Financial Data and Key Metrics Changes - The net asset value increased by $0.34 per share to $5.55 from $5.21 as of June 30, 2024, driven by higher net investment income and unrealized gains on investments [6][21] - Net investment income for the quarter was $2.3 million or approximately $0.16 per share, reflecting a $1 million increase over the prior quarter [7] - The fair value of the portfolio rose to $190.1 million from $184.6 million, with net assets increasing by $4.9 million to $79.7 million [21][25] - The weighted average of the debt portfolio decreased to 10.5% from 12.3% in the previous quarter, influenced by declining SOFR and tighter spreads [22] Business Line Data and Key Metrics Changes - The median EBITDA of the portfolio increased from approximately $55 million to $61 million, while the weighted average net leverage declined from 5.1 times to 4.7 times [11] - Non-accruals as a percentage of total fair market value improved to 4.8% from 5% in the previous quarter [11] Market Data and Key Metrics Changes - New deal flow in M&A and LBO activity remained subdued, but origination volumes increased due to refinancing deposits [8] - The investment pipeline is described as robust, with a focus on high-quality sponsors and companies in defensible industries [10] Company Strategy and Development Direction - The company aims to build a business around core middle market companies, focusing on those with $15 million to $75 million in EBITDA [35][38] - The strategy includes increasing the average EBITDA of the portfolio, decreasing leverage, and sourcing more directly from sponsors [38] - The company is also looking to improve operating efficiencies and reduce expenses over time [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating economic uncertainties and delivering value to shareholders [5] - The company is optimistic about future opportunities despite intense competition and a challenging market environment [10][27] Other Important Information - The Board of Directors declared a distribution of $0.12 per share for the quarter ended December 1, 2024, payable on January 8, 2025 [24] - As of September 30, the company had approximately $10.1 million in cash, with $52.5 million of capacity under its revolving credit facility [25] Q&A Session Summary Question: What was the driver of the PIK income for the quarter? - The primary driver was the reversal of non-accrual to accrual of Klein Hersh, which had been on non-accrual for the previous three quarters [28] Question: Were there any timing issues affecting the quarter's results? - Yes, some deals that were expected to close last quarter spilled over into this quarter, which is common in this business [29] Question: Can you provide details on realized loss and unrealized gain? - The realized loss was due to Crafty Apes, while unrealized gains were attributed to the markups of Klein Hersh and Bioplan [33] Question: What is the vision for sourcing deals in the market? - The focus is on core middle market companies, with a significant portion of transactions sourced directly from sponsors [35][36] Question: Are there plans to improve operating efficiencies? - The company is conducting a deep dive into managing expenses efficiently, with expectations that the expense ratio will decrease as the business grows [40]

Investment Objectives and Strategy - Investcorp Credit Management BDC, Inc. has a primary investment objective to maximize total return to stockholders through investments in debt and equity of privately held middle-market companies [148]. - The company has a strong track record of consistent performance and growth, positioning it well to manage current market challenges [156]. - Revenue is primarily generated from interest on debt, with additional income from royalties, dividends, and capital gains [172]. Financial Position and Assets - As of September 30, 2024, Investcorp manages assets totaling $21.8 billion, indicating a strong position in the credit investment market [149]. - As of September 30, 2024, the investment portfolio represented 93.7% of total assets, down from 96.0% as of June 30, 2024 [165]. - The company had a total cash balance of $1.7 million, $8.3 million in restricted cash, and $52.5 million of capacity under the Capital One Revolving Financing [193]. Debt and Financing - The Base Management Fee for the Adviser is set at 1.75% of gross assets, with an Incentive Fee of 20% on pre-incentive fee net investment income above an 8% hurdle rate [152]. - The company is permitted to issue multiple classes of indebtedness if asset coverage is at least 150% immediately after issuance [155]. - Borrowings under the Capital One Revolving Financing amounted to $47.5 million as of September 30, 2024, compared to $43.0 million as of June 30, 2024 [166]. - The company amended the Capital One Revolving Financing to extend the maturity date to January 17, 2029, and increased applicable interest spreads [166]. Investment Performance - Investment income for the three months ended September 30, 2024, increased to $6.8 million from $5.9 million for the same period in 2023, primarily due to an increase in PIK interest income [186]. - Net investment income rose to $2.3 million for the three months ended September 30, 2024, compared to $1.6 million for the same period in 2023, driven by increased PIK interest income and lower interest expenses [188]. - Net realized loss from investments was $4.1 million for the three months ended September 30, 2024, primarily due to losses from the restructuring of the investment in Klein Hersh, LLC [189]. Regulatory Compliance and Risk Management - The company has no Taxable Subsidiaries as of September 30, 2024, maintaining compliance with RIC requirements [154]. - The company is required to comply with regulatory requirements, including maintaining at least 70% of total assets in qualifying assets [170]. - The company is subject to financial market risks, including changes in interest rates, which could materially affect net investment income [204]. Valuation and Investment Process - Fair value of portfolio investments is determined based on principles set forth by the board of directors, with significant reliance on market quotations [159]. - The valuation process for investments involves a multi-step review by the board of directors and independent valuation firms [163]. - The investment rating system indicated that as of September 30, 2024, 12.1% of the portfolio was rated 1, 62.0% rated 2, and 19.4% rated 3, with 4.8% rated 5 [185]. Cash Flow and Distributions - For the three months ended September 30, 2024, the total cash balance increased by $5.0 million, with cash from operating activities contributing $0.5 million, primarily due to $14.3 million from sales and repayments of portfolio companies [192]. - The company intends to distribute between 90% and 100% of its annual taxable income to stockholders, but may face limitations due to covenants in financing arrangements [199]. - The board of directors declared a distribution of $0.12 per share for the quarter ended December 31, 2024, payable on January 8, 2025 [203]. Interest Rate Exposure - Approximately 96.9% of debt investments bore interest based on floating rates as of September 30, 2024, exposing net interest income to interest rate fluctuations [205]. - A 1.00% increase in interest rates would increase the company's net interest income by approximately 7.42%, while a 2.00% increase would raise it by approximately 18.38% [207]. - The company had no hedging transactions in place as of September 30, 2024, as management deemed the interest rate risk acceptable [209].

Portfolio Overview - As of June 30, 2024, the company's portfolio had a fair value of $184.6 million, consisting of 85.02% first lien investments and 14.98% equity and other positions[12]. - The total fair value of the portfolio as of June 30, 2024, is $184,569,530, with 60 investments, compared to $220,111,329 with 65 investments as of June 30, 2023[48]. - The company's portfolio as of June 30, 2024, consisted of 85.02% first lien investments and 14.98% equity, warrant, or other positions[91]. Investment Strategy - The company focuses on middle-market companies due to reduced availability of capital and robust demand for debt capital, with private equity firms holding approximately $965.0 billion of uncalled capital as of March 31, 2024[25]. - The company primarily invests in middle-market companies with annual revenues of at least $50 million and EBITDA of at least $15 million[28]. - Investments typically range in size from $5 million to $25 million, with a focus on standalone first and second lien loans, unitranche loans, and selectively in unsecured debt[28]. - The investment strategy includes a focus on companies with significant asset or franchise values and strong free cash flow[28]. - The company aims to capitalize on the limited competition in the middle-market lending space, facilitating higher quality deal flow[24]. - The company believes that current market conditions allow for attractively priced debt investments with potential return-enhancing mechanisms[27]. Risk Management and Underwriting - The company emphasizes disciplined underwriting policies and rigorous portfolio management to achieve favorable risk-adjusted returns[26]. - The underwriting process includes evaluating historical and projected financial performance, management team experience, and industry dynamics[35][37]. - The investment rating system categorizes investments from 1 (performing above expectations) to 5 (substantially below expectations), with 18.4% of the portfolio rated 3 or below as of June 30, 2024[45][46]. - The company utilizes hedging techniques, such as interest rate swaps, to mitigate potential interest rate risks on indebtedness[58]. - A 1.00% increase or decrease in interest rates would affect the company's net interest income by approximately 5.93%[410]. - A 2.00% increase or decrease in interest rates would affect the company's net interest income by approximately 14.94%[410]. Management and Advisory Fees - The Base Management Fee is set at an annual rate of 1.75% of gross assets, calculated based on the average value at the end of the two most recently completed calendar quarters[66]. - The Income-Based Fee is 20.0% of the Pre-Incentive Fee Net Investment Income exceeding a 2.0% hurdle rate, with a catch-up provision for amounts between 2.0% and 2.5%[68]. - The management fee is set at an annualized rate of 1.75%[82]. - The advisory fee structure is considered reasonable and beneficial to stockholders, particularly due to the exclusion of cash and cash equivalents from the Base Management Fee calculation[90]. - The board of directors concluded that the proposed advisory fees are reasonable, considering indirect benefits to the Adviser[94]. Compliance and Regulatory Requirements - The company is a BDC under the 1940 Act, which imposes restrictions on transactions with affiliates and requires a majority of independent directors[103]. - The company must provide significant managerial assistance to portfolio companies, except in cases of control or group purchases[107]. - 70% of the company's assets are required to be in qualifying assets or temporary investments, which include cash and U.S. government securities[108]. - The company is required to distribute at least 90% of its investment company taxable income to qualify as a Regulated Investment Company (RIC)[124]. - To avoid a 4% excise tax, the company must distribute 98% of its net ordinary income and 98.2% of its capital gain net income annually[125]. - The company must satisfy the 90% Income Test and Diversification Tests to maintain its RIC status[130]. - If the company fails to maintain its RIC qualification, it could be subject to corporate-level U.S. federal income taxes on all taxable income[131]. Performance and Returns - The weighted average total yield of debt and income-producing securities at amortized cost was 12.47%, while the total portfolio yield was 10.60%[12]. - The company expects to receive interest income over the investment period, providing significant returns on invested capital prior to final exit[57]. - The company aims to exit investments through company sales, recapitalizations, or loan repayments, with a focus on maintaining significant underlying equity value[31]. - Cumulative incentive compensation accrued for the preceding 11 calendar quarters was $9,000,000, with a cumulative net increase in net assets of $8,000,000[80]. Competition and Market Position - The company faces competition from larger public and private funds, other BDCs, and commercial banks, which may have access to funding sources not available to it[60]. - The investment adviser, CM Investment Partners, has a team with over 100 combined years of experience in structuring customized debt solutions for middle-market companies[18]. - The investment team has extensive networks for sourcing investment opportunities, enhancing the company's competitive advantage in identifying investments[26]. Governance and Operations - The company does not have direct employees; day-to-day operations are managed by the Adviser, with key officers being employees of the Adviser[62]. - The Advisory Agreement allows for a termination notice of 60 days without penalty from either party[85]. - The Board of Directors approved the continuation of the Advisory Agreement on July 23, 2024, considering various factors including advisory fees and operating expenses[87]. - The Administration Agreement allows the Adviser to provide various administrative services, including maintaining financial records and preparing reports for stockholders[95]. - The company has adopted a code of ethics to govern personal investments and restrict certain transactions by its personnel[112].

Group 1 - The article emphasizes the importance of a proven ranking system that focuses on earnings estimates and revisions to identify winning stocks [1] - Value investing is highlighted as a popular strategy for finding undervalued stocks that have potential for profit [2] - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly in the Value category, where stocks with "A" grades and high Zacks Ranks are considered strong value stocks [3] Group 2 - Investcorp Credit Management BDC (ICMB) is identified as a stock to watch, currently holding a Zacks Rank of 2 (Buy) and an A for Value [4] - ICMB has a P/E ratio of 7.30, which is lower than the industry average of 8.56, indicating potential undervaluation [4] - The P/B ratio for ICMB is 0.59, compared to the industry average of 0.93, further suggesting that the stock may be undervalued [5] - ICMB's P/S ratio is 1.84, significantly lower than the industry's average P/S of 3.7, reinforcing the notion of undervaluation [6] - Overall, the key metrics indicate that ICMB is likely undervalued and presents an impressive value stock opportunity [7]

Financial Data and Key Metrics Changes - For the quarter ended March 31, 2024, net investment income was $2.1 million or $0.14 per share, an increase of approximately 32% from the previous quarter's net investment income of $1.6 million or $0.11 per share [23][28] - Net asset value per share increased approximately 0.2% to $5.49 per share from $5.48 per share at the end of the prior quarter, driven by an increase in capital gains [23][28] - The fair value of the portfolio was $192.2 million compared to $207.4 million on December 31, 2023 [28] Business Line Data and Key Metrics Changes - The weighted average yield of the debt portfolio increased to 12.36% compared to 11.46% for the quarter ended December 31, 2023 [28] - Fundings for new investments totaled approximately $8.9 million at cost with a weighted average yield of approximately 12.49% [25] - Six portfolio company realizations during the quarter totaled $21.2 million in proceeds with an IRR of approximately 17.09% [25][26] Market Data and Key Metrics Changes - Sponsored middle market direct lending new money volume in the quarter ending March 31, 2024, was down almost 10% from the quarter ended December 31, 2023 [25] - The weighted average EBITDA of the portfolio increased from $42.6 million as of March 31, 2023, to $63.5 million this quarter [25] Company Strategy and Development Direction - The company is focused on capital preservation and maintaining a stable dividend while rotating and diversifying the portfolio into more stable credits [29] - The strategy includes investing in larger credits backed by known sponsors and managing watch list names diligently [25][29] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline and capacity to invest capital in high-quality opportunities despite a competitive market with tightening spreads [24][29] - The company is actively working on nonaccrual situations and believes the overall health of the portfolio remains strong [19][20] Other Important Information - The company covered its March quarterly dividend with net investment income and expects to earn its dividend through the next quarter end [24] - Gross leverage was 1.52 times and net leverage was 1.36 times as of March 31, 2024, compared to 1.70 times gross and 1.51 times net for the previous quarter [28] Q&A Session Summary Question: What was the driver for the change in the yields on the portfolio? - Management indicated that the change was largely due to market conditions, with spreads tightening and a lack of deal flow in the marketplace [14] Question: Any update on Klein Hersh, one of the larger nonaccruals? - Management stated that discussions are ongoing and they believe they are in a good place, with more information to be shared once restructuring is finalized [15] Question: Will earnings cover the base dividend or the entire base and supplemental? - Management confirmed that earnings are expected to cover the base dividend, but not necessarily the supplemental at this point [16] Question: Thoughts on refinancing the 2026 notes with a higher coupon? - Management is developing a strategy around the refinancing and has been reducing net leverage over time [17] Question: Resolution time frame for other nonaccruals and overall health of the credit portfolio? - Management expressed satisfaction with the overall health of the portfolio and indicated that there are no imminent issues, although a couple of situations are developing [18][19]

Core Viewpoint - Investcorp reported quarterly earnings of $0.14 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, but down from $0.18 per share a year ago, indicating a 16.67% earnings surprise [1][2] Financial Performance - The company achieved revenues of $6.62 million for the quarter ended March 2024, surpassing the Zacks Consensus Estimate by 13.52%, compared to $7.01 million in the same quarter last year [2] - Over the last four quarters, Investcorp has exceeded consensus EPS estimates three times and topped revenue estimates three times as well [2] Stock Performance - Investcorp shares have declined approximately 8.6% since the beginning of the year, contrasting with the S&P 500's gain of 9.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $5.71 million, and for the current fiscal year, it is $0.47 on revenues of $23.68 million [7] Industry Outlook - The Financial - SBIC & Commercial Industry, to which Investcorp belongs, is currently ranked in the top 40% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 814-01054 INVESTCORP CREDIT MANAGEMENT BDC, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other Jurisdiction of Incorporation or Organization ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 814-01054 INVESTCORP CREDIT MANAGEMENT BDC, INC. (Exact Name of Registrant as Specified in Its Charter) (State or other Jurisdiction of Incorporation or Organizat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 814-01054 INVESTCORP CREDIT MANAGEMENT BDC, INC. (Exact Name of Registrant as Specified in Its Charter) Maryland 46-2883380 (State or other Jurisdiction of Incor ...

```markdown [Part I](index=3&type=section&id=PART%20I) [Business](index=3&type=section&id=Item%201.%20Business) The company operates as an externally managed Business Development Company (BDC) focused on maximizing total return by investing in debt and equity of U.S. middle-market companies - The company is an externally managed **BDC** and a **RIC**, primarily investing in debt of **U.S. middle-market companies** with enterprise values under **$750 million**[11](index=11&type=chunk)[12](index=12&type=chunk) Portfolio Snapshot as of June 30, 2023 | Metric | Value | | :--- | :--- | | Total Portfolio Fair Value | $220.1 million | | Number of Portfolio Companies | 36 | | First Lien Investments (as % of FV) | 89.21% | | Equity, Warrant, Other (as % of FV) | 10.79% | | Weighted Average Total Yield (Debt & Income Producing) | 12.46% | - The company is externally managed by **CM Investment Partners LLC**, which is approximately **76%** owned by **Investcorp Credit Management US LLC**[23](index=23&type=chunk)[24](index=24&type=chunk) [Portfolio Composition and Strategy](index=4&type=section&id=1.1%20Portfolio%20Composition%20and%20Strategy) The company's $220.1 million portfolio, as of June 30, 2023, is concentrated in specific industries, focusing on first and second lien loans to middle-market companies with defined revenue and EBITDA thresholds Top 5 Industry Concentrations (at Fair Value) - June 30, 2023 | Industry | Percentage of Total Portfolio | | :--- | :--- | | Trading Companies & Distributors | 15.98% | | Professional Services | 12.83% | | IT Services | 10.71% | | Commercial Services & Supplies | 6.51% | | Software | 6.26% | - The company primarily invests in standalone **first and second lien loans**, and **unitranche loans**, with selective investments in unsecured debt and equity, targeting companies with revenues of at least **$50 million** and EBITDA of at least **$15 million**[35](index=35&type=chunk) - The investment portfolio is managed using a **five-level risk rating system**, with **59.7%** of the portfolio by fair value rated **1 or 2** (performing at or above expectations) and **11.9%** rated **4 or 5** (performing substantially below expectations) as of **June 30, 2023**[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) [Management and Advisory Agreements](index=14&type=section&id=1.2%20Management%20and%20Advisory%20Agreements) The company is managed by CM Investment Partners LLC under an Advisory Agreement, outlining a Base Management Fee and a two-part Incentive Fee, alongside an Administration Agreement for services - The Base Management Fee is **1.75%** annually of gross assets, excluding cash and cash equivalents[76](index=76&type=chunk) - The Income-Based Incentive Fee is **20%** of pre-incentive fee net investment income over an **8%** annualized hurdle rate, with a catch-up provision, subject to a **Total Return Requirement**[79](index=79&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - The Capital Gains Fee is **20%** of cumulative realized capital gains, net of cumulative realized losses and unrealized depreciation, since the agreement's commencement[86](index=86&type=chunk) - The Board of Directors, including all Independent Directors, approved the continuation of the Advisory Agreement on **August 29, 2023**, finding the fees reasonable for the services provided[99](index=99&type=chunk)[100](index=100&type=chunk) [Regulation and Taxation](index=23&type=section&id=1.3%20Regulation%20and%20Taxation) Operating as a BDC and RIC, the company adheres to 1940 Act requirements for asset composition and coverage, and tax rules for income distribution - As a BDC, the company must invest at least **70%** of its assets in "**qualifying assets**," typically securities of private or small public U.S. companies[117](index=117&type=chunk) - The company is permitted to issue senior securities if its asset coverage ratio is at least **150%** immediately after issuance, a level adopted effective **May 2, 2019**[120](index=120&type=chunk)[121](index=121&type=chunk) - To maintain its RIC status and avoid corporate-level income tax, the company must distribute at least **90%** of its annual investment company taxable income to shareholders[136](index=136&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including dependence on key personnel, conflicts of interest, leverage, illiquidity, industry concentration, regulatory compliance, and market disruptions - The business is highly dependent on **key personnel** of the Adviser, particularly **Messrs. Mauer and Shaikh**, whose loss could significantly harm the company's ability to achieve its investment objective[153](index=153&type=chunk) - The use of leverage magnifies potential gains and losses, requiring the company to maintain an asset coverage ratio of at least **150%**, where a decline in asset value could force disadvantageous asset sales[161](index=161&type=chunk)[163](index=163&type=chunk) - The portfolio is concentrated in a few industries, with **Trading Companies & Distributors (16.0%)**, **Professional Services (12.8%)**, and **IT Services (10.7%)** representing significant portions as of **June 30, 2023**, exposing the company to downturns in these sectors[225](index=225&type=chunk)[226](index=226&type=chunk) - The transition away from **LIBOR** to alternative rates like **SOFR** could cause market disruptions and adversely impact the value of certain investments[240](index=240&type=chunk)[241](index=241&type=chunk) [Properties](index=57&type=section&id=Item%202.%20Properties) The company does not own real estate, with its principal executive offices provided by the Adviser under an Administration Agreement - The company **does not own any real estate**; its office facilities are provided by the Adviser pursuant to the **Administration Agreement**[316](index=316&type=chunk) [Legal Proceedings](index=57&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is it aware of any threatened against it - The company is **not currently subject to any material legal proceedings**[317](index=317&type=chunk) [Part II](index=58&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=58&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under 'ICMB', experiencing a significant discount to NAV in FY2023, while maintaining quarterly distributions and an opt-out dividend reinvestment plan Quarterly Stock Price and Distribution Data (Fiscal Year 2023) | Quarter | NAV per Share | High Price | Low Price | Discount to NAV (High) | Discount to NAV (Low) | Distribution per Share | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Q1 2023 | $6.47 | $4.85 | $3.52 | (25.04)% | (45.60)% | $0.15 | | Q2 2023 | $6.36 | $4.32 | $3.42 | (32.08)% | (46.23)% | $0.15 | | Q3 2023 | $6.13 | $4.23 | $3.39 | (31.00)% | (44.70)% | $0.15 | | Q4 2023 | $6.12 | $3.98 | $3.24 | (34.97)% | (46.99)% | $0.18 | - As of September 15, 2023, the company's common stock traded at a discount of approximately **33.50%** to its **June 30, 2023** NAV of **$6.09 per share**[324](index=324&type=chunk) - The company has an '**opt out**' dividend reinvestment plan (**DRIP**), where cash distributions are automatically reinvested unless the stockholder elects to receive cash[328](index=328&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For FY2023, net investment income increased, despite a significant net realized loss partially offset by unrealized appreciation, while credit quality shifted and liquidity was maintained with a strong asset coverage ratio Results of Operations Comparison (in millions) | Metric | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Total Investment Income | $26.7 | $24.4 | $26.7 | | Net Expenses | $17.3 | $15.5 | $17.6 | | **Net Investment Income** | **$9.4** | **$8.9** | **$9.1** | | Net Realized Loss | ($26.9) | ($14.4) | ($5.8) | | Net Change in Unrealized Appreciation (Depreciation) | $20.7 | $8.1 | ($5.6) | | **Net Increase (Decrease) in Net Assets** | **$3.2** | **$2.6** | **($2.3)** | Portfolio Risk Rating Distribution (% of Fair Value) | Investment Rating | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | 1 - Performing Above Expectations | 7.5% | 15.0% | | 2 - Performing Within Expectations | 52.2% | 73.9% | | 3 - Performing Below Expectations | 28.4% | 10.0% | | 4 - Substantially Below, Loss of Return Expected | 6.0% | 0.0% | | 5 - Substantially Below, Loss of Principal Expected | 5.9% | 1.1% | - As of June 30, 2023, the company had **$71.9 million** outstanding on its **$100 million** Capital One Revolving Financing and **$65.0 million** of **4.875% Notes due 2026**, with an asset coverage ratio of **164.1%**, above the required **150%**[373](index=373&type=chunk)[380](index=380&type=chunk)[411](index=411&type=chunk) - Unfunded commitments to portfolio companies decreased to **$6.0 million** as of **June 30, 2023**, from **$13.9 million** as of **June 30, 2022**[437](index=437&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, with 99.6% of debt investments being floating-rate, leading to a positive impact on net interest income from hypothetical rate increases - As of **June 30, 2023**, **99.6%** of the company's debt investments bore floating interest rates, making net interest income sensitive to rate changes[440](index=440&type=chunk) Interest Rate Sensitivity Analysis (as of June 30, 2023) | Change in Interest Rates | Estimated Impact on Net Interest Income | | :--- | :--- | | +1.00% | +5.4% | | +2.00% | +13.4% | [Financial Statements and Supplementary Data](index=80&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The FY2023 audited financial statements show total assets of $231.8 million and net assets of $87.7 million, with a NAV per share of $6.09, and an unqualified auditor's opinion highlighting Level 3 investment valuation Consolidated Financial Highlights (Per Share) | For the Year Ended June 30, | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net asset value, beginning of year | $6.50 | $6.92 | $7.79 | | Net investment income | $0.65 | $0.62 | $0.65 | | Net realized and unrealized gains (losses) | ($0.43) | ($0.44) | ($0.82) | | **Net increase (decrease) in net assets** | **$0.22** | **$0.18** | **($0.17)** | | Dividends from net investment income | ($0.63) | ($0.60) | ($0.70) | | **Net asset value, end of year** | **$6.09** | **$6.50** | **$6.92** | - The independent auditor, **RSM US LLP**, issued an **unqualified opinion** on the financial statements and highlighted the valuation of **Level 3 investments** as a **critical audit matter** due to subjective judgments involved[447](index=447&type=chunk)[452](index=452&type=chunk)[453](index=453&type=chunk) Consolidated Statement of Assets and Liabilities (in millions) | | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Total Investments, at fair value | $220.1 | $233.7 | | Total Assets | $231.8 | $246.4 | | Total Liabilities | $144.1 | $152.9 | | **Total Net Assets** | **$87.7** | **$93.5** | | **Net Asset Value Per Share** | **$6.09** | **$6.50** | [Controls and Procedures](index=120&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of June 30, 2023, management concluded that both disclosure controls and internal control over financial reporting were effective, with no material changes identified - Management concluded that the company's disclosure controls and procedures were **effective** as of **June 30, 2023**[630](index=630&type=chunk) - Based on the **COSO 2013 framework**, management determined that the company's internal control over financial reporting was **effective** as of **June 30, 2023**[633](index=633&type=chunk) [Part III](index=121&type=section&id=PART%20III) Information for Part III (**Items 10-14**) is incorporated by reference from the company's definitive **Proxy Statement** for the **2023 Annual Meeting of Stockholders** - Information required for Part III (**Items 10-14**) is incorporated by reference from the definitive **Proxy Statement** for the **2023 Annual Meeting of Stockholders**[637](index=637&type=chunk) [Part IV](index=122&type=section&id=PART%20IV) Part IV lists the financial statements, schedules, and comprehensive exhibits filed with the report or incorporated by reference, including governance and material contracts - Part IV lists the **financial statements, schedules, and exhibits** filed with the **Form 10-K**[645](index=645&type=chunk)[646](index=646&type=chunk) ```