UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

Form 10-K

 

(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2016

OR

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

COMMISSION FILE NUMBER: 814-00809

 

Full Circle Capital Corporation

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

MARYLAND		27-2411476
(State or jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

102 Greenwich Avenue, 2nd Floor Greenwich, CT		06830
(Address of principal executive office)		(Zip Code)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE:

(203) 900-2100

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share 8.25% Notes due 2020		NASDAQ Global Market NASDAQ Global Market

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

 

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

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

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

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

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

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

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

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

The aggregate market value of common stock beneficially owned by non-affiliates of the Registrant on December 31, 2015, based on the closing price on that date of $2.47 on the NASDAQ Stock Market, was $49,369,822. For the purposes of calculating this amount only, all directors and executive officers of the Registrant have been treated as affiliates. There were 22,472,243 shares of the Registrant’s common stock outstanding as of September 28, 2016.

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		Page
PART I
Item 1. Business			1
Item 1A. Risk Factors			32
Item 1B. Unresolved Staff Comments			58
Item 2. Properties			58
Item 3. Legal Proceedings			58
Item 4. Reserved			59
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			60
Item 6. Selected Financial Data			63
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			64
Item 7A. Quantitative and Qualitative Disclosures about Market Risk			93
Item 8. Consolidated Financial Statements and Supplementary Data			94
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			143
Item 9A. Controls and Procedures			143
Item 9B. Other Information			144
PART III
Item 10. Directors, Executive Officers and Corporate Governance			145
Item 11. Executive Compensation			148
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			150
Item 13. Certain Relationships and Related Transactions, and Director Independence			152
Item 14. Principal Accounting Fees and Services			153
PART IV
Item 15. Exhibits and Financial Statement Schedules			155
Exhibit Index			156
Signatures			158

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PART I

Item 1.  Business

Full Circle Capital Corporation (“Full Circle Capital,” the “Company,” or “we”), a Maryland corporation formed in April 2010, is an externally managed non-diversified closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We are managed by Full Circle Advisors, LLC (“Full Circle Advisors” or our “investment adviser”) and Full Circle Service Company, LLC (“Full Circle Service Company” or our “administrator”) provides the administrative services necessary for us to operate.

We invest primarily in senior secured loans and, to a lesser extent, second lien loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies that operate in a diverse range of industries. In our lending activities, we focus primarily on portfolio companies with both (i) tangible and intangible assets available as collateral and security against our loan to help mitigate our risk of loss, and (ii) cash flow to cover debt service. We believe this provides us with a more attractive risk adjusted return profile, with greater principal protection and likelihood of repayment.

Our investments generally range in size from $3 million to $10 million; however, we may make larger or smaller investments from time to time on an opportunistic basis. We focus primarily on senior secured loans and “stretch” senior secured loans, also referred to as “unitranche” loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans. We believe that having a first lien, senior secured position provides us with greater control and security in the primary collateral of a borrower and helps mitigate risk against loss of principal should a borrower default. Our stretch senior secured loans typically possess a greater advance rate against the borrower’s assets and cash flow, and accordingly carry a higher interest rate and/or greater equity participation, than traditional senior secured loans. Stretch senior secured loan instruments can provide borrowers with a more efficient and desirable solution than a senior bank line combined with a separate second lien or mezzanine loan obtained from another source. We also may invest in mezzanine, subordinated or unsecured loans. In addition, we may acquire equity or equity related interests from a borrower along with our debt investment. We attempt to protect against risk of loss on our debt investments by investing in borrowers with sufficient cash flows to service debt, while frequently securing most of our loans against a significant level of tangible or intangible assets of our borrowers, which may include accounts receivable and contracts for services, and obtaining a favorable loan-to-value ratio, and in many cases, securing other financial protections or credit enhancements, such as personal guarantees from the principals of our borrowers, make well agreements and other forms of collateral, rather than lending predominantly against anticipated cash flows of our borrowers. We believe this allows us more options and greater likelihood of repayment from refinancing, asset sales of our borrowers and/or amortization.

We generally seek to invest in lower middle-market and middle-market companies in areas that we believe have been historically under-serviced, especially during and after the 2008/2009 credit crisis. These areas can include industries that are outside the focus of mainstream institutions or investors due to required industry-specific knowledge or are too small to attract interest from larger investment funds or other financial institutions. Because we believe there are fewer banks and specialty finance companies focused on lending to these lower middle-market companies, we believe we can negotiate more favorable terms on our debt investments in these companies than those that would be available for debt investments in comparable larger, more mainstream borrowers. Such favorable terms may include higher debt yields, lower leverage levels, more significant covenant protection and/or greater equity grants than typical of other transactions. We generally seek to avoid competing directly with other capital providers with respect to specific transactions in order to avoid the less favorable terms we believe are typically associated with such competitive bidding processes.

As a business development company, we are required to meet regulatory tests, including the requirement to invest at least 70% of our gross assets in “qualifying assets.” Qualifying assets generally include, among other things, securities of “eligible portfolio companies.” “Eligible portfolio companies” generally include U.S. companies that are not investment companies and that do not have securities listed on a national

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exchange. We may also borrow funds to make investments. In addition, we have elected to be treated for federal income tax purposes as a regulated investment company, or “RIC,” under Subchapter M of the Internal Revenue Code of 1986, as amended, which we refer to as the Code.

Our headquarters are located at 102 Greenwich Avenue, 2^nd Floor, Greenwich, CT 06830 and our telephone number is 203-900-2100.

Strategic Transaction

On June 23, 2016, we and Great Elm Capital Corp., a Maryland corporation (“GECC”) entered into a definitive merger agreement (the “Merger Agreement”) under which we will merge with and into GECC, with GECC as the surviving corporation (the “Merger”). Concurrently with the execution of the Merger Agreement, GECC, Great Elm Capital Group, Inc. (“Great Elm”) and certain investment funds (the “Funds”) managed by MAST Capital Management, LLC (“MAST”) entered into a subscription agreement (the “Subscription Agreement”). Pursuant to the Subscription Agreement, (i) Great Elm has contributed $30 million in cash to GECC in exchange for shares of GECC’s common stock and (ii) the Funds have agreed to contribute an investment portfolio, presently valued at approximately $90 million, also in exchange for shares of GECC’s common stock. The contribution of the investment portfolio will occur prior to the closing of the Merger. When the Merger becomes effective, GECC, as the surviving corporation, will be externally managed by Great Elm Capital Management, Inc. (“GECM”), pursuant to a new investment advisory agreement. GECM will be owned by Great Elm. Great Elm has advised the Company that GECM will employ substantially all of the investment and back office personnel of MAST. The obligations of the parties to the Merger Agreement and the Subscription Agreement are subject to various conditions. We have also entered into an agreement (the “Termination Agreement”) with Full Circle Advisors and Full Circle Service Company providing for the future termination of our investment advisory agreement, dated July 13, 2010, and administration agreement, dated July 14, 2010, as required under the Merger Agreement.

The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, (i) we will merge with and into GECC with GECC continuing as the surviving corporation. In the Merger, all of the Company’s outstanding shares of common stock will be converted into shares of GECC’s common stock. The amount of GECC’s common stock to be received by our stockholders will be derived from an exchange ratio (the “Exchange Ratio”), which will be calculated based on our net asset value as of the month-end preceding the date on which the definitive proxy statement relating to the Merger is mailed to our stockholders, subject to adjustments as described below.

Pursuant to the terms of the Merger Agreement, our Board of Directors intends to declare a special cash distribution to our stockholders of record as of the close of business on the day on which the Merger becomes legally effective.

The Merger Agreement provides that our Board of Directors will declare a special cash distribution, which will be payable after the Merger to the persons who are the record holders of shares of our common stock immediately before the effective time of the Merger, in an aggregate amount equal to the sum of:

The amount of the special cash distribution is expected to be approximately $0.24 per share of our common stock. The special cash distribution will be paid by the exchange agent appointed to process exchanges of GECC share certificates for our share certificates upon delivery by the holders of our common stock of a letter of transmittal.

Neither the special cash distribution, nor any dividends or other distributions with respect to shares of GECC common stock will be paid to any former Full Circle stockholders who held their shares in certificated form and who have not surrendered their certificates to the exchange agent for shares of GECC common stock

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until those certificates are surrendered in accordance with the letter of transmittal. Following the surrender of any such certificates in accordance with the letter of transmittal, the record holders of such certificates will be entitled to receive, without interest, the special cash distribution and the amount of dividends or other distributions with a record date after the Effective Time payable with respect to shares of GECC common stock exchangeable for those certificates and not previously paid.

We expect that a significant part of the $5.0 million fixed portion of the special cash distribution will be a distribution in excess of our current and accumulated earnings and profits and could be treated as a return of capital for U.S. federal income tax purposes.

The closing of the Merger is subject to the satisfaction of customary closing conditions, including, among others, the registration and listing of the shares of common stock of GECC that will be issued in the Merger and the approval of the Merger by the holders of a majority of the outstanding shares of the common stock of the Company (the “Company Stockholder Approval”).

The Merger Agreement contains customary representations, warranties and covenants of each party, including covenants providing for the Company and GECC (i) to conduct their respective businesses in all material respects in the ordinary course of business and in a manner consistent with past practice during the period between the execution of the Merger Agreement and the effective time of the Merger, (ii) not to engage in certain kinds of transactions during such period, and (iii) only with respect to the Company, to convene and hold a meeting of its stockholders to consider and vote upon the approval of the Merger.

The Merger Agreement contains a customary “no-shop” provision which prohibits us and our subsidiaries from engaging in certain actions with respect to any other offer or proposal relating to an acquisition, merger or business combination resulting in ownership of more than 25% of us or our assets (an “Acquisition Proposal”). Subject to certain exceptions, we may not: (i) initiate, solicit or knowingly encourage any inquiries with respect to any Acquisition Proposal; (ii) engage in negotiations or discussions that reasonably could be expected to lead to an Acquisition Proposal; (iii) approve, endorse or recommend any Acquisition Proposal; or (iv) execute or enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement or any similar agreement relating to any Acquisition Proposal.

The “no shop” provision is subject to a customary “fiduciary out” provision that allows us, under certain circumstances and in compliance with certain obligations, to provide non-public information and engage in discussions and negotiations with any third party making an Acquisition Proposal if our Board of Directors determines in good faith, after consultation with counsel and its financial advisor, that such third party is reasonably likely to submit a Superior Proposal. A “Superior Proposal” is a bona fide proposal in writing relating to an acquisition, merger or business combination resulting in ownership of more than 50% of us or our assets that is reasonably likely to be consummated and which has terms more favorable to us and our stockholders from a financial point of view than those set forth in the Merger Agreement and related documents.

At any time prior to obtaining the Company Stockholder Approval, subject to certain conditions, our Board of Directors may endorse the Superior Proposal and may change its recommendation regarding the Merger if our Board of Directors has determined in good faith (after consultation with counsel) that the failure to take action would be inconsistent with the directors’ fiduciary duties. Any such action can be taken only after giving three business days advance notice to GECC and during those three business days we must negotiate with GECC (if GECC wishes to negotiate) to adjust the terms and conditions of the Merger Agreement to make them at least as favorable to our stockholders as the Superior Proposal.

The Merger Agreement contains certain termination rights for both the Company and GECC, including if the Merger is not completed on or before October 31, 2016 (subject to extension under certain circumstances), or if the Company Stockholder Approval is not obtained. In the event of a termination of the Merger Agreement under certain circumstances, including termination of the Merger Agreement by us to enter into a definitive agreement with respect to a Superior Proposal or termination by GECC as a result of a change of recommendation by our Board of Directors, the Company will be required to pay GECC a termination fee of $3.0 million. Additionally, in the event that the Company Stockholder Approval is not obtained and a proposal for a business combination with a third party or an acquisition by a third party of 50% of more of the shares

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or assets of the Company (each, an “Alternative Transaction”) has been publicly announced and not withdrawn, upon termination of the Merger Agreement by us or GECC, we will be required to reimburse GECC for its out of pocket expenses, up to a maximum of $1.0 million (the “Expense Reimbursement”). If we enter into a definitive agreement for one or more Alternative Transactions within 12 months after termination of the Merger Agreement, we will be required to pay GECC a termination fee of $3.0 million, less the Expense Reimbursement.

The Investment Adviser and Administrator

We are managed by Full Circle Advisors, whose investment committee members have an average of approximately 23 years of experience financing and investing in lower middle-market and middle-market companies. Full Circle Advisors is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Certain members of Full Circle Advisors’ investment committee also presently manage Full Circle Funding, LP, a specialty lender serving lower middle-market companies. The existing investment funds managed by Full Circle Funding, LP, which currently consist of Full Circle Partners, LP and Full Circle Fund, Ltd. (collectively, the “Legacy Funds”), have been fully committed and are no longer making investments in new opportunities. Full Circle Funding, LP and other affiliates of our investment adviser may manage other funds and accounts in the future.

We benefit from the proven ability of our investment adviser’s investment committee to identify attractive investment opportunities, conduct diligence on and value prospective investments, negotiate terms, secure collateral against our loans and manage and monitor a diversified portfolio of those investments. Our investment adviser’s investment committee members have broad investment backgrounds, with prior experience at investment banks, commercial banks, unregistered investment funds and other financial services companies, and have collectively developed a broad network of contacts to provide us with our principal source of investment opportunities.

Our investment adviser is controlled and led by John E. Stuart, our Chairman, and Gregg J. Felton, our Chief Executive Officer and President and the Chief Investment Officer of Full Circle Advisors. Mr. Stuart and Mr. Felton are assisted by Crandall Deery, who serves as a Senior Vice President of Full Circle Advisors. Full Circle Advisors’ investment committee consists of Messrs. Stuart, Felton and Deery. Under our investment advisory agreement with Full Circle Advisors, we have agreed to pay Full Circle Advisors an annual base management fee based on our gross assets as well as an incentive fee based on our net investment income and realized gains.

We have also entered into an administration agreement, under which we have agreed to reimburse Full Circle Service Company for our allocable portion of overhead and other expenses incurred by Full Circle Service Company in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services. Full Circle Service Company is controlled by Messrs. Stuart and Felton.

Business Strategy

Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We have adopted the following business strategies to achieve our investment objective:

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Market Opportunity

We believe that the current credit environment provides favorable opportunities to achieve attractive risk-adjusted returns on the types of senior secured loans and other investments we may target. In particular, we believe that, despite a recent trend of slowing growth in loan demand, demand for financing from lower middle-market and middle-market companies is largely outpacing the availability of lenders that have traditionally served this market. While this has traditionally been an underserved market, we believe the supply-demand imbalance of loans to smaller borrowers was exacerbated by the credit crisis in 2008/2009, and has not fully recovered. We believe that bank consolidations and regulations, the failure of a number of alternative lending vehicles due to poor underwriting practices and an overall tightening of underwriting standards has significantly reduced the number and activity level of potential lenders.

Thus we believe that the current credit markets combined with certain long term trends associated with lending to lower middle-market and middle-market companies provide an attractive market environment for our strategy.

We believe these bank lending market conditions will continue to exacerbate existing funding gaps for firms comprising our target market.

With the decreased availability of debt capital for lower middle-market and middle-market borrowers, combined with the significant demand for refinancing, we believe there are increased lending opportunities for us.

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Investments

We engage in various investment strategies in order to achieve our overall lending and investment objectives. The strategy we select depends upon, among other things, market opportunities, the skills and experience of our investment adviser’s investment committee and our overall portfolio composition. Our strategies generally seek to provide current cash yields and favorable loan-to-value ratios, or other financial guarantees or credit enhancements with respect to loan collateral. Many of our debt investments offer the opportunity to participate in a borrower’s equity performance through warrants, equity related success fees, direct equity ownership or otherwise, and many notes that we own require the borrower to pay an early termination fee. Collectively, these attributes have been, and are expected to be, an important contributor to the returns generated by our investment adviser’s investment committee.

Full Circle Advisors’ investment committee uses a disciplined investment, portfolio monitoring and risk management process which emphasizes strict underwriting standards and guidelines, strong due diligence investigation, regular position review and analysis, and proper investment diversification. They allocate capital among different investment sectors on the basis of relative risk/reward profiles as a function of their associated downside risk, volatility, perceived fundamental risk and liquidity.

Types of Investments

We target debt investments that yield meaningful current income and, in many cases, provide the opportunity for capital appreciation through equity securities.

Debt Investments

Full Circle Advisors’ investment committee tailors the terms of each debt investment to the facts and circumstances of the transaction and prospective portfolio company, negotiating a structure that seeks to protect our rights and manage our risk while creating incentives for the portfolio company to achieve its business plan. As of June 30, 2016, our debt investments were secured by first, and in some cases second, priority liens on the assets of the portfolio company. Our primary source of return is the monthly cash interest we collect on our debt investments.

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Full Circle Advisors’ investment committee typically structures debt investments to include covenants that seek to minimize the risk of capital loss. These debt investments generally have strong protections, including default penalties, information rights, board observation rights, and affirmative, negative and financial covenants, such as lien protection and prohibitions against change of control. These debt investments also have substantial prepayment penalties designed to extend the average life of the loans, which we believe will help to grow our portfolio.

Equity Investments

When we make a debt investment, we may be granted equity participation in the form of warrants to purchase common equity in the company in the same class of security that the owners or equity sponsors receive upon funding. In addition, we may make equity investments or structure a profit sharing arrangement in conjunction with a loan transaction with a borrower. Full Circle Advisors’ investment committee generally seeks to structure our equity investments, such as direct equity co-investments, to provide us with minority rights provisions and event-driven put rights. They also seek to obtain limited registration rights in connection with these investments, which may include “piggyback” registration rights.

Senior Secured Lending Focus

In most cases, our investment adviser’s investment committee attempts to protect against risk of loss on our debt investments by making senior loans secured by the assets of our borrowers, and obtaining favorable loan-to-value ratios or other financial protections or credit enhancements, rather than lending exclusively against “cash flows”. Loans may be backed by a variety of types of tangible and intangible assets, including, but not limited to, lease obligations, royalty interests, commercial account receivables, contractual revenue and payment rights (including contracts providing for recurring monthly revenue streams), settlements, franchise rights, licenses, permits, mortgages, easements and other real property interests, and other tangible personal property, and intangible property such as intellectual property and patents. Our debt investments typically have a first, and in some cases a second, priority senior security interest in the operative assets of the borrower and collateral assignment of rights and contracts, though we also may make mezzanine and equity investments where we believe the risk and reward, and level of security, warrants such an investment. As a lender, we seek to provide working capital lines to borrowers secured by accounts receivable, inventory, machinery and equipment, real estate and in some cases, intellectual property or brand values. These facilities will typically be comprised of a borrowing base formula and include revolving loans and term loans as part of their structures.

Our investment focus may shift over time, consistent with our overall lending and investment objectives, and desire for senior secured loans with some level of collateral protection.

Invested Industries

Our portfolio contains investments in a variety of industries where some aspect of tangible or intangible asset is available for collateral protection. Our portfolio contains a number of investments in the business services, communications and media industries, as a result of the Legacy Portfolios’ emphasis, and the focus and prior investing experience of our investment adviser’s investment committee, in those sectors. However, these industries are not our only focus, and we seek prospective investments in other healthcare, commercial

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and industrial sectors, including industrial manufacturing. As a result, we expect that the relative portion of our portfolio invested in the media and communications and business services industries may decrease over time.

As of June 30, 2016, approximately 24% of our portfolio consists of loans to and investments in companies involved in the broader business services industry (such as companies that provide services related to data and information, building, cleaning and maintenance services, and energy efficiency services). These companies typically provide a range of services to customers and such services are generally characterized by their non-discretionary spending nature, contracts of varying length which provide recurring monthly revenues and contracts or services that can be sold or assigned to another provider upon liquidation or sale of a business.

As of June 30, 2016, approximately 15% of our portfolio consists of loans to and investments in companies involved in the media industry (such as outdoor advertising and radio broadcasting companies). We believe that these sectors present significant investment opportunities that possess attractive loan attributes. These include, but are not limited to, long-term tangible and intangible assets, the ability to perfect our security interest in the collateral, relatively stable revenue and cash flow profile, the ability to foreclose on and transport the underlying collateral should we need to take control of it, and a broad market of participants to purchase or operate the business and assets in the event of foreclosure.

As of June 30, 2016, approximately 11% of our portfolio consists of loans to and investments in companies involved in the healthcare industry. We believe that this sector can present significant investment opportunities that possess attractive loan attributes. These include, but are not limited to, high barriers to entry, the ability to perfect our security interest in the collateral and attractive risk exposure when viewed on a debt to earnings before interest taxes depreciation and amortization basis.

Investment Selection

Our investment adviser’s investment committee is responsible for all aspects of our investment process. The current members of the investment committee are John Stuart, our Chairman, Gregg J. Felton, our Chief Executive Officer and President, and Crandall Deery, who serves as a Senior Vice President of Full Circle Advisors. While the investment strategy involves a team approach, whereby potential transactions are screened by various members of the investment committee, Mr. Stuart and Mr. Felton, who serves as Chief Investment Officer of Full Circle Advisors, must approve of all investments in order for them to proceed. The stages of our investment selection process are as follows:

Deal Generation/Origination

Deal generation and origination is maximized through long-standing and extensive relationships with industry contacts, brokers, commercial and investment bankers, entrepreneurs, services providers such as lawyers and accountants, as well as current and former clients, portfolio companies and investors. Our investment adviser’s investment committee supplements these lead generators by also utilizing broader marketing efforts, such as attendance at prospective borrower industry conventions, an active calling effort to smaller private equity firms and sponsors, and through web presence and search tool optimizations. They also focus their deal generation and origination efforts on lower middle-market and middle-market companies. Our investment adviser’s investment committee has developed a reputation as a knowledgeable and reliable source of capital, providing value-added industry advice and financing assistance to borrowers’ businesses.

Screening

In screening potential investments, our investment adviser’s investment committee utilizes the same value-oriented investment philosophy they have employed historically with analytics and resources focused on managing downside exposure.

Portfolio Company Characteristics

We have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for our investment adviser’s investment committee’s decisions; however, not all of these criteria will be met by each prospective portfolio

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company in which they choose to invest. Generally, our investment adviser seeks to utilize its access to information generated by its investment committee to identify investment candidates and to structure investments quickly and effectively.

Established Companies.  We primarily seek to invest in established companies with sound historical financial and operating performance. We typically focus on companies with an operating cash flow profile. We generally do not intend to invest in start-up companies or companies with highly speculative business plans.

Defensible and Sustainable Business or Asset Values.  We seek to invest in companies with proven products and/or services and strong regional or national operations and assets that cannot be easily replicated or substituted, and generally hold value through economic downturns, industry consolidation, changing business preferences and other factors that may negatively impact their customers, suppliers and competitors.

Exit Strategy.  We predominantly invest in companies that provide multiple alternatives for an eventual exit. We seek companies that we believe will provide a stable underlying asset value and a steady stream of cash flow that will allow for repayment from refinancing, asset or business sales and principal amortization. We believe that such asset coverage combined with internally generated cash flow, which primarily provides for the payment of interest on, and the repayment of the principal of, our investments in portfolio companies represents a key means by which we will be able to service our loans and eventually exit from our investments over time.

In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities due to strong asset values and unique or difficult to aggregate assets. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock or another capital market transaction.

Liquidation Value of Assets.  The prospective liquidation value of the assets, if any, collateralizing loans in which we invest is an important factor in our credit analysis. Our analysis emphasizes both tangible assets, such as accounts receivable, inventory, equipment and real estate, and intangible assets, such as intellectual property, customer lists, networks and databases.

Experienced and Committed Management.  We generally require that portfolio companies have an experienced management team. We also generally require portfolio companies have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests.

Due Diligence.  Our investment adviser conducts diligence on prospective portfolio companies consistent with the approach its investment committee has historically adopted. We believe that the investment committee has a reputation for conducting extensive due diligence investigations in their investment activities. In conducting due diligence, our investment adviser uses publicly available information as well as information from its relationships with former and current management teams, consultants, competitors and investment bankers.

Our investment adviser’s due diligence typically includes:

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Upon the completion of due diligence and a decision to proceed with an investment in a company, the investment professionals leading the investment present the investment opportunity to our investment adviser’s investment committee, which then determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants prior to the closing of the investment, as well as other outside third-party advisers, as appropriate. Any fees and expenses incurred by Full Circle Advisors in connection with due diligence investigations undertaken by third parties are subject to reimbursement by Full Circle Capital, if not otherwise reimbursed by the prospective borrower. Such reimbursements are in addition to any management or incentive fees payable under our Investment Advisory Agreement to Full Circle Advisors. While the investment strategy involves a team approach, Full Circle Capital may not enter into a transaction without the prior approval of Messrs. Stuart and Felton.

Ongoing Relationship with Portfolio Companies

Managerial Assistance

As a business development company, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. With regard to the Control Investment in Texas Westchester Financial, LLC, the Company has provided managerial assistance during the year ended June 30, 2016 for which no fees were charged. Our Chairman, John Stuart, previously served as a director of The Finance Company, LLC, which was previously a Control Investment.

Monitoring

Our investment adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company.

Our investment adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

In addition to various risk management and monitoring tools, our investment adviser also uses an investment rating system to characterize and monitor our expected level of return on each debt investment in our portfolio.

We use an investment rating scale of 1 to 5. The following is a description of the conditions associated with each debt investment rating:

Investment Rating		Summary Description
1		Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit)
2		The portfolio company is performing above expectations and the risk profile is generally favorable

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Investment Rating		Summary Description
3		Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3
4		The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable
5		The investment is performing well below expectations and is not anticipated to be repaid in full

Our investment adviser monitors and, when appropriate, changes the investment ratings assigned to each debt investment in our portfolio. As of June 30, 2016, the weighted average investment rating on the fair market value of our portfolio was 3.12. In connection with our valuation process, our investment adviser reviews these debt investment ratings on a quarterly basis and reports any changes to the debt investment rating of a portfolio company quarterly. The investment rating of a particular debt investment should not, however, be deemed to be a guarantee of the investment’s future performance.

Valuation Procedures

We conduct the valuation of our assets, pursuant to which our net asset value is determined, at all times consistent with generally accepted accounting principles in the United States (“GAAP”) and the 1940 Act. Our valuation procedures are set forth in more detail below:

Securities for which market quotations are readily available on an exchange are valued at such price as of the closing price on the day of valuation. We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.

Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our investment adviser or Board of Directors, does not represent fair value, which currently represents all of the investments in our portfolio, shall each be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; (iii) independent third-party valuation firms engaged by, or on behalf of, the Board of Directors will conduct independent appraisals and/or review management’s preliminary valuations or make their own assessment for all material assets; and (iv) the Board of Directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the investment adviser and, where appropriate, the respective third-party valuation firms.

The recommendation of fair value is generally based on the following factors, as relevant:

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include, but are not limited to, the following:

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Determination of fair value by our Board of Directors involves subjective judgments and estimates.

Portfolio Overview

Our investments generally range in size from $3 million to $10 million; however, we may make larger investments from time to time on an opportunistic basis. We focus primarily on senior secured loans and “stretch” senior secured loans, also referred to as “unitranche” loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans.

The following is a representative list of the industries in which we have invested:

•   Asset Recovery Services		•   Beverages		•   Cable TV/Broadband Services
•   Consumer Financing		•   Equipment Rental Services		•   Healthcare Services
•   Industrial Metal Treatings		•   Information and Data Services		•   Information Retrieval Services
•   Outdoor Advertising Services		•   Radio Broadcasting		•   Geophysical Surveying and Mapping Services
•   Energy Efficiency Services		•   Munitions		•   Food Distributors and Wholesalers
•   Aerospace Parts Plating and Finishing		•   Staffing Services		•   Medical Transcription Services
•   Stationary, Tablets, and Related Products		•   Art Dealers		•   Real Estate Management Services
•   Financial Services		•   Maritime Security Services		•   Healthcare Billing and Collections
•   Wireless Communications		•   Television Programming		•   Electric Services
•   Oil and Gas Field Services		•   Biological Products		•   Industrial Molded Products
•   Non-Residential Property		•   Specialty Pharmaceuticals		•   Building Cleaning and Maintenance Services
•   Internet Advertising		•   Gambling Machine Manufacturer		•   Data Connectivity Service Company
•   IT and Business Skill Training		•   Mobile Device Management		•   Daily and Weekly Newspaper Publisher
•   Hotel Operator		•   Medical Liability Claims Factoring		•   Power Generation
•   Appliance Parts Distributor		•   Grain Mill Products		•   Residential Property
•   Real Estate Holding Company		•   Enterprise Software Company

At June 30, 2016, our portfolio was invested approximately 86.8% in senior secured loans, 8.9% in subordinated secured loans, 3.8% in unsecured notes and the remaining 0.5% in limited liability companies and equity warrants.

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TEN LARGEST PORTFOLIO INVESTMENTS AS OF JUNE 30, 2016

Our ten largest portfolio company investments at June 30, 2016, based on the combined fair value of the debt and equity securities we hold in each portfolio company, were as follows:

						At June 30, 2016
Portfolio Company		Industry				Cost				Fair Value				% of Net Asset Value
Pristine Environments, Inc.			Building Cleaning and Maintenance Services			$	10,332,961			$	10,351,928				12.83	%
Davidzon Radio, Inc.			Radio Broadcasting				8,809,981				9,650,035				11.96
PR Wireless, Inc.			Wireless Communications				8,390,580				7,706,844				9.55
Sundberg America, LLC et al.			Appliance Parts Distributor				7,247,922				7,278,684				9.02
Bioventus, LLC			Specialty Pharmaceuticals				5,954,883				6,000,000				7.44
31053RD, LLC			Real Estate Holding Company				5,935,776				6,000,000				7.44
OPS Acquisitions Limited and Ocean Protection Services Limited			Maritime Security Services				4,490,547				4,449,058				5.52
The Selling Source, LLC			Information and Data Services				4,132,707				3,965,090				4.92
AP Gaming I, LLC			Gambling Machine Manufacturer				3,915,675				3,712,405				4.60
RiceBran Technologies Corporation			Grain Mill Products				3,391,512				3,453,243				4.28
Total						$	62,602,544			$	62,567,287				77.56	%

For a description of the factors relevant to the values of the above portfolio investments for the year ended June 30, 2016, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies.”

Set forth below are descriptions of the ten largest portfolio investments as of June 30, 2016:

Pristine Environments, Inc.

Pristine Environments, Inc. provides facilities maintenance services to large commercial and government clients. Pristine Environments, Inc. manages, maintains and optimizes the performance of mission critical facilities for corporate real estate owners in nearly 100 million square feet of specialized buildings through North America. Pristine Environments, Inc. is headquartered in McLean, Virginia and has operations nationwide.

Davidzon Radio, Inc.

Davidzon Radio, Inc. engages in radio broadcasting activities through its ownership and operation of an AM radio station in the New York, New York market. Davidzon’s station is partially operated on a brokered time model whereby blocks of broadcast time are sold under fixed price, multi-year contracts to independent programmers.

PR Wireless, Inc.

PR Wireless, Inc. operates under the OpenMobile brand name and is a mobile network operator that provides wireless telephony services throughout Puerto Rico.

Sundberg America, LLC et al.

Sundberg America, LLC is a wholesale distributor of replacement parts for household appliance parts, heating, ventilation, and air conditioning HVAC parts, water filters, ice makers, and specialty cleaning products to repairmen and dealers, primarily in the Midwest. Sundberg America, LLC is headquartered in Chicago, Illinois.

Bioventus, LLC

Bioventus, LLC manufactures and distributes bone stimulation devices for customers in the United States and internationally. Bioventus, LLC is headquartered in Durham, North Carolina.

31053RD, LLC

31053RD, LLC is a senior secured credit facility which is collateralized by real estate based in New York, New York.

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OPS Acquisitions Limited and Ocean Protection Services Limited

Ocean Protection Services, Ltd. based in London, United Kingdom, is a leading maritime security services provider to the global shipping industry.

The Selling Source, LLC

The Selling Source, LLC based in Las Vegas, Nevada, is a technology-based marketing firm in the United States, especially in the marketing of financial-based products and services.

AP Gaming I, LLC

AP Gaming I, LLC is a maker of casino gaming machines headquartered in Las Vegas, Nevada.

RiceBran Technologies Corporation

RiceBran Technologies Corporation is a global leader in the acquisition, processing, and refinement of rice bran, rice bran oil and derivative products. RiceBran Technologies Corporation is headquartered in Scottsdale, Arizona.

Investment Advisory Agreement

Management Services

Full Circle Advisors serves as our investment adviser. Full Circle Advisors is an investment adviser that is registered as an investment adviser under the Advisers Act. Subject to the overall supervision of our Board of Directors, our investment adviser manages the day-to-day operations of, and provides investment advisory and management services to, Full Circle Capital. Under the terms of our Investment Advisory Agreement, Full Circle Advisors:

Full Circle Advisors’ services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.

Management Fee

Pursuant to the Investment Advisory Agreement, we have agreed to pay Full Circle Advisors a fee for investment advisory and management services consisting of two components — a base management fee and an incentive fee.

For the periods commencing on April 1, 2015 and ending on June 30, 2015 and commencing on July 1, 2015 and ending on June 30, 2016, Full Circle Advisors had agreed to waive the portion of the base management fees and incentive fees that Full Circle Advisors would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for us to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then declared by our Board of Directors; however, on February 11, 2016, our Board of Directors authorized the termination of Full Circle Advisors’ management fee and incentive fee waiver, effective as of January 1, 2016, as part of the strategic process. Full Circle Advisors will not be entitled to recoup any amounts previously waived pursuant to this agreement.

The base management fee is calculated at an annual rate of 1.75% of our gross assets, as adjusted. For services rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets, as adjusted, at

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the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be appropriately pro-rated. Our investment adviser waived the portion of the base management fee that exceeded 1.50% of Full Circle Capital’s gross assets, as adjusted, from the time we commenced operations to August 31, 2011, when such waiver expired.

The incentive fee has two parts. The first part of the incentive fee is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to Full Circle Service Company, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 1.75% base management fee. We pay Full Circle Advisors an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

The following is a graphical representation of the calculation of the income-related portion of the incentive fee:

Quarterly Incentive Fee Based on Net Investment Income
 
Pre-incentive fee net investment income
 
(expressed as a percentage of the value of net assets)

Percentage of pre-incentive fee net investment income allocated to Full Circle Advisors

These calculations are appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter. You should be aware that a rise in the general

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level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase of the amount of incentive fees payable to our investment adviser with respect to pre-incentive fee net investment income.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees with respect to each of the investments in our portfolio. For accounting purposes only, in order to reflect the theoretical capital gains incentive fee that would be payable for a given period as if all unrealized gains were realized, we will accrue a capital gains incentive fee based upon realized capital gains and losses during the current calendar year through the end of the period, plus any unrealized capital appreciation and depreciation as of the end of the period. It should be noted that a fee so calculated and accrued would not necessarily be payable under the Investment Advisory Agreement, and may never be paid based upon the computation of capital gains incentive fees in subsequent periods.

The Company may enter into swap agreements to sell all or a portion of the economics, such as the right to receive all or a portion of the dividends, interest, capital appreciation or principal payments to which we may be entitled, with respect to certain debt or equity investments if we believe it may be appropriate to reduce our risk exposure to a specific portfolio company or we can achieve a higher overall return on our invested capital.

Full Circle does not currently intend to pay an income incentive fee or a capital gains incentive fee based on income or gains derived from swaps or other derivatives.

Full Circle Advisors has not taken any incentive fees with respect to any swaps or derivatives to date. For purposes of computing the capital gains incentive fee, Full Circle Advisors will become entitled to a capital gains incentive fee only upon the termination or disposition of any swaps or derivatives, at which point all net gains and losses of the underlying loans constituting the reference assets of the swaps or derivatives, will be realized. For purposes of computing our income incentive fee, Full Circle Advisors will not be entitled to a subordinated incentive fee with respect to swaps or derivatives. Any unrealized appreciation on such investments, if any, will be reflected in total assets in our consolidated balance sheet and included in the computation of our base management fee.

All such swaps or derivatives will be reflected as portfolio investments and any resulting gain or loss will be reflected in Full Circle Capital’s income statements. While the investment advisory agreement with Full Circle Advisors neither includes nor contemplates the inclusion of net unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of the AICPA Technical Practice Aid for investment companies, we will accrue capital gains incentive fees on unrealized gains. This accrual will reflect the incentive fees that would be payable to Full Circle Advisors if our entire investment portfolio was liquidated at its fair value as of the balance sheet date even though Full Circle Advisors will not be entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

For purposes of the asset coverage ratio test applicable to us as a BDC, we will treat the outstanding notional amount of any swaps or derivatives, less the total amount of cash collateral posted under any swaps or derivatives we hold (if any), as a senior security for the life of that instrument. We may, however, accord different treatment to any such swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC.

Further, for purposes of Section 55(a) under the 1940 Act, we will treat each loan underlying any swaps or derivatives as a qualifying asset if the obligor on such loan is an eligible portfolio company and as a non-qualifying asset if the obligor is not an eligible portfolio company. We may, however, accord different treatment to any swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC. Incentive fees would increase if, and to the extent that, we

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earn greater interest income through our investments in portfolio companies or realize additional capital gains upon the sale of warrants or other equity investments in such companies.

Examples of Quarterly Incentive Fee Calculation

Example 1: Income Related Portion of Incentive Fee*:

Alternative 1:

Assumptions

Investment income (including interest, dividends, fees, etc.) = 1.25%
Hurdle rate⁽¹⁾ = 1.75%
Management fee⁽²⁾ = 0.4375%
Other expenses (legal, accounting, transfer agent, etc.)⁽³⁾ = 0.20%

Pre-incentive fee net investment income
  (investment income – (management fee + other expenses)) = 0.6125%

Pre-incentive net investment income does not exceed hurdle rate, therefore there is no incentive fee.

Alternative 2:

Assumptions

Investment income (including interest, dividends, fees, etc.) = 2.70%
Hurdle rate⁽¹⁾ = 1.75%
Management fee⁽²⁾ = 0.4375%
Other expenses (legal, accounting, transfer agent, etc.)⁽³⁾ = 0.20%

Pre-incentive fee net investment income
  (investment income – (management fee + other expenses)) = 2.0625%

Incentive fee = 100% × pre-incentive fee net investment income, subject to the “catch-up”⁽⁴⁾

   = 100% × (2.0625% – 1.75%)

   = 0.3125%

Alternative 3:

Assumptions

Investment income (including interest, dividends, fees, etc.) = 3.00%
Hurdle rate⁽¹⁾ = 1.75%
Management fee⁽²⁾ = 0.4375%
Other expenses (legal, accounting, transfer agent, etc.)⁽³⁾ = 0.20%

Pre-incentive fee net investment income
  (investment income – (management fee + other expenses)) = 2.3625%

Incentive fee = 20% × pre-incentive fee net investment income, subject to “catch-up”⁽⁴⁾

Incentive fee = 100% × “catch-up” + (20% × (pre-incentive fee net investment income – 2.1875%))

Catch-up = 2.1875% – 1.75%

   = 0.4375%

Incentive fee = (100% × 0.4375%) + (20% × (2.3625% – 2.1875%))

   = 0.4375% + (20% × 0. 175%)

   = 0.4375% + 0.035%

   = 0.4725%

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Example 2: Capital Gains Portion of Incentive Fee:

Alternative 1:

Assumptions

The capital gains portion of the incentive fee would be:

Alternative 2:

Assumptions

The capital gains incentive fee, if any, would be:

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Payment of Our Expenses

The investment committee of our investment adviser and their respective staffs, when and to the extent they are engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by Full Circle Advisors. We bear all other costs and expenses of our operations and transactions, including (without limitation):

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Our investment adviser had agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and organizational and offering expenses, in excess of 2% of our net assets for the first twelve months following the completion of the initial public offering, which occurred on August 31, 2010. This agreement was extended through September 30, 2011 and expired on such date.

Our investment adviser has agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.5% of our net assets, beginning with our fiscal quarter ending September 30, 2014 through the end of our fiscal year 2015. For our fiscal year 2016 and beyond, our investment adviser had agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.75% of our net assets.

Duration and Termination

Our Board of Directors initially approved the Investment Advisory Agreement on July 8, 2010 and most recently re-approved such agreement on June 22, 2016. Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect from year to year if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not parties to such agreement or who are not “interested persons” of any such party, as such term is defined in Section 2(a)(19) of the 1940 Act. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may also be terminated by either party without penalty upon not more than 60 days’ written notice to the other party. See “Risk Factors — Risks Relating to Our Business and Structure — Our investment adviser has the right to resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.”

Upon the completion of the Merger, the Investment Advisory Agreement with Full Circle Advisors will terminate and GECM will be GECC’s investment adviser.

Indemnification

The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Full Circle Advisors and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Full Circle Capital for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Full Circle Advisors’ services under the Investment Advisory Agreement or otherwise as an investment adviser of Full Circle Capital.

Organization of our Investment Adviser

Full Circle Advisors is a Delaware limited liability company. The principal executive offices of Full Circle Advisors are located at 102 Greenwich Avenue, 2^nd Floor, Greenwich, Connecticut 06830.

Board Approval of the Investment Advisory Agreement

Our Board of Directors determined at a meeting held on June 22, 2016 to re-approve the Investment Advisory Agreement. In its consideration of the re-approval of the Investment Advisory Agreement, the Board of Directors focused on current, historical and projected information it had received relating to, among other things:

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Based on the information reviewed and related discussions, the Board of Directors, including a majority of the non-interested directors, concluded that fees payable to Full Circle Advisors pursuant to the Investment Advisory Agreement were reasonable in relation to the services to be provided. The Board of Directors did not assign relative weights to the above factors or the other factors considered by it. In addition, the Board of Directors did not reach any specific conclusion on each factor considered, but conducted an overall analysis of these factors. Individual members of the Board of Directors may have given different weights to different factors.

For purposes of computing the capital gains incentive fee, Full Circle Advisors will become entitled to a capital gains incentive fee upon the termination or disposition of any swaps or derivatives, at which point all net gains and losses of the underlying securities constituting the reference assets of the swaps or derivatives, as well as any payments received from the counterparty to the swap will be realized. For purposes of computing our income incentive fee, Full Circle Advisors will not be entitled to an income incentive fee with respect to swaps or derivatives. Any unrealized appreciation on such investments, if any, will be reflected in total assets in our consolidated balance sheet and included in the computation of our base management fee.

All such swaps or derivatives will be reflected as portfolio investments and any resulting gain or loss will be reflected in Full Circle Capital’s income statements. While the investment advisory agreement with Full Circle Advisors neither includes nor contemplates the inclusion of net unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of the AICPA Technical Practice Aid for investment companies, we will accrue capital gains incentive fees on unrealized gains. This accrual will reflect the incentive fees that would be payable to Full Circle Advisors if our entire investment portfolio was liquidated at its fair value as of the balance sheet date even though Full Circle Advisors will not be entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

For purposes of the asset coverage ratio test applicable to us as a BDC, we will treat the outstanding notional amount of any swaps or derivatives, less the total amount of cash collateral posted under any swaps or derivatives we hold (if any), as a senior security for the life of that instrument. We may, however, accord different treatment to any such swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC. Further, for purposes of Section 55(a) under the 1940 Act, we will treat each loan underlying any swaps or derivatives as a qualifying asset if the obligor on such loan is an eligible portfolio company and as a non-qualifying asset if the obligor is not an eligible portfolio company. We may, however, accord different treatment to any swaps or derivatives in the future in accordance with any applicable new rules or interpretations adopted by the staff of the SEC. Incentive fees would increase if, and to the extent that, we earn greater interest income through our investments in portfolio companies or realize additional capital gains upon the sale of warrants or other equity investments in such companies.

Administration Agreement

Full Circle Service Company, a Delaware limited liability company, serves as our administrator. The principal executive offices of Full Circle Service Company are located at 102 Greenwich Avenue, 2^nd Floor,

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Greenwich, CT 06830. Pursuant to an Administration Agreement most recently ratified by our Board of Directors on June 22, 2016, Full Circle Service Company furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, Full Circle Service Company also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our stockholders. In addition, Full Circle Service Company assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Full Circle Service Company’s overhead in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the compensation of our Chief Financial Officer and our allocable portion of the compensation of any administrative support staff employed by the Administrator, directly or indirectly. Under the Administration Agreement, Full Circle Service Company will also provide on our behalf managerial assistance to those portfolio companies that request such assistance. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.

Full Circle Service Company also may provide administrative services to our investment adviser, Full Circle Advisors. As a result, Full Circle Advisors would reimburse Full Circle Service Company for its allocable portion of Full Circle Service Company’s overhead, including rent, the fees and expenses associated with performing compliance functions for Full Circle Advisors, and its allocable portion of the compensation of any administrative support staff. To the extent Full Circle Advisors or any of its affiliates manage other investment vehicles in the future, no portion of any administrative services provided by Full Circle Service Company to such other investment vehicles will be charged to us.

The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Full Circle Service Company and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Full Circle Capital for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Full Circle Service Company’s services under the Administration Agreement or otherwise as administrator for Full Circle Capital.

Our former Chief Financial Officer, William E. Vastardis, is the Chairman of Conifer Financial Services, LLC (“Conifer. Full Circle Service Company has engaged Conifer to provide certain administrative services to us. In exchange for providing such services, Full Circle Service Company pays Conifer an asset-based fee with a $200,000 annual minimum. This asset-based fee varies depending upon our gross assets as follows:

Gross Assets		Fee
first $150 million of gross assets		20 basis points (0.20%)
next $150 million of gross assets		15 basis points (0.15%)
next $200 million of gross assets		10 basis points (0.10%)
in excess of $500 million of gross assets		5 basis points (0.05%)

Additionally, prior to September 30, 2013, we reimbursed Full Circle Service Company for the fees charged by Conifer for the service of Mr. Vastardis as our Chief Financial Officer, Treasurer and Secretary at an annual rate of up to $250,000. Conifer agreed to cap its first year fees at $200,000 for administrative services to us, and at $100,000 for the service of Mr. Vastardis as our Chief Financial Officer, Treasurer and Secretary. These caps expired on August 31, 2011. As of September 30, 2013, Michael J. Sell became our Chief Financial Officer, Treasurer and Secretary and Mr. Vastardis no longer receives fees for such services.

License Agreement

We have entered into a license agreement with Full Circle Advisors pursuant to which Full Circle Advisors has agreed to grant us a non-exclusive, royalty-free license to use the name “Full Circle.” Under

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this agreement, we have a right to use the Full Circle name for so long as the Investment Advisory Agreement with Full Circle Advisors is in effect. Other than with respect to this limited license, we will have no legal right to the “Full Circle” name.

Staffing

We do not currently have any employees. Mr. Stuart, our Chairman, and Mr. Felton, our Chief Executive Officer and President, each serve as a managing member of our investment adviser, Full Circle Advisors. The services of Mr. Sell, our Chief Financial Officer, Secretary, and Treasurer, are provided by Full Circle Service Company in accordance with the terms of the Administration Agreement. Salvatore Faia, our Chief Compliance Officer, is the President of Vigilant Compliance Services and performs his function under the terms of an agreement between Full Circle Service Company and Vigilant Compliance Services.

Our day-to-day investment operations are managed by Full Circle Advisors. Full Circle Advisors’ investment committee currently consists of Messrs. Stuart, Felton and Deery, its experienced senior investment professionals. Full Circle Advisors may hire additional investment professionals, based upon its needs. See “Business — Investment Advisory Agreement.”

Competition

We compete for investments with other business development companies and investment funds (including private equity funds, mezzanine funds and small business investment companies), as well as traditional financial services companies such as commercial banks and other sources of funding. Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles, such as hedge funds, those entities have begun to invest in areas they have not traditionally invested in, including making investments in lower mid-sized companies. As a result of these new entrants, competition for investment opportunities in lower mid-sized companies may intensify. Many of these entities have greater financial and managerial resources than we do. We believe we are able to compete with these entities primarily on the basis of the experience and contacts of our investment adviser, our responsive and efficient investment analysis and decision-making processes, the investment terms we offer, and our willingness to make smaller investments.

We believe that certain of our competitors will make first and second lien loans with interest rates and returns that are comparable to or lower than the rates and returns that we target. Therefore, we do not seek to compete solely on the interest rates and returns that we offer to potential portfolio companies. For additional information concerning the competitive risks we face, see “Risk Factors — Risk Relating to Our Business and Structure — We may face increasing competition for investment opportunities.”

Securities Exchange Act Reports

We maintain a website at www.fccapital.com. The information on our website is not incorporated by reference in this annual report on Form 10-K.

We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.

Regulation

As a business development company, we are regulated by the 1940 Act. A business development company must be organized in the United States for the purpose of investing in or lending to primarily private companies and making managerial assistance available to them. A business development company may use capital provided by public stockholders and from other sources to make long-term, private investments in businesses. A business development company provides stockholders the ability to retain the liquidity of a publicly traded stock while sharing in the possible benefits, if any, of investing in primarily privately owned companies.

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We may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company unless authorized by vote of a majority of the outstanding voting securities, as required by the 1940 Act. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company. We do not anticipate any substantial change in the nature of our business.

As with other companies regulated by the 1940 Act, a business development company must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not interested persons, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the business development company. Furthermore, as a business development company, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

As a business development company, we are generally required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 200% after each issuance of senior securities. We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

As a business development company, we are not generally permitted to invest in any portfolio company in which our investment adviser or any of its affiliates currently have an investment or to make any co-investments with our investment adviser or its affiliates without an exemptive order from the SEC, subject to certain exceptions.

We are not generally able to sell our common stock at a price below net asset value per share. See “Risk Factors — Risks Relating to our Business and Structure — Regulations governing our operation as a business development company affect our ability to raise additional capital and the way in which we do so. As a business development company, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.” We may, however, sell our common stock at a price below net asset value per share (i) in connection with a rights offering to our existing stockholders, (ii) with the consent of the majority of our common stockholders, or (iii) under such other circumstances as the SEC may permit. For example, we may sell our common stock at a price below the then current net asset value of our common stock if our Board of Directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders approve our policy and practice of making such sales. We do not have stockholder approval and do not currently intend to seek stockholder approval to allow us to issue common stock at a price below net asset value per share.

We may be examined by the SEC for compliance with the 1940 Act.

As a business development company, we are subject to certain risks and uncertainties. See “Risk Factors — Risks Relating to our Business and Structure.”

Qualifying Assets

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

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Managerial Assistance to Portfolio Companies

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

Temporary Investments

Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of

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a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our gross assets constitute repurchase agreements from a single counterparty, we would not meet the diversification tests in order to qualify as a Registered Investment Company (“RIC”) for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our investment adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

Senior Securities

We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our gross assets for temporary or emergency purposes without regard to asset coverage. See “Risk Factors — We borrow money, which magnifies the potential for gain or loss on amounts invested and increases the risk of investing in us.”

Code of Ethics

We and Full Circle Advisors have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain transactions by our personnel. Our codes of ethics generally do not permit investments by our employees in securities that may be purchased or held by us. You may read and copy these codes of ethics at the SEC’s Public Reference Room in Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. In addition, each code of ethics is available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. You may also obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.

Compliance Policies and Procedures

We and our investment adviser have adopted and implemented written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and designate a chief compliance officer to be responsible for administering the policies and procedures. Salvatore Faia currently serves as our Chief Compliance Officer.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example:

The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to

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monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.

Proxy Voting Policies and Procedures

We have delegated our proxy voting responsibility to Full Circle Advisors. The Proxy Voting Policies and Procedures of Full Circle Advisors are set forth below. The guidelines will be reviewed periodically by Full Circle Advisors and our non-interested directors, and, accordingly, are subject to change. For purposes of these Proxy Voting Policies and Procedures described below, “we,” “our” and “us” refers to Full Circle Advisors.

Introduction

An investment adviser registered under the Advisers Act has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, we recognize that we must vote client securities in a timely manner free of conflicts of interest and in the best interests of our clients.

These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

Proxy Policies

We will vote proxies relating to our portfolio securities in what we perceive to be the best interest of our clients’ stockholders. We will review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by our clients. Although we will generally vote against proposals that may have a negative impact on our clients’ portfolio securities, we may vote for such a proposal if there exist compelling long-term reasons to do so.

Our proxy voting decisions will be made by the senior officers who are responsible for monitoring each of our clients’ investments. To ensure that our vote is not the product of a conflict of interest, we will require that: (1) anyone involved in the decision making process disclose to our manager any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.

Proxy Voting Records

You may obtain information about how we voted proxies by making a written request for proxy voting information to: Full Circle Advisors, LLC, 102 Greenwich Avenue, 2^nd floor, Greenwich, CT 06830.

Privacy Principles

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

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

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

Material U.S. Federal Income Tax Considerations

We have elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any income that we

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distribute to our stockholders as dividends. To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to qualify for RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses (the “Annual Distribution Requirement”).

Taxation as a Regulated Investment Company

If we:

then we will not be subject to U.S. federal income tax on the portion of our income we distribute (or are deemed to distribute) to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) to our stockholders.

We will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the “Excise Tax Avoidance Requirement”). We generally will endeavor in each taxable year to make sufficient distributions to our stockholders to avoid any U.S. federal excise tax on our earnings.

In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:

We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments issued with warrants, or carrying PIK interest or, in certain cases, increasing interest rates), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation (assuming we believe such amounts are ultimately collectable), regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash (assuming we believe such amounts are ultimately collectable), such as contractual PIK interest and deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount.

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Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. See “Regulation — Senior Securities.” Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things: (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (iv) cause us to recognize income or gain without a corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of securities is deemed to occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will not be qualifying income for purposes of the 90% gross income test described above. We will monitor its transactions and may make certain tax elections in order to mitigate the potential adverse effect of these provisions.

Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. The treatment of such gain or loss as long-term or short-term will depend on how long we held a particular warrant. Upon the exercise of a warrant acquired by us, our tax basis in the stock purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise of the warrant.

Failure to Qualify as a Regulated Investment Company

If we were unable to qualify for treatment as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates, regardless of whether we make any distributions to our stockholders. Distributions would not be required, and any distributions made in taxable years beginning before January 1, 2014 would be taxable to our stockholders as ordinary dividend income that, subject to certain limitations, may be eligible for the 15% maximum rate to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributes would be eligible for the dividends-received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain.

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Item 1A.  Risk Factors

RISK FACTORS

Investing in our securities involves a number of significant risks. In addition to the other information contained in this annual report on Form 10-K, you should consider carefully the following information before making an investment in our securities. The risks set out below are the principal risks with respect to an investment in our securities, and with respect to business development companies. They may not be the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us might also impair our operations and performance. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Relating to Our Business and Structure

Our investment portfolio is recorded at fair value, with our Board of Directors having final responsibility for overseeing, reviewing and approving, in good faith, its estimate of fair value and, as a result, there is uncertainty as to the value of our portfolio investments.

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by us in accordance with our written valuation policy, with our Board of Directors having final responsibility for overseeing, reviewing and approving, in good faith, our estimate of fair value. Typically, there will not be a public market for the securities of the privately held companies in which we invest. As a result, we value these securities quarterly at fair value based on input from management, third party independent valuation firms and our audit committee, with the oversight, review and approval of our Board of Directors.

The determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are to a certain degree, subjective and dependent on a valuation process approved by our Board of Directors. Certain factors that may be considered in determining the fair value of our investments include estimates of the collectability of the principal and interest on our debt investments and expected realization on our equity investments, as well as external events, such as private mergers, sales and acquisitions involving comparable companies. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates. Our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our investments. As a result, investors purchasing our securities based on an overstated net asset value would pay a higher price than the value of our investments might warrant. Conversely, investors selling securities during a period in which the net asset value understates the value of our investments will receive a lower price for their securities than the value of our investments might warrant.

Our process of exploring strategic alternatives and implementing strategic initiatives to enhance stockholder value may not be successful and/or provide any meaningful benefit to our stockholders.

Our common stock has been trading at a significant discount to net asset value and, as a result, has limited our ability to grow and reap the benefits of increased scale, including the ability to commit to larger hold sizes, enhanced liquidity for our stockholders and substantially increased operating leverage. As a result, we previously announced our exploration of various strategic alternatives potentially available to us. In order to maximize the types of potential strategic alternatives available to us, we opted to retain the cash proceeds received by us in connection with loan repayments and sales and have otherwise limited our origination activities. Because our investment income has declined and is expected to continue to decline in the current and subsequent quarters as a result of this change in investment strategy, our Board of Directors decided to suspend the declaration of any future distributions to our stockholders. In addition, given that our Board of Directors has chosen to pursue a strategic process which, among other things, calls for reducing the size of our investment portfolio and the resulting impact that such reduction has had and will have on the fees

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payable to our investment adviser, our Board of Directors terminated, effective January 1, 2016, our investment adviser’s management and incentive fee waiver and operating expense reimbursement obligations to ensure its continuing financial and operational viability pending the completion of the strategic process.

As a result of our review of strategic alternatives, in July 2016, we announced that we entered into the Merger Agreement with GECC providing for the Merger with GECC as the surviving entity. There is no assurance that the Merger will be consummated or, if consummated, that the Merger will result in the creation of value for stockholders of the Company. If the Merger is not completed, we will have incurred substantial expenses for which no ultimate benefit will have been received. We have incurred out-of-pocket expenses in connection with the Merger for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Merger is not completed. In addition, because we have limited our origination activities as a result of our review of various strategic alternatives, if the Merger is not consummated, we can provide no assurances that we will be able to reimplement our investment strategy, which would further adversely affect our financial condition, business and results of operations.

Our financial condition and results of operations depend on our ability to effectively manage and deploy capital.

Our ability to achieve our investment objective depends on our ability to effectively manage and deploy capital, which depends, in turn, on our investment adviser’s ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria.

Accomplishing our investment objective on a cost-effective basis is largely a function of our investment adviser’s handling of the investment process, its ability to provide competent, attentive and efficient services and our access to investments offering acceptable terms. In addition to monitoring the performance of our existing investments, our investment adviser’s investment committee may also be called upon, from time to time, to provide managerial assistance to some of our portfolio companies. These demands on their time may distract them or slow the rate of investment.

Even if we are able to grow and build upon our investment operations, any failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. The results of our operations will depend on many factors, including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial markets and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment policies and strategies as described herein, it could negatively impact our ability to pay distributions.

We may face increasing competition for investment opportunities.

We compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds and small business investment companies), as well as traditional financial services companies such as commercial banks and other sources of funding. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than us. For example, some competitors have a lower cost of capital and access to funding sources that are not available to us, including from federal government agencies through federal rescue programs such as the U.S. Department of Treasury’s Financial Stability Plan (formerly known as the Troubled Asset Relief Program) or the Small Business Administration. In addition, some of our competitors have higher risk tolerances or different risk assessments than we have. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the market for investments in lower middle-market and middle-market companies is underserved by traditional commercial banks and other financing sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC. We believe that certain of our

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competitors will make first and second lien loans with interest rates and returns that are comparable to or lower than the rates and returns that we target. Therefore, we do not seek to compete solely on the interest rates and returns that we offer to potential portfolio companies.

We are dependent upon Full Circle Advisors’ key personnel for our future success.

We depend on the diligence, skill and network of business contacts of Messrs. Stuart and Felton, who serve with Mr. Deery as members of the investment committee of Full Circle Advisors. Messrs. Stuart and Felton, together with the other dedicated senior investment professionals available to Full Circle Advisors, evaluate, negotiate, structure, close and monitor our investments. Our future success depends on the continued service of Messrs. Stuart and Felton and the other senior investment professionals available to Full Circle Advisors. We cannot assure you that unforeseen business, medical, personal or other circumstances would not lead Messrs. Stuart or Felton or any other such individual to terminate his relationship with us. The loss of Mr. Stuart, Mr. Felton or any of the other senior investment professionals who serve on Full Circle Advisors’ investment committee, could have a material adverse effect on our ability to achieve our investment objective as well as on our financial condition and results of operations. In addition, we can offer no assurance that Full Circle Advisors will continue indefinitely as our investment adviser.

The members of Full Circle Advisors’ investment committee are and may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us, and may have conflicts of interest in allocating their time. We expect that Messrs. Stuart and Felton will dedicate a significant portion of their time to the activities of Full Circle Capital; however, they may be engaged in other business activities which could divert their time and attention in the future.

Our success depends on the ability of Full Circle Advisors to attract and retain qualified personnel in a competitive environment.

Our growth requires that Full Circle Advisors retain and attract new investment and administrative personnel in a competitive market. Its ability to attract and retain personnel with the requisite credentials, experience and skills depends on several factors including, but not limited to, its ability to offer competitive wages, benefits and professional growth opportunities. Many of the entities, including investment funds (such as private equity funds and mezzanine funds) and traditional financial services companies, with which it competes for experienced personnel have greater resources than it has.

There are significant potential conflicts of interest which could impact our investment returns.

Our executive officers and directors, as well as the current and any future members of our investment adviser, Full Circle Advisors, may serve as officers, directors or principals of other entities that operate in the same or a related line of business as we do. Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations may not be in the best interests of us or our stockholders. In addition, certain members of Full Circle Advisors’ investment committee presently manage Full Circle Funding, LP, a specialty lender serving lower middle-market companies. Although the existing investment funds managed by Full Circle Funding, LP, which currently consist of the Legacy Funds, are no longer making new investments, any affiliated investment vehicle formed in the future and managed by our investment adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, Full Circle Advisors may face conflicts in allocating investment opportunities between us and such other entities. Although Full Circle Advisors will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by our investment adviser or an investment manager affiliated with our investment adviser. In any such case, when Full Circle Advisors identifies an investment, it will be forced to choose which investment fund should make the investment. Full Circle Advisors has implemented an allocation policy to ensure the equitable distribution of such investment opportunities consistent with the requirements of the 1940 Act.

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If our investment adviser forms other affiliates in the future, we may co-invest on a concurrent basis with such other affiliates, subject to compliance with applicable regulations and regulatory guidance and our allocation procedures. While we may co-invest with investment entities managed by Full Circle Advisors or its affiliates, to the extent permitted by the 1940 Act and the rules and regulations thereunder, the 1940 Act imposes significant limits on co-investment. As a result, we and Full Circle Advisors have applied for exemptive relief from the SEC under the 1940 Act, which allows additional latitude to co-invest. However, there is no assurance when, or even if, we will obtain such relief. In the event the SEC does not grant us relief, we will be limited in our ability to invest in certain portfolio companies in which Full Circle Advisors or any of its respective affiliates are investing or are invested. Even if we are able to obtain exemptive relief, we will be unable to participate in certain transactions originated by Full Circle Advisors or its respective affiliates prior to receipt of such relief.

In the course of our investing activities, we pay management and incentive fees to Full Circle Advisors and reimburse Full Circle Advisors for certain expenses it incurs. As a result, investors in our common stock invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of Full Circle Advisors will have interests that differ from those of our stockholders, giving rise to a conflict. Full Circle Advisors is not reimbursed for any performance-related compensation for its employees.

We have entered into a royalty-free license agreement with our investment adviser, pursuant to which Full Circle Advisors grants us a non-exclusive royalty-free license to use the name “Full Circle.” Under the license agreement, we have the right to use the “Full Circle” name for so long as Full Circle Advisors or one of its affiliates remains our investment adviser. In addition, we will pay Full Circle Service Company, an affiliate of Full Circle Advisors, our allocable portion of overhead and other expenses incurred by Full Circle Service Company in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the compensation of our Chief Financial Officer and any administrative support staff. These arrangements create conflicts of interest that our Board of Directors must monitor.

In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions. In order to ensure that we do not engage in any prohibited transactions with any persons affiliated with us, we have implemented certain policies and procedures whereby our executive officers screen each of our transactions for any possible affiliations between the proposed portfolio investment, us, companies controlled by us and our employees and directors. We will not enter into any agreements unless and until we are satisfied that doing so will not raise concerns under the 1940 Act or, if such concerns exist, we have taken appropriate actions to seek board review and approval or exemptive relief for such transactions. Our Board of Directors reviews these procedures on an annual basis.

We have, along with our investment adviser, also adopted Codes of Ethics which apply to, among others, our senior officers, including our Chief Executive Officer, Chairman and Chief Financial Officer, as well as every officer, director and employee of Full Circle and our investment adviser. These Codes of Ethics require that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Codes of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Codes of Ethics. As required by NASDAQ corporate governance listing standards, the Audit Committee of our Board of Directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).

There are potential conflicts of interest between us and FC Capital Investment Partners (“FCCIP”) which could impact our investment returns.

FCCIP is a multiple series private fund for which we serve as the managing member and investment adviser. Certain of our officers serve or may serve in an investment management capacity to FCCIP. As a result, investment professionals may allocate such time and attention as is deemed appropriate and necessary to carry out operations for FCCIP. In this respect, they may experience diversions of their attention from us

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and potential conflicts of interest between their work for us and their work for FCCIP in the event that the interests of FCCIP run counter to our interests.

FCCIP invests in the same or similar asset classes that we target. These investments may be made at the direction of the same individuals acting in their capacity on behalf of us and FCCIP. As a result, there may be conflicts in the allocation of investment opportunities between us and FCCIP. We may or may not participate in investments made by funds managed by us or one of our affiliates.

If FCCIP grows, we may have to register as a registered investment adviser, which would subject us to increased regulatory burdens.

Our incentive fee structure and the formula for calculating the management fee may incentivize Full Circle Advisors to pursue speculative investments, use leverage when it may be unwise to do so, or refrain from delevering when it would otherwise be appropriate to do so.

The incentive fee payable by us to Full Circle Advisors may create an incentive for Full Circle Advisors to pursue investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to our investment adviser is calculated based on a percentage of our return on invested capital. In addition, our base management fee is calculated on the basis of our gross assets, including assets acquired through the use of leverage. This may encourage our investment adviser to use leverage to increase the aggregate amount of and the return on our investments, even when it may not be appropriate to do so, and to refrain from delevering when it would otherwise be appropriate to do so. Under certain circumstances, the use of leverage may increase the Company’s likelihood of default, which would impair the value of our securities. In addition, the investment adviser will receive the incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive fee based on income, there will be no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result, the investment adviser may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

The incentive fee payable by us to our investment adviser also may induce Full Circle Advisors to invest on our behalf in instruments that have a deferred interest feature, even if such deferred payments would not provide cash necessary to enable us to pay current distributions to our stockholders. Under these investments, we would accrue interest over the life of the investment but would not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our investment fee, however, will include accrued interest. Thus, a portion of this incentive fee would be based on income that we have not yet received in cash. In addition, the “catch-up” portion of the incentive fee may encourage Full Circle Advisors to accelerate or defer interest payable by portfolio companies from one calendar quarter to another, potentially resulting in fluctuations in timing and distribution amounts.

We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest, will bear our ratable share of any such investment company’s expenses, including management and performance fees. We will also remain obligated to pay management and incentive fees to Full Circle Advisors with respect to the assets invested in the securities and instruments of other investment companies. With respect to each of these investments, each of our stockholders will bear his or her share of the management and incentive fee of Full Circle Advisors as well as indirectly bearing the management and performance fees and other expenses of any investment companies in which we invest.

In addition, if we repurchase our debt securities that are outstanding and such repurchase results in our recording a net gain on the extinguishment of debt for financial reporting and tax purposes, such net gain will be included in our pre-incentive fee net investment income for purposes of determining the income incentive fee payable to our investment adviser under the Investment Advisory Agreement.

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A general increase in interest rates will likely have the effect of making it easier for our investment adviser to receive incentive fees, without necessarily resulting in an increase in our net earnings.

Given the structure of our Investment Advisory Agreement with Full Circle Advisors, any general increase in interest rates will likely have the effect of making it easier for Full Circle Advisors to meet the quarterly hurdle rate for payment of income incentive fees under the Investment Advisory Agreement without any additional increase in relative performance on the part of our investment adviser. In addition, in view of the catch-up provision applicable to income incentive fees under the Investment Advisory Agreement, our investment adviser could potentially receive a significant portion of the increase in our investment income attributable to such a general increase in interest rates. If that were to occur, our increase in net earnings, if any, would likely be significantly smaller than the relative increase in our investment adviser’s income incentive fee resulting from such a general increase in interest rates.

Our investment adviser has the right to resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

Our investment adviser has the right, under the Investment Advisory Agreement, to resign at any time upon not more than 60 days’ written notice, whether we have found a replacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.

Our investment adviser may not be able to achieve the same or similar returns as those achieved by Messrs. Stuart and Felton while they were employed at prior positions.

Although in the past Messrs. Stuart and Felton held senior positions at a number of investment firms, their track record and achievements are not necessarily indicative of future results that will be achieved by our investment adviser. We cannot assure you that we will be able to achieve the results realized by prior vehicles managed by Messrs. Stuart or Felton.

Any failure on our part to maintain our status as a BDC would reduce our operating flexibility.

We have elected to be regulated as a BDC under the 1940 Act. The 1940 Act imposes numerous constraints on the operations of BDCs. For example, BDCs are required to invest at least 70% of their gross assets in specified types of securities, primarily in private companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants. In addition, upon approval of a majority of our stockholders, we may elect to withdraw our status as a BDC. If we decide to withdraw our election, or if we otherwise fail to qualify, or maintain our qualification, as a BDC, we may be subject to substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with such regulations would significantly decrease our operating flexibility, and could significantly increase our costs of doing business.

Regulations governing our operation as a BDC affect our ability to raise additional capital and the way in which we do so. As a business development company, the necessity of raising additional capital may expose us to risks, including the typical risks associated with leverage.

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, referred to collectively as “senior securities,” up to the maximum amount permitted by the

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1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders. Furthermore, as a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss. As of June 30, 2016, we had approximately $33.6 million principal amount of 8.25% Notes due 2020 (the “Notes”) outstanding. As of June 30, 2016, we did not have any outstanding borrowings under our senior secured credit facility (the “Credit Facility”) with Santander Bank, N.A. (“Santander Bank”). If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.

We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock if our Board of Directors determines that such sale is in the best interests of Full Circle Capital and its stockholders, and our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and you may experience dilution.

We borrow money, which magnifies the potential for gain or loss on amounts invested and increases the risk of investing in us.

The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our securities. We borrow from and issue senior debt securities to banks, insurance companies and/or other lenders. Holders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affect our ability to make distribution payments on our common stock. We may enter into swap agreements to sell all or a portion of the economics with respect to certain investments from time to time, which may be viewed as leverage under the 1940 Act. Leverage is generally considered a speculative investment technique. Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover, as the management fee payable to our investment adviser, Full Circle Advisors, is payable based on our gross assets, including those assets acquired through the use of leverage, Full Circle Advisors has a financial incentive to incur leverage which may not be consistent with our stockholders’ interests. In addition, our common stockholders bear the burden of any increase in our expenses as a result of leverage, including any increase in the management fee payable to Full Circle Advisors.

As a business development company, we are generally required to meet an asset coverage ratio, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities, of at least 200% after each issuance of senior securities. If this ratio declines below 200%, we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make distributions. The amount of leverage that we employ depends on our investment adviser’s and our Board of Directors’ assessment of market and other factors at the time of any proposed borrowing.

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In addition, the Credit Facility and Notes impose, and any other debt facility into which we may enter would likely impose, financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code. For example, the Credit Facility requires us to maintain a minimum balance sheet leverage ratio and subjects us to prepayment fees in certain circumstances.

Pending legislation may allow us to incur additional leverage.

As a BDC, under the 1940 Act we generally are not permitted to incur indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). Recent legislation introduced in the U.S. House of Representatives, if passed, would modify this section of the 1940 Act and increase the amount of debt that BDCs may incur by modifying the asset coverage percentage from 200% to 150%. As a result, we may be able to incur additional indebtedness in the future and therefore your risk of an investment may increase.

An inability to raise capital or access debt financing could negatively affect our business.

We will need to periodically access the capital markets to raise cash to fund new investments. We have elected to be treated as a RIC and operate in a manner so as to qualify for the U.S. federal income tax treatment applicable to RICs. Among other things, in order to maintain our RIC status, we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of our investment company taxable income (as defined by the Code), and, as a result, such distributions will not be available to fund investment originations. As a result, we must continue to borrow from financial institutions and issue additional securities to fund our growth. Unfavorable economic or capital market conditions may increase our funding costs, limit our access to the capital markets or could result in a decision by lenders not to extend credit to us. Over the past several years, the capital markets and the credit markets have been experiencing extreme volatility and disruption and, accordingly, there has been and will continue to be uncertainty in the financial markets in general. An inability to successfully access the capital or credit markets for either equity or debt could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any.

If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the 1940 Act. Any such failure, or a tightening or general disruption of the credit markets, would affect our ability to issue senior securities, including borrowings, and pay distributions, which could materially impair our business operations.

We may experience fluctuations in our quarterly results.

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

Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and privileges to its owners.

Under Maryland General Corporation Law and our charter, our Board of Directors is authorized to classify and reclassify any authorized but unissued shares of stock into one or more classes of stock, including preferred stock. Prior to issuance of shares of each class or series, the Board of Directors will be required by Maryland law and our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the Board of Directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or

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otherwise be in their best interest. The cost of any such reclassification would be borne by our common stockholders. Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock. For example, holders of preferred stock would vote as a separate class from the holders of common stock on a proposal to cease operations as a business development company. In addition, the 1940 Act provides that holders of preferred stock are entitled to vote separately from holders of common stock to elect two preferred stock directors. We currently have no plans to issue preferred stock. The issuance of preferred shares convertible into shares of common stock may also reduce the net income and net asset value per share of our common stock upon conversion, provided, that we will only be permitted to issue such convertible preferred stock to the extent we comply with the requirements of Section 61 of the 1940 Act, including obtaining common stockholder approval. These effects, among others, could have an adverse effect on your investment in our common stock.

Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.

Our Board of Directors has the authority to modify or waive our investment objective, current operating policies, investment criteria and strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay you distributions and cause you to lose all or part of your investment.

We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code.

Although we have elected to be treated as a RIC under Subchapter M of the Code, no assurance can be given that we will be able to continue to qualify for and maintain RIC status. To maintain RIC tax treatment under the Code, we must meet the following annual distribution, income source and asset diversification requirements.

The annual distribution requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirement. If we are unable to make the required distributions, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

The income source requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from the sale of stock or securities or similar sources.

The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. Failure to meet those requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses. Further, the illiquidity of our investments may make them difficult or impossible to dispose of in a timely manner.

If we fail to qualify for RIC tax treatment for any reason and become subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

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

We intend to make distributions on a monthly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. In addition, due to the asset

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coverage test applicable to us as a business development company, we may be limited in our ability to make distributions. See “Business — Regulation.”

Any amounts that we use to service our indebtedness will not be available for distributions to our common stockholders.

Although we have no current intention to do so, we may in the future issue debt securities and/or borrow money from banks or other financial institutions, referred to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted, as a registered closed-end management investment company, to issue senior securities representing indebtedness so long as our asset coverage ratio with respect thereto, defined under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to our outstanding senior securities representing indebtedness, is at least 200% after each issuance of such senior securities. If the value of our assets declines, we may be unable to satisfy these tests. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when doing so may be disadvantageous. Any amounts that we use to service our indebtedness would not be available for distributions to our common stockholders.

We may have difficulty paying our required distributions under applicable tax rules if we recognize income before or without receiving cash representing such income.

For federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants in connection with the origination of a loan or possibly in other circumstances, or contractual PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such original issue discounts or increases in loan balances as a result of contractual PIK arrangements will be included in income before we receive any corresponding cash payments. We are also required to include in income certain other amounts that we do not receive in cash.

Since, in certain cases, we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the annual distribution requirement necessary to maintain RIC tax treatment under the Code. In addition, since our incentive fee is payable on our income recognized, rather than cash received, we may be required to pay advisory fees on income before or without receiving cash representing such income. The base management fee we pay to our adviser may also increase in the event that the accrual of non-cash income results in an increase to the fair value of our investments. Accordingly, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities in order to pay advisory fees. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax. For additional discussion regarding the tax implications of a RIC, please see “Business — Material U.S. Federal Income Tax Considerations.”

We may in the future choose to pay distributions in our own stock, in which case stockholders may be required to pay tax in excess of the cash they receive.

We may distribute taxable distributions that are payable in part in our stock. Under certain applicable provisions of the Code and the Treasury regulations, distributions payable in cash or in shares of stock at the election of stockholders may be treated as taxable dividends. The Internal Revenue Service has issued private rulings indicating that this rule will apply even if the total amount of cash that may be distributed is limited to no more than 20% of the total distribution. Under these rulings, if too many stockholders elect to receive their distributions in cash, each such stockholder would receive a pro rata share of the total cash to be distributed and would receive the remainder of their distribution in shares of stock. If we decide to make any distributions consistent with these rulings that are payable in part in our stock, taxable stockholders receiving such distributions will be required to include the full amount of the distribution (whether received in cash, our stock, or combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly designated as a capital gain distribution) to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it

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receives as a distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions, it may put downward pressure on the trading price of our stock.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We and our portfolio companies are subject to applicable local, state and federal laws and regulations, including, without limitation, federal immigration laws and regulations. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. Such changes could result in material differences to the strategies and plans set forth herein and may result in our investment focus shifting from the areas of expertise of our investment adviser’s investment committee to other types of investments in which the investment committee may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.

We incur significant costs as a result of being a publicly traded company.

As a publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, and other rules implemented by the Securities and Exchange Commission.

Terrorist attacks, acts of war or natural disasters may affect any market for our common stock, impact the businesses in which we invest and harm our business, operating results and financial condition.

Terrorist acts, acts of war or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks and natural disasters are generally uninsurable.

Uncertainty about the financial stability of the United States and of several countries in the European Union (EU) and China could have a significant adverse effect on our business, financial condition and results of operations.

Due to federal budget deficit concerns, S&P Global Ratings (formerly Standard and Poor’s Rating Services) downgraded the federal government’s credit rating from AAA to AA+ for the first time in history on August 5, 2011. Further, Moody’s and Fitch had warned that they may downgrade the federal government’s credit rating. Further downgrades or warnings by S&P Global Ratings (formerly Standard and Poor’s Rating Services) or other rating agencies, and the United States government’s credit and deficit concerns in general, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased U.S. government credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock.

In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt in Greece, Ireland, Italy, Portugal and Spain, which created concerns about the

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ability of these nations to continue to service their sovereign debt obligations. While the financial stability of many such countries has improved significantly, risks resulting from any future debt crisis in Europe or any similar crisis could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these countries and the financial condition of European financial institutions. In July and August 2015, Greece reached agreements with its international creditors for bailouts that provide aid in exchange for austerity terms that had previously been rejected by Greek voters. Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors. We cannot assure you that market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not impact the global economy, and we cannot assure you that assistance packages will be available, or if available, be sufficient to stabilize countries and markets in Europe or elsewhere affected by a financial crisis. To the extent uncertainty regarding any economic recovery in Europe negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected.

In the second quarter of 2015, stock prices in China experienced a significant drop, resulting primarily from continued sell-off of shares trading in Chinese markets. In August 2015, Chinese authorities sharply devalued China’s currency. These market and economic disruptions affected, and these or similar market conditions may in the future affect, the U.S. capital markets, which could adversely affect our business.

In October 2014, the Federal Reserve announced that it was concluding its bond-buying program, or quantitative easing, which was designed to stimulate the economy and expand the Federal Reserve’s holdings of long-term securities, suggesting that key economic indicators, such as the unemployment rate, had showed signs of improvement since the inception of the program. It is unclear what effect, if any, the conclusion of the Federal Reserve’s bond-buying program will have on the value of our investments. However, it is possible that, without quantitative easing by the Federal Reserve, these developments, along with the United States government’s credit and deficit concerns and the European sovereign debt crisis, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. Additionally, in July 2015, the Federal Reserve reaffirmed its view that the current target range for the federal funds rate was appropriate based on current economic conditions and that it would be appropriate to raise the rate when economic conditions improve further. However, if key economic indicators, such as the unemployment rate or inflation, do not progress at a rate consistent with the Federal Reserve’s objectives, the target range for the federal funds rate may increase and cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.

A failure or the perceived risk of a failure to raise the statutory debt limit of the United States could have a material adverse effect on our business, financial condition and results of operations.

As has been widely reported, the United States Treasury Secretary has stated that the federal government may not be able to meet its debt payments in the relatively near future unless the federal debt ceiling is raised. If legislation increasing the debt ceiling is not enacted and the debt ceiling is reached, the federal government may stop or delay making payments on its obligations. A failure by Congress to raise the debt limit would increase the risk of default by the United States on its obligations, as well as the risk of other economic dislocations.

If the U.S. government fails to complete its budget process or to provide for a continuing resolution before the expiration of the current continuing resolution, another federal government shutdown may result. Such a failure or the perceived risk of such a failure, consequently, could have a material adverse effect on the financial markets and economic conditions in the United States and throughout the world. It could also limit our ability and the ability of our portfolio companies to obtain financing, and it could have a material adverse effect on the valuation of our portfolio companies. Consequently, the continued uncertainty in the general economic environment, including the recent government shutdown and potential debt ceiling implications, as well in specific economies of several individual geographic markets in which our portfolio companies operate, could adversely affect our business, financial condition and results of operations.

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The failure in cyber security systems, as well as the occurrence of events unanticipated in the Company’s disaster recovery systems and management continuity planning could impair the Company’s ability to conduct business effectively.

The occurrence of a disaster such as a cyber attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in the Company’s disaster recovery systems, or a support failure from external providers, could have an adverse effect on the Company’s ability to conduct business and on the Company’s results of operations and financial condition, particularly if those events affect the Company’s computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of the Company’s managers were unavailable in the event of a disaster, the Company’s ability to effectively conduct its business could be severely compromised.

We depend heavily upon computer systems to perform necessary business functions. Despite the Company’s implementation of a variety of security measures, its computer systems could be subject to cyber attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, the Company may experience threats to its data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, the Company’s computer systems and networks, or otherwise cause interruptions or malfunctions in its operations, which could result in damage to the Company’s reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.

Risks Relating to Our Investments

Our investments are very risky and highly speculative, and the lower middle-market and middle-market companies we target may have difficulty accessing the capital markets to meet their future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.

We invest primarily in senior secured term loans, mezzanine debt and select equity investments issued by leveraged companies.

Senior Secured Loans.  There is a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital, and, in some circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.

Mezzanine Loans.  Our mezzanine debt investments are generally subordinated to senior loans and are generally unsecured. As such, other creditors may rank senior to us in the event of an insolvency, which could likely in many cases result in a substantial or complete loss on such investment in the case of such insolvency. This may result in an above average amount of risk and loss of principal.

Equity Investments.  When we invest in senior secured loans or mezzanine loans, we may acquire equity securities, including warrants, as well. In addition, we may invest directly in the equity securities of portfolio companies. The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

In addition, investing in lower middle-market and middle-market companies involves a number of significant risks, including:

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Investing in lower middle-market and middle-market companies involves a high degree of risk and our financial results may be affected adversely if one or more of our significant portfolio investments defaults on its loans or fails to perform as we expect.

Our portfolio consists primarily of debt and equity investments in privately owned lower middle-market and middle-market companies. Investing in lower middle-market and middle-market companies involves a number of significant risks. Typically, the debt in which we invest is not initially rated by any rating agency; however, we believe that if such investments were rated, they would be below investment grade, which are referred to as junk bonds. Compared to larger publicly owned companies, these lower middle-market and middle-market companies may be in a weaker financial position and experience wider variations in their operating results, which may make them more vulnerable to economic downturns and other business disruptions. Typically, these companies need more capital to compete; however, their access to capital is limited and their cost of capital is often higher than that of their competitors. Our portfolio companies face intense competition from larger companies with greater financial, technical and marketing resources and their success typically depends on the managerial talents and efforts of an individual or a small group of persons. Therefore, the loss of any of their key employees could affect a portfolio company’s ability to compete effectively and harm its financial condition. Further, some of these companies conduct business in regulated industries that are susceptible to regulatory changes. These factors could impair the cash flow of our portfolio companies and result in other events, such as bankruptcy. These events could limit a portfolio company’s ability to repay its obligations to us, which may have an adverse effect on the return on, or the recovery of, our investment in these businesses. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in the value of the loan’s collateral and the fair market value of the loan.

Most of the loans in which we invest are not structured to fully amortize during their lifetime. Accordingly, if a borrower has not previously pre-paid its loan to us, a significant portion of the principal amount due on such a loan may be due at maturity. As of June 30, 2016, none of the Level 3 debt instruments in our portfolio, on a fair value basis, will fully amortize prior to maturity and 54% of the Level 3 debt instruments in our portfolio, on a fair value basis, will partially amortize prior to maturity. In order to create liquidity to pay the final principal payment, borrowers typically must raise additional capital or sell their assets, which could potentially result in the collateral being sold for less than its fair market value. If they are unable to raise sufficient funds to repay us or we have not elected to enter into a new loan agreement providing for an extended maturity, the loan will go into default, which will require Full Circle Capital to foreclose on the borrower’s assets, even if the loan was otherwise performing prior to maturity. This will deprive Full Circle Capital from immediately obtaining full recovery on the loan and prevent or delay the

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reinvestment of the loan proceeds in other, more profitable investments. Moreover, there are no assurances that any recovery on such loan will be obtained.

Some of these companies cannot obtain financing from public capital markets or from traditional credit sources, such as commercial banks. Accordingly, loans made to these types of companies pose a higher default risk than loans made to companies that have access to traditional credit sources.

An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns.

We invest primarily in privately held companies. Generally, little public information exists about these companies, and we are required to rely on the ability of Full Circle Advisors’ investment committee to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. Also, privately held companies frequently have less diverse product lines and smaller market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

We invest primarily in senior secured term debt issued by lower middle-market and middle-market companies. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or in some cases senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

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.

Even though we may have structured most of our investments as secured loans, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, and based upon principles of equitable subordination as defined by existing case law, a bankruptcy court could subordinate all or a portion of our claim to that of other creditors and transfer any lien securing such subordinated claim to the bankruptcy estate. The principles of equitable subordination defined by case law have generally indicated that a claim may be subordinated only if its holder is guilty of misconduct or where the senior loan is re-characterized as an equity investment and the senior lender has actually provided significant managerial assistance to the bankrupt debtor. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering significant managerial assistance or actions to compel and collect payments from the borrower outside the ordinary course of business.

Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.

Certain loans that we make are secured by a second priority security interest in the same collateral pledged by a portfolio company to secure senior debt owed by the portfolio company to commercial banks or other traditional lenders. Often the senior lender has procured covenants from the portfolio company

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prohibiting the incurrence of additional secured debt without the senior lender’s consent. Prior to and as a condition of permitting the portfolio company to borrow money from us secured by the same collateral pledged to the senior lender, the senior lender will require assurances that it will control the disposition of any collateral in the event of bankruptcy or other default. In many such cases, the senior lender will require us to enter into an “intercreditor agreement” prior to permitting the portfolio company to borrow from us. Typically the intercreditor agreements we will be requested to execute expressly subordinate our debt instruments to those held by the senior lender and further provide that the senior lender shall control: (1) the commencement of foreclosure or other proceedings to liquidate and collect on the collateral; (2) the nature, timing and conduct of foreclosure or other collection proceedings; (3) the amendment of any collateral document; (4) the release of the security interests in respect of any collateral; and (5) the waiver of defaults under any security agreement. Because of the control we may cede to senior lenders under intercreditor agreements we may enter, we may be unable to realize the proceeds of any collateral securing some of our loans.

Capital markets have recently been in a period of disruption and instability. These market conditions have materially and adversely affected debt and equity capital markets in the United States and abroad, which had, and may in the future have, a negative impact on our business and operations.

The global capital markets have recently been in a period of disruption as evidenced by a lack of liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of certain major financial institutions. Despite actions of the United States federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. While recent indicators suggest improvement in the capital markets, we cannot provide any assurance that these conditions will not worsen. Under current conditions, we and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital. Equity capital may be difficult to raise because as a business development company we are generally not able to issue additional shares of our common stock at a price less than net asset value. In addition, our ability to incur indebtedness (including by issuing preferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 200% immediately after each time we incur indebtedness. The debt capital that will be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations.

The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments. In addition, significant changes in the capital markets, including the recent extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations.

Uncertainty relating to the LIBOR calculation process may adversely affect the value of our portfolio of the LIBOR-indexed, floating-rate debt securities.

Concerns have been publicized that some of the member banks surveyed by the British Bankers’ Association (“BBA”) in connection with the calculation of LIBOR across a range of maturities and currencies may have been under-reporting or otherwise manipulating the inter-bank lending rate applicable to them in order to profit on their derivatives positions or to avoid an appearance of capital insufficiency or adverse reputational or other consequences that may have resulted from reporting inter-bank lending rates higher than those they actually submitted. A number of BBA member banks have entered into settlements with their regulators and law enforcement agencies with respect to alleged manipulation of LIBOR, and investigations by regulators and governmental authorities in various jurisdictions are ongoing.

Actions by the BBA, regulators or law enforcement agencies may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of such potential changes may adversely affect the market for LIBOR-based securities, including our portfolio of LIBOR-indexed, floating-rate debt securities. In

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addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based securities or the value of our portfolio of LIBOR-indexed, floating-rate debt securities.

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

In recent years, the economy was in the midst of a recession and in a difficult part of a credit cycle. Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required to record the values of our investments. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments at fair value. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided significant managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt holding and subordinate all or a portion of our claim to that of other creditors.

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

Generally, we invest in companies whose securities are not publicly traded, and whose securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. Our investments will usually be subject to contractual or legal restrictions on resale or are otherwise illiquid because there is usually no established trading market for such investments. The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.

Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to: (i) increase or maintain in whole or in part our equity ownership percentage; (ii) exercise warrants, options or convertible securities that were acquired in the original or a subsequent financing; or (iii) attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. We will have the discretion to make any follow-on investments, subject to the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we do not want to increase our concentration of risk, we prefer other opportunities, we are subject to business development company requirements that would prevent such follow-on investments, or the follow-on investment would affect our RIC tax status.

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Our portfolio may lack diversification among portfolio companies which may subject us to a risk of significant loss if one or more of these companies defaults on its obligations under any of its debt instruments.

Our portfolio may hold a limited number of portfolio companies. For example, the 5 largest investments in our portfolio as of June 30, 2016 represented 50% of the portfolio assets of the Company. Beyond the asset diversification requirements associated with our qualification as a RIC under the Code, we do not have fixed guidelines for diversification, and our investments may be concentrated in relatively few companies. As our portfolio is less diversified than the portfolios of some larger funds, we are more susceptible to failure if a single loan fails. Similarly, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment.

Our portfolio may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated.

Our portfolio may be concentrated in a limited number of industries. A downturn in any particular industry in which we are invested could significantly impact the aggregate returns we realize.

As of June 30, 2016, our investments in the business services industry (such as companies that provide services related to data and information, information retrieval, asset recovery, and energy efficiency services) represented approximately 24% of the fair value of our portfolio, our investments in the media industry represented approximately 15% of the fair value of our portfolio, and our investments in the healthcare industry represented approximately 11% of the fair value of our portfolio. In addition, we may from time to time invest a relatively significant percentage of our portfolio in industries we do not necessarily target. If an industry in which we have significant investments suffers from adverse business or economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financial position and results of operations.

Because we generally do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.

We generally do not hold controlling equity positions in our portfolio companies. As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments.

Defaults by our portfolio companies will harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. If any of these occur, it could materially and adversely affect our operating results and cash flows.

Any unrealized losses we experience on our loan portfolio may be an indication of future realized losses, which could reduce our income available for distribution.

As a business development company, we are required to carry our investments at fair value as determined in good faith by our Board of Directors. Decreases in the fair values of our investments are recorded as unrealized depreciation. Any unrealized losses in our loan portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans. This could result in realized losses in the future and ultimately in reductions of our income available for distribution in future periods.

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Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments or repay our Credit Facility, depending on future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock. The investments in our portfolio have historically experienced only limited prepayments.

Because we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.

Because we borrow money to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in the event we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with equity and/or long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Our investment adviser does not have significant experience with utilizing these techniques and did not implement these techniques to any significant extent with the Legacy Portfolio. If we do not implement these techniques properly, we could experience losses on our hedging positions, which could be material.

You should also be aware that a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase in the amount of incentive fees payable to our investment adviser with respect to our pre-incentive fee net investment income.

We may not realize gains from our equity investments.

Certain investments that we may make include warrants or other equity securities. Investments in equity securities involve a number of significant risks, including the risk of further dilution as a result of additional issuances, inability to access additional capital and failure to pay current distributions. Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited voting rights. In addition, we may from time to time make non-control, equity investments in portfolio companies. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We often seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these puts rights for the consideration provided in our investment documents if the issuer is in financial distress.

Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.

Our investment strategy contemplates possible investments in debt securities of foreign companies. Our investment adviser does not have significant experience with investments in foreign securities and did not acquire such investments to any significant extent in connection with its management of the Legacy Portfolio.

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Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.

Although all of our investments are U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or that if we do, such strategies will be effective.

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

If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.

Risks Related to the Merger Agreement with Great Elm Capital Corp.

The announcement and pendency of the proposed Merger could adversely affect our business, financial results and operations.

The announcement and pendency of the proposed Merger could cause disruptions in and create uncertainty surrounding our business, including affecting our relationships with our existing and future borrowers and Full Circle Advisors’ investment professionals, which could have a significant negative impact on our future revenues and results of operations, regardless of whether the Merger is completed. In particular, Full Circle Advisors could potentially lose important personnel as a result of the departure of personnel who decide to pursue other opportunities in light of the proposed transaction. Existing borrowers may refinance their loans with us and Full Circle Advisors could also potentially lose and may have difficulty in hiring new personnel. In addition, we have diverted, and will continue to divert, significant management resources towards the completion of the Merger, which could have a significant negative impact on our future revenues and results of operations.

We are also subject to restrictions on the conduct of our business prior to the completion of the Merger as provided in the Merger Agreement, generally requiring us to conduct our business only in the ordinary course and subject to specific limitations, including, among other things, certain restrictions on our ability to make certain capital expenditures, investments and acquisitions, sell, transfer or dispose of our assets, amend our organizational documents and enter into or modify certain contracts. These restrictions could prevent us from pursuing otherwise attractive business opportunities, industry developments and future opportunities and may otherwise have a significant negative impact on our future revenues and results of operations.

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GECC may be unable to realize the benefits anticipated by the Merger, including estimated cost savings and synergies, or it may take longer than anticipated to achieve such benefits.

The realization of benefits anticipated as a result of the Merger will depend in part on the integration of our investment portfolio with GECC’s and the integration of our business with GECC’s. There can be no assurance that our investment portfolio or business can be operated profitably or integrated successfully into GECC’s in a timely fashion or at all. The dedication of management resources to such integration may detract attention from the day-to-day business of GECC and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts. Such effects including, but not limited to, incurring unexpected costs or delays in connection with such integration and failure of our investment portfolio to perform as expected, could have a material adverse effect on the financial results of GECC.

GECC also expects to achieve cost savings and synergies from the Merger when the two companies have fully integrated their portfolios. It is possible that the estimates of the potential cost savings and synergies could turn out to be incorrect. In addition, the cost savings and synergies estimates also assume GECC’s ability to refinance our debt and to combine the investment portfolios and businesses of GECC and the Company in a manner that permits those cost savings and synergies to be fully realized. If the estimates turn out to be incorrect or GECC is not able to successfully refinance or pay down our debt and combine the investment portfolios and businesses of the two companies, the anticipated cost savings and synergies may not be fully realized, may take longer to realize than expected or may not be realized at all.

Termination of the Merger Agreement could negatively impact the Company.

If the Merger Agreement is terminated, there may be various consequences, including:

Under certain circumstances, we are obligated to pay GECC a termination fee upon termination of the Merger Agreement.

No assurance can be given that the Merger will be completed. The Merger Agreement provides for the payment by us to GECC of a termination fee of $3.0 million if the Merger is terminated under certain circumstances. In addition, the Merger Agreement also provides for the reimbursement to GECC of its out of pocket expenses, up to a maximum of $1.0 million, if the Merger Agreement is terminated under certain circumstances. See “Item 1. Business — Strategic Transaction” for a discussion of the circumstances that could result in the payment of a termination fee.

The Merger Agreement limits our ability to pursue alternatives to the Merger.

The Merger Agreement contains provisions that limit our ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of the Company. These provisions, which are typical for transactions of this type, and include a $3.0 million termination fee payable under certain circumstances, might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share price than that proposed in the Merger or might result in a potential competing acquiror proposing to pay a lower per share price to acquire the Company than it might otherwise have proposed to pay.

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The Merger is subject to closing conditions, including stockholder approval that, if not satisfied or waived, will result in the Merger not being completed, which may result in material adverse consequences to our business and operations.

The Merger is subject to closing conditions, including the approval of our stockholders that, if not satisfied, will prevent the Merger from being completed. The closing condition that our stockholders approve the Merger may not be waived under applicable law and must be satisfied for the Merger to be completed. Under certain circumstances, we may be obligated to pay an expense reimbursement to GECC in the amount of up to $1.0 million or a termination fee in the amount of $3.0 million. The payment of such expenses or termination fee could have a material adverse impact on our business and operations. In addition to the required approval of our stockholders, the Merger is subject to a number of other conditions beyond our control that may prevent, delay or otherwise materially adversely affect its completion. Neither we nor GECC can predict whether and when these other conditions will be satisfied.

Certain persons related to the Company have interests in the Merger that differ from the interests of our stockholders.

Certain persons related to the Company have financial interests in the Merger that are different from, and/or in addition to, the interests in our stockholders. In particular, Great Elm Capital Management, LLC, the investment adviser to GECC, is expected to retain Gregg Felton, our chief executive officer, and John Stuart, our chairman, both of whom collectively control Full Circle Advisors, as consultants subsequent to completion of the Merger in view of their collective knowledge of our current portfolio investments and Mr. Stuart will serve as a member of GECC’s board of directors. In addition, Michael Sell, our chief financial officer, has agreed to be retained by Great Elm Capital Management, LLC and serve as GECC’s chief financial officer, treasurer and secretary subsequent to completion of the Merger.

Full Circle will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Uncertainty about the effect of the Merger may have an adverse effect on Full Circle and, consequently, on the combined company following completion of the Merger. These uncertainties may impair Full Circle’s ability to retain and motivate key personnel until the Merger is consummated and could cause those that deal with Full Circle to seek to change their existing business relationships with Full Circle. Retention of certain employees may be challenging during the pendency of the Merger, as certain employees may experience uncertainty about their future following completion of the Merger. If key Full Circle employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain affiliated with the combined company following completion of the Merger, the combined company’s business following the Merger could be harmed. In addition, the Merger Agreement restricts Full Circle from taking actions that it might otherwise consider to be in its best interests, including, but not limited to, making new investments. These restrictions may prevent Full Circle from pursuing certain business opportunities that may arise prior to the completion of the Merger.

You will experience a reduction in percentage ownership and voting power in the combined company as a result of the Merger.

You will experience a substantial reduction in your percentage ownership interests and effective voting power in respect of the combined company relative to your percentage ownership interests in the Company prior to the Merger. Consequently, you should expect to exercise less influence over the management and policies of the combined company following the Merger than you currently exercise over the management and policies of the Company.

Litigation challenging the Merger could prevent or delay the completion of the Merger or result in rescission of the Merger, and if the Merger is completed, the surviving corporation may face additional risks.

We are aware that two lawsuits have been filed challenging the Merger. The first action alleges that our directors breached their fiduciary duties by failing properly to disclose certain purportedly material information relating to the Merger in the registration statement filed with the SEC with respect to the Merger. The plaintiff

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seeks, among other relief, a preliminary and permanent injunction enjoining the Merger, rescission or rescissory damages in the event the Merger is consummated, an order directing the defendants to account for damages, and costs and fees in connection with the lawsuit. The second action alleges that Full Circle Capital, Full Circle’s directors, GECC and MAST Capital Management, LLC violated the federal securities laws by failing properly to disclose certain purportedly material information relating to the Merger in the registration statement filed with the SEC with respect to the Merger. The plaintiff seeks, among other relief, a preliminary and permanent injunction enjoining the Merger, rescission or rescissory damages in the event the Merger is consummated, an order directing the defendants to issue a new registration statement, declaring that defendants have violated the federal securities laws, and costs and fees in connection with the lawsuit. These legal proceedings could delay or prevent the Merger from becoming effective within the agreed upon timeframe or at all. We cannot predict the eventual outcome of these proceedings and the ultimate outcome of such proceedings could, upon completion of the Merger, cause rescission of the Merger or may be material to the results of operations, cash flows or financial condition of the surviving corporation. It is possible that third parties could try to seek to impose liability against the surviving corporation in connection with this matter or other potential legal proceedings.

Risks Relating to Our Common Stock

Shares of closed-end investment companies, including BDCs, may trade at a discount to their net asset value.

Shares of closed-end investment companies, including BDCs, may trade at a discount from net asset value. This characteristic of closed-end investment companies and business development companies is separate and distinct from the risk that our net asset value per share may decline. Our common stock is currently trading below net asset value and we cannot predict whether, in the future, our common stock will trade at, above, or below net asset value.

Our common stock price may be volatile and may decrease substantially, and our stockholders may lose money in connection with an investment in our shares.

The trading price of our common stock may fluctuate substantially. The price of our common stock may increase or decrease, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include, but are not limited to, the following:

In the event our common stock price decreases, our stockholders may lose money.

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In addition, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price once a market for our stock is established, we may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

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

The Maryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficult a change in control of Full Circle Capital or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicable requirements of the 1940 Act. Our Board of Directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our Board of Directors, including approval by a majority of our independent directors. If the resolution exempting business combinations is repealed or our Board of Directors does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws provide that the Maryland Control Share Acquisition Act shall not restrict acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction.

We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board of Directors in three classes serving staggered three-year terms, and authorizing our Board of Directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, to amend our charter without stockholder approval and to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

If we issue preferred stock, the net asset value and market value of our common stock will likely become more volatile.

We cannot assure you that the issuance of preferred stock would result in a higher yield or return to the holders of the common stock. The issuance of preferred stock would likely cause the net asset value and market value of the common stock to become more volatile. If the dividend rate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of the common stock would be reduced. If the dividend rate on the preferred stock were to exceed the net rate of return on our portfolio, the leverage would result in a lower rate of return to the holders of common stock than if we had not issued preferred stock. Any decline in the net asset value of our investments would be borne entirely by the holders of common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of common stock than if we were not leveraged through the issuance of preferred stock. This greater net asset value decrease would also tend to cause a greater decline in the market price for the common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock or of losing our ratings, if any, on the preferred stock or, in an extreme case, our current investment income might not be sufficient to meet the dividend requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory fees if our total return exceeds the dividend rate on the preferred stock. Holders of preferred stock may have different interests than holders of common stock and may at times have disproportionate influence over our affairs.

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Holders of any preferred stock we might issue would have the right to elect members of our Board of Directors and class voting rights on certain matters.

Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of our Board of Directors at all times and in the event dividends become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred stockholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, if any, or the terms of our credit facilities, if any, might impair our ability to maintain our qualification as a RIC for federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements.

Risks Relating to our Notes

Our Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

Our Notes are not secured by any of our assets or any of the assets of our subsidiaries. As a result, our Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred, such as indebtedness under the Credit Facility, and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security). In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of our Notes. As of June 30, 2016, we did not have any outstanding borrowings under the Credit Facility.

Our Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

Our Notes are obligations exclusively of Full Circle Capital Corporation and not of any of our subsidiaries. None of our subsidiaries is a guarantor of our Notes and our Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of our Notes.

Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of our Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, our Notes are structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise. As of June 30, 2016, none of our subsidiaries had outstanding borrowings to third parties. However, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to our Notes.

The indenture under which our Notes are issued contains limited protection for holders of our Notes.

The indenture under which our Notes are issued offers limited protection to holders of our Notes. The terms of the indenture and our Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on investments in our Notes. In particular, the terms of the indenture and our Notes do not place any restrictions on our or our subsidiaries’ ability to:

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In addition, the indenture does not require us to offer to purchase our Notes in connection with a change of control or any other event.

Furthermore, the terms of the indenture and our Notes do not protect holders of our Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity.

Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of our Notes may have important consequences for you as a holder of our Notes, including making it more difficult for us to satisfy our obligations with respect to our Notes or negatively affecting the trading value of our Notes.

Certain of our current debt instruments include more protections for their holders than the indenture and our Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture and our Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of our Notes.

An active trading market for the Notes may not exist, which could limit your ability to sell the Notes or affect the market price of the Notes.

The Notes are listed on the Nasdaq Global Market under the symbol “FULLL.” However, we cannot provide any assurances that an active trading market for the Notes will exist in the future or that you will be able to sell your Notes. Even if an active trading market does exist, the Notes may trade at a discount from their par value depending on prevailing interest rates, the market for similar securities, our credit ratings, if any, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market does not exist, the liquidity and trading price for the Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.

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If we default on our obligations to pay our other indebtedness, we may not be able to make payments on our Notes.

Any default under the agreements governing our indebtedness, including a default under the Credit Facility or other indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on our Notes and substantially decrease the market value of our Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, including our Notes, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Credit Facility or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. In addition, any such default may constitute a default under our Notes, which could further limit our ability to repay our debt, including our Notes. If our operating performance declines, we may in the future need to seek to obtain waivers from the lenders under the Credit Facility or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Credit Facility or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including those under the Credit Facility, could proceed against the collateral securing the debt. Because the Credit Facility has, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.

We may choose to redeem our Notes when prevailing interest rates are relatively low.

We may choose to redeem our Notes from time to time, especially when prevailing interest rates are lower than the interest rate on our Notes. If prevailing rates are lower at the time of redemption, an investor in our Notes would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on our Notes being redeemed. Our redemption right also may adversely impact an investor’s ability to sell our Notes as the optional redemption date or period approaches.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

Our executive offices are located at 102 Greenwich Avenue, 2^nd Floor, Greenwich, CT 06830, and are provided by Full Circle Service Company in accordance with the terms of the Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.

Item 3.  Legal Proceedings

From time to time, we, our investment adviser or administrator, may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

A lawsuit challenging the Merger was filed in the Circuit Court for Baltimore County, Maryland on September 12, 2016. It is a putative stockholder derivative action filed by William J. Russell, Jr., individually and on behalf of all others similarly situated, against Full Circle Capital Corporation, Mark Biderman, Edward H. Cohen, Gregg J. Felton, Terence Flynn, Thomas A. Ortwein and John E. Stuart.

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The plaintiff claims to be a stockholder of Full Circle. He alleges that Full Circle’s directors breached their fiduciary duties by failing properly to disclose certain purportedly material information relating to the Merger in the registration statement filed with the SEC with respect to the Merger. The plaintiff seeks, among other relief, a preliminary and permanent injunction enjoining the Merger, rescission or rescissory damages in the event the Merger is consummated, an order directing the defendants to account for damages, and costs and fees in connection with the lawsuit.

A second lawsuit challenging the Merger was filed in the U.S. District Court for the District of Maryland on September 23, 2016. It is a putative class action filed by Daniel Saunders, on behalf of himself and all others similarly situated, against Full Circle Capital, Mark C. Biderman, Edward H. Cohen, Terence Flynn, Thomas A. Ortwein, John E. Stuart, Gregg J. Felton, GECC, Great Elm Capital Group, Inc. and MAST Capital Management, LLC. The plaintiff claims to be a stockholder of Full Circle. He alleges that Full Circle, Full Circle's directors, GECC and Mast Capital Management, LLC violated the federal securities by failing properly to disclose certain purportedly material information relating to the Merger in the registration statement filed with the SEC with respect to the Merger. The plaintiff seeks, among other relief, a preliminary and permanent injunction enjoining the Merger, rescission or rescissory damages in the event the Merger is consummated, an order directing the defendants to issue a new registration statement, a declaration that defendants have violated the federal securities laws, and costs and fees in connection with the lawsuit.

Item 4.  Reserved

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PART II

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

Our common stock is traded on the NASDAQ Global Market under the symbol “FULL.” The following table sets forth the range of high and low sales prices of our common stock as reported on NASDAQ and our net asset value per share for each fiscal quarter during the last two most recently completed fiscal years:

		NAV(1)				Price Range
						High				Low
Fiscal 2016
Fourth quarter		$	3.59			$	2.95			$	2.28
Third quarter			3.61				2.64				2.04
Second quarter			3.76				3.27				2.41
First quarter			4.00				3.60				3.00
Fiscal 2015
Fourth quarter			4.30				3.84				3.46
Third quarter			4.43				5.00				3.48
Second quarter			5.48				6.58				4.43
First quarter		$	6.24			$	7.98			$	6.05

The last reported sale price for our common stock on the NASDAQ Global Market on September 27, 2016 was $2.67 per share. As of September 15, 2016, there were approximately 83 holders of record of the common stock which did not include shareholders for whom shares are held in “nominee” or “street name.”

Distributions

Our distributions, if any, will be determined by our Board of Directors on a quarterly basis. In February 2016, our Board of Directors determined to suspend the declaration of any future distributions to stockholder beyond the previously declared distributions to stockholders. Thereafter, we announced that pursuant to the terms of the Merger Agreement, our Board of Directors intends to declare and pay a special cash distribution to our stockholders of record as of the close of business on the day on which the Merger becomes legally effective.

The Merger Agreement provides that our Board of Directors will declare a special cash distribution, which will be payable after the Merger to the persons who are the record holders of shares of our common stock immediately before the effective time of the Merger, in an aggregate amount equal to the sum of:

The amount of the special cash distribution is expected to be approximately $0.24 per share of our common stock. The special cash distribution will be paid by the exchange agent appointed to process exchanges of GECC share certificates for our share certificates upon delivery by the holders of our common stock of a letter of transmittal.

Neither the special cash distribution, nor any dividends or other distributions with respect to shares of GECC common stock will be paid to any former Full Circle stockholders who held their shares in certificated form and who have not surrendered their certificates to the exchange agent for shares of GECC common stock

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until those certificates are surrendered in accordance with the letter of transmittal. Following the surrender of any such certificates in accordance with the letter of transmittal, the record holders of such certificates will be entitled to receive, without interest, the special cash distribution and the amount of dividends or other distributions with a record date after the Effective Time payable with respect to shares of GECC common stock exchangeable for those certificates and not previously paid.

We expect that a significant part of the $5.0 million fixed portion of the special cash distribution will be a distribution in excess of our current and accumulated earnings and profits and could be treated as a return of capital for U.S. federal income tax purposes.

We have elected to be treated, and intend to qualify annually, as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of our ordinary income and our realized net short-term capital gains in excess of our realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment.

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

We may not be able to achieve operating results that will allow us to make dividends and distributions at a specific level or to increase the amount of these dividends and distributions from time to time. In addition, we may be limited in our ability to make dividends and distributions due to the asset coverage test for borrowings when applicable to us as a BDC under the 1940 Act and due to provisions in current and future credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our RIC status. We cannot assure stockholders that they will receive any dividends and distributions or dividends and distributions at a particular level.

All distributions declared in cash payable to stockholders that are participants in our dividend reinvestment plan are generally automatically reinvested in shares of our common stock. As a result, stockholders that do not participate in the dividend reinvestment plan may experience dilution over time. Stockholders who do not elect to receive distributions in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the dividend payable to a stockholder.

The following table lists the cash distributions, including dividends and returns of capital, if any, per share that we have declared since our formation on April 16, 2010. There were no dividends declared prior to our initial public offering. The table is divided by fiscal year according to record date.

Date Declared

Record Date

Payment Date

Amount

Total Fiscal 2011

$

0.751

Total Fiscal 2012

$

0.918

Total Fiscal 2013

$

0.924

Total Fiscal 2014

$

0.864

Fiscal 2015:

May 2, 2014

July 31, 2014

August 15, 2014

$

0.067

May 2, 2014

August 29, 2014

September 15, 2014

0.067

May 2, 2014

September 30, 2014

October 15, 2014

0.067

September 8, 2014

October 31, 2014

November 14, 2014

0.067

September 8, 2014

November 28, 2014

December 15, 2014

0.067

September 8, 2014

December 31, 2014

January 15, 2015

0.067

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Date Declared

Record Date

Payment Date

Amount

November 3, 2014

January 30, 2015

February 13, 2015

0.067

November 3, 2014

February 27, 2015

March 13, 2015

0.067

November 3, 2014

March 31, 2015

April 15, 2015

0.067

February 20, 2015

April 30, 2015

May 15, 2015

0.035

February 20, 2015

May 29, 2015

June 15, 2015

0.035

February 20, 2015

June 30, 2015

July 15, 2015

0.035

Total (2015)

$

0.708

Fiscal 2016:

May 5, 2015

July 31, 2015

August 14, 2015

$

0.035

May 5, 2015

August 31, 2015

September 15, 2015

0.035

May 5, 2015

September 30, 2015

October 15, 2015

0.035

August 4, 2015

October 30, 2015

November 13, 2015

0.035

August 4, 2015

November 30, 2015

December 15, 2015

0.035

August 4, 2015

December 31, 2015

January 15, 2016

0.035

November 3, 2015

January 29, 2016

February 15, 2016

0.035

November 3, 2015

February 29, 2016

March 15, 2016

0.035

November 3, 2015

March 31, 2016

April 15, 2016

0.035

Total (2016)

$

0.315

To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our taxable ordinary income or capital gains. In this regard, $1,051,922 of our distributions during the year ended June 30, 2016 constituted a return of capital to our stockholders. Stockholders should read any written disclosure accompanying a dividend payment carefully and should not assume that the source of any distribution is our taxable ordinary income or capital gains.

During the year ended June 30, 2016, our distributions were made primarily from undistributed net investment income. We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a business development company under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of favorable regulated investment company tax treatment. We cannot assure shareholders that they will receive any distributions.

Sales of Unregistered Securities

We did not engage in unregistered sales of equity securities during the year ended June 30, 2016.

Issuer Purchases of Equity Securities

For the quarter ended June 30, 2016, as a part of our dividend reinvestment plan for our common stockholders, we purchased 3,326 shares of our common stock for an average price of approximately $2.50 per share in the open market in order to satisfy the reinvestment portion of our dividends. The following chart outlines repurchases of our common stock during the quarter ended June 30, 2016.

Month		Total Number of Shares Purchased				Average Price Paid per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 2016			3,326			$	2.50				—				—
May 2016			—			$	—				—				—
June 2016			—			$	—				—				—
Total			3,326			$	2.50				—				—

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Performance Graph

This graph compares the return on our common stock with that of the S&P BDC Index and the Russell 2000 Index, for the period from September 1, 2010, the date our common stock began trading on the NASDAQ Stock Market, through June 30, 2016. The graph assumes that, on September 1, 2010, a person invested $10,000 in each of our common stock, the S&P BDC Index and the Russell 2000 Financial Services Index. The graph measures total shareholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are reinvested in like securities.

The graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the 1934 Act. The stock price performance included in the above graph is not necessarily indicative of future stock price performance.

Item 6.  Selected Financial Data

The following selected financial data is derived from our Consolidated Financial Statements which have been audited by Rothstein Kass for the years ended June 30, 2012 and June 30, 2013, by KPMG LLP for the year ended June 30, 2014, and by RSM LLP, formerly known as McGladrey LLP, our independent registered public accounting firm, for the years ended June 30, 2015 and June 30, 2016. The data should be read in conjunction with our Consolidated Financial Statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.

		Year ended June 30, 2016				Year ended June 30, 2015				Year ended June 30, 2014				Year ended June 30, 2013				Year ended June 30, 2012
Income Statement Data:
Total Investment Income		$	16,458,393			$	17,749,343			$	13,823,693			$	12,046,023			$	9,827,011
Total Gross Expenses			11,134,916				10,557,114				7,792,972				6,665,442				5,307,300
Total Net Expenses			10,167,544				9,136,271				7,792,972				6,665,442				4,993,508
Net Investment Income			6,290,849				8,613,072				6,030,721				5,380,581				4,833,503
Net Increase (Decrease) in Net Assets Resulting from Operations			(9,700,162	)			(5,200,728	)			(7,622,395	)			3,801,143				2,678,172
Per Share Data:
Net Investment Income(1)			0.28				0.63				0.71				0.77				0.78
Net Increase (Decrease) in Net Assets Resulting from Operations(1)			(0.43	)			(0.35	)			(0.88	)			0.54				0.43
Dividends Declared			0.32				0.71				0.86				0.92				0.92

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		Year ended June 30, 2016				Year ended June 30, 2015				Year ended June 30, 2014				Year ended June 30, 2013				Year ended June 30, 2012
Balance Sheet Data:
Total Assets(3)			115,859,694				160,724,982				156,284,362				113,063,839				99,449,379
Total Net Assets		$	80,670,495			$	99,938,567			$	72,980,277			$	60,644,039			$	53,442,785
Other Data:
Total Return based on Market Value(2)			(14.98	)%			(46.78	)%			11.51	%			15.12	%			8.71	%
Total Return based on Net Asset Value(2)			(6.15	)%			(21.53	)%			(11.00	)%			4.94	%			6.20	%

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

Except as otherwise specified, references to “Full Circle Capital,” the “Company,” “we,” “us” and “our” refer to Full Circle Capital Corporation.

Forward-Looking Statements

This annual report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Full Circle Capital Corporation, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements.

The forward looking statements contained in this annual report on Form 10-K involve risks and uncertainties, including statements as to:

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These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this annual report on Form 10-K should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” and elsewhere in this annual report on Form 10-K. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report on Form 10-K.

The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained elsewhere in this Form 10-K.

Overview

We are an externally managed non-diversified closed-end management investment company formed in April 2010, and have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We are managed by Full Circle Advisors, LLC. Full Circle Service Company provides the administrative services necessary for us to operate.

We invest primarily in senior secured loans and, to a lesser extent, second liens loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies that operate in a diverse range of industries. In our lending activities, we focus primarily on portfolio companies with both (i) tangible and intangible assets available as collateral and security against our loan to help mitigate our risk of loss, and (ii) cash flow to cover debt service. We believe this provides us with a more attractive risk adjusted return profile, with greater principal protection and likelihood of repayment.

Our investments generally range in size from $3 million to $10 million; however, we may make larger or smaller investments from time to time on an opportunistic basis. We focus primarily on senior secured loans and “stretch” senior secured loans, also referred to as “unitranche” loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans. We believe that having a first lien, senior secured position provides us with greater control and security in the primary collateral of a borrower and helps to mitigate risk against loss of principal should a borrower default. Our stretch senior secured loans typically possess a greater advance rate against the borrower’s assets and cash flow, and accordingly carry a higher interest rate and/or greater equity participation, than traditional senior secured loans. Stretch senior secured loan instruments can provide borrowers with a more efficient and desirable solution than a senior bank line combined with a separate second lien or mezzanine loan obtained from another source. We also may invest in mezzanine, subordinated or unsecured loans. In addition, we may acquire equity or equity related interests from a borrower along with our debt investment. We attempt to protect against risk of loss on our debt investments by investing in borrowers with cash flows to cover debt

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service, while frequently securing our loans against tangible or intangible assets of our borrowers, which may include accounts receivable and contracts for services, and obtaining a favorable loan-to-value ratio, and in many cases, securing other financial protections or credit enhancements, such as personal guarantees from the principals of our borrowers, make well agreements and other forms of collateral, rather than lending predominantly against anticipated cash flows of our borrowers. We believe this allows us more options and greater likelihood of repayment from refinancing, asset sales of our borrowers and/or amortization.

We generally seek to invest in lower middle-market and middle-market companies in areas that we believe have been historically under-serviced, especially during and after the 2008/2009 credit crisis. These areas include industries that are outside the focus of mainstream institutions or investors due to required industry-specific knowledge or are too small to attract interest from larger investment funds or other financial institutions. Because we believe there are fewer banks and specialty finance companies focused on lending to these lower middle-market and middle market companies, we believe we can negotiate more favorable terms on our debt investments in these companies than those that would be available for debt investments in comparable larger, more mainstream borrowers. Such favorable terms may include higher debt yields, lower leverage levels, more significant covenant protection and/or greater equity grants than typical of other transactions. We generally seek to avoid competing directly with other capital providers with respect to specific transactions in order to avoid the less favorable terms that we believe are typically associated with such competitive bidding processes.

On June 4, 2014, we formed FC Capital Investment Partners (“FCCIP”), a multiple series private fund, for which we serve as the managing member and investment adviser. FCCIP was formed as a Delaware limited liability company and operates under a limited liability company agreement dated June 13, 2014. FCCIP closed its first series on June 17, 2014, raising approximately $5.6 million in capital from investors. FCCIP closed its second series on September 25, 2014, raising approximately $10.0 million in capital from investors. On November 30, 2015, the second series ceased investing and was liquidated after full realization of its proceeds from its investment strategy. We may co-invest in certain portfolio investments from time to time with one or more series issued by FCCIP where we determine that the aggregate available investment opportunity exceeds what we believe would be appropriate for us to acquire directly, subject to certain conditions. In addition, we expect to receive certain fees or other distributions for FCCIP in connection with the services we provide to each series it may issue. Such fees may include management fees, incentive fees and administration fees and could be offset by expense caps or waivers in the future. For the year ended June 30, 2016, the Company earned $36,758 and waived $15,396 of management fee income related to the services performed for FCCIP. During the years ended June 30, 2015 and June 30, 2014, we earned $67,163 and $2,941 of management income related to services performed for FCCIP. Such amounts are included in Other Income from Non-Investment Sources in the Consolidated Statements of Operations.

On July 14, 2014, we sold 506,000 shares of our common stock at $7.40 per share in a direct registered offering to certain investors for total gross proceeds of approximately $3.7 million.

On July 14, 2014, we closed an offering of $12,500,000 in aggregate principal amount of our 8.25% fixed-rate notes due 2020 (the “Notes”). The Notes were sold at price of $25.375 per note plus accrued interest from June 30, 2014, a premium to par value of $25.00 per Note, for total gross proceeds of approximately $12.7 million. The Notes are a further issuance of, rank equally in right of payment with, and form a single series with the $21.1 million of currently outstanding Notes that will mature on June 30, 2020, and may be redeemed in whole or in part at any time or from time to time at our option on or after June 30, 2016. The Notes are listed on the NASDAQ Global Market and trade under the trading symbol “FULLL.”

On March 30, 2015, we completed a non-transferable rights offering to our stockholders of record as of 5:00 p.m., New York City time on March 6, 2015. The rights entitled holders of rights to subscribe for an aggregate of up to 11,949,034 shares of our common stock. Our stockholders as of the record date received one right for each share of common stock owned on the record date. The rights entitled the holder to purchase one new share of common stock for every one right held and record date stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and pro-rata allocation, for additional shares that remain unsubscribed as a result of any unexercised rights. The subscription price per share was $3.50. The net proceeds from this rights offering, after deducting the fee payable to the dealer managers and

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offering expenses, were approximately $37.8 million, which we received on April 6, 2015. In connection with this rights offering, the dealer manager received a fee for its financial advisory, marketing and soliciting services equal to a maximum of 4.0% of the subscription price per share for each share issued pursuant to the exercise of rights, including pursuant to the over-subscription privilege. We incurred offering expenses, including the dealer manager fee of $1,401,660, in connection with this rights offering.

As part of the rights offering, an institutional investor committed to purchase approximately 214,000 shares in open market transactions over a seven-day period following the expiration date of the rights offering. The institutional investor agreed to acquire the remainder of the 214,000 shares in a private placement directly from us to the extent such shares were not purchased in open market transactions during such seven-day period. Subsequent to the end of the seven-day period, on April 13, 2015, such investor acquired 80,475 shares, the remainder of its initial commitment of approximately 214,000 shares, in a private placement at $3.50 per share directly from us. We incurred offering expenses of $3,345 in connection with this offering.

Exemptive Relief

On September 23, 2015, we received exemptive relief from the SEC to permit us to co-invest with investment funds managed by our investment adviser where doing so is consistent with our investment strategy as well as applicable law (including the terms and conditions of the exemptive order issued by the SEC). Under the terms of the relief permitting us to co-invest with other funds managed by our investment adviser, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objectives and strategies. We may co-invest, subject to the conditions included in the exemptive order we received from the SEC, with one or more funds managed by our investment adviser that have an investment strategy that is similar to or overlaps our investment strategy. We believe that such co-investments may afford us additional investment opportunities and an ability to achieve greater diversification.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

  Basis of Consolidation

Under the 1940 Act and the rules thereunder, the rules and regulations pursuant to Article 6 of Regulation S-X, the SEC’s Division of Investment Management’s consolidation guidance in IM Guidance Update No. 2014-11 issued in October 2014 and Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies (“ASC 946”), we are precluded from consolidating any entity other than another investment company that acts as an extension of our investment operations and facilitates the execution of our investment strategy. An exception to this guidance occurs if we have an investment in a controlled operating company that provides substantially all of its services to us. Our Consolidated Financial Statements include our accounts and the accounts of Full Circle West, Inc., FC New Media Inc., TransAmerican Asset Servicing Group, Inc., FC New Specialty Foods, Inc., FC Shale Inc., and FC Takoda Holdings, LLC, our only wholly-owned, or previously wholly-owned, subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

  Valuation of Investments in Securities at Fair Value — Definition and Hierarchy

In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

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In determining fair value, the Board of Directors uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Board of Directors. Unobservable inputs reflect the Board of Directors’ assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers or market makers. Debt and equity securities for which market quotations are not readily available or are not considered to be the best estimate of fair value are valued at fair value as determined in good faith by the Board of Directors. Because the Company expects that there will not be a readily available market value for many of the investments in the Company’s portfolio, many of the Company’s portfolio investments’ values will be determined in good faith by the Board of Directors in accordance with a documented valuation policy that has been reviewed and approved by the Board of Directors and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Board of Directors in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls, is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

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  Net realized gain (loss) and net change in unrealized gain (loss) on investments

Net change in unrealized appreciation or depreciation recorded on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs.

From time to time, the Company may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, the Company may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the portfolio investment. Such elimination of unrealized gain (loss) is included on the Consolidated Statements of Operations as a (decrease) increase in the Change in Unrealized Gain (Loss) on Investments.

  Valuation Techniques

Senior and Subordinated Loans

The Company’s portfolio consists primarily of private debt instruments such as senior and subordinated loans. Investments for which market quotations are readily available (“Level 2 Debt”) are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers. For other debt investments (“Level 3 Debt”) market quotations are not available and other techniques are used to determine fair value. The Company considers its Level 3 Debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is otherwise not deemed to be impaired. In determining the fair value of the performing Level 3 Debt, the Board of Directors considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, the financial condition of the borrower, economic conditions, success and prepayment fees and other relevant factors, both qualitative and quantitative. In the event that a Level 3 Debt instrument is not performing, as defined above, the Company’s Board of Directors will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the Level 3 Debt instrument.

This evaluation will be updated no less than quarterly for Level 3 Debt instruments, and more frequently for time periods where there are significant changes in the investor base or significant changes in the perceived value of the underlying collateral. The collateral value will be analyzed on an ongoing basis using internal metrics, appraisals, work performed by third-party valuation agents, if applicable, and other data as may be acquired and analyzed by management and Board of Directors.

Investments in Private Companies

The Company’s Board of Directors determines the fair value of its investments in private companies where no market quotations are readily available (“Level 3 Private Companies”) by incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, and performance multiples, among other factors, including work performed by third-party valuation agents. The Level 3 Private Companies investments can include limited liability company interests, common stock and other equity investments. These nonpublic investments are included in Level 3 of the fair value hierarchy.

Warrants

The Board of Directors ascribes value to warrants based on fair value analyses that may include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate.

Publicly Traded Common Stock

Publicly traded common stock in an active market (“Level 1 Common Stock”) is valued based on unadjusted closing prices in active markets for identical Level 1 Common Stock that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 Common Stock.

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Swap Contracts

Derivative financial instruments such as swap contracts are valued based on discounted cash flow models and option pricing models, as appropriate. Models use observable data to the extent practicable. However, areas such as credit risk (both our own and that of the counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of derivative financial instruments at the valuation date.

The Company’s accounting policy is to not offset fair value amounts recognized for derivative financial instruments. The related assets and liabilities are presented gross in the Consolidated Statements of Assets and Liabilities. Any cash collateral payables or receivables associated with these instruments are not added to or netted against the fair value amounts of the derivative financial instruments.

All derivative financial instruments are carried in assets when amounts are receivable by the Company and in liabilities when amounts are payable by the Company. During the period a contract is open, changes in the value of the contracts are recognized as unrealized appreciation or depreciation to reflect the fair value of the contract at the reporting date. When the contracts settle, mature, terminate, or are otherwise closed, the Company records realized gains or losses equal to the difference between the proceeds from (or cost of) the close-out of the contracts and the original contract price. Additionally, the Company records realized gains (losses) on open swap contracts when periodic payments are received or made at the end of each measurement period.

Fair Value

The Company’s assets measured at fair value on a recurring basis subject to the requirements of ASC Topic 820 at June 30, 2016 and June 30, 2015 were as follows:

As of June 30, 2016

		Level 1				Level 2				Level 3				Total
Assets
Senior and Subordinated Loans, at fair value		$	—			$	—			$	80,701,466			$	80,701,466
Limited Liability Company Interests, at fair value			—				—				100,000				100,000
Investments in Warrants, at fair value			—				—				320,749				320,749
Total		$	—			$	—			$	81,122,215			$	81,122,215

As of June 30, 2015

		Level 1				Level 2				Level 3				Total
Assets
Senior and Subordinated Loans, at fair value		$	—			$	12,275,000			$	121,630,798			$	133,905,798
Limited Liability Company Interests, at fair value			—				—				1,228,978				1,228,978
Investments in Warrants, at fair value			—				90				2,695,075				2,695,165
Common Stock, at fair value			1,308,818				—				12,975,000				14,283,818
Open Swap Contract, at fair value			—				—				—				—
Total		$	1,308,818			$	12,275,090			$	138,529,851			$	152,113,759

During the year ended June 30, 2016, the senior secured term loan and warrants in US Shale Solutions, Inc. were transferred from Level 2 to Level 3. During the year ended June 30, 2015, a portion of the Level 3 General Cannabis Corp. (formerly known as Advanced Cannabis Solutions, Inc.) warrant was converted into Level 1 Common Stock.

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Revenue Recognition

Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs. Realized gains or losses on the sale of investments are calculated using the specific identification method.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with senior and subordinated secured loans are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a senior or subordinated secured loan, any unamortized loan origination, closing and/or commitment fees are recorded as interest income. Generally, when a payment default occurs on a loan in the portfolio, or if the Company otherwise believes that the issuer of the loan will not be able to make contractual interest payments, the Company may place the loan on non-accrual status and cease recognizing interest income on the loan until all principal and interest is current through payment, or until a restructuring occurs, and the interest income is deemed to be collectible. The Company may make exceptions to this policy if a loan has sufficient collateral value and is in the process of collection or is viewed to be able to pay all amounts due if the loan were to be collected on through an investment in, or sale of the business, the sale of the assets of the business, or some portion or combination thereof.

Dividend income is recorded on the ex-dividend date.

Structuring fees, excess deal deposits, prepayment fees and similar fees are recognized as Other Income from Investments as earned, usually when received, and are non-recurring in nature. Other fee income, including annual fees and monitoring fees are included in Other Income from Investments. Management fee income is included in Other Income from Non-Investment Sources.

  Use of Estimates

The preparation of our Consolidated Financial Statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts disclosed in the Consolidated Financial Statements of Full Circle Capital. Actual results could differ from those estimates.

Current Market Conditions and Market Opportunity

We believe that the current credit environment provides favorable opportunities to achieve attractive risk-adjusted returns on the types of senior secured loans and other investments we may target. In particular, we believe that, despite an overall fall off in loan demand due to the depressed economic conditions, demand for financing from lower middle-market and middle-market companies is largely outpacing the availability of lenders that have traditionally served this market. We believe that bank consolidations, the failure of a number of alternative lending vehicles due to poor underwriting practices and an overall tightening of underwriting standards has significantly reduced the number and activity level of potential lenders.

We believe there has long been a combination of demand for capital and an underserved market for capital addressing lower middle-market and middle-market borrowers. We believe there is robust demand for continued growth capital as well as demand from very significant refinancing requirements of many borrowers as debt facilities come due, given the lack of willing and qualified capital providers. We believe these market conditions have been further exacerbated in the current environment due to:

With the decreased availability of debt capital for lower middle-market and middle-market borrowers, combined with the significant demand for refinancing, we believe there are increased lending opportunities for us. As always, we remain cautious in selecting new investment opportunities, and will only deploy capital in deals which are consistent with our disciplined philosophy of pursuing superior risk-adjusted returns.

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Review of Strategic Alternatives

Public equity market conditions for business development companies (“BDCs”) have been challenging for an extended period of time. Similar to many other BDCs, our common stock has been trading at a significant discount to its net asset value and, as a result, has limited our ability to grow and reap the benefits of increased scale, including the ability to commit to larger hold sizes, enhanced liquidity for our shareholders and substantially increased operating leverage. We do not believe that these market conditions are likely to abate in the near term.

In light of the current situation, our Board of Directors formed a Special Committee, composed solely of independent directors Mark C. Biderman, Edward H. Cohen and Thomas A. Ortwein Jr., in November 2015 to consider various strategic alternatives potentially available to us. The Special Committee is authorized to consider, negotiate, and potentially implement all strategic alternatives reasonably available to us, including, but not limited to, the acquisition or disposition of assets and the sale or merger of the Company. The Special Committee has engaged Houlihan Lokey Capital, Inc. as its financial advisor.

In order to maximize the types of potential strategic alternatives available to us and enhance the benefits to be derived therefrom for our stockholders, we have opted to retain the cash proceeds received by us in connection with loan repayments and sales and have otherwise limited our origination activities. However, because our investment income has declined and is expected to continue to decline in the current and subsequent quarters as a result of this change in investment strategy, our Board of Directors has decided to suspend the declaration of any future distributions to our stockholders beyond the previously declared distribution of $0.035 per share to stockholders of record on March 31, 2016 and paid on April 15, 2016.

In addition, given that our Board of Directors has chosen to pursue a strategic process which, among other things, calls for reducing the size of our investment portfolio and the resulting impact that such reduction has had and will have on the fees payable to our investment adviser, our Board of Directors has terminated, effective January 1, 2016, our investment adviser’s management and incentive fee waiver and operating expense reimbursement obligations to ensure its continuing financial and operational viability pending the completion of the strategic process.

Professional services expense increased by $1,863,846, or 266% for the year ended June 30, 2016, over the comparable period in 2015, primarily due to $1,344,111 of transaction costs associated with our strategic review process.

Operating Expense Reimbursement

Our investment adviser agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses that exceed 1.50% of our net assets, beginning with our fiscal quarter ended September 30, 2014 through June 30, 2015. For our fiscal year 2016 and beyond, our investment adviser had agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, that exceed 1.75% of our net assets; however, on February 11, 2016, our Board of Directors authorized the termination of our investment adviser’s operating expense reimbursement obligations, effective as of January 1, 2016, as part of the strategic process. The expense reimbursement from the Adviser for the year to date period ended December 31, 2015 was $506,364 and is included in the fee waivers and expense reimbursement line on the Consolidated Statement of Operations.

Management Fee and Incentive Fee Waiver

For the periods commencing on April 1, 2015 and ending on June 30, 2015 and commencing on July 1, 2015 and ending on June 30, 2016, our investment adviser had agreed to waive the portion of the base management fees and incentive fees that our investment adviser would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for us to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then declared by our Board of Directors; however, on February 11, 2016, our Board of Directors authorized the termination of our investment adviser’s management fee and incentive fee waiver, effective as of January 1, 2016, as part of the strategic process. Our investment adviser will not be entitled to recoup any amounts previously waived pursuant to this agreement. For the year

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ended June 30, 2016, we incurred $1,992,111 of base management fees, of which $214,129 was accrued for as a management fee waiver and is included in the fees waiver and expense reimbursement line on the Consolidated Statement of Operations. Additionally, the Adviser waived $246,879 of income incentive fees for the year ended June 30, 2016, and such fees are not subject to reimbursement or recoupment by the Adviser.

Portfolio Composition and Investment Activity

Our portfolio of investments consists primarily of senior secured loans and, to a lesser extent, second lien loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies. We focus primarily on senior secured loans and “stretch” senior secured loans, also referred to as “unitranche” loans, which combine characteristics of traditional first lien senior secured loans and second-lien or subordinated loans. Our investment objective is to generate both current income and capital appreciation through debt and equity investments.

The following is a summary of our investment activity since the completion of our initial public offering. Such amounts are not inclusive of our holdings of United States Treasury Bills.

Time Period		Acquisitions(1) (dollars in millions)				Dispositions(2) (dollars in millions)				Weighted Average Interest Rate of Portfolio at End of Period(3)
For the year ended June 30, 2011		$	90.0			$	32.6				12.68	%
For the year ended June 30, 2012			55.3				38.1				12.93	%
For the year ended June 30, 2013			75.1				58.1				12.90	%
For the year ended June 30, 2014			132.5				82.3				11.27	%
July 1, 2014 through September 30, 2014			36.5				28.7				10.53	%
October 1, 2014 through December 31, 2014			28.7				23.2				10.23	%
January 1, 2015 through March 31, 2015			24.4				32.1				10.53	%
April 1, 2015 through June 30, 2015			47.5				13.9				9.99	%
For the year ended June 30, 2015			137.1				97.9				9.99	%
July 1, 2015 through September 30, 2015			29.8				32.7				8.93	%
October 1, 2015 through December 31, 2015			20.1				34.3				9.27	%
January 1, 2016 through March 31, 2016			29.6				58.7				10.27	%
April 1, 2016 through June 30, 2016			17.2				27.5				10.46	%
For the year ended June 30, 2016			96.7				153.2				10.46	%
Since inception		$	586.7			$	462.2				N/A

At June 30, 2016, the weighted average interest rate of our performing debt investments was 12.08%.

  Portfolio Activity for the Year Ended June 30, 2016

The primary investment activities for the year ended June 30, 2016 were fundings and repayments under the revolving credit facilities and the funding of the following loan facilities:

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  Portfolio Activity for Year Ended June 30, 2015

The primary investment activities for the year ended June 30, 2015 were fundings and repayments under the revolving credit facilities and the funding of the following loan facilities:

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  Portfolio Activity for Year Ended June 30, 2014

The primary investment activities for the year ended June 30, 2014 were fundings and repayments under the revolving credit facilities and the funding of the following loan facilities:

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Portfolio Reconciliation

The following is a reconciliation of the investment portfolio, including our open swap contract, for the years ended June 30, 2016, 2015, and 2014:

		Year Ended June 30, 2016				Year Ended June 30, 2015				Year Ended June 30, 2014
Beginning Investment Portfolio		$	152,113,759			$	150,190,759			$	88,174,501
Portfolio Investments Acquired(1)			96,729,673				137,121,602				132,503,963
Treasury and Money Market Purchases(2)			—				—				71,000,730
Amortization and Accretion of Fixed Income Premiums and Discounts			1,511,281				1,496,851				466,184
Portfolio Investments Repaid			(153,241,487	)			(97,880,572	)			(82,301,503	)
Sales and Maturities of Treasury Securities(2)			—				(25,000,000	)			(46,000,000	)
Net Change in Unrealized Gain (Loss) on Investments			5,355,642				(6,237,328	)			(12,704,614	)
Net Realized Gains (Losses) on Investments and Open Swap Contract			(21,346,653	)			(7,577,553	)			(948,502	)
Ending Investment Portfolio		$	81,122,215			$	152,113,759			$	150,190,759

During the year ended June 30, 2016, we recorded net unrealized appreciation (depreciation) of $5,355,642. This consisted of $10,127,563 of net unrealized appreciation on debt investments and $(4,771,921) of net unrealized depreciation on equity investments. The change in unrealized appreciation (depreciation) was primarily due to a reversal of prior year unrealized losses of $4,074,888, $3,811,681, and $3,068,175 on our loans to ProGrade Ammo Group, LLC, New Media West, LLC, and TransAmerican Asset Services Group, LLC, respectively, due to the disposition of these investments. This was partially offset by depreciation of $(4,325,739) on our equity interest in US Shale Solutions, Inc. and $(4,397,973) on our loan to US Oilfield Company, LLC.

During the year ended June 30, 2015, we recorded net unrealized appreciation (depreciation) of $(6,237,328). This consisted of $(6,260,564) of net unrealized depreciation on debt investments and $23,236 of net unrealized appreciation on equity investments. The change in unrealized appreciation (depreciation) was primarily due to the depreciation of $(2,757,498), $(2,186,981), $(1,658,078), and $(1,391,962) of our loans to Takoda Resources, Inc., US Shale Solutions, Inc., TransAmerican Asset Servicing Group, LLC, and Fuse, LLC, respectively. This was partially offset by appreciation of $4,128,706 due to the restructuring of the loan to Blackstrap Broadcasting, LLC, which included $3,500,000 of unrealized losses being reversed upon the disposition of the second lien loan to Blackstrap Broadcasting, LLC.

During the year ended June 30, 2014, we recorded net unrealized appreciation (depreciation) of $(12,704,614). This consisted of $(11,380,297) of net unrealized depreciation on debt investments and $(1,324,317) of net unrealized depreciation on equity investments. The change in unrealized appreciation (depreciation) was primarily due to the depreciation of $(3,363,038) of our loan to and limited liability company interest in New Media West, LLC, and depreciation of $(3,251,689), $(2,870,123), and $(2,803,251) of our loans to Blackstrap Broadcasting, LLC, ProGrade Ammo Group, LLC, and Modular Process Control, LLC, respectively. This was partially offset by the $1,856,212 appreciation of our warrant in General Cannabis Corp.

During the year ended June 30, 2016, we recorded net realized losses of $21,346,653, primarily in connection with the exit of our loans to ProGrade Ammo Group, LLC and TransAmerican Asset Servicing Group, LLC which resulted in realized losses of $4,843,750 and $3,119,245, respectively. We realized additional net losses in connection with the write off of the term loan to New Media West, LLC of $3,803,567.

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During the year ended June 30, 2015, we recorded net realized losses of $7,576,472, primarily in connection with the write off of the second lien investment in Blackstrap Broadcasting, LLC, which resulted in a realized loss of $3,500,000 and the write off of our limited liability company interest in New Media West which resulted in a realized loss of $3,600,000.

During the year ended June 30, 2014, we recorded a realized loss of $948,502 primarily in connection with the continued disposition of our investment in Ygnition Networks, Inc. in an amount of $678,553 and a realized loss on our position in MDU Communications (USA), Inc. of $492,217. This was partially offset by a gain realized on the partial prepayment of PEAKS Trust 2009-1 of $223,169.

Portfolio Classifications

The following table shows the fair value of our portfolio of investments by asset class as of June 30, 2016 and June 30, 2015:

		June 30, 2016								June 30, 2015
		Investments at Fair Value (dollars in millions)				Percentage of Total Portfolio				Investments at Fair Value (dollars in millions)				Percentage of Total Portfolio
Investments:
Senior Secured Loans		$	70.4				86.8	%		$	122.8				80.7	%
Subordinated Secured Loans			7.2				8.9				7.9				5.2
Unsecured Notes			3.1				3.8				3.2				2.1
Warrants			0.3				0.4				2.7				1.8
Limited Liability Company Interests			0.1				0.1				1.2				0.8
Common Stock			—				—				14.3				9.4
Total Investments at Fair Value		$	81.1				100.0	%		$	152.1				100.0	%

At June 30, 2016, the 22 borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately 67% (i.e., each $67 of loan value outstanding is secured by $100 of collateral value). At June 30, 2015, the 32 borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately 59% (i.e., each $59 of loan value outstanding is secured by $100 of collateral value).

The following table shows the fair value of our portfolio of investments by industry, as of June 30, 2016 and June 30, 2015:

		June 30, 2016								June 30, 2015
		Investments at Fair Value (dollars in millions)				Percentage of Total Investment Portfolio				Investments at Fair Value (dollars in millions)				Percentage of Total Investment Portfolio
Building Cleaning and Maintenance Services		$	10.4				12.8	%		$	10.7				7.0	%
Radio Broadcasting			9.7				11.9				9.3				6.1
Wireless Communications			7.6				9.4				8.0				5.2
Appliance Parts Distributor			7.3				9.0				8.0				5.2
Real Estate Holding Company			6.0				7.4				—				—
Specialty Pharmaceuticals			6.0				7.4				6.0				3.9
Maritime Security Services			4.4				5.4				6.0				3.9
Information and Data Services			4.0				4.9				3.4				2.2
Consumer Financing			3.7				4.6				7.9				5.2
Gambling Machine Manufacturer			3.7				4.6				3.8				2.5
Grain Mill Products			3.5				4.3				3.3				2.2
Biological Products			3.2				4.0				3.4				2.3
Data Connectivity Service Company			3.1				3.8				3.2				2.1
Hotel Operator			3.1				3.8				4.3				2.8
Oil and Gas Field Services			2.5				3.1				10.1				6.8
Outdoor Advertising Services			1.8				2.2				2.0				1.3

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		June 30, 2016								June 30, 2015
		Investments at Fair Value (dollars in millions)				Percentage of Total Investment Portfolio				Investments at Fair Value (dollars in millions)				Percentage of Total Investment Portfolio
Internet Advertising			1.1				1.4				2.4				1.6
Equipment Rental Services			0.6				0.8				0.6				0.4
Television Programming			—				—				5.8				3.8
Munitions			—				—				2.6				1.7
Electric Services			—				—				5.2				3.5
Energy Efficiency Services			—				—				3.6				2.4
Non-Residential Property Owner			—				—				1.3				0.9
Power Generation			—				—				13.0				8.5
Mobile Device Management			—				—				11.1				7.3
Real Estate Management Services			—				—				8.5				5.6
Food Distributors and Wholesalers			—				—				3.8				2.5
Daily and Weekly Newspaper Publisher			—				—				2.0				1.3
IT and Business Skill Training			—				—				2.0				1.3
Asset Recovery Services			—				—				0.5				0.3
Geophysical Surveying and Mapping Services			—				—				0.2				0.1
Medical Liability Claims Factoring			—				—				0.1				0.1
Healthcare Billing and Collections			—				—				—				—
Enterprise Software Company			(0.6	)			(0.8	)			—				—
Total		$	81.1				100.0	%		$	152.1				100.0	%

Portfolio Grading

We have adopted a credit grading system to monitor the quality of our debt investment portfolio. As of June 30, 2016, our portfolio had a weighted average grade of 3.12 based upon the fair value of the debt investments in the portfolio. Equity securities and investments in United States Treasury Bills, if held, are not graded. This was an increase of 0.16 from the weighted average grade of 2.96 at June 30, 2015.

At June 30, 2016, our debt investment portfolio was graded as follows:

		June 30, 2016
Grade		Summary Description				Fair Value				Percentage of Total Portfolio*
1			Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).			$	—				—	%
2			The portfolio company is performing above expectations and the risk profile is generally favorable.				—				—
3			Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.				71,093,813				87.64
4			The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable.				9,304,435				11.47
5			The investment is performing well below expectations and is not anticipated to be repaid in full.				303,218				0.37
						$	80,701,466				99.48	%

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At June 30, 2015, our debt investment portfolio was graded as follows:

		June 30, 2015
Grade		Summary Description				Fair Value				Percentage of Total Portfolio
1			Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).			$	8,516,728				5.60	%
2			The portfolio company is performing above expectations and the risk profile is generally favorable.				10,720,287				7.05
3			Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.				98,780,645				64.93
4			The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable.				9,932,823				6.53
5			The investment is performing well below expectations and is not anticipated to be repaid in full.				5,955,315				3.92
						$	133,905,798				88.03	%

We expect that a portion of our investments will be in grades 4 or 5 from time to time, and, as such, we will be required to work with portfolio companies to improve their business and protect our investment. The number and amount of investments included in grades 4 or 5 may fluctuate from period to period.

Results of Operations

Comparison of the years ended June 30, 2016, 2015, and 2014

		Year Ended June 30, 2016								Year Ended June 30, 2015								Year Ended June 30, 2014
		Total				Per Share(1)				Total				Per Share(1)				Total				Per Share(1)
Total Investment Income		$	16,458,393			$	0.73			$	17,749,343			$	1.20			$	13,823,693			$	1.59
Interest Income(2)			14,167,884				0.63				16,955,098				1.15				11,151,497				1.29
Dividend Income			75,207				0.00				36,247				0.00				114,704				0.01
Other Income			2,215,302				0.10				757,998				0.05				2,557,492				0.29
Net Operating Expenses			10,167,544				0.45				9,136,271				0.62				7,792,972				0.90
Management Fee			1,992,111				0.09				2,280,058				0.16				1,631,694				0.19
Incentive Fee			1,263,241				0.06				1,798,000				0.12				1,511,362				0.17
Total Advisory Fees			3,255,352				0.15				4,078,058				0.28				3,143,056				0.36
Total Costs Incurred Under Administration Agreement			764,277				0.03				731,447				0.05				682,662				0.08
Director’s Fees			168,000				0.01				182,196				0.01				127,625				0.01
Interest Expenses			3,799,951				0.17				4,305,558				0.29				2,693,487				0.31
Professional Services Expense			2,564,170				0.11				700,324				0.05				610,362				0.07
Bank Fees			33,302				0.00				39,931				0.00				56,184				0.01
Other			549,864				0.02				519,600				0.04				479,596				0.06
Fees Waivers and Expense Reimbursement			(967,372	)			(0.04	)			(1,420,843	)			(0.10	)			—				—
Net Investment Income			6,290,849				0.28				8,613,072				0.63				6,030,721				0.71
Net Change in Unrealized Gain (Loss)			5,355,642				0.24				(6,237,328	)			(0.51	)			(12,704,614	)			(1.36	)
Net Realized Loss			(21,346,653	)			(0.94	)			(7,576,472	)			(0.51	)			(948,502	)			(0.11	)

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Total Investment Income

Total investment income includes interest and dividend income on our investments and other income, which is typically comprised of fee income. Fee income typically consists of administrative fees, prepayment fees, structuring fees and unused line fees which are not recurring.

Total investment income decreased from $17,749,343 for the year ended June 30, 2015 to $16,458,393 for the year ended June 30, 2016. The decrease in investment income was predominantly due to decreased interest income resulting from a smaller debt portfolio versus the prior year period and decreasing average coupon rates, and was offset by an increase in other income. The increase in other income is predominantly due to prepayment fees received as a result of the payoff of Good Technology Corporation and Butler Burger Group, LLC.

Total investment income decreased on a per share basis, as interest income decreased from $1.15 per share for the year ended June 30, 2015 to $0.63 per share for the year ended June 30, 2016. Other income per share increased from $0.05 per share for the year ended June 30, 2015 to $0.10 per share for the year ended June 30, 2016. Per share figures noted above reflect an increase in the weighted average shares outstanding from 14,803,637 to 22,662,947 for the year ended June 30, 2015 and 2016, respectively; this increase in share count from our rights offering decreased the per share impact of increased total investment income.

Total investment income increased from $13,823,693 for the year ended June 30, 2014 to $17,749,343 for the year ended June 30, 2015. The increase in investment income was predominantly due to increased interest income. The increase in interest income for the year ended June 30, 2015 relative to the year ended June 30, 2014 is primarily due to a larger average investment portfolio. This increase was offset by a decline in other income due to elevated other income for the year ended June 30, 2014 from success and prepayment fees received as a result of the payoff of iMedx, Inc. and Global Energy Efficiency Holdings, Inc.

Total investment income decreased on a per share basis, as interest income decreased from $1.29 per share for the year ended June 30, 2014 to $1.15 per share for the year ended June 30, 2015. Other income per share decreased from $0.29 per share for the year ended June 30, 2014 to $0.05 per share for the year ended June 30, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 8,698,814 to 14,803,637 for the year ended June 30, 2014 and June 30, 2015, respectively; this increase in share count from our rights offering decreased the per share impact of increased total investment income.

Expenses

Net operating expenses increased from $9,136,271 for the year ended June 30, 2015 to $10,167,544 for the year ended June 30, 2016. The increase in net operating expenses is primarily due to an increase in professional services expenses, which were higher primarily due to the expenses incurred as a result of the strategic process. This increase in is partially offset by decreased interest expense related to reduced borrowings.

Net operating expenses per share decreased from $0.62 per share for the year ended June 30, 2015 to $0.45 per share for the year ended June 30, 2016. Per share figures noted above reflect an increase in the weighted average shares outstanding from 14,803,637 to 22,662,947 for the year ended June 30, 2015 and June 30, 2016, respectively; this increase in share count from our rights offering decreased the per share impact of increased net operating expenses.

Net operating expenses increased from $7,792,972 for the year ended June 30, 2014 to $9,136,271 for the year ended June 30, 2015. The increase in net operating expenses is primarily due to increased interest expense. Interest expense increased due to the increased use of our credit facility and the issuance of additional Notes (as defined below). These additional borrowings enabled us to fund portfolio growth, which

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had the effect of increasing management fees as a result of a larger average investment portfolio, and increasing incentive fees due to greater pre-incentive fee net investment income. The increase in net operating expenses was partially offset by the management fee waiver and expense reimbursement provided by our investment adviser. Refer to Note 5 of our Consolidated Financial Statements for our expense reimbursement policy.

Net operating expenses per share decreased from $0.90 per share for the year ended June 30, 2014 to $0.62 per share for the year ended June 30, 2015. This decrease is predominantly related to a decrease in total advisory fees per share from $0.36 per share to 0.28 per share. Additionally, $0.10 of the decline was due to the management fee waiver and the investment adviser’s reimbursement to the Company of operating expenses exceeding 1.50% (excluding interest expense, management and incentive fees and offering expenses) for the year ended June 30, 2015.

Net Investment Income

Net investment income decreased from $8,613,072 for the year ended June 30, 2015 to $6,290,849 for the year ended June 30, 2016. The decrease in net investment income for the year ended June 30, 2016, as compared to the year ended June 30, 2015, was primarily due to an increase in net operating expenses resulting from an increase in professional services expenses, which were higher primarily due to the expenses incurred as a result of the strategic process as well as lower interest income resulting from a smaller debt portfolio. This was partially offset by increased fee income related to the prepayment fees received as a result of the payoff of Good Technology Corporation and Butler Burger Group, LLC.

Net investment income per share decreased from $0.63 per share for the year ended June 30, 2015 to $0.28 per share for the year ended June 30, 2016. Per share figures noted above reflect an increase in the weighted average shares outstanding from 14,803,637 to 22,662,947 for the year ended June 30, 2015 as compared to the year ended June 30, 2016. This increase in share count from our rights offering increased the per share impact of decreased net investment income.

Net investment income increased from $6,030,721 for the year ended June 30, 2014 to $8,613,072 for the year ended June 30, 2015. The increase in net investment income for the year ended June 30, 2015, as compared to the year ended June 30, 2014 was primarily due to greater interest income from a larger average investment portfolio. Net investment income also increased due to the management fee waiver and our investment adviser’s reimbursement of certain operating expenses which totaled $1,420,843 during the year ended June 30, 2015, as compared to no waiver or reimbursed expenses for the year ended June 30, 2014. The increase in interest income was partially offset by greater interest expense from additional borrowings and greater management and incentive fees resulting from a larger portfolio and greater pre-incentive fee net investment income during the period.

Net investment income per share decreased from $0.71 per share for the year ended June 30, 2014 to $0.63 per share for the year ended June 30, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 8,698,814 to 14,803,637 for the year ended June 30, 2014 as compared to the year ended June 30, 2015. This increase in share count from our rights offering decreased the per share impact of increased net investment income.

Realized Gain (Loss) on Investments

Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs.

During the year ended June 30, 2016, we recorded net realized losses of $21,346,653, primarily in connection with the exit of our loans to ProGrade Ammo Group, LLC and TransAmerican Asset Servicing Group, LLC, and the restructuring of the senior secured term loan with Modular Process Control, LLC into an unsecured note which resulted in realized losses of $4,843,750, $3,119,245, and $3,959,741, respectively. We realized additional net losses in connection with the write off of the term loans to New Media West, LLC and Takoda Resources Inc. of $3,803,567 and $2,891,736, respectively, and the write off of the warrant in Good Technology Corporation of $2,289,400. These losses were partially offset by a gain from the payoff of the term loan to Good Technology Corporation of $1,508,603 and a gain from the sale of the equity interest in West World Media, LLC of $1,713,400. The Company also had a realized gain on the sale of the common

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stock in Granite Ridge Energy, LLC of $2,145,000. This gain was offset by a realized loss of $1,882,294 as a result of unwinding the corresponding swap contract.

During the year ended June 30, 2015, we recorded net realized losses of $7,576,472, primarily in connection with the write off of the second lien investment in Blackstrap Broadcasting, LLC, which resulted in a realized loss of $3,500,000 and the write off of our limited liability company interest in New Media West which resulted in a realized loss of $3,600,000.

During the year ended June 30, 2014, we recorded a realized loss of $948,502 primarily in connection with the continued disposition of our investment in Ygnition Networks, Inc. in an amount of $678,553 and a realized loss on our position in MDU Communications (USA), Inc. of $492,217. This was partially offset by a gain realized on the partial prepayment of PEAKS Trust 2009-1 of $223,169.

Change in Unrealized Gain (Loss) on Investments

Net unrealized appreciation or depreciation recorded on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See “Critical Accounting Policies — Change in Unrealized Gain (Loss) on Investments.”

From time to time, we may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, we may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, we may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the portfolio investment. Such elimination of unrealized gain (loss) is included on the Consolidated Statements of Operations as a (decrease) increase in the Net Change in Unrealized Gain (Loss) on Investments.

Net change in unrealized appreciation (depreciation) on investments was $5,355,642 for the year ended June 30, 2016 compared to $(6,237,328) for the year ended June 30, 2015. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Company’s investment portfolio, for the year ended June 30, 2016 by portfolio company.

Portfolio Company		Change in Unrealized Appreciation (Depreciation)				June 30, 2016												June 30, 2015
						Cost				Fair Value				Unrealized Appreciation (Depreciation)				Cost				Fair Value				Unrealized Appreciation (Depreciation)
ProGrade Ammo Group, LLC		$	4,251,658			$	—			$	—			$	—			$	6,841,967			$	2,590,309			$	(4,251,658	)
New Media West, LLC			3,811,681				—				—				—				3,811,681				—				(3,811,681	)
TransAmerican Asset Servicing Group, LLC			3,068,175				—				—				—				3,534,960				466,785				(3,068,175	)
US Oilfield Company, LLC			(5,377,269	)			5,727,925				313,355				(5,414,570	)			5,720,639				5,683,338				(37,301	)
US Shale Solutions, Inc.			(3,578,898	)			7,995,044				2,229,165				(5,765,879	)			6,642,071				4,455,090				(2,186,981	)
Other(1)			3,180,295				82,125,748				78,579,695				(3,546,053	)			145,644,585				138,918,237				(6,726,348	)
Totals		$	5,355,642			$	95,848,717			$	81,122,215			$	(14,726,502	)		$	172,195,903			$	152,113,759			$	(20,082,144	)

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Net change in unrealized appreciation (depreciation) of investments was $(6,237,328) for the year ended June 30, 2015 compared to $(12,704,614) for the year ended June 30, 2014. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Company’s investment portfolio for the year ended June 30, 2015 by portfolio company.

Portfolio Company		Change in Unrealized Appreciation (Depreciation)				June 30, 2015												June 30, 2014
						Cost				Fair Value				Unrealized Appreciation (Depreciation)				Cost				Fair Value				Unrealized Appreciation (Depreciation)
Blackstrap Broadcasting, LLC		$	4,128,706			$	—			$	—			$	—			$	6,595,547			$	2,466,841			$	(4,128,706	)
Takoda Resources Inc.			(2,757,498	)			3,054,532				161,585				(2,892,947	)			2,692,828				2,557,379				(135,449	)
US Shale Solutions, Inc.			(2,186,981	)			6,642,071				4,455,090				(2,186,981	)			—				—				—
TransAmerican Asset Servicing Group, LLC			(1,658,078	)			3,534,960				466,785				(3,068,175	)			2,970,154				1,560,057				(1,410,097	)
Fuse, LLC			(1,391,962	)			7,041,962				5,775,000				(1,266,962	)			7,050,000				7,175,000				125,000
Other(1)			(2,371,515	)			151,922,378				141,255,299				(10,667,079	)			144,727,046				136,431,482				(8,295,564	)
Totals		$	(6,237,328	)		$	172,195,903			$	152,113,759			$	(20,082,144	)		$	164,035,575			$	150,190,759			$	(13,844,816	)