UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



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



For the Quarterly Period Ended September 30, 2015



OR



|o |  | 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 x No o



Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes o No o



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



|Large accelerated filer  o                                             |  | Accelerated filer  x        
|---------------------------------------------------------------------- |  | ----------------------------
|Non-accelerated filer  o (Do not check if a smaller reporting company) |  | Smaller reporting company  o



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



As of November 2, 2015 the Registrant had 16,758,779 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 September 30, 2015 (unaudited) and December 31, 2014                        | 1   
|                                                                                                                                 |     
|Consolidated Schedules of Investments as of September 30, 2015 (unaudited) and December 31, 2014                                 | 2   
|                                                                                                                                 |     
|Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2015 and September 30, 2014  | 15  
|                                                                                                                                 |     
|Consolidated Statements of Changes in Net Assets (unaudited) for the nine months ended September 30, 2015 and September 30, 2014 | 16  
|                                                                                                                                 |     
|Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2015 and September 30, 2014            | 17  
|                                                                                                                                 |     
|Notes to Consolidated Financial Statements (unaudited)                                                                           | 18  
|                                                                                                                                 |     
|Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations                                    | 48  
|                                                                                                                                 |     
|Item 3. Quantitative and Qualitative Information About Market Risk                                                               | 63  
|                                                                                                                                 |     
|Item 4. Controls and Procedures                                                                                                  | 63  
|                                                                                                                                 |     
|Part II. Other Information                                                                                                       |     
|                                                                                                                                 |     
|Item 1. Legal Proceedings                                                                                                        | 64  
|                                                                                                                                 |     
|Item 1A. Risk Factors                                                                                                            | 64  
|                                                                                                                                 |     
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                              | 64  
|                                                                                                                                 |     
|Item 3. Defaults Upon Senior Securities                                                                                          | 64  
|                                                                                                                                 |     
|Item 4. Mine Safety Disclosures                                                                                                  | 64  
|                                                                                                                                 |     
|Item 5. Other Information                                                                                                        | 64  
|                                                                                                                                 |     
|Item 6. Exhibits                                                                                                                 | 64  







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





|                                                                                                                                                                                               |  | September 30, 2015 |            | December 31, 2014
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | -----------------
|                                                                                                                                                                                               |  | (unaudited)        |            |                  
|Assets                                                                                                                                                                                         |  |                    |            |                  
|Cash                                                                                                                                                                                           |  | $                  | 30,602     |                  
|Restricted cash                                                                                                                                                                                |  |                    | 6,755      |                  
|Due from counterparties                                                                                                                                                                        |  |                    | 1,541      |                  
|Investments, at fair value                                                                                                                                                                     |  |                    |            |                  
|Non-control/Non-affiliate investments (amortized cost of $413,074 and $467,904, respectively)                                                                                                  |  |                    | 407,757    |                  
|Accrued interest receivable                                                                                                                                                                    |  |                    | 5,449      |                  
|Deferred debt issuance costs (net of
    accumulated amortization of $2,740 and $2,141, respectively)                                                                                          |  |                    | 4,509      |                  
|Deferred offering costs                                                                                                                                                                        |  |                    | 503        |                  
|Prepaid administrator fee                                                                                                                                                                      |  |                    | -          |                  
|Other assets                                                                                                                                                                                   |  |                    | 498        |                  
|Total assets                                                                                                                                                                                   |  | $                  | 457,614    |                  
|                                                                                                                                                                                               |  |                    |            |                  
|Liabilities                                                                                                                                                                                    |  |                    |            |                  
|Due to counterparties                                                                                                                                                                          |  | $                  | -          |                  
|Incentive fee payable                                                                                                                                                                          |  |                    | 494        |                  
|Management fee payable                                                                                                                                                                         |  |                    | 1,955      |                  
|Administrator fee payable                                                                                                                                                                      |  |                    | 544        |                  
|GLC Trust 2013-2 Class A note (Note 7)                                                                                                                                                         |  |                    | 19,065     |                  
|Senior secured revolving note (Note 7)                                                                                                                                                         |  |                    | 9,500      |                  
|Senior secured term notes (Note 7)                                                                                                                                                             |  |                    | 159,798    |                  
|SBIC Borrowings                                                                                                                                                                                |  |                    | 14,800     |                  
|Interest payable                                                                                                                                                                               |  |                    | 616        |                  
|Accrued expenses and other payables                                                                                                                                                            |  |                    | 729        |                  
|Total liabilities                                                                                                                                                                              |  | $                  | 207,501    |                  
|                                                                                                                                                                                               |  |                    |            |                  
|Commitments and contingencies (Note 12)                                                                                                                                                        |  |                    |            |                  
|                                                                                                                                                                                               |  |                    |            |                  
|Net assets                                                                                                                                                                                     |  |                    |            |                  
|Common stock, par value $0.001 per share, 100,000,000 shares authorized, 16,758,779 and 16,758,779 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively) |  | $                  | 17         |                  
|Paid-in-capital in excess of par                                                                                                                                                               |  |                    | 257,741    |                  
|Underdistributed net investment income                                                                                                                                                         |  |                    | 5,505      |                  
|Accumulated net realized (loss)/gain from investments                                                                                                                                          |  |                    | (7,833     | )                
|Net unrealized (loss) from investments                                                                                                                                                         |  |                    | (5,317     | )                
|Total net assets                                                                                                                                                                               |  |                    | 250,113    |                  
|Total liabilities and net assets                                                                                                                                                               |  | $                  | 457,614    |                  
|                                                                                                                                                                                               |  |                    |            |                  
|Shares of common stock outstanding                                                                                                                                                             |  |                    | 16,758,779 |                  
|Net asset value per share                                                                                                                                                                      |  | $                  | 14.92      |                  





See accompanying notes to consolidated financial
statements



1








Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



September 30, 2015 (unaudited)



(in thousands, except share amounts)









|Security Description                               |  | Shares |           | Cost |  | Fair Value |       | % of Net  Assets
|-------------------------------------------------- |  | ------ | --------- | ---- |  | ---------- | ----- | ----------------
|Non-Control/Non-Affiliate Investments              |  |        |           |      |  |            |       |                 
|Investments - United States                        |  |        |           |      |  |            |       |                 
|Common Equity                                      |  |        |           |      |  |            |       |                 
|Apparel Products                                   |  |        |           |      |  |            |       |                 
|Everyware Global, Inc., Common*                    |  |        | 242,035   |      |  | $          | 2,714 |                 
|Total Apparel Products                             |  |        |           |      |  |            | 2,714 |                 
|                                                   |  |        |           |      |  |            |       |                 
|Health Services                                    |  |        |           |      |  |            |       |                 
|Juniper TGX Investment Partners, LLC, Common       |  |        | 3,146     |      |  |            | 671   |                 
|Total Health Services                              |  |        |           |      |  |            | 671   |                 
|                                                   |  |        |           |      |  |            |       |                 
|Miscellaneous Manufacturing                        |  |        |           |      |  |            |       |                 
|Valterra Products Holdings, LLC, Common Class A    |  |        | 185,847   |      |  |            | 186   |                 
|Valterra Products Holdings, LLC, Common Class B    |  |        | 20,650    |      |  |            | 21    |                 
|Total Miscellaneous Manufacturing                  |  |        |           |      |  |            | 207   |                 
|                                                   |  |        |           |      |  |            |       |                 
|Miscellaneous Retail                               |  |        |           |      |  |            |       |                 
|Faraday Holdings, LLC, Common                      |  |        | 2,265     |      |  |            | 110   |                 
|Provo Craft Holdings, LLC, Common                  |  |        | 2,436,157 |      |  |            | -     |                 
|Total Miscellaneous Retail                         |  |        |           |      |  |            | 110   |                 
|                                                   |  |        |           |      |  |            |       |                 
|Transportation Services                            |  |        |           |      |  |            |       |                 
|EZE Trucking, LLC, Common                          |  |        | 2,898     |      |  |            | 268   |                 
|Total Transportation Services                      |  |        |           |      |  |            | 268   |                 
|                                                   |  |        |           |      |  |            |       |                 
|Total Common Equity                                |  |        |           |      |  | $          | 3,970 |                 
|                                                   |  |        |           |      |  |            |       |                 
|Preferred Equity                                   |  |        |           |      |  |            |       |                 
|Consumer Finance Services                          |  |        |           |      |  |            |       |                 
|Prosper Marketplace Series B Preferred Stock(1)(2) |  |        | 182,573   |      |  | $          | 551   |                 
|Total Consumer Finance Services                    |  |        |           |      |  |            | 551   |                 
|                                                   |  |        |           |      |  |            |       |                 
|Miscellaneous  Services                            |  |        |           |      |  |            |       |                 
|SC Academy Holdings, Inc., Preferred Equity        |  |        | 25,000    |      |  |            | 1,250 |                 
|Total Miscellaneous Services                       |  |        |           |      |  |            | 1,250 |                 
|                                                   |  |        |           |      |  |            |       |                 
|Total Preferred Equity                             |  |        |           |      |  | $          | 1,801 |                 















See accompanying notes to consolidated financial statements.



2










Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



September 30, 2015 (unaudited)



(in thousands)







|                                                           |  |     |        |      |  |            |        | % of Net
|---------------------------------------------------------- |  | --- | ------ | ---- |  | ---------- | ------ | --------
|Security Description                                       |  | Par |        | Cost |  | Fair Value |        | Assets  
|Non-Control/Non-Affiliate Investments (continued)          |  |     |        |      |  |            |        |         
|Investments - United States (continued)                    |  |     |        |      |  |            |        |         
|Debt Investments                                           |  |     |        |      |  |            |        |         
|Agricultural Services                                      |  |     |        |      |  |            |        |         
|BFN Operations LLC , Term Loan*                            |  |     |        |      |  |            |        |         
|Libor ("L") + 10.00%, 1.00% L Floor, 12/29/2017            |  |     | 10,500 |      |  | $          | 10,319 |         
|Total Agricultural Services                                |  |     |        |      |  |            | 10,319 |         
|                                                           |  |     |        |      |  |            |        |         
|Automotive                                                 |  |     |        |      |  |            |        |         
|CTC Casting Technologies, Inc. (Compass), Loan*(3)         |  |     |        |      |  |            |        |         
|L+ 7.00% Cash,1.5% PIK,  0.50% L Floor, 3/28/2019          |  |     | 9,780  |      |  |            | 9,711  |         
|Penda Corporation, Term Loan(3)                            |  |     |        |      |  |            |        |         
|14.00% Cash, 2.00% PIK, 1/26/2019                          |  |     | 7,474  |      |  |            | 7,387  |         
|Total Automotive                                           |  |     |        |      |  |            | 17,098 |         
|                                                           |  |     |        |      |  |            |        |         
|Broadcasting & Entertainment                               |  |     |        |      |  |            |        |         
|CF Entertainment Inc. (Entertainment Studios), Term Loan*  |  |     |        |      |  |            |        |         
|L+ 7.50%, 1.00% L Floor, 6/26/2019                         |  |     | 9,861  |      |  |            | 9,787  |         
|Total Broadcasting & Entertainment                         |  |     |        |      |  |            | 9,787  |         
|                                                           |  |     |        |      |  |            |        |         
|Building & Real Estate                                     |  |     |        |      |  |            |        |         
|ShelterLogic Corp., Term Loan*                             |  |     |        |      |  |            |        |         
|L+ 9.50%, 1.00% L Floor, 7/30/2019                         |  |     | 10,238 |      |  |            | 10,081 |         
|Total Building & Real Estate                               |  |     |        |      |  |            | 10,081 |         
|                                                           |  |     |        |      |  |            |        |         
|Business Services                                          |  |     |        |      |  |            |        |         
|Connexity, Inc., Term Loan*                                |  |     |        |      |  |            |        |         
|L+ 10.00%, 1.00% L Floor, 2/13/2020                        |  |     | 10,300 |      |  |            | 10,104 |         
|Total Business Services                                    |  |     |        |      |  |            | 10,104 |         
|                                                           |  |     |        |      |  |            |        |         
|Chemicals                                                  |  |     |        |      |  |            |        |         
|Aristech Surfaces LLC, Term Loan B*                        |  |     |        |      |  |            |        |         
|L+ 8.00%, 1.00% L Floor, 10/17/2019                        |  |     | 10,303 |      |  |            | 10,157 |         
|Total Chemicals                                            |  |     |        |      |  |            | 10,157 |         
|                                                           |  |     |        |      |  |            |        |         
|Communications                                             |  |     |        |      |  |            |        |         
|HC Cable OpCo, LLC, Term Loan*                             |  |     |        |      |  |            |        |         
|L+ 8.50%, 1.00% L Floor, 7/17/2018                         |  |     | 10,788 |      |  |            | 10,683 |         
|Sirva Worldwide, Loan*                                     |  |     |        |      |  |            |        |         
|L+ 6.25%, 1.25% L Floor, 3/27/2019                         |  |     | 8,090  |      |  |            | 8,068  |         
|TableTop Media, LLC, Term Loan**                           |  |     |        |      |  |            |        |         
|10.00%, 9/15/2019                                          |  |     | 4,934  |      |  |            | 4,931  |         
|Total Communications                                       |  |     |        |      |  |            | 23,682 |         
|                                                           |  |     |        |      |  |            |        |         
|Consumer Finance Services                                  |  |     |        |      |  |            |        |         
|Affiliated
    Wealth Partners Holdings LLC, Term Loan (1) |  |     |        |      |  |            |        |         
|L+ 8.00%, 1.00% L Floor, 9/15/2020                         |  |     | 4,750  |      |  |            | 4,679  |         
|PlanMember Financial Corporation, Term Loan*(1)            |  |     |        |      |  |            |        |         
|L+ 8.50%, 1.50% L Floor, 2/14/2018                         |  |     | 1,264  |      |  |            | 1,248  |         
|Project Sunshine IV Pty Ltd (Sensis), New Term Loans*(1)   |  |     |        |      |  |            |        |         
|L+ 7.00%, 1.00% L Floor, 9/23/2019                         |  |     | 6,070  |      |  |            | 6,022  |         
|Total Consumer Finance Services                            |  |     |        |      |  |            | 11,949 |         
|                                                           |  |     |        |      |  |            |        |         
|Cosmetics/Toiletries                                       |  |     |        |      |  |            |        |         
|ActivStyle, Inc., Term Loan**                              |  |     |        |      |  |            |        |         
|L+ 9.00%, 0.50% L Floor, 7/9/2020                          |  |     | 10,300 |      |  |            | 10,128 |         
|Total Cosmetics/Toiletries                                 |  |     |        |      |  |            | 10,128 |         
|                                                           |  |     |        |      |  |            |        |         
|Electrical Equipment                                       |  |     |        |      |  |            |        |         
|AbelConn, LLC (Atrenne Computing), Term Loan*              |  |     |        |      |  |            |        |         
|L+ 8.50%, 1.00% L Floor, 7/17/2019                         |  |     | 10,423 |      |  |            | 10,265 |         
|Total Electrical Equipment                                 |  |     |        |      |  |            | 10,265 |         
|                                                           |  |     |        |      |  |            |        |         
|Food Stores - Retail                                       |  |     |        |      |  |            |        |         
|Specialty Bakers LLC, Term Loan*                           |  |     |        |      |  |            |        |         
|L+ 7.25%, 1.00% L Floor, 8/7/2019                          |  |     | 9,435  |      |  |            | 9,280  |         
|Total Food Stores - Retail                                 |  |     |        |      |  |            | 9,280  |         













See accompanying notes to consolidated financial statements.



3








Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



September 30, 2015 (unaudited)



(in thousands)





|                                                             |  |     |        |      |  |            |        | % of Net
|------------------------------------------------------------ |  | --- | ------ | ---- |  | ---------- | ------ | --------
|Security Description                                         |  | Par |        | Cost |  | Fair Value |        | Assets  
|Non-Control/Non-Affiliate Investments (continued)            |  |     |        |      |  |            |        |         
|Investments - United States (continued)                      |  |     |        |      |  |            |        |         
|Debt Investments (continued)                                 |  |     |        |      |  |            |        |         
|Health Services                                              |  |     |        |      |  |            |        |         
|Aurora Diagnostics, LLC, Delayed Draw Term Loan              |  |     |        |      |  |            |        |         
|L+ 7.13%, 1.25% L Floor, 7/31/2019                           |  |     | 850    |      |  | $          | 845    |         
|Aurora Diagnostics, LLC, Term Loan*                          |  |     |        |      |  |            |        |         
|L+ 7.13%, 1.25% L Floor, 7/31/2019                           |  |     | 5,591  |      |  |            | 5,545  |         
|Forest Park Medical Center at Fort Worth, LLC, Lease         |  |     |        |      |  |            |        |         
|13.00%, 2/11/2020                                            |  |     | 9,246  |      |  |            | 9,105  |         
|Forest Park Medical Center at Fort Worth, LLC, Term Loan     |  |     |        |      |  |            |        |         
|14.00%, on Demand                                            |  |     | 344    |      |  |            | 337    |         
|Forest Park Medical Center at San Antonio, LLC, Lease(4)     |  |     |        |      |  |            |        |         
|13.00%, 2/11/2020                                            |  |     | 8,982  |      |  |            | 8,832  |         
|Forest Park Medical Center at San Antonio, LLC, Term Loan(4) |  |     |        |      |  |            |        |         
|14.00%, on Demand                                            |  |     | 1,951  |      |  |            | 1,914  |         
|SCG Capital Corporation (Radiation Therapy), Term Note       |  |     |        |      |  |            |        |         
|12.00%, 5/1/2017                                             |  |     | 4,313  |      |  |            | 4,313  |         
|Theragenics Corporation, Term Loan**                         |  |     |        |      |  |            |        |         
|L+ 12.00%, 1.00% L Floor, 2/26/2020                          |  |     | 6,407  |      |  |            | 6,294  |         
|Walnut Hill Physicians' Hospital, LLC, Lease                 |  |     |        |      |  |            |        |         
|12.50%, 4/16/2020                                            |  |     | 7,828  |      |  |            | 7,828  |         
|Total
    Health Services                                    |  |     |        |      |  |            | 45,013 |         
|                                                             |  |     |        |      |  |            |        |         
|Insurance Agents                                             |  |     |        |      |  |            |        |         
|Worley Claims Services, LLC, Term Loan*                      |  |     |        |      |  |            |        |         
|L+ 8.00%, 1.00% L Floor, 10/31/2020                          |  |     | 10,421 |      |  |            | 10,346 |         
|Total
    Insurance Agents                                   |  |     |        |      |  |            | 10,346 |         
|                                                             |  |     |        |      |  |            |        |         
|Miscellaneous Manufacturing                                  |  |     |        |      |  |            |        |         
|AP Gaming I, LLC, Term B Loan*                               |  |     |        |      |  |            |        |         
|L+ 8.25%, 1.00% L Floor, 12/20/2020                          |  |     | 10,248 |      |  |            | 10,088 |         
|A.S.V., Inc., Term Loan*                                     |  |     |        |      |  |            |        |         
|L+ 9.50%, 1.00% L Floor, 12/19/2019                          |  |     | 9,257  |      |  |            | 9,101  |         
|CR Brands, Inc., Term Loan*                                  |  |     |        |      |  |            |        |         
|L+ 9.25%, 1.00% L Floor, 8/23/2017                           |  |     | 10,500 |      |  |            | 10,383 |         
|Kranos Acquisition Corp., Term Loan*(3)                      |  |     |        |      |  |            |        |         
|L+ 11.00% Cash, 1.00% PIK, 1.00% L Floor, 6/15/2017          |  |     | 9,837  |      |  |            | 9,771  |         
|Lexmark Carpet Mills, Inc., Term Loan*                       |  |     |        |      |  |            |        |         
|L+ 10.00%, 1.00% L Floor, 12/19/2019                         |  |     | 10,500 |      |  |            | 10,279 |         
|NPI Holding Corp. (Nudo Products, Inc.), Term Loan*,**       |  |     |        |      |  |            |        |         
|L+ 9.75%, 1.00% L Floor, 1/13/2020                           |  |     | 10,500 |      |  |            | 10,319 |         
|PCCR USA, Inc., Term Loan A*                                 |  |     |        |      |  |            |        |         
|L+ 8.00%, 1.00% L Floor, 12/1/2019                           |  |     | 6,913  |      |  |            | 6,798  |         
|PCCR USA, Inc., Term Loan B*                                 |  |     |        |      |  |            |        |         
|L+ 8.00%, 1.00% L Floor, 12/1/2019                           |  |     | 3,456  |      |  |            | 3,384  |         
|Profusion Industries, LLC, Term Loan*                        |  |     |        |      |  |            |        |         
|L+ 9.00%, 6/19/2020                                          |  |     | 10,300 |      |  |            | 10,106 |         
|Total
    Miscellaneous Manufacturing                        |  |     |        |      |  |            | 80,229 |         







See accompanying notes to consolidated financial statements.



4








Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



September 30, 2015 (unaudited)



(in thousands)





|                                                         |  |     |        |      |  |            |        | % of Net
|-------------------------------------------------------- |  | --- | ------ | ---- |  | ---------- | ------ | --------
|Security Description                                     |  | Par |        | Cost |  | Fair Value |        | Assets  
|Non-Control/Non-Affiliate Investments (continued)        |  |     |        |      |  |            |        |         
|Investments - United States (continued)                  |  |     |        |      |  |            |        |         
|Debt Investments (continued)                             |  |     |        |      |  |            |        |         
|Miscellaneous Retail                                     |  |     |        |      |  |            |        |         
|Confluence Outdoor, LLC, Term Loan*                      |  |     |        |      |  |            |        |         
|L+ 7.00%, 1.00% L Floor, 4/18/2019                       |  |     | 6,657  |      |  | $          | 6,574  |         
|Confluence Outdoor, LLC, Delayed Draw Term Loan          |  |     |        |      |  |            |        |         
|L+ 7.00%, 1.00% L Floor, 4/18/2019                       |  |     | 999    |      |  |            | 999    |         
|Interior Specialists, Inc., Term Loan*                   |  |     |        |      |  |            |        |         
|L+ 8.00%, 1.00% L Floor, 6/30/2020                       |  |     | 10,300 |      |  |            | 10,104 |         
|PD
Products, LLC, Term Loan*                             |  |     |        |      |  |            |        |         
|L+
    10.50%, 1.50% L Floor, 10/4/2018                  |  |     | 9,777  |      |  |            | 9,662  |         
|PD
Products, LLC, Revolver                               |  |     |        |      |  |            |        |         
|L+
    10.50%, 1.50% L Floor, 10/4/2018                  |  |     | 837    |      |  |            | 820    |         
|Total Miscellaneous Retail                               |  |     |        |      |  |            | 28,159 |         
|                                                         |  |     |        |      |  |            |        |         
|Miscellaneous Services                                   |  |     |        |      |  |            |        |         
|Speed
    Commerce, Inc., Term Loan*(3)(4)               |  |     |        |      |  |            |        |         
|L+ 11.00% PIK, 1.00% L Floor, 11/21/2019                 |  |     | 12,146 |      |  |            | 11,974 |         
|Sprint Industrial Holdings, LLC, Term Loan (First Lien)* |  |     |        |      |  |            |        |         
|L+ 5.75%, 1.25% L Floor, 5/14/2019                       |  |     | 4,836  |      |  |            | 4,813  |         
|YourMembership Holding Company, Term Loan A**            |  |     |        |      |  |            |        |         
|L+ 7.00%, 1.00% L Floor, 9/12/2019                       |  |     | 10,109 |      |  |            | 10,040 |         
|Total Miscellaneous Services                             |  |     |        |      |  |            | 26,827 |         
|                                                         |  |     |        |      |  |            |        |         
|Printing & Publishing                                    |  |     |        |      |  |            |        |         
|Dodge Data & Analytics LLC, Term Loan*                   |  |     |        |      |  |            |        |         
|L+ 8.75%, 1.00% L Floor, 10/31/2019                      |  |     | 9,355  |      |  |            | 9,202  |         
|Total Printing & Publishing                              |  |     |        |      |  |            | 9,202  |         
|                                                         |  |     |        |      |  |            |        |         
|Oil & Gas                                                |  |     |        |      |  |            |        |         
|Badlands Production Company (fka Gasco), Term Loan*      |  |     |        |      |  |            |        |         
|L+ 12.50%, 1.00% L Floor, 5/14/2018                      |  |     | 10,500 |      |  |            | 10,314 |         
|Iracore International Holdings, Inc., Term Loan*         |  |     |        |      |  |            |        |         
|L+ 9.00%, 1.00% L Floor, 7/10/2020                       |  |     | 8,878  |      |  |            | 8,750  |         
|Rooster Energy Ltd., Term Loan*                          |  |     |        |      |  |            |        |         
|L+
    11.50%, 1.50% L Floor, 6/25/2018                  |  |     | 5,938  |      |  |            | 5,857  |         
|Total Oil & Gas                                          |  |     |        |      |  |            | 24,921 |         















See accompanying notes to consolidated financial statements.





5




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



September 30, 2015 (unaudited)



(in thousands)







|                                                      |  |     |        |      |  |            |         | % of Net
|----------------------------------------------------- |  | --- | ------ | ---- |  | ---------- | ------- | --------
|Security Description                                  |  | Par |        | Cost |  | Fair Value |         | Assets  
|Non-Control/Non-Affiliate Investments (continued)     |  |     |        |      |  |            |         |         
|Investments - United States (continued)               |  |     |        |      |  |            |         |         
|Debt Investments (continued)                          |  |     |        |      |  |            |         |         
|Specialty Services                                    |  |     |        |      |  |            |         |         
|Vistronix, LLC, Term Loan*                            |  |     |        |      |  |            |         |         
|L+ 8.00%, 0.50% L Floor, 12/4/2018                    |  |     | 9,636  |      |  | $          | 9,574   |         
|Vistronix, LLC, Revolver                              |  |     |        |      |  |            |         |         
|L+ 8.00%, 0.50% L Floor, 12/4/2018                    |  |     | 350    |      |  |            | 350     |         
|Total Specialty Services                              |  |     |        |      |  |            | 9,924   |         
|                                                      |  |     |        |      |  |            |         |         
|Transportation Services                               |  |     |        |      |  |            |         |         
|Fleetgistics Holdings, Inc., Term Loan*               |  |     |        |      |  |            |         |         
|L+ 6.13%, 2.00% L Floor, 12/31/2018                   |  |     | 1,021  |      |  |            | 1,021   |         
|MXD Group, Inc. (fka Exel Direct Inc.), Term Loan*(3) |  |     |        |      |  |            |         |         
|L+ 3.00% Cash, 10.00% PIK, 1.00% L Floor, 5/31/2018   |  |     | 14,014 |      |  |            | 13,879  |         
|Raymond Express International, LLC, Term Loan*        |  |     |        |      |  |            |         |         
|L+
    7.75%, 1.75% L Floor, 2/28/2018                |  |     | 2,412  |      |  |            | 2,401   |         
|Total Transportation Services                         |  |     |        |      |  |            | 17,301  |         
|                                                      |  |     |        |      |  |            |         |         
|Total Debt Investments                                |  |     |        |      |  | $          | 384,772 |         
|                                                      |  |     |        |      |  |            |         |         
|Financial Assets                                      |  |     |        |      |  |            |         |         
|Consumer Finance Services                             |  |     |        |      |  |            |         |         
|GLC Trust 2013-2 Consumer Loan Pool(1)(5)             |  |     | 22,652 |      |  | $          | 22,652  |         
|Total Consumer Finance Services                       |  |     |        |      |  |            | 22,652  |         
|                                                      |  |     |        |      |  |            |         |         
|Total Financial Assets                                |  |     |        |      |  | $          | 22,652  |         
|                                                      |  |     |        |      |  |            |         |         
|Unfunded Obligations                                  |  |     |        |      |  |            |         |         
|Communications                                        |  |     |        |      |  |            |         |         
|HC Cable OpCo, LLC, Revolver                          |  |     |        |      |  |            |         |         
|0.50%,  7/17/2018                                     |  |     | 955    |      |  | $          | (9      | )       
|TableTop
    Media, LLC, Term Loan**(6)               |  |     |        |      |  |            |         |         
|0.00%, 3/22/2016                                      |  |     | 1,128  |      |  |            | (12     | )       
|Total Communications                                  |  |     |        |      |  |            | (21     | )       
|                                                      |  |     |        |      |  |            |         |         
|Health Services                                       |  |     |        |      |  |            |         |         
|Aurora Diagnostics, LLC, Delayed Draw Term Loan(6)    |  |     |        |      |  |            |         |         
|2.25%, 7/31/2019                                      |  |     | 2,393  |      |  |            | (21     | )       
|Aurora Diagnostics, LLC, Revolver(6)                  |  |     |        |      |  |            |         |         
|0.38%, 7/31/2019                                      |  |     | 1,020  |      |  |            | (8      | )       
|Total Health Services                                 |  |     |        |      |  |            | (29     | )       
|                                                      |  |     |        |      |  |            |         |         
|Miscellaneous Retail                                  |  |     |        |      |  |            |         |         
|Confluence Outdoor, LLC, Delayed Draw Term Loan(6)    |  |     |        |      |  |            |         |         
|2.00%, 4/18/2019                                      |  |     | 2,330  |      |  |            | (41     | )       
|PD
Products, LLC, Revolver                            |  |     |        |      |  |            |         |         
|0.50%, 10/4/2018                                      |  |     | 820    |      |  |            | (20     | )       
|Total Miscellaneous Retail                            |  |     |        |      |  |            | (61     | )       













See accompanying notes to consolidated financial statements



6




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



September 30, 2015 (unaudited)



(in thousands)





|                                                                 |  |     |     |      |  |                |         | %
    of Net
|---------------------------------------------------------------- |  | --- | --- | ---- |  | -------------- | ------- | ------------
|Security
    Description                                         |  | Par |     | Cost |  | Fair
    Value |         | Assets      
|Non-Control/Non-Affiliate
    Investments (continued)            |  |     |     |      |  |                |         |             
|Investments - United
    States (continued)                      |  |     |     |      |  |                |         |             
|Unfunded
    Obligations (continued)                             |  |     |     |      |  |                |         |             
|Miscellaneous
    Services                                       |  |     |     |      |  |                |         |             
|YourMembership
    Holding Company, Revolver(6)                  |  |     |     |      |  |                |         |             
|0.00%,
    9/12/2019                                             |  |     | 441 |      |  | $              | (3      | )           
|Total
    Miscellaneous Services                                 |  |     |     |      |  |                | (3      | )           
|                                                                 |  |     |     |      |  |                |         |             
|Specialty
    Services                                           |  |     |     |      |  |                |         |             
|Vistronix,
    LLC, Revolver(6)                                  |  |     |     |      |  |                |         |             
|0.50%,
    12/4/2018                                             |  |     | 525 |      |  |                | (6      | )           
|Total
    Specialty Services                                     |  |     |     |      |  |                | (6      | )           
|                                                                 |  |     |     |      |  |                |         |             
|Transportation
    Services                                      |  |     |     |      |  |                |         |             
|Raymond
    Express International, LLC, Revolver                 |  |     |     |      |  |                |         |             
|0.50%,
    2/28/2018                                             |  |     | 215 |      |  |                | (1      | )           
|Total
    Transportation Services                                |  |     |     |      |  |                | (1      | )           
|                                                                 |  |     |     |      |  |                |         |             
|Total
    Unfunded Obligations                                   |  |     |     |      |  | $              | (121    | )           
|Total
    Non-Control/Non-Affiliated Investments - United States |  |     |     |      |  | $              | 413,074 |             







_____________



|* |  | Denotes that all or a portion of the investment is held as collateral
    by the collateralized loan obligation (the “CLO”) (see Note 7).
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------



|** |  | Denotes that all or a portion of the loan is held by Garrison
    SBIC.
|-- |  | -----------------------------------------------------------------------



| |  | L = London Interbank Offered Rate.
| |  | ----------------------------------



|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|(5) |  | GLC Trust 2013-2 includes 2,892 small balance consumer loans
    with an average par of $7,832, a weighted average rate of 15.6% and a weighted average maturity of April 10, 2018. See Note
    4 for additional information. See exhibit 99.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2015 for detail on underlying loans.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



All debt investments were income producing as of September
30, 2015, unless otherwise noted. Common and preferred equity investments are non income-producing unless otherwise noted.



See accompanying notes to consolidated
financial statements.



7




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2014



(in thousands, except share amounts)





|                                                        |  |        |         |      |  |            |       | % of Net
|------------------------------------------------------- |  | ------ | ------- | ---- |  | ---------- | ----- | --------
|Security Description                                    |  | Shares |         | Cost |  | Fair Value |       | Assets  
|Non-Control/Non-Affiliate Investments                   |  |        |         |      |  |            |       |         
|Investments - United States                             |  |        |         |      |  |            |       |         
|Common Equity                                           |  |        |         |      |  |            |       |         
|Apparel Products                                        |  |        |         |      |  |            |       |         
|Everyware Global, Inc., Warrant*                        |  |        | 82,843  |      |  | $          | -     |         
|Total Apparel Products                                  |  |        |         |      |  |            | -     |         
|                                                        |  |        |         |      |  |            |       |         
|Health Services                                         |  |        |         |      |  |            |       |         
|Juniper TGX Investment Partners, LLC, Common            |  |        | 3,146   |      |  |            | 671   |         
|Total Health Services                                   |  |        |         |      |  |            | 671   |         
|                                                        |  |        |         |      |  |            |       |         
|Miscellaneous Manufacturing                             |  |        |         |      |  |            |       |         
|Valterra Products Holdings, LLC, Common Class A         |  |        | 185,847 |      |  |            | 186   |         
|Valterra Products Holdings, LLC, Common Class B         |  |        | 20,650  |      |  |            | 21    |         
|Total Miscellaneous Manufacturing                       |  |        |         |      |  |            | 207   |         
|                                                        |  |        |         |      |  |            |       |         
|Miscellaneous Retail                                    |  |        |         |      |  |            |       |         
|Provo Craft Holdings, LLC, Common                       |  |        | 1,110   |      |  |            | -     |         
|Total Miscellaneous Retail                              |  |        |         |      |  |            | -     |         
|                                                        |  |        |         |      |  |            |       |         
|Transportation Services                                 |  |        |         |      |  |            |       |         
|EZE Trucking, LLC, Common                               |  |        | 2,898   |      |  |            | 268   |         
|Total Transportation Services                           |  |        |         |      |  |            | 268   |         
|                                                        |  |        |         |      |  |            |       |         
|Total Common Equity                                     |  |        |         |      |  | $          | 1,146 |         
|                                                        |  |        |         |      |  |            |       |         
|Preferred Equity                                        |  |        |         |      |  |            |       |         
|Consumer Finance Services                               |  |        |         |      |  |            |       |         
|Prosper
    Marketplace Series B Preferred Stock (4)(7) |  |        | 261,912 |      |  | $          | 790   |         
|Total Consumer Finance Services                         |  |        |         |      |  |            | 790   |         
|                                                        |  |        |         |      |  |            |       |         
|Total Preferred Equity                                  |  |        |         |      |  | $          | 790   |         





8










Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2014



(in thousands)





|                                                             |  |     |        |      |  |                |        | %
    of Net
|------------------------------------------------------------ |  | --- | ------ | ---- |  | -------------- | ------ | ------------
|Security Description                                         |  | Par |        | Cost |  | Fair
    Value |        | Assets      
|Non-Control/Non-Affiliate Investments (continued)            |  |     |        |      |  |                |        |             
|Investments - United States (continued)                      |  |     |        |      |  |                |        |             
|Debt Investments (continued)                                 |  |     |        |      |  |                |        |             
|Apparel Products                                             |  |     |        |      |  |                |        |             
|Joe's Jeans Inc., Term Loan*                                 |  |     |        |      |  |                |        |             
|Libor ("L") + 12.75%, 1.25% L Floor, 9/30/2018               |  |     | 10,487 |      |  | $              | 10,330 |             
|Total Apparel Products                                       |  |     |        |      |  |                | 10,330 |             
|                                                             |  |     |        |      |  |                |        |             
|Automotive                                                   |  |     |        |      |  |                |        |             
|CTC Casting Technologies, Inc. (Compass), Loan*              |  |     |        |      |  |                |        |             
|L+ 6.75%, 0.75% L Floor, 3/28/2019                           |  |     | 10,150 |      |  |                | 10,064 |             
|Penda
    Corporation, Term Loan(5)                          |  |     |        |      |  |                |        |             
|L+ 12.00% Cash, 2.00% PIK, 1/26/2019                         |  |     | 7,361  |      |  |                | 7,255  |             
|Total Automotive                                             |  |     |        |      |  |                | 17,319 |             
|                                                             |  |     |        |      |  |                |        |             
|Broadcasting & Entertainment                                 |  |     |        |      |  |                |        |             
|CF Entertainment Inc. (Entertainment Studios), Term Loan*    |  |     |        |      |  |                |        |             
|L+ 7.50%, 1.00% L Floor, 6/26/2019                           |  |     | 9,936  |      |  |                | 9,846  |             
|Total Broadcasting & Entertainment                           |  |     |        |      |  |                | 9,846  |             
|                                                             |  |     |        |      |  |                |        |             
|Building & Real Estate                                       |  |     |        |      |  |                |        |             
|ShelterLogic Corp., Term Loan*                               |  |     |        |      |  |                |        |             
|L+ 8.50%, 1.00% L Floor, 7/30/2019                           |  |     | 10,369 |      |  |                | 10,179 |             
|Total Building & Real Estate                                 |  |     |        |      |  |                | 10,179 |             
|                                                             |  |     |        |      |  |                |        |             
|Chemicals                                                    |  |     |        |      |  |                |        |             
|Aristech Surfaces LLC, Term Loan B*                          |  |     |        |      |  |                |        |             
|L+ 8.00%, 1.00% L Floor, 10/17/2019                          |  |     | 10,500 |      |  |                | 10,324 |             
|Galata Chemicals, LLC, Term Loan*                            |  |     |        |      |  |                |        |             
|L+ 8.00%, 1.00% L Floor, 2/28/2019                           |  |     | 8,750  |      |  |                | 8,602  |             
|Total Chemicals                                              |  |     |        |      |  |                | 18,926 |             
|                                                             |  |     |        |      |  |                |        |             
|Communications                                               |  |     |        |      |  |                |        |             
|HC
    Cable OpCo, LLC, Term Loan*                           |  |     |        |      |  |                |        |             
|L+
    8.50%, 1.00% L Floor, 7/17/2018                       |  |     | 10,873 |      |  |                | 10,738 |             
|Sirva
    Worldwide, Loan*                                   |  |     |        |      |  |                |        |             
|L+
    6.25%, 1.25% L Floor, 3/27/2019                       |  |     | 4,913  |      |  |                | 4,843  |             
|Total
    Communications                                     |  |     |        |      |  |                | 15,581 |             
|                                                             |  |     |        |      |  |                |        |             
|Consumer Finance Services                                    |  |     |        |      |  |                |        |             
|PlanMember
    Financial Corporation, Term Loan*(4)          |  |     |        |      |  |                |        |             
|L+
    8.50%, 1.50% L Floor, 2/14/2018                       |  |     | 1,411  |      |  |                | 1,388  |             
|Project
    Sunshine IV Pty Ltd (Sensis), New Term Loans*(4) |  |     |        |      |  |                |        |             
|L+
    7.00%, 1.00% L Floor, 9/23/2019                       |  |     | 9,186  |      |  |                | 9,099  |             
|Total
    Consumer Finance Services                          |  |     |        |      |  |                | 10,487 |             
|                                                            

9






Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2014



(in thousands)





|                                                              |  |     |        |      |  |                |        | %
    of Net
|------------------------------------------------------------- |  | --- | ------ | ---- |  | -------------- | ------ | ------------
|Security Description                                          |  | Par |        | Cost |  | Fair
    Value |        | Assets      
|Non-Control/Non-Affiliate Investments (continued)             |  |     |        |      |  |                |        |             
|Investments - United States (continued)                       |  |     |        |      |  |                |        |             
|Debt Investments (continued)                                  |  |     |        |      |  |                |        |             
|Electrical Equipment                                          |  |     |        |      |  |                |        |             
|AbelConn,
    LLC (SIE Computing), Term Loan A*               |  |     |        |      |  |                |        |             
|L+
    8.50%, 1.00% L Floor, 7/17/2019                        |  |     | 10,500 |      |  | $              | 10,309 |             
|AbelConn,
    LLC (SIE Computing), Term Loan B                |  |     |        |      |  |                |        |             
|L+
    2.50%, 1.00% L Floor, 7/17/2019                        |  |     | 71     |      |  |                | 69     |             
|Total
    Electrical Equipment                                |  |     |        |      |  |                | 10,378 |             
|                                                              |  |     |        |      |  |                |        |             
|Food Stores - Retail                                          |  |     |        |      |  |                |        |             
|Specialty
    Bakers LLC, Term Loan*                          |  |     |        |      |  |                |        |             
|L+
    7.25%, 1.00% L Floor, 8/7/2019                         |  |     | 9,486  |      |  |                | 9,300  |             
|Sqwincher
    Corporation (The), Term Loan*                   |  |     |        |      |  |                |        |             
|L+
    10.00%, 1.50% L Floor, 8/3/2016                        |  |     | 9,336  |      |  |                | 9,256  |             
|Total
    Food Stores - Retail                                |  |     |        |      |  |                | 18,556 |             
|                                                              |  |     |        |      |  |                |        |             
|Health Services                                               |  |     |        |      |  |                |        |             
|Aurora
    Diagnostics, LLC, Delayed Draw Term Loan           |  |     |        |      |  |                |        |             
|L+
    7.00%, 1.25% L Floor, 7/31/2019                        |  |     | 330    |      |  |                | 330    |             
|Aurora
    Diagnostics, LLC, Term Loan*                       |  |     |        |      |  |                |        |             
|L+
    7.00%, 1.25% L Floor, 7/31/2019                        |  |     | 5,608  |      |  |                | 5,553  |             
|Forest
    Park Medical Center at Fort Worth, LLC, Term Loan  |  |     |        |      |  |                |        |             
|L+
    14.00%, 7/16/2019                                      |  |     | 9,591  |      |  |                | 9,436  |             
|Forest
    Park Medical Center at San Antonio, LLC, Term Loan |  |     |        |      |  |                |        |             
|L+
    14.00%, 7/16/2019                                      |  |     | 11,409 |      |  |                | 11,226 |             
|Virtual
    Radiologic Corporation, Term Loan B*              |  |     |        |      |  |                |        |             
|L+
    5.50%, 1.75% L Floor, 12/22/2016                       |  |     | 4,825  |      |  |                | 4,808  |             
|SCG
    Capital Corporation (Radiation Therapy), Term Note    |  |     |        |      |  |                |        |             
|L+
    12.00%, 5/1/2017                                       |  |     | 6,171  |      |  |                | 6,171  |             
|Walnut
    Hill Physicians' Hospital, LLC, Acquistion Loan    |  |     |        |      |  |                |        |             
|12.50%,
    on Demand                                         |  |     | 1,529  |      |  |                | 1,529  |             
|Walnut
    Hill Physicians' Hospital, LLC, Term Loan          |  |     |        |      |  |                |        |             
|12.50%,
    4/1/2019                                          |  |     | 7,482  |      |  |                | 7,482  |             
|Total
    Health Services                                     |  |     |        |      |  |                | 46,535 |             
|                                                              |  |     |        |      |  |                |        |             
|Insurance Agents                                              |  |     |        |      |  |                |        |             
|Affirmative
    Insurance Holdings, Inc., Term Loan*          |  |     |        |      |  |                |        |             
|L+
    9.25%, 1.25% L Floor, 3/30/2016                        |  |     | 5,734  |      |  |                | 5,587  |             
|Worley
    Claims Services, LLC, Term Loan*                   |  |     |        |      |  |                |        |             
|L+
    8.00%, 1.00% L Floor, 10/31/2020                       |  |     | 10,500 |      |  |                | 10,398 |             
|Total
    Insurance Agents                                    |  |     |        |      |  |                | 15,985 |             







See accompanying notes to consolidated
financial statements.





10




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2014



(in thousands)





|Security Description                                              |  | Par |        | Cost |  | Fair
    Value |        | %
                                         of Net
                                                                                Assets
|----------------------------------------------------------------- |  | --- | ------ | ---- |  | -------------- | ------ | ----------------------------------------------------------------------------------------------------------------------------------------
|Non-Control/Non-Affiliate Investments (continued)                 |  |     |        |      |  |                |        |                                                                                                                                         
|Investments - United States (continued)                           |  |     |        |      |  |                |        |                                                                                                                                         
|Debt Investments  (continued)                                     |  |     |        |      |  |                |        |                                                                                                                                         
|Miscellaneous Manufacturing                                       |  |     |        |      |  |                |        |                                                                                                                                         
|Anchor
    Hocking, LLC (EveryWare Global), Initial Term Loan*(5) |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    6.50% Cash, 1.75% PIK, 1.25% L Floor, 5/21/2020            |  |     | 6,947  |      |  | $              | 6,856  |                                                                                                                                         
|AP
    Gaming I, LLC, Term B Loan*                                |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    8.25%, 1.00% L Floor, 12/20/2020                           |  |     | 4,950  |      |  |                | 4,823  |                                                                                                                                         
|A.S.V.,
    Inc., Term Loan*                                      |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    9.50%, 1.00% L Floor, 12/19/2019                           |  |     | 9,494  |      |  |                | 9,306  |                                                                                                                                         
|CR
    Brands, Inc., Term Loan*                                   |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.25%, 1.00% L Floor, 3/31/2019                            |  |     | 10,500 |      |  |                | 10,322 |                                                                                                                                         
|Frontier
    Spinning Mills, Inc., Term Loan*                     |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    6.50%, 1.00% L Floor, 12/19/2018                           |  |     | 4,810  |      |  |                | 4,790  |                                                                                                                                         
|Kranos
    Acquisition Corp., Term Loan*(5)                       |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    11.00% Cash, 1.00% PIK, 1.00% L Floor, 6/15/2017           |  |     | 10,158 |      |  |                | 10,060 |                                                                                                                                         
|Lexmark
    Carpet Mills, Inc., Term Loan*                        |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    10.00%, 1.00% L Floor, 12/19/2019                          |  |     | 10,500 |      |  |                | 10,239 |                                                                                                                                         
|Nursery
    Supplies, Inc., Term Loan*                            |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.50%, 1.00% L Floor, 6/13/2018                            |  |     | 10,794 |      |  |                | 10,757 |                                                                                                                                         
|PCCR
    USA, Inc., Term Loan A*                                  |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    8.00%, 1.00% L Floor, 12/1/2019                            |  |     | 7,000  |      |  |                | 6,863  |                                                                                                                                         
|PCCR
    USA, Inc., Term Loan B*                                  |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    8.00%, 1.00% L Floor, 12/1/2019                            |  |     | 3,500  |      |  |                | 3,414  |                                                                                                                                         
|Valterra
    Products Holdings, LLC, Term Loan*                   |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    9.00%, 1.00% L Floor, 5/31/2018                            |  |     | 8,409  |      |  |                | 8,294  |                                                                                                                                         
|Total
    Miscellaneous Manufacturing                             |  |     |        |      |  |                | 85,724 |                                                                                                                                         
|                                                                  |  |     |        |      |  |                |        |                                                                                                                                         
|Miscellaneous Retail                                              |  |     |        |      |  |                |        |                                                                                                                                         
|Confluence
    Outdoor, LLC, Term Loan*                           |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.00%, 1.00% L Floor, 4/18/2019                            |  |     | 6,657  |      |  |                | 6,557  |                                                                                                                                         
|Confluence
    Outdoor, LLC, Delayed Draw Term Loan               |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.00%, 1.00% L Floor, 4/18/2019                            |  |     | 999    |      |  |                | 999    |                                                                                                                                         
|PD
    Products, LLC, Term Loan*                                  |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    10.50%, 1.50% L Floor, 10/4/2018                           |  |     | 9,969  |      |  |                | 9,819  |                                                                                                                                         
|PD
    Products, LLC, Revolver                                    |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    10.50%, 1.50% L Floor, 10/4/2018                           |  |     | 804    |      |  |                | 804    |                                                                                                                                         
|PSP
    Group, LLC, Term Loan*                                    |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    4.75%, 1.50% L Floor, 9/13/2016                            |  |     | 4,360  |      |  |                | 4,341  |                                                                                                                                         
|Total
    Miscellaneous Retail                                    |  |     |        |      |  |                | 22,520 |                                                                                                                                         







See accompanying notes to consolidated
financial statements.





11




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2014



(in thousands)





|Security Description                                         |  | Par |        | Cost |  | Fair
    Value |        | %
                                         of Net
                                                                                Assets
|------------------------------------------------------------ |  | --- | ------ | ---- |  | -------------- | ------ | ----------------------------------------------------------------------------------------------------------------------------------------
|Non-Control/Non-Affiliate Investments (continued)            |  |     |        |      |  |                |        |                                                                                                                                         
|Investments - United States (continued)                      |  |     |        |      |  |                |        |                                                                                                                                         
|Debt Investments  (continued)                                |  |     |        |      |  |                |        |                                                                                                                                         
|Miscellaneous Services                                       |  |     |        |      |  |                |        |                                                                                                                                         
|Academi
    Holdings LLC, Second Lien Term Loan*             |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    10.00%, 1.00% L Floor, 7/25/2020                      |  |     | 10,000 |      |  | $              | 9,815  |                                                                                                                                         
|Dorsey
    School of Business Holdings, Inc., Term Loan*     |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    8.00%, 1.50% L Floor, 6/28/2018                       |  |     | 4,500  |      |  |                | 4,500  |                                                                                                                                         
|Global
    Traffic Technologies, LLC, Term Loan A*           |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    5.25%, 1.25% L Floor, 6/30/2015                       |  |     | 381    |      |  |                | 363    |                                                                                                                                         
|Global
    Traffic Technologies, LLC, Term Loan B*           |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    5.25%, 1.25% L Floor, 6/30/2015                       |  |     | 3,560  |      |  |                | 3,551  |                                                                                                                                         
|Midwest
    Technical Institute, Inc., Term Loan A*          |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    10.00%, 1.50% L Floor, 10/4/2017                      |  |     | 7,146  |      |  |                | 7,146  |                                                                                                                                         
|Midwest
    Technical Institute, Inc., Revolver              |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    10.00%, 1.50% L Floor, 10/4/2017                      |  |     | 999    |      |  |                | 999    |                                                                                                                                         
|NAP
    Asset Holdings Ltd., Canadian Term Loan*             |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.00%, 1.00% L Floor, 3/22/2018                       |  |     | 2,486  |      |  |                | 2,469  |                                                                                                                                         
|NAP
    Asset Holdings Ltd., Term Loan*                      |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.00%, 1.00% L Floor, 3/22/2018                       |  |     | 5,563  |      |  |                | 5,527  |                                                                                                                                         
|SC
    Academy Holdings, Inc., Term Loan(3)                  |  |     |        |      |  |                |        |                                                                                                                                         
|14.00%, 7/16/2016                                            |  |     | 7,761  |      |  |                | 5,588  |                                                                                                                                         
|Speed
    Commerce, Inc., Term Loan*                         |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.50%, 1.00% L Floor, 11/21/2019                      |  |     | 10,500 |      |  |                | 10,296 |                                                                                                                                         
|Sprint
    Industrial Holdings, LLC, Term Loan (First Lien)* |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    5.75%, 1.25% L Floor, 5/14/2019                       |  |     | 4,873  |      |  |                | 4,845  |                                                                                                                                         
|Tecta
    America Corp., Term Loan*                          |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    4.00%, 1.00% L Floor, 7/1/2018                        |  |     | 4,040  |      |  |                | 3,873  |                                                                                                                                         
|YourMembership
    Holding Company, Term Loan A**            |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    7.00%, 1.00% L Floor, 9/12/2019                       |  |     | 8,505  |      |  |                | 8,421  |                                                                                                                                         
|Total
    Miscellaneous Services                             |  |     |        |      |  |                | 67,393 |                                                                                                                                         
|                                                             |  |     |        |      |  |                |        |                                                                                                                                         
|Printing & Publishing                                        |  |     |        |      |  |                |        |                                                                                                                                         
|Dodge
    Data & Analytics LLC, Term Loan*                   |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    8.75%, 1.00% L Floor, 10/31/2019                      |  |     | 10,500 |      |  |                | 10,297 |                                                                                                                                         
|Total
    Printing & Publishing                              |  |     |        |      |  |                | 10,297 |                                                                                                                                         
|                                                             |  |     |        |      |  |                |        |                                                                                                                                         
|Oil & Gas                                                    |  |     |        |      |  |                |        |                                                                                                                                         
|Gasco
    Production Company, Term Loan*                     |  |     |        |      |  |                |        |                                                                                                                                         
|L+
    8.50%, 1.00% L Floor, 8/18/2017                       |  |     | 9,985  |      |  |                | 9,767  |                                                                                                                                         
|Total
    Oil & Gas                                          |  |     |        |      |  |                | 9,767  |                                                                                                                                         





See accompanying notes to consolidated
financial statements.





12




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2014



(in thousands)





|Security Description                                   |  | Par |        | Cost |  | Fair Value |         | % of Net  Assets
|------------------------------------------------------ |  | --- | ------ | ---- |  | ---------- | ------- | ----------------
|Non-Control/Non-Affiliate Investments (continued)      |  |     |        |      |  |            |         |                 
|Investments - United States (continued)                |  |     |        |      |  |            |         |                 
|Debt Investments  (continued)                          |  |     |        |      |  |            |         |                 
|Restaurants                                            |  |     |        |      |  |            |         |                 
|Rita's Water Ice Franchise Company, LLC, Term Loan B*  |  |     |        |      |  |            |         |                 
|L+ 12.50%, 1.50% L Floor, 11/30/2016                   |  |     | 4,688  |      |  | $          | 4,688   |                 
|Ted's Cafe Escondido Holdings, Inc., Term Loan A*      |  |     |        |      |  |            |         |                 
|L+ 8.00%, 1.50% L Floor, 12/31/2018                    |  |     | 6,825  |      |  |            | 6,825   |                 
|Ted's Cafe Escondido Holdings, Inc., Revolver          |  |     |        |      |  |            |         |                 
|L+ 8.00%, 1.50% L Floor, 12/31/2018                    |  |     | 100    |      |  |            | 100     |                 
|Total Restaurants                                      |  |     |        |      |  |            | 11,613  |                 
|                                                       |  |     |        |      |  |            |         |                 
|Specialty Services                                     |  |     |        |      |  |            |         |                 
|Vistronix, LLC, Term Loan*                             |  |     |        |      |  |            |         |                 
|L+ 8.00%, 0.50% L Floor, 12/4/2018                     |  |     | 10,015 |      |  |            | 9,935   |                 
|Total Specialty Services                               |  |     |        |      |  |            | 9,935   |                 
|                                                       |  |     |        |      |  |            |         |                 
|Transportation Services                                |  |     |        |      |  |            |         |                 
|EZE Trucking, LLC, Term
    Loan*(5)                   |  |     |        |      |  |            |         |                 
|L+ 10.75% Cash, 1.00% PIK, 0.25% L Floor, 7/31/2018    |  |     | 10,499 |      |  |            | 10,230  |                 
|Fleetgistics Holdings, Inc., Term Loan*                |  |     |        |      |  |            |         |                 
|L+ 6.13%, 2.00% L Floor, 12/31/2018                    |  |     | 1,021  |      |  |            | 1,021   |                 
|MXD Group, Inc. (fka Exel Direct Inc.), Term Loan*     |  |     |        |      |  |            |         |                 
|L+ 13.00%, 1.00% L Floor, 5/31/2018                    |  |     | 13,213 |      |  |            | 13,027  |                 
|Raymond Express International, LLC, Term Loan*         |  |     |        |      |  |            |         |                 
|L+ 7.75%, 1.75% L Floor, 2/28/2018                     |  |     | 3,897  |      |  |            | 3,871   |                 
|Total Transportation Services                          |  |     |        |      |  |            | 28,149  |                 
|                                                       |  |     |        |      |  |            |         |                 
|Total Debt Investments                                 |  |     |        |      |  | $          | 429,520 |                 
|                                                       |  |     |        |      |  |            |         |                 
|Financial Assets                                       |  |     |        |      |  |            |         |                 
|Consumer Finance Services                              |  |     |        |      |  |            |         |                 
|GLC
    Trust 2013-2 Consumer Loan Portfolio(1)(4)(6)  |  |     | 36,842 |      |  | $          | 36,842  |                 
|Total Consumer Finance Services                        |  |     |        |      |  |            | 36,842  |                 
|                                                       |  |     |        |      |  |            |         |                 
|Total Financial Assets                                 |  |     |        |      |  | $          | 36,842  |                 
|                                                       |  |     |        |      |  |            |         |                 
|Unfunded Obligations                                   |  |     |        |      |  |            |         |                 
|Communications                                         |  |     |        |      |  |            |         |                 
|HC Cable OpCo, LLC, Revolver                           |  |     |        |      |  |            |         |                 
|0.50%,  7/17/2018                                      |  |     | 489    |      |  | $          | (6      | )               
|Total Communications                                   |  |     |        |      |  |            | (6      | )               
|                                                       |  |     |        |      |  |            |         |                 
|Health Services                                        |  |     |        |      |  |            |         |                 
|Aurora Diagnostics, LLC,
    Delayed Draw Term Loan(2) |  |     |        |      |  |            |         |                 
|0.00%, 7/31/2019                                       |  |     | 520    |      |  |            | (5      | )               
|Aurora Diagnostics, LLC,
    Revolver(2)               |  |     |        |      |  |            |         |                 
|0.38%, 7/31/2019                                       |  |     | 1,020  |      |  |            | (10     | )               
|Total Health Services                                  |  |     |        |      |  |            | (15     | )               
|                                                       |  |     |        |      |  |            |         |                 
|Miscellaneous Manufacturing                            |  |     |        |      |  |            |         |                 
|Valterra Products Holdings, LLC, Revolver              |  |     |        |      |  |            |         |                 
|0.50%, 5/31/2018                                       |  |     | 1,588  |      |  |            | (22     | )               
|Total Miscellaneous Manufacturing                      |  |     |        |      |  |            | (22     | )               
|                                                       |  |     |        |      |  |            |         |                 
|Miscellaneous Retail                                   |  |     |        |      |  |            |         |                 
|Confluence Outdoor, LLC, Delayed Draw Term Loan        |  |     |        |      |  |            |         |                 
|2.00%, 4/18/2019                                       |  |     | 2,330  |      |  |            | (50     | )               
|PD Products, LLC, Revolver                             |  |     |        |      |  |            |         |                 
|0.50%, 10/4/2018                                       |  |     | 837    |      |  |            | (25     | )               
|Total Miscellaneous Retail                             |  |     |        |      |  |            | (75     | )               
|                                                       |  |     |        |      |  |            |         |                 
|Miscellaneous Services                                 |  |     |        |      |  |            |         |                 
|Dorsey School of Business Holdings, Inc., Revolver     |  |     |        |      |  |            |         |                 
|0.50%, 6/28/2018                                       |  |     | 1,000  |      |  |            | -       |                 
|Global Traffic Technologies, LLC, Revolver             |  |     |        |      |  |            |         |                 
|0.50%, 6/30/2015                                       |  |     | 1,458  |      |  |            | (4      | )               
|Tecta America Corp., Revolver(2)                       |  |     |        |      |  |            |         |                 
|0.50%, 7/1/2018                                        |  |     | 6,269  |      |  |            | (259    | )               
|YourMembership Holding
    Company, Revolver(2)**      |  |     |        |      |  |            |         |                 
|0.00%, 9/12/2019                                       |  |     | 356    |      |  |            | (3      | )               
|Total Miscellaneous Services                           |  |     |        |      |  |            | (266    | )               











See accompanying notes to consolidated
financial statements.





13




Garrison Capital Inc. and Subsidiaries



Consolidated Schedule of Investments



December 31, 2014



(in thousands)





|Security Description                                             |  | Par |     | Cost |  | Fair Value |         | Assets
|---------------------------------------------------------------- |  | --- | --- | ---- |  | ---------- | ------- | ------
|Non-Control/Non-Affiliate Investments (continued)                |  |     |     |      |  |            |         |       
|Investments - United States (continued)                          |  |     |     |      |  |            |         |       
|Unfunded Obligations  (continued)                                |  |     |     |      |  |            |         |       
|Restaurants                                                      |  |     |     |      |  |            |         |       
|Ted's Cafe Escondido Holdings, Inc., Revolver                    |  |     |     |      |  |            |         |       
|0.50%, 12/31/2018                                                |  |     | 400 |      |  | $          | -       |       
|Ted's Cafe Escondido Holdings, Inc., Delayed Draw Term Loan B    |  |     |     |      |  |            |         |       
|1.00%, 12/31/2018                                                |  |     | 500 |      |  |            | -       |       
|Total Restaurants                                                |  |     |     |      |  |            | -       |       
|                                                                 |  |     |     |      |  |            |         |       
|Specialty Services                                               |  |     |     |      |  |            |         |       
|Vistronix, LLC, Revolver                                         |  |     |     |      |  |            |         |       
|0.50%,
    12/4/2018(2)                                          |  |     | 875 |      |  |            | (7      | )     
|Total Specialty Services                                         |  |     |     |      |  |            | (7      | )     
|                                                                 |  |     |     |      |  |            |         |       
|Transportation Services                                          |  |     |     |      |  |            |         |       
|Raymond Express International, LLC, Revolver                     |  |     |     |      |  |            |         |       
|0.50%, 2/28/2018                                                 |  |     | 538 |      |  |            | (3      | )     
|Total Transportation Services                                    |  |     |     |      |  |            | (3      | )     
|Total Unfunded Obligations                                       |  |     |     |      |  | $          | (394    | )     
|Total Non-Control/Non-Affiliated
    Investments - United States |  |     |     |      |  | $          | 467,904 |       









_____________



|* |  | Denotes that all or a portion of the investment is held as collateral
    by the CLO (see Note 7).
|- |  | --------------------------------------------------------------------------------------------------



|** |  | Denotes that all or a portion of the loan is held by Garrison
    SBIC.
|-- |  | -----------------------------------------------------------------------



|(1) |  | GLC Trust 2013-2 includes 3,731 small balance consumer loans
    with an average par of $9,875, a weighted average rate of 15.6% and a weighted average maturity of February 6, 2018. See Note
    4 for additional information.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | The negative fair value is the result of the unfunded commitment
    being valued below par. These amounts may or may not be funded to the borrowing party currently or in the future.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Investment is currently in default, not income producing and
    placed on non-accrual status.
|--- |  | ----------------------------------------------------------------------------------------------



|(4) |  | 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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | Coupon is payable in cash and/or PIK, or a combination thereof.
|--- |  | ---------------------------------------------------------------



|(6) |  | See exhibit 99.2 to the Company’s Annual Report on Form
    10-K for the year ended December 31, 2014, as amended, for detail on underlying loans.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



|(7) |  | 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.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All debt investments were income producing as of December
31, 2014, unless otherwise noted. Common and preferred equity investments are non-income producing unless otherwise noted.





.

See accompanying
notes to consolidated financial statements.





14




Garrison Capital Inc. and Subsidiaries



Consolidated Statements of Operations
(unaudited)



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





|                                                                                      |  | Three
    Months 
ended |            | Three
    Months 
ended |  | Nine
    Months 
ended |            | Nine
    Months 
ended
|------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ----------------------- |  | ---------------------- | ---------- | ----------------------
|                                                                                      |  | September
    30,
 2015 |            | September
    30,
2014  |  | September
    30,
2015 |            | September
    30,
2014
|Investment income                                                                     |  |                         |            |                         |  |                        |            |                       
|Interest income                                                                       |  |                         |            |                         |  |                        |            |                       
|Non-Control/Non-Affiliate
    investments                                             |  | $                       | 12,285     |                         |  | $                      | 12,009     |                       
|Other
    income                                                                      |  |                         | 921        |                         |  |                        | 935        |                       
|Affiliate
    investments                                                             |  |                         | -          |                         |  |                        | -          |                       
|Dividend income                                                                       |  |                         |            |                         |  |                        |            |                       
|Affiliate
    investments                                                             |  |                         | -          |                         |  |                        | -          |                       
|Total investment income                                                               |  |                         | 13,206     |                         |  |                        | 12,944     |                       
|Expenses                                                                              |  |                         |            |                         |  |                        |            |                       
|Interest expense                                                                      |  |                         | 1,874      |                         |  |                        | 1,871      |                       
|Loss on refinancing of GLC
    Trust 2013-2 revolver                                  |  |                         | -          |                         |  |                        | 243        |                       
|Management fee                                                                        |  |                         | 1,955      |                         |  |                        | 2,024      |                       
|Incentive fee                                                                         |  |                         | (83        | )                       |  |                        | 1,270      |                       
|Professional fees                                                                     |  |                         | 400        |                         |  |                        | 255        |                       
|Directors' fees                                                                       |  |                         | 97         |                         |  |                        | 96         |                       
|Administrator expenses                                                                |  |                         | 241        |                         |  |                        | 165        |                       
|Other
    expenses                                                                    |  |                         | 484        |                         |  |                        | 623        |                       
|Total expenses                                                                        |  |                         | 4,968      |                         |  |                        | 6,547      |                       
|Net investment income before excise taxes                                             |  |                         | 8,238      |                         |  |                        | 6,397      |                       
|Excise tax expense                                                                    |  |                         | 6          |                         |  |                        | (136       | )                     
|Net investment income                                                                 |  |                         | 8,244      |                         |  |                        | 6,261      |                       
|Realized and unrealized (loss)/gain
    on investments                                |  |                         |            |                         |  |                        |            |                       
|Net realized (loss)/gain from
    investments                                         |  |                         |            |                         |  |                        |            |                       
|Non-Control/Non-Affiliate
    investments                                             |  |                         | (2,301     | )                       |  |                        | 822        |                       
|Affiliate
    investments                                                             |  |                         | -          |                         |  |                        | 376        |                       
|Net change in unrealized (loss)/gain
    from investments                             |  |                         |            |                         |  |                        |            |                       
|Non-Control/Non-Affiliate
    investments                                             |  |                         | (6,184     | )                       |  |                        | (2,378     | )                     
|Affiliate
    investments                                                             |  |                         | -          |                         |  |                        | -          |                       
|Net
    realized and unrealized (loss)/gain on investments                            |  |                         | (8,485     | )                       |  |                        | (1,180     | )                     
|Net
    (decrease)/increase in net assets resulting from operations                   |  | $                       | (241       | )                       |  | $                      | 5,081      |                       
|Net
    investment income per common share                                            |  | $                       | 0.49       |                         |  | $                      | 0.37       |                       
|Net
    (decrease)/increase in net assets resulting from operations  per common share |  | $                       | (0.01      | )                       |  | $                      | 0.30       |                       
|Basic weighted average common shares outstanding                                      |  |                         | 16,758,779 |                         |  |                        | 16,758,779 |                       
|Dividends
    and distributions declared per common share (1)                         |  | $                       | 0.35       |                         |  | $                      | 0.35       |                       





____________



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





See accompanying notes to consolidated
financial statements.





15




Garrison Capital
Inc. and Subsidiaries



Consolidated
Statements of Changes in Net Assets (unaudited)



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





|                                                                          |  | Nine months ended      |            | Nine months ended     
|------------------------------------------------------------------------- |  | ---------------------- | ---------- | ----------------------
|                                                                          |  | September
    30, 2015 |            | September
    30, 2014
|                                                                          |  |                        |            |                       
|Increase in net assets from operations:                                   |  |                        |            |                       
|Net investment
    income                                                 |  | $                      | 23,103     |                       
|Net realized (loss)/gain from
    investments                             |  |                        | (11,312    | )                     
|Net change
    in unrealized loss on investments                          |  |                        | (5,183     | )                     
|Net increase
    in net assets from operations                            |  |                        | 6,608      |                       
|                                                                          |  |                        |            |                       
|Dividends and distributions to stockholders:                              |  |                        |            |                       
|From
    net investment income(1)                                         |  |                        | (17,598    | )                     
|Total
    dividends and distributions to stockholders                     |  |                        | (17,598    | )                     
|                                                                          |  |                        |            |                       
|Total (decrease)/increase in
    net assets                               |  |                        | (10,990    | )                     
|Net assets
    at beginning of period                                     |  |                        | 261,103    |                       
|Net
    assets at end of period                                           |  | $                      | 250,113    |                       
|Net asset value per common share                                          |  | $                      | 14.92      |                       
|Common shares outstanding at end of period                                |  |                        | 16,758,779 |                       
|                                                                          |  |                        |            |                       
|Under/(over)
    distributed net investment income included in net assets |  | $                      | 5,505      |                       





|(1) |  | 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.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





____________







See accompanying notes to consolidated
financial statements.



16




Garrison Capital Inc. and Subsidiaries



Consolidated Statements of Cash Flows
(unaudited)



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



|                                                                                                                            |  | Nine months ended  |          | Nine months ended 
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -------- | ------------------
|                                                                                                                            |  | September 30, 2015 |          | September 30, 2014
|Cash flows from operating activities                                                                                        |  |                    |          |                   
|Net increase in net assets resulting from operations                                                                        |  | $                  | 6,608    |                   
|Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities: |  |                    |          |                   
|Net accretion of discounts on investments                                                                                   |  |                    | (1,234   | )                 
|Net realized loss/(gain) from investments                                                                                   |  |                    | 11,312   |                   
|Amortization of discount on senior secured notes payable                                                                    |  |                    | 229      |                   
|Loss on refinancing of GLC Trust 2013-2 revolving note                                                                      |  |                    | -        |                   
|Amortization of deferred debt issuance costs                                                                                |  |                    | 599      |                   
|Net change in unrealized loss on investments                                                                                |  |                    | 5,183    |                   
|Payment-in-kind interest                                                                                                    |  |                    | (1,953   | )                 
|Purchases of investments                                                                                                    |  |                    | (128,579 | )                 
|Paydowns of investments                                                                                                     |  |                    | 169,174  |                   
|Sales of investments                                                                                                        |  |                    | 6,111    |                   
|Changes in operating assets and liabilities:                                                                                |  |                    |          |                   
|Decrease in cash and cash equivalents, restricted                                                                           |  |                    | 7,505    |                   
|Decrease in due from counterparties                                                                                         |  |                    | 74       |                   
|Increase in accrued interest receivable                                                                                     |  |                    | (1,942   | )                 
|Increase in deferred offering costs                                                                                         |  |                    | (189     | )                 
|Decrease in prepaid administrator fee                                                                                       |  |                    | 74       |                   
|Increase in other assets                                                                                                    |  |                    | (264     | )                 
|Decrease in due to counterparties                                                                                           |  |                    | (109     | )                 
|(Decreased)/increase in payables to affiliates                                                                              |  |                    | (92      | )                 
|Decrease in interest payable on notes payable                                                                               |  |                    | (74      | )                 
|Increase/(decrease) in accrued expenses and other payables                                                                  |  |                    | 132      |                   
|Net cash provided by operating activities                                                                                   |  |                    | 72,565   |                   
|                                                                                                                            |  |                    |          |                   
|Cash flows from financing activities                                                                                        |  |                    |          |                   
|Distributions paid to stockholders                                                                                          |  |                    | (17,598  | )                 
|Payments for financing costs                                                                                                |  |                    | (690     | )                 
|Repayment of senior secured revolving notes                                                                                 |  |                    | (40,500  | )                 
|Repayment of GLC Trust 2013-2 Class A notes                                                                                 |  |                    | (11,626  | )                 
|Repayment of GLC Trust 2013-2 revolving notes                                                                               |  |                    | -        |                   
|Net proceeds from GLC 2013-2 notes                                                                                          |  |                    | -        |                   
|Proceeds from Garrison SBIC borrowings                                                                                      |  |                    | 14,800   |                   
|Net cash used in financing activities                                                                                       |  |                    | (55,614  | )                 
|                                                                                                                            |  |                    |          |                   
|Net increase in cash and cash equivalents                                                                                   |  |                    | 16,951   |                   
|Cash and cash equivalents at beginning of period                                                                            |  |                    | 13,651   |                   
|Cash and cash equivalents at end of period                                                                                  |  | $                  | 30,602   |                   
|                                                                                                                            |  |                    |          |                   
|Supplemental disclosure of cash flow information                                                                            |  |                    |          |                   
|Cash paid for interest expense                                                                                              |  | $                  | 4,739    |                   
|                                                                                                                            |  |                    |          |                   
|Supplemental disclosure of non-cash activities                                                                              |  |                    |          |                   
|Restructuring of portfolio investments                                                                                      |  | $                  | 3,986    |                   











See accompanying
notes to consolidated financial statements.





17




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated
Financial Statements (unaudited)



September 30, 2015



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.



Garrison Capital LLC, a Delaware limited liability
company, commenced operations on December 17, 2010. On October 9, 2012, Garrison Capital LLC converted from a Delaware
limited liability company to a Delaware corporation (the “Conversion”). In this Conversion, Garrison Capital Inc.
succeeded to the business of Garrison Capital LLC and its subsidiaries, and the members of Garrison Capital LLC became
stockholders of GARS. An aggregate of 10,707,221 shares of common stock, par value $0.001 per share, were issued to the
former members of Garrison Capital LLC in this Conversion in accordance with their respective pro-rata membership interests in Garrison
Capital LLC. As a result of a reverse stock split on February 25, 2013, which resulted in the conversion of one share of
common stock into 0.9805106 shares of common stock (the “Reverse Stock Split”), all amounts related to
shares/units, share/unit prices, earnings per share/per unit and distributions per share/unit have been retroactively
restated for all periods presented. As a result, the 10,707,221 shares of common stock issued in the Conversion have been
retroactively restated to 10,498,544.



GARS priced its initial public offering (“IPO”)
on March 26, 2013, which closed on April 2, 2013, selling 6,133,334 shares, including 800,000 shares issued pursuant to the underwriters’
exercise of the over-allotment option, at a public offering price of $15.00 per share. Concurrent with the closing of the IPO,
the Company’s directors, officers, employees and an affiliate of Garrison Capital Advisers LLC, a Delaware limited liability
company (the “Investment Adviser”), purchased an additional 126,901 shares through a private placement transaction
(the “Concurrent Private Placement”) exempt from registration under the Securities Act of 1933, as amended (the "Securities
Act"), at a price of $15.00 per share. GARS’ shares trade on the NASDAQ Global Select Market, or NASDAQ, under the
symbol “GARS”.



Our investment objective is to generate current
income and capital appreciation by making investments generally in the range of $5.0 million to $25.0 million primarily
in debt securities and loans of U.S. based middle-market companies, which we define as those having annual earnings before
interest, taxes, depreciation and amortization (“EBITDA”) of between $5.0 million and $30.0 million. Our goal is
to generate attractive risk-adjusted returns by assembling a broad portfolio of investments.



We invest or provide direct lending primarily in (1) first
lien senior secured loans, (2) second lien senior secured loans, (3) “one-stop” senior secured or “unitranche”
loans, (4) subordinated or mezzanine loans, (5) unsecured consumer loans and (6) to a lesser extent, selected equity co-investments
in middle-market companies. We use the term “one-stop” or “unitranche” to refer to a loan that combines
characteristics of traditional first lien senior secured loans and second lien or subordinated loans. We use the term “mezzanine”
to refer to a loan that ranks senior only to a borrower’s equity securities and ranks junior in right of payment to all
of such borrower’s other indebtedness.



The Company’s business and affairs are managed and controlled
by the Company’s board of directors (the “Board”), of which a majority of the members are independent of the
Company, and the Investment Adviser and its affiliates.



On April 19, 2012, GARS formed Garrison Funding 2012-1 Manager
LLC, a Delaware limited liability company (“GF 2012-1 Manager”). This entity is a wholly owned consolidated subsidiary
of GARS created for the purpose of acquiring and holding an investment in Garrison Funding 2012-1 LLC, a Delaware limited liability
company (“GF 2012-1”). GARS formed GF 2012-1 for the purpose of acquiring or participating in U.S. dollar-denominated
senior secured or second lien corporate loans and to acquire up to $150.0 million in financing. On September 23, 2013, in anticipation
of refinancing the credit facility of GF 2012-1, GF 2012-1 Manager effectuated a name change to Garrison Funding 2013-2 Manager
LLC (“GF 2013-2 Manager”).



18




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



1. Organization  – (continued)



On May 21, 2012, GF 2012-1 entered into a $150.0 million credit
facility (the “Credit Facility”), consisting of $125.0 million of term loans (“Class A-T Loans”) and $25.0
million of revolving loans (“Class A-R Loans”), which was utilized to refinance the GF 2010-1 Notes (as defined in
Note 7).



On May 17, 2013, GARS formed GLC Trust 2013-2, a Delaware
statutory trust (“GLC Trust 2013-2”). This entity is a wholly owned subsidiary of GARS created for the purpose of
investing in a portfolio of small balance consumer loans. GLC Trust 2013-2 is 100% owned by GARS. GLC Trust 2013-2 closed on a
$10.0 million revolving facility with Capital One Bank, N.A. on December 6, 2013 (“GLC Trust 2013-2 Revolver”). The
GLC Trust 2013-2 Revolver included an accordion feature, such that GLC Trust 2013-2 was permitted to increase the total commitment
up to $15.0 million under the terms of the loan agreement. GARS exercised this option on December 20, 2013.



On July 24, 2013, GARS formed Garrison Funding 2013-2 Ltd.
(“GF 2013-2”), a Cayman Islands exempted company, for the purpose of refinancing the Credit Facility. On September
25, 2013 (the “Refinancing Date”), under Part XVI of the Cayman Islands Companies Law (2012 Revision), GF 2013-2 and
GF 2012-1 merged with GF 2013-2 remaining as the surviving entity (the “Merger”). On the effective date of the Merger,
all of the rights, the property, and the business, undertaking, goodwill, benefits, immunities and privileges of each individual
company immediately vested in the surviving company.



On the Refinancing Date, GF 2013-2 completed a $350.0 million
collateralized loan obligation (the “CLO”) through a private placement, the proceeds of which were utilized, along
with cash on hand, to refinance the existing Credit Facility (see Note 7). Immediately following the completion of the CLO, GF
2013-2 Manager owned 100% of the Subordinated Notes (as defined below). GF 2013-2 Manager serves as collateral manager to GF 2013-2
and has entered into a sub-collateral management agreement with the Investment Adviser.



On July 11, 2014, GARS increased the GLC Trust 2013-2 Revolver
total commitment by $15.0 million for a total commitment of $30.0 million. On July 18, 2014, GARS completed a $39.2 million term
debt securitization (“GLC Trust 2013-2 Notes”) collateralized by the GLC Trust 2013-2 consumer loan portfolio, to
refinance the GLC Trust 2013-2 Revolver (see Note 7).



On August 15, 2013, Walnut Hill II LLC was formed for the
purpose of holding a first lien equipment loan. Walnut Hill II LLC is 100% owned by GARS.



On May 29, 2014, Garrison Capital SBIC
LP (“Garrison SBIC”), which has an investment objective substantially similar to GARS, was formed in accordance
with small business investment company (“SBIC”) regulations and may acquire up to $150.0 million in financing.
Garrison SBIC received a license from the U.S Small Business Administration (the “SBA”) on May 26,
2015.



On July 7, 2014, Forest Park II LLC was formed for the purpose
of holding first lien equipment loans. Forest Park II LLC is 100% owned by GARS.



GARS will periodically form limited liability companies for
the purpose of holding minority equity investments (the “GARS Equity Holdings Entities”). GARS intends to form a new
GARS Equity Holding Entity for each minority equity investment in order to provide specific tax treatment for individual investments.
The GARS Equity Holdings Entities are 100% owned by GARS.



American Stock Transfer & Trust Company, LLC (“AST”)
serves as the transfer and dividend paying agent and registrar to GARS.



GARS entered into a custody agreement, which was effective as of October 9,
2012 (“the Custody Agreement”), with Deutsche Bank Trust Company Americas (the “Custodian”) to act as
the Custodian for GARS. Deutsche Bank also acts as the trustee of GF 2013-2 and the custodian for Garrison SBIC.



GARS entered into an administration agreement, which was effective
as of October 9, 2012 (the “Administration Agreement”), with Garrison Capital Administrator LLC, a Delaware limited
liability company (the “GARS Administrator”).





19




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



1. Organization  – (continued)



GARS entered into an investment advisory agreement with the
Investment Adviser, which was effective as of October 9, 2012, and subsequently amended and restated on May 6, 2014 (the “Investment
Advisory Agreement”). A new Investment Advisory Agreement was approved by the Company’s stockholders on May 1, 2015.



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.



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



2. Significant Accounting Policies and Recent Updates



Basis of Presentation



The accompanying unaudited consolidated
financial statements have been prepared in accordancewith U.S. generally accepted accounting
principles (“U.S. GAAP”)for interim financial information and the instructions
to Form 10-Q and Articles 6 or 10 of Regulation S-X. The consolidated financial statements, including the notes, are unaudited
and exclude some of the disclosures required in audited financial statements. Management believes it has made all necessary adjustments,
consisting of only normal recurring items, so that the consolidated financial statements are presented fairly and that estimates
made in preparing its consolidated financial statements are reasonable and prudent. Certain reclassifications have been made for
previous periods in order to conform to the current period’s presentation. The operating results presented for interim periods
are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. The accompanying
unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements
and the related management’s discussion and analysis of financial condition and results of operations included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2014, as amended, filed with the Securities and Exchange Commission
(the “SEC”).



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 Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification, as amended (“ASC”), Topic 946,
Financial Services —  Investment Companies, the Company is precluded from consolidating any entity other
than another investment company.



The Company generally consolidates any investment company
when it owns 100% of its partners’ or members’ capital or equity units. 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.



20




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



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



GF 2013-2 Manager owns a 100% interest in GF 2013-2, which
is an investment company for accounting purposes, and also provides collateral management services solely to GF 2013-2. As such,
GARS has consolidated the accounts of these entities into these consolidated financial statements. As a result of this consolidation,
the amounts outstanding under the CLO are treated as the Company’s indebtedness.



The GARS Equity Holdings Entities, Walnut Hill II LLC, Forest
Park II LLC and GLC Trust 2013-2 are 100% owned investment companies for accounting purposes. As such, GARS has consolidated the
accounts of these entities into these consolidated financial statements. As a result of this consolidation, the amounts outstanding
under the GLC Trust 2013-2 Notes are treated as the Company’s indebtedness.



Investment Classification



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. As of both
September 30, 2015 and December 31, 2014, all of the Company’s investments were Non-Control/Non-Affiliate Investments.



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 September 30, 2015 and December 31, 2014, cash held
in designated bank accounts with GARS’ Custodian was $26.7 million and $7.6 million, respectively. As of September 30, 2015 and
December 31, 2014, cash held in designated bank accounts with other major financial institutions was $3.9 million and $6.1 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 September 30, 2015 and December 31, 2014, the Company held no cash equivalents.



Cash and Cash Equivalents, Restricted



Restricted cash as of September 30, 2015 and December 31,
2014 included cash of $5.3 million and $12.6 million, respectively, held by GF 2013-2 in designated bank accounts with its Custodian.
GF 2013-2 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 of the CLO. Funds held by GF 2013-2 are not available
for general use by the Company. Restricted cash as of September 30, 2015 and December 31, 2014 also included cash of $1.5 million
and $1.7 million, respectively, held by GLC Trust 2013-2 in designated restricted bank accounts.



21




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





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



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 of both September 30, 2015 and December 31, 2014, the Company
held no restricted cash equivalents.



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. 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.



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 that 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.







The Company recognized $0.8 million and $2.1 million in
charge offs of consumer loans held by GLC Trust 2013-2 in realized losses from investments for the three and nine months
ended September 30, 2015, respectively. The Company recognized $0.3 million and $0.6 million in charge offs of consumer loans
held by GLC Trust 2013-2 in realized losses from investments for the three and nine months ended September 30, 2014,
respectively. The Company had two investments placed on non-accrual status as of September 30, 2015 and one investment
placed on non-accrual status as of December 31, 2014.



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.



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.



Expenses



Expenses related to, but not limited to, ratings fees, due
diligence, valuation expenses and independent collateral appraisals may arise when the Company makes certain investments. These
expenses are recognized as incurred in the consolidated statements of operations within  other expenses.



22




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





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



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 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 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.



Valuation of Investments



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 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.



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,
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.



23




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





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



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
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.



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.



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.



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.



The valuation process is conducted at the end of each fiscal
quarter, with a portion of the Company’s 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 the Company’s 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:



| | • | 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | Preliminary valuation conclusions are then documented and discussed with
    our senior management and the 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
    described above.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | • | The Board discusses valuations and determines the fair value of each
    investment in the Company’s 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.



24




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





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



Offering Costs



Deferred offering costs consist of fees paid in
relation to legal, accounting, regulatory and printing work completed in preparation of equity or debt offerings and are
charged against proceeds from the offerings when received. As of September 30, 2015 and December 31, 2014, $0.5 million and
$0.3 million of expenses associated with the shelf registration statement initially filed with the SEC on April 3, 2014 (“Registration Statement”), were deferred and included in deferred offering costs, respectively. These amounts will be
charged against proceeds from future offerings of securities when received.



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.



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 authorizes, and we declare, 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 acquired by AST through open-market purchases, rather than receiving the cash
distribution. As of September 30, 2015, no new shares have been issued to fulfill 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. AST will set up an account for shares acquired through the plan for each stockholder who
has not elected to receive dividends or other distributions in cash and hold such shares in non-certificated form. Upon request
by a stockholder participating in the plan, received in writing not less than 10 days prior to the record date, AST will, instead
of crediting shares to the participant’s account, issue a certificate registered in the participant’s name for the
number of whole shares of our common stock and a check for any fractional share.



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.



Income Taxes



As discussed in Note 1, for tax purposes, GARS has elected
to be treated as a RIC under Subchapter M of the Code, and intends to qualify each taxable year for such treatment. In addition,
GF 2013-2, GF 2013-2 Manager, the GARS Equity Holdings Entities, Walnut Hill II LLC and Forest Park II LLC are disregarded entities
for tax purposes. GLC Trust 2013-2 is a grantor trust for U.S. taxable income purposes, whereby the income reverts to GARS, accordingly,
no provision for federal income tax was made in the consolidated financial statements for the nine months ended September 30,
2015 or the year ended December 31, 2014.



Each taxable year, GARS intends to comply with all RIC qualification
provisions contained in the Code including certain source-of-income and asset diversification requirements, as well as distribution
requirements to our stockholders equal to at least 90% of “investment company taxable income”. “Investment company
taxable income” is generally defined as net ordinary income plus the excess of realized net short-term capital gains over
realized net long-term capital losses. As a RIC, GARS generally does not have to pay corporate-level U.S. federal income taxes
on any net ordinary income or capital gains that it distributes to its stockholders in a timely manner.



25




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





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



However, GARS is subject to U.S. federal income taxes at regular
corporate tax rates on any net ordinary income or net capital gain not distributed to its stockholders assuming at least 90% of
its investment company taxable income is distributed timely.



Depending on the level of taxable income earned in a tax year,
the Company may choose to retain taxable income in excess of current year dividend distributions, and would distribute such taxable
income in the next tax year. The Company would then pay a 4% excise tax on such taxable income, as required. To the extent that
the Company determines that its estimated current year annual taxable income, determined on a calendar basis, could exceed estimated
current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable
income is earned.



No U.S. federal excise tax expense was recorded for the
three or nine months ended September 30, 2015. For the three and nine months ended September 30, 2014, $0.1 million of
U.S. federal excise tax was recorded.



In addition, GARS has certain wholly owned taxable subsidiaries
(the “Taxable Subsidiaries”), each of which holds a portion of one or more of our portfolio investments that are listed
on the consolidated schedule of investments. The Taxable Subsidiaries are consolidated for financial reporting purposes in accordance
with GAAP, so that our consolidated financial statements reflect our investments in the portfolio companies owned by the Taxable
Subsidiaries. The purpose of the Taxable Subsidiaries is, among other things, to permit GARS to hold certain interests in
portfolio companies that are organized as limited liability companies (“LLCs”) (or other forms of pass-through entities)
and still satisfy the RIC tax requirement that at least 90.0% of the RIC’s gross income for federal income tax purposes
must consist of qualifying investment income. Absent the Taxable Subsidiaries, a proportionate amount of any gross income of an
LLC (or other pass-through entity) portfolio investment would flow through directly to the RIC. To the extent that such income
did not consist of investment income, it could jeopardize GARS’ ability to qualify as a RIC and therefore cause GARS to
incur significant amounts of corporate-level U.S. federal income taxes. Where interests in LLCs (or other pass-through entities)
are owned by the Taxable Subsidiaries, however, the income from such interests is taxed to the Taxable Subsidiaries and does not
flow through to the RIC, thereby helping GARS preserve its RIC status and resultant tax advantages. The Taxable Subsidiaries are
not consolidated for U.S. federal income tax purposes and may generate income tax expense as a result of their ownership of the
portfolio companies.



Dividends from net investment income and distributions from
net realized capital gains are determined in accordance with U.S. federal tax regulations, which may differ from amounts determined
in accordance with U.S. GAAP and those differences could be material. These book-to-tax differences are either temporary or permanent
in nature. Reclassifications due to permanent differences have no impact on net assets. The below were reclassifications made
due to permanent differences for the tax year ended December 31, 2014:



($ in thousands)

|Accumulated Net Investment Income/(Loss) |  | $ | (1,102 | )
|---------------------------------------- |  | - | ------ | -
|Accumulated Net Realized Gain/(Loss)     |  |   | 1,165  |  
|Paid-In Capital                          |  | $ | (63    | )



The permanent book-to-tax differences arose primarily due
to the tax classification of certain short-term capital losses and the accrual of nondeductible U.S. federal excise taxes.



Taxable income differs from the net increase (decrease) in
net assets resulting from operations primarily due to the exclusion of unrealized gain (loss) on investments from taxable income
until they are realized, book-to-tax temporary differences related to the deductibility of accrued Incentive Fees payable to the
Investment Adviser attributable to unrealized gain (loss) on investments, book-to-tax temporary differences on taxable
income inclusions of investment income earned on certain securities that was accrued for tax but not for U.S. GAAP, and book-to-tax
temporary differences related to utilization of net capital gain loss carryforwards from prior years.





26




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



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



The following table reconciles net increase in net assets
resulting from operations to taxable income for tax year ended December 31, 2014:



|($ in thousands)                                         |  | December
    31,  2014
|-------------------------------------------------------- |  | ----------------------
|Net Increase in Net Assets Resulting
    from Operations |  | $                     
|Net Change in Unrealized Gain/(Loss) on Investments      |  |                       
|Permanent Book-to-Tax Differences                        |  |                       
|Temporary Book-to-Tax Differences                        |  |                       
|Taxable Income Before
    Deductions for Distribution    |  | $                     



As of December 31, 2014, the accumulated earnings/(deficit)
on a tax basis is:



|($ in thousands)                                  |  | December
    31,  2014
|------------------------------------------------- |  | ----------------------
|Undistributed ordinary income                     |  | $                     
|Accumulated capital gain and other gains/(losses) |  |                       
|Unrealized (loss) on investments                  |  |                       
|Total accumulated earnings/(deficit)              |  | $                     



The tax character of all distributions paid for the year
ended December 31, 2014 in the amount of $23.5 million was ordinary income. As of December 31, 2014, the components of
accumulated losses on a tax basis, as detailed below, differ from the amounts reflected per GARS’ consolidated
statement of financial condition by temporary book-to-tax differences arising from book-to-tax differences related to the
deductibility of accrued incentive fees payable to the Investment Adviser attributable to unrealized gain (loss) on
investments and book-to-tax differences on taxable income inclusions of investment income earned on certain securities that
was accrued for tax but not for U.S. GAAP.



($ in thousands)

|Other temporary differences               |  | $ | (2,169 | )
|----------------------------------------- |  | - | ------ | -
|Unrealized (loss)                         |  |   | (134   | )
|Total
    Components of Unrealized Income |  | $ | (2,303 | )



As of December 31, 2014, the federal income tax basis of investments
was $467.9 million resulting in net unrealized loss of $0.7 million.



The Company is required to determine whether a tax position
of the Company is more likely-than-not to be sustained upon examination by the applicable taxing authority, including resolution
of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized
is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.
De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that could negatively
impact the Company’s net assets.



U.S. GAAP provides guidance on thresholds, measurement, de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide
better financial statement comparability among different entities.



The Company has concluded that it was not necessary to record
a liability for any such tax positions as of September 30, 2015 and December 31, 2014. However, the Company’s conclusions
regarding this policy may be subject to review and adjustment at a later date based on factors including ongoing analyses of,
and changes to, tax laws, regulations and interpretations thereof.



27




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



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



The Company’s activities from commencement of operations
remain subject to examination by U.S. federal, state, and local tax authorities. No interest expense or penalties have been assessed
as of September 30, 2015 and December 31, 2014.



If the Company were required to recognize interest and penalties,
if any, related to unrecognized tax benefits, this would be recognized as income tax expense in the consolidated statements of
operations.



During 2014, the Company utilized capital loss carryforwards
of $5.8 million. As of December 31, 2014, the Company had no post-enactment long-term capital loss carryforwards.



Recent Accounting Pronouncements



In January 2015, the FASB issued ASU 2015-01, Income Statement
– Extraordinary and Unusual Items (Topic 225), which eliminates the concept of extraordinary items from GAAP. This guidance
is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted provided that the guidance
is applied from the beginning of the fiscal year of adoption. The Company does not expect ASU 2015-01 to have a material impact
on the Company’s consolidated financial position or disclosures.



In February 2015, the FASB issued ASU 2015-02, Consolidation
(Topic 810): Amendments to the Consolidation Analysis, containing new guidance for assessing whether to consolidate certain
legal entities including limited partnerships and other similar legal entities. This guidance is effective for annual and interim
periods beginning after December 15, 2015, and early adoption is permitted. The Company does not expect ASU 2015-02 to have a
material impact on the Company’s consolidated financial position or disclosures.



In April 2015, the FASB issued ASU 2015-03, Interest –
Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs. The new guidance requires that debt
issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying
amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the new guidance.
This guidance is effective for annual and interim periods beginning after December 15, 2015, and early adoption is permitted for
financial statements that have not been previously issued. The Company is currently evaluating the impact ASU 2015-03 will
have on the Company’s consolidated financial position and disclosures.



In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement
(Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).
ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured
using the net asset value per share practical expedient.  This new guidance is effective retrospectively for annual and interim
periods beginning on or after December 15, 2016, and for interim periods within those fiscal years, with early adoption permitted. 
The Company is currently evaluating the impact ASU 2015-07 will have on the Company’s consolidated financial position and
disclosures.



3. Investments



The Company’s investments include debt investments (both
funded and unfunded, “Debt Investments”), preferred and minority equity investments (“Equity”) of diversified
companies and a portfolio of unsecured small balance consumer loans (“Financial Assets”).





28




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



3. Investments  – (continued)



These financial instruments also may be purchased indirectly
through an interest in a limited partnership or a limited liability company. Certain of the risks of investing in the financial
instruments of a distressed borrower or a company are discussed herein. Through investing in these assets, the Company is exposed
to credit risk relating to whether the borrower will meet its obligation to pay when it comes due until the investments are sold
or mature. Any investment in a distressed company may involve special risks.



The Company may invest in assets for which the underlying
borrower or companies are experiencing various forms of financial, operational, legal, and/or other distress or impairment, including
companies involved in bankruptcy or other reorganization or liquidation proceedings, and those which might become involved in
such proceedings.



The Company’s transactions in Debt Investments are normally
secured financings that are collateralized by physical assets and/or the enterprise value of the borrower. This collateral, and
the Company’s rights to this collateral, are different depending on the specific transaction and are defined by the legal
documents agreed to in the transaction.



The terms of the Debt Investments may provide for the extension
to a borrower of additional credit or funding at the request of the borrower, subject to the terms of each loan’s respective
credit agreement. This exposes the Company to potential liabilities that are not reflected on the consolidated statements of financial
condition. As of September 30, 2015 and December 31, 2014, the Company had $9.8 million and $18.2 million of unfunded obligations
with a fair value of $(0.1) million and $(0.3) million, respectively. The negative fair value is the result of the unfunded commitment
being valued below par. These amounts may or may not be funded to the borrowing party now or in the future.



There is no central clearinghouse for the Company’s
Debt Investments, Equity or Financial Assets, nor is there a central depository for custody of any such interests. The processes
by which these interests are cleared, settled and held in custody are individually negotiated between the parties to the transaction.
This subjects the Company to operational risk to the extent that there are delays and failures in these processes. The Custodian
maintains records of the investments owned by the Company.



4. Fair Value of Financial Instruments



The fair value of the Company’s assets and liabilities
which qualify as financial instruments approximate the carrying amounts presented in the consolidated statements of financial
condition.



U.S. GAAP requires enhanced disclosures about investments
that are measured and reported on a fair value basis. Under U.S. GAAP, fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.



Further, the guidance distinguishes between inputs that reflect
the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources
independent of the reporting entity (observable inputs) and inputs that reflect the reporting entity’s own assumptions about
the assumptions market participants would use in pricing an asset or liability developed based on the best information available
in the circumstances (unobservable inputs). Various inputs are used in determining the values of the Company’s investments
and these inputs are categorized as of each valuation date.



The inputs are summarized in three broad hierarchies listed
below:



| | • | 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).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





29




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



4. Fair Value of Financial Instruments  – (continued)



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 consensus pricing information 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.



Factors that could affect fair value measurements of debt
investments using the above referenced approaches include assumed growth rates, capitalization rates, discount rates, loan-to-value
ratios, liquidation value, relative capital structure priority, market comparables, compliance with applicable loan, covenant
and interest coverage performance, book value, market derived multiples, reserve valuation, assessment of credit ratings of an
underlying borrower, review of ongoing performance, review of financial projections as compared to actual performance, review
of interest rate and yield risk.



Factors that could affect fair value measurements of consumer
loans using the above referenced approaches include prepayment rates, default rates, review of financial projections as compared
to actual performance and discount rates.



Such factors may be given different weighting depending on
management’s assessment of the underlying investment, and management may analyze apparently comparable investments in different
ways. The Company has used, and intends to continue to use, independent valuation firms to provide additional corroboration for
estimating the fair values of investments. Valuations performed by the independent valuation firms may utilize proprietary models
and inputs. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with
investing in those securities.



All of the Company’s investments (other than cash and
cash equivalents) are classified as Level 3 under ASC 820.





30




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



4. Fair Value of Financial Instruments  – (continued)



The following tables summarize the valuation of the Company’s
investments measured at fair value based on the fair value hierarchy detailed above as of September 30, 2015 and December 31,
2014:



|                             |  | As
    of September 30, 2015
|---------------------------- |  | ----------------------------
|($ in thousands)             |  | Level
    1                 
|Senior Secured (1)           |  | $                           
|Mezzanine                    |  |                             
|Preferred Equity Investments |  |                             
|Common Equity Investments    |  |                             
|Financial Assets             |  |                             
|                             |  | $                           



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



|                             |  | As
    of December 31, 2014
|---------------------------- |  | ---------------------------
|($ in thousands)             |  | Level
    1                
|Senior Secured (1)           |  | $                          
|Second Lien                  |  |                            
|Mezzanine                    |  |                            
|Subordinated                 |  |                            
|Preferred Equity Investments |  |                            
|Common Equity Investments    |  |                            
|Financial Assets             |  |                            
|                             |  |                            









|(1) | Includes unfunded obligations with a fair value of $(0.3) million.
|--- | ------------------------------------------------------------------



The net change in unrealized (loss)/gain attributable to
the Company’s Level 3 assets for the nine months ended September 30, 2015 and September 30, 2014 included in the
net change in unrealized (loss)/gain on investments in the Company’s consolidated statement of operations was $(5.2)
million and $(1.2) million, respectively.



31




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





4. Fair Value of Financial Instruments  – (continued)



The following table is a reconciliation of investments in
which significant unobservable inputs (Level 3) were used in determining fair value for the nine months ended September 30, 2015:









|                                                                                                                                      |  | Nine Months Ended September 30, 2015
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|                                                                                                                                      |  | Senior Secured Investments          
|($ in thousands)                                                                                                                      |  |                                     
|Fair value, beginning of period                                                                                                       |  | $                                   
|Total net realized and unrealized (loss)/gain on investments                                                                          |  |                                     
|Total net accretion of discounts on investments                                                                                       |  |                                     
|Purchases/issuances                                                                                                                   |  |                                     
|Sales                                                                                                                                 |  |                                     
|Paydowns                                                                                                                              |  |                                     
|Fair value, end of period                                                                                                             |  | $                                   
|                                                                                                                                      |  |                                     
|Net change in unrealized (loss)/gain on investments in our Consolidated Statement of Operations attributable to our Level 3 assets(1) |  | $                                   





|(1) | Net change in unrealized (loss)/gain included in earnings related to investments
    still held at reporting date.
|--- | ------------------------------------------------------------------------------------------------------------------



There were no transfers of investments between levels by the
Company for the nine months ended September 30, 2015.



The following table is a reconciliation of investments in
which significant unobservable inputs (Level 3) were used in determining fair value for the nine months ended September 30, 2014:







|                                                                                                                                      |  | Nine Months Ended September 30, 2014
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|                                                                                                                                      |  | Senior Secured Investments          
|($ in thousands)                                                                                                                      |  |                                     
|Fair value, beginning of period                                                                                                       |  | $                                   
|Transfers into Level 3(1)                                                                                                             |  |                                     
|Transfers out of Level 3 (1)                                                                                                          |  |                                     
|Total net realized and unrealized (loss)/gain on investments                                                                          |  |                                     
|Total net accretion of discounts on investments                                                                                       |  |                                     
|Purchases/issuances                                                                                                                   |  |                                     
|Sales                                                                                                                                 |  |                                     
|Paydowns                                                                                                                              |  |                                     
|Fair value, end of period                                                                                                             |  | $                                   
|                                                                                                                                      |  |                                     
|Net change in unrealized gain/(loss) on investments in our Consolidated Statement of Operations attributable to our Level 3 assets(2) |  | $                                   





|(1) | Represents transfer between senior secured investments and second lien investments. There were no transfers of
    investments     between levels by     the     Company for     the     nine months     ended September 30, 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Net change in unrealized gain/(loss) included in earnings related to investments still held at
    reporting date.                                                                                                                





32




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





4. Fair Value of Financial Instruments  – (continued)



The following table is a quantitative disclosure about significant
unobservable inputs (Level 3) that were used in determining fair value at September 30, 2015:









|                              |  |   | Quantitative
                                         Information about Level 3 Fair Value Measurements
|----------------------------- |  | - | -------------------------------------------------------------------------------------------------------
|                              |  |   | Fair
                                         Value at                                                 
|($ in thousands)              |  |   | September
                                         30, 2015                                            
|Senior Secured Investments(1) |  | $ | 369,375                                                                                                
|                              |  |   |                                                                                                        
|Mezzanine Investments         |  |   | 7,474                                                                                                  
|                              |  |   |                                                                                                        
|Equity Investments(2)         |  |   | 8,777                                                                                                  
|                              |  |   |                                                                                                        
|Financial Assets (3)          |  |   | 22,131                                                                                                 
|                              |  |   |                                                                                                        
|                              |  |   |                                                                                                        
|                              |  |   |                                                                                                        
|                              |  |   |                                                                                                        
|                              |  |   |                                                                                                        
|                              |  |   |                                                                                                        
|Total                         |  | $ | 407,757                                                                                                





|(1) |  | Includes
                                         total unfunded obligations of $(0.1) million.
|--- |  | -----------------------------------------------------------------------------------------------

|(2) |  | Includes
                                         preferred and common equity.
|--- |  | ------------------------------------------------------------------------------

|(3) |  | 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 September 30, 2015, 24.5%,
                                                                                                                    32.2%, 32.2%, 7.6%, 3.3%, and 0.2%, 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 September 30, 2015 for detail on underlying loans.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(5) |  | Excludes                                          $43.1 million
                                                                                                                    of par value related to non-operating portfolio companies, which we define as those investments collateralized
                                                                                                                    by real estate, proved developed producing value (“PDP”) or other hard assets. PDPs are proven revenues
                                                                                                                    that can be produced with existing wells.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







33




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





The following table is a quantitative disclosure about significant
unobservable inputs (Level 3) that were used in determining fair value at December 31, 2014:





|                               |  | Quantitative
    Information about Level 3 Fair Value Measurements
|------------------------------ |  | ------------------------------------------------------------------
|                               |  | Fair
    Value at                                                 
|                               |  | December
    31, 2014                                             
|($ in thousands)               |  |                                                                   
|Senior Secured Investments (1) |  | $                                                                 
|                               |  |                                                                   
|Second Lien Investments        |  |                                                                   
|                               |  |                                                                   
|Mezzanine Investments          |  |                                                                   
|                               |  |                                                                   
|Subordinated Investments       |  |                                                                   
|Equity Investments(2)          |  |                                                                   
|                               |  |                                                                   
|Financial Assets (3)           |  |                                                                   
|                               |  |                                                                   
|                               |  |                                                                   
|                               |  |                                                                   
|Total                          |  | $                                                                 



|(1) |  | Includes
                                         total unfunded obligations of $(0.3) million.
|--- |  | -----------------------------------------------------------------------------------------------

|(2) |  | Includes preferred and common equity.
|--- |  | -------------------------------------

|(3) |  | Financial
                                         Assets are aggregated 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 borrower’s 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, 2014, 26.0%,
                                         30.2%, 31.8%, 7.7%, 3.8% and 0.5% of the total fair value of Financial Assets was comprised
                                         of A, B, C, D, E and F risk rated loans, respectively. See exhibit 99.2 to the Company’s
                                         Annual Report on Form 10-K for the year ended December 31, 2014, as amended, for detail on underlying
                                         loans.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Market
                                         rate 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.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Excludes
                                         non-operating portfolio companies, which we define as those investments collateralized
                                         by real estate or other hard assets.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







34




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





4. Fair Value of Financial Instruments  – (continued)



Significant unobservable inputs used in the fair value measurement
of the Company’s Debt Investments include indicative bid quotations obtained from independent third party pricing
services (“consensus pricing”), multiples of market comparable companies, and relative comparable yields.



Significant decreases (increases) in consensus pricing or
market comparables could result in significantly lower (higher) fair value measurements. Significant increases (decreases) in
comparable yields could result in significantly 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.



Significant unobservable inputs used in the fair value measurement
of the Company’s Equity Investments include market comparables. Significant decreases (increases) in market comparables
could result in significantly lower (higher) fair value measurements.



Significant unobservable inputs used in the fair value measurement
of the Company’s Financial Assets include interest rate, prepayment rate, unit loss rate and discount rate.



Significant decreases (increases) in interest rates or prepayment
rates could result in significantly lower (higher) fair value measurements. Significant increases (decreases) in unit loss rates
or discount rates could result in significantly lower (higher) fair value measurements.



The composition of the Company’s portfolio by industry
at cost and fair value as of September 30, 2015 was as follows:





|Industry                     |  | Cost of Investments |         | Fair
    Value of Investments
|---------------------------- |  | ------------------- | ------- | -----------------------------
|($ in thousands)             |  |                     |         |                              
|Miscellaneous Manufacturing  |  | $                   | 80,434  |                              
|Health Services              |  |                     | 45,656  |                              
|Consumer Finance Services    |  |                     | 35,151  |                              
|Miscellaneous Retail         |  |                     | 28,209  |                              
|Miscellaneous Services       |  |                     | 28,073  |                              
|Oil & Gas                    |  |                     | 24,921  |                              
|Communications               |  |                     | 23,661  |                              
|Transportation Services      |  |                     | 17,570  |                              
|Automotive                   |  |                     | 17,098  |                              
|Insurance Agents             |  |                     | 10,346  |                              
|Agricultural Services        |  |                     | 10,319  |                              
|Electrical Equipment         |  |                     | 10,265  |                              
|Chemicals                    |  |                     | 10,157  |                              
|Cosmetics/Toiletries         |  |                     | 10,128  |                              
|Business Services            |  |                     | 10,104  |                              
|Building & Real Estate       |  |                     | 10,081  |                              
|Specialty Services           |  |                     | 9,918   |                              
|Broadcasting & Entertainment |  |                     | 9,787   |                              
|Food Stores - Retail         |  |                     | 9,280   |                              
|Printing & Publishing        |  |                     | 9,202   |                              
|Apparel Products             |  |                     | 2,714   |                              
|                             |  | $                   | 413,074 |                              





Refer to the consolidated schedule of investments for detailed
disaggregation of the Company’s investments.





35




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





4. Fair Value of Financial Instruments  – (continued)



The composition of the Company’s portfolio by industry
at cost and fair value as of December 31, 2014 was as follows:





|Industry                     |  | Cost
    of Investments |         | Fair
    Value of Investments
|---------------------------- |  | ----------------------- | ------- | -----------------------------
|($ in thousands)             |  |                         |         |                              
|Miscellaneous Manufacturing  |  | $                       | 85,907  |                              
|Miscellaneous Services       |  |                         | 67,126  |                              
|Consumer Finance Services    |  |                         | 48,119  |                              
|Health Services              |  |                         | 47,190  |                              
|Transportation Services      |  |                         | 28,417  |                              
|Miscellaneous Retail         |  |                         | 22,444  |                              
|Chemicals                    |  |                         | 18,926  |                              
|Food Stores – Retail         |  |                         | 18,556  |                              
|Automotive                   |  |                         | 17,319  |                              
|Insurance Agents             |  |                         | 15,985  |                              
|Communications               |  |                         | 15,576  |                              
|Restaurants                  |  |                         | 11,613  |                              
|Electrical Equipment         |  |                         | 10,379  |                              
|Apparel Products             |  |                         | 10,330  |                              
|Printing & Publishing        |  |                         | 10,297  |                              
|Building & Real Estate       |  |                         | 10,179  |                              
|Specialty Services           |  |                         | 9,928   |                              
|Broadcasting & Entertainment |  |                         | 9,846   |                              
|Oil & Gas                    |  |                         | 9,767   |                              
|Total                        |  | $                       | 467,904 |                              





Refer to the consolidated schedule of investments for detailed
disaggregation of the Company’s investments.



5. Indemnifications



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.



6. Due To and Due From Counterparties



The Company executes investment transactions with agents,
brokers, investment companies, agent banks and other financial institutions. Due to and due from counterparties include amounts
related to unsettled purchase and sale transactions of investments and principal paydowns receivable from the borrowers.



No amounts were due to counterparties as of September
30, 2015 and $0.1 million was due to counterparties as of December 31, 2014. Amounts due from counterparties were $1.5 million
and $1.6 million as of September 30, 2015 and December 31, 2014, respectively.



7. Financing



As of September 30, 2015, the total carrying value of the
Company’s aggregate debt outstanding was $203.2 million with a weighted average effective interest rate of 3.25%.
The Company’s debt outstanding as of September 30, 2015 was comprised of notes issued by GF 2013-2 and GLC Trust
2013-2 Notes, as well as Garrison SBIC borrowings.





36




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





7. Financing  – (continued)



The table below provides details of our outstanding debt as
of September 30, 2015:





|                          |  | Amortized
    Carrying Value |         | Outstanding
    Principal at Par |  | Interest Rate |         | Rating(2) |  | Stated Maturity
|------------------------- |  | ---------------------------- | ------- | -------------------------------- |  | ------------- | ------- | --------- |  | ---------------
|($ in thousands)          |  |                              |         |                                  |  |               |         |           |  |                
|Senior Secured Notes:     |  |                              |         |                                  |  |               |         |           |  |                
|Class
    A-1R Notes      |  | $                            | 9,500   |                                  |  | $             | 9,500   |           |  |                
|Class A-1T Notes          |  |                              | 110,819 |                                  |  |               | 111,175 |           |  |                
|Class A-2 Notes           |  |                              | 24,054  |                                  |  |               | 24,150  |           |  |                
|Class B Notes             |  |                              | 24,925  |                                  |  |               | 25,025  |           |  |                
|Garrison SBIC Borrowings: |  |                              |         |                                  |  |               |         |           |  |                
|SBIC Borrowings           |  |                              | 14,800  |                                  |  |               | 14,800  |           |  |                
|GLC Trust 2013-2 Notes:   |  |                              |         |                                  |  |               |         |           |  |                
|Class
    A Notes         |  |                              | 19,065  |                                  |  |               | 19,284  |           |  |                
|                          |  | $                            | 203,163 |                                  |  | $             | 203,934 |           |  |                





|(1) |  | May
                                         bear interest at either the CP Rate (as defined in the indenture governing the CLO) or
                                         the London Interbank Offered Rate (“LIBOR”). As of September 30, 2015, the
                                         Class A-1R Notes’ base rate was LIBOR.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(3) |  | Represents the stated interest rate and annual charge of our SBA-guaranteed debentures.
The Company also had interim financings of $0.8 million outstanding as of September 30, 2015. These interim financings have an interest
rate of LIBOR + 1.04% and a maturity date of March 23, 2016, upon which we expect them to be pooled into the SBA-guaranteed debentures.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Represents
                                         maturity date of our SBA-guaranteed debentures.
|--- |  | ---------------------------------------------------------------------------------------------------



The table below provides details of our outstanding debt as
of December 31, 2014:





|                        |  | Amortized
    Carrying Value |         | Outstanding
    Principal at Par |  | Interest Rate |         | Rating(2) |  | Stated Maturity
|----------------------- |  | ---------------------------- | ------- | -------------------------------- |  | ------------- | ------- | --------- |  | ---------------
|($ in thousands)        |  |                              |         |                                  |  |               |         |           |  |                
|Senior Secured Notes:   |  |                              |         |                                  |  |               |         |           |  |                
|Class
    A-1R Notes    |  | $                            | 50,000  |                                  |  | $             | 50,000  |           |  |                
|Class A-1T Notes        |  |                              | 110,787 |                                  |  |               | 111,175 |           |  |                
|Class A-2 Notes         |  |                              | 24,045  |                                  |  |               | 24,150  |           |  |                
|Class B Notes           |  |                              | 24,915  |                                  |  |               | 25,025  |           |  |                
|GLC Trust 2013-2 Notes: |  |                              |         |                                  |  |               |         |           |  |                
|Class
    A Notes       |  |                              | 30,513  |                                  |  |               | 30,910  |           |  |                
|                        |  | $                            | 240,260 |                                  |  | $             | 241,260 |           |  |                





|(1) |  | May
                                         bear interest at either the CP Rate or
                                         LIBOR. As of December 31, 2014, the
                                         Class A-1R Notes’ base rate was LIBOR.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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 SEC). As of September 30, 2015 and December 31, 2014, the Company’s asset coverage for borrowed amounts was 231.83%
and 207.8%, respectively.





37




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



7. Financing  – (continued)



The table below shows the weighted average interest rates
and weighted average effective interest rates, inclusive of deferred debt issuance costs, of our debt as of September 30, 2015
and December 31, 2014:



|                                               |  | September 30,
    2015 |      | December 31, 2014
|---------------------------------------------- |  | ---------------------- | ---- | -----------------
|                                               |  |                        |      |                  
|Senior Secured Revolving Notes:                |  |                        |      |                  
|Weighted average interest rate                 |  |                        | 2.23 | %                
|Weighted average effective interest rate(1)    |  |                        | 2.52 |                  
|Senior Secured Term Notes:                     |  |                        |      |                  
|Weighted average interest rate                 |  |                        | 2.82 |                  
|Weighted average effective interest rate(1)    |  |                        | 3.23 |                  
|GLC Trust 2013-2  Class A Note:                |  |                        |      |                  
|Weighted average interest rate                 |  |                        | 3.00 |                  
|Weighted average effective interest rate(1)    |  |                        | 3.21 |                  
|SBIC Borrowing:                                |  |                        |      |                  
|Weighted average interest rate                 |  |                        | 3.46 |                  
|Weighted average effective interest rate(1)    |  |                        | 3.97 |                  
|Total                                          |  |                        |      |                  
|Total weighted average interest rate           |  |                        | 2.86 |                  
|Total weighted average effective interest rate |  |                        | 3.25 |                  



|(1) |  | Includes
                                         the effects of deferred debt issuance costs
|--- |  | ---------------------------------------------------------------------------------------------



Senior Secured Notes



On November 5, 2010, GF 2010-1 completed a $300.0 million
collateralized loan securitization. GF 2010-1 was the borrower under a collateralized loan obligation facility (the “CLO
Facility”) which consisted of senior secured notes (collectively, the “GF 2010-1 Notes”).



On May 21, 2012, GF 2012-1, the Company’s wholly owned
indirect subsidiary, entered into the Credit Facility in an aggregate principal amount of $150.0 million which was utilized, along
with cash on hand of GF 2010-1 and Garrison Capital LLC, to redeem the existing GF 2010-1 Notes. On June 5, 2013, GF 2012-1 entered
into an agreement to increase the size of the Credit Facility from $150.0 million to $175.0 million, which consisted of $125.0
million of Class A-T loans and $50.0 million of Class A-R loans. All other terms of the Credit Facility remained unchanged.



In connection with the execution of the Credit Facility and
the redemption of the GF 2010-1 Notes in accordance with the indenture governing such notes, a majority of the loans and other
assets owned or financed under such indenture were sold or contributed to GF 2012-1 as collateral for the Credit Facility.



On September 25, 2013, GF 2013-2 completed the CLO
through a private placement of (1) $50.0 million Class A-1R revolving notes (“Class A-1R Notes”); (2) $111.2
million of Class A-1T notes (“Class A-1T Notes”); (3) $24.1 million of Class A-2 notes (“Class A-2
Notes” and collectively with the Class A-1R Notes and the Class A-1T Notes, the “Class A Notes”); (4) $25.0
million of Class B notes (“Class B Notes”); (5) $13.7 million of Class C notes (“Class C Notes”),
which bear interest at three-month LIBOR plus 5.50% (collectively, the Class A Notes, Class B Notes and Class C Notes are
referred to as the “Secured Notes”); and (6) $126.0 million of subordinated notes (“Subordinated
Notes”), which do not have a stated interest rate (collectively, the Class A Notes, Class B Notes, Class C Notes and
the Subordinated Notes as the “GF 2013-2 Notes”).





38




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





7. Financing  – (continued)



We utilized the proceeds of the GF 2013-2 Notes, along with
cash on hand, to refinance the existing Credit Facility. All of the GF 2013-2 Notes are scheduled to mature on September 25, 2023.
As of September 30, 2015, GARS had retained 100% of the Class C Notes, which are eliminated in consolidation. The Subordinated
Notes represent the residual interest in GF 2013-2. Immediately following the completion of the CLO, GF 2013-2 Manager owned 100%
of the Subordinated Notes, which are eliminated in consolidation.



At September 30, 2015, $40.5 million of the Class A-1R Notes
were undrawn. As of December 31, 2014, the Class A-1R Notes were fully drawn. The Class A-1R Notes bear a 1.00% annual fee on
undrawn amounts. The fair value of the GF 2013-2 Notes approximated its carrying value on the consolidated statements of financial
condition as of September 30, 2015 and December 31, 2014, respectively.



The ability of GF 2013-2 to draw under the Class A-1R Notes
terminates on September 25, 2016, which is also the end of the extended reinvestment period. The Secured Notes are secured by
all of the assets held by GF 2013-2.



The indenture governing the notes issued as part of the CLO
provides that, to the extent cash is available from cash collections, the holders of the GF 2013-2 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 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 2013-2 to the amount of interest payable on the Secured Notes under the 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 2013-2 will be required to apply available amounts to the repayment of interest on and principal of
the GF 2013-2 Notes to the extent necessary to satisfy the applicable coverage tests and, as a result, there may be reduced funds
available for GF 2013-2 to make additional investments or to make distributions on the Company’s equity interests in GF
2013-2. Additionally, compliance is measured on each day collateral loans are purchased, originated or sold and in connection
with monthly reporting to the note holder.



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-1
Notes and remains so for ten business days, an event of default will be deemed to have occurred. As of September 30, 2015 and
December 31, 2014, the trustee for the CLO has asserted that all of the coverage tests were met.



Garrison SBIC Borrowings



As discussed in Note 1, Garrison
SBIC received a license to operate as an SBIC from the SBA on May 26, 2015. The SBIC license allows Garrison SBIC to obtain SBA-guaranteed
debentures in an amount equal to 2.0x equity 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.





39




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





7. 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 the SBA exercises its remedies
under the SBA-guaranteed debentures issued by Garrison SBIC upon an event of default.



As of September 30, 2015,Garrison
SBIChad regulatory capital of $35.0 million and total SBIC borrowings outstanding of $14.8
million. The SBIC borrowings were comprised of $14.0 million of SBA guaranteed debentures that mature on September 1, 2025 and
$0.8 million of interim financings that mature on March 23, 2016 upon which they are expected to be pooled into 10 year debentures.The fair value of the SBIC borrowings approximated its carrying value on the consolidated statement of financial condition
as of September 30, 2015. As of September 30, 2015, the Company had $2.7 million of available SBIC leverage capacity.



GLC Trust 2013-2 Notes



GLC Trust 2013-2 entered into a $10.0 million revolving facility
with Capital One Bank, NA on December 6, 2013. The revolving facility included an accordion feature, such that GLC Trust 2013-2
was permitted to increase the total commitment up to $15.0 million under the terms of the loan agreement. GLC Trust 2013-2 exercised
this option on December 20, 2013.



On July 11, 2014, GARS increased the GLC Trust 2013-2 Revolver
commitment by $15.0 million, for a total commitment of $30.0 million. On July 18, 2014, GARS completed a $39.2 million term debt
securitization collateralized by the GLC Trust 2013-2 consumer loan portfolio (“GLC Trust 2013-2 Securitization”).



The notes offered in the GLC Trust 2013-2 Securitization were
issued by GLC Trust 2013-2 and 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”, and collectively with the GLC Trust 2013-2 Class
A Notes, the “GLC Trust 2013-2 Notes”). As of December 31, 2014, GARS has retained all of the 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
GLC Trust 2013-2 Revolver, 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 of September 30, 2015 and December 31, 2014, 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% 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.





40




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





7. Financing  – (continued)



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 September 30, 2015, all of the coverage
tests were met.



Deferred Debt Issuance Costs and other Fees



Fees paid as part of the execution of the Credit
Facility, the refinance of the Credit Facility and the execution of the CLO in the amount of $6.2 million consisted of
facility fees of $4.3 million and other costs of $1.9 million, which included rating agency fees and legal fees. Fees paid as
part of the execution of the GLC Trust 2013-2 Securitization in the amount of $0.4 million consisted of legal and other fees. For
the nine months ended September 30, 2015, we paid upfront fees of $0.7 million on our SBIC borrowings. The upfront fees
totaled 3.48% and comprised of a 1.00% commitment fee, a 2.00% leverage fee and 0.43% of other fees. These costs are
included in deferred debt issuance costs on the consolidated statements of financial condition and will be amortized over the
stated maturity of the respective loans, with $4.5 million and $4.4 million of deferred debt issuance costs remaining as of
September 30, 2015 and December 31, 2014, respectively.





8. Related Party Transactions



Investment Advisory Agreement



GARS entered into the Investment Advisory Agreement with the Investment Adviser, which was
effective as of October 9, 2012 and subsequently amended and restated on May 6, 2014. A new Investment Advisory Agreement was approved
by the Company’s stockholders on May 1, 2015. 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.



Incentive Fee Overview



Under the 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% 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% 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% of such pre-incentive fee net investment income as if the Hurdle Rate did not apply; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | 20% 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).
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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.









41




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015







8. Related Party Transactions – (continued)





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% 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.



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 20.0% of our cumulative pre-incentive fee net return during the
applicable 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 will consist of fewer than 12 full fiscal quarters.



The following table provides a breakdown of our management and incentive fees for the Three
and Nine Months Ended September 30, 2015 and 2014:





|                                                   |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|-------------------------------------------------- |  | -------------------------------- | ----- | -------------------------------
|($ in thousands)                                   |  | 2015                             |       | 2014                           
|Management Fees                                    |  |                                  |       |                                
|Management Fees                                    |  |                                  | 1,955 |                                
|Total Management Fees                              |  |                                  | 1,955 |                                
|                                                   |  |                                  |       |                                
|Incentive Fees                                     |  |                                  |       |                                
|Income-Based Incentive Fees                        |  |                                  | 1,632 |                                
|Capital Gains-Based Incentive Fees(1)              |  |                                  | (844  | )                              
|Incentive Fees Subject to Cap & Deferral Mechanism |  |                                  | (871  | )                              
|Total Incentive Fees                               |  |                                  | (83   | )                              







| | (1) | Capital Gains-Based Incentive Fee included $(0.8) million and $(1.6) million of incentive fees on unrealized capital gains/(losses)
as calculated under U.S. GAAP for the three and nine months ended September 30, 2015, respectively. Capital Gains-Based Incentive
Fee included $(0.3) million and $1.4 million of incentive fees on unrealized capital gains/(losses) as calculated under U.S. GAAP
for the three and nine months ended September 30, 2014, respectively.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Management fees in the amount of $2.0 million and $0.3 million were payable as of September
30, 2015 and December 31, 2014, respectively, and are included in management fee payable on the consolidated statements of financial
condition.



Based on our actual cumulative pre-incentive fee net return as of September 30, 2015, incentive
fees earned by our Investment Advisor were capped, which resulted in the reversal of $(0.1) million of aggregate incentive fees
for the three months ended September 30, 2015. Had the company met or exceeded the 20% cumulative pre-incentive fee net return
the Investment Advisor would have earned $1.6 million on the income portion of its incentive fee for the three months ended September
30, 2015. These amounts may be earned and payable in future periods based on the future performance of the fund, subject to the
Incentive Fee Look-back Period. For the nine months ended September 30, 2015, the Investment Adviser earned $1.6 million of incentive
fees in the aggregate.







42




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





8. Related Party Transactions  – (continued)





The Investment Adviser earned aggregate incentive fees of $1.3 million and $7.1 million for
the three and nine months ended September 30, 2014, respectively. Incentive fees in the amount of $0.5 million and $2.8
million were payable as of September 30, 2015 and December 31, 2014, respectively, and are included in incentive fee payable on
the consolidated statements of financial condition.





Administration Agreement



As discussed in Note 1, GARS entered into 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 nine months ended
September 30, 2015 and September 30, 2014.



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 for the three and nine months ended
September 30, 2015 were $0.2 million and $0.8 million, respectively. Administrator
charges for the three and nine months ended September 30, 2014 were $0.2 million and $0.6 million, respectively. Administration
fees of $0.5 million were payable to the GARS Administrator as of September 30, 2015 and $0.1 million were prepaid as of December
31, 2014.





43




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





8. Related Party Transactions  – (continued)



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 and nine months ended September 30, 2015, independent
directors earned Directors’ Fees of $0.1 million and $0.3 million, respectively. For the three and nine months ended
September 30, 2014, independent directors earned Directors’ Fees of $0.1 million and $0.3 million, respectively. No directors’
fees were payable as of September 30, 2015 and December 31, 2014.



Affiliated Stockholders



GSOF LLC, GSOF 2014 LLC, GSOF-SP LLC, GSOF-SP 2014 LLC, GSOF-SP
II LLC, GSOF-SP 2014 II LLC, GSOF-SP DB LLC (subsidiaries of Garrison Special Opportunities Fund LP), GSOIF Corporate Loan Pools
Ltd. (a subsidiary of Garrison Special Opportunities Institutional Fund LP), GCOH SubCo 2014-1 LLC (a subsidiary of Garrison Credit
Opportunities Holdings L.P.), GCOH SubCo 2014-2 LLC (a subsidiary of Garrison Credit Opportunities Holdings L.P.), Garrison Capital
Fairchild I Ltd. (a subsidiary of Fairchild Offshore Fund L.P.), Garrison Capital Fairchild II Ltd. (a subsidiary of Fairchild
Offshore Fund II L.P.) and Garrison Capital Adviser Holdings MM LLC (collectively, the “Garrison Funds”) are all entities
that are owned by funds that are managed by the Investment Manager.



As of December 31, 2014, the Garrison Funds owned an
aggregate of 2,024,372, or 12.1%, of the total outstanding common shares of GARS, and the officers and directors of the
Company directly owned an aggregate of 73,032, or 0.4%, of the total outstanding common shares of GARS. On March 19, 2015,
GSOF LLC, GSOF-SP LLC, GSOF-SP II LLC, GSOF-SP DB LLC, GSOIF Corporate Loan Pools Ltd., and GCOH SubCo 2014-1 LLC.
(collectively, the “Garrison Offering Funds”) sold an aggregate 884,990 shares of GARS common stock in a
secondary offering. In connection with this sale, the Garrison Offering Funds agreed to reimburse the Company for certain
fees and expenses in the amount of $18,654 incurred in connection with the filing of the Company’s Registration
Statement. On March 23, 2015, the Garrison Offering Funds sold an aggregate of 125,000 shares of GARS common stock in a
private offering. On May 8, 2015, Garrison Capital Fairchild I Ltd. and Garrison Capital Fairchild II Ltd sold an aggregate
200,000 shares of GARS common stock in a secondary offering.





On August 10, 2015 GSOF 2014 LLC, GSOF-SP 2014 LLC, GSOF-SP 2014 II LLC and
GCOH SubCo 2014-2 LLC distributed an aggregate of 24,472 shares to certain officers and members of senior management of
the Company. As of September 30, 2015, Garrison Capital Fairchild I Ltd., Garrison
Capital Fairchild II Ltd. and Garrison Capital Adviser Holdings MM LLC owned an aggregate of 789,910, or 4.7%, of the
total outstanding shares of GARS common stock, the officers and directors of the Company directly owned an aggregate
of 111,015, or 0.7%, of the total outstanding shares of GARS common stock, and the Garrison Offering Funds held zero
shares of common stock.





44




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





8. Related Party Transactions  – (continued)



Other



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 nine months ended September 30, 2015 and September 30, 2014.



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.



9. Financial Highlights



The following table represents financial highlights for the
Company for the nine months ended September 30, 2015 and September 30, 2014:





|Per share data                                                       |  | September 30,
2015 |            | September 30,
2014
|-------------------------------------------------------------------- |  | ------------------ | ---------- | ------------------
|($ in thousands, except share and per share amounts)                 |  |                    |            |                   
|Net asset value per common share at beginning of period              |  | $                  | 15.58      |                   
|Increase in net assets from operations:                              |  |                    |            |                   
|Net investment income                                                |  |                    | 1.38       |                   
|Net realized (loss)/gain on investments                              |  |                    | (0.67      | )                 
|Net unrealized (loss) on investments                                 |  |                    | (0.32      | )                 
|Net increase in net assets from operations                           |  |                    | 0.39       |                   
|Stockholder transactions                                             |  |                    |            |                   
|Distributions from net investment income                             |  |                    | (1.05      | )                 
|Total additions from and dividends and distributions to stockholders |  |                    | (1.05      | )                 
|Net asset value per common share at end of period                    |  |                    | 14.92      |                   
|Per share market value at beginning of period                        |  | $                  | 14.44      |                   
|Per share market value at end of period                              |  |                    | 13.69      |                   
|Total book return (1)                                                |  |                    | 2.50       | %                 
|Total market return (2)                                              |  |                    | 1.70       | %                 
|Common shares outstanding at beginning of period                     |  |                    | 16,758,779 |                   
|Common shares outstanding at end of period                           |  |                    | 16,758,779 |                   
|Weighted average common shares outstanding                           |  |                    | 16,758,779 |                   
|Net assets at beginning of period                                    |  | $                  | 261,103    |                   
|Net assets at end of period                                          |  | $                  | 250,113    |                   
|Average net assets (3)                                               |  | $                  | 260,279    |                   
|Ratio of net investment income to average net assets (3)(5)          |  |                    | 11.41      | %                 
|Ratio of net expenses to average net assets (4)(5)                   |  |                    | 9.00       | %                 
|Ratio of portfolio turnover to average investments at fair value(4)  |  |                    | 29.02      | %                 
|Asset coverage ratio (6)                                             |  |                    | 231.83     | %                 
|Average outstanding debt (7)                                         |  | $                  | 230,084    |                   
|Average debt per common share                                        |  | $                  | 13.73      |                   



|(1) |  | Total
                                         book return equals the net increase of ending net asset value from operations over the
                                         net asset value per common share at 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) |  | Calculated
                                         based on monthly average investments at fair value.
|--- |  | -------------------------------------------------------------------------------------------------------

|(5) |  | There
                                         were no fee waivers for the  nine months ended  September 30, 2015 or  September 30, 2014.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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









45




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015





10. Earnings per Share



The following table sets forth the computation of the net
increase in net assets per share resulting from operations, pursuant to FASB ASC 260, Earnings per Share (“ASU 260”),
for the nine months ended September 30, 2015 and September 30, 2014:





|                                                        |  | Nine months ended      |            | Nine
    months ended 
|------------------------------------------------------- |  | ---------------------- | ---------- | ----------------------
|                                                        |  | September
    30, 2015 |            | September
    30, 2014
|($ in thousands, except share and per share amounts)    |  |                        |            |                       
|Net increase in net asset resulting
    from operations |  | $                      | 6,608      |                       
|Basic weighted average shares                           |  |                        | 16,758,779 |                       
|Basic earnings per share                                |  | $                      | 0.39       |                       





11. Dividends and 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,
that we have declared on our common stock for the nine months ended September 30, 2015 and September 30, 2014:





|Record Dates                             |  | Board
    Approval Date |                                                         | Payment
    Date |  | Distribution
    Declared |                                                             | Distribution
    Declared per Share
|---------------------------------------- |  | ----------------------- | ------------------------------------------------------- | ---------------- |  | ------------------------- | ----------------------------------------------------------- | -----------------------------------
|($ in thousands)                         |  |                         |                                                         |                  |  |                           |                                                             |                                    
|Nine months ended September 30, 2015 (1) |  |                         |                                                         |                  |  |                           |                                                             |                                    
|March 20, 2015                           |  |                         | March
                                         3, 2015  |                  |  |                           | March
                                         27, 2015     |                                    
|June 12, 2015                            |  |                         | April
                                         30, 2015 |                  |  |                           | June
                                         26, 2015      |                                    
|September 10, 2015                       |  |                         | July
                                         30, 2015  |                  |  |                           | September
                                         25, 2015 |                                    
|                                         |  |                         |                                                         |                  |  |                           |                                                             |                                    



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







|Record Dates                             |  | Board
    Approval Date |                                                         | Payment
    Date |  | Distribution
    Declared |                                                             | Distribution
    Declared per Share
|---------------------------------------- |  | ----------------------- | ------------------------------------------------------- | ---------------- |  | ------------------------- | ----------------------------------------------------------- | -----------------------------------
|($ in thousands)                         |  |                         |                                                         |                  |  |                           |                                                             |                                    
|Nine months ended September 30, 2014 (1) |  |                         |                                                         |                  |  |                           |                                                             |                                    
|March 21, 2014                           |  |                         | March
                                         11, 2014 |                  |  |                           | March
                                         28, 2014     |                                    
|June 13, 2014                            |  |                         | May
                                         6, 2014    |                  |  |                           | June
                                         27, 2014      |                                    
|September 12, 2014                       |  |                         | August
                                         4, 2014 |                  |  |                           | September
                                         26, 2014 |                                    
|                                         |  |                         |                                                         |                  |  |                           |                                                             |                                    



|(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.





46




Garrison Capital Inc. and Subsidiaries



Notes to Consolidated Financial Statements
(unaudited)



September 30, 2015



12. Commitments and Contingencies



The Company had outstanding commitments to fund investments
totaling $9.8 million and $18.2 million under various undrawn revolvers and other credit facilities as of September 30, 2015 and
December 31, 2014, 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.





13. Subsequent Events





On October 5, 2015, the Company adopted a share repurchase plan that provides for repurchase
of up to $10.0 million of its common stock at prices below the Company's net asset value per share as reported in its most recent
financial statements. Under the repurchase program, the Company 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 the Company will comply with the requirements of Rule 10b-18 under the Securities Exchange
Act of 1934, as amended, and any applicable requirements of the Investment Company Act of 1940, as amended. Unless extended by
the Company's board of directors, the repurchase program will terminate on the earlier of October 5, 2016 or the repurchase
of $10.0 million of the Company's common stock. The Company's board of directors may amend this program, solely in its discretion,
at any time prior to its termination.







On November 2, 2015, the Board approved a distribution in the amount of $5.9 million, or $0.35 a share, which will be paid
on December 28, 2015 to stockholders of record as of December 11, 2015.



These consolidated financial statements were approved by the
Board and were available for issuance on November 4, 2015. Subsequent events have been evaluated through this date. No material
subsequent events other than as disclosed above have occurred through this date.



47




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 "we,"
"us," "our" 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 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 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;
|- |  | --------------------------------------------------------------------------------------------------

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

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

|• |  | our ability to make distributions to our stockholders;
|- |  | ------------------------------------------------------

|• |  | 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 “anticipates,” “believes,” “expects,”
“intends” and similar expressions 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, except as required by law. 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 U.S. 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.





48




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
by making investments generally in the range of $5.0 million to $25.0 million primarily in debt securities and loans
of U.S. based middle-market companies, which we define as those having annual earnings before interest, taxes,  depreciation
and amortization, or EBITDA, of between $5.0 million and $30.0 million. Our goal is to generate attractive risk-adjusted returns by
assembling a broad portfolio of investments.



We invest primarily in (1) first lien senior secured loans, (2) second lien senior secured
loans, (3) “one-stop” senior secured or “unitranche” loans, (4) subordinated or mezzanine loans, (5) unsecured
consumer loans and (6) to a lesser extent, selected equity co-investments in middle-market companies. We use the term “one-stop”
or “unitranche” to refer to a loan that combines characteristics of traditional first lien senior secured loans and
second lien or subordinated loans. We use the term “mezzanine” to refer to a loan that ranks senior only to a borrower’s
equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness.



We believe that the middle market offers attractive risk-adjusted returns for debt investors.
Historically, we believe there has been a persistent scarcity of available capital relative to demand, which, from a lender’s
perspective, has generally resulted in more favorable transaction structures, including enhanced covenant protection and increased
pricing of debt securities relative to larger companies. We further believe that the turmoil in the markets has exacerbated this
scarcity of capital, as many traditional lenders to middle-market companies have exited the business or focused their attention
on larger borrowers. In addition, we believe middle-market companies traditionally have exhibited lower default rates and improved
recoveries compared to larger borrowers and typically offer greater access to key senior managers, which we believe further enhances
the attractiveness of lending to this market segment and facilitates due diligence investigations and regular monitoring.



Our investment activities are managed by our Investment Adviser. Our five member investment
committee is comprised of Joseph Tansey, Rafael Astruc, Brian Chase, Mitch Drucker and Susan George. 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, or the Investment Advisory Agreement, with the Investment Adviser, we pay the Investment
Adviser a base management fee and an incentive fee 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
and 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 September 30, 2015, we held investments in 52 portfolio companies with a
fair value of $407.8 million, including investments in 37 portfolio companies held through the collateralized loan
obligation, or the CLO. The investments held by the CLO as of September 30, 2015 consisted of senior secured loans fair
valued at $299.5 million and related indebtedness of $169.3 million. The loans held by the CLO (held at fair value), together
with cash and other assets held by the CLO, equaled approximately $311.4 million as of September 30, 2015. As of September
30, 2015, our portfolio had an average investment size of approximately $7.8 million, a weighted average yield on debt
investments of 10.9% and a weighted average contractual maturity of 44 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.





49




As of December 31, 2014, we held investments in 57 portfolio companies with a fair value
of $467.8 million, including investments in 47 portfolio companies held through the CLO. The investments held by the CLO as of
December 31, 2014 consisted of senior secured loans fair valued at $339.4 million and related indebtedness of $209.7 million.
As of that date, the loans held by the CLO (held at fair value), together with cash and other assets held by the CLO, equaled
approximately $357.8 million. As of December 31, 2014, our portfolio had an average investment size of approximately $6.8 million,
a weighted average yield on debt investments of 10.5% and a weighted average contractual maturity of 46 months.



Revenues



We generate revenue in the form of interest earned on the debt investments that we hold
as well as capital gains and distributions, if any, on the warrants or other equity interests 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 seven years and bear interest at a fixed or floating rate. Interest is generally payable monthly or quarterly, with the
amortization of principal generally being deferred for several years from the date of the initial investment. In some cases, loans
may have a payment-in-kind, or PIK, 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 commitment, origination, amendment
and forbearance fees. Loan origination fees, original issue discount and market discount are recorded as a reduction of par value,
and we then accrete such amounts into interest income. 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 investment income when we receive
such amounts. We recognize amendment and forbearance fees upon completion of the amendments or waivers, generally when such fees
are receivable.



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 firm);
|- |  | ----------------------------------------------------------------------------------------------------------------------------------

|• |  | 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;
|- |  | ------------------



50




|• |  | 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 the allocable portion of overhead under the Administration Agreement, 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. Incentive fees,
interest expenses and costs relating to future offerings of securities would be additive to the expenses described above.



Recent Developments





On October 5, 2015, we adopted a share repurchase plan that provides for repurchase
of up to $10.0 million of our common stock at prices below our net asset value per share as reported in our most recent
financial statements. Under the repurchase program, we may, but
are not obligated to, repurchase shares of our outstanding common stock in the open market or in privately negotiated
transactions from time to time. Any repurchases by us will comply with the requirements of Rule 10b-18 under the Securities
Exchange Act of 1934, as amended, and any applicable requirements of the Investment Company Act of 1940, as amended. Unless
extended by our board of directors, or the Board, the repurchase program will terminate on the earlier of October
5, 2016 or the repurchase of $10.0 million of our common stock. The company's Board  may amend
this program, solely in its discretion, at any time prior to its termination.



On November 2, 2015, the Board approved
a distribution in the amount of $5.9 million, or $0.35 a share, which will be paid on December 28, 2015 to stockholders of
record as of December 11, 2015.



Since September 30, 2015, the Company closed additional investments totaling $16.5
million of par value across seven new portfolio investments.



Market Trends



We believe that capital remains limited in the lower middle-market as
many traditional lenders to these companies have exited the business due to regulatory restrictions, and many competitors
have moved up-market to focus their attention on larger borrowers. Sponsor and club business continues to represent the
majority of direct lending opportunities in the lower middle-market, although we have seen banks, other non-bank finance
companies and funds participate in select one-off financings. However, capital markets volatility negatively affected demand
for capital over the last few months and sponsor business has decreased. Lower middle-market opportunities continued to
command better pricing and structures than in the broadly syndicated market and upper middle-market.



We believe that our expertise in providing non-traditional financing solutions to the
lower middle-market allows us to tailor loan structures that meet borrower objectives while commanding premium pricing and maximizing
the preservation of capital although increased competition could result in further spread compression.





51




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 and nine months ended September 30, 2015
and September 30, 2014 are as follows:





|                                                                |  | Three Months
                                                                       ended |        | Three Months
                                                                       ended |  | Three
                                                                       Months |        | Nine Months
                                                                       ended |  | Nine Months
                                                                       ended |        | Nine
                                                                       Months
|--------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | ------ | ----------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- | ------ | ---------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- | ------ | ----------------------------------------------------------------------------------
|                                                                |  | September 30, 2015                                                                        |        | September 30, 2014                                                                        |  | Variance                                                                            |        | September 30, 2015                                                                       |  | September 30, 2014                                                                       |        | Variance                                                                          
|($ in thousands, except per share data)                         |  | (Unaudited)                                                                               |        | (Unaudited)                                                                               |  |                                                                                     |        | (Unaudited)                                                                              |  | (Unaudited)                                                                              |        |                                                                                   
|Net investment income                                           |  | $                                                                                         | 8,244  |                                                                                           |  | $                                                                                   | 6,261  |                                                                                          |  | $                                                                                        | 1,983  |                                                                                   
|Total investment income                                         |  |                                                                                           | 13,206 |                                                                                           |  |                                                                                     | 12,944 |                                                                                          |  |                                                                                          | 262    |                                                                                   
|Total expenses                                                  |  |                                                                                           | 4,962  |                                                                                           |  |                                                                                     | 6,683  |                                                                                          |  |                                                                                          | (1,721 | )                                                                                 
|Net realized (loss)/gain on investments                         |  |                                                                                           | (2,301 | )                                                                                         |  |                                                                                     | 1,198  |                                                                                          |  |                                                                                          | (3,499 | )                                                                                 
|Net change in unrealized losses on investments                  |  |                                                                                           | (6,184 | )                                                                                         |  |                                                                                     | (2,378 | )                                                                                        |  |                                                                                          | (3,806 | )                                                                                 
|Net (decrease)/increase in net assets resulting from operations |  |                                                                                           | (241   | )                                                                                         |  |                                                                                     | 5,081  |                                                                                          |  |                                                                                          | (5,322 | )                                                                                 
|                                                                |  |                                                                                           |        |                                                                                           |  |                                                                                     |        |                                                                                          |  |                                                                                          |        |                                                                                   
|Net investment income per share                                 |  |                                                                                           | 0.49   |                                                                                           |  |                                                                                     | 0.37   |                                                                                          |  |                                                                                          | 0.12   |                                                                                   
|Net realized/unrealized (loss)/gain from                        |  |                                                                                           |        |                                                                                           |  |                                                                                     |        |                                                                                          |  |                                                                                          |        |                                                                                   
|investments per share                                           |  |                                                                                           | (0.50  | )                                                                                         |  |                                                                                     | (0.07  | )                                                                                        |  |                                                                                          | (0.43  | )                                                                                 
|Net (loss)/earnings per share                                   |  |                                                                                           | (0.01  | )                                                                                         |  |                                                                                     | 0.30   |                                                                                          |  |                                                                                          | (0.31  | )                                                                                 
|Net asset value per share                                       |  |                                                                                           | 14.92  |                                                                                           |  |                                                                                     | 15.59  |                                                                                          |  |                                                                                          | (0.67  | )                                                                                 





Net Investment Income



Net investment income for the three and nine months ended September 30, 2015 was $8.2
million and $23.1 million, respectively. Net investment income for the three and nine months ended September 30, 2014 was $6.3
million and $15.1 million, respectively.



Net investment income increased by $2.0 million for the three months ended September
30, 2015 from the three months ended September 30, 2014 and increased by $8.0 million for the nine months ended September 30, 2015
from the nine months ended September 30, 2014, as described below under “Investment Income” and “Expenses.”





Investment Income



Investment income for the three and nine months ended September 30, 2015 was $13.2 million
and $39.8 million, respectively. Investment income for the three and nine months ended September 30, 2014 was $12.9 million and
$37.1 million, respectively.



Investment income increased by $0.3 million for the three months ended September 30,
2015 from the three months ended September 30, 2014 due to an increase in interest income in the amount of $0.3 million. The increase
in interest income was largely driven by an increased weighted average yield on investments during the three months ended September
30, 2015 as compared to September 30, 2014.



Investment income increased by $2.8 million for the nine months ended September 30, 2015
from the nine months ended September 30, 2014 due to an increase in interest income in the amount of $3.5 million and an increase
in other income of $0.1 million, offset by a decrease in dividend income of $(0.5) million. The increase in interest income was
primarily driven by the increase in the average portfolio investment balance and an increased weighted average yield on investments
during the nine months ended September 30, 2015 as compared to September 30, 2014. The decrease in dividend income was primarily
driven by decrease in dividend income from one portfolio investment.









Expenses



Total expenses for the three and nine months ended September 30, 2015 were $5.0 million
and $16.7 million, respectively. Total expenses for the three and nine months ended September 30, 2014 were $6.7 million and $21.9
million, respectively.





52




The following table summarizes our expenses, excluding accrued excise tax and
the loss on refinancing of QLC Trust 2013-2 Revolvers, for the three and nine months ended September 30, 2015 and September
30, 2014:





|                       |  | Three Months ended |       | Three Months ended |  | Three Months |       | Nine Months ended  |  | Nine Months ended  |        | Nine Months
|---------------------- |  | ------------------ | ----- | ------------------ |  | ------------ | ----- | ------------------ |  | ------------------ | ------ | -----------
|($ in thousands)       |  | September 30, 2015 |       | September 30, 2014 |  | Variance     |       | September 30, 2015 |  | September 30, 2014 |        | Variance   
|                       |  | (Unaudited)        |       | (Unaudited)        |  |              |       | (Unaudited)        |  | (Unaudited)        |        |            
|Interest               |  | $                  | 1,874 |                    |  | $            | 1,871 |                    |  | $                  | 3      |            
|Management fees        |  |                    | 1,955 |                    |  |              | 2,024 |                    |  |                    | (69    | )          
|Incentive Fees         |  |                    | (83   | )                  |  |              | 1,270 |                    |  |                    | (1,353 | )          
|Professional fees      |  |                    | 400   |                    |  |              | 255   |                    |  |                    | 145    |            
|Directors fees         |  |                    | 97    |                    |  |              | 96    |                    |  |                    | 1      |            
|Administrator expenses |  |                    | 241   |                    |  |              | 165   |                    |  |                    | 76     |            
|Other expenses         |  |                    | 484   |                    |  |              | 623   |                    |  |                    | (139   | )          
|Total expenses         |  | $                  | 4,968 |                    |  | $            | 6,304 |                    |  | $                  | (1,336 | )          





Interest expense increased $0.3 million, for the nine months ended September 30, 2015
from the nine months ended September 30, 2014, primarily due to an increase in average effective interest rate on debt outstanding.
As of September 30, 2015 and September 30, 2014, the weighted average effective interest rate for total outstanding
debt was 3.25% and 3.05%, respectively.



Incentive fees decreased by $(1.4) million and $(5.4) million for the three and nine
months ended September 30, 2015, respectively, from the three and nine months ended September 30, 2014, primarily due to increased
realized and unrealized losses on investments.





Professional fees increased by $0.1
million for both the three and nine months ended September 30, 2015 from the three and nine months ended September 30, 2014, driven
primarily by higher audit and consulting expenses. The Administrator expense increase by $0.1 million and $0.2 million for the
three and nine months ended September 30, 2015, respectively, from the three and nine months ended September 30, 2014, primarily
driven by higher allocation of overhead costs.





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



For the three and nine months ended September 30, 2015, we realized a net loss on investments
of $(2.3) million and $(11.3) million, respectively.



Net realized losses for the three months ended September 30, 2015 were primarily
driven by a $(4.3) million realized loss resulting from the significant restructuring of one portfolio investment and $(0.8)
million of realized losses in GLC Trust 2013-2’s consumer loan portfolio. These were offset by a $2.5 million realized
gain recognized as a result of the partial sale of one portfolio investment and $0.3 million of realized gains on the early
full repayments of six portfolio investments and other partial repayments.





Net realized losses for the nine months ended
September 30, 2015 were primarily driven by $(8.4) million of realized losses incurred from the significant restructurings of
two portfolio investments, a realized loss of $(4.4) million from the early full repayment of one portfolio investment, and
$(2.1) million of realized losses in GLC Trust 2013-2’s consumer loan portfolio. This was offset by a $2.5 million
realized gain incurred from the partial sale of one portfolio investment and net realized gains of $1.1 million incurred from
the early full repayment of 16 portfolio investments, the sale of one portfolio investment and other partial repayments.





For the three and nine months ended September 30, 2014, we realized net gain on investments
of $1.2 million and $10.9 million, respectively.



Net realized gains for the three months ended September 30, 2014 were incurred as a result
of the sale of five portfolio investments, the early full repayment of eight portfolio investments and other partial repayments.





53




Net realized gains for the nine months ended September 30, 2014 were driven primarily
by $8.1 million of realized gains incurred from the sale of the parent company of one portfolio investment, Anchor Drilling Fluids
USA, Inc., or Anchor, resulting in the early full repayment of the debt and sale of the equity, with the remaining net realized
gain of $2.8 million resulting from the sale of 13 portfolio investments, early full repayment of 27 portfolio
investments and other partial repayments.



For the three and nine months ended September 30, 2015 the net change in unrealized loss
on investments was $(6.2) million and $(5.2) million, respectively.







The net change in unrealized
loss for the three months ended September 30, 2015 was driven primarily by $(4.2) million of negative credit related
adjustment of three portfolio investments, a $(2.2) million reversal of prior period unrealized gains due to the partial sale
of one portfolio investment,  a $(0.9) million negative market-related adjustment on one portfolio investment, $(0.3) million
of reversals of prior period unrealized gains due to the early full repayment of six portfolio investments and $(0.1) million
decrease in the market value of the remaining portfolio. This was offset by the reversal of a prior period unrealized loss in
the amount of $1.5 million driven by the significant restructuring of one portfolio investment.









The net change in unrealized loss
for the nine months ended September 30, 2015 was primarily driven by $(7.4) million of negative credit related adjustment of
four portfolio investments, a $(1.5) million reversal of prior period unrealized gains resulting from the partial sale of one
portfolio investment, and a $(0.9) million negative market-related adjustment on one portfolio investment. This was offset by $4.3
million  from the reversal of prior period unrealized losses resulting from the significant restructuring of two portfolio
investments, and an increase of $0.3 million in the value of one portfolio investment.





For the three and nine months ended September 30, 2014, the net change in unrealized
loss on investments was $(2.4) million and $(1.2) million, respectively.



The net change in unrealized loss for the three months ended September 30, 2014 was driven
primarily by the negative credit related adjustment of one portfolio investment in the amount of $(1.5). The remaining net change
in unrealized losses on investments was due to the reversal of prior period unrealized gains of $(1.1) million offset by the increase
in the market value of the remaining portfolio of $0.2 million.



The net change in unrealized loss for the nine months ended September 30, 2014 was driven
primarily by the reversal of prior period unrealized gains in the amount of $(1.8) million as a result of the sale of the parent
company of Anchor and the negative credit related adjustment of two portfolio investments in the amount of $(3.3) million, offset
by the increase in value of two portfolio investments in the amount of $3.8 million. The remaining net change in unrealized
loss on investments was due to the reversal of prior period unrealized gains of $(0.6) million, offset by the increase in the market
value of the remaining portfolio in the amount of $0.7 million.



Net Increase in Net Assets from Operations



We had a net asset value per common share outstanding on September 30, 2015 of $14.92.
We had a net asset value per common share outstanding on December 31, 2014 of $15.58.





Based on 16,758,779 basic weighted average shares outstanding, the net decrease in net
assets from operations per share for the three months ended September 30, 2015 was $(0.01).



Based on 16,758,779 basic weighted average shares outstanding, the net increase in net
assets from operations per share for the three months ended September 30, 2014 was $0.30.



Based on 16,758,779 basic weighted average shares outstanding, the net increase in net
assets from operations per share for the nine months ended September 30, 2015 was $0.39.



Based on 16,758,779 basic weighted average shares outstanding, the net increase in net
assets from operations per share for the nine months ended September 30, 2014 was $1.48.



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 securities, the CLO, as described below, Garrison SBIC, other borrowings we may incur, and 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.





54




In addition to proceeds from public and private offerings of securities, our CLO, Garrison
SBIC borrowings and GLC Trust 2013-2 Notes, as of September 30, 2015 we have identified two portfolio companies with a total par
value of $12.9 million and a fair value of $12.3 million which are transitory, which we define as those investments that generally
yield less than 9.0%. We view these investments as an additional source of liquidity to meet our investment objectives.



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 and our transitory portfolio as of September 30, 2015 will be
sufficient to fund our anticipated funding requirements through at least September 30, 2016.



On March 3, 2015, the Board approved a distribution in the amount of $5.9 million, or
$0.35 a share, which was paid on March 27, 2015 to stockholders of record as of March 20, 2015. On April 30, 2015, the Board
approved a distribution in the amount of $5.9 million, or $0.35 a share, which was paid on June 26, 2015 to stockholders of
record as of June 12, 2015. On November 3, 2015, the Board approved a distribution in the amount of $5.9 million, or $0.35 a share,
which will be paid on December 28, 2015 to stockholders of record as of December 11, 2015.



As of September 30, 2015 and December 31, 2014, we had cash of $30.6 million and $13.7
million, respectively. Also, as of September 30, 2015 and December 31, 2014, we had restricted cash of $6.8 million and $14.3 million,
respectively.



During the nine months ended September 30, 2015, cash increased by $17.0 million as a
result of net cash provided by operating activities of $72.6 million offset by net cash used in financing activities in the amount
of $(55.6) million.



During the nine months ended September 30, 2015, cash provided by operating
activities resulted mainly from $23.1 million of net investment income, $46.7 million of  net repayments and sales
of investments, $(11.3) million of realized losses from investments, a $7.5 million change in restricted cash and $(5.2) million of
unrealized losses. Net cash used in financing activities resulted from $(17.6) million in cash distributions, $(11.6) million
in repayments of the GLC Trust 2013-2 Class A notes and $(40.5) million in repayments of the CLO revolving notes, offset by
proceeds from Garrison SBIC borrowings in the amount of $14.8 million.



During the nine months ended September 30, 2014, cash and cash equivalents increased
by $11.9 million as a result of net cash provided by operating activities of $21.5 million offset by cash used in financing activities
in the amount of $(9.6) million.



During the nine months ended September 30, 2014, cash provided by operating
activities resulted mainly from net investment income in the amount of $15.1 million, realized gains in the amount of $10.9
million, repayments and sales of investments in the amount of $225.7 million and $91.4 million, respectively, as well as an
increase in payables to affiliates in the amount of $3.6 million and a decrease in due from counterparties in the amount of
$5.0 million, offset by purchases of investments in the amount of $325.0 million and a decrease in due to counterparties in
the amount of $2.7 million. Net cash used in financing activities resulted from cash distributions in the amount of $17.6
million, repayments on the Class A-1R note in the amount of $16.0 million, repayment of the GLC Trust 2013-2 Revolver in
the amount of $9.7 million and debt issuance costs of $0.5 million, offset by proceeds from the GLC Trust 2013-2 Notes in the
amount of $34.2 million.



As of September 30, 2015 and December 31, 2014, we had $9.8 million and $18.2 million,
respectively, of unfunded obligations with a fair value of $(0.1) million and $(0.3) 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 September 30, 2015 and December 31, 2014, respectively, subject
to the terms of each loan’s respective credit agreement.



Subject to leverage and borrowing base restrictions, as of September 30, 2015, we had
approximately $40.5 million available for additional borrowings under the CLO, $2.7 million of available SBIC leverage and no available
borrowings under the GLC Trust 2013-2 Revolver. As of December 31, 2014, we had approximately $0.0 and $0.8 million available for
additional borrowings under the CLO and GLC Trust 2013-2 Revolver, respectively.





55




Portfolio Composition and Select Portfolio Information



As of September 30, 2015, we held investments in 52 portfolio companies with a fair value
of $407.8 million. As of September 30, 2015, our portfolio had an average investment size of approximately $7.8 million, a weighted
average yield of 10.9% and a weighted average contractual maturity of 44 months.



The following table shows select information of our portfolio for the periods from September
30, 2014 to September 30, 2015.



|($ in thousands)                         |  |   | September 30,2015 |   |  | June 30,2015 |         | March 31,2015 |  | December 31,2014 |         | September 30,2014 | 
|---------------------------------------- |  | - | ----------------- | - |  | ------------ | ------- | ------------- |  | ---------------- | ------- | ----------------- | 
|Total Market Value                       |  | $ | 407,757           |   |  | $            | 435,072 |               |  | $                | 452,011 |                   | 
|Number of portfolio companies            |  |   | 52                |   |  |              | 54      |               |  |                  | 57      |                   | 
|Average investment size (1)              |  | $ | 7,794             |   |  | $            | 7,361   |               |  | $                | 6,730   |                   | 
|Weighted average yield (2)               |  |   | 10.9              | % |  |              | 11.0    | %             |  |                  | 10.8    | %                 | 
|Weighted average price (1)               |  |   | 97.3              |   |  |              | 97.1    |               |  |                  | 95.9    |                   | 
|First lien                               |  |   | 90.6              | % |  |              | 88.8    | %             |  |                  | 85.8    | %                 | 
|Second lien & mezzanine/subordinated     |  |   | 1.8               | % |  |              | 2.6     | %             |  |                  | 5.5     | %                 | 
|Consumer loans                           |  |   | 5.4               | % |  |              | 6.1     | %             |  |                  | 6.9     | %                 | 
|Equity & other                           |  |   | 2.2               | % |  |              | 2.5     | %             |  |                  | 1.8     | %                 | 
|Originated (3)                           |  |   | 61.1              | % |  |              | 55.3    | %             |  |                  | 50.4    | %                 | 
|Club (4)                                 |  |   | 27.6              | % |  |              | 28.7    | %             |  |                  | 27.0    | %                 | 
|Purchased                                |  |   | 11.3              | % |  |              | 16.0    | %             |  |                  | 22.6    | %                 | 
|Fixed (1)                                |  |   | 8.0               | % |  |              | 9.0     | %             |  |                  | 9.1     | %                 | 
|Floating (1)                             |  |   | 92.0              | % |  |              | 91.0    | %             |  |                  | 90.9    | %                 | 
|Performing (1)                           |  |   | 95.6              | % |  |              | 99.0    | %             |  |                  | 99.1    | %                 | 
|Non-accrual (1)                          |  |   | 4.4               | % |  |              | 1.0     | %             |  |                  | 0.9     | %                 | 
|Weighted average debt/EBITDA (1) (2) (5) |  |   | 3.7               | x |  |              | 3.7     | x             |  |                  | 3.6     | x                 | 
|Weighted average risk rating (1)         |  |   | 2.66              |   |  |              | 2.51    |               |  |                  | 2.48    |                   | 



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

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

| | (3) | Originated positions include investments where we have sourced and led the execution of the deal.
| | --- | -------------------------------------------------------------------------------------------------

| | (4) | Club positions include investments where we provided direct lending to a borrower with one or two other lenders but did not lead the deal.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Excludes non-operating portfolio companies, which we define as those
    investments collateralized by real estate, proved developed producing value (“PDP”) or other hard assets. PDPs
    are     proven revenues that can be produced with existing wells. As of September 30, 2015, $43.1 million of par value
    related     to non-operating portfolio companies was excluded.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



56




Ongoing Monitoring



We view 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 it’s 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 portfolio company’s 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 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 performance rating scale at fair value, excluding our interest in GLC Trust 2013-2, unfunded revolvers and equity
investments as of as of September 30, 2015 and December 31, 2014:



|                 |  | As of September 30, 2015 |         | As of December 31, 2014        
|---------------- |  | ------------------------ | ------- | -------------------------------
|($ in thousands) |  | Investmentsat Fair Value |         | Percentage of Total Investments
|Risk Rating 1    |  | $                        | 7,349   |                                
|Risk Rating 2    |  |                          | 138,599 |                                
|Risk Rating 3    |  |                          | 213,565 |                                
|Risk Rating 4    |  |                          | 17,370  |                                
|                 |  | $                        | 376,883 |                                



The weighted average risk rating of the portfolio was 2.66 and 2.52 as of September 30,
2015 and December 31, 2014, respectively.



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.





57




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 September 30, 2015 and December 31, 2014, we had $9.8 million and $18.2 million of outstanding commitments to fund
such investments, respectively.



Contractual Obligations



A summary of our significant contractual payment obligations as of September 30, 2015
is as follows:



|                              |  | Payments Due by Period
|----------------------------- |  | ----------------------
|                              |  | Less Than             
|($ in thousands)              |  | 1 Year                
|CLO Facility II               |  | $                     
|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 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.



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.





58




Basis for Consolidation



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 Topic 946, Financial Services-Investment
Companies, or ASC 946, we are precluded from consolidating any entity other than another investment company. We generally
consolidate any investment company when we own 100% of its partners’ or members’ capital or equity units. ASC 946 also provides an exception to the aforementioned if the investment company has an investment in a controlled operating company
that provides substantially all of its services to the investment company. GF 2013-2 Manager owns a 100% equity interest in GF
2013-2, which is an investment company for accounting purposes, and also provides collateral management services solely to GF 2013-2.
As such, we have consolidated the accounts of these entities into our financial statements. Our blocker subsidiaries, Walnut Hill
II LLC, Forest Park II LLC and GLC Trust 2013-2, are 100% owned investment companies for accounting purposes. As such, we have
consolidated the accounts of these entities into our financial statements. As a result of this consolidation, the amounts outstanding
under the CLO and the GLC Trust 2013-2 Notes are treated as our indebtedness.



Valuation of Portfolio Investments



We value our investments in accordance with ASC Topic 820, Fair Value Measurements and
Disclosures, or 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 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 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 Investment Adviser’s own assumptions about the assumptions market participants would use in determining the fair values of 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.



Our portfolio consists of primarily debt investments and unsecured consumer loans. The
fair value of our investments is initially determined by investment professionals of the Investment Adviser and ultimately determined
by the Board on a quarterly basis.



In valuing our 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, 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 our 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 our 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.





59




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 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.





60




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.



We accrue interest income if we expect that ultimately we 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 we 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 two investments  placed on non-accrual status as of September 30, 2015 and one investment placed on
non-accrual status as of December 31, 2014.



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, we 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.



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.



Other Expenses



Certain expenses related to rating fees, due diligence, valuation expenses and independent
collateral appraisals may arise when we make certain investments. These expenses are recognized in the consolidated statement of
operations within ratings fees and other expenses as they are incurred.



Loan Origination, Facility, Commitment and Amendment Fees



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





61




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.



We have 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 our Board authorizes, and we declare, 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, rather than receiving the cash distribution.



No action is required on the part of a registered stockholder to have their 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 American Stock Transfer & Trust Company, LLC, the plan administrator and our transfer agent and registrar,
in writing so that such notice is received by the plan administrator no later than the record date for distributions to stockholders.
The plan administrator will set up an account for shares acquired through the plan for each stockholder who has not elected to
receive dividends or other distributions in cash and hold such shares in non-certificated form. Upon request by a stockholder participating
in the plan, received in writing not less than 10 days prior to the record date, the plan administrator will, instead of crediting
shares to the participant’s account, issue a certificate registered in the participant’s name for the number of whole
shares of our common stock and a check for any fractional share. The plan administrator is authorized to deduct a $15.00 transaction
fee plus a $0.10 per share brokerage commission from the proceeds of the sale of any fractional share of common stock.



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.



Income Tax



As a business development company, we have elected to be treated as a RIC under Subchapter
M of the Code and we intend to qualify annually for such treatment.



We intend to comply with all RIC qualification provisions contained in the Code including
certain source-of-income and asset diversification requirements as well as the annual distribution requirements, which require
us to distribute to our stockholders an amount generally equal to at least 90% of “investment company taxable income.”
“Investment company taxable income” is generally defined as net ordinary income plus the excess of realized net short-term
capital gains over realized net long-term capital losses. As a RIC, we do not have to pay corporate-level U.S. federal income taxes
on any net ordinary income or net capital gains that we distribute to our stockholders in a timely manner. However, we are subject
to U.S. federal income taxes at regular corporate tax rates on any net ordinary income or net capital gain not distributed to our
stockholders assuming at least 90% of our investment company taxable income is distributed each taxable year.



Depending on the level of taxable income earned in a tax year, we may choose
to retain taxable income in excess of current year dividend distributions, and would distribute such taxable income in the next
tax year. We would then pay a 4% excise tax on such income, as required. To the extent that we determine that our estimated
current year annual taxable income, determined on a calendar basis, could exceed estimated current calendar year dividend distributions,
we accrue excise tax, if any, on estimated excess taxable income as taxable income is earned.





62




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 are usually based on a floating London Interbank Offered 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 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 September 30, 2015 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.





|                         |  | Increase        |       |                     |  | Net Increase/    
|------------------------ |  | --------------- | ----- | ------------------- |  | -----------------
|                         |  | in              |       | (Decrease)/increase |  | (decrease) in    
|Change in interest rates |  | interest income |       | in interest expense |  | investment income
|($ in thousands)         |  |                 |       |                     |  |                  
|Down 25 basis points     |  |                 | -     |                     |  |                  
|Up 50 basis points       |  |                 | 134   |                     |  |                  
|Up 100 basis points      |  |                 | 1,189 |                     |  |                  
|Up 200 basis points      |  |                 | 4,202 |                     |  |                  
|Up 300 basis points      |  |                 | 7,792 |                     |  |                  





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 CLO or other borrowings, that could affect
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, and
the collateral manager may engage in similar hedging activities with respect to the obligations of the 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, our Investment Adviser and the collateral manager have not hedged
any of the obligations of the CLO.



Item 4: Controls and Procedures



As 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.





63




Part II — Other Information



Item 1: Legal Proceedings



Garrison Capital, the Investment Adviser and the Administrator are not currently subject
to any material legal proceedings.



Item 1A: Risk Factors



In addition to 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 4, 2015 and amended on July
21, 2015, and Post-Effective Amendment No. 6 to our Form N-2, filed on July 28, 2015, 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.
| | - | ---------------



64




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: November 4, 2015 |  | By /s/ Joseph Tansey
        
        Joseph Tansey
        Chief Executive Officer
        (Principal Executive Officer)      
|                        |  |                                                                                                                                
|Dated: November 4, 2015 |  | By /s/ Brian Chase
        
        Brian Chase
        Chief Financial Officer
        (Principal Financial Officer)          
|                        |  |                                                                                                                                
|Dated: November 4, 2015 |  | By /s/ Michelle Rancic
        
        Michelle Rancic
        Chief Accounting Officer
        (Principal Accounting Officer)







65