**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**






**FORM
      10-K**





**x**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
      the fiscal year ended February 28, 2007**





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




**For
      the transition period from       
        to**




**Commission
      File No. 001-33376**





**GSC
      Investment Corp.**


**(Exact
      name of Registrant as specified in its charter)**








**Maryland**
            
            **20-8700615****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            **(I.R.S.
                Employer**
              **Identification
                Number)**




**12
      East 49thStreet,
      Suite 3200**


**New
      York, New York 10017**


**(Address
      of principal executive offices)**




**(212)
      884-6200**


**(Registrant’s
      telephone number, including area code)**




**Securities
      registered pursuant to Section 12(b) of the Act:**





**Title
                  of each class**
            
            **Name
                of each exchange**
              **on
                  which registered****Common
                Shares, par value $0.0001 per share**
            
            **The
                New York Stock Exchange**




**Securities
      registered pursuant to Section 12(g) of the Act:
      None**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.    Yes   ̈    No  x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act.    Yes   ̈    No  x




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   ̈











Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K.  x




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large
      accelerated filer   ̈                    Accelerated
      filer   ̈                    Non-accelerated
      filer  x




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




The
      aggregate market value of the voting and non-voting common stock held by
      non-affiliates of the registrant as of May 21, 2007 was approximately $100.2
      million based upon a closing price of $13.85 reported for such date by the
      New
      York Stock Exchange. Common shares held by each executive officer and director
      and by each person who owns 5% or more of the outstanding common shares have
      been excluded in that such persons may be deemed to be affiliates. This
      determination of affiliate status is not necessarily a conclusive determination
      for other purposes.




The
      number
      of outstanding common shares of the registrant as of May 21, 2007 was
      8,291,384.



















**NOTE
      ABOUT REFERENCES TO GSC INVESTMENT CORP.**




In
      this
      Annual Report on Form 10-K (the “Annual Report”), the “Company”, “we”, “us” and
“our” refer to GSC Investment Corp., its subsidiaries and related companies,
      unless the context otherwise requires.




**NOTE
      ABOUT TRADEMARKS**





We
      have entered into a license agreement
      with GSC Group, pursuant to which GSC Group grants us a non-exclusive,
      royalty-free license to use
      the “GSC”nameand logo.




**NOTE
      ABOUT FORWARD-LOOKING STATEMENTS**




Some
        of
        the statements under “Risk Factors” and “Business” and elsewhere in this
        annual report constitute forward-looking statements. Forward-looking statements
        relate to expectations, beliefs, projections, future plans and strategies,
        anticipated events or trends and similar expressions concerning matters that
        are
        not historical facts. In some cases, you can identify forward-looking statements
        by terms such as
“anticipate,”“believe,”“could,”“estimate,”“expect,”“intend,”“may,”“plan,”“potential,”“project,”“should,”“will”
and “would” or the negative of these terms or other comparable terminology. Any
        forward-looking statements contained in this annual report do not have the
        benefit of the safe harbor for forward-looking statements pursuant to
        Section 27A of the Securities Act of 1933.


The
        forward-looking statements are based
        on our beliefs, assumptions and expectations of our future performance, taking
        into account all information currently available
        to us. These
        beliefs, assumptions and expectations can change as a result of many possible
        events or factors, not all of which are known to us or are within our control.
        If a change occurs, our business, financial condition, liquidity
        and results of operations may
        vary materially from those expressed in our forward-looking
        statements.




The
      forward-looking statements contained
      in thisannual
      reportinvolve risks and
      uncertainties, including the risks listed under “Risk Factors”herein as well as the statements
      as
      to:





•
            our
                limitedoperating
                history;•
            changes
                in economic conditions
                generally;•
            our
                dependence on GSCP (NJ), L.P.,
                our investment adviser, and ability to find a suitable replacement
                if ourinvestment
                adviser
                were to terminate its investment advisory and management agreement
                with
                us;•
            the
                existence of conflicts of
                interest in our relationship with GSCP (NJ), L.P. and/or its affiliates,
                which could result in decisions that are notin the best
                interests of our
                stockholders;•
            limitations
                imposed on our
                business by our election to be treated as a BDC under the 1940
                Act;•
            changes
              in our business
              strategy;•
            general
                volatility of the
                securities markets
                and the market price of our common stock;•
            availability
                of qualified
                personnel;





1
 
  •
                changes
                      in our industry, interest
                      rates or the general economy;•
                the
                      degree and nature of our
                      competition; and•
                changes
                    in governmental
                    regulations, tax laws
                    and tax rates and other similar matters which may affect us and
                    our
                    stockholders.


For
      a
      discussion of factors that could cause our actual results to differ from
      forward-looking statements contained in this Annual Report, please see the
      discussion under “Risk Factors” in Item 1A. You should not place undue
      reliance on these forward-looking statements. The forward-looking statements
      made in this Annual Report relate only to events as of the date on which the
      statements are made. We undertake no obligation to update any forward-looking
      statement to reflect events or circumstances occurring after the date of this
      Annual Report.











**TABLE
      OF CONTENTS**







Page


PART IItem 1.
            Business
            1Item 1A.
            Risk
                Factors
            21Item 1B.
            Unresolved
                Staff Comments
            38Item 2.
            Properties
            38Item 3.
            Legal
                Proceedings
            38Item 4.
            Submission
                of Matters to a Vote of Security Holders
            38PART
                IIItem 5.
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            39Item 6.
            Selected
                Financial Data
            40Item 7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            40Item 7A.
            Quantitative
                and Qualitative Disclosures about Market Risk
            43Item 8.
            Financial
                Statements and Supplementary Data
            44Item 9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            44Item 9A.
            Controls
                and Procedures
            44Item 9B.
            Other
                Information
            44PART IIIItem 10.
            Directors,
                Executive Officers and Corporate Governance
            45Item 11.
            Executive
                Compensation
            51Item 12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            51Item 13.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            52Item 14.
            Principal
                Accountant Fees and Services
            54PART IVItem 15.
            Exhibits
                and Financial Statement Schedules
            55Signatures
            
            58Financial
                Statements
            
            F-1








i




**PART I**





**Item 1.**
            ***Business***




**General**




GSC
      Investment Corp. is a newly-incorporated Maryland corporation that has elected
      to be treated as a business development company (“BDC”) under the Investment
      Company Act of 1940 (the “1940 Act”). Our investment objectives are to generate
      both current income and capital appreciation through debt and equity investments
      by primarily investing in private middle market companies and select high yield
      bonds. We have filed an election to be treated as a regulated investment company
      (“RIC”) under subchapter M of the Internal Revenue Code commencing with our
      first taxable year as a corporation.  We commenced operations on March
      23, 2007 and completed our initial public offering (“IPO”) on March 28,
      2007.




We
      used the net proceeds of our IPO to
      acquire portfolios in March and April 2007 of approximately $89.5 million and
      $11.2 million, respectively, in aggregate principal amount of debt investments
      composed of first lien and second lien loans, senior secured bonds and unsecured
      bonds purchased from GSC Partners
      CDOFundIII,
      Limited (“CDOFundIII”)a CDO managed by our investment
      adviser.  We used borrowings under our revolving securitized
      credit facility and our term securitized credit facility to acquire additional
      debt investments of approximately $55.8 million and $59.3 million in aggregate
      principal amount in April and May 2007, respectively from CDO Fund III and
      GSC
      Partners CDO Fund Limited (“CDO Fund I”), another CDO also managed by our
      investment adviser.





Our
      portfolio is composed primarily of investments in first and second lien loans
      and mezzanine debt issued by private companies and high yield bonds that are
      sourced through a network of relationships with commercial finance companies,
      commercial and investment banks, and financial sponsors. The capital that we
      provide is generally used to fund buyouts, acquisitions, growth,
      recapitalizations and other types of financings. First and second lien loans
      are
      generally senior debt instruments that rank ahead of subordinated debt of the
      portfolio company. These loans also have the benefit of security interests
      on
      the assets of the portfolio company, which may rank ahead of, or be junior
      to,
      other security interests. Mezzanine debt and high yield bonds are typically
      subordinated to leveraged loans and generally unsecured, though a substantial
      amount of the high yield bonds that we currently own are
      secured.  Substantially all of the debt investments held in our
      portfolio hold a non-investment grade rating by Moody’s Investors Service and/or
      Standard & Poor’s or, if not rated, would be rated below investment grade if
      rated.  Debt securities rated below investment grade are commonly
      referred to as “junk bonds.”  In some cases, we may also receive
      warrants or options in connection with our debt investments. We also anticipate
      making equity investments in private middle market companies.




While
      our
      primary focus is to generate both current income and capital appreciation
      through investments in debt and equity securities of private middle market
      companies and high-yield bonds, we intend to invest up to 30% of our assets
      in
      opportunistic investments. Opportunistic investments may include investments
      in
      distressed debt, debt and equity securities of public companies, credit default
      swaps, emerging market debt, and structured finance vehicles, including
      collateralized debt obligations (“CDO”) holding debt, equity or synthetic
      securities. As part of this 30%, we may also invest in debt of private middle
      market companies located outside the United States. Given our primary investment
      focus on first and second lien loans and mezzanine debt in private companies
      and
      high yield bonds, we believe our opportunistic investments will allow us to
      supplement our core investments with other investments that are











within
      our
      investment adviser’s expertise that we believe offer attractive yields and/or
      the potential for capital appreciation.




**About
      GSC Group**




GSC
      Group
      was founded in 1999 by Alfred C. Eckert III, its Chairman and Chief
      Executive Officer. Its senior officers and advisers are in many cases long-time
      colleagues who have worked together extensively at other institutions, including
      Goldman, Sachs & Co., Greenwich Street Capital Partners and The
      Blackstone Group. GSC Group specializes in credit-based alternative investment
      strategies including corporate credit, distressed investing and real estate.
      GSC
      Group is privately owned and has over 180 employees with headquarters in New
      Jersey, and offices in New York, London and Los Angeles.  GSC
      Group conducts its investment advisory business through GSCP (NJ), L.P., an
      SEC
      registered investment adviser with approximately $25 billion of assets under
      management (including leverage and warehoused assets) as of March 31,
      2007.




GSC
      Group
      operates in three main business lines: (i) the corporate credit group,
      which is comprised of 26 investment professionals who manage approximately
      $8.5
      billion of assets in leveraged loans, high yield bonds, mezzanine debt and
      derivative products with investments in more than 450 companies; (ii) the
      equity and distressed investing group, which is comprised of 19 investment
      professionals who manage approximately $1.3 billion of assets in three control
      distressed debt funds and a long/short credit strategies hedge fund; and
      (iii) the real estate group, which is comprised of 18 investment
      professionals managing $15.0 billion of assets in various synthetic and hybrid
      collateralized debt obligation funds, a real estate investment trust and a
      structured products hedge fund.




**Our
      investment adviser**




We
      are
      externally managed and advised by our investment adviser, GSCP (NJ), L.P. Our
      Chairman Richard M. Hayden and Chief Executive Officer Thomas V. Inglesby have
      management responsibility for GSC Group’s corporate credit group and are senior
      managers of our investment adviser. Mr. Hayden and Mr. Inglesby have
      over 36 years and 20 years experience in the financial services
      industry, respectively. Mr. Hayden and Mr. Inglesby are supported by
      the 24 investment professionals within GSC Group’s corporate credit group.
      Additionally, the Company has access to 37 investment professionals in GSC
      Group’s equity and distressed investing group and GSC Group’s real estate
      group.




Our
      investment adviser is responsible for administering our business activities
      and
      day-to-day operations and uses the resources of GSC Group to support our
      operations. Our investment adviser is able to leverage GSC Group’s current
      investment platform, resources and existing relationships with financial
      institutions, financial sponsors, hedge funds and other investment firms to
      provide us with attractive investment opportunities. In addition to deal flow,
      the GSC Group investment platform assists our investment adviser in analyzing
      and monitoring investments. In particular, these resources provide us with
      a
      wide variety of investment opportunities and information that assists us in
      making investment decisions across our targeted asset classes, which we believe
      provide us with a competitive advantage. GSC Group has been investing in
      corporate debt since its founding in 1999.  In addition to having
      access to its more than 63 investment professionals, we also have access to
      over
      100 GSC Group administrative professionals who provide assistance in accounting,
      legal, compliance and investor relations.






2




**Our
      relationship with our investment adviser and GSC Group**




We
      currently have no employees, and each of our executive officers is also an
      employee of GSC Group.  GSC Group and its affiliates currently own
      1,030,389 shares of our common stock.




On
      March
      21, 2007, we entered into an investment advisory and management agreement with
      our investment adviser. The initial term of the investment advisory and
      management agreement is two years, with automatic, one-year renewals at the
      end
      of each year subject to certain approvals by our board of directors and/or
      our
      stockholders. Pursuant to the investment advisory and management agreement,
      our
      investment adviser implements our business strategy on a day-to-day basis and
      performs certain services for us, subject to oversight by our board of
      directors. Our investment adviser is responsible for, among other duties,
      performing all of our day-to-day functions, determining investment criteria,
      sourcing, analyzing and executing investments, asset sales, financings and
      performing asset management duties.  Under our investment advisory and
      management agreement, we have agreed to pay our investment adviser an annual
      base management fee based on our total assets, as defined under the 1940 Act
      (other than cash and cash equivalents but including assets purchased with
      borrowed funds), and an incentive fee based on our performance.




Pursuant
      to our investment advisory and management agreement, our investment adviser
      has
      formed an investment committee to advise and consult with our investment
      adviser’s senior management team with respect to our investment policies,
      investment portfolio holdings, financing and leveraging strategies and
      investment guidelines. We believe that the cumulative experience of the
      investment committee members across a variety of fixed income asset classes
      benefits us.  Along with GSC Group’s corporate credit group’s
      investment staff, the investment committee monitors investments in our
      portfolio.




**Market
      opportunity**




We
      believe
      the environment for investing in private middle market companies is attractive
      for the following reasons:





•
            middle
                market debt securities are
                attractive compared to broadlysyndicateddebt securities because middle
                market debt securities generally have more conservative capital
                structures, tighter financial covenants, better security packages
                and
                higher yields.•
            established
                relationships create a
                high barrier to entry in the middle market financing business.
                Specifically,privatemiddle market companies and their
                financial sponsors prefer to access capital from and maintain close
                and
                longstanding relationships with
                a small group of
                well-known capital providers.•
            the
                middle market debt segment is
                a highly fragmented portion of the leveraged finance market. We believe
                that many of the largest capital providers in the broader leveraged
                finance market choose
                not to participate in middle market lending because of a preference
                for
                larger, more liquid
                transactions.




•
            we
                expect continued strong
                leveragedbuyout activity fromprivateequity firms who currently hold
                large pools of uninvestedcapital earmarked
                for acquisitions
                ofprivatemiddle market companies. Theseprivateequity firms will continue to
                seek to leverage their investments by combining their equity capital
                withleveragedloans and mezzanine debt from
                other sources.







3





**Competitive
      advantages**




Although
      we have a limited prior operating history and our investment advisor has no
      experience managing a BDC, we believe that through our relationship with GSC
      Group we enjoy several competitive advantages over other capital providers
      to
      private middle market companies.




***GSC
      Group’s investment platform***




GSC
      Group
      has a long history of strong performance across a broad range of asset classes
      and sectors. The senior investment professionals of GSC Group have extensive
      experience investing in leveraged loans, high-yield bonds, mezzanine debt and
      private equity.  GSC Group’s corporate credit group has drawn from its
      extensive middle market investment experience to develop a rigorous investment
      process that emphasizes detailed business and financial analysis to minimize
      principal loss while maximizing risk adjusted returns.




***Experience
      sourcing and managing middle market loans***




GSC
      Group’s corporate credit group has historically focused on investments in
      private middle market companies and we expect to benefit from this experience.
      Our investment adviser uses GSC Group’s extensive network of relationships with
      intermediaries focused on private middle market companies to attract
      well-positioned prospective portfolio company investments. Since 2003, GSC
      Group’s corporate credit group has reviewed over 1060 new middle market loan
      opportunities, including 370 second lien loans. Of the loans reviewed, 307
      were
      purchased, including 54 second lien loans. In addition, GSC Group’s corporate
      credit group consults with GSC Group’s equity and distressed debt and European
      mezzanine groups, which oversee a portfolio of investments in over 145
      companies, maintain an extensive network of relationships and possess valuable
      insights into industry trends.




***Experienced
      management and investment committee***




Thomas
      V.
      Inglesby, our Chief Executive Officer and a Senior Managing Director of GSC
      Group, has over 20 years of middle market investing experience, having
      managed leveraged loan, high-yield bond, mezzanine debt, distressed debt and
      private equity portfolios. In addition to Mr. Inglesby, our investment
      committee consists of Richard M. Hayden, Robert F. Cummings, Jr., Thomas J.
      Libassi and Daniel I. Castro, Jr. Mr. Hayden is Vice
      Chairman of GSC Group, head of the corporate credit group and a member of GSC
      Group’s management committee. Mr. Hayden was previously with Goldman,
      Sachs & Co. from 1969 until 1999. Mr. Cummings is a Senior
      Managing Director of GSC Group, Chairman of the risk and conflicts committee,
      Chairman of the valuation committee and a member of GSC Group’s management
      committee. Mr. Cummings was previously with Goldman, Sachs & Co.
      from 1973 to 1998. Mr. Libassi is a Senior Managing Director of GSC Group
      in the equity and distressed debt group and has 23 years of experience
      managing high-yield and distressed debt portfolios. Mr. Castro is a
      Managing Director of GSC Group in the real estate group. Mr. Castro has
      over 24 years of experience investing in debt products and was, until 2004,
      on the Institutional Investor All-American Fixed Income Research Team every
      year
      since its inception in 1992.






4




***Extensive
      transaction sourcing network and relationships with middle market
      lenders***




We
      intend
      to capitalize on the diverse deal-sourcing opportunities that we believe GSC
      Group brings to us as a result of its investment experience in our targeted
      asset classes, track record and extensive network of contacts in the financial
      community, including financial sponsors, merger and acquisition advisory firms,
      investment banks, capital markets desks, lenders and other financial
      intermediaries and sponsors. In addition, through its other activities, GSC
      Group is regularly in contact with portfolio company management teams that
      can
      help provide additional insights on a wide variety of companies and
      industries.




In
      particular, GSC Group has developed its middle market franchise via extensive
      relationships with middle market loan originators. These relationships have
      been
      developed over the past 15 years at multiple levels of management within
      GSC Group and have resulted in GSC Group’s ability to generate a significant
      amount of middle market opportunities, including first and second lien loans
      and
      mezzanine debt securities. We believe that these relationships will continue
      to
      provide GSC Group with access to middle market debt securities.




***Flexible
      transaction structuring***




We
      expect
      to be flexible in structuring investments, the types of securities in which
      we
      invest and the terms associated with such investments. The principals of GSC
      Group have extensive experience in a wide variety of securities for private
      middle market companies with a diverse set of terms and conditions. This
      approach and experience should enable our investment adviser to identify
      attractive investment opportunities throughout various economic cycles and
      across a company’s capital structure so that we can make investments consistent
      with our stated objectives.





***Access
      to GSC Group’s infrastructure***




We
      have
      access to GSC Group’s finance and administration infrastructure, which addresses
      information technology, risk management, legal and compliance, and operational
      matters, and promulgates and administers comprehensive policies and procedures
      regarding important investment adviser matters, including portfolio management,
      trade allocation and execution and securities valuation. We believe that the
      finance and administrative infrastructure established by GSC Group is an
      important component of a complex investment vehicle such as a BDC. These systems
      support, and are integrated with, our portfolio management
      functions.




We
      also
      have the benefit of the experience of GSC Group’s senior professionals and
      members of its advisory board, many of whom have served on public and private
      company boards and/or served in other senior management roles.




**Investments**




As
      of May
      1, 2007, our portfolio consisted of $212.7 million in assets.  We are
      seeking to create a diversified portfolio that includes first and second lien
      loans, mezzanine debt and high-yield bonds by investing up to 5% of capital
      in
      each investment, although the investment sizes may be more or less than the
      targeted range. As of May 1, 2007, we invested in excess of 5% of our capital
      in
      4 of our 44 investments, but in each case less than 11% of our capital, and
      our
      five largest investments represented approximately 38% of our total
      assets.  We also anticipate making equity investments in private
      middle market companies. In this Annual Report, we generally use the term
“middle market” to refer to companies with annual EBITDA of between
      $5 million and $50 million. EBITDA represents earnings before net
      interest expense, income taxes, depreciation and amortization.






5




***First
      lien loans***




First
      lien
      loans are secured by a first priority perfected security interest on all or
      substantially all of the assets of the borrower and typically include a first
      priority pledge of the capital stock of the borrower. First lien loans hold
      a
      first priority with regard to right of payment. Generally, first lien loans
      offer floating rate interest payments, have a stated maturity of five to seven
      years, and have a fixed amortization schedule. First lien loans generally have
      restrictive financial and negative covenants.




***Second
      lien loans***




Second
      lien loans are secured by a second priority perfected security interest on
      all
      or substantially all of the assets of the borrower and typically include a
      second priority pledge of the capital stock of the borrower. Second lien loans
      hold a second priority with regard to right of payment. Second lien loans offer
      either floating rate or fixed rate interest payments, generally have a stated
      maturity of five to eight years, and may or may not have a fixed amortization
      schedule. Second lien loans that do not have fixed amortization schedules
      require payment of the principal amount of the loan upon the maturity date
      of
      the loan. Second lien loans have less restrictive financial and negative
      covenants than those that govern first lien loans.




***Senior
      secured bonds***




Senior
      secured bonds are secured by a perfected security interest on all or
      substantially all of the assets of the borrower, but which may be contractually
      subordinated to liens on certain assets of the borrower.  In addition,
      senior secured bonds may have a pledge of the capital stock of the
      borrower.  Senior secured bonds offer either floating rate or fixed
      rate interest payments and generally have a stated maturity of five to eight
      years and do not have fixed amortization schedules.  Senior secured
      bonds generally have less restrictive financial and negative covenants than
      those that govern first lien and second lien loans.




***Unsecured
      bonds***




Unsecured
      bonds are not secured by the underlying assets or collateral of the issuer
      and
      may be subordinate in priority of payment to senior debt of the issuer. In
      the
      event of the borrower’s liquidation, dissolution, reorganization, bankruptcy or
      other similar proceeding, the bondholders only have the right to share pari
      passu in the issuer’s unsecured assets with other equally-ranking creditors of
      the issuer. Unsecured bonds typically have fixed rate interest payments and
      a
      stated maturity of five to ten years and do not have fixed amortization
      schedules.




***Mezzanine
      debt***





Mezzanine
        debt usually ranks subordinate
        in priority of payment to senior debt and is often unsecured. However, mezzanine
        debtranks senior to common
        and preferred equity in a borrowers’capital structure. Mezzanine debttypically has fixed rate interest payments and a stated maturity of
        six
        to eight years and does not have fixed amortization
        schedules.





In
      some
      cases our debt investments may provide for a portion of the interest payable
      to
      be paid-in-kind interest. To the extent interest is paid-in-kind, it will be
      payable through the increase of the principal amount of the obligation by the
      amount of interest due on the then-outstanding aggregate principal amount of
      such obligation.






6





***Equity
      investments***




Equity
      investments may consist of preferred equity that is expected to pay dividends
      on
      a current basis or preferred equity that does not pay current dividends.
      Preferred equity generally has a preference over common equity as to
      distributions on liquidation and dividends. In some cases, we may acquire common
      equity. In general, our equity investments are not control-oriented investments
      and we expect that in many cases we will acquire equity securities as part
      of a
      group of private equity investors in which we are not the lead
      investor.





***Prospective
      portfolio company characteristics***




Our
      investment adviser utilizes the disciplined investment philosophy of GSC Group’s
      corporate credit group in identifying and selecting portfolio company
      investments. Our portfolio companies generally have one of more of the following
      characteristics:





•
            a
                history of generating stable
                earnings and strong free cash flow;•
            well
                constructed balance
                sheets, including an
                established tangible liquidation value;•
            reasonable
                debt-to-cash flow multiples;•
            industry
                leadershipwith competitive advantages and
                sustainable market shares in attractive sectors;and•
            capital
                structures that provide
                appropriate terms and reasonable covenants.




***Investment
      selection***




In
      managing us, our investment adviser employs the same investment philosophy
      and
      portfolio management methodologies used by GSC Group’s corporate credit
      group.  Through this rigorous and consistent investment selection
      process, based on extensive quantitative and qualitative analysis, we seek
      to
      identify those issuers exhibiting superior fundamental risk-reward profiles
      and
      strong defensible business franchises with the goal of minimizing principal
      losses while maximizing risk-adjusted returns. Our investment process emphasizes
      the following:





•
            bottoms-up,
                company-specific
                research and analysis;•
            capital
                preservation, low
                volatility and
                minimization of downside risk; and•
            investing
                withexperiencedmanagement
                teams that hold
                meaningful equity ownership in theirbusinesses.The
              investment process of GSC
              Group’s
              corporate credit group includes
              the following steps:




•
            ***Initial
                screening.***A
                brief analysis identifies the
                investment opportunity and reviews the merits of the transaction.
                The initial
                screening
                memorandumprovidesa briefdescriptionof
                the company, its industry,
                competitive position, capital structure,financials,equity
                sponsor and deal economics.
                If the deal isdeterminedto be attractive by theseniormembers of the deal team, the
                opportunityismore fully
                analyzed.•
            ***Full
                analysis.***Afull analysis
                includes:






7




•
            Business
                andIndustryanalysis—areviewofthecompany’sbusiness
                position, competitive
                dynamics withinitsindustry, cost and growth drivers
                and technological and geographic factors.Business
                and industry research
                often includes meetings with industry experts, consultants, GSC
                Group advisory board
                members, other investors, customers and
                competitors.•
            Company
                analysis—areview of thecompany’shistorical
                financial performance,
                future projections, cash flow characteristics, balance sheet strength,
                liquidation value,
                legal, financial and accounting risks, contingent liabilities, market
                share analysis and growth prospects.•
            Structural/security
                analysis—a
                thorough legal document analysis
                including but not limited to an assessment of financialand
                negativecovenants,events
                of default,enforceability
                of liens and voting
                rights.




•
            ***Approval
                of the group
                head.***After
                an investment has been
                identified and diligence has been completed, a report is prepared.
                This
                reportisreviewedby theseniorinvestment
                professional in charge
                of the potential investment. If suchseniorinvestment
                professional is in
                favor of the potential investment, it is presentedfortheapprovalof
                the group head.Additional
                due diligence with
                respect to any investmentmay be conducted
                by attorneys and
                independent accountants prior to the closing of the investment, as
                well as
                by other outside advisers, as appropriate.•
            ***Approval
                of the
                investment committee.***After
                the approval of the group
                head, the investmentis presented
                to the investment
                committeefor
                approval.Salerecommendations made
                bythe investment staffmust also
                be approved by the
                investment committee.




In
      addition to various risk management and monitoring tools, GSC Group normally
      grades all investments using a credit and monitoring rating system (“CMR”). The
      CMR rating consists of two components: (i) a numerical debt score and
      (ii) a corporate letter rating. The numerical debt score is based on the
      objective evaluation of six risk categories: (i) leverage,
      (ii) seniority in the capital structure, (iii) fixed charge coverage
      ratio, (iv) debt service coverage/liquidity, (v) operating
      performance, and (vi) business/industry risk. The numerical debt score
      ranges from 1.00 to 5.00, which can generally be characterized as follows:
      1.00-2.00 represents assets that hold senior positions in the capital structure
      and, typically, have low financial leverage and/or strong historical operating
      performance; 2.00-3.00 represents assets that hold relatively senior positions
      in the capital structure, either senior secured, senior unsecured, or senior
      subordinate, and have moderate financial leverage and/or are performing at
      or
      above expectations; 3.00-4.00 represents assets that are junior in the capital
      structure, have moderate financial leverage and/or are performing at or below
      expectations; and 4.00-5.00 represents assets that are highly leveraged and/or
      have poor operating performance. Our numerical debt score is designed to produce
      higher scores for debt positions that are more subordinate in the capital
      structure. Therefore, generally second lien loans, high-yield bonds and
      mezzanine debt will be assigned scores of 2.25 or higher.





The
      CMR
      also consists of a corporate letter rating whereby each credit is assigned
      a
      letter rating based on several subjective criteria, including perceived
      financial and operating strength and covenant compliance. The corporate letter
      ratings range from (A) through (F) and are characterized as follows:
      (A) equals strong credit, (B) equals satisfactory credit,
      (C) equals special attention credit, (D) equals payment default risk,
      (E) equals payment default, (F) equals restructured equity
      security.






8




As
      of May
      1, 2007, the weighted average rating of the investments in our portfolio was
      approximately 2.7B and the weighted average yield of such investments was
      approximately 11.5%. A weighted average score of 2.7B reflects our investment
      adviser’s belief that our portfolio is performing well. No asset in our
      portfolio is currently in payment default or delinquent on any payment
      obligations.




***Investment
      structure***




Once
      our
      investment adviser determines that a prospective portfolio company is suitable
      for investment, it works with the management of that company and its other
      capital providers, including senior, junior, and equity capital providers,
      to
      structure an investment. Our investment adviser negotiates among these parties
      to agree on how our investment is expected to perform relative to the other
      capital in the portfolio company’s capital structure.




Our
      investment adviser seeks, where appropriate, to limit the downside potential
      of
      our investments by:




•
            requiring
                a total return on our
                investments (including both interest and potential equity appreciation)
                that compensates us for credit risk;•
            requiring
                companies to use a
                portion of their excess cash flow to repay debt;•
            selecting
                investments with
                covenants that incorporate call protection as part of the investment
                structure; and•
            selecting
                investments
                with affirmative
                and
                negative covenants, default penalties, lien protection, change of
                control
                provisions and board rights, including either observation or participation
                rights.








In
      general, our investment adviser intends to select investments with financial
      covenants and terms that reduce leverage over time, thereby enhancing credit
      quality. These methods include: (i) maintenance leverage covenants
      requiring a decreasing ratio of debt to cash flow; (ii) maintenance cash
      flow covenants requiring an increasing ratio of cash flow to the sum of interest
      expense and capital expenditures; and (iii) debt incurrence prohibitions,
      limiting a company’s ability to re-lever. In addition, limitations on asset
      sales and capital expenditures should prevent a company from changing the nature
      of its business or capitalization without consent.




There
      may
      be certain restrictions on our investment adviser’s ability to negotiate and
      structure the terms of our investments when we co-invest with other GSC Group
      managed investment vehicles.  See “Co-investment” below.




***Valuation
      process***




Investments
      for which market quotations are readily available are recorded in our financial
      statements at such market quotations.  While a majority of our
      portfolio is currently comprised of investments for which market quotations
      are
      readily available, we expect that over time, the majority of our investments
      will be comprised of investments for which market quotations are not readily
      available.  We value investments for which market quotations are not
      readily available quarterly at fair value as determined in good faith by our
      board of directors based on input from our investment adviser, a third party
      independent valuation firm and our audit committee. We may also be required
      to
      value any publicly traded investments at fair value as determined in good faith
      by our board of directors to the extent necessary to reflect significant events
      affecting the value of those investments.  Determinations of fair
      value may involve






9






subjective
      judgments and estimates. The types of factors that may be considered in a fair
      value pricing include the nature and realizable value of any collateral, the
      portfolio company’s ability to make payments, the markets in which the portfolio
      company does business, comparison to publicly traded companies, discounted
      cash
      flow and other relevant factors. Because such valuations, and particularly
      valuations of private investments and private companies, are inherently
      uncertain, they may fluctuate over short periods of time and may be based on
      estimates. The determination of fair value by our board of directors 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 adversely affected if the
      determinations regarding the fair value of our investments were materially
      higher than the values that we ultimately realize upon the disposal of such
      investments.




We
      undertake a multi-step valuation process each quarter when valuing investments
      for which market quotations are not readily available, as described
      below:





•
            Each
                investmentisinitially valued by theresponsibleinvestment
                professionals;•
            Preliminary
                valuation conclusionsaredocumented
                and discussed with our
                senior management;•
            An
                independent valuation firm
                engaged by our board of directors reviewsat
                leastone quarter
                ofthese preliminary
                valuationseach
                quarterso thatthevaluation
                ofeachinvestment
                for which market quotes
                are not readilyavailableis reviewed by an independent valuation
                firmat least
                annually;•
            The
                audit committee of our board
                of directors reviewseachpreliminary valuation and our
                investment adviser and independent valuation firm(if applicable)will
                respond and supplement the
                preliminaryvaluation
                to reflect any comments provided by the audit
                committee; and•
            Our
                board of directors
                discussesthevaluations
                and
                determinesthe fair value of each investment
                in good faith based on the input of our investment adviser, independent
                valuation
                firm(if
                applicable)and audit
                committee.




***Ongoing
      relationships with and
      monitoring of portfolio companies***





Our
      investment adviser will closely
      monitor each investment the Company makes, maintain a regular dialogue with
      both
      the management teamand
      other stockholders and seek specifically tailoredfinancial reporting.
      In addition,seniorinvestment professionals of GSC Group
      may take board seats or
      board observation seats when appropriate.




**Leverage**




In
      addition to funds available from the issuance of our common stock, we use
      borrowed funds, known as “leverage,” to make investments and to attempt to
      increase returns to our shareholders by reducing our overall cost of capital.
      As
      a BDC, we are only allowed to employ leverage to the extent that our asset
      coverage, as defined in the 1940 Act, equals at least 200% after giving effect
      to such leverage. The amount of leverage that we employ at any time depends
      on
      our assessment of the market and other factors at the time of any proposed
      borrowing. As of February 28, 2007, we had no outstanding
      borrowings.




On
      April
      11, 2007, we entered into a revolving securitized credit facility (the
“Revolving Facility”) under which we may borrow up to $100 million, which amount
      may be increased to $130 million subject to certain conditions. Advances under
      the Revolving Facility were used to






10






purchase
      $55.8 million in aggregate principal amount of debt investments from CDO Fund
      III.  Future advances under the Revolving Facility may be used to
      purchase additional investments as they become available. The Revolving Facility
      is secured by collateral that we currently own and the collateral acquired
      by us
      with the advances under the Revolving Facility.  Under the Revolving
      Facility, funds are borrowed from or through certain lenders at prevailing
      commercial paper rates or, if the commercial paper market is at any time
      unavailable, at prevailing LIBOR rates, plus 0.70% payable monthly.




On
      May 1,
      2007, we entered into a $25.7 million term securitized credit facility (the
      “Term Facility” and, together with the Revolving Facility, the “Facilities”),
      which was fully drawn at closing to purchase $59.3 million in aggregate
      principal amount of debt investments from CDO Fund I.  The Term
      Facility bears interest at prevailing commercial paper rates or, if the
      commercial paper market is at any time unavailable, at prevailing LIBOR rates,
      plus 0.70%, payable quarterly.




Each
      of
      the Facilities contain limitations as to how borrowed funds may be used, such
      as
      restrictions on geographic and industry concentrations, asset size, payment
      frequency and status, average life, collateral interests and investment
      ratings.  In addition, our financing relies on Rule 3a-7 under the
      1940 Act which prohibits us from, among other things, directing either of the
      Facilities to acquire, or dispose of investments for the primary purpose of
      recognizing gains or decreasing losses resulting from market value changes,
      which our investment advisor may otherwise do absent such
      restrictions.  We are also subject to regulatory restrictions on
      leverage which may affect the amount of funding that we can obtain under the
      Facilities. The Facilities also includes certain requirements relating to
      portfolio performance the violation of which could result in the early
      amortization of the Facilities, limit further advances (in the case of the
      Revolving Facility) and, in some cases, result in an event of
      default.




In
      the
      interests of diversifying
      our sources of debt funding, we may in the future borrow from and issue senior
      debt securities to banks and other lenders and/or securitize certain of our
      portfolio investments, subject to our ability to satisfy the1940 Act
      restrictions on BDCs.




**Portfolio
        management
        policies**
  GSC
        Group
        has designed a compliance program to monitor its conflict-resolution policies
        and procedures and regularly evaluates the reasonableness of such policies
        and
        procedures. GSC Group’s compliance program monitors the implementation of and
        tests adherence to compliance-related policies and procedures that address
        GSC
        Group’s Code of Ethics and other compliance matters including investment
        allocation, trade aggregation, best execution, cross trades and proxy voting
        and
        related matters. The program is governed in part by the requirements of the
        1940
        Act and is headed by GSC Group’s Chief Compliance Officer. GSC Group has also
        established a Compliance Committee consisting of GSC Group’s Chief Compliance
        Officer, Associate General Counsel, Compliance (who also serves as our chief
        compliance officer) and a Senior Managing Director that provides day-to-day
        guidance on GSC Group compliance matters in addition to overseeing the
        compliance program.
  **Managerial
      assistance**




As
      a BDC
      we offer, and must provide upon request, managerial assistance to our portfolio
      companies. This assistance could involve, among other things, monitoring the
      operations of our portfolio companies, participating in board and management
      meetings, consulting with and advising officers of portfolio companies and
      providing other organizational and financial guidance. Pursuant to a separate
      administration agreement, our investment adviser (to the extent permitted under
      the 1940 Act) will provide such managerial assistance on our behalf to portfolio
      companies






11






that
      request this assistance, recognizing that our involvement with each investment
      will vary based on factors including the size of the company, the nature of
      our
      investment, the company’s overall stage of development and our relative position
      in the capital structure. We may receive fees for these services.




**Competition**




Our
      primary competitors in providing financing to private middle market companies
      include public and private investment funds, commercial and investment banks
      and
      commercial financing companies. Many of our competitors are substantially larger
      and have considerably greater financial and marketing resources than us. For
      example, some competitors may have access to funding sources that are not
      available to us. In addition, some of our competitors may have higher risk
      tolerances or different risk assessments, that may allow them to consider a
      wider variety of investments. Furthermore, many of our competitors are not
      subject to the regulatory restrictions that the 1940 Act imposes on us as a
      BDC.
      We expect to use GSC Group’s knowledge and resources to learn about, and compete
      effectively for, financing opportunities with attractive private middle market
      companies in the industries in which we seek to invest. For additional
      information concerning the competitive risks we face, see “Risk Factors —
Risks related to our business — We operate in a highly competitive market
      for investment opportunities.”




**Staffing**




We
      do not
      currently have any employees and do not expect to have any employees in the
      future. Services necessary for our business will be provided by individuals
      who
      are employees of GSC Group, pursuant to the terms of the investment advisory
      and
      management agreement and the administration agreement. We reimburse GSC Group
      for our allocable portion of expenses incurred by it in performing its
      obligations under the administration agreement, including rent and our allocable
      portion of the cost of our officers and their respective staffs, subject to
      certain limitations.




**Regulation**




We
      have
      elected to be treated as a BDC under the 1940 Act. As with other companies
      regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory
      requirements. The 1940 Act contains prohibitions and restrictions relating
      to
      transactions between BDCs and their affiliates (including any investment
      advisers or sub-advisers), principal underwriters and affiliates of those
      affiliates or underwriters, and requires that a majority of the directors be
      persons other than “interested persons,” as that term is defined in the 1940
      Act. In addition, the 1940 Act provides that we may not change the nature of
      our
      business so as to cease to be, or to withdraw our election as, a BDC, unless
      approved by a majority of our outstanding voting securities. A majority of
      the
      outstanding voting securities of a company is defined under the 1940 Act as
      the
      lesser of: (i) 67% or more of such company’s stock present at a meeting if
      more than 50% of the outstanding stock of such company are present and
      represented by proxy or (ii) more than 50% of the outstanding stock of such
      company.




Under
      the
      1940 Act, we may invest up to 100% of our assets in securities acquired directly
      from issuers in privately negotiated transactions. With respect to such
      securities, we may, for the purpose of public resale, be deemed a “principal
      underwriter” as that term is defined in the Securities Act.




Our
      intention is to not write (sell) or buy put or call options to manage risks
      associated with the publicly traded securities of our portfolio companies,
      except that we may enter into hedging transactions to manage the risks
      associated with interest rate fluctuations. However, we






12






may
      purchase or otherwise receive warrants to purchase the common stock of our
      portfolio companies in connection with acquisition financing or other
      investment. Similarly, in connection with an acquisition, we may acquire rights
      to require the issuers of acquired securities or their affiliates to repurchase
      them under certain circumstances.




We
      also do
      not intend to acquire securities issued by any investment company that exceed
      the limits imposed by the 1940 Act. Under these limits, we generally cannot
      acquire more than 3% of the voting stock of any registered investment company,
      invest more than 5% of the value of our total assets in the securities of one
      investment company or invest more than 10% of the value of our total assets
      in
      the securities of investment companies in general. With regard to that portion
      of our portfolio invested in securities issued by investment companies, it
      should be noted that such investments might subject our stockholders to
      additional expenses. None of these policies are fundamental and may be changed
      without stockholder approval.





***Qualifying
      assets***




Under
      the
      1940 Act, a BDC may not acquire any asset other than assets of the type listed
      in Section 55(a) of the 1940 Act, which are referred to as qualifying
      assets, unless, at the time the acquisition is made, qualifying assets represent
      at least 70% of the company’s total assets. The principal categories of
      qualifying assets relevant to our proposed business are the
      following:




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




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




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




(c) satisfies
      either of the following:




(i) does
      not have any class of securities listed on a national securities
      exchange; or




(ii) is
      controlled by a BDC or a group of companies including a BDC, and the BDC
      actually exercises a controlling influence over the management or policies
      of
      the eligible portfolio company, and, as a result thereof, the BDC has an
      affiliated person who is a director of the eligible portfolio
      company.




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




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






13






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




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




(6) Cash,
      cash equivalents, U.S. Government securities or high-quality debt
      securities maturing in one year or less from the time of
      investment.





***Managerial
      assistance to portfolio companies***




In
      addition, a BDC must have been organized and have its principal place of
      business in the United States and must be operated for the purpose of making
      investments in the types of securities described in (1), (2) or
      (3) above under “— Qualifying assets.” However, in order to count
      portfolio securities as qualifying assets for the purpose of the 70% test,
      the
      BDC must either control the issuer of the securities or must offer to make
      available to the issuer of the securities (other than small and solvent
      companies described above) significant managerial assistance; except that,
      where
      the BDC purchases such securities in conjunction with one or more other persons
      acting together, one of the other persons in the group may make available such
      managerial assistance. Making available significant managerial assistance means,
      among other things, any arrangement whereby the BDC, through its directors,
      officers or employees, offers to provide, and, if accepted, does so provide,
      significant guidance and counsel concerning the management, operations or
      business objectives and policies of a portfolio company.




***Temporary
      investments***




As
      a BDC,
      pending investment in other types of “qualifying assets,” as described above,
      our investments may consist of cash, cash equivalents, U.S. Government
      securities or high-quality debt securities maturing in one year or less from
      the
      time of investment, which we refer to, collectively, as temporary investments,
      so that 70% of our assets are qualifying assets. Typically, we will invest
      in
      U.S. Treasury bills or in repurchase agreements, provided that such
      agreements are fully collateralized by cash or securities issued by the
      U.S. Government or its agencies. A repurchase agreement involves the
      purchase by an investor, such as us, of a specified security and the
      simultaneous agreement by the seller to repurchase it at an agreed-upon future
      date and at a price which is greater than the purchase price by an amount that
      reflects an agreed-upon interest rate. There is no percentage restriction on
      the
      proportion of our assets that may be invested in such repurchase agreements.
      However, if more than 25% of our total assets constitute repurchase agreements
      from a single counterparty, we would not meet the asset diversification
      requirements in order to qualify as a RIC for U.S. federal income tax
      purposes. Thus, we do not intend to enter into repurchase agreements with a
      single counterparty in excess of this limit. Our investment adviser will monitor
      the creditworthiness of the counterparties with which we enter into repurchase
      agreement transactions.




***Indebtedness
      and senior  securities***




As
      a BDC,
      we are permitted, under specified conditions, to issue multiple classes of
      indebtedness and one class of shares of stock senior to our common stock if
      our
      asset coverage, as defined in the 1940 Act, is at least equal to 200%
      immediately after each such issuance. In addition, while any indebtedness and
      senior securities remain outstanding, we must make provisions to prohibit any
      distribution to our stockholders or the repurchase of such securities or stock
      unless we meet the applicable asset coverage ratios at the time of the
      distribution or






14






repurchase.
      We may also borrow amounts up to 5% of the value of our total assets for
      temporary or emergency purposes without regard to asset coverage. For a
      discussion of the risks associated with leverage, see “Risk factors — Risks
      related to our operation as a BDC — Regulations governing our operation as
      a BDC will affect our ability to, and the way in which we, raise additional
      capital.”




***Code
      of ethics***




As
      a BDC,
      we and our investment adviser have each adopted a code of ethics pursuant to
      Rule 17j-1 under the 1940 Act that establishes procedures for personal
      investments and restricts certain personal securities transactions. Personnel
      subject to each code may invest in securities for their personal investment
      accounts, including securities that may be purchased or held by us, so long
      as
      such investments are made in accordance with the code’s
      requirements.




***Proxy
      voting policies and procedures***




SEC
      registered investment advisers that have the authority to vote (client) proxies
      (which authority may be implied from a general grant of investment discretion)
      are required to adopt policies and procedures reasonably designed to ensure
      that
      the adviser votes proxies in the best interests of its clients. Registered
      investment advisers also must maintain certain records on proxy voting. In
      most
      cases, we will invest in securities that do not generally entitle us to voting
      rights in its portfolio companies. When we do have voting rights, we will
      delegate the exercise of such rights to our investment adviser.




Our
      investment adviser has particular proxy voting policies and procedures in place.
      In determining how to vote, officers of our investment adviser will consult
      with
      each other and other investment professionals of GSC Group, taking into account
      our interests and the interests of our investors, as well as any potential
      conflicts of interest. Our investment adviser will consult with legal counsel
      to
      identify potential conflicts of interest. Where a potential conflict of interest
      exists, our investment adviser may, if it so elects, resolve it by following
      the
      recommendation of a disinterested third party, by seeking the direction of
      our
      independent directors or, in extreme cases, by abstaining from voting. While
      our
      investment adviser may retain an outside service to provide voting
      recommendations and to assist in analyzing votes, our investment adviser will
      not delegate its voting authority to any third party.




An
      officer
      of our investment adviser will keep a written record of how all such proxies
      are
      voted. Our investment adviser will retain records of (1) proxy voting
      policies and procedures, (2) all proxy statements received (or it may rely
      on proxy statements filed on the SEC’s EDGAR system in lieu thereof),
      (3) all votes cast, (4) investor requests for voting information, and
      (5) any specific documents prepared or received in connection with a
      decision on a proxy vote. If it uses an outside service, our investment adviser
      may rely on such service to maintain copies of proxy statements and records,
      so
      long as such service will provide a copy of such documents promptly upon
      request.




Our
      investment adviser’s proxy voting policies are not exhaustive and are designed
      to be responsive to the wide range of issues that may be subject to a proxy
      vote. In general, our investment adviser will vote our proxies in accordance
      with these guidelines unless: (1) it has determined otherwise due to the
      specific and unusual facts and circumstances with respect to a particular vote,
      (2) the subject matter of the vote is not covered by these guidelines,
      (3) a material conflict of interest is present, or (4) it finds it
      necessary to vote contrary to its general guidelines to maximize stockholder
      value or our best interests.






15






In
      reviewing proxy issues, our investment adviser generally will use the following
      guidelines:




***Elections
      of Directors***:  In general, our investment adviser will
      vote in favor of the management- proposed slate of directors. If there is a
      proxy fight for seats on a portfolio company’s board of directors, or our
      investment adviser determines that there are other compelling reasons for
      withholding our vote, it will determine the appropriate vote on the matter.
      We
      may withhold votes for directors that fail to act on key issues, such as failure
      to: (1) implement proposals to declassify a board, (2) implement a
      majority vote requirement, (3) submit a rights plan to a stockholder vote
      or (4) act on tender offers where a majority of stockholders have tendered
      their shares. Finally, our investment adviser may withhold votes for directors
      of non-U.S. issuers where there is insufficient information about the
      nominees disclosed in the proxy statement.




***Appointment
      of Auditors***:  We believe that a portfolio company
      remains in the best position to choose its independent auditors and our
      investment adviser will generally support management’s recommendation in this
      regard.




***Changes
      in Capital Structure***:  Changes in a portfolio company’s
      organizational documents may be required by state or federal regulation. In
      general, our investment adviser will cast our votes in accordance with the
      management on such proposals. However, our investment adviser will consider
      carefully any proposal regarding a change in corporate structure that is not
      required by state or federal regulation.




***Corporate
      Restructurings, Mergers and Acquisitions:***  We believe
      proxy votes dealing with corporate reorganizations are an extension of the
      investment decision. Accordingly, our investment adviser will analyze such
      proposals on a case-by-case basis and vote in accordance with its perception
      of
      our interests.




***Proposals Affecting
      Stockholder Rights:***  We will generally vote in favor of
      proposals that give stockholders a greater voice in the affairs of a portfolio
      company and oppose any measure that seeks to limit such rights. However, when
      analyzing such proposals, our investment adviser will balance the financial
      impact of the proposal against any impairment of stockholder rights as well
      as
      of our investment in the portfolio company.




***Corporate
      Governance:***  We recognize the importance of good
      corporate governance. Accordingly, our investment adviser will generally favor
      proposals that promote transparency and accountability within a portfolio
      company.




***Anti-Takeover
      Measures***:  Our investment adviser will evaluate, on a
      case-by-case basis, any proposals regarding anti-takeover measures to determine
      the measure’s likely effect on stockholder value dilution.




***Share
      Splits:***  Our investment adviser will generally vote with
      management on share split matters.




***Limited
      Liability of Directors:***  Our investment adviser will
      generally vote with management on matters that could adversely affect the
      limited liability of directors.




***Social
      and Corporate Responsibility***:  Our investment adviser
      will review proposals related to social, political and environmental issues
      to
      determine whether they may adversely affect stockholder value. Our investment
      adviser may abstain from voting on such proposals where they do not have a
      readily determinable financial impact on stockholder value.






16




**Privacy
        principles**





We
        are committed to maintaining the
        privacy of our stockholders
        and to safeguarding their non-public personal information. The following
        information is provided to help you understand what personal information
        we
        collect, how we protect that information and why, in certain cases, we may
        share
        information with select
        other
        parties.





Generally,
        we do not receive any
        non-public personal information relating to our stockholders, although certain
        non-public personal information of our stockholders may become available
        to us.
        We do not disclose any non-public personal information about our
        stockholders or
        former stockholders to anyone, except as permitted by law or as is necessary
        in
        order to service stockholder accounts (for example, to a transfer agent or
        third
        party administrator).





We
        restrict access to non-public
        personal information
        about
        our stockholders to employees of our investment adviser and its affiliates
        with
        a legitimate business need for the information. We maintain physical, electronic
        and procedural safeguards designed to protect the non-public personalinformation of our
        stockholders.





**Other**





As
        a BDC, weareperiodically examined by the SEC for
        compliance with the 1940 Act.Our manager is aRegisteredInvestment Advisorand is also subject toexamination by the
        SEC.





We
        will be required to provide
        and maintain a bond
        issued
        by a reputable fidelity insurance company to protect us against larceny and
        embezzlement. Furthermore, as a BDC, we are prohibited from protecting any
        director or officer against any liability to us or our stockholders arising
        from
        willful misfeasance, bad faith, gross
        negligence or reckless disregard of the duties involved in the conduct of
        such
        person’s
        office.





We
        and our investment adviser are each
        required to adopt and implement written policies and procedures reasonably
        designed to prevent
        violation of the federal securities laws, review these policies and procedures
        annually for their adequacy and the effectiveness of their implementation,
        and
        designate a chief compliance officer to be responsible for administering
        the
        policies
        and
        procedures.





**Co-investment**





As
        a BDC, we are prohibited under the
        1940 Act from knowingly participating in certain transactions with our
        affiliates without the prior approval of our independent directors, or in
        some
        cases, the prior approval of the SEC. For example,
        any person that
        owns, directly or indirectly, 5% or more of our outstanding voting securitiesisour
        affiliate for purposes of the 1940 Act
        and we
        aregenerallyprohibited from buying or selling any
        security from or to such affiliate,absent the prior approval
        of our
        independent directors. The 1940 Act also prohibits “joint”transactions with an affiliate, which
        could include investments in the same portfolio company (whether at the same
        or
        different times), without prior approval of our
        independent directors and, in some
        cases, the SEC. If a person acquires more than 25% of our voting securities,
        we
        are prohibited from buying or selling any security from or to such person,
        or
        entering into joint transactions with such person, absent theprior approval of the SEC. Similar
        restrictions limit our ability to transact business with our officers or
        directors or their affiliates. As a result, we will be limited in our ability
        to
        negotiating the term of any investment (except with respect to price)
        in instances where we are
        participating in such investments with other funds managed by GSC Group. Generally,
        we areprohibited from knowingly
        making an
        investment in securities of a portfolio company that is already held by GSC
        Group or any other fundmanaged by GSC Group. However, if a portfolio
   17
   company
        offers additional securities and
        existing securities are held by us and GSC Group or other funds managed by
        GSC
        Group, then we may participate in a follow-on investment in such securities
        on a
        pro-ratabasis.





The
        Company and GSC Group may in the
        future submit an exemptive application to the SEC to permit greater flexibility
        to negotiate the terms of co-investments because we believe that it will
        be
        advantageous for the Company to co-invest with fundsmanaged by GSC Group
        where such
        investment is consistent with the investment objectives, investment positions,
        investment policies, investment strategies, investment restrictions, regulatory
        requirements and other pertinent factors applicable to the Company.
        We believe that co-investment by the
        Company and funds managed by GSC Group may afford the Company additional
        investment opportunities and the ability to achieve greater diversification.
        Accordingly, any application would seek an exemptive order permitting
        the Company to negotiate more than
        price terms when investing with funds managed by GSC Group in the same portfolio
        companies. It is expected that any exemptive relief permitting co-investments
        on
        those terms would be granted, if at all, only upon theconditions,
        among others, that before
        such a co-investment transaction is effected, our investment adviser will
        make a
        written investment presentation regarding the proposed co-investment to the
        independent directors of the Company and the independent directors
        of the Company will review our
        investment adviser’s
        recommendation.





Moreover,
        it is expected that prior to
        committing to a co-investment, a “required majority”(as defined in Section 57(o) of
        the 1940 Act) of the independent directors of the Companywould conclude that
        (i) the terms
        of the proposed transaction are reasonable and fair to the Company and its
        stockholders and do not involve overreaching of the Company and its stockholders
        on the part of any person concerned; (ii) the transaction is
        consistent
        with the interests of the
        stockholders of the Company and is consistent with the investment objectives
        and
        policies of the Company; and (iii) the co-investment by any GSC Group fund
        would not disadvantage the Company in making its investment, maintaining
        its investment position, or
        disposing of such investment and that participation by the Company would
        not be
        on a basis different from or less advantageous than that of the affiliated
        co-investor. There is no assurance that the application for exemptive
        relief will be granted by the SEC or
        that, if granted, it will be on the terms set forth
        above.





**Resolution
      of potential conflicts of
      interest; equitable allocation of investment
      opportunities**




Subject
      to
      the 1940 Act restrictions on co-investments with affiliates, GSC Group will
      offer us the right to participate in all investment opportunities that it
      determines are appropriate for us in view of our investment objectives, policies
      and strategies and other relevant factors, subject to the exception that, in
      accordance with GSC Group’s conflict of interest and allocation policies, we
      might not participate in each individual opportunity but are, on an overall
      basis, entitled to equitably participate with GSC Group’s other funds or other
      clients.




We
      are GSC Group’s
      principal investment vehicle for
      non-distressed second lien loans and mezzanine debt ofU.S.middle
      market entities. Although
      existing and future investment vehicles managed or to be managed by GSC Group
      invest or may invest in mezzanine loans andsecond
      lien loans, none of these
      investment vehicles target non-distressed domestic second lien and mezzanine
      loans as the core of their portfolios. For example, while funds managed by
      GSC
      Group’s
      equity and distressed debt group may
      purchase second lien loans
      and mezzanine debt ofprivatemiddle market companies, these funds
      will typically be interested in these assets in distressed situations, whereas
      we generally will seek to hold performing debt. Likewise, while funds managed
      by
      GSC Group’s
      real estategroup
      may purchase second lien loans and
      mezzanine debt as an aspect of their investment strategies, these funds are
      largely focused on asset-backed and mortgage-backed loans and debt, not on
      corporate debt of the type we target. Finally, due to the high amounts
      of leverage deployed by various
      CDO funds managed by GSC Group, these






18




funds
      tend to target first lien loans,
      while second lien and mezzanine loans are a secondary part of the
      strategy.




To
      the extent that we do compete with
      any of GSC Group’s
      clientsfor a particular investment
      opportunity,
      our investment adviser will allocate the investment opportunity across the
      funds
      for which the investment is appropriate based on its internal conflict of
      interest and allocation policies consistent with the requirements
      of the Advisers Act, subject
      further to the 1940 Act restrictions on co-investments with affiliates and
      also
      giving effect to priorities that may be enjoyed from to time to time by one
      or
      more funds based on their investment mandate or guidelines, orany right of first review agreed to
      from time to time by GSC Group. Currently, GSC European Mezzanine Fund II,
      L.P. has a priority on investments in mezzanine securities of issuers located
      primarily inEurope.
      In addition, GSC Acquisition Company
      has recently
      entered into a business opportunity
      right of first review agreement which provides that it will have a right of
      first review prior to any other fund managed by GSC Group with respect to
      business combination opportunities with an enterprise value of $175 million
      or more until the
      earlier of it consummating an initial business combination or its liquidation.
      Subject to the foregoing, GSC Group’s
      allocation policies are intended to
      ensure that we may generally share equitably with other GSC
      Group-managedinvestment
      vehicles in investment
      opportunities, particularly those involving a security with limited supply
      or
      involving differing classes of securities of the same issuer, that may be
      suitable for us and such other investment vehicles.




GSC
      Group has historically managed investment
      vehicles
      with similar or overlapping investment strategies and has a conflict-resolution
      policy in place that will also address the co- investment restrictions under
      the
      1940 Act. The policy is intended to ensure that we complywith
      the 1940 Act restrictions on
      transactions with affiliates. These restrictions will significantly impact
      our
      ability to co-invest with other GSC Group’s
      funds. While the 1940 Act generally
      prohibits all “joint
      transactions”between
      entities that sharea
      common investment adviser, the staff
      of the SEC has granted no-action relief to an investment adviser permitting
      purchases of a single class of privately-placed securities, provided that the
      investment adviser negotiates no term other than price and certain
      other conditions are satisfied.
      Neither our investment adviser nor any participant in a co-investment will
      have
      both a material pecuniary incentive and ability to cause us to participate
      with
      it in a co-investment. As a result, we only expect to co-invest
      on a concurrent basis with GSC
      Group’s
      funds when each fund will own the same
      securities of the issuer. If opportunities arise that would otherwise be
      appropriate for us and for one or more of GSC Group’s
      other funds to invest in different
      securitiesof
      the same issuer, our investment
      adviser will need to decide whether we or the other funds will proceed with
      the
      investment.




GSC
      Group’s
      allocation procedures are designed to
      allocate investment opportunities among the investment vehicles of GSC Group
      ina manner consistent with
      its obligations under the Advisers Act. If two or more investment vehicles
      with
      similar investment strategies are still in their investment periods, an
      available investment opportunity will be allocated as described below,
      subjectto
      any provisions governing allocations
      of investment opportunities in the relevant organizational documents. As an
      initial step, our investment adviser will determine whether a particular
      investment opportunity is an appropriate investment for us and itsother
      clients and typically will
      determine the amount that would be appropriate for each client by considering,
      among other things, the following criteria: (1) the investment guidelines
      and/or restrictions set forth in the applicable organizational
      documents;
      (2) the risk and return profile
      of the client entity; (3) the suitability/priority of a particular
      investment for the client entity; (4) if applicable, the target position
      size of the investment for the client entity; and (5) the level of
      available cash
      for investment with respect to the
      particular client entity. If there is an insufficient amount of an opportunity
      to satisfy the needs of all participants, the investment opportunity will
      generally be allocated pro-rata based on the initial investment amounts.
      See “Risk Factors—There are






19






conflicts
      of interest in our
      relationship with our investment adviser and/or GSC Group, which could result
      in
      decisions that are not in the best interests of our
      stockholders.”





**Compliance
        with the Sarbanes-Oxley Act
        and theNew
        YorkStock Exchange corporate
        governance
        regulations**





The
        Sarbanes-Oxley Act of
        2002(the “Sarbanes-Oxley
        Act”)imposes a wide variety of new
        regulatory requirements on publicly-held companies and their insiders. The
        Sarbanes-Oxley Act requiresus to review our policies and
        procedures to determine whether we comply with the Sarbanes-Oxley Act and
        the
        new regulations promulgated thereunder. We will continue to monitor our
        compliance with all future regulations that are adopted under the
        Sarbanes-Oxley
        Act and will take actions
        necessary to ensure that we are in compliance
        therewith.





In
        addition, the New York Stock Exchange
        adopted corporate governance changes to its listing standards in 2003. We
        believe we are in compliance with such corporate governance listing standards.
        We will
        continue to monitor our compliance with all future listing standards and
        will
        take actions necessary to ensure that we are in compliance
        therewith.





**Available
      Information**





We
      file
      with or submit to the SEC annual, quarterly and current periodic reports, proxy
      statements and other information meeting the informational requirements of
      the
      Securities Exchange of 1934, as amended (the “Exchange Act”). You may inspect
      and copy these reports, proxy statements and other information at the Public
      Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549.
      You may obtain information on the operation of the Public Reference Room by
      calling the SEC at 1-800-SEC-0330. Copies of these reports, proxy and
      information statements and other information may be obtained, after paying
      a
      duplicating fee, by electronic request at the following e-mail address:
      publicinfo@sec.gov, or by writing the SEC’s Public Reference Section,
      Washington, D.C. 20549-0102. In addition, the SEC maintains an Internet
      website that contains reports, proxy and information statements and other
      information filed electronically by us with the SEC at
*http://www.sec.gov*.







20





**Item 1A.**
            **Risk
                Factors**




Investing
      in our common stock involves a high degree of risk. The risks set forth below
      are not the only risks we face. If any of the following risks occur, our
      business and financial condition could be materially adversely affected. In
      such
      case, our net asset value and the trading price of our common stock could
      decline.




**Risks
      related to our
      business**




***We
      are a newly-incorporatedMarylandcorporation with no operating
      history.***




We
      were incorporated in March 2007
      andcommenced our operations
      that same
      month. We are subject to
      all of the business risks and uncertainties associated with any new
      business, including
      the risk that wemaynot achieve our investment objectives
      and that the value of your investment could decline
      substantially.





***We
      may not be able to replicate GSC
      Group’s
      historical
      performance.***




Our
      primary focus in making investments differs from those of other private funds
      that are or have been managed by GSC Group’s investment professionals. Further,
      our investors are not acquiring an interest in other GSC Group
      funds.  Accordingly, we cannot assure you that we will replicate GSC
      Group’s historical performance, and we caution you that our investment returns
      could be substantially lower than the returns achieved by other GSC Group
      funds.




***We
      may compete with investment vehicles
      of GSC Group for access to GSC Group.***




Our
      investment adviser and its affiliates have sponsored and currently manage other
      investment vehicles with an investment focus that overlaps with our focus,
      and
      may in the future sponsor or manage additional investment vehicles with an
      overlapping focus to ours, which, in each case, could result in us competing
      for
      access to the benefits that we expect our relationship with GSC Group to provide
      to us.




***We
      are dependent upon our investment
      adviser’s
      key personnel for our future success
      and upon their access to GSC Group’s investment
      professionals.***




We
      depend
      on the diligence, skill and network of business contacts of GSC Group’s
      investment professionals and the information and deal flow generated by them
      in
      the course of their investment and portfolio management activities. The
      departure of a significant number of the investment professionals of GSC Group,
      could have a material adverse effect on our ability to achieve our investment
      objectives. In addition, we cannot assure you that our investment adviser will
      remain our investment adviser or that we will continue to have access to GSC
      Group’s investment professionals or its information and deal flow.




***Our
      financial condition and results of operation depends on our ability to manage
      future growth effectively.***




Our
      ability to achieve our investment objectives depends on our ability to acquire
      suitable investments and monitor and administer those investments, which
      depends, in turn, on our investment adviser’s ability to identify, invest in and
      monitor companies that meet our investment criteria.






21




Accomplishing
      this result on a cost-effective basis is largely a function of our investment
      adviser’s structuring of the investment process and its ability to provide
      competent, attentive and efficient service to us. Our executive officers and
      the
      employees of our investment adviser have substantial responsibilities in
      connection with their roles at GSC Group and with the other GSC Group investment
      vehicles as well as responsibilities under the investment advisory and
      management agreement. They may also be called upon to provide managerial
      assistance to our portfolio companies. These demands on their time, which will
      increase as the number of investments grow, may distract them or slow the rate
      of investment. In order to grow, our investment adviser may need to hire, train,
      supervise and manage new employees. However, we cannot assure you that any
      such
      employees will contribute to the work of the investment adviser. Any failure
      to
      manage our future growth effectively could have a material adverse effect on
      our
      business and financial condition.




***Our
      ability to grow will depend on our ability to raise
      capital.***




We
      will
      need to periodically access the capital markets to raise cash to fund new
      investments. Unfavorable economic conditions could increase our funding costs,
      limit our access to the capital markets or result in a decision by lenders
      not
      to extend credit to us. An inability to successfully access the capital markets
      could limit our ability to grow our business and fully execute our business
      strategy and could decrease our earnings, if any.




***We
      employ leverage.***




We
      currently use our Facilities to leverage our portfolio and we expect in the
      future to borrow from and issue senior debt securities to banks and other
      lenders and may securitize certain of our portfolio investments.




With
      certain limited exceptions, as a BDC we are only allowed to borrow amounts
      such
      that our asset coverage, as defined in the 1940 Act, is at least 200% after
      such
      borrowing. The amount of leverage that we employ will depend on our investment
      adviser’s and our board of directors’ assessment of market conditions and other
      factors at the time of any proposed borrowing. There is no assurance that a
      leveraging strategy will be successful. Leverage involves risks and special
      considerations for stockholders, including:





•
            Alikelihood
                of greater volatilityin thenet
                asset value and market price
                of our common stock.•
            Diminishedoperating
                flexibilityas a result
                ofasset coverage
                or investment
                portfolio composition
                requirements that are more stringent than those imposed by the 1940
                Act.In
                addition, our financing subsidiaries rely on Rule 3a-7 under the
                1940 Act,
                which prohibits us from, among other things, directing either of
                our
                financing subsidiaries to acquire, or dispose of investments for
                the
                primary purpose of recognizing gains or decreasing losses resulting
                from
                market value changes.•
            The
                possibility that investments
                will have to be liquidated at less than full value or at
                inopportune times
                to
                comply with debt covenants.•
            Increased
                operating expenses due
                tothe cost of
                leverage, including issuance and servicing
                costs.




•
            Subordination
                toLenders’superiorclaims on
                our assetsas a result
                of which lenders
                willbe able to
                receive proceeds available in the case of our liquidation before
                any
                proceeds are distributed to our
                shareholders.







22





Any
      requirement that we sell assets at a loss to redeem or pay interest or dividends
      on any leverage or for other reasons would reduce our net asset value and also
      make it difficult for the net asset value to recover. Our investment adviser
      and
      our board of directors in their best judgment nevertheless may determine to
      use
      leverage if they expect that the benefits to our stockholders of maintaining
      the
      leveraged position will outweigh the risks.




***Our
      investment adviser’s base compensation may cause it to increase our leverage
      contrary to our interest.***




We
      pay the
      investment adviser a quarterly base management fee based on the value of our
      total assets (including any assets acquired with leverage). Accordingly, the
      investment adviser has an economic incentive to increase our leverage. Our
      board
      of directors monitors the conflicts presented by this compensation structure
      by
      approving the amount of leverage that we incur. If our leverage is increased,
      we
      will be exposed to increased risk of loss, bear the increase cost of issuing
      and
      servicing such senior indebtedness, and will be subject to any additional
      covenant restrictions imposed on us in an indenture or other instrument or
      by
      the applicable lender.




***Our
      investment adviser’s incentive compensation may cause it to pursue a high risk
      investment strategy.***




The
      incentive fee payable to the investment adviser may create an incentive for
      the
      investment adviser to make investments that are riskier or more speculative
      than
      would be the case in the absence of such compensation arrangement. The way
      in
      which the incentive fee payable to the investment adviser is determined, which
      is calculated as a percentage of the return on net assets, may encourage the
      investment adviser to use leverage to increase the return to the Company’s
      investments. If the investment adviser acquires poorly-performing assets with
      such leverage, the loss to holders of the shares could be substantial. Moreover,
      if our leverage is increased, we will be exposed to increased risk of loss,
      bear
      the increased cost of issuing and servicing such senior indebtedness, and will
      be subject to any additional covenant restrictions imposed on us in an indenture
      or other instrument or by the applicable lender. Our board of directors will
      monitor the conflicts presented by this compensation structure by approving
      the
      amount of leverage that we may incur.  In addition, the investment
      adviser receives the incentive fee based, in part, upon net capital gains
      realized on our investments. Unlike the portion of the incentive fee based
      on
      income, there is no hurdle rate applicable to the portion of the incentive
      fee
      based on net capital gains. As a result, the investment adviser may have a
      tendency to invest more in investments that are likely to result in capital
      gains as compared to income producing securities. Such a practice could result
      in our investing in more speculative securities than would otherwise be the
      case, which could result in higher investment losses, particularly during
      economic downturns.




***We
      are exposed to risks associated with changes in interest
      rates.***




General
      interest rate fluctuations and changes in credit spreads on floating rate loans
      may have a substantial negative impact on our investments and investment
      opportunities and, accordingly, may have a material adverse effect on investment
      objectives and our rate of return on invested capital. In addition, an increase
      in interest rates would make it more expensive to use debt to finance our
      investments. Decreases in credit spreads on debt that pays a floating rate
      of
      return would have an impact on the income generation of our floating rate
      assets. Trading prices for debt that pays a fixed rate of return tend to fall
      as
      interest rates rise. Trading prices tend to fluctuate more for fixed-rate
      securities that have longer maturities. Although we have no policy governing
      the
      maturities of our investments, under current market conditions we expect that
      we
      will invest in a portfolio of debt generally having maturities of up to ten
      years. This means that we will be






23




subject
      to
      greater risk (other things being equal) than an entity investing solely in
      shorter-term securities. A decline in the prices of the debt we own could
      adversely affect the trading price of our common stock.




***Many
      of our portfolio investments are recorded at fair value as determined in good
      faith by our board of directors. As a result, there is uncertainty as to the
      value of our portfolio investments.***




We
      expect
      that, over time, a large percentage of our portfolio will be comprised of
      investments that are not publicly traded. The fair value of investments that
      are
      not publicly traded may not be readily determinable. We value these investments
      quarterly at fair value as determined in good faith by our board of directors.
      However, we may be required to value our investments more frequently as
      determined in good faith by our board of directors to the extent necessary
      to
      reflect significant events affecting their value. Where appropriate, our board
      of directors may utilize the services of an independent valuation firm to aid
      it
      in determining fair value. The types of factors that may be considered in
      valuing our investments include the nature and realizable value of any
      collateral, the portfolio company’s ability to make payments and its earnings,
      the markets in which the portfolio company does business, comparison to publicly
      traded companies, discounted cash flow and other relevant factors. Because
      such
      valuations, and particularly valuations of private investments and private
      companies, are inherently uncertain, may fluctuate over short periods of time
      and may be based on estimates, our determinations of fair value may differ
      materially from the values that would have been used if a ready market for
      these
      investments existed. Our net asset value could be adversely affected if our
      determinations regarding the fair value of our investments are materially higher
      than the values that we ultimately realize upon the sale of our
      investments.




***We
      may experience fluctuations in our quarterly results.***




We
      could
      experience fluctuations in our quarterly operating results due to a number
      of
      factors, including the interest rate payable on the debt investments we make,
      the default rate on such investments, the level of our expenses, variations
      in
      and the timing of the recognition of realized and unrealized gains or losses,
      the degree to which we encounter competition in our markets and general economic
      conditions. As a result of these factors, results for any period should not
      be
      relied upon as being indicative of performance in future periods.




***There
      are conflicts of interest in our relationship with our investment adviser and/or
      GSC Group, which could result in decisions that are not in the best interests
      of
      our stockholders.***




Subject
      to
      the restrictions of the 1940 Act, we may co-invest in investments of portfolio
      companies on a concurrent basis with other investment vehicles managed by GSC
      Group. Similarly a GSC Group managed investment vehicle may, in certain
      circumstances, invest in securities issued by a company in which we have made,
      or are making, an investment. Although certain such investments may present
      conflicts of interest, we nonetheless may pursue and consummate such
      transactions. These conflicts may include:







***Co-Investment.***  We
      are prohibited from co-investing with other investment vehicles managed now
      or
      in the future by GSC Group in certain investments of portfolio companies in
      instances where GSC Group negotiates terms other than price. In instances where
      we co-invest with a GSC Group managed investment vehicle, while we will invest
      on the same terms and neither we nor the GSC Group managed investment vehicle
      may negotiate terms of the transaction other than price, conflicts of interest
      may arise. For example, if an investee company in which both we and a GSC Group
      managed investment vehicle have invested becomes distressed, and if






24






the
      size
      of our relative investments vary significantly, the decisions relating to
      actions to be taken could raise conflicts of interest.




***Conflicts
      in Different Parts of Capital Structure.***  If a portfolio
      company in which we and another GSC Group managed investment vehicle hold
      different classes of securities encounters financial problems, decisions over
      the terms of any workout will raise conflicts of interests. For example, a
      debt
      holder may be better served by a liquidation of the issuer in which it will
      be
      paid in full, whereas an equity holder might prefer a reorganization that could
      create value for the equity holder.




***Potential
      Conflicting Positions.***  Given our investment objectives
      and the investment objectives of other GSC Group managed investment vehicles,
      it
      is possible that we may hold a position that is contrary to a position held
      by
      another GSC Group managed investment vehicle. For example, we could hold a
      longer term investment in a certain portfolio company and at the same time
      another GSC Group managed investment vehicle could hold a short term position
      in
      the same company. The GSC Group makes each investment decision separately based
      upon the investment objective of each of its clients.




***Shared
      Legal Counsel.***  We and a GSC Group managed investment
      vehicle generally engage common legal counsel in transactions in which both
      are
      participating. Although separate counsel may be engaged, the time and cost
      savings and other efficiencies and advantages of using common counsel will
      generally outweigh the disadvantages. In the event of a significant dispute
      or
      divergence of interests, typically in a work-out or other distressed situation,
      separate representation may become desirable, and in litigation and other
      circumstances, separate representation may be necessary.




***Allocation
      of Opportunities.***  In particular, our investment adviser
      provides investment management, investment advice or other services in relation
      to a number of investment vehicles of GSC Group, which focus on corporate
      credit, distressed debt, mezzanine investments and structured finance products
      and have investment objectives that are similar to or overlap with ours.
      Investment opportunities that may be of interest to us may also be of interest
      to GSC Group’s other investment vehicles, and GSC Group may buy or sell
      securities for us which differ from securities which they may cause to be bought
      or sold for GSC Group’s other investment vehicles. GSC Group may have
      conflicting interests, including a larger capital commitment to, or larger
      fees
      from, another investment vehicle of GSC Group, in determining which investment
      vehicle should pursue the investment opportunity.




***Material
      Nonpublic Information.***  GSC Group or its employees,
      officers, principals or affiliates may come into possession of material
      nonpublic information in connection with business activities unrelated to our
      operations. The possession of such information may limit our ability to buy
      or
      sell securities or otherwise participate in an investment opportunity or to
      take
      other action it might consider in our best interest.




***Cross-Trading.***  Subject
      to applicable law, we may engage in transactions directly with other investment
      vehicles managed by GSC Group, including the purchase or sale of all or a
      portion of a portfolio investment. Cross-trades can save us brokerage
      commissions and, in certain cases, related transaction costs. Cross-trades
      between affiliates may create conflicts of interest with respect to certain
      terms, including price, of the transaction. The 1940 Act imposes substantial
      restrictions on cross-trades between us and investment vehicles managed by
      GSC
      Group. As a result, our board of directors has adopted cross-trading procedures
      designed to ensure compliance with the requirements of the 1940 Act and will
      regularly review the terms of any cross-trades.






25




***Our
      investment adviser’s liability is limited under the investment advisory and
      management agreement and we will indemnify our investment adviser against
      certain liabilities, which may lead our investment adviser to act in a riskier
      manner on our behalf than it would when acting for its own
      account.***




Our
      investment adviser has not assumed any responsibility to us other than to render
      the services described in the investment advisory and management agreement.
      Pursuant to the investment advisory and management agreement, our investment
      adviser and its general partner, officers and employees are not liable to us
      for
      their acts, under the investment advisory and management agreement, absent
      willful misfeasance, bad faith, gross negligence or reckless disregard in the
      performance of their duties. We have agreed to indemnify, defend and protect
      our
      investment adviser and its general partner, officers and employees with respect
      to all damages, liabilities, costs and expenses resulting from acts of our
      investment adviser not arising out of willful misfeasance, bad faith, gross
      negligence or reckless disregard in the performance of their duties under the
      investment advisory and management agreement. These protections may lead our
      investment adviser to act in a riskier manner when acting on our behalf than
      it
      would when acting for its own account.




***We
      may be obligated to pay our investment adviser incentive compensation even
      if we
      incur a net loss, regardless of the market value of our common
      stock.***




Our
      investment adviser is entitled to incentive compensation for each fiscal quarter
      in an amount equal to a percentage of the excess of our investment income for
      that quarter (before deducting incentive compensation, net operating losses
      and
      certain other items) above a threshold return for that quarter. Our
      pre-incentive fee net investment income, for incentive compensation purposes,
      excludes realized and unrealized capital losses that we may incur in the fiscal
      quarter, even if such capital losses result in a net loss on our statement
      of
      operations for that quarter. Thus, we may be required to pay our investment
      adviser incentive compensation for a fiscal quarter even if there is a decline
      in the value of our Portfolio or we incur a net loss for that
      quarter.




Under
      the
      investment advisory and management agreement, we will defer cash payment of
      any
      incentive fee otherwise earned by our investment adviser if, during the most
      recent four full quarterly periods ending on or prior to the date such payment
      is to be made, the sum of (a) our aggregate distributions to our
      stockholders and (b) our change in net assets (defined as total assets less
      liabilities) is less than 7.5% of our net assets at the beginning of such
      period. These calculations will be appropriately pro rated during the first
      three quarters of this fiscal year and will be adjusted for any share issuances
      or repurchases. Furthermore, the incentive fee that we pay is not tied to the
      market value of our common stock.




If
      a
      portfolio company defaults on a loan that is structured to provide accrued
      interest, it is possible that accrued interest previously included in the
      calculation of the incentive fee will become uncollectible. The investment
      adviser is not under any obligation to reimburse us for any part of the
      incentive fee it received that was based on accrued income that we never
      received as a result of a default by an entity on the obligation that resulted
      in the accrual of such income.




***Changes
      in laws or regulations governing our operations, or changes in the
      interpretation thereof, and any failure by us to comply with laws or regulations
      governing our operations may adversely affect our
      business.***




We
      and our
      portfolio companies are subject to regulation at the local, state and federal
      levels. These laws and regulations, as well as their interpretation, may be
      changed from time to time.  Any change in these laws or regulations,
      or their interpretation, or any failure by us to comply with these laws or
      regulations may adversely affect our business.






26




As
      discussed below, there is a risk that certain investments that we intend to
      treat as qualifying assets will be determined to not be eligible for such
      treatment. Any such determination would have a material adverse effect on our
      business.




***We
      operate in a highly competitive market for investment
      opportunities.***




A
      number
      of entities compete with us to make the types of investments that we plan to
      make in private middle market companies. We compete with other BDCs, public
      and
      private funds, commercial and investment banks, commercial financing companies,
      insurance companies, high-yield investors, hedge funds, and, to the extent
      they
      provide an alternative form of financing, private equity funds. Many of our
      competitors are substantially larger and have considerably greater financial,
      technical and marketing resources than us. Several other BDCs have recently
      raised, or are expected to raise, significant amounts of capital, and may have
      investment objectives that overlap with ours, which may create competition
      for
      investment opportunities. Some competitors may have a lower cost of funds and
      access to funding sources that are not available to us. In addition, some of
      our
      competitors may have higher risk tolerances or different risk assessments that
      could allow them to consider a wider variety of investments and establish more
      relationships than us. Furthermore, many of our competitors are not subject
      to
      the regulatory restrictions that the 1940 Act will impose on us as a BDC. We
      cannot assure you that the competitive pressures we face will not have a
      material adverse effect on our business and financial condition. Also, as a
      result of this competition, we may not be able to take advantage of attractive
      investment opportunities from time to time, and we cannot assure you that we
      will be able to identify and make investments that meet our investment
      objectives.




We
      do not
      seek to compete primarily based on the interest rates we offer and we believe
      that some of our competitors may make loans with interest rates that are
      comparable to or lower than the rates we offer.




We
      may
      lose investment opportunities if we do not match our competitors’ pricing, terms
      and structure. If we match our competitors’ pricing, terms and structure, we may
      experience decreased net interest income and increased risk of credit loss.
      As a
      result of operating in such a competitive environment, we may make investments
      that are on better terms to our portfolio companies than we originally
      anticipated, which may impact our return on these investments.





We
      are a
      non-diversified investment company within the meaning of the 1940 Act, and
      therefore are not limited with respect to the proportion of our assets that
      may
      be invested in securities of a single issuer.To the
      extent that we assume large positions in the securities of a small number of
      issuers, our net asset value may fluctuate to a greater extent than that of
      a
      diversified investment company as a result of changes in the financial condition
      or the market’s assessment of the issuer.  We may also be more
      susceptible to any single economic or regulatory occurrence than a diversified
      investment company.  However, we intend to comply with the
      diversification requirements imposed by the Code for qualification as a
      RIC.




**Risks
      related to our operation as a BDC**




***Our
      investment adviser has no experience managing a BDC.***




The
      1940
      Act imposes numerous constraints on the operations of BDCs. For example, BDCs
      are required to invest at least 70% of their total assets primarily in
      securities of private U.S. operating companies or public U.S. companies whose
      securities are not listed on a national securities exchange registered under
      the
      Exchange Act (i.e., New York Stock Exchange, American Stock Exchange and The
      NASDAQ Global Market), cash, cash equivalents, U.S. government securities
      and high quality debt investments that mature in one year or less. Our
      investment






27






adviser
      does not have any experience managing a BDC. The lack of experience of our
      investment adviser in managing a portfolio of assets under such constraints
      may
      hinder its ability to take advantage of attractive investment opportunities
      and,
      as a result, achieve our investment objectives.




***A
      failure on our part to maintain our qualification as a BDC would significantly
      reduce our operating flexibility.***




If
      we fail
      to qualify as a BDC, we might be regulated as a closed-end investment company
      under the 1940 Act, which would significantly decrease our operating
      flexibility.




***We
      will be subject to corporate-level income tax if we fail to qualify as a
      RIC.***




We
      will
      seek to qualify as a RIC under the Code, which requires us to qualify
      continuously as a BDC and meet certain source of income, distribution and asset
      diversification requirements.




The
      source
      of income requirement is satisfied if we derive at least 90% of our annual
      gross
      income from interest, dividends, payments with respect to certain securities
      loans, gains from the sale or other disposition of securities or options thereon
      or foreign currencies, or other income derived with respect to our business
      of
      investing in such securities or currencies, and net income from interests in
      “qualified publicly traded partnerships,” as defined in the Code.




The
      annual
      distribution requirement is satisfied if we distribute to our stockholders
      on an
      annual basis an amount equal to at least 90% of our ordinary net taxable income
      and realized net short-term capital gains in excess of realized net long-term
      capital losses, if any, reduced by deductible expenses.  We are
      subject to certain asset coverage ratio requirements under the 1940 Act and
      covenants under the Facilities that could, under certain circumstances, restrict
      us from making distributions necessary to qualify as a RIC. In such case, if
      we
      are unable to obtain cash from other sources, we may fail to qualify as a RIC
      and, thus, may be subject to corporate-level income tax.




To
      qualify
      as a RIC, we must also meet certain asset diversification requirements at the
      end of each calendar quarter. Failure to meet these tests may result in our
      having to (i) dispose of certain investments quickly or (ii) raise
      additional capital to prevent the loss of our RIC qualification. Because most
      of
      our investments will be in private companies, any such dispositions could be
      made at disadvantageous prices and may result in substantial losses. If we
      raise
      additional capital to satisfy the asset diversification requirements, it could
      take us time to invest such capital. During this period, we will invest the
      additional capital in temporary investments, such as cash and cash equivalents,
      which we expect will earn yields substantially lower than the interest income
      that we anticipate receiving in respect of investments in first and second
      lien
      loans, mezzanine debt and high yield debt.




If
      we fail
      to qualify as a RIC for any reason, all of our taxable income will be subject
      to
      U.S. federal income tax at regular corporate rates. The resulting corporate
      taxes could substantially reduce our net assets, the amount of income available
      for distribution and the amount of our distributions. Such a failure would
      have
      a material adverse effect on us and our stockholders.




***There
      is a risk that you may not receive distributions or that our distributions
      may
      not grow over time.***




As
      a BDC
      for 1940 Act purposes and a RIC for U.S. federal income tax purposes, we
      intend to make distributions out of assets legally available for distribution
      on
      a quarterly basis to our stockholders once such distributions are authorized
      by
      our board of directors and declared by






28






us.
      We
      cannot assure you that we will achieve investment results that will allow us
      to
      make a specified level of cash distributions or year-to-year increases in cash
      distributions. In addition, due to the asset coverage test that is applicable
      to
      us as a BDC, we may be limited in our ability to make distributions. Further,
      if
      we invest a greater amount of assets in equity securities that do not pay
      current dividends, it could reduce the amount available for
      distribution.





***As
      a BDC, we may have difficulty paying our required distributions if we recognize
      income before or without receiving cash in respect of such
      income.***




For
      U.S. federal income tax
      purposes, we include in income certain amounts that we have not yet received
      in
      cash, such as original issue discount, which may arise if we receive warrants
      in
      connection with the making of a loan or possibly in othercircumstances, or contractedpaid-in-kind
      interest, which represents
      contractual interest added to the loan balance and due at the end of the loan
      term. Such original issue discount, which could be significant relative to
      our
      overall investment activities,or increases in loan
      balances will be
      included in income before we receive any corresponding cash payments. We also
      may be required to include in income certain other amounts that we will not
      receive in cash, including, for example, non-cash income
      from
      paid-in-kind
      securities and deferred payment
      securities.




Since
      in certain cases we may recognize
      income before or without receiving cash in respect of such income, we may have
      difficulty meeting the requirement that we distribute an amount equal to at
      least90% of our ordinary
      net taxable income and realized net short-term capital gains in excess of
      realized net long-term capital losses, if any, reduced by deductible expenses,
      to qualify as a RIC. Accordingly, we may have to sell some of our investments
      attimes
      we would not consider advantageous,
      raise additional debt or equity capital or reduce new investments to meet these
      distribution requirements. If we are not able to obtain cash from other sources,
      we may fail to qualify as a RIC and thus be subject tocorporate-level income
      tax.




***Regulations
      governing our operation as a BDC will affect our ability to, and the way in
      which we, raise additional capital.***




Wehave incurred indebtednessunder the Facilitiesandwe
      may issue debt securities
      or preferred
      stock,which we refer to
      collectively as “seniorsecurities,”up to the maximum amount
      permitted by
      the 1940 Act. Under the provisions of the 1940 Act, we are permitted, as a
      BDC,
      to incur indebtedness or issueseniorsecurities only in amounts such that
      our asset coverage, as
      defined in the 1940 Act, equalsat least 200% after such incurrence or
      issuance. If the value of our assets declines, we may be unable to satisfy
      this
      test, which would prohibit us from paying dividends and could prevent us from
      qualifyingas a RIC. If we
      cannot satisfy this test, we may be required to sell a portion of our
      investments and, depending on the nature of our leverage, repay a portion of
      our
      indebtedness at a time when such sales may be
      disadvantageous.




We
      are not generally ableto issue and sell our
      common stock at a
      price below net asset value per share. We may, however, sell our common stock,
      or warrants, options or rights to acquire our common stock, at a price below
      the
      current net asset value of the common stock if our boardof directors determines that such sale
      is in our best interests and the best interests of our stockholders, and our
      stockholders approve such sale. In any such case, the price at which our
      securities are to be issued and sold may not be less than a pricewhich,
      in the determination of our board
      of directors, closely approximates the market value of such securities (less
      any
      commission or discount). If our common stock trades at a discount to net asset
      value, this restriction could adversely affect our ability
      to raise
      capital.




To
      generate cash for funding new
      investments, wesecuritized
      a substantial
      portion of our portfolio via the Facilities.We mayin
      the futureseek to do additional
      securitizations. An
      inability






29






to
      successfully securitize our loan
      portfolio could limit our
      ability to grow our business, fully execute our business strategy and decrease
      our earnings, if any. The securitization market is subject to changing market
      conditions and we may not be able to access this market when we would
      otherwise
      deem appropriate. Moreover, the
      successful securitization of our loan portfolio might expose us to losses as
      the
      residual loans in which we do not sell interests will tend to be those that
      are
      riskier and more apt to generate losses. The 1940 Act may also
      impose restrictions on the structure
      of any securitization.




***If
      our primary investments are deemed not to be qualifying assets, we could fail
      to
      qualify as a BDC or be precluded from investing according to our current
      business plan.***




If
      we are to maintainour qualification as
      a BDC, we must not
      acquire any assets other than “qualifying assets”unless, at the time of and after giving
      effect to such acquisition, at least 70% of our total assets are qualifying
      assets. We believe that theleveraged loansand mezzanine investments
      that we propose to
      acquire constitute qualifying assets because the privately held issuers will
      not, at the time of our investment, have securities listed on a national
      securities exchange.




The
      Securities and Exchange Commission (the “SEC”) has adopted a rule that defines
      an “eligible portfolio company” as any private domestic operating company and
      public domestic operating company that does not have securities listed on a
      national securities exchange. In addition, the SEC has proposed a new rule
      that
      would expand the definition of eligible portfolio companies to include
      publicly-traded companies with a market capitalization of less than
      $250 million. If adopted or enacted, the effect of this rule would be to
      further reduce or eliminate confusion surrounding whether a company qualifies
      as
      an eligible portfolio company. We cannot assure you that this rule will be
      approved by the SEC. Until the SEC or its staff has issued a final rule, we
      will
      continue to monitor this issue closely. See “— Risks related to our
      business — Changes in laws or regulations governing our operations, or
      changes in the interpretation thereof, and any failure by us to comply with
      laws
      or regulations governing our operations may adversely affect our business”
above.





***Our
      common stock may trade at a discount
      to our net asset value per share.***





Common
        stock of BDCs, as closed-end
        investment companies, frequently trades at a discount to net asset value.
        The
        possibility that our common stock may trade at a discount to our net asset value is separate
        and distinct
        from the risk that our net asset value per share may
        decline.




***The
      floating interest rate features of
      any indebtedness incurred by us could adversely affect us if interest rates
      rise.***




Any
      indebtedness incurred by us will likely bear interest at a floating rate based
      on an index. As a result, if that index increases, our costs under any
      indebtedness incurred would become more expensive, which could have a material
      adverse effect on our earnings.




**Risks
      related to our investments**




***Our
      investments may be risky, and you could lose all or part of your
      investment.***




Substantially
      all of the debt investments held in the portfolio hold, and will likely continue
      to hold, a non-investment grade rating by Moody’s Investors Service and/or
      Standard & Poor’s or, where not rated by any rating agency, would be
      below investment grade, if rated. Debt securities rated below investment grade
      are commonly referred to as “junk bonds.” A below investment grade rating means
      that, in the rating agency’s view, there is an increased risk that the






30






obligor
      on
      such debt will be unable to pay interest and repay principal on its debt in
      full.  We may also invest in debt that defers or pays paid-in-kind
      interest.  To the extent interest payments associated with such debt
      are deferred, such debt will be subject to greater fluctuations in value based
      on changes in interest rates, such debt could produce taxable income without
      a
      corresponding cash payment to us, and since we generally do not receive any
      cash
      prior to maturity of the debt, the investment will be of greater
      risk.




In
      addition, private middle market companies in which we expect to invest are
      exposed to a number of significant risks, including:





•
            limited
                financial resources andan inabilityto meet their
                obligations, which may be accompanied by a deterioration in the value
                of
                any collateral and a reduction in the likelihood of us realizing
                any
                guarantees we may have obtained in connection with our
                investment;•
            shorter
                operating histories, narrower
                product lines
                and smaller market shares than larger businesses, which tend to render
                them more vulnerable to competitors’actions and market conditions, as
                well as general economic downturns;•
            dependenceon
                the management talents and efforts
                of a small group
                of persons; the death, disability, resignation or termination of
                one or
                moreofwhichcould
                have a material adverse
                impact onthecompany and,
                in turn,
                on us;•
            lesspredictable operating
                resultsand,
                possibly,substantial
                additional capitalrequirementsto support
                their
                operations, finance expansion or maintain their competitive
                position; and•
            difficulty
                accessing the capital
                markets to meet future capital
                needs.




In
        addition, our executive
        officers, directors and
        our
        investment adviser may, in the ordinary course of business, be named as
        defendants in litigation arising from our investments in the portfolio
        companies.





***Economic
      recessions or downturns could impair our portfolio companies and harm our
      operating results.***




Many
      of
      our portfolio companies may be susceptible to economic slowdowns or recessions
      and may be unable to repay our loans during these periods. Therefore, our
      non-performing assets are likely to increase and the value of our portfolio
      is
      likely to decrease during these periods. Adverse economic conditions also may
      decrease the value of collateral securing some of our loans and the value of
      our
      equity investments. Economic slowdowns or recessions could lead to financial
      losses in our portfolio and a decrease in revenues, net income and assets.
      Unfavorable economic conditions also could increase our funding costs, limit
      our
      access to the capital markets or result in a decision by lenders not to extend
      credit to us. These events could prevent us from increasing investments and
      harm
      our operating results.




A
      portfolio company’s failure to satisfy financial or operating covenants imposed
      by us or other lenders could lead to defaults and, potentially, acceleration
      of
      the time when the loans are due and foreclosure on its secured assets, which
      could trigger cross-defaults under other agreements and jeopardize our portfolio
      company’s ability to meet its obligations under the debt that we hold and the
      value of any equity securities we own. We may incur expenses to the extent
      necessary to seek recovery upon default or to negotiate new terms with a
      defaulting portfolio company.






31




***There
      may be circumstances where our debt investments could be subordinated to claims
      of other creditors or we could be subject to lender liability
      claims.***




If
      one of
      our portfolio companies were to go bankrupt, even though we may have structured
      our interest as senior debt, depending on the facts and circumstances, including
      the extent to which we actually provided managerial assistance to that portfolio
      company, a bankruptcy court might recharacterize our debt holding and
      subordinate all or a portion of our claim to that of other creditors. In
      addition, lenders can be subject to lender liability claims for actions taken
      by
      them where they become too involved in the borrower’s business or exercise
      control over the borrower. It is possible that we could become subject to a
      lender’s liability claim, including as a result of actions taken if we actually
      render significant managerial assistance.




***The
      debt securities in which we invest are subject to credit risk and prepayment
      risk.***




An
      issuer
      of debt security may be unable to make interest payments and repay principal.
      We
      could lose money if the issuer of a debt obligation is, or is perceived to
      be,
      unable or unwilling to make timely principal and/or interest payments, or to
      otherwise honor its obligations. The downgrade of a security by rating agencies
      may further decrease its value.




Certain
      debt instruments may contain call or redemption provisions which would allow
      the
      issuer thereof to prepay principal prior to the debt instrument’s stated
      maturity. This is known as prepayment risk. Prepayment risk is greater during
      a
      falling interest rate environment as issuers can reduce their cost of capital
      by
      refinancing higher interest debt instruments with lower interest debt
      instruments. An issuer may also elect to refinance their debt instruments with
      lower interest debt instruments if the credit standing of the issuer improves.
      To the extent debt securities in our portfolio are called or redeemed, we may
      receive less than we paid for such security and we may be forced to reinvest
      in
      lower yielding securities or debt securities of issuers of lower credit
      quality.




***Available
      information about privately held companies is
      limited.***




We
      invest
      primarily in privately-held companies. Generally, little public information
      exists about these companies, and we are required to rely on the ability of
      our
      investment adviser’s investment professionals to obtain adequate information to
      evaluate the potential returns from investing in these companies. These
      companies and their financial information are not subject to the Sarbanes-Oxley
      Act and other rules that govern public companies. If we are unable to uncover
      all material information about these companies, we may not make a fully informed
      investment decision, and we may lose money on our investments.




***Our
      portfolio companies may incur debt or issue equity securities that rank equally
      with, or senior to, our investments in such
      companies.***




Our
      portfolio companies usually will have, or may be permitted to incur, other
      debt,
      or issue other equity securities, that rank equally with, or senior to, our
      investments. By their terms, such instruments may provide that the holders
      are
      entitled to receive payment of dividends, interest or principal on or before
      the
      dates on which we are entitled to receive payments in respect of our
      investments. These debt instruments will usually prohibit the portfolio
      companies from paying interest on or repaying our investments in the event
      and
      during the continuance of a default under such debt. Also, in the event of
      insolvency, liquidation, dissolution, reorganization or bankruptcy of a
      portfolio company, holders of securities ranking senior to our investment in
      that portfolio company would typically be entitled to receive payment in full
      before we receive any distribution in respect of our investment. After repaying
      such holders, the portfolio company may not have any remaining assets to use
      for
      repaying its obligation to us. In the case of debtor equity ranking equally
      with
      our investments, we would have to share on an equal basis any distributions






32






with
      other
      holders in the event of an insolvency, liquidation, dissolution, reorganization
      or bankruptcy of the relevant portfolio company.





***Investments
      in equity securities involve a substantial degree of
      risk.***




We
      may
      purchase common stock and other equity securities. Although equity securities
      have historically generated higher average total returns than fixed-income
      securities over the long term, equity securities also have experienced
      significantly more volatility in those returns and in recent years have
      significantly under performed relative to fixed-income securities. The equity
      securities we acquire may fail to appreciate and may decline in value or become
      worthless and our ability to recover our investment will depend on our portfolio
      company’s success. Investments in equity securities involve a number of
      significant risks, including:





•
            any
                equity investment we make in a
                portfolio company could be subject to further dilution as a result
                of the
                issuance of additional equity interests and to serious risks as a
                junior
                security thatwillbe subordinate to all
                indebtedness orseniorsecurities in
                the event that the
                issuer is unable to meet its obligations or becomes subject to a
                bankruptcy process;•
            to
                the extent that the portfolio
                company requires additional capital and is unable to obtain it, we
                may not
                recover our investment in equity
                securities; and•
            in
                some cases, equity securities
                in which we invest will not pay current dividends, and our ability
                to
                realize a return on our investment, as well as to recover our investment,
                will be dependent on the success of our portfolio
                companies. Even if
                the portfolio companies are successful, our ability to realize the
                value
                of our investment may be dependent on the occurrence of a liquidity
                event,
                such as a public offering or the sale of the portfolio company. It
                is
                likelyto take a significant amount of
                time before a liquidity event occurs or we can sell our equity
                investments. In addition, the equity securities we receive or invest
                in
                may be subject to restrictions on resale during periods in which
                it could
                be advantageous
                to
                sell.




There
        are special risks associated with
        investing in preferred securities, including:





•
            preferred
                securities may include
                provisions that permit the issuer, at its discretion, to defer
                distributions for a stated period without any adverse consequences
                to the issuer.
                If we own a preferred security that is deferring its distributions,
                we may
                be required to report income for tax purposes even though we have
                not
                received any cash payments in respect of such
                income;•
            preferredsecurities
                are subordinatedwith respect
                tocorporate income
                and
                liquidation payments, andaretherefore
                subject to greater risk
                than debt;•
            preferred
                securities may be
                substantially less liquid than many other securities, such as common
                securities orU.S.government
                securities; and•
            preferred
                security holders
                generally have no voting rights with respect to the issuing company,
                subject to limited
                exceptions.




***Our
      investments in foreign debt, including that of emerging market issuers, may
      involve significant risks in addition to the risks inherent in
      U.S. investments.***






33






Although
      there are limitations on our ability to invest in foreign debt, we may, from
      time to time, invest in debt of foreign companies, including the debt of
      emerging market issuers. Investing in foreign companies may expose us to
      additional risks not typically associated with investing in U.S. companies.
      These risks include changes in exchange control regulations, political and
      social instability, expropriation, imposition of foreign taxes, less liquid
      markets and less available information than is generally the case in the United
      States, higher transaction costs, less government supervision of exchanges,
      brokers and issuers, less developed bankruptcy laws, difficulty in enforcing
      contractual obligations, lack of uniform accounting and auditing standards
      and
      greater price volatility. Investments in the debt of emerging market issuers
      may
      subject us to additional risks such as inflation, wage and price controls,
      and
      the imposition of trade barriers. Furthermore, economic conditions in emerging
      market countries are, to some extent, influenced by economic and securities
      market conditions in other emerging market countries. Although economic
      conditions are different in each country, investors’ reaction to developments in
      one country can have effects on the debt of issuers in other
      countries.




Although
      most of our investments will be U.S. dollar-denominated, our investments
      that are denominated in a foreign currency will be subject to the risk that
      the
      value of a particular currency will change in relation to one or more other
      currencies. Among the factors that may affect currency values are trade
      balances, the level of short-term interest rates, differences in relative values
      of similar assets in different currencies, long-term opportunities for
      investment and capital appreciation, and political developments. We may employ
      hedging techniques to minimize these risks, but we cannot assure you that we
      will fully hedge against these risks or that such strategies will be
      effective.




***We
      may expose ourselves to risks if we engage in hedging
      transactions.***




We
      may
      utilize instruments such as forward contracts, currency options and interest
      rate swaps, caps, collars and floors to seek to hedge against fluctuations
      in
      the relative values of our portfolio positions from changes in currency exchange
      rates and market interest rates. Use of these hedging instruments may expose
      us
      to counter-party credit risk. Hedging against a decline in the values of our
      portfolio positions does not eliminate the possibility of fluctuations in the
      values of such positions or prevent losses if the values of such positions
      decline. However, such hedging can establish other positions designed to gain
      from those same developments, thereby offsetting the decline in the value of
      such portfolio positions. Such hedging transactions may also limit the
      opportunity for gain if the values of the portfolio positions should increase.
      Moreover, it may not be possible to hedge against an exchange rate or interest
      rate fluctuation that is generally anticipated at an acceptable
      price.





***The
      lack of liquidity in our investments may adversely affect our
      business.***




We
      expect
      to make investments in private companies. A portion of these securities may
      be
      subject to legal and other restrictions on resale, transfer, pledge or other
      disposition or will otherwise be less liquid than publicly traded securities.
      The illiquidity of our investments may make it difficult for us to sell such
      investments if the need arises. In addition, if we are required to liquidate
      all
      or a portion of our portfolio quickly, we may realize significantly less than
      the value at which we have previously recorded our investments. In addition,
      we
      may face other restrictions on our ability to liquidate an investment in a
      business entity to the extent that we or our investment adviser has or could
      be
      deemed to have material non-public information regarding such business
      entity.




***When
      we are a debt or minority equity investor in a portfolio company, we may not
      be
      in a position to control the entity, and its management may make decisions
      that
      could decrease the value of our investment.***






34




We
      anticipate making both debt and minority equity investments; therefore, we
      will
      be subject to the risk that a portfolio company may make business decisions
      with
      which we disagree, and the stockholders and management of such company may
      take
      risks or otherwise act in ways that do not serve our interests. As a result,
      a
      portfolio company may make decisions that could decrease the value of our
      portfolio holdings.




***Our
      board of directors may change our operating policies and strategies without
      prior notice or stockholder approval, the effects of which may be
      adverse.***




Our
      board
      of directors has the authority to modify or waive our current operating policies
      and our strategies without prior notice and without stockholder approval. We
      cannot predict the effect any changes to our current operating policies and
      strategies would have on our business, financial condition, and value of our
      common stock. However, the effects might be adverse, which could negatively
      impact our ability to pay dividends and cause you to lose all or part of your
      investment.




**Risks
      related to an investment in our shares**




***Investing
      in our common stock may involve an above average degree of
      risk.***




The
      investments we make in accordance with our investment objectives may result
      in a
      higher amount of risk than alternative investment options and volatility or
      loss
      of principal. Our investments in portfolio companies may be highly speculative
      and aggressive, and therefore, an investment in our common stock may not be
      suitable for someone with lower risk tolerance.




***The
      market price of our common stock may fluctuate
      significantly.***




The
      market
      price and liquidity of the market for our common stock may be significantly
      affected by numerous factors, some of which are beyond our control and may
      not
      be directly related to our operating performance. These factors
      include:





•
            significant
                volatilityin the market
                price
                and trading volume of securities ofBDCsor other companies in our sector,
                which are not necessarily related to the operating performance of
                these
                companies;•
            changes
                in regulatory policies or
                tax rules, particularly with respect to RICs
                or
                BDCs;•
            loss
                of RIC
                qualification;•
            changes
                in earnings or variations
                in operating results;•
            changes
                in the value of our
                portfolio of investments;•
            any
                shortfall in revenue or net
                income or any
                increase in losses from levels expected by investors or securities
                analysts;•
            departure
                of our investment
                adviser’s
                key
                personnel;•
            operating
                performance of companies
                comparable to us;•
            general
                economic trends and
                other external
                factors; and•
            loss
                of a major funding
                source.







35





***Provisions
        of our governing documents
        and the Maryland General Corporation Law could deter takeover attempts and
        have
        an adverse impact on the price of our common
        stock.***





We
        are governed by our charter and
        bylaws, which we refer to as our “governing
        documents.”





Our
        governing documents and the Maryland
        General Corporation Law contain provisions that may have the effect of delaying,
        deferring or preventing a transaction or a change in control of us that might
        involve a premium price for our stockholders or otherwise be in their best
        interest.





Our
        charter provides for the
        classification of our board of directors into three classes of directors,
        serving staggered three-year terms, which may render a change of control
        of us
        or removal of our incumbent management more difficult. Furthermore, any and
        all
        vacancies on our board of directors will be filled generally only by the
        affirmative vote of a majority of the remaining directors in office, even
        if the
        remaining directors do not constitute a quorum, and any director elected
        to fill
        a vacancy will serve for the remainder of the full term until a successor
        is
        elected and qualifies.





Our
        board of directors is authorized to
        create and issue new series of shares, to classify or reclassify any unissued
        shares of stock into one or more classes or series, including preferred stock
        and, without stockholder approval, to amend our charter to increase or decrease
        the number of shares of stock that we have authority to issue, which could
        have
        the effect of diluting a stockholder’s ownership interest. Prior to the issuance
        of shares of stock of each class or series, including any reclassified series,
        our board of directors is required by our governing documents to set the
        terms,
        preferences, conversion or other rights, voting powers, restrictions,
        limitations as to dividends or other distributions, qualifications and terms
        or
        conditions of redemption for each class or series of shares of
        stock.





Our
        governing documents also provide
        that our board of directors has the exclusive power to adopt, alter or repeal
        any provision of our bylaws, and to make new bylaws. The Maryland General
        Corporation Law also contains certain provisions that may limit the ability
        of a
        third party to acquire control of us, such as:





•
            The
                Maryland Business Combination
                Act, which, subject to certain limitations, prohibits certain business
                combinations between us and an “interested stockholder” (defined generally
                as any person who beneficially owns 10% or more of the voting power
                of the
                common stock or an affiliate thereof) for five years after the most
                recent
                date on which the stockholder becomes an interested stockholder and,
                thereafter, imposes special minimum price provisions and special
                stockholder voting requirements on these
                combinations; and•
            The
                Maryland Control Share
                Acquisition Act, which provides that “control shares” of a
                Maryland corporation (defined as shares of common stock which, when
                aggregated with other shares of common stock controlled by the
                stockholder, entitles the stockholder to exercise one of three increasing
                ranges of voting power in electing directors) acquired in a “control share
                acquisition” (defined as the direct or indirect acquisition of ownership
                or control of “control shares”) have no voting rights except to the extent
                approved by stockholders by the affirmative vote of at least two-thirds
                of
                all the votes entitled to be cast on the matter, excluding all
                interestedshares of common
                stock.





The
        provisions of the Maryland Business
        Combination Act will not apply, however, if our board of directors adopts
        a
        resolution that any business combination between us and any other
   36
   person
        will be exempt from the
        provisions of the Maryland Business Combination Act. Although our board of
        directors has adopted such a resolution, there can be no assurance that this resolution
        willnot be altered or
        repealed in whole or in part at any time. If the resolution is altered or
        repealed, the provisions of the Maryland Business Combination Act may discourage
        others from trying to acquire control of us.





As
        permitted byMarylandlaw, our bylaws contain a provision
        exempting from the Maryland Control Share Acquisition Act any and all
        acquisitions by any person of our common stock. Although our bylaws include
        such
        a provision, such a provision may also be amended or eliminated by our board
        of
        directors at any time in the future.










37





**Item 1B.**
            **Unresolved
                Staff Comments**




None.





**Item 2.**
            **Properties**





Our
        corporate office is located at12
        East 49th Street,
        Suite 3200,New
        York,New
        York10017.
        Our telephone number is
        (212) 884-6200. We have an additional office located at535 Madison Avenue,
        Floor 17,New York,New
        York10022.





**Item 3.**
            **Legal
                Proceedings**




Neither
      we nor our investment adviser
      are currently
      subject to any material legal proceedings.





**Item 4.**
            **Submission
                of Matters to a Vote of Security
                Holders**




No
      matters
      were submitted to a vote of stockholders through the solicitation of proxies
      or
      otherwise during the fourth quarter of the fiscal year ending February 28,
      2007.









38


**PART
      II**







**Item 5.**
            **Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity
                Securities**




**PRICE
      RANGE OF COMMON STOCK**




Our
      common
      stock is quoted on the New York Stock Exchange under the symbol “GNV” and
      started trading on March 23, 2007 at an initial public offering price of $15.00
      per share. Prior to such date there was no public market for our common
      stock.




**HOLDERS**




As
      of
      February 28, 2007, there was one holder of record of our common
      stock.




**SALES
      OF UNREGISTERED SECURITIES**




We
      did not
      sell any securities during the period covered by this report that were not
      registered under the Securities Act.




**ISSUER
      PURCHASES OF EQUITY SECURITIES**




We
      did not
      repurchase any shares of our common stock during the three months ended February
      28, 2007.




**DIVIDEND
      POLICY**




We
      intend to make quarterly
      distributions to our stockholders out of assets legally available for
      distribution. Our quarterly distributions, if any, will be determinedby our board of directors.
      Any such distributions will be taxable to our stockholders, including to those
      stockholders who receive additional shares of our common stock pursuant to
      a
      dividend reinvestment plan. In order to maintain our qualification as aRIC,
      we mustfor each fiscal yeardistribute an amount equal to at least
      90% of our ordinary net taxable income and realized net short-term capital
      gains
      in excess of realized net long-term capital losses, if any, reduced by
      deductible expenses. To avoid certain excise taxes imposed
      on RICs, we
      currently intend to distribute during eachcalendaryear
      an amount at least equal to the sum
      of (1) 98% of ourordinary income for thecalendaryear,
      (2) 98% of our capital gains
      in excess of capital losses for the one-year period ending
      on October 31
      of the calendar year and (3) any ordinary income and net capital gains for
      preceding years that were not distributed during such years. In addition,
      although we currently intend to distribute realized net capital gains
      (i.e.,
      net long-term capital gains in
      excess of short-term capital losses), if any, at least annually, out of the
      assets legally available for such distributions, we may in the future decide
      to
      retain such capital gains for investment.We
      cannot assure youthat we will achieve
      results that will
      permit the payment of any cash distributions.  In addition,weareprohibited from making distributionsthatcause
      us to fail to maintain the asset
      coverage ratios stipulated by the 1940 Act orthatviolateour debt covenants.




We
      maintain an “opt out” dividend reinvestment plan for our common stockholders. As
      a result, if we declare a dividend, then stockholders’ cash dividends will be
      automatically reinvested in additional shares of our common stock, unless they
      specifically “opt out” of the dividend reinvestment plan so as to receive cash
      dividends.




39





**Item 6.**
            **Selected
                Financial Data**





Not
      applicable.  As of February 28, 2007, we had not yet commenced
      operations.





**Item 7.**
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations**




The
      following discussion should be read in conjunction with our financial statements
      and related notes and other financial information appearing elsewhere in this
      Annual Report. In addition to historical information, the following discussion
      and other parts of this Annual Report contain forward-looking information that
      involves risks and uncertainties. Our actual results could differ materially
      from those anticipated by such forward-looking information due to the factors
      discussed under “Risk Factors” and “Note about Forward-Looking Statements”
appearing elsewhere herein.





**Overview**




GSC
      Investment Corp. was incorporated
      under the Maryland General Corporation Law on March 21, 2007. We have
      elected to be treated as a BDC under the 1940 Act. As
      a BDC, we are
      required to comply with certain regulatory requirements. For instance, we
      generally have to invest at least 70% of our total assets in “qualifying assets,”including securities ofprivateU.S. operating companies or
      public
      U.S. companies whose securities
      are not listed on a national securities exchange registered under the Exchange
      Act (i.e., New York Stock Exchange, American Stock Exchange and The NASDAQ
      Global Market), cash, cash equivalents, U.S. government securitiesand
      high-quality debt investments that
      mature in one year or less. In addition, we are subject to a leverage
      restriction. We are only allowed to borrow amounts, with certain limited
      exceptions, such that our asset coverage, as defined in the 1940 Act,
      equals
      at least 200% after such borrowing.
      The amount of leverage that we employ will depend on our investment
      adviser’s
      and our board of directors’assessment of market and other factors
      at the time of any proposed borrowing.Weused
      the proceeds of our
      initial public offering in
      March 2007 toacquire portfolios in March and April 2007 of approximately
      $89.5 million and $11.2 million, respectively, in aggregate principal amount
      of
      debt investments.  We entered into the Revolving Facility on April 11,
      2007 and the Term Facility on May 1, 2007 and used the proceeds thereof to
      acquire additional debt investments of $55.8 and $59.3 million in April and
      May
      2007, respectively.




***Revenues***




Wegeneraterevenue in the form of interest income
      on the debt that we hold and capital gains, if any,
      on warrants or
      other equity interests that we may acquire in portfolio companies. We expect
      our
      debt investments, whether in the form of first and second lienleveraged loans,mezzanine debtor high yield bonds,
      to have terms of up toten years, and typically
      to bear
      interest at a fixed or floating rate. Interest on debt will be payable generally
      quarterly or semi-annually.In some cases
      our debt investments may provide for a portion of the
      interest payable to be paid-in-kind interest. To the extent interest is
      paid-in-kind, it will be payable through the increase of the principal amount
      of
      the obligation by the amount of interest due on the then-outstanding aggregate
      principal amount of such obligation. The principal amount of the
      debt 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, structuring or
      diligence fees, fees for providing managerial assistance and possibly
      consulting
      fees. Any such fees will be generated
      in connection with our investments and recognized as earned. We may also
      investin
      equity securities, which may, in some
      cases, include preferred securities that pay dividends on a current
      basis.






40




***Expenses***




Ourprimary operating expensesinclude the payment of investment
      advisory and management fees and overhead expenses, including our allocable
      portion of our administrator’s
      overhead under the administration
      agreement. Our allocable portionisbased on the proportionthat our total assets
      bears to the total
      assets administered by our administrator. Our investment advisory and management
      fees compensate our investment adviser for its work in identifying, evaluating,
      negotiating, closing and monitoring our investments.
      Webear all other costs and expenses of
      our operations and transactions, including those relating to: organization;
      calculating our net asset value (including the cost and expenses of any
      independent valuation firm); expenses incurred by our investment
      adviser payable to third
      parties, including agents, consultants or other advisers, in monitoring our
      financial and legal affairs and in monitoring our investments and performing
      due
      diligence on our prospective portfolio companies; interest payable on debt,
      ifany, incurred to finance our
      investments; offerings of our common stock and other securities; investment
      advisory and management fees; administration fees; fees payable to third
      parties, including agents, consultants or other advisers, relating to, or
      associated
      with, evaluating and making
      investments; transfer agent and custodial fees; registration fees; listing
      fees;
      taxes; independent directors’fees and expenses; costs of preparing
      and filing reports or other documents of the SEC; the costs of any
      reports,
      proxy statements or other notices
      to stockholders, including printing costs; to the extent we are covered by
      any
      joint insurance policies, our allocable portion of the insurance premiums for
      such policies; direct costs and expenses of administration,including
      auditor and legal costs; and
      allother expensesincurred
      by us or our
      administrator in connection with administering our business.We
      estimate our annual expenses will be
      approximately $2.5 million.Fora period of atleast 12 months ending March 23,
      2008,we will bereimbursed
      by the manager foroperatingexpensesto
      theextentthat operating expenses (other than
      investment advisory and management fees and interest expense)exceedanamount
      equal to1.55% of our net assets
      attributable to
      common stock.




To
      the extent that any of our loans are
      denominated in a currency other than U.S. dollars, we may enter into
      currency hedging contracts to reduce our exposure to fluctuations in currency
      exchange rates. We may also enter into interest rate hedgingagreements.Such
      hedging activities, which will be
      subject to compliance with applicable legal requirements, may include the
      use of futures, options
      and
      forward contracts. Costs incurred in entering into such contracts or in settling
      them will be borne byus.





***Financial
      condition, liquidity and capital resources***




We
      generated cash from the net proceeds of our IPO and borrowings under the
      Facilities.  In the future, we may generate cash from future offerings
      of securities, future borrowings 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. In the future, we may also securitize a portion of our investments in
      first and second lien leveraged loans or mezzanine debt or other assets. Our
      primary use of funds will be investments in our targeted asset classes and
      cash
      distributions to holders of our common stock.




**Distribution
      policy**




We
      intend
      to qualify as a RIC under the Code, which allows us to avoid corporate-level
      tax
      on our income. To qualify as a RIC, we must distribute to our stockholders
      an
      amount equal to at least 90% of our ordinary net taxable income and realized
      net
      short-term capital gains in excess of realized net long-term capital losses,
      if
      any, reduced by deductible expenses, on an annual basis. We intend to pay
      dividends on a quarterly basis. In addition, we also intend to distribute any






41




realized
      net capital gains (i.e., realized net long-term capital gains in excess of
      realized net short-term capital losses) at least annually out of the assets
      legally available for such distributions.




**Contractual
      obligations**




We
      have
      entered into three contracts under which we have material future commitments:
      the investment advisory and management agreement, pursuant to which GSCP (NJ),
      L.P. has agreed to serve as our investment adviser; the administration
      agreement, pursuant to which our administrator has agreed to furnish us with
      the
      facilities and administrative services necessary to conduct our day-to-day
      operations and provide managerial assistance on our behalf to those portfolio
      companies to which we are required to provide such assistance, and a license
      agreement with GSC Group, pursuant to which GSC Group has agreed to grant us
      a
      non-exclusive, royalty-free license to use the name “GSC” and the GSC logo.
      Payments under the investment advisory and management agreement are equal to
      (1) a percentage of the value of our total assets (other than cash and cash
      equivalents but including assets purchased with borrowed funds) and (2) an
      incentive fee based on our performance. Payments under the administration
      agreement are equal to an amount based upon our allocable portion of our
      administrator’s overhead in performing its obligations under the administration
      agreement, including rent and our allocable portion of the cost of our officers
      and their respective staffs. Each of these contracts may be terminated by either
      party without penalty upon 60 days written notice to the other. Further,
      although our Chief Financial Officer, Chief Compliance Officer, and Vice
      President and Secretary have certain duties to us, they also perform duties
      for
      other GSC Group-related entities.




**Management
      and service fee**




Pursuant
      to the investmentadvisory and management
      agreement, we
      pay our investment adviser a fee for investment advisory and management services
      consisting of two components—a base management fee and an incentive
      fee.





As
      originally adopted, thebase management feewascalculated
      based on the average value of our
      total assets (other than cash or cash equivalents but including assets purchased
      with borrowed funds) at the end of the two most recently completed calendar
      quarters, and appropriately adjusted for any share issuances orrepurchases during the current calendar
      quarter.





The
        incentive feehastwo
        parts, as
        follows:





The
      first, payable quarterly in arrears,
      equals 20% of our pre-incentive fee net investment income, expressed as a rate
      of return on the value of the net assets at the end of the
      immediately
      preceding quarter (including interest that is accrued but not yet received
      in
      cash), that exceeds a 1.875% quarterly (7.5% annualized) hurdle rate measured
      as
      of the end of each calendar quarter. Under this provision, in any
      calendar quarter, our investment
      adviser receives no incentive fee unless our pre-incentive fee net investment
      income exceeds the hurdle rate of 1.875%. Amounts received as a return of
      capitalarenot
      included in calculating this portion
      of the incentivefee. Since
      the hurdle rate is based on net assets, a return of less than the hurdle rate
      on
      total assets may still result in an incentive fee.





The
      second, payable at the end of each
      calendar year equals 20% of our net realized capital gains, if any,
      computed net of all
      realized capital losses and unrealized capital depreciation, in each case on
      a
      cumulative basis, less the aggregate amount of capital gains incentive fees
      paid
      to the investment adviser through such date.





On
      May 18, 2007, ourboardof directors
      approved an amendment
      tothe investment advisory
      and management agreement providing that the base management fee and
      incentive fee shall be computed with reference to the fiscal year of the
      Company rather than the calendar year (in order to align the fee calculation
      dates with the financial reporting cycle).






42




**Operations**




As
      of
      February 28, 2007, we had not yet commenced operations.




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




Our
      business activities contain elements of market risks. We consider our principal
      market risks to be fluctuations in interest rates and the valuations of our
      investment portfolio. Essential to our business is managing these risks.
      Accordingly, we have systems and procedures designed to identify and analyze
      our
      risks, to establish appropriate policies and thresholds and to continually
      monitor these risks and thresholds by means of administrative and information
      technology systems and other policies and processes.




**Interest
      Rate Risk**




Interest
      rate risk is defined as the
      sensitivity of our current and future earnings to interest rate volatility,
      variability of spread relationships, the difference in re-pricing intervals
      between our assets and liabilities and the effect that interest rates may have
      on our cash flows. Changes in the general level of interest rates can affect
      our
      net interest income, which is the difference between the interest income earned
      on interest earning assets and our interest expense incurred in connection
      with
      our interest bearing debt and liabilities. Changes in interest rates can also
      affect, among other things, our ability to acquire and originate loans and
      securities and the value of our investment portfolio.




Our
      investment income is affected by fluctuations in various interest rates,
      including LIBOR and prime rates. We expect that future portfolio investments
      may
      include assets that carry a fixed interest rate. As of February 28, 2007, we
      had
      no borrowings outstanding. However, on April 11, 2007, we established the
      Revolving Facility, which allows us to borrow up to $100 million (which amount
      may be increased to $130 million subject to certain conditions) and on May
      1,
      2007, we borrowed $25.7 million under our Term Facility, interest on each of
      which is tied to the prevailing commercial paper rate plus a margin of
      0.70%.




Because
      we
      plan on borrowing money to make investments, our net investment income is
      dependent upon the difference between the rate at which we borrow funds and
      the
      rate at which we invest the funds borrowed. Accordingly, there can be no
      assurance that a significant change in market interest rates will not have
      a
      material adverse effect on our net investment income. In periods of rising
      interest rates, our cost of funds would increase, which could reduce our net
      investment income if there is not a corresponding increase in interest income
      generated by floating rate assets in our investment portfolio.




We
      did not
      hold any derivative financial instruments for hedging purposes as
      of  February 28, 2007. We entered into three interest rate caps in
      connection with the entry into and upsizing of the Revolving Facility and the
      entry into the Term Facility.




**Portfolio
      Valuation**




We
      carry
      our investments at fair value, as determined in good faith by our Board of
      Directors. Investments for which market quotations are readily available are
      valued at such market quotations. Because there is not a readily available
      market value for some of the investments in






43






our
      portfolio, we value a material portion of our portfolio investments at fair
      value as determined in good faith by our board under a valuation policy and
      a
      consistently applied valuation process. Due to the inherent uncertainty of
      determining the fair value of investments that do not have a readily available
      market value, the fair value of our investments may differ significantly from
      the values that would have been used had a ready market existed for such
      investments, and the differences could be material. In addition, changes in
      the
      market environment and other events that may occur over the life of the
      investments may cause the gains or losses ultimately realized on these
      investments to be different than the valuations that are assigned. The types
      of
      factors that we may take into account in fair value pricing of our investments
      include, as relevant, the nature and realizable value of any collateral, third
      party valuations, the portfolio company’s ability to make payments and its
      earnings and discounted cash flow, the markets in which the portfolio company
      does business, comparison to publicly-traded securities, recent sales of or
      offers to buy comparable companies, and other relevant factors.




**Item 8.**
            **Financial
                Statements and Supplementary
                Data**




Our
      financial statements are annexed to this Annual Report beginning on page
      F-1.




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




Not
      applicable.




**Item 9A.**
            **Controls
                and Procedures**




***Evaluation
      of Controls and Procedures.*** Our management is responsible for
      establishing and maintaining adequate internal control over financial reporting,
      as defined in Rule 13a-15(f) under the Exchange Act. The Company’s management,
      under the supervision and with the participation of various members of
      management, including our CEO and our CFO, has evaluated the effectiveness
      of
      the design and operation of our disclosure controls and procedures (as defined
      in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered
      by
      this report. Based upon that evaluation, our CEO and CFO have concluded that
      our
      current disclosure controls and procedures are effective as of the end of the
      period covered by this report. This annual report does not include a report
      of
      management’s assessment regarding internal control over financial reporting or
      an attestation report of the company’s registered public accounting firm due to
      a transition period established by rules of the Securities and Exchange
      Commission for newly public companies.




***Changes
      in Internal Controls***. There have been no changes in the Company’s
      internal control over financial reporting (as defined in Rules 13a-15(f) and
      15d-15(f) of the Securities Exchange Act of 1934) that occurred during the
      period ended February 28, 2007 that have materially affected, or are reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.




**Item 9B.**
            **Other
                Information**




None.






44




**PART III**




**Item 10.**
            **Directors,
                Executive Officers and Corporate
                Governance**




Our
        business and affairs are managed
        under the direction of our board of directors. The board of directors currently
        consists of 7 members, of whom 4 are not “interested persons”of GSC Investment Corp. as defined in
        Section 2(a)(19) of the 1940 Act. Our board of directors elects our
        officers, who will
        serveat the discretion
        of
        the board of directors.





**Executive
        officers and board of
        directors**





Under
        our charter, our
        directors are divided into
        three classes. Each class of directorswillhold office for a three-year term.
        However, the initial members of the three classes have initial terms of one,
        two
        and three years, respectively. At each annual meeting of our stockholders,
        the successors to the
        class
        of directors whose terms expire at such meeting will be elected to hold office
        for a term expiring at the annual meeting of stockholders held in the third
        year
        following the year of their election. Each director will hold officefor
        the term to which he or she is
        elected and until his or her successor is duly elected and
        qualified.





***Directors***





As
        ofMay1,
        2007, information regarding
        the board of directors is
        as
        follows:





**Name**
            **Age**
            **Position**
            **DirectorSince**
            **Expirationof
                  Term**
            **Principal
                  Occupation(s)During**
                **Last
                  Five
                  Years**
            **Other
                  Directorships/Trusteeships
                  Held byBoard
                  Member****Independent
                Directors**Peter
                K.
                Barker
            58
            Director
            2007
            2009
            Currently
                aprivateinvestor.
                Prior to
                2002,Mr. Barker
                served as
                anAdvisory
                Director ofGoldman,
                Sachs &
                Co.
            Avery
                DennisonCorporationSteven
                M.
                Looney
            57
            Director
            2007
            2010
            CurrentlyManagingDirector
                of Peale
                Davies &Co.
                Inc. Prior to
                2005,Mr. Looney
                served asSeniorVice
                President and
                ChiefFinancial
                Officer of
                PCCI,Inc.
            Sun
                Healthcare,WH
                Industries,APW,Ltd.,
                and Vein Associates of
                America,IncCharles
                S.
                Whitman III
            65
            Director
            2007
            2010
            Currently
                isseniorcounsel(retired)
                at Davis
                Polk &Wardwell.
                Prior to
                2006,Mr. Whitman
                was aPartner
                in Davis Polk’sCorporate
                Department.
            noneG.
                Cabell
                Williams
            52
            Director
            2007
            2008
            Currently
                is ManagingGeneral
                Partner ofWilliams
                and
                Gallagher.Prior
                to 2004,Mr.Williams
                served asManaging
                Director ofAllied
                Capital
                Corporation.
            none**Interested
                Directors**Thomas
                V.
                Inglesby
            49
            Chief
                Executive Officer and
                Director
            2007
            2008
            Joined
                GSC Group at
                itsinception
                in 1999 and
                hasbeen
                aSeniorManagingDirector
                since
                2006.
            none








45





**Name**
            **Age**
            **Position**
            **DirectorSince**
            **Expirationof
                Term**
            **Principal
                Occupation(s)During**
              **Last
                Five
                Years**
            **Other
                Directorships/Trusteeships
                Held byBoard
                Member**Richard
                M.
                Hayden
            61
            Chairman
                of the Board of
                Directors
            2007
            2009
            Joined
                GSC Group in 2000 and has
                been a Vice Chairman
                of GSC Group since 2000 and is head of the corporate credit group.
                Prior
                to 2000, Mr. Hayden was a Partner of Goldman, Sachs &Co.,
                where he was a Managing Director
                and the Deputy Chairman of Goldman, Sachs & Co. International
                Ltd., responsiblefor
                all European investment
                banking activities.
            COFRA
                Holdings, AG and Deutsche
                Boerse AGRobert
                F.
                Cummings, Jr.
            56
            Director
            2007
            2010
            Joined
                GSC Group in 2002 and has
                been aSeniorManaging Director since 2006 and
                Chairman of the Risk & Conflicts Committee and the
                Valuation Committee
                since 2003. Prior to joining GSC Group, was a Partner of Goldman,
                Sachs & Co., where he was a member of the Corporate Finance
                Department, advising corporate clients on financing, mergers and
                acquisitions, and strategic financial
                issues.
            GSC
                Capital Corp., Precision
                Partners Inc., RR Donnelley and Sons Co., Corning Inc., Viasystems
                Group
                Inc., and a member of the Board of Trustees of Union
                College





The
        address for each director is
        c/o GSC Investment Corp.,12 East 49thStreet,New
        York,New York10017.





***Executive
        officers who are not
        directors***





Information
        regarding our executive
        officers who are not
        directors is as follows:





**Name**
            **Age**
            **Position**
            **Since**
            **Principal
                  Occupation(s)During**
                **Last
                  Five
                  Years**
            **OtherDirectorships/TrusteeshipsHeld
                  byBoard
                  Member**


David
                L. Goret
            43
            Vice
                President and Secretary
            2006
            Joined
                GSC Group as General Counsel in 2004, where he manages legal, human
                resources and certain and general counsel of Hawk Holdings, LLC.
                From 2002
                to 2003, he served as senior vice president and general counsel of
                Mercator Software, Inc.
            none








46


**Name**
              **Age**
              **Position**
              **Since**
              **Principal
                    Occupation(s)During**
                  **Last
                    Five
                    Years**
              **OtherDirectorships/TrusteeshipsHeld
                    byBoard
                    Member**


Richard
                T. Allorto, Jr.
            35
            Chief
                Financial Officer
            2006
            Joined
                GSC Group in 2001 and is responsible for overseeing the financial
                statement preparation and accounting operations relating to the funds
                managed by GSC Group. Mr. Allorto was with Schering Plough Corp. from
                1998 to 2001, where he worked as an Audit Supervisor within the internal
                audit group with a focus on operational audits of the company’s
                international subsidiaries.
            noneMichael
                J. Monticciolo
            35
            Chief
                Compliance Officer
            2006
            Joined
                GSC Group in 2006. From 2000 to 2006, he was with the
                U.S. Securities & Exchange Commission as a senior counsel in
                the Division of Enforcement where he investigated and prosecuted
                enforcement matters involving broker-dealers, investment advisers,
                hedge
                funds and public companies.
            none





**Biographical
        information**





***Directors***





Our
        directors have been divided into two groups—independent directors and interested
        directors. Interested directors are interested persons as defined in the
        1940
        Act.





***Independent
        directors***





***Peter
        K.
        Barker***—Mr. Barker is currently aprivateinvestor. After spending 28 years
        at Goldman,
        Sachs & Co., Mr. Barker stepped down as a General Partner in 1998
        and as an Advisory Director in 2002. Mr. Barker headed Goldman,
        Sachs & Co.’s
        investment banking activities on the
        West Coast from 1978 to 1998. Mr. Barker joined Goldman,
        Sachs&Co. in 1971. Mr. Barker began his
        career in theLondonoffice, then spent seven years in the
        New York Corporate Finance Department before assuming his responsibilities
        on
        the West Coast. Mr. Barker has been active in several civic organizations,
        includingthe Los Angeles Area Boy Scout Council,
        Los Angeles Metropolitan YMCA,ClaremontMcKennaCollegeand the Phoenix House of California. He
        has also been a member of the California State Senate Commission on Corporate
        Governance and is currently a directorof
        Avery Dennison Corporation.
        Mr. Barker graduated from theUniversityofChicago’s
        Graduate School of Business with a
        M.B.A. degree.





***Steven
        M.
        Looney***—Mr. Looney is a Managing Director
        of Peale Davies & Co. Inc., a consulting firm with particular
        expertise in financial
        process and IT outsourcing, and is a CPA and an attorney. Mr. Looney also
        serves as a consultant and director to numerous companies in the healthcare,
        manufacturing and technology services industries, including Sun Healthcare, WH
        Industries, APW Ltd., and
        Vein Associates of America,Inc. Between 2000 and
        2005, he served asSeniorVice President and Chief Financial
        Officer of PCCI, Inc., aprivateIT staffing and outsourcing firm.
        Between 1992 and 2000, Mr. Looney worked at WH Industries asChief Financial and
        Administrative
        Officer. Mr. Looney graduated summa cum laude from theUniversityofWashingtonwith a B.A. degree in Accounting and
        received a J.D. from the University of Washington School of Law where he
        was a
        member of the law review.





***Charles
        S.
        Whitman III***—Mr. Whitman isseniorcounsel
        (retired) at Davis
        Polk & Wardwell. Mr. Whitman was a partner in Davis
        Polk’s
        Corporate Department for
        28 years,
   47
   representing
        clients in a broad range of
        corporate finance matters, including shelfregistrations, securities
        compliance for
        financial institutions, foreign asset privatizations, and mergers and
        acquisitions. From 1971 to 1973, Mr. Whitman served as Executive Assistant
        to three successive Chairmen of the U.S. Securities and Exchange
        Commission.
        Mr. Whitman serves on the
        Legal Advisory Board of the National Association of Securities Dealers.
        Mr. Whitman graduated fromHarvardCollegeand graduated magna cum laude fromHarvardLawSchoolwith a LL.B. Mr. Whitman also
        received an LL.M. fromCambridgeUniversityinEngland.





***G. Cabell
        Williams***—Mr. Williams
        is currently the
        Managing General Partner of Williams and Gallagher, aprivateequity partnership located inChevy Chase,Maryland.
        In 2004 Mr. Williams concluded a
        23 yearcareer
        at AlliedCapital Corporation,
        a $4 billion
        business development corporation based inWashington,DC.
        While at Allied, Mr. Williams
        held a variety of positions including President, COO and finally Managing
        Director following Allied’s
        merger with its affiliates in
        1998.
        From 1991 to 2004, Mr. Williams
        either led or co-managed the firm’sPrivateEquity Group. For the nine years prior
        to 1999, Mr. Williams led Allied’s
        Mezzanine investment activities. For
        15 years, Mr. Williams served on Allied’s
        Investment Committee where
        he was responsible for reviewing and
        approving all of the firm’s
        investments. Prior to 1991,
        Mr. Williams ran Allied’s
        Minority Small Business Investment
        Company. He also founded Allied Capital Commercial Corporation, a real estate
        investment vehicle.Mr. Williams
        has served on the
        board of various public andprivatecompanies. Mr. Williams attended
        The Landon School, and graduated fromMercersburgAcademyandRollinsCollege,
        receiving a B.S. in Business
        Administration from the latter.





***Interested
        directors***





***Thomas
        V.
        lnglesby***—Mr. Inglesby is the Chief
        Executive Officer of GSC Investment Corp. Mr. Inglesby joined GSC Group at
        its inception in 1999 and is currently aSeniorManaging Director. From 1997 to 1999,
        Mr. Inglesby was a Managing Director atGreenwich Street Capital
        Partners.
        Prior to that, Mr. Inglesby was a Managing Director with Harbour Group inSt. Louis,Missouri,
        an investment firm specializing in the
        acquisition of manufacturing companies in fragmented industries. In 1986,
        Mr. Inglesbyjoined PaineWebber and was a Vice
        President in the Merchant Banking department from 1989 to 1990.
        Mr. Inglesby graduated with honors from theUniversityofMarylandwith a B.S. degree in Accounting, from
        the University of Virginia School of Law with a J.D.
        degree and from the Darden Graduate
        School of Business Administration with a M.B.A.
        degree.





***Richard
        M.
        Hayden***—Mr. Hayden is the Chairman of GSC
        Investment Corp. Mr. Hayden joined GSC Group in 2000 and is currently a
        Vice Chairman of GSC Group, head of the corporate credit
        group and a
        member of the firm management committee. Mr. Hayden was previously with
        Goldman, Sachs & Co. from 1969 until 1999 and wasnameda Partner in 1980. Mr. Hayden
        transferred toLondonin 1992, where he was a Managing
        Directorand the Deputy
        Chairman of Goldman, Sachs & Co. International Ltd., responsible for
        all European investment banking activities. Mr. Hayden was also Chairman of
        the Credit Committee from 1991 to 1996, a member of the firm’s
        Commitment Committee from 1990to
        1995, a member of the firm’s
        Partnership Committee from 1997 to
        1998 and a member of the Goldman, Sachs & Co. International Executive
        Committee from 1995 to 1998. In 1998, Mr. Hayden retired from Goldman,
        Sachs & Co. and was retained as an Advisory Director
        to consult in the Principal
        Investment Area. Mr. Hayden is a non-executive director of COFRA Holdings,
        AG and Deutsche Boerse AG. Mr. Hayden is also a member of The Wharton
        Business School International Advisory Board. Mr. Hayden graduated magna
        cum laude
        and Phi Beta Kappa fromGeorgetownUniversitywith a B.A. degree in Economics, and
        graduated from The Wharton School with a M.B.A.
        degree.






48





***Robert
        F. Cummings,
        Jr***.—Mr. Cummings joined GSC Group in
        2002 and is currently aSeniorManaging Director, Chairman of the Risk & Conflicts
        Committee and the Valuation Committee and a member of the firm management
        committee. Mr. Cummings is a former member of the GSC Advisory Board. For
        the prior 28 years, Mr. Cummings was with Goldman, Sachs &
Co., where he wasa
        member of the Corporate Finance
        Department, advising corporate clients on financing, mergers and acquisitions,
        and strategic financial issues. Mr. Cummings was named a Partner of
        Goldman, Sachs &Co.in 1986. Mr. Cummings retired in
        1998 and was retainedas an Advisory Director by Goldman,
        Sachs & Co. to work with certain clients on a variety of banking
        matters. Mr. Cummings is a director of GSC Capital Corp., Precision
        Partners Inc., RR Donnelley and Sons Co., Corning Inc., Viasystems Group
        Inc.,
        and amember
        of the Board of Trustees of Union
        College. Mr. Cummings graduated fromUnionCollegewith a B.A. degree and from theUniversityofChicagowith a M.B.A.
        degree.





***Executive
        officers who are not
        directors***





***David
        L. Goret, Vice
        President and Secretary***—Mr. Goret joined GSC Group in 2004
        asManagingDirector,GeneralCounsel
        andChiefComplianceOfficer
        and became aSeniorManagingDirector
        in January 2007. He manages
        legal, compliance and certain administrative functions atGSC Group, and has
        significantexpertise
        in a wide range of legal
        matters. From 2000 to 2002, Mr. Goret served asManagingDirector
        andGeneralCounsel
        of Hawk Holdings, LLC, which
        focused on creating, financing and operating emerging technology infrastructure
        and service businesses.
        From 2002 to 2003, he served asSeniorVicePresident
        andGeneralCounsel
        of Mercator Software, Inc., a
        Nasdaq-listed software company. Mr. Goret graduated magna cum laude fromDukeUniversitywith a B.A. degree in Religion and
        Political Science and fromtheUniversityofMichiganwith a J.D.
        degree.





***Richard
        T.
        Allorto, Jr., Chief Financial Officer***—Mr. Allorto joined GSC Group in
        2001 and is responsible for overseeing the financial statement preparation
        and
        accounting operations relating to the corporate credit group division’s
        funds managed by GSC Group.
        Mr. Allorto was previously with Schering Plough Corp. from 1998 to 2001
        where he worked as an Audit Supervisor within the internal audit group with
        a
        focus on operational audits of the company’s
        international
        subsidiaries. From 1994 to
        1998, he was with Arthur Andersen as a Supervising AuditSenorwith a manufacturing industry focus.
        Mr. Allorto graduated fromSetonHallUniversitywith a B.S. degree in Accounting and is
        a licensed CPA.





***Michael
        J.
        Mo******nticciolo,
        Chief Compliance
        Officer***—Mr. Monticciolo joined GSC Group
        in 2006. He was previously with the U.S. Securities & Exchange
        Commission as aSeniorCounsel
        in the Division of Enforcement
        from 2000 to 2006 where he investigated and prosecuted enforcement matters involving
        broker-dealers,
        investment advisers, hedge funds and public companies. Prior to that,
        Mr. Monticciolo was aStaffAttorney
        with the Commission’s
        Office of Compliance Inspections and
        Examinations from 1998 to 2000. Mr. Monticciolo graduated from theOhioStateUniversitywith a B.A. degree in Political Science
        and graduated from Hofstra University School of Law with a J.D.
        degree.





**Portfolio
        Management**





The
        day-to-day management of the
        Company’s
        portfolioisthe
        responsibility of the corporate credit
        group of GSC Group
        and overseen by our investment committee. The corporate credit group’s
        investment professionals collaborate
        to manage the Company’s
        portfolio and no one person is
        primarily responsible for the day-to-day management ofthe
        Company. Richard M. Hayden oversees
        the corporate credit group of GSC Group and,together with Thomas V. Inglesby, Seth
        M. Katzenstein, Harvey E. Siegel, Alexander B. Wright, John R. Kline and
        David
        B.
   49
   Thompson
        Jr.,hasthe most significant
        responsibility for the
        day-to-day management of the Company’s
        portfolio.





Information
        regarding our portfolio
        managers who are not directors or officers is as
        follows:





***Seth
        M.
        Katzenstein***—Mr. Katzenstein joined GSC Group
        at its inception in 1999 and is currentlya Managing Director
        of the corporate
        credit group. He was with Greenwich Street Capital Partners from 1998 to
        1999 as
        an associate. Prior to 1998, Mr. Katzenstein was with Salomon Smith Barney
        Inc., in the Financial Institutions Group, where he worked ona
        variety of financing and advisory
        transactions. Mr. Katzenstein graduated with High Distinction from theUniversityofMichiganwith a B.B.A.
        degree.





***Harvey
        E.
        Siegel***—Mr. Siegel joined GSC Group in
        2002 and is currently a Managing Director of the corporate credit group.
        Mr. Siegel was
        previously with IBJ Whitehall Bank & Trust Company from 1982 to 2002,
        where he most recently held the position ofSeniorVice President and Head of the Loan
        Workout Department. From 1980 to 1982, he was Associate GeneralCounsel at Belco Petroleum
        Corporation.
        From 1978 to 1980, he was Vice President and Deputy General Counsel at
        Studebaker-Worthington, Inc. From 1969 to 1978, he was with Fried, Frank,
        Harris, Shriver & Jacobson as an associate in the corporate finance
        and
        M&A practice groups.
        Mr. Siegel graduated from City College of New York with a B.A. degree in
        Political Science, and from Columbia University School of Law with a J.D.
        degree.





***Alexander
        B.
        Wright***—Mr. Wright joined GSC Group in
        2002 and is currently aManaging Director of the corporate credit group. He was previously with IBJ
        Whitehall Bank & Trust Corporation, in the Media &
Communications Group, where he sourced, underwrote, and restructuredseniordebt financings from 1995 to 2002. In
        addition, Mr.Wright
        acted as a Portfolio Manager for IBJ Whitehall’s
        equity investment portfolio from
        1999to 2002. Prior to 1995, Mr. Wright
        worked at Chemical Banking Corporation as an analyst. Mr. Wright graduated
        fromRutgersCollegewith a B.A. degree in
        PoliticalScience and a
        minor in Economics, and fromFordhamUniversitywith a M.B.A.
        degree.





***John
        R.
        Kline***—Mr. Kline joined GSC Group in 2001
        and is currentlya
        Vice President of the
        corporate credit group. Mr. Kline is responsible for bond and loan trading
        within the corporate
        credit
        group. Prior to 2001, he was with Goldman, Sachs & Co. in the Credit
        Risk Management and Advisory Group, where he was involved in capital structure
        analysis and credit risk management. Mr. Kline graduated fromDartmouthCollege,with
        an A.B. degree in
        History.


***David
        B. Thompson
        Jr.***—Mr. Thompson joined GSC Group in
        2002 and is currently a Vice President of the corporate credit group. Prior
        to
        joining GSC Group, Mr. Thompson was with Goldman, Sachs & Co. in
        the Bank Debt PortfolioGroup, where he worked
        on a variety of
        leveraged loan transactions. From 2000 to 2002, Mr. Thompson was in the
        Credit Risk Management and Advisory Group of Goldman, Sachs & Co. where
        he was involved in capital structure analysis andcredit
        risk management.Mr. Thompson graduated
        from theUniversityofPennsylvaniawith a B.A. degree in
        Economics.


**Committees
        of the board of
        directors**




***Audit
        committee***




The
        audit committee is made up of Steven
        M. Looney, Charles S. Whitman III and G. Cabell
        Williams.  Steven
        M. Looney serves as the audit committee chairman.  Theaudit committee is
        responsible for
        approving our independent accountants, reviewing with our independent
        accountants the plans and results of the audit engagement, approving
        professional services provided by our independent
        accountants,
        reviewing the independence of our independent
   50
   accountants
        and reviewing the adequacy
        of our internal accounting controls. The audit committee is also responsible
        for
        aiding our board of directors in determining the fair value of debt
        and equity investments that are
        not publicly traded or for which current market values are not readily
        available; where appropriate, the board of directors and audit committee
        may
        utilize the services of an independent valuation firm to assist them in
        determining
        the fair value of these
        investments.




***Nominating
        and Corporate
        Governance committee***




The
        nominating committee is made up of
        Charles S. Whitman III, Peter K. Barker and G. Cabell
        Williams.  Charles S. Whitman III serves as the nominating
        committeechairman.The
        nominating committee is responsible for selecting, researching and nominating
        directors for election by our stockholders, selecting nominees to fill vacancies
        on the board of directors or a committee of the board of directors, developing
        and recommending to the
        board of directors a set of corporate governance principles and overseeing
        the
        evaluation of the board of directors.




***Compensation
        committee***




The
        compensation committee is made up of
        G. Cabell Williams, Peter K. Barker and StevenM. Looney.  G. Cabell
        Williams serves as the compensation committee chairman.The
        compensation committee
        consistsentirely of independent directors. The
        compensation committee oversees our compensation policies generally, makes
        recommendations to the board of directors with respect to our incentive
        compensation and
        equity-based plans that are subject to the approval of our board of directors,
        evaluates executive officer performance and reviews our management succession
        plan, oversees and sets compensation, if any, for our executive officers,
        and prepares the report on
        executive officer compensation, if applicable, that Securities and Exchange
        Commission rules require to be included in our annual proxy statement.
        Currently, none of our executive officers are compensated by the
        Company.




**Director
        compensation**




The
        independent directors receive an
        annual fee of $40,000. They also receive $2,500 plus reimbursement of reasonable
        out-of-pocket expenses incurred in connection with attending each 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 receivesan annual fee of $5,000 and the
        chairman of each other committee receivesan annual fee of $2,000 for their additional
        services in
        these capacities. In
        addition, we have purchaseddirectors’and officers’liability insurance on behalf of our
        directors and officers. Independent directors have the option to receive
        their
        directors’feesin the form of our
        common stock issued
        at a price per share equal to the greater of net asset value or the market
        price
        at the time of payment. No compensationispaid
        to directors who are “interested persons.”


**Item 11.**
            **Executive
                Compensation**




Currently,
      none of our executive officers
      are compensated by
      the Company.  Each of our executive officers is an employee of
      GSC Group.  See “Business - Our relationship with our investment
      adviser and GSC Group.”




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




The
        following table sets forth certain
        ownership information with respect to our common stockas ofMay
        1, 2007for
        those persons who directly or
        indirectly own, control or hold with the power to vote, 5% or more ofour outstanding shares
        of
        common stock and all officers and directors,
        as a
        group.


51


**Percentage
                  of Common Stock Outstanding****Name
                  and Address**
            
            **Type
                  of Ownership**
            
            **Shares
                  Owned**
            
            
            **Percentage**GSC
                Group(1)
            
            Record
                and beneficial
            
            
            960,021
            
            
            
            11.6%All
                officers and directors as a group (10 persons)(2)
            
            Record
                and beneficial
            
            
            68,380
            
            
            
            0.8%





(1)
            Includes
                common stock held by affiliates of GSC Group as follows: 66 2⁄3 shares of
                common stock held by GSC Secondary Interest Company LLC, a Delaware
                limited liability company, 54,975 shares of common stock held by
                Greenwich
                Street Capital Partners II, L.P., a Delaware limited partnership,
                and
                904,980 shares of common stock, held by GSC CDO III, L.L.C., a Delaware
                limited liability company.


(2)
            The
                address for all officers and directors is c/o GSC Investment Corp.,
                12
                East 49th Street, New York, New York
                10017.





The
        following table sets forth the
        dollar range of our equity securities beneficially owned by each of our
        directorsas of March 23,
        2007. We are not part of
        a
“family of
        investment
        companies,”as that term is
        defined in the 1940 Act.





**Name
                  of
                  Director**
            
            **DollarRangeof
                  Equity**
                **Securities
                  in GSC Investment
                  Corp.(1)****Independent
                Directors**Peter
                K
                Barker
            
            $10,001-$50,000Steven
                M.
                Looney
            
            $1-$10,000Charles
                S.
                Whitman III
            
            noneG.
                Cabell
                Williams
            
            over
                $100,000**Interested
                Directors**Thomas
                V.
                Inglesby
            
            over
                $100,000Richard
                M.
                Hayden
            
            over
                $100,000Robert
                F.
                Cummings, Jr.
            
            None





(1)
            Dollar
                ranges are as follows: None, $1-$10,000, $10,001-$50,000,
                $50,001-$100,000, or over $100,000.






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




**Conflicts
        of
        Interest**





The
        investment adviser has built a
        professional working environment, a firm-wide compliance culture and compliance
        procedures and systems designed to protect against
        potential
        incentives that may favor one account over another. The investment adviser
        has
        adopted policies and procedures that address the allocation of investment
        opportunities, execution of portfolio transactions, personal tradingby employees and other potential
        conflicts of interest that are designed to ensure that all client accounts
        are
        treated equitably over time. Nevertheless, the investment adviser furnishes
        advisory services to numerous clients in addition to the Company,and
        the investment adviser may,
        consistent with applicable law, make investment recommendations to other
        clients
        or accounts (including accounts that are hedge funds or have performance
        or
        higher fees paid to the investment adviser or in which portfolio managers
        have a personal interest in the
        receipt of such fees) that may be the same as or different from those made
        to
        the Company. In addition, the investment adviser, its affiliates and any
        officer, director, stockholder or employee may or may not have aninterest
        in the securities whose purchase
        and sale the investment adviser recommends to the Company. Actions with respect
        to securities of the same kind may be the same as or different from the action
        that the investment adviser, or any of its affiliates,or
        any officer, director, stockholder,
        employee or any member of their families may take with respect to the same
        securities. Moreover, the investment adviser may refrain from rendering any
        advice or services concerning securities of companies of which anyof
        the investment
   52
   adviser’s
        (or its affiliates’)
        partners, officers, directors or
        employees are directors or officers, or companies as to which the investment
        adviser or any of its affiliates or the partners, officers, directors and
        employees of any of them
        has any substantial economic interest
        or possesses material non-public information. In addition to its various
        policies and procedures designed to address these issues, the investment
        adviser
        includes disclosure regarding these matters to its clients inboth
        its Form ADV and investment
        advisory agreements.




The
        investment adviser, its affiliates
        or their officers and employees similarly serve or may similarly serve entities
        that operate in the same or related lines of business. Accordingly, these
        individuals may have
        obligations to investors in those entities or funds or to other clients,
        the
        fulfillment of which might not be in the best interests of the Company. As
        a
        result, the investment adviser will face conflicts in the allocation of
        investment opportunities
        to the Company and other funds
        and clients. In order to enable such affiliates to fulfill their fiduciary
        duties to each of the clients for which they have responsibility, the investment
        adviser will endeavor to allocate investment opportunities ina fair and equitable manner which may,
        subject to applicable regulatory constraints, involve pro rata co-investment
        by
        the Company and such other clients or may involve a rotation of opportunities
        among the Company and such other clients.




While
        the investment adviser does
        not believe there
        will be frequent conflicts of interest, if any, the investment adviser and
        its
        affiliates have both subjective and objective procedures and policies in
        place
        and designed to manage the potential conflicts of interest between
        the investment adviser’s
        fiduciary obligations to the Company
        and their similar fiduciary obligations to other clients so that, for example,
        investment opportunities are allocated in a fair and equitable manner among
        the
        Company and such other clients.
        An investment opportunity that is
        suitable for multiple clients of the investment adviser and its affiliates
        may
        not be capable of being shared among some or all of such clients due to the
        limited scale of the opportunity or other factors, including regulatory
        restrictions imposed by the 1940
        Act. There can be no assurance that the investment adviser’s
        or its affiliates’efforts to allocate any particular
        investment opportunity fairly among all clients for whom such opportunity
        is
        appropriate will resultin an allocation of all or part of such
        opportunity to the Company. Not all conflicts of interest can be expected
        to be
        resolved in favor of the Company.
 **Certain
        Affiliations**





Our
        Chairman, Chief Executive Officer
        and Vice President and Secretary alsoserve asseniormanagersof GSC Group. In addition, certain
        of our directors
        areseniormanagersof GSC Group. As a result, the
        investment advisory and management agreement between us and our investment
        adviser was negotiated between related parties, and the terms, including
        fees payable, may
        not be as favorable to us as if it had been negotiated with an unaffiliated
        third party. See “Risk
        Factors—Risks related to our
        business—There are conflicts of interest in our
        relationship with our investment adviser
        and/or GSC Group, which could result
        in decisions that are not in the best interests of our stockholders”and “Risk
        Factors—Risks related to our
        business—Our investment adviser’s
        liability will be limited under the
        investment advisory and managementagreement, and we will indemnify our
        investment adviser against certain liabilities, which may lead our investment
        adviser to act in a riskier manner on our behalf that it would when acting
        for
        its own account.”





We
        have entered into a license agreementwith GSC Group, pursuant
        to
        which GSC Group grants us a non-exclusive, royalty-free license to use the
        “GSC”name.





As
        a
        result of regulatory restrictions, we are not permitted to invest in any
        portfolio company in which GSC Group or any affiliate currently has an
        investment. We may in the future submit an exemptive application to the SEC
        to
        permit greater flexibility to negotiate the terms of
   53
   co-investments
        because we believe that it will be advantageous for the Company to co-invest
        with funds managed by GSC Group where such investment is consistent with
        the
        investment objectives, investment positions, investment policies, investment
        strategies, investment restrictions, regulatory requirements and other pertinent
        factors applicable to the Company. There is no assurance that an application
        for
        exemptive relief would be granted by the SEC. Accordingly, we cannot assure
        you
        that we will be permitted to co-invest with funds managed by GSC
        Group.





**Item 14.**
            **Principal
                Accountant Fees and
                Services**




The
      following table presents fees for professional audit services rendered by Ernst
      & Young LLP for the audit of the Company’s annual financial statements as of
      February 28, 2007 and for the period from May 12, 2006 (inception) to
      February 28, 2007 and fees billed for other services rendered by Ernst &
Young LLP through February 28, 2007.





Audit
                Fees (1)
            $
            25,000Aggregate
                Non-Audit FeesAudit-Related
                Fees (2)
            
            35,000Tax
                Fees (3)All
                Other FeesTotal
                Aggregate Non-Audit Fees (4)
            
            35,000Total
                Fees
            $
            60,000




(1)
            Audit
                fees represent fees and expenses for the audit of the Company’s annual
                financial statements.(2)
            Audit-related
                fees represent services in conjunction with the Company’s initial public
                offering and registration statement and this annual report on Form
                10-K.(3)
            Tax
                fees represent services in conjunction with preparation of the Company’s
                tax return.(4)
            Aggregate
                non-audit fees comprise audit-related fees, tax fees and all other
                fees.





The
      Audit
      Committee has concluded the provision of the non-audit services listed above
      is
      compatible with maintaining the independence of Ernst & Young
      LLP.




54


**PART IV**







**Item 15.**
            **Exhibits
                and Financial Statement
                Schedules**




1.
      *Financial Statements*




The
      following financial statements of GSC Investment Corp. (the “Company” or the
“Registrant”) are filed herewith:




Statement
                of Assets, Liabilities, and Member's Capital as of February 28,
                2007
            
            F-3Statement
                of Operations for the period from May 12, 2006 (date of inception)
                to
                February 28, 2007
            
            F-4Statement
                of Members Capital for the period from May 12, 2006 (date of inception)
                to February 28, 2007
            
            F-5Statement
                of Cash Flows for the period from May 12, 2006 (date of inception)
                to
                February 28, 2007
            
            F-6Statement
                of Changes in Net Assets for the period from May 12, 2006 (date of
                inception) to February 28, 2007
            
            F-7Notes
                to Financial Statements
            
            F-8




2.*Exhibits*




**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            
            **Description**3.1
            
            Form
                of Charter of GSC Investment
                Corp.*********3.2
            
            Formof
                Bylaws of GSC Investment
                Corp.*********4.1
            
            Specimen
                certificate of GSC
                Investment Corp.’s
                common stock, par value $0.0001
                per share.*********4.2
            
            Form
                of Registration Rights
                Agreement
                dated          , 2007
                between GSC Investment Corp., GSC CDO III
                L.L.C., GSCP (NJ)
                L.P. and the other investors party thereto.***4.3
            
            Form
                of Dividend Reinvestment
                Plan.*******10.1
            
            Form
                of Investment Advisory and
                Management Agreement
                dated          , 2007
                between GSC Investment LLC and GSCP (NJ)
                L.P.*******10.2
            
            Form
                of Custodian Agreement
                dated          , 2007
                between GSC Investment LLC
                and          .*******10.3
            
            Form
                of Regulations of American
                Stock Transfer and Trust Company.***10.4
            
            Form
                of Administration Agreement
                dated          , 2007
                between GSC Investment Corp. and GSCP (NJ) L.P.*








55





10.5
            
            Form
                ofTrademarkLicense Agreement
                dated          , 2007
                between GSC Investment Corp. and GSCP (NJ)
                L.P.*******10.6
            
            Contribution
                and Exchange
                Agreement dated October 17, 2006 among
                GSC
                Investment LLC, GSC CDO III, L.L.C., GSCP (NJ), L.P., and the other
                investors party thereto.*******10.7
            
            Portfolio
                Acquisition Agreement
                dated March 21, 2007 between GSC Investment Corp. and GSC PartnersCDO Fund
                III,
                Limited.*******10.8
            
            Form
                of Indemnification Agreement
                dated          , 2007
                between GSC Investment LLC and each officer and director of GSC Investment
                LLC.*******10.9
            
            Form
                of Indemnification Agreement
                dated          , 2007
                between GSC Investment LLCand each investment
                committee
                member of GSCP (NJ) L.P.*******10.10
            
            Collateral
                Management Agreement
                dated November 5, 2001 among GSC PartnersCDO Fund III,
                Limited and GSCP (NJ),
                L.P.*****10.11
            
            Amended
                and Restated Limited
                Partnership Agreement
                of GSC Partners CDO GP III, L.P. dated October 16,
                2001.*****10.12
            
            Amended
                and Restated Limited
                Partnership Agreement of GSC Partners CDO Investors III, L.P. dated
                August 27, 2001.*****10.13
            
            Form
                of Amendment to the
                Contribution and Exchange Agreement
                dated          , 2007
                among GSC Investment LLC, GSC CDO III, L.L.C., GSCP (NJ), L.P., and
                the other investors party thereto.**10.14
            
            Form
                of Assignment and Assumption
                Agreement
                dated          , 2007
                among GSCP (NJ), L.P. and GSC Investment LLC.****110.15
            
            Form
                of Notification of Fee
                Reimbursement
                dated          ,
                2007.*10.16
            
            Form
                of AmendmenttoInvestment Advisory and
                Management Agreementdated May 23, 2007 betweenGSC Investment Corp.andGSCP (NJ), L.P.14.1
            
            Code
                of Ethics of the Company
                adopted under Rule 17j-1.***21.1
            
            List
                of Subsidiaries.31.1
            
            Chief
                Executive Officer Certification Pursuant to Rule 13a-14 of the Securities
                Exchange Act of 1934, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Chief
                Financial Officer Certification Pursuant to Rule 13a-14 of the Securities
                Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
                Act
                of 2002.32.1
            
            Chief
                Executive Officer Certification pursuant to Section 1350, Chapter
                63 of
                Title 18, United States Code, as adopted pursuant to Section 906
                of the
                Sarbanes-Oxley Act of 2002.32.2
            
            Chief
                Financial Officer Certification pursuant to Section 1350, Chapter
                63 of
                Title 18, United States Code, as adopted pursuant to Section 906
                of the
                Sarbanes-Oxley Act of 2002.





*
            
            Incorporated
                by reference to
                Amendment No. 8 to GSC Investment Corp.’s
                Registration Statement on
                Form N-2, File No.333-138051,
                filed on March 23,
                2007.






56






**
            
            Incorporated
                by reference to
                Amendment No. 7
                to GSC Investment Corp.’s
                Registration Statement on
                Form N-2, File No.333-138051,
                filed on March 22,
                2007.***
            
            Incorporated
              by reference to
              Amendment No. 6 to GSC Investment Corp.’s
              Registration Statement on
              Form N-2,File
              No.333-138051,
              filed on March 22,
              2007.****
            
            Incorporated
                by reference to
                Amendment No. 5 to GSC Investment LLC’s
                Registration Statement on Form
                N-2, File No.333-138051,
                filed on March 8,
                2007.*****
            
            Incorporated
                by reference to
                Amendment No. 4
                to GSC Investment LLC’s
                Registration Statement on
                Form N-2, File No.333-138051,
                filed on February 23,
                2007.******
            
            Incorporated
                by reference to
                Amendment No. 3 to GSC Investment LLC’s
                Registration Statement on
                Form N-2, File No.333-138051,
                filed on February 7,
                2007.*******
            
            Incorporated
              by reference to
              Amendment No. 2 to GSC Investment LLC’s
              Registration Statement on
              Form N-2, File No.333-138051,
              filed on January 12,
              2007.********
            
            Incorporated
                by reference to
                GSCInvestment
                LLC’s
                Registration Statement on
                Form N-2, File No.333-138051,
                filed on December 1,
                2006.*********
            
            Incorporated
                by reference to GSC
                Investment Corp’s
                Registration Statement on
                Form 8-A, File No. 001-333-76, filed on March 21,
                2007.




57


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act
      of 1934, the registrant has duly caused this report to be signed on its behalf
      by the undersigned, thereunto duly authorized.




GSC
                Investment CORP.Date:  May
                24, 2007
            
            By
            
            **/s/
                  Thomas V. Inglesby****Thomas
                V. Inglesby**
              **Director
                and Chief Executive Officer, GSC Investment
                Corp.**






*  *  *  *  *




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.


**Signature**
              
              **Title**
              
              **Date**/s/
                  Richard M. Hayden**RICHARD
                  M.
                  HAYDEN**
              
              Chairman
                  of the Board of
                  Directors
              
              May
                  24, 2007/s/
                  Thomas V. Inglesby**THOMAS
                  V.
                  INGLESBY**
              
              Director
                  and Chief Executive
                  Officer
              
              May
                  24, 2007/s/
                  Richard T. Allorto, JR.**RICHARDT.
                  ALLORTO,
                  JR.**
              
              Chief
                  Financial Officer and Chief
                  Accounting Officer
              
              May
                  24, 2007/s/
                  Robert F. Cummings, JR.**ROBERT
                  F. CUMMINGS,
                  JR.**
              
              Member
                  of the Board of Directors
              
              May
                  24, 2007/s/
                  Peter K. Barker**PETER
                  K.
                  BARKER**
              
              Member
                  of the Board of Directors
              
              May
                  24, 2007/s/
                  Steven M. Looney**STEVEN
                  M.
                  LOONEY**
              
              Member
                  of the Board of Directors
              
              May
                  24, 2007/s/
                  Charles S. Whitman III**CHARLES
                  S. WHITMAN
                  III**
              
              Member
                  of the Board of Directors
              
              May
                  24, 2007/s/
                  G. Cabell Williams**G.
                  CABELL
                  WILLIAMS**
              
              Member
                  of the Board of Directors
              
              May
                  24, 2007







58







**INDEX
      TO FINANCIAL STATEMENTS**




Report
                of Independent Registered Public Accounting Firm
            
            F-
                2Statement
                of Assets, Liabilities, and Member’s Capital as of February 28,
                2007
            
            F-
                3Statement
                of Operations for the period from May 12, 2006 (date of inception)
                to
                February 28, 2007
            
            F-
                4Statement
                of Member’s Capital for the period from May 12, 2006 (date of inception)
                to February 28, 2007
            
            F-
                5Statement
                of Cash Flows for the period from May 12, 2006 (date of inception)
                to
                February 28, 2007
            
            F-
                6Statement
                of Changes in Net Assets for the period from May 12, 2006 (date of
                inception) to February 28, 2007
            
            F-7Notes
                to Financial Statements
            
            F-8












**Ernst
                      & Young LLP**
                    5
                        Times Square
                      New
                        York, New York
                  
                  Phone:
                      (212) 773-3000
                    www.ey.com
   Report
          of
          Independent Registered Public Accounting Firm
 
 To
          the
          Management of GSC Investment LLC:
 
 We
          have
          audited the accompanying statement of assets, liabilities and member’s capital
          of GSC Investment LLC (the “Company”) as of February 28, 2007, and the related
          statements of operations, cash flows and Members’ capital for the period from
          May 12, 2006 (inception) to February 28, 2007. These financial statements
          are
          the responsibility of the Company's management. Our responsibility is to
          express
          an opinion on these financial statements based on our audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. We were not engaged to perform
          an
          audit of the Company’s internal control over financial reporting. Our audit
          included consideration of internal control over financial reporting as
          a basis
          for designing audit procedures that are appropriate in the circumstances,
          but
          not for the purpose of expressing an opinion on the effectiveness of the
          Company’s internal control over financial reporting. Accordingly, we express no
          such opinion. An audit includes examining, on a test basis, evidence supporting
          the amounts and disclosures in the financial statements. An audit also
          includes
          assessing the accounting principles used and significant estimates made
          by
          management, as well as evaluating the overall financial statement presentation.
          We believe that our audit provides a reasonable basis for our
          opinion.
 
 In
          our
          opinion, the financial statements referred to above present
          fairly, in all material respects, the financial position of GSC
          Investment LLC as of February 28, 2007 and the results of its operations,
          changes in Members’ capital and its cash flows for the period from May 12, 2006
          (inception) to February 28, 2007, in conformity with U.S. generally accepted
          accounting principles.
   
 
 New
          York,
          New York
 May
          18,
          2007
 
 A
          Member Practice of Ernst & Young Global
   F-2
   **GSC
                  Investment
                  LLC**Statement
                  of Assets, Liabilities,
                  and Member's CapitalFebruary
                  28,
                  2007**Assets**Deferred
                  offering
                  costs
              
              $
              808,617Cash
              
              
              
              1,030Total
                  assets
              
              $
              809,647**Liabilities
                  and member's
                  capital**Accrued
                  offering
                  costs
              
              $
              760,000Accrued
                  expenses
              
              
              105,000Due
                  to
                  affiliate
              
              
              73,810Total
                  liabilities
              
              
              938,810Member's
                  capitalCapital
                  contributed
              
              
              1,000Accumulated
                  loss
              
              
              (130,163
              )Total
                  member's
                  capital
              
              
              (129,163
              )Total
                  liabilities and member's
                  capital
              
              $
              809,647*See
                  accompanying
                  notes.*
  F-3
 
 **GSC
                  Investment
                  LLC**Statement
                  of
                  OperationsFor
                  the period from May 12, 2006
                  (date of inception)to
                  February 28,
                  2007**Income**Interest
              
              $
              30**Expenses**Organization
                  costs
              
              $
              95,193Professional
                  fees
              
              
              35,000Total
                  expenses
              
              
              130,193Net
                  loss
              
              $
              (130,163
              )*See
                  accompanying
                  notes.*
 
 F-4
 
 **GSC
                  Investment
                  LLC**Statement
                  of Member's
                  CapitalFor
                  the period from May 12, 2006
                  (date of inception)to
                  February 28,
                  2007Member's
                  capital, May 12,
                  2006
              
              
              -Capital
                  contributions
              
              
              1,000Net
                  loss
              
              
              (130,163
              )Member's
                  capital, February 28,
                  2007
              
              $
              (129,163
              )*See
                  accompanying
                  notes.*
 
 F-5
 
 **GSC
                  Investment
                  LLC**Statement
                  of
                  Cash  FlowsFor
                  the period from May 12, 2006
                  (date of inception)to
                  February 28,
                  2007**Cash
                  flows from operating
                  activities**Net
                  loss
              
              $
              (130,163
              )Adjustments
                  to reconcile net loss
                  to net cash and cash equivalents from operating
                  activities:Increase
                  in deferred offering
                  costs
              
              
              (808,617
              )Increase
                  in accrued deferred
                  offering costs
              
              
              760,000Increase
                  in due to
                  affiliate
              
              
              73,810Increase
                  in accrued
                  expenses
              
              
              105,000Net
                  cash and cash equivalents from
                  operating activities
              
              
              30**Cash
                  flows from financing
                  activities**Contribution
                  from
                  Member
              
              
              1,000Net
                  cash and cash equivalents
                  provided by financing activities
              
              
              1,000Net
                  change in
                  cash
              
              
              1,030Cash,
                  beginning of
                  period
              
              
              -Cash,
                  end of the
                  period
              
              $
              1,030*See
                  accompanying
                  notes.*
 
 F-6
 
 **GSC
                  Investment
                  LLC**Statement
                  of Changes in Net
                  AssetsFor
                  the period from May 12, 2006
                  (date of inception)to
                  February 28,
                  2007For
                  the period
                  fromMay
                  12, 2006 (date of
                  inception)to
                  February 28,
                  2007**Operations:**Net
                  operating
                  loss
              
              $
              (130,163
              )Net
                  decrease in net assets
                  resulting from operations
              
              
              (130,163
              )**Capital
                  share
                  transactions:**Issuance
                  of common
                  stock
              
              
              1,000Net
                  increase in net assets
                  resulting from capital share transactions
              
              
              1,000Total
                  increase (decrease) in net
                  assets
              
              
              (129,163
              )**Net
                  assets at beginning of
                  period**
              
              
              -**Net
                  assets at end of
                  period**
              
              $
              (129,163
              )**Net
                  asset value per common
                  share**
              
              N/A**Common
                  shares outstanding at end
                  of period**
              
              
              67*See
                  accompanying
                  notes.*
   
 F-7






**GSC
      INVESTMENT LLC**


**NOTES
      TO FINANCIAL STATEMENTS**


**As
      of February 28, 2007**




**1.
      Organization**





GSC
      Investment, LLC (the “LLC”) was organized in May 2006 as a Maryland limited
      liability company. The LLC is a newly organized non-diversified closed-end
      management investment company and has elected to be regulated as a business
      development company (“BDC”) under the Investment Company Act of 1940, as amended
      (the “1940 Act”). As of February 28, 2007, the LLC had not yet commenced its
      operations and investment activities.





On
      March 21, 2007,
      GSC Investment Corp.(which
      is referred to
      as the “Company”, “we” and “us”) was
      incorporated in
      Maryland and concurrently, theLLCwas
      merged with and into the Company in accordance with the procedure for such
      merger in the LLC’s limited liability company agreement and Maryland law.In
      connection with such merger, each outstanding common share of the LLC was
      converted into an equivalent number of shares of common stock of the Company
      and
      the Company is the surviving entity.





The
      LLC’s
      and the Company’s, as the surviving entity, operations will be externally
      managed and advised by our investment adviser, GSCP (NJ), L.P. (individually
      and
      collectively with its affiliates, “GSC Group” or the “Manager”), pursuant to an
      investment advisory and management agreement.




**2.
      Significant Accounting Policies**





**Basis
      of Presentation**





The
      financial statements have been prepared in accordance with U.S generally
      accepted accounting principles and are expressed in U.S. dollars.





**Use
      of Estimates in Preparation of Financial Statements**





The
      preparation of financial statements in conformity with U.S generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, and disclosure of
      contingent assets and liabilities at the date of the financial statements,
      and
      revenues and expenses during the period reported. Actual results could differ
      from those estimates.





**Recent
      Accounting Pronouncements**





In
      September 2006, the FASB released Statement of Financial Accounting Standards
      No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an
      authoritative definition of fair value, sets out a framework for measuring
      fair
      value, and requires additional disclosures about fair-value measurements. The
      application of FAS 157 is required for fiscal years beginning after November
      15,
      2007 and interim periods within those fiscal years. At this time, management
      is
      evaluating the implications of FAS 157 and its impact on the financial
      statements has not yet been determined.




**Cash
      and Cash Equivalents**






F-8






The
      LLC
      considers all highly liquid investments with original maturities of three months
      or less to be cash equivalents.




**Deferred
      Offering Cost**




Deferred
      offering costs consist principally of legal fees incurred by the LLC related
      to
      the Company’s IPO that was subsequently completed on March 28, 2007. These
      offering costs will be charged directly against capital and are limited to
      $1
      million. Offering costs in excess of $1 million will be paid for by the Manager.
      As of February 28, 2007, the LLC has accrued $808,617 relating to offering
      costs.





**Organizational
      Expenses**




Organizational
      expenses consist principally of professional fees incurred in connection with
      the organization of the LLC and have been expensed as incurred. The Manager
      has
      agreed to pay organizational expenses on behalf of the LLC, and to be
      subsequently reimbursed through the proceeds of the IPO.





**Income
      Taxes**





As
      of
      February 28, 2007, no provision for federal, state and local income taxes has
      been made in the LLC financial statements, as the member is individually liable
      for its own tax payments.





The
      Company intends to elect and continue to qualify for the tax treatment
      applicable to regulated investment companies under Subchapter M of the Internal
      Revenue Code of 1986 (the "Code"), as amended, and among other things, intends
      to continue to make the requisite distributions to its stockholders which will
      relieve the Company from federal income taxes. Therefore, no provision has
      been
      recorded for federal income taxes.





In
      order
      to qualify as a RIC, among other factors, the Company is required to timely
      distribute to its stockholders at least 90% of its investment company taxable
      income, as defined by the Code, for each fiscal tax year. The Company will
      be
      subject to a nondeductible federal excise tax of 4% if we do not distribute
      at
      least 98% of our investment company taxable income in any calendar year and
      98%
      of our capital gain net income for each one-year period ending on October
      31.





In
      July
      2006, the Financial Accounting Standards Board (“FASB”) released FASB
      Interpretation No. 48 *“Accounting for Uncertainty in Income Taxes”* (FIN
      48”). FIN 48 provides guidance for how uncertain tax positions should be
      recognized, measured, presented and disclosed in the financial statements.
      FIN
      48 requires the evaluation of tax positions taken or expected to be taken in
      the
      course of preparing the Company’s tax returns to determine whether the tax
      positions are “more-likely-than-not” of being sustained by the applicable tax
      authority. Tax positions not deemed to meet the more-likely-than-not threshold
      would be recorded as a tax expense in the current year. Adoption of FIN 48
      is
      required for fiscal years beginning after December 15, 2006 and is to be applied
      to all open tax years as of the effective date. At this time, management has
      evaluated the implications of FIN 48 and has determined that all uncertain
      tax
      positions have been properly presented and disclosed in the financial
      statements.





F-9






**3.
      Related Party Transactions**





The
      due to
      affiliate balance of $73,810 includes amounts paid by the Manager on behalf
      of
      the LLC for certain organizational expenses and offering costs.





In
      May
      2006, GSC Secondary Interest Fund, LLC, an affiliated entity of GSC Group,
      contributed $1,000 to the LLC in exchange for 66 2/3 shares, constituting all
      of
      the issued and outstanding shares of the LLC.





**4.
      Subsequent events**





On
      March 21, 2007,
      GSC Investment Corp. was incorporated in Maryland and concurrently,
      GSCInvestment,
      LLCwas merged with and into the Company in accordance with the procedure
      for such merger in the LLC’s limited liability company agreement and Maryland
      law.In
      connection with such merger, each outstanding common share of the LLC was
      converted into an equivalent number of shares of common stock of the Company
      and
      the Company is the surviving entity. The Company is a non-diversified
      closed-end management investment company that has elected to be regulated as
      a
      business development company (“BDC”) under the Investment Company Act of 1940,
      as amended (the “1940 Act”).





On
      March
      21, 2007, the Company entered into an Investment Advisory and Management
      Agreement (the “Management Agreement”) with the Manager pursuant to which the
      Manager will act as the investment advisor to the Company and manage the
      investment and reinvestment activities of the Company, subject to the
      supervision of the board of directors of the Company. The Manager shall have
      the
      power and authority on behalf of the Company to effectuate investment decisions
      for the Company, including the execution and delivery of all documents relating
      to the Company’s investments and the placing of orders for other purchase or
      sale transactions on behalf of the Company. The initial term of the Management
      Agreement is 2 years and thereafter shall continue automatically for successive
      annual periods, provided that such continuance is specifically approved at
      least
      annually by the vote of the board of directors, or by the vote of shareholders
      holding a majority of the outstanding voting securities of the Company, and
      the
      vote of a majority of the Company’s Directors who are not parties to this
      Agreement or “interested persons” (as such term is defined in Section 2(a)(19)
      of the 1940 Act) of any party to this Agreement, in accordance with the
      requirements of the 1940 Act.





Under
      the
      Management Agreement, the Company agrees to pay the Manager a base management
      fee (“Base Management Fee”) and an incentive fee (“Incentive Fee”) for the
      services provided. The Base Management Fee shall be calculated and payable
      quarterly in arrears and is equal to 1.75% per annum of the Company’s total
      assets (other than cash or cash equivalents but including assets purchased
      with
      borrowed funds). The Incentive Fee shall consist of two parts, the
“Pre-Incentive Fee” and “Capital Gains Fee”. The Pre-Incentive Fee is calculated
      and payable quarterly in arrears based on the pre-incentive fee net investment
      income for the quarter and is subject to a hurdle rate of 1.875% per quarter
      (7.5% annualized). The Capital Gains Fee is calculated and payable as of the
      end
      of each fiscal year and is calculated by subtracting (i) the sum of the
      Company’s cumulative aggregate realized capital losses and cumulative aggregate
      unrealized capital depreciation from (ii) the Company’s cumulative aggregate
      realized capital gains, in each case calculated from inception. If such amount
      is positive at the end of such year, then the Capital Gains Fee for such year
      is
      equal to 20.0% of such amount, less the cumulative aggregate amount of Capital
      Gains Fees paid in all prior years. If such amount is negative, then there
      is no
      Capital Gains Fee for such year.






F-10





On
      March 28, 2007,
      the Company completed its initial public offeringof 7,250,000 shares of
      common stock,
      priced at $15.00 per share, before underwriting discounts and commissionsand
      commenced its investment operations.





On
      March
      28, 2007 and April 2, 2007, pursuant to a portfolio acquisition agreement with
      GSC Partners CDO Fund III, Limited, a Cayman Islands exempted company (“CDO Fund
      III”) the Company purchased for cash a portfolio of first lien and second lien
      loans, senior secured bonds and unsecured bonds held by CDO Fund III for
      approximately $87 million and $11 million, respectively.





On
      April
      11, 2007, the Company and GSC Investment Funding LLC (“GSC Funding”), its wholly
      owned subsidiary, entered into a purchase and sale agreement, pursuant to which
      the Company agreed to sell to GSC Funding certain securities and loans
      originated or purchased by the Company in its normal course of business and
      the
      related rights of payment thereunder and the interests of the Company in the
      related property and other interest securing the payments to be made under
      such
      securities and loans.




Additionally
      on April 11, the Company, as performance guarantor, GSC Funding, as borrower,
      and the Manager, as servicer, entered into a credit agreement (the “Credit
      Agreement”) with Deutsche Bank AG, New York branch, as administrative agent,
      U.S. Bank National Association, as trustee and back-up servicer, and the
      commercial paper lenders and financial institutions from time to time party
      thereto. The Credit Agreement provides for a $85,000,000 revolving securitized
      credit facility that may be increased up to $130,000,000 subject to satisfaction
      of certain conditions.  The interest rate on the revolving securitized
      credit facility is based on the commercial paper rate plus 0.70%. The Credit
      Agreement contains certain negative covenants, customary representations and
      warranties, affirmative covenants and events of default. On May 1, 2007,
      pursuant to Section 2.3(b) in the Credit Agreement, the facility amount was
      increased to $100,000,000.





On
      May 1,
      2007, the Company and GSC Investment Funding II LLC (“GSC Funding II”), its
      wholly owned subsidiary, entered into a purchase and sale agreement, pursuant
      to
      which the Company agreed to sell to GSC Funding II certain securities and loans
      purchased by the Company and the related rights of payment thereunder and the
      interests of the Company in the related property and other interest securing
      the
      payments to be made under such securities and loans.





On
      May 1,
      2007, the Company and GSC Partners CDO Fund Limited (“GSC CDO”) entered into a
      purchase and sale agreement, pursuant to which GSC CDO agreed to sell to the
      Company for cash a portfolio of first lien and second lien loans, senior secured
      bonds, and unsecured bonds for approximately $58 million.




On
      May 1,
      2007, the Company, as performance guarantor, GSC Funding II, as borrower, and
      GSCP (NJ), L.P., as servicer, entered into a credit agreement (the “GSC Funding
      II Credit Agreement”) with Deutsche Bank AG, New York branch, as administrative
      agent, U.S. Bank National Association, as trustee and back-up servicer, and
      the
      commercial paper lenders and financial institutions from time to time party
      thereto. The GSC Funding II Credit Agreement provides for a $25,708,119 term
      securitized credit facility.  The GSC Funding II Credit Agreement
      contains certain negative covenants, customary representations and warranties,
      affirmative covenants and events of default.




On
      May 1,
      2007, the Company, as performance guarantor, GSC Funding, as borrower, and
      the
      Manager, as servicer, entered into Amendment No.1 to the Credit Agreement dated
      April 11, 2007 with Deutsche Bank AG, New York branch, as the committed lender,
      managing agent and administrative agent.




F-11