UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



For the Quarterly Period Ended March 31, 2017



OR



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



For the transition period from         
   to



Commission File Number 814-00878



Garrison Capital Inc.

(Exact name of registrant as specified in its charter)



|Delaware                                                               |  | 90-0900145                                  
|---------------------------------------------------------------------- |  | --------------------------------------------
|(State or other jurisdiction of
        incorporation or organization) |  | (I.R.S. Employer
        Identification No.)



1290 Avenue of the Americas, Suite 914

New York, New York 10104

(Address of principal executive offices)



(212) 372-9590

(Registrant’s telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes ☒  No ☐



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 ☐  No ☐



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





|Large accelerated filer  ☐                                                | Accelerated filer         |  | ☒
|------------------------------------------------------------------------- | ------------------------- |  | -
|Non-accelerated filer    ☐  (Do not check if a smaller reporting company) | Smaller reporting company |  | ☐
|                                                                          | Emerging growth company   |  | ☒



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



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒



As of May 5, 2017 the Registrant had 16,049,352 shares of common
stock, $0.001 par value, outstanding.











Table of Contents





|                                                                                                                          | Page
|------------------------------------------------------------------------------------------------------------------------- | ----
|Part I. Financial Information                                                                                             |     
|                                                                                                                          |     
|Item 1. Financial Statements                                                                                              | 1   
|                                                                                                                          |     
|Consolidated Statements of Financial Condition as of March 31, 2017 (unaudited) and December 31, 2016                     | 1   
|                                                                                                                          |     
|Consolidated Schedules of Investments as of March 31, 2017 (unaudited) and December 31, 2016                              | 2   
|                                                                                                                          |     
|Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2017 and March 31, 2016            | 12  
|                                                                                                                          |     
|Consolidated Statements of Changes in Net Assets (unaudited) for the three months ended March 31, 2017 and March 31, 2016 | 13  
|                                                                                                                          |     
|Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2017 and March 31, 2016            | 14  
|                                                                                                                          |     
|Notes to Consolidated Financial Statements (unaudited)                                                                    | 15  
|                                                                                                                          |     
|Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations                             | 34  
|                                                                                                                          |     
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                        | 46  
|                                                                                                                          |     
|Item 4. Controls and Procedures                                                                                           | 46  
|                                                                                                                          |     
|Part II. Other Information                                                                                                |     
|                                                                                                                          |     
|Item 1. Legal Proceedings                                                                                                 | 47  
|                                                                                                                          |     
|Item 1A. Risk Factors                                                                                                     | 47  
|                                                                                                                          |     
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                       | 47  
|                                                                                                                          |     
|Item 3. Defaults Upon Senior Securities                                                                                   | 47  
|                                                                                                                          |     
|Item 4. Mine Safety Disclosures                                                                                           | 47  
|                                                                                                                          |     
|Item 5. Other Information                                                                                                 | 47  
|                                                                                                                          |     
|Item 6. Exhibits                                                                                                          | 47  





i








Garrison Capital Inc. and Subsidiaries



Consolidated Statements of Financial Condition



($ in thousands, except
share and per share amounts)





Part I. Financial Information



Item 1. Financial Statements





|                                                                                                                                                                                    |  |                |             |                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | -----------------
|                                                                                                                                                                                    |  | March 31, 2017 |             | December 31, 2016
|                                                                                                                                                                                    |  |                | (unaudited) |                  
|Assets                                                                                                                                                                              |  |                |             |                  
|Cash                                                                                                                                                                                |  | $              | 19,622      |                  
|Restricted cash                                                                                                                                                                     |  |                | 14,595      |                  
|Due from counterparties                                                                                                                                                             |  |                | 836         |                  
|Investments, at fair value                                                                                                                                                          |  |                |             |                  
|Non-control/non-affiliate investments (amortized cost of $377,540 and $387,265, respectively)                                                                                       |  |                | 358,748     |                  
|Non-control/affiliate investments (amortized cost of $4,944 and $4,796, respectively)                                                                                               |  |                | -           |                  
|Accrued interest receivable                                                                                                                                                         |  |                | 2,365       |                  
|Other assets                                                                                                                                                                        |  |                | 1,149       |                  
|Total assets                                                                                                                                                                        |  | $              | 397,315     |                  
|                                                                                                                                                                                    |  |                |             |                  
|Liabilities                                                                                                                                                                         |  |                |             |                  
|Management fee payable (Note 5)                                                                                                                                                     |  | $              | 1,423       |                  
|Senior secured revolving note (Note 4)                                                                                                                                              |  |                | -           |                  
|Senior secured term notes (Note 4)                                                                                                                                                  |  |                | 164,358     |                  
|SBIC borrowings (Note 4)                                                                                                                                                            |  |                | 35,878      |                  
|GLC Trust 2013-2 Class A note (Note 4)                                                                                                                                              |  |                | 3,042       |                  
|Interest payable                                                                                                                                                                    |  |                | 827         |                  
|Accrued expenses and other payables                                                                                                                                                 |  |                | 862         |                  
|Total liabilities                                                                                                                                                                   |  | $              | 206,390     |                  
|                                                                                                                                                                                    |  |                |             |                  
|Commitments and contingencies (Note 9)                                                                                                                                              |  |                |             |                  
|                                                                                                                                                                                    |  |                |             |                  
|Net assets                                                                                                                                                                          |  |                |             |                  
|Common stock, par value $0.001 per share, 100,000,000 shares authorized, 16,758,779 shares issued and 16,049,352
shares outstanding as of both March 31, 2017 and December 31, 2016 |  | $              | 17          |                  
|Paid-in-capital in excess of par                                                                                                                                                    |  |                | 249,148     |                  
|Underdistributed net investment income                                                                                                                                              |  |                | 4,857       |                  
|Accumulated net realized loss from investments                                                                                                                                      |  |                | (39,361     | )                
|Net unrealized loss from investments                                                                                                                                                |  |                | (23,736     | )                
|Total net assets                                                                                                                                                                    |  |                | 190,925     |                  
|Total liabilities and net assets                                                                                                                                                    |  | $              | 397,315     |                  
|                                                                                                                                                                                    |  |                |             |                  
|Shares of common stock outstanding                                                                                                                                                  |  |                | 16,049,352  |                  
|Net asset value per share                                                                                                                                                           |  | $              | 11.90       |                  











See accompanying notes to consolidated financial
statements.

1






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



March 31, 2017 (unaudited)



(in thousands, except share
amounts)







|Security Description                                       |  | Base Rate |  | Spread                  |  | All In Rate |  | Maturity   |  | Par / Shares |         | Cost |  | Fair Value |        | % of Net Assets
|---------------------------------------------------------- |  | --------- |  | ----------------------- |  | ----------- |  | ---------- |  | ------------ | ------- | ---- |  | ---------- | ------ | ---------------
|Non-Control/Non-Affiliate Investments                      |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Investments - United States                                |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Common Equity                                              |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Building Products                                          |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Valterra Products Holdings, LLC, Class A                   |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 185,847 |      |  | $          | 186    |                
|Valterra Products Holdings, LLC, Class B                   |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 20,650  |      |  |            | 21     |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 207    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Commercial Services and Supplies                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Faraday Holdings, LLC, Common                              |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 2,752   |      |  |            | 140    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 140    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Healthcare Equipment and  Services                         |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Juniper TGX Investment Partners, LLC, Common               |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 3,146   |      |  |            | 671    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 671    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Household Products and Durables                            |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Oneida Group Inc. (fka Everyware Global, Inc.), Common     |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 242,035 |      |  |            | 2,714  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 2,714  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Transportation Services                                    |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|EZE Trucking, LLC, Common                                  |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 2,898   |      |  |            | 268    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 268    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Total Common Equity                                        |  |           |  |                         |  |             |  |            |  |              |         |      |  | $          | 4,000  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Preferred Equity                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Diversified Financial Services                             |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Prosper Marketplace Series B Preferred Stock, Common(1)(2) |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 912,865 |      |  | $          | 551    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 551    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Total Preferred Equity                                     |  |           |  |                         |  |             |  |            |  |              |         |      |  | $          | 551    |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Debt Investments                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Aerospace and Defense                                      |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|AbelConn, LLC (Atrenne Computing), Term Loan*              |  | 1.15%     |  | 8.75%                   |  | 9.90%       |  | 7/17/2019  |  |              | 9,592   |      |  | $          | 9,504  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 9,504  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Air Freight and Logistics                                  |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Fleetgistics Holdings, Inc., Term Loan*                    |  | 2.00%     |  | 6.13%                   |  | 8.13%       |  | 12/31/2018 |  |              | 862     |      |  |            | 863    |                
|Gruden Acquisition, Inc., Term Loan (First Lien)*          |  | 1.15%     |  | 4.75%                   |  | 5.90%       |  | 8/18/2022  |  |              | 1,975   |      |  |            | 1,944  |                
|MXD Group, Inc. (fka Exel Direct Inc.), Term Loan*(3)      |  | 1.00%     |  | 11.00% Cash + 2.00% PIK |  | 14.00%      |  | 5/31/2018  |  |              | 15,457  |      |  |            | 15,327 |                
|Raymond Express International, LLC, Term Loan*             |  | 1.75%     |  | 7.75%                   |  | 9.50%       |  | 2/28/2018  |  |              | 1,291   |      |  |            | 1,288  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 19,422 |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Auto Components                                            |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|FRAM Group Holdings Inc. (Autoparts Holdings), Term Loan*  |  | 1.00%     |  | 6.75%                   |  | 7.75%       |  | 12/23/2021 |  |              | 8,888   |      |  |            | 8,720  |                
|Inteva Products, LLC, Term Loan*                           |  | 1.25%     |  | 8.50%                   |  | 9.75%       |  | 9/8/2021   |  |              | 4,904   |      |  |            | 4,861  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 13,581 |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Building Products                                          |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|ShelterLogic Corp., Term Loan*                             |  | 1.00%     |  | 9.50%                   |  | 10.50%      |  | 7/30/2019  |  |              | 9,727   |      |  |            | 9,637  |                
|                                                           |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 9,637  |                



See accompanying notes to consolidated financial statements.

2






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments - (continued)



March 31, 2017 (unaudited)



(in thousands)







|Security Description                                         |  | Base Rate |  | Spread |  | All In Rate |  | Maturity   |  | Par / Shares |        | Cost |  | Fair Value |        | % of Net Assets
|------------------------------------------------------------ |  | --------- |  | ------ |  | ----------- |  | ---------- |  | ------------ | ------ | ---- |  | ---------- | ------ | ---------------
|Non-Control/Non-Affiliate Investments                        |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Investments - United States                                  |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Debt Investments (continued)                                 |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Chemicals                                                    |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Aristech Surfaces LLC, Term Loan B*                          |  | 1.00%     |  | 8.00%  |  | 9.00%       |  | 10/17/2019 |  |              | 9,532  |      |  | $          | 9,447  |                
|PCCR USA, Inc., Term Loan A*                                 |  | 1.00%     |  | 8.00%  |  | 9.00%       |  | 12/1/2019  |  |              | 6,606  |      |  |            | 6,536  |                
|Profusion Industries, LLC, Term Loan*                        |  | 1.00%     |  | 10.25% |  | 11.25%      |  | 6/19/2020  |  |              | 9,656  |      |  |            | 9,532  |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            | 25,515 |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Commercial Services and Supplies                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Del Mar Recovery Solutions, Inc., Revolver*                  |  | 0.99%     |  | 8.50%  |  | 9.49%       |  | 6/27/2021  |  |              | 495    |      |  |            | 495    |                
|Del Mar Recovery Solutions, Inc., Term Loan**                |  | 0.99%     |  | 8.50%  |  | 9.49%       |  | 6/27/2021  |  |              | 8,419  |      |  |            | 8,294  |                
|Interior Specialists, Inc., Term Loan*                       |  | 1.00%     |  | 8.00%  |  | 9.00%       |  | 6/30/2020  |  |              | 9,988  |      |  |            | 9,858  |                
|VIP Cinema Holdings, Inc., Term Loan*                        |  | 1.00%     |  | 6.00%  |  | 7.00%       |  | 3/1/2023   |  |              | 1,583  |      |  |            | 1,576  |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            | 20,223 |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Diversified Financial Services                               |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Affiliated Wealth Partners Holdings LLC, Term Loan*(1)       |  | 1.00%     |  | 8.00%  |  | 9.00%       |  | 9/15/2020  |  |              | 2,703  |      |  |            | 2,675  |                
|PlanMember Financial Corporation,
    Term Loan*(1)          |  | 1.50%     |  | 6.50%  |  | 8.00%       |  | 12/31/2020 |  |              | 1,135  |      |  |            | 1,121  |                
|Worley Claims Services, LLC, Term Loan*                      |  | 1.00%     |  | 8.00%  |  | 9.00%       |  | 10/31/2020 |  |              | 10,264 |      |  |            | 10,216 |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            | 14,012 |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Diversified Telecommunication Services                       |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Onvoy, LLC, Term Loan*                                       |  | 1.15%     |  | 4.50%  |  | 5.65%       |  | 2/10/2024  |  |              | 3,037  |      |  |            | 3,026  |                
|U.S. Telepacific Corp., Term Loan*                           |  | 1.04%     |  | 5.00%  |  | 6.04%       |  | 11/25/2020 |  |              | 1,965  |      |  |            | 1,957  |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            | 4,983  |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Food Products                                                |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Diamond Crystal Brands, Inc., Term Loan**                    |  | 0.99%     |  | 7.75%  |  | 8.74%       |  | 7/29/2021  |  |              | 5,460  |      |  |            | 5,411  |                
|Specialty Bakers LLC, Term Loan*(7)                          |  | 1.00%     |  | 8.21%  |  | 9.21%       |  | 8/7/2019   |  |              | 9,818  |      |  |            | 9,718  |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            | 15,129 |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Healthcare Equipment and  Services                           |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|ActivStyle, Inc., Term Loan**                                |  | 1.00%     |  | 9.00%  |  | 10.00%      |  | 7/9/2020   |  |              | 8,697  |      |  |            | 8,597  |                
|Aurora Diagnostics, LLC, Delayed Draw Term Loan*             |  | 1.25%     |  | 7.13%  |  | 8.38%       |  | 7/31/2019  |  |              | 850    |      |  |            | 847    |                
|Aurora Diagnostics, LLC, Delayed Draw Term Loan B*           |  | 1.25%     |  | 7.13%  |  | 8.38%       |  | 7/31/2019  |  |              | 598    |      |  |            | 595    |                
|Aurora Diagnostics, LLC, Revolver*                           |  | 1.25%     |  | 7.13%  |  | 8.38%       |  | 7/31/2019  |  |              | 544    |      |  |            | 539    |                
|Aurora Diagnostics, LLC, Term Loan*                          |  | 1.25%     |  | 7.13%  |  | 8.38%       |  | 7/31/2019  |  |              | 5,477  |      |  |            | 5,449  |                
|Forest Park Medical Center at San Antonio, LLC, Lease(4)     |  | N/A       |  | 13.00% |  | 13.00%      |  | 2/11/2020  |  |              | 8,982  |      |  |            | 8,832  |                
|Forest Park Medical Center at San Antonio, LLC, Term Loan(4) |  | N/A       |  | 14.00% |  | 14.00%      |  | On Demand  |  |              | 1,951  |      |  |            | 1,914  |                
|RCS Management Corporation (SMS), Term Loan B**              |  | 1.00%     |  | 10.50% |  | 11.50%      |  | 7/29/2018  |  |              | 9,500  |      |  |            | 9,374  |                
|SCG Capital Corporation (Radiation Therapy), Term Note       |  | N/A       |  | 12.00% |  | 12.00%      |  | 5/1/2017   |  |              | 59     |      |  |            | 59     |                
|Theragenics Corporation, Term Loan**                         |  | 1.15%     |  | 12.00% |  | 13.15%      |  | 12/23/2020 |  |              | 6,882  |      |  |            | 6,790  |                
|Walnut Hill Physicians' Hospital,
    LLC, Lease(4)          |  | N/A       |  | 12.50% |  | 12.50%      |  | 4/30/2019  |  |              | 6,765  |      |  |            | 6,765  |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            | 49,761 |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|Hotels, Restaurants and Leisure                              |  |           |  |        |  |             |  |            |  |              |        |      |  |            |        |                
|AP Gaming I, LLC, Term B Loan*                               |  | 1.00%     |  | 8.25%  |  | 9.25%       |  | 12/21/2020 |  |              | 10,091 |      |  |            | 9,980  |                
|HRI Holding Corp. (Houlihans Restaurants),
    Term Loan*(7) |  | 1.00%     |  | 8.07%  |  | 9.07%       |  | 12/17/2020 |  |              | 6,800  |      |  |            | 6,695  |                
|                                                             |  |           |  |        |  |             |  |            |  |              |        |      |  |            | 16,675 |                







See accompanying notes to consolidated financial statements.

3




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments - (continued)



March 31, 2017 (unaudited)



(in thousands)







|Security Description                                         |  | Base Rate |  | Spread                  |  | All In Rate |  | Maturity   |  | Par / Shares |        | Cost |  | Fair Value |        | % of Net Assets
|------------------------------------------------------------ |  | --------- |  | ----------------------- |  | ----------- |  | ---------- |  | ------------ | ------ | ---- |  | ---------- | ------ | ---------------
|Non-Control/Non-Affiliate Investments                        |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Investments - United States                                  |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Debt Investments (continued)                                 |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Household Products and Durables                              |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Brown Jordan International Inc., Term Loan*                  |  | 1.04%     |  | 5.75%                   |  | 6.79%       |  | 1/31/2023  |  |              | 5,938  |      |  | $          | 5,892  |                
|CR Brands, Inc., Term Loan*                                  |  | 1.00%     |  | 9.25%                   |  | 10.25%      |  | 8/23/2017  |  |              | 9,552  |      |  |            | 9,530  |                
|Lexmark Carpet Mills, Inc., Term Loan*                       |  | 1.00%     |  | 10.00%                  |  | 11.00%      |  | 12/19/2019 |  |              | 9,480  |      |  |            | 9,351  |                
|Otter Products, LLC (OtterBox Holdings, Inc.), Term B Loan*  |  | 1.00%     |  | 4.75%                   |  | 5.75%       |  | 6/3/2020   |  |              | 2,000  |      |  |            | 1,995  |                
|University Furnishings, L.P., Term
    Loan B**(7)           |  | 0.99%     |  | 7.64%                   |  | 8.63%       |  | 12/17/2020 |  |              | 7,102  |      |  |            | 7,012  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 33,780 |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Internet Software and Services                               |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Aptos, Inc., Term Loan B*                                    |  | 1.15%     |  | 6.75%                   |  | 7.90%       |  | 9/1/2022   |  |              | 8,955  |      |  |            | 8,793  |                
|Dodge Data & Analytics LLC, Term Loan*                       |  | 1.19%     |  | 8.75%                   |  | 9.94%       |  | 10/31/2019 |  |              | 8,892  |      |  |            | 8,800  |                
|Emtec Global Services Holdings, LLC, Revolver(3)             |  | 0.78%     |  | 8.25% Cash + 2.00% PIK  |  | 11.03%      |  | 11/30/2020 |  |              | 338    |      |  |            | 339    |                
|Emtec Global Services Holdings, LLC, Term Loan**(3)          |  | 0.78%     |  | 8.25% Cash + 2.00% PIK  |  | 11.03%      |  | 11/30/2020 |  |              | 2,845  |      |  |            | 2,818  |                
|Lionbridge Technologies, Inc., Term Loan*                    |  | 1.05%     |  | 5.50%                   |  | 6.55%       |  | 2/28/2024  |  |              | 1,429  |      |  |            | 1,422  |                
|Syncsort Incorporated, Term Loan*                            |  | 1.15%     |  | 5.25%                   |  | 6.40%       |  | 12/23/2022 |  |              | 6,712  |      |  |            | 6,648  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 28,820 |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Leisure Products                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Bass Pro Group, LLC, Initial Term Loan*                      |  | 1.15%     |  | 5.00%                   |  | 6.15%       |  | 12/15/2023 |  |              | 5,750  |      |  |            | 5,708  |                
|Confluence Outdoor, LLC, Delayed Draw Term Loan              |  | 1.00%     |  | 8.75%                   |  | 9.75%       |  | 4/18/2019  |  |              | 999    |      |  |            | 991    |                
|Confluence Outdoor, LLC, Term Loan*                          |  | 1.00%     |  | 8.75%                   |  | 9.75%       |  | 4/18/2019  |  |              | 6,657  |      |  |            | 6,609  |                
|Kranos Acquisition Corp., Term Loan*                         |  | 1.00%     |  | 10.00%                  |  | 11.00%      |  | 4/30/2018  |  |              | 8,031  |      |  |            | 8,023  |                
|Playpower, Inc., Initial Term Loan
(First Lien)*             |  | 1.15%     |  | 4.75%                   |  | 5.90%       |  | 6/23/2021  |  |              | 965    |      |  |            | 962    |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 22,293 |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Machinery                                                    |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Texas Hydraulics Holding, Inc., Term
    Loan**(7)           |  | 0.99%     |  | 9.66%                   |  | 10.65%      |  | 2/17/2021  |  |              | 8,200  |      |  |            | 8,073  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 8,073  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Media                                                        |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Project Sunshine IV Pty Ltd (Sensis),
    New Term Loans*(1) |  | 1.00%     |  | 7.00%                   |  | 8.00%       |  | 9/23/2019  |  |              | 6,913  |      |  |            | 6,822  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 6,822  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Metals and Mining                                            |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Metal Services LLC (Phoenix), New Term Loans*                |  | 1.15%     |  | 7.50%                   |  | 8.65%       |  | 6/30/2019  |  |              | 6,065  |      |  |            | 6,002  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 6,002  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Retailing                                                    |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Sears Holdings Corporation, Term Loan*(1)                    |  | 1.00%     |  | 7.50%                   |  | 8.50%       |  | 7/20/2020  |  |              | 1,218  |      |  |            | 1,190  |                
|Western Convenience Stores, Inc., Term Loan*                 |  | 0.79%     |  | 11.00%                  |  | 11.79%      |  | 9/1/2019   |  |              | 9,000  |      |  |            | 8,782  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 9,972  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Oil, Gas and Consumable Fuels                                |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Badlands Production Company (fka Gasco), Term Loan(4)        |  | 1.00%     |  | 17.50%                  |  | 18.50%      |  | 5/14/2018  |  |              | 10,500 |      |  |            | 10,421 |                
|Iracore International Holdings, Inc., Term Loan*             |  | 1.00%     |  | 11.00%                  |  | 12.00%      |  | 7/10/2020  |  |              | 8,878  |      |  |            | 8,790  |                
|Rooster Energy Ltd., Term Loan*(3)(7)                        |  | 1.50%     |  | 12.93% Cash + 8.00% PIK |  | 22.43%      |  | 6/25/2018  |  |              | 5,236  |      |  |            | 5,104  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 24,315 |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Professional Services                                        |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Simmons Research LLC, Term Loan*                             |  | 1.19%     |  | 10.50%                  |  | 11.69%      |  | 12/11/2020 |  |              | 2,392  |      |  |            | 2,356  |                
|                                                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 2,356  |                





See accompanying notes to consolidated financial statements.

4




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments - (continued)



March 31, 2017 (unaudited)



(in thousands)







|Security Description                                     |  | Base Rate |  | Spread |  | All In Rate |  | Maturity   |  | Par / Shares |       | Cost |  | Fair Value |         | % of Net Assets
|-------------------------------------------------------- |  | --------- |  | ------ |  | ----------- |  | ---------- |  | ------------ | ----- | ---- |  | ---------- | ------- | ---------------
|Non-Control/Non-Affiliate Investments                    |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Investments - United States                              |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Debt Investments (continued)                             |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Transportation Services                                  |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Jack Cooper Holdings Corp., Term Loan                    |  | 3.00%     |  | 7.00%  |  | 10.00%      |  | 10/18/2018 |  |              | 5,000 |      |  | $          | 5,098   |                
|Sirva Worldwide, Term Loan*                              |  | 1.16%     |  | 6.50%  |  | 7.66%       |  | 11/22/2022 |  |              | 5,885 |      |  |            | 5,747   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 10,845  |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Technology Hardware, Storage and Peripherals             |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|TableTop Media, LLC, Lease**                             |  | N/A       |  | 10.00% |  | 10.00%      |  | 10/15/2019 |  |              | 3,988 |      |  |            | 3,979   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 3,979   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Textiles, Apparel and Luxury Goods                       |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|League Collegiate Holdings, LLC, Term Loan*              |  | 0.99%     |  | 8.00%  |  | 8.99%       |  | 6/28/2021  |  |              | 7,556 |      |  |            | 7,459   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 7,459   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Trading Companies and Distributors                       |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Sprint Industrial Holdings, LLC, Term Loan (First Lien)* |  | 1.25%     |  | 5.75%  |  | 7.00%       |  | 5/14/2019  |  |              | 4,762 |      |  |            | 4,749   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 4,749   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Total Debt Investments                                   |  |           |  |        |  |             |  |            |  |              |       |      |  | $          | 367,907 |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Financial Assets                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Diversified Financial Services                           |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|GLC Trust 2013-2 Consumer Loan Pool(1)(5)                |  | N/A       |  | N/A    |  | N/A         |  | N/A        |  |              | 5,359 |      |  | $          | 5,140   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 5,140   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Total Financial Assets                                   |  |           |  |        |  |             |  |            |  |              |       |      |  | $          | 5,140   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Unfunded Commitments                                     |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Air Freight and Logistics                                |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Raymond Express International, LLC, Revolver*(6)         |  | N/A       |  | 0.50%  |  | 0.50%       |  | 2/28/2018  |  |              | 215   |      |  | $          | -       |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | -       |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Commercial Services and Supplies                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Del Mar Recovery Solutions, Inc., Revolver*(6)           |  | N/A       |  | 0.75%  |  | 0.75%       |  | 6/27/2021  |  |              | 825   |      |  |            | (20     | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (20     | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Healthcare Equipment and Services                        |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Aurora Diagnostics, LLC, Revolver*                       |  | N/A       |  | 0.38%  |  | 0.38%       |  | 7/31/2019  |  |              | 476   |      |  |            | (5      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (5      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Internet Software and Services                           |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Emtec Global Services Holdings, LLC, Revolver(6)         |  | N/A       |  | 0.00%  |  | 0.00%       |  | 11/30/2020 |  |              | 119   |      |  |            | (5      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (5      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Textiles, Apparel and Luxury Goods                       |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|League Collegiate Holdings, LLC, Revolver*(6)            |  | N/A       |  | 0.75%  |  | 0.75%       |  | 6/28/2021  |  |              | 2,200 |      |  |            | (28     | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (28     | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Total Unfunded Commitments                               |  |           |  |        |  |             |  |            |  |              |       |      |  | $          | (58     | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Total Non-Control/Non-Affiliate Investments              |  |           |  |        |  |             |  |            |  |              |       |      |  | $          | 377,540 |                







See accompanying notes to consolidated financial statements.

5




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments - (continued)



March 31, 2017 (unaudited)



(in thousands, except
share amounts)







|Security Description                                                 |  | Base Rate |  | Spread |  | All In Rate |  | Maturity  |  | Par / Shares |       | Cost |  | Fair Value |         | % of Net Assets
|-------------------------------------------------------------------- |  | --------- |  | ------ |  | ----------- |  | --------- |  | ------------ | ----- | ---- |  | ---------- | ------- | ---------------
|Non-Control/Affiliate Investments                                    |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Investments - United States                                          |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Common Equity                                                        |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Air Freight and Logistics                                            |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Speed Commerce Investment Partners LLC, Class A Unit                 |  | N/A       |  | N/A    |  | N/A         |  | N/A       |  |              | 1,780 |      |  | $          | 1,693   |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            | 1,693   |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Common Equity                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 1,693   |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Debt Investments                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Air Freight and Logistics                                            |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Speed Commerce Operating Company LLC, Closing Date Term Loan B(3)(4) |  | 1.00%     |  | 18.00% |  | 19.00% PIK  |  | 12/8/2017 |  |              | 1,972 |      |  | $          | 1,969   |                
|Speed Commerce Operating Company LLC, Delayed Draw Term Loan B(3)(4) |  | 1.00%     |  | 18.00% |  | 19.00% PIK  |  | 12/8/2017 |  |              | 1,284 |      |  |            | 1,282   |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 3,251   |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Debt Investments                                               |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 3,251   |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Unfunded Commitments                                                 |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Air Freight and Logistics                                            |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Speed Commerce Operating Company LLC, Delayed Draw Term Loan B(4)    |  | N/A       |  | 0.00%  |  | 0.00%       |  | 12/8/2017 |  |              | 18    |      |  | $          | -       |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            | -       |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Unfunded Commitments                                           |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | -       |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Non-Control/Affiliate Investments                              |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 4,944   |                
|                                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Investments - United States                                    |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 382,484 |                



_____________



|*  |  | Denotes that all or a portion of the investment is held as collateral by Garrison Funding
2016-2 Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** |  | Denotes that all or a portion of the loan is held by Garrison Capital SBIC LP.

Base Rate = Our floating rate investments bear interest at a base rate plus a spread. Generally, the borrower
has an option to choose whether the base rate is referenced to the London Interbank Offered Rate (“LIBOR”) or the prime
rate. The spread may change as a result of the borrower’s choice of base rate. In addition, the floating rate investments
that are referenced to LIBOR are generally indexed to 30-day or 90-day U.S. Dollar LIBOR and subject to a minimum LIBOR Floor.
The terms disclosed in the Consolidated Schedule of Investments represent the actual base rate and spread in effect as of the reporting
period date.



|(1) |  | Not a qualifying asset under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”).  Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of March 31, 2017, 95.4% of the Company’s assets were qualifying assets.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Net of incentive fee payable to a third party equal to 20% of any distribution after the Company has received its full net capital investment plus a 12% preferred return in GLC Trust 2013-2 and Prosper Marketplace Series B Preferred Stock.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Interest is payable in cash, and/or payment-in-kind (“PIK”), or a combination thereof.
|--- |  | --------------------------------------------------------------------------------------



|(4) |  | Investment is currently not income producing and placed on non-accrual status.
|--- |  | ------------------------------------------------------------------------------



|(5) |  | GLC Trust 2013-2 includes 1,080 small balance consumer loans
    with an average par of $4,760, a weighted average rate of 16.2% and a weighted average maturity of January 19, 2019. See Note
    3 for additional information. See Exhibit 99.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
    March 31, 2017 for detail on underlying loans.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) |  | The negative fair value is the result of the unfunded commitments being valued below par. These amounts may or may not be funded to the borrowing party currently or in the future.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|(7) |  | In addition to the interest earned on the stated base rate and spread of this investment, the Company
received additional interest during the three months ended March 31, 2017 due to an arrangement between the Company and certain
other lenders to the portfolio company. The additional interest received during the quarter has been annualized and included in
the spread disclosed for this investment.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





As required by the 1940 Act, investments are classified by level of control. “Control
Investments” are investments in those companies that the Company is deemed to control as defined in the 1940 Act. “Affiliate
Investments” are investments in those companies that are affiliated companies, as defined in the 1940 Act, other than Control
Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.



Generally, under the 1940 Act, the Company is deemed to control a company in which it
has invested if it owns more than 25% of the voting securities of such company. The Company is deemed to be an affiliate of a company
in which it has invested if it owns 5% or more of the voting securities of such company.



See accompanying notes to consolidated financial statements.





6






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2016



($ in thousands, except share amounts)





|Security Description                                           |  | Base Rate |  | Spread                  |  | All In Rate |  | Maturity   |  | Par / Shares |         | Cost |  | Fair Value |        | % of Net Assets
|-------------------------------------------------------------- |  | --------- |  | ----------------------- |  | ----------- |  | ---------- |  | ------------ | ------- | ---- |  | ---------- | ------ | ---------------
|Non-Control/Non-Affiliate Investments                          |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Investments - United States                                    |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Common Equity                                                  |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Building Products                                              |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Valterra Products Holdings, LLC, Class A                       |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 185,847 |      |  | $          | 186    |                
|Valterra Products Holdings, LLC, Class B                       |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 20,650  |      |  |            | 21     |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 207    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Commercial Services and Supplies                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Faraday Holdings, LLC, Common                                  |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 2,752   |      |  |            | 140    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 140    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Healthcare Equipment and Services                              |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Juniper TGX Investment Partners, LLC, Common                   |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 3,146   |      |  |            | 671    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 671    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Household Products and  Durables                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Oneida Group Inc. (fka Everyware
    Global, Inc.),     Common |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 242,035 |      |  |            | 2,714  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 2,714  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Transportation Services                                        |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|EZE Trucking, LLC, Common                                      |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 2,898   |      |  |            | 268    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 268    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Total Common Equity                                            |  |           |  |                         |  |             |  |            |  |              |         |      |  | $          | 4,000  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Preferred Equity                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Diversified Financial Services                                 |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Prosper Marketplace Series B Preferred
    Stock(1)(2)         |  | N/A       |  | N/A                     |  | N/A         |  | N/A        |  |              | 912,865 |      |  | $          | 551    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 551    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Total Preferred Equity                                         |  |           |  |                         |  |             |  |            |  |              |         |      |  | $          | 551    |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Debt Investments                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Aerospace and Defense                                          |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|AbelConn, LLC (Atrenne Computing), Term Loan*                  |  | 1.00%     |  | 8.50%                   |  | 9.50%       |  | 7/17/2019  |  |              | 9,688   |      |  | $          | 9,589  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 9,589  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Air Freight  and Logistics                                     |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Fleetgistics Holdings, Inc., Term Loan*                        |  | 2.00%     |  | 6.13%                   |  | 8.13%       |  | 12/31/2018 |  |              | 900     |      |  |            | 900    |                
|Gruden Acquisition, Inc., Term Loan (First Lien)*              |  | 1.00%     |  | 4.75%                   |  | 5.75%       |  | 8/18/2022  |  |              | 1,980   |      |  |            | 1,947  |                
|MXD Group, Inc. (fka Exel Direct Inc.), Term Loan*(3)          |  | 1.00%     |  | 11.00% Cash + 2.00% PIK |  | 14.00%      |  | 5/31/2018  |  |              | 15,380  |      |  |            | 15,229 |                
|Raymond Express International, LLC, Term Loan*                 |  | 1.75%     |  | 7.75%                   |  | 9.50%       |  | 2/28/2018  |  |              | 1,507   |      |  |            | 1,503  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 19,579 |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Auto Components                                                |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|FRAM Group Holdings Inc. (Autoparts Holdings), Term Loan*      |  | 1.00%     |  | 6.75%                   |  | 7.75%       |  | 12/23/2021 |  |              | 9,000   |      |  |            | 8,821  |                
|Inteva Products, LLC, Term Loan*                               |  | 1.25%     |  | 8.50%                   |  | 9.75%       |  | 9/8/2021   |  |              | 4,960   |      |  |            | 4,914  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 13,735 |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Building Products                                              |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|ShelterLogic Corp., Term Loan*                                 |  | 1.00%     |  | 9.50%                   |  | 10.50%      |  | 7/30/2019  |  |              | 9,854   |      |  |            | 9,752  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 9,752  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Chemicals                                                      |  |           |  |                         |  |             |  |            |  |              |         |      |  |            |        |                
|Aristech Surfaces LLC, Term Loan B*                            |  | 1.00%     |  | 8.00%                   |  | 9.00%       |  | 10/17/2019 |  |              | 9,595   |      |  |            | 9,501  |                
|PCCR USA, Inc., Term Loan A*                                   |  | 1.00%     |  | 8.00%                   |  | 9.00%       |  | 12/1/2019  |  |              | 6,650   |      |  |            | 6,573  |                
|PCCR USA, Inc., Term Loan B*                                   |  | 1.00%     |  | 8.00%                   |  | 9.00%       |  | 12/1/2019  |  |              | 1,709   |      |  |            | 1,685  |                
|Profusion Industries, LLC, Term Loan*                          |  | 0.82%     |  | 9.00%                   |  | 9.82%       |  | 6/19/2020  |  |              | 9,785   |      |  |            | 9,649  |                
|                                                               |  |           |  |                         |  |             |  |            |  |              |         |      |  |            | 27,408 |                



See accompanying notes to consolidated financial statements.





7






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments – (continued)



December 31, 2016



(in thousands)





|Security Description                                         |  | Base Rate |  | Spread                 |  | All In Rate |  | Maturity   |  | Par / Shares |        | Cost |  | Fair Value |        | % of Net Assets
|------------------------------------------------------------ |  | --------- |  | ---------------------- |  | ----------- |  | ---------- |  | ------------ | ------ | ---- |  | ---------- | ------ | ---------------
|Non-Control/Non-Affiliate Investments                        |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Investments - United States                                  |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Debt Investments (continued)                                 |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Commercial Services and Supplies                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Del Mar Recovery Solutions, Inc., Term Loan**                |  | 0.61%     |  | 8.50%                  |  | 9.11%       |  | 6/27/2021  |  |              | 8,526  |      |  | $          | 8,392  |                
|Del Mar Recovery Solutions, Inc., Revolver*                  |  | 0.61%     |  | 8.50%                  |  | 9.11%       |  | 6/27/2021  |  |              | 495    |      |  |            | 495    |                
|Interior Specialists, Inc., Term Loan*                       |  | 1.00%     |  | 8.00%                  |  | 9.00%       |  | 6/30/2020  |  |              | 10,040 |      |  |            | 9,900  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 18,787 |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Diversified Financial Services                               |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Affiliated Wealth Partners Holdings LLC, Term Loan*(1)       |  | 1.00%     |  | 8.00%                  |  | 9.00%       |  | 9/15/2020  |  |              | 2,868  |      |  |            | 2,836  |                
|PlanMember Financial Corporation, Term Loan*(1)              |  | 1.50%     |  | 6.50%                  |  | 8.00%       |  | 12/31/2020 |  |              | 1,154  |      |  |            | 1,139  |                
|Worley Claims Services, LLC, Term Loan*                      |  | 1.00%     |  | 8.00%                  |  | 9.00%       |  | 10/31/2020 |  |              | 10,290 |      |  |            | 10,238 |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 14,213 |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Diversified Telecommunication Services                       |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|U.S. Telepacific Corp., Term Loan*                           |  | 1.00%     |  | 5.00%                  |  | 6.00%       |  | 11/25/2020 |  |              | 1,971  |      |  |            | 1,961  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 1,961  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Food Products                                                |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Diamond Crystal Brands, Inc., Term Loan**                    |  | 0.77%     |  | 7.75%                  |  | 8.52%       |  | 7/29/2021  |  |              | 5,460  |      |  |            | 5,408  |                
|Specialty Bakers LLC, Term Loan*(7)                          |  | 1.00%     |  | 8.13%                  |  | 9.13%       |  | 8/7/2019   |  |              | 9,818  |      |  |            | 9,707  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 15,115 |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Healthcare Equipment  and Services                           |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|ActivStyle, Inc., Term Loan**                                |  | 0.88%     |  | 9.00%                  |  | 9.88%       |  | 7/9/2020   |  |              | 9,656  |      |  |            | 9,537  |                
|Aurora Diagnostics, LLC, Delayed Draw Term Loan*             |  | 1.25%     |  | 7.13%                  |  | 8.38%       |  | 7/31/2019  |  |              | 850    |      |  |            | 850    |                
|Aurora Diagnostics, LLC, Delayed Draw Term Loan B*           |  | 1.25%     |  | 7.13%                  |  | 8.38%       |  | 7/31/2019  |  |              | 598    |      |  |            | 598    |                
|Aurora Diagnostics, LLC, Term Loan*                          |  | 1.25%     |  | 7.13%                  |  | 8.38%       |  | 7/31/2019  |  |              | 5,506  |      |  |            | 5,476  |                
|Forest Park Medical Center at San Antonio, LLC, Lease(4)     |  | N/A       |  | 13.00%                 |  | 13.00%      |  | 2/11/2020  |  |              | 8,982  |      |  |            | 8,832  |                
|Forest Park Medical Center at San Antonio, LLC, Term Loan(4) |  | N/A       |  | 14.00%                 |  | 14.00%      |  | On Demand  |  |              | 1,951  |      |  |            | 1,914  |                
|RCS Management Corporation (SMS), Term Loan B**              |  | 1.00%     |  | 10.50%                 |  | 11.50%      |  | 7/29/2018  |  |              | 9,500  |      |  |            | 9,351  |                
|SCG Capital Corporation (Radiation Therapy), Term Note       |  | N/A       |  | 12.00%                 |  | 12.00%      |  | 5/1/2017   |  |              | 822    |      |  |            | 822    |                
|Theragenics Corporation, Term Loan**                         |  | 1.00%     |  | 12.00%                 |  | 13.00%      |  | 12/23/2020 |  |              | 6,977  |      |  |            | 6,877  |                
|Walnut Hill Physicians' Hospital,
LLC, Lease                 |  | N/A       |  | 12.50%                 |  | 12.50%      |  | 4/30/2019  |  |              | 6,765  |      |  |            | 6,765  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 51,022 |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Hotels, Restaurants and Leisure                              |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|AP Gaming I, LLC, Term B Loan*                               |  | 1.00%     |  | 8.25%                  |  | 9.25%       |  | 12/21/2020 |  |              | 10,117 |      |  |            | 9,998  |                
|HRI Holding Corp. (Houlihans Restaurants),
    Term Loan*(7) |  | 1.00%     |  | 8.10%                  |  | 9.10%       |  | 12/17/2020 |  |              | 6,800  |      |  |            | 6,688  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 16,686 |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Household Products and Durables                              |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|CR Brands, Inc., Term Loan*                                  |  | 1.00%     |  | 9.25%                  |  | 10.25%      |  | 8/23/2017  |  |              | 9,722  |      |  |            | 9,685  |                
|Lexmark Carpet Mills, Inc., Term Loan*                       |  | 1.00%     |  | 10.00%                 |  | 11.00%      |  | 12/19/2019 |  |              | 9,578  |      |  |            | 9,436  |                
|University Furnishings, L.P., Term Loan B**(7)               |  | 0.77%     |  | 7.39%                  |  | 8.16%       |  | 12/17/2020 |  |              | 7,102  |      |  |            | 7,006  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 26,127 |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Internet Software  and Services                              |  |           |  |                        |  |             |  |            |  |              |        |      |  |            |        |                
|Aptos, Inc., Term Loan B*                                    |  | 1.00%     |  | 6.75%                  |  | 7.75%       |  | 9/1/2022   |  |              | 8,978  |      |  |            | 8,808  |                
|Dodge Data & Analytics LLC, Term Loan*                       |  | 1.00%     |  | 8.75%                  |  | 9.75%       |  | 10/31/2019 |  |              | 9,023  |      |  |            | 8,921  |                
|Emtec Global Services Holdings, LLC, Revolver(3)             |  | 0.57%     |  | 8.25% Cash + 2.00% PIK |  | 10.82%      |  | 11/30/2020 |  |              | 335    |      |  |            | 335    |                
|Emtec Global Services Holdings, LLC, Term Loan**(3)          |  | 0.57%     |  | 8.25% Cash + 2.00% PIK |  | 10.82%      |  | 11/30/2020 |  |              | 2,820  |      |  |            | 2,791  |                
|Syncsort Incorporated, Term Loan*                            |  | 1.00%     |  | 5.25%                  |  | 6.25%       |  | 12/23/2022 |  |              | 6,729  |      |  |            | 6,662  |                
|YourMembership Holding Company, Term Loan A**                |  | 1.00%     |  | 7.00%                  |  | 8.00%       |  | 9/12/2019  |  |              | 9,371  |      |  |            | 9,328  |                
|                                                             |  |           |  |                        |  |             |  |            |  |              |        |      |  |            | 36,845 |                









See accompanying notes to consolidated financial statements.





8






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments – (continued)



December 31, 2016



(in thousands)





|Security Description                                      |  | Base Rate |  | Spread                  |  | All In Rate |  | Maturity   |  | Par / Shares |        | Cost |  | Fair Value |        | % of Net Assets
|--------------------------------------------------------- |  | --------- |  | ----------------------- |  | ----------- |  | ---------- |  | ------------ | ------ | ---- |  | ---------- | ------ | ---------------
|Non-Control/Non-Affiliate Investments                     |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Investments - United States                               |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Debt Investments (continued)                              |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Leisure Products                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Confluence Outdoor, LLC,  Term Loan*                      |  | 1.00%     |  | 7.00%                   |  | 8.00%       |  | 4/18/2019  |  |              | 6,657  |      |  | $          | 6,604  |                
|Confluence Outdoor, LLC, Delayed Draw Term Loan           |  | 1.00%     |  | 7.00%                   |  | 8.00%       |  | 4/18/2019  |  |              | 999    |      |  |            | 991    |                
|Kranos Acquisition Corp., Term Loan*                      |  | 1.00%     |  | 10.00%                  |  | 11.00%      |  | 6/15/2017  |  |              | 8,293  |      |  |            | 8,277  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 15,872 |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Machinery                                                 |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Texas Hydraulics Holding, Inc., Term
    Loan**(7)        |  | 0.77%     |  | 9.62%                   |  | 10.39%      |  | 2/17/2021  |  |              | 8,200  |      |  |            | 8,065  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 8,065  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Media                                                     |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|CF Entertainment Inc. (Entertainment Studios), Term Loan* |  | 1.00%     |  | 11.00%                  |  | 12.00%      |  | 6/26/2020  |  |              | 10,032 |      |  |            | 9,979  |                
|Project Sunshine IV Pty Ltd (Sensis), New Term Loans*(1)  |  | 1.00%     |  | 7.00%                   |  | 8.00%       |  | 9/23/2019  |  |              | 6,876  |      |  |            | 6,747  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 16,726 |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Metals and Mining                                         |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Metal Services LLC (Phoenix), New Term Loans*             |  | 1.00%     |  | 7.50%                   |  | 8.50%       |  | 6/30/2019  |  |              | 6,081  |      |  |            | 6,010  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 6,010  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Retailing                                                 |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|360 Holdings III Corp., Term Loan*                        |  | 1.00%     |  | 9.00%                   |  | 10.00%      |  | 10/1/2021  |  |              | 7,308  |      |  |            | 7,067  |                
|Sears Holdings Corporation, Term Loan*(1)                 |  | 1.00%     |  | 7.50%                   |  | 8.50%       |  | 7/20/2020  |  |              | 1,600  |      |  |            | 1,561  |                
|Western Convenience Stores, Inc., Term Loan*              |  | 0.63%     |  | 11.00%                  |  | 11.63%      |  | 9/1/2019   |  |              | 9,000  |      |  |            | 8,760  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 17,388 |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Oil, Gas and Consumable Fuels                             |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Badlands Production Company (fka Gasco), Term Loan(4)     |  | 1.00%     |  | 17.50%                  |  | 18.50%      |  | 5/14/2018  |  |              | 10,500 |      |  |            | 10,403 |                
|Iracore International Holdings, Inc., Term Loan*          |  | 1.00%     |  | 9.00%                   |  | 10.00%      |  | 7/10/2020  |  |              | 8,878  |      |  |            | 8,784  |                
|Rooster Energy Ltd., Term Loan*(3)(7)                     |  | 1.50%     |  | 12.89% Cash + 8.00% PIK |  | 22.39%      |  | 6/25/2018  |  |              | 5,587  |      |  |            | 5,517  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 24,704 |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Professional Services                                     |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Simmons Research LLC, Term Loan*                          |  | 0.88%     |  | 10.50%                  |  | 11.38%      |  | 12/11/2020 |  |              | 3,810  |      |  |            | 3,750  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 3,750  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Transportation Services                                   |  |           |  |                         |  |             |  |            |  |              |        |      |  |            |        |                
|Sirva Worldwide, Term Loan*                               |  | 1.00%     |  | 6.50%                   |  | 7.50%       |  | 11/22/2022 |  |              | 5,900  |      |  |            | 5,755  |                
|                                                          |  |           |  |                         |  |             |  |            |  |              |        |      |  |            | 5,755  |                







See accompanying notes to consolidated financial statements.





9






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments – (continued)



December 31, 2016



(in thousands)







|Security Description                                     |  | Base Rate |  | Spread |  | All In Rate |  | Maturity   |  | Par / Shares |       | Cost |  | Fair Value |         | % of Net Assets
|-------------------------------------------------------- |  | --------- |  | ------ |  | ----------- |  | ---------- |  | ------------ | ----- | ---- |  | ---------- | ------- | ---------------
|Non-Control/Non-Affiliate Investments                    |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Investments - United States                              |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Debt Investments (continued)                             |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Technology Hardware, Storage and Peripherals             |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|TableTop Media, LLC, Lease**                             |  | 0.00%     |  | 10.00% |  | 10.00%      |  | 10/15/2019 |  |              | 4,354 |      |  | $          | 4,344   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 4,344   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Textiles, Apparel and Luxury Goods                       |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|League Collegiate Holdings, LLC, Term Loan*              |  | 0.77%     |  | 8.00%  |  | 8.77%       |  | 6/28/2021  |  |              | 7,604 |      |  |            | 7,501   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 7,501   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Trading Companies and Distributors                       |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Sprint Industrial Holdings, LLC, Term Loan (First Lien)* |  | 1.25%     |  | 5.75%  |  | 7.00%       |  | 5/14/2019  |  |              | 4,774 |      |  |            | 4,759   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 4,759   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Total Debt Investments                                   |  |           |  |        |  |             |  |            |  |              |       |      |  | $          | 375,693 |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Financial Assets                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Diversified Financial Services                           |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|GLC Trust 2013-2 Consumer Loan Pool(1)(5)                |  | N/A       |  | N/A    |  | N/A         |  | N/A        |  |              | 7,086 |      |  | $          | 7,086   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | 7,086   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Total Financial Assets                                   |  |           |  |        |  |             |  |            |  |              |       |      |  | $          | 7,086   |                
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Unfunded Commitments                                     |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Air Freight  and Logistics                               |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Raymond Express International, LLC,
    Revolver*(6)     |  | N/A       |  | 0.50%  |  | 0.50%       |  | 2/28/2018  |  |              | 215   |      |  | $          | (1      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (1      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Commercial Services and Supplies                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Del Mar Recovery Solutions, Inc., Revolver*(6)           |  | N/A       |  | 0.75%  |  | 0.75%       |  | 6/27/2021  |  |              | 825   |      |  |            | (21     | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (21     | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Healthcare Equipment  and Services                       |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Aurora Diagnostics, LLC, Revolver*(6)                    |  | N/A       |  | 0.38%  |  | 0.38%       |  | 7/31/2019  |  |              | 1,020 |      |  |            | (6      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (6      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Internet Software and Services                           |  |           |  |        |  |             |  |            |  |              |       |      |  |            |         |                
|Emtec Global Services Holdings, LLC, Revolver(6)         |  | N/A       |  | 0.00%  |  | 0.00%       |  | 11/30/2020 |  |              | 123   |      |  |            | (5      | )              
|YourMembership Holding Company, Revolver*(6)             |  | N/A       |  | 0.00%  |  | 0.00%       |  | 9/12/2019  |  |              | 441   |      |  |            | (2      | )              
|                                                         |  |           |  |        |  |             |  |            |  |              |       |      |  |            | (7      | )              





See accompanying notes to consolidated financial statements.





10






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments – (continued)



December 31, 2016



(in thousands, except share amounts)





|Security Description                                              |  | Base Rate |  | Spread |  | All In Rate |  | Maturity  |  | Par / Shares |       | Cost |  | Fair Value |         | % of Net Assets
|----------------------------------------------------------------- |  | --------- |  | ------ |  | ----------- |  | --------- |  | ------------ | ----- | ---- |  | ---------- | ------- | ---------------
|Non-Control/Non-Affiliate Investments                             |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Investments - United States                                       |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Unfunded Commitments (continued)                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Textiles, Apparel and Luxury Goods                                |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|League Collegiate Holdings, LLC, Revolver*(6)                     |  | N/A       |  | 0.75%  |  | 0.75%       |  | 6/28/2021 |  |              | 2,200 |      |  | $          | (30     | )              
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            | (30     | )              
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Unfunded Commitments                                        |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | (65     | )              
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Non-Control/Non-Affiliate Investments                       |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 387,265 |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Non-Control/Affiliate Investments                                 |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Investments - United States                                       |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Common Equity                                                     |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Air Freight and  Logistics                                        |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Speed Commerce Investment Partners LLC, Class A Unit              |  | N/A       |  | N/A    |  | N/A         |  | N/A       |  |              | 1,780 |      |  | $          | 1,693   |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            | 1,693   |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Common Equity                                               |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 1,693   |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Debt Investments                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Air Freight  and Logistics                                        |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Speed Commerce Operating Company LLC, Closing Date Term Loan B(3) |  | 1.00%     |  | 16.00% |  | 17.00% PIK  |  | 12/8/2017 |  |              | 1,879 |      |  | $          | 1,879   |                
|Speed Commerce Operating Company LLC, Delayed Draw Term Loan B(3) |  | 1.00%     |  | 16.00% |  | 17.00% PIK  |  | 12/8/2017 |  |              | 1,224 |      |  |            | 1,224   |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 3,103   |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Debt Investments                                            |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 3,103   |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Unfunded Commitments                                              |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Air Freight  and Logistics                                        |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Speed Commerce Operating Company LLC, Delayed Draw Term Loan B    |  | N/A       |  | 0.00%  |  | 0.00%       |  | 12/8/2017 |  |              | 18    |      |  | $          | -       |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            | -       |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Unfunded Commitments                                        |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | -       |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Non-Control/Affiliate Investments                           |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 4,796   |                
|                                                                  |  |           |  |        |  |             |  |           |  |              |       |      |  |            |         |                
|Total Investments - United States                                 |  |           |  |        |  |             |  |           |  |              |       |      |  | $          | 392,061 |                



______________

| | * | Denotes that all or a portion of the investment is held as collateral by Garrison Funding 2016-2 Ltd.
| | - | -----------------------------------------------------------------------------------------------------

| | ** | Denotes that all or a portion of the loan is held by Garrison Capital SBIC LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    | Base Rate = Our floating rate investments bear interest at a base rate plus a spread. Generally, the borrower
has an option to choose whether the base rate is referenced to the London Interbank Offered Rate (“LIBOR”) or the prime
rate. The spread may change as a result of the borrower’s choice of base rate. In addition, the floating rate investments
that are referenced to LIBOR are generally indexed to 30-day or 90-day U.S. Dollar LIBOR and subject to a minimum LIBOR Floor.
The terms disclosed in the Consolidated Schedule of Investments represent the actual base rate and spread in effect as of the reporting
period date.





|(1) |  | Not a qualifying asset under Section 55(a) of the 1940 Act.  Under the 1940 Act, the Company may
not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the
Company’s total assets. As of December 31, 2016, 94.8% of the Company’s assets were qualifying assets.                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Net of incentive fee payable to a third party equal to 20% of any distribution after the Company has received its full net capital investment plus a 12% preferred return in GLC Trust 2013-2 and Prosper Marketplace Series B Preferred Stock.                                                                                                                                                                                                        
|(3) |  | Interest is payable in cash, and/or PIK, or a combination thereof.                                                                                                                                                                                                                                                                                                                                                                                     
|(4) |  | Investment is currently not income producing and placed on non-accrual status.                                                                                                                                                                                                                                                                                                                                                                         
|(5) |  | GLC Trust 2013-2 includes 1,458 small balance consumer loans with an average par of $4,860, a weighted average rate of 16.0% and a weighted average maturity of November 16, 2018. See Note 3 for additional information. See Exhibit 99.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for detail on underlying loans.                                                                                            
|(6) |  | The negative fair value is the result of the unfunded commitments being valued below par. These amounts may or may not be funded to the borrowing party currently or in the future.                                                                                                                                                                                                                                                                    
|(7) |  | In addition to the interest earned on the stated base rate and spread of this investment, the
    Company received additional interest for the year ended December 31, 2016 due to
    an     arrangement     between     the     Company and certain other lenders to the portfolio company. The additional
    interest     received during the     quarter has     been     annualized and included in the spread disclosed for this
    investment.



As required by the 1940 Act, investments are classified by level of control. “Control
Investments” are investments in those companies that the Company is deemed to control as defined in the 1940 Act. “Affiliate
Investments” are investments in those companies that are affiliated companies, as defined in the 1940 Act, other than Control
Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.



Generally, under the 1940 Act, the Company is deemed to control a company in which it
has invested if it owns more than 25% of the voting securities of such company. The Company is deemed to be an affiliate of a company
in which it has invested if it owns 5% or more of the voting securities of such company.



See accompanying notes to consolidated financial
statements.





11






Garrison Capital Inc. and Subsidiaries



Consolidated Statements of Operations (unaudited)



($ in thousands, except
share and per share amounts)





|                                                                          |  | Three Months Ended |            | Three Months Ended
|------------------------------------------------------------------------- |  | ------------------ | ---------- | ------------------
|                                                                          |  | March 31, 2017     |            | March 31, 2016    
|Investment income                                                         |  |                    |            |                   
|Interest income                                                           |  |                    |            |                   
|Non-control/non-affiliate investments                                     |  | $                  | 8,428      |                   
|Non-control/affiliate investments                                         |  |                    | 148        |                   
|Other income                                                              |  |                    | 418        |                   
|Total investment income                                                   |  |                    | 8,994      |                   
|                                                                          |  |                    |            |                   
|Expenses                                                                  |  |                    |            |                   
|Interest expense                                                          |  |                    | 2,110      |                   
|Management fee                                                            |  |                    | 1,611      |                   
|Incentive fee                                                             |  |                    | -          |                   
|Professional fees                                                         |  |                    | 319        |                   
|Directors' fees                                                           |  |                    | 82         |                   
|Administrator expenses                                                    |  |                    | 224        |                   
|Other expenses                                                            |  |                    | 674        |                   
|Total expenses                                                            |  |                    | 5,020      |                   
|Base management fee waived                                                |  |                    | (230       | )                 
|Net expenses                                                              |  |                    | 4,790      |                   
|Net investment income before excise taxes                                 |  |                    | 4,204      |                   
|Excise tax expense/(benefit)                                              |  |                    | 17         |                   
|Net investment income                                                     |  |                    | 4,187      |                   
|                                                                          |  |                    |            |                   
|Realized and unrealized gain/(loss) on investments                        |  |                    |            |                   
|Net realized gain/(loss) from investments                                 |  |                    |            |                   
|Non-control/non-affiliate investments                                     |  |                    | 204        |                   
|Non-control/affiliate investments                                         |  |                    | -          |                   
|Net change in unrealized gain/(loss) from investments                     |  |                    |            |                   
|Non-control/non-affiliate investments                                     |  |                    | (5,110     | )                 
|Non-control/affiliate investments                                         |  |                    | (3,269     | )                 
|Net realized and unrealized loss on investments                           |  |                    | (8,175     | )                 
|                                                                          |  |                    |            |                   
|Net decrease in net assets resulting from operations                      |  | $                  | (3,988     | )                 
|                                                                          |  |                    |            |                   
|Net investment income per common share                                    |  | $                  | 0.26       |                   
|Net decrease in net
    assets resulting from operations per common share |  | $                  | (0.24      | )                 
|Basic weighted average common shares outstanding(1)                       |  |                    | 16,049,352 |                   
|                                                                          |  |                    |            |                   
|Dividends and distributions declared per common share                     |  | $                  | 0.28       |                   











____________

|(1) |  | Calculated using basic weighted average common shares outstanding.
|--- |  | ------------------------------------------------------------------



See accompanying notes to consolidated financial statements.





12






Garrison Capital Inc. and Subsidiaries



Consolidated Statements of Changes in Net Assets (unaudited)



($ in thousands, except
share and per share amounts)





|                                                              |  | Three Months Ended |            | Three Months Ended
|------------------------------------------------------------- |  | ------------------ | ---------- | ------------------
|                                                              |  | March 31, 2017     |            | March 31, 2016    
|                                                              |  |                    |            |                   
|(Decrease)/increase in net assets from operations:            |  |                    |            |                   
|Net investment income                                         |  | $                  | 4,187      |                   
|Net realized gain/(loss) from investments                     |  |                    | 204        |                   
|Net change in unrealized (loss) on investments                |  |                    | (8,379     | )                 
|Net (decrease) in net assets from operations                  |  |                    | (3,988     | )                 
|                                                              |  |                    |            |                   
|Dividends and distributions to stockholders:                  |  |                    |            |                   
|From net investment income                                    |  |                    | (4,495     | )                 
|Total dividends and distributions to stockholders(1)          |  |                    | (4,495     | )                 
|                                                              |  |                    |            |                   
|Common share transactions                                     |  |                    |            |                   
|Repurchase of common stock (see Note 8)                       |  |                    | -          |                   
|Net (decrease) in net assets from common share transactions   |  |                    | -          |                   
|                                                              |  |                    |            |                   
|Total (decrease) in net assets                                |  |                    | (8,483     | )                 
|Net assets at beginning of period                             |  |                    | 199,408    |                   
|Net assets at end of period                                   |  | $                  | 190,925    |                   
|Net asset value per common share                              |  | $                  | 11.90      |                   
|Common shares outstanding at end of period                    |  |                    | 16,049,352 |                   
|                                                              |  |                    |            |                   
|Underdistributed net investment income included in net assets |  | $                  | 4,857      |                   









____________

|(1) |  | Dividends from net investment income are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with U.S. GAAP.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







See accompanying notes to consolidated financial statements.





13






Garrison Capital Inc. and Subsidiaries



Consolidated Statements of Cash Flows (unaudited)



($ in thousands, except
share and per share amounts)



|                                                                                                                          |  | Three Months Ended |         | Three Months Ended
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ------------------
|                                                                                                                          |  | March 31, 2017     |         | March 31, 2016    
|Cash flows from operating activities                                                                                      |  |                    |         |                   
|Net decrease in net assets resulting from operations                                                                      |  | $                  | (3,988  | )                 
|Adjustments to reconcile net increase in net assets resulting from operations to net cash (used in) operating activities: |  |                    |         |                   
|Net accretion of discounts on investments                                                                                 |  |                    | (377    | )                 
|Net realized (gain)/loss from investments                                                                                 |  |                    | (204    | )                 
|Amortization of deferred debt issuance costs and discount on notes payable                                                |  |                    | 127     |                   
|Net change in unrealized loss/(gain) on investments                                                                       |  |                    | 8,379   |                   
|Payment-in-kind interest                                                                                                  |  |                    | (273    | )                 
|Purchases of investments                                                                                                  |  |                    | (28,326 | )                 
|Paydowns of investments                                                                                                   |  |                    | 38,757  |                   
|Sales of investments                                                                                                      |  |                    | -       |                   
|Changes in operating assets and liabilities:                                                                              |  |                    |         |                   
|Increase in cash, restricted                                                                                              |  |                    | (2,027  | )                 
|Decrease/(increase) in due from counterparties                                                                            |  |                    | 1,247   |                   
|Decrease/(increase) in accrued interest receivable                                                                        |  |                    | 1,022   |                   
|Decrease in other assets                                                                                                  |  |                    | 260     |                   
|Increase in due to counterparties                                                                                         |  |                    | -       |                   
|Increase in payables to affiliates                                                                                        |  |                    | 1,381   |                   
|(Decrease) in interest payable on notes payable                                                                           |  |                    | (262    | )                 
|(Decrease)/increase in accrued expenses and other payables                                                                |  |                    | (35     | )                 
|Net cash provided by/(used in) operating activities                                                                       |  |                    | 15,681  |                   
|                                                                                                                          |  |                    |         |                   
|Cash flows from financing activities                                                                                      |  |                    |         |                   
|Repurchase of common stock                                                                                                |  |                    | -       |                   
|Distributions paid to stockholders                                                                                        |  |                    | (4,495  | )                 
|Payments for financing costs                                                                                              |  |                    | -       |                   
|Proceeds of senior secured revolving notes                                                                                |  |                    | -       |                   
|Repayment of GLC Trust 2013-2 Class A notes                                                                               |  |                    | (1,942  | )                 
|Proceeds from Garrison SBIC borrowings                                                                                    |  |                    | -       |                   
|Net cash (used in)/provided by financing activities                                                                       |  |                    | (6,437  | )                 
|                                                                                                                          |  |                    |         |                   
|Net increase/(decrease) in cash                                                                                           |  |                    | 9,244   |                   
|Cash at beginning of period                                                                                               |  |                    | 10,378  |                   
|Cash at end of period                                                                                                     |  | $                  | 19,622  |                   
|                                                                                                                          |  |                    |         |                   
|Supplemental disclosure of cash flow information                                                                          |  |                    |         |                   
|Cash paid for interest expense                                                                                            |  | $                  | 2,245   |                   













See accompanying notes to consolidated financial statements.





14








Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



1. Organization





Garrison Capital Inc. (“GARS” and, collectively with its subsidiaries, the “Company”, “we”
or “our”) is a Delaware corporation and is an externally managed, closed-end, non-diversified management investment
company that has filed an election to be treated as a business development company (“BDC”) under the Investment Company
Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes, GARS has elected to be treated as a regulated
investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”),
for the period beginning October 9, 2012 and intends to qualify annually thereafter. GARS’ shares trade on the NASDAQ Global
Select Market under the symbol “GARS”.



Our investment objective is to generate current
income and capital appreciation through direct loans and debt investments in U.S. based middle-market companies. Our loans and
debt investments are primarily first and second lien senior secured loans
(including "unitranche" loans, which are loans that combine the characteristics of both senior and subordinated debt,
generally in a first lien position). We also may, to a lesser extent, invest in subordinated and mezzanine debt, unsecured consumer
loans and equityinvestments. Our goal is to generate attractive risk-adjusted returns by assembling a broad portfolio of
investments.



The Company’s business and affairs are managed and controlled by the Company’s board of directors
(the “Board”). The majority of the members of the Board are independent of the Company and its affiliates. Our investment
activities and day-to-day operations are managed by Garrison Capital Advisers, LLC (our “Investment Adviser”) and Garrison
Capital Administrator, LLC (the “GARS Administrator”) provide the Company with certain administrative services necessary
to conduct our day-to-day operations. We are organized as a holding company and conduct our business primarily through our various
subsidiaries.



2. Significant Accounting Policies and Recent Updates



Basis of Presentation



The Company is an investment company as defined in the accounting
and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 946 — Financial Services —  Investment Companies (“ASC Topic 946”).





The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6
or 10 of Regulation S-X. In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications
consisting solely of normal accruals that are necessary for the fair presentation of financial results as of and for the periods
presented. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have
been reclassified to conform to the current period presentation.



Principles of Consolidation





The consolidated financial statements include
the accounts of Garrison Capital Inc. and its wholly-owned subsidiaries. The accounts of the subsidiaries are prepared using consistent
accounting policies and as of the same reporting period as GARS. Under ASC Topic 946, the Company is generally precluded from consolidating
any entity other than another investment company. Accordingly, the Company consolidates any investment company when it owns 100%
of its equity units or 100% of the economic equity interest. ASC Topic 946 also provides for the consolidation of a controlled
operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries.



As a result, GARS has consolidated the results
of Garrison Funding 2013-2 Manager, LLC (“GF 2013-2 Manager”), Garrison Funding 2013-2 Ltd. (“GF 2013-2”),
Garrison Funding 2016-2 Ltd. (“GF 2016-2”), Garrison Capital SBIC, LP (“Garrison SBIC”), GLC Trust 2013-2
(“GLC Trust 2013-2”) and a series of limited liability companies that GARS created primarily to provide specific tax
treatment for the minority equity and other investments held in these limited liability companies.



15












Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



2. Significant Accounting Policies and Recent Updates  – (continued)



Use of Estimates



The preparation of consolidated financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures in the consolidated
financial statements, including the estimated fair values of investments and the amount of income and expenses during the reporting
period. Actual results could differ from those estimates.



Cash and Cash Equivalents



As of March 31, 2017 and December 31, 2016, cash held in designated
bank accounts with Deutsche Bank Trust Company Americas (the “Custodian”) was $18.4 million and $9.1 million, respectively.
As of March 31, 2017 and December 31, 2016, cash held in designated bank accounts with other major financial institutions was $1.2
million and $1.3 million, respectively. At times, these balances may exceed federally insured limits and this potentially subjects
the Company to a concentration of credit risk. The Company believes it is not exposed to any significant credit risk associated
with its cash custodian.



The Company defines cash equivalents as highly liquid financial instruments
with original maturities of three months or less, including those held in overnight sweep bank deposit accounts. As of both March
31, 2017 and December 31, 2016, the Company held no cash equivalents.



Cash and Cash Equivalents, Restricted



Restricted
cash as of March 31, 2017 and December 31, 2016 included cash of $13.5 million and $11.3 million, respectively, held by GF 2016-2
in designated bank accounts with the Custodian. GF 2016-2 is required to use a portion of these amounts to pay interest expense,
reduce borrowings at the end of the investment period and to pay other amounts in accordance with the terms of the indenture governing
the 2016-2 CLO, as defined in Note 4. Funds held by GF 2016-2 are not available for general use by the Company. Restricted cash
as of March 31, 2017 and December 31, 2016 also included cash of $1.1 million and $1.3 million, respectively, held by GLC Trust
2013-2 in designated restricted bank accounts. GLC Trust 2013-2 is required to use a portion of these amounts to make principal
payments and pay interest expense in accordance with the terms of the indenture governing the GLC Trust 2013-2 Notes, as defined
in Note 4.



As of both March 31, 2017 and December 31, 2016, the Company held
no restricted cash equivalents.





16








Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



2. Significant Accounting Policies and Recent Updates  – (continued)



Investment Transactions and Related Investment Income and Expense



The Company records its investment transactions on a trade date basis,
which is the date when management has determined that all material legal terms have been contractually defined for the transactions.
These transactions could possibly settle on a subsequent date depending on the transaction type. Any amounts related to purchase,
sale and principal paydowns that have traded but not settled will be reflected as either a due to counterparty or due from counterparty
on our Statement of Financial Condition. All related revenue and expenses attributable to our investment transactions are reflected
on the consolidated statements of operations commencing on the trade date unless otherwise specified by the transaction documents.
Realized gains and losses on investment transactions are recorded using the specific identification method.



The Company accrues interest income if it expects that ultimately
it will be able to collect such income. Generally, when a payment default occurs on a loan in the portfolio, or if management otherwise
believes that the issuer of the loan will not be able to make contractual interest payments or principal payments, the Investment
Adviser will place the loan on non-accrual status and will cease recognizing interest income on that loan until all principal and
interest is current through payment or until a restructuring occurs, such that the interest income is deemed to be collectible.
However, the Company remains contractually entitled to this interest.



The
Company may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. Accrued
interest is written off when it becomes probable that the interest will not be collected and the amount of uncollectible interest
can be reasonably estimated. For consumer loans, any loan which is 120 days past due is considered defaulted and 100% of the principal
is charged off with no expected recovery or sale of defaulted receivables. As of March 31, 2017 the Company had investments to
four portfolio companies that were place on non-accrual status. As of December 31, 2016, the Company had investments to two portfolio
companies that were placed on non-accrual status.



Any original issue discounts, as well as any other purchase discounts
or premiums on debt investments, are accreted or amortized and included in interest income over the maturity periods of the investments.
If a loan is placed on non-accrual status, the Company will cease recognizing amortization of original issue discount and purchase
discount until all principal and interest is current through payment or until a restructuring occurs, such that the income is deemed
to be collectible.



Dividend income on preferred equity securities is recorded as dividend
income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected.



Loan Origination, Facility, Commitment and Amendment Fees



The Company may receive loan origination, prepayment, facility, commitment,
forbearance and amendment fees in addition to interest income during the life of the investment. The Company may receive origination
fees upon the origination of an investment.



Origination fees received by the Company are initially deferred and
reduced from the cost basis of the investment and subsequently accreted into interest income over the stated term of the loan.



Upon the prepayment of a loan or debt security, any unamortized loan
origination fees are recorded as interest income. We record prepayment premiums on loans and debt securities as interest income
when we receive such amounts. Facility fees, sometimes referred to as asset management fees, are accrued as a percentage periodic
fee on the base amount (either the funded facility amount or the committed principal amount). Commitment fees are based upon the
undrawn portion committed by the Company and are accrued over the life of the loan.



Amendment and forbearance fees are paid in connection with loan amendments
and waivers and are recognized upon completion of the amendments or waivers, generally when such fees are receivable. Any such
fees are recorded and classified as other income and included in investment income on the consolidated statements of operations.
As these fees are paid and recognized in connection with specific loan amendments or forbearance, they are typically non-recurring
in nature.





Interest Expense



Interest expense is recorded on an accrual
basis and is adjusted for amortization of deferred debt issuance costs and any original issue discount.





Fair Value Measurements



The Company values its investments in accordance with FASB ASC Topic
820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework
for measuring fair value and expands disclosures about assets and liabilities measured at fair value. ASC Topic 820’s definition
of fair value focuses on exit price in the principal, or most advantageous, market and prioritizes the use of market-based inputs
over entity-specific inputs within a measurement of fair value.



ASC Topic 820 classifies the inputs used to measure these fair values
into the following hierarchy:



| | · | Level 1 — Unadjusted quoted prices in active markets for identical investments as of the reporting date.
| | - | --------------------------------------------------------------------------------------------------------



| | · | Level 2 — Pricing inputs include quoted prices in active markets for similar instruments, quoted prices in less active or inactive markets for identical or similar instruments where multiple price quotes can be obtained, and other observable inputs, such as interest rates, yield curves, credit risks, and default rates.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level 3 — Pricing inputs are unobservable and includes situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation including, in certain instances, the Investment Adviser’s own assumptions about how market participants would price the financial instrument.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our
investments include debt investments (both funded and unfunded, “Debt Investments”), preferred and minority common
equity investments of diversified companies (“Equity”) and a portfolio of unsecured small balance consumer loans (“Financial
Assets”). Due to the nature of the Company’s strategy, the Company’s portfolio is primarily comprised of relatively
illiquid investments that are privately held. Inputs into the determination of fair value of the Company’s portfolio investments
require significant management judgment or estimation. This means that the Company’s portfolio valuations are based on unobservable
inputs and the Investment Adviser’s own assumptions about how market participants would price the asset or liability in
question. Valuations of privately held investments are inherently uncertain and they may fluctuate over short periods of time
and may be based on estimates. The determination of fair value by the Board may differ materially from the values that would have
been used if a ready market for these investments existed.



Net assets could be materially affected if the determinations regarding
the fair value of the investments were materially higher or lower than the values that are ultimately realized upon the disposal
of such investments.







17












Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



2. Significant Accounting Policies and Recent Updates  – (continued)





Valuation Techniques



The following is a description of the different valuation techniques
utilized by the Company.



Debt and Equity Investments



Bid quotations – Certain of the Company’s
debt investments are publicly traded instruments for which quoted market prices are not readily available. The fair value of these
investments may be determined based bid quotations from unaffiliated market makers or independent third-party pricing services
or the price activity of comparable instruments. The Company will generally supplement the bid quotations for these investments
by also performing a comparable yield approach outlined below.



Comparable yield approach – This valuation technique determines
the fair value of an investment by assessing the expected market yield of other debt investments with similar credit structures,
leverage statistics, interest rates and time to maturity. The Company generally uses this approach for its debt investments that
have not been deemed to be credit-impaired and where a market rate of recovery is expected.



Market
comparable companies – This valuation technique determines the total enterprise value of a company by assessing the expected
multiple that a market participant would apply to that company’s earnings before interest, taxes, depreciation and amortization
(“EBITDA”), revenue or other collateral that secures the investment. These valuation multiples are typically determined
based on reviewing market comparable transactions or other comparable publicly traded companies, if any. The resulting enterprise
value will dictate whether or not the Company’s debt investment has adequate enterprise value coverage. In instances where
the enterprise value is inadequate, the market comparable companies approach may be used to estimate a recovery value for our
credit-impaired debt investments. The Company generally also uses this approach for its equity investments.





Financial Assets



Discounted
cash flows – This valuation technique determines the fair value of an investment by projecting the expected cash flows of
the investment based on contractual terms, and discounts such cash flows back to the valuation date using a discount rate.



Valuation Process



The Board is responsible for determining
the fair value of the Company’s assets in good faith using a documented valuation policy and consistently applied valuation
process. The valuation process is a multi-step process conducted at the end of each fiscal quarter as described below:



| | · | The Company’s valuation process begins with each portfolio company or investment being initially valued by investment
professionals of the Investment Adviser responsible for credit monitoring.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | At least once annually, the valuation for each portfolio investment that does not have a readily available quotation is reviewed
by an independent valuation firm, subject to the de minimis exception as more full described below.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Preliminary valuation conclusions are then documented, compared to the range of prices provided by an independent valuation
firm where applicable, and discussed with our senior management and the Investment Adviser.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Investment Adviser submits these preliminary valuations to the Valuation Committee of the Board.
| | - | ----------------------------------------------------------------------------------------------------



| | · | The Board discusses valuations and determines the fair value of each investment in the Company’s portfolio in good faith
| | - | ------------------------------------------------------------------------------------------------------------------------



As noted above, the Board has retained several
independent valuation firms to review the valuation of each portfolio investment that does not have a readily available market
quotation at least once during each 12-month period. To the extent a security is reviewed in a particular quarter, it is reviewed
and valued by only one service provider. However, the Board does not intend to have de minimis investments of less than 0.5% of
the Company’s total assets (up to an aggregate of 10.0% of the Company’s total assets) independently reviewed.





Dividends and Distributions



Dividends and distributions to common stockholders are recorded on
the ex-dividend date. The amount to be paid out as a dividend or distribution is determined by the Board each quarter and is generally
based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually, although
the Company may decide to retain such capital gains for investment.



Recent Accounting Pronouncements



In January 2017, the FASB issued ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs
(Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 amends the amortization period for
certain purchased callable debt securities held at a premium. The amortization period will be shortened for the premium to the
earliest call date. This new guidance is effective for annual and interim periods beginning on or after December 15, 2018 and for
interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact ASU
2017-08 will have on the Company’s consolidated financial position and disclosures.





18














Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



3. Investments



As
of March 31, 2017, we held investments in 63 portfolio companies with a fair value of $358.7 million, a weighted average yield
on debt investments of 10.8% and a weighted average contractual maturity of 36 months. Weighted average yield is calculated based
on the fair value of the investments and interest expected to be received using the current all-in rate of interest at the balance
sheet date to contractual maturity, excluding the effects of future scheduled principal amortization.





The composition of the Company’s portfolio by industry at fair
value as of March 31, 2017 and December 31, 2016 was as follows:







|                                             |  | Fair Value of Investments
|-------------------------------------------- |  | -------------------------
|Industry ($ in thousands)                    |  | As of March 31, 2017     
|Healthcare Equipment and Services            |  | $                        
|Household Products and Durables              |  |                          
|Internet Software and Services               |  |                          
|Chemicals                                    |  |                          
|Leisure Products                             |  |                          
|Commercial Services and Supplies             |  |                          
|Diversified Financial Services               |  |                          
|Oil, Gas and Consumable Fuels                |  |                          
|Air Freight and Logistics                    |  |                          
|Hotels, Restaurants and Leisure              |  |                          
|Food Products                                |  |                          
|Auto Components                              |  |                          
|Transportation Services                      |  |                          
|Building Products                            |  |                          
|Retailing                                    |  |                          
|Aerospace and Defense                        |  |                          
|Machinery                                    |  |                          
|Textiles, Apparel and Luxury Goods           |  |                          
|Media                                        |  |                          
|Metals and Mining                            |  |                          
|Diversified Telecommunication Services       |  |                          
|Technology Hardware, Storage and Peripherals |  |                          
|Trading Companies and Distributors           |  |                          
|Professional Services                        |  |                          
|                                             |  | $                        



Refer to the Consolidated Schedules of Investments for detailed disaggregation of the Company’s investments.



19










Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



3. Investments – (continued)



Fair Value Measurement





The following tables summarize the valuation
of the Company’s investments measured at fair value based on the fair value hierarchy, as detailed in Note 2, as of both
March 31, 2017 and December 31, 2016:





|                             |  | As of March 31, 2017
|---------------------------- |  | --------------------
|($ in thousands)             |  |                     
|Senior Secured (1)(2)        |  | $                   
|Preferred Equity Investments |  |                     
|Common Equity Investments    |  |                     
|Financial Assets             |  |                     
|                             |  | $                   





______________

| | (1) | Includes unfunded commitments with a negative fair value of $0.1 million.                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Included in senior secured loans are loans structured as first lien, last out loans. These loans may in certain cases be subordinated in payment priority to other senior secured lenders.





|                             |  | As of December 31, 2016
|---------------------------- |  | -----------------------
|($ in thousands)             |  |                        
|Senior Secured (1)(2)        |  | $                      
|Preferred Equity Investments |  |                        
|Common Equity Investments    |  |                        
|Financial Assets             |  |                        
|                             |  | $                      



______________

| | (1) | Includes unfunded commitments with a negative fair value of $0.1 million.                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Included in senior secured loans are loans structured as first lien, last out loans. These loans may in certain cases be subordinated in payment priority to other senior secured lenders.





The net change in unrealized loss attributable to the Company’s
Level 3 assets for the three months ended March 31, 2017 and March 31, 2016 included in the net change in unrealized loss from
investments in the Company’s consolidated statement of operations was $8.4 million and $8.5 million, respectively.







20










Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



3. Investments – (continued)



The following table is a reconciliation of investments in which significant
unobservable inputs (Level 3) were used in determining fair value for the three months ended March 31, 2017:





|                                                                |  | Three Months Ended March 31, 2017
|--------------------------------------------------------------- |  | ---------------------------------
|                                                                |  | Senior Secured                   
|($ in thousands)                                                |  | Investments                      
|Fair value, beginning of period                                 |  | $                                
|Total net realized and unrealized gain/(loss) on investments(1) |  |                                  
|Total net accretion of discounts on investments                 |  |                                  
|Purchases/issuances(2)                                          |  |                                  
|Sales                                                           |  |                                  
|Paydowns(2)                                                     |  |                                  
|Fair value, end of period                                       |  | $                                









______________



|(1) |  | Net change in unrealized loss from investments attributable to our Level 3 assets still held at March
31, 2017 totaled $8.2 million, consisting of the following: Senior Secured Investments of $7.8 million, Preferred Equity Investments
of $0.6 million and Financial Assets of $0.1 million, offset by unrealized gains on Common Equity Investments of $0.3 million.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | There were no non-cash restructuring of portfolio investments or transfers of investments between levels by the Company for the three months ended March 31, 2017.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table is a reconciliation of investments in which significant
unobservable inputs (Level 3) were used in determining fair value for the three months ended March 31, 2016:





|                                                         |  | Three Months Ended March 31, 2016
|-------------------------------------------------------- |  | ---------------------------------
|                                                         |  | Senior Secured                   
|($ in thousands)                                         |  | Investments                      
|Fair value, beginning of period                          |  | $                                
|Total net realized and unrealized loss on investments(1) |  |                                  
|Total net accretion of discounts on investments          |  |                                  
|Purchases/issuances(2)                                   |  |                                  
|Sales                                                    |  |                                  
|Paydowns(2)                                              |  |                                  
|Fair value, end of period                                |  | $                                



______________



| | (1) | Net change in unrealized loss from investments attributable to our Level 3 assets still held at March 31, 2016 totaled $8.6 million, consisting of the following: Senior Secured Investments of $8.7 million, offset by unrealized gains on Financial Assets of $0.1 million.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | There were no non-cash restructuring of portfolio investments or transfers
of investments between levels by the Company for the three months ended March 31, 2016.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------







21










Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



3. Investments  – (continued)



The following table is a quantitative disclosure about significant
unobservable inputs (Level 3) that were used in determining fair value at March 31, 2017:



|                           |  | Quantitative Information about Level 3 Fair Value Measurements
|-------------------------- |  | --------------------------------------------------------------
|                           |  | Fair Value at                                                 
|($ in thousands)           |  | March 31, 2017                                                
|Senior Secured Investments |  | $                                                             
|                           |  |                                                               
|                           |  |                                                               
|Equity Investments (3)     |  |                                                               
|                           |  |                                                               
|                           |  |                                                               
|Financial Assets (4)       |  |                                                               
|                           |  |                                                               
|                           |  |                                                               
|                           |  |                                                               
|Total                      |  | $                                                             



____________

|(1) |  | Includes total unfunded commitments with a negative fair value of $0.1 million.                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Market rate is calculated based on the fair value of the investments and interest expected to be received
using the current all-in rate of interest at the balance sheet date to contractual maturity, excluding the effects of future scheduled
principal amortizations.
|(3) |  | Includes preferred and common equity.                                                                                                                                                                                                                                    

|(4) |  | Financial Assets are valued by the level of risk associated with the underlying loan measured by the estimated loss
rate. The estimated loss rate is based on the historical performance of loans with similar characteristics, the borrowers credit
score obtained from an official credit reporting agency at origination, debt-to-income ratios at origination, information from
the borrower’s credit report at origination, as well as the borrower’s self-reported income range, occupation and employment
status at origination. Financial Asset risk ratings are assigned on a scale from A through F, with A having the lowest level of
risk and F having the highest level of risk. As of March 31, 2017, 12.9%, 36.5%, 39.6%, 8.6%, 2.4% and 0.00% of the total fair
value of Financial Assets was comprised of A, B, C, D, E and F risk rated loans, respectively. See Exhibit 99.1 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 for detail on the underlying loans.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) |  | Excludes non-operating portfolio companies, which we define as those loans collateralized by proved developed
producing (“PDP”) value, real estate or other hard assets. PDPs are proven revenues that can be produced with existing
wells. As of March 31, 2017, non-operating portfolio companies with an aggregate $47.7 million of par value and $28.5 million of
fair value were excluded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        





22










Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



3. Investments  – (continued)



The following table is a quantitative disclosure about significant
unobservable inputs (Level 3) that were used in determining fair value at December 31, 2016:





|                           |  | Quantitative Information about Level 3 Fair Value Measurements
|-------------------------- |  | --------------------------------------------------------------
|                           |  | Fair Value at                                                 
|($ in thousands)           |  | December 31, 2016                                             
|Senior Secured Investments |  | $                                                             
|                           |  |                                                               
|                           |  |                                                               
|Equity Investments (3)     |  |                                                               
|                           |  |                                                               
|                           |  |                                                               
|Financial Assets (4)       |  |                                                               
|                           |  |                                                               
|                           |  |                                                               
|                           |  |                                                               
|Total                      |  | $                                                             



______________

|(1) |  | Includes total unfunded commitments with a negative fair value of $0.1 million.
|--- |  | -------------------------------------------------------------------------------

|(2) |  | Market rate is calculated based on the fair value of the investments and interest expected to be received
using the current all-in rate of interest at the balance sheet date to contractual maturity, excluding the effects of future scheduled
principal amortizations.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes preferred and common equity.
|--- |  | -------------------------------------

|(4) |  | Financial Assets are valued by the level of risk associated with the underlying loan measured by the estimated loss rate. The estimated loss rate is based on the historical performance of loans with similar characteristics, the borrowers credit score obtained from an official credit reporting agency at origination, debt-to-income ratios at origination, information from the borrower’s credit report at origination, as well as the borrower’s self-reported income range, occupation and employment status at origination. Financial Asset risk ratings are assigned on a scale from A through F, with A having the lowest level of risk and F having the highest level of risk. As of December 31, 2016, 16.6%, 35.4%, 37.4%, 8.1%, 2.5% and 0.0%, of the total fair value of Financial Assets was comprised of A, B, C, D, E and F risk rated loans, respectively. See Exhibit 99.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for detail on the underlying loans.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Excludes non-operating portfolio companies, which we define as those loans collateralized by PDP value,
real estate or other hard assets. PDPs are proven revenues that can be produced with existing wells. As of December 31, 2016, non-operating
portfolio companies with an aggregate $49.6 million of par value and $36.0 million of market value were excluded.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Unobservable
inputs used in the fair value measurement of the Company’s Debt and Equity Investments include consensus pricing, multiples
of market comparable companies, and relative comparable yields. Significant decreases (increases) in consensus pricing or market
comparables could result in lower (higher) fair value measurements. Significant increases (decreases) in comparable yields could
result in lower (higher) fair value measurements. Generally, a change in the assumption used for relative comparable yields is
accompanied by a directionally opposite change in the assumptions used for pricing.



Unobservable inputs used in the fair value measurement of the Company Financial Assets
include interest rate, prepayment rate, unit loss rate, default rate multiplier and discount rate. Significant decreases (increases)
in interest rates or prepayment rates could result in lower (higher) fair value measurements. Significant increases (decreases)
in unit loss rates, default rate multiplier or discount rates could result in significantly lower (higher) fair value measurements.





The terms of the Debt Investments may provide for us to extend to
a borrower additional credit or provide funding for any unfunded portion of such Debt Investments at the request of the borrower.
This exposes us to potential liabilities that are not reflected on the Consolidated Statements of Financial Condition. As of March
31, 2017 and December 31, 2016, the Company had $3.9 million and $4.8 million of unfunded commitments both with negative fair values
of $0.1 million. The negative fair value is the result of the unfunded commitments being valued below par. These amounts may or
may not be funded to the borrowing party now or in the future.







23














Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



4. Financing





As of March 31, 2017, the total carrying value of the Company’s
aggregate debt outstanding was $207.1 million with a weighted average effective interest rate of 4.06%. The Company’s debt
outstanding as of March 31, 2017 was comprised of notes issued by GF 2016-2 and GLC Trust 2013-2 as well as Garrison SBIC borrowings.





The table below provides details of the Company’s outstanding
debt as of March 31, 2017:







|                                |  | Amortized      |         | Outstanding      |  |               |         |           |  |                
|------------------------------- |  | -------------- | ------- | ---------------- |  | ------------- | ------- | --------- |  | ---------------
|March 31, 2017 ($ in thousands) |  | Carrying Value |         | Principal at Par |  | Interest Rate |         | Rating(1) |  | Stated Maturity
|GF 2016-2 Secured Notes:        |  |                |         |                  |  |               |         |           |  |                
|Class A-1R Notes                |  | $              | -       |                  |  | $             | -       |           |  |                
|Class A-1F Notes                |  |                | 24,705  |                  |  |               | 25,000  |           |  |                
|Class A-1T Notes                |  |                | 86,973  |                  |  |               | 88,150  |           |  |                
|Class A-2 Notes                 |  |                | 20,349  |                  |  |               | 20,700  |           |  |                
|Class B Notes                   |  |                | 20,922  |                  |  |               | 21,450  |           |  |                
|Class C Notes                   |  |                | 11,409  |                  |  |               | 11,700  |           |  |                
|                                |  |                | 164,358 |                  |  |               | 167,000 |           |  |                
|Garrison SBIC Borrowings:       |  |                |         |                  |  |               |         |           |  |                
|SBIC 2017-10 A                  |  |                | 6,751   |                  |  |               | 6,980   |           |  |                
|SBIC 2016-10 B                  |  |                | 3,212   |                  |  |               | 3,320   |           |  |                
|SBIC 2016-10 A                  |  |                | 12,315  |                  |  |               | 12,700  |           |  |                
|SBIC 2015-10 B                  |  |                | 13,600  |                  |  |               | 14,000  |           |  |                
|                                |  |                | 35,878  |                  |  |               | 37,000  |           |  |                
|GLC Trust 2013-2 Notes:         |  |                |         |                  |  |               |         |           |  |                
|Class A Notes                   |  |                | 3,042   |                  |  |               | 3,105   |           |  |                
|                                |  |                | 3,042   |                  |  |               | 3,105   |           |  |                
|                                |  |                |         |                  |  |               |         |           |  |                
|                                |  | $              | 203,278 |                  |  | $             | 207,105 |           |  |                



______________

|(1) |  | Represents an S&P rating as of the closing of the 2016-2 CLO, as defined below.
|--- |  | -------------------------------------------------------------------------------

|(2) |  | May bear interest at either the CP Rate (as defined in the governing indenture) or the London Interbank
Offered Rate (“LIBOR”).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Represents the stated interest rate and annual charge of our SBA-guaranteed debentures.
|--- |  | ---------------------------------------------------------------------------------------



The table below provides details of the Company’s outstanding debt as of December 31, 2016:





|                                   |  | Amortized      |         | Outstanding      |  |               |         |           |  |                
|---------------------------------- |  | -------------- | ------- | ---------------- |  | ------------- | ------- | --------- |  | ---------------
|December 31, 2016 ($ in thousands) |  | Carrying Value |         | Principal at Par |  | Interest Rate |         | Rating(1) |  | Stated Maturity
|GF 2016-2 Secured Notes:           |  |                |         |                  |  |               |         |           |  |                
|Class A-1R Notes                   |  | $              | -       |                  |  | $             | -       |           |  |                
|Class A-1F Notes                   |  |                | 24,699  |                  |  |               | 25,000  |           |  |                
|Class A-1T Notes                   |  |                | 86,950  |                  |  |               | 88,150  |           |  |                
|Class A-2 Notes                    |  |                | 20,342  |                  |  |               | 20,700  |           |  |                
|Class B Notes                      |  |                | 20,913  |                  |  |               | 21,450  |           |  |                
|Class C Notes                      |  |                | 11,404  |                  |  |               | 11,700  |           |  |                
|                                   |  |                | 164,308 |                  |  |               | 167,000 |           |  |                
|Garrison SBIC Borrowings:          |  |                |         |                  |  |               |         |           |  |                
|SBIC 2016-10 B                     |  |                | 3,210   |                  |  |               | 3,320   |           |  |                
|SBIC 2016-10 A                     |  |                | 12,306  |                  |  |               | 12,700  |           |  |                
|SBIC 2015-10 B                     |  |                | 13,589  |                  |  |               | 14,000  |           |  |                
|SBIC Interim Financing             |  |                | 6,746   |                  |  |               | 6,980   |           |  |                
|                                   |  |                | 35,851  |                  |  |               | 37,000  |           |  |                
|GLC Trust 2013-2 Notes:            |  |                |         |                  |  |               |         |           |  |                
|Class A Notes                      |  |                | 4,953   |                  |  |               | 5,048   |           |  |                
|                                   |  |                | 4,953   |                  |  |               | 5,048   |           |  |                
|                                   |  |                |         |                  |  |               |         |           |  |                
|                                   |  | $              | 205,112 |                  |  | $             | 209,048 |           |  |                



______________

|(1) |  | Represents an S&P rating as of the closing of the 2016-2 CLO.
|--- |  | -------------------------------------------------------------

|(2) |  | May bear interest at either the CP Rate (as defined in the governing indenture) or LIBOR.
|--- |  | -----------------------------------------------------------------------------------------

|(3) |  | Represents the stated interest rate and annual charge of our SBA-guaranteed debentures.
|--- |  | ---------------------------------------------------------------------------------------

|(4) |  | These interim financings bore an interest rate of three month LIBOR + 0.93%, which was comprised of a weighted
average annual charge of 0.63% and a spread of 0.30%. These interim financings had a maturity date of March 29, 2017, upon which
they were pooled into the ten year SBA-guaranteed debentures.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts
such that its asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing (other than the SBA debentures
of Garrison SBIC, as permitted by exemptive relief the Company has been granted by the Securities and Exchange Commission (the
“SEC”)). As of March 31, 2017 and December 31, 2016, the Company’s asset coverage for borrowed amounts was 212.2%
and 215.5%, respectively.





24








Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



4. Financing  – (continued)



The
table below shows the weighted average interest rates and the weighted average effective interest rates, inclusive of the effects
of deferred debt issuance costs, of our debt as of March 31, 2017 and December 31, 2016:





|                                               |  | March 31, 2017 |      | December 31,2016
|---------------------------------------------- |  | -------------- | ---- | ----------------
|Senior Secured Revolving Notes:                |  |                |      |                 
|Weighted average interest rate                 |  |                | 3.25 | %               
|Weighted average effective interest rate       |  |                | 3.36 |                 
|Senior Secured Term Notes:                     |  |                |      |                 
|Weighted average interest rate                 |  |                | 3.89 |                 
|Weighted average effective interest rate       |  |                | 4.13 |                 
|GLC Trust 2013-2 Class A Notes:                |  |                |      |                 
|Weighted average interest rate                 |  |                | 3.00 |                 
|Weighted average effective interest rate       |  |                | 3.35 |                 
|SBIC Borrowings:                               |  |                |      |                 
|Weighted average interest rate                 |  |                | 3.37 |                 
|Weighted average effective interest rate       |  |                | 3.77 |                 
|Total                                          |  |                |      |                 
|Total weighted average interest rate           |  |                | 3.79 |                 
|Total weighted average effective interest rate |  |                | 4.06 |                 





Refinancing of the 2013-2 Collateralized Loan Obligation



On
September 25, 2013, GF 2013-2 completed a $350.0 million collateralized loan obligation (the “2013-2 CLO”), the proceeds
of which were utilized, along with cash on hand, to refinance an existing credit facility. The notes offered in the 2013-2 CLO
(the “2013-2 Notes”) were issued by GF 2013-2 through a private placement and were comprised of $50.0 million of senior
secured revolving notes, $160.3 million of senior secured term notes and an aggregate of $139.7 million of subordinated notes
that were retained by GARS via the GF 2013-2 Manager.



On September 29, 2016, GF 2016-2 completed a $300.0 million collateralized loan obligation
(the “2016-2 CLO”), the proceeds of which were utilized, along with cash on hand, to refinance the 2013-2 CLO. The
notes offered in the 2016-2 CLO (the “2016-2 Notes”) were issued by GF 2016-2 through a private placement and were
comprised of: (i) $25.00 million of AAA(sf) Class A-1R Senior Secured Revolving Floating Rate Notes (“Class A-1R Notes”);
(ii) $88.15 million of AAA(sf) Class A-1T Senior Secured Floating Rate Notes (“Class A-1T Notes”); (iii)
$25.00 million of AAA(sf) Class A-1F Senior Secured Fixed Rate Notes (“Class A-1F Notes”); (iv) $20.70 million of AA(sf)
Class A-2 Senior Secured Floating Rate Notes (“Class A-2 Notes” and collectively with the Class A-1R Notes, the Class
A-1T Notes and the Class A-2F Notes, the “Class A Notes”); (v) $21.45 million of A(sf) Class B Secured Deferrable Floating
Rate Notes (“Class B Notes”); (vi) $11.70 million of BBB(sf) Class C Secured Deferrable Floating Rate Notes (“Class
C Notes” and collectively, the Class A Notes, Class B Notes and Class C Notes are referred to as the “Secured Notes”);
and (vii) $108.00 million of subordinated notes (“Subordinated Notes”), which do not have a stated interest rate, are
not rated and were retained by GARS. The 2016-2 Notes are scheduled to mature on September 29, 2027. The 2013-2 CLO and 2016-2
CLO are collectively referred to as “the CLOs”.



In connection with the closing of the sale of the 2016-2 Notes, substantially all of
the net cash proceeds, along with existing cash, were used to purchase a portion of the portfolio of loans held by GF 2013-2.
GF 2013-2 used the proceeds received in connection with such sale of loans to redeem in full all of the 2013-2 Notes. The refinance
of the 2013-2 CLO resulted in a $1.8 million loss for the year ended December 31, 2016 due to the third party expenses incurred
as part of the 2013-2 CLO which had initially been deferred and was being amortized over the stated life of the 2013-2 CLO. This
loss was included in the consolidated statements of operations within loss on refinancing of secured notes.







25










Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



4. Financing  – (continued)



As of both March 31, 2017 and December 31, 2016, the Class A-1R
Notes under the 2016-2 CLO were fully undrawn. The fair value of the notes issued by the CLOs approximated their carrying values
on the consolidated statements of financial condition as of March 31, 2017 and December 31, 2016.



The indenture governing the 2016-2 Notes provides that, to the extent
cash is available from cash collections, the holders of the 2016-2 Notes are to receive quarterly interest payments on the 20th
day or, if not a business day, the next succeeding business day of February, May, August and November of each year until the stated
maturity.



Under the documents governing the 2016-2 CLO, there are two coverage
tests applicable to the Secured Notes. The first test compares the amount of interest received on the collateral loans held by
GF 2016-2 to the amount of interest payable on the Secured Notes under the 2016-2 CLO in respect of the amounts drawn and certain
expenses. To meet this first test, at any time, the aggregate amount of interest received on the collateral loans must equal, after
the payment of certain fees and expenses, at least 135.0% of the aggregate amount of interest payable on the Class A Notes, 125.0%
of the interest payable on the Class A Notes and Class B Notes, taken together, and 115% of the interest payable on the Class A
Notes, Class B Notes and Class C Notes, taken together.



The second test compares the aggregate principal amount of the collateral
loans, as calculated in accordance with the indenture, to the aggregate outstanding principal amount of the Secured Notes in respect
of the amounts drawn. To meet this second test at any time, the aggregate principal amount of the collateral loans must equal at
least 173.4% of the aggregate outstanding principal amount of the Class A Notes, 156.1% of the aggregate principal amount of the
Class A Notes and Class B Notes, taken together, and 148.1% of the aggregate outstanding principal amount of the Class A Notes,
Class B Notes and Class C Notes, taken together.



If the coverage tests are not satisfied with respect to a quarterly
payment date, GF 2016-2 will be required to apply available amounts to the repayment of interest on and principal of the 2016-2
Notes to the extent necessary to satisfy the applicable coverage tests and, as a result, there may be reduced funds available for
GF 2016-2 to make additional investments or to make distributions on the Subordinated Notes held by the Company. Additionally,
compliance is measured on each day collateral loans are purchased, originated or sold and in connection with monthly reporting
to the note holders.



Furthermore, if under the second coverage test the aggregate principal
amount of the collateral loans equals 125.0% or less of the aggregate outstanding principal amount on the Class A-1T Notes and
Class A-1R Notes, taken together, and remains so for ten business days, an event of default will be deemed to have occurred. As
of March 31, 2017 and December 31, 2016, the trustee for the 2016-2 CLO and 2013-2 CLO, respectively, has asserted that all of
the coverage tests were met.



Garrison SBIC Borrowings



On May 29, 2014, Garrison SBIC, which has an investment objective
substantially similar to GARS, was formed in accordance with small business investment company (“SBIC”) regulations.
Garrison SBIC received a license from the U.S Small Business Administration (the “SBA”) on May 26, 2015. The
SBIC license allows Garrison SBIC to obtain SBA-guaranteed debentures in an amount equal to twice its equity capitalization up
to $150.0 million of leverage, subject to the issuance of a capital commitment by the SBA and other customary procedures. On June
16, 2015, the SBA issued Garrison SBIC a commitment to provide $35.0 million of leverage and on October 24, 2016 issued a second
commitment to provide an additional $35.0 million of leverage.





26










Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



4. Financing  – (continued)



The SBA issues SBA-guaranteed
debentures bi-annually on pooling dates in March and September of each year. These debentures are non-recourse, interest only debentures
with a 10 year stated maturity, but may be prepaid at any time without penalty. The interest rate of the debentures is fixed at
the time of issuance and is based on a coupon rate over the ten year treasury rate at the time of issuance. Interest on the debentures
is payable on a semi-annual basis. The SBA issues interim financings to SBICs on non-pooling dates that carry a lower interest
rate than the debentures and mature on the next pooling date.



The SBA, as a creditor, will
have a superior claim to Garrison SBIC’s assets over the Company’s stockholders if Garrison SBIC were to be liquidated,
or if the SBA exercises its remedies under the SBA-guaranteed debentures issued by Garrison SBIC upon an event of default.



As of March 31, 2017, Garrison
SBIC had regulatory capital of $36.1 million and total SBIC borrowings outstanding of $37.0 million. The SBIC borrowings were comprised
of $14.0 million, $12.7 million, $3.3 million, and $7.0 million of SBA guaranteed debentures that mature on September 1, 2025,
March 1, 2026, September 1, 2026 and March 1, 2027 respectively. The fair value of the SBIC borrowings approximated its carrying
value on the consolidated statements of financial condition as of March 31, 2017 and December 31, 2016. As of March 31, 2017, the
Company had $33.0 million of available SBIC leverage capacity.



GLC Trust 2013-2 Notes



On July 18, 2014, GARS completed a $39.2 million term debt securitization
and the notes offered thereby, (the “GLC Trust 2013-2 Notes”) collateralized by the GLC Trust 2013-2 consumer loan
portfolio. GLC Trust 2013-2 Notes consisted of $36.9 million of Class A Notes (“GLC
Trust 2013-2 Class A Notes”) and $2.3 million of Class B Notes (“GLC Trust 2013-2 Class B Notes”). As
of March 31, 2017, GARS has retained all of the GLC Trust 2013-2 Class B Notes, which are eliminated in consolidation.



The GLC Trust 2013-2 Class A
Notes bear interest at 3.00% per annum and are scheduled to mature on July 15, 2021. The proceeds of the GLC Trust 2013-2 Notes
were used to refinance the $10.0 million revolving credit facility with Capital One, N.A. which was fully paid down and terminated
concurrent with the issuance of the GLC Trust 2013-2 Notes.



The fair value of the GLC Trust
2013-2 Notes approximated the carrying value on the consolidated statements of financial condition as ofMarch 31, 2017
and December 31, 2016, respectively.



The indenture governing the GLC Trust 2013-2 Notes provides that,
to the extent cash is available from cash collections, the holders of the GLC Trust 2013-2 Notes are to receive monthly interest
and principal payments on the 15th day or, if not a business day, the next succeeding business day, commencing in August 2014,
until the stated maturity.



Under the indenture governing the GLC Trust 2013-2 Notes, there are
two applicable monthly tests. The first test compares the principal balance of the underlying loans to the principal balance of
the GLC Trust 2013-2 Notes. To meet this first test, the aggregate principal balance of the underlying loans less the aggregate
principal balance of the GLC Trust 2013-2 Notes must equal, at least, the greater of (1) 13.00% of the aggregate principal balance
of the underlying loans as of the end of the prior month and (2) 5.25% of the loan pool balance as of July 11, 2014.



The second test compares the ratio of the dollar amount of cumulative
defaults to the original principal balance of the underlying loans as of July 11, 2014 (“Cumulative Default Ratio”)
to the Cumulative Default Ratio trigger level, as stated in the indenture. To meet this second test, the Cumulative Default Ratio
must not exceed the Cumulative Default Ratio trigger level.



If these tests are not satisfied with respect to a monthly payment
date and are not cured within 45 days, an event of default will be deemed to have occurred and the GLC Trust 2013-2 Notes will
become immediately due and payable, in accordance with the terms of the indenture. As of both March 31, 2017 and December 31, 2016,
all of the coverage tests were met.



27










Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



4. Financing  – (continued)



Deferred Debt Issuance Costs and other Fees



In
connection with the issuance of our various debt instruments, GARS incurred aggregate fees in the amount of $6.2 million which
consisted of facility fees, rating agency fees, legal fees and other costs. Costs incurred in connection with the issuance of
the Company’s debt instruments, are included as a reduction to the carrying amount of the related liability on the consolidated
statements of financial condition and will be amortized over the stated maturity of the respective loans, with $4.2 million and
$4.3 million of deferred debt issuance costs remaining as of March 31, 2017 and December 31, 2016, respectively.



In the ordinary course of operations, GARS incurs fees and costs as part of the execution and refinancing
of our various debt instruments. These costs typically represent facility fees, rating agency fees and other legal costs incurred
in connection to our CLOs and consist of a 1.00% fee on commitments received, as well as, a 2.00% leverage fee, a 0.375% underwriting
fee and a 0.05% administrative fee on our SBA Borrowings. Deferred debt issuance costs are included on the consolidated statements
of financial condition as a reduction to the carrying amount of the related liability with the exception of those costs associated
with our revolving credit facilities, which are included within other assets on our consolidated statement of financial condition.
The deferred debt issuance costs will be amortized over the stated maturity of the debt liability to which they relate. As of
March 31, 2017, $4.2 million of deferred debt issuance costs remained on our consolidated statement of financial position and
was comprised of $2.6 million of costs related to our CLOs, $1.5 million of costs related to our SBA Borrowings and $0.1 million
of costs related to the GLC Trust 2013-2 Notes. As of December 31, 2016, $4.3 million of deferred debt issuance costs remained
on our consolidated statement of financial position and was comprised of $2.7 million of costs related to our CLOs, $1.5 million
of costs related to our SBA Borrowings and $0.1 million of costs related to the GLC Trust 2013-2 Notes.



5. Related Party Transactions and Other Agreements



Investment Advisory Agreement



The Investment Adviser is responsible for sourcing potential investments,
conducting research and diligence on prospective investments and equity sponsors, analyzing investment opportunities, structuring
our investments and monitoring our investments and portfolio companies on an ongoing basis subject to the supervision of the Board.
The Investment Adviser was organized in November 2010 and is a registered investment adviser under the Investment Advisers Act
of 1940, as amended. The Investment Adviser is an affiliate of Garrison Investment Group LP (the “Investment Manager”),
which is also the investment manager of various stockholders of the Company.



GARS entered into an investment advisory agreement with the Investment
Adviser, which was most recently amended and restated on August 5, 2016 (the “Investment Advisory Agreement”). The
Investment Advisory Agreement entitles the Investment Adviser to a base management fee and an incentive fee, both of which are
described further below.



Effective as of October 1, 2016, the Investment Adviser, in consultation
with the Board, agreed to irrevocably waive any fees payable to the Investment Adviser under the Investment Advisory Agreement
with respect to a calendar quarter in excess of the sum of (i) 0.375% per quarter (1.50% annualized) of the gross assets of the
Company, excluding cash and cash equivalents but including assets purchased with borrowed funds, calculated based on the average
carrying value of the gross assets of the Company at the end of the two most recently completed calendar quarters, (ii) 20% of
pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end
of the immediately preceding calendar quarter, in excess of a “hurdle rate” of 1.75% per quarter (7.00% annualized)
and (iii) in the case of the final calendar quarter of each year, the capital gains incentive fee. This waiver will be in effect
until the earlier of (i) June 30, 2017 and (ii) approval by the stockholders of the Company of an amendment to the Investment Advisory
Agreement to decrease the base management fee to an annual rate of 1.50% and to decrease the “hurdle rate” for the
income-based portion of the Incentive Fee to 1.75% per quarter (7.00% annualized).



Base Management Fee



Under the Investment Advisory Agreement, the Investment Adviser is
entitled to a base management fee for its services calculated at an annual rate of 1.75% of gross assets, excluding cash and cash
equivalents, and cash and cash equivalents, restricted, but including assets purchased with borrowed funds. For purposes of the
Investment Advisory Agreement, cash equivalents means U.S. government securities and commercial paper maturing within 270 days
of purchase.



The following table details our management fee expenses for the three
months ended March 31, 2017 and March 31, 2016:





|                                          |  | Three Months Ended March 31,
|----------------------------------------- |  | ----------------------------
|($ in thousands)                          |  | 2017                        
|Management fees                           |  |                             
|Gross management fees                     |  | $                           
|Management fees waived                    |  |                             
|Total management fees, net of waived fees |  | $                           











Management
fees of $1.4 million and $0.1 million were payable as of March 31, 2017 and December 31, 2016, respectively, and are included
in management fee payable on the Consolidated Statements of Financial Condition.





Incentive Fee Overview



Under the current Investment Advisory Agreement, the Investment Adviser
is entitled to an incentive fee consisting of two components and a cap and deferral mechanism. The two components are independent
of each other, and may result in one component being payable even if the other is not.



The first component, which is income-based and payable quarterly in
arrears, equals 20.00% of the amount, if any, that the Company’s pre-incentive fee net investment income exceeds a 2.00%
quarterly (8.00% annualized) hurdle rate (the “Hurdle Rate”), subject to a “catch-up” provision measured
at the end of each calendar quarter.



The operation of the first component of the incentive fee for each
quarter is as follows:



|• |  | no incentive fee is payable to the Investment Adviser in any calendar quarter in which the Company’s pre-incentive fee net investment income does not exceed the Hurdle Rate;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | 100.00% of the Company’s pre-incentive fee net investment income with respect to that portion of the Company’s pre-incentive fee net investment income, if any, that exceeds the Hurdle Rate but is less than 2.50% in any calendar quarter (10.00% annualized). We refer to this portion of the Company’s pre-incentive fee net investment income (which exceeds the Hurdle Rate but is less than 2.50%) as the “catch-up”. The effect of the “catch-up” provision is that, if the Company’s pre-incentive fee net investment income exceeds 2.50% in any calendar quarter, the Investment Adviser will receive 20.00% of such pre-incentive fee net investment income as if the Hurdle Rate did not apply; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | 20.00% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 2.50% in any calendar quarter (10.00% annualized) (once the Hurdle Rate is reached and the catch-up is achieved).
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





28












Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



5. Related Party Transactions and Other Agreements – (continued)



The portion of such incentive fee that is attributable to deferred
interest (such as PIK interest or original issue discount) will be paid to the Investment Adviser, together with any other interest
accrued on the loan from the date of deferral to the date of payment, only if and to the extent the Company actually receives such
interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any
write-off or similar treatment of the investment giving rise to any deferred interest accrual. Any reversal of such amounts would
reduce net income for the quarter by the net amount of the reversal (after taking into account the reversal of incentive fees payable)
and would result in a reduction and possible elimination of the incentive fees for such quarter. For the avoidance of doubt, no
incentive fee will be paid to the Investment Adviser on amounts accrued and not paid in respect of deferred interest.



The second component, which is capital gains-based, 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 equals 20% of the Company’s cumulative aggregate realized capital gains through the end of such year,
computed net of the Company’s aggregate cumulative realized capital losses and aggregate cumulative unrealized capital loss
through the end of such year, less the aggregate amount of any previously paid capital gains incentive fees and subject to the
Incentive Fee Cap and Deferral Mechanism described below. The capital-gains component of the incentive fee excludes any portion
of realized gains/(losses) that are associated with the reversal of any portion of unrealized gain/(loss) attributable to periods
prior to April 1, 2013. The capital gains component of the incentive fee is not subject to any minimum return to stockholders.



In addition, under U.S. GAAP, we are required to accrue a capital gains incentive fee based upon the aggregate
cumulative realized capital gains and losses and aggregate cumulative unrealized capital gain and loss on investments held
at the end of each period. If such amount is positive at the end of a period, then the Company will record a capital gains incentive
fee equal to 20.00% of such amount, less the aggregate amount of actual capital gains related incentive fees paid in all prior
years. If such amount is negative, then there is no accrual for such period. There were no accrued capital gains incentive fees
as of March 31, 2017 or December 31, 2016.



The Investment Advisory Agreement does not permit unrealized capital
gains for purposes of calculating the amount payable to the Investment Adviser. Amounts due related to unrealized capital gains,
if any, will not be paid to the Investment Adviser until realized under the terms of the Investment Advisory Agreement (as described
above).



Incentive Fee Cap and Deferral Mechanism



We have structured the calculation of these incentive fees to include
a fee limitation such that no incentive fee will be paid to our Investment Adviser for any fiscal quarter if, after such payment,
the cumulative incentive fees paid to our Investment Adviser for the period that includes such fiscal quarter and the 11 full preceding
fiscal quarters (the “Incentive Fee Look-back Period”) would exceed 20.00% of our Cumulative Pre-Incentive Fee Net
Return during the applicable Incentive Fee Look-back Period. The “Cumulative Pre-Incentive Fee Net Return” is defined
as the sum of (1) pre-incentive fee net investment income, (2) cumulative realized capital gains/(losses), and (3) cumulative unrealized
capital gains/(losses) for the Incentive Fee Look-back Period. The Incentive Fee Look-back Period commenced on April 1, 2013. Prior
to April 1, 2016, the Incentive Fee Look-back Period consisted of fewer than 12 full fiscal quarters.



The following table provides a breakdown of our incentive fees for
the three months ended March 31, 2017 and March 31, 2016:





|                                                      |  | Three Months Ended March 31,
|----------------------------------------------------- |  | ----------------------------
|($ in thousands)                                      |  | 2017                        
|Incentive fees                                        |  |                             
|Income-based incentive fees                           |  | $                           
|Capital gains-based incentive fees                    |  |                             
|Incentive fees subject to cap & deferral mechanism(1) |  |                             
|Total incentive fees                                  |  | $                           



__________

| | (1) | As of March 31, 2017, the Investment Adviser had calculated an aggregate
        of $15.3 million of income-based incentive fees, since April 1, 2014, of which $10.6 million had been paid as of March 31, 2017.
        However, the Cumulative Pre-Incentive Fee Net Return has been decreased by the aggregate cumulative net realized and unrealized
        capital losses, as calculated under U.S. GAAP, experienced through the Incentive Fee Look-back Period. As a result, as of March
        31, 2017, aggregate incentive fees payable to the Investment Adviser during the Incentive Fee Look-back Period were capped by the
        Incentive Fee Cap and Deferral Mechanism at $3.1 million (i.e., 20% of Cumulative Pre-Incentive Fee Net Return, during the Incentive
        Fee Look-back Period).
        
        Due to the fact that there is no clawback of amounts previously
        paid to the Investment Adviser in accordance with the Investment Advisory Agreement, the Company has not recorded a receivable
        for the $7.5 million difference between amounts paid under the Investment Advisory Agreement in prior quarters and the Incentive
        Fee Cap based on the Company’s Cumulative Pre-Incentive Fee Net Return as of March 31, 2017.
        
        The $7.5 million difference may be used to reduce future amounts
        earned by the Investment Adviser. However, as noted above, no incentive fee will be paid to the Investment Adviser for any fiscal
        quarter if, after such payment, the cumulative incentive fees paid to our Investment Adviser for the Incentive Fee Look-back Period
        would exceed 20% of our Cumulative Pre-Incentive Fee Net Return during the applicable Incentive Fee Look-back Period. To the extent
        unrealized capital losses incurred as of March 31, 2017 are reversed within the applicable Incentive Fee Look-back Period, the
        corresponding increase in our Cumulative Pre-Incentive Fee Net Return may result in the Investment Adviser earning and being paid
        up to $5.0 million of income based incentive fees which are currently subject to the Incentive Fee Cap.
        
        As of March 31, 2017, the Incentive Fee Look-back Period is in effect
        through March 31, 2020 and realized and unrealized capital gains and losses and pre-incentive net investment income earned through
        March 31, 2017 will cease to impact the Incentive Fee Cap and Deferral after this date.
        
        The Investment Adviser earned aggregate incentive fees of $0.2 million and $1.2 million for the three months
ended March 31, 2017 and March 31, 2016, respectively. However, no incentive fees were payable on the Consolidated Statements of
Financial Condition as of March 31, 2017 and December 31, 2016 due to the Incentive Fee Cap.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





29






Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



5. Related Party Transactions and Other Agreements
– (continued)



Administration Agreement



GARS entered into an administration agreement, which was effective as of October 9, 2012 (the “Administration
Agreement”), with GARS Administrator. Under the Administration Agreement, the GARS Administrator provides the Company with
office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities and such other services as the
GARS Administrator, subject to review by the Board, from time to time determines to be necessary or useful to perform its obligations
under the Administration Agreement. The GARS Administrator is responsible for the financial and other records that the Company
is required to maintain and prepares reports to stockholders, and reports and other materials filed with the SEC. The GARS Administrator
provides on the Company’s behalf significant managerial assistance to those portfolio companies to which the Company is required
to provide such assistance. No managerial assistance was provided to any portfolio companies for the three months ended March 31,
2017 and March 31, 2016.



In addition, the GARS Administrator assists the Company in determining
and publishing the Company’s net asset value, overseeing the preparation and filing of the Company’s tax returns, and
the printing and dissemination of reports to stockholders of the Company, and generally oversees the payment of the Company’s
expenses and the performance of administrative and professional services rendered to the Company by others. The Company reimburses
the GARS Administrator for the costs and expenses incurred by the GARS Administrator in performing its obligations and providing
personnel and facilities as described.



GLC Trust 2013-2 entered into the GLC Trust 2013-2 Administration Agreement with GARS Administrator, fees
incurred under this agreement are included in total administrator expenses presented on the Consolidated Statement of Operations.





Administrator charges were $0.2 million and $0.3 million for the three
months ended March 31, 2017 and March 31, 2016, respectively. No charges were waived by the GARS Administrator for the three months
ended March 31, 2017 and March 31, 2016. No administration fees were payable to the GARS Administrator as of March 31, 2017 or
December 31, 2016.





Directors’ Fees



The Company’s independent directors each receive an annual fee
of $75,000. They also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending
each in-person Board meeting and receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection
with attending each committee meeting.



In addition, the chairman of the audit committee receives an annual
fee of $10,000, the chairman of the valuation committee receives an annual fee of $10,000 and each chairman of any other committee
receives an annual fee of $5,000 for their additional services in these capacities (all such fees and reimbursements collectively,
“Directors’ Fees”). No compensation is paid to directors who are not independent of the Company and the Investment
Adviser.



For the three months ended March 31, 2017, and March 31, 2016, independent
directors earned Directors’ Fees of $0.1 million and $0.1 million, respectively.  No Directors’ Fees were payable
as of March 31, 2017 and December 31, 2016.



Affiliated Stockholders



As of March 31, 2017, Garrison Capital Fairchild I Ltd., Garrison
Capital Fairchild II Ltd. and Garrison Capital Adviser Holdings MM LLC owned an aggregate of 789,910, or 4.9%, of the total outstanding
shares of GARS common stock. As of March 31, 2017, the officers and directors of the Company owned an aggregate of 146,599, or
0.9%, of the total outstanding shares of GARS common stock. As of December 31, 2016, the officers and directors of the Company
owned an aggregate of 140,471, or 0.9%, of the total outstanding shares of GARS common stock.



Other Agreements



Garrison Loan Agency Services LLC acts as the administrative and collateral
agent for certain loans held by the Company. No fees were paid by the Company to Garrison Loan Agency Services LLC during the three
months ended March 31, 2017 and March 31, 2016.



The Company may invest alongside other clients of the Investment Manager
and their affiliates in certain circumstances where doing so is consistent with applicable law, SEC staff interpretations and the
terms of our exemptive relief.



For certain other expenses, the GARS Administrator facilitates payments
by GARS to third parties through the Investment Adviser or other affiliate. Other than the amount of expenses paid to third parties
and fees payable under the Investment Advisory Agreement, no additional charges or fees are assessed by the GARS Administrator,
the Investment Adviser or other affiliates.





GARS entered into a custody agreement with Deutsche Bank Trust Company Americas to act as custodian for GARS.
The Custodian is also the trustee of the CLOs and the custodian for Garrison SBIC.





GLC Trust 2013-2 has entered into an agreement with GARS Administrator
to act as securities administrator. In addition, GLC Trust 2013-2 has entered into agreements with Prosper Funding LLC, U.S. Bank
National Association and Wilmington Trust, National Association and Manufacturers and Traders Trust Company to act as servicer,
indenture trustee and custodian, respectively.





30








Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



6. Financial Highlights



The following table represents financial highlights for the Company
for the three months ended March 31, 2017 and March 31, 2016:





|Per share data ($ in thousands, except
    share and per share amounts) |  | March 31, 2017 |            | March 31, 2016
|----------------------------------------------------------------------- |  | -------------- | ---------- | --------------
|Net asset value per common share at beginning of period                 |  | $              | 12.42      |               
|Increase in net assets from operations:                                 |  |                |            |               
|Net investment income                                                   |  |                | 0.26       |               
|Net realized gain/(loss) on investments                                 |  |                | 0.01       |               
|Net unrealized loss on investments                                      |  |                | (0.51      | )             
|Net decrease in net assets from operations                              |  |                | (0.24      | )             
|Stockholder transactions                                                |  |                |            |               
|Repurchase of common stock                                              |  |                | -          |               
|Distributions from net investment income                                |  |                | (0.28      | )             
|Total stockholder transactions                                          |  |                | (0.28      | )             
|Net asset value per common share at end of period                       |  | $              | 11.90      |               
|                                                                        |  |                |            |               
|Per share market value at beginning of period                           |  | $              | 9.35       |               
|Per share market value at end of period                                 |  |                | 9.78       |               
|Total book return (1)                                                   |  |                | (1.93      | )%            
|Total market return (2)                                                 |  |                | 7.60       | %             
|Common shares outstanding at beginning of period                        |  |                | 16,049,352 |               
|Common shares outstanding at end of period                              |  |                | 16,049,352 |               
|Weighted average common shares outstanding                              |  |                | 16,049,352 |               
|Net assets at beginning of period                                       |  | $              | 199,408    |               
|Net assets at end of period                                             |  | $              | 190,925    |               
|Average net assets (3)                                                  |  | $              | 197,286    |               
|Ratio of net expenses to average net assets (4)                         |  |                | 9.74       | %             
|Ratio of net investment income to average net assets (4)                |  |                | 8.49       | %             
|Ratio of portfolio turnover to average investments at fair value (5)    |  |                | 7.66       | %             
|Asset coverage ratio (6)                                                |  |                | 212.24     | %             
|Average outstanding debt (7)                                            |  | $              | 204,119    |               
|Average debt per common share                                           |  | $              | 12.72      |               



_________

|(1) |  | Total book return equals the net increase of ending net asset value from operations plus the effect of repurchases of common stock over the net asset value per common share at the beginning of the period.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Based upon the change in market price per share during the period and takes into account distributions, if any, reinvested in accordance with our dividend reinvestment plan.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Calculated utilizing monthly net assets.
|--- |  | ----------------------------------------

|(4) |  | During the three months ended March 31, 2017, $0.2 million of income-based incentive fees were capped
as a result of the Incentive Fee Cap and Deferral Mechanism and $0.2 million of management fees were
irrevocably waived. Had these management and incentive fees been earned, the ratio of net investment income, to average net assets
and the ratio of net expenses to average net assets would have been 7.97% and 10.27%, respectively.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Calculated based on monthly average investments at fair value.
|--- |  | --------------------------------------------------------------

|(6) |  | In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing. Based on the exemptive relief received from the SEC, our SBIC Borrowings are excluded from the Company’s asset coverage test calculation.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Calculated based on monthly average debt outstanding.
|--- |  | -----------------------------------------------------





31












Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



7. Earnings per Share



The following table sets forth the computation of the net decrease in net assets per share resulting from
operations, pursuant to FASB ASC 260, Earnings per Share, for the three months ended March 31, 2017 and March 31, 2016:





|                                                     |  | Three Months Ended |            | Three Months Ended
|---------------------------------------------------- |  | ------------------ | ---------- | ------------------
|($ in thousands, except per share data)              |  | March 31, 2017     |            | March 31, 2016    
|Net decrease in net assets resulting from operations |  | $                  | (3,988     | )                 
|Basic weighted average shares outstanding            |  |                    | 16,049,352 |                   
|Basic loss per share/unit                            |  | $                  | (0.24      | )                 





8. Stockholders’ Equity



Distributions



The Company’s dividends and distributions are recorded on the
ex-dividend date. The following table reflects the cash distributions, including dividends and returns of capital per share, declared
on common stock for the three months ended March 31, 2017 and March 31, 2016:





|Record Dates ($
    in thousands except per share data) |  | Board Approval Date |  | Payment Date   |  | Distribution 
Declared |       | Distribution Declared 
per Share
|------------------------------------------------------- |  | ------------------- |  | -------------- |  | ---------------------- | ----- | --------------------------------
|Three Months Ended March 31, 2017(1)                    |  |                     |  |                |  |                        |       |                                 
|March 23, 2017                                          |  | February 28, 2017   |  | March 30, 2017 |  | $                      | 4,495 |                                 
|                                                        |  |                     |  |                |  | $                      | 4,495 |                                 



__________

|(1) |  | Does not include any return of capital for tax purposes.
|--- |  | --------------------------------------------------------





|Record Dates ($
    in thousands except per share data) |  | Board Approval Date |  | Payment Date   |  | Distribution 
Declared |       | Distribution Declared 
per Share
|------------------------------------------------------- |  | ------------------- |  | -------------- |  | ---------------------- | ----- | --------------------------------
|Three Months Ended March 31, 2016(1)                    |  |                     |  |                |  |                        |       |                                 
|March 8, 2016                                           |  | February 24, 2016   |  | March 28, 2016 |  | $                      | 5,685 |                                 
|                                                        |  |                     |  |                |  | $                      | 5,685 |                                 



__________

|(1) |  | Does not include any return of capital for tax purposes.
|--- |  | --------------------------------------------------------



Dividends from net investment income and distributions from net realized
capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined
in accordance with U.S. GAAP.



Dividend Reinvestment Plan



The Company adopted a dividend reinvestment plan that provides for
reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash
as provided below. As a result, if the Board declares a cash dividend or other distribution, then our stockholders who have not
‘opted out’ of our dividend reinvestment plan will have their cash distribution automatically reinvested in additional
shares of our common stock, which may be newly issued shares or shares acquired by American Stock Transfer & Trust Company,
LLC (“AST”), the transfer and dividend paying agent and registrar to GARS, through open-market purchases, rather than
receiving the cash distribution. As of March 31, 2017 and December 31, 2016, no new shares were issued pursuant to the dividend
reinvestment plan.



No action is required on the part of a registered stockholder to have
its cash dividend or other distribution reinvested in shares of our common stock. A registered stockholder may elect to receive
an entire distribution in cash by notifying AST in writing so that such notice is received by AST no later than the record date
for distributions to stockholders.



Those stockholders whose shares are held by a broker or other financial
intermediary may receive dividends and other distributions in cash by notifying their broker or other financial intermediary of
their election.



Stock Repurchase Program



On October 5, 2015, GARS adopted a share repurchase plan that provides
for repurchase of up to $10.0 million of its common stock at prices below GARS' net asset value per share as reported in its most
recent financial statements. Under the repurchase program, GARS may, but is not obligated to, repurchase shares of its outstanding
common stock in the open market or in privately negotiated transactions from time to time. Any repurchases by GARS will comply
with the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and any applicable requirements of
the 1940 Act. The repurchase program terminated in accordance with its terms on October 5, 2016. GARS' net asset value per share
was increased by approximately $0.10 as a result of the aggregate share repurchases.





|                                             |  | Three Months Ended |   | Year Ended       
|-------------------------------------------- |  | ------------------ | - | -----------------
|($ in thousands, except per share data)      |  | March 31, 2017     |   | December 31, 2016
|Dollar amount repurchased                    |  |                    | - |                  
|Shares repurchased                           |  |                    | - |                  
|Average price per share                      |  |                    | - |                  
|Weighted average discount to net asset value |  |                    | - |                  







32








Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements (unaudited)



March 31, 2017



9. Commitments and Contingencies



The Company had outstanding commitments to fund investments totaling
$3.9 million and $4.8 million under various undrawn revolvers and other credit facilities as of March 31, 2017 and December 31,
2016, respectively.



In the ordinary course of business, the Company may be named as a
defendant or a plaintiff in various lawsuits and other legal proceedings. Such proceedings include actions brought against the
Company and others with respect to transactions to which the Company may have been a party. The outcomes of such lawsuits are uncertain
and, based on these lawsuits, the values of the investments to which they relate could decrease. Management does not believe that
as a result of litigation there would be any material impact on the consolidated financial condition of the Company. The Company
has had no outstanding litigation proceedings brought against it since the commencement of operations on December 17, 2010.



In the normal course of business, the Company enters into certain
contracts that provide a variety of indemnifications. The Company’s maximum exposure under these indemnifications is unknown.
However, no liabilities have arisen under these indemnifications in the past and, while there can be no assurances in this regard,
there is no expectation that any will occur in the future. Therefore, the Company does not consider it necessary to record a liability
for any indemnifications under U.S. GAAP.



10. Transactions with Non-control/Affiliate Investments



As required by the 1940 Act, investments are classified by level
of control. “Control Investments” are investments in those companies that the Company is deemed to control as defined
in the 1940 Act. “Affiliate Investments” are investments in those companies that are affiliated companies, as defined
in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those that are neither
Control Investments nor Affiliate Investments.



Generally, under the 1940 Act, the Company is deemed to control a
company in which it has invested if it owns more than 25% of the voting securities of such company. The Company is deemed to be
an affiliate of a company in which it has invested if it owns 5% or more of the voting securities of such company.





|                                        |  | Three Months Ended March 31, 2017
|--------------------------------------- |  | ---------------------------------
|                                        |  | Fair value at                    
|Portfolio Company                       |  | December 31, 2016                
|Non-control affiliate investments       |  |                                  
|Speed Commerce Operating Company LLC(1) |  | $                                
|Speed Commerce Investment Partners LLC  |  |                                  
|Total non-control affiliate investments |  | $                                



__________

|(1) |  | Comprised of two investments, including the Closing Date Term Loan and Delayed Draw Term Loan.
|--- |  | ----------------------------------------------------------------------------------------------



11. Subsequent Events



On May 2, 2017 the Board approved a distribution in the amount of
$4.5 million, or $0.28 a share, which will be paid on June 23, 2017 to stockholders of record as of June 9, 2017.



On
May 3, 2017, the Company entered into the fourth amended and restated investment advisory agreement (the “Fourth Amended
and Restated Investment Advisory Agreement”) with the Investment Adviser following approval of the agreement by the Company’s
stockholders at the annual meeting of stockholders. The Fourth Amended and Restated Investment Advisory Agreement, which is effective
beginning as of May 3, 2017, (i) reduced the base management fee from an annual rate of 1.75% to an annual rate of 1.50% of the
Company’s gross assets, excluding cash and cash equivalents but including assets purchased with borrowed funds, payable
quarterly in arrears and (ii) reduced the hurdle rate for the income component of the incentive fee from 2.00% per quarter (8.00%
annualized) to 1.75% per quarter (7.00% annualized).



These consolidated financial statements were approved by the Board
and were available for issuance on May 9, 2017. Subsequent events have been evaluated through this date. No material subsequent
events other than as disclosed above have occurred through this date.





33












Item 2: Management’s Discussion and Analysis of Financial Condition and Results
of Operations



The information contained in this section should be read in conjunction with our consolidated financial statements
and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. References to the “Company,” "we,"
"us," "our,” “GARS” and "Garrison Capital" refer to Garrison Capital Inc. and its consolidated
subsidiaries.



Forward-Looking Statements



Some of the statements in this quarterly report on Form 10-Q constitute forward-looking
statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained
in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:



|• |  | our future operating results;
|- |  | -----------------------------



|• |  | changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | our business prospects and the prospects of our current and prospective portfolio companies;
|- |  | --------------------------------------------------------------------------------------------



|• |  | the impact of investments that we expect to make;
|- |  | -------------------------------------------------



|• |  | the impact of increased competition;
|- |  | ------------------------------------



|• |  | our contractual arrangements and relationships with third parties;
|- |  | ------------------------------------------------------------------



|• |  | the dependence of our future success on the general economy, including general economic trends, and its impact on the industries in which we invest;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | the ability of our prospective portfolio companies to achieve their objectives;
|- |  | -------------------------------------------------------------------------------



|• |  | the relative and absolute performance of Garrison Capital Advisers LLC, or the Investment Adviser, including in identifying suitable investments for us;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | our expected financings and investments;
|- |  | ----------------------------------------



|• |  | the adequacy of our cash resources and working capital;
|- |  | -------------------------------------------------------



|• |  | our ability to make distributions to our stockholders;                    
|- |  | --------------------------------------------------------------------------
|  |  |                                                                           
|• |  | the effects of applicable legislation and regulations and changes thereto;



|• |  | the timing of cash flows, if any, from the operations of our prospective portfolio companies; and
|- |  | -------------------------------------------------------------------------------------------------



|• |  | the impact of future acquisitions and divestitures.
|- |  | ---------------------------------------------------



We use words such as “anticipate,” “believe,” “expect,”
“intend,” “may,” “might,” “will,” “should,” “could,” “can,”
“would,” “believe,” “estimate,” “anticipate,” “predict,” “potential”
and similar words to identify forward-looking statements. Our actual results could differ materially from those projected in the
forward-looking statements for any reason, including the factors set forth as “Risk Factors” and elsewhere in this
Quarterly Report on Form 10-Q.



We have based the forward-looking statements included in this Quarterly Report on Form
10-Q on information available to us on the date of this report, and we assume no obligation to update any such forward-looking
statements. Actual results could differ materially from those anticipated in our forward-looking statements and future results
could differ materially from historical performance. Although we undertake no obligation to revise or update any forward-looking
statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures
that we may make directly to you or through reports that we in the future may file with the Securities and Exchange Commission,
or the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.



You should understand that, under Section 27A(b)(2)(B) of the Securities Act of 1933,
as amended, and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with this Quarterly
Report on Form 10-Q or any periodic reports we file under the Exchange Act.





34












Overview



We are an externally managed, non-diversified, closed-end management investment company
that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended, or the 1940
Act. In addition, for tax purposes, we have elected to be treated as a regulated investment company, or RIC, under Subchapter M
of the Internal Revenue Code of 1986, as amended, or the Code, and intend to qualify annually for such treatment. Our shares are
currently listed on The NASDAQ Global Select Market under the symbol “GARS”.



Our investment objective is to generate current income and capital appreciation through
direct loans and debt investments in U.S. based middle-market companies. Our loans and debt investments are primarily first and
second lien senior secured loans (including "unitranche" loans, which are loans that combine the characteristics of
both senior and subordinated debt, generally in a first lien position). We also may, to a lesser extent, invest in subordinated
and mezzanine debt, unsecured consumer loans and equity investments. Our goal is to generate attractive risk-adjusted returns
by assembling a broad portfolio of investments.



Our investment activities are managed by our Investment Adviser. The six member investment
committee of our Investment Adviser is comprised of Joseph Tansey, Brian Chase, Mitch Drucker, Susan George, Robert Chimenti and
Joshua Brandt. Our Investment Adviser is responsible for sourcing potential investments, conducting research and diligence on
prospective investments and equity sponsors, analyzing investment opportunities, structuring our investments and monitoring our
investments and portfolio companies on an ongoing basis. Under an investment advisory agreement with the Investment Adviser, or
the Investment Advisory Agreement, we pay a base management fee and an incentive fee to our Investment Adviser for its services.
Garrison Capital Administrator LLC, or the Administrator, provides certain administrative services and facilities necessary for
us to operate, including office facilities and equipment and clerical, bookkeeping and record-keeping services, pursuant to an
administration agreement, or the Administration Agreement. The Administrator oversees our financial reporting and prepares our
reports to stockholders and reports required to be filed with the SEC.



The Administrator also manages the determination and publication of our net asset value,
the preparation and filing of our tax returns and generally monitors the payment of our expenses and the performance of administrative
and professional services rendered to us by others. The Administrator may retain third parties to assist in providing administrative
services to us. To the extent that the Administrator outsources any of its functions, we pay the fees associated with such functions
on a direct basis without any profit to the Administrator.







As of March 31, 2017, we held investments in 62 portfolio companies with a fair value
of $358.7 million, including investments in 47 portfolio companies held through the 2016-2 CLO. The investments held by the 2016-2
CLO as of March 31, 2017 consisted of senior secured loans fair valued at $260.8 million and related indebtedness of $167.0 million.
The loans held by the 2016-2 CLO (held at fair value), together with cash and other assets held by the CLO, equaled approximately
$274.3 million as of March 31, 2017. As of March 31, 2017, our portfolio had an average investment size of approximately $5.7 million,
a weighted average yield on debt investments of 10.8% and a weighted average contractual maturity of 36 months. Weighted average
yield is calculated based on the fair value of the investments and interest expected to be received using the current rate of interest
at the balance sheet date to maturity, excluding the effects of future scheduled principal amortizations.





As of December 31, 2016, we held investments in 58 portfolio companies with a fair value
of $376.7 million, including investments in 41 portfolio companies held through the 2016-2 CLO. The investments held by the 2016-2
CLO as of December 31, 2016 consisted of senior secured loans fair valued at $260.2 million and related indebtedness of $164.3
million. As of that date, the loans held by the 2016-2 CLO (held at fair value), together with cash and other assets held by the
2016-2 CLO, equaled approximately $275.6 million. As of December 31, 2016, our portfolio had an average investment size of approximately
$6.2 million, a weighted average yield on debt investments of 10.9% and a weighted average contractual maturity of 37 months.



Revenues



We generate revenue in the form of interest earned on the debt investments that we hold and capital gains
and distributions, if any, on the equity interests or warrants that we may acquire in portfolio companies. Our debt investments,
whether in the form of senior secured, unitranche or mezzanine loans, typically have a term of one to six years and bear interest
at a fixed or floating rate. Interest is generally payable quarterly or semiannually, and in some cases, loans may have a payment-in-kind
feature. The principal amount of the debt securities and any accrued but unpaid interest will generally become due at the maturity
date. In addition, we may generate revenue in the form of loan origination, prepayment, facility, commitment, forbearance and amendment
fees. We also may receive structuring or diligence fees, consulting fees and possibly fees for providing managerial assistance.
Origination fees received by us are initially deferred and reduced from the cost basis of the investment and subsequently accreted
into interest income over the remaining stated term of the loan.





35






Upon the prepayment of a loan or debt security, any unamortized loan origination fees
are recorded as interest income. We record prepayment premiums on loans and debt securities as interest income when we receive
such amounts. Facility fees, sometimes referred to as asset management fees, are accrued as a percentage periodic fee on the base
amount (either the funded facility amount or the committed principal amount). Commitment fees are based upon the undrawn portion
committed by us and are accrued over the life of the loan.



Amendment and forbearance fees are paid in connection with loan amendments and waivers
and are recognized upon completion of the amendments or waivers, generally when such fees are receivable. Any such fees are recorded
and classified as other income and included in investment income on the consolidated statements of operations. As these fees are
paid and recognized in connection with specific loan amendments or forbearance, they are typically non-recurring in nature.



Expenses



Our primary operating expenses include the payment of (1) the base management fee and
incentive fee to the Investment Adviser under the Investment Advisory Agreement; (2) the allocable portion of overhead to the Administrator
under the Administration Agreement; (3) the interest expense on our outstanding debt, if any; and (4) our other operating costs,
as detailed below. We bear all other costs and expenses of our operations and transactions, including:



|• |  | our organization;
|- |  | -----------------



|• |  | calculating our net asset value and net asset value per share (including the cost and expenses of any independent valuation firms);
|- |  | -----------------------------------------------------------------------------------------------------------------------------------



|• |  | fees and expenses, including travel expenses, incurred by the Investment Adviser or payable to third parties in performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | offerings of our common stock and other securities;
|- |  | ---------------------------------------------------



|• |  | distributions on our shares;
|- |  | ----------------------------



|• |  | transfer agent and custody fees and expenses;
|- |  | ---------------------------------------------



|• |  | amounts payable to third parties relating to, or associated with, evaluating, making and disposing of investments;
|- |  | ------------------------------------------------------------------------------------------------------------------



|• |  | brokerage fees and commissions;
|- |  | -------------------------------



|• |  | registration fees;
|- |  | ------------------



|• |  | listing fees;
|- |  | -------------



|• |  | taxes;
|- |  | ------



|• |  | independent director fees and expenses;
|- |  | ---------------------------------------



|• |  | costs associated with our reporting and compliance obligations under the 1940 Act and applicable U.S. federal and state securities laws;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------



|• |  | the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;
|- |  | ----------------------------------------------------------------------------------------------------------



|• |  | costs of holding stockholder meetings;
|- |  | --------------------------------------



|• |  | our fidelity bond;
|- |  | ------------------



|• |  | directors and officers/errors and omissions liability insurance and any other insurance premiums;
|- |  | -------------------------------------------------------------------------------------------------



|• |  | litigation, indemnification and other non-recurring or extraordinary expenses;
|- |  | ------------------------------------------------------------------------------



|• |  | direct costs and expenses of administration and operation, including audit and legal costs;
|- |  | -------------------------------------------------------------------------------------------



|• |  | fees and expenses associated with marketing efforts;
|- |  | ----------------------------------------------------



|• |  | dues, fees and charges of any trade association of which we are a member; and
|- |  | -----------------------------------------------------------------------------



|• |  | all other expenses reasonably incurred by us or the Administrator in connection with administering our business, including rent and our allocable portion of the costs and expenses of our chief compliance officer, chief financial officer and their respective staffs.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Recent Developments



On May 2, 2017 the board of directors (the “Board”) approved a distribution
in the amount of $4.5 million, or $0.28 a share, which will be paid on June 23, 2017 to stockholders of record as of June 9,
2017.



On May 3, 2017, the Company entered into the fourth amended and restated investment
advisory agreement, or the Fourth Amended and Restated Investment Advisory Agreement, with the Investment Adviser following approval
of the agreement by our stockholders at the annual meeting of stockholders. The Fourth Amended and Restated Investment Advisory
Agreement, which is effective beginning as of May 3, 2017, (i) reduced the base management fee from an annual rate of 1.75% to
an annual rate of 1.50% of our gross assets, excluding cash and cash equivalents but including assets purchased with borrowed
funds, payable quarterly in arrears and (ii) reduced the hurdle rate for the income component of the incentive fee from 2.00%
per quarter (8.00% annualized) to 1.75% per quarter (7.00% annualized).



36












Consolidated Results of Operations



The results of operations described below may not be indicative of the results we report
in future periods. Net income can vary substantially from period to period for various reasons, including the recognition of realized
gains and losses and unrealized gains and losses. As a result, quarterly comparisons of net income may not be meaningful.



Consolidated operating results for the three months ended March 31, 2017 and March 31,
2016 are as follows:





|                                                        |  | Three Months Ended |             | Three Months Ended |  | Three Months
|------------------------------------------------------- |  | ------------------ | ----------- | ------------------ |  | ------------
|($ in thousands, except per share data)                 |  | March 31, 2017     |             | March 31, 2016     |  | Variance    
|                                                        |  |                    | (Unaudited) |                    |  |             
|Net investment income                                   |  | $                  | 4,187       |                    |  | $           
|Total investment income                                 |  |                    | 8,994       |                    |  |             
|Total expenses                                          |  |                    | 4,807       |                    |  |             
|Net realized gain/(loss) on investments                 |  |                    | 204         |                    |  |             
|Net change in unrealized loss on investments            |  |                    | (8,379      | )                  |  |             
|Net decrease in net assets resulting from operations    |  |                    | (3,988      | )                  |  |             
|                                                        |  |                    |             |                    |  |             
|Net investment income per share                         |  |                    | 0.26        |                    |  |             
|Net realized/unrealized loss from investments per share |  |                    | (0.50       | )                  |  |             
|Net loss per share                                      |  |                    | (0.24       | )                  |  |             
|Net asset value per share                               |  |                    | 11.90       |                    |  |             







Net Investment Income



Net investment income for the three months ended March 31, 2017 and March 31, 2016 was
$4.2 million and $5.9 million, respectively. Net investment income decreased by $1.7 million for the three months ended March 31,
2017 from the three months ended March 31, 2016, as described below under “Investment Income” and “Expenses.”



Investment Income





Investment income for the three months ended March 31, 2017 and March 31, 2016 was $9.0
million and $11.1 million, respectively. Investment income decreased by $2.1 million for the three months ended March 31, 2017
from the three months ended March 31, 2016 due to a decrease in interest income in the amount of $2.3 million offset by an increase
in other income of $0.2 million. The decrease in interest income was largely driven by our non-performing assets and lower investment
balances during the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. The increase in other
income was primarily driven by prepayment fees recognized during the three months ended March 31, 2017.









37














Expenses





Total expenses for the three months ended March 31, 2017 and
March 31, 2016 were $4.8 million and $5.2 million, respectively.



The following table summarizes our expenses for
the three months ended March 31, 2017 and March 31, 2016:





|                                |  | Three Months Ended |       | Three Months Ended |  | Three Months
|------------------------------- |  | ------------------ | ----- | ------------------ |  | ------------
|($ in thousands)                |  | March 31, 2017     |       | March 31, 2016     |  | Variance    
|Interest Expense                |  | $                  | 2,110 |                    |  | $           
|Management fee (net of waivers) |  |                    | 1,381 |                    |  |             
|Incentive fees                  |  |                    | -     |                    |  |             
|Professional fees               |  |                    | 319   |                    |  |             
|Directors' fees                 |  |                    | 82    |                    |  |             
|Administrator expenses          |  |                    | 224   |                    |  |             
|Other expenses                  |  |                    | 691   |                    |  |             
|Total expenses                  |  | $                  | 4,807 |                    |  | $           









Interest expense increased $0.1 million for the three months ended March 31, 2017 from
the three months ended March 31, 2016, primarily due to an increase in the average effective interest rate on debt outstanding.
As of March 31, 2017 and March 31, 2016, the weighted average effective interest rate for total debt outstanding was 4.06% and
3.40%, respectively.







Management fees decreased by $0.5 million for the three months ended March 31, 2017 from the three months ended March
31, 2016, primarily due to a reduction in total assets and the irrevocable waiver of certain fees during the three months ended
March 31, 2017. Refer to Note 5 of our consolidated financial statements for additional disclosures regarding fee waivers currently
in effect.



Professional fees decreased by $0.1 million for the three months ended March 31, 2017
from the three months ended March 31, 2016 primarily driven by lower legal fees.





Other expenses increased by $0.1 million for the three months ended March 31, 2017,
from the three months ended March 31, 2016 primarily due to an increase in deal costs related to the Forest Park Medical Center
at San Antonio investment.



Net Realized (Loss)/Gain and Unrealized (Loss)/Gain on Investments



We realized a net gain on investments of $0.2 million and a net loss on investments
of $0.1 million for the three months ended March 31, 2017 and March 31, 2016, respectively.



The net realized gain on investments for the three months ended March 31, 2017 was primarily
driven by $0.4 million of gains from the partial and full repayments of portfolio investments. This was offset by $0.2 million
of realized losses from charge-offs in the GLC Trust 2013-2’s consumer loan portfolio.



Net realized losses for the three months ended March 31, 2016 were primarily driven by
a $0.4 million realized loss in the GLC Trust 2013-2’s consumer loan portfolio. This was offset by $0.3 million of realized
gains from repayments and sales of portfolio investments.



For the three months ended March 31, 2017 and March 31, 2016, the net change in unrealized
loss on investments was $8.4 and $8.5 million, respectively.



The net change in unrealized loss for the three months ended March 31, 2017 was driven
primarily by $9.0 million of negative credit related adjustments on Walnut Hill Physicians Hospital, Speed Commerce Operating
Company, Forest Park Medical Center at San Antonio and Badlands Production Company investments in the amounts of $3.4 million,
$3.3 million, $1.2 million and $1.1 million, respectively. This was offset by an aggregate $0.6 million of positive fair value
adjustments across various portfolio investments.



The net change in unrealized loss for the three months ended March 31, 2016 was driven primarily by $6.7 million of
negative credit related adjustment of four portfolio investments, $1.7 million of negative market-related adjustments on seven
portfolio investments, and a $0.2 million decrease in the market value of one energy investment. This was offset by a $0.1 million
reversal of prior period unrealized losses due to the partial repayment of five portfolio investments.





38










Net Increase/(Decrease) in Net Assets from Operations





We had a net asset value per common share outstanding on March
31, 2017 of $11.90. We had a net asset value per common share outstanding on December 31, 2016 of $12.42.







Based on basic weighted average shares outstanding of 16,049,352, the net decrease in
net assets from operations per share for the three months ended March 31, 2017 was $0.24. This decrease was primarily driven by
net change in unrealized losses from investments during the quarter.





Based on basic weighted average shares outstanding of 16,319,453, the net decrease in
net assets from operations per share for the three months ended March 31, 2016 was $0.17.



Liquidity and Capital Resources



As a business development company, we distribute substantially all of our net income
to our stockholders and will have an ongoing need to raise additional capital for investment purposes. We generate cash primarily
from offerings of our equity securities and the issuance of debt securities including the 2016-2 Notes, as described below, Garrison
SBIC Debentures and any repayments of portfolio investments. In addition, our cash flows from operations, including interest earned
from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one
year or less also provide liquidity.



As of March 31, 2017 and December 31, 2016, we had cash of $19.6 million and $10.4 million,
respectively. Also, as of March 31, 2017 and December 31, 2016, we had restricted cash of $14.6 million and $12.6 million, respectively.



In addition to proceeds from public and private offerings of our debt and equity securities,
we have identified eight portfolio companies with a total par value of $23.2 million and a fair value of $22.9 million which we
view as transitory investments. Transitory investments are generally those investments that we view as an additional source of
liquidity that we are able to sell in order to fund investments that fit our core investment strategy. These transitory investments
are generally at the lower end of our target portfolio yield range.



Our primary use of funds from operations includes investments in portfolio companies,
cash distributions to holders of our common stock, payments of interest on our debt, and payments of fees and other operating expenses
we incur. We believe that our existing cash and cash equivalents, available borrowings and our transitory portfolio as of March
31, 2017 will be sufficient to fund our anticipated funding requirements through at least March 31, 2018.



On February 28, 2017 the Board approved a distribution in the amount of $4.5 million,
or $0.28 a share, which was paid on March 30, 2017 to stockholders of record as of March 23, 2017.



During the three months ended March 31, 2017, cash increased by $9.2 million as a result
of net cash provided by operating activities of $15.7 million, offset by net cash used in financing activities in the amount of
$6.4 million.



During the three months ended March 31, 2017, cash provided by operating activities
resulted mainly from net investment income in the amount of $4.2 million and the net repayments of investments in the amount of
$10.5 million. Net cash used in financing activities resulted from cash distributions in the amount of $4.5 million and repayment
of the GLC Trust 2013-2 Class A notes in the amount of $2.0 million.



During the three months ended March 31, 2016, cash decreased by $1.4 million as a result
of net cash used by operating activities of $2.2 million offset by net cash provided by financing activities in the amount of $0.8
million.



During the three months ended March 31, 2016, cash provided by operating activities resulted
mainly from net investment income in the amount of $5.9 million, repayments and sales of investments in the amount of $11.6 million
and $25.0 million, respectively, offset by unrealized losses in the amount of $8.5 million, purchases of investments of $34.9 million,
net due from counterparties of $9.2 million, and realized losses from investments in the amount of $0.1 million. Net cash used
in financing activities resulted from cash distributions in the amount of $5.7 million, repurchases of common stock in the amount
of $3.1 million, repayment of the GLC Trust 2013-2 Class A notes in the amount of $3.1 million and debt issuance costs of $0.2
million, offset by proceeds from the senior secured revolving notes in the amount of $5.5 million, and proceeds from the Garrison
SBIC borrowings in the amount of $7.4 million.







As of March 31, 2017 and December 31, 2016, we
had $3.9 million and $4.8 million, respectively, of unfunded commitments with a negative fair value of $0.1 million and $0.1 million,
respectively. These amounts may or may not be funded to the borrowing party now or in the future. The unfunded commitments relate
to loans with various maturity dates, but the entire amount was eligible for funding to the borrowers as of March 31, 2017 and
December 31, 2016, respectively, subject to the terms of each loan’s respective credit agreement.



Subject to leverage and borrowing base restrictions, as of both March 31, 2017 and December 31, 2016, we had approximately
$20.8 million available for additional borrowings under our senior secured revolving notes of the 2016-2 CLO, $33.0 million of
available small business investment company, or SBIC, leverage and no available borrowings under the GLC Trust 2013-2 Revolver.





39




Portfolio Composition and Select Portfolio Information





As of March 31, 2017, we held investments in 62 portfolio companies with a fair value
of $358.7 million. As of March 31, 2017, our portfolio had an average investment size of approximately $5.7 million, a weighted
average yield on debt investments of 10.8% and a weighted average contractual maturity of 36 months.





The following table shows select information of our portfolio for the periods from March
31, 2017 to March 31, 2016.





|Portfolio characteristics ($ in millions, % based on fair market value)* |  | March 31,
    2017 |       | December 31,
    2016 |  | September 30,
    2016 |       | June 30,
    2016 |  | March 31,
    2016
|------------------------------------------------------------------------ |  | ------------------ | ----- | --------------------- |  | ---------------------- | ----- | ----------------- |  | ------------------
|Total fair market value                                                  |  | $                  | 358.7 |                       |  | $                      | 376.7 |                   |  | $                 
|Number of portfolio companies                                            |  |                    | 61    |                       |  |                        | 57    |                   |  |                   
|Average investment size (1)                                              |  | $                  | 5.7   |                       |  | $                      | 6.2   |                   |  | $                 
|Weighted average yield (2)                                               |  |                    | 10.8  | %                     |  |                        | 10.9  | %                 |  |                   
|Weighted average price (1)                                               |  |                    | 92.9  |                       |  |                        | 95.0  |                   |  |                   
|First lien                                                               |  |                    | 97.1  | %                     |  |                        | 96.6  | %                 |  |                   
|Second lien & mezzanine/subordinated                                     |  |                    | -     | %                     |  |                        | -     | %                 |  |                   
|Consumer loans                                                           |  |                    | 1.3   | %                     |  |                        | 1.8   | %                 |  |                   
|Equity & other                                                           |  |                    | 1.6   | %                     |  |                        | 1.6   | %                 |  |                   
|Core(3)                                                                  |  |                    | 93.5  | %                     |  |                        | 97.3  | %                 |  |                   
|Transitory                                                               |  |                    | 6.5   | %                     |  |                        | 2.7   | %                 |  |                   
|Originated (4)                                                           |  |                    | 52.6  | %                     |  |                        | 53.0  | %                 |  |                   
|Club (5)                                                                 |  |                    | 18.8  | %                     |  |                        | 27.0  | %                 |  |                   
|Purchased                                                                |  |                    | 28.6  | %                     |  |                        | 20.0  | %                 |  |                   
|Floating (1)                                                             |  |                    | 98.9  | %                     |  |                        | 96.8  | %                 |  |                   
|Fixed (1)                                                                |  |                    | 1.1   | %                     |  |                        | 3.2   | %                 |  |                   
|Performing (1)                                                           |  |                    | 97.1  | %                     |  |                        | 97.5  | %                 |  |                   
|Non-accrual (1)                                                          |  |                    | 2.9   | %                     |  |                        | 2.5   | %                 |  |                   
|Weighted average debt/EBITDA (1) (2) (6)                                 |  |                    | 3.7   | x                     |  |                        | 3.6   | x                 |  |                   
|Weighted average risk rating (1)                                         |  |                    | 2.60  |                       |  |                        | 2.49  |                   |  |                   











__________

|(1) |  | Excludes consumer loans and equity investments.
|--- |  | -----------------------------------------------

|(2) |  | Excludes investments with a risk rating of 4, unfunded revolvers and equity investments.
|--- |  | ----------------------------------------------------------------------------------------

|(3) |  | The period ended March 31, 2016 includes the transfer of one portfolio company, total par of $4.8 million, to core from transitory, based on the current yield.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Originated positions include investments where we have sourced and led the execution of the deal.
|--- |  | -------------------------------------------------------------------------------------------------

|(5) |  | Club positions include investments where we provided direct lending to a borrower with one or two other lenders but did not lead the deal.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Excludes non-operating portfolio companies, which we define as those loans collateralized by proved developed
producing value, or PDP, real estate or other hard assets. PDPs are proven revenues that can be produced with existing wells. As
of March 31, 2017, non-operating portfolio companies with an aggregate $47.7 million of par value and $28.5 million of fair value
were excluded.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





* Table excludes positions with a fair market value of zero.



Inflation



Inflation has not had a significant effect on our results of operations in any of the
reporting periods presented in our financial statements. However, from time to time, inflation may impact the operating results
of our portfolio companies.



Off-Balance Sheet Arrangements



We may become a party to financial instruments with off-balance sheet risk in the normal
course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend
credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance
sheet. As of March 31, 2017 and December 31, 2016, we had $3.9 million and $4.8 million of outstanding commitments to fund such
investments, respectively. As of March 31, 2017 and December 31, 2016, we had $34.2 million and $22.9 million of cash and restricted
cash, respectively.



40












Ongoing Monitoring



We view active portfolio monitoring as a vital part of the investment process. Our Investment
Adviser monitors the financial trends of each portfolio company to determine if it is meeting its respective business plan and
to assess the appropriate course of action for each company.



Our Investment Adviser uses 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 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 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.
| | - | -------------------------------------------------------------------------------------------------------



Our Investment Adviser assigns an internal rating for each of our portfolio companies.
The rating scale is a numeric scale of 1 to 4 based on the credit attributes and prospects of the portfolio company’s business.
In general, we use the ratings as follows:



| | • | a rating of 1 denotes a high quality investment with no loss of principal expected;
| | - | -----------------------------------------------------------------------------------



| | • | a rating of 2 denotes a moderate to high quality investment with no loss of principal expected;
| | - | -----------------------------------------------------------------------------------------------



| | • | a rating of 3 denotes a moderate quality investment with market rates of expected loss of principal and potential non-compliance with financial covenants; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | a rating of 4 denotes a low quality investment with an expected loss of principal. In the case of risk grade 4 loans, our Investment Adviser will assign a recovery value to the loan.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table shows the distribution of our investments on the 1 to 4 investment
risk scale at fair value, excluding our interest in GLC Trust 2013-2 and equity investments as of March 31, 2017 and December 31,
2016:





|                 |  | As of March 31, 2017       |         | As of December 31, 2016         
|---------------- |  | -------------------------- | ------- | --------------------------------
|($ in thousands) |  | Investments at  Fair Value |         | Percentage of 
Total Investments
|Risk Rating 1    |  | $                          | 25,317  |                                 
|Risk Rating 2    |  |                            | 143,589 |                                 
|Risk Rating 3    |  |                            | 164,556 |                                 
|Risk Rating 4    |  |                            | 14,782  |                                 
|                 |  | $                          | 348,244 |                                 







The weighted average risk rating of the portfolio was 2.60 and
2.49 as of March 31, 2017 and December 31, 2016, respectively.





41








Contractual Obligations



A summary of our significant contractual payment obligations as of March 31, 2017 is
as follows:









|                              |  | Payments Due by Period
|----------------------------- |  | ----------------------
|($ in thousands)              |  |                       
|2016-2 CLO Facility           |  | $                     
|GLC Trust 2013-2 Class A Note |  |                       
|SBIC Borrowings               |  |                       
|Total contractual obligations |  | $                     





We have certain contracts under which we have material future commitments. Under the
Investment Advisory Agreement, the Investment Adviser provides us with investment advisory and management services. We have agreed
to pay for these services (1) a base management fee equal to a percentage of the average adjusted value of our gross assets and
(2) an incentive fee based on our performance.



We entered into the Administration Agreement on October 9, 2012 with the Administrator.
Under the Administration Agreement, the Administrator furnishes us with office facilities and equipment, provides us clerical,
bookkeeping and record keeping services and provides us with other administrative services necessary to conduct our day-to-day
operations.



If any of the contractual obligations discussed above are terminated, our costs under
any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating
alternative parties to provide the services we expect to receive under our Investment Advisory Agreement and our Administration
Agreement. Any new investment advisory agreement would also be subject to approval by our stockholders.



Both the Investment Advisory Agreement and the Administration Agreement may be terminated
by either party without penalty upon no fewer than 60 days’ written notice to the other.



Related Party Transactions



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



| | • | We entered into the Investment Advisory Agreement with the Investment Adviser, under which our Investment
Adviser is responsible for sourcing potential investments, conducting research and diligence on prospective investments and equity
sponsors, analyzing investment opportunities, structuring our investments and monitoring our investments and portfolio companies
on an ongoing basis.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | The Administrator provides us with the office facilities and administrative services necessary to conduct
day-to-day operations pursuant to our Administration Agreement.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | We have entered into the License Agreement with Garrison Investment Group pursuant to which Garrison Investment Group has agreed to grant us a non-exclusive, royalty-free license to use the name “Garrison.”                                         
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                        
| | • | GLC Trust 2013-2 entered into the GLC Trust 2013-2 Administration Agreement with the GARS
    Administrator, fees incurred under this agreement are included in total administrator expenses presented on the consolidated
    statement of operations.



| | • | Under the Staffing Agreement, Garrison Investment Group provides the Investment Adviser with the resources necessary
to fulfill these obligations. The Staffing Agreement provides that Garrison Investment Group will make available to the Investment
Adviser experienced investment professionals and access to the senior investment personnel of Garrison Investment Group for purposes
of evaluating, negotiating, structuring, closing and monitoring our investments. The Staffing Agreement also includes a commitment
that the members of the Investment Adviser’s investment committee serve in such capacity. The Staffing Agreement remains
in effect until terminated and may be terminated by either party without penalty upon 60 days’ written notice to the other
party. Services under the Staffing Agreement are provided to the Investment Adviser on a direct cost reimbursement basis, and such
fees are not our obligation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | In connection with the 2016-2 CLO, we retained the Investment Adviser to furnish collateral management sub-management services to us pursuant to a sub-collateral management agreement. The Investment Adviser does not receive a fee for providing such services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | • | Effective as of October 1, 2016, the Investment Adviser, in consultation with our Board agreed to irrevocably
waive any fees payable to the Investment Adviser under the Investment Advisory Agreement with respect to a calendar quarter in
excess of the sum of (i) 0.375% per quarter (1.50% annualized) of our gross assets, excluding cash and cash equivalents but including
assets purchased with borrowed funds, calculated based on the average carrying value of our gross assets at the end of the two
most recently completed calendar quarters, (ii) 20% of 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, in excess of a “hurdle rate”
of 1.75% per quarter (7.00% annualized) and (iii) in the case of the final calendar quarter of each year, the capital gains incentive
fee.  This waiver was in effect until May 3, 2017.



We have adopted a joint code of ethics that governs the conduct of our and our Investment Adviser’s
officers, directors and employees. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and
the Delaware General Corporation Law.





42








Critical Accounting Policies



The preparation of our financial statements in accordance with U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the
economic environment, financial markets and any other parameters used in determining such estimates could cause actual results
to differ. We have identified the following as critical accounting policies.



Basis for Consolidation



The consolidated financial statements include the accounts of GARS and its wholly owned
subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The accounts of the subsidiaries are
prepared for the same reporting period as GARS using consistent accounting policies. Under the investment company rules and regulations
pursuant to the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, codified
in ASC Topic 946, the Company is precluded from consolidating any entity other than another investment company. Accordingly, the
Company consolidated the results of the Company’s wholly-owned subsidiaries GLC Trust 2013-2 (“GLC Trust 2013-2”),
Garrison Funding 2013-2 Ltd. (“GF 2013-2”), Garrison Capital SBIC LP (“Garrison SBIC”), Garrison Funding
2016-2 Ltd. (“GF 2016-2”), Walnut Hill II LLC, and Forest Park II LLC and limited liability companies for the purpose
of holding minority equity investments (the “GARS Equity Holdings Entities”) in its consolidated financial statements.



In the normal course of business GARS may form new GARS Equity Holdings Entities for
the purpose of holding minority equity investment in order to provide specific tax treatment for individual investments.



The Company generally consolidates any investment company when it owns 100% of its partners’
or members’ capital or equity units or 100% of the economic equity interest. ASC Topic 946 provides for the consolidation
of a controlled operating company that provides substantially all of its services to the investment company or its consolidated
subsidiaries.



Fair Value Measurements



The Company values its investments in accordance with FASB ASC Topic
820, Fair Value Measurements and Disclosures (formerly FASB Statement No. 157, “ASC 820”). ASC 820 defines fair
value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value.
ASC Topic 820’s definition of fair value focuses on exit price in the principal, or most advantageous, market and prioritizes
the use of market-based inputs over entity-specific inputs within a measurement of fair value.



ASC Topic 820 classifies the inputs used to measure these fair values
into the following hierarchy:



| | • | Level 1 — quoted unadjusted prices in active markets for identical investments as of the reporting date.
| | - | --------------------------------------------------------------------------------------------------------



| | • | Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc.).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Level 3 — significant unobservable inputs (including the reporting
        entity’s own assumptions about the assumptions market participants would use in determining the fair values of investments
        or indicative bid prices from unaffiliated market makers or independent third party pricing services).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Fair value of publicly traded instruments
is generally based on quoted market prices. Fair value of non-publicly traded instruments, and of publicly traded instruments for
which quoted market prices are not readily available, may be determined based on other relevant factors, including bid quotations
from unaffiliated market makers or independent third-party pricing services, the price activity of comparable instruments and valuation
pricing models.



For those investments valued using quotations,
the bid price is generally used, unless the Company determines that it is not representative of an exit price. To the extent observable
market data is available, such information may be the result of indicative bid quotations obtained from independent third party
pricing services (“consensus pricing”) or broker quotes. Due to the fact that the significant inputs used by the contributors
of the consensus pricing source or the broker are unobservable and evidence with respect to trading levels is not available, any
investments valued using indicative bid prices from unaffiliated market makers and independent third-party pricing services have
been classified within Level 3.



Investments classified as Level 3 may be fair valued using the
income and market approaches, using a market yield valuation methodology or enterprise value methodology.



Valuation of Investments



The Company’s portfolio consists of primarily debt investments and unsecured consumer loans. The fair
value of the Company’s investments is initially determined by investment professionals of the Investment Adviser and ultimately
determined by the Board on a quarterly basis. In valuing the Company’s debt investments, the Investment Adviser generally
uses various approaches, including proprietary models that consider the analyses of independent valuation agents as well as credit
risk, liquidity, market credit spreads, other applicable factors for similar transactions, and bid quotations obtained from other
financial institutions that trade in similar investments or based on bid prices provided by independent third party pricing services.



The types of factors that the Board may take into account when reviewing
the fair value initially derived by the Investment Adviser and determining the fair value of the Company’s debt investments
generally include, as appropriate, comparison to publicly traded securities, including such factors as yield, maturity and measures
of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio
company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company
does business and other relevant factors.



In valuing the Company’s unsecured consumer loans, the Investment
Adviser generally uses a discounted cash flow methodology based upon a set of assumptions. The primary assumptions used to value
the unsecured consumer loans include prepayment and default rates derived from historical performance, actual performance as compared
to historical projections and discount rate.





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The types of factors that the Board may take into account when reviewing the fair value
initially derived by the Investment Adviser and determining the fair value of the our consumer loan investments generally include,
as appropriate, prepayment and default rates derived from historical performance, actual performance as compared to historical
projections and discount rates.



Our Board has retained several independent valuation firms to review the valuation of
each portfolio investment that does not have a readily available market quotation at least once during each 12-month period. To
the extent a security is reviewed in a particular quarter, it is reviewed and valued by only one service provider. However, our
Board does not intend to have de minimis investments of less than 0.5% of our total assets (up to an aggregate of 10% of our total
assets) independently reviewed. Our Board is ultimately and solely responsible for determining the fair value of our assets using
a documented valuation policy and consistently applied valuation process.



Due to the nature of our strategy, our portfolio includes relatively illiquid investments
that are privately held. Inputs into the determination of fair value of our portfolio investments require significant management
judgment or estimation. This means that our portfolio valuations are based on unobservable inputs and our own assumptions about
how market participants would price the asset or liability in question. Valuations of privately held investments are inherently
uncertain and they may fluctuate over short periods of time and may be based on estimates. The determination of fair value by our
Board may differ materially from the values that would have been used if a ready market for these investments existed. Our net
asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher
or lower than the values that we ultimately realized upon the disposal of such investments.



The valuation process is conducted at the end of each fiscal quarter, with a portion
of our valuations of portfolio companies without market quotations subject to review by the independent valuation firms each quarter.
When an external event with respect to one of our portfolio companies, such as a purchase transaction, public offering or subsequent
equity sale, occurs, we expect to use the pricing indicated by the external event to corroborate our valuation.



With respect to investments for which market quotations are not readily available, our
Board will undertake a multi-step valuation process each quarter, as described below:



| | • | Our quarterly valuation process begins with each portfolio company or investment being initially valued by investment professionals of our Investment Adviser responsible for credit monitoring.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Preliminary valuation conclusions are then documented and discussed with our senior management and our Investment Adviser.
| | - | --------------------------------------------------------------------------------------------------------------------------



| | • | The valuation committee of the Board reviews these preliminary valuations.
| | - | --------------------------------------------------------------------------



| | • | At least once annually, the valuation for each portfolio investment that does not have a readily available quotation is reviewed by an independent valuation firm, subject to the de minimis exception above.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | The Board discusses valuations and determines the fair value of each investment in our portfolio in good faith.
| | - | ---------------------------------------------------------------------------------------------------------------



Net assets could be materially affected if the determinations regarding the fair value
of the investments were materially higher or lower than the values that are ultimately realized upon the disposal of such investments.



Investment Transactions and Related Investment Income and Expense



We record our investment transactions on a trade date basis, which is the date when we
have determined that all material terms have been defined for the transactions. These transactions could possibly settle on a subsequent
date depending on the transaction type. Due to and due from counterparties include amounts related to unsettled purchase and sale
transactions of investments, and principal paydowns receivable from the borrowers. All related revenue and expenses attributable
to these transactions are reflected on the consolidated statements of operations commencing on the trade date unless otherwise
specified by the transaction documents. Realized gains and losses on investment transactions are recorded using the specific identification
method.





44








We accrue interest income if we expect that ultimately we will be able to collect it.
Generally, when an interest default occurs on a loan in our portfolio, or if our management otherwise believes that the issuer
of the loan will not be able to service the loan and other obligations, we will place the loan on non-accrual status and will cease
recognizing interest income on that loan until all principal and interest is current through payment or until a restructuring occurs,
such that the interest income is deemed to be collectible. However, we remain contractually entitled to this interest. We may make
exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. Accrued interest is
written off when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably
estimated. For consumer loans, any loan which is 120 days past due is considered defaulted and 100% of the principal is charged
off with no expected recovery or sale of defaulted receivables. We had four investments on non-accrual status as of March 31, 2017
and two investment on non-accrual status as of December 31, 2016.



Any original issue discounts, as well as any other purchase discounts or premiums on
debt investments, are accreted or amortized and included in interest income over the maturity periods of the investments.



Interest Expense



Interest expense is recorded on an accrual basis and is adjusted for amortization of
deferred debt issuance costs.



Loan Origination, Facility, Commitment and Amendment Fees



We may receive loan origination fees when making a new investment, as well as prepayment,
facility, commitment, forbearance, and amendment fees during the life of the investment.



Origination fees received by us are initially deferred and reduced from the cost basis
of the investment and subsequently accreted into interest income over the remaining stated term of the loan.



Upon the prepayment of a loan or debt security, any unamortized loan origination fees
are recorded as interest income. We record prepayment premiums on loans and debt securities as interest income when we receive
such amounts. Facility fees, sometimes referred to as asset management fees, are accrued as a percentage periodic fee on the base
amount (either the funded facility amount or the committed principal amount). Commitment fees are based upon the undrawn portion
committed by us and are accrued over the life of the loan.



Amendment and forbearance fees are paid in connection with loan amendments and waivers
and are recognized upon completion of the amendments or waivers, generally when such fees are receivable. Any such fees are recorded
and classified as other income and included in investment income on the consolidated statements of operations. As these fees are
paid and recognized in connection with specific loan amendments or forbearance, they are typically non-recurring in nature.



Distributions



Dividends and distributions to common stockholders are recorded on the ex-dividend date.
The amount to be paid out as a distribution is determined by our Board each quarter and is generally based upon the earnings estimated
by management. Net realized capital gains, if any, are distributed at least annually, although we may decide to retain such capital
gains for investment.





45












Item 3: Quantitative and Qualitative Disclosures About Market Risk



We are subject to financial market risks, including changes in interest rates. During
the period covered by our financial statements, the majority of the loans in our portfolio had floating interest rates, and we
expect that our loans in the future will also have floating interest rates. These loans usually have floating interest rates based
on the London Interbank Offer Rate, or LIBOR, and typically have interest rate re-set provisions that adjust applicable LIBOR under
such loans to current market rates on a regular basis. In addition, the 2016-2 CLO has a floating interest rate provision based
on a cost of funds that approximates LIBOR and we expect that any other credit facilities into which we enter in the future may
have floating interest rate provisions.



Assuming that the interim and unaudited consolidated statement of financial condition
as of March 31, 2017 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following
table shows the annualized impact of hypothetical base rate changes in interest rates.





|                                          |  | (Decrease)/increase |        | (Decrease)/increase |  | Net increase        
|----------------------------------------- |  | ------------------- | ------ | ------------------- |  | --------------------
|Change in interest rates ($ in thousands) |  | in interest income  |        | in interest expense |  | in investment income
|Down 25 basis points                      |  | $                   | (146   | )                   |  | $                   
|Up 50 basis points                        |  |                     | 2,021  |                     |  |                     
|Up 100 basis points                       |  |                     | 3,689  |                     |  |                     
|Up 200 basis points                       |  |                     | 7,042  |                     |  |                     
|Up 300 basis points                       |  |                     | 10,438 |                     |  |                     







Although management believes that this analysis is indicative of our existing sensitivity
to interest rate changes, it does not adjust for changes in the credit markets, the size, credit quality or composition of the
assets in our portfolio and other business developments, including indebtedness under the 2016-2 CLO, Garrison SBIC borrowings
or additional borrowings, that could affect our net increase in net assets resulting from operations, or net income. Accordingly,
we cannot assure you that actual results would not differ materially from the statement above.



We may in the future hedge against currency and interest rate fluctuations by using standard
hedging instruments such as futures, forward contracts, currency options and interest rate swaps, caps, collars and floors, including
with respect to the obligations of the 2016-2 CLO, to the extent permitted under the 1940 Act and applicable commodities laws.
While hedging activities may insulate us against adverse changes in currency exchange and 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. We and our Investment Adviser have not hedged any of the obligations of the 2016-2 CLO.



Item 4: Controls and Procedures



As of 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) under the Exchange Act). Based on our evaluation, our management, including the chief executive officer
and chief financial officer, concluded that our disclosure controls and procedures were effective in timely alerting management,
including the chief executive officer and chief financial officer, of material information about us required to be included in
our periodic SEC filings. However, in evaluating the disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, are based upon certain assumptions about the likelihood of future events
and 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. There has not been any change
in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the
period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.





46










Part II — Other Information



Item 1: Legal Proceedings



We, the Investment Adviser, the Administrator and our wholly-owned subsidiaries are not
currently subject to any material legal proceedings.



Item 1A: Risk Factors



In addition to the other information set forth in this report, you should carefully consider the “Risk
Factors” discussed in our Annual Report on Form 10-K filed with the SEC on March 7, 2017, which could materially affect our
business, financial condition and/or operating results. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.



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



None.



Item 3: Defaults Upon Senior Securities



None.



Item 4: Mine Safety Disclosures



Not applicable.



Item 5: Other Information



None.



Item 6: Exhibits



EXHIBIT INDEX





|Number |  | Description                                                                                                                                             
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1*  |  | Certifications by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|31.2*  |  | Certifications by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1*  |  | Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.      
|32.2*  |  | Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.      
|99.1*  |  | GLC Trust 2013-2 Consumer Loan Pool Schedule of Investments.                                                                                            









| | * | Filed herewith.
| | - | ---------------





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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





|                   | Garrison Capital Inc.                       
|------------------ | --------------------------------------------
|                   |                                             
|Dated: May 9, 2017 | By                                          
|                   |                                             
|                   | Joseph Tansey                               
|                   | Chief Executive Officer                     
|                   | (Principal Executive Officer)               
|                   |                                             
|                   |                                             
|Dated: May 9, 2017 | By                                          
|                   |                                             
|                   | Brian Chase                                 
|                   | Chief Financial Officer                     
|                   | (Principal Financial and Accounting Officer)











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