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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the fiscal year ended February 28, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from           to
 Commission File 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)
 888 Seventh Ave
New York, New York 10019  (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 RegisteredCommon Shares, par value $0.0001 per share
    
    The New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
None
 o þ
 o þ
 þ o
 o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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NOTE ABOUT REFERENCES TO GSC INVESTMENT CORP.
  NOTE ABOUT TRADEMARKS
  NOTE ABOUT FORWARD-LOOKING STATEMENTS
    
    
    our future operating results;
    
    our business prospects and the prospects of our portfolio companies;
    
    the impact of investments that we expect to make;
    
    our contractual arrangements and relationships with third parties;
    
    the dependence of our future success on the general economy and its impact on the
industries in which we invest;
    
    the ability of our portfolio companies to achieve their objectives;
    
    our expected financings and investments;
    
    our regulatory structure and tax treatment, including our ability to operate as a
business development company and a regulated investment company;
    
    the adequacy of our cash resources and working capital;
    
    the timing of cash flows, if any, from the operations of our portfolio companies;
    
    the ability of our investment adviser to locate suitable investments for us and to
monitor and effectively administer our investments; and
    
    continued access to our Revolving Facility.
  2




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##### 



TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    18Item 1B. Unresolved Staff Comments
    
    
    31Item 2. Properties
    
    
    31Item 3. Legal Proceedings
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    32Item 6. Selected Financial Data
    
    
    34Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    35Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    46Item 8. Financial Statements and Supplementary Data
    
    
    48Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    48Item 9A. Controls and Procedures
    
    
    48Item 9B. Other Information
    
    
    48PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    49Item 11. Executive Compensation
    
    
    49Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    49Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    49Item 14. Principal Accountant Fees and Services
    
    
    49PART IVItem 15. Exhibits and Consolidated Financial Statement Schedules
    
    
    50Signatures
    
    
    54Consolidated Financial Statements
    
    
    F-1EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION
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PART I
 
 Item 1. Business
 General
       4




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Investments
  Leveraged loans
  High yield bonds
  pari passu
 Mezzanine debt
   Equity investments
  5




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Opportunistic Investments
  Prospective portfolio company 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 leadership with competitive advantages and sustainable market shares in
attractive sectors; and
    
    capital structures that provide appropriate terms and reasonable covenants.
 Investment selection
  
    
    bottoms-up, company-specific research and analysis;
    
    capital preservation, low volatility and minimization of downside risk; and
    
    investing with experienced management teams that hold meaningful equity ownership
in their businesses.
  
    
    Initial screening. A brief analysis identifies the investment opportunity and
reviews the merits of the transaction. The initial screening memorandum provides a brief
description of the company, its industry, competitive position, capital structure,
financials, equity sponsor and deal economics. If the deal is determined to be
attractive by the senior members of the deal team, the opportunity is more fully
analyzed.
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
    
    Full analysis. A full analysis includes:
 
    
    Business and Industry analysis  a review of the companys
business position, competitive dynamics within its industry, cost and growth
drivers and technological and geographic factors. Business and industry research
often includes meetings with industry experts, consultants, other investors,
customers and competitors.
    
    Company analysis  a review of the companys historical 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 financial and negative covenants,
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 report is reviewed by the
senior investment professional in charge of the potential investment. If such senior
investment professional is in favor of the potential investment, it is presented for the
approval of the group head. Additional due diligence with respect to any investment may
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
investment is presented to the investment committee for approval. Sale recommendations
made by the investment staff must also be approved by the investment committee. Purchase
and sale recommendations over $10 million per issuer require unanimous and majority
approval of the investment committee, respectively. Each of our Chief Executive Officer,
Seth M. Katzenstein, and Chairman, Richard M. Hayden has discretionary authority to make
purchases or sales below $10 million per issuer, subject to certain aggregate limits.
 Investment structure
  
    
    maintenance leverage covenants requiring a decreasing ratio of debt to cash flow;
    
    maintenance cash flow covenants requiring an increasing ratio of cash flow to the
sum of interest expense and capital expenditures; and
    
    debt incurrence prohibitions, limiting a companys ability to re-lever.
   
    
    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.
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Valuation process
    
    
    each investment is initially valued by the responsible investment professionals
and preliminary valuation conclusions are documented and discussed with our senior
management; and
    
    an independent valuation firm engaged by our Board of Directors independently
values at least one quarter of our investments each quarter so that the valuation of
each investment for which market quotes are not readily available is independently
valued by an independent valuation firm at least annually.
  
    
    the audit committee of our Board of Directors reviews each preliminary valuation
and our investment adviser and independent valuation firm (if applicable) will
supplement the preliminary valuation to reflect any comments provided by the audit
committee; and
    
    our Board of Directors discusses the valuations and determines the 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
  Leverage
   8




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Dividend
      About GSC Group
  9




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(1)
 (1) (1)
 
 (1)
    
    The methodology used by GSC Group to calculate its assets under management varies with the
nature of the account and represents (i) the sum of cash, uncalled capital commitments, as
applicable, and the market value of each investment or (ii) the principal balance of the
underlying assets adjusted for defaulted securities plus the market value of equity
securities, all as measured under the relevant account documents. In all cases, the fair value
(as determined in accordance with U.S. GAAP) of the underlying assets may differ significantly
from the assets under management as forth above. Assets under management does not include
pooled investment vehicles comprised of asset-backed securities that are co-managed by GSC
Group with a sub-advisor Our investment adviser
   Our relationship with our investment adviser and GSC Group
    10




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Competitive advantages
  GSC Groups investment platform
  Experience sourcing and managing middle market loans
  Experienced management and investment committee
  Access to GSC Groups infrastructure
   11




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Compliance policies
  Managerial assistance
  Competition
  Staffing
  Regulation
  12




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Qualifying assets
  (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)
    
    has a class of securities listed on a national securities
exchange but has an aggregate market value of outstanding voting and non-voting
common equity of less than $250 million.
 (2)
    
    Securities of any eligible portfolio company which we control.(3)
    
    Securities purchased in a private transaction from a U.S. issuer that is not an
investment company or from an affiliated person of the issuer, or in transactions
incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the
issuer, immediately prior to the purchase of its securities was unable to meet its
obligations as they came due without material assistance other than conventional lending
or financing arrangements.(4)
    
    Securities of an eligible portfolio company purchased from any person in a
private transaction if there is no ready market for such securities and we already own
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.
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Managerial assistance to portfolio companies
  Temporary investments
  Indebtedness and senior securities
  Code of ethics
  Proxy voting policies and procedures
   14




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Privacy principles
    Other
    Co-investment
   15




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Resolution of potential conflicts of interest; equitable allocation of investment
opportunities
      16




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(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;(5)
    
    the level of available cash for investment with respect to the particular client
entity;(6)
    
    the total amount of funds committed to the client; and(7)
    
    the age of the fund and the remaining term of a funds investment period, if any.
  Compliance with the Sarbanes-Oxley Act and the New York Stock Exchange corporate governance
regulations
   Available Information
 http://www.sec.gov http://www.gscinvestmentcorp.com
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Item 1A. Risk Factors
  Risks related to current economic and market conditions
 Economic recessions, including the current global recession, could impair our portfolio companies
and harm our operating results.
  Declining asset values and illiquidity in the corporate debt markets have adversely affected, and
may continue to adversely affect, the fair value of our portfolio investments, reducing the value
of our assets.
  Ratings downgrades in our portfolio could require us to liquidate assets or face a default under
the Revolving Facility.
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The current severe capital markets disruption has limited our ability to obtain new equity
capital and alternative sources of leverage.
  Our common stock could be delisted from the New York Stock Exchange if our average market
capitalization over 30 consecutive trading days is below $15 million.
  Risks related to our business
 We employ leverage.
   
    
    A likelihood of greater volatility in the net asset value and market price of our
common stock.
    
    Diminished operating flexibility as a result of asset coverage or investment
portfolio composition requirements that are more stringent than those imposed by the
1940 Act.
    
    The possibility that investments will have to be liquidated at less than full
value or at inopportune times to comply with debt covenants or to pay interest or
dividends on the leverage.
    
    Increased operating expenses due to the cost of leverage, including issuance and
servicing costs.
    
    Subordination to lenders superior claims on our assets as a result of which
lenders will be able to receive proceeds available in the case of our liquidation before
any proceeds are distributed to our shareholders.
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We need to find alternative sources of leverage and/or access the equity markets to maintain and
grow our business.
   Many of our portfolio investments are recorded at fair value as determined in good faith by our
Board of Directors; such valuations are inherently uncertain and may be materially higher or
lower than the values that we ultimately realize upon the disposal of such investments.
  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.
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Our investment advisers incentive compensation may cause it to pursue a high risk investment
strategy.
  Our investment advisers base compensation may cause it to increase our leverage contrary to our
interest.
  We operate in a highly competitive market for investment opportunities.
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Our financial condition and results of operation depend on our ability to manage future growth
effectively.
   There are conflicts of interest in our relationship with our investment adviser and/or GSC Group
that could cause them to make decisions that are not in the best interests of our stockholders.
  Co-Investment.
 Conflicts in Different Parts of Capital Structure.
 Potential Conflicting Positions.
 Shared Legal Counsel.
 Allocation of Opportunities.
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Material Nonpublic Information.
 Cross-Trading.
 We may compete with investment vehicles of GSC Group for access to GSC Group.
  We are dependent upon our investment adviser and its personnel.
  We are exposed to risks associated with changes in interest rates.
  We may experience fluctuations in our quarterly results.
  23




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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.
  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 have a limited operating history.
  Risks related to our operation as a BDC
 Our common stock may trade at a discount to our net asset value per share.
  Regulations governing our operation as a BDC will affect our ability to raise additional capital.
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There is a risk that you may not receive distributions or that our distributions may not grow
over time.
  Our investment adviser has limited experience in managing a BDC.
  A failure on our part to maintain our qualification as a BDC would significantly reduce our
operating flexibility.
  We will be subject to corporate-level income tax if we fail to qualify as a RIC.
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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.
   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.
  The floating interest rate features of any indebtedness incurred by us could adversely affect us
if interest rates rise.
  Risks related to our investments
 Our investments may be risky, and you could lose all or part of your investment.
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
    
    limited financial resources and an inability to 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;
    
    dependence on the management talents and efforts of a small group of persons; the
death, disability, resignation or termination of one or more of which could have a
material adverse impact on the company and, in turn, on us;
    
    less predictable operating results and, possibly, substantial additional capital
requirements to support their operations, finance expansion or maintain their
competitive position.; and
    
    difficulty accessing the capital markets to meet future capital needs.
  The lack of liquidity in our investments may adversely affect our business.
  The debt securities in which we invest are subject to credit risk and prepayment risk.
   Our investment in GSCIC CLO constitutes a leveraged investment in a portfolio of predominantly
senior secured first lien term loans and is subject to additional risks and volatility.
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Available information about privately held companies is limited.
  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.
  Our portfolio companies may incur debt or issue equity securities that rank equally with, or
senior to, our investments in such companies.
  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.
  Investments in equity securities involve a substantial degree of risk.
  
    
    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 that will be subordinate to all indebtedness or senior securities
in the event that the issuer is unable to meet its obligations or becomes subject to a
bankruptcy process;
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
    
    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 likely to 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.
  
    
    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;
    
    preferred securities are subordinated with respect to corporate income and
liquidation payments, and are therefore subject to greater risk than debt;
    
    preferred securities may be substantially less liquid than many other securities,
such as common securities or U.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.
   We may expose ourselves to risks if we engage in hedging transactions.
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Our Board of Directors may change our operating policies and strategies without prior notice or
stockholder approval, the effects of which may be adverse.
  Risks related to an investment in our shares
 Investing in our common stock may involve an above average degree of risk.
  The market price of our common stock may fluctuate significantly.
  
    
    significant volatility in the market price and trading volume of securities of
BDCs or 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 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.
 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.
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
    
    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 interested shares of common stock.
   
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 Price range of common stock
  Price RangeFiscal 2008
    
    NAV(1)
    
    High
    
    LowFirst Quarter
    
    $
    14.21
    
    
    $
    15.00
    
    
    $
    12.57Second Quarter
    
    $
    13.76
    
    
    $
    14.06
    
    
    $
    10.74Third Quarter
    
    $
    13.51
    
    
    $
    12.75
    
    
    $
    10.92Fourth Quarter
    
    $
    11.80
    
    
    $
    11.43
    
    
    $
    9.68
 Fiscal 2009
    
    NAV(1)
    
    High
    
    LowFirst Quarter
    
    $
    11.75
    
    
    $
    10.67
    
    
    $
    9.30Second Quarter
    
    $
    11.05
    
    
    $
    11.05
    
    
    $
    9.16Third Quarter
    
    $
    10.14
    
    
    $
    10.86
    
    
    $
    1.10Fourth Quarter
    
    $
    8.20
    
    
    $
    3.15
    
    
    $
    1.55
 
 (1)
    
    Net asset value per share is determined as of the last day in the relevant quarter and
therefore may not reflect the net asset value per share on the date of the high and low
closing sales prices. The net asset values shown are based on outstanding shares at the end of
each period. Holders
  Dividend Policy
  AmountDate Declared
    
    Record Date
    
    Payment Date
    
    per ShareMay 21, 2007
    
    May 29, 2007
    
    June 6, 2007
    
    $
    0.24August 14, 2007
    
    August 24, 2007
    
    August 31, 2007
    
    $
    0.36November 15, 2007
    
    November 30, 2007
    
    December 3, 2007
    
    $
    0.38December 28, 2007
    
    January 18, 2008
    
    January 28, 2008
    
    $
    0.18February 20, 2008
    
    February 29, 2008
    
    March 10, 2008
    
    $
    0.39Total Dividends Declared for Fiscal 2008
    
    
    
    
    $
    1.55May 22, 2008
    
    May 30, 2008
    
    June 13, 2008
    
    $
    0.39August 19, 2008
    
    August 29, 2008
    
    September 15, 2008
    
    $
    0.39December 8, 2008
    
    December 18, 2008
    
    December 29, 2008
    
    $
    0.25Total Dividends Declared for Fiscal 2009
    
    
    
    
    $
    1.03
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Performance Graph
  
 Sales of unregistered securities
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Issuer purchases of equity securities
  Total Number
    
    Maximum Numberof Shares
    
    (or ApproximatePurchased as
    
    Dollar Value) ofPart of Publicly
    
    Shares that MayTotal Number
    
    Average
    
    Announced
    
    Yet be Purchasedof Shares
    
    Price Paid
    
    Plans or
    
    Under the Plans orPeriod
    
    Purchased
    
    per Share
    
    Program
    
    Programs(In thousands, except per share numbers)December 1, 2008
through December
31, 2008
    
    
    127
    (1)
    
    
    2.23
    
    
    
    
    
    
    
    Total
    
    
    127
    
    
    
    2.23
    
    
    
    
    
    
    
    
 
 (1)
    
    Pursuant to our dividend reinvestment plan, we directed our plan administrator to purchase
the indicated quantity of shares in the open market in order to satisfy our obligations to
deliver shares of common stock to our stockholders with respect to our dividend for the third
quarter of fiscal year 2009. 
 Item 6. Selected Financial Data
  GSC INVESTMENT CORP.
SELECTED FINANCIAL DATA
For the Years Ended February 28, 2009 and February 29, 2008
 Year Ended
    
    
    Year EndedFebruary 28, 2009
    
    
    February 29, 2008($ in thousands, except share and per share numbers)Income Statement Data:Interest and related portfolio income:Interest
    
    $
    21,142
    
    
    $
    20,744Management fee and other income
    
    
    2,245
    
    
    
    642Total interest and related portfolio income
    
    
    23,387
    
    
    
    21,386Expenses:Interest and credit facility financing expenses
    
    
    2,605
    
    
    
    5,031Base management and incentive management fees(1)
    
    
    4,432
    
    
    
    3,650Administrator expenses
    
    
    961
    
    
    
    892Administrative and other
    
    
    2,433
    
    
    
    2,766Expense reimbursement
    
    
    (1,010
    )
    
    
    (1,789
    )Total operating expenses
    
    
    9,421
    
    
    
    10,550Net investment income before income taxes
    
    
    13,966
    
    
    
    10,836Income tax expenses, including excise tax
    
    
    (140
    )
    
    
    (89
    )Net investment income
    
    
    13,826
    
    
    
    10,747Realized and unrealized gain (loss) on investments and derivativesNet realized gain (loss)
    
    
    (7,143
    )
    
    
    3,908Net change in unrealized loss
    
    
    (27,998
    )
    
    
    (20,106
    )Total net loss
    
    
    (35,141
    )
    
    
    (16,198
    )Net decrease in net assets resulting from operations
    
    $
    (21,315
    )
    
    $
    (5,451
    )
 34




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##### Table of Contents



Year Ended
    
    
    Year EndedFebruary 28, 2009
    
    
    February 29, 2008($ in thousands, except share and per share numbers)Per Share:Earnings (loss) per common share  basic and diluted(2)
    
    $
    (2.57
    )
    
    $
    (0.70
    )Net investment income per share  basic and diluted(2)
    
    $
    1.67
    
    
    $
    1.38Net realized and unrealized gain (loss) per share  basic and diluted(2)
    
    $
    (4.24
    )
    
    $
    (2.08
    )Dividends declared per common share(3)
    
    $
    1.03
    
    
    $
    1.55Balance Sheet Data:Investment assets at fair value
    
    $
    118,912
    
    
    $
    172,837Total assets
    
    
    130,662
    
    
    
    192,842Total debt outstanding
    
    
    58,995
    
    
    
    78,450Stockholders equity
    
    
    68,014
    
    
    
    97,869Net asset value per common share
    
    $
    8.20
    
    
    $
    11.80Common shares outstanding at end of year
    
    
    8,291,384
    
    
    
    8,291,384Other Data:Investments funded
    
    
    28,260
    
    
    
    314,003Principal collections related to investment repayments or sales
    
    
    49,195
    
    
    
    141,772Number of portfolio investments at year end
    
    
    45
    
    
    
    46Weighted average yield of income producing debt investments  Non-control/non-affiliate
    
    
    9.7
    %
    
    
    10.7
    %Weighted average yield on income producing debt investments  Control
    
    
    12.2
    %
    
    
    8.2
    %
 Quarterly Data
 2009

    

    2008Qtr 4
    
    Qtr 3
    
    Qtr 2
    
    Qtr 1
    
    Qtr 4
    
    Qtr 3
    
    Qtr 2
    
    Qtr 1($ in thousands, except per share numbers)(Unaudited)Interest and related portfolio income
    
    $
    5,480
    
    
    $
    6,361
    
    
    $
    5,835
    
    
    $
    5,715
    
    
    $
    5,520
    
    
    $
    5,882
    
    
    $
    5,882
    
    
    $
    4,102Net investment income
    
    
    3,288
    
    
    
    3,887
    
    
    
    3,455
    
    
    
    3,195
    
    
    
    2,562
    
    
    
    3,070
    
    
    
    3,157
    
    
    
    1,958Net realized and unrealized gain (loss)
    
    
    (17,296
    )
    
    
    (11,438
    )
    
    
    (6,023
    )
    
    
    (384
    )
    
    
    (11,972
    )
    
    
    (2,009
    )
    
    
    (3,939
    )
    
    
    1,722Net increase (decrease) in net assets
resulting from operations
    
    
    (14,008
    )
    
    
    (7,551
    )
    
    
    (2,567
    )
    
    
    2,811
    
    
    
    (9,410
    )
    
    
    1,061
    
    
    
    (782
    )
    
    
    3,680Net investment income per common share
at end of each quarter
    
    $
    0.40
    
    
    $
    0.47
    
    
    $
    0.42
    
    
    $
    0.39
    
    
    $
    0.32
    
    
    $
    0.37
    
    
    $
    0.38
    
    
    $
    0.23Net realized and unrealized gain
(loss) per common share at end of each
quarter
    
    $
    (2.09
    )
    
    $
    (1.38
    )
    
    $
    (0.73
    )
    
    $
    (0.05
    )
    
    $
    (1.46
    )
    
    $
    (0.24
    )
    
    $
    (0.47
    )
    
    $
    0.21Dividends declared per common share
    
    $
    
    
    
    $
    0.25
    
    
    $
    0.39
    
    
    $
    0.39
    
    
    $
    0.57
    
    
    $
    0.38
    
    
    $
    0.36
    
    
    $
    0.24Net asset value per common share
    
    $
    8.20
    
    
    $
    10.14
    
    
    $
    11.05
    
    
    $
    11.75
    
    
    $
    11.80
    
    
    $
    13.51
    
    
    $
    13.76
    
    
    $
    14.21
 
 (1)
    
    See note 6 in consolidated financial statements.(2)
    
    For the period ended February 29, 2008, amounts are calculated using weighted average common
shares outstanding for the year of 7,761,965.(3)
    
    Based on 8,291,384 common shares outstanding. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  35




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##### Table of Contents



Overview
   Revenues
     Expenses
  
    
    organization;
 36




---



##### Table of Contents




    
    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, if any, 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 joint policies;
    
    direct costs and expenses of administration, including auditor and legal
costs; and
    
    all other expenses incurred by us or our administrator in connection with
administering our business.
    
    
    A fee, payable quarterly in arrears, equal to 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, that exceeds a 1.875% quarterly (7.5%
annualized) hurdle rate measured as of the end of each fiscal quarter. Under this
provision, in any fiscal quarter, our investment adviser receives no incentive fee
unless our pre-incentive fee net investment income exceeds the hurdle rate of
 37




---



##### Table of Contents



1.875%. Amounts received as a return of capital are not included in calculating this portion
of the incentive fee. 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.
    
    A fee, payable at the end of each fiscal year, equal to 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.
    Portfolio and investment activity
 Corporate Debt Portfolio Overview (1)
 At February 28, 2009
    
    At February 29, 2008($ in millions)Number of investments
    
    
    42
    
    
    
    43Number of portfolio companies
    
    
    35
    
    
    
    36Average investment size
    
    $
    2.3
    
    
    $
    3.3Weighted average maturity

    
    3.3
    years
    
    
    3.8
    yearsNumber of industries
    
    
    22
    
    
    
    23Average investment per portfolio company
    
    $
    2.8
    
    
    $
    4.0Non-Performing or delinquent investments
    
    $
    0.4
    
    
    $
    Fixed rate debt (% of interest bearing portfolio)
    
    $
    40.3 (41.8
    %)
    
    $
    57.0 (39.6
    %)Weighted average current coupon
    
    
    11.7
    %
    
    
    11.6
    %Floating rate debt (% of interest bearing portfolio)
    
    $
    56.2 (58.2
    %)
    
    $
    86.8 (60.4
    %)Weighted average current spread over LIBOR
    
    
    5.9
    %
    
    
    5.6
    %
 
 (1)
    
    Excludes our investment in the subordinated notes of GSCIC CLO and GSC Partners CDO
GP III, LP.   38




---



##### Table of Contents



Portfolio composition
 At February 28, 2009
    
    At February 29, 2008Percentage of
    
    Weighted Average
    
    Percentage of
    
    Weighted AverageTotal Portfolio
    
    Current Yield
    
    Total Portfolio
    
    Current YieldFirst lien term loans
    
    
    14.4
    %
    
    
    6.8
    %
    
    
    15.3
    %
    
    
    8.1
    %Second lien term loans
    
    
    34.5
    
    
    
    9.0
    
    
    
    36.1
    
    
    
    10.8Senior secured notes
    
    
    21.7
    
    
    
    11.6
    
    
    
    18.3
    
    
    
    11.5Unsecured notes
    
    
    10.4
    
    
    
    12.3
    
    
    
    13.5
    
    
    
    12.2GSCIC CLO subordinated notes
    
    
    18.8
    
    
    
    12.2
    
    
    
    16.7
    
    
    
    8.4Equity/limited partnership interests
    
    
    0.2
    
    
    
    N/A
    
    
    
    0.1
    
    
    
    N/ATotal
    
    
    100.0
    %
    
    
    10.2
    %
    
    
    100.0
    %
    
    
    10.3
    %
   
    
    1.00-2.00 represents investments 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 investments 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 investments 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 investments that are highly leveraged and/or have poor
operating performance.
   39




---



##### Table of Contents



Portfolio CMR distribution
 At February 28, 2009
    
    
    At February 29, 2008Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofNumerical Debt Score
    
    Fair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total Portfolio($ in thousands)1.00 - 1.99
    
    $
    8,941
    
    
    
    7.5
    %
    
    $
    11,863
    
    
    
    6.9
    %2.00 - 2.99
    
    
    33,831
    
    
    
    28.5
    
    
    
    87,423
    
    
    
    50.63.00 - 3.99
    
    
    49,076
    
    
    
    41.2
    
    
    
    44,459
    
    
    
    25.74.00 - 4.99
    
    
    4,614
    
    
    
    3.9
    
    
    
    
    
    
    
    5.00
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A(1)
    
    
    22,450
    
    
    
    18.9
    
    
    
    29,092
    
    
    
    16.8Total
    
    $
    118,912
    
    
    
    100.0
    %
    
    $
    172,837
    
    
    
    100.0
    %
 At February 28, 2009
    
    
    At February 29, 2008Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofCorporate Letter Rating
    
    Fair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total Portfolio($ in thousands)A
    
    $
    4,602
    
    
    
    3.9
    %
    
    $
    
    
    
    
    
    %B
    
    
    36,818
    
    
    
    30.9
    
    
    
    112,019
    
    
    
    64.8C
    
    
    42,700
    
    
    
    35.9
    
    
    
    31,726
    
    
    
    18.4D
    
    
    11,668
    
    
    
    9.8
    
    
    
    
    
    
    
    E
    
    
    674
    
    
    
    0.6
    
    
    
    
    
    
    
    F
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    N/A(1)
    
    
    22,450
    
    
    
    18.9
    
    
    
    29,092
    
    
    
    16.8Total
    
    $
    118,912
    
    
    
    100.0
    %
    
    $
    172,837
    
    
    
    100.0
    %
 
 (1)
    
    Predominantly comprised of our investment in the subordinated notes of GSCIC CLO.   Portfolio composition by industry grouping at fair value
 At February 28, 2009
    
    
    At February 29, 2008Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofFair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total Portfolio($ in thousands)Structured Finance Securities(1)
    
    $
    22,341
    
    
    
    18.8
    %
    
    $
    28,915
    
    
    
    16.7
    %Manufacturing
    
    
    14,480
    
    
    
    12.2
    
    
    
    15,030
    
    
    
    8.7Packaging
    
    
    10,070
    
    
    
    8.5
    
    
    
    16,370
    
    
    
    9.5Consumer Products
    
    
    7,843
    
    
    
    6.6
    
    
    
    10,021
    
    
    
    5.8Oil and Gas
    
    
    7,359
    
    
    
    6.2
    
    
    
    7,738
    
    
    
    4.5Electronics
    
    
    6,849
    
    
    
    5.8
    
    
    
    6,377
    
    
    
    3.7Apparel
    
    
    6,616
    
    
    
    5.5
    
    
    
    8,004
    
    
    
    4.6Publishing
    
    
    6,477
    
    
    
    5.4
    
    
    
    9,289
    
    
    
    5.4Healthcare Services
    
    
    6,010
    
    
    
    5.0
    
    
    
    6,040
    
    
    
    3.5Metals
    
    
    5,693
    
    
    
    4.8
    
    
    
    5,129
    
    
    
    3.0Natural Resources
    
    
    4,470
    
    
    
    3.8
    
    
    
    4,167
    
    
    
    2.4Environmental
    
    
    3,592
    
    
    
    3.0
    
    
    
    5,066
    
    
    
    2.9Homebuilding
    
    
    3,490
    
    
    
    2.9
    
    
    
    5,912
    
    
    
    3.4
 40




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##### Table of Contents



At February 28, 2009
    
    
    At February 29, 2008Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofFair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total PortfolioFinancial Services
    
    $
    3,162
    
    
    
    2.7
    %
    
    $
    3,815
    
    
    
    2.2
    %Logistics
    
    
    2,134
    
    
    
    1.8
    
    
    
    2,688
    
    
    
    1.6Food and Beverage
    
    
    1,707
    
    
    
    1.4
    
    
    
    
    
    
    
    Printing
    
    
    1,638
    
    
    
    1.4
    
    
    
    
    
    
    
    Insurance
    
    
    1,493
    
    
    
    1.3
    
    
    
    1,700
    
    
    
    1.0Building Products
    
    
    1,426
    
    
    
    1.2
    
    
    
    2,964
    
    
    
    1.7Software
    
    
    773
    
    
    
    0.6
    
    
    
    
    
    
    
    Education
    
    
    674
    
    
    
    0.6
    
    
    
    1,546
    
    
    
    0.9Chemicals
    
    
    371
    
    
    
    0.3
    
    
    
    
    
    
    
    Consumer Services
    
    
    244
    
    
    
    0.2
    
    
    
    1,290
    
    
    
    0.7Agriculture
    
    
    
    
    
    
    
    
    
    
    3,850
    
    
    
    2.2Automotive
    
    
    
    
    
    
    
    
    
    
    22,158
    
    
    
    12.8Retail
    
    
    
    
    
    
    
    
    
    
    2,179
    
    
    
    1.3Gaming
    
    
    
    
    
    
    
    
    
    
    1,730
    
    
    
    1.0Restaurants
    
    
    
    
    
    
    
    
    
    
    859
    
    
    
    0.5Total
    
    $
    118,912
    
    
    
    100.0
    %
    
    $
    172,837
    
    
    
    100.0
    %
 
 (1)
    
    Comprised of our investment in the subordinated notes of GSCIC CLO.  Portfolio composition by geographic location at fair value
 At February 28, 2009
    
    
    At February 29, 2008Investments at
    
    
    Percentage of
    
    
    Investments at
    
    
    Percentage ofFair Value
    
    
    Total Portfolio
    
    
    Fair Value
    
    
    Total Portfolio($ in thousands)Midwest
    
    $
    31,716
    
    
    
    26.7
    %
    
    $
    40,109
    
    
    
    23.2
    %Southeast
    
    
    23,094
    
    
    
    19.4
    
    
    
    33,685
    
    
    
    19.5Other(1)
    
    
    22,449
    
    
    
    18.9
    
    
    
    29,092
    
    
    
    16.8West
    
    
    16,137
    
    
    
    13.6
    
    
    
    24,450
    
    
    
    14.2Northeast
    
    
    12,578
    
    
    
    10.6
    
    
    
    11,395
    
    
    
    6.6International
    
    
    12,165
    
    
    
    10.2
    
    
    
    13,739
    
    
    
    7.9Mid-Atlantic
    
    
    773
    
    
    
    0.6
    
    
    
    20,367
    
    
    
    11.8Total
    
    $
    118,912
    
    
    
    100.0
    %
    
    $
    172,837
    
    
    
    100.0
    %
 
 (1)
    
    Predominantly comprised of our investment in the subordinated notes of GSCIC CLO. Results of operations
 Investment income
  41




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##### Table of Contents



Investment Income
 Fiscal year endedFebruary 28, 2009
    
    
    February 29, 2008($ in thousands)Interest from investments
    
    $
    20,967
    
    
    $
    20,378Management of GSCIC CLO
    
    
    2,050
    
    
    
    599Interest from cash and cash equivalents and other income
    
    
    370
    
    
    
    409Total
    
    $
    23,387
    
    
    $
    21,386
  Operating expenses
  Operating Expenses
 Fiscal year endedFebruary 28, 2009
    
    
    February 29, 2008($ in thousands)Interest and credit facility expense
    
    $
    2,605
    
    
    $
    5,031Base management fees
    
    
    2,680
    
    
    
    2,939Professional fees
    
    
    1,166
    
    
    
    1,410Incentive management fees
    
    
    1,752
    
    
    
    711Administrator expenses
    
    
    961
    
    
    
    892Insurance expenses
    
    
    682
    
    
    
    587Directors fees
    
    
    295
    
    
    
    314General and administrative expenses
    
    
    290
    
    
    
    262Other
    
    
    
    
    
    
    193Total
    
    $
    10,431
    
    
    $
    12,339
   42




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##### Table of Contents



Net realized gains/losses on sales of investments
  Fiscal year ended February 28, 2009Net RealizedIssuer
    
    Asset Type
    
    Gross Proceeds
    
    Cost
    
    Gain/(Loss)($ in thousands)Key Safety Systems
    
    First Lien Term Loan
    
    $
    2,063
    
    
    $
    1,857
    
    
    $
    206SILLC Holdings, LLC
    
    Second Lien Term Loan
    
    
    23,049
    
    
    
    22,878
    
    
    
    171EuroFresh, Inc.
    
    Unsecured Notes
    
    
    2,880
    
    
    
    6,900
    
    
    
    (4,020
    )Atlantis Plastics Films, Inc.
    
    First Lien Term Loan
    
    
    3,073
    
    
    
    6,053
    
    
    
    (2,980
    )Claires Stores, Inc.
    
    First Lien Term Loan
    
    
    2,103
    
    
    
    2,584
    
    
    
    (481
    )Jason Incorporated
    
    Unsecured Notes
    
    
    1,581
    
    
    
    1,700
    
    
    
    (119
    )
  Fiscal year ended February 29, 2008Net RealizedIssuer
    
    Asset Type
    
    Gross Proceeds
    
    Cost
    
    Gain/(Loss)($ in thousands)Sportcraft, LTD
    
    Second Lien Term Loan
    
    $
    9,000
    
    
    $
    7,302
    
    
    $
    1,698SILLC Holdings, LLC
    
    Senior Secured Notes
    
    
    22,821
    
    
    
    21,838
    
    
    
    983McMillin Companies, LLC
    
    Senior Secured Notes
    
    
    3,300
    
    
    
    3,066
    
    
    
    234
  Net unrealized appreciation/depreciation on investments
  Fiscal year ended February 28, 2009Total Unrealized
    
    YTD Change inIssuer
    
    Asset Type
    
    Cost
    
    Fair Value
    
    Depreciation
    
    Unrealized Depreciation($ in thousands)GSCIC CLO
    
    Other/Structured Finance Securities
    
    $
    29,905
    
    
    $
    22,341
    
    
    $
    (7,564
    )
    
    $
    (6,480
    )Jason Incorporated
    
    Unsecured Notes
    
    
    13,700
    
    
    
    9,878
    
    
    
    (3,822
    )
    
    
    (3,453
    )Grant U.S. Holdings LLP
    
    Second Lien Term Loan
    
    
    6,140
    
    
    
    2,388
    
    
    
    (3,752
    )
    
    
    (2,553
    )McMillin Companies, LLC
    
    Unsecured Notes
    
    
    7,295
    
    
    
    3,490
    
    
    
    (3,805
    )
    
    
    (2,522
    )Penton Media, Inc.
    
    First Lien Term Loan
    
    
    3,724
    
    
    
    2,008
    
    
    
    (1,716
    )
    
    
    (1,906
    )Network Communications
    
    Unsecured Notes
    
    
    5,082
    
    
    
    2,503
    
    
    
    (2,579
    )
    
    
    (1,884
    )Terphane Holdings Corp.
    
    Senior Secured Notes
    
    
    10,431
    
    
    
    7,694
    
    
    
    (2,737
    )
    
    
    (1,863
    )
  43




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##### Table of Contents



Fiscal year ended February 29, 2008Total Unrealized
    
    YTD Change inIssuer
    
    Asset Type
    
    Cost
    
    Fair Value
    
    Depreciation
    
    Unrealized Depreciation($ in thousands)Eurofresh, Inc.
    
    Unsecured Notes
    
    $
    6,891
    
    
    $
    3,850
    
    
    $
    (3,041
    )
    
    $
    (3,041
    )SILLC Holdings, LLC
    
    Second Lien Term Loan
    
    
    22,865
    
    
    
    20,283
    
    
    
    (2,582
    )
    
    
    (2,582
    )Atlantis Plastics Films, Inc.
    
    First Lien Term Loan
    
    
    6,492
    
    
    
    4,298
    
    
    
    (2,194
    )
    
    
    (2,194
    )Bankruptcy Management
    
    Second Lien Term Loan
    
    
    4,902
    
    
    
    3,555
    
    
    
    (1,347
    )
    
    
    (1,347
    )McMillin Companies LLC
    
    Unsecured Notes
    
    
    7,195
    
    
    
    5,912
    
    
    
    (1,283
    )
    
    
    (1,283
    )Grant U.S. Holdings LLP
    
    Second Lien Term Loan
    
    
    5,365
    
    
    
    4,167
    
    
    
    (1,198
    )
    
    
    (1,198
    )
  Net realized gains/losses on derivatives
  Net unrealized appreciation/depreciation on derivatives
  Changes in net asset value from operations
  Financial condition, liquidity and capital resources
   44




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45




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##### Table of Contents



At February 28, 2009
    
    
    At February 29, 2008Fair
    
    
    Percent
    
    
    Fair
    
    
    PercentValue
    
    
    of Total
    
    
    Value
    
    
    of Total($ in thousands)Cash and cash equivalents
    
    $
    6,356
    
    
    
    5.0
    %
    
    $
    1,073
    
    
    
    0.6
    %Cash and cash equivalents, securitization accounts
    
    
    1,178
    
    
    
    0.9
    
    
    
    14,581
    
    
    
    7.7First lien term loans
    
    
    17,118
    
    
    
    13.5
    
    
    
    26,362
    
    
    
    14.0Second lien term loans
    
    
    41,043
    
    
    
    32.5
    
    
    
    62,446
    
    
    
    33.1Senior secured notes
    
    
    25,832
    
    
    
    20.4
    
    
    
    31,657
    
    
    
    16.8Unsecured notes
    
    
    12,381
    
    
    
    9.8
    
    
    
    23,280
    
    
    
    12.4Other/structured finance securities
    
    
    22,341
    
    
    
    17.7
    
    
    
    28,915
    
    
    
    15.3Equity/limited partnership interests
    
    
    198
    
    
    
    0.2
    
    
    
    176
    
    
    
    0.1Total
    
    $
    126,447
    
    
    
    100.0
    %
    
    $
    188,490
    
    
    
    100.0
    %
  Contractual obligations
  Payment Due by PeriodLess Than 1
    
    
    1-3
    
    
    3-5
    
    
    More Than 5Total
    
    
    Year
    
    
    Years
    
    
    Years
    
    
    Years($ in thousands)Long-Term Debt Obligations
    
    $
    58,995
    
    
    
    
    
    
    $
    58,995
 Off-balance sheet arrangements
  Recent Developments
  
 Item 7A.  Quantitative and Qualitative Disclosures about Market Risk
  46




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Interest Rate Risk
      Portfolio Valuation
   47




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##### Table of Contents



Percent of TotalFair Value
    
    
    Investments($ in thousands)Market yield trend analysis and enterprise valuation
    
    $
    53,629
    
    
    
    45.1
    %Third party independent valuation firm
    
    
    36,048
    
    
    
    30.3Discounted cash flow model
    
    
    22,341
    
    
    
    18.8Readily available market maker, broker quotes
    
    
    6,786
    
    
    
    5.7Other
    
    
    108
    
    
    
    0.1Total fair valued investments
    
    $
    118,912
    
    
    
    100.0
    %
 
 Item 8.Financial Statements and Supplementary Data
  
 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A.Controls and Procedures
 Evaluation of disclosure controls and procedures
  Managements annual report on internal control over financial reporting
 Internal Control-Integrated Framework Internal Control-Integrated Framework
  Changes in internal controls over financial reporting.
  
 Item 9B.Other Information
  48




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##### Table of Contents



PART III
 
 Item 10.Directors, Executive Officers and Corporate Governance
  
 Item 11.Executive Compensation
  
 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
  
 Item 13.Certain Relationships and Related Transactions, and Director Independence
  
 Item 14.Principal Accountant Fees and Services
  49




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PART IV
 
 Item 15.Exhibits and Consolidated Financial Statement Schedules
 Consolidated Financial Statements
         50




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Exhibits
 EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Articles of Incorporation of GSC Investment Corp.(8)3.2
    
    Amended and Restated Bylaws of GSC Investment Corp.(9)4.1
    
    Specimen certificate of GSC Investment Corp.s common stock, par value $0.0001 per share.(4)4.2
    
    Registration Rights Agreement dated March 27, 2007 between GSC Investment Corp., GSC CDO III L.L.C., GSCP
(NJ) L.P. and the other investors party thereto.(8)4.3
    
    Form of Dividend Reinvestment Plan.(1)10.1
    
    Amended and Restated Limited Partnership Agreement of GSC Partners CDO Investors III, L.P. dated August 27,
2001.(2)10.2
    
    Amended and Restated Limited Partnership Agreement of GSC Partners CDO GP III, L.P. dated October 16, 2001.(2)10.3
    
    Collateral Management Agreement dated November 5, 2001 among GSC Partners CDO Fund III, Limited and GSCP
(NJ), L.P.(2)10.4
    
    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.(1)10.5
    
    Amendment to the Contribution and Exchange Agreement dated as of March 20, 2007 among GSC Investment LLC, GSC
CDO III, L.L.C., GSCP (NJ), L.P., and the other investors party
thereto.(11)10.6
    
    Form of Regulations of American Stock Transfer and Trust Company.(3)10.7
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Peter K. Barker, as director of
GSC Investment LLC.(8)10.8
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Robert F. Cummings, Jr., as
director of GSC Investment LLC.(8)10.9
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Richard M. Hayden, as director
of GSC Investment LLC.(8)10.10
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Thomas V. Inglesby, as director
of GSC Investment LLC.(8)10.11
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Steven M. Looney, as director
of GSC Investment LLC.(8)10.12
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Charles S. Whitman III, as
director of GSC Investment LLC.(8)10.13
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and G. Cabell Williams, as director
of GSC Investment LLC.(8)10.14
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Richard T. Allorto, Jr., as
Chief Financial Officer of GSC Investment LLC.(8)10.15
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and David L. Goret, as Vice
President and Secretary of GSC Investment LLC.(8)10.16
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Michael J. Monticciolo, as
Chief Compliance Officer of GSC Investment LLC.(8)10.17
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Daniel I. Castro, Jr., as
member of the investment committee of GSCP (NJ), LP.(8)10.18
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Robert F. Cummings, Jr., as
member of the investment committee of GSCP (NJ), LP.(8)10.19
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Richard M. Hayden, as member of
the investment committee of GSCP (NJ), LP.(8)10.20
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Thomas V. Inglesby, as member
of the investment committee of GSCP (NJ), LP.(8)10.21
    
    Indemnification Agreement dated March 20, 2007 between GSC Investment LLC and Thomas J. Libassi, as member of
the investment committee of GSCP (NJ), LP.(8)10.22
    
    Assignment and Assumption Agreement dated March 20, 2007 among GSCP (NJ), L.P. and GSC Investment LLC.(8)10.23
    
    Investment Advisory and Management Agreement dated March 21, 2007 between GSC Investment LLC and GSCP (NJ)
L.P.(8)
 51




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ExhibitNumber
    
    Description10.24
    
    Custodian Agreement dated March 21, 2007 between GSC Investment LLC and U.S. Bank National Association.(8)10.25
    
    Administration Agreement dated March 21, 2007 between GSC Investment Corp. and GSCP (NJ) L.P.(8)10.26
    
    Trademark License Agreement dated March 21, 2007 between GSC Investment Corp. and GSCP (NJ) L.P.(8)10.27
    
    Notification of Fee Reimbursement dated March 21, 2007.(8)10.28
    
    Portfolio Acquisition Agreement dated March 23, 2007 between GSC Investment Corp. and GSC Partners CDO
Fund III, Limited.(8)10.29
    
    Credit Agreement dated as of April 11, 2007 among GSC Investment Funding LLC, GSC Investment Corp., GSC (NJ),
L.P., the financial institutions from time to time party thereto, the commercial paper lenders from time to
time party thereto and Deutsche Bank AG, New York Branch.(5)10.30
    
    Purchase and Sale Agreement between GSC Investment Corp. and GSC Investment Funding LLC dated as of April 11,
2007.(5)10.31
    
    Amendment No. 1 to Credit Agreement, dated as of May 1, 2007 among GSC Investment Funding LLC, Deutsche Bank
AG, New York Branch, GSC Investment Corp., and GSCP (NJ), L.P.(6)10.32
    
    Credit Agreement dated as of May 1, 2007 among GSC Investment Funding II LLC, GSC Investment Corp., GSC (NJ),
L.P., the financial institutions from time to time party thereto, the commercial paper lenders from time to
time party thereto and Deutsche Bank AG, New York Branch.(6)10.33
    
    Purchase Sale Agreement dated as of May 1, 2007 between GSC Investment Funding II LLC and GSC Investment
Corp.(6)10.34
    
    Purchase and Sale Agreement dated as of May 1, 2007 between GSC Investment Corp. and GSC Partners CDO
Fund Limited.(6)10.35
    
    Amendment to Investment Advisory and Management Agreement dated May 23, 2007 between GSC Investment Corp. and
GSCP (NJ), L.P.(7)10.36
    
    Indemnification Agreement dated October 9, 2007 between GSC Investment Corp. and David Goret, as member of
the disclosure committee of GSC Investment Corp.(11)10.37
    
    Indemnification Agreement dated October 9, 2007 between GSC Investment Corp. and David Rice, as member of the
disclosure committee of GSC Investment Corp.(11)10.38
    
    Agreement Terminating Fee Reimbursement dated as of April 15, 2008 between GSCP (NJ), L.P. and GSC Investment
Corp.(10)10.39
    
    Amendment No. 3 to Credit Agreement, dated as of August 8, 2008 among GSC Investment Funding LLC and Deutsche
Bank AG, New York Branch(12)10.40
    
    Indemnification Agreement dated October 15, 2008 between GSC Investment Corp. and Seth M, Katzenstein, as
director of GSC Investment Corp.(13)10.41
    
    Indemnification Agreement dated October 15, 2008 between GSC Investment Corp. and Seth M. Katzenstein as
Chief Executive Officer and President of GSC Investment Corp.(13)14.1
    
    Code of Ethics of the Company adopted under Rule 17j-1.(3)21.1
    
    List of Subsidiaries.(11)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 and 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.
 
 (1)
    
    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.(2)
    
    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.(3)
    
    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.(4)
    
    Incorporated by reference to GSC Investment Corps Registration Statement on Form 8-A, File
No. 001-333-76, filed on March 21, 2007.(5)
    
    Incorporated by reference to GSC Investment Corp.s Form 8-K, File No. 001-33376 dated April 11, 2007. 52




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##### Table of Contents



(6)
    
    Incorporated by reference to GSC Investment Corp.s Form 8-K, File No. 001-33376 dated May 1, 2007.(7)
    
    Incorporated by reference to GSC Investment Corp.s Form 10-K for the fiscal year ended February 28,
2007, file No. 001-33376.(8)
    
    Incorporated by reference to GSC Investment Corp.s Form 10-Q for the quarterly period ended May 31,
2007, File No. 001-33376.(9)
    
    Incorporated by reference to GSC Investment Corp.s Form 8-K, File No. 001-33376 dated February 19, 2008.(10)
    
    Incorporated by reference to GSC Investment Corp.s Form 8-K, File No. 001-33376 dated April 15, 2008.(11)
    
    Incorporated by reference to GSC Investment Corp.s Form
10-K for the fiscal year ended February 29, 2008, File No. 001-33376.(12)
    
    Incorporated by reference to GSC Investment Corp.s Form 8-K, File No. 001-33376 dated August 8, 2008.(13)
    
    Incorporated by reference to GSC Investment Corp.s Form 8-K, File No. 001-33376 dated October 15, 2008. 53




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##### Table of Contents



SIGNATURES
  GSC Investment Corp.Date: May 21, 2009
    
    By:
    
    /s/ Seth M. Katzenstein

Seth M. KatzensteinDirector, Chief Executive Officer and President,GSC Investment Corp.
   Signature
    
    Title
    
    Date/s/  Richard M. Hayden

RICHARD M. HAYDEN
    
    Chairman of the Board of Directors
    
    May 21, 2009/s/  Seth M. Katzenstein

SETH M. KATZENSTEIN
    
    Director, Chief Executive Officer and President
    
    May 21, 2009/s/  Richard T. Allorto, Jr.

RICHARD T. ALLORTO, JR.
    
    Chief Financial Officer
    
    May 21, 2009/s/ Robert F. Cummings Jr.

ROBERT F. CUMMINGS, JR.
    
    Member of the Board of Directors
    
    May 21, 2009/s/  Peter K. Barker

PETER K. BARKER
    
    Member of the Board of Directors
    
    May 21, 2009/s/  Steven M. Looney

STEVEN M. LOONEY
    
    Member of the Board of Directors
    
    May 21, 2009/s/  Charles S. Whitman III

CHARLES S. WHITMAN III
    
    Member of the Board of Directors
    
    May 21, 2009/s/  G. Cabell Williams

G. CABELL WILLIAMS
    
    Member of the Board of Directors
    
    May 21, 2009
 54




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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Reports of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of February 28, 2009 and February 29, 2008
    
    
    F-3Consolidated Statements of Operations for the years ended February 28, 2009 and February 29, 2008
and for the period from May 12, 2006 (date of inception) to February 28, 2007
    
    
    F-4Consolidated Schedule of Investments as of February 28, 2009 and February 29, 2008
    
    
    F-5Consolidated Statements of Changes in Net Assets for the years ended February 28, 2009 and February 29, 2008
and for the period from May 12, 2006 (date of inception) to February 28, 2007
    
    
    F-13Consolidated Statements of Cash Flows for the years ended February 28, 2009 and February 29, 2008
and for the period from May 12, 2006 (date of inception) to February 28, 2007
    
    
    F-14Notes to Consolidated Financial Statements
    
    
    F-15
 F-1




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F-2




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##### Table of Contents



GSC Investment Corp.
 
 Consolidated Balance Sheets
 As ofFebruary 28, 2009
    
    
    February 29, 2008ASSETSInvestments at fair valueNon-control/non-affiliate investments (amortized cost of $137,020,449 and $162,888,724, respectively)
    
    $
    96,462,919
    
    
    $
    143,745,269Control investments (cost of $29,905,194 and $30,000,000, respectively)
    
    
    22,439,029
    
    
    
    29,075,299Affiliate investments (cost of $0 and $0, respectively)
    
    
    10,527
    
    
    
    16,233Total investments at fair value (amortized cost of $166,925,643 and $192,888,724, respectively)
    
    
    118,912,475
    
    
    
    172,836,801Cash and cash equivalents
    
    
    6,356,225
    
    
    
    1,072,641Cash and cash equivalents, securitization accounts
    
    
    1,178,201
    
    
    
    14,580,973Outstanding interest rate cap at fair value (cost of $131,000 and $131,000, respectively)
    
    
    39,513
    
    
    
    76,734Interest receivable
    
    
    3,087,668
    
    
    
    2,355,122Due from manager
    
    
    
    
    
    
    940,903Deferred credit facility financing costs, net
    
    
    529,767
    
    
    
    723,231Management fee receivable
    
    
    237,370
    
    
    
    215,914Other assets
    
    
    321,260
    
    
    
    39,349Total assets
    
    $
    130,662,479
    
    
    $
    192,841,668LIABILITIESRevolving credit facility
    
    $
    58,994,673
    
    
    $
    78,450,000Payable for unsettled trades
    
    
    
    
    
    
    11,329,150Dividend payable
    
    
    
    
    
    
    3,233,640Management and incentive fees payable
    
    
    2,880,667
    
    
    
    943,061Accounts payable and accrued expenses
    
    
    700,537
    
    
    
    713,422Interest and credit facility fees payable
    
    
    72,825
    
    
    
    292,307Due to manager
    
    
    
    
    
    
    11,048Total liabilities
    
    $
    62,648,702
    
    
    $
    94,972,628STOCKHOLDERS EQUITYCommon stock, par value $.0001 per share, 100,000,000 common shares authorized, 8,291,384 and
8,291,384 common shares issued and outstanding, respectively
    
    
    829
    
    
    
    829Capital in excess of par value
    
    
    110,943,738
    
    
    
    116,218,966Accumulated undistributed net investment income
    
    
    6,122,492
    
    
    
    455,576Accumulated undistributed net realized gain/(loss) from investments and derivatives
    
    
    (6,948,628
    )
    
    
    1,299,858Net unrealized depreciation on investments and derivatives
    
    
    (48,104,654
    )
    
    
    (20,106,189
    )Total stockholders equity
    
    
    68,013,777
    
    
    
    97,869,040Total liabilities and stockholders equity
    
    $
    130,662,479
    
    
    $
    192,841,668NET ASSET VALUE PER SHARE
    
    $
    8.20
    
    
    $
    11.80
  F-3




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##### Table of Contents



GSC Investment Corp.
 
 Consolidated Statement of Operations
 For the period fromMay 12, 2006For the year ended
    
    
    For the year ended
    
    
    (date of inception)February 28, 2009
    
    
    February 29, 2008
    
    
    to February 28, 2007INVESTMENT INCOMEInterest from investmentsNon-Control/Non-Affiliate investments
    
    $
    16,572,973
    
    
    $
    20,115,301
    
    
    $
    Control investments
    
    
    4,393,818
    
    
    
    262,442
    
    
    
    Total interest income
    
    
    20,966,791
    
    
    
    20,377,743
    
    
    
    Interest from cash and cash equivalents
    
    
    175,567
    
    
    
    366,312
    
    
    
    30Management fee income
    
    
    2,049,717
    
    
    
    599,476
    
    
    
    Other income
    
    
    195,135
    
    
    
    42,548
    
    
    
    Total investment income
    
    
    23,387,210
    
    
    
    21,386,079
    
    
    
    30EXPENSESInterest and credit facility financing expenses
    
    
    2,605,367
    
    
    
    5,031,233
    
    
    
    Base management fees
    
    
    2,680,231
    
    
    
    2,938,659
    
    
    
    Professional fees
    
    
    1,166,111
    
    
    
    1,409,806
    
    
    
    35,000Administrator expenses
    
    
    960,701
    
    
    
    892,112
    
    
    
    Incentive management fees
    
    
    1,752,254
    
    
    
    711,363
    
    
    
    Insurance
    
    
    682,154
    
    
    
    586,784
    
    
    
    Directors fees
    
    
    295,017
    
    
    
    313,726
    
    
    
    General & administrative
    
    
    289,477
    
    
    
    261,653
    
    
    
    Cost of acquiring management contract
    
    
    
    
    
    
    144,000
    
    
    
    Organizational expense
    
    
    
    
    
    
    49,542
    
    
    
    95,193Expenses before manager expense waiver and reimbursement
    
    
    10,431,312
    
    
    
    12,338,878
    
    
    
    130,193Expense reimbursement
    
    
    (1,010,416
    )
    
    
    (1,789,028
    )
    
    
    Total expenses net of expense waiver and reimbursement
    
    
    9,420,896
    
    
    
    10,549,850
    
    
    
    130,193NET INVESTMENT INCOME BEFORE INCOME TAXES
    
    
    13,966,314
    
    
    
    10,836,229
    
    
    
    (130,163
    )Income tax expense, including excise tax
    
    
    (140,322
    )
    
    
    (88,951
    )
    
    
    NET INVESTMENT INCOME
    
    
    13,825,992
    
    
    
    10,747,278
    
    
    
    (130,163
    )REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:Net realized gain/(loss) from investmentsNon-Control/Non-Affiliate investments
    
    
    (7,173,118
    )
    
    
    2,707,402
    
    
    
    Control investments
    
    
    
    
    
    
    428,673
    
    
    
    Affiliate investments
    
    
    
    
    
    
    39,147
    
    
    
    Net realized gain from derivatives
    
    
    30,454
    
    
    
    732,526
    
    
    
    Net unrealized depreciation on investments
    
    
    (27,961,244
    )
    
    
    (20,051,923
    )
    
    
    Net unrealized depreciation on derivatives
    
    
    (37,221
    )
    
    
    (54,266
    )
    
    
    Net loss on investments
    
    
    (35,141,129
    )
    
    
    (16,198,441
    )
    
    
    NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
    
    $
    (21,315,137
    )
    
    $
    (5,451,163
    )
    
    $
    (130,163
    )WEIGHTED AVERAGE  BASIC AND DILUTED EARNINGS PER COMMON SHARE
    
    $
    (2.57
    )
    
    $
    (0.70
    )
    
    
    n/aWEIGHTED AVERAGE COMMON STOCK OUTSTANDING  BASIC AND DILUTED
    
    
    8,291,384
    
    
    
    7,761,965
    
    
    
    67
  F-4




---



##### Table of Contents



GSC Investment Corp.
Consolidated Schedule of InvestmentsFebruary 28, 2009
 Investment Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofStockholdersCompany (a, c)
    
    Industry
    
    Rate/Maturity
    
    Principal
    
    
    Cost
    
    
    Fair Value
    
    

EquityNon-control/Non-affiliated investments  141.8% (b)GFSI Inc (d)
    
    Apparel
    
    Senior Secured Notes10.50%, 6/1/2011
    
    $
    7,082,000
    
    
    $
    7,082,000
    
    
    $
    6,616,004
    
    
    
    9.7
    %Legacy Cabinets, Inc. (d)
    
    Building Products
    
    First Lien Term Loan
5.75%, 8/18/2012
    
    
    1,437,555
    
    
    
    1,420,872
    
    
    
    975,956
    
    
    
    1.4
    %Legacy Cabinets, Inc. (d)
    
    Building Products
    
    Second Lien Term Loan9.75%, 8/18/2013
    
    
    1,862,420
    
    
    
    1,828,197
    
    
    
    450,519
    
    
    
    0.7
    %Total Building Products
    
    
    3,299,975
    
    
    
    3,249,069
    
    
    
    1,426,475
    
    
    
    2.1
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
5.75%, 12/20/2013
    
    
    32,381
    
    
    
    27,281
    
    
    
    6,152
    
    
    
    0.0
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan 
5.47%, 12/20/2013
    
    
    77,141
    
    
    
    64,991
    
    
    
    14,657
    
    
    
    0.0
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan 
5.16%, 12/20/2014
    
    
    92,962
    
    
    
    78,320
    
    
    
    17,663
    
    
    
    0.0
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
5.16%, 12/20/2014
    
    
    92,962
    
    
    
    78,320
    
    
    
    17,663
    
    
    
    0.0
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
5.16%, 12/20/2014
    
    
    92,962
    
    
    
    78,320
    
    
    
    17,663
    
    
    
    0.0
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
5.75%, 12/20/2013
    
    
    121,428
    
    
    
    102,303
    
    
    
    23,071
    
    
    
    0.0
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
5.75%, 12/20/2013
    
    
    231,354
    
    
    
    194,916
    
    
    
    43,957
    
    
    
    0.1
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
7.00%, 12/20/2014
    
    
    403,388
    
    
    
    339,854
    
    
    
    76,644
    
    
    
    0.1
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
7.00%, 12/20/2014
    
    
    403,388
    
    
    
    339,854
    
    
    
    76,644
    
    
    
    0.1
    %Lyondell Chemical Company (d)
    
    Chemicals
    
    First Lien Term Loan
7.00%, 12/20/2014
    
    
    403,388
    
    
    
    339,854
    
    
    
    76,644
    
    
    
    0.1
    %Total Chemicals
    
    
    1,951,354
    
    
    
    1,644,013
    
    
    
    370,758
    
    
    
    0.4
    %Hopkins Manufacturing Corporation (d)
    
    Consumer Products
    
    Second Lien Term Loan
7.70%, 1/26/2012
    
    
    3,250,000
    
    
    
    3,246,870
    
    
    
    2,627,950
    
    
    
    3.9
    %Targus Group International, Inc. (d)
    
    Consumer Products
    
    First Lien Term Loan
4.67%, 11/22/2012
    
    
    3,122,943
    
    
    
    2,895,723
    
    
    
    2,089,561
    
    
    
    3.1
    %Targus Group International, Inc. (d)
    
    Consumer Products
    
    Second Lien Term Loan
9.75%, 5/22/2013
    
    
    5,000,000
    
    
    
    4,777,205
    
    
    
    3,126,000
    
    
    
    4.6
    %Total Consumer Products
    
    
    11,372,943
    
    
    
    10,919,798
    
    
    
    7,843,511
    
    
    
    11.6
    %CFF Acquisition LLC (d)
    
    Consumer Services
    
    First Lien Term Loan
8.57%, 7/31/2013
    
    
    308,912
    
    
    
    308,912
    
    
    
    243,793
    
    
    
    0.4
    %M/C Communications, LLC (d)
    
    Education
    
    First Lien Term Loan
13.12%, 12/31/2010
    
    
    1,697,164
    
    
    
    1,590,350
    
    
    
    674,283
    
    
    
    1.0
    %Advanced Lighting Technologies, Inc. (d)
    
    Electronics
    
    Second Lien Term Loan
8.53%, 6/1/2014
    
    
    2,000,000
    
    
    
    1,771,457
    
    
    
    1,503,200
    
    
    
    2.2
    %




---



##### Table of Contents



GSC Investment Corp.
Consolidated Schedule of InvestmentsFebruary 28, 2009
 Investment Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofStockholdersCompany (a, c)
    
    Industry
    
    Rate/Maturity
    
    Principal
    
    
    Cost
    
    
    Fair Value
    
    
    EquityGroup Dekko (d)
    
    Electronics
    
    Second Lien Term Loan
6.45%, 1/20/2012
    
    $
    6,670,000
    
    
    $
    6,670,000
    
    
    $
    5,321,326
    
    
    
    7.8
    %IPC Systems, Inc. (d)
    
    Electronics
    
    First Lien Term Loan
3.71%, 3/31/2014
    
    
    46,332
    
    
    
    42,367
    
    
    
    24,621
    
    
    
    0.0
    %Total Electronics
    
    
    8,716,332
    
    
    
    8,483,824
    
    
    
    6,849,147
    
    
    
    10.0
    %USS Mergerco, Inc. (d)
    
    Environmental
    
    Second Lien Term Loan
4.73%, 6/29/2013
    
    
    5,960,000
    
    
    
    5,846,833
    
    
    
    3,592,092
    
    
    
    5.3
    %Bankruptcy Management Solutions, Inc.
(d)
    
    Financial Services
    
    Second Lien Term Loan
6.70%, 7/31/2013
    
    
    4,887,500
    
    
    
    4,858,282
    
    
    
    3,053,221
    
    
    
    4.5
    %Big Train, Inc. (d)
    
    Food and Beverage
    
    First Lien Term Loan
4.98%, 3/31/2012
    
    
    2,478,660
    
    
    
    1,671,647
    
    
    
    1,706,557
    
    
    
    2.5
    %IDI Acquisition Corp. (d)
    
    Healthcare Services
    
    Senior Secured Notes 
10.75%, 12/15/2011
    
    
    3,800,000
    
    
    
    3,623,605
    
    
    
    2,428,580
    
    
    
    3.6
    %PRACS Institute, LTD (d)
    
    Healthcare Services
    
    Second Lien Term Loan
11.13%, 4/17/2013
    
    
    4,093,750
    
    
    
    4,047,419
    
    
    
    3,581,213
    
    
    
    5.3
    %Total Healthcare Services
    
    
    7,893,750
    
    
    
    7,671,024
    
    
    
    6,009,793
    
    
    
    8.9
    %McMillin Companies LLC (d)
    
    Homebuilding
    
    Senior Secured Notes
9.53%, 4/30/2012
    
    
    7,700,000
    
    
    
    7,294,643
    
    
    
    3,489,640
    
    
    
    5.1
    %




---



##### Table of Contents



Investment Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofStockholdersCompany (a, c)
    
    Industry
    
    Rate/Maturity
    
    Principal
    
    
    Cost
    
    
    Fair Value
    
    
    EquityAsurion Corporation (d)
    
    Insurance
    
    First Lien Term Loan
3.76%, 7/3/2014
    
    $
    2,000,000
    
    
    $
    1,704,665
    
    
    $
    1,493,400
    
    
    
    2.2
    %Worldwide Express Operations, LLC (d)
    
    Logistics
    
    First Lien Term Loan
6.95%, 6/30/2013
    
    
    2,820,779
    
    
    
    2,815,612
    
    
    
    2,133,637
    
    
    
    3.1
    %Jason Incorporated (d)
    
    Manufacturing
    
    Unsecured Notes
13.00%, 11/1/2010
    
    
    12,000,000
    
    
    
    12,000,000
    
    
    
    8,652,000
    
    
    
    12.7
    %Jason Incorporated (d)
    
    Manufacturing
    
    Unsecured Notes
13.00%, 11/1/2010
    
    
    1,700,000
    
    
    
    1,700,000
    
    
    
    1,225,700
    
    
    
    1.8
    %Specialized Technology Resources, Inc.
(d)
    
    Manufacturing
    
    Second Lien Term Loan
7.48%, 12/15/2014
    
    
    5,000,000
    
    
    
    4,769,304
    
    
    
    4,602,000
    
    
    
    6.8
    %Total Manufacturing
    
    
    18,700,000
    
    
    
    18,469,304
    
    
    
    14,479,700
    
    
    
    21.3
    %Blaze Recycling & Metals, LLC (d)
    
    Metals
    
    Senior Secured Notes
10.88%, 7/15/2012
    
    
    2,500,000
    
    
    
    2,494,342
    
    
    
    1,850,500
    
    
    
    2.7
    %Elyria Foundry Company, LLC (d)
    
    Metals
    
    Senior Secured Notes
13.00%, 3/1/2013
    
    
    5,000,000
    
    
    
    4,853,894
    
    
    
    3,753,000
    
    
    
    5.5
    %Elyria Foundry Company, LLC
    
    Metals
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    89,610
    
    
    
    0.1
    %Total Metals
    
    
    7,500,000
    
    
    
    7,348,236
    
    
    
    5,693,110
    
    
    
    8.3
    %Abitibi-Consolidated Company of Canada
(d, e)
    
    Natural Resources
    
    First Lien Term Loan
11.50%, 3/30/2009
    
    
    2,948,640
    
    
    
    2,940,073
    
    
    
    2,081,740
    
    
    
    3.1
    %Grant U.S. Holdings LLP (d, e)
    
    Natural Resources
    
    Second Lien Term Loan
9.81%, 9/20/2013
    
    
    6,139,928
    
    
    
    6,139,764
    
    
    
    2,388,432
    
    
    
    3.5
    %Total Natural Resources
    
    
    9,088,568
    
    
    
    9,079,837
    
    
    
    4,470,172
    
    
    
    6.6
    %Edgen Murray II, L.P. (d)
    
    Oil and Gas
    
    Second Lien Term Loan
7.24%, 5/11/2015
    
    
    3,000,000
    
    
    
    2,815,938
    
    
    
    2,072,700
    
    
    
    3.0
    %Energy Alloys, LLC (d)
    
    Oil and Gas
    
    Second Lien Term Loan
11.75%, 10/5/2012
    
    
    6,200,000
    
    
    
    6,200,000
    
    
    
    5,286,740
    
    
    
    7.8
    %Total Oil and Gas
    
    
    9,200,000
    
    
    
    9,015,938
    
    
    
    7,359,440
    
    
    
    10.8
    %Stronghaven, Inc. (d)
    
    Packaging
    
    Second Lien Term Loan
13.00%, 10/31/2010
    
    
    2,500,000
    
    
    
    2,500,000
    
    
    
    2,375,500
    
    
    
    3.5
    %Terphane Holdings Corp. (d, e)
    
    Packaging
    
    Senior Secured Notes
12.50%, 6/15/2009
    
    
    4,850,000
    
    
    
    4,846,976
    
    
    
    3,575,420
    
    
    
    5.3
    %Terphane Holdings Corp. (d, e)
    
    Packaging
    
    Senior Secured Notes
12.50%, 6/15/2009
    
    
    5,087,250
    
    
    
    5,084,820
    
    
    
    3,750,321
    
    
    
    5.5
    %Terphane Holdings Corp. (d, e)
    
    Packaging
    
    Senior Secured Notes
12.02%, 6/15/2009
    
    
    500,000
    
    
    
    499,670
    
    
    
    368,600
    
    
    
    0.5
    %Total Packaging
    
    
    12,937,250
    
    
    
    12,931,466
    
    
    
    10,069,841
    
    
    
    14.8
    %Custom Direct, Inc. (d)
    
    Printing
    
    First Lien Term Loan
4.21%, 12/31/2013
    
    
    2,049,694
    
    
    
    1,618,148
    
    
    
    1,638,526
    
    
    
    2.4
    %Advanstar Communications Inc. (d)
    
    Publishing
    
    First Lien Term Loan
3.71%, 5/31/2014
    
    
    1,970,000
    
    
    
    1,553,133
    
    
    
    807,700
    
    
    
    1.2
    %Affinity Group, Inc. (d)
    
    Publishing
    
    First Lien Term Loan
3.01%, 6/24/2009
    
    
    476,261
    
    
    
    468,285
    
    
    
    418,872
    
    
    
    0.6
    %Affinity Group, Inc. (d)
    
    Publishing
    
    First Lien Term Loan
2.98%, 6/24/2009
    
    
    511,811
    
    
    
    503,239
    
    
    
    450,137
    
    
    
    0.7
    %Brown Publishing Company (d)
    
    Publishing
    
    Second Lien Term Loan
8.76%, 9/19/2014
    
    
    1,203,226
    
    
    
    1,198,390
    
    
    
    288,774
    
    
    
    0.4
    %Network Communications, Inc. (d)
    
    Publishing
    
    Unsecured Notes
10.75%, 12/1/2013
    
    
    5,000,000
    
    
    
    5,082,100
    
    
    
    2,503,000
    
    
    
    3.7
    %Penton Media, Inc. (d)
    
    Publishing
    
    First Lien Term Loan
3.35%, 2/1/2013
    
    
    4,897,651
    
    
    
    3,723,761
    
    
    
    2,008,037
    
    
    
    3.0
    %Total Publishing
    
    
    14,058,949
    
    
    
    12,528,908
    
    
    
    6,476,520
    
    
    
    9.6
    %GXS Worldwide, Inc. (d)
    
    Software
    
    Second Lien Term Loan
8.63%, 9/30/2013
    
    
    1,000,000
    
    
    
    887,940
    
    
    
    773,299
    
    
    
    1.2
    %Sub Total Non-control/Non-affiliated investments
    
    
    
    
    
    
    137,020,449
    
    
    
    96,462,919
    
    
    
    141.8
    %
  F-7




---



##### Table of Contents



Investment Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofStockholdersCompany (a, c)
    
    Industry
    
    Rate/Maturity
    
    Principal
    
    
    Cost
    
    
    Fair Value
    
    
    EquityControl investments  33.0% (b)GSC Partners CDO GP III, LP (h)
    
    Financial Services
    
    100% General
Partnership interest
    
    $
    
    
    
    $
    
    
    
    $
    98,412
    
    
    
    0.1
    %GSC Investment Corp. CLO 2007 LTD.
(f, h)
    
    Structured Finance Securities
    
    Other/Structured
Finance Securities
12.15%, 1/21/2020
    
    
    30,000,000
    
    
    
    29,905,194
    
    
    
    22,340,617
    
    
    
    32.9
    %Sub Total Control investments
    
    
    
    
    
    
    
    
    
    
    29,905,194
    
    
    
    22,439,029
    
    
    
    33.0
    %Affiliate investments  0.0% (b)GSC Partners CDO GP III, LP (g)
    
    Financial Services
    
    6.24% Limited
Partnership interest
    
    
    
    
    
    
    
    
    
    
    10,527
    
    
    
    0.0
    %TOTAL INVESTMENT ASSETS  174.8% (b)
    
    
    
    
    
    
    
    
    
    $
    166,925,643
    
    
    $
    118,912,475
    
    
    
    174.8
    %
 % ofStockholdersOutstanding interest rate cap
    
    Interest rate
    
    
    Maturity
    
    
    Notional
    
    
    Cost
    
    
    Fair value
    
    
    EquityInterest rate cap
    
    
    8.0
    %
    
    
    2/9/2014
    
    
    $
    40,000,000
    
    
    $
    87,000
    
    
    $
    27,682
    
    
    
    0.0
    %Interest rate cap
    
    
    8.0
    %
    
    
    11/30/2013
    
    
    
    26,433,408
    
    
    
    44,000
    
    
    
    11,831
    
    
    
    0.0
    %Sub Total Outstanding interest rate cap
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    131,000
    
    
    $
    39,513
    
    
    
    0.1
    %
 
 (a)
    
    All of the Funds equity and debt investments are issued by eligible portfolio companies,
as defined in the Investment Company Act of 1940, except Abitibi-Consolidated Company of Canada,
Grant U.S. Holdings LLP, GSC Investment Corp. CLO 2007, Terphane Holdings Corp., and GSC Partners
CDO GP III, LP.(b)
    
    Percentages are based on net assets of $68,013,777 as of February 28, 2009.(c)
    
    Fair valued investment (see Note 2 to the consolidated financial statements).(d)
    
    All or a portion of the securities are pledged as collateral under a revolving
securitized credit facility (see Note 7 to the consolidated financial statements).(e)
    
    Non-U.S. company. The principal place of business for Terphane Holdings Corp is Brazil,
and for Abitibi-Consolidated Company of Canada and Grant U.S. Holdings LLP is Canada.(f)
    
    12.15% represents the modeled effective interest rate that is expected to be earned over
the life of the investment.(g)
    
    As defined in the Investment Company Act, we are an Affiliate of this portfolio company
because we own 5% or more of the portfolio companys outstanding voting securities. Transactions
during the period in which the issuer was an Affiliate are as follows: Interest
    
    Management
    
    Net Realized
    
    Net UnrealizedCompany
    
    Purchases
    
    Redemptions
    
    Sales (cost)
    
    Income
    
    fee income
    
    gains/(losses)
    
    gains/(losses)GSC Partners CDO GP
III, LP
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (5,706
    )
 (h)
    
    As defined in the Investment Company Act, we are an Affiliate of this portfolio company
because we own 5% or more of the portfolio companys outstanding voting securities. In addition, as
defined in the Investment Company Act, we Control this portfolio company because we own more than
25% of the portfolio companys outstanding voting securities. Transactions during the period in
which the issuer was both an Affiliate and a portfolio company that we Control are as follows: Interest
    
    Management
    
    Net Realized
    
    Net UnrealizedCompany
    
    Purchases
    
    Redemptions
    
    Sales (cost)
    
    Income
    
    fee income
    
    gains/(losses)
    
    gains/(losses)GSC Investment
Corp. CLO 2007 LTD.
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,393,818
    
    
    $
    2,049,717
    
    
    $
    
    
    
    $
    (6,479,722
    )GSC Partners CDO GP
III, LP
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (61,741
    )
  F-8




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##### Table of Contents



GSC Investment Corp.Consolidated Schedule of InvestmentsFebruary 29, 2008
 Investment Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofStockholdersCompany (a, c)
    
    Industry
    
    Rate/Maturity
    
    Principal
    
    
    Cost
    
    
    Fair Value
    
    
    EquityNon-control/Non-affiliated investments  146.9% (b)EuroFresh Inc. (d)
    
    Agriculture
    
    Unsecured Notes
11.50%, 1/15/2013
    
    $
    7,000,000
    
    
    $
    6,890,639
    
    
    $
    3,850,000
    
    
    
    3.9
    %GFSI Inc (d)
    
    Apparel
    
    Senior Secured Notes
10.50%, 6/1/2011
    
    
    8,425,000
    
    
    
    8,421,760
    
    
    
    8,003,750
    
    
    
    8.2
    %Key Safety Systems (d)
    
    Automotive
    
    First Lien Term Loan
6.68%, 3/8/2014
    
    
    2,500,000
    
    
    
    1,837,500
    
    
    
    1,875,000
    
    
    
    1.9
    %SILLC Holdings, LLC (d)
    
    Automotive
    
    Second Lien Term Loan
9.86%, 5/24/2011
    
    
    23,049,210
    
    
    
    22,865,049
    
    
    
    20,283,305
    
    
    
    20.7
    %Total Automotive
    
    
    25,549,210
    
    
    
    24,702,549
    
    
    
    22,158,305
    
    
    
    22.6
    %Legacy Cabinets, Inc. (d)
    
    Building Products
    
    First Lien Term Loan
8.56%, 8/18/2012
    
    
    1,871,500
    
    
    
    1,847,290
    
    
    
    1,403,625
    
    
    
    1.4
    %Legacy Cabinets, Inc. (d)
    
    Building Products
    
    Second Lien Term Loan
12.31%, 8/18/2013
    
    
    2,400,000
    
    
    
    2,354,989
    
    
    
    1,560,000
    
    
    
    1.6
    %Total Building Products
    
    
    4,271,500
    
    
    
    4,202,280
    
    
    
    2,963,625
    
    
    
    3.0
    %Hopkins Manufacturing Corporation (d)
    
    Consumer Products
    
    Second Lien Term Loan
11.82%, 1/26/2012
    
    
    3,250,000
    
    
    
    3,245,793
    
    
    
    3,152,500
    
    
    
    3.2
    %Targus Group International, Inc. (d)
    
    Consumer Products
    
    First Lien Term Loan
7.61%, 11/22/2012
    
    
    3,408,271
    
    
    
    3,095,060
    
    
    
    2,851,701
    
    
    
    2.9
    %Targus Group International, Inc. (d)
    
    Consumer Products
    
    Second Lien Term Loan
13.35%, 5/22/2013
    
    
    5,000,000
    
    
    
    4,743,768
    
    
    
    4,016,500
    
    
    
    4.1
    %Total Consumer Products
    
    
    11,658,271
    
    
    
    11,084,621
    
    
    
    10,020,701
    
    
    
    10.2
    %Affinity Group, Inc. (d)
    
    Consumer Services
    
    First Lien Term Loan
5.62%, 6/24/2009
    
    
    481,233
    
    
    
    449,953
    
    
    
    444,371
    
    
    
    0.4
    %Affinity Group, Inc. (d)
    
    Consumer Services
    
    First Lien Term Loan
5.74%, 6/24/2009
    
    
    518,767
    
    
    
    485,047
    
    
    
    479,859
    
    
    
    0.5
    %CFF Acquisition LLC (d)
    
    Consumer Services
    
    First Lien Term Loan
8.77%, 7/31/2013
    
    
    406,228
    
    
    
    406,228
    
    
    
    365,605
    
    
    
    0.4
    %Total Consumer Services
    
    
    1,406,228
    
    
    
    1,341,228
    
    
    
    1,289,835
    
    
    
    1.3
    %M/C Communications, LLC (d)
    
    Education
    
    First Lien Term Loan
5.54%, 12/31/2010
    
    
    1,736,766
    
    
    
    1,571,773
    
    
    
    1,545,721
    
    
    
    1.6
    %Group Dekko (d)
    
    Electronics
    
    Second Lien Term Loan
9.38%, 1/20/2012
    
    
    6,670,000
    
    
    
    6,670,000
    
    
    
    6,336,500
    
    
    
    6.5
    %IPC Systems, Inc. (d)
    
    Electronics
    
    First Lien Term Loan
7.09%, 5/31/2014
    
    
    49,750
    
    
    
    44,647
    
    
    
    40,497
    
    
    
    0.0
    %Total Electronics
    
    
    6,719,750
    
    
    
    6,714,647
    
    
    
    6,376,997
    
    
    
    6.5
    %USS Mergerco, Inc. (d)
    
    Environmental
    
    Second Lien Term Loan
9.08%, 6/29/2013
    
    
    5,960,000
    
    
    
    5,827,121
    
    
    
    5,066,000
    
    
    
    5.2
    %Bankruptcy Management Solutions,
Inc. (d)
    
    Financial Services
    
    Second Lien Term Loan
9.37%, 7/31/2013
    
    
    4,937,500
    
    
    
    4,902,101
    
    
    
    3,555,000
    
    
    
    3.6
    %Realogy Corp. (d)
    
    Financial Services
    
    First Lien Term Loan
6.11%, 10/10/2013
    
    
    21,106
    
    
    
    19,693
    
    
    
    17,746
    
    
    
    0.0
    %Realogy Corp. (d)
    
    Financial Services
    
    First Lien Term Loan
7.51%, 10/10/2013
    
    
    78,394
    
    
    
    73,147
    
    
    
    65,733
    
    
    
    0.1
    %Total Financial Services
    
    
    5,037,000
    
    
    
    4,994,941
    
    
    
    3,638,479
    
    
    
    3.7
    %CCM Merger Inc. (d)
    
    Gaming
    
    First Lien Term Loan
6.35%, 7/13/2012
    
    
    2,000,000
    
    
    
    1,670,000
    
    
    
    1,730,000
    
    
    
    1.8
    %IDI Acquisition Corp. (d)
    
    Healthcare Services
    
    Senior Secured Notes
10.75%, 12/15/2011
    
    
    3,800,000
    
    
    
    3,574,228
    
    
    
    3,040,000
    
    
    
    3.1
    %PRACS Institute, LTD (d)
    
    Healthcare Services
    
    Second Lien Term Loan
11.41%, 4/17/2013
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    3,000,000
    
    
    
    3.1
    %Total Healthcare Services
    
    
    6,800,000
    
    
    
    6,574,228
    
    
    
    6,040,000
    
    
    
    6.2
    %
  F-9




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##### Table of Contents



GSC Investment Corp.Consolidated Schedule of InvestmentsFebruary 29, 2008
 Investment Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofStockholdersCompany (a, c)
    
    Industry
    
    Rate/Maturity
    
    Principal
    
    
    Cost
    
    
    Fair Value
    
    
    EquityMcMillin Companies LLC (d)
    
    Homebuilding
    
    Senior Secured Notes
9.53%, 4/30/2012
    
    $
    7,700,000
    
    
    $
    7,194,636
    
    
    $
    5,912,060
    
    
    
    6.0
    %Asurion Corporation (d)
    
    Insurance
    
    First Lien Term Loan
6.10%, 7/3/2014
    
    
    2,000,000
    
    
    
    1,665,000
    
    
    
    1,699,600
    
    
    
    1.7
    %Worldwide Express Operations, LLC (d)
    
    Logistics
    
    First Lien Term Loan
7.89%, 6/30/2013
    
    
    2,973,362
    
    
    
    2,966,658
    
    
    
    2,687,919
    
    
    
    2.7
    %Jason Incorporated (d)
    
    Manufacturing
    
    Unsecured Notes
13.00%, 11/1/2008
    
    
    12,000,000
    
    
    
    12,000,000
    
    
    
    11,712,000
    
    
    
    12.0
    %Jason Incorporated (d)
    
    Manufacturing
    
    Unsecured Notes
13.00%, 11/1/2008
    
    
    3,400,000
    
    
    
    3,400,000
    
    
    
    3,318,400
    
    
    
    3.4
    %Total Manufacturing
    
    
    15,400,000
    
    
    
    15,400,000
    
    
    
    15,030,400
    
    
    
    15.4
    %Blaze Recycling & Metals, LLC (d)
    
    Metals
    
    Senior Secured Notes
10.88%, 7/15/2012
    
    
    2,500,000
    
    
    
    2,493,087
    
    
    
    2,218,750
    
    
    
    2.3
    %Elyria Foundry Company, LLC (c, d)
    
    Metals
    
    Senior Secured Notes
13.00%, 3/1/2013
    
    
    3,000,000
    
    
    
    2,893,873
    
    
    
    2,910,000
    
    
    
    3.0
    %Total Metals
    
    
    5,500,000
    
    
    
    5,386,960
    
    
    
    5,128,750
    
    
    
    5.3
    %Grant U.S. Holdings LLP (d, e)
    
    Natural Resources
    
    Second Lien Term Loan
12.75%, 9/20/2013
    
    
    5,365,592
    
    
    
    5,365,393
    
    
    
    4,167,456
    
    
    
    4.3
    %
  F-10




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##### Table of Contents



Investment Interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofStockholdersCompany (a, c)
    
    Industry
    
    Rate/Maturity
    
    Principal
    
    
    Cost
    
    
    Fair Value
    
    
    EquityEdgen Murray II, L.P. (d)
    
    Oil and Gas
    
    Second Lien Term Loan
9.32%, 5/11/2015
    
    $
    2,000,000
    
    
    $
    1,947,348
    
    
    $
    1,600,000
    
    
    
    1.6
    %Energy Alloys, LLC (d)
    
    Oil and Gas
    
    Second Lien Term Loan
12.15%, 10/5/2012
    
    
    6,200,000
    
    
    
    6,200,000
    
    
    
    6,138,000
    
    
    
    6.3
    %Total Oil and Gas
    
    
    8,200,000
    
    
    
    8,147,348
    
    
    
    7,738,000
    
    
    
    7.9
    %Atlantis Plastics Films, Inc. (d)
    
    Packaging
    
    First Lien Term Loan
8.71%, 9/22/2011
    
    
    6,516,244
    
    
    
    6,491,835
    
    
    
    4,298,114
    
    
    
    4.4
    %Stronghaven, Inc. (d)
    
    Packaging
    
    Second Lien Term Loan
11.00%, 10/31/2010
    
    
    2,500,000
    
    
    
    2,500,000
    
    
    
    2,500,000
    
    
    
    2.6
    %Terphane Holdings Corp. (d, e)
    
    Packaging
    
    Senior Secured Notes
12.50%, 6/15/2009
    
    
    4,850,000
    
    
    
    4,853,648
    
    
    
    4,447,450
    
    
    
    4.5
    %Terphane Holdings Corp. (d, e)
    
    Packaging
    
    Senior Secured Notes
12.50%, 6/15/2009
    
    
    5,087,250
    
    
    
    5,094,096
    
    
    
    4,665,008
    
    
    
    4.8
    %Terphane Holdings Corp. (d, e)
    
    Packaging
    
    Senior Secured Notes
15.11%, 6/15/2009
    
    
    500,000
    
    
    
    498,536
    
    
    
    459,500
    
    
    
    0.5
    %Total Packaging
    
    
    19,453,494
    
    
    
    19,438,114
    
    
    
    16,370,073
    
    
    
    16.8
    %Advanstar Communications Inc. (d)
    
    Publishing
    
    First Lien Term Loan
7.09%, 5/31/2014
    
    
    1,990,000
    
    
    
    1,516,878
    
    
    
    1,492,500
    
    
    
    1.5
    %Brown Publishing Company (d)
    
    Publishing
    
    Second Lien Term Loan
11.09%, 9/19/2014
    
    
    1,203,226
    
    
    
    1,197,520
    
    
    
    1,070,871
    
    
    
    1.1
    %Network Communications, Inc. (d)
    
    Publishing
    
    Unsecured Notes
10.75%, 12/1/2013
    
    
    5,000,000
    
    
    
    5,095,198
    
    
    
    4,400,000
    
    
    
    4.5
    %Penton Media, Inc. (d)
    
    Publishing
    
    First Lien Term Loan
5.37%, 2/1/2013
    
    
    2,962,500
    
    
    
    2,134,841
    
    
    
    2,325,563
    
    
    
    2.4
    %Total Publishing
    
    
    11,155,726
    
    
    
    9,944,437
    
    
    
    9,288,934
    
    
    
    9.5
    %QCE LLC (d)
    
    Restaurants
    
    First Lien Term Loan
7.03%, 5/5/2013
    
    
    992,443
    
    
    
    804,673
    
    
    
    859,456
    
    
    
    0.9
    %Claires Stores, Inc. (d)
    
    Retail
    
    First Lien Term Loan
6.47%, 5/29/2014
    
    
    2,786,000
    
    
    
    2,579,717
    
    
    
    2,179,209
    
    
    
    2.2
    %Sub Total Non-control/Non-affiliated investments
    
    
    
    
    
    
    162,888,724
    
    
    
    143,745,269
    
    
    
    146.9
    %Control investments  29.7% (b)GSC CDO III, LLC (g)
    
    Financial Services
    
    100% General
Partnership interest
    
    
    
    
    
    
    
    
    
    
    160,153
    
    
    
    0.2
    %GSC Investment Corp. CLO 2007 LTD.
(g)
    
    Structured Finance Securities
    
    Other/Structured Finance Securities
20.36%, 1/21/2020
    
    
    30,000,000
    
    
    
    30,000,000
    
    
    
    28,915,146
    
    
    
    29.5
    %Sub Total Control investments
    
    
    
    
    
    
    
    
    
    
    30,000,000
    
    
    
    29,075,299
    
    
    
    29.7
    %Affiliate investments  0.0% (b)GSC Partners CDO GP III, LP (f)
    
    Financial Services
    
    6.24% Limited
Partnership interest
    
    
    
    
    
    
    
    
    
    
    16,233
    
    
    
    0.0
    %TOTAL INVESTMENT ASSETS  176.6% (b)
    
    
    
    
    
    
    
    
    
    $
    192,888,724
    
    
    $
    172,836,801
    
    
    
    176.6
    %
 % ofOutstanding interest rate cap
    
    Interest rate
    
    
    Maturity
    
    
    Notional
    
    
    Cost
    
    
    Fair value
    
    
    Stockholders EquityInterest rate cap
    
    
    8.0
    %
    
    
    2/9/2014
    
    
    $
    40,000,000
    
    
    $
    87,000
    
    
    $
    50,703
    
    
    
    0.1
    %Interest rate cap
    
    
    8.0
    %
    
    
    11/30/2013
    
    
    
    46,637,408
    
    
    
    44,000
    
    
    
    26,031
    
    
    
    0.0
    %Sub Total Outstanding interest rate cap
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    131,000
    
    
    $
    76,734
    
    
    
    0.1
    %
  F-11




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##### Table of Contents



(a)
    
    All of the Funds equity and debt investments are issued by eligible portfolio companies,
as defined in the Investment Company Act of 1940, except Atlantis Plastics Films, Inc., Grant U.S.
Holdings LLP, GSC Investment Corp. CLO 2007, Terphane Holdings Corp., and GSC Partners CDO GP III,
LP.(b)
    
    Percentages are based on net assets of $97,869,040 as of February 29, 2008.(c)
    
    Fair valued investment (see Note 2 to the consolidated financial statements).(d)
    
    All or a portion of the investment is pledged as collateral under a revolving securitized
credit facility (see Note 7 to the consolidated financial statements).(e)
    
    Non-U.S. company. The principal place of business for Terphane Holdings Corp is Brazil,
and for Grant U.S. Holdings LLP is Canada.(f)
    
    As defined in the Investment Company Act, we are an Affiliate of this portfolio company
because we own 5% or more of the portfolio companys outstanding voting securities. Transactions
during the period in which the issuer was an Affiliate are as follows: Interest
    
    Management
    
    Net Realized
    
    Net UnrealizedCompany
    
    Purchases
    
    Redemptions
    
    Sales (cost)
    
    Income
    
    fee income
    
    gains/(losses)
    
    gains/(losses)GSC Partners CDO GP
III, LP
    
    $
    2,045,067
    
    
    $
    2,084,214
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    39,147
    
    
    $
    16,233
 (g)
    
    As defined in the Investment Company Act, we are an Affiliate of this portfolio company
because we own 5% or more of the portfolio companys outstanding voting securities. In addition, as
defined in the Investment Company Act, we Control this portfolio company because we own more than
25% of the portfolio companys outstanding voting securities. Transactions during the period in
which the issuer was both an Affiliate and a portfolio company that we Control are as follows: Interest
    
    Management
    
    Net Realized
    
    Net UnrealizedCompany
    
    Purchases
    
    Redemptions
    
    Sales (cost)
    
    Income
    
    fee income
    
    gains/(losses)
    
    gains/(losses)GSC Investment
Corp. CLO 2007 LTD.
    
    $
    30,000,000
    
    
    $
    
    
    
    $
    
    
    
    $
    262,442
    
    
    $
    215,914
    
    
    $
    
    
    
    $
    (1,084,854
    )GSC Partners CDO GP
III, LP
    
    $
    13,574,694
    
    
    $
    14,003,367
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    428,673
    
    
    $
    160,153
  F-12




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##### Table of Contents



GSC Investment Corp.

Consolidated Statements of Changes in Net Assets
 For the period fromMay 12, 2006 (date ofFor the year ended
    
    
    For the year ended
    
    
    inception)February 28, 2009
    
    
    February 29, 2008
    
    
    to February 28, 2007OPERATIONS:Net investment income
    
    $
    13,825,992
    
    
    $
    10,747,278
    
    
    $
    (130,163
    )Net realized gain/(loss) from investments
    
    
    (7,173,118
    )
    
    
    3,175,222
    
    
    
    Net realized gain from derivatives
    
    
    30,454
    
    
    
    732,526
    
    
    
    Net unrealized depreciation on investments
    
    
    (27,961,244
    )
    
    
    (20,051,923
    )
    
    
    Net unrealized depreciation on derivatives
    
    
    (37,221
    )
    
    
    (54,266
    )
    
    
    Net decrease in net assets from operations
    
    
    (21,315,137
    )
    
    
    (5,451,163
    )
    
    
    (130,163
    )SHAREHOLDER DISTRIBUTIONS:Distributions declared
    
    
    (8,540,126
    )
    
    
    (12,851,645
    )
    
    
    Net decrease in net assets from shareholder distributions
    
    
    (8,540,126
    )
    
    
    (12,851,645
    )
    
    
    CAPITAL SHARE TRANSACTIONS:Issuance of common stock, net
    
    
    
    
    
    
    116,301,011
    
    
    
    1,000Net increase in net assets from capital share transactions
    
    
    
    
    
    
    116,301,011
    
    
    
    1,000Total increase/(decrease) in net assets
    
    
    (29,855,263
    )
    
    
    97,998,203
    
    
    
    (129,163
    )Net assets at beginning of year/period
    
    
    97,869,040
    
    
    
    (129,163
    )
    
    
    Net assets at end of year/period
    
    $
    68,013,777
    
    
    $
    97,869,040
    
    
    $
    (129,163
    )Net asset value per common share
    
    $
    8.20
    
    
    $
    11.80
    
    
    
    n/aCommon shares outstanding at end of period
    
    
    8,291,384
    
    
    
    8,291,384
    
    
    
    67
  F-13




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##### Table of Contents



GSC Investment Corp.  
 Consolidated Statements of Cash Flows
 For the period fromMay 12, 2006 (dateFor the year ended
    
    
    For the year ended
    
    
    of inception)February 28, 2009
    
    
    February 29, 2008
    
    
    to February 28, 2007Operating activitiesNET DECREASE IN NET ASSETS FROM OPERATIONS
    
    $
    (21,315,137
    )
    
    $
    (5,451,163
    )
    
    $
    (130,163
    )ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES:Paid-in-kind interest income
    
    
    (819,905
    )
    
    
    (365,592
    )
    
    
    Net accretion of discount on investments
    
    
    (1,323,644
    )
    
    
    (765,255
    )
    
    
    Amortization of deferred credit facility financing costs
    
    
    193,464
    
    
    
    502,468
    
    
    
    Net realized (gain) loss from investments
    
    
    7,173,118
    
    
    
    (3,175,222
    )
    
    
    Net realized
(gain) from derivatives
    
    
    
    
    
    
    (732,526
    )
    
    
    Net unrealized (appreciation) depreciation on investments
    
    
    27,961,244
    
    
    
    20,051,923
    
    
    
    Unrealized depreciation on
derivatives
    
    
    37,221
    
    
    
    54,266
    
    
    
    Proceeds from sale and redemption of investments
    
    
    49,193,508
    
    
    
    141,772,158
    
    
    
    Purchase of investments
    
    
    (28,259,995
    )
    
    
    (314,002,526
    )
    
    
    (Increase) decrease in operating assets and liabilities:Cash and cash equivalents, securitization accounts
    
    
    13,402,772
    
    
    
    (14,580,973
    )
    
    
    Interest receivable
    
    
    (732,546
    )
    
    
    (2,355,122
    )
    
    
    Due from manager
    
    
    940,903
    
    
    
    (940,903
    )
    
    
    Management fee receivable
    
    
    (21,456
    )
    
    
    (215,914
    )
    
    
    Other assets
    
    
    (281,911
    )
    
    
    (39,349
    )
    
    
    Deferred offering costs
    
    
    
    
    
    
    808,617
    
    
    
    (808,617
    )Payable for unsettled trades
    
    
    (11,329,150
    )
    
    
    11,329,150
    
    
    
    Management and incentive fees payable
    
    
    1,937,606
    
    
    
    943,061
    
    
    
    Accounts payable and accrued expenses
    
    
    (12,885
    )
    
    
    608,422
    
    
    
    105,000Interest and credit facility fees payable
    
    
    (219,482
    )
    
    
    292,307
    
    
    
    Due to manager
    
    
    (11,048
    )
    
    
    (62,762
    )
    
    
    73,810Accrued offering costs
    
    
    
    
    
    
    (760,000
    )
    
    
    760,000NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
    
    
    36,512,677
    
    
    
    (167,084,935
    )
    
    
    30Financing activitiesContribution from member
    
    
    
    
    
    
    
    
    
    
    1,000Issuance of shares of common stock
    
    
    
    
    
    
    108,750,000
    
    
    
    Offering costs and sales load
    
    
    
    
    
    
    (8,068,750
    )
    
    
    Borrowings on debt
    
    
    7,800,000
    
    
    
    167,958,119
    
    
    
    Paydowns on debt
    
    
    (27,255,327
    )
    
    
    (89,508,119
    )
    
    
    Credit facility financing cost
    
    
    
    
    
    
    (1,225,699
    )
    
    
    Cost of interest rate cap
    
    
    
    
    
    
    (131,000
    )
    
    
    Payments of cash dividends
    
    
    (11,773,766
    )
    
    
    (9,618,005
    )
    
    
    NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
    
    
    (31,229,093
    )
    
    
    168,156,546
    
    
    
    1,000CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    5,283,584
    
    
    
    1,071,611
    
    
    
    1,030CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    1,072,641
    
    
    
    1,030
    
    
    
    CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    6,356,225
    
    
    $
    1,072,641
    
    
    $
    1,030Supplemental Information:Interest paid during the period
    
    $
    2,631,385
    
    
    $
    4,236,458
    
    
    
    n/aSupplemental non-cash informationIssuance of common stock for acquisition of investments in GSC CDO III, LLC
and GSC Partners CDO GP III, L.P.
    
    $
    
    
    
    $
    15,619,761
    
    
    
    n/aPaid-in-kind interest income
    
    $
    819,905
    
    
    $
    365,592
    
    
    
    n/aNet accretion of discount on investments
    
    $
    1,323,644
    
    
    $
    765,255
    
    
    
    n/aAmortization of deferred credit facility financing costs
    
    $
    193,464
    
    
    $
    502,468
    
    
    
    n/a
  F-14




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##### Table of Contents



Note 1. Organization and Basis of Presentation
      Note 2. Summary of Significant Accounting Policies
 Use of Estimates in the Preparation of Financial Statements
  Cash and Cash Equivalents
  Cash and cash equivalents, Securitization Accounts
  Risk Management
  F-15




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##### Table of Contents



Investment Classification
  Investment Valuation
 Disclosure About Fair Value of Financial
Instruments,
   
    
    Each investment is initially valued by the responsible investment professionals and
preliminary valuation conclusions are documented and discussed with our senior management;
and
    
    An independent valuation firm engaged by our board of directors reviews at least one
quarter of these preliminary valuations each quarter so that the valuation of each
investment for which market quotes are not readily available is reviewed by the independent
valuation firm at least annually.
  
    
    The audit committee of our board of directors reviews each preliminary valuation and our
investment adviser and independent valuation firm (if applicable) will supplement the
preliminary valuation to reflect any comments provided by the audit committee; and
    
    Our board of directors discuss the valuations and determine the fair value of each
investment in good faith based on the input of our investment adviser, independent
valuation firm (if applicable) and audit committee.
   F-16




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##### Table of Contents



Income Recognition
    Paid-in-Kind Interest
  Organizational Expenses
  Deferred Credit Facility Financing Costs
  Indemnifications
  Income Taxes
   F-17




---



##### Table of Contents



Dividends
   New Accounting Pronouncements
  Disclosures
about Derivative Instruments and Hedging Activities
 Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active
 F-18




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##### Table of Contents



Note 3. Investments
   
    
    Level 1  Valuations based on quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access.
    
    Level 2  Valuations based on inputs other than quoted prices in active markets, which
are either directly or indirectly observable.
    
    Level 3  Valuations based on inputs that are unobservable and significant to the
overall fair value measurement. The inputs into the determination of fair value may require
significant management judgment or estimation. Even if observable-market data is available,
such information may be the result of consensus pricing information or broker quotes which
include a disclaimer that the broker would not be held to such a price in an actual
transaction. The non-binding nature of consensus pricing and/or quotes accompanied by
disclaimer would result in classification as Level III information, assuming no additional
corroborating evidence.
  F-19




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##### Table of Contents



Fair Value Measurements UsingLevel 1
    
    Level 2
    
    Level 3
    
    
    TotalNon-control/non-affiliate
investments
    
    $           
    
    $           
    
    $
    96,463
    
    
    $
    96,463Control investments
    
    
    
    
    
    
    22,439
    
    
    
    22,439Affiliate investments
    
    
    
    
    
    
    10
    
    
    
    10Total investments at fair value
    
    $           
    
    $           
    
    $
    118,912
    
    
    $
    118,912
  Level 3Balance as of February 29, 2008
    
    $
    172,837Net unrealized losses
    
    
    (27,961
    )Purchases and other adjustments to cost
    
    
    23,230Sales and redemptions
    
    
    (49,194
    )Net transfers in and/or out
    
    
    Balance as of February 28, 2009
    
    $
    118,912
     Investments at
    
    
    
    
    
    
    Fair ValueAmortized
    
    
    Investments
    
    
    Percentage ofCost
    
    
    at Fair Value
    
    
    Total PortfolioFirst lien term loans
    
    $
    24,901
    
    
    $
    17,117
    
    
    
    14.4
    %Second lien term loans
    
    
    57,558
    
    
    
    41,043
    
    
    
    34.5Senior secured notes
    
    
    35,780
    
    
    
    25,832
    
    
    
    21.7Unsecured notes
    
    
    18,782
    
    
    
    12,381
    
    
    
    10.4Structured Finance Securities
    
    
    29,905
    
    
    
    22,341
    
    
    
    18.8Equity/limited partnership interest
    
    
    
    
    
    
    198
    
    
    
    0.2Total
    
    $
    166,926
    
    
    $
    118,912
    
    
    
    100.0
    %
  Investments at
    
    
    
    
    
    
    Fair ValueAmortized
    
    
    Investments
    
    
    Percentage ofCost
    
    
    at Fair Value
    
    
    Total PortfolioFirst lien term loans
    
    $
    29,660
    
    
    $
    26,362
    
    
    
    15.3
    %Second lien term loans
    
    
    70,819
    
    
    
    62,446
    
    
    
    36.1Senior secured notes
    
    
    35,024
    
    
    
    31,657
    
    
    
    18.3Unsecured notes
    
    
    27,386
    
    
    
    23,281
    
    
    
    13.5Structured Finance Securities
    
    
    30,000
    
    
    
    28,915
    
    
    
    16.7Equity/limited partnership interest
    
    
    
    
    
    
    176
    
    
    
    0.1Total
    
    $
    192,889
    
    
    $
    172,837
    
    
    
    100.0
    %
 F-20




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##### Table of Contents



Note 4. Investment in GSC Investment Corp. CLO 2007, Ltd.
  Note 5. Income Taxes
    Accumulated net investment income/(loss)
    
    $
    381Accumulated net realized gains (losses) on investments
    
    
    (1,106
    )Additional paid-in-capital
    
    
    725
  Ordinary income (a)
    
    $
    8,540Capital gains
    
    
    Return of capital
    
    
    Total reported on tax Form 1099-DIV
    
    $
    8,540
 
    Accumulated capital gains/(losses)
    
    $
    (3,195
    )Other temporary differences
    
    
    (119
    )Undistributed ordinary income
    
    
    6,312Unrealized depreciation
    
    
    (146,540
    )Components of distributable earnings
    
    $
    (143,542
    )
   F-21




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##### Table of Contents



Note 6. Agreements
           F-22




---



##### Table of Contents



Note 7. Borrowings
        F-23




---



##### Table of Contents



Note 8. Interest Rate Cap Agreements
    InterestInstrument
    
    Type
    
    Notional
    
    Rate
    
    Maturity
    
    Fair ValueInterest Rate Cap
    
    Free Standing Derivative
    
    $
    40,000
    
    
    
    8.0
    %
    
    Feb 2014
    
    $
    28Interest Rate Cap
    
    Free Standing Derivative
    
    
    26,433
    
    
    
    8.0
    
    
    Nov 2013
    
    
    12Net fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    40
  InterestInstrument
    
    Type
    
    Notional
    
    Rate
    
    Maturity
    
    Fair ValueInterest Rate Cap
    
    Free Standing Derivative
    
    $
    40,000
    
    
    
    8.0
    %
    
    Feb 2014
    
    $
    51Interest Rate Cap
    
    Free Standing Derivative
    
    
    46,637
    
    
    
    8.0
    
    
    Nov 2013
    
    
    26Net fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    77
 Note 9. Directors Fees
  F-24




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##### Table of Contents



Note 10. Stockholders Equity
    Note 11. Earnings Per Share
  February 28, 2009
    
    February 29, 2008Basic and dilutedNet decrease in net assets from operations
    
    $
    (21,315
    )
    
    $
    (5,451
    )Weighted average common shares outstanding
    
    
    8,291,384
    
    
    
    7,761,965Earnings per common share-basic and diluted
    
    $
    (2.57
    )
    
    $
    (0.70
    )
 Note 12. Dividend
  Date Declared
    
    Record Date
    
    Payment Date
    
    Amount Per 
Share *
    
    Total AmountMay 22, 2008
    
    May 30, 2008
    
    June 13, 2008
    
    $
    0.39
    
    
    $
    3,234August 19, 2008
    
    August 29, 2008
    
    September 15, 2008
    
    
    0.39
    
    
    
    3,234December 8, 2008
    
    December 18, 2008
    
    December 29, 2008
    
    
    0.25
    
    
    
    2,072Total dividends declared
    
    
    
    
    
    
    
    
    
    $
    1.03
    
    
    $
    8,540Amount PerDate Declared
    
    Record Date
    
    Payment Date
    
    Share *
    
    Total AmountMay 21, 2007
    
    May 29, 2007
    
    June 6, 2007
    
    $
    0.24
    
    
    $
    1,990August 14, 2007
    
    August 24, 2007
    
    August 31, 2007
    
    
    0.36
    
    
    
    2,985November 15, 2007
    
    November 30, 2007
    
    December 3, 2007
    
    
    0.38
    
    
    
    3,151December 28, 2007
    
    January 18, 2008
    
    January 28, 2008
    
    
    0.18
    
    
    
    1,492February 20, 2008
    
    February 29, 2008
    
    March 10, 2008
    
    
    0.39
    
    
    
    3,234Total dividends declared
    
    
    
    
    
    
    
    
    
    $
    1.55
    
    
    $
    12,852
 
 *
    
    Amount per share is calculated based on the number of shares outstanding at the date of
declaration. F-25




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##### Table of Contents



Note 13. Financial Highlights
  February 28, 2009
    
    February 29, 2008Per share data:Public offering cost at IPO, March 23, 2007
    
    $
    
    
    
    $
    15.00Sales load
    
    
    
    
    
    
    (0.85
    )Offering cost
    
    
    
    
    
    
    (0.12
    )Net asset value at beginning of period/IPO
    
    
    11.80
    
    
    
    14.03Net investment income (1)
    
    
    1.67
    
    
    
    1.30Net realized gains (losses) on investments and derivatives
    
    
    (0.86
    )
    
    
    0.47Net unrealized depreciation on investments and derivatives
    
    
    (3.38
    )
    
    
    (2.45)
    *Net decrease in stockholders equity
    
    
    (2.57
    )
    
    
    (0.68
    )Distributions declared from net investment income
    
    
    (1.03
    )
    
    
    (1.37
    )Distributions declared from net realized capital gains
    
    
    
    
    
    
    (0.18
    )Total distributions to stockholders
    
    
    (1.03
    )
    
    
    (1.55
    )Net asset value at end of period
    
    $
    8.20
    
    
    $
    11.80Net assets at end of period
    
    $
    68,013,777
    
    
    $
    97,869,040Shares outstanding at end of period
    
    
    8,291,384
    
    
    
    8,291,384Per share market value at end of period
    
    $
    1.99
    
    
    $
    11.04Total return based on market value (2)
    
    
    (72.64
    )%
    
    
    (16.07
    )%Total return based on net asset value (3)
    
    
    (21.78
    )%
    
    
    (11.00
    )%
 
 *
    
    Net unrealized depreciation on investments and derivatives per share amount includes the net
loss incurred prior to the IPO. Ratio/Supplemental data:Ratio of net investment income to average net assets (4)
    
    
    15.19
    %
    
    
    8.11
    %Ratio of operating expenses to average net assets (4)
    
    
    7.12
    %
    
    
    5.91
    %Ratio of incentive management fees to average net assets
    
    
    2.05
    %
    
    
    0.64
    %Ratio of credit facility related expenses to average net assets
    
    
    3.05
    %
    
    
    4.51
    %Ratio of total expenses to average net assets (4)
    
    
    12.23
    %
    
    
    11.05
    %
 
 (1)
    
    Net investment income excluding expense waiver and reimbursement equals $1.55 and $1.08 per
share for the years ended February 28, 2009 and February 29, 2008, respectively.(2)
    
    For the year ended February 28, 2009, the total return based on market value equals the
decrease in market value at February 28, 2009, of $9.05 per share over the price per share at
February 29, 2008, of $11.04, plus the declared dividend of $0.39 per share for stockholders
of record on May 30, 2008, the declared dividend of $0.39 per share for stockholders of record
on August 29, 2008, and the declared dividend of $0.25 per share for stockholders of record on
December 29, 2008, divided by the February 29, 2008 price per share. For the year ended
February 29, 2008, the total return based on market value equals the decrease in market value
at February 29, 2008 of $3.96 per share over the IPO offering price per share at March 23,
2007 of $15.00, plus the declared dividend of $0.24 per share for stockholders of record on
May 29, 2007, the declared dividend of $0.36 per share for stockholders of record on August
24, 2007, the declared dividend of $0.38 per share for stockholders of record on November 30,
2007, the declared dividend of $0.18 per share for stockholders of record on January 28, 2008,
and the declared dividend of $0.39 per share for stockholders of record on March 10, 2008,
divided by the IPO offering price per share. Total return based on market value is not
annualized.(3)
    
    For the year ended February 28, 2009, the total return based on net asset value equals the
change in net asset value during the period plus the declared dividend of $0.39 per share for
stockholders of record on May 30, 2008, the declared dividend of $0.39 per share for
stockholders of record on August 29, 2008, and the declared dividend of $0.25 per share for
stockholders of record on December 29, 2008, divided by the beginning net asset value during
the period. For the year ended February 29, 2008, the total return based on net asset value
equals the change in net asset value during the period plus the declared dividend of $0.24 per
share for stockholders of record on May 29, 2007, the declared dividend of $0.36 per share for
stockholders of record on August 24, 2007, the declared dividend of $0.38 per share for
stockholders of record on November 30, 2007, the declared dividend of $0.18 per share for
stockholders of record on January 28, 2008, and the declared dividend of $0.39 per share for
stockholders of record on March 10, 2008,divided by the beginning net asset value during the
period. Total return based on net asset value is not annualized.(4)
    
    For the year ended February 28, 2009, incorporating the expense waiver and reimbursement
arrangement, the ratio of net investment income, operating expenses, total expenses to average
net assets is 16.21%, 5.94%, and 11.04%, respectively. For the year ended F-26




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##### Table of Contents



February 29, 2008, incorporating the expense waiver and reimbursement arrangement, the ratio of net investment
income, operating expenses, total expenses to average net assets is 9.63%, 4.31%, and 9.45%. Note 14. Related Party Transaction
     Note 15. Selected Quarterly Data (Unaudited)
 2009Qtr 4
    
    Qtr 3
    
    Qtr 2
    
    Qtr 1($ in thousands, except per share numbers)Interest and related portfolio income
    
    $
    5,480
    
    
    $
    6,361
    
    
    $
    5,835
    
    
    $
    5,715Net investment income
    
    
    3,288
    
    
    
    3,887
    
    
    
    3,455
    
    
    
    3,195Net realized and unrealized loss
    
    
    (17,296
    )
    
    
    (11,438
    )
    
    
    (6,023
    )
    
    
    (384
    )Net increase (decrease) in net assets resulting
from operations
    
    
    (14,008
    )
    
    
    (7,551
    )
    
    
    (2,567
    )
    
    
    2,811Net investment income per common share at end
of each quarter
    
    $
    0.40
    
    
    $
    0.47
    
    
    $
    0.42
    
    
    $
    0.39Net realized and unrealized loss per common
share at end of each quarter
    
    $
    (2.09
    )
    
    $
    (1.38
    )
    
    $
    (0.73
    )
    
    $
    (0.05
    )Dividends declared per common share
    
    $
    
    
    
    $
    0.25
    
    
    $
    0.39
    
    
    $
    0.39Net asset value per common share
    
    $
    8.20
    
    
    $
    10.14
    
    
    $
    11.05
    
    
    $
    11.75
 F-27




---



##### Table of Contents



2008Qtr 4
    
    Qtr 3
    
    Qtr 2
    
    Qtr 1($ in thousands, except per share numbers)Interest and related portfolio income
    
    $
    5,520
    
    
    $
    5,882
    
    
    $
    5,882
    
    
    $
    4,102Net investment income
    
    
    2,562
    
    
    
    3,070
    
    
    
    3,157
    
    
    
    1,958Net realized and unrealized gain (loss)
    
    
    (11,972
    )
    
    
    (2,009
    )
    
    
    (3,939
    )
    
    
    1,722Net increase (decrease) in net assets resulting
from operations
    
    
    (9,410
    )
    
    
    1,061
    
    
    
    (782
    )
    
    
    3,680Net investment income per common share at end
of each quarter
    
    $
    0.32
    
    
    $
    0.37
    
    
    $
    0.38
    
    
    $
    0.23Net realized and unrealized gain (loss) per
common share at end of each quarter
    
    $
    (1.46
    )
    
    $
    (0.24
    )
    
    $
    (0.47
    )
    
    $
    0.21Dividends declared per common share
    
    $
    0.57
    
    
    $
    0.38
    
    
    $
    0.36
    
    
    $
    0.24Net asset value per common share
    
    $
    11.80
    
    
    $
    13.51
    
    
    $
    13.76
    
    
    $
    14.21
 Note 16. Subsequent Events
  F-28