurances that an active trading market for the Notes will exist in the future or that you will be able to sell your Notes. Even if an active trading market does exist, the Notes may trade at a discount from their par value depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market does not exist, the liquidity and trading price for
the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time. If we default on our obligations to pay our other indebtedness, we may not be able to make payments on our Notes. Any default under the agreements governing our indebtedness, including a default under the Credit Facility or other indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on our Notes and substantially decrease the market value of our Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to
comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, including our Notes, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Credit Facility or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. In addition, any such default may constitute a default under our Notes, which could further limit our ability to repay our debt, including our Notes. If our operating performance declines, we may in the future need to seek to obtain waivers from the lenders under the Credit Facility or other debt that we may incur
in the future to avoid being in default. If we breach our covenants under the Credit Facility or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including those under the Credit Facility, could proceed against the collateral securing the debt. Because the Credit Facility has, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due. We may choose to redeem our Notes when prevailing interest rates are relatively low. On or after June 30, 2016, we may choose to redeem our Notes from time to time, especially when prevailing interest rates are lower than the interest rate on our Notes. If prevailing rates are lower at the time of redemption, an investor in our Notes would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on our Notes being redeemed. Our redemption right also may adversely impact an investors ability to sell our Notes as the optional redemption date or period approaches.
 57    TABLE OF CONTENTS Item 1B.  Unresolved Staff Comments None. Item 2.  Properties Our executive offices are located at 102 Greenwich Avenue, 2nd Floor, Greenwich, CT 06830, and are provided by Full Circle Service Company in accordance with the terms of the Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted. Item 3.  Legal Proceedings None of us, our investment adviser or administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our investment adviser or administrator. From time to time, we, our investment adviser or administrator, may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a
material effect upon our financial condition or results of operations. Item 4.  Reserved
 58    TABLE OF CONTENTS PART II Item 5.  Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Market under the symbol FULL. The following table sets forth the range of high and low sales prices of our common stock as reported on NASDAQ and our net asset value per share for each fiscal quarter during the last two most recently completed fiscal years:  Price RangeNAV(1)

          

          High

          

          LowFiscal 2015Fourth quarter

          

          $

          4.30

          

          

          $

          3.84

          

          

          $

          3.46Third quarter

          

          

          4.43

          

          

          

          5.00

          

          

          

          3.48Second quarter

          

          

          5.48

          

          

          

          6.58

          

          

          

          4.43First quarter

          

          

          6.24

          

          

          

          7.98

          

          

          

          6.05Fiscal 2014Fourth quarter

          

          $

          6.38

          

          

          $

          8.35

          

          

          $

          7.35Third quarter

          

          

          7.20

          

          

          

          9.59

          

          

          

          6.67Second quarter

          

          

          7.09

          

          

          

          8.60

          

          

          

          6.73First quarter

          

          

          7.48

          

          

          

          8.75

          

          

          

          7.65
  (1)

          Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of each period. The last reported sale price for our common stock on the NASDAQ Global Market on September 11, 2015 was $3.13 per share. As of September 4, 2015, there were approximately 90 holders of record of the common stock which did not include shareholders for whom shares are held in nominee or street name. Distributions We intend to distribute monthly dividends to our stockholders. Our dividends, if any, will be determined by our Board of Directors on a quarterly basis. We have elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and our realized net short-term capital gains in excess of our realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to
retain such capital gains for investment. We maintain an opt out dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically opt out of the dividend reinvestment plan so as to receive cash dividends. We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. In addition, we may be limited in our ability to make dividends and distributions due to the asset coverage test for borrowings when applicable to us as a BDC under the 1940 Act and due to provisions in current and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our RIC status. We cannot assure stockholders that
they will receive any dividends and distributions or dividends and distributions at a particular level. All dividends declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally automatically reinvested in shares of our common stock. As a result, stockholders that do
 59    TABLE OF CONTENTS not participate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to receive dividends in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the dividend payable to a stockholder. The following table lists the cash distributions, including dividends and returns of capital, if any, per share that we have declared since our formation on April 16, 2010. There were no dividends declared prior to our initial public offering. The table is divided by fiscal year according to record date.  Date Declared

          

          Record Date

          

          Payment Date

          

          AmountTotal Fiscal 2011

          

          

          

          

          

          

          

          

          

          $

          0.751Total Fiscal 2012

          

          

          

          

          

          

          

          

          

          $

          0.918Total Fiscal 2013

          

          

          

          

          

          

          

          

          

          $

          0.924Total Fiscal 2014

          

          

          

          

          

          

          

          

          

          $

          0.864Fiscal 2015:May 2, 2014

          

          

          July 31, 2014

          

          

          

          August 15, 2014

          

          

          $

          0.067May 2, 2014

          

          

          August 29, 2014

          

          

          

          September 15, 2014

          

          

          

          0.067May 2, 2014

          

          

          September 30, 2014

          

          

          

          October 15, 2014

          

          

          

          0.067September 8, 2014

          

          

          October 31, 2014

          

          

          

          November 14, 2014

          

          

          

          0.067September 8, 2014

          

          

          November 28, 2014

          

          

          

          December 15, 2014

          

          

          

          0.067September 8, 2014

          

          

          December 31, 2014

          

          

          

          January 15, 2015

          

          

          

          0.067November 3, 2014

          

          

          January 30, 2015

          

          

          

          February 13, 2015

          

          

          

          0.067November 3, 2014

          

          

          February 27, 2015

          

          

          

          March 13, 2015

          

          

          

          0.067November 3, 2014

          

          

          March 31, 2015

          

          

          

          April 15, 2015

          

          

          

          0.067February 20, 2015

          

          

          April 30, 2015

          

          

          

          May 15, 2015

          

          

          

          0.035February 20, 2015

          

          

          May 29, 2015

          

          

          

          June 15, 2015

          

          

          

          0.035February 20, 2015

          

          

          June 30, 2015

          

          

          

          July 15, 2015

          

          

          

          0.035Total (2015)

          

          

          

          

          

          

          

          

          

          $

          0.708Fiscal 2016:May 5, 2015

          

          

          July 31, 2015

          

          

          

          August 14, 2015

          

          

          $

          0.035May 5, 2015

          

          

          August 31, 2015

          

          

          

          September 15, 2015

          

          

          

          0.035May 5, 2015

          

          

          September 30, 2015

          

          

          

          October 15, 2015

          

          

          

          0.035August 4, 2015

          

          

          October 30, 2015

          

          

          

          November 13, 2015

          

          

          

          0.035August 4, 2015

          

          

          November 30, 2015

          

          

          

          December 15, 2015

          

          

          

          0.035August 4, 2015

          

          

          December 31, 2015

          

          

          

          January 15, 2016

          

          

          

          0.035Total 2016 to date

          

          

          

          

          

          

          

          

          

          $

          0.210
 To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our taxable ordinary income or capital gains. In this regard, $1,302,681 of our distributions during the year ended June 30, 2015 constituted a return of capital to our stockholders. Stockholders should read any written disclosure accompanying a dividend payment carefully and should not assume that the source of
any distribution is our taxable ordinary income or capital gains. During the year ended June 30, 2015, our distributions were made primarily from undistributed net investment income. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a business development company under the 1940 Act. If we do not distribute a certain percentage of our income
 60    TABLE OF CONTENTS annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment company tax treatment. We cannot assure shareholders that they will receive any distributions. Sales of Unregistered Securities We did not engage in unregistered sales of equity securities during the year ended June 30, 2015. Issuer Purchases of Equity Securities For the quarter ended June 30, 2015, as a part of our dividend reinvestment plan for our common stockholders, we purchased 19,608 shares of our common stock for an average price of approximately $3.57 per share in the open market in order to satisfy the reinvestment portion of our dividends. The following chart outlines repurchases of our common stock during the quarter ended June 30, 2015.  Month

          

          Total Number of Shares Purchased

          

          Average Price Paid per Share

          

          Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

          

          Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or ProgramsApril 2015

          

          

          10,595

          

          

          $

          3.57

          

          

          

          

          

          

          

          May 2015

          

          

          4,706

          

          

          $

          3.51

          

          

          

          

          

          

          

          June 2015

          

          

          4,307

          

          

          $

          3.63

          

          

          

          

          

          

          

          Total

          

          

          19,608

          

          

          $

          3.57

          

          

          

          

          

          

          

          
 Performance Graph This graph compares the return on our common stock with that of the S&P BDC Index and the Russell 2000 Index, for the period from September 1, 2010, the date our common stock began trading on the NASDAQ Stock Market, through June 30, 2015. The graph assumes that, on September 1, 2010, a person invested $100,000 in each of our common stock, the S&P BDC Index and the Russell 2000 Financial Services Index. The graph measures total shareholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are reinvested in like securities. [GRAPHIC MISSING] The graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the 1934 Act. The stock price performance included in the above graph is not necessarily indicative of future stock price performance.
 61    TABLE OF CONTENTS Item 6.  Selected Financial Data The following selected financial data is derived from our Consolidated Financial Statements which have been audited by Rothstein Kass for the years ended June 30, 2011 through June 30, 2013, by KPMG LLP for the year ended June 30, 2014, and by McGladrey LLP, our independent registered public accounting firm, for the year ended June 30, 2015. The data should be read in conjunction with our Consolidated Financial Statements and related notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report.  Year ended June 30, 2015

          

          Year ended June 30, 2014

          

          Year ended June 30, 2013

          

          Year ended June 30, 2012

          

          Year ended June 30, 2011(1)Income Statement Data:Total Investment Income

          

          $

          17,749,343

          

          

          $

          13,823,693

          

          

          $

          12,046,023

          

          

          $

          9,827,011

          

          

          $

          7,959,637Total Gross Expenses

          

          

          10,557,114

          

          

          

          7,792,972

          

          

          

          6,665,442

          

          

          

          5,307,300

          

          

          

          4,172,566Total Net Expenses

          

          

          9,136,271

          

          

          

          7,792,972

          

          

          

          6,665,442

          

          

          

          4,993,508

          

          

          

          3,625,258Net Investment Income

          

          

          8,613,072

          

          

          

          6,030,721

          

          

          

          5,380,581

          

          

          

          4,833,503

          

          

          

          4,334,379Net Increase (Decrease) in Net Assets Resulting from Operations

          

          

          (5,200,728

          )

          

          

          (7,622,395

          )

          

          

          3,801,143

          

          

          

          2,678,172

          

          

          

          2,882,314Per Share Data:Net Investment Income(2)

          

          

          0.63

          

          

          

          0.71

          

          

          

          0.77

          

          

          

          0.78

          

          

          

          0.70Net Increase (Decrease) in Net Assets Resulting from Operations(2)

          

          

          (0.35

          )

          

          

          (0.88

          )

          

          

          0.54

          

          

          

          0.43

          

          

          

          0.47Dividends Declared

          

          

          0.71

          

          

          

          0.86

          

          

          

          0.92

          

          

          

          0.92

          

          

          

          0.75Balance Sheet Data:Total Assets

          

          

          160,724,982

          

          

          

          156,284,362

          

          

          

          113,063,839

          

          

          

          99,449,379

          

          

          

          88,495,049Total Net Assets

          

          $

          99,938,567

          

          

          $

          72,980,277

          

          

          $

          60,644,039

          

          

          $

          53,442,785

          

          

          $

          56,474,006Other Data:Total Return based on Market Value

          

          

          (46.78

          )%(3)

          

          

          11.51

          %(3)

          

          

          15.12

          %(3)

          

          

          8.71

          %(3)

          

          

          (4.03

          )%(4)Total Return based on Net Asset Value

          

          

          (21.53

          )%(3)

          

          

          (11.00

          )%(3)

          

          

          4.94

          %(3)

          

          

          6.20

          %(3)

          

          

          5.62

          %
  (1)

          Because we began full operations on August 31, 2010, the date of our initial public offering, our financial results for the year ended June 30, 2011 reflect approximately ten months of operations. (2)

          Per share data is based on average weighted shares outstanding, except where such amounts need to be adjusted to be consistent with what is disclosed in the financial highlights of our audited Consolidated Financial Statements. (3)

          Total return based on market value is based on the change in market price per share and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. The total returns are not annualized. (4)

          Total return based on market value is based on the change in market price per share assuming an investment at the initial public offering price of $9.00 per share and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. The total returns are not annualized. Item 7.  Managements Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This annual report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Full Circle Capital Corporation, our current and prospective
 62    TABLE OF CONTENTS portfolio investments, our industry, our beliefs, and our assumptions. Words such as anticipates, expects, intends, plans, will, may, continue, believes, seeks, estimates, would, could, should, targets, projects, and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are
beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation: 

          an economic downturn could impair our portfolio companies ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies; 

          an expiration or contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities; 

          interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy; 

          the risks, uncertainties and other factors we identify in Risk Factors and elsewhere in this annual report on Form 10-K and in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this annual report on Form 10-K should not be regarded as a representation by us that our
plans and objectives will be achieved. These risks and uncertainties include those described or identified in Risk Factors and elsewhere in this annual report on Form 10-K. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report on Form 10-K. The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained elsewhere in this Form 10-K. Overview We are an externally managed non-diversified closed-end management investment company formed in April 2010, and have elected to be regulated as a business development company under the 1940 Act. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We are managed by Full Circle Advisors. Full Circle Service Company provides the administrative services necessary for us to operate. We invest primarily in senior secured loans and, to a lesser extent, second liens loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies that operate in a diverse range of industries. In our lending activities, we focus primarily on portfolio companies with both (i) tangible and intangible assets available as collateral and security against our loan to help mitigate our risk of loss, and (ii) cash flow to cover debt service. We believe this provides us with a more attractive risk adjusted return profile, with greater principal protection and likelihood of repayment. Our investments generally range in size from $3 million to $10 million; however, we may make larger or smaller investments from time to time on an opportunistic basis. We focus primarily on senior secured loans and stretch senior secured loans, also referred to as unitranche loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans. We believe that having a first lien, senior secured position provides us with greater control and security in the primary collateral of a borrower and helps to mitigate risk against loss of principal should a
borrower default. Our stretch senior secured loans typically possess a greater advance rate against the borrowers assets and cash flow, and accordingly carry a higher interest rate and/or greater equity participation, than traditional senior secured loans. Stretch senior secured loan instruments can provide borrowers with a more efficient and desirable solution than a senior bank line combined with a separate second lien or mezzanine loan obtained from
 63    TABLE OF CONTENTS another source. We also may invest in mezzanine, subordinated or unsecured loans. In addition, we may acquire equity or equity related interests from a borrower along with our debt investment. We attempt to protect against risk of loss on our debt investments by investing in borrowers with cash flows to cover debt service, while frequently securing our loans against tangible or intangible assets of our borrowers, which may include accounts receivable and contracts for services, and obtaining a favorable loan-to-value ratio, and in many cases, securing other financial protections or credit enhancements, such as personal
guarantees from the principals of our borrowers, make well agreements and other forms of collateral, rather than lending predominantly against anticipated cash flows of our borrowers. We believe this allows us more options and greater likelihood of repayment from refinancing, asset sales of our borrowers and/or amortization. We generally seek to invest in lower middle-market and middle-market companies in areas that we believe have been historically under-serviced, especially during and after the 2008/2009 credit crisis. These areas include industries that are outside the focus of mainstream institutions or investors due to required industry-specific knowledge or are too small to attract interest from larger investment funds or other financial institutions. Because we believe there are fewer banks and specialty finance companies focused on lending to these lower middle-market and middle-market companies, we believe we can negotiate more favorable
terms on our debt investments in these companies than those that would be available for debt investments in comparable larger, more mainstream borrowers. Such favorable terms may include higher debt yields, lower leverage levels, more significant covenant protection and/or greater equity grants than typical of other transactions. We generally seek to avoid competing directly with other capital providers with respect to specific transactions in order to avoid the less favorable terms we believe are typically associated with such competitive bidding processes. On June 4, 2014, we formed FC Capital Investment Partners (FCCIP), a multiple series private fund, for which we serve as the managing member and investment adviser. FCCIP was formed as a Delaware limited liability company and operates under a limited liability company agreement dated June 13, 2014. FCCIP closed its first series on June 17, 2014, raising approximately $5.6 million in capital from investors. FCCIP closed its second series on September 25, 2014, raising approximately $10.0 million in capital from investors. We may co-invest in certain portfolio investments from time to time with one or more series
issued by FCCIP where we determine that the aggregate available investment opportunity exceeds what we believe would be appropriate for us to acquire directly, subject to certain conditions. In addition, we expect to receive certain fees or other distributions for FCCIP in connection with the services we provide to each series it may issue. Such fees may include management fees, incentive fees and administration fees and could be offset by expense caps or waivers in the future. During the year ended June 30, 2015, we recognized $67,163 in management fee income related to the services performed for FCCIP. On July 14, 2014, we sold 506,000 shares of our common stock at $7.40 per share in a direct registered offering to certain investors for total gross proceeds of approximately $3.7 million. On July 14, 2014, we closed an offering of $12,500,000 in aggregate principal amount of our 8.25% fixed-rate notes due 2020 (the Notes). The Notes were sold at price of $25.375 per note plus accrued interest from June 30, 2014, a premium to par value of $25.00 per Note, for total gross proceeds of approximately $12.7 million. The Notes are a further issuance of, rank equally in right of payment with, and form a single series with the $21.1 million of currently outstanding Notes that will mature on June 30, 2020, and may be redeemed in whole or in part at any time or from time to time at our option on or after June
30, 2016. The Notes are listed on the NASDAQ Global Market and trade under the trading symbol FULLL. On March 30, 2015, we completed non-transferable rights offering to our stockholders of record as of 5:00 p.m., New York City time, on March 6, 2015. The rights entitled holders of rights to subscribe for an aggregate of up to 11,949,034 shares of our common stock. Our stockholders as of the record date received one right for each share of common stock owned on the record date. The rights entitled the holder to purchase one new share of common stock for every one right held and record date stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and pro-rata allocation, for
additional shares that remain unsubscribed as a result of any unexercised rights. The subscription price per share was $3.50. The net proceeds from this rights offering, after deducting the fee payable to the dealer managers and offering expenses, were approximately $37.8 million, which we received on April 6, 2015. In connection with
 64    TABLE OF CONTENTS this rights offering, the dealer manager received a fee for its financial advisory, marketing and soliciting services equal to a maximum of 4.0% of the subscription price per share for each share issued pursuant to the exercise of rights, including pursuant to the over-subscription privilege. We incurred offering expenses, including the dealer manager fee of $1,401,660, in connection with this rights offering. Upon completion of the rights offering, for the periods commencing on April 1, 2015 and ending on June 30, 2015 and commencing on July 1, 2015 and ending on June 30, 2016, Full Circle Advisors has agreed to waive the portion of the base management fees and incentive fees that Full Circle Advisors would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for Full Circle Capital to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then
declared by our board of directors. The determination of the amount to be waived will be finalized as of the end of the fiscal year for each period, with such amounts being accrued on a quarterly basis. Net investment income is defined as net income before net realized gains (losses) and unrealized gains (losses), in each case, as determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Full Circle Advisors will not be entitled to recoup any amount of base management fees that it waives pursuant to this agreement. There can be no assurance that Full Circle Advisors will extend the waiver beyond June 30, 2016. As part of the rights offering, an institutional investor committed to purchase approximately 214,000 shares in open market transactions over a seven-day period following the expiration date of the rights offering. The institutional investor agreed to acquire the remainder of the 214,000 shares in a private placement directly from us to the extent such shares were not purchased in open market transactions during such seven-day period. Subsequent to the seven-day period, on April 13, 2015, such investor acquired 80,475 shares, the remainder of its initial commitment of approximately 214,000 shares, in a private placement at
$3.50 per share directly from us. We incurred offering expenses of $3,345 in connection with this offering. Exemptive Relief On December 4, 2014, we filed an exemptive application with the SEC to permit us to co-invest with funds or entities managed by our investment adviser in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. Any such order, if granted by the SEC, will be subject to certain terms and conditions. Furthermore, there is no assurance when, or even if, this application for exemptive relief will be granted by the SEC. 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. Basis of Consolidation Under the 1940 Act rules, the regulations pursuant to Article 6 of Regulation S-X and the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services and benefits to us. Our Consolidated Financial Statements include our accounts and the accounts of Full Circle West, Inc., FC New Media Inc., TransAmerican Asset Servicing Group, Inc., FC New Specialty Foods, Inc., and FC Takoda Holdings, LLC, our only wholly-owned
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Valuation of Investments in Securities at Fair Value  Definition and Hierarchy In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
 65    TABLE OF CONTENTS In determining fair value, the Board of Directors uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Board of Directors. Unobservable inputs reflect the Board of Directors assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers or market makers. Debt and equity securities for which market quotations are not readily available or are not considered to be the best estimate of fair value are valued at fair value as determined in good faith by the Board of Directors. Because the Company expects that there will not be a readily available market value for many of the investments in the Companys portfolio, it is expected that many of the Companys portfolio
investments values will be determined in good faith by the Board of Directors in accordance with a documented valuation policy that has been reviewed and approved by the Board of Directors and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Companys investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1  Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. Level 2  Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3  Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be
reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Board of Directors in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls, is determined based on the lowest level input that is significant to the fair value measurement. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Companys own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be
reclassified to a lower level within the fair value hierarchy.
 66    TABLE OF CONTENTS Net realized gain (loss) and net change in unrealized gain (loss) on investments Net change in unrealized appreciation or depreciation recorded on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs. From time to time, the Company may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, the Company may receive newly-issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the
portfolio investment. Such elimination of unrealized gain (loss) is included on the Consolidated Statements of Operations as a (decrease) increase in the Change in Unrealized Gain (Loss) on Investments. Valuation Techniques Senior and Subordinated Loans The Companys portfolio consists primarily of private debt instruments. Investments for which market quotations are readily available (Level 2 Debt) are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers. For other debt investments (Level 3 Debt) market quotations are not available and other techniques are used to determine fair value. The Company considers its Level 3 Debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is otherwise not
deemed to be impaired. In determining the fair value of the performing Level 3 Debt, the Board of Directors considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, the financial condition of the borrower, economic conditions, success and prepayment fees and other relevant factors, both qualitative and quantitative. In the event that a Level 3 Debt instrument is not performing, as defined above, the Companys Board of Directors will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the Level 3 Debt instrument. This evaluation will be updated no less than quarterly for Level 3 Debt instruments, and more frequently for time periods where there are significant changes in the investor base or significant changes in the perceived value of the underlying collateral. The collateral value will be analyzed on an ongoing basis using internal metrics, appraisals, work performed by third party valuation agents, if applicable, and other data as may be acquired and analyzed by Management and Board of Directors. Investments in Private Companies The Companys Board of Directors determines the fair value of its investments in private companies where no market quotations are readily available (Level 3 Private Companies) by incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, and performance multiples, among other factors, including work performed by third-party valuation agents. The Level 3 Private Companies investments can include Limited Liability Company interests, common stock and other equity investments.
These nonpublic investments are included in Level 3 of the fair value hierarchy. Warrants The Board of Directors ascribes value to warrants based on fair value analyses that may include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate. Publicly Traded Common Stock Publicly traded common stock in an active market (Level 1 common stock) is valued based on unadjusted closing prices in active markets for identical Level 1 common stock that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 common stock.
 67    TABLE OF CONTENTS Derivative Financial Instruments Derivative financial instruments such as swap contracts are valued based on discounted cash flow models and option pricing models, as appropriate. Models use observable data to the extent practicable. However, areas such as credit risk (both our own and that of the counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of derivative financial instruments at the valuation date. The Company has made the accounting policy not to offset fair value amounts recognized for derivative financial instruments. The related assets and liabilities are presented gross in the Consolidated Statements of Assets and Liabilities. Any cash collateral payables or receivables associated with these instruments are not added to or netted against the fair value amounts of the derivative financial instruments. All derivative financial instruments are carried in assets when amounts are receivable by the Company and in liabilities when amounts are payable by the Company. During the period a contract is open, changes in the value of the contracts are recognized as unrealized appreciation or depreciation to reflect the fair value of the contract at the reporting date. When the contracts settle, mature, terminate, or are otherwise closed, the Company records realized gains or losses equal to the difference between the proceeds from (or cost of) the close-out of the contracts and the original contract price. Additionally, the Company
records realized gains (losses) on swap contracts when periodic payments are received or made at the end of each measurement period. Fair Value The Companys assets measured at fair value on a recurring basis subject to the requirements of ASC Topic 820 at June 30, 2015 and 2014 were as follows: As of June 30, 2015  Level 1

          

          Level 2

          

          Level 3

          

          TotalAssetsSenior and Subordinated Loans, at fair value

          

          $

          

          

          

          $

          12,275,000

          

          

          $

          121,630,798

          

          

          $

          133,905,798Limited Liability Company Interests, at fair value

          

          

          

          

          

          

          

          

          

          

          1,228,978

          

          

          

          1,228,978Investments in Warrants, at fair value

          

          

          

          

          

          

          90

          

          

          

          2,695,075

          

          

          

          2,695,165Common Stock, at fair value

          

          

          1,308,818

          

          

          

          

          

          

          

          12,975,000

          

          

          

          14,283,818Open Swap Contract, at fair value

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          $

          1,308,818

          

          

          $

          12,275,090

          

          

          $

          138,529,851

          

          

          $

          152,113,759
 As of June 30, 2014  Level 1

          

          Level 2

          

          Level 3

          

          TotalAssetsSenior and Subordinated Loans, at fair value

          

          $

          

          

          

          $

          7,175,000

          

          

          $

          111,079,608

          

          

          $

          118,254,608Limited Liability Company Interests, at fair value

          

          

          

          

          

          

          

          

          

          

          3,875,583

          

          

          

          3,875,583Investments in Warrants, at fair value

          

          

          

          

          

          

          

          

          

          

          3,060,421

          

          

          

          3,060,421U.S. Treasury Securities, at fair value(1)

          

          

          25,000,147

          

          

          

          

          

          

          

          

          

          

          

          25,000,147$

          25,000,147

          

          

          $

          7,175,000

          

          

          $

          118,015,612

          

          

          $

          150,190,759
  (1)

          U.S. Treasury Securities were purchased and temporarily held in connection with compliance with RIC diversification requirements under Subchapter M of the Code. During the year ended June 30, 2015, a portion of the Level 3 General Cannabis Corp. (formerly known as Advanced Cannabis Solutions, Inc.) warrant was converted into Level 1 common stock. During the year ended June 30, 2014, there were no transfers in or out of levels.
 68    TABLE OF CONTENTS Revenue Recognition Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs. Realized gains or losses on the sale of investments are calculated using the specific identification method. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with senior and subordinated secured loans are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a senior or subordinated secured loan, any unamortized loan origination, closing and/or commitment fees are recorded as interest income. Generally, when a payment default occurs on a loan in the portfolio, or if the Company otherwise believes that the issuer of the loan will not be able to make contractual
interest payments, the Company may place the loan on non-accrual status and cease recognizing interest income on the loan until all principal and interest is current through payment, or until a restructuring occurs, and the interest income is deemed to be collectible. The Company may make exceptions to this policy if a loan has sufficient collateral value and is in the process of collection or is viewed to be able to pay all amounts due if the loan were to be collected on through an investment in, or sale of the business, the sale of the assets of the business, or some portion or combination thereof. Dividend income is recorded on the ex-dividend date. Structuring fees, excess deal deposits, prepayment fees and similar fees are recognized as Other Income from Investments as earned, usually when paid. Other fee income, including annual fees and monitoring fees are included in Other Income from Investments. Management fee income is included in Other Income from Non-Investment Sources. Use of Estimates The preparation of our Consolidated Financial Statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts disclosed in the Consolidated Financial Statements of Full Circle Capital. Actual results could differ from those estimates. Current Market Conditions and Market Opportunity We believe that the current credit environment provides favorable opportunities to achieve attractive risk-adjusted returns on the types of senior secured loans and other investments we may target. In particular, we believe that, despite an overall fall off in loan demand due to the depressed economic conditions, demand for financing from lower middle-market and middle-market companies is largely outpacing the availability of lenders that have traditionally served this market. We believe that bank consolidations, the failure of a number of alternative lending vehicles due to poor underwriting practices and an overall
tightening of underwriting standards has significantly reduced the number and activity level of potential lenders. We believe there has long been a combination of demand for capital and an underserved market for capital addressing lower middle-market and middle-market borrowers. We believe there is robust demand for continued growth capital as well as demand from very significant refinancing requirements of many borrowers as debt facilities come due, given the lack of willing and qualified capital providers. We believe these market conditions have been further exacerbated in the current environment due to: o

          larger lenders exiting this market to focus on larger investment opportunities that are more appropriate for their operating cost structures; o

          the elimination of many specialized lenders from the market due to lack of capital as a result of, for instance, the closing off of the securitization market or their own poor performance, and o

          the need for certain capital providers to reduce lending activities due to their reduced access to capital and the overall deleveraging of the financial market. With the decreased availability of debt capital for lower middle-market and middle-market borrowers, combined with the significant demand for refinancing, we believe there are increased lending opportunities for us. As always, we remain cautious in selecting new investment opportunities, and will only deploy capital in deals which are consistent with our disciplined philosophy of pursuing superior risk-adjusted returns.
 69    TABLE OF CONTENTS Operating Expense Reimbursement Our investment adviser has agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses that exceed 1.50% of our net assets, beginning with our fiscal quarter ending September 30, 2014 through June 30, 2015. For our fiscal year 2016 and beyond, our investment adviser has agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, that exceed 1.75% of our net assets. Our investment adviser reimbursed us $989,818 for the fiscal year ended June 30, 2015. Management Fee and Incentive Fee Waiver For the periods commencing on April 1, 2015 and ending on June 30, 2015 and commencing on July 1, 2015 and ending on June 30, 2016, Full Circle Advisors has agreed to waive the portion of the base management fees and incentive fees that Full Circle Advisors would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for us to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then declared by our board of directors. The determination of the
amount to be waived will be finalized as of the end of the fiscal year for each period, with such amounts being accrued on a quarterly basis. Net investment income is defined as net income before net realized gains (losses) and unrealized appreciation (depreciation), in each case, as determined in accordance with GAAP. Full Circle Advisors will not be entitled to recoup any amount of base management fees that it waives pursuant to this agreement. There can be no assurance that Full Circle Advisors will extend the waiver beyond June 30, 2016. For the period ended June 30, 2015, we incurred $2,280,058 of base management fees, of which $431,025 was waived. Portfolio Composition and Investment Activity Our portfolio of investments consists primarily of senior secured loans and, to a lesser extent, second lien loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies. We focus primarily on senior secured loans and stretch senior secured loans, also referred to as unitranche loans, which combine characteristics of traditional first lien senior secured loans and second-lien or subordinated loans. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. The following is a summary of our quarterly investment activity since the completion of our initial public offering. Such amounts are not inclusive of our holdings of United States Treasury Bills.  Time Period

          

          Acquisitions(1) (dollars in millions)

          

          Dispositions(2) (dollars in millions)

          

          Weighted Average Interest Rate of Portfolio at End of Period(3)Legacy Portfolio Acquisition (August 31, 2010)

          

          $

          72.3

          

          

          

          N/A

          

          

          

          12.10

          %August 31, 2010 through September 30, 2010

          

          

          0.4

          

          

          $

          1.4

          

          

          

          12.16

          %October 1, 2010 through December 31, 2010

          

          

          3.7

          

          

          

          10.1

          

          

          

          12.09

          %January 1, 2011 through March 31, 2011

          

          

          4.0

          

          

          

          19.9

          

          

          

          12.39

          %April 1, 2011 through June 30, 2011

          

          

          9.6

          

          

          

          1.2

          

          

          

          12.68

          %Fiscal 2011

          

          

          90.0

          

          

          

          32.6July 1, 2011 through September 30, 2011

          

          

          27.7

          

          

          

          15.9

          

          

          

          12.89

          %October 1, 2011 through December 31, 2011

          

          

          5.9

          

          

          

          9.4

          

          

          

          13.04

          %January 1, 2012 through March 31, 2012

          

          

          6.7

          

          

          

          5.7

          

          

          

          12.98

          %April 1, 2012 through June 30, 2012

          

          

          15.0

          

          

          

          7.1

          

          

          

          12.93

          %Fiscal 2012

          

          

          55.3

          

          

          

          38.1
 70    TABLE OF CONTENTS Time Period

          

          Acquisitions(1) (dollars in millions)

          

          Dispositions(2) (dollars in millions)

          

          Weighted Average Interest Rate of Portfolio at End of Period(3)July 1, 2012 through September 30, 2012

          

          

          11.4

          

          

          

          8.1

          

          

          

          12.84

          %October 1, 2012 through December 31, 2012

          

          

          29.1

          

          

          

          25.1

          

          

          

          12.55

          %January 1, 2013 through March 31, 2013

          

          

          22.4

          

          

          

          12.1

          

          

          

          12.69

          %April 1, 2013 through June 30, 2013

          

          

          12.2

          

          

          

          12.8

          

          

          

          12.90

          %Fiscal 2013

          

          

          75.1

          

          

          

          58.1July 1, 2013 through September 30, 2013

          

          

          20.0

          

          

          

          10.1

          

          

          

          12.81

          %October 1, 2013 through December 31, 2013

          

          

          22.4

          

          

          

          38.1

          

          

          

          12.48

          %January 1, 2014 through March 31, 2014

          

          

          33.0

          

          

          

          20.9

          

          

          

          11.41

          %April 1, 2014 through June 30, 2014

          

          

          57.1

          

          

          

          13.2

          

          

          

          11.27

          %Fiscal 2014

          

          

          132.5

          

          

          

          82.3July 1, 2014 through September 30, 2014

          

          

          36.5

          

          

          

          28.7

          

          

          

          10.53

          %October 1, 2014 through December 31, 2014

          

          

          28.7

          

          

          

          23.2

          

          

          

          10.23

          %January 1, 2015 through March 31, 2015

          

          

          24.4

          

          

          

          32.1

          

          

          

          10.53

          %April 1, 2015 through June 30, 2015

          

          

          47.5

          

          

          

          13.9

          

          

          

          9.99

          %Fiscal 2015

          

          

          137.1

          

          

          

          97.9Since inception

          

          $

          490.0

          

          

          $

          309.0

          

          

          

          N/A
  (1)

          Includes new deals, additional fundings, refinancings (inclusive of those on revolving credit facilities) and payment in kind PIK interest (2)

          Includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities) (3)

          For transactions in the secondary market, the interest rate used for the weighted average interest rate reflects the effective yield on the loan at the purchase price. Weighted average interest rate is based upon the stated coupon rate and face value of outstanding debt securities at the measurement date. Debt securities on non-accrual status are included in the calculation and are treated as having 0.00% as their applicable interest rate for purposes of this calculation, unless such debt securities are valued at zero. Portfolio Activity for Year Ended June 30, 2015 The primary investment activities for the year ended June 30, 2015 were fundings and repayments under the revolving credit facilities and the funding of the following loan facilities: 

          On July 23, 2014, the Company closed on approximately $0.4 million of a $3.0 million senior secured revolving line of credit to Medinet Investments, LLC, a medical liability claims factoring company. 

          On August 13, 2014, the Company funded approximately $0.9 million of a $1.3 million revolving loan and $4.0 million of a $5.8 million senior secured term loan facility to U.S. Oilfield Company, LLC, an oil and gas field services company. The Company funded an additional $1.9 million, net, during September 2014 under the credit facility. 

          On August 21, 2014, the Company purchased approximately $4.0 million of a $210.0 million senior secured note to US Shale Solutions, Inc., an oil and gas field services company. 

          On September 3, 2014, the senior secured credit facility with US Path Labs, LLC, a healthcare services company, was paid off at par plus accrued interest and fees for total proceeds of $3.6 million. 

          On September 22, 2014, the Company sold $4.9 million of the senior secured term loan to Dynamic Energy Services International, LLC for $4.9 million plus accrued interest. 

          On September 22, 2014, the Company sold $4.0 million of the subordinated term loan to RCS Capital Corporation, for $4.1 million plus accrued interest. On September 24, 2014, the Company sold an additional $3.5 million of the subordinated term loan to RCS Capital Corporation for $3.6 million plus accrued interest.
 71    TABLE OF CONTENTS 

          On September 25, 2014, the Company purchased $10.0 million of an $80.0 million senior secured note to Good Technology Corporation, a mobile device management company, for $7.7 million. As part of the transaction, the Company also purchased 2,032,520 warrants for $2.3 million. 

          During the quarter ended September 30, 2014, the senior secured term loan with PEAKS Trust 2009-1 was partially prepaid at par plus accrued interest for total proceeds of $2.7 million. 

          On October 16, 2014 the Company increased the size of the revolving loan to U.S. Oilfield Company, LLC to $1.8 million. On November 6, 2014, the senior secured term loan B to U.S. Oilfield Company, LLC was increased to $6.3 million. This increase was funded by a third party. 

          On October 9, 2014, the Company funded a $2.3 million senior secured credit facility to Ads Direct Media, Inc., an internet advertising agency. 

          On October 10, 2014, the Company funded $6.0 million of a $60.0 million second lien secured loan to Bioventus LLC, a specialty pharmaceutical company. 

          On October 15, 2014, the senior secured credit facility with Esselte Holdings Inc., Esselte AB was paid off in full at par plus accrued interest for total proceeds of $1.8 million. 

          On December 17, 2014, the Company funded $4.5 million of a senior secured mortgage term loan to Luling Lodging, LLC, a hotel operator. 

          On December 22, 2014, the senior secured credit facility with GW Power, LLC and Greenwood Fuels WI, LLC, was partially prepaid at par plus prepayment fees for total proceeds of $0.7 million. 

          On December 24, 2014, the senior secured credit facility and revolving term loan with CPX, Inc. were paid off in full at par plus accrued interest for total proceeds of $2.7 million. 

          During the quarter ended December 31, 2014, the senior secured term loan with PEAKS Trust 2009-1 was partially prepaid at par plus accrued interest for total proceeds of $3.2 million. 

          On January 21, 2015, the Company partially exercised its warrant issued by General Cannabis Corp in a cashless exercise in exchange for 660,263 shares of General Cannabis Corp. The cashless exercise reduced the amount of common shares underlying the remaining warrant by 1,215,000, leaving the Company with a warrant to purchase 185,000 shares in General Cannabis Corp with a strike price of $4.00 per share. 

          On January 30, 2015, the Company funded $2.0 million of a $50.0 million second lien term loan with GK Holdings, Inc., an IT and business skill training company. 

          On March 10, 2015, the senior secured credit facilities with Infinite Aegis Group, LLC, a healthcare billing and collections company, were paid off at par plus accrued interest and fees for total proceeds of $4.6 million. 

          On March 31, 2015, the revolving loans to Blackstrap Broadcasting, LLC were terminated as part of a restructuring with Davidzon Radio, Inc., who purchased Blackstrap Broadcasting, LLCs assets. Additionally, the second lien secured credit facility to Blackstrap Broadcasting, LLC was written off. 

          During the quarter ended March 31, 2015, the senior secured term loan with PEAKS Trust 2009-1 was partially prepaid at par plus accrued interest for total proceeds of $0.8 million. 

          On April 1, 2015, the Company purchased $3.2 million of $23.5 million in unsecured notes issued by GC Pivotal, LLC, a data connectivity service company. 

          During the fourth fiscal quarter of 2015, the Company purchased an additional $5.0 million of $210.0 million senior secured notes to US Shale Solutions, Inc., an oil and gas field services company for approximately $2.5 million.
 72    TABLE OF CONTENTS 

          On April 29, 2015, the Company purchased $8.0 million of $43.0 million in senior secured notes issued by Sundberg America, LLC et al, an appliance parts distributor. The $8.0 million first out notes are structurally senior to the remaining $35.0 million of the issue. 

          On May 14, 2015, the Company funded $1.0 million of a $3.5 million revolving credit facility and a $2.5 million senior secured loan to RiceBran Technologies Corporation, a grain mill products company. Additionally, the Company received warrants to purchase 300,000 shares in RiceBran Technologies Corporation at a $5.25 strike price, which expire on May 12, 2020. 

          On May 18, 2015 and June 29, 2015, the senior secured term loan B to U.S. Oilfield Company, LLC was increased by $0.3 million and $0.2 million, respectively, to $6.7 million. The Company funded $0.3 million of the increase and the remainder was funded by a third party. The Company also received additional warrants for 1.824% of the class B non-voting shares of U.S. Oilfield Company, LLC. 

          On June 17, 2015, the Company funded $4.0 million in a senior secured term loan to AP Gaming I, LLC, a gambling machine manufacturer. Additionally, the Company has an unfunded revolver commitment to AP Gaming I, LLC. 

          On June 29, 2015, the Company purchased $2.0 million in a senior secured note to Lee Enterprises Incorporated, a daily and weekly newspaper publisher. 

          On June 30, 2015, the Company funded a $2.6 million synthetic loan in the form of a total return swap. More specifically, Full Circle Capital purchased 60,000 shares of Granite Ridge Holdings, LLC, a power generation company, for approximately $13.0 million. Full Circle contemporaneously entered into a collateralized swap agreement with another private fund, which posted $10.4 million of cash collateral, whereby the Company swapped the returns on the shares for a fixed rate of return of 15.0% on the net loan amount. Portfolio Activity for Year Ended June 30, 2014 The primary investment activities for the year ended June 30, 2014 were fundings and repayments under the revolving credit facilities and the funding of the following loan facilities: 

          On August 1, 2013, the Company funded $4.5 million of a $9.0 million senior secured credit facility to Infinite Aegis Group, LLC. 

          On September 4, 2013, the Company funded $1.5 million of a $5.0 million senior secured credit facility to Franklin Place Shops  Red, LLC. 

          On September 30, 2013, the Company funded $2.5 million of a $3.3 million senior secured credit facility to CPX, Inc. 

          On October 17, 2013, the senior secured credit facility with CSL Operating, LLC, an industrial metal treatings company, was paid off at par value plus accrued interest and fees of $3.7 million. 

          On October 17, 2013, the senior secured credit facility with Coast Plating, Inc., an aerospace parts plating and finishing company, was paid off at par plus accrued interest and fees of $4.7 million. 

          On October 21, 2013, the senior secured credit facility with Employment Plus, Inc., a staffing services company, was paid off at par value plus accrued interest of $5.0 million. 

          On October 30, 2013, the Company purchased $5.0 million of a $141.7 million senior secured credit facility to Esselte Holdings, Inc./Esselte AB, a global manufacturer and distributor of office supplies. 

          On October 31, 2013, MDU Communications (USA) Inc., a cable TV/broadband services company entered into an asset purchase agreement to sell substantially all of its assets to a third party. In conjunction with this sale, the senior secured credit facility has been partially prepaid in an amount of $4.9 million. As part of this sales process, on October 22, 2013, the Company reduced the interest rate on the outstanding balance of the loan to 2.00% and realized a partial loss of $0.5 million as part of the transaction. Future gains and losses related to the sales process may occur as the borrower finalizes the sales process.
 73    TABLE OF CONTENTS 

          On December 11, 2013, we received gross proceeds of $6.0 million relating to the full repayment of our senior secured credit facility to iMedX, Inc. Of the $6.0 million in gross proceeds, $1.0 million represented early termination fees and success fees upon repayment. 

          On December 26, 2013, the senior secured loan with Franklin Place Shops-Red, LLC, a real estate investment trust, was paid off at par of $1.5 million. 

          On January 15, 2014, the senior secured revolving loan with Global Energy Efficiency Holdings, Inc., an energy efficiency company, was paid off at par value plus accrued interest and fees of $7.7 million. Of the $7.7 million in gross proceeds, $0.4 million represented early termination fees and success fees upon repayment. 

          On January 21, 2014, the Company invested $0.5 million in a warrant as part of a $30.0 million senior secured convertible note purchase agreement with General Cannabis Corp (ACS), a non-residential property owner. The agreement to purchase convertible notes is contingent upon ACS satisfaction of certain requirements. 

          On January 31, 2014, the Company purchased $8.8 million initial par amount of a $256.3 million senior secured credit facility to PEAKS Trust 2009-1, a consumer financing company, for $6.0 million. 

          On March 4, 2014, the Company funded a $7.0 million senior secured credit facility to Ocean Protection Services, a maritime security services company. 

          On March 12, 2014, the Company funded $5.0 million of a $150.0 million senior secured credit facility to Dynamic Energy Services International, LLC, an oil and gas field services company. 

          On March 31, 2014, the Company funded a $6.0 million senior secured credit facility to GW Power, LLC and Greenwood Fuels IW, LLC, an electrical service company. 

          During the fourth quarter of 2014, the Company purchased $7.5 million of a $150.0 million secured second lien term loan to RCS Capital Corporation, a financial services company. 

          On June 12, 2014, the Company purchased an additional $4.0 million of the $256.3 million senior secured credit facility to PEAKS Trust 2009-1, a consumer financing company, for $3.4 million. 

          In June 2014, the Company purchased $7.0 million of a $240.0 million senior secured note to Fuse, LLC, a television programming company. 

          On June 23, 2014, the Company purchased $8.5 million of a $190.0 million senior secured credit facility to PR Wireless, Inc., a wireless communications company. 

          On June 30, 2014, the Company funded an additional $3.3 million senior secured credit facility to Pristine Environments, Inc. and expanded the revolving line of credit to $5.3 million. 

          On June 30, 2014, the Company funded a $3.5 million senior secured credit facility to JN Medical Corporation, a biological products company. 

          On June 30, 2014, the Company funded $0.8 million of a $2.0 million revolving line of credit and $8.0 million of a $16.0 million senior secured term loan to Butler Burgher Group, LLC, a real estate management company. The remaining funded portion of the credit facility was funded by a third party participant. Portfolio Activity for Year Ended June 30, 2013 The primary investment activities for the year ended June 30, 2013, were fundings and repayments under the revolving credit facilities and the funding of the following loan facilities: 

          On September 7, 2012 the Company originated a $3.3 million credit facility, comprised of a $1.0 million senior secured term loan and a $2.3 million senior secured revolving credit facility, both bearing interest at LIBOR plus 12.25% to Global Energy Efficiency Holdings Inc. (GEE). GEE provides energy efficiency products, installation and maintenance services to small and medium sized businesses in multiple food sales and service industries.
 74    TABLE OF CONTENTS 

          On September 27, 2012, the Company funded an additional $0.6 million to iMedX, Inc. as part of the Companys existing senior secured term loan. 

          On December 19, 2012, Ygnition Networks, Inc. (Ygnition) entered into transactions which involved the sale of substantially all of its assets to Access Media 3, Inc. (Access Media 3) and to New Media West, LLC (New Media West), an affiliate of the Company and of Access Media 3. Pursuant to this transaction the Company, in exchange for its secured interest in the Ygnition assets, received: (i) an equity interest in New Media West, valued at $3.6 million, (ii) a $5.80 million five year note due from New Media West bearing interest at 9%, and (iii) cash consideration from Access Media 3 valued at $0.40 million. Such amounts are subject to final purchase price adjustments, which through June 30, 2013 aggregated $0.8 million resulting in an additional $0.2 million realized loss. At December 19, 2012, immediately prior to these transactions, the Company had $13.0 million of debt outstanding to Ygnition, held at
approximately $12.1 million. As a result of the transaction, the Company recognized a loss of $2.2 million, comprised of a realized loss of $3.0 million on the disposition of the Ygnition debt and the reversal of a previously unrealized loss of $0.8 million. 

          On December 28, 2012, the Company funded $3.9 million to SOLEX Fine Foods, LLC and Catsmo, LLC, as co-borrower, as a first out participation under a $5.6 million senior secured term loan. The Company also purchased $0.3 million of common equity units as part of the transaction. SOLEX Fine Foods, LLC and Catsmo, LLC are providers of specialty foods in New York City and the surrounding areas. 

          On January 31, 2013, the senior secured credit facility with The Selling Source, LLC, an information and data services company was paid off at par value of $2.0 million. On February 1, 2013, the Company funded $4.0 million in a new senior secured credit facility with The Selling Source, LLC. 

          During February 2013, the senior secured credit facility with European Evaluators, LLC, an art dealer, was paid off at par value of $0.6 million. 

          On March 28, 2013, the Company funded $5.5 million of a $6.0 million senior secured credit facility to Modular Process Control, LLC, an energy efficiency services firm focused on energy efficiency solutions for industrial companies. 

          On March 31, 2013, the Company entered into a $4.4 million senior secured credit facility with Pristine Environments, Inc., which provides building cleaning and maintenance services to large commercial and government clients. 

          On April 15, 2013, the Company funded $1.4 million of a $1.7 million senior secured credit facility to Takoda Resources, Inc., a provider of seismic data acquisition services in Canada and the United States. 

          During May 2013, the senior secured term loan with Matt Martin Real Estate Management, LLC, was paid off at par value of $3.1 million, plus accrued interest and fees. Portfolio Reconciliation The following is a reconciliation of the investment portfolio for the years ended June 30, 2015, 2014, and 2013:  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Beginning Investment Portfolio

          

          $

          150,190,759

          

          

          $

          88,174,501

          

          

          $

          94,846,770Portfolio Investments Acquired(1)

          

          

          137,121,602

          

          

          

          132,503,963

          

          

          

          75,145,289Treasury and Money Market Purchases(2)

          

          

          

          

          

          

          71,000,730

          

          

          

          62,001,462Amortization and Accretion of Fixed Income Premiums and Discounts

          

          

          1,496,851

          

          

          

          466,184

          

          

          

          368,279Portfolio Investments Repaid

          

          

          (97,880,572

          )

          

          

          (82,301,503

          )

          

          

          (58,107,861

          )Sales of and Maturities of Treasury and Money Market Securities(2)

          

          

          (25,000,000

          )

          

          

          (46,000,000

          )

          

          

          (84,500,000

          )Net Change in Unrealized Gain (Loss) on Investments

          

          

          (6,237,328

          )

          

          

          (12,704,614

          )

          

          

          2,636,310
 75    TABLE OF CONTENTS Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Net Realized Gains (Losses) on Investments

          

          

          (7,577,553

          )

          

          

          (948,502

          )

          

          

          (4,215,748

          )Ending Investment Portfolio

          

          $

          152,113,759

          

          

          $

          150,190,759

          

          

          $

          88,174,501
  (1)

          Includes PIK interest. (2)

          U.S. Treasury Securities were purchased and temporarily held in connection with complying with RIC diversification requirements under Subchapter M of the Code. During the year ended June 30, 2015, we recorded net unrealized appreciation (depreciation) of $(6,237,328). This consisted of $(6,260,564) of net unrealized depreciation on debt investments and $23,236 of net unrealized appreciation on equity investments. The change in unrealized depreciation is primarily due to the depreciation of $(2,757,498), $(2,186,981), $(1,658,078), and $(1,391,962) of our loans to Takoda Resources, Inc., US Shale Solutions, Inc., TransAmerican Asset Servicing Group, LLC, and Fuse, LLC, respectively. This was partially offset by appreciation of $4,128,706 due to the restructuring of the loan to
Blackstrap Broadcasting, LLC, which included $3,500,000 of unrealized losses being reversed upon the disposition of the second lien loan to Blackstrap Broadcasting, LLC. During the year ended June 30, 2014, change in unrealized appreciation (depreciation) on investments was $(12,704,614). This consisted of $(11,380,297) of net unrealized depreciation on debt investments and $(1,324,317) of net unrealized depreciation on equity investments. The change in unrealized depreciation is primarily due to the depreciation of $(3,363,038) of our loan to and limited liability company interest in New Media West, LLC, and depreciation of $(3,251,689), $(2,870,123), and $(2,803,251) of our loans to Blackstrap Broadcasting, LLC, ProGrade Ammo Group, LLC, and Modular Process Control, LLC, respectively. This
was partially offset by the $1,856,212 appreciation of our warrant in General Cannabis Corp. During the year ended June 30, 2013, we recorded net unrealized appreciation of $2,636,310. This consisted of $1,005,263 of net unrealized appreciation on debt investments and $1,631,047 of net unrealized appreciation on equity investments. On December 19, 2012, Ygnition Networks, Inc. (Ygnition) entered into transactions which involved the sale of substantially all of its assets to Access Media 3, Inc. (Access Media 3) and to New Media West, LLC (New Media West), an affiliate of the Company and of Access Media 3. Pursuant to this transaction the Company, in exchange for its secured interest
in the Ygnition assets, received: (i) an equity interest in New Media West, valued at, $3,600,000, (ii) a $5,800,000 five year note from New Media West bearing interest of 9% annually, and (iii) cash consideration from Access Media 3 valued at $412,483. Such amounts are subject to final purchase price adjustments, which through June 30, 2013 aggregated $0.8 million resulting in an additional $0.2 million realized loss. At December 19, 2012, immediately prior to these transactions, the Company had $13,000,000 of debt outstanding to Ygnition, held at approximately $12,050,000. As a result of the transaction, the Company recognized a loss of $2,203,806, comprised of a realized loss of $3,031,842 on the disposition of the Ygnition debt and the reversal of a previously unrealized loss of $828,036. The Company recorded unrealized appreciation of $994,164 on its equity investment in The Finance Company, LLC. The Company recorded unrealized depreciation of $900,925 on its loan to TransAmerican
Asset Servicing Group, LLC.
 76    TABLE OF CONTENTS Portfolio Classifications The following table shows the fair value of our portfolio of investments by asset class as of June 30, 2015 and 2014, excluding United States Treasury Bills. At June 30, 2015, we did not hold United States Treasury Bills. At June 30, 2014, we held approximately $25.0 million in United States Treasury Bills.  June 30, 2015

          

          June 30, 2014Investments at Fair Value (dollars in millions)

          

          Percentage of Total Portfolio

          

          Investments at Fair Value (dollars in millions)

          

          Percentage of Total PortfolioSenior Secured Loans

          

          $

          122.8

          

          

          

          80.7

          %

          

          $

          110.5

          

          

          

          88.3

          %Subordinated Secured Loans

          

          

          7.9

          

          

          

          5.2

          

          

          

          7.7

          

          

          

          6.2Unsecured Notes

          

          

          3.2

          

          

          

          2.1

          

          

          

          

          

          

          

          Warrants

          

          

          2.7

          

          

          

          1.8

          

          

          

          3.1

          

          

          

          2.4Limited Liability Company Interests

          

          

          1.2

          

          

          

          0.8

          

          

          

          3.9

          

          

          

          3.1Common Stock

          

          

          14.3

          

          

          

          9.4

          

          

          

          

          

          

          

          Total

          

          $

          152.1

          

          

          

          100.0

          %

          

          $

          125.2

          

          

          

          100.0

          %
 At June 30, 2015, the 32 borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately 59% (i.e., each $59 of loan value outstanding is secured by $100 of collateral value). At June 30, 2014, the 26 borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately 60% (i.e., each $60 of loan value outstanding is secured by $100 of collateral value). The following table shows the fair value of our portfolio of investments by industry, as of June 30, 2015 and 2014, excluding United States Treasury Bills. At June 30, 2015, we did not hold United States Treasury Bills. At June 30, 2014, we held approximately $25.0 million in United States Treasury Bills.  June 30, 2015

          

          June 30, 2014Investments at Fair Value (dollars in millions)

          

          Percentage of Total Portfolio

          

          Investments at Fair Value (dollars in millions)

          

          Percentage of Total PortfolioPower Generation

          

          $

          13.0

          

          

          

          8.5

          %

          

          $

          

          

          

          

          

          %Mobile Device Management

          

          

          11.1

          

          

          

          7.3

          

          

          

          

          

          

          

          Building Cleaning and Maintenance Services

          

          

          10.7

          

          

          

          7.0

          

          

          

          7.9

          

          

          

          6.3Oil and Gas Field Services

          

          

          10.1

          

          

          

          6.8

          

          

          

          4.8

          

          

          

          3.9Radio Broadcasting

          

          

          9.3

          

          

          

          6.1

          

          

          

          2.5

          

          

          

          2.0Real Estate Management Services

          

          

          8.5

          

          

          

          5.6

          

          

          

          8.7

          

          

          

          6.9Appliance Parts Distributor

          

          

          8.0

          

          

          

          5.2

          

          

          

          

          

          

          

          Wireless Communications

          

          

          8.0

          

          

          

          5.2

          

          

          

          8.3

          

          

          

          6.7Consumer Financing

          

          

          7.9

          

          

          

          5.2

          

          

          

          16.5

          

          

          

          13.2Specialty Pharmaceuticals

          

          

          6.0

          

          

          

          3.9

          

          

          

          

          

          

          

          Maritime Security Services

          

          

          6.0

          

          

          

          3.9

          

          

          

          7.1

          

          

          

          5.7Television Programming

          

          

          5.8

          

          

          

          3.8

          

          

          

          7.2

          

          

          

          5.7Electric Services

          

          

          5.2

          

          

          

          3.5

          

          

          

          5.9

          

          

          

          4.8Hotel Operator

          

          

          4.3

          

          

          

          2.8

          

          

          

          

          

          

          

          Food Distributors and Wholesalers

          

          

          3.8

          

          

          

          2.5

          

          

          

          3.9

          

          

          

          3.1Gambling Machine Manufacturer

          

          

          3.8

          

          

          

          2.5

          

          

          

          

          

          

          

          Energy Efficiency Services

          

          

          3.6

          

          

          

          2.4

          

          

          

          4.0

          

          

          

          3.2Biological Products

          

          

          3.4

          

          

          

          2.3

          

          

          

          3.5

          

          

          

          2.8Information and Data Services

          

          

          3.4

          

          

          

          2.2

          

          

          

          2.7

          

          

          

          2.1Grain Mill Products

          

          

          3.3

          

          

          

          2.2

          

          

          

          

          

          

          

          Data Connectivity Service Company

          

          

          3.2

          

          

          

          2.1

          

          

          

          

          

          

          

          Munitions

          

          

          2.6

          

          

          

          1.7

          

          

          

          4.1

          

          

          

          3.3
 77    TABLE OF CONTENTS June 30, 2015

          

          June 30, 2014Investments at Fair Value (dollars in millions)

          

          Percentage of Total Portfolio

          

          Investments at Fair Value (dollars in millions)

          

          Percentage of Total PortfolioInternet Advertising

          

          

          2.4

          

          

          

          1.6

          

          

          

          

          

          

          

          Daily and Weekly Newspaper Publisher

          

          

          2.0

          

          

          

          1.3

          

          

          

          

          

          

          

          IT and Business Skill Training

          

          

          2.0

          

          

          

          1.3

          

          

          

          

          

          

          

          Outdoor Advertising Services

          

          

          2.0

          

          

          

          1.3

          

          

          

          2.2

          

          

          

          1.7Non-Residential Property Owner

          

          

          1.3

          

          

          

          0.9

          

          

          

          2.4

          

          

          

          1.9Equipment Rental Services

          

          

          0.6

          

          

          

          0.4

          

          

          

          1.8

          

          

          

          1.4Asset Recovery Services

          

          

          0.5

          

          

          

          0.3

          

          

          

          1.6

          

          

          

          1.2Geophysical Surveying and Mapping Services

          

          

          0.2

          

          

          

          0.1

          

          

          

          2.6

          

          

          

          2.0Medical Liability Claims Factoring

          

          

          0.1

          

          

          

          0.1

          

          

          

          

          

          

          

          Healthcare Billing and Collections

          

          

          

          

          

          

          

          

          

          

          5.4

          

          

          

          4.4Industrial Molded Products

          

          

          

          

          

          

          

          

          

          

          3.0

          

          

          

          2.4Stationery, Tablets, and Related Products

          

          

          

          

          

          

          

          

          

          

          1.8

          

          

          

          1.4Healthcare Services

          

          

          

          

          

          

          

          

          

          

          3.5

          

          

          

          2.8Financial Services

          

          

          

          

          

          

          

          

          

          

          7.7

          

          

          

          6.2Cable TV/Broadband Services

          

          

          

          

          

          

          

          

          

          

          6.1

          

          

          

          4.9Total

          

          $

          152.1

          

          

          

          100.0

          %

          

          $

          125.2

          

          

          

          100.0

          %
 Portfolio Grading We have adopted a credit grading system to monitor the quality of our debt investment portfolio. As of June 30, 2015, our portfolio had a weighted average grade of 2.96, based upon the fair value of the debt investments in the portfolio. Equity securities and investments in United States Treasury Bills are not graded. This was a decrease of 0.11 from the weighted average grade of 3.07 at June 30, 2014. At June 30, 2015, our debt investment portfolio was graded as follows:  June 30, 2015Grade

          

          Summary Description

          

          Fair Value

          

          Percentage of Total Portfolio1

          

          

          Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).

          

          

          $

          8,516,728

          

          

          

          5.60

          %2

          

          

          The portfolio company is performing above expectations and the risk profile is generally favorable.

          

          

          

          10,720,287

          

          

          

          7.053

          

          

          Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.

          

          

          

          98,780,645

          

          

          

          64.934

          

          

          The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable.

          

          

          

          9,932,823

          

          

          

          6.535

          

          

          The investment is performing well below expectations and is not anticipated to be repaid in full.

          

          

          

          5,955,315

          

          

          

          3.92$

          133,905,798

          

          

          

          88.03

          %
 78    TABLE OF CONTENTS At June 30, 2014, our debt investment portfolio was graded as follows:  June 30, 2014Grade

          

          Summary Description

          

          Fair Value

          

          Percentage of Total Portfolio1

          

          

          Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).

          

          

          $

          1,794,764

          

          

          

          1.43

          %2

          

          

          The portfolio company is performing above expectations and the risk profile is generally favorable.

          

          

          

          

          

          

          

          3

          

          

          Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.

          

          

          

          105,809,233

          

          

          

          84.524

          

          

          The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable.

          

          

          

          9,314,861

          

          

          

          7.445

          

          

          The investment is performing well below expectations and is not anticipated to be repaid in full.

          

          

          

          1,335,750

          

          

          

          1.07$

          118,254,608

          

          

          

          94.46

          %
 We expect that a portion of our investments will be in grades 4 or 5 from time to time, and, as such, we will be required to work with portfolio companies to improve their business and protect our investment. The number and amount of investments included in grades 4 or 5 may fluctuate from period to period. Results of Operations Comparison of the years ended June 30, 2015, June 30, 2014, and June 30, 2013  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Total

          

          Per Share(1)

          

          Total

          

          Per Share(1)

          

          Total

          

          Per Share(1)Total Investment Income

          

          $

          17,749,343

          

          

          $

          1.20

          

          

          $

          13,823,693

          

          

          $

          1.59

          

          

          $

          12,046,023

          

          

          $

          1.72Interest Income(2)

          

          

          16,955,098

          

          

          

          1.15

          

          

          

          11,151,497

          

          

          

          1.29

          

          

          

          10,492,257

          

          

          

          1.50Dividend Income

          

          

          36,247

          

          

          

          0.00

          

          

          

          114,704

          

          

          

          0.01

          

          

          

          223,474

          

          

          

          0.03Other Income

          

          

          757,998

          

          

          

          0.05

          

          

          

          2,557,492

          

          

          

          0.29

          

          

          

          1,330,292

          

          

          

          0.19Net Operating Expenses

          

          

          9,136,271

          

          

          

          0.62

          

          

          

          7,792,972

          

          

          

          0.90

          

          

          

          6,665,442

          

          

          

          0.95Management Fee

          

          

          2,280,058

          

          

          

          0.16

          

          

          

          1,631,694

          

          

          

          0.19

          

          

          

          1,431,851

          

          

          

          0.20Incentive Fee

          

          

          1,798,000

          

          

          

          0.12

          

          

          

          1,511,362

          

          

          

          0.17

          

          

          

          1,339,833

          

          

          

          0.19Total Advisory Fees

          

          

          4,078,058

          

          

          

          0.28

          

          

          

          3,143,056

          

          

          

          0.36

          

          

          

          2,771,684

          

          

          

          0.39Administrative Fees

          

          

          731,447

          

          

          

          0.05

          

          

          

          682,662

          

          

          

          0.08

          

          

          

          834,577

          

          

          

          0.13Directors Fees

          

          

          182,196

          

          

          

          0.01

          

          

          

          127,625

          

          

          

          0.01

          

          

          

          124,500

          

          

          

          0.02Interest Expenses

          

          

          4,305,558

          

          

          

          0.29

          

          

          

          2,693,487

          

          

          

          0.31

          

          

          

          1,854,495

          

          

          

          0.26Professional Services Expense

          

          

          700,324

          

          

          

          0.05

          

          

          

          610,362

          

          

          

          0.07

          

          

          

          567,126

          

          

          

          0.08Bank Fees

          

          

          39,931

          

          

          

          0.00

          

          

          

          56,184

          

          

          

          0.01

          

          

          

          16,429

          

          

          

          0.00Tax Expenses

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4,369

          

          

          

          0.00Other

          

          

          519,600

          

          

          

          0.04

          

          

          

          479,596

          

          

          

          0.06

          

          

          

          492,262

          

          

          

          0.07Management Fee Waiver and Expense Reimbursement

          

          

          (1,420,843

          )

          

          

          (0.10

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Net Investment Income

          

          

          8,613,072

          

          

          

          0.63

          

          

          

          6,030,721

          

          

          

          0.71

          

          

          

          5,380,581

          

          

          

          0.77
 79    TABLE OF CONTENTS Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Total

          

          Per Share(1)

          

          Total

          

          Per Share(1)

          

          Total

          

          Per Share(1)Net Change in Unrealized Gain (Loss)

          

          

          (6,237,328

          )

          

          

          (0.51

          )

          

          

          (12,704,614

          )

          

          

          (1.36

          )

          

          

          2,636,310

          

          

          

          0.38Net Realized Loss

          

          

          (7,576,472

          )

          

          

          (0.51

          )

          

          

          (948,502

          )

          

          

          (0.11

          )

          

          

          (4,215,748

          )

          

          

          (0.60

          )
  (1)

          The basic per share figures noted above are based on a weighted-average of 14,803,637, 8,698,814, and 7,018,286 shares outstanding for the years ended June 30, 2015, June 30, 2014, and June 30, 2013, respectively, except where such amounts need to be adjusted to be consistent with what is disclosed in the financial highlights of our audited Consolidated Financial Statements. (2)

          Interest income includes PIK interest of $429,720, $117,500, and $0 for the years ended June 30, 2015, June 30, 2014, and June 30, 2013, respectively. Total Investment Income Total investment income includes interest and dividend income on our investments and other income, which is typically comprised of fee income. Fee income typically consists of administrative fees, prepayment fees, structuring fees and unused line fees. Total investment income increased from $13,823,693 for the year ended June 30, 2014 to $17,749,343 for the year ended June 30, 2015. The increase in investment income was predominantly due to increased interest income. The increase in interest income for the year ended June 30, 2015 relative to the year ended June 30, 2014 is primarily due to a larger average investment portfolio. This increase was offset by a decline in other income due to elevated other income for the year ended June 30, 2014 from success and prepayment fees received as a result of the payoff of iMedx, Inc. and Global Energy Efficiency Holdings, Inc. Total investment income decreased on a per share basis, as interest income decreased from $1.29 per share to $1.15 per share. Other income per share decreased from $0.29 per share for the year ended June 30, 2014 to $0.05 per share for the year ended June 30, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 8,698,814 to 14,803,637 for the year ended June 30, 2014 and June 30, 2015, respectively; this increase in share count from our rights offering decreased the per share impact of increased total investment income. Total investment income increased from $12,046,023 for the year ended June 30, 2013 to $13,823,693 for the year ended June 30, 2014. The increase in investment income was predominantly due to increased interest income. Interest income for the year ended June 30, 2014 relative to the year ended June 30, 2013 is primarily due to a larger average investment portfolio. The dividend income for the year ended June 30, 2014 decreased as compared with the dividend income for the year ended June 30, 2013, reflecting lower distributions related to the Companys investment in The Finance Company, LLC. The increase in fee income,
which can fluctuate, for the year ended June 30, 2014 as compared to the year ended June 30, 2013 was primarily a result of success and prepayment fees received as a result of the full repayment of our loans to iMedx, Inc. and Global Energy Efficiency Holdings, Inc. Total investment income decreased on a per share basis, as interest income decreased from $1.50 per share to $1.29 per share. Other income per share increased from $0.19 per share for the year ended June 30, 2013 to $0.29 per share for the year ended June 30, 2014. Per share figures noted above reflect an increase in the weighted average shares outstanding from 7,018,286 to 8,698,814 for the year ended June 30, 2013 and June 30, 2014, respectively; this increase in share count decreased the per share impact of increased total investment income. Expenses Net operating expenses increased from $7,792,972 for the year ended June 30, 2014 to $9,136,271 for the year ended June 30, 2015. The increase in net operating expenses is primarily due to increased interest expense. Interest expense increased due to the increased use of our credit facility and the issuance of additional Notes (as defined below). These additional borrowings enabled us to fund portfolio growth, which had the effect of increasing management fees as a result of a larger average investment portfolio, and
 80    TABLE OF CONTENTS increasing incentive fees due to greater pre-incentive fee net investment income. The increase in net operating expenses was partially offset by the management fee waiver and expense reimbursement provided by our investment adviser. Refer to Note 5 of our Consolidated Financial Statements for our expense reimbursement policy. Net operating expenses per share decreased from $0.90 per share for the year ended June 30, 2014 to $0.62 per share for the year ended June 30, 2015. This decrease is predominantly related to a decrease in total advisory fees per share from $0.36 per share to 0.28 per share. Additionally, $0.10 of the decline was due to the management fee waiver and the investment advisers reimbursement to the Company of operating expenses exceeding 1.50% (excluding interest expense, management and incentive fees and offering expenses) for the year ended June 30, 2015. Net operating expenses increased from $6,665,442 for the year ended June 30, 2013 to $7,792,972, for the year ended June 30, 2014. The increase in net operating expenses for the year ended June 30, 2014 as compared to the year ended June 30, 2013 is primarily due to the increase in interest expense from greater borrowings under our Notes (as defined below), to fund portfolio growth, an increase in management fees due to a larger average investment portfolio, and an increase in incentive fees due to greater pre-incentive fee net investment income. These increases were partially offset by declining costs under our Administration
Agreement Net operating expenses per share were $0.95 per share for the year ended June 30, 2013 and $0.90 for the year ended June 30, 2014. This is due to an increase in interest expense per share from $0.26 for the year ended June 30, 2013 to $0.31 for the year ended June 30, 2014, which was offset by a decline in administrative fees per share from $0.13 for the year ended June 30, 2013 to $0.08 for the year ended June 30, 2014. Net Investment Income Net investment income increased from $6,030,721 for the year ended June 30, 2014 to $8,613,072 for the year ended June 30, 2015. The increase in net investment income for the year ended June 30, 2015, as compared to the year ended June 30, 2014 was primarily due to greater interest income from a larger average investment portfolio. Net investment income also increased due to the management fee waiver and our investment advisers reimbursement of certain operating expenses which totaled $1,420,843 during the year ended June 30, 2015, as compared to no waiver or reimbursed expenses for the year ended June 30, 2014. The
increase in interest income was partially offset by greater interest expense from additional borrowings and greater management and incentive fees resulting from a larger portfolio and greater pre-incentive fee net investment income during the period. Net investment income per share decreased from $0.71 per share for the year ended June 30, 2014 to $0.63 per share for the year ended June 30, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 8,698,814 to 14,803,637 for the year ended June 30, 2014 as compared to the year ended June 30, 2015. This increase in share count from our rights offering decreased the per share impact of increased net investment income. Net investment income increased from $5,380,581 for the year ended June 30, 2013 to $6,030,721, for the year ended June 30, 2014. The increase in net investment income for the year ended June 30, 2014 as compared to the year ended June 30, 2013 was primarily due to greater interest income from a larger average investment portfolio and success and prepayment fees received as a result of the full repayment of our loans to iMedx, Inc. and Global Energy Efficiency Holdings, Inc. The increase in interest income was partially offset by greater interest expense from greater costs associated with outstanding borrowings and greater
management and incentive fees resulting from a larger portfolio and greater pre-incentive fee net investment income during the period. Net investment income per share decreased from $0.77 per share for the year ended June 30, 2013 to $0.71 per share for the year ended June 30, 2014. Per share figures noted above reflect an increase in the weighted average shares outstanding from 7,018,286 to 8,698,814 for the year ended June 30, 2013 and June 30, 2014, respectively; this increase in share count decreased the per share impact of increased net investment income.
 81    TABLE OF CONTENTS Realized Gain (Loss) on Investments Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs. During the year ended June 30, 2015, we recorded net realized losses of $7,576,472, primarily in connection with the write off of the second lien investment in Blackstrap Broadcasting, LLC, which resulted in a realized loss of $3,500,000 and the write off of our limited liability company interest in New Media West which resulted in a realized loss of $3,600,000. During the year ended June 30, 2014, we recorded a realized loss of $948,502 primarily in connection with the continued disposition of our investment in Ygnition Networks, Inc. in an amount of $678,553 and a realized loss on our position in MDU Communications (USA), Inc. of $492,217. This was partially offset by a gain realized on the partial prepayment of PEAKS Trust 2009-1 of $223,169. During the year ended June 30, 2013, we recorded a realized loss of $4,215,748, primarily from the disposition of our senior secured loan in Ygnition Networks, Inc. and the conversion of our senior secured loan in Equisearch Acquisition, Inc. to a senior secured term loan in TransAmerican Asset Servicing Group, LLC upon the finalization of Equisearch Acquisition, Inc.s bankruptcy proceedings. Change in Unrealized Gain (Loss) on Investments Net unrealized appreciation or depreciation recorded on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See  Critical Accounting Policies  Change in Unrealized Gain (Loss) on Investments. From time to time, the Company may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, the Company may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the
portfolio investment. Such elimination of unrealized gain (loss) is included on the Consolidated Statements of Operations as a (decrease) increase in the Net Change in Unrealized Gain (Loss) on Investments. Net change in unrealized appreciation (depreciation) of investments was $(6,237,328) for the year ended June 30, 2015 compared to $(12,704,614) for the year ended June 30, 2014. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Companys investment portfolio for the year ended June 30, 2015 by portfolio company.  Portfolio Company

          

          Change in Unrealized Appreciation (Depreciation)

          

          June 30, 2015

          

          June 30, 2014Cost

          

          Fair Value

          

          Unrealized Appreciation (Depreciation)

          

          Cost

          

          Fair Value

          

          Unrealized Appreciation (Depreciation)Blackstrap Broadcasting, LLC

          

          $

          4,128,706

          

          

          $

          

          

          

          $

          

          

          

          $

          

          

          

          $

          6,595,547

          

          

          $

          2,466,841

          

          

          $

          (4,128,706

          )Takoda Resources Inc.

          

          

          (2,757,498

          )

          

          

          3,054,532

          

          

          

          161,585

          

          

          

          (2,892,947

          )

          

          

          2,692,828

          

          

          

          2,557,379

          

          

          

          (135,449

          )US Shale Solutions, Inc.

          

          

          (2,186,981

          )

          

          

          6,642,071

          

          

          

          4,455,090

          

          

          

          (2,186,981

          )

          

          

          

          

          

          

          

          

          

          

          TransAmerican Asset Servicing Group, LLC

          

          

          (1,658,078

          )

          

          

          3,534,960

          

          

          

          466,785

          

          

          

          (3,068,175

          )

          

          

          2,970,154

          

          

          

          1,560,057

          

          

          

          (1,410,097

          )Fuse, LLC

          

          

          (1,391,962

          )

          

          

          7,041,962

          

          

          

          5,775,000

          

          

          

          (1,266,962

          )

          

          

          7,050,000

          

          

          

          7,175,000

          

          

          

          125,000Other(1)

          

          

          (2,371,515

          )

          

          

          151,922,378

          

          

          

          141,255,299

          

          

          

          (10,667,079

          )

          

          

          144,727,046

          

          

          

          136,431,482

          

          

          

          (8,295,564

          )Totals

          

          $

          (6,237,328

          )

          

          $

          172,195,903

          

          

          $

          152,113,759

          

          

          $

          (20,082,144

          )

          

          $

          164,035,575

          

          

          $

          150,190,759

          

          

          $

          (13,844,816

          )
  (1)

          Other represents all remaining investments, including U.S. Treasury Bills (if any). Net change in unrealized appreciation (depreciation) of investments was $(12,704,614) for the year ended June 30, 2014 compared to $2,636,310 for the year ended June 30, 2013. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Companys investment portfolio for the year ended June 30, 2014 by portfolio company.
 82    TABLE OF CONTENTS  Portfolio Company

          

          Change in Unrealized Appreciation (Depreciation)

          

          June 30, 2014

          

          June 30, 2013Cost

          

          Fair Value

          

          Unrealized Appreciation (Depreciation)

          

          Cost

          

          Fair Value

          

          Unrealized Appreciation (Depreciation)New Media West, LLC

          

          $

          (3,363,038

          )

          

          $

          8,426,711

          

          

          $

          5,666,679

          

          

          $

          (2,760,032

          )

          

          $

          8,679,679

          

          

          $

          9,282,685

          

          

          $

          603,006Blackstrap Broadcasting, LLC

          

          

          (3,251,689

          )

          

          

          6,595,547

          

          

          

          2,466,841

          

          

          

          (4,128,706

          )

          

          

          6,500,000

          

          

          

          5,622,983

          

          

          

          (877,017

          )Modular Process Control, LLC

          

          

          (2,964,664

          )

          

          

          6,807,837

          

          

          

          3,971,110

          

          

          

          (2,836,727

          )

          

          

          5,941,309

          

          

          

          6,069,246

          

          

          

          127,937ProGrade Ammo Group LLC

          

          

          (2,870,124

          )

          

          

          8,265,226

          

          

          

          4,133,284

          

          

          

          (4,131,942

          )

          

          

          7,473,642

          

          

          

          6,211,824

          

          

          

          (1,261,818

          )General Cannabis Corp

          

          

          1,856,212

          

          

          

          500,000

          

          

          

          2,356,212

          

          

          

          1,856,212

          

          

          

          

          

          

          

          

          

          

          

          Other(1)

          

          

          (2,111,311

          )

          

          

          133,440,254

          

          

          

          131,596,633

          

          

          

          (1,843,621

          )

          

          

          60,720,073

          

          

          

          60,987,763

          

          

          

          267,690Totals

          

          $

          (12,704,614

          )

          

          $

          164,035,575

          

          

          $

          150,190,759

          

          

          $

          (13,844,816

          )

          

          $

          89,314,703

          

          

          $

          88,174,501

          

          

          $

          (1,140,202

          )
 Liquidity and Capital Resources At June 30, 2015, we had investments in debt securities of 32 companies, totaling approximately $133.9 million at fair value, and equity investments in 17 companies, totaling approximately $18.2 million at fair value. The debt investment amount includes approximately $345,219 in accrued PIK interest earned for the year ended June 30, 2015, and $402,385, cumulatively, which is added to the carrying value of our investments. For the year ended June 30, 2015, cash used in operating activities, consisting primarily of net purchases of investments and the items described in Results of Operations, was approximately $31.4 million, reflecting the purchases and repayments of investments, net investment income resulting from operations, offset by non-cash income related to OID income, changes in working capital and accrued interest receivable. Net cash used in purchases and sales of investments was approximately $39.2 million, reflecting additional investments of $137.1 million, offset by principal repayments of $97.9 million. Such amounts are
not inclusive of our purchases or sales of United States Treasury Bills. As of June 30, 2015, we did not have any outstanding borrowings under our senior secured credit facility (the Credit Facility) with Santander Bank, N.A. (Santander Bank), as administrative agent. On November 6, 2013, the Company increased the size of the Credit Facility from $32.5 million to $45.0 million. On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company
has not exercised its option to expand the Credit Facility as of June 30, 2015. In addition, as of June 30, 2015, the Company had $33.6 million in Notes Payable outstanding. At June 30, 2014, we had investments in debt securities of 26 companies, totaling approximately $118.3 million, and equity investments in 13 companies, totaling approximately $6.9 million. The debt investment amount includes approximately $117,500 in accrued PIK interest, which is added to the carrying value of our investments. For the year ended June 30, 2014, cash used in operating activities, consisting primarily of net purchases of investments and the items described in Results of Operations, was approximately $20.7 million, reflecting the net purchases of investments, income resulting from operations, offset by non-cash income related to PIK interest and OID income, changes in working capital and accrued interest receivable. Net cash used for purchases and sales of investments was approximately $50.2 million, reflecting net additional investments in securities of $132.5 million, offset by principal repayments of $82.3 million. Such
amounts are not inclusive of our purchase of United States Treasury Bills or Money Market Funds. As of June 30, 2014, we had $8.4 million of outstanding borrowings under our Credit Facility with Santander Bank, N.A. and $21.1 million of aggregate principal amount of Notes Payable outstanding. As of June 30, 2014, we had no Distribution Notes outstanding. On July 3, 2013, we repaid the Distribution Notes at par plus accrued interest. As a business development company, we generally have an ongoing need to raise additional capital for investment purposes. As a result, we expect, from time to time, to access the debt and equity markets when we believe it is necessary and appropriate to do so. In this regard, we continue to explore various options for obtaining additional debt or equity capital for investments. This may include expanding or extending our
 83    TABLE OF CONTENTS Credit Facility, or the issuance of additional shares of our common stock, possibly at prices below our then current net asset value per share pursuant to a proposal, approved by our stockholders at our most recent Special Meeting of Stockholders, authorizing us to sell shares of our common stock below its then current net asset value per share in one or more offerings for a period of one year or, if earlier, the date of our next Annual Meeting of Shareholders. We would need similar future approval from our stockholders to issue shares below the then current net asset value per share any time after the expiration of the current
approval. If we are unable to obtain leverage or raise equity capital on terms that are acceptable to us, our ability to grow our portfolio will be substantially impacted. Capital Raises On July 14, 2014, we sold 506,000 shares of our common stock at $7.40 per share in a direct registered offering to certain investors for total gross proceeds of approximately $3.7 million. Our non-transferable rights offering to our stockholders of record as of 5:00 p.m., New York City time, on March 6, 2015 expired at 5:00 p.m., New York City time, on March 30, 2015. The rights entitled holders of rights to subscribe for an aggregate of up to 11,949,034 shares of our common stock. Record date stockholders received one right for each share of common stock owned on the record date. The rights entitled the holder to purchase one new share of common stock for every one right held and record date stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and pro-rata
allocation, for additional shares that remain unsubscribed as a result of any unexercised rights. The subscription price per share was $3.50. The net proceeds from this rights offering, after deducting the fee payable to the dealer managers and offering expenses, were approximately $37.8 million, which we received on April 6, 2015. In connection with this rights offering, the dealer manager received a fee for its financial advisory, marketing and soliciting services equal to a maximum of 4.0% of the subscription price per share for each share issued pursuant to the exercise of rights, including pursuant to the over-subscription privilege. We incurred offering expenses, including the dealer manager fee, of $1,401,660 in connection with this rights offering. As part of the rights offering, an institutional investor committed to purchase approximately 214,000 shares in open market transactions over a seven-day period following the expiration date of the rights offering. The institutional investor agreed to acquire the remainder of the 214,000 shares in a private placement directly from the Company to the extent such shares were not purchased in open market transactions during such seven-day period. Subsequent to the seven-day period, on April 13, 2015, such investor acquired 80,475 shares, the remainder of its initial commitment of approximately 214,000 shares, in a private
placement at $3.50 per share directly from the Company. We incurred offering expenses of $3,345 in connection with this offering. Contractual Obligations  Payments Due By Period (dollars in millions)Total

          

          Less than 1 year

          

          1  3 years

          

          3  5 years

          

          More than 5 yearsCredit Facility(1)

          

          $

          

          

          

          $

          

          

          

          $

          

          

          

          $

          

          

          

          $

          Notes

          

          

          33.6

          

          

          

          

          

          

          

          

          

          

          

          33.6

          

          

          

          Total

          

          $

          33.6

          

          

          $

          

          

          

          $

          

          

          

          $

          33.6

          

          

          $

          
  (1)

          On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank, N.A. to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised its option to expand the facility as of June 30, 2015. At June 30, 2015, $45.0 million remained unused under the Credit Facility. In addition to the contractual obligations set forth above, we have certain obligations with respect to the investment advisory and administration services we receive. See Overview. For the years ended June 30, 2015, 2014, and 2013, we incurred fees of $4,078,058, $3,143,056, and $2,771,684, respectively, for
 84    TABLE OF CONTENTS investment advisory services. For the years ended June 30, 2015, 2014, and 2013, we incurred fees of $731,447, $682,662, and $834,577, respectively, for administrative services. As of June 30, 2015, we had approximately $2.7 million in unfunded loan commitments, subject to our approval in certain instances, to provide debt financing to certain of our portfolio companies. Share Repurchase Program On April 7, 2014, the Board of Directors authorized a share repurchase program which provides for the purchase of up to 1 million shares of outstanding common stock to be implemented at the discretion of our management team. On August 26, 2015, the Board of Directors authorized the purchase of an additional 1 million shares to provide for the purchase up to 2 million shares of the outstanding common stock as part of the share repurchase program. Under the repurchase program, we may, but are not obligated to, repurchase our outstanding common stock in the open market from time to time. The timing and number of shares to be
repurchased in the open market will depend on a number of factors, including market conditions and alternative investment opportunities. In addition, any repurchases will be conducted in accordance with the 1940 Act. Off-Balance Sheet Arrangements We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices. Borrowings Secured Revolving Credit Facility.  On June 3, 2013, we entered into a credit agreement with Santander Bank, as administrative agent, which provided us with our $32.5 million Credit Facility. The Credit Facility replaced our prior senior secured revolving credit facility with FCC, LLC d/b/a First Capital. The Credit Facility matures on June 3, 2016 and bears interest based on a tiered rate structure, depending upon utilization, ranging from LIBOR (one month, two month or three month, depending on our option) plus 3.25% to 4.00% per annum, or from Santander Banks prime rate plus 1.25% to 2.00% per annum, based on our election. In addition, a fee of 0.50% per annum is charged on unused amounts under the Credit Facility. The Credit Facility is secured by all of our assets. Under the Credit Facility, we have made certain customary representations and warranties, and are required to comply with various covenants, reporting
requirements and other customary requirements, including a minimum balance sheet leverage ratio, for similar credit facilities. The Credit Facility includes usual and customary events of default for credit facilities of this nature. On November 6, 2013, the Company increased the size of its Credit Facility with Santander Bank from $32.5 million to $45.0 million. On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised its option to expand the Credit Facility as of June 30, 2015. Notes Payable.  On June 28, 2013, we issued approximately $21.1 million in aggregate principal amount of our 8.25% Notes due June 30, 2020 for net proceeds of approximately $20.2 million after deducting underwriting commissions of approximately $0.9 million. Offering expenses of approximately $0.2 million were incurred. The Notes were issued pursuant to an indenture, dated June 3, 2013, as supplemented by the first supplemental indenture, dated June 28, 2013 (collectively, the Indenture), between us and U.S. Bank National Association (the Trustee). The Notes are our unsecured obligations and rank senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including
existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries or financing vehicles. Interest on the Notes is paid quarterly in arrears on March 30, June 30, September 30 and December 30, at a rate of 8.25% per annum, beginning September 30, 2013. The Notes mature on June 30, 2020 and may be redeemed in whole or in part at any time or from time to time at our
 85    TABLE OF CONTENTS option on or after June 30, 2016. The Notes are listed on the NASDAQ Global Market under the trading symbol FULLL with a par value of $25.00 per share. The Indenture contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the Indenture. We may repurchase the Notes in accordance with the 1940 Act and the rules
promulgated thereunder. Any Notes repurchased by us may, at our option, be surrendered to the Trustee for cancellation, but may not be reissued or resold by us. Any Notes surrendered for cancellation will be promptly cancelled and no longer outstanding under the Indenture. As of June 30, 2013, we had not repurchased any of the Notes in the open market. On July 14, 2014, we closed an offering of Notes consisting of $12,500,000 in aggregate principal amount of the Notes. The Notes were sold at price of $25.375 plus accrued interest from June 30, 2014, a premium to par value of $25.00 per Note, for total gross proceeds of approximately $12.7 million. The Notes are a further issuance of, rank equally in right of payment with, and form a single series with the $21,145,525 of outstanding Notes that will mature on June 30, 2020, and may be redeemed in whole or in part at any time or from time to time at our option on or after June 30, 2016. Distribution Notes.  On July 3, 2013, we repaid the $3.4 million of Distribution Notes issued in connection with our initial public offering at par plus accrued interest. As a result, the Distribution Notes are no longer outstanding. Distributions In order to qualify as a regulated investment company and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and short-term capital gains to our stockholders on an annual basis. The following table lists the cash distributions, including dividends and returns of capital, if any, per share that we have declared since our formation on April 16, 2010. The table is divided by fiscal year according to record date.  Date Declared

          

          Record Date

          

          Payment Date

          

          AmountTotal Fiscal 2011

          

          

          

          

          

          

          

          

          

          $

          0.751Total Fiscal 2012

          

          

          

          

          

          

          

          

          

          $

          0.918Total Fiscal 2013

          

          

          

          

          

          

          

          

          

          $

          0.924Total Fiscal 2014

          

          

          

          

          

          

          

          

          

          $

          0.864Fiscal 2015:May 2, 2014

          

          

          July 31, 2014

          

          

          

          August 15, 2014

          

          

          $

          0.067May 2, 2014

          

          

          August 29, 2014

          

          

          

          September 15, 2014

          

          

          

          0.067May 2, 2014

          

          

          September 30, 2014

          

          

          

          October 15, 2014

          

          

          

          0.067September 8, 2014

          

          

          October 31, 2014

          

          

          

          November 14, 2014

          

          

          

          0.067September 8, 2014

          

          

          November 28, 2014

          

          

          

          December 15, 2014

          

          

          

          0.067September 8, 2014

          

          

          December 31, 2014

          

          

          

          January 15, 2015

          

          

          

          0.067November 3, 2014

          

          

          January 30, 2015

          

          

          

          February 13, 2015

          

          

          

          0.067November 3, 2014

          

          

          February 27, 2015

          

          

          

          March 13, 2015

          

          

          

          0.067November 3, 2014

          

          

          March 31, 2015

          

          

          

          April 15, 2015

          

          

          

          0.067February 20, 2015

          

          

          April 30, 2015

          

          

          

          May 15, 2015

          

          

          

          0.035February 20, 2015

          

          

          May 29, 2015

          

          

          

          June 15, 2015

          

          

          

          0.035February 20, 2015

          

          

          June 30, 2015

          

          

          

          July 15, 2015

          

          

          

          0.035Total (2015)

          

          

          

          

          

          

          

          

          

          $

          0.708
 86    TABLE OF CONTENTS Date Declared

          

          Record Date

          

          Payment Date

          

          AmountFiscal 2016:May 5, 2015

          

          

          July 31, 2015

          

          

          

          August 14, 2015

          

          

          $

          0.035May 5, 2015

          

          

          August 31, 2015

          

          

          

          September 15, 2015

          

          

          

          0.035May 5, 2015

          

          

          September 30, 2015

          

          

          

          October 15, 2015

          

          

          

          0.035August 4, 2015

          

          

          October 30, 2015

          

          

          

          November 13, 2015

          

          

          

          0.035August 4, 2015

          

          

          November 30, 2015

          

          

          

          December 15, 2015

          

          

          

          0.035August 4, 2015

          

          

          December 31, 2015

          

          

          

          January 15, 2016

          

          

          

          0.035Total 2016 to date

          

          

          

          

          

          

          

          

          

          $

          0.210
 Related Parties We have entered into a number of business relationships with affiliated or related parties, including the following: 

          We have entered into the Investment Advisory Agreement with Full Circle Advisors. John E. Stuart, our Chairman, and Gregg J. Felton, our Chief Executive Officer and President, are both managing members of, and have financial and controlling interests in, Full Circle Advisors. 

          We have entered into the Administration Agreement with Full Circle Service Company. Pursuant to the terms of the Administration Agreement, Full Circle Service Company provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. Mr. Stuart, our Chairman, and Mr. Felton, our Chief Executive Officer and President, are managing members of, and have financial and controlling interests in, Full Circle Service Company. Our Chief Financial Officer, Michael J. Sell, is the Vice President of Full Circle Service Company. 

          We have entered into a license agreement with Full Circle Advisors, pursuant to which Full Circle Advisors has agreed to grant us a non-exclusive, royalty-free license to use the name Full Circle. 

          Our former Chief Financial Officer, Treasurer and Secretary, William E. Vastardis, is the Chairman of Conifer Asset Solutions LLC (Conifer) formerly known as Vastardis Fund Services LLC. Full Circle Service Company has engaged Conifer to provide certain administrative services to us. For the year ended June 30, 2015, Conifer earned $256,236 for services provided under the Sub-Administration Agreement. On September 30, 2013, Michael J. Sell succeeded Mr. Vastardis as our Chief Financial Officer, Treasurer, and Secretary. FCCIP is a multiple series private fund, for which we serve as the managing member and investment adviser. FCCIP was formed as a Delaware limited liability company and operates under a limited liability company agreement dated June 13, 2014. We may co-invest in certain portfolio investments from time to time with one or more series issued by FCCIP where we determine that the aggregate available investment opportunity exceeds what we believe would be appropriate for us to acquire directly, subject to certain conditions. In addition, we expect to receive certain fees or other distributions for FCCIP in connection with the
services we provide to each series it may issue. Such fees may include management fees, incentive fees and administration fees and could be offset by expense caps or waivers in the future. Certain members of Full Circle Advisors investment committee presently manage Full Circle Funding, LP, a specialty lender serving lower middle-market companies. Although the existing investment funds managed by Full Circle Funding, LP, which currently consist of the Legacy Funds, are no longer making investments in new opportunities, any affiliated investment vehicle formed in the future and managed by our investment adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those
targeted by us. Full Circle Advisors and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Full Circle Advisors or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Full Circle Advisors allocation procedures.
 87    TABLE OF CONTENTS We have also adopted a Code of Ethics which applies to, among others, our senior officers, including our Chairman, Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individuals personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged
with approving any waivers under our Code of Ethics. As required by the NASDAQ corporate governance listing standards, the Audit Committee of our Board of Directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K). Recent Developments Recent Portfolio Activity On July 1, 2015, the Company issued a $6.0 million mortgage note to 310E53RD, LLC, a real estate holding company. The note bears interest at LIBOR plus 10.00% with a LIBOR floor of 0.15% and has a final maturity of July 1, 2017. On July 1, 2015, the senior secured credit facility and revolving commitment with Butler Burger Group, LLC, was fully repaid at par plus accrued interest and fees for total proceeds of $8,628,197. On July 17, 2015, the Company purchased $3.0 million of a $175.0 million senior secured term loan to Liquidnet Holdings, Inc., an equities trading platform, at 96.375% of par. The credit facility bears interest at LIBOR plus 6.75% with a LIBOR floor of 1.00% and has a final maturity of May 22, 2019. On July 31, 2015, the Company purchased an additional $1.0 million of senior secured notes to Lee Enterprises, Incorporated, a daily and weekly newspaper publisher. The notes bear interest at 9.50% and have a final maturity of March 15, 2022. On August 26, 2015, the Board of Directors authorized the purchase of an additional 1 million shares to provide for the purchase up to 2 million shares of the outstanding common stock as part of the share repurchase program. On September 3, 2015, the senior secured credit facility with GW Power, LLC and Greenwood Fuels WI, LLC was partially repaid for total proceeds of $2,200,000. On September 4, 2015, Blackberry Ltd announced that it has entered into a definitive agreement to acquire Good Technology Corporation for $425 million in cash. Upon closing of the transaction, the Company is expected to receive an $11 million repayment on its first lien notes, which would reflect a 110% redemption on the Companys initial investment. The Company has not received an indication of what value, if any, is expected to be received related to the warrants. On September 10, 2015, the Company sold the full $2,000,000 at the second lien term loan with GK Holdings, Inc. for total proceeds of $1,955,000 plus accured interest. Distribution On August 4, 2015, the Board of Directors declared the following monthly distributions:  Record Date

          

          Payment Date

          

          Per Share AmountOctober 30, 2015

          

          

          November 13, 2015

          

          

          $

          0.035November 30, 2015

          

          

          December 15, 2015

          

          

          $

          0.035December 31, 2015

          

          

          January 15, 2016

          

          

          $

          0.035
 88    TABLE OF CONTENTS Item 7A.  Quantitative and Qualitative Disclosures about Market Risk We are subject to financial market risks, including changes in interest rates. As of June 30, 2015, 10 debt investments in our portfolio bore interest at a fixed rate, and the remaining 33 debt investments were at variable rates, representing approximately $36.0 million and $97.9 million in principal debt, respectively. The variable rates are based upon LIBOR. To illustrate the potential impact of a change in the underlying interest rate on our net investment income, we have assumed a 1%, 2%, and 3% increase and 1%, 2%, and 3% decrease in the underlying Prime Rate or LIBOR, and no other change in our portfolio as of June 30, 2015. We have also assumed that there are no outstanding floating rate borrowings by the Company. See the below table for the effect the rate changes would have on net investment income.  LIBOR or Prime Rate Increase (Decrease)

          

          Increase (decrease) of Net Investment Income (in millions)3.00%

          

          $

          2.52.00%

          

          $

          1.51.00%

          

          $

          0.6(1.00)%

          

          $

          (0.1

          )(2.00)%

          

          $

          (0.2

          )(3.00)%

          

          $

          (0.3

          )
 Although management believes that this analysis is indicative of our existing interest rate sensitivity at June 30, 2015, it does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments, including borrowing under a credit facility, that could affect the net increase in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis. We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.
 89    TABLE OF CONTENTS Item 8.  Consolidated Financial Statements and Supplementary Data Index to Consolidated Financial Statements  PageReports of Independent Registered Public Accounting Firms





91Consolidated Statements of Assets and Liabilities as of June 30, 2015 and June 30, 2014





95Consolidated Statements of Operations for the years ended June 30, 2015, June 30, 2014, and June 30, 2013





96Consolidated Statements of Changes in Net Assets for the years ended June 30, 2015, June 30, 2014, and June 30, 2013





97Consolidated Statements of Cash Flows for the years ended June 30, 2015, June 30, 2014, and June 30, 2013





98Consolidated Schedules of Investments as of June 30, 2015 and June 30, 2014





100Notes to Consolidated Financial Statements





113
 90    TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm The Board of Directors and StockholdersFull Circle Capital Corporation and Subsidiaries: We have audited the accompanying consolidated statement of assets and liabilities of Full Circle Capital Corporation and Subsidiaries (the Company), including the consolidated schedule of investments, as of June 30, 2015, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of June 30, 2015 by correspondence with the custodians, loan agents, or borrowers as applicable, or by other appropriate auditing procedures where replies from
these parties, as applicable, were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Full Circle Capital Corporation and its Subsidiaries as of June 30, 2015, and the results of their operations, changes in net assets and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Full Circle Capital Corporation and Subsidiaries internal control over financial reporting as of June 30, 2015, based on criteria established in Internal Control  Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013, and our report dated September 14, 2015 expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting. /s/ McGladrey LLPNew York, New YorkSeptember 14, 2015
 91    TABLE OF CONTENTS Report of Independent Registered Public Accounting FirmOn Internal Control Over Financial Reporting The Board of Directors and StockholdersFull Circle Capital Corporation and Subsidiaries: We have audited Full Circle Capital Corporation and Subsidiaries (the Company) internal control over financial reporting as of June 30, 2015, based on criteria established in Internal Control  Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Full Circle Capital Corporation and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2015, based on criteria established in Internal Control  Integrated Framework, issued by COSO in 2013. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of assets and liabilities of Full Circle Capital Corporation and Subsidiaries, including the consolidated schedule of investments, as of June 30, 2015, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended and our report dated September 14, 2015 expressed an unqualified opinion. /s/ McGladrey LLPNew York, New YorkSeptember 14, 2015
 92    TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders Full Circle Capital Corporation: We have audited the accompanying consolidated statement of assets and liabilities of Full Circle Capital Corporation (the Company), including the consolidated schedule of investments, as of June 30, 2014, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securities owned as of June 30, 2014, by correspondence with custodians, or by other appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Full Circle Capital Corporation as of June 30, 2014, and the results of its operations, the changes in its net assets and cash flows for the year ended June 30, 2014, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP  New York, New York September 22, 2014
 93    TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Full Circle Capital Corporation We have audited the accompanying consolidated statements of operations, changes in net assets, and cash flows for the year ended June 30, 2013. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2013 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above of the Full Circle Capital Corporation, present fairly, in all material respects, the results of their operations and their cash flows for the year ended June 30, 2013, in conformity with accounting principles generally accepted in the United States of America. /s/ Rothstein Kass Roseland, New Jersey September 12, 2013
 94    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES  June 30, 2015

          

          June 30, 2014AssetsControl Investments at Fair Value (Cost of $11,409,596 and $20,253,149, respectively)

          

          

          

          

          

          $

          5,812,064

          

          

          $

          17,539,057Affiliate Investments at Fair Value (Cost of $24,434,726 and $20,177,115, respectively)

          

          

          

          

          

          

          16,019,272

          

          

          

          14,588,417Non-Control/Non-Affiliate Investments at Fair Value (Cost of $136,351,581 and $123,605,311, respectively)

          

          

          

          

          

          

          130,282,423

          

          

          

          118,063,285Total Investments at Fair Value (Cost of $172,195,903 and $164,035,575, respectively)

          

          

          (NOTE 9)

          

          

          

          152,113,759

          

          

          

          150,190,759Open Swap Contract Asset, at Fair Value

          

          

          (NOTE 10

          )

          

          

          

          

          

          

          Cash

          

          

          

          

          

          

          3,736,563

          

          

          

          Deposit with Broker

          

          

          

          

          

          

          

          

          

          

          2,525,000Interest Receivable

          

          

          

          

          

          

          1,903,606

          

          

          

          1,016,726Principal Receivable

          

          

          

          

          

          

          23,287

          

          

          

          207,233Distributions Receivable

          

          

          

          

          

          

          15,141

          

          

          

          Due from Affiliates

          

          

          

          

          

          

          605,749

          

          

          

          4,273Due from Portfolio Investments

          

          

          

          

          

          

          180,300

          

          

          

          135,288Receivable on Swap Contract

          

          

          

          

          

          

          1,081

          

          

          

          Prepaid Expenses

          

          

          

          

          

          

          66,105

          

          

          

          57,470Other Assets

          

          

          

          

          

          

          1,483,578

          

          

          

          750,326Deferred Offering Expenses

          

          

          

          

          

          

          328,168

          

          

          

          Deferred Credit Facility Fees

          

          

          (NOTE 8)

          

          

          

          267,645

          

          

          

          449,350Total Assets

          

          

          

          

          

          

          160,724,982

          

          

          

          155,336,425LiabilitiesDue to Affiliates

          

          

          (NOTE 5)

          

          

          

          1,052,489

          

          

          

          891,966Bank Overdraft

          

          

          

          

          

          

          

          

          

          

          821,316Accrued Liabilities

          

          

          

          

          

          

          179,378

          

          

          

          184,857Deposit from Swap Counterparty

          

          

          

          

          

          

          10,380,000Due to Broker

          

          

          

          

          

          

          

          

          

          

          25,000,221Payable for Investments Acquired

          

          

          

          

          

          

          15,020,000

          

          

          

          24,900,172Distributions Payable

          

          

          

          

          

          

          813,240

          

          

          

          766,683Interest Payable

          

          

          

          

          

          

          57,605

          

          

          

          45,254Other Liabilities

          

          

          

          

          

          

          305,957

          

          

          

          1,076,800Accrued Offering Expenses

          

          

          

          

          

          

          7,258

          

          

          

          35,828Line of Credit

          

          

          (NOTE 8)

          

          

          

          

          

          

          

          8,435,463Notes Payable 8.25% due June 30, 2020 (plus unamortized premium of $158,504 and $0 and less deferred debt issuance costs of $833,541 and $947,937, respectively.

          

          

          (NOTE 8)

          

          

          

          32,970,488

          

          

          

          20,197,588Total Liabilities

          

          

          

          

          

          

          60,786,415

          

          

          

          82,356,148Commitments and contingencies

          

          

          (NOTE 12)

          

          

          

          

          

          

          

          Net Assets

          

          

          

          

          

          $

          99,938,567

          

          

          $

          72,980,277Components of Net AssetsCommon Stock, par value $0.01 per share (100,000,000 authorized; 23,235,430 and 11,443,034 issued and outstanding, respectively)

          

          

          

          

          

          $

          232,354

          

          

          $

          114,430Paid-in Capital in Excess of Par

          

          

          

          

          

          

          132,487,067

          

          

          

          92,103,666Distributions in Excess of Net Investment Income

          

          

          

          

          

          

          (119,318

          )

          

          

          (131,251

          )Accumulated Net Realized Losses

          

          

          

          

          

          

          (12,579,392

          )

          

          

          (5,261,752

          )Accumulated Net Unrealized Losses

          

          

          

          

          

          

          (20,082,144

          )

          

          

          (13,844,816

          )Net Assets

          

          

          

          

          

          $

          99,938,567

          

          

          $

          72,980,277Net Asset Value Per Share

          

          

          

          

          

          $

          4.30

          

          

          $

          6.38
 See Notes to Consolidated Financial Statements.
 95    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Investment IncomeInterest Income from Non-Control/Non-Affiliate Investments

          

          

          

          

          

          $

          13,044,316

          

          

          $

          6,486,729

          

          

          $

          7,400,633Interest Income from Affiliate Investments

          

          

          

          

          

          

          2,445,713

          

          

          

          2,701,361

          

          

          

          1,587,281Interest Income from Control Investments

          

          

          

          

          

          

          1,465,069

          

          

          

          1,963,407

          

          

          

          1,504,343Dividend Income from Control Investments

          

          

          

          

          

          

          36,247

          

          

          

          114,704

          

          

          

          223,474Other Income from Non-Control/Non-Affiliate Investments

          

          

          

          

          

          

          542,164

          

          

          

          2,487,959

          

          

          

          1,136,661Other Income from Affiliate Investments

          

          

          

          

          

          

          98,671

          

          

          

          16,592

          

          

          

          143,631Other Income from Control Investments

          

          

          

          

          

          

          50,000

          

          

          

          50,000

          

          

          

          50,000Other Income from Non-Investment Sources

          

          

          

          

          

          

          67,163

          

          

          

          2,941

          

          

          

          Total Investment Income

          

          

          

          

          

          

          17,749,343

          

          

          

          13,823,693

          

          

          

          12,046,023Operating ExpensesManagement Fee

          

          

          

          

          

          

          2,280,058

          

          

          

          1,631,694

          

          

          

          1,431,851Incentive Fee

          

          

          

          

          

          

          1,798,000

          

          

          

          1,511,362

          

          

          

          1,339,833Total Advisory Fees

          

          

          (NOTE 5)

          

          

          

          4,078,058

          

          

          

          3,143,056

          

          

          

          2,771,684Allocation of Overhead Expenses

          

          

          

          

          

          

          171,559

          

          

          

          180,737

          

          

          

          310,412Sub-Administration Fees

          

          

          

          

          

          

          256,236

          

          

          

          200,000

          

          

          

          223,429Officers Compensation

          

          

          

          

          

          

          303,652

          

          

          

          301,925

          

          

          

          300,736Total Costs Incurred Under Administration Agreement

          

          

          (NOTE 5)

          

          

          

          731,447

          

          

          

          682,662

          

          

          

          834,577Directors Fees

          

          

          

          

          

          

          182,196

          

          

          

          127,625

          

          

          

          124,500Interest Expenses

          

          

          (NOTE 8)

          

          

          

          4,305,558

          

          

          

          2,693,487

          

          

          

          1,854,495Professional Services Expense

          

          

          

          

          

          

          700,324

          

          

          

          610,362

          

          

          

          567,126Bank Fees

          

          

          

          

          

          

          39,931

          

          

          

          56,184

          

          

          

          16,429Tax Expenses

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          4,369Other

          

          

          

          

          

          

          519,600

          

          

          

          479,596

          

          

          

          492,262Total Gross Operating Expenses

          

          

          

          

          

          

          10,557,114

          

          

          

          7,792,972

          

          

          

          6,665,442Management Fee Waiver and Expense Reimbursement

          

          

          (NOTE 5)

          

          

          

          (1,420,843

          )

          

          

          

          

          

          

          Total Net Operating Expenses

          

          

          

          

          

          

          9,136,271

          

          

          

          7,792,972

          

          

          

          6,665,442Net Investment Income

          

          

          

          

          

          

          8,613,072

          

          

          

          6,030,721

          

          

          

          5,380,581Net Change in Unrealized Gain (Loss) on Investments

          

          

          

          

          

          

          (6,237,328

          )

          

          

          (12,704,614

          )

          

          

          2,636,310Net Realized Gain (Loss) on:Non-Control/Non-Affiliate Investments

          

          

          

          

          

          

          (4,055,309

          )

          

          

          (947,601

          )

          

          

          (4,250,076

          )Affiliate Investments

          

          

          

          

          

          

          321,394

          

          

          

          

          

          

          

          7,846Control Investments

          

          

          

          

          

          

          (3,842,390

          )

          

          

          

          

          

          

          26,482Swap Contract

          

          

          

          

          

          

          1,081

          

          

          

          

          

          

          

          Foreign Currency Transactions

          

          

          

          

          

          

          (1,248

          )

          

          

          (901

          )

          

          

          Net Realized Gain (Loss)

          

          

          

          

          

          

          (7,576,472

          )

          

          

          (948,502

          )

          

          

          (4,215,748

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

          

          

          

          

          

          $

          (5,200,728

          )

          

          $

          (7,622,395

          )

          

          $

          3,801,143Earnings (Loss) per Common Share Basic and Diluted

          

          

          (NOTE 4)

          

          

          $

          (0.35

          )

          

          $

          (0.88

          )

          

          $

          0.54Net Investment Income per Common Share Basic and Diluted

          

          

          

          

          

          $

          0.63

          

          

          $

          0.71

          

          

          $

          0.77Weighted Average Shares of Common Stock Outstanding Basic and Diluted

          

          

          

          

          

          

          14,803,637

          

          

          

          8,698,814

          

          

          

          7,018,286
 See Notes to Consolidated Financial Statements.
 96    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Increase (Decrease) in Net Assets Resulting from Operations:Net Investment Income

          

          $

          8,613,072

          

          

          $

          6,030,721

          

          

          $

          5,380,581Net Change in Unrealized Gain (Loss) on Investments

          

          

          (6,237,328

          )

          

          

          (12,704,614

          )

          

          

          2,636,310Net Realized Gain (Loss) on:Investments and Swap Contract

          

          

          (7,575,224

          )

          

          

          (947,601

          )

          

          

          (4,215,748

          )Foreign Currency Transactions

          

          

          (1,248

          )

          

          

          (901

          )

          

          

          Net Realized Gain (Loss)

          

          

          (7,576,472

          )

          

          

          (948,502

          )

          

          

          (4,215,748

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

          

          

          (5,200,728

          )

          

          

          (7,622,395

          )

          

          

          3,801,143Dividends from Net Investment Income

          

          

          (8,613,072

          )

          

          

          (6,030,721

          )

          

          

          (5,380,581

          )Distributions from Other Sources

          

          

          (1,031,916

          )

          

          

          (1,529,310

          )

          

          

          (1,197,728

          )Net Decrease in Net Assets Resulting from Distributions

          

          

          (9,644,988

          )

          

          

          (7,560,031

          )

          

          

          (6,578,309

          )Capital Share Transactions:Issuance of Common Stock

          

          

          43,246,786

          

          

          

          28,412,404

          

          

          

          10,665,000Less Offering Costs and Underwriting Fees

          

          

          (1,442,780

          )

          

          

          (893,740

          )

          

          

          (686,580

          )Net Increase in Net Assets Resulting from Capital Share Transactions

          

          

          41,804,006

          

          

          

          27,518,664

          

          

          

          9,978,420Total Increase (Decrease) in Net Assets

          

          

          26,958,290

          

          

          

          12,336,238

          

          

          

          7,201,254Net Assets at Beginning of Year

          

          

          72,980,277

          

          

          

          60,644,039

          

          

          

          53,442,785Net Assets at End of Year

          

          $

          99,938,567

          

          

          $

          72,980,277

          

          

          $

          60,644,039Capital Share Activity:Shares Issued

          

          

          11,792,396

          

          

          

          3,873,652

          

          

          

          1,350,000Shares Outstanding at Beginning of Year

          

          

          11,443,034

          

          

          

          7,569,382

          

          

          

          6,219,382Shares Outstanding at End of Year

          

          

          23,235,430

          

          

          

          11,443,034

          

          

          

          7,569,382
 See Notes to Consolidated Financial Statements.
 97    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Cash Flows from Operating Activities:Net Increase (Decrease) in Net Assets Resulting from Operations

          

          $

          (5,200,728

          )

          

          $

          (7,622,395

          )

          

          $

          3,801,143Adjustments to Reconcile Net Increase (Decrease) in Net Assets Resulting from Operations to Net Cash Provided by (Used in) Operating ActivitiesPurchases of Investments

          

          

          (136,691,882

          )

          

          

          (203,387,193

          )

          

          

          (137,146,751

          )Increase in Investments Due to PIK

          

          

          (429,720

          )

          

          

          (117,500

          )Proceeds from Sale or Refinancing of Investments

          

          

          122,880,572

          

          

          

          128,301,503

          

          

          

          142,607,861Net Realized (Gain) Loss on:Investments and Swap Contract

          

          

          7,575,224

          

          

          

          947,601

          

          

          

          4,215,748Foreign Currency Transactions

          

          

          1,248

          

          

          

          901

          

          

          

          Net Change in Unrealized (Gain) Loss on Investments

          

          

          6,237,328

          

          

          

          12,704,614

          

          

          

          (2,636,310

          )Amortization and Accretion of Fixed Income Premiums and Discounts

          

          

          (1,496,851

          )

          

          

          (466,184

          )

          

          

          (368,279

          )Amortization and Accretion of Deferred Debt Issuance Premiums and Costs

          

          

          129,066

          

          

          

          158,060

          

          

          

          1,277Amortization of Deferred Credit Facility Fees

          

          

          274,826

          

          

          

          279,561

          

          

          

          16,950Change in Operating Assets and LiabilitiesDeposit with Broker

          

          

          2,525,000

          

          

          

          (2,525,000

          )

          

          

          2,350,000Interest Receivable

          

          

          (886,880

          )

          

          

          81,244

          

          

          

          (195,259

          )Principal Receivable

          

          

          183,946

          

          

          

          (102,465

          )

          

          

          408,604Distributions Receivable

          

          

          (15,141

          )

          

          

          36,705

          

          

          

          (36,705

          )Due from Affiliates

          

          

          (601,476

          )

          

          

          (4,273

          )

          

          

          Due from Portfolio Investment

          

          

          (45,012

          )

          

          

          (30,258

          )

          

          

          (93,890

          )Prepaid Expenses

          

          

          (8,635

          )

          

          

          3,728

          

          

          

          (18,145

          )Other Assets

          

          

          (733,252

          )

          

          

          686,947

          

          

          

          (1,411,774

          )Due to Affiliates

          

          

          160,523

          

          

          

          163,595

          

          

          

          148,018Accrued Liabilities

          

          

          (5,479

          )

          

          

          (296,612

          )

          

          

          286,077Deposit from Swap Counterparty

          

          

          10,380,000

          

          

          

          

          

          

          

          Due to Broker

          

          

          (25,000,221

          )

          

          

          25,000,221

          

          

          

          (22,500,041

          )Payable for Investments Acquired

          

          

          (9,880,172

          )

          

          

          24,900,172

          

          

          

          Interest Payable

          

          

          12,351

          

          

          

          (88,913

          )

          

          

          (8,351

          )Other Liabilities

          

          

          (770,843

          )

          

          

          718,104

          

          

          

          218,238Net Cash Provided by (Used in) Operating Activities

          

          

          (31,406,208

          )

          

          

          (20,657,837

          )

          

          

          (10,361,589

          )Cash Flows from Financing Activities:Bank Overdraft

          

          

          (821,316

          )

          

          

          821,316

          

          

          

          Borrowings Under Credit Facility

          

          

          200,789,889

          

          

          

          133,483,457

          

          

          

          98,538,884Payments Under Credit Facility

          

          

          (209,225,352

          )

          

          

          (150,632,141

          )

          

          

          (91,499,397

          )Distributions Paid to Shareholders

          

          

          (9,598,431

          )

          

          

          (7,376,190

          )

          

          

          (6,474,359

          )Deferred Credit Facility Fees

          

          

          (93,121

          )

          

          

          (185,065

          )

          

          

          (510,796

          )Payment of Offering Expenses and Underwriting Fees

          

          

          (1,799,518

          )

          

          

          (771,078

          )

          

          

          (725,426

          )Payment of Distribution Notes

          

          

          

          

          

          

          (3,404,583

          )

          

          

          Proceeds from Notes Payable

          

          

          12,643,834

          

          

          

          2,280,602

          

          

          

          17,757,649Proceeds from Issuance of Common Stock

          

          

          43,246,786

          

          

          

          28,412,404

          

          

          

          10,665,000Net Cash Provided by (Used in) Financing Activities

          

          

          35,142,771

          

          

          

          2,628,722

          

          

          

          27,751,555Total Increase (Decrease) in Cash

          

          

          3,736,563

          

          

          

          (18,029,115

          )

          

          

          17,389,966Cash Balance at Beginning of Year

          

          

          

          

          

          

          18,029,115

          

          

          

          639,149Cash Balance at End of Year

          

          $

          3,736,563

          

          

          $

          

          

          

          $

          18,029,115
 See Notes to Consolidated Financial Statements.
 98    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Supplemental Disclosure of Non-Cash Operating Activities:Exercise of General Cannabis Corp. warrant into common stock

          

          $

          486,786

          

          

          $

          

          

          

          $

          Supplemental Disclosures of Non-Cash Financing Activities:Distributions Declared, Not Yet Paid

          

          $

          813,240

          

          

          $

          766,683

          

          

          $

          582,842Accrued Offering Expenses

          

          $

          7,258

          

          

          $

          35,828

          

          

          $

          Supplemental Disclosure of Cash Flow Information:Cash Paid During the Period for Interest

          

          $

          3,889,315

          

          

          $

          2,344,779

          

          

          $

          1,844,619
 See Notes to Consolidated Financial Statements.
 99    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED SCHEDULE OF INVESTMENTS June 30, 2015  Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueControl Investments(3)Takoda Resources Inc.* Geophysical Surveying and Mapping Services

          

          

          Senior Secured Term Loan, 16.00%, 4/1/2016(9)

          

          

          $

          3,054,532

          

          

          $

          3,054,532

          

          

          $

          161,585

          

          

          

          0.16

          %Common Stock,(5)

          

          

          

          749

          

          

          

          

          

          

          

          

          

          

          

          

          %3,054,532

          

          

          

          161,585

          

          

          

          0.16

          %Texas Westchester Financial, LLC Consumer Financing

          

          

          Limited Liability Company Interests

          

          

          

          9,278

          

          

          

          491,713

          

          

          

          177,500

          

          

          

          0.18

          %The Finance Company, LLC Consumer Financing

          

          

          Senior Secured Term Loan, 15.00% (one month LIBOR plus 14.25%, 15.00% floor), 9/30/2015

          

          

          $

          4,195,915

          

          

          

          4,187,977

          

          

          

          4,204,167

          

          

          

          4.21

          %Limited Liability Company Interests

          

          

          

          50

          

          

          

          140,414

          

          

          

          802,027

          

          

          

          0.80

          %4,328,391

          

          

          

          5,006,194

          

          

          

          5.01

          %TransAmerican Asset Servicing Group, LLC Asset Recovery Services

          

          

          Senior Secured Revolving Loan, 12.00%, 7/25/2016(9)

          

          

          $

          3,563,246

          

          

          

          3,534,960

          

          

          

          466,785

          

          

          

          0.47

          %Limited Liability Company Interests,(6)

          

          

          

          75

          

          

          

          

          

          

          

          

          

          

          

          

          %3,534,960

          

          

          

          466,785

          

          

          

          0.47

          %Total Control Investments

          

          

          

          

          

          

          

          

          

          

          11,409,596

          

          

          

          5,812,064

          

          

          

          5.82

          %Affiliate Investments(4)Modular Process Control, LLC Energy Efficiency Services

          

          

          Senior Secured Revolving Loan, 14.50% (one month LIBOR plus 13.50%, 14.50% floor), 3/28/2017

          

          

          $

          1,297,884

          

          

          

          1,294,200

          

          

          

          1,175,320

          

          

          

          1.18

          %Senior Secured Term Loan, 15.50% (one month LIBOR plus 14.50%, 15.50% floor), 3/28/2017

          

          

          $

          4,900,000

          

          

          

          4,743,125

          

          

          

          2,296,957

          

          

          

          2.30

          %Senior Secured Term Loan  Tranche 2, 18.00% (one month LIBOR plus 17.00%, 18.00% floor), 3/28/2017**

          

          

          $

          953,143

          

          

          

          953,143

          

          

          

          191,550

          

          

          

          0.19

          %Warrant for 14.50% of the outstanding Class B LLC Interests (at a $0.01 strike price), expires 3/28/2023

          

          

          

          1

          

          

          

          288,000

          

          

          

          

          

          

          

          

          %7,278,468

          

          

          

          3,663,827

          

          

          

          3.67

          %ProGrade Ammo Group, LLC Munitions

          

          

          Senior Secured Revolving Loan, 9.19% (one month LIBOR plus 9.00%, 9.19% floor), 3/30/2016(9)

          

          

          $

          1,821,447

          

          

          

          1,821,447

          

          

          

          1,821,447

          

          

          

          1.82

          %Senior Secured Term Loan, 16.19% (one month LIBOR plus 16.00%, 16.19% floor), 3/30/2016(9)

          

          

          $

          4,843,750

          

          

          

          4,843,750

          

          

          

          768,862

          

          

          

          0.77

          %Warrants for 19.9% of the outstanding LLC interests (at a $10.00 strike price), expire 8/2/2018

          

          

          

          181,240

          

          

          

          176,770

          

          

          

          

          

          

          

          

          %6,841,967

          

          

          

          2,590,309

          

          

          

          2.59

          %
 See Notes to Consolidated Financial Statements.
 100    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015  Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueAffiliate Investments (continued)SOLEX Fine Foods, LLC; Catsmo, LLC Food Distributors and Wholesalers

          

          

          Senior Secured Term Loan, 12.33% (one month LIBOR plus 12.14%), 12/28/2016

          

          

          $

          3,861,696

          

          

          $

          3,814,813

          

          

          $

          3,832,347

          

          

          

          3.83

          %Limited Liability Company Interests,(7)

          

          

          

          1

          

          

          

          290,284

          

          

          

          

          

          

          

          

          %Warrants for 1.6% of the outstanding LLC interests (strike price $0.01), expire 12/31/2022,(7)

          

          

          

          1

          

          

          

          58,055

          

          

          

          

          

          

          

          

          %4,163,152

          

          

          

          3,832,347

          

          

          

          3.83

          %US Oilfield Company, LLC Oil and Gas Field Services

          

          

          Senior Secured Revolving Loan, 12.69% (one month LIBOR plus 12.50%), 8/13/2017

          

          

          $

          545,118

          

          

          

          545,118

          

          

          

          545,118

          

          

          

          0.55

          %Senior Secured Term Loan A, 12.69% (one month LIBOR plus 12.50%), 8/13/2017

          

          

          $

          854,167

          

          

          

          847,155

          

          

          

          840,415

          

          

          

          0.84

          %Senior Secured Term Loan B, 12.69% (one month LIBOR plus 12.50%), 8/13/2017

          

          

          $

          4,368,132

          

          

          

          4,328,366

          

          

          

          4,297,805

          

          

          

          4.30

          %Warrant for 7.625% of the outstanding Class A voting LLC interests (strike price $0.01), expires 8/13/2024

          

          

          

          1

          

          

          

          

          

          

          

          

          

          

          

          

          %Warrants for 1.824% of the outstanding Class B non-voting LLC interests (strike price $0.01), expires 8/13/2024

          

          

          

          2

          

          

          

          

          

          

          

          

          

          

          

          5,720,639

          

          

          

          5,683,338

          

          

          

          5.69

          %West World Media, LLC Information and Data Services

          

          

          Limited Liability Company Interests,(8)

          

          

          

          148,326

          

          

          

          430,500

          

          

          

          249,451

          

          

          

          0.25

          %Total Affiliate Investments

          

          

          

          

          

          

          

          

          

          

          24,434,726

          

          

          

          16,019,272

          

          

          

          16.03

          %Other InvestmentsAds Direct Media, Inc. Internet Advertising

          

          

          Senior Secured Term Loan, 13.50% (one month LIBOR plus 13.00%, 13.50% floor) 10/9/2017

          

          

          $

          2,406,250

          

          

          

          2,387,763

          

          

          

          2,392,294

          

          

          

          2.39

          %Warrant for 3.25% of outstanding LLC interests (strike price $0.01) expires 10/9/2024

          

          

          

          1

          

          

          

          

          

          

          

          

          

          

          

          

          %2,387,763

          

          

          

          2,392,294

          

          

          

          2.39

          %AP Gaming I, LLC Gambling Machine Manufacturer

          

          

          Unfunded Revolving Loan, 8.25%, 12/20/2018(10)

          

          

          $

          

          

          

          

          (146,988

          )

          

          

          (146,988

          )

          

          

          (0.15

          )%Senior Secured Term Loan, 9.25% (one month LIBOR plus 8.25%, 9.25% floor) 12/20/2020

          

          

          $

          3,989,873

          

          

          

          3,950,167

          

          

          

          3,950,167

          

          

          

          3.95

          %3,803,179

          

          

          

          3,803,179

          

          

          

          3.80

          %Attention Transit Advertising Systems, LLC Outdoor Advertising Services

          

          

          Senior Secured Term Loan, 11.50%, 9/30/2016

          

          

          $

          1,915,341

          

          

          

          1,915,341

          

          

          

          1,979,058

          

          

          

          1.98%
 See Notes to Consolidated Financial Statements.
 101    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015 Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueOther Investments (continued)Background Images, Inc. Equipment Rental Services

          

          

          Senior Secured Term Loan  Term A, 14.69% (one month LIBOR plus 14.50%), 7/31/2015

          

          

          $

          132,866

          

          

          

          132,866

          

          

          

          146,525

          

          

          

          0.15

          %Senior Secured Term Loan   Term B, 16.44% (one month LIBOR plus 16.25%), 7/31/2015

          

          

          $

          485,725

          

          

          $

          485,725

          

          

          $

          493,449

          

          

          

          0.49

          %618,591

          

          

          

          639,974

          

          

          

          0.64

          %Bioventus, LLC Specialty Pharmaceuticals

          

          

          Subordinated Secured Term Loan, 11.00% (one month LIBOR plus 10.00%, 11.00% floor), 4/10/2020

          

          

          $

          6,000,000

          

          

          

          5,944,426

          

          

          

          5,970,000

          

          

          

          5.97

          %Butler Burgher Group, LLC Real Estate Management Services

          

          

          Senior Secured Revolving Loan, 13.50% (one month LIBOR plus 13.25%, 13.50% floor), 6/30/2017

          

          

          $

          750,000

          

          

          

          745,237

          

          

          

          800,000

          

          

          

          0.80

          %Senior Secured Term Loan, 13.50% (one month LIBOR plus 13.25%, 13.50% floor), 6/30/2017

          

          

          $

          7,349,264

          

          

          

          7,302,515

          

          

          

          7,716,728

          

          

          

          7.72

          %8,047,752

          

          

          

          8,516,728

          

          

          

          8.52

          %Davidzon Radio, Inc. Radio Broadcasting

          

          

          Senior Secured Term Loan, 11.00% (one month LIBOR plus 10.00%, 11.00% floor), 3/31/2020

          

          

          $

          10,897,013

          

          

          

          8,991,089

          

          

          

          9,262,098

          

          

          

          9.27

          %Fuse, LLC Television Programming

          

          

          Senior Secured Note, 10.375%, 7/1/2019

          

          

          $

          7,000,000

          

          

          

          7,041,962

          

          

          

          5,775,000

          

          

          

          5.78

          %GC Pivotal, LLC Data Connectivity Services Company

          

          

          Unsecured Notes, 11.00%, 12/31/2020

          

          

          $

          3,164,000

          

          

          

          3,171,910

          

          

          

          3,171,910

          

          

          

          3.17

          %General Cannabis Corp. Non-Residential Property Owner

          

          

          Common Stock

          

          

          

          654,409

          

          

          

          515,094

          

          

          

          1,308,818

          

          

          

          1.31

          %GK Holdings Inc. IT and Business Skill Training

          

          

          Subordinated Secured Term Loan, 10.50% (one month LIBOR plus 9.50%, 10.50% floor), 1/20/2022

          

          

          $

          2,000,000

          

          

          

          1,962,074

          

          

          

          1,980,000

          

          

          

          1.98

          %Good Technology Corporation Mobile Device Management

          

          

          Senior Secured Note, 5.00%, 10/1/2017

          

          

          $

          10,000,000

          

          

          

          8,201,173

          

          

          

          8,845,667

          

          

          

          8.85

          %Warrants for 203.252 shares (at a $4.92 strike price), expire 9/30/2018

          

          

          

          10,000

          

          

          

          2,289,400

          

          

          

          2,289,400

          

          

          

          2.29

          %10,490,573

          

          

          

          11,135,067

          

          

          

          11.14

          %Granite Ridge Energy, LLC Power Generation

          

          

          Common Stock

          

          

          

          60,000

          

          

          

          12,975,000

          

          

          

          12,975,000

          

          

          

          12.98

          %GW Power, LLC and Greenwood Fuels WI, LLC Electric Services

          

          

          Senior Secured Term Loan, 12.19% (one month LIBOR plus 12.00%, 12.16% floor), 3/31/2016

          

          

          $

          5,320,388

          

          

          

          5,299,835

          

          

          

          5,255,480

          

          

          

          5.26

          %Infinite Aegis Group, LLC Healthcare Billing and Collections

          

          

          Warrant for 2.0% of the outstanding LLC interests (at a $0.01 strike price), expires 8/1/2023

          

          

          

          1

          

          

          

          107,349

          

          

          

          

          

          

          

          %
 See Notes to Consolidated Financial Statements.
 102    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015 Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueOther Investments (continued)JN Medical Corporation Biological Products

          

          

          Senior Secured Term Loan, 11.25%, (one month LIBOR plus 11.00%, 11.25% floor, 12.00% cap), 6/30/2016

          

          

          $

          3,500,000

          

          

          

          3,481,766

          

          

          

          3,449,367

          

          

          

          3.45

          %Lee Enterprises, Incorporated Daily and Weekly Newspaper Publisher

          

          

          Senior Secured Notes, 9.50%, 3/15/2022

          

          

          $

          2,000,000

          

          

          

          2,045,000

          

          

          

          2,045,000

          

          

          

          2.05

          %Luling Lodging, LLC Hotel Operator

          

          

          Senior Secured Term Loan, 12.25% (one month LIBOR plus 12.00%, 12.25% floor), 12/17/2017

          

          

          $

          4,500,000

          

          

          $

          4,463,119

          

          

          $

          4,303,650

          

          

          

          4.31

          %Medinet Investments, LLC Medical Liability Claims Factoring

          

          

          Senior Secured Revolving Loan, 13.50%, (one month LIBOR plus 13.00%, 13.50% floor), 7/23/2017

          

          

          $

          188,313

          

          

          

          183,211

          

          

          

          103,083

          

          

          

          0.10

          %New Media West, LLC Cable TV/Broadband Services

          

          

          Senior Secured Term Loan, 9.00%, 12/31/2017(9)

          

          

          $

          3,811,681

          

          

          

          3,811,681

          

          

          

          

          

          

          

          

          %OPS Acquisitions Limited and Ocean Protection Services Limited* Maritime Security Services

          

          

          Senior Secured Term Loan, 12.50%, (one month LIBOR plus 12.00%, 12.50% floor), 3/4/2017

          

          

          $

          5,950,000

          

          

          

          5,913,412

          

          

          

          5,968,246

          

          

          

          5.97

          %PEAKS Trust 2009-1* Consumer Financing

          

          

          Senior Secured Term Loan, 7.50%, (one month LIBOR plus 5.50%, 7.50% floor), 1/27/2020

          

          

          $

          3,450,828

          

          

          

          2,947,443

          

          

          

          2,705,449

          

          

          

          2.71

          %PR Wireless, Inc. Wireless Communications

          

          

          Senior Secured Term Loan, 10.00%, (one month LIBOR plus 9.00%, 10.00% floor), 6/27/2020

          

          

          $

          8,415,000

          

          

          

          7,618,897

          

          

          

          7,573,500

          

          

          

          7.58

          %Warrant for 101 shares (at a $0.01 strike price), expires 6/27/2024

          

          

          

          1

          

          

          

          634,145

          

          

          

          378,675

          

          

          

          0.38

          %8,253,042

          

          

          

          7,952,175

          

          

          

          7.96

          %Pristine Environments, Inc. Building Cleaning and Maintenance Services

          

          

          Senior Secured Revolving Loan, 11.70% (one month LIBOR plus 11.50%, 11.70% floor), 3/31/2017

          

          

          $

          5,614,310

          

          

          

          5,614,310

          

          

          

          5,863,211

          

          

          

          5.87

          %Senior Secured Term Loan A, 12.70% (one month LIBOR plus 12.50%, 12.70% floor), 3/31/2017

          

          

          $

          1,607,656

          

          

          

          1,602,678

          

          

          

          1,685,037

          

          

          

          1.69

          %Senior Secured Term Loan B, 12.70% (one month LIBOR plus 12.50%, 12.70% floor), 3/31/2017

          

          

          $

          3,026,563

          

          

          

          2,979,285

          

          

          

          3,172,039

          

          

          

          3.17

          %10,196,273

          

          

          

          10,720,287

          

          

          

          10.73

          %RiceBran Technologies Corporation Grain Mill Products

          

          

          Senior Secured Revolving Loan, 11.50% (one month LIBOR plus 10.75%, 11.50% floor), 6/1/2018

          

          

          $

          1,000,000

          

          

          

          939,362

          

          

          

          939,362

          

          

          

          0.94

          %Senior Secured Term Loan, 11.50% (one month LIBOR plus 10.75%, 11.50% floor), 6/1/2018

          

          

          $

          2,500,000

          

          

          

          2,348,330

          

          

          

          2,348,330

          

          

          

          2.35

          %Warrants for 300,000 (at a $5.25 strike price), expires 5/12/2020

          

          

          

          300,000

          

          

          

          39,368

          

          

          

          27,000

          

          

          

          0.03

          %3,327,060

          

          

          

          3,314,692

          

          

          

          3.32%
 See Notes to Consolidated Financial Statements.
 103    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015 Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueOther Investments (continued)Sundberg America, LLC et al Appliance Parts Distributor

          

          

          Senior Secured Notes, 9.50%, 4/30/2020

          

          

          $

          8,000,000

          

          

          

          7,960,112

          

          

          

          7,960,112

          

          

          

          7.97

          %The Selling Source, LLC Information and Data Services

          

          

          Senior Secured Term Loan, 15.00%, 12/31/2017**

          

          

          $

          3,869,881

          

          

          

          3,855,453

          

          

          

          3,140,666

          

          

          

          3.14

          %US Shale Solutions, Inc. Oil and Gas Field Services

          

          

          Senior Secured Note, 12.50%, 9/1/2017

          (9)

          

          $

          9,000,000

          

          

          $

          6,641,957

          

          

          $

          4,455,000

          

          

          

          4.46

          %Warrants for 2.78 shares (at a $0.01 strike price), expire 9/1/2024

          

          

          

          9,000

          

          

          

          114

          

          

          

          90

          

          

          

          0.00

          %6,642,071

          

          

          

          4,455,090

          

          

          

          4.46

          %Total Other Investments

          

          

          

          

          

          

          

          

          

          

          136,351,581

          

          

          

          130,282,423

          

          

          

          130.36

          %Total Investments

          

          

          

          

          

          

          

          

          

          $

          172,195,903

          

          

          $

          152,113,759

          

          

          

          152.21

          %
  Counterparty

          

          Instrument

          

          # of Contracts

          

          Notional

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueDerivative InstrumentsReef Road Master Fund, Ltd.

          

          

          Total Return Swap, Pay Total Return on 60,000 shares of Granite Ridge Energy, LLC, Receive 3% Fixed Rate, expires June 29, 2016

          

          

          

          1

          

          

          $

          12,975,000

          

          

          $

          

          

          

          $

          

          

          

          

          

          %
 See Notes to Consolidated Financial Statements.
 104    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015 The following tables show the fair value of our portfolio of investments by geography and industry as of June 30, 2015.  June 30, 2015Geography

          

          Investment at Fair Value (in millions)

          

          Percentage of Net AssetsUnited States

          

          $

          145.9

          

          

          

          146.08

          %United Kingdom

          

          

          6.0

          

          

          

          5.97Canada

          

          

          0.2

          

          

          

          0.16Total

          

          $

          152.1

          

          

          

          152.21

          %
  June 30, 2015Industry

          

          Investment at Fair Value (in millions)

          

          Percentage of Net AssetsPower Generation

          

          $

          13.0

          

          

          

          12.98

          %Mobile Device Management

          

          

          11.1

          

          

          

          11.14Building Cleaning and Maintenance Services

          

          

          10.7

          

          

          

          10.73Oil and Gas Field Services

          

          

          10.1

          

          

          

          10.14Radio Broadcasting

          

          

          9.3

          

          

          

          9.27Real Estate Management Services

          

          

          8.5

          

          

          

          8.52Appliance Parts Distributor

          

          

          8.0

          

          

          

          7.97Wireless Communications

          

          

          8.0

          

          

          

          7.96Consumer Financing

          

          

          7.9

          

          

          

          7.90Specialty Pharmaceuticals

          

          

          6.0

          

          

          

          5.97Maritime Security Services

          

          

          6.0

          

          

          

          5.97Television Programming

          

          

          5.8

          

          

          

          5.78Electric Services

          

          

          5.2

          

          

          

          5.26Hotel Operator

          

          

          4.3

          

          

          

          4.31Food Distributors and Wholesalers

          

          

          3.8

          

          

          

          3.83Gambling Machine Manufacturer

          

          

          3.8

          

          

          

          3.81Energy Efficiency Services

          

          

          3.6

          

          

          

          3.67Biological Products

          

          

          3.4

          

          

          

          3.45Information and Data Services

          

          

          3.4

          

          

          

          3.39Grain Mill Products

          

          

          3.3

          

          

          

          3.32Data Connectivity Service Company

          

          

          3.2

          

          

          

          3.17Munitions

          

          

          2.6

          

          

          

          2.59Internet Advertising

          

          

          2.4

          

          

          

          2.39Daily and Weekly Newspaper Publisher

          

          

          2.0

          

          

          

          2.05IT and Business Skill Training

          

          

          2.0

          

          

          

          1.98Outdoor Advertising Services

          

          

          2.0

          

          

          

          1.98Non-Residential Property Owner

          

          

          1.3

          

          

          

          1.31Equipment Rental Services

          

          

          0.6

          

          

          

          0.64Asset Recovery Services

          

          

          0.5

          

          

          

          0.47Geophysical Surveying and Mapping Services

          

          

          0.2

          

          

          

          0.16Medical Liability Claims Factoring

          

          

          0.1

          

          

          

          0.10Cable TV/Broadband Services

          

          

          

          

          

          

          Total

          

          $

          152.1

          

          

          

          152.21

          %
  (1)

          The Companys investments are acquired in private transactions exempt from registration under the Securities Act of 1933 and therefore, are generally subject to certain limitations on resale, and may be deemed to be restricted securities under the Securities Act of 1933. See Notes to Consolidated Financial Statements.
 105    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015 (2)

          A majority of the Companys variable rate debt investments bear interest at a rate that is determined by reference to LIBOR (London Interbank Offered Rate) or the U.S. prime rate, and which is reset daily, monthly, quarterly or semi-annually. For each debt investment, the Company has provided the interest rate in effect as of June 30, 2015. If no reference to LIBOR or the U.S. prime rate is made, the rate is fixed. A floor is the minimum rate that will be applied in calculating an interest rate. A cap is the maximum rate that will be applied in calculating an interest rate. (3)

          Control Investments are investments in those companies that are Control Investments of the Company, as defined in the Investment Company Act of 1940. A company is deemed to be a Control Investment of Full Circle Capital Corporation if Full Circle Capital Corporation owns more than 25% of the voting securities of such company. (4)

          Affiliate Investments are investments in those companies that are Affiliated Companies of the Company, as defined in the Investment Company Act of 1940, which are not Control Investments. A company is deemed to be an Affiliate of Full Circle Capital Corporation if Full Circle Capital Corporation owns 5% or more, but less than 25%, of the voting securities of such company. (5)

          Full Circle Capital Corporations equity investment in Takoda Resources Inc. is held through its wholly owned subsidiary FC Takoda Holdings, LLC. (6)

          Full Circle Capital Corporations equity investment in TransAmerican Asset Servicing Group, LLC is held through its wholly owned subsidiary TransAmerican Asset Servicing Group, Inc. (7)

          Full Circle Capital Corporations equity investments in SOLEX Fine Foods, LLC; Catsmo, LLC are held through its wholly owned subsidiary FC New Specialty Foods, Inc. (8)

          A portion of Full Circle Capital Corporations investment in West World Media, LLC is held through its wholly owned subsidiary Full Circle West, Inc. The remainder of the LLC interests are held directly by Full Circle Capital Corporation. (9)

          Investments were on non-accrual status as of June 30, 2015. (10)

          The negative fair value is the result of the unfunded commitment being valued below par. These amounts may or may not be funded to the borrowing party now or in the future. *

          Indicates assets that the Company believes do not represent qualifying assets under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Companys total assets at the time of acquisition of any additional non-qualifying assets. **

          Security pays all or a portion of its interest in kind. 

          Security is a non-income producing security. See Notes to Consolidated Financial Statements.
 106    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES   CONSOLIDATED SCHEDULE OF INVESTMENTS June 30, 2014  Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueControl Investments(3)New Media West, LLC Cable TV/Broadband Services

          

          

          Senior Secured Term Loan, 9.00%, 12/31/2017

          

          

          $

          4,826,711

          

          

          $

          4,826,711

          

          

          $

          4,605,326

          

          

          

          6.31

          %Limited Liability Company Interests,(5)

          

          

          

          720

          

          

          

          3,600,000

          

          

          

          1,061,353

          

          

          

          1.45

          %8,426,711

          

          

          

          5,666,679

          

          

          

          7.76

          %Takoda Resources Inc.* Geophysical Surveying and Mapping Services

          

          

          Senior Secured Term Loan, 16.00%, 4/1/2016

          

          

          $

          2,692,828

          

          

          

          2,692,828

          

          

          

          2,557,379

          

          

          

          3.50

          %Common Stock,(6)

          

          

          

          749

          

          

          

          

          

          

          

          

          

          

          

          

          %2,692,828

          

          

          

          2,557,379

          

          

          

          3.50

          %Texas Westchester Financial, LLC Consumer Financing

          

          

          Limited Liability Company Interests

          

          

          

          9,278

          

          

          

          905,819

          

          

          

          540,037

          

          

          

          0.74

          %The Finance Company, LLC Consumer Financing

          

          

          Senior Secured Term Loan, 15.00% (LIBOR plus 14.25%, 15.00% floor), 9/30/2015

          

          

          $

          5,163,547

          

          

          

          5,117,223

          

          

          

          5,258,384

          

          

          

          7.21

          %Limited Liability Company Interests

          

          

          

          50

          

          

          

          140,414

          

          

          

          1,956,521

          

          

          

          2.68

          %5,257,637

          

          

          

          7,214,905

          

          

          

          9.89

          %TransAmerican Asset Servicing Group, LLC Asset Recovery Services

          

          

          Senior Secured Revolving Loan, 12.00%, 7/25/2016

          

          

          $

          3,008,154

          

          

          

          2,970,154

          

          

          

          1,560,057

          

          

          

          2.14

          %Limited Liability Company Interests,(7)

          

          

          

          75

          

          

          

          

          

          

          

          

          

          

          

          

          %2,970,154

          

          

          

          1,560,057

          

          

          

          2.14

          %Total Control Investments

          

          

          

          

          

          

          

          

          

          

          20,253,149

          

          

          

          17,539,057

          

          

          

          24.03

          %Affiliate Investments(4)Advanced Cannabis Solutions, Inc. Non-Residential Property Owner

          

          

          Warrant for 1,000,000 shares (at a $5.50 strike price), 1/21/2017

          

          

          

          1

          

          

          

          500,000

          

          

          

          2,356,212

          

          

          

          3.23

          %Modular Process Control, LLC Energy Efficiency Services

          

          

          Senior Secured Revolving Loan, 14.50% (LIBOR plus 13.50%, 14.50% floor), 3/28/2017

          

          

          $

          984,569

          

          

          

          956,401

          

          

          

          984,569

          

          

          

          1.35

          %Senior Secured Term Loan, 15.50% (LIBOR plus 14.50%, 15.50% floor), 3/28/2017

          

          

          $

          5,000,000

          

          

          

          4,768,199

          

          

          

          2,845,333

          

          

          

          3.90

          %Senior Secured Term Loan  Tranche 2, 18.00%, (LIBOR plus 17.00%, 18.00% floor), 3/28/2017***

          

          

          $

          795,237

          

          

          

          795,237

          

          

          

          141,208

          

          

          

          0.19

          %Modular Process Control, LLC  Warrant for 14.50% of the outstanding Class B LLC Interests (at a $0.01 strike price), expire 3/28/2023

          

          

          

          1

          

          

          

          288,000

          

          

          

          

          

          

          

          

          %6,807,837

          

          

          

          3,971,110

          

          

          

          5.44

          %ProGrade Ammo Group, LLC Munitions

          

          

          Senior Secured Revolving Loan, 9.19% (LIBOR plus 9.00%, 9.19% floor), 3/30/2016

          

          

          $

          3,249,300

          

          

          

          3,249,300

          

          

          

          3,249,300

          

          

          

          4.45

          %Senior Secured Term Loan, 16.19% (LIBOR plus 16.00%, 16.19% floor), 3/30/2016

          

          

          $

          4,843,750

          

          

          

          4,839,156

          

          

          

          883,984

          

          

          

          1.21

          %Warrants for 9.5% of the outstanding LLC interests (at a $10.00 strike price), expire 8/2/2018

          

          

          

          181,240

          

          

          

          176,770

          

          

          

          

          

          

          

          

          %8,265,226

          

          

          

          4,133,284

          

          

          

          5.66

          %
 See Notes to Consolidated Financial Statements.
 107    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES   CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2014  Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/ Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueAffiliate Investments(4) (continued)SOLEX Fine Foods, LLC; Catsmo, LLC Food Distributors and Wholesalers

          

          

          Senior Secured Term Loan, 12.30% (LIBOR plus 12.14%), 12/28/2016

          

          

          $

          3,900,000

          

          

          $

          3,825,213

          

          

          $

          3,792,490

          

          

          

          5.20

          %Limited Liability Company Interests,(8)

          

          

          

          1

          

          

          

          290,284

          

          

          

          78,775

          

          

          

          0.11

          %Warrants for 1.6% of the outstanding LLC interests (strike price $0.01), expire 12/31/2022,(8)

          

          

          

          1

          

          

          

          58,055

          

          

          

          17,649

          

          

          

          0.02

          %4,173,552

          

          

          

          3,888,914

          

          

          

          5.33

          %West World Media, LLC Information and Data Services

          

          

          Limited Liability Company Interests,(9)

          

          

          

          85,210

          

          

          

          430,500

          

          

          

          238,897

          

          

          

          0.33

          %Total Affiliate Investments

          

          

          

          

          

          

          

          

          

          

          20,177,115

          

          

          

          14,588,417

          

          

          

          19.99

          %Other InvestmentsAttention Transit Advertising Systems, LLC Outdoor Advertising Services

          

          

          Senior Secured Term Loan, 11.50%, 9/30/2016

          

          

          $

          2,147,504

          

          

          

          2,147,504

          

          

          

          2,174,419

          

          

          

          2.98

          %Background Images, Inc.Equipment Rental Services

          

          

          Senior Secured Term Loan  Term A, 14.66% (LIBOR plus 14.50%), 6/28/2015

          

          

          $

          1,109,750

          

          

          

          1,109,750

          

          

          

          1,136,939

          

          

          

          1.56

          %Senior Secured Term Loan  Term B, 16.41% (LIBOR plus 16.25%), 6/28/2015

          

          

          $

          627,250

          

          

          

          627,250

          

          

          

          641,321

          

          

          

          0.88

          %1,737,000

          

          

          

          1,778,260

          

          

          

          2.44

          %Blackstrap Broadcasting, LLCRadio Broadcasting

          

          

          Senior Secured Term Loan, 6.16% (LIBOR plus 6.00%), 7/31/2014(10)

          

          

          $

          3,095,547

          

          

          

          3,095,547

          

          

          

          2,466,841

          

          

          

          3.38

          %Subordinated Secured Term Loan, 16.00% (PRIME plus 7.75%, 16.00% floor), 7/31/2014(10)

          

          

          $

          3,500,000

          

          

          

          3,500,000

          

          

          

          

          

          

          

          

          %6,595,547

          

          

          

          2,466,841

          

          

          

          3.38

          %Butler Burgher Group, LLC Real Estate Management Services

          

          

          Senior Secured Revolving Loan, 12.00% (LIBOR plus 11.75%, 12.00% floor), 6/30/2017

          

          

          $

          750,000

          

          

          

          743,250

          

          

          

          743,250

          

          

          

          1.02

          %Senior Secured Term Loan, 12.00% (LIBOR plus 11.75%, 12.00% floor), 6/30/2017

          

          

          $

          8,000,000

          

          

          

          7,928,006

          

          

          

          7,928,006

          

          

          

          10.86

          %8,671,256

          

          

          

          8,671,256

          

          

          

          11.88

          %CPX, Inc. Industrial Molded Products

          

          

          Senior Secured Revolving Loan, 14.19% (LIBOR plus 14.00%, 14.19% floor), 9/30/2016

          

          

          $

          2,000,000

          

          

          

          1,984,726

          

          

          

          2,000,000

          

          

          

          2.74

          %Senior Secured Term Loan, 14.69% (LIBOR plus 14.50%, 14.69% floor), 9/30/2016

          

          

          $

          950,000

          

          

          

          938,103

          

          

          

          953,040

          

          

          

          1.31

          %2,922,829

          

          

          

          2,953,040

          

          

          

          4.05

          %Dynamic Energy Services International, LLC Oil and Gas Field Services

          

          

          Senior Secured Term Loan, 9.50%, (LIBOR plus 8.50%, 9.50% floor), 3/12/2018

          

          

          $

          4,937,500

          

          

          

          4,845,331

          

          

          

          4,845,331

          

          

          

          6.64

          %Esselte Holdings Inc., Esselte AB*Stationery, Tablets, and Related Products

          

          

          Senior Secured Term Loan, 10.75% (LIBOR plus 8.75%, 10.75% floor), 2/29/2016

          

          

          $

          1,779,931

          

          

          

          1,780,317

          

          

          

          1,794,764

          

          

          

          2.46%
 See Notes to Consolidated Financial Statements.
 108    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES   CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2014 Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/ Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueOther Investments (continued)GW Power, LLC and Greenwood Fuels WI, LLC Electric Services

          

          

          Senior Secured Term Loan, 12.16% (LIBOR plus 12.00%, 12.16% floor), 3/31/2016

          

          

          $

          6,000,000

          

          

          $

          5,947,109

          

          

          $

          5,947,109

          

          

          

          8.15

          %Infinite Aegis Group, LLCHealthcare Billing and Collections

          

          

          Senior Secured Revolving Loan, 12.19% (LIBOR plus 12.00%, 12.19% floor), 7/31/2017

          

          

          $

          1,550,000

          

          

          

          1,536,485

          

          

          

          1,550,000

          

          

          

          2.12

          %Senior Secured Term Loan, 15.19% (LIBOR plus 15.00%, 15.19% floor), 7/31/2017***

          

          

          $

          3,950,458

          

          

          

          3,842,232

          

          

          

          3,846,957

          

          

          

          5.27

          %Warrants for 2.0% of the outstanding LLC interests (at a $0.01 strike price), expire 8/1/2023

          

          

          

          1

          

          

          

          107,349

          

          

          

          52,415

          

          

          

          0.07

          %5,486,066

          

          

          

          5,449,372

          

          

          

          7.46

          %JN Medical Corporation Biological Products

          

          

          Senior Secured Term Loan, 11.25%, (LIBOR plus 11.00%, 11.25% floor, 12.00% cap), 6/30/2016

          

          

          $

          3,500,000

          

          

          

          3,465,000

          

          

          

          3,465,000

          

          

          

          4.75

          %MDU Communications (USA) Inc. Cable TV/Broadband Services

          

          

          Senior Secured Term Loan   Tranche A, 2.00%, 10/3/2014(10)

          

          

          $

          1,755,111

          

          

          

          1,755,111

          

          

          

          451,766

          

          

          

          0.62

          %Ocean Protection Services*Maritime Security Services

          

          

          Senior Secured Term Loan, 12.50%, (LIBOR plus 12.00%, 12.50% floor), 3/4/2017

          

          

          $

          7,000,000

          

          

          

          6,935,624

          

          

          

          7,136,267

          

          

          

          9.78

          %PEAKS Trust 2009-1* Consumer Financing

          

          

          Senior Secured Term Loan, 7.50%, (LIBOR plus 5.50%, 7.50% floor), 1/27/2020

          

          

          $

          10,296,774

          

          

          

          8,560,025

          

          

          

          8,803,741

          

          

          

          12.06

          %PR Wireless, Inc. Wireless Communications

          

          

          Senior Secured Term Loan, 10.00%, (LIBOR plus 9.00%, 10.00% floor), 6/27/2020

          

          

          $

          8,500,000

          

          

          

          7,695,855

          

          

          

          7,695,855

          

          

          

          10.54

          %Warrant for 101 shares (at a $0.01 strike price), 6/27/2024

          

          

          

          1

          

          

          

          634,145

          

          

          

          634,145

          

          

          

          0.87

          %8,330,000

          

          

          

          8,330,000

          

          

          

          11.41

          %Pristine Environments, Inc.Building Cleaning and Maintenance Services

          

          

          Senior Secured Revolving Loan, 11.70% (LIBOR plus 11.50%, 11.70% floor), 3/31/2017

          

          

          $

          3,378,379

          

          

          

          3,378,379

          

          

          

          3,519,370

          

          

          

          4.82

          %Senior Secured Term Loan A, 12.70% (LIBOR plus 12.50%, 12.70% floor), 3/31/2017

          

          

          $

          1,049,875

          

          

          

          1,041,852

          

          

          

          1,079,097

          

          

          

          1.48

          %Senior Secured Term Loan B, 12.70% (LIBOR plus 12.50%, 12.70% floor), 3/31/2017

          

          

          $

          3,250,000

          

          

          

          3,175,000

          

          

          

          3,336,125

          

          

          

          4.57

          %7,595,231

          

          

          

          7,934,592

          

          

          

          10.87

          %RCS Capital Corp.* Financial Services

          

          

          Subordinated Secured Term Loan, 10.50%, (LIBOR plus 9.50%, 10.50% floor), 4/29/2021

          

          

          $

          7,500,000

          

          

          

          7,628,939

          

          

          

          7,743,750

          

          

          

          10.61

          %SiTV, LLC**** Television Programming

          

          

          Senior Secured Note, 10.375%, 7/1/2019

          

          

          $

          7,000,000

          

          

          

          7,050,000

          

          

          

          7,175,000

          

          

          

          9.83

          %The Selling Source, LLCInformation and Data Services

          

          

          Senior Secured Term Loan, 12.54%, 1/31/2017

          

          

          $

          3,637,572

          

          

          

          3,613,822

          

          

          

          2,442,630

          

          

          

          3.35%
 See Notes to Consolidated Financial Statements.
 109    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES   CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2014 Description and Industry(1)

          

          Type of Investment(2)

          

          Par Amount/ Quantity

          

          Cost

          

          Fair Value

          

          % of Net Asset ValueOther Investments (continued)US Path Labs, LLC Healthcare Services

          

          

          Senior Secured Term Loan, 14.00% (LIBOR plus 13.25%, 14.00% floor), 8/31/2014

          

          

          $

          3,500,000

          

          

          $

          3,482,306

          

          

          $

          3,500,000

          

          

          

          4.80

          %VaultLogix, LLC Information Retrieval Services

          

          

          Warrants for Variable % Ownership, (at a $307.855 strike price), expire 1/14/2019

          

          

          

          3,349

          

          

          

          56,147

          

          

          

          

          

          

          

          

          %United States Treasury

          

          

          United States Treasury Bill** (0.11)%, 7/3/2014

          

          

          $

          25,000,000

          

          

          

          25,000,147

          

          

          

          25,000,147

          

          

          

          34.26

          %Total Other Investments

          

          

          

          

          

          

          

          

          

          

          123,605,311

          

          

          

          118,063,285

          

          

          

          161.78

          %Total Investments

          

          

          

          

          

          

          

          

          

          $

          164,035,575

          

          

          $

          150,190,759

          

          

          

          205.80

          %
 See Notes to Consolidated Financial Statements.
 110    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES   CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2014 The following tables show the fair value of our portfolio of investments by geography and industry as of June 30, 2014, excluding United States Treasury Bills.  June 30, 2014Geography

          

          Investment at Fair Value (in millions)

          

          Percentage of Net AssetsUnited States

          

          $

          115.5

          

          

          

          158.26

          %United Kingdom

          

          

          7.1

          

          

          

          9.78Canada

          

          

          2.6

          

          

          

          3.50Total

          

          $

          125.2

          

          

          

          171.54

          %
  June 30, 2014Industry

          

          Investment at Fair Value (in millions)

          

          Percentage of Net AssetsConsumer Financing

          

          $

          16.5

          

          

          

          22.69

          %Real Estate Management Services

          

          

          8.7

          

          

          

          11.88Wireless Communications

          

          

          8.3

          

          

          

          11.41Building Cleaning and Maintenance Services

          

          

          7.9

          

          

          

          10.87Financial Services

          

          

          7.7

          

          

          

          10.61Television Programming

          

          

          7.2

          

          

          

          9.83Maritime Security Services

          

          

          7.1

          

          

          

          9.78CableTV/Broadband Services

          

          

          6.1

          

          

          

          8.38Electric Services

          

          

          5.9

          

          

          

          8.15Healthcare Billing and Collections

          

          

          5.4

          

          

          

          7.47Oil and Gas Field Services

          

          

          4.8

          

          

          

          6.64Munitions

          

          

          4.1

          

          

          

          5.66Energy Efficiency Services

          

          

          4.0

          

          

          

          5.44Food Distributors and Wholesalers

          

          

          3.9

          

          

          

          5.33Healthcare Services

          

          

          3.5

          

          

          

          4.80Biological Products

          

          

          3.5

          

          

          

          4.75Industrial Molded Products

          

          

          3.0

          

          

          

          4.05Information and Data Services

          

          

          2.7

          

          

          

          3.67Geophysical Surveying and Mapping Services

          

          

          2.6

          

          

          

          3.50Radio Broadcasting

          

          

          2.5

          

          

          

          3.38Non-Residential Property Owner

          

          

          2.4

          

          

          

          3.23Outdoor Advertising Services

          

          

          2.2

          

          

          

          2.98Stationery, Tablets, and Related Products

          

          

          1.8

          

          

          

          2.46Equipment Rental Services

          

          

          1.8

          

          

          

          2.44Asset Recovery Services

          

          

          1.6

          

          

          

          2.14Total

          

          $

          125.2

          

          

          

          171.54

          %
  (1)

          The Companys investments are acquired in private transactions exempt from registration under the Securities Act of 1933 and therefore, are generally subject to certain limitations on resale, and may be deemed to be restricted securities under the Securities Act of 1933. See Notes to Consolidated Financial Statements.
 111    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES   CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2014 (2)

          A majority of the Companys variable rate debt investments bear interest at a rate that is determined by reference to LIBOR (London Interbank Offered Rate) or the U.S. prime rate, and which is reset daily, monthly, quarterly or semi-annually. For each debt investment, the Company has provided the interest rate in effect as of June 30, 2014. If no reference to LIBOR or the U.S. prime rate is made, the rate is fixed. (3)

          Control Investments are investments in those companies that are Control Investments of the Company, as defined in the Investment Company Act of 1940. A company is deemed to be a Control Investment of Full Circle Capital Corporation if Full Circle Capital Corporation owns more than 25% of the voting securities of such company. (4)

          Affiliate Investments are investments in those companies that are Affiliated Companies of the Company, as defined in the Investment Company Act of 1940, which are not Control Investments. A company is deemed to be an Affiliate of Full Circle Capital Corporation if Full Circle Capital Corporation owns 5% or more, but less than 25%, of the voting securities of such company. (5)

          Full Circle Capital Corporations equity investment in New Media West, LLC is held through its wholly owned subsidiary FC New Media, Inc. (6)

          Full Circle Capital Corporations equity investment in Takoda Resources Inc. is held through its wholly owned subsidiary FC Takoda Holdings, LLC. (7)

          Full Circle Capital Corporations equity investment in TransAmerican Asset Servicing Group, LLC is held through its wholly owned subsidiary TransAmerican Asset Servicing Group, Inc. (8)

          Full Circle Capital Corporations equity investments in SOLEX Fine Foods, LLC; Catsmo, LLC are held through its wholly owned subsidiary FC New Specialty Foods, Inc. (9)

          A portion of Full Circle Capital Corporations investment in West World Media, LLC is held through its wholly owned subsidiary Full Circle West, Inc. The remainder of the LLC interests are held directly by Full Circle Capital Corporation. (10)

          Investments were on non-accrual status as of June 30, 2014. *

          Investment is not a qualifying asset under Section 55(a) of the 1940 Act. **

          Interest rate shown reflects yield to maturity at time of purchase. ***

          Security pays all or a portion of its interest in kind. ****

          Security is a when issued security. 

          Security is a non-income producing security. See Notes to Consolidated Financial Statements.
 112    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 1. Organization References herein to we, us or our refer to Full Circle Capital Corporation and Subsidiaries (Full Circle Capital or the Company) unless the context specifically requires otherwise. We were formed as Full Circle Capital Corporation, a Maryland corporation, on April 16, 2010 and were funded in an initial public offering, or IPO, completed on August 31, 2010. We are a non-diversified, closed-end investment company that has filed an election to be treated as a business development company, or BDC, under the Investment Company Act of 1940 (the 1940 Act). As a BDC, we expect to qualify annually as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code. We invest primarily in senior secured term debt issued by lower middle-market and middle-market companies. Our
investment objective is to generate both current income and capital appreciation through debt and equity investments. Note 2. Significant Accounting Policies Use of Estimates and Basis of Presentation The preparation of the accompanying Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reporting period. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ
materially. The June 30, 2014 and June 30, 2013 Consolidated Financial Statements were reclassified in order to be consistent with the new format used for the June 30, 2015 Consolidated Financial Statements. Investment Classification We are a non-diversified company within the meaning of the 1940 Act. We classify our investments by level of control. As defined in the 1940 Act, control investments are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of 25% or more of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist through
the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities owned by another company or person. Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Investments in other, non-security financial instruments, such as limited partnerships or private companies, are recorded on the basis of subscription date or redemption date, as applicable. Amounts for investments recognized or derecognized
but not yet settled are reported as receivables for investments sold and payables for investments acquired, respectively, in the Consolidated Statements of Assets and Liabilities. Basis of Consolidation Under the 1940 Act rules, the regulations pursuant to Article 6 of Regulation S-X and the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, we are generally precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services and benefits to us. Our Consolidated Financial Statements include our accounts and the accounts of Full Circle West, Inc., FC New Media, Inc.,
 113    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 2. Significant Accounting Policies   (continued) TransAmerican Asset Servicing Group, Inc., FC New Specialty Foods, Inc., and FC Takoda Holdings, LLC, our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Valuation of Investments In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers or market makers. Debt and equity securities for which market quotations are not readily available or are not considered to be the best estimate of fair value are valued at fair value as determined in good faith by the Board of Directors (the Board). Because the Company expects that there will not be a readily available market value for many of the investments in the Companys portfolio, it is expected that many of the
Companys portfolio investments values will be determined in good faith by the Board in accordance with a documented valuation policy that has been reviewed and approved by the Board and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Companys investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. In determining fair value, Full Circle Capitals Board uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Board. Unobservable inputs reflect the Boards assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Board or the Audit Committee of the Board (the Audit Committee), does not represent fair value, are valued as follows: 1.

          The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment; 2.

          Preliminary valuation conclusions are then documented and discussed with the Companys senior management. Independent third-party valuation firms are engaged by, or on behalf of, the Audit Committee to conduct independent appraisals or review managements preliminary valuations or make their own independent assessment, for certain assets; 3.

          The Audit Committee discusses valuations and recommends the fair value of each investment in the portfolio in good faith based on the input of the Company and, where appropriate, the independent valuation firms; and 4.

          The Board then discusses the valuations and determines in good faith the fair value of each investment in the portfolio based upon input from the Company, estimates from the independent valuation firms and the recommendations of the Audit Committee.
 114    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 2. Significant Accounting Policies   (continued) GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows: Level 1  Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. Level 2  Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3  Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The availability of valuation techniques and observable inputs can vary from investment to investment and is affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that
cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Board in determining fair value is greatest for investments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Companys own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause an investment to be
reclassified to a lower level within the fair value hierarchy. Valuation Techniques Senior and Subordinated Loans The Companys portfolio consists primarily of private debt instruments. Investments for which market quotations are readily available (Level 2 Debt) are generally valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers. For other debt investments (Level 3 Debt), market quotations are not available and other techniques are used to determine fair value. The Company considers its Level 3 Debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is
otherwise not deemed to be impaired. In determining the fair value of the performing Level 3 Debt, the Board considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions, success and prepayment fees, and other relevant factors, both qualitative
 115    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 2. Significant Accounting Policies   (continued) and quantitative. In the event that a Level 3 Debt instrument is not performing, as defined above, the Board may evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the Level 3 Debt instrument. This evaluation will be updated no less than quarterly for Level 3 Debt instruments that are not performing, and more frequently for time periods where there are significant changes in the investor base or significant changes in the perceived value of the underlying collateral. The collateral value will be analyzed on an ongoing basis using internal metrics, appraisals, third-party valuation agents and other data as may be acquired and analyzed by management and the Board. Investments in Private Companies The Board determines the fair value of its investments in private companies where no market quotations are readily available (Level 3 Private Companies) by incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, and performance multiples, among other factors, including work performed by third-party valuation agents. The Level 3 Private Companies investments can include Limited Liability Company interests, common stock and other equity investments. These nonpublic investments are
included in Level 3 of the fair value hierarchy. Warrants The Board ascribes value to warrants based on fair value analyses that can include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate. Publicly Traded Common Stock Publicly traded common stock in an active market (Level 1 common stock) is valued based on unadjusted quoted prices in active markets for identical Level 1 common stock that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 common stock. Swap Contracts Derivative financial instruments such as swap contracts are valued based on discounted cash flow models and options pricing models, as appropriate. Models use observable data to the extent practicable. However, areas such as credit risk (both our own and that of the counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of derivative financial instruments at the valuation date. The Company has made the accounting policy not to offset fair value amounts recognized for derivative financial instruments. The related assets and liabilities are presented gross in the Consolidated Statements of Assets and Liabilities. Any cash collateral payables or receivables associated with these instruments are not added to or netted against the fair value amounts of the derivative financial instruments. All derivative financial instruments are carried in assets when amounts are receivable by the Company and in liabilities when amounts are payable by the Company. During the period a contract is open, changes in the value of the contracts are recognized as unrealized appreciation or depreciation to reflect the fair value of the contract at the reporting date. When the contracts settle, mature, terminate, or are otherwise closed, the Company records realized gains or losses equal to the difference between the proceeds from (or cost of) the close-out of the contracts and the original contract price. Additionally, the Company
records realized gains (losses) on swap contracts when periodic payments are received or made at the end of each measurement period.
 116    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 2. Significant Accounting Policies   (continued) Fair Value of Financial Instruments The carrying amounts of the Companys financial instruments, including cash and accrued liabilities, approximate fair value due to their short-term nature. The carrying amounts and fair values of the Companys long-term obligations are disclosed in Note 8. Cash The Company places its cash with Santander Bank, N.A. f/k/a Sovereign Bank, N.A. (Santander Bank), and at times, cash held in such accounts may exceed the Federal Deposit Insurance Corporation insured limit. The Company may invest a portion of its cash in money market funds, within the limitations of the 1940 Act. Revenue Recognition Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs. Realized gains or losses on the sale of investments are calculated using the specific identification method. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with senior and subordinated secured loans are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a senior or subordinated secured loan, any unamortized loan origination, closing and/or commitment fees are recorded as interest income. Generally, when a payment default occurs on a loan in the portfolio, or if the Company otherwise believes that the issuer of the loan will not be able to make contractual
interest payments, the Company may place the loan on non-accrual status and cease recognizing interest income on the loan until all principal and interest is current through payment, or until a restructuring occurs, and the interest income is deemed to be collectible. The Company may make exceptions to this policy if a loan has sufficient collateral value and is in the process of collection or is viewed to be able to pay all amounts due if the loan were to be collected on through an investment in or sale of the business, the sale of the assets of the business, or some portion or combination thereof. Dividend income is recorded on the ex-dividend date. Structuring fees, excess deal deposits, prepayment fees, management fee income and similar fees are recognized as Other Income from Investments as earned, usually when received. Other fee income, including administrative and unused line fees, is included in Other Income from Investments. Income from such sources was $727,082, $2,554,551, and $1,300,292 for the years ended June 30, 2015, 2014, and 2013, respectively. Management fee income is included in Other Income from Non-Investment Sources. Income from such sources was $67,163, $2,941, and $0, for the years ended June 30, 2015, 2014, and 2013, respectively. Change in unrealized gain (loss) on investments Net change in unrealized appreciation or depreciation recorded on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. From time to time, the Company may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, the Company may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the
portfolio investment. Such elimination of unrealized loss is included on the Consolidated Statements of Operations as an increase in the Net Change in Unrealized Gain (Loss) on Investments.
 117    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 2. Significant Accounting Policies   (continued) Federal and State Income Taxes The Company has elected to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90% of the sum of investment company taxable income (ICTI) including PIK, as defined by the Code, and net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) for each taxable year in order to
be eligible for tax treatment under subchapter M of the Code. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year. Any such carryover ICTI must be distributed prior to the 15th day of the ninth month after the tax year-end. Permanent differences between ICTI and net investment income for financial reporting purposes are reclassified among capital accounts in the Consolidated Financial Statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes. During the years ended June 30, 2015, 2014, and 2013, the Company reclassified for book purposes amounts arising from permanent book/tax differences related as follows:  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Capital in excess of par value

          

          $

          (1,302,681

          )

          

          $

          (1,695,841

          )

          

          $

          (1,100,573

          )Accumulated undistributed net investment income

          

          

          1,043,849

          

          

          

          1,598,259

          

          

          

          1,120,291Accumulated net realized gain (loss) from investments

          

          $

          258,832

          

          

          $

          97,582

          

          

          $

          (19,718

          )
 For income tax purposes, distributions paid to stockholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof. The tax character of distributions paid for the years ended June 30, 2015, 2014, and 2013 were as follows:  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Ordinary income

          

          $

          8,342,307

          

          

          $

          5,864,191

          

          

          $

          5,489,254Distributions of long-term capital gains

          

          

          

          

          

          

          

          

          

          

          Return of capital

          

          

          1,302,681

          

          

          

          1,695,841

          

          

          

          1,089,055Distributions on a tax basis

          

          $

          9,644,988

          

          

          $

          7,560,032

          

          

          $

          6,578,309
 For federal income tax purposes, the tax cost of investments owned at June 30, 2015, 2014, and 2013 was $176,255,797, $164,878,626, and $90,254,434, respectively. The net unrealized depreciation on investments owned at June 30, 2015, 2014, and 2013 was $24,142,039, $14,687,867, and $2,079,933, respectively. At June 30, 2015, 2014, and 2013, the components of distributable earnings on a tax basis detailed below differ from the amounts reflected in the Companys Consolidated Statements of Assets and Liabilities by temporary and other book/tax differences, primarily relating to the tax treatment of certain investments in partnerships and wholly-owned subsidiary corporations, fee income and organizational expenses, as follows:  As of June 30, 2015

          

          As of June 30, 2014

          

          As of June 30, 2013Accumulated capital losses

          

          $

          (8,519,497

          )

          

          $

          (4,418,701

          )

          

          $

          (3,471,100

          )Unrealized depreciation

          

          

          (24,142,039

          )

          

          

          (14,687,867

          )

          

          

          (2,079,933

          )Components of distributable earnings at year end

          

          $

          (32,661,536

          )

          

          $

          (19,106,568

          )

          

          $

          (5,551,033

          )
 118    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 2. Significant Accounting Policies   (continued) For the years ended June 30, 2015 and 2014, the net capital loss carryfowards were $8,519,497 and $4,418,701, respectively, which will not expire. The Company accounts for income taxes in conformity with ASC Topic 740  Income Taxes (ASC 740). ASC 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Companys tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority. Tax positions deemed to meet a more-likely-than-not threshold would be recorded
as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Consolidated Statements of Operations. There were no material uncertain income tax positions at June 30, 2015. Although we file federal and state tax returns, our major tax jurisdiction is federal. The Company remains subject to examination by the Internal Revenue Service for the initial tax year ending June 30, 2012 and all future years. If we do not distribute (or are not deemed to have distributed) each calendar year sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the Minimum Distribution Amount), we will generally be required to pay an excise tax equal to 4% of the amount by the which Minimum Distribution Amount exceeds the distributions for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess
of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income. Distributions Distributions to common stockholders are recorded on the ex-dividend date. The amounts, if any, of our monthly distributions are approved by our Board each quarter and are generally based upon our managements estimate of our earnings for the quarter. Net realized capital gains, if any, are distributed at least annually. Guarantees and Indemnification Agreements We follow ASC Topic 460  Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (ASC 460). The application of ASC 460 elaborates on the disclosure requirements of a guarantor in its interim and annual Consolidated Financial Statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, for those guarantees that are covered by ASC 460, the fair value of the obligation undertaken in issuing certain guarantees. ASC 460 did not have a material effect
on the Consolidated Financial Statements. Refer to Note 5 for further discussion of guarantees and indemnification agreements. Per Share Information Basic and diluted earnings (loss) per common share is calculated using the weighted average number of common shares outstanding for the period presented. For the years ended June 30, 2015, 2014, and 2013, respectively, basic and diluted earnings (loss) per share, were the same since there are no potentially dilutive securities outstanding. Organizational Expenses and Offering Costs The Company did not incur organizational expenses for the years ended June 30, 2015, 2014, and 2013. The Company complies with the requirements of ASC 340-10-S99-1, Expenses of Offering. Deferred offering costs consist principally of legal and audit costs incurred through the balance sheet date that are
 119    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 2. Significant Accounting Policies   (continued) related to an offering of equity securities. Such costs are charged against the gross proceeds of the offering or will be charged to the Companys operations if the offering is not completed. Offering expenses related to the Companys July 14, 2014, March 30, 2015, and April 13, 2015 offerings were $1,442,780. Refer to Note 6. Capital Accounts Certain capital accounts including undistributed net investment income, accumulated net realized gain or loss, accumulated net unrealized appreciation or depreciation, and paid-in capital in excess of par, are adjusted, at least annually, for permanent differences between book and tax. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP. Recent Accounting Pronouncements In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, Interest  Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). ASU 2015-03 requires companies to present debt issuance costs related to a recognized debt liability in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Public companies are required to apply ASU 2015-03 retrospectively for interim and annual reporting periods beginning after
December 15, 2015 and early adoption is permitted. The Company has decided to early adopt this standard. As a result, deferred debt issuance costs of $833,541 and $947,937 at June 30, 2015 and 2014, respectively, are now presented as a reduction to Notes Payable in the Consolidated Statements of Assets and Liabilities. In prior periods, the deferred debt issuance costs had been presented as assets on the Consolidated Statements of Assets and Liabilities. In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-07). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. ASU 2015-07 is effective for fiscal years beginning after December 15, 2016. The Company does not believe this standard will have an impact on its Consolidated Financial Statements. Note 3. Concentration of Credit Risk and Liquidity Risk In the normal course of business, the Company maintains its cash balances in financial institutions, which at times may exceed federally insured limits. The Company is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf. Management monitors the financial condition of such financial institutions and does not anticipate any losses from these counterparties. The Company utilizes two financial institutions to provide financing, which are essential to its business. There are a number of other financial institutions available that could potentially provide the Company with financing. Management believes that such other financial institutions would likely be able to provide similar financing with generally comparable terms. However, a change in financial institutions at the present time could cause a delay in service provisioning or result in potential lost opportunities, which could adversely affect operating results.
 120    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 4. Earnings (Loss) per Common Share  Basic and Diluted The following information sets forth the computation of basic and diluted earnings (loss) per common share for the years ended June 30, 2015, June 30, 2014, and June 30, 2013:  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013Per Share Data(1):Net Increase (Decrease) in Net Assets Resulting from Operations

          

          $

          (5,200,728

          )

          

          $

          (7,622,395

          )

          

          $

          3,801,143Weighted average shares outstanding for period basic and diluted

          

          

          14,803,637

          

          

          

          8,698,814

          

          

          

          7,018,286Basic and diluted earnings (loss) per common share

          

          $

          (0.35

          )

          

          $

          (0.88

          )

          

          $

          0.54
  (1)

          Per share data based on weighted average shares outstanding. Note 5. Related Party Agreements and Transactions Investment Advisory Agreement On June 22, 2015, the Board re-approved an investment advisory agreement (the Investment Advisory Agreement) with Full Circle Advisors, LLC (the Adviser) under which the Adviser, subject to the overall supervision of our Board, manages the day-to-day operations of, and provides investment advisory services to, us. Under the terms of the Investment Advisory Agreement, our Adviser: (i) determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes, (ii) identifies, evaluates and negotiates the structure of the investments we
make (including performing due diligence on our prospective portfolio companies); and (iii) closes and monitors investments we make. The Advisers services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. For providing these services, the Adviser receives a fee from us, consisting of two components, a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 1.75% of our gross assets, as adjusted. For services rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets, as adjusted, at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be appropriately pro-rated. The total base management fees earned by the Adviser for the years ended June 30, 2015, 2014, and 2013 were $2,280,058, $1,631,694, and $1,431,851, respectively. The total base management fee payable to the Adviser as of June 30, 2015, 2014, and 2013 was $580,607, $475,595, and $389,945, after reflecting payment of $2,175,046, $1,546,044, and $1,350,177 for the years ended June 30, 2015, 2014, and 2013, and is included in the Consolidated Statements of Assets and Liabilities in Due to Affiliates. The incentive fee has two parts. The first part of the incentive fee (the Income incentive fee) is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our
operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to Full Circle Service Company (the Administrator), and any interest expenses
 121    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 5. Related Party Agreements and Transactions   (continued) and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include organizational costs or any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate
of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 1.75% base management fee. We pay the Adviser an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows: 

          no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle of 1.75%; 

          100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized). We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle but is less than 2.1875%) as the catch-up. The catch-up is meant to provide our investment adviser with 20% of our pre-incentive fee net investment income as if a hurdle did not apply if this net investment income exceeds 2.1875% in any calendar quarter; and 

          20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to the Adviser (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated to the Adviser). These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter. The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees with respect to each of the investments in our portfolio, provided that, the incentive fee determined as of December 31,
2010 was calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses and unrealized capital depreciation from the inception of Full Circle Capital. There were no incentive fees earned on realized capital gains for the years ended June 30, 2015, 2014, and 2013. Income incentive fees of $1,798,000, $1,511,362, and $1,339,833 were earned by the Adviser for the years ended June 30, 2015, 2014, and 2013, respectively, and the total income incentive fee payable to the Adviser as of June 30, 2015, 2014, and 2013 was $462,350, $370,132, and $338,426, after reflecting payment of $1,705,782, $1,479,656, and $1,273,489 during the years ended June 30, 2015, 2014, and 2013, respectively, and is included in the Consolidated Statements of Assets and Liabilities in Due to Affiliates. The Adviser has agreed to reimburse the Company for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.50% of our net assets, beginning with our fiscal quarter ending September 30, 2014 through the end of our fiscal year 2015. For our fiscal year 2016 and beyond, the Adviser has agreed to reimburse us for any operating expenses,
 122    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 5. Related Party Agreements and Transactions   (continued) excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.75% of our net assets. The expense reimbursements from the Adviser for the years ended June 30, 2015, 2014, and 2013 were $989,818, $0, and $0, respectively, and the total expense reimbursement receivable from the Adviser as of June 30, 2015, 2014, and 2013 was $159,295, $0, and $0, after reflecting payment of $830,523, $0, and $0 during the years ended June 30, 2015, 2014, and 2013, respectively, and is included in Due from Affiliates on the Consolidated Statements of Assets and Liabilities. The Adviser had agreed to reimburse the Company for any operating expenses, excluding interest expenses, investment advisory and management fees, and organizational and offering expenses, in excess of 2% of our net assets for the first twelve months following the completion of the initial public offering, which occurred on August 31, 2010. For the periods commencing on April 1, 2015 and ending on June 30, 2015, and commencing on July 1, 2015 and ending on June 30, 2016, Full Circle Advisors has agreed to waive the portion of the base management fees and incentive fees that Full Circle Advisors would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for Full Circle Capital to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then declared by our board of directors. The
determination of the amount to be waived will be finalized as of the end of the fiscal year for each period, with such amounts being accrued on a quarterly basis. Net investment income is defined as net income before net realized gains (losses) and unrealized gains (losses), in each case, as determined in accordance with GAAP. Full Circle Advisors will not be entitled to recoup any amount of base management fees that it waives pursuant to this agreement. For the years ended June 30, 2015, 2014, and 2013 $431,025, $0 and $0, respectively, of the base management fee was waived and is included in the management fee waiver and expense reimbursement line in the Consolidated Statements of Operations. Administration Agreement On June 22, 2015, the Board re-approved an Administration Agreement with the Administrator under which the Administrator, among other things, furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, the Administrator also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our stockholders. In addition, the Administrator assists us in determining and publishing our
net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Full Circle Service Companys overhead in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the compensation of our chief financial officer and our allocable portion of the compensation of any administrative support staff employed by the Administrator, directly or indirectly. Under the Administration Agreement, the Administrator will also provide on our behalf managerial assistance to those portfolio companies that request such assistance. The Administration Agreement may be
terminated by either party without penalty upon 60 days written notice to the other party. The Administrator, and Conifer Asset Solutions LLC, f/k/a Vastardis Fund Services LLC (Conifer or the Sub-Administrator), may also provide administrative services to the Adviser. As a result, the Adviser also reimburses the Administrator and/or the Sub-Administrator for its allocable portion of the Administrators and/or Sub-Administrators overhead, including rent, the fees and expenses associated with performing compliance functions for Full Circle Advisors, and its allocable portion of the compensation of any
 123    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 5. Related Party Agreements and Transactions   (continued) administrative support staff. To the extent the Adviser or any of its affiliates manage other investment vehicles in the future, no portion of any administrative services provided by the Administrator to such other investment vehicles will be charged to us. The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Administrator and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Full Circle Capital for any damages, liabilities, costs and expenses (including reasonable attorneys fees and amounts reasonably paid in settlement) arising from the rendering of the Administrators services under the Administration
Agreement or otherwise as administrator for Full Circle Capital. Sub-Administration Agreement The Administrator has engaged Conifer to provide certain administrative services to us. In exchange for providing such services, the Administrator pays Conifer an asset-based fee with a $200,000 annual minimum as adjusted for any reimbursement of expenses. This asset-based fee will vary depending upon our gross assets, as adjusted, as follows:  Gross Assets

          

          Feefirst $150 million of gross assets

          

          20 basis points (0.20%)next $150 million of gross assets

          

          15 basis points (0.15%)next $200 million of gross assets

          

          10 basis points (0.10%)in excess of $500 million of gross assets

          

          5 basis points (0.05%)
 Additionally, prior to September 30, 2013, we reimbursed the Administrator for the fees charged for the services of William E. Vastardis, our Chief Financial Officer, Treasurer and Secretary, at an annual rate of up to $250,000. On September 9, 2013, the Companys Board of Directors appointed Michael J. Sell to succeed William E. Vastardis as our Chief Financial Officer, Treasurer and Secretary effective as of September 30, 2013. Mr. Vastardis is the Chairman of Conifer Asset Solutions LLC. For the years ended June 30, 2015, 2014, and 2013, respectively, the Company incurred $731,447, $682,662 and $834,577, respectively, of expenses under the Administration Agreement, $256,236, $200,000, and $223,429, respectively, of which were earned by the Sub-Administrator and $303,652, $301,925, and $300,736, respectively, were paid for officers compensation. The remaining $171,559, $180,737, and $310,412, respectively, were recorded as an Allocation of Overhead Expenses in the Consolidated Statements of Operations. FC Capital Investment Partners, LLC On June 4, 2014, we formed FC Capital Investment Partners, LLC (FCCIP), a multiple series private fund, for which we serve as the managing member and investment adviser. FCCIP was formed as a Delaware limited liability company and operates under a Limited Liability Company agreement dated June 13, 2014. FCCIP closed its first series on June 17, 2014, raising approximately $5.6 million in capital from investors. FCCIP closed its second series on September 25, 2014, raising approximately $10.0 million in capital from investors. We may co-invest in certain portfolio investments from time to time with one or more
series issued by FCCIP where we determine that the aggregate available investment opportunity exceeds what we believe would be appropriate for us to acquire directly, subject to certain conditions. During the years ended June 30, 2015, 2014, and 2013, the Company recognized $67,163, $2,941, and $0, respectively, in management fee income related to the services performed for FCCIP. Such amounts are included in Other Income from Non-Investment Sources on the Consolidated Statements of Operations.
 124    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 5. Related Party Agreements and Transactions   (continued) Managerial Assistance As a business development company, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. With regard to the Control Investments in Texas Westchester Financial, LLC, New Media West, LLC, TransAmerican Asset Servicing Group, LLC, Takoda Resources Inc., and The Finance Company, LLC, the Company has provided
managerial assistance during the period for which no fees were charged. Our Chairman, John Stuart, currently serves as a director of The Finance Company, LLC, New Media West, LLC and Takoda Resources Inc. Lawrence Chua, a Senior Vice President of Full Circle Advisors, serves on the board of Takoda Resources Inc. As of June 30, 2015, only one non-control investment, JN Medical Corporation, had accepted our offer for managerial services during the current fiscal year. No fees have been charged to JN Medical Corporation for such services. Note 6. Equity Offerings, Related Expenses, and Other Stock Issuances Equity offerings are included in the Companys capital accounts on the date that the Company assumes the obligation to issue the shares. For purposes of the calculation of Net Asset Value Per Share, Earnings Per Share and Per Share Data, the related shares are treated as outstanding on the same date that the equity offering is included in the Companys capital accounts. Offering expenses are generally charged against paid-in capital in excess of par. The proceeds raised, the related underwriting fees, the offering expenses, and the price at which common stock was issued, since inception, are detailed in the following table:  Issuances of Common Stock

          

          Number of Shares Issued

          

          Gross Proceeds Raised, Net Assets Acquired and Dividends Reinvested

          

          Underwriting Fees

          

          Offering Expenses

          

          Gross Offering PriceApril 16, 2010

          

          

          100

          

          

          $

          1,500

          

          

          $

          

          

          

          $

          

          

          

          $

          15.00  per/shareAugust 31, 2010

          

          

          4,191,415

          (1)

          

          $

          42,425,564

          

          

          $

          

          

          

          $

          

          

          

          $

          10.13  per/share

          (2)August 31, 2010

          

          

          2,000,000

          

          

          $

          18,000,000

          

          

          $

          1,350,000

          

          

          $

          1,052,067

          

          

          $

          9.00  per/shareNovember 27, 2012

          

          

          1,350,000

          

          

          $

          10,665,000

          

          

          $

          533,250

          

          

          $

          153,330

          

          

          $

          7.90  per/shareJanuary 14, 2014

          

          

          1,892,300

          (3)

          

          $

          13,492,099

          

          

          $

          539,684

          

          

          $

          261,994

          

          

          $

          7.13  per/shareFebruary 27, 2014

          

          

          630,000

          

          

          $

          4,920,300

          

          

          $

          

          (4)

          

          $

          47,236

          

          

          $

          7.81  per/shareJune 19, 2014

          

          

          1,351,352

          

          

          $

          10,000,005

          

          

          $

          

          (4)

          

          $

          44,826

          

          

          $

          7.40  per/shareJuly 14, 2014

          

          

          506,000

          

          

          $

          3,744,400

          

          

          $

          

          (4)

          

          $

          37,775

          

          

          $

          7.40  per/shareMarch 30, 2015

          

          

          11,205,921

          

          

          $

          39,220,723

          

          

          $

          952,214

          (5)

          

          $

          449,446

          

          

          $

          3.50  per/shareApril 13, 2015

          

          

          80,475

          

          

          $

          281,663

          

          

          $

          

          

          

          $

          3,345

          

          

          $

          3.50  per/share
  (1)

          Includes 403,662 shares that were issued on September 30, 2010 upon the expiration of the overallotment option granted to the underwriters in connection with our initial public offering. Such shares were deemed to be outstanding at August 31, 2010. (2)

          Based on weighted average price assigned to shares. (3)

          Includes 242,300 overallotment shares that were granted to the underwriters in connection with our January 14, 2014 follow-on offering. The underwriters exercised their option to purchase additional shares on January 27, 2014. Such shares were deemed to be outstanding at January 14, 2014.
 125    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 6. Equity Offerings, Related Expenses, and Other Stock Issuances   (continued) (4)

          This was a registered offering placed directly with investors. (5)

          Shares were issued pursuant to a rights offering. The dealer manager received $952,214 for services provided in connection with the rights offering. Note 7. Financial Highlights  Year Ended June 30, 2015

          

          Year Ended June 30, 2014

          

          Year Ended June 30, 2013

          

          Year Ended June 30, 2012

          

          For the period from August 31, 2010 (commencement of operations) to June 30, 2011Per Share Data(1)(2):Net asset value at beginning of period

          

          $

          6.38

          

          

          $

          8.01

          

          

          $

          8.59

          

          

          $

          9.08

          

          

          $

          9.40Accretion (dilution) from offering(s)(3)

          

          

          (0.92

          )

          

          

          0.03

          

          

          

          (0.18

          )

          

          

          

          

          

          

          Offering costs

          

          

          (0.06

          )

          

          

          (0.04

          )

          

          

          (0.02

          )

          

          

          

          

          

          

          (0.04

          )Net investment income (loss)(8)

          

          

          0.63

          

          

          

          0.71

          

          

          

          0.77

          

          

          

          0.78

          

          

          

          0.70Net change in unrealized gain (loss)

          

          

          (0.51

          )

          

          

          (1.36

          )

          

          

          0.37

          

          

          

          (0.32

          )

          

          

          (0.29

          )Net realized gain (loss)

          

          

          (0.51

          )

          

          

          (0.11

          )

          

          

          (0.60

          )

          

          

          (0.03

          )

          

          

          0.06Dividends from net investment income

          

          

          (0.63

          )

          

          

          (0.69

          )

          

          

          (0.78

          )

          

          

          (0.80

          )

          

          

          (0.75

          )Return of capital

          

          

          (0.08

          )

          

          

          (0.17

          )

          

          

          (0.14

          )

          

          

          (0.12

          )

          

          

          Net asset value at end of period

          

          $

          4.30

          

          

          $

          6.38

          

          

          $

          8.01

          

          

          $

          8.59

          

          

          $

          9.08Per share market value at end of period

          

          $

          3.57

          

          

          $

          7.81

          

          

          $

          7.83

          

          

          $

          7.65

          

          

          $

          7.90Total return based on market value

          

          

          (46.78

          )%(5)

          

          

          11.51

          %(5)

          

          

          15.12

          %(5)

          

          

          8.71

          %(5)

          

          

          (4.03

          )%(4)Total return based on net asset value

          

          

          (21.53

          )%(5)

          

          

          (11.00

          )%(5)

          

          

          4.94

          %(5)

          

          

          6.20

          %(5)

          

          

          5.62

          %(4)Shares outstanding at end of period

          

          

          23,235,430

          

          

          

          11,443,034

          

          

          

          7,569,382

          

          

          

          6,219,382

          

          

          

          6,219,382Weighted average shares outstanding for period

          

          

          14,803,637

          

          

          

          8,698,814

          

          

          

          7,018,286

          

          

          

          6,219,382

          

          

          

          6,206,824Ratio/Supplemental Data:Net assets at end of period

          

          $

          99,938,567

          

          

          $

          72,980,277

          

          

          $

          60,644,039

          

          

          $

          53,442,785

          

          

          $

          56,474,006Average net assets

          

          $

          78,137,174

          

          

          $

          64,360,541

          

          

          $

          57,842,601

          

          

          $

          55,531,518

          

          

          $

          57,455,987Annualized ratio of gross operating expenses to average net assets(6)

          

          

          13.51

          %

          

          

          12.11

          %

          

          

          11.52

          %

          

          

          9.56

          %

          

          

          8.49

          %Annualized ratio of net operating expenses to average net assets(6)

          

          

          11.69

          %

          

          

          12.11

          %

          

          

          11.52

          %

          

          

          8.99

          %

          

          

          7.34

          %Annualized ratio of net investment income (loss) to average net assets(6)

          

          

          11.02

          %

          

          

          9.37

          %

          

          

          9.30

          %

          

          

          8.70

          %

          

          

          9.29

          %Annualized ratio of net operating expenses excluding management fees (net of waiver), incentive fees, and interest expense to average net assets(6)

          

          

          1.51

          %

          

          

          3.04

          %

          

          

          3.53

          %

          

          

          3.15

          %

          

          

          2.00

          %Portfolio Turnover(7)

          

          

          74

          %

          

          

          88

          %(9)

          

          

          73

          %(9)

          

          

          58

          %(9)

          

          

          54

          %(9)
  (1)

          Financial highlights are based on weighted average shares outstanding. (2)

          Financial highlights for the period from April 16, 2010 (inception) through June 30, 2010 are not presented as the Companys operations were limited to organization and offering activities only.
 126    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 7. Financial Highlights   (continued) (3)

          Accretion and dilution from offering(s) is based on the net change in net asset value from each follow-on offering. (4)

          Total return based on market value is based on the change in market price per share assuming an investment at the initial public offering price of $9.00 per share and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. The total returns are not annualized. (5)

          Total return based on market value is based on the change in market price per share and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. The total returns are not annualized. (6)

          Financial Highlights for periods of less than one year are annualized and the ratios of gross and net operating expenses to average net assets and net investment income (loss) to average net assets are adjusted accordingly. Non-recurring expenses were not annualized. For the period from August 31, 2010 (commencement of operations) to June 30, 2011 the Company incurred $102,609 of organizational expenses, which were deemed to be non-recurring. (7)

          Portfolio Turnover is not annualized. (8)

          Net investment income (loss) per share is calculating based on the beginning of year and end of year shares outstanding. (9)

          Unaudited. Note 8. Long Term Liabilities Line of Credit On June 3, 2013, the Company entered into a credit facility (the Credit Facility) with Santander Bank. The facility size was originally $32.5 million and replaced the Companys First Capital Credit Facility. The Credit Facility was subsequently increased to $45.0 million on November 5, 2013. On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank, N.A. to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised
its option to expand the facility as of June 30, 2015. The Credit Facility matures on June 3, 2016 and bears interest based on a tiered rate structure, depending upon utilization, ranging from LIBOR (one month, two month or three month, depending on the Companys option) plus 3.25% to 4.00% per annum, or from Santander Banks prime rate plus 1.25% to 2.00% per annum, based on the Companys election. As of June 30, 2015, one month LIBOR, two month LIBOR, and three month LIBOR respectively were: 0.19%, 0.23%, and 0.28%. As of June 30, 2015, the Prime Rate was 3.25%. In addition, a fee of 0.50% to 1.00% per annum, depending on utilization, is charged on unused amounts
under the Credit Facility. The Credit Facility is secured by all of the Companys assets. Under the Credit Facility, the Company has made certain customary representations and warranties, and is required to comply with various covenants, reporting requirements and other customary requirements, including a minimum balance sheet leverage ratio, for similar credit facilities. The Credit Facility includes usual and customary events of default for credit facilities of this nature. The fees and expenses associated with opening and expanding the Credit Facility are being amortized over the term of the Credit Facility in accordance with ASC 470  Debt. As of June 30, 2015, of the total $763,984 fees and expenses incurred, $267,645 remains to be amortized and is reflected as Deferred Credit Facility Fees on the Consolidated Statements of Assets and Liabilities.
 127    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 8. Long Term Liabilities   (continued) At June 30, 2015 and June 30, 2014, the Company had outstanding borrowings of $0 and $8,435,463, respectively, under the Credit Facility, which amounts are included as Line of Credit in the Consolidated Statements of Assets and Liabilities. Distribution Notes On August 31, 2010, the Company entered into multiple senior unsecured notes (the Distribution Notes). The Distribution Notes consisted of $3,404,583 in senior unsecured notes, which bore interest at a fixed rate of 8% per annum, payable quarterly in cash, and were scheduled to mature on February 28, 2014. The Distribution Notes were paid off at par plus accrued interest on July 3, 2013. At June 30, 2015 and June 30, 2014, the Company had no Distribution Notes outstanding. Notes Payable On June 28, 2013, the Company issued $21,145,525 in aggregate principal amount of 8.25% Notes due June 30, 2020 (the Notes) (including a partial exercise of the underwriters overallotment option in July 2013) for net proceeds of $20,038,250 after deducting underwriting commissions of approximately $860,822 and offering expenses of $246,453. On July 14, 2014, we closed an offering of our 8.25% fixed-rate notes due 2020. The Notes offering consisted of $12,500,000 in aggregate principal amount of the Notes. The Notes were sold at price of $25.375 plus accrued interest from June 30, 2014, a premium to par value of $25.00 per Note. The sale of the notes resulted in total gross proceeds of $12,687,500. The Notes are a further issuance of, rank equally in right of payment with, and form a single series with the $21,145,525 of currently outstanding Notes. The offering expenses and underwriting commissions are being amortized over the term of the notes in accordance with ASC 470  Debt. Additionally, in accordance with ASU 2015-03, debt issuance costs related to the Notes are reported on the Consolidated Statements of Assets and Liabilities as a direct deduction from the face amount of the Notes. As such, as of June 30, 2015, of the total $1,150,940 issuance costs incurred, $833,541 remains to be amortized and is included in, and offsets, the Notes Payable balance in the Consolidated Statements of Assets and Liabilities. Additionally, $158,504 of the $187,500
premium related to the July 14, 2014 issuance remains unamortized and is included in the Notes Payable balance in the Consolidated Statements of Assets and Liabilities. Deferred Debt Issuance Costs as of June 30, 2014 on the Consolidated Statements of Assets and Liabilities has retrospectively been adjusted in accordance with ASU 2015-03. As of June 30, 2014, Notes Payable on the Consolidated Statements of Assets and Liabilities is reflected net of deferred debt issuance costs of $947,937 in accordance with ASU 2015-03. Prior to the adoption of ASU 2015-03, of the total debt issuance costs of $1,107,275 incurred, $947,937 remained to be amortized and was reflected as Deferred Debt Issuance Costs in the Consolidated Statements of Assets and Liabilities and the face amount of the Notes of
$21,145,525 was presented as Notes Payable on the Consolidated Statements of Assets and Liabilities. The Notes were issued pursuant to an indenture, dated June 3, 2013, as supplemented by the first supplemental indenture, dated June 28, 2013 (collectively, the Indenture), between the Company and U.S. Bank National Association (the Trustee). The Notes are unsecured obligations of the Company and rank senior in right of payment to the Companys existing and future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to the Companys existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to
any of the Companys secured indebtedness (including existing unsecured indebtedness that is later secured) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Companys subsidiaries or financing vehicles. Interest on the Notes is paid quarterly in arrears on March 30, June 30, September 30 and December 30, at a fixed rate of 8.25% per annum, beginning September 30, 2013. The Notes mature on June 30, 2020 and may be
 128    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 8. Long Term Liabilities   (continued) redeemed in whole or in part at any time or from time to time at the Companys option on or after June 30, 2016. The Notes are listed on the Nasdaq Global Market under the trading symbol FULLL with a par value of $25.00 per share. The Indenture contains certain covenants, including covenants requiring compliance with (regardless of whether the Company is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring the Company to provide financial information to the holders of the Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the Indenture. The Company may repurchase the Notes in accordance with the
1940 Act and the rules promulgated thereunder. Any Notes repurchased by the Company may, at the Companys option, be surrendered to the Trustee for cancellation, but may not be reissued or resold by the Company. Any Notes surrendered for cancellation will be promptly cancelled and no longer outstanding under the Indenture. As of June 30, 2015, the Company had not repurchased any of the Notes in the open market. At June 30, 2015 and June 30, 2014, the Company had a balance of $33,645,525 and $21,145,525 on the Notes, respectively, which is included in Notes Payable in the Consolidated Statements of Assets and Liabilities. The following shows a summary of the Long Term Liabilities as of June 30, 2015 and June 30, 2014: As of June 30, 2015  Facility

          

          Commitments

          

          Borrowings Outstanding

          

          Fair ValueCredit Facility(1)

          

          $

          45,000,000

          

          

          $

          

          

          

          $

          Notes

          

          

          33,645,525

          

          

          

          33,645,525

          

          

          

          34,049,271Total

          

          $

          78,645,525

          

          

          $

          33,645,525

          

          

          $

          34,049,271
 As of June 30, 2014  Facility

          

          Commitments

          

          Borrowings Outstanding

          

          Fair ValueCredit Facility(1)

          

          $

          45,000,000

          

          

          $

          8,435,463

          

          

          $

          8,435,463Notes

          

          

          21,145,525

          

          

          

          21,145,525

          

          

          

          22,304,300Total

          

          $

          66,145,525

          

          

          $

          29,580,988

          

          

          $

          30,739,763
  (1)

          On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank, N.A. to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised its option to expand the facility as of June 30, 2015. As of June 30, 2015 and June 30, 2014, the carrying amount of the Companys outstanding Credit Facility approximated fair value. The fair values of the Companys Credit Facility and Notes are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Companys Notes is determined by utilizing market quotations at the measurement date.
 129    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 9. Fair Value Measurements The Companys assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC Topic 820  Fair Value Measurements and Disclosures (ASC 820). See Note 2 for a discussion of the Companys policies. The following table presents information about the Companys assets measured at fair value as of June 30, 2015 and June 30, 2014, respectively:  As of June 30, 2015Level 1

          

          Level 2

          

          Level 3

          

          TotalAssetsSenior and Subordinated Loans, at fair value

          

          $

          

          

          

          $

          12,275,000

          

          

          $

          121,630,798

          

          

          $

          133,905,798Limited Liability Company Interests, at fair value

          

          

          

          

          

          

          

          

          

          

          1,228,978

          

          

          

          1,228,978Investments in Warrants, at fair value

          

          

          

          

          

          

          90

          

          

          

          2,695,075

          

          

          

          2,695,165Common Stock, at fair value

          

          

          1,308,818

          

          

          

          

          

          

          

          12,975,000

          

          

          

          14,283,818Open Swap Contract, at fair value

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          $

          1,308,818

          

          

          $

          12,275,090

          

          

          $

          138,529,851

          

          

          $

          152,113,759
  As of June 30, 2014Level 1

          

          Level 2

          

          Level 3

          

          TotalAssetsSenior and Subordinated Loans, at fair value

          

          $

          

          

          

          $

          7,175,000

          

          

          $

          111,079,608

          

          

          $

          118,254,608Limited Liability Company Interests, at fair value

          

          

          

          

          

          

          

          

          

          

          3,875,583

          

          

          

          3,875,583Investments in Warrants, at fair value

          

          

          

          

          

          

          

          

          

          

          3,060,421

          

          

          

          3,060,421U.S. Treasury Securities, at fair value(1)

          

          

          25,000,147

          

          

          

          

          

          

          

          

          

          

          

          25,000,147$

          25,000,147

          

          

          $

          7,175,000

          

          

          $

          118,015,612

          

          

          $

          150,190,759
  (1)

          U.S. Treasury Securities were purchased and temporarily held in connection with compliance with RIC diversification requirements under Subchapter M of the Code. During the year ended June 30, 2015, a portion of the Level 3 General Cannabis Corp. warrant was converted into Level 1 common stock. During the year ended June 30, 2014, there were no transfers in or out of levels.
 130    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 9. Fair Value Measurements   (continued) The following table presents additional information about Level 3 assets measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the net unrealized gains and losses for assets within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs. The tables below reflect the changes in Level 3 assets measured at fair value for the year ended June 30, 2015 and for the year ended June 30, 2014.  Year Ended June 30, 2015Beginning Balance July 1, 2014

          

          Amortization & Accretion of Fixed IncomePremiums & Discounts

          

          Realized &UnrealizedGains (Losses)

          

          Transfers out of Level 3(2)

          

          Purchases(1)

          

          Sales &Settlements

          

          Ending Balance June 30, 2015

          

          Change in Unrealized Gains (Losses) for Investments still held at June 30, 2015AssetsSenior and Subordinated Loans, at fair value

          

          $

          111,079,608

          

          

          $

          1,371,720

          

          

          $

          (6,728,531

          )

          

          $

          

          

          

          $

          113,149,706

          

          

          $

          (97,241,705

          )

          

          $

          121,630,798

          

          

          $

          (7,918,295

          )Limited Liability Company Interests, at fair value

          

          

          3,875,583

          

          

          

          

          

          

          

          (2,474,886

          )

          

          

          

          

          

          

          

          

          

          

          (171,719

          )

          

          

          1,228,978

          

          

          

          (1,171,144

          )Warrants, at fair value

          

          

          3,060,421

          

          

          

          

          

          

          

          (2,194,114

          )

          

          

          (486,786

          )

          

          

          2,328,768

          

          

          

          (13,214

          )

          

          

          2,695,075

          

          

          

          (337,902

          )Common Stock, at fair value

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          12,975,000

          

          

          

          

          

          

          

          12,975,000

          

          

          

          Open Swap Contract, at fair value

          

          

          

          

          

          

          

          

          

          

          1,081

          

          

          

          

          

          

          

          

          

          

          

          (1,081

          )

          

          

          

          

          

          

          $

          118,015,612

          

          

          $

          1,371,720

          

          

          $

          (11,396,450

          )

          

          $

          (486,786

          )

          

          $

          128,453,474

          

          

          $

          (97,427,719

          )

          

          $

          138,529,851

          

          

          $

          (9,427,341

          )
  (1)

          Includes PIK interest. (2)

          Represents the transfer of a portion of the General Cannabis Corp. warrant out of Level 3 into Level 1 common stock upon conversion.  Year Ended June 30, 2014Beginning Balance July 1, 2013

          

          Amortization & Accretion of Fixed Income Premiums & Discounts

          

          Realized & Unrealized Gains (Losses)

          

          Purchases(1)

          

          Sales & Settlements

          

          Ending Balance June 30, 2014

          

          Change in Unrealized Gains (Losses) for Investmentsstill held atJune 30, 2014AssetsSenior and Subordinated Loans, at fair value

          

          $

          81,195,958

          

          

          $

          466,767

          

          

          $

          (12,452,898

          )

          

          $

          124,171,284

          

          

          $

          (82,301,503

          )

          

          $

          111,079,608

          

          

          $

          (12,199,647

          )Limited Liability Company Interests, at fair value

          

          

          6,784,435

          

          

          

          

          

          

          

          (2,949,136

          )

          

          

          40,284

          

          

          

          

          

          

          

          3,875,583

          

          

          

          (2,949,136

          )Warrants, at fair value

          

          

          194,108

          

          

          

          

          

          

          

          1,624,819

          

          

          

          1,241,494

          

          

          

          

          

          

          

          3,060,421

          

          

          

          1,624,819$

          88,174,501

          

          

          $

          466,767

          

          

          $

          (13,777,215

          )

          

          $

          125,453,062

          

          

          $

          (82,301,503

          )

          

          $

          118,015,612

          

          

          $

          (13,523,964

          )
  (1)

          Includes PIK interest. Realized and unrealized gains and losses are included in net realized gain (loss) on investments and net change in unrealized gain (loss) on investments in the Consolidated Statements of Operations. The change in unrealized losses for Level 3 investments still held at June 30, 2015 of $9,427,341 is included in net change in unrealized gain (loss) on investments in the Consolidated Statements of Operations for the year ended June 30, 2015. The change in unrealized losses for Level 3 investments still held at June 30, 2014 of $13,523,964 is included in net change in net unrealized gain (loss) on investments in the Consolidated
Statements of Operations for the year ended June 30, 2014.
 131    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 9. Fair Value Measurements   (continued) The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2015:  Description:

          

          Fair Value

          

          Valuation Technique

          

          Unobservable Inputs

          

          Range (Average)(1)Senior and Subordinated Loans

          

          $

          91,569,415

          

          

          

          Discounted cash flows (income approach)

          

          

          

          Discount Rate

          

          

          

          8.51%  55.00% (16.27)%26,739,621

          

          

          

          Precedent Transactions

          

          

          

          Transaction Value

          

          

          

          N/A3,321,762

          

          

          

          Liquidation Value

          

          

          

          Asset Value

          

          

          

          N/ATotal

          

          

          121,630,798Limited Liability Interests, Warrants, and Common Stock (Private Companies)

          

          

          3,719,553

          

          

          

          Market comparable companies (market approach)

          

          

          

          EBITDA multiple

          

          

          

          4.00x  7.25x (5.15x)12,975,000

          

          

          

          Precedent Transactions

          

          

          

          Transaction Value

          

          

          

          N/A177,500

          

          

          

          Liquidation Value

          

          

          

          Asset Value

          

          

          

          N/ATotal

          

          

          16,872,053Warrant (Public Companies)

          

          

          27,000

          

          

          

          Option Pricing Model

          

          

          

          Volatility

          

          

          

          32.588%Open Swap Contract

          

          

          

          

          

          

          Option Pricing Model

          

          

          

          Broker Quotes

          

          

          $

          212.50/share  $220.00/share($216.50/share)Total Level 3 Investments

          

          $

          138,529,851
  (1)

          The average values were determined using the weighted average of the fair value of the investments in each investment category. The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2014:  Description:

          

          Fair Value

          

          Valuation Technique

          

          Unobservable Inputs

          

          Range (Average)(1)Senior and Subordinated Loans

          

          $

          56,194,050

          

          

          

          Discounted cash flows (income approach)

          

          

          

          Discount Rate

          

          

          

          3.58%  30.31% (13.02)%42,326,711

          

          

          

          Precedent Transactions

          

          

          

          Transaction Value

          

          

          

          N/A12,558,847

          

          

          

          Liquidation Value

          

          

          

          Asset Value

          

          

          

          N/ATotal

          

          

          111,079,608Limited Liability Interests and Warrants (Private Companies)

          

          

          3,405,610

          

          

          

          Market comparable companies (market approach)

          

          

          

          EBITDA multiple

          

          

          

          4.00x  7.50x (4.99x)634,145

          

          

          

          Precedent Transactions

          

          

          

          Transaction Value

          

          

          

          N/A540,037

          

          

          

          Liquidation Value

          

          

          

          Asset Value

          

          

          

          N/ATotal

          

          

          4,579,792Warrant (Public Companies)

          

          

          2,356,212

          

          

          

          Option Pricing Model

          

          

          

          VolatilityDiscount Rate

          

          

          

          60%  100%40%  60%Total Investments

          

          $

          118,015,612
  (1)

          The average values were determined using the weighted average of the fair value of the investments in each investment category. The primary significant unobservable input used in the fair value measurement of the Companys debt securities (first lien debt, second lien debt and subordinated debt), including income-producing investments in funds, is the discount rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. In determining the discount rate, for the income, or yield, approach, the Company considers current market yields and multiples, portfolio company performance,
 132    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 9. Fair Value Measurements   (continued) leverage levels and credit quality, among other factors in its analysis. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate discount rate to use in the income approach. The primary significant unobservable input used in the fair value measurement of the Companys private equity and warrant investments is the EBITDA multiple, which is used to determine the Enterprise Value. Significant increases (decreases) in the Enterprise Value in isolation would result in a significantly higher (lower) fair value measurement. To determine the Enterprise Value for the market approach, the Company considers current market trading and/or transaction multiples, portfolio company performance (financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes
in one or more of these factors can have a similar directional change on other factors in determining the appropriate multiple to use in the market approach. The primary unobservable inputs used in the fair value measurement of the Companys warrant investments, when using an option pricing model, are the discount rate and volatility. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in the volatility in isolation would result in a significantly higher (lower) fair value measurement. Changes in one or more factors can have a similar directional change on other factors in determining the appropriate discount rate or volatility to use in the valuation of a
warrant using an option pricing model. Note 10. Derivative Contracts In the normal course of business, the Company may utilize derivative contracts in connection with its investment activities. Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment. The derivative activities and exposure to derivative contracts primarily involve equity price risks. In addition to the primary underlying risk, additional counterparty risk exists due to the potential inability of counterparties to meet the terms of their contracts. Warrants The warrants provide exposure and potential gains upon equity appreciation of the portfolio companys equity value. The value of a warrant has two components: time value and intrinsic value. A warrant has a limited life and expires on a certain date. As a warrants expiration date approaches, the time value of the warrant will decline. In addition, if the stock underlying the warrant declines in price, the intrinsic value of an in the money warrant will decline. Further, if the price of the stock underlying the warrant does not exceed the strike price of the warrant on the expiration date, the warrant will expire worthless. As a result, there is the potential for the entire value of an investment in a warrant to be lost. Counterparty risk exists from the potential failure of an issuer of warrants to settle its exercised warrants. The maximum risk of loss from counterparty risk is the fair value of the contracts and the purchase price of the warrants. The Companys Board of Directors considers the effects of counterparty risk when determining the fair value of its investments in warrants. Swap contracts  general The Company may enter into swap contracts, including interest rate swaps, total return swaps, and credit default swaps, as part of its investment strategy, to hedge against unfavorable changes in the value of investments and to protect against adverse movements in interest rates or credit performance with counterparties. Generally, a swap contract is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified notional amount of the underlying assets. The payment flows are usually netted against
each
 133    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 10. Derivative Contracts   (continued) other, with the difference being paid by one party to the other. Payments are disclosed as realized gain (loss) on open swap contracts on the Consolidated Statements of Operations. If the payment is a receivable as of the end of the period, it is disclosed as receivable on open swap contract on the Consolidated Statements of Assets and Liabilities. The fair value of open swaps reported in the Consolidated Statements of Assets and Liabilities may differ from that which would be realized in the event the Company terminated its position in the contract. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of counterparty is generally limited to the aggregate fair value of swap contracts in an unrealized gain position, as adjusted for any collateral posted to us by the counterparty or by us with the counterparty. Therefore, the Company considers the creditworthiness
of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in the fair value of the underlying investments. Total return swaps The Company is subject to market risk in the normal course of pursuing its investment objectives. The Company may enter into total return swaps either to manage its exposure to the market or certain sectors of the market, or to create exposure to certain investments to which it is otherwise not exposed. Total return swap contracts involve the exchange by the Company and a counterparty of their respective commitments to pay or receive a net amount based on the change in the fair value of a particular security or index and a specified notional amount. During the year ended June 30, 2015, we funded one synthetic secured loan in the form of a total return swap. More specifically, we purchased 60,000 shares of Granite Ridge Holdings, LLC, a power generation company. We contemporaneously entered into a collateralized swap agreement with another private fund, which posted approximately $10.4 million of cash collateral, whereby we swapped the returns on the shares for a fixed rate of 15.0% on the net loan amount. Under the terms of the swap, the Company expects to receive periodic payments from the counterparty. These periodic payments will be recorded as realized capital gains
for accounting purposes in accordance with GAAP. For the year ended June 30, 2015, $1,081 of realized gain was included on the Consolidated Statements of Operations. Note 11. Subsequent Events Recent Portfolio Activity On July 1, 2015, the Company issued a $6.0 million mortgage note to 310E53RD, LLC, a real estate holding company. The note bears interest at LIBOR plus 10.00% with a LIBOR floor of 0.15% and has a final maturity of July 1, 2017. On July 1, 2015, the senior secured credit facility and revolving commitment with Butler Burger Group, LLC, was fully repaid at par plus accrued interest and fees for total proceeds of $8,628,197. On July 17, 2015, the Company purchased $3.0 million of a $175.0 million senior secured term loan to Liquidnet Holdings, Inc., an equities trading platform, at 96.375% of par. The credit facility bears interest at LIBOR plus 6.75% with a LIBOR floor of 1.00% and has a final maturity of May 22, 2019. On July 31, 2015, the Company purchased an additional $1.0 million of senior secured notes to Lee Enterprises, Incorporated, a daily and weekly newspaper publisher. The notes bear interest at 9.50% and have a final maturity of March 15, 2022. On August 26, 2015, the Board of Directors authorized the purchase of an additional 1 million shares to provide for the purchase up to 2 million shares of the outstanding common stock as part of the share repurchase program.
 134    TABLE OF CONTENTS FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATMENTS June 30, 2015 Note 11. Subsequent Events   (continued) On September 3, 2015, the senior secured credit facility with GW Power, LLC and Greenwood Fuels WI, LLC was partially repaid for total proceeds of $2,200,000. On September 4, 2015, Blackberry Ltd announced that it has entered into a definitive agreement to acquire Good Technology Corporation for $425 million in cash. Upon closing of the transaction, the Company is expected to receive an $11 million repayment on its first lien notes, which would reflect a 110% redemption on the Companys initial investment. The Company has not received an indication of what value, if any, is expected to be received related to the warrants. On September 10, 2015, the Company sold the full $2,000,000 of the second lien term loan with GK Holdings, Inc. for total proceeds of $1,955,000 plus accrued interest. Distribution On August 4, 2015, the Board of Directors declared the following monthly distributions:  Record Date

          

          Payment Date

          

          Per Share AmountOctober 30, 2015

          

          

          November 13, 2015

          

          

          $

          0.035November 30, 2015

          

          

          December 15, 2015

          

          

          $

          0.035December 31, 2015

          

          

          January 15, 2016

          

          

          $

          0.035
 Note 12. Commitments and Contingencies In the normal course of business, the Company may enter into investment agreements under which it commits to make an investment in a portfolio company at some future date or over a specified period of time. As of June 30, 2015, we had approximately $2.7 million in unfunded loan commitments, subject to our approval in certain instances, to provide debt financing to certain of our portfolio companies. The Company is currently not subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations. Note 13. Selected Quarterly Financial Data (Unaudited)  Total Investment Income

          

          Net Investment Income

          

          Net Realized andUnrealized Gains (Losses)

          

          Net Increase (Decrease) in NetAssets from OperationsQuarter Ended

          

          Total

          

          Per Share(1)

          

          Total

          

          Per Share(1)

          

          Total

          

          PerShare(1)

          

          Total

          

          Per Share(1)June 30, 2012

          

          $

          2,481,143

          

          

          $

          0.40

          

          

          $

          1,071,947

          

          

          $

          0.17

          

          

          $

          (1,769,463

          )

          

          $

          (0.28

          )

          

          $

          (697,516

          )

          

          $

          (0.11

          )September 30, 2012

          

          

          2,773,303

          

          

          

          0.45

          

          

          

          1,238,245

          

          

          

          0.20

          

          

          

          (343,354

          )

          

          

          (0.06

          )

          

          

          894,891

          

          

          

          0.14December 31, 2012

          

          

          3,099,599

          

          

          

          0.46

          

          

          

          1,465,650

          

          

          

          0.22

          

          

          

          (1,893,852

          )

          

          

          (0.28

          )

          

          

          (428,202

          )

          

          

          (0.06

          )March 31, 2013

          

          

          2,843,041

          

          

          

          0.38

          

          

          

          1,312,164

          

          

          

          0.18

          

          

          

          168,654

          

          

          

          0.02

          

          

          

          1,480,818

          

          

          

          0.20June 30, 2013

          

          

          3,330,080

          

          

          

          0.44

          

          

          

          1,364,522

          

          

          

          0.18

          

          

          

          489,114

          

          

          

          0.06

          

          

          

          1,853,636

          

          

          

          0.24September 30, 2013

          

          

          3,218,186

          

          

          

          0.43

          

          

          

          1,244,227

          

          

          

          0.16

          

          

          

          (3,501,376

          )

          

          

          (0.46

          )

          

          

          (2,257,149

          )

          

          

          (0.30

          )December 31, 2013

          

          

          3,996,903

          

          

          

          0.53

          

          

          

          1,899,588

          

          

          

          0.25

          

          

          

          (3,119,528

          )

          

          

          (0.41

          )

          

          

          (1,219,940

          )

          

          

          (0.16

          )March 31, 2014

          

          

          3,191,624

          

          

          

          0.34

          

          

          

          1,406,379

          

          

          

          0.15

          

          

          

          1,975,143

          

          

          

          0.21

          

          

          

          3,381,522

          

          

          

          0.36June 30, 2014

          

          

          3,416,980

          

          

          

          0.33

          

          

          

          1,480,527

          

          

          

          0.15

          

          

          

          (9,007,355

          )

          

          

          (0.79

          )

          

          

          (7,526,828

          )

          

          

          (0.73

          )September 30, 2014

          

          

          4,086,624

          

          

          

          0.34

          

          

          

          1,842,074

          

          

          

          0.16

          

          

          

          (1,613,376

          )

          

          

          (0.14

          )

          

          

          228,698

          

          

          

          0.02December 31, 2014

          

          

          4,912,220

          

          

          

          0.41

          

          

          

          2,353,341

          

          

          

          0.19

          

          

          

          (8,926,211

          )

          

          

          (0.75

          )

          

          

          (6,572,870

          )

          

          

          (0.56

          )March 31, 2015

          

          

          4,308,525

          

          

          

          0.36

          

          

          

          1,977,936

          

          

          

          0.17

          

          

          

          (319,968

          )

          

          

          0.00

          

          

          

          1,657,968

          

          

          

          0.17June 30, 2015

          

          

          4,441,974

          

          

          

          0.19

          

          

          

          2,439,720

          

          

          

          0.11

          

          

          

          (2,954,244

          )

          

          

          (0.13

          )

          

          

          (514,524

          )

          

          

          (0.02

          )
  (1)

          Per share amounts are calculated using weighted average shares outstanding during the period, except where such amounts need to be adjusted to be consistent with what is disclosed in the financial highlights of our audited financial statements.
 135    TABLE OF CONTENTS Schedule 12  14 The table below represents the fair value of control and affiliate investments at June 30, 2014 and any amortization, purchases, sales, and realized and net unrealized gain (loss) made to such investments, as well as the ending fair value as of June 30, 2015. Schedule of Investments in and Advances to Affiliates  Portfolio Company/Type of Investment

          

          Par Amount/Quantity

          

          Amount of Interest and Dividends Credited in Income

          

          Fair Value at June 30, 2014

          

          Accretion/ Amortization

          

          Purchases

          

          Sales

          

          Realized and Unrealized Gains/Losses

          

          Transfer from Control to Non-Control/ Non-Affiliate Investment

          

          Fair Value at June 30, 2015Control InvestmentsNew Media West, LLC(2)Senior Debt/Limited Liability Company Interests(4)

          

          $

          3,811,681

          

          

          $

          318,461

          

          

          $

          5,666,679

          

          

          $

          

          

          

          $

          

          

          

          $

          (1,015,030

          )

          

          $

          (4,651,649

          )

          

          $

          

          

          

          $

          Takoda Resources Inc.Senior Debt/Common Stock(1)

          

          $

          3,054,532/749

          

          

          

          118,703

          

          

          

          2,557,379

          

          

          

          

          

          

          

          453,272

          

          

          

          (91,568

          )

          

          

          (2,757,498

          )

          

          

          

          

          

          

          161,585Texas Westchester Financial, LLCLimited Liability Company Interests(1)

          

          

          9,278

          

          

          

          

          

          

          

          540,037

          

          

          

          

          

          

          

          

          

          

          

          (171,717

          )

          

          

          (190,820

          )

          

          

          

          

          

          

          177,500The Finance Company, LLCSenior Debt/Limited Liability Company Interests(1)

          

          $

          4,195,915/50

          

          

          

          881,110

          

          

          

          7,214,905

          

          

          

          38,386

          

          

          

          

          

          

          

          (967,632

          )

          

          

          (1,279,465

          )

          

          

          

          

          

          

          5,006,194TransAmerican Asset Servicing Group, LLCSenior Debt/Limited Liability Company Interests(1)

          

          $

          3,563,246/75

          

          

          

          183,042

          

          

          

          1,560,057

          

          

          

          9,714

          

          

          

          1,532,467

          

          

          

          (977,374

          )

          

          

          (1,658,079

          )

          

          

          

          

          

          

          466,785Total Control Investments

          

          

          

          

          

          $

          1,501,316

          

          

          $

          17,539,057

          

          

          $

          48,100

          

          

          $

          1,985,739

          

          

          $

          (3,223,321

          )

          

          $

          (10,537,511

          )

          

          $

          

          

          

          $

          5,812,064Affiliate InvestmentsGeneral Cannabis Corp.(3)Common Stock/Warrant(1),(4)

          

          

          654,409

          

          

          

          

          

          

          

          2,356,212

          

          

          

          

          

          

          

          113,214

          

          

          

          (377,639

          )

          

          

          (600,986

          )

          

          

          (1,490,801

          )

          

          

          Modular Process Control, LLCSenior Debt/Warrant(1)

          

          $

          7,151,027/1

          

          

          

          1,205,914

          

          

          

          3,971,110

          

          

          

          99,410

          

          

          

          2,282,926

          

          

          

          (1,911,704

          )

          

          

          (777,915

          )

          

          

          

          

          

          

          3,663,827ProGrade Ammo Group, LLCSenior Debt/Warrants(1)

          

          $

          6,665,197/181,240

          

          

          

          4,594

          

          

          

          4,133,284

          

          

          

          4,594

          

          

          

          877,441

          

          

          

          (2,305,294

          )

          

          

          (119,716

          )

          

          

          

          

          

          

          2,590,309SOLEX Fine Foods, LLC; Catsmo, LLCSenior Debt/Limited Liability Company Interests(1)/Warrant(1)

          

          $

          3,861,696/1/1

          

          

          

          512,253

          

          

          

          3,888,914

          

          

          

          27,904

          

          

          

          110,000

          

          

          

          (148,304

          )

          

          

          (46,167

          )

          

          

          

          

          

          

          3,832,347US Oilfield Company, LLCSenior Debt/Warrants(1)

          

          $

          5,767,417/3

          

          

          

          722,952

          

          

          

          

          

          

          

          38,812

          

          

          

          18,396,291

          

          

          

          (12,714,465

          )

          

          

          (37,300

          )

          

          

          

          

          

          

          5,683,338West World Media, LLCLimited Liability Company Interests(1)

          

          

          148,326

          

          

          

          

          

          

          

          238,897

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          10,554

          

          

          

          

          

          

          

          249,451Total Affiliate Investments

          

          

          

          

          

          $

          2,445,713

          

          

          $

          14,588,417

          

          

          $

          170,720

          

          

          $

          21,779,872

          

          

          $

          (17,457,406

          )

          

          $

          (1,571,530

          )

          

          $

          (1,490,801

          )

          

          $

          16,019,272
  (1)

          Non-income producing security. (2)

          On June 30, 2015, New Media West, LLC transferred from a Control Investment to a Non-Control/Non-Affiliate Investment. (3)

          As of May 13, 2015, General Cannabis Corp. transferred from an Affiliate Investment to a Non-Control/Non-Affiliate Investment. All purchases and sales after May 13, 2015 have been excluded from the purchase and sales columns in the above table. Realized and unrealized gains/losses have been prorated and only the realized and unrealized gains/losses which are attributable to the investment as an Affiliate Investment have been included. (4)

          Investment no longer held as of June 30, 2015.
 136    TABLE OF CONTENTS Schedule 12  14 The table below represents the fair value of control and affiliate investments at June 30, 2013 and any amortization, purchases, sales, and realized and net unrealized gain (loss) made to such investments, as well as the ending fair value as of June 30, 2014. Schedule of Investments in and Advances to Affiliates  Portfolio Company/Type of Investment

          

          Par Amount/ Quantity

          

          Amount of Interest or Dividends Credited in Income

          

          Fair Value at June 30, 2013

          

          Accretion/ Amortization

          

          Purchases

          

          Sales

          

          Realized and Unrealized Gains/Losses

          

          Fair Value at June 30, 2014Control InvestmentsNew Media West, LLCSenior Debt/Limited Liability Company Interests(1)

          

          $

          4,826,711/720

          

          

          $

          456,828

          

          

          $

          9,282,685

          

          

          $

          

          

          

          $

          

          

          

          $

          (252,968

          )

          

          $

          (3,363,038

          )

          

          $

          5,666,679Takoda Resources Inc.Senior Debt/Common Stock(1)

          

          $

          2,692,828/749

          

          

          

          349,777

          

          

          

          1,469,063

          

          

          

          

          

          

          

          1,223,765

          

          

          

          

          

          

          

          (135,449

          )

          

          

          2,557,379Texas Westchester Financial, LLCLimited Liability Company Interests(1)

          

          

          9,278

          

          

          

          

          

          

          

          602,154

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (62,117

          )

          

          

          540,037The Finance Company, LLCSenior Debt/Limited Liability Company Interests

          

          $

          5,163,547/50

          

          

          

          902,429

          

          

          

          6,303,101

          

          

          

          32,018

          

          

          

          500,000

          

          

          

          

          

          

          

          379,786

          

          

          

          7,214,905TransAmerican Asset Servicing Group, LLCSenior Debt/Limited Liability Company Interests(1)

          

          $

          3,008,154/75

          

          

          

          369,077

          

          

          

          1,458,437

          

          

          

          2,636

          

          

          

          3,494,196

          

          

          

          (2,886,042

          )

          

          

          (509,170

          )

          

          

          1,560,057Total Control Investments

          

          

          

          

          

          $

          2,078,111

          

          

          $

          19,115,440

          

          

          $

          34,654

          

          

          $

          5,217,961

          

          

          $

          (3,139,010

          )

          

          $

          (3,689,988

          )

          

          $

          17,539,057Affiliate InvestmentsGeneral Cannabis Corp.Warrant(1)

          

          

          1

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          500,000

          

          

          

          

          

          

          

          1,856,212

          

          

          

          2,356,212Modular Process Control, LLCSenior Debt/Warrant(1)

          

          $

          6,779,806/1

          

          

          

          1,069,498

          

          

          

          6,069,246

          

          

          

          86,722

          

          

          

          3,555,009

          

          

          

          (2,775,204

          )

          

          

          (2,964,663

          )

          

          

          3,971,110ProGrade Ammo Group, LLCSenior Debt/Warrants(1)

          

          $

          8,093,050/181,240

          

          

          

          1,120,904

          

          

          

          6,211,824

          

          

          

          63,546

          

          

          

          10,648,661

          

          

          

          (9,932,096

          )

          

          

          (2,858,651

          )

          

          

          4,133,284SOLEX Fine Foods, LLC; Catsmo, LLCSenior Debt/Limited Liability Company Interests(1)/Warrant(1)

          

          $

          3,900,000/1/1

          

          

          

          510,959

          

          

          

          4,031,382

          

          

          

          24,097

          

          

          

          40,284

          

          

          

          

          

          

          

          (206,849

          )

          

          

          3,888,914West World Media, LLCLimited Liability Company Interests(1)

          

          

          85,210

          

          

          

          

          

          

          

          235,451

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          3,446

          

          

          

          238,897Total Affiliate Investments

          

          

          

          

          

          $

          2,701,361

          

          

          $

          16,547,903

          

          

          $

          174,365

          

          

          $

          14,743,954

          

          

          $

          (12,707,300

          )

          

          $

          (4,170,505

          )

          

          $

          14,588,417
  (1)

          Non-income producing security.
 137    TABLE OF CONTENTS Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Item 9A.  Controls and Procedures (a)  Evaluation of Disclosure Controls and Procedures As of June 30, 2015 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. (b)  Managements Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of June 30, 2015. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Companys internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements. Management performed an assessment of the effectiveness of the Companys internal control over financial reporting as of June 30, 2015 based upon criteria in Internal Control  Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, management determined that the Companys internal control over financial reporting was effective as of June 30, 2105 based on the criteria in Internal Control  Integrated Framework issued by COSO. (c)  Attestation Report of the Registered Public Accounting Firm. McGladrey LLP, our independent registered public accounting firm, has issued an attestation report on the effectiveness of the Companys internal control over financial reporting as of June 30, 2015, as stated in its report, which is included under Item 8. Consolidated Financial Statements and Supplementary Data of this annual report on Form 10-K. (d)  Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during our most recently completed fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 138    TABLE OF CONTENTS Item 9B.  Other Information Not applicable.
 139    TABLE OF CONTENTS PART III Item 10.  Directors, Executive Officers and Corporate Governance The information required by Item 10 is hereby incorporated by reference from the Companys definitive Proxy Statement relating to the Companys 2016 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Companys fiscal year. Item 11.  Executive Compensation The information required by Item 11 is hereby incorporated by reference from the Companys definitive Proxy Statement relating to the Companys 2016 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Companys fiscal year. Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by Item 12 is hereby incorporated by reference from the Companys definitive Proxy Statement relating to the Companys 2016 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Companys fiscal year. Item 13.  Certain Relationships and Related Transactions, and Director Independence The information required by Item 13 is hereby incorporated by reference from the Companys definitive Proxy Statement relating to the Companys 2015 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Companys fiscal year. Item 14.  Principal Accountant Fees and Services The information required by Item 14 is hereby incorporated by reference from the Companys definitive Proxy Statement relating to the Companys 2016 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Companys fiscal year.
 140    TABLE OF CONTENTS PART IV Item 15.  Exhibits and Financial Statement Schedules a. Documents Filed as Part of this Report The following Consolidated Financial Statements are set forth in Item 8:  PageReport of Independent Registered Public Accounting Firm





91Consolidated Statements of Assets and Liabilities as of June 30, 2015 and June 30, 2014





95Consolidated Statements of Operations for the years ended June 30, 2015, June 30, 2014, and June 2013





96Consolidated Statements of Changes in Net Assets for the years ended June 30, 2015, June 30, 2014, and June 30, 2013





97Consolidated Statements of Cash Flows for the years ended June 30, 2015, June 30, 2014, and June 30, 2013





98Consolidated Schedules of Investments as of June 30, 2015 and June 30, 2014





100Notes to Consolidated Financial Statements





113
 141    TABLE OF CONTENTS b. Exhibits The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:  Exhibit Number

          

          Description3.1

          

          Articles of Amendment and Restatement(2)3.2

          

          Amended and Restated Bylaws(9)4.1

          

          Form of Common Stock Certificate(1)4.2

          

          Form of Note Agreement for Distribution Notes(1)4.3

          

          Indenture, dated as of June 3, 2013(6)4.4

          

          Form of First Supplemental Indenture(7)4.5

          

          Form of Global Note (included as Exhibit A to the Form of First Supplemental Indenture)(7)10.1

          

          Amended and Restated Dividend Reinvestment Plan(13)10.2

          

          Investment Advisory Agreement by and between Registrant and Full Circle Advisors, LLC(1)10.3

          

          Administration Agreement by and between Registrant and Full Circle Service Company, LLC(1)10.4

          

          Credit Agreement by and among Registrant, Sovereign Bank, N.A., as agent, and the lenders party thereto, dated as of June 3, 2013(5)10.5

          

          First Amendment to Credit Agreement by and between Registrant and Sovereign Bank, N.A., as agent, dated as of September 25, 2013.(10)10.6

          

          Second Amendment to Credit Agreement by and between Registrant, Santander Bank, N.A. (formerly known as Sovereign Bank, N.A.), as agent, and the lenders party thereto, dated as of November 6, 2013(11)10.7

          

          Third Amendment to Credit Agreement by and between Registrant, Santander Bank, N.A. (formerly known as Sovereign Bank, N.A.), as agent, and the lenders party thereto, dated as of September 12, 2014.(12)10.8

          

          Pledge Agreement by Registrant in favor of Sovereign Bank, N.A., as agent, dated as of June 3, 2013(5)10.9

          

          Security Agreement by Registrant in favor of Sovereign Bank, N.A., as agent, dated as of June 3, 2013(5)10.10

          

          Form of Indemnification Agreement by and between Registrant and each of its directors(1)10.11

          

          Trademark License Agreement by and between Registrant and Full Circle Advisors, LLC(1)10.12

          

          Form of Purchase and Sale Agreement by and between Registrant, Full Circle Partners, LP, Full Circle Fund, Ltd., Full Circle Offshore, LLC, and FCC, LLC d/b/a First Capital(2)14.1

          

          Code of Ethics(8)14.2

          

          Code of Business Conduct(8)23.1

          

          Consent of KPMG LLP*23.2

          

          Consent of Rothstein Kass*31.1

          

          Certification of Chief Executive Officers pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended*31.2

          

          Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended*32.1

          

          Certification of Chief Executive Officers pursuant to Section 906 of The Sarbanes-Oxley Act of 2002*32.2

          

          Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002*
  (1)

          Incorporated by reference to Registrants registration statement on Form N-2 Pre-Effective Amendment No. 2 (File No. 333-166302) filed on August 5, 2010.
 142    TABLE OF CONTENTS (2)

          Incorporated by reference to Registrants registration statement on Form N-2 Pre-Effective Amendment No. 3 (File No. 333-166302) filed on August 26, 2010. (3)

          Incorporated by reference to Registrants registration statement on Form N-2 Pre-Effective Amendment No. 2 (File No. 333-180321) filed on July 13, 2012. (4)

          Incorporated by reference to the Registrants registration statement on Form N-2 (File No. 333-187207) filed on March 12, 2013. (5)

          Incorporated by reference to Registrants current report on Form 8-K (File No. 814-00809) filed on June 4, 2013. (6)

          Incorporated by reference to Registrants registration statement on Form N-2 Pre-Effective Amendment No. 1 (File No. 333-188280) filed on June 11, 2013. (7)

          Incorporated by reference to Registrants registration statement on Form N-2 Pre-Effective Amendment No. 2 (File No. 333-188280) filed on June 19, 2013. (8)

          Incorporated by reference to Registrants annual report on form 10-K (File No. 814-00809) filed on September 13, 2013. (9)

          Incorporated by reference to Registrants current report on Form 8-K (Item 5.03) (File No. 814-00809) filed on November 7, 2013. (10)

          Incorporated by reference to Registrants quarterly report on Form 10-Q (File No. 814-00809) filed on November 7, 2013. (11)

          Incorporated by reference to Registrants current report on Form 8-K (Items 1.01, 2.03 and 9.01) (File No. 814-00809) filed on November 7, 2013. (12)

          Incorporated by reference to Registrants current report on Form 8-K (Items 1.01, 2.03 and 9.01) (File No. 814-00809) filed on September 15, 2014. (13)

          Incorporated by reference to Registrants registration statement on Form N-2 (File No. 333-198737) filed on September 15, 2014. *

          Filed herewith. c. Financial statement schedules No financial statement schedules are filed herewith because (1) such schedules are not required or (2) the information has been presented in the aforementioned financial statements.
 143    TABLE OF CONTENTS SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  FULL CIRCLE CAPITAL CORPORATIONDate: September 14, 2015

          

          /s/ Gregg J. FeltonGregg J. Felton,Chief Executive Officer and President (Principal Executive Officer)
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.  Date: September 14, 2015

          

          /s/ John E. StuartJohn E. Stuart, Chairman of the Board of DirectorsDate: September 14, 2015

          

          /s/ Gregg J. FeltonGregg J. Felton, Chief Executive Officer and President (Principal Executive Officer)Date: September 14, 2015

          

          /s/ Michael J. SellMichael J. Sell, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)Date: September 14, 2015

          

          /s/ Mark C. BidermanMark C. Biderman, DirectorDate: September 14, 2015

          

          /s/ Edward H. CohenEdward H. Cohen, DirectorDate: September 14, 2015

          

          /s/ Terence, B. FlynnTerence B. Flynn, DirectorDate: September 14, 2015

          

          /s/ Thomas A. Ortwein, Jr.Thomas A. Ortwein, Jr., Director
 144