Corporate Capital Trust, Inc. - FORM 10-K

Corporate Capital Trust, Inc. - FORM 10-K - March 14, 2018

Attached files

Attached files

Corporate Capital Trust, Inc. Reports

file	filename
EX-32.1 - EXHIBIT 32.1 - Corporate Capital Trust, Inc.	ex-321certificationofceoan.htm
EX-31.2 - EXHIBIT 31.2 - Corporate Capital Trust, Inc.	ex-312certificationofchief.htm
EX-31.1 - EXHIBIT 31.1 - Corporate Capital Trust, Inc.	ex-311certificationofchief.htm
EX-21.1 - EXHIBIT 21.1 - Corporate Capital Trust, Inc.	ex211subsidiariesoftheregi.htm
EX-14.1 - EXHIBIT 14.1 - Corporate Capital Trust, Inc.	ex141codeofethics.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2017



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



Commission file number: 814-00827

CORPORATE CAPITAL TRUST, INC.

(Exact name of registrant as specified in its charter)



Maryland		27-2857503
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

555 California Street 50th Floor San Francisco, California		94104
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (415) 315-3620

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



Title of each class		Name of exchange on which registered
Common Stock, $0.001 par value per share		The New York Stock Exchange

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

None

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

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 ☐ No ☒

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

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☐

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 the 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. Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

There was no established market for the Registrant’s shares of common stock as of June 30, 2017 (the last business day of the registrant’s most recently completed second fiscal quarter). The Registrant closed the public offering of its shares of common stock in October 2016. The last offering price at which the Registrant issued shares in its public offering was $20.41 per share.

As of March 9, 2018, there were 127,130,589 shares of the registrant's common stock outstanding.

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CORPORATE CAPITAL TRUST, INC.

INDEX




		PAGE

Part I.
	Statement Regarding Forward Looking Information	1
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	35
Item 2.	Properties	35
Item 3.	Legal Proceedings	35
Item 4.	Mine Safety Disclosures	35

Part II.
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	35
Item 6.	Selected Financial Data	38
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 8.	Financial Statements and Supplementary Data	67
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	67
Item 9A.	Controls and Procedures	67
Item 9B.	Other Information	67

Part III.
Item 10.	Directors, Executive Officers and Corporate Governance	67
Item 11.	Executive Compensation	75
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	75
Item 13.	Certain Relationships and Related Transactions, and Director Independence	76
Item 14.	Principal Accountant Fees and Services	77

Part IV.
Item 15.	Exhibits, Financial Statement Schedules	79
Item 16.	Form 10-K Summary	82

Signatures		83

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PART I

STATEMENT REGARDING FORWARD LOOKING INFORMATION

The following information contains statements that constitute forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements generally are characterized by the use of terms such as “may,” “should,” “plan,” “anticipate,” “estimate,” “intend,” “predict,” “believe” and “expect” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: persistent economic weakness at the global or national level, increased direct competition, changes in government regulations or accounting rules, changes in local, national and global capital market conditions, our ability to obtain or maintain credit lines or credit facilities on satisfactory terms, changes in interest rates, availability of proceeds from our offering of shares, our ability to identify suitable investments, our ability to close on identified investments, our ability to maintain our qualification as a regulated investment company and as a business development company, the ability of KKR Credit Advisors (US) LLC ("KKR") and its affiliates to attract and retain highly talented professionals, inaccuracies of our accounting estimates, the ability of KKR to locate suitable borrowers for our loans and the ability of such borrowers to make payments under their respective loans. Given these uncertainties, we caution you not to place undue reliance on such statements, which apply only as of the date hereof. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances or to reflect the occurrence of unanticipated events. The forward-looking statements should be read in light of the risk factors identified in Item A. “Risk Factors” of this report.

The forward-looking statements and projections contained in this report are excluded from the safe harbor protection provided by Section 27A of the Securities Act and Section 21E of the Exchange Act.


Item 1.	Business

General

Corporate Capital Trust, Inc. (which is referred to in this report as “we,” “our,” “us” and “our company”) is a non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the “1940 Act.” Formed as a Maryland corporation on June 9, 2010, we are externally managed by KKR, a investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). KKR is responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments and monitoring our portfolio on an ongoing basis. KKR also provides the administrative services necessary for our company to operate.

Through November 2017 we were externally managed by CNL Fund Advisors Company (“CNL”) and KKR. CNL, which was our investment adviser, and KKR, which was our investment sub-adviser, are referred to in this report as our “Advisers.” On November 14, 2017, shares of our common stock commenced trading on the New York Stock Exchange (the "NYSE") with the ticker symbol “CCT” (the “Listing”). Concurrent with the Listing, KKR acquired certain of CNL’s assets primarily used in its role as our investment adviser, and in connection with that transaction, KKR became our sole investment adviser. In connection with the Listing, we entered into a new administrative services agreement with KKR pursuant to which KKR replaced CNL as our administrator.

Our Common Stock Offering and Listing

In October 2016, we closed our continuous public offering of shares of common stock (the "Offering") to new investors. Throughout the course of the Offering, we sold 143.09 million shares of common stock (as adjusted for our reverse stock split) for gross proceeds of $3.44 billion, including the reinvestment of distributions. Since the close of the Offering we have continued to issue shares of our common stock pursuant to our distribution reinvestment plan. The Listing accomplished our goal of providing liquidity to our shareholders. See Item 5. “Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities” for information on our common stock, including our reverse stock split on October 31, 2017.

Proposed Transition of Investment Advisory Services

In December 2017, our board of directors (the "Board") approved the investment co-advisory agreements and the investment advisory agreements to be entered into between us, KKR and an affiliate of Franklin Square Holdings, L.P. (“FS Investments”) setting forth our proposed new advisory structure. In January 2018, we filed a definitive proxy statement soliciting shareholder approval of certain co-advisory agreements and the joint investment advisory agreement, each of which would replace the New Investment Advisory Agreement. The effectiveness of the investment co-advisory agreements and joint advisor investment advisory agreement is subject to various conditions, including shareholder approval thereof. If any of these

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conditions are not satisfied or (to the extent permitted) waived, the investment co-advisory agreements and/or the joint advisor investment advisory agreement may not go into effect.

Investment Objectives and Strategy

Our investment objective is to provide our shareholders with current income and, to a lesser extent, long-term capital appreciation. We pursue our investment objective by investing primarily in the debt of privately owned U.S. companies with a focus on originated transactions sourced through KKR's network. As of December 31, 2017, our investment portfolio, excluding our short term investments, totaled $3.97 billion and consisted primarily of senior and subordinated debt. As we continue to grow our investment portfolio we anticipate that a substantial portion of our portfolio will consist of senior and subordinated debt, which we believe offer opportunities for superior risk-adjusted returns and income generation. Our debt investments may take the form of corporate loans or bonds, may be secured or unsecured and may, in some cases, be accompanied by warrants, options, equity co-investments, or other forms of equity participation. We may separately purchase common or preferred equity interests in transactions. Our portfolio includes fixed-rate investments that generate absolute returns, as well as floating-rate investments that provide protection in rising interest rate and inflationary environments.

We will seek to continue to build on KKR's strong investment expertise and sourcing networks and adhere to an investment approach that emphasizes strong fundamental credit analysis and rigorous portfolio monitoring. We intend to continue to be disciplined in selecting investments and focused on opportunities that we perceive offer favorable risk/reward characteristics and relative value. We believe the market for lending is currently characterized by significant demand for capital and that we will continue to have considerable opportunities as a provider of capital to achieve attractive pricing and terms on our investments.

Throughout this report, we refer to the issuers of our debt and equity investments as portfolio companies.

Our Investment Focus

While we consider each investment opportunity independently, we generally focus on portfolio companies that share the following characteristics:

•

Size. We seek to provide capital to medium- and large-sized private companies, which typically have more defensible market positions, stronger franchises and operations and better credit characteristics relative to their smaller peers. Although there are no strict lower or upper limits on the size of a company in which we may invest, we expect to focus on companies with EBITDAs (earnings before interest, taxes, depreciation and amortization) greater than $25 million.


•	Capital Structure. Our portfolio consists primarily of senior and subordinated debt, which may in some cases be accompanied by warrants, options, equity co-investments, or other forms of equity participation. We seek to invest in companies that generate free cash flow at the time of our investment and benefit from material investments from well-known equity investors.


•	Management Team. We seek to prioritize investing in portfolio companies with strong management teams that we believe have a clear strategic vision, long-standing experience in their industry and a successful operating track record. We favor companies in which management’s incentives appear to be closely aligned with the long-term performance of the business, such as through equity ownership.

•

Stage of Business Life Cycle. We seek mature, privately owned businesses that have long track records of stable, positive cash flow. We do not intend to invest in start-up companies or companies with speculative business plans. As a business development company, we generally must, under relevant SEC rules, invest at least 70% of our total assets in “qualifying assets,” which includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public listed companies that have a market capitalization of less than $250 million.

•

Industry Focus. While we will consider opportunities within all industries, we seek to prioritize industries having, in our view, favorable characteristics from a lending perspective. For example, we seek companies in established industries with stable competitive and regulatory frameworks, where the main participants have enjoyed predictable, low-volatility earnings. We give less emphasis to industries that are frequently characterized by less predictable and more volatile earnings.

•

Geography. As a business development company under the 1940 Act, we focus on and invest at least 70% of our total assets in U.S. companies. To the extent we invest in foreign companies, we are required to do so in accordance with 1940 Act limitations and only in jurisdictions with established legal frameworks and a history of respecting creditor rights, including countries that are members of the European Union, as well as Canada, Australia and Japan.

While we believe the criteria listed above are important in identifying and investing in portfolio companies, we consider each investment on a case-by-case basis. It is possible that not all of these criteria will be met by each portfolio company in which we invest. There is no limit on the maturity or duration of any investment in our portfolio. Substantially all of the investments held in our portfolio have either a sub-investment grade rating by Moody’s Investors Service and/or

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Standard & Poor’s or are not rated by any rating agency. Investment sizes vary as our capital base changes and are ultimately at the discretion of KKR subject to oversight by the Board.

Except as restricted by the 1940 Act or by the Internal Revenue Code of 1986, as amended (the “Code”), we deem all of our investment policies to be non-fundamental, which means that they may be changed by our Board without shareholder approval.

Other Factors Affecting Portfolio Construction

As a business development company under the 1940 Act that intends to continue to qualify annually as a regulated investment company (“RIC”) under the Code, our investment activities are subject to certain regulatory restrictions. These restrictions include (i) requirements under the 1940 Act that we invest our capital primarily in U.S. companies either that are privately owned or that are listed on a national securities exchange with a market capitalization of less than $250 million, and (ii) investment diversification and source of income criteria imposed by the Code. For a description of certain valuation risks associated with our investments in portfolio companies, see Item 1A. “Risk Factors - Risks Related to Our Business.” A significant portion of our Investment Portfolio (as defined below) is recorded at fair value as determined in good faith by our Board and, as a result, there is and will be uncertainty as to the value of our portfolio investments and uncertainty as to the accuracy of our net asset value.

In addition, we generally are not permitted to co-invest alongside certain affiliates of KKR in privately negotiated transactions, absent an exemptive order from the SEC. On May 21, 2013, the SEC issued an order granting us exemptive relief that expands our ability to co-invest with certain of our affiliates in privately negotiated transactions. The exemptive order (as amended, the "SEC Exemptive Order") was amended by the SEC on June 19, 2017. Subject to the conditions specified in the SEC Exemptive Order, we are permitted to co-invest with those affiliates in certain additional investment opportunities, including investments originated and directly negotiated by KKR.

Portfolio and Investment Activity

In the case of our TRS Portfolio, we received all: (i) realized income and fees and (ii) realized capital gains generated by the TRS assets. In return, we paid quarterly to the TRS counterparty a payment consisting of: (i) realized capital losses and (ii) financing costs that were based on (a) a floating financing rate and (b) the settled notional amount of the TRS assets. The settled notional amount of the TRS assets was the net aggregate cost of the TRS assets underlying the TRS Portfolio that were settled and owned by the counterparty. The total notional amount of TRS assets included the settled notional amount plus the effect of the purchase and sale of TRS assets where a TRS asset trade settlement, if any, was pending. We terminated the TRS on June 30, 2017, in connection with our ongoing transition towards directly originated private credit investments, as the TRS arrangements were primarily limited to the financing of traded investments.

As of December 31, 2017 and 2016, our Investment Portfolio consisted of debt and equity securities relating to 113 and 129 portfolio companies, respectively, diversified across 21 industry classifications as of each period. As of December 31, 2016, the TRS Portfolio consisted of debt securities relating to 43 portfolio companies, respectively, diversified across 16 industry classifications.

Our investment program is not managed with any specific investment diversification or dispersion target goals. The table below summarizes the composition of our Investment Portfolio based on fair value as of December 31, 2017 and 2016 and TRS Portfolio as of December 31, 2016, excluding our short term investments.

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	Investment Portfolio as of (in thousands)
	December 31, 2017				December 31, 2016
Asset Category	Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio
Senior Debt
First Lien Senior Secured Loans	$	1,672,178	42.1	%	$	1,547,100	38.4	%
Second Lien Senior Secured Loans	943,753		23.8		1,074,183		26.7
Other Senior Secured Debt	141,302		3.6		134,786		3.4
Total Senior Debt	2,757,233		69.5		2,756,069		68.5
Subordinated Debt	381,677		9.6		642,427		16.0
Asset Based Finance	346,507		8.7		344,305		8.5
Strategic Credit Opportunities Partners, LLC	300,652		7.6		98,998		2.5
Equity/Other	182,340		4.6		183,488		4.5
Total	$	3,968,409	100.0	%	$	4,025,287	100.0	%



	TRS Portfolio as of (in thousands)
	December 31, 2016
Asset Category	Fair Value		Percentage of Portfolio
Senior Debt
First Lien Senior Secured Loans	$	200,326	77.6	%
Second Lien Senior Secured Loans	30,026		11.6
Other Senior Secured Debt	15,632		6.1
Total Senior Debt	245,984		95.3
Subordinated Debt	12,315		4.7
Total	$	258,299	100.0	%

Joint Venture

We also co-invest with Conway Capital, LLC (“Conway”), an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company, through an unconsolidated limited liability company, Strategic Credit Opportunities Partners (“SCJV”). SCJV was formed in May 2016 to invest its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. We and Conway each have 50% voting control of SCJV and together are required to agree on all investment decisions as well as all other significant actions for SCJV. As of December 31, 2017, SCJV had total capital commitments of $500 million, $437.50 million of which was from us and the remaining $62.50 million of which was from Conway. As of December 31, 2017, we had funded approximately $294.03 million of our commitment. Additionally, SCJV has $250 million of borrowing capacity through a revolving credit facility with Goldman Sachs Bank (the "GS Credit Facility") with a maturity date of September 29, 2021. As of December 31, 2017, our investment in SCJV was approximately $300.65 million at fair value. We do not consolidate SCJV in our consolidated financial statements.

For a further discussion of our investment activities and investment attributes of our Investment Portfolio as of December 31, 2017 and 2016 and TRS Portfolio as of December 31, 2016 and for the years then ended, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Portfolio and Investment Activity - Portfolio Investment Activity for the Years Ended December 31, 2017, 2016 and 2015.”

Competition

As a business development company with a particular focus on lending activities, we experience competition from other business development companies, commercial banks, specialty finance companies, open-end and closed-end investment companies, opportunity funds, private equity funds and institutional investors, many of which may have greater financial resources than we do for the purposes of lending to U.S. businesses within our stated investment focus. These competitors may also have a lower cost of capital, may be subject to less regulatory oversight, and may have lower overall operating costs. The level of competition impacts both our ability to raise capital, find suitable corporate borrowers that meet our investment criteria and acquire and originate loans to corporate borrowers. We may also face competition from other funds that affiliates of KKR participate in or advise.

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We believe we have the following potential competitive advantages over other capital providers that operate in the markets we target, which allow us to take advantage of the market opportunities we have identified:

•

Proprietary Sourcing and Deal Origination. KKR, through its deep industry relationships and investment teams that actively source new investments, provides us with immediate access to an established source of proprietary investment opportunities. KKR has built leading franchises and deep relationships with major companies, financial institutions and other investment and advisory institutions for sourcing new investments. KKR’s investment professionals are also organized into industry groups that conduct their own primary research, develop views on industry themes and trends and proactively work to identify companies in which to invest, often on an exclusive basis. We believe that KKR's broad networks and the internal deal generation strategies of their investment teams create favorable opportunities to deploy capital across a broad range of originated transactions that have attractive investment characteristics.

•

Focus on Preserving Capital and Minimizing Losses. We believe that protecting principal and avoiding capital losses are critical to generating attractive risk-adjusted returns. Toward that end, our investment process is designed to: (i) utilize KKR’s proprietary knowledge and deep industry relationships to identify attractive prospective portfolio companies, (ii) conduct rigorous due diligence to evaluate the creditworthiness of, and potential returns from, credit investments in such portfolio companies, (iii) stress test prospective investments to assess the viability of potential portfolio companies in a downside scenario and their ability to repay principal and (iv) structure investments and design covenants and other rights that anticipate and mitigate issues identified through this process.


•	Experienced Management and Investment Expertise. Affiliates of KKR have more than 40 years of investment experience that spans a broad range of economic, market and financial conditions. We believe we benefit from KKR’s rigorous investment approach, industry expertise and experience investing throughout a company’s capital structure.

•

Disciplined Credit Analysis and Portfolio Monitoring. KKR provides us with immediate access to an established platform for evaluating investments, managing risk and focusing on opportunities that generate superior returns with appropriate levels of risk. Through KKR, we benefit from an investment infrastructure that allows for intensive due diligence to filter investment opportunities and helps select investments that offer favorable risk/reward characteristics.

•

Versatile Transaction Structuring and Flexible Capital. KKR has experience and expertise in evaluating and structuring investments at all levels of a company’s capital structure and with varying features, providing numerous tools to manage risk while preserving opportunities for income, capital preservation and, to a lesser extent, long-term capital appreciation. We seek to continue to capitalize on this expertise and build our Investment Portfolio that performs in a broad range of economic conditions while meeting the unique needs of a broad range of borrowers. Although we are subject to regulation as a business development company, we are not subject to many of the regulatory limitations that govern traditional lending institutions. As a result, we believe that we can be more flexible in selecting and structuring investments and adjusting investment criteria. We believe borrowers view this flexibility as a benefit, making us an attractive financing partner.

•

Long-Term Investment Horizon. We believe that our flexibility to make investments with a long-term perspective provides us with the opportunity to generate favorable returns on invested capital and expands the types of investments that we may consider. The long-term nature of our capital helps us avoid disposing of assets at unfavorable prices and we believe makes us a better financing partner for portfolio companies.

Business Development Company Requirements

Business development companies are closed-end funds that elect to be treated as business development companies under the 1940 Act. As such, business development companies are subject to only certain provisions of the 1940 Act, as well as the Exchange Act. Business development companies are provided greater flexibility under the 1940 Act than other investment companies in dealing with their portfolio companies, issuing securities, and compensating their investment advisers. Business development companies can be internally or externally managed and may qualify to elect to be taxed as RICs for federal tax purposes. The 1940 Act contains prohibitions and restrictions relating to transactions between business development companies and their affiliates, principal underwriters, and affiliates of those affiliates or underwriters. The 1940 Act requires that a majority of a business development company’s directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company unless approved by a majority of our outstanding voting securities. The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of: (1) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (2) 50% of our outstanding voting securities.

We are generally unable 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 of our common stock if our Board determines that such sale is in our best interests and the best interests of our

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shareholders, and our shareholders approve such sale. In addition, we may generally issue new shares of our common stock at a price below net asset value in rights offerings to existing shareholders, in payment of dividends, and in certain other limited circumstances.

As a business development company, we are generally not permitted to invest in any portfolio company in which KKR or any of its affiliates currently have an investment, or to make any co-investments with KKR or any of its affiliates, without an exemptive order from the SEC. We may, however, invest alongside KKR and its affiliates’ other clients in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may invest alongside such other clients’ accounts consistent with guidance promulgated by the SEC staff permitting us and such other clients’ accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that KKR, acting on our behalf or on behalf of other clients, does not negotiate any term other than price. We may also invest alongside KKR's other clients as otherwise permissible under regulatory guidance, applicable regulations and KKR's allocation policies. Subject to the conditions specified in the SEC Exemptive Order, we are permitted to co-invest with those affiliates in certain additional investment opportunities, including investments originated and directly negotiated by KKR.

Financial Information About Industry Segments and Geographic Areas

Our primary objectives include investing in and originating a portfolio of loans, bonds and equity investments to commercial businesses located throughout the United States. We presently do not evaluate our investments by industry segment but rather, we review performance on an individual basis. Accordingly, we do not report industry or geographic area segment information.

Agreements for Investment Advisory Services and Administrative Services

Prior to the Listing, we were party to an investment advisory agreement with CNL, (the "Former Investment Advisory Agreement") for the overall management of our company’s investment activities. Under the terms of the Former Investment Advisory Agreement, CNL earned a base management fee equal to two percent of our gross assets. Our company and CNL had also entered into a sub-advisory agreement with KKR under which KKR was responsible for the day-to-day management of our company’s investment portfolio. CNL compensated KKR for advisory services that it provided to our company with 50% of the fees that CNL received under the Former Investment Advisory Agreement. Concurrent with the Listing, the Company entered into an investment advisory agreement with KKR (the “New Investment Advisory Agreement”). Under the terms of the New Investment Advisory Agreement, KKR earns a base management fee equal to an annual rate of 1.5% of the Company’s average gross assets, computed using the same method as under the Former Investment Advisory Agreement.

For a further discussion of the New Investment Advisory, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Contractual Obligations - Investment Advisory Agreement.”

Prior to the Listing, we were party to an administrative services agreement with CNL (the “Former Administrative Services Agreement”) whereby CNL performed, and oversaw the performance of, various administrative services on our behalf. Administrative services generally included investor services, general ledger accounting, fund accounting, maintaining required corporate and financial records, financial reporting for us and our subsidiaries, preparation of reports to our Board and lenders, calculating our net asset value, filing tax returns, preparing and filing SEC reports, preparing, printing and disseminating shareholder reports and proxy statements, overseeing the payment of our expenses and distributions on common stock, oversight of service providers and the performance of administrative and professional services rendered to our company by others. The Company reimbursed CNL for the professional services and expenses it incurred in performing its administrative obligations on behalf of the Company. In connection with the Listing, KKR replaced CNL as the sole investment adviser and entered into a new administrative services agreement with the Company with similar terms.

CNL, certain CNL affiliates, and KKR receive or have received compensation and reimbursement of expenses and personnel time in connection with (i) the performance and supervision of administrative services on our behalf, and (ii) certain expenses associated with investment advisory activities. See Note 6. “Related Party Transactions” in Item 8. “Financial Statements and Supplementary Data” for additional information on amounts paid to these related parties.

Employees

We are externally managed and as such we do not have any employees.

Tax Status

Beginning with our 2011 tax year, we have elected to be treated for federal income tax purposes, and intend to qualify annually, as a regulated investment company, or a RIC, under the Code. As a RIC, we generally will not be subject to federal income tax on distributed taxable income to the extent we distribute annually at least 90% of our taxable income (excluding capital gains) to our shareholders and meet other compliance requirements.

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Corporate Information

Our executive offices are located at 555 California Street, 50th Floor, San Francisco, CA 94104, and our telephone number is 415-315-3620. Prior to the Listing, our executive offices were located at CNL Center at City Commons, 450 South Orange Avenue, Orlando, FL 32801.

We make available all of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports free of charge on our internet website at www.corporatecapitaltrust.com as soon as reasonably practical after such material is electronically filed with or furnished to the SEC. These reports are also available on the SEC’s internet website at www.sec.gov. The public may also read and copy paper filings we have made with the SEC at the SEC’s Public Reference Room, located at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.


Item 1A.	Risk Factors

Risks Related to Our Business

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

We acquire a significant percentage of our portfolio company investments from privately held companies in directly negotiated transactions. Substantially all of these securities are subject to legal and other restrictions on resale or are otherwise less liquid than exchange-listed securities. We typically would be unable to exit these investments unless and until the portfolio company has a liquidity event such as a sale, refinancing, or initial public offering.

The illiquidity of our investments may make it difficult or impossible for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments, which could have a material adverse effect on our business, financial condition and results of operations.

Moreover, securities purchased by us that are liquid at the time of purchase may subsequently become illiquid due to events relating to the issuer of the securities, market events, economic conditions or investor perceptions, or the absence of active investment market participants.

Price declines in the corporate leveraged loan market may adversely affect the fair value of our portfolio, reducing our net asset value through increased net unrealized depreciation and the incurrence of realized losses.

Conditions in the U.S. corporate debt market may experience disruption or deterioration in the future, which may cause pricing levels to decline or be volatile. As a result, our net asset value could decline through an increase in unrealized depreciation and incurrence of realized losses in connection with the sale of our investments, which could have a material adverse impact on us and our business, financial condition and results of operations.

Our ability to achieve our investment objective depends on KKR’s ability to manage and support our investment process. If KKR were to lose a significant number of its key professionals, or terminate the New Investment Advisory Agreement, our ability to sustain our investment objective could be significantly harmed.

We do not have employees. Additionally, we have no internal management capacity other than our appointed executive officers and are dependent upon the investment expertise, skill and network of business contacts of KKR to achieve our investment objective. KKR evaluates, negotiates, structures, executes, monitors and services our investments. Our success depends to a significant extent on the continued service and coordination of KKR, including its key professionals. The departure of a significant number of key professionals from KKR could have a material adverse effect on our ability to sustain our investment objective.

Our ability to sustain our investment objective also depends on the continued ability of KKR to identify, analyze, invest in, finance, and monitor companies that meet our investment criteria. KKR’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the involvement of investment professionals of adequate number and sophistication to match the corresponding flow of transactions. To sustain our investment objective, KKR may need to retain, hire, train, supervise, and manage new investment professionals to participate in our investment selection and monitoring process. KKR may not be able to find qualified investment professionals in a timely manner or at all. Any failure to do so could have a material adverse effect on our business, financial condition and results of operations.

In addition, the New Investment Advisory Agreement has termination provisions that allow the agreement to be terminated by us on 60 days’ notice without penalty and by KKR upon 120 days’ notice to us without penalty. The termination of the New Investment Advisory Agreement may adversely affect the quality of our investment opportunities. In addition, in the event that the New Investment Advisory Agreement is terminated, it may be difficult for us to replace KKR as our investment

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adviser, and we would no longer have the ability to co-invest in privately negotiated transactions unless we filed a new SEC Exemptive Order and obtained the required exemptive relief.

The amount of any distributions we may make on our common stock is uncertain. We may not be able to pay you distributions, or be able to sustain distributions at any particular level, and our distributions per share, if any, may not grow over time, and our distributions per share may be reduced.

We pay distributions out of assets legally available for distribution. However, we cannot assure you that we will achieve investment results that will allow us to sustain a consistent targeted level of cash distributions or year-to-year increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of the risks described in this report. In addition, the inability to satisfy the asset coverage test applicable to us as a business development company and certain covenants in our credit facilities can limit our ability to pay distributions. We cannot assure you that we will continue to pay distributions to our shareholders in the future.

Distributions on our common stock may exceed our taxable earnings and profits; therefore, portions of the distributions that we pay may represent a return of capital to you, which will (i) lower your tax basis in your shares and thereby increase the amount of capital gain (or decrease the amount of capital loss) realized upon a subsequent sale or redemption of such shares, and (ii) reduce the amount of funds we have for investment in portfolio companies. We have not established any limit on the extent to which we may use borrowings, if any, or offering proceeds to fund distributions (which may reduce the amount of capital we ultimately invest in portfolio companies).

We may pay our distributions from offering proceeds or from borrowings in anticipation of future cash flow, which may constitute a return of your capital and will lower your tax basis in your shares, thereby increasing the amount of capital gain (or decreasing the amount of capital loss) realized upon a subsequent sale or redemption of such shares, even if such shares have not increased in value or have, in fact, lost value. Distributions from offering proceeds or from borrowings also could reduce the amount of capital we ultimately have available to invest in debt or equity securities of portfolio companies.

Because our business model depends to a significant extent upon relationships with corporations, financial institutions and investment firms, the inability of KKR to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.

We expect that KKR will depend on its relationships with corporations, financial institutions and investment firms in providing investment advisory services to us, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities. If KKR fails to maintain its existing relationships or develop new relationships or sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom KKR has relationships are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.

We may face increasing competition for investment opportunities, which could delay further deployment of our capital, reduce returns and result in losses.

We compete for investments with other business development companies and investment funds (including registered investment companies, private equity funds and mezzanine funds), as well as traditional financial services companies such as commercial banks and other sources of funding. Moreover, alternative investment vehicles, such as hedge funds, continue to increase their investment focus in our target market of privately owned U.S. companies. We have experienced, and may continue to experience, increased competition from banks and investment vehicles who may continue to lend to the middle market. Additionally, the Federal Reserve and other bank regulators may periodically provide incentives to U.S. commercial banks to originate more loans in the middle market of private companies. As a result of these market participants and regulatory incentives, competition for investment opportunities in privately owned U.S. companies is strong and may intensify. Many of our competitors are larger and have considerably greater financial, technical, and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some competitors may have higher risk tolerances or different risk assessments than us. 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 do.

We may lose investment opportunities if we do not match our competitors’ pricing, terms, and investment structure criteria. If we are forced to match these competitors’ investment terms criteria, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. 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 competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company or the source of income, asset diversification and distribution requirements we must satisfy to maintain our RIC status. The competitive pressures we face, and the manner in which we react or adjust to competitive pressures, may have a material adverse effect on our business, financial condition, results of operations, effective yield on investments, investment returns, leverage ratio, and

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cash flows. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time. Also we may not be able to identify and make investments that are consistent with our investment objective.

Investment in us involves a considerable amount of risk.

An investment in us involves a considerable amount of risk. Before making an investment decision, a prospective investor should (i) consider the suitability of this investment with respect to his or her investment objectives and personal situation and (ii) consider factors such as his or her personal net worth, income, age, risk tolerance and liquidity needs. An investment in our common stock represents an indirect investment in the portfolio of loans and fixed-income instruments, short positions and other securities and derivative instruments owned by us, and the value of these securities and instruments may fluctuate, sometimes rapidly and unpredictably, and such investment is subject to investment risk, including the possible loss of the entire principal amount invested. At any point in time, an investment in our common stock may be worth less than the original amount invested, even after taking into account distributions paid by us and the ability of our shareholders to reinvest distributions. We may also use leverage, which would magnify our investment, market and certain other risks.

We may be materially affected by market, economic and political conditions globally and in the jurisdictions and sectors in which we invest or operate, including factors affecting interest rates, the availability of credit, currency exchange rates and trade barriers. These factors are outside our control and could adversely affect the liquidity and value of our investments, and may reduce our ability to make attractive new investments.

We may be subject to risk arising from a default by one of several large institutions that are dependent on one another to meet their liquidity or operational needs, so that a default by one institution may cause a series of defaults by the other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which we interact on a daily basis.

A majority of our investment portfolio is recorded at fair value as determined in good faith in accordance with procedures established by our Board and, as a result, there is and will be uncertainty as to the value of our portfolio investments.

A majority of our investment portfolio is comprised of investments that are negotiated and originated directly with portfolio companies. Such investments should be considered illiquid or requiring a lengthy time to sell. Additionally, such investments feature more uncertainty as to the precise accuracy of their fair market value since these investments are not positioned in any active securities exchange or secondary market that would otherwise enable informed market participants and dealers to submit bid prices.

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 in accordance with procedures established by our Board. There is not a public market or active secondary market for many of the securities of the privately held companies in which we invest. The majority of our investments are not publicly traded or actively traded on a secondary market but, instead, may be traded on a privately negotiated over-the-counter secondary market for institutional investors. As a result, we value a majority of our securities quarterly at fair value as determined in good faith in accordance with valuation policy and procedures approved by our Board.

The determination of fair value, and thus the amount of unrealized gains or losses we may recognize in any reporting period, is to a degree subjective, and KKR has a conflict of interest in making recommendations of fair value. We value our investments quarterly at fair value as determined in good faith in accordance with procedures established by our Board based on input from KKR. Our Board utilizes the services of an independent third-party valuation firm to aid us in determining the fair value of certain securities. The types of factors that may be considered in determining the fair values of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow, current market interest rates and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, the valuations may fluctuate significantly over short periods of time due to changes in current market conditions. The determinations of fair value in accordance with procedures established by our Board may differ materially from the values that would have been used if an active market and market quotations existed for such investments. Our net asset value could be adversely affected if the determinations regarding the fair value of the investments were materially higher than the values that we ultimately realize upon the disposal of such investments. Additionally, a substantial over-estimate of the fair value of our investments may result in excessive borrowing advances relative to collateral value in certain of our credit facilities and lead to remedial margin calls.

Our Board may change our operating policies and strategies without prior notice or shareholder approval, the effects of which may be adverse to our shareholders.

Our Board has the authority to modify or waive current operating policies, investment criteria and strategies without prior notice and without shareholder approval. We cannot predict the effect any changes to current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and the value of our securities.

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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. Moreover, we will have significant flexibility in managing our portfolio of assets, including investing in ways with which investors may not agree.

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 regulation at the local, state, and federal levels. Changes to the laws and regulations governing our permitted investments may require a change to our investment strategy. Such changes could differ materially from our previously disclosed strategies and plans and may shift our investment focus from the areas of expertise of KKR. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment in us.

We may experience fluctuations in our operating results.

We could experience fluctuations in our operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, interest rates and default rates on the debt securities we acquire, 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. These occurrences could have a material adverse effect on our results of operations, the value of your investment in us and our ability to pay distributions to you and our other shareholders.

Our investments expose us to interest rate risks.

Our investments expose us to interest rate risks, meaning that changes in prevailing market interest rates could negatively affect the value of such investments. Factors that may affect market interest rates include, without limitation, inflation, slow or stagnant economic growth or recession, unemployment, money supply, governmental monetary policies, international disorders and instability in U.S. and non-U.S. financial markets. We expect that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities and the relationships of various interest rates to each other. In a changing interest rate environment, we may not be able to manage this risk effectively. If we are unable to manage interest rate risk effectively, our performance could be adversely affected.

Any unrealized losses we experience on our 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 market value or, if no market value is ascertainable, at the fair value as determined in good faith in accordance with procedures established by our Board. Decreases in the market values or fair values of our investments relative to amortized cost will be 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. In addition, decreases in the market value or fair value of our investments will reduce our net asset value.

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we hold large positions in the securities of a small number of issuers, or within a particular industry, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in a single issuer’s financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. However, we are subject to the diversification requirements applicable to RICs under Subchapter M of the Code.

We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations.

Our business is dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control. There could be:


•	sudden electrical or telecommunications outages;


•	natural disasters such as earthquakes, tornadoes and hurricanes;

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•	disease pandemics;


•	events arising from local or larger scale political or social matters, including terrorist acts; and


•	cyber-attacks.

These events, in turn, could have a material adverse effect on our operating results and negatively affect the net asset value of our common stock and our ability to pay distributions to our shareholders.

In addition, increased reliance on internet-based programs and applications to conduct transactions and store data creates growing operational and security risks. Targeted cyber-attacks or accidental events can lead to breaches in computer and data systems security, and subsequent unauthorized access to sensitive transactional and personal information held or maintained by us, our affiliates, and third party service providers or counterparties. Any breaches that occur could result in a failure to maintain the security, confidentiality, or privacy of sensitive data, including personal information relating to investors and the beneficial owners of investors, and may lead to theft, data corruption, or overall disruption in operational systems. Criminals may use data taken in breaches in identity theft, obtaining loans or payments under false identities and other crimes that have the potential to affect the value of assets in which we invests. These risks have the potential to disrupt our ability to engage in transactions, cause direct financial loss and reputational damage or lead to violations of applicable laws related to data and privacy protection and consumer protection. Cybersecurity risks also necessitate ongoing prevention and compliance costs.

We, our affiliates, and their respective third-party service providers could be negatively impacted by cybersecurity attacks which could have a material adverse impact on our financial condition, business or results of operations.

We, our affiliates, and their respective third-party service providers may use a variety of information technology systems in the ordinary course of business, which are potentially vulnerable to unauthorized access, computer viruses and cyber-attacks, including attacks to our information technology infrastructure and attempts by others to gain access to our propriety or sensitive information, and ranging from individual attempts to advanced persistent threats. The procedures and controls we use to monitor these threats and mitigate our exposure may not be sufficient to prevent cybersecurity incidents. The results of these incidents could include misstated financial data, theft of trade secrets or other intellectual property, liability for disclosure of confidential information, increased costs arising from the implementation of additional protective measures, litigation and reputational damage, which could have a material adverse impact on our financial condition, business or results of operations.

We are exposed to risks resulting from the current low interest rate environment.

Since we will borrow money to make investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. The current low interest rate environment can, depending on our cost of capital, depress our net investment income, even though the terms of our investments generally will include a minimum interest rate. In addition, any reduction in the level of interest rates on new investments relative to interest rates on our current investments could adversely impact our net investment income, reducing our ability to service the interest obligations on, and to repay the principal of, our indebtedness, as well as our capacity to pay distributions. Any such developments would result in a decline in our net asset value and in net asset value per share. Floating interest rate investments tied to certain indices that tend to lag behind the market may perform better in a falling interest rate environment, while floating interest rate investments tied to other indices, such as LIBOR, may do better in a rising rate environment. Not all investments perform alike under different interest rate scenarios. Generally, our variable interest rate debt investments provide for interest payments based on three-month LIBOR (the base rate) and typically, every three months, the base rates are reset to then prevailing three-month LIBOR.

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

In August 2011, Standard & Poor’s Rating Services (“S&P”) lowered its long-term sovereign credit rating on the U.S. from “AAA” to “AA+,” which was last affirmed by S&P in November 2016. Moody’s and Fitch Ratings, Inc. have also warned that they may downgrade the U.S. federal government’s credit rating. In addition, the economic downturn and the significant government interventions into the financial markets and fiscal stimulus spending over the last several years have contributed to significantly increased U.S. budget deficits. The U.S. government has on several occasions adopted legislation to suspend the federal debt ceiling to allow the U.S. Treasury Department to issue additional debt. Further downgrades or warnings by S&P or other rating agencies, and the U.S. government’s credit and deficit concerns in general, including issues around the federal debt ceiling, 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. Furthermore, in February 2014, the Federal Reserve began scaling back its bond-buying program, or quantitative easing, which it ended in October 2014. Quantitative easing was designed to stimulate the economy and expand the Federal Reserve’s holdings of long-term securities until key economic indicators, such as the unemployment rate, showed signs of improvement. The Federal Reserve also raised interest rates during the fourth quarter of 2015 and the fourth quarter of 2016. It is unclear

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what effect, if any, the end of quantitative easing, future interest rate raises, if any, and the pace of any such raises will have on the value of our investments or our ability to access the debt markets on favorable terms.

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 ability of these nations to continue to service their sovereign debt obligations. In January 2012, S&P lowered its long-term sovereign credit rating for France, Italy, Spain and six other European countries, which has negatively impacted global markets and economic conditions. In addition, in April 2012, S&P further lowered its long-term sovereign credit rating for Spain. While the financial stability of such countries has improved, 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 U.S. and European financial institutions. Furthermore, following the United Kingdom’s referendum to leave the European Union, S&P lowered its long-term sovereign credit rating. In addition the terms of the United Kingdom’s exit and any future referendums in other European countries may disrupt the global market. Market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, could negatively impact the global economy, and there can be no assurance that assistance packages will be available, or if available, will be sufficient to stabilize countries and markets in Europe. To the extent uncertainty regarding any economic recovery in Europe negatively impacts consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, or other credit factors, our business, financial condition and results of operations could be significantly and adversely affected.

Future disruptions or instability in capital markets could have a material adverse effect on our business, financial condition and results of operations.

From time to time, the global capital markets may experience periods of disruption and instability, which could materially and adversely impact the broader financial and credit markets and reduce the availability to us of debt and equity capital. For example, between 2008 and 2009, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the repricing of credit risk in the broadly syndicated credit market, the failure of major domestic and international financial institutions and a response from the U.S. Federal Reserve of lowering interest rates and quantitative easing. While market conditions have experienced relative stability and substantial growth in recent years, there have been continuing periods of volatility and there can be no assurance that adverse market conditions will not repeat themselves in the future which may require similar, or more experimental action by the U.S. Federal Reserve, such as negative interest rates. Global capital markets are sensitive to U.S. domestic and international economic conditions, social and political tensions, military conflict, and terrorism, including the financial stability of EU countries, perceived or actual downturns in China’s economy, further and sustained depreciation in the price of oil, and political and social unrest and military conflict in the Middle East.

We monitor U.S. and global developments and seek to manage our investments in a manner consistent with achieving our investment objectives, however, there can be no assurance that we will be successful in doing so. The re-appearance of market conditions similar to those experienced from 2008 through 2009 for any substantial length of time could lead to increased market volatility and tighter credit markets, which could make it difficult to extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms. Significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. While most of our investments will not be publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity) and impairments of the market values or fair market values of our investments, even if unrealized, must be reflected in our financial statements for the applicable period, which could result in significant reductions to our net asset value for the period. With certain limited exceptions, we are only allowed to borrow amounts or issue debt securities if our asset coverage, as calculated pursuant to the 1940 Act, equals at least 200% immediately after such borrowing. Equity capital may also be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, 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 without first obtaining approval for such issuance from our shareholders and our independent directors. If we are unable to raise capital or refinance existing debt on acceptable terms, then we may be limited in our ability to make new commitments or to fund existing commitments to our portfolio companies. Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes.

The impact on us of recent financial reform legislation, including the Dodd-Frank Act, is uncertain.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, or the Dodd-Frank Act enacted in July 2010, instituted a wide range of reforms that will have an impact on financial institutions. Many of the requirements called for in the Dodd-Frank Act remain to be implemented. However, the new presidential administration has announced its intention to repeal, amend or replace certain portions of Dodd-Frank and the regulations implemented thereunder. Given the uncertainty

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associated with the manner in which and whether the provisions of the Dodd-Frank Act will be implemented, repealed, amended or replaced, the full impact such requirements will have on our business, results of operations or financial condition is unclear. The changes resulting from the Dodd-Frank Act or any changes to the regulations already implemented thereunder may require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements. Failure to comply with any such laws, regulations or principles, or changes thereto, may negatively impact our business, results of operations and financial condition. While we cannot predict what effect any changes in the laws or regulations or their interpretations would have on us as a result of recent financial reform legislation, these changes could be materially adverse to us and our shareholders.

The impact of recently enacted federal tax legislation on us, our shareholders and our investments is uncertain.

Significant U.S. federal tax reform legislation was recently enacted that, among other things, permanently reduces the maximum federal corporate income tax rate, reduces the maximum individual income tax rate (effective for taxable years 2018 through 2025), restricts the deductibility of business interest expense, changes the rules regarding the calculation of net operating loss deductions that may be used to offset taxable income, expands the circumstances in which a foreign corporation will be treated as a “controlled foreign corporation” and, under certain circumstances, requires accrual method taxpayers to recognize income for U.S. federal income tax purposes no later than the income is taken into account as revenue in an applicable financial statement. The impact of this new legislation on us, our shareholders and entities in which we may invest is uncertain. Prospective investors are urged to consult their tax advisers regarding the effects of the new legislation on an investment in us.

We may invest in European companies and companies that have operations that may be affected by the Eurozone economy.

We may invest in European companies and companies that have operations that may be affected by the Eurozone economy. For example, concerns regarding the sovereign debt of various Eurozone countries and proposals for investors to incur substantial write-downs and reductions in the face value of certain countries’ sovereign debt have given rise to new concerns about sovereign defaults, following the vote by the United Kingdom to leave the EU and the possibility that one or more further countries might leave the EU or the Eurozone and various proposals (still under consideration and unclear in material respects) for support of affected countries and the Euro as a currency. The outcome of this situation cannot yet be predicted. Sovereign debt defaults and EU and/or Eurozone exits, could have material adverse effects on our investments in European companies, including but not limited to the availability of credit to support such companies’ financing needs, uncertainty and disruption in relation to financing, customer and supply contracts denominated in the Euro and wider economic disruption in markets served by those companies, while austerity and other measures introduced in order to limit or contain these issues may themselves lead to economic contraction and resulting adverse effects for us. It is possible that a number of our securities will be denominated in the Euro. Greece, Ireland and Portugal received one or more “bailouts” from other members of the EU. Although several countries in the Eurozone have agreed to multi-year bailout loans with the European Central Bank and the International Monetary Fund, it is unclear how much additional funding these countries, or other Eurozone countries, will require. Legal uncertainty about the funding of Euro denominated obligations following any breakup or exits from the Eurozone (particularly in the case of investments in companies in affected countries) could also have material adverse effects on us.

On June 23, 2016, the United Kingdom voted, via referendum, to exit from the EU, triggering political, economic and legal uncertainty. While such uncertainty most directly affects the United Kingdom and the EU, global markets suffered immediate and significant disruption. On March 29, 2017, the United Kingdom made a formal notification to the European Council under Article 50 of the Treaty on EU, which triggers a two year period during which the terms of an exit will be negotiated. The United Kingdom and the EU are therefore entering a period of legal, regulatory and political uncertainty. The United Kingdom’s exit from the EU will impact us and our investments (and their underlying issuers) in a variety of ways, not all of which are currently readily apparent immediately following the exit vote. We may invest in portfolio companies and other issuers with significant operations and/or assets in the United Kingdom, any of which could be adversely impacted by any new legal, tax and regulatory environment, whether by increased costs or impediments to the implementation of their business plan. Further, the vote by the United Kingdom to leave the EU may increase the likelihood of similar referenda in other member states of the EU, which could result in additional departures from the EU and may trigger steps by countries within the United Kingdom to leave the United Kingdom. The uncertainty resulting from any such developments, or the possibility of such developments, would also be likely to cause significant market disruption in the EU and the United Kingdom and more broadly across the global economy, as well as introduce further legal, tax and regulatory uncertainty in the EU and the United Kingdom.

Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies.

Economic sanction laws in the United States and other jurisdictions may prohibit us or our affiliates from transacting with certain countries, individuals and companies. In the United States, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) administers and enforces laws, executive orders and regulations establishing U.S.

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economic and trade sanctions, which prohibit, among other things, transactions with, and the provision of services to, certain non-U.S. countries, territories, entities and individuals. These types of sanctions may significantly restrict or completely prohibit investment activities in certain jurisdictions, and if we, our portfolio companies or other issuers in which we invest were to violate any such laws or regulations, we may face significant legal and monetary penalties.

The FCPA and other anti-corruption laws and regulations, as well as anti-boycott regulations, may also apply to and restrict our activities, our portfolio companies and other issuers of their investments. If an issuer or we were to violate any such laws or regulations, such issuer or we may face significant legal and monetary penalties. The U.S. government has indicated that it is particularly focused on FCPA enforcement, which may increase the risk that an issuer or we becomes the subject of such actual or threatened enforcement. In addition, certain commentators have suggested that private investment firms and the funds that they manage may face increased scrutiny and/or liability with respect to the activities of their underlying portfolio companies. As such, a violation of the FCPA or other applicable regulations by us or an issuer of our portfolio investments could have a material adverse effect on us. We are committed to complying with the FCPA and other anti-corruption laws and regulations, as well as anti-boycott regulations, to which they are subject. As a result, we may be adversely affected because of our unwillingness to enter into transactions that violate any such laws or regulations.

Future legislation or rules could modify how we treat derivatives and other financial arrangements for purposes of our compliance with the leverage limitations of the 1940 Act.

Future legislation or rules may modify how we treat derivatives and other financial arrangements for purposes of our compliance with the leverage limitations of the 1940 Act. For example, the SEC proposed a new rule in December 2015 that was designed to enhance the regulation of the use of derivatives by registered investments companies and business development companies. While the adoption of the proposed rule is currently uncertain, the proposed rule, if adopted, or any future legislation or rules, may modify how leverage is calculated under the 1940 Act and, therefore, may increase or decrease the amount of leverage currently available to us under the 1940 Act, which may be materially adverse to us and our shareholders.

As a public company, we are subject to regulations not applicable to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to comply with such regulations will involve significant expenditures, and non-compliance with such regulations may adversely affect us.

As a public 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 Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC and the listing standards of the NYSE. Our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and rules and regulations of the SEC thereunder. In particular, our management is required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

We incur significant expenses in connection with our compliance with the Sarbanes-Oxley Act and other regulations applicable to public companies, which may negatively impact our financial performance and our ability to make distributions. Compliance with such regulations also requires a significant amount of our management’s time and attention. For example, we cannot be certain as to the timing of the completion of our Sarbanes-Oxley mandated evaluations, testings and remediation actions, if any, or the impact of the same on our operations, and we may not be able to ensure that the process is effective or that our internal control over financial reporting are or will be deemed effective in the future. In the event that we are unable to maintain an effective system of internal control and maintain compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.

Our business and operations could be negatively affected if we become subject to shareholder activism, which could cause us to incur significant expense, hinder the execution of our investment strategy or impact our stock price.

Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing in the business development company space recently. While we are currently not subject to any shareholder activism, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of shareholder activism. Shareholder activism could result in substantial costs and divert management’s and our Board's attention and resources from our business. Additionally, such shareholder activism could give rise to perceived uncertainties as to our future and adversely affect our relationships with service providers and our portfolio companies. Also, we may be required to incur significant legal and other expenses related to any activist shareholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any shareholder activism.

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If the Company can no longer satisfy the conditions of Letter 12-40 (as defined below) issued by the Commodity Futures Trading Commission (the “CFTC”), the Company and KKR could be subject to additional regulatory requirements.

The Company has claimed relief available under a no-action letter (“Letter 12-40”) issued by the staff of the CFTC. Letter 12-40 relieves KKR from registering with the CFTC as the commodity pool operator (“CPO”) of the Company, provided that the Company (i) continues to be regulated by the SEC as a BDC, (ii) allocates no more than a designated percentage of its liquidation value to futures contracts, certain swap contracts and certain other derivative instruments that are within the jurisdiction of the Commodity Exchange Act (collectively, “CEA-regulated products”), and (iii) is not marketed to the public as a commodity pool or as a vehicle for trading in CEA-regulated products. If the Company can no longer satisfy the conditions of Letter 12-40, KKR could be subject to the CFTC’s CPO registration requirements, and the disclosure and operations of the Company would need to comply with all applicable regulations governing commodity pools and CPOs. If KKR were required to register as a CPO, it would also be required to become a member of the National Futures Association (“NFA”) and be subject to the NFA’s rules and bylaws. Compliance with these additional registration and regulatory requirements may increase KKR’s operating expenses, which, in turn, could result in the Company’s investors being charged additional fees.

Risks Related to KKR and its Affiliates

KKR and its affiliates have limited experience managing a business development company.

KKR and its affiliates have less than one year of experience serving as the sole investment adviser of a business development company and six years of experience sub-advising a vehicle regulated as a business development company and may not be able to continue to operate our business successfully or achieve our investment objective. As a result, an investment in our securities may entail more risk than the securities of a comparable company with a substantial operating history.

The 1940 Act and the Code impose numerous constraints on the operations of business development companies and RICs that do not apply to the other types of investment vehicles previously managed by KKR and its affiliates. For example, under the 1940 Act, business development companies are generally required to invest at least 70% of their total assets primarily in securities of qualifying U.S. private or thinly traded companies. Moreover, qualification for RIC tax treatment under subchapter M of the Code requires satisfaction of source-of-income, asset diversification and other requirements. Any failure by us to comply with these provisions could prevent us from maintaining our qualification as a business development company or RIC or could force us to pay unexpected taxes and penalties, which could be material. KKR’s and its affiliates’ limited experience in managing a portfolio of assets under such constraints may hinder its ability to take advantage of attractive investment opportunities and, as a result, achieve our investment objective.

We may not replicate our historical performance or the historical success of KKR.

We cannot provide any assurance that we will replicate our own historical performance, the historical success of KKR or the historical performance of other companies that KKR and/or its affiliates have advised in the past. Accordingly, our investment returns could be substantially lower than the returns achieved by the Company in the past, other KKR managed funds or by other clients of KKR and/or its affiliates. We can offer no assurance that KKR will be able to continue to implement our investment objective with the same degree of success as it has had in the past.

KKR and its affiliates, including our officers and some of our directors, may face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in increased risk-taking by us.

KKR and its affiliates will receive substantial fees from us in return for their services, including certain incentive fees based on the amount of appreciation of our investments. These fees could influence the advice provided to us. Generally, the more equity we sell in public offerings and the greater the risk assumed by us with respect to our investments, the greater the potential for growth in our assets and profits (and, correlatively, the fees payable by us to KKR). These compensation arrangements could affect KKR’s or its affiliates’ judgment with respect to public offerings of equity and investments made by us, which allow KKR to earn increased asset management fees.

The time and resources that individuals associated with KKR devote to us may be diverted, and we may face additional competition due to the fact that KKR is not prohibited from raising money for or managing other entities that make the same types of investments that we target.

KKR and its affiliates currently manage other investment entities and are not prohibited from raising money for and managing future investment entities that make the same types of investments as those we target. As a result, the time and resources that KKR devotes to us may be diverted, and during times of intense activity in other programs it may devote less time and resources to our business than is necessary or appropriate. In addition, we may compete with any such investment entity for the same investors and investment opportunities.

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KKR will experience conflicts of interest in connection with the management of our business affairs.

KKR will experience conflicts of interest in connection with the management of our business affairs, including relating to the allocation of investment opportunities by KKR and its affiliates; compensation to KKR; services that may be provided by KKR and its affiliates to issuers in which we invest; investments by us and other clients of KKR, subject to the limitations of the 1940 Act; the formation of additional investment funds by KKR; differing recommendations given by KKR to us versus other clients; KKR’s use of information gained from issuers in our portfolio for investments by other clients, subject to applicable law; and restrictions on KKR’s use of “inside information” with respect to potential investments by us.

KKR and its affiliates may experience conflicts of interest in connection with the negotiation of arranging and other transaction-related fees paid by our portfolio companies.

In negotiating originated loans and certain other originated credit investments on our behalf, KKR and its affiliates may have the ability to negotiate the payment of arranging and other transaction-related fees by the relevant counterparty to KKR and its affiliates and/or an original issue discount (“OID”). In such circumstances, KKR will face a conflict of interest to the extent that a portion of any arranging or transaction-related fees payable to KKR and its affiliates may be retained by KKR and its affiliates, whereas any OID provided by the relevant counterparty would solely benefit us.

KKR may face conflicts of interest with respect to services performed for issuers in which we invest.

KKR and its affiliates may provide a broad range of financial services to companies in which we invest, in compliance with applicable law, and will generally be paid fees for such services. In addition, affiliates of KKR may act as underwriters or placement agents in connection with an offering of securities by one of the companies in our portfolio. Any compensation received by KKR for providing these services will not be shared with us and may be received before we realize a return on our investment. KKR may face conflicts of interest with respect to services performed for these companies, on the one hand, and investments recommended to us, on the other hand. Depending on the nature and magnitude of the fees, we could perform these services through a taxable subsidiary.

KKR has incentives to favor its other accounts and clients over us, which may result in conflicts of interest that could be harmful to us.

Because KKR and its affiliates manage assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals), certain conflicts of interest are present. For instance, KKR and its affiliates may receive fees from certain accounts that are higher than the fees received by KKR from us, or receive a performance-based fee on certain accounts. In those instances, a portfolio manager for KKR has an incentive to favor the higher fee and/or performance-based fee accounts over us. In addition, a conflict of interest exists to the extent KKR has proprietary investments in certain accounts, where its portfolio managers or other employees have personal investments in certain accounts, or when certain accounts are investment options in KKR’s employee benefit plans. KKR has an incentive to favor these accounts over us. Our Board monitors these conflicts.

Misconduct by employees of KKR or by third-party service providers could cause significant losses to us.

Misconduct by employees of KKR or by third-party service providers could cause significant losses to us. Employee misconduct may include binding us to transactions that exceed authorized limits or present unacceptable risks and unauthorized investment activities or concealing unsuccessful investment activities (which, in either case, may result in unknown and unmanaged risks or losses). Losses could also result from actions by third-party service providers, including, without limitation, failing to recognize trades and misappropriating assets. In addition, employees and third-party service providers may improperly use or disclose confidential information, which could result in litigation or serious financial harm, including limiting our business prospects or future marketing activities. No assurances can be given that the due diligence performed by KKR will identify or prevent any such misconduct.

KKR’s actions on behalf of its other accounts and clients may be adverse to us and our investments and harmful to us.

KKR and its affiliates manage assets for accounts other than us, including private funds (for purposes of this section, “Advisor Funds”). Actions taken by KKR on behalf of its Advisor Funds may be adverse to us and our investments which could harm our performance. For example, we may invest in the same credit obligations as other Advisor Funds, although, to the extent permitted under the 1940 Act, our investments may include different obligations of the same issuer. Decisions made with respect to the securities held by one Advisor Fund may cause (or have the potential to cause) harm to a different class of securities of the issuer held by other Advisor Funds (including us). As a further example, KKR may manage accounts that engage in short sales of (or otherwise take short positions in) securities or other instruments of the type in which we invest, which could harm our performance for the benefit of the accounts taking short positions, if such short positions cause the market value of the securities to fall.

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Our access to confidential information may restrict our ability to take action with respect to some investments, which, in turn, may negatively affect our results of operations.

We, directly or through KKR, may obtain confidential information about the companies in which we have invested or may invest. If we possess confidential information about such companies, there may be restrictions on our ability to make, dispose of, increase the amount of, or otherwise take action with respect to, an investment in those companies. The impact of these restrictions on our ability to take action with respect to our investments could have an adverse effect on our results of operations.

KKR currently serves as an investment sub-adviser to one other business development company with substantially the same investment objectives and strategies as ours and KKR and its affiliates may in the future serve as an adviser to other business development companies with substantially the same investment objective and strategies, thereby subjecting KKR and its affiliates to actual and potential conflicts of interests in connection with the management of our business affairs.

The members of the senior management and investment teams of KKR and certain of its affiliates are presently, and plan in the future to continue to be, involved with activities which are unrelated to us, including serving as officers, directors or principals of entities that operate in the same or a related line of business as us. For example, KKR’s senior management and investment teams and other KKR personnel also serve in similar capacities for Corporate Capital Trust II, a business development company sub-advised by KKR. By serving in these multiple capacities, the senior management and investment teams may have obligations to Corporate Capital Trust II and/or other entities, and to the investors of such entities, which may conflict with our best interests or the best interest of our shareholders. For instance, we rely on KKR to manage our day-to-day activities and to implement our investment strategy. As a result of these activities, KKR, its senior management, investment team and other personnel, and certain of KKR’s affiliates may have conflicts of interest in allocating their time between us and the other activities in which they are or may become involved, including the management of Corporate Capital Trust II and other entities affiliated with KKR.

Furthermore, our investment objectives overlap with those of Corporate Capital Trust II, and may overlap with the investment objectives of other clients and affiliates of KKR, subjecting KKR to additional conflicts of interest. For example, we may compete for investments with Corporate Capital Trust II, thereby subjecting KKR and its affiliates to certain conflicts of interest with respect to evaluating the suitability of investment opportunities and making or recommending acquisitions on our behalf. To mitigate these conflicts, KKR will seek to execute such transactions for all of the participating investment accounts, including us, on a fair and equitable basis and in accordance with its allocation policies, taking into account such factors as the relative amounts of capital available for new investments, the investment programs and portfolio positions of the participating investment accounts, the clients for which participation is appropriate, and any other factors deemed appropriate.

There can be no assurance that the proposed investment co-advisory agreements or the joint adviser investment advisory agreement with KKR, FB Income Advisor, LLC, or FS Investments, as applicable, will receive shareholder approval or go into effect. The failure of such investment advisory agreements to go into effect could adversely affect our stock price, business, financial condition, results of operations or ability to achieve our investment objective.

On January 23, 2018, we filed a definitive proxy statement soliciting shareholder approval of certain co-advisory agreements and the joint adviser investment advisory agreement, each of which would replace the current Investment Advisory Agreement. The effectiveness of the investment co-advisory agreements and joint adviser investment advisory agreement is subject to various conditions, including shareholder approval thereof. If any of these conditions are not satisfied or (to the extent permitted) waived, the investment co-advisory agreements and/or the joint adviser investment advisory agreement may not go into effect. There can be no assurance that the investment co-advisory agreements or the joint adviser investment advisory agreement will become effective. As a result, the failure of the investment co-advisory agreements and/or the joint adviser investment advisory agreement to go into effect could adversely affect our stock price, business, financial condition, results of operations or ability to achieve our investment objective.

KKR has adopted restrictions on its use of inside information about existing or potential investments that its personnel acquires through their relationships with other advisory clients, and those restrictions may limit the freedom of KKR to enter into or exit from investments for us, which could have an adverse effect on our results of operations.

In the course of their respective duties, the members, officers, directors, employees, principals or affiliates of KKR may come into possession of material, non-public information. The possession of such information may, to our detriment, limit the ability of KKR to buy or sell a security or otherwise to participate in an investment opportunity for us. In certain circumstances, employees of KKR may serve as board members or in other capacities for portfolio or potential portfolio companies, which could restrict our ability to trade in the securities of such companies. For example, if personnel of KKR come into possession of material non-public information with respect to our investments, such personnel will be restricted by KKR’s information-sharing policies and procedures or by law or contract from sharing such information with our management team, even where the disclosure of such information would be in our best interests or would otherwise influence decisions taken by the members of the management team with respect to that investment. This conflict and these procedures and practices

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may limit the freedom of KKR to enter into or exit from potentially profitable investments for us which could have an adverse effect on our results of operations. Accordingly, there can be no assurance that we will be able to fully leverage the resources and industry expertise of KKR’s other businesses. Additionally, there may be circumstances in which one or more individuals associated with KKR will be precluded from providing services to us because of certain confidential information available to those individuals or to other parts of KKR.

We may be obligated to pay KKR incentive fees even if we incur a net decrease in net assets resulting from operations due to a decline in the value of our portfolio and even if our earned interest income is not payable in cash.

Our Investment Advisory Agreement entitles KKR to receive an incentive fee based on our pre-incentive fee net investment income regardless of any capital losses. In such case, we may be required to pay KKR an incentive fee for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net decrease in net assets resulting from operations for that quarter.

Any incentive fee payable by us that relates to our pre-incentive fee net investment income may be computed and paid on income that may include interest that has been accrued but not yet received or interest in the form of securities received rather than cash (“payment-in-kind,” or “PIK,” income). If a portfolio company defaults on a loan that is structured to provide accrued interest income, it is possible that accrued interest income previously included in the calculation of the incentive fee will become uncollectible. KKR is not obligated to reimburse us for any part of the incentive fee it received that was based on accrued interest income that we never received as a result of a subsequent default. PIK income will be included in the pre-incentive fee net investment income used to calculate the incentive fee to KKR even though we do not receive the income in the form of cash.

The quarterly incentive fee on income is recognized and paid without regard to: (i) the trend of pre-incentive fee net investment income as a percent of adjusted capital over multiple quarters in arrears which may in fact be consistently less than the preference return, or (ii) the net income or net loss in the current calendar quarter, the current year or any combination of prior periods.

For federal income tax purposes, we may be required to recognize taxable income in some circumstances in which we do not receive a corresponding payment in cash and to make distributions with respect to such income to maintain our status as a RIC and/or minimize excise tax. Under such circumstances, we may have difficulty meeting the annual distribution requirement necessary to maintain RIC tax treatment under the Code. This difficulty in making the required distribution may be amplified to the extent that we are required to pay a subordinated incentive fee on income with respect to such accrued income. As a result, 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 for this purpose. 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.

Our incentive fee may induce KKR to make speculative investments.

The incentive fee payable by us to KKR may create an incentive for KKR to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangements. The way in which the incentive fee is determined may encourage KKR to use leverage to increase the leveraged return on our investment portfolio.

In addition, the fact that our base management fee is payable based upon our average gross assets (which includes any borrowings for investment purposes or any unrealized depreciation) may encourage KKR to use leverage to make additional investments. 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 cyclical economic downturns. Under certain circumstances, the use of substantial leverage may increase the likelihood of our defaulting on our borrowings, which would be detrimental to holders of our securities.

Our ability to enter into transactions with our affiliates is restricted.

We are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of a majority of our independent directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act, and we will generally be prohibited from buying or selling any securities from or to such affiliate on a principal basis, absent the prior approval of our Board and, in some cases, the SEC. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which in certain circumstances could include investments in the same portfolio company (whether at the same or different times to the extent the transaction involves a joint investment), without prior approval of our Board and, in some cases, the SEC. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates. The SEC has interpreted the business development company regulations governing transactions with affiliates to prohibit certain joint transactions involving entities that share a common investment adviser. As a result of these

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restrictions, we may be prohibited from buying or selling any security from or to any portfolio company that is controlled by a fund managed by KKR or its affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.

We may, however, invest alongside KKR’s and its affiliates’ other clients, including other entities it manages, which we refer to as affiliates’ other clients, in certain circumstances when doing so is consistent with applicable law and SEC staff interpretations and guidance. We may also invest alongside the other clients of KKR, as otherwise permissible under regulatory guidance, applicable regulations and KKR’s allocation policies. It is our policy to base our Board’s determinations as to the amount of capital available for investment are based on such factors as: the amount of cash on-hand, existing commitments and reserves, the targeted leverage level, the targeted asset mix and diversification requirements and other investment policies and restrictions set by our Board or imposed by applicable laws, rules, regulations or interpretations. However, there can be no assurance that investment opportunities will be allocated to us fairly or equitably in the short-term or over time.

The SEC Exemptive Order granted by the SEC to us, KKR and certain of its affiliates, permits us to participate in certain transactions originated by KKR or its affiliates. However, affiliates of KKR whose primary business includes the origination of investments may engage in investment advisory businesses with client accounts that compete with us, and those affiliates have no obligation to make their originated investment opportunities available to KKR or to us.

In situations when co-investment with affiliates’ other clients is not permitted under the 1940 Act and related rules, existing or future staff guidance, or the terms and conditions of exemptive relief granted to us by the SEC (as discussed above), KKR will need to decide which client or clients will proceed with the investment. Generally, we will not have an entitlement to make a co-investment in these circumstances and, to the extent that another client elects to proceed with the investment, we will not be permitted to participate. Moreover, except in certain circumstances, we are unable to invest in any issuer in whom an affiliate’s other client holds a controlling interest.

We may make investments that could give rise to a conflict of interest.

We do not expect to invest in, or hold securities of, companies that are controlled by affiliates’ other clients. However, an affiliates’ other clients may invest in, and gain control over, one of our portfolio companies. If an affiliates’ other client, or clients, gains control over one of our portfolio companies, it may create conflicts of interest and may subject us to certain restrictions under the 1940 Act. As a result of these conflicts and restrictions KKR may be unable to implement our investment strategies as effectively as it could have in the absence of such conflicts or restrictions. For example, as a result of a conflict or restriction, KKR may be unable to engage in certain transactions that it would otherwise pursue. In order to avoid these conflicts and restrictions, KKR may choose to exit such investments prematurely and, as a result, we would forego any positive returns associated with such investments. In addition, to the extent that an affiliates’ other client holds a different class of securities than us as a result of such transactions, our interests may not be aligned.

The recommendations given to us by KKR may differ from those rendered by KKR to its other clients.

KKR and its affiliates may give advice and recommend securities to other clients which may differ from advice given to, or securities recommended or bought for, us even though such other clients’ investment objectives may be similar to ours.

We are not managed by KKR & Co., but rather a subsidiary of KKR & Co. and may not replicate the success of KKR & Co.

We are managed by KKR and not by KKR & Co. Our performance may be lower or higher than the performance of other entities managed by KKR & Co. or its affiliates and their past performance is no guarantee of our future results.

KKR’s liability is limited under the Investment Advisory Agreement, and we are required to indemnify KKR against certain liabilities, which may lead KKR to act in a riskier manner on our behalf than it would when acting for its own account.

KKR has not assumed any responsibility to us other than to render the services described in the New Investment Advisory Agreement, and it will not be responsible for any action of our Board in declining to follow KKR’s advice or recommendations. Pursuant to the New Investment Advisory Agreement, KKR and its directors, officers, shareholders, members, agents, employees, controlling persons, and any other person or entity affiliated with, or acting on behalf of KKR will not be liable to us for their acts under the New Investment Advisory Agreement, absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have also agreed to indemnify, defend and protect KKR and its directors, officers, shareholders, members, agents, employees, controlling persons and any other person or entity affiliated with, or acting on behalf of KKR with respect to all damages, liabilities, costs and expenses resulting from acts of KKR not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. These protections may lead KKR to act in a riskier manner when acting on our behalf than it would when acting for its own account.

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Risks Related to Business Development Companies

The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a business development company.

As a business development company, the 1940 Act prohibits us from acquiring any assets other than certain qualifying assets unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes U.S. operating companies whose securities are not listed on a national securities exchange (i.e., private companies), and certain U.S. public operating companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million. Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. Conversely, if we fail to invest a sufficient portion of our assets in qualifying assets, we could lose our status as a business development company, which would have a material adverse effect on our business, financial condition, and results of operations. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments in the portfolio for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments.

Failure to maintain our status as a business development company would reduce our operating flexibility.

If we do not remain a business development company, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions and correspondingly decrease our operating flexibility.

Regulations governing our operation as a business development company and RIC affect our ability to raise capital and the way in which we raise additional capital or borrow for investment purposes, which may have a negative effect on our growth. As a business development company, the necessity of raising additional capital may expose us to risks, including risks associated with leverage.

As a result of the annual distribution requirement to qualify as a RIC, we may need to access the capital markets periodically to raise cash to fund new investments in portfolio companies. We may continue to issue “senior securities,” including borrowing money from banks or other financial institutions only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance. The senior securities we have issued, as well as senior securities we may issue in the future, expose us to risks associated with leverage, including an increased risk of loss. Our ability to issue different types of securities is also limited. Compliance with these distribution requirements may unfavorably limit our investment opportunities and reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend.

We have and may continue to borrow for investment purposes. If the value of our assets declines, we may be unable to satisfy the asset coverage test, which would prohibit us from paying distributions and could prevent us from qualifying as a RIC, which would generally result in a corporate-level tax on any income and net gains. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, 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 shareholders.

In addition, we anticipate that as market conditions permit, we may securitize our loans to generate cash for funding new investments. To securitize loans, we may create a wholly owned subsidiary, contribute a pool of loans to the subsidiary and have the subsidiary issue primarily investment grade debt securities to purchasers who we would expect to be willing to accept a substantially lower interest rate than the loans earn. We would retain all or a portion of the equity in the securitized pool of loans. Our retained equity would be exposed to any losses on the portfolio of loans before any of the debt securities would be exposed to such losses. Accordingly, if the pool of loans experienced a low level of losses due to defaults, we would earn an incremental amount of income on our retained equity but we would be exposed, up to the amount of equity we retained, to that proportion of any losses we would have experienced if we had continued to hold the loans in our portfolio.

Risks Related to Our Investments

Our investments in portfolio companies may be risky, and we could lose all or part of our indirect investment.

We pursue a strategy focused on investing primarily in the debt of privately owned U.S. companies with a focus on originated transactions sourced through the networks of KKR. Short transaction closing timeframes associated with originated transactions coupled with added tax or accounting structuring complexity and international transactions may result in a higher risk in comparison to non-originated transactions.

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Senior Debt. When we invest in senior debt, we generally seek to take a security interest in the available assets of the portfolio company, including equity interests in any of its subsidiaries. These investments will generally take the form of senior secured first lien loans, senior secured second lien loans, or senior secured bonds. There is a risk that the collateral securing our investments may decrease in value over time or lose its entire value, 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. Also, 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 decide to enforce our remedies.

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Subordinated Debt. Our subordinated debt investments are generally subordinated to senior debt and are generally unsecured, which may result in a heightened level of risk and volatility or a loss of principal, which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect our investment returns as compared to our senior debt investments. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our shareholders to non-cash income. Since we will not receive any principal repayments prior to the maturity of some of our subordinated debt investments, such investments will be of greater risk than amortizing loans.

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Equity Investments. Certain investments that we may make may include equity related securities, such as rights and warrants, that may be converted into or exchanged for common stock or the cash value of the common stock. In addition, we may make direct equity investments in portfolio companies. The equity interests we receive may not appreciate in value and, in fact, may decline in value. In addition, when we invest in senior and subordinated debt, we may acquire warrants or options to purchase equity securities or benefit from other types of equity participation. Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. 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. Depending on the nature of the equity investment, we could invest through a taxable subsidiary which could impact the return on investment. We may also 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 may be unable to exercise any put rights we acquire, which grant us the right to sell our equity securities back to the portfolio company, for the consideration provided in our investment documents if the issuer is in financial distress However, the equity interests we receive may not appreciate in value and, in fact, may decline in value.

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Convertible Securities. We may invest in convertible securities, such as bonds, debentures, notes, preferred stocks or other securities that may be converted into, or exchanged for, a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula. A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by us is called for redemption, we will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on our ability to achieve our investment objective.

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Investments in Private Investment Funds. We may invest in, or wholly own, private investment funds, including hedge funds, private equity funds, limited liability companies, REITs, and other business entities. In valuing our investments in private investment funds, we rely primarily on information provided by managers of such funds. Valuations of illiquid securities, such as interests in certain private investment funds, involve various judgments and consideration of factors that may be subjective. There is a risk that inaccurate valuations provided by managers of private investment funds could adversely affect the value of our common stock. We may not be able to withdraw our investment in certain private investment funds promptly after we have made a decision to do so, which may result in a loss to us and adversely affect our investment returns.

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Derivatives. Derivative investments have risks, including: the imperfect correlation between the value of such instruments and our underlying assets, which creates the possibility that the loss on such instruments may be greater than the gain in the value of the underlying assets in our portfolio; the loss of principal; the possible default of the other party to the transaction; and illiquidity of the derivative investments. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding, or may not recover at all. In addition, in the event of the insolvency of a counterparty to a derivative transaction, the derivative contract would typically be terminated at its fair market value. If we are owed this fair market value in the termination of the derivative contract and our claim is unsecured, we will be treated as a general creditor of such counterparty and will not have any claim with respect to the underlying security. Certain of the derivative investments in which we may invest may, in certain circumstances, give rise to a form of financial leverage, which may magnify the risk of owning such instruments. The ability to successfully use derivative investments

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depends on the ability of KKR to predict pertinent market movements, which cannot be assured. In addition, amounts paid by us as premiums and cash or other assets held in margin accounts with respect to our derivative investments would not be available to us for other investment purposes, which may result in lost opportunities for gain.

The Dodd-Frank Act could, depending on future rulemaking by regulatory agencies, impact the use of derivatives. The Dodd-Frank Act is intended to regulate the over-the-counter (“OTC”) derivatives market by requiring many derivative transactions to be cleared and traded on an exchange, expanding entity registration requirements, imposing business conduct requirements on dealers and requiring banks to move some derivatives trading units to a non-guaranteed affiliate separate from the deposit-taking bank or divest them altogether. Future rulemaking to implement these requirements could potentially limit or completely restrict our ability to use these instruments as a part of our investment strategy, increase the costs of using these instruments or make them less effective. Limits or restrictions applicable to the counterparties with which we engage in derivative transactions could also prevent us from using these instruments or affect the pricing or other factors relating to these instruments, or may change availability of certain investments. The SEC has also indicated that it may adopt new policies on the use of derivatives by registered investment companies. Such policies could affect the nature and extent of our use of derivatives.

Most debt securities in which we invest will not be rated by any rating agency and, if they were rated, they would be rated as below investment grade quality. Debt securities rated below investment grade, which are often referred to as “junk” securities, are generally regarded as having predominantly speculative characteristics and may carry a greater risk with respect to a borrower’s capacity to pay interest and repay principal.

The credit ratings of certain of our investments may not be indicative of the actual credit risk of such rated instruments.

Rating agencies rate debt securities based upon their assessment of the likelihood of the receipt of principal and interest payments. Rating agencies do not consider the risks of fluctuations in market value or other factors that may influence the value of debt securities. Therefore, the credit rating assigned to a particular instrument may not fully reflect the true risks of an investment in such instrument. Credit rating agencies may change their methods of evaluating credit risk and determining ratings. These changes may occur quickly and often. While we may give some consideration to ratings, ratings may not be indicative of the actual credit risk of our investments in rated instruments.

A redemption of convertible securities held by us could have an adverse effect on our ability to achieve our investment objective.

A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by us is called for redemption, we will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on our ability to achieve our investment objective.

To the extent OID and payment-in-kind (PIK) interest income constitute a portion of our income, we will be exposed to risks associated with the deferred receipt of cash representing such income.

Our investments may include OID and PIK instruments. To the extent OID and PIK constitute a portion of our income, we will be exposed to risks associated with such income being required to be included in income for financial reporting purposes in accordance with generally accepted accounting principles (“GAAP”) and taxable income prior to receipt of cash, including the following:


•	OID and PIK instruments may have unreliable valuations because the accruals require judgments about collectibility;


•	OID and PIK instruments may create heightened credit risks because the inducement to the borrower to accept higher interest rates in exchange for the deferral of cash payments typically represents, to some extent, speculation on the part of the borrower;


•	For GAAP purposes, cash distributions to shareholders that include a component of OID or PIK income are not considered a return of capital, although they may be paid from the offering proceeds. Thus, although a distribution of OID or PIK income may be funded from the cash invested by the shareholders, the 1940 Act does not require that shareholders be given notice of this fact;


•	The presence of OID and PIK creates the risk of non-refundable cash payments to KKR in the form of subordinated incentive fees on income based on non-cash OID and PIK income accruals that may never be realized; and


•	In the case of PIK “toggle” debt, the PIK election has the simultaneous effects of increasing the investment income, thus increasing the potential for realizing incentive fees.

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

We pursue a strategy focused on investing primarily in the debt of privately owned U.S. companies with a focus on originated transactions sourced through the networks of KKR. Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle

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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.

If we cannot obtain debt financing or equity capital on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.

Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require additional debt financing or equity capital to operate. Pursuant to tax rules that apply to us, we are required to distribute at least 90% of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our shareholders to maintain our RIC status. Accordingly, in the event that we need additional capital in the future for investments or for any other reason we may need to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital. These sources of funding may not be available to us due to unfavorable economic conditions, which 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. Consequently, if we cannot obtain further debt or equity financing on acceptable terms, our ability to acquire additional investments and to expand our operations will be adversely affected. As a result, we would be less able to achieve portfolio diversification and our investment objective, which may negatively impact our results of operations and reduce our ability to make distributions to our shareholders.

Subordinated liens on collateral securing debt investments that we have made or may make to 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 debt investments that we make in portfolio companies will be secured on a second priority basis by the same collateral securing senior debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the debt. In the event of a default, the holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any.

We may also make unsecured debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on any such portfolio company’s collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the debt investments we make in our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more inter-creditor agreements that we enter into with the holders of senior debt. Under such an inter-creditor agreement, at any time obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.

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Certain of our investments may be adversely affected by laws relating to fraudulent conveyance or voidable preferences.

Certain of our investments could be subject to federal bankruptcy law and state fraudulent transfer laws, which vary from state to state, if the debt obligations relating to such investments were issued with the intent of hindering, delaying or defrauding creditors or, in certain circumstances, if the issuer receives less than reasonably equivalent value or fair consideration in return for issuing such debt obligations. If the debt is used for a buyout of shareholders, this risk is greater than if the debt proceeds are used for day-to-day operations or organic growth. If a court were to find that the issuance of the debt obligations was a fraudulent transfer or conveyance, the court could void or otherwise refuse to recognize the payment obligations under the debt obligations or the collateral supporting such obligations, further subordinate the debt obligations or the liens supporting such obligations to other existing and future indebtedness of the issuer or require us to repay any amounts received by us with respect to the debt obligations or collateral. In the event of a finding that a fraudulent transfer or conveyance occurred, we may not receive any repayment on the debt obligations.

Under certain circumstances, payments to us and distributions by us to our shareholders may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance, preferential payment or similar transaction under applicable bankruptcy and insolvency laws. Furthermore, investments in restructurings may be adversely affected by statutes relating to, among other things, fraudulent conveyances, voidable preferences, lender liability and the court’s discretionary power to disallow, subordinate or disenfranchise particular claims or recharacterize investments made in the form of debt as equity contributions.

Most of our mezzanine securities and other investments (if any) are expected to be unsecured and made in companies whose capital structures have significant indebtedness ranking ahead of the investments, all or a significant portion of which may be secured.

Mezzanine debt is typically junior to the obligations of a company to senior creditors, trade creditors and employees. Most of our mezzanine securities and other investments (if any) are expected to be unsecured and made in companies whose capital structures have significant indebtedness ranking ahead of the investments, all or a significant portion of which may be secured. While the securities and other investments may benefit from the same or similar financial and other covenants as those enjoyed by the indebtedness ranking ahead of the investments and may benefit from cross-default provisions and security over the portfolio company’s assets, some or all of such terms may not be part of particular investments. Default rates for mezzanine debt securities have historically been higher than for investment grade securities. Mezzanine securities and other investments generally are subject to various risks including, without limitation: (i) a subsequent characterization of an investment as a “fraudulent conveyance”; (ii) the recovery as a “preference” of liens perfected or payments made on account of a debt in the 90 days before a bankruptcy filing; (iii) equitable subordination claims by other creditors; (iv) so-called “lender liability” claims by the issuer of the obligations; and (v) environmental liabilities that may arise with respect to collateral securing the obligations. Mezzanine debt investments may also be subject to early redemption features, refinancing options, prepayment options or similar provisions which, in each case, could result in the issuer repaying the principal on an obligation earlier than expected. In addition, mezzanine debt investments may include enhanced information rights or other involvement with a company’s Board that could result in limiting our ability to liquidate positions in the company.

We may invest in debt securities and instruments that are rated below investment grade by recognized rating agencies or will be unrated and face ongoing uncertainties and exposure to adverse business, financial or economic conditions and the issuer’s failure to make timely interest and principal payments. Such securities and instruments are generally not exchange-traded and, as a result, trade in the OTC marketplace, which is less transparent than the exchange-traded marketplace. In addition, we may invest in bonds of issuers that do not have publicly traded equity securities, making it more difficult to hedge the risks associated with such investments. Our investments in below investment grade instruments exposes us to a substantial degree of credit risk and interest rate risk. The market for high yield securities has recently experienced periods of significant volatility and reduced liquidity. The market values of certain of these lower-rated and unrated debt investments may reflect individual corporate developments to a greater extent and tend to be more sensitive to economic conditions than those of higher-rated investments, which react primarily to fluctuations in the general level of interest rates. Companies that issue such securities are often highly leveraged and may not have available to them more traditional methods of financing. General economic recession or a major decline in the demand for products and services in which the borrower operates would likely have a materially adverse impact on the value of such securities and the ability of the issuers of such securities to repay principal and interest thereon, thereby increasing the incidence of default of such securities. In addition, adverse publicity and investor perceptions, whether or not based on fundamental analysis, may also decrease the value and liquidity of these high yield debt investments.

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Certain of our investments are exposed to the credit risk of the counterparties with which, or the dealers, brokers and exchanges through which, our deals, whether in exchange-traded or OTC transactions. If there is a default by the counterparty to such a transaction, we will, under most normal circumstances, have contractual remedies pursuant to the agreements related to the transaction. However, exercising such contractual rights may involve delays or costs which could result in losses to us. We may be subject to the risk of loss of our assets on deposit or being settled or cleared with a broker in the event of the broker’s bankruptcy, the bankruptcy of any clearing broker through which the broker executes and clears transactions on behalf of us, the bankruptcy of an exchange clearing house or the bankruptcy of any other counterparty. In the case of any such bankruptcy, we might recover, even in respect of property specifically traceable to us, only a pro rata share of all property available for distribution to all of the counterparty’s customers and counterparties. Such an amount may be less than the amounts owed to us. Such events would have an adverse effect on the net asset value of our funds. Certain counterparties may have general custody of, or title to, our assets. The failure of any such counterparty may result in adverse consequences to the net asset value of our fund.

In addition, we may from time to time use counterparties located in jurisdictions outside the U.S. Such counterparties usually are subject to laws and regulations in non-U.S. jurisdictions that are designed to protect customers in the event of their insolvency. However, the practical effect of these laws and their application to our assets may be subject to substantial limitations and uncertainties. Because of the range of possible factual scenarios involving the insolvency of a counterparty and the potential number of entities and jurisdictions that may be involved, it is impossible to generalize about the effect of such an insolvency on us and our assets. Investors should assume that the insolvency of any such counterparty would result in significant delays in recovering our financial instruments from or the payment of claims therefor by such counterparty and a loss to us, which could be material.

Our investments may be structured through the use of OTC options and swaps or other indirect investment transactions. Such transactions may be entered into with a small number of counterparties resulting in a concentration of counterparty risk. The exercise of counterparty rights under such arrangements, including forced sales of securities, may have a significant adverse impact on us and our fund’s net asset value.

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.

Although we generally structure certain of our investments as senior debt, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we provided managerial assistance to that portfolio company or a representative of us or KKR sat on the Board of such portfolio company, a bankruptcy court might re-characterize our debt investment and subordinate all or a portion of our claim to that of other creditors. In situations where a bankruptcy carries a high degree of political significance, our legal rights may be subordinated to other creditors.

In addition, a number of U.S. judicial decisions have upheld judgments obtained by borrowers against lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has violated a duty (whether implied or contractual) of good faith, commercial reasonableness and fair dealing, or a similar duty owed to the borrower or has assumed an excessive degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or shareholders. Because of the nature of our investments in portfolio companies (including that, as a business development company, we may be required to provide managerial assistance to those portfolio companies), we may be subject to allegations of lender liability.

We generally will not control the business operations of our portfolio companies and, due to the illiquid nature of our holdings in our portfolio companies, we may not be able to dispose of our interest in our portfolio companies.

We do not expect to control most of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements may impose certain restrictive covenants on our borrowers. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as a debt investor. Due to the lack of liquidity for our investments in private companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

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

General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities and, accordingly, may have a material adverse effect on our ability to achieve our investment objective and the rate of return on invested capital. Because we borrow money and may issue debt securities to make investments, our net investment income is dependent, in part, upon the difference between the rate at which we borrow funds or pay interest on such

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debt securities and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

Trading prices for debt that pays a fixed rate of return tend to fall as interest rates rise. Trading prices tend to fluctuate more for fixed-rate securities that have longer maturities. We may enter into certain hedging transactions, such as interest rate swap agreements, to mitigate our exposure to adverse fluctuations in interest rates and we may increase our floating rate investments to position the portfolio for rate increases. However, we cannot assure you that such transactions will be successful in mitigating our exposure to interest rate risk or if we will enter into such interest rate hedges. Hedging transactions may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio investments.

We do not have a policy governing the maturities of our investments. This means that we are subject to greater risk (other things being equal) than a fund invested solely in shorter-term securities. A decline in the prices of the debt we own could adversely affect our net asset value. Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividend rate.

International investments create additional risks.

We have made, and expect to continue to make, investments in portfolio companies that are domiciled outside of the United States. We anticipate that up to 30% of our investments may be in these types of assets. Our investments in foreign portfolio companies are deemed “non-qualifying assets,” which means, as required by the 1940 Act, they, along with other non-qualifying assets, may not constitute more than 30% of our total assets at the time of our acquisition of any asset, after giving effect to the acquisition. Notwithstanding the limitation on our ownership of foreign portfolio companies, such investments subject us to many of the same risks as our domestic investments, as well as certain additional risks, including the following:


•	foreign governmental laws, rules and policies, including those restricting the ownership of assets in the foreign country or the repatriation of profits from the foreign country to the United States;


•	foreign currency devaluations that reduce the value of and returns on our foreign investments;


•	adverse changes in the availability, cost and terms of investments due to the varying economic policies of a foreign country in which we invest;


•	adverse changes in tax rates, the tax treatment of transaction structures and other changes in operating expenses of a particular foreign country in which we invest;


•	the assessment of foreign-country taxes (including withholding taxes, transfer taxes and value added taxes, any or all of which could be significant) on income or gains from our investments in the foreign country;


•	adverse changes in foreign-country laws, including those relating to taxation, bankruptcy and ownership of assets;


•	changes that adversely affect the social, political and/or economic stability of a foreign country in which we invest;


•	high inflation in the foreign countries in which we invest, which could increase the costs to us of investing in those countries;


•	deflationary periods in the foreign countries in which we invest, which could reduce demand for our assets in those countries and diminish the value of such investments and the related investment returns to us; and


•	legal and logistical barriers in the foreign countries in which we invest that materially and adversely limit our ability to enforce our contractual rights with respect to those investments.

In addition, we may make investments in countries whose governments or economies may prove unstable. Certain of the countries in which we may invest may have political, economic and legal systems that are unpredictable, unreliable or otherwise inadequate with respect to the implementation, interpretation and enforcement of laws protecting asset ownership and economic interests. In some of the countries in which we may invest, there may be a risk of nationalization, expropriation or confiscatory taxation, which may have an adverse effect on our portfolio companies in those countries and the rates of return that we are able to achieve on such investments. We may also lose the total value of any investment which is nationalized, expropriated or confiscated. The financial results and investment opportunities available to us, particularly in developing countries and emerging markets, may be materially and adversely affected by any or all of these political, economic and legal risks.

Our investments in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities, subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.

We may invest in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities which would be required to register as investment companies but for an exemption under Sections 3(c)(1) and 3(c)(7) of the 1940 Act. Our investments in such private investment funds expose us to the risks associated with the businesses of such funds or entities as well as such private investment funds’ portfolio companies. These private investment funds may or may not be registered investment companies and, thus, may not be subject to protections afforded by the 1940

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Act, covering, among other areas, liquidity requirements, governance by an independent board, affiliated transaction restrictions, leverage limitations, public disclosure requirements and custody requirements.

We rely primarily on information provided by managers of private investment funds in valuing our investments in such funds. There is a risk that inaccurate valuations provided by managers of private investment funds could adversely affect the value of our common stock. In addition, there can be no assurance that a manager of a private investment fund will provide advance notice of any material change in such private investment fund’s investment program or policies and thus, our investment portfolio may be subject to additional risks which may not be promptly identified by KKR.

Before investing in any private investment fund, KKR, under the oversight of our Board, will conduct a due diligence review of the valuation methodology utilized by the private investment fund, which as a general matter we expect would utilize market values when available, and otherwise utilize principles of fair value that KKR reasonably believes to be consistent with those used by us for valuing our own investments. After investing in a private investment fund, KKR will monitor the valuation methodology used by the asset manager and/or issuer of the private investment fund. Following procedures adopted by our Board, in the absence of specific transaction activity in a particular private investment fund, our Board will consider whether it is appropriate, in light of all relevant circumstances, to value our investment at the net asset value reported by the private investment fund at the time of valuation or to adjust the value to reflect a premium or discount.

KKR will provide our Board with periodic reports, no less frequently than quarterly, that discuss the functioning of the valuation process, if applicable to that period, and that identify issues and valuations problems that have arisen, if any. To the extent deemed necessary by KKR, our Board will review any securities valued by KKR in accordance with our valuation policies.

Our Board - with the assistance of KKR, officers and, through them, independent valuation agents - is responsible for determining in good faith the fair value of our portfolio investments for which market quotations are not readily available (as is the case of private investment funds). Our Board will make this determination on a quarterly basis and any other time when a decision is required regarding the fair value of our investments in private investment funds or other portfolio investments for which market quotations are not available. A determination of fair value involves subjective judgments and estimates, and it is possible that the fair value determined for a security may differ materially from the value that could be realized upon the sale of the security.

Investments in the securities of private investment funds may also involve duplication of advisory fees and certain other expenses. By investing in private investment funds indirectly through us, you bear a pro rata portion of our advisory fees and other expenses, and also indirectly bear a pro rata portion of the advisory fees, performance-based allocations and other expenses borne by us as an investor in the private investment funds. In addition, the purchase of the shares of some private investment funds requires the payment of sales loads and (in the case of closed-end investment companies) sometimes substantial premiums above the value of such investment companies’ portfolio securities.

In addition, certain private investment funds may not provide us with the liquidity we require and would thus subject us to liquidity risk. Further, even if an investment in a private investment fund is deemed liquid at the time of investment, the private investment fund may, in the future, alter the nature of our investments and cease to be a liquid investment fund, subjecting us to liquidity risk.

We may acquire various structured financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce the cash available to service our debt or for distribution to our shareholders.

We may seek to hedge against interest rate and currency exchange rate fluctuations and credit risk by using structured financial instruments such as futures, options, swaps and forward contracts, subject to the requirements of the 1940 Act. Use of structured financial instruments for hedging purposes may present significant risks, including the risk of loss of the amounts invested. Defaults by the other party to a hedging transaction can result in losses in the hedging transaction. Hedging activities also involve the risk of an imperfect correlation between the hedging instrument and the asset being hedged, which could result in losses both on the hedging transaction and on the instrument being hedged. Use of hedging activities may not prevent significant losses and could increase our losses. Further, hedging transactions may reduce cash available to service our debt or pay distributions to our shareholders.

Derivative transactions which we may enter into may expose us to certain risks, including market risk, liquidity risk and other risks associated with the use of leverage.

Certain derivative transactions, such as a total return swap arrangement, or TRS, effectively add leverage to our portfolio by providing us investment and economic exposure to a security or portfolio of securities without our owning, investing directly in, or taking physical custody of such security or portfolio of securities.

Such derivative transactions are subject to market risks, liquidity risks and risks of imperfect correlation between the value of the transaction and the assets underlying the transaction. In addition, because such transactions are forms of

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synthetic leverage, they are subject to risks associated with the use of leverage. Moreover, we may incur certain costs in connection with such transactions that could in the aggregate be significant.

Such transactions are subject to the risk that the counterparty will default on its payment obligations or that one party will otherwise not be able to meet its contractual obligations to the other. Additionally, if the counterparty chooses to exercise its termination rights under such transactions, it is possible that, because of adverse market conditions existing at the time of such termination, we will owe more to the counterparty (or will be entitled to receive less from the counterparty) than we would otherwise have if we controlled the timing of such termination.

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 debt financing 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.

An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.

We invest primarily in privately held companies. Investments in private companies pose certain incremental risks as compared to investments in public companies including that they:


•	have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand financial distress;


•	may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;


•	may have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns;


•	are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on a privately held company and, in turn, on us; and

•

generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and members of KKR’s management may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies.

In addition, investments in private companies tend to be less liquid. The securities of private companies are not publicly traded or actively traded on the secondary market and are, instead, traded on a privately negotiated over-the-counter secondary market for institutional investors. These over-the-counter secondary markets may be inactive during an economic downturn or a credit crisis. In addition, the securities in these companies will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. If there is no readily available market for these investments, we are required to carry these investments at fair value as determined by our Board. As a result, 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. We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we, KKR or any of its affiliates have material nonpublic information regarding such portfolio company or where the sale would be an impermissible joint transaction. The reduced liquidity 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.

Finally, little public information generally exists about private companies and these companies may not have third-party credit ratings or audited financial statements. We must therefore rely on the ability of KKR to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. Additionally, these companies and their financial information will not generally be subject to the Sarbanes-Oxley Act of 2002 and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments.

Certain investment analyses and decisions by KKR may be required to be undertaken on an expedited basis.

Investment analyses and decisions by KKR may be required to be undertaken on an expedited basis to take advantage of investment opportunities. While we generally will not seek to make an investment until KKR has conducted

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sufficient due diligence to make a determination as to the acceptability of the credit quality of the investment and the underlying issuer, in such cases, the information available to KKR at the time of making an investment decision may be limited. Therefore, no assurance can be given that KKR will have knowledge of all circumstances that may adversely affect an investment. In addition, KKR expects often to rely upon independent consultants in connection with its evaluation of proposed investments. No assurance can be given as to the accuracy or completeness of the information provided by such independent consultants and we may incur liability as a result of such consultants’ actions.

We may not have the funds or ability to make additional investments in our portfolio companies or to fund our unfunded commitments.

After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant or other right to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Even if we do have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our level of risk, we prefer other opportunities, we are limited in our ability to do so by compliance with business development company requirements, or we desire to maintain our RIC status. Our ability to make follow-on investments may also be limited by KKR’s allocation policies. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment.

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, pending their 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, net of prepayment fees, could negatively impact our return on equity.

The agreements governing each of our revolving credit facilities and our senior secured term loan contain various covenants which, if not complied with, could accelerate repayment under the relevant facility, thereby materially and adversely affecting our liquidity, financial condition, results of operations and our ability to service our debt or pay distributions to our shareholders.

We and each of our wholly owned, special purpose financing subsidiaries are party to revolving or term credit facilities with one or more lenders. We or our special purpose financing subsidiaries may become party to additional such facilities in the future. The agreements governing these facilities currently, and are likely to continue to, contain default provisions such as:


•	the failure to make principal payments when due or interest payments within three business days of when due;


•	borrowings under the facility exceeding the applicable advance rates;


•	the purchase by us or the relevant financing subsidiary, as applicable, of certain ineligible assets;


•	the insolvency or bankruptcy of us or the relevant financing subsidiary;


•	the decline of our or the relevant financing subsidiary’s, as applicable, net asset value below a specified threshold; and


•	fraud or other illicit acts by us or KKR in our or its investment advisory capacities.

An event of default under any one credit facility may result, among other things, in the termination of the availability of further funds under that facility and other unrelated credit facilities, and an accelerated maturity date for all amounts outstanding under the credit facility or facilities. This could disrupt our business, reduce our revenues and, by delaying any distributions allowed to us under the facility until the lender has been paid in full, reduce our liquidity and cash flow and impair our ability to grow our business, service our debt, make distribution payments to our shareholders and maintain our status as a RIC.

The agreements governing each credit facility would require us or the relevant financing subsidiary, as applicable, to comply with certain operational covenants. These covenants may, for example, require us or the relevant financing subsidiary, as applicable, to, among other things, maintain eligible assets with an aggregate equity value, net of borrowing balance, equal to or exceeding specified amounts under the facility. In addition, under the relevant facility, the occurrence of certain “Super-Collateralization Events” may result in an increase of the collateral equity value that we or the relevant financing subsidiary, as applicable, is required to maintain. Super-Collateralization Events would include, among other things:


•	certain key employees ceasing to be directors, principals, officers or investment managers of KKR;

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•	the bankruptcy or insolvency of KKR;


•	KKR ceasing to act as adviser for us or the relevant financing subsidiary;


•	our ceasing to act as the relevant financing subsidiary’s investment manager, becoming bankrupt or insolvent, defaulting on certain material agreements or failing to maintain a net asset value above a specified threshold; and


•	fraud or other illicit acts by us or KKR in our or its investment advisory capacities.

A decline in the value of assets owned by us or the relevant financing subsidiary, as applicable or the occurrence of a Super-Collateralization Event under the relevant facility could result in our being required to retain, acquire or contribute to the relevant financing subsidiary, as applicable, additional assets, which would likely disrupt our business and impact our ability to meet our investment objectives, service our debt and pay distributions to our shareholders.

The failure to meet collateral requirements under the relevant facility or the occurrence of any other event of default that results in the termination of such facility may force us to liquidate positions at a time and/or at a price that is disadvantageous to us and could result in losses. In addition, upon the occurrence of an event of default under the relevant facility, the related lender would have the right to the assets pledged as collateral supporting the amounts outstanding under the facility and could sell such assets in order to satisfy amounts due under the facility.

Each borrowing under any credit facility will be subject to the satisfaction of certain conditions. We cannot assure you that we or the relevant financing subsidiary, as applicable, will be able to borrow funds under the relevant facility at any particular time or at all.

To the extent that we borrow money, the potential for gain or loss on amounts invested in us will be magnified and may increase the risk of investing in us. Borrowed money may also adversely affect the return on our assets, reduce cash available to service our debt or for distribution to our shareholders, and result in losses.

The use of borrowings, also known as leverage, increases the volatility of investments by magnifying the potential for gain or loss on invested equity capital. Since we use leverage to partially finance our investments, through borrowing from banks and other lenders, you will experience increased risks of investing in our securities. If the value of our assets decreases, leveraging will cause our net asset value to decline more sharply than it otherwise would if we had not borrowed and employed leverage. Similarly, any decrease in our income would cause our net income to decline more sharply than it would have if we had not borrowed and employed leverage. Such a decline could negatively affect our ability to service our debt or make distributions to our shareholders. In addition, our shareholders will bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the management or incentive fees payable to KKR.

The amount of leverage that we employ depends on KKR’s and our Board’s assessment of market and other factors at the time of any proposed borrowing. There can be no assurance that additional leveraged financing will be available to us on favorable terms or at all. However, to the extent that we use leverage to finance our assets, our financing costs will reduce cash available for servicing our debt or distributions to shareholders. Moreover, we may not be able to meet our financing obligations and, to the extent that we cannot, we risk the loss of some or all of our assets to liquidation or sale to satisfy the obligations. In such an event, we may be forced to sell assets at significantly depressed prices due to market conditions or otherwise, which may result in losses.

As a business development company, we are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%. If this ratio declines below 200%, we cannot incur additional debt and could be required to sell a portion of our investments to repay some debt when it is disadvantageous to do so. This could have a material adverse effect on our operations, and we may not be able to service our debt or make distributions.

Legislation was previously introduced in the U.S. House of Representatives that proposed a modification of this section of the 1940 Act to permit an increase in the amount of debt that business development companies could incur by modifying the percentage from 200% to 150%. Similar legislation may be reintroduced and may pass that permits us to incur additional leverage under the 1940 Act. As a result, we may be able to incur additional indebtedness in the future, and, therefore, the risk of an investment in us may increase.

Investments in which we have a non-controlling interest may involve risks specific to third-party management of those investments.

We may also co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring jointly-controlled or non-controlling interests in certain investments in conjunction with participation by one or more third parties in such investment. Such joint venture partners or third party managers may include former KKR personnel or associated persons. As co-investors, we may have interests or objectives that are inconsistent with those of the third-party partners or co-venturers. Although we may not have full control over these investments and therefore, may have a limited ability to protect its position therein, we expect that we will negotiate appropriate rights to protect our interests. Nevertheless, such investments may involve risks not present in investments where a third party is not involved, including the possibility that

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a third-party partner or co-venturer may have financial difficulties, resulting in a negative impact on such investment, may have economic or business interests or goals which are inconsistent with ours, or may be in a position to take (or block) action in a manner contrary to the our investment objectives or the increased possibility of default by, diminished liquidity or insolvency of, the third party, due to a sustained or general economic downturn. Third-party partners or co-venturers may opt to liquidate an investment at a time during which such liquidation is not optimal for us. In addition, we may in certain circumstances be liable for the actions of its third-party partners or co-venturers. In those circumstances where such third parties involve a management group, such third parties may receive compensation arrangements relating to such investments, including incentive compensation arrangements.

Risks Related to an Investment in our Common Stock

A shareholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.

Our shareholders do not have preemptive rights to any shares we issue in the future. Our charter, which we refer to herein as the articles of incorporation, authorizes us to issue up to 1,000,000,000 shares of common stock. Pursuant to our articles of incorporation, a majority of our entire Board may amend our articles of incorporation to increase or decrease the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series without shareholder approval. Our board may elect to sell additional shares in the future or issue equity interests in private offerings. To the extent we issue additional equity interests at or below net asset value, your percentage ownership interest in us may be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.

Under the 1940 Act, we generally are prohibited from issuing or selling our common stock at a price below net asset value per share, which may be a disadvantage as compared with certain public companies. We may, however, sell our common stock, or warrants, options, or rights to acquire our common stock, at a price below the current net asset value of our common stock if our Board and independent directors determine that such sale is in our best interests and the best interests of our shareholders, and our shareholders, including a majority of those shareholders that are not affiliated with us, 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, closely approximates the fair value of such securities (less any distributing commission or discount). If we raise additional funds by issuing common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our shareholders at that time will decrease and you will experience dilution.

Any sale or other issuance of shares of our common stock at a price below net asset value per share would result in an immediate dilution to our common stock and a reduction of our net asset value per share. This dilution would occur as a result of a proportionately greater decrease in a shareholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Because the number of future shares of common stock that may be issued below our net asset value per share and the price and timing of such issuances are not currently known, we cannot predict the actual dilutive effect of any such issuance nor can we predict the resulting reduction in our net asset value per share, however, such effects may be material. If our shares of common stock are trading at a price below its net asset value per share, we will generally not be able to issue additional shares of our common stock at their market price without first obtaining approval for such issuance from our shareholders and our independent directors. We may not be able to obtain the necessary approvals to sell shares of common stock below net asset value. We undertake to describe the material risks and dilutive effects of any offering that we make at a price below our then-current net asset value in the future in a prospectus supplement issued in connection with any such offering.

Preferred stock could be issued with rights and preferences that would adversely affect holders of our common stock.

Under the terms of our articles of incorporation, our Board is authorized to issue shares of preferred stock in one or more series without shareholder approval, which could potentially adversely affect the interests of existing shareholders.

Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.

Sales of substantial amounts of our common stock, or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues for a sustained period of time, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.

Investing in our common stock involves a high degree of risk.

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

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The net asset value of our common stock may fluctuate significantly.

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


•	changes in the value of our portfolio of investments and derivative instruments as a result of changes in market factors, such as interest rate shifts, and also portfolio specific performance, such as portfolio company defaults, among other reasons;


•	changes in regulatory policies or tax guidelines, particularly with respect to RICs or business development companies;


•	de-listing from the NYSE;


•	loss of RIC or business development company status;


•	distributions that exceed our net investment income and net income as reported according to GAAP;


•	changes in earnings or variations in operating results;


•	changes in accounting guidelines governing valuation of our investments;


•	any shortfall in revenue or net income or any increase in losses from levels expected by investors;


•	departure of KKR or certain of its key personnel;


•	general economic trends and other external factors; and


•	loss of a major funding source.

Certain provisions of the Maryland General Corporation Law could deter takeover attempts.

Our bylaws exempt us from the Maryland Control Share Acquisition Act, which significantly restricts the voting rights of control shares of a Maryland corporation acquired in a control share acquisition. If our bylaws were amended to repeal this exemption from the Maryland Control Share Acquisition Act, that statute may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. Although we do not presently intend to adopt such an amendment to our bylaws, there can be no assurance that we will not so amend our bylaws at some time in the future. We will not, however, amend our bylaws to make us subject to the Maryland Control Share Acquisition Act without our Board determining that doing so would not conflict with the 1940 Act and obtaining confirmation from the SEC that it does not object to that determination.

Additionally, our Board may, without shareholder action, authorize the issuance of shares of stock in one or more classes or series, including preferred stock. Our Board may also, without shareholder action, amend our articles of incorporation to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the value of our common stock.

We may pay distributions from offering proceeds, borrowings or the sale of assets to the extent our cash flows from operations, net investment income or earnings are not sufficient to fund declared distributions.

We may fund distributions from the uninvested proceeds of an offering and borrowings, and we have not established limits on the amount of funds we may use from such proceeds or borrowings to make any such distributions. We have paid and may continue to pay distributions from the sale of assets to the extent distributions exceed our earnings or cash flows from operations. Distributions from offering proceeds or from borrowings could reduce the amount of capital we ultimately invest in our investment portfolio.

Shareholders may experience dilution in their ownership percentage if they do not participate in our distribution reinvestment plan.

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

Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares.

In the event we issue subscription rights, shareholders who do not fully exercise their subscription rights should expect that they will, at the completion of a rights offering pursuant to our prospectus, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution

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in share ownership because we do not know at this time what proportion of the shares will be purchased as a result of such rights offering.

In addition, if the subscription price is less than the net asset value per share of our common stock, then our shareholders would experience an immediate dilution of the aggregate net asset value of their shares as a result of the offering. The amount of any decrease in net asset value is not predictable because it is not known at this time what the subscription price and net asset value per share will be on the expiration date of a rights offering or what proportion of the shares will be purchased as a result of such rights offering. Such dilution could be substantial.

These dilutive effects may be exacerbated if we were to conduct multiple subscription rights offerings, particularly if such offerings were to occur over a short period of time. In addition, subscription rights offerings and the prospect of future subscription rights offerings may create downward pressure on the secondary market price of our common stock due to the potential for the issuance of shares at a price below our net asset value, without a corresponding change to our net asset value.

If we issue preferred stock, debt securities or convertible debt securities, the net asset value of our common stock may become more volatile.

We cannot assure you that the issuance of preferred stock and/or debt securities would result in a higher yield or return to the holders of our common stock. The issuance of preferred stock, debt securities or convertible debt would likely cause the net asset value of our common stock to become more volatile. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of our common stock would be reduced. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to exceed the net rate of return on our portfolio, the use of leverage would result in a lower rate of return to the holders of common stock than if we had not issued the preferred stock or debt securities. Any decline in the net asset value of our investment would be borne entirely by the holders of our 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 our common stock than if we were not leveraged through the issuance of preferred stock. This decline in net asset value would also tend to cause a greater decline in the market price for our common stock.

There is also a risk that, in the event of a sharp decline in the value of our net assets, we would be in danger of failing to maintain required asset coverage ratios which may be required by the preferred stock, debt securities or convertible debt or our current investment income might not be sufficient to meet the dividend requirements on the preferred stock or the interest payments on the debt securities. In order to counteract such an event, we might need to liquidate investments in order to fund redemption of some or all of the preferred stock, debt securities or convertible debt. In addition, we would pay (and the holders of our common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, debt securities, convertible debt, any combination of these securities. Holders of preferred stock, debt securities or convertible debt may have different interests than holders of common stock and may at times have disproportionate influence over our affairs.

Holders of any preferred stock that we may issue will have the right to elect members of the Board and have class voting rights on certain matters.

The 1940 Act requires that holders of shares of preferred stock must be entitled as a class to elect two directors at all times and to elect a majority of the directors if distributions on such preferred stock are in arrears by two years or more, until such arrearage is eliminated. In addition, certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock, including changes in fundamental investment restrictions and conversion to open-end status and, accordingly, preferred shareholders could veto any such changes. Restrictions imposed on the declarations and payment of distributions 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, might impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes.

Federal Income Tax Risks

We will be subject to corporate-level income tax if we are unable to maintain our qualification as a RIC under Subchapter M of the Code or if we make investments through taxable subsidiaries.

To maintain RIC tax treatment under the Code, we must meet the following minimum annual distribution, income source and asset diversification requirements.

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The minimum annual distribution requirement for a RIC will be satisfied if we distribute to our shareholders on an annual basis at least 90% of our investment company taxable income. In addition, a RIC may, in certain cases, satisfy the 90% distribution requirement by distributing distributions relating to a taxable year after the close of such taxable year under the “spillback dividend” provisions of subchapter M. We would be taxed, at regular corporate rates, on retained income and/or gains, including any short-term capital gains or long-term capital gains. We must also satisfy an additional annual distribution requirement with respect to each calendar year in order to avoid a 4% excise tax on the amount of the under-distribution. Because we use debt financing, we are subject to (i) an asset coverage ratio requirement under the 1940 Act and (ii) certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirements. If we are unable to obtain cash from other sources, or chose or be required to retain a portion of our taxable income or gains, we could (1) be required to pay excise tax and (2) fail to qualify for RIC tax treatment, and thus become subject to corporate-level income tax on our taxable income (including gains).

The income source requirement will be satisfied if we obtain at least 90% of our annual income from dividends, interest, gains from the sale of stock or securities, or other income derived from the business of investing in stock or securities.

The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents (including receivables), U.S. Government securities, securities of other RICs, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships.” Failure to meet these 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.

If we fail to qualify for or maintain RIC tax treatment for any reason and are 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.

We may invest in certain debt and equity investments through taxable subsidiaries and the net taxable income of these taxable subsidiaries will be subject to federal and state corporate income taxes. We may invest in certain foreign debt and equity investments which could be subject to foreign taxes (such as income tax, withholding, and value added taxes).

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

For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, since we will likely hold debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK, secondary market purchases of debt securities at a discount to par, interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, 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, such as unrealized appreciation for foreign currency forward contracts 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. Furthermore, we may invest in non-U.S. corporations (or other non-U.S. entities treated as corporations for U.S. federal income tax purposes) that could be treated under the Code and U.S. Treasury regulations as “passive foreign investment companies” and/or “controlled foreign corporations.” The rules relating to investment in these types of non-U.S. entities are designed to ensure that U.S. taxpayers are either, in effect, taxed currently (or on an accelerated basis with respect to corporate level events) or taxed at increased tax rates at distribution or disposition. In certain circumstances this could require us to recognize income where we do not receive a corresponding payment in cash.

Unrealized appreciation on derivatives, such as foreign currency forward contracts, may be included in taxable income while the receipt of cash may occur in a subsequent period when the related contract expires. Any unrealized depreciation on investments that the foreign currency forward contracts are designed to hedge is not currently deductible for tax purposes. This can result in increased taxable income whereby we may not have sufficient cash to pay distributions or we may opt to retain such taxable income and pay a 4% excise tax. In such case we could still rely upon the “spillback provisions” to maintain RIC qualification.

A portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discounts with respect to debt securities acquired in the secondary market and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for tax purposes. Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be

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required to make a distribution to our shareholders in order to satisfy the annual distribution requirement, even if we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the annual distribution requirement necessary to maintain RIC tax treatment under the Code. 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, make a partial share distribution, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, and choose not to make a qualifying share distribution, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

Impact of recently enacted federal tax legislation

Significant U.S. federal tax reform legislation was recently enacted which, among other things, permanently reduces the maximum federal corporate income tax rate, reduces the maximum individual income tax rate (effective for taxable years 2018 through 2025), restricts the deductibility of business interest expense, changes the rules regarding the calculation of net operating loss deductions which may be used to offset taxable income, expands the circumstances in which a foreign corporation will be treated as a “controlled foreign corporation” and, under certain circumstances, requires accrual method taxpayers to recognize income for U.S. federal income tax purposes no later than the income is taken into account as revenue in an applicable financial statement. The impact of this new legislation on us, our shareholders and entities in which we may invest is uncertain. Prospective investors are urged to consult their tax advisors regarding the effects of the new legislation on an investment in us.

Item 1B. Unresolved Staff Comments

Not applicable.


Item 2.	Properties

We do not own any real estate or other physical properties materially important to our operation. We believe that the office facilities of KKR are suitable and adequate for our business as it is contemplated to be conducted.

Item 3. Legal Proceedings

Neither we nor any of our subsidiaries, are currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or our subsidiaries. In addition, to our knowledge, KKR is not currently subject to any material legal proceedings nor is any material legal proceeding threatened against them. From time to time, we, our subsidiaries, our investment adviser or our administrator may be a party to certain legal proceedings in the ordinary course of, or incidental to the normal course of, our business, including the enforcement of our rights under contracts with our portfolio companies. While we cannot predict the outcome of these legal proceedings with certainty, we do not expect that these proceedings will have a material adverse effect on our results of operations or financial condition.

Item 4. Mine Safety Disclosures

Not applicable.

PART II


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

Market Information

Our common stock has been listed on the NYSE under the ticker symbol “CCT” since November 14, 2017. Prior to such date, there was no public market for our common stock. Our shares of common stock have traded at prices below our net asset value per share. It is not possible to predict whether shares of our common stock will trade at, above or below our net asset value in the future. See “Risk Factors—Risks Related to an Investment in our Common Stock—Our shares of common stock may trade at a discount to net asset value.”

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The following table sets forth the net asset value per share of our common stock as of the applicable period end and the range of high and low closing sales prices of our common stock as reported on the NYSE during such period. On March 9, 2018, the last reported closing sales price of our common stock on the NYSE was $16.23 per share.



	Net Asset Value Per Share⁽¹⁾		Closing Sales Price
For the Three Months Ended	Net Asset Value Per Share⁽¹⁾		High		Low
Fiscal 2017
Period from November 14, 2017 to December 31, 2017	$	19.55	$	18.98	$	15.98


⁽¹⁾	Net asset value per share is determined as of the last day in the relevant period and therefore may not reflect the net asset value per share on the date of the high and low closing sales prices. The net asset values shown are based on outstanding shares at the end of the relevant period.

In October 2016, we closed our Offering to new investors. Following the closing of our Offering, we have continued to issue shares pursuant to our distribution reinvestment plan.

Set forth below is a chart that reconciles gross and net proceeds from the Offering since its commencement on April 4, 2011:



	As of December 31, 2017
(in thousands, except share and per share amounts)	Shares	Amount
Gross proceeds from offering	127,408,871	$	3,106,850
Commissions and marketing support fees	—	(284,052		)
Reinvestment of distributions	21,491,845	455,845
Net proceeds from offering	148,900,716	$	3,278,644
Average net proceeds per share	$22.02

Holders

As of March 9, 2018, we had 5,820 registered record holders of our common stock. This number does not include beneficial owners of shares of common stock held in “street name” by brokers and other institutions on behalf of shareholders.

Recent Sales of Unregistered Securities

None.

Listing Tender Offer and Share Repurchase Program

Through August 2017, we conducted quarterly tender offers pursuant to our share repurchase program. In anticipation of the Listing and the concurrent liquidity it was expected to provide to our shareholders, on August 10, 2017, our Board voted to terminate our share repurchase program following the completion of our tender offer which commenced on July 17, 2017. The tender offer expired and the share repurchase program was terminated on August 21, 2017.

On November 14, 2017, we commenced a tender offer in connection with the Listing, or the listing tender offer, to purchase for cash up the $185 million in value of our shares of common stock at a price of $20.01 per share. The listing tender offer expired on December 15, 2017. We accepted for purchase on a pro rata basis 9,245,377 shares of common stock, or approximately 13.9% of the shares tendered. The 9,245,377 shares of common stock accepted for purchase in the listing tender offer represented approximately 6.8% of our issued and outstanding shares of common stock as of December 15, 2017.

On January 3, 2018, KKR Alternative Assets L.P. entered into written trading plans in accordance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act (the "KKR Trading Plan"). The KKR Trading Plan provides for the purchase of up to $49.75 million worth of shares of our common stock, subject to the limitations provided therein. The KKR Trading Plan is scheduled to expire on January 3, 2019. As of March 2, 2018, 1.30 million shares of our common stock have been purchased under the KKR Trading Plan.

In February 2018, our Board authorized a share repurchase program. Under the program, we may repurchase up to $50 million in the aggregate of our outstanding common stock in the open market at prices below the current net asset value per share, in accordance with the guidelines specified in Rule 10b-18 of the Exchange Act. The timing, manner, price and amount of any share repurchases will be determined by us, in our discretion, based upon the evaluation of economic and market conditions, our stock price, applicable legal and regulatory requirements and other factors. The program will be in effect for 12 months, unless extended or until the aggregate repurchase amount that has been approved by our board of directors has been expended. The program does not require us to repurchase any specific number of shares and we cannot assure shareholders that any shares will be repurchased under the program. The program may be suspended, extended, modified or discontinued at any time.

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The table below provides information concerning our repurchases of shares of our common stock during the quarter ended December 31, 2017.



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Number of Shares that May Yet Be Purchased Under the Program
October 1, 2017 through October 31, 2017	—	$	—	—	—
November 1, 2017 through November 30, 2017	—	—		—	—
December 1, 2017 through December 31, 2017	9,245,377	20.01		9,245,377	—
Total	9,245,377	$	20.01	9,245,377	—

Distributions

Distributions to our shareholders are governed by our articles of incorporation. Our Board declares a quarterly record date, distribution rate and payment date. We intend to continue to pay quarterly distributions to our shareholders. The timing and amount of our quarterly distributions, if any, is determined by our Board. Any distributions to our shareholders are declared out of assets legally available for distribution. (See Note 8. “Distributions” and Note 12. “Federal Income Taxes” included in Item 8. “Financial Statements and Supplementary Data.”)

The following table presents the total cash distributions declared per share of common stock outstanding during the years ended December 31, 2017 and 2016:



	Cash Distributions Declared Per Share
Quarter	2017			2016
First	$	0.452878		$	0.452878
Second	0.452878			0.452878
Third	0.402165			0.452878
Fourth	0.503435		⁽¹⁾	0.452878
Total	$	1.811356		$	1.811512


⁽¹⁾	Includes a special cash distribution in the amount of $0.10125 per share.

Because we intend to maintain our qualification as a RIC, we intend to distribute at least 90% of our annual net investment taxable income to our shareholders. To the extent our taxable earnings fall below the total amount of our paid distributions for any given fiscal year, a portion of those paid distributions may be deemed to be a tax return of capital to our shareholders. For the years ended December 31, 2017 and 2016, 100% of the distributions paid to shareholders were comprised of taxable income (ordinary income and capital gains, if any) for federal income tax purposes, and none of the paid distributions were determined to be a return of capital. As required, a Form 1099-DIV was timely sent to our shareholders which stated the amount and sources of the paid distributions and provided information with respect to appropriate tax treatment of the paid distributions.

On February 26, 2018, our Board declared distributions for the first quarter of 2018. It is anticipated that these distributions, in the aggregate, will be substantially supported by our taxable income and the sources of distributions will be disclosed in our regular financial reports. Distributions will be recorded and paid quarterly in accordance with the schedule below.



Distribution Type	Record Date	Distribution Payment Date	Declared Distribution Per Share Per Record Date
Regular	March 29, 2018	April 6, 2018	$	0.402190
Special	May 14, 2018	May 21, 2018	$	0.101250

We have adopted a distribution reinvestment plan that enables our registered shareholders to elect for the reinvestment of distributions in shares of common stock. In connection with the Listing, our Board approved a second amended and restated distribution reinvestment plan (the "New DRP"). Pursuant to the New DRP, we will reinvest all distributions declared by the Board on behalf of registered shareholders who do not elect to receive their distributions in cash (the “Participants”). As a result, if the Board declares a distribution, then Participants will have their distributions automatically reinvested in additional shares of the our common stock as described below. Existing shareholders who had not elected to participate in our distribution reinvestment plan as of the effective date of the New DRP will continue to receive their distributions in cash until such time as such shareholder otherwise notifies DST Systems, Inc., the plan administrator and the Company’s transfer agent and registrar (the “Plan Administrator), in accordance with the terms of the New DRP.

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With respect to each distribution pursuant to the New DRP, we reserve the right to either issue new shares of our common stock or purchase such shares in the open market. Unless we, in our sole discretion, otherwise direct the plan administrator, (A) if the market price per share is equal to or greater than the net asset value per share, then we will issue shares of our common stock at the greater of (i) net asset value per share and (ii) 95% of the market price per share; and (B) if the market price per share is less than the net asset value per share, then, in our sole discretion, (i) shares of our common stock will be purchased in open market transactions for the accounts of Participants to the extent practicable, or (ii) we will issue shares of our common stock at net asset value per share. Pursuant to the terms of the New DRP, the number of shares of our common stock to be issued to a Participant will be determined by dividing the total dollar amount of the distribution payable to a Participant by the price per share at which we issue such shares. However, shares purchased in open market transactions by the plan administrator will be allocated to a Participant based on the average purchase price, excluding any brokerage charges or other charges, of all shares of our common stock purchased in the open market. The Plan Administrator will establish an account for shares acquired through the New DRP for each shareholder who has not elected to receive distributions in cash. In January 2018, we completed the purchase of 166,846 shares of our common stock for an average price per share of $16.25 in the open market in order to satisfy the reinvestment portion of the dividends declared in December 2017.

Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act.

The following graph shows a comparison from November 14, 2017 (the date our shares of common stock commenced trading on the NYSE) through December 31, 2017 of the cumulative total return for our common stock, the S&P/LSTA Leveraged Loan Index, the Merrill Lynch High Yield Master II Index and the Wells Fargo® BDC Index. The graph assumes that $100 was invested at the market close on November 14, 2017 in our common stock, the S&P/LSTA Leveraged Loan Index, the Merrill Lynch High Yield Master II Index and the Wells Fargo® BDC Index, is based on historical stock prices and assumes all dividends or distributions are reinvested on the respective dividend or distribution payment dates without commissions. The stock price performance reflected by the following graph is not necessarily indicative of future stock price performance.

Item 6. Selected Financial Data

The following selected financial data as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 is derived from our consolidated financial statements. The following selected financial data should be read in conjunction with

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Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8. “Financial Statements and Supplementary Data” included elsewhere in this report.



($ in thousands, except per share amounts)	Year Ended December 31,
	2017			2016			2015			2014			2013
Statement of operations data:
Investment income	$	397,709		$	386,468		$	311,097		$	230,712		$	119,573
Operating expenses
Total expenses	186,752			173,061			131,443			99,194			68,502
Reimbursement of expense support	—			—			—			—			1,136
Net expenses	186,752			173,061			131,443			99,194			69,638
Net investment income before taxes	210,957			213,407			179,654			131,518			49,935
Income tax expense, including excise tax	658			3,311			2,966			1,392			—
Net investment income	210,299			210,096			176,688			130,126			49,935
Net realized and unrealized gains (losses) ⁽⁴⁾	(36,169		)	33,019			(214,895		)	(45,809		)	55,022
Net (decrease) increase in net assets resulting from operations	$	174,130		$	243,115		$	(38,207	)	$	84,317		$	104,957
Per share data:
Net investment income - basic and diluted	1.54			1.55			1.56			1.65			1.08
Net (decrease) increase in net assets resulting from operations - basic and diluted	1.27			1.80			(0.34		)	1.08			2.25
Distributions declared	1.81			1.81			1.81			1.80			1.86
Other data:
Total investment return-net asset value⁽¹⁾	6.4		%	9.4		%	(0.9		)%	5.9		%	11.4		%
Total investment return-market value⁽²⁾	(7.1		)%	—			—			—			—
Number of portfolio companies at period end ⁽³⁾	113			129			124			112			94
Total portfolio investments for the period ⁽³⁾	$	1,582,962		$	1,669,095		$	2,068,738		$	1,899,447		$	2,090,370
Investment sales and prepayments for the period ⁽³⁾	$	1,697,701		$	1,378,020		$	842,372		$	1,058,221		$	925,095

	As of December 31,
	2017			2016			2015			2014			2013
Balance sheet data:
Total assets	$	4,221,500		$	4,430,696		$	4,045,125		$	2,971,720		$	2,281,186
Borrowings, net	$	1,588,380		$	1,627,657		$	1,418,657		$	772,678		$	707,389
Total net assets	$	2,485,102		$	2,759,332		$	2,594,022		$	2,145,821		$	1,430,434

⁽¹⁾

Total investment return-net asset value is a measure of the change in total value for shareholders who held the Company’s common stock at the beginning and end of the period, including distributions declared during the period. Total investment return-net asset value is based on (i) net asset value per share on the first day of the period, (ii) the net asset value per share on the last day of the period of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of monthly distributions and (iii) distributions payable relating to one share, if any, on the last day of the period. The total investment return-net asset value calculation assumes that (i) monthly cash distributions are reinvested in accordance with the Company’s distribution reinvestment plan and (ii) the fractional shares issued pursuant to the distribution reinvestment plan are issued at the then current public offering price, net of sales load, on each monthly distribution payment date. The Company’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. Investment performance is presented without regard to sales load that may be incurred by shareholders in the purchase of the Company’s shares of common stock.

⁽²⁾

Total investment return-market value was calculated by taking the closing price of the Company’s shares on the NYSE on December 31, 2017, adding the cash distributions per share that were declared during the period from November 14, 2017 to December 31, 2017 and dividing the total by $17.60, the closing price of the Company’s shares on the NYSE on November 14, 2017 (the first day the shares began trading on the NYSE). The Company’s performance changes over time and currently may be different than that shown above. Given the short period of time for the calculation and the special distributions declared during this period, this return may not be indicative of current or future performance.


⁽³⁾	Excludes TRS portfolio companies and TRS transactions.


⁽⁴⁾	See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” for a discussion of realized and unrealized gains and losses for the years ended December 31, 2017 and 2016.

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

The information contained in this section should be read in conjunction with our consolidated financial statements and related notes thereto appearing elsewhere in this annual report on Form 10-K. In this report, “we,” “our,” “us” and “our company” refer to Corporate Capital Trust, Inc.

Overview

We were incorporated under the general corporation laws of the State of Maryland on June 9, 2010 and commenced business operations on June 17, 2011. We are a non-diversified closed-end management investment company that has elected to be treated as a business development company under the 1940 Act. Through November 2017, we were externally managed by CNL Fund Advisors Company (“CNL”) and KKR Credit Advisors (US) LLC (“KKR,” and, together with CNL, the “Advisers”), which were responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments, determining the securities and other assets that we will purchase, retain or sell and monitoring our portfolio on an ongoing basis. Both Advisers are registered as investment advisers with the Securities and Exchange Commission (the “SEC”). CNL also provided the administrative services necessary for us to operate. On November 14, 2017, shares of our common stock commenced trading on the New York Stock Exchange with the ticker symbol “CCT” (the “Listing”). Concurrent with the Listing, KKR acquired certain of CNL’s assets primarily used in its role as investment adviser to the Company, and in connection with that transaction, KKR became our sole investment adviser. In addition, we entered into a new administrative services agreement with KKR, the terms of which are substantially similar to our prior administrative services agreement with CNL, pursuant to which KKR replaced CNL as our administrator.

Proposed Transition of Investment Advisory Services

In December 2017, our Board approved the investment co-advisory agreements and the investment advisory agreements to be entered into between us, KKR and an affiliate of Franklin Square Holdings, L.P. (“FS Investments”) setting forth our proposed new advisory structure. In January 2018, we filed a definitive proxy statement soliciting shareholder approval of certain co-advisory agreements and the joint investment advisory agreement, each of which would replace the New Investment Advisory Agreement. The effectiveness of the investment co-advisory agreements and joint advisor investment advisory agreement is subject to various conditions, including shareholder approval thereof. If any of these conditions are not satisfied or (to the extent permitted) waived, the investment co-advisory agreements and/or the joint advisor investment advisory agreement may not go into effect.

Investment Objective, Investment Program and Primary Investment Types

Our investment objective is to provide our shareholders with current income and, to a lesser extent, long-term capital appreciation. We pursue our investment objective by investing primarily in the debt of privately owned and thinly traded U.S. companies (also referred to as “portfolio companies”) with a focus on originated transactions sourced through KKR's network. We define directly originated transactions as any investment where KKR negotiates the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms (the “Directly Originated Investments”). Additionally, we have the ability to participate in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions. We refer to Directly Originated Investments and other originated transactions together as our “Originated Strategies.” We anticipate that a substantial portion of our investment portfolio will consist of senior and subordinated debt, which we believe offer potential opportunities for superior risk-adjusted returns and income generation. Our debt investments may take the form of corporate loans or bonds, may be secured or unsecured and may, in some cases, be accompanied by warrants, options or other forms of equity participation. We may separately purchase common or preferred equity interests in transactions. We may also invest in structured products, such as collateralized loan obligations, and loan participations and assignments.

Historically, our investment program consisted of two main components. First, since the inception of our investment activities, we have been engaged in the direct purchase of debt and equity securities, primarily issued by portfolio companies, through both direct lending and, to a lesser extent, secondary market transactions. We refer to this investment program component as our “Investment Portfolio” in this report. Second, beginning in November 2012 and until June 2017, we supplemented our economic exposure to portfolio companies by entering into total return swap arrangements (“TRS”) with a commercial bank counterparty and directing the creation of a portfolio of debt investments that served as reference assets under the TRS. We refer to this investment program component as our portfolio of TRS assets or our “TRS Portfolio” in this report. In the case of our TRS Portfolio, we received all (i) realized income and fees and (ii) realized capital gains generated by the TRS assets. In return, we paid quarterly to the TRS counterparty a payment consisting of (i) realized capital losses generated by the TRS assets and (ii) financing costs that are based on (a) a floating financing rate and (b) the settled notional amount of TRS assets. We terminated the TRS on June 30, 2017, in connection with the Company’s ongoing transition towards directly originated private credit investments, as the TRS arrangements were primarily limited to the financing of traded investments.

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Our investment strategy is focused on creating and growing an Investment Portfolio that generates superior risk-adjusted returns by carefully selecting investments through rigorous due diligence and actively managing and monitoring our Investment Portfolio. When evaluating an investment and the related portfolio company, we use KKR's resources to develop an investment thesis and a proprietary view of a potential portfolio company’s intrinsic value. We believe our flexible approach to investing allows us to take advantage of opportunities that offer favorable risk/reward characteristics.

We primarily focus on the following investment types:

•

Senior Debt. We invest in senior debt, in which we generally take a security interest in the available assets of the portfolio company, including equity interests in any of its subsidiaries. These investments generally take the form of senior secured first lien loans, senior secured second lien loans or senior secured bonds. In some circumstances, our lien could be subordinated to claims of other creditors.


•	Subordinated Debt. Our subordinated debt investments are generally subordinated to senior debt and are generally unsecured. These investments are generally structured with interest-only payments throughout the life of the security, with the principal due at maturity.

•

Structured Products. We also invest in structured products, which may include collateralized debt obligations, collateralized bond obligations, collateralized loan obligations, structured notes and credit-linked notes. The issuers of such investment products may be structured as trusts or other types of pooled investment vehicles. Such products may also involve the deposit with or purchase by an entity of the underlying investments and the issuance by that entity of one or more classes of securities backed by, or representing interests in, the underlying investments or referencing an indicator related to such investments.


•	Equity Investments. We also make selected equity investments. In addition, when we invest in senior and subordinated debt, we may acquire warrants or options to purchase equity securities or benefit from other types of equity participation. Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests.


•	Convertible Securities. We may invest in convertible securities, such as bonds, debentures, notes, preferred stocks or other securities that may be converted into, or exchanged for, a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula.

•

Investments in Private Investment Funds. We may invest in, or wholly own, private investment funds, including hedge funds, private equity funds, limited liability companies, REITs, and other business entities. In particular, we expect we may invest in asset-based opportunities through joint ventures, investment platforms or build-ups that provide one or more of the following services: origination or sourcing of potential investment opportunities, due diligence and negotiation of potential investment opportunities and/or servicing, development and management (including turnaround) and disposition of investments. Such investments in joint ventures, platforms and build-ups may be in or alongside existing or newly formed operators, consultants and/or managers that pursue such opportunities and may or may not include capital and/or assets contributed by third party investors. Such investments may include opportunities to direct-finance physical assets, such as airplanes and ships, and/or operating assets, such as financial service entities, as opposed to investment securities, or to invest in origination and/or servicing platforms directly. These asset-based opportunities are expected to offer mezzanine-like structural downside protection as well as asset collateral, and equity-like upside that can be achieved through appreciation at the asset-level or, in the case of platforms, through growth of the enterprise value. Key areas of focus include, without limitation, (i) aircraft, (ii) shipping, (iii) renewables, (iv) real estate, (v) consumer finance, and (vi) energy/infrastructure.


•	Derivatives. We may invest in various types of derivatives, including TRS, interest rate swaps and foreign currency forward contracts and options.

•

Investments with Third-Parties. We may co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring jointly-controlled or non-controlling interests in certain investments in conjunction with participation by one or more third parties in such investment. Such joint venture partners or third party managers may include former KKR personnel or associated persons.

We co-invest with Conway Capital, LLC (“Conway”), an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company, through an unconsolidated, limited liability company, Strategic Credit Opportunities Partners (“SCJV”). SCJV was formed in May 2016 to invest its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. We and Conway each have 50% voting control of SCJV and together are required to agree on all investment decisions as well as all other significant actions for SCJV. As of December 31, 2017, SCJV had total capital commitments of $500 million, $437.50 million of which was from us and the remaining $62.50 million from Conway. As of December 31, 2017, we had funded approximately $294.03 million of our commitment. SCJV had $165 million of borrowing capacity through a revolving credit facility with Bank of America Merrill Lynch (“BAML Credit Facility”) with a maturity date of

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August 15, 2018. SCJV also had $250 million of borrowing capacity through a revolving credit facility with Goldman Sachs Bank USA (the “GS Credit Facility”) with a maturity date of September 29, 2021. As of December 31, 2017, our investment in SCJV was approximately $300.65 million at fair value. We do not consolidate SCJV in our consolidated financial statements.

Our investment activity can and does vary substantially from period to period depending on many factors, including: the demand for debt from creditworthy privately owned U.S. companies, the level of merger, acquisition and refinancing activity involving private companies, the availability of credit to finance transactions, the general economic environment, the competitive investment environment for the types of investments we currently seek and intend to seek in the future, cash available from operations and the amount of capital we may borrow.

As a business development company, we are required to comply with certain regulatory requirements. For instance, we may not acquire any assets other than “qualifying assets” as specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets as determined at the end of the prior quarter (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private U.S. companies, U.S. companies whose securities are not listed on a national securities exchange and certain public U.S. companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million. These rules also permit us to include as qualifying assets certain follow-on investments in companies that were eligible portfolio companies at the time of our initial investment but no longer meet the definition of eligible portfolio company at the time of the follow-on investment.

Revenues

We generate revenues primarily in the form of interest on the debt securities of portfolio companies that we acquire and hold for investment purposes. Our investments in debt securities generally have an expected maturity of three to ten years, although we have no lower or upper constraint on maturity, and typically earn interest at fixed or floating rates. Interest on our debt securities is generally payable to us quarterly or semi-annually. Some of our investments in debt securities contain payment-in-kind (“PIK”) interest provisions. The outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of dividends from equity investments, prepayment fees, commitment fees, origination fees and fees for providing significant managerial assistance. While the TRS assets also generated interest income and fees, such amounts, net of the financing expenses, were recognized as realized gains pursuant to generally accepted accounting principles (“GAAP”) when payable to us quarterly and upon the termination of the TRS.

Operating Expenses

Our primary operating expenses include an investment advisory fee and, depending on our operating results, performance-based incentive fees, interest expense, administrative expenses, custodian and accounting fees, other third-party professional services and expenses and amortization of deferred offering expenses. The investment advisory fee and performance-based incentive fees compensate the investment adviser services in identifying, evaluating, negotiating, closing and monitoring our investments.

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Financial and Operating Highlights

The following table presents financial and operating highlights as of December 31, 2017 and 2016, and for the years ended December 31, 2017, 2016 and 2015:



As of December 31, (in thousands, except ratios and per share amounts)	2017			2016
Total assets	$	4,221,500		$	4,430,696
Adjusted total assets (Total assets, net of payable for investments purchased)	$	4,174,403		$	4,408,491
Investments in portfolio companies	$	3,968,409		$	4,025,287
Borrowings	$	1,595,000		$	1,631,454
Deemed borrowings (TRS implied leverage classified as senior securities)	$	—		$	163,689
Net assets	$	2,485,102		$	2,759,332
Net asset value per share	$	19.55		$	20.09
Leverage ratio (Borrowings + Deemed borrowings)/Adjusted total assets)	38		%	41		%

Activity for the Year Ended December 31,
(in thousands, except per share amounts)	2017			2016			2015
Average net assets	$	2,749,653		$	2,698,040		$	2,428,271
Average borrowings under credit facilities and term loan	$	1,496,641		$	1,476,426		$	1,011,175
Purchases of investments⁽¹⁾	$	1,784,590		$	1,761,495		$	2,068,738
Sales, principal payments and other exits⁽¹⁾	$	1,899,329		$	1,378,020		$	842,372
Net investment income	$	210,299		$	210,096		$	176,688
Net realized gains (losses) on investments, derivative instruments and foreign currency transactions	$	(79,259	)	$	(2,645	)	$	50,657
Net change in unrealized appreciation (depreciation) on investments, derivative instruments and foreign currency translation	$	43,090		$	35,664		$	(265,552	)
Net increase (decrease) in net assets resulting from operations	$	174,130		$	243,115		$	(38,207	)
Total distributions declared	$	244,133		$	244,950		$	205,044
Net investment income per share	$	1.54		$	1.55		$	1.56
Earnings (losses) per share	$	1.27		$	1.80		$	(0.34	)
Distributions declared per share outstanding for the entire period	$	1.81		$	1.81		$	1.81

Summary of Common Stock Offering for the Year Ended December 31,
(in thousands, except share and per share amounts)	2017			2016			2015
Gross proceeds, excluding reinvestment of distributions	$	—		$	137,245		679,862
Net proceeds to Company, excluding reinvestment of distributions	$	—		$	127,596		618,505
Reinvestment of distributions	$	96,994		$	124,139		105,363
Average net proceeds per share	$	20.41		$	20.10		21.81
Shares issued in connection with Offering, excluding reinvestment of distributions	—			6,365,828			28,329,936
Shares issued in connection with reinvestment of distributions	4,752,882			6,159,186			4,866,789


⁽¹⁾	Includes $201.63 million and $92.40 million for the years ended December 31, 2017 and 2016, respectively, of investments sold to SCJV in exchange for equity interest in SCJV.

Business Environment

For nearly a decade, the major global central banks have implemented accommodative monetary policy and/or quantitative easing. Over this time period fixed income investors have benefited from a period of (largely) low levels of market volatility underpinned by this central bank bid. With a backdrop of improving fundamental performance and low market price fluctuations, credit spreads have compressed as institutional capital searched for yield.

For the first time since 2014, net issuance by the G4 central banks will be positive. With rising interest rate risk in the U.S., we also expect more restrictive monetary policy from the Federal Open Market Committee of the U.S. Federal Reserve. With the potential for lower overall demand for credit, we believe that fixed income market volatility is likely to increase in 2018 relative to the recent past.

Our focus is on investments in credits that offer an illiquidity premium (i.e. they may not be traded on an open market and therefore would not be subject to the same technical pressures of more traded assets). We believe originated credits

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can offer attractive risk-adjusted returns and that our Company, as a business development company, offers investors an investment option to access these returns with lower market volatility than traditional assets.

Portfolio and Investment Activity

Portfolio Investment Activity as of and for the years ended December 31, 2017 and 2016

The following tables summarize our investment activity as of December 31, 2017 and 2016 and for the years ended December 31, 2017 and 2016, excluding our short term investments:



	Investment Activity Summary as of ($ in thousands)
	December 31, 2017		December 31, 2016
	Investment Portfolio		Investment Portfolio		TRS Portfolio
Total fair value	$	3,968,409	$	4,025,287	$	258,299
No. portfolio companies	113		129		43
No. debt investments	124		141		47
No. asset based finance investments	10		11		—
No. equity/other investments	35		37		—



	Investment Portfolio Activity Summary ($ in thousands)									TRS Portfolio Activity Summary ($ in thousands)
	Year Ended December 31,									Year Ended December 31,
	2017			2016			2015			2017			2016			2015
Purchases of Investments:
First Lien Senior Secured Loans	$	1,075,389		$	655,182		$	785,833		$	40,411		$	70,504		$	174,138
Second Lien Senior Secured Loans	223,432			357,841			514,469			4,661			4,185			33,892
Other Senior Secured Debt	98,687			68,458			123,404			1,542			15,000			—
Subordinated Debt	37,554			332,196			343,916			—			9,500			—
Asset Based Finance	142,185			218,926			211,596			—			—			—
Strategic Credit Opportunities Partners, LLC⁽¹⁾	201,628			92,400			—			—			—			—
Equity/Other	5,715			36,492			89,520			—			—			—
Total	$	1,784,590		$	1,761,495		$	2,068,738		$	46,614		$	99,189		$	208,030
Sales, Principal Payments and Other Exits:
First Lien Senior Secured Loans⁽¹⁾	$	892,546		$	629,222		$	205,660		$	244,425		$	127,166		$	159,172
Second Lien Senior Secured Loans	403,231			402,022			217,911			44,673			35,515			9,968
Other Senior Secured Debt	82,591			121,132			72,082			4,939			3,221			—
Subordinated Debt	350,736			154,230			263,178			12,458			—			875
Asset Based Finance	154,128			57,368			67,589			—			—			—
Equity/Other	16,097			14,046			15,952			—			—			—
Total	$	1,899,329		$	1,378,020		$	842,372		$	306,495		$	165,902		$	170,015
Portfolio Company Additions	38			35			40			2			13			15
Portfolio Company Exits	(54		)	(30		)	(28		)	(45		)	(18		)	(14		)
Debt Investment Additions⁽²⁾	71			60			52			9			19			18
Debt Investment Exits⁽²⁾	(88		)	(60		)	(38		)	(56		)	(23		)	(16		)


⁽¹⁾	Includes $201.63 million and $92.40 million for each of the years ended December 31, 2017 and 2016, respectively, of investments sold to SCJV in exchange for equity interests in SCJV.


⁽²⁾	Debt investment additions and exits includes any asset based lending investments with a stated interest rate.

While the Investment Portfolio and the TRS Portfolio are accounted for and presented as two distinct portfolios, the two portfolios had 17 debt investment positions and 24 portfolio companies in common as of December 31, 2016. The changes in the fair value of our Investment Portfolio and our TRS Portfolio are directly related to (i) the changes in their cost basis and notional amounts, respectively, as a result of incremental purchases, sales and principal payments as described in the

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table above, and (ii) the changes in fair value for assets held at the beginning and end of the period. The net change in unrealized appreciation (depreciation) for the years ended December 31, 2017, 2016 and 2015 was $112.54 million, (1.86) million and ($232.45) million, respectively, for our Investment Portfolio, and $0.39 million, $16.36 million and $(10.30) million, respectively, for our TRS Portfolio. See “Results of Operations – Net Change in Unrealized Appreciation or Depreciation” below for further details relating to the changes.

As discussed above under “— Overview,” since obtaining co-investment exemptive relief from the SEC, we have increased our focus on Originated Strategies as a main element of our investment strategy. Through our Originated Strategies investments we are able to participate alongside KKR’s institutional clients and proprietary funds in certain investments. Our total new fundings of Originated Strategies investments, at par, plus future expected fundings related to such investments, totaled approximately $1.10 billion and $1.24 billion for the years ended December 31, 2017 and 2016, respectively, representing 48% and 50% of approximately $2.28 billion and $2.48 billion in total originations by KKR in Originated Strategies investments for each respective period.

The following summarizes our investment activity associated with our investment focus on new originated investments during the years ended December 31, 2017 and 2016 and the status of originated investments held in the Investment Portfolio as of December 31, 2017 and 2016:



	December 31,
Directly Originated Transactions Activity for the Year Ended ($ in thousands)	2017			2016
Number of investments, by issuer	32			20
Total amount of investments, at cost ⁽¹⁾	$	1,077,813		$	1,126,559
Percentage of total investment activity ⁽²⁾	68.1		%	67.5		%
Fee income recognized in connection with directly originated transactions	$	10,243		$	10,352

Originated Strategies Activity for the Year Ended ($ in thousands)	2017			2016
Number of investments, by issuer	34			29
Total amount of investments, at cost ⁽¹⁾	$	1,130,564		$	1,211,386
Percentage of total investment activity ⁽²⁾	71.4		%	72.6		%



Directly Originated Transactions Summary as of December 31, ($ in thousands)	2017			2016
Total investments, at fair value	$	3,051,289		$	2,877,710
Percentage of total Investment Portfolio, at fair value ⁽²⁾	76.9		%	71.5		%
Weighted average annual yield of debt investments ⁽³⁾⁽⁴⁾	9.5		%	9.9		%

Originated Strategies Investments Summary as of December 31, ($ in thousands)	2017			2016
Total investments, at fair value	$	3,343,924		$	3,558,247
Percentage of total Investment Portfolio, at fair value ⁽²⁾	84.3		%	83.4		%
Weighted average annual yield of debt investments ⁽³⁾⁽⁴⁾	9.7		%	9.8		%


⁽¹⁾	The total amount of investments, at cost, includes new issuers during the reporting periods and any follow-on investments from existing issuers.


⁽²⁾	Percentage of total investment activity and total Investment Portfolio excludes our investments in SCJV.

⁽³⁾

The weighted average annual yield on debt investments is based on amortized cost as of the end of the applicable period. The weighted average annual yield for our debt investments is computed as (i) the sum of (a) the annual interest rate of each accruing or partial accruing debt investment multiplied by its par amount as of the end of the applicable reporting period, plus (b) the annual accretion or amortization of the purchase or original issue discount or premium of each accreting or amortizing debt investment, if any; divided by (ii) the total amortized cost of all accruing debt investments included in the calculated group as of the end of the applicable reporting period.

⁽⁴⁾

The weighted average annual yield of originated debt investments is higher than what investors in our Company will realize because it does not reflect expenses of the Company or realized and unrealized gains and losses. Total investment return – net asset value was 6.4% and 9.4%, respectively, for the years ended December 31, 2017 and 2016. See Note 13. “Financial Highlights” in our consolidated financial statements for information on how such returns were calculated.

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The following information presents additional analysis of our Investment Portfolio as of December 31, 2017 and 2016 and TRS Portfolio as of December 31, 2016, excluding our short-term investments. Our investment program is not managed with any specific asset category target goals. The primary investment type concentrations include (i) senior debt securities and (ii) subordinated debt securities.



	Investment Portfolio as of (in thousands)
	December 31, 2017				December 31, 2016
Asset Category	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Senior Debt
First Lien Senior Secured Loans	$	1,712,750	$	1,672,178	$	1,641,759	$	1,547,100
Second Lien Senior Secured Loans	978,764		943,753		1,131,035		1,074,183
Other Senior Secured Debt	148,754		141,302		177,826		134,786
Total Senior Debt	2,840,268		2,757,233		2,950,620		2,756,069
Subordinated Debt	393,053		381,677		683,640		642,427
Asset Based Finance	372,035		346,507		388,117		344,305
Strategic Credit Opportunities Partners, LLC	294,028		300,652		92,400		98,998
Equity/Other	258,119		182,340		212,140		183,488
Total	$	4,157,503	$	3,968,409	$	4,326,917	$	4,025,287



	TRS Portfolio as of (in thousands)
	December 31, 2016
Asset Category	Notional Amount		Fair Value
Senior Debt
First Lien Senior Secured Loans	$	202,506	$	200,326
Second Lien Senior Secured Loans	29,957		30,026
Other Senior Secured Debt	15,724		15,632
Total Senior Debt	248,187		245,984
Subordinated Debt	10,502		12,315
Total	$	258,689	$	258,299

The weighted average yield on debt investments at amortized cost held in our Investment Portfolio as of December 31, 2017 and 2016 were as follows:



	December 31, 2017				December 31, 2016
Asset Category	Investment Portfolio at Amortized Cost ⁽¹⁾		Weighted Average Yield		Investment Portfolio at Amortized Cost ⁽¹⁾		Weighted Average Yield		TRS Portfolio at Notional Amount		Weighted Average Yield
Senior Debt ⁽²⁾⁽³⁾
First Lien Senior Secured Loans	$	1,646,602	8.9	%	$	1,537,971	9.1	%	$	202,506	7.9	%
Second Lien Senior Secured Loans	972,306		10.3	%	1,080,166		10.0	%	29,957		9.8	%
Other Senior Secured Debt	119,999		9.4	%	114,896		9.8	%	15,724		12.3	%
Subordinated Debt ⁽²⁾⁽³⁾	378,757		9.8	%	669,497		9.7	%	10,502		10.9	%
Asset Based Finance ^(2)(3)(4)	69,997		11.8	%	79,399		10.8	%	—		—


⁽¹⁾	Excludes investments on non-accrual status.

⁽²⁾

The weighted average yield on debt investments is based on amortized cost as of the end of the applicable period. The weighted average yield for our debt investments is computed as (i) the sum of (a) the annual interest rate of each accruing or partial accruing debt investment multiplied by its par amount as of the end of the applicable reporting period, plus (b) the annual accretion or amortization of the purchase or original issue discount or premium of each accreting or amortizing debt investment, if any; divided by (ii) the total amortized cost of all accruing debt investments included in the calculated group as of the end of the applicable reporting period.

⁽³⁾


⁽⁴⁾	Includes any investments with a stated interest rate.

The following table presents a summary of interest rate and maturity statistics for the debt investments, based on par value, in our Investment Portfolio as of December 31, 2017 and 2016 and the TRS Portfolio as of December 31, 2016:

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	Investment Portfolio as of December 31,				TRS Portfolio as of December 31,
Floating interest rate debt investments:	2017		2016		2016
Percent of debt portfolio	78.4	%	77.8	%	89.6	%
Percent of floating rate debt investments with interest rate floors	91.9	%	92.6	%	100.0	%
Weighted average interest rate floor	1.0	%	1.0	%	1.0	%
Weighted average coupon spread to base rate ⁽¹⁾	719 bps		806 bps		505 bps
Weighted average years to maturity	4.7		4.5		3.8
Fixed interest rate debt investments:
Percent of debt portfolio	21.6	%	22.2	%	10.4	%
Weighted average coupon rate ⁽¹⁾	9.5	%	10.2	%	10.1	%
Weighted average years to maturity	4.7		5.4		6.2


⁽¹⁾	Excludes investments on non-accrual status.

All of our floating interest rate debt investments have base rate reset frequencies of less than twelve months with the majority resetting at least quarterly. The three-month LIBOR, the most prevalent index employed among our floating interest rate debt investments, ranged between 0.999% and 1.695%, and 0.612% and 0.998% during the years ended December 31, 2017 and 2016, respectively, and was 1.694% and 0.998% on December 31, 2017 and 2016, respectively. Base rate resets for floating interest rate investments will only result in interest income increases when the reset base interest rate exceeds the associated interest rate floor.

Our weighted average annual yield on debt investments, adjusting for any non-accreting or partial accrual investments, was 9.5% and 9.6% as of December 31, 2017 and 2016, respectively. The weighted average annual yield on debt investments is higher than what investors in our Company will realize because it does not reflect expenses of the Company or realized and unrealized gains and losses. Total investment return – net asset value was 6.4% and 9.4%, respectively, for the years ended December 31, 2017 and 2016. See Note 13. “Financial Highlights” in our consolidated financial statements.

The following table shows the credit ratings of the investments in our Investment Portfolio as of December 31, 2017 and 2016 and TRS Portfolio as of December 31, 2016, based upon the rating scale of Standard & Poor’s Ratings Services:



	Investment Portfolio as of (in thousands)								TRS Portfolio as of (in thousands)
	December 31, 2017				December 31, 2016				December 31, 2016
Standard & Poor’s rating	Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio
BB	$	66,725	1.7	%	$	—	—	%	$	10,360	4.0	%
BB-	30,512		0.8		41,193		1.0		17,764		6.9
B+	52,336		1.3		156,336		3.9		39,868		15.4
B	184,924		4.7		191,565		4.8		103,907		40.2
B-	110,375		2.8		145,753		3.6		54,433		21.1
CCC+	438,159		11.0		612,476		15.2		20,277		7.8
CCC	171,561		4.3		203,931		5.1		11,022		4.3
CCC-	34,370		0.9		17,549		0.4		668		0.3
CC	9,114		0.2		4,217		0.1		—		—
Not rated	2,870,333		72.3		2,652,267		65.9		—		—
Total	$	3,968,409	100.0	%	$	4,025,287	100.0	%	$	258,299	100.0	%

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The table below presents a summary of our debt investment positions held in our Investment Portfolio that feature PIK interest provisions for some or all of the portfolio companies’ interest payment obligations.



PIK Summary as of ($ in thousands) ⁽¹⁾	December 31, 2017			December 31, 2016
Total number of all investments with PIK feature	11			18
Par value of all investments with PIK feature	$	366,248		$	582,492
Total number of all investments that have active PIK election	11			15
Par value of all investments that have active PIK election	$	366,248		$	534,394
Percent of debt investment portfolio with active PIK election, at par value	10.5		%	14.0		%
Number of originated investments with PIK feature and active PIK election	10			9
Par value of originated investments with PIK feature and active PIK election	$	359,563		$	409,045


⁽¹⁾	Includes investments on non-accrual status.



	December 31,
PIK Interest Income Activity for the Year Ended (in thousands)	2017			2016			2015
PIK interest income	$	18,137		$	19,490		$	30,402
PIK interest income as a percentage of interest income and PIK interest income	5.2		%	5.5		%	10.8		%
PIK interest income as a percentage of total investment income	4.6		%	5.0		%	9.8		%
Collections of PIK interest ⁽¹⁾	$	21,895		$	18,932		$	853


⁽¹⁾	Includes both principal payments and proceeds from sales of investments.

As of December 31, 2017, our Investment Portfolio consisted of 113 portfolio companies, diversified across 21 industry classifications, as compared to our Investment Portfolio as of December 31, 2016 which consisted of 129 portfolio companies, diversified across 21 distinct industry classifications. As of December 31, 2016, the TRS Portfolio consisted of 43 portfolio companies, diversified across 16 distinct industry classifications. The following table presents a summary of our Investment Portfolio as of December 31, 2017 and 2016 and TRS Portfolio as of December 31, 2016, arranged by industry classifications of the portfolio companies:

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	Investment Portfolio as of (in thousands)								TRS Portfolio as of (in thousands)
	December 31, 2017				December 31, 2016				December 31, 2016
Industry Classification	Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio
Capital Goods	$	764,598	19.3	%	$	853,615	21.2	%	$	15,674	6.1	%
Software & Services	453,296		11.4		350,413		8.7		59,848		23.2
Diversified Financials	398,106		10.0		320,480		7.9		—		—
SCJV	300,652		7.6		98,998		2.4		—		—
Retailing	267,358		6.7		318,624		7.9		33,698		13.0
Consumer Durables & Apparel	251,908		6.3		167,194		4.2		9,786		3.8
Automobiles & Components	227,742		5.8		237,152		5.9		—		—
Materials	215,827		5.5		242,410		6.0		7,235		2.8
Real Estate	199,957		5.0		216,371		5.4		—		—
Health Care Equipment & Services	140,339		3.6		196,315		4.9		27,742		10.7
Transportation	125,080		3.2		161,398		4.0		23,641		9.2
Commercial & Professional Services	114,560		2.9		82,657		2.1		14,228		5.5
Household & Personal Products	104,334		2.6		36,750		0.9		—		—
Energy	85,053		2.1		161,950		4.0		—		—
Consumer Services	79,605		2.0		119,313		3.0		19,716		7.6
Technology Hardware & Equipment	54,228		1.4		178,017		4.4		8,087		3.1
Food & Staples Retailing	53,280		1.3		51,970		1.4		9,838		3.8
Media	47,600		1.2		35,230		0.9		12,550		4.9
Insurance	27,628		0.7		45,554		1.1		6,121		2.4
Food, Beverage & Tobacco	21,455		0.5		57,203		1.4		8,081		3.1
Semiconductors & Semiconductor Equipment	20,698		0.5		—		—		—		—
Banks	15,105		0.4		—		—		—		—
Pharmaceuticals, Biotechnology & Life Science	—		—		56,892		1.4		1,027		0.4
Telecommunications Services	—		—		36,781		0.9		1,027		0.4
Total	$	3,968,409	100.0	%	$	4,025,287	100.0	%	$	258,299	100.0	%

Portfolio Asset Quality

In addition to various risk management and monitoring tools, KKR uses a risk grading system to characterize and monitor the expected level of returns on each investment in our portfolio. KKR uses a risk grading scale of A to E. The following is a description of the conditions associated with each risk grade:



Risk Grades		Summary Description
A		Investment is performing as expected and there are no concerns about the portfolio company’s performance or ability to meet covenant requirements.

B		No concern about repayment of both interest and our cost basis but there may be some concerns about the company’s recent performance or trends in the industry.

C		Expect to fully recover both interest and our cost basis but covenant headroom is tight and a covenant violation is possible or the company and/or industry are facing headwinds.

D		Concerned about the recoverability of principal or interest or a material covenant has been violated.

E		Investment is in or near default.

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The following table shows the distribution of our Investment Portfolio on the A to E risk grading scale at fair value as of December 31, 2017:



	Investment Portfolio as of (in thousands)
	December 31, 2017
Risk Grade	Fair Value		Percentage of Portfolio
A	$	1,682,750	42.4	%
B	1,190,791		30.0
C	846,518		21.3
D	135,683		3.4
E	112,667		2.9
Total	$	3,968,409	100.0	%

Portfolio Developments

In May 2017, Amtek Global Technology Pte. Ltd. (“Amtek”), a portfolio company in which we have invested a total of $151.30 million as of December 31, 2017, based on amortized cost, was placed into receivership. Our investments in Amtek include an investment in a portion of a term loan facility with a cost of $146.51 million (par of €141.34 million) and equity warrants with a cost of $4.78 million. On June 29, 2017, we and the other lenders to the term loan facility entered into an agreement among lenders (the “AAL”). The AAL effectively divided the amounts borrowed by Amtek into two facilities, Facility A and Facility B, with Facility A ranking first in order of priority. Our portion of Facility A has a par amount of €82.06 million ($98.45 million as of December 31, 2017) and our portion of Facility B has a par amount of €59.28 million ($71.13 million as of December 31, 2017). Any principal payments received from or on behalf of Amtek will first be applied to Facility A and second to Facility B. Any interest payments received from or on behalf of Amtek will be applied first toward the payment of interest on Facility A at the rate of 5.0% annually and second to the repayment of Facility B. Facility B does not have a stated interest rate. Any payments applied to Facility B are expected to reduce the outstanding principal. As of December 31, 2017, our investments in Amtek have an aggregate fair value of $138.93 million.

Strategic Credit Opportunities Partners, LLC

In May 2016, SCJV was formed pursuant to the terms of a limited liability company agreement between our company and Conway. Pursuant to the terms of the agreement, we and Conway each have 50% voting control of SCJV and together are required to agree on all investment decisions as well as all other significant actions for SCJV. SCJV was formed to invest its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. We, along with Conway, have agreed to provide capital to SCJV of up to $500 million in the aggregate. We will provide 87.5% and 12.5%, respectively, of the committed capital. As administrative agent of SCJV, we perform certain day-to-day management responsibilities on behalf of SCJV.

In August 2016, we completed the initial funding of SCJV. As part of the initial funding, we sold investments with a fair value of $247.24 million to SCJV, in exchange for cash and a $92.40 million equity interest in SCJV. We recognized a net realized loss of $0.95 million in connection with the transaction. Conway completed its initial funding of SCJV with a cash contribution of $13.20 million. In December 2016, we sold investments with a fair value of $45.88 million to SCJV. We recognized a net realized gain of $1.03 million in connection with the transaction. In September 2017, we sold investments with a fair value of $373.05 million to SCJV, in exchange for cash and an additional $201.63 million equity interest in SCJV. We recognized a net realized gain of $3.43 million in connection with the transaction.

On August 15, 2016, Charlotte Funding LLC (formerly CSCOP SE I LLC, “Charlotte Funding”), a wholly-owned subsidiary of SCJV, entered into a credit agreement (the “BAML Credit Agreement”), with Bank of America Merrill Lynch. The BAML Credit Agreement provides for a revolving credit facility which provides for up to $165.00 million in total commitments to Charlotte Funding (the “BAML Credit Facility”), and is secured by substantially all of the assets of Charlotte Funding. The stated borrowing rate under the BAML Credit Facility may take the form of either base rate loans or Eurocurrency rate loans and may be converted to either or during the term of the loan by delivering a notice to the BAML Credit Agreement administrative agent and State Street Bank and Trust Company, as collateral administrator, pursuant to the terms of the BAML Credit Agreement. Base rate loans shall bear interest at a rate per annum equal to the sum of (a) the fluctuating rate per annum equal to the highest of (i) the federal funds rate plus 1/2 of 1%, (ii) the prime rate set by Bank of America for such day and (iii) the 1-month LIBOR plus (b) 1.85%. Eurocurrency rate loans shall bear interest at the rate per annum equal to the sum of (a) LIBOR (or a comparable or successor rate approved by the BAML Credit Agreement administrative agent) plus (b) 1.85%. Charlotte Funding shall also pay a commitment fee for undrawn commitment in the

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amount between 0.75% and 1.75%. As of December 31, 2017 and 2016, total outstanding borrowings under the BAML Credit Facility were $102.20 million and $152.00 million, respectively. On February 15, 2018 Charlotte Funding paid off and terminated the BAML Credit Agreement.

On September 29, 2017, Jersey City Funding LLC (“Jersey City Funding”), a wholly-owned subsidiary of SCJV, entered into a credit agreement (the “GS Credit Agreement”), with Goldman Sachs Bank. The GS Credit Agreement established a revolving credit facility which provides for up to $250 million in total commitments to Jersey City Funding (the “GS Credit Facility”), and is secured by substantially all of the assets of Jersey City Funding. The GS Credit Agreement contains an "accordion" feature that allows Jersey City Funding, under certain circumstances, to increase the size of the facility to a maximum of $400 million. The stated borrowing rate under the GS Credit Facility may take the form of either base rate loans or foreign currency rate loans and may be converted to either or during the term of the loan by delivering a notice to the GS Credit Agreement administrative agent and State Street Bank and Trust Company, as collateral administrator, pursuant to the terms of the GS Credit Agreement. The GS Credit Facility provides loans in U.S. dollars, Australian dollars, Euros and Pounds Sterling. U.S. dollar loans will bear interest at the rate of LIBOR plus 2.25%. Foreign currency loans will bear interest at the floating rate plus the spread applicable to the specified currency as defined in the GS Credit Agreement. The GS Credit Facility matures on September 29, 2021. As of December 31, 2017, total outstanding borrowings under the GS Credit Facility were $166.02 million. On March 12, 2018, Jersey City Funding exercised the accordion feature to increase the aggregate loan commitment under the GS Credit Facility to $350 million.

As of December 31, 2017 and 2016, SCJV had total investments with a fair value of $514.04 million and $248.60 million, respectively. As of December 31, 2017 and 2016, SCJV had no investments on non-accrual status. The investment portfolio and SCJV’s portfolio had 16 and 17 debt investment positions and 18 and 22 portfolio companies in common as of December 31, 2017 and 2016, respectively.

See Note 3. “Investments” in our consolidated financial statements for more details on SCJV’s portfolio and summary balance sheet information as of December 31, 2017 and 2016, and summary statement of operations information for the year ended December 31, 2017.

Capital Resources and Liquidity

Sources and Uses of Capital

Our capital resources and liquidity are derived primarily from cash flows from operations, including investment sales and repayments and borrowings. Our primary uses of funds include (i) investments in portfolio companies, (ii) distributions to our shareholders, (iii) payment of principal and interest on our borrowings, and (iv) operating expenses. We have used, and expect to continue to use, proceeds from the turnover of our Investment Portfolio, and borrowings under our credit facilities to finance our investment activities primarily focused on directly originated investments in portfolio companies.

Liquidity

During the year ended December 31, 2017, proceeds from sales of investments and principal payments totaled $1.70 billion. In addition, distributions reinvested in the company as a percentage of total distributions paid during the year ended December 31, 2017 was 49.2%, or $96.99 million. As of December 31, 2017, we had the following sources of immediate liquidity available to us:



(in thousands)	Amount
Cash and Foreign Currency	$	130,964
Short Term Investments	688
Credit Facilities-Effective Borrowing Capacity⁽¹⁾	538,116
Total	$	669,768


⁽¹⁾	Effective borrowing capacity represents additional amounts that we could borrow from our credit facilities based on collateral in place as of December 31, 2017.

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Borrowings

Our outstanding borrowings as of December 31, 2017 and 2016 were as follows:



	As of December 31, 2017								As of December 31, 2016
	Total Aggregate Principal Amount Committed			Principal Amount Outstanding		Carrying Value			Total Aggregate Principal Amount Committed			Principal Amount Outstanding		Carrying Value
Senior Secured Revolving Credit Facility⁽¹⁾	$	958,000	⁽²⁾	$	615,000	$	615,000		$	928,000	⁽²⁾	$	799,000	$	799,000
BNP Credit Facility⁽¹⁾	—			—		—			200,000			183,000		183,000
SMBC Credit Facility⁽¹⁾	300,000			110,000		110,000			200,000			102,000		102,000
JPM Credit Facility⁽¹⁾	300,000			240,000		240,000			300,000			135,000		135,000
Total credit facilities	1,558,000			965,000		965,000			1,628,000			1,219,000		1,219,000
2014 Senior Secured Term Loan	385,000			385,000		382,768		⁽³⁾	389,000			389,000		385,203		⁽³⁾
2022 Notes	245,000			245,000		240,612		⁽⁴⁾	—			—		—
CS Facility⁽⁵⁾	—			—		—			23,454			23,454		23,454
Total borrowings	$	2,188,000		$	1,595,000	$	1,588,380		$	2,040,454		$	1,631,454	$	1,627,657


⁽¹⁾	Subject to borrowing base and leverage restrictions.


⁽²⁾	Includes an accordion feature that allows the Company under certain circumstances to increase the size of the Senior Secured Revolving Credit Facility to a maximum of $1.34 billion.


⁽³⁾	Comprised of outstanding principal less the unaccreted original issue discount of $0.58 million and $0.99 million and deferring financing costs of $1.65 million and $2.81 million as of December 31, 2017 and 2016, respectively.


⁽⁴⁾	Comprised of outstanding principal less deferred financing costs of $4.39 million as of December 31, 2017.


⁽⁵⁾	Borrowings denominated in Euros.

For the years ended December 31, 2017 and 2016, our total all-in cost of financing, including fees and expenses, was 4.38% and 3.49%, respectively. We expect to continue to draw on the revolving credit facilities to finance our acquisition of investment positions in portfolio companies. We may further increase our aggregate borrowing capacity in the future beyond the current combined commitment amount of $2.19 billion that is available to us from our existing financing arrangements.

See Note 10. “Borrowings” in our consolidated financial statements for additional disclosures regarding our borrowings.

Total Return Swaps

On June 30, 2017, Halifax Funding LLC (“Halifax Funding”), our wholly owned, special purpose financing subsidiary, terminated its TRS arrangement with The Bank of Nova Scotia (“BNS”). Upon termination of the TRS, Halifax Funding recognized $5.50 million of net realized losses, including a make-whole fee of $6.40 million, an amount based on a minimum spread amount that would have been earned by BNS over the life the TRS agreements.

See Note 4. “Derivative Instruments” in our consolidated financial statements for additional disclosures on the TRS.

Commitments and Contingencies

See Note 11. “Commitments and Contingencies” in our consolidated financial statements for information on our commitments and contingencies as of December 31, 2017.

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Distributions to Shareholders

We intend to pay quarterly distributions to our shareholders in the form of cash. Registered shareholders may elect to reinvest their distributions as additional shares of our common stock under our distribution reinvestment plan. Dividends are taxable to our shareholders even if they are reinvested in additional shares of our common stock. The following table reflects the cash distributions per share and the total amount of distributions that we have declared on our common stock during the years ended December 31, 2017, 2016 and 2015:



(in thousands, except per share amounts)	Per Share			Amount
December 31, 2017	$	1.81	⁽¹⁾	$	244,133
December 31, 2016	$	1.81		$	244,950
December 31, 2015	$	1.81		$	205,044


⁽¹⁾	Includes a special cash distribution in the amount of $0.10125 per share.

Approximately 49%, 51% and 51% of the distributions we declared in the years ended December 31, 2017, 2016 and 2015, respectively, were reinvested in shares of our common stock by participants in our distribution reinvestment plan and the reinvested distributions represent an additional source of capital to us. Net investment income and realized capital gains represent the primary sources for us to pay distributions. See Note 8. “Distributions” in our consolidated financial statements for additional disclosures on distributions.

We have adopted a distribution reinvestment plan that enables our shareholders to elect for the reinvestment of distributions in shares of common stock. In connection with the Listing, our Board approved an amended and restated distribution reinvestment plan (the "New DRP"). Pursuant to the New DRP, we will reinvest all distributions declared by the Board on behalf of investors who do not elect to receive their distributions in cash (the “Participants”). As a result, if the Board declares a distribution, then shareholders who have not “opted out” of the New DRP will have their distributions automatically reinvested in additional shares of the our common stock as described below.

With respect to each distribution pursuant to the New DRP, we reserve the right to either issue new shares of our common stock or purchase such shares in the open market. Unless we, in our sole discretion, otherwise direct the plan administrator, (A) if the market price per share is equal to or greater than the net asset value per share, then we will issue shares of our common stock at the greater of (i) net asset value per share and (ii) 95% of the market price per share; and (B) if the market price per share is less than the net asset value per share, then, in our sole discretion, (i) shares of our common stock will be purchased in open market transactions for the accounts of Participants to the extent practicable, or (ii) we will issue shares of our common stock at net asset value per share. Pursuant to the terms of the New DRP, the number of shares of our common stock to be issued to a Participant will be determined by dividing the total dollar amount of the distribution payable to a Participant by the price per share at which we issue such shares. However, shares purchased in open market transactions by the plan administrator will be allocated to a Participant based on the average purchase price, excluding any brokerage charges or other charges, of all shares of our common stock purchased in the open market. The plan administrator will establish an account for shares acquired through the New DRP for each shareholder who has not elected to receive distributions in cash.

We had sufficient taxable income to support 100% of our declared distributions for the year ended December 31, 2017. We do not expect to use equity capital or borrowed funds to pay distributions to shareholders. We routinely disclose the sources of funds used to pay distributions to our registered shareholders in periodic reports that accompany (i) quarterly account statements and (ii) quarterly distribution checks that are prepared and sent directly by our transfer agent to our registered shareholders. See Note 8. “Distributions” in our consolidated financial statements for a discussion of the sources of funds used to pay distributions on a GAAP basis for the periods presented.

Results of Operations

As of December 31, 2017, our Investment Portfolio had a fair value of $3.97 billion. The majority of our investments at December 31, 2017 consisted of debt investments. See the section entitled “Portfolio and Investment Activity” above for a discussion of the general terms and characteristics of our investments, and for information regarding investment activities during the years ended December 31, 2017, 2016 and 2015. The growth of our Investment Portfolio was the primary contributing factor to the significant increases in investment income, operating expenses, investment advisory fees, net investment income and net assets between the comparative periods, as discussed below.

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The following is a summary of our operating results for the years ended December 31, 2017, 2016 and 2015:



	Year Ended December 31,
(in thousands)	2017			2016			2015
Total investment income	$	397,709		$	386,468		$	311,097
Total operating expense	186,752			173,061			131,443
Net investment income before taxes	210,957			213,407			179,654
Income tax expense, including excise tax	658			3,311			2,966
Net investment income	210,299			210,096			176,688
Net realized gains (losses)	(79,259		)	(2,645		)	50,657
Net change in unrealized appreciation (depreciation)	43,090			35,664			(265,552		)
Net increase (decrease) in net assets resulting from operations	$	174,130		$	243,115		$	(38,207	)

Investment income

Investment income consisted of the following for the years ended December 31, 2017, 2016 and 2015:



	Year Ended December 31,
(in thousands)	2017		2016		2015
Interest income	$	333,446	$	337,850	$	250,599
Payment-in-kind interest income	18,137		19,490		30,402
Subtotal	351,583		357,340		281,001
Fee income	17,829		13,582		18,305
Dividend and other income	28,297		15,546		11,791
Total investment income	$	397,709	$	386,468	$	311,097

The decrease in interest income during the year ended December 31, 2017 was partially due to a decrease in our portfolio of debt investments. Our average debt investment balance was $3.65 billion and $3.76 billion for the years ended December 31, 2017 and 2016, respectively, based on par value. The increase in interest income during the year ended December 31, 2016 was due primarily to the growth of our portfolio of debt investments. Our average debt investment balance was $3.20 billion for the year ended December 31, 2015, respectively, based on par value. Variations in interest income are also partly due to nonrecurring recognition of prepayment penalties and unamortized loan fees, discounts and premiums upon the prepayment of debt investments. We recorded interest income from these sources in the combined amount of $32.54 million, $16.93 million and $6.37 million for the years ended December 31, 2017, 2016 and 2015, respectively. For the year ended December 31, 2017, 5.2% of our total interest income including PIK interest income was attributable to PIK interest income as compared to 5.5% and 10.8% for the same periods in 2016 and 2015, respectively. The decrease in PIK interest income during the years ended December 31, 2017 is primarily due to investments that have been placed on non-accrual or partial accrual status and investments that were sold or repaid. The decrease in PIK interest income during the year ended December 31, 2016 is primarily due to investments that were sold or repaid during the period ($7.29 million) and investments that were placed on non-accrual status during the period ($5.90 million). We also recorded a partial write-down of PIK interest income in the amount of $2.66 million for one investment with a valuation that indicated the PIK interest income may not be fully collectible. These reductions in PIK interest income were partially offset by increases due to new PIK investments added to the portfolio as well as increases caused by the compounding nature of PIK. As of December 31, 2017, our weighted average annual yield on our accruing debt investments was 9.5% based on amortized cost, as defined above in “Portfolio and Investment Activity.” As of December 31, 2017, approximately 78.4% of our debt investments had floating rate interest; therefore, changes in interest rates could have a material impact on our interest income in the future. See Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for further information on the impact interest rate changes could have on our results of operations.

Interest income earned on TRS assets is not included in investment income in the consolidated statements of operations, but rather is recorded as part of (i) realized gains or losses on derivative instruments in connection with quarterly TRS settlement payments and (ii) unrealized appreciation (depreciation) on derivatives for amounts not yet received from the counterparty as of period end.

Our fee income consists of transaction-based fees and is nonrecurring. The increase in fee income during the year ended December 31, 2017 as compared to the same period in 2016 was primarily due to a break-up fee earned on a potential Directly Originated Investment transaction that fell through. Fee income was higher during the year ended December 31, 2015 as compared to the same period in 2016 due primarily to an amendment fee received in the amount of $7.76 million earned during the first quarter of 2015 from one of our portfolio companies seeking financial covenant relief. The decrease in amendment fees earned during the year ended December 31, 2016 was partially offset by an increase in capital structuring fees earned related to our Directly Originated Investment transactions. Going forward, we expect to earn additional structuring

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services fees on Directly Originated Transactions as a result of our persistent focus on direct lending activities. See Note 7. “Fee Income” in our consolidated financial statements for additional information on fee income.

Operating expenses

Our operating expenses for the years ended December 31, 2017, 2016 and 2015 were as follows:



	Year Ended December 31,
(in thousands)	2017		2016		2015
Investment advisory fees	$	80,676	$	82,736	$	70,298
Interest expense	65,501		51,519		36,311
Performance-based incentive fees	16,139		24,123		8,733
Professional services	5,592		2,876		2,913
Listing advisory fees	4,800		—		—
Investment adviser expenses	3,491		1,316		1,518
Administrative services	3,378		3,446		2,728
Custodian and accounting fees	1,724		1,569		1,309
Offering expense	402		2,285		4,481
Director fees and expenses	565		495		569
Other	4,484		2,696		2,583
Total operating expenses	$	186,752	$	173,061	$	131,443

Investment advisory fees and performance-based incentive fees — Prior to the Listing, our investment advisory fees were calculated at an annual rate of 2% of our average gross assets. Since the Listing, pursuant to the terms of the New Investment Advisory Agreement, our investment advisory fees are calculated at an annual rate of 1.5% of our average gross assets. The changes in these fees for the periods presented were primarily attributable to the net changes in our gross assets. Going forward, absent a material change in our gross assets, we expect our investment advisory fees to decrease due to the decrease in the rate from 2% to 1.5%.

KKR, as our investment adviser is, and CNL, as our former investment adviser, was also eligible to receive incentive fees based on our performance. Our performance-based incentive fee, which is comprised of two parts, consisted of the following for the years ended December 31, 2017, 2016 and 2015:



	Year Ended December 31,
(in thousands)	2017		2016		2015
Subordinated Incentive fee on income	$	16,139	$	24,123	$	8,733
Incentive fee on capital gains	—		—		—
Total performance-based incentive fees	$	16,139	$	24,123	$	8,733

Prior to the Listing, a subordinated incentive fee on income was payable to our Advisers each calendar quarter if our pre-incentive fee net investment income (as defined in the Former Investment Advisory Agreement and approved by our Board) exceeds the 1.75% quarterly preference return to our shareholders (the ratio of pre-incentive fee net investment income divided by average adjusted capital). Pursuant to the New Investment Advisory Agreement, average net assets replaced average adjusted capital in the calculation of the subordinated incentive fee on income.

Effective January 1, 2017, the subordinated incentive fee on income is subject to a total return requirement, which provides generally that no incentive fee will be payable except to the extent that 20.0% of the cumulative net increase in net assets resulting from operations over the then-current and three preceding calendar quarters (or, if four calendar quarters have not passed, then the time period since January 1, 2017) exceeds the cumulative incentive fees accrued and/or paid for the same period. Accordingly, any subordinated incentive fee on income that is payable in a calendar quarter will be limited to the lesser of (i) 20.0% of all of our pre-incentive fee net investment income when our pre-incentive fee net investment income exceeds the applicable quarterly hurdle rate for such calendar quarter, subject to the catch-up provision, and (ii) (x) 20.0% of the cumulative net increase in net assets resulting from operations for the then-current and three preceding calendar quarters minus (y) the cumulative incentive fees accrued and/or paid for the three preceding calendar quarters or period since January 1, 2017, whichever period is shorter. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the sum of our pre-incentive fee net investment income, base management fees, realized gains and losses and unrealized appreciation and depreciation for the then-current and three preceding calendar quarters. There will be no accumulation of amounts on the hurdle rate from quarter to quarter and, accordingly, there will be no clawback of amounts previously paid if subsequent quarters are below the applicable quarterly hurdle rate and there will be no delay of payment if prior quarters are below the applicable quarterly hurdle rate.

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Concurrently with the Listing, KKR agreed to certain waivers which may further reduce the amount of the investment advisory fees that are payable by us under the New Investment Advisory Agreement. Specifically, KKR agreed to irrevocably waive subordinated incentive fees that would otherwise be payable under the New Investment Advisory Agreement up to the amount that would cause the total subordinated fees paid in any calendar quarter (or partial calendar quarter for which the subordinated incentive fee is required to be calculated) to not exceed the amount that would be payable if the following revised definitions had applied in such period: (a) “look back period” as defined on or after December 31, 2017 to be the most recently completed quarter and the 11 preceding calendar quarters and (b) “cumulative net increase in net assets resulting from operations” as defined to remove the addition of management fees paid following the Listing. Neither the total return requirement nor the waivers resulted in a reduction of the amount of incentive fee payable to the advisers for the year ended December 31, 2017.

The annual incentive fees on capital gains recorded for GAAP purposes is equal to (i) 20% of our realized and unrealized capital gains on a cumulative basis since inception, net of all realized capital losses and unrealized depreciation on a cumulative basis from inception, less (ii) the aggregate amount of any previously paid incentive fees on capital gains. As discussed in Note 6. “Related Party Transactions” in our consolidated financial statements, the calculation of performance-based incentive fees disregards any net realized and unrealized gains associated with the TRS interest spread. In addition, for financial reporting purposes, in accordance with GAAP, we include unrealized appreciation on our Investment Portfolio and derivative instruments in the calculation of incentive fees on capital gains; however, such amounts are not payable by us unless and until the net unrealized appreciation is actually realized. The actual amount of incentive fees on capital gains that are due and payable to the Advisers is determined at the end of the calendar year.

We did not pay any incentive fee on capital gains for the years ended December 31, 2017, 2016 and 2015. As of December 31, 2017, we had cumulative realized and unrealized losses of $371.35 million in excess of our cumulative realized capital gains since inception. The Advisers earned incentive fees on capital gains of $2.32 million during the year ended December 31, 2013, at which time we had cumulative net realized capital gains of $11.61 million in excess of our unrealized losses. Due to the cumulative nature of the incentive fee on capital gains, we will not owe the Advisers any incentive fees on capital gains for future years until such time, if any, that our cumulative realized net capital gains since inception exceed our unrealized losses as of a particular measurement date by more than $11.61 million.

See “—Contractual Obligations —Investment Advisory Agreement,” below for further details about the performance-based incentive fees.

Interest expense – The components of interest expense for the years ended December 31, 2017, 2016 and 2015 were as follows:



	Year Ended December 31,
(in thousands)	2017		2016		2015
Stated interest expense	$	57,532	$	45,126	$	30,522
Unused commitment fees	3,049		1,845		2,172
Amortization of deferred financing costs	4,512		4,150		3,233
Accretion of discount on term loan	408		398		384
Total interest expense	$	65,501	$	51,519	$	36,311

The increase in interest expense during the year ended December 31, 2017 was attributable to the increase in our weighted average debt outstanding to $1.50 billion, as compared to $1.48 billion during the year ended December 31, 2016, as well as the increase in our all-in cost of financing to 4.38% for the year ended December 31, 2017, from 3.49% for the year ended December 31, 2016. The increase in interest expense during the year ended December 31, 2016 was primarily attributable to the increase in our weighted average debt outstanding to $1.48 billion, as compared to $1.01 billion for the same period in 2015. This increase is partially offset by a decrease in our all-in cost of financing, including fees and expenses, to 3.49%, as compared to 3.59% for the same period in 2015.

Our performance-based incentive fees and interest expense, among other things, may increase or decrease our overall operating expenses and expense ratios relative to comparative periods depending on portfolio performance, an increase or reduction in borrowed funds and borrowing commitments, and changes in benchmark interest rates, such as LIBOR, among other factors.

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All other operating expenses – The increases in professional services and other expenses for the year ended December 31, 2017 as compared to the years ended December 31, 2016 and 2015 are due to increased legal and other expenses associated with the Listing. We also incurred listing advisory fees upon the completion of the Listing. The following table presents our expenses associated with the Listing:



(in thousands)	Year Ended December 31, 2017
Professional services	1,283
Listing advisory fees	4,800
Investment adviser expenses	59
Administrative services	47
Other	1,395
Total listing expenses	$	7,584

The increase in investment adviser expenses for the year ended December 31, 2016 is due to an increase in reimbursable expenses incurred by KKR related to the restructuring of existing investments and the underwriting and structuring of new transactions. Our offering expenses were capitalized as deferred offering expenses and then subsequently expensed over a 12-month period. As a result of the closing of our Offering in October 2016, we did not record any deferred offering expenses during the year ended December 31, 2017, as compared to $1.08 million and $3.48 million for the years ended December 31, 2016 and 2015. As of December 31, 2017, all deferred offering expenses have been recorded as expense in the consolidated statements of operations and we do not expect to incur this expense going forward.

During the years ended December 31, 2017, 2016 and 2015 the ratio of core operating expenses (excluding investment advisory fees, performance-based incentive fees, interest expense and organization and offering expenses, and including net expense support) to average net assets was 0.87%, 0.46% and 0.48%, respectively.

Income tax expense, including excise tax

We have elected to be treated as a RIC under the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, we must, among other things, timely distribute to our shareholders generally at least 90% of our investment company taxable income, as defined by the Code, for each year. In order to maintain our RIC status, we, among other things, have made and intend to continue to make the requisite distributions, including spillback distributions, to our shareholders which will generally relieve us from U.S. federal corporate-level income taxes.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current calendar year dividend distributions into the next tax year and pay a 4% excise tax on the amount of current year taxable income in excess of distributions, as required. As a result of our estimated taxable income exceeding distributions paid to our shareholders, we recorded net excise tax expense of $0.21 million, $3.31 million and $2.89 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes and foreign income taxes. For the years ended December 31, 2017, 2016 and 2015, we recorded a net tax expense of approximately $0.97 million, $1.26 million and $0.56 million, respectively, for these subsidiaries, of which $0.53 million, $1.26 million and $0.48 million, respectively, represents foreign tax withholding and is recorded net against the related interest income in the consolidated statements of operations.

Net realized gain and losses—Net realized gains and losses for the years ended December 31, 2017, 2016 and 2015 were as follows:



	Year Ended December 31,
(in thousands)	2017			2016			2015
Net realized losses on investments	$	(95,222	)	$	(27,548	)	$	(29,310	)
Net realized gains on derivative instruments	15,247			24,306			83,550
Net realized gains (losses) on foreign currency transactions	716			597			(3,583		)
Net realized gains (losses)	$	(79,259	)	$	(2,645	)	$	50,657

The net realized loss on investments for the year ended December 31, 2017 consisted of a net loss on the disposition of investments of $76.15 million and a net currency loss on those investments of $19.07 million that were denominated in foreign currencies. The realized losses were driven primarily by investments that were sold or restructured during the period. The net realized loss on investments for the year ended December 31, 2016 consisted of a net gain on the

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disposition of investments of $5.86 million and and a net currency loss on those investments of $33.41 million and $31.02 million, respectively, that were denominated in foreign currencies. The net realized loss on investments for the year ended 2015 consisted of a net loss on the disposition of investments of $20.19 million and a net currency loss on those investments of $9.12 million that were denominated in foreign currencies. The net realized loss on investments for the year ended December 31, 2015 was partially due to a restructuring of one of the portfolio companies in whose debt securities we have invested, Towergate Finance PLC, resulting in a realized loss of $23.0 million.

Our net realized gains (losses) on derivative instruments for the years ended December 31, 2017, 2016 and 2015 consisted of the following:



	Year Ended December 31,
(in thousands)	2017			2016			2015
Net realized gains (losses) on:
Cross currency swaps	$	22,324		$	8,328		$	541
Foreign currency forward contracts	(12,006		)	7,344			70,096
Interest rate swaps	1,915			(3,851		)	—
TRS	3,014			12,485			12,913
	$	15,247		$	24,306		$	83,550

See Note 4. “Derivative Instruments” in our consolidated financial statements for more information about the components of the realized gain on TRS recorded during each period.

As described in Note 4. “Derivative Instruments” in our consolidated financial statements, we utilize foreign currency forward contracts and cross currency swaps to economically hedge the impact that changes in foreign exchange rates have on the value of our investments denominated in foreign currencies. We record realized gains on these derivative instruments upon periodic settlement dates and upon maturity or termination. Although both types of instruments serve as an economic hedge against changes in foreign exchange rates, the unrealized gains and losses may have differing tax treatments. By hedging our foreign investments with a combination of foreign currency forward contracts and cross currency swaps, we expect to reduce potential volatility in our taxable income while maintaining some flexibility to increase or decrease the overall notional balance of our hedges when deemed necessary. The cross currency swaps generate realized gains or losses upon each quarterly settlement payment. The realized gains on foreign currency forward contracts and cross currency swaps help offset realized and unrealized losses in investments denominated in foreign currencies as a result of foreign currency movements, as described further below.

Net change in unrealized appreciation or depreciation

For the years ended December 31, 2017, 2016 and 2015, net unrealized appreciation and depreciation consisted of the following:



	Year Ended December 31,
(in thousands)	2017			2016			2015
Net change in unrealized appreciation (depreciation) on:
Investments	$	112,536		$	(1,860	)	$	(232,449	)
Derivative instruments	(70,308		)	40,141			(34,881		)
Foreign currency translation	(1,026		)	(551		)	1,778
Provision for taxes	1,888			(2,066		)	—
Net change in unrealized depreciation	$	43,090		$	35,664		$	(265,552	)

The net change in unrealized appreciation (depreciation) on investments consisted of the following:



	Year Ended December 31,
(in thousands)	2017			2016			2015
Net change in unrealized appreciation (depreciation) on investments:
Unrealized appreciation	$	136,570		$	133,870		$	29,519
Unrealized depreciation	(166,382		)	(206,953		)	(281,185		)
Net unrealized (appreciation) depreciation reversal related to net realized gains or losses ⁽¹⁾	142,348			71,223			19,217
Total net unrealized appreciation (depreciation)	$	112,536		$	(1,860	)	$	(232,449	)


⁽¹⁾	Represents the unrealized appreciation or depreciation recorded on the related asset at the end of prior period.

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Approximately 8.7% of our Investment Portfolio, measured at fair value, is denominated in foreign currencies. Such investments expose our portfolio to the risk that the value of the investments will be affected by changes in exchange rates between the currency in which the investments are denominated and the currency in which the investments are made. Our practice is to minimize these risks in certain cases by employing hedging techniques, including using foreign currency forward contracts and cross currency swaps, to reduce exposure to changes in exchange rates when a meaningful amount of capital has been invested in foreign currencies. We do not, however, hedge our currency exposure in all currencies or all investments.

The success of our hedging transactions will depend on our ability to correctly predict movements in currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to (or be able 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.

We do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held; therefore, fluctuations related to foreign exchange rate conversions are included with unrealized appreciation (depreciation) on investments. The following table presents the combined realized and unrealized gains and losses on investments, including the impact of our hedges. Changes in foreign currency exchange rates could impact our earnings to the extent that our investments denominated in foreign currencies are not hedged or the hedges are not effective. See Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for further discussion of the impact of foreign currency exchange rates on our earnings.



	Year Ended December 31,
(in thousands)	2017			2016			2015
Net realized and unrealized gains (losses) on investments	$	17,314		$	(29,408	)	$	(261,759	)
Net realized and unrealized gains (losses) on foreign currency forward contracts	(17,717		)	9,131			31,368
Net realized and unrealized losses on cross currency swaps	(33,777		)	26,882			8,484
	$	(34,180	)	$	6,605		$	(221,907	)

The net realized and unrealized gains (losses) on investments during the year ended December 31, 2017, after applying the net impacts of movements in valuation on the underlying foreign currency forward contracts and cross currency swaps put in place to mitigate currency risk, were generally attributable to a tightening of credit spreads and a general improvement in market conditions experienced during the year ended December 31, 2017. These gains were offset by unrealized losses incurred on our investments in Amtek, as discussed above in “Portfolio and Investment Activity – Portfolio Developments.” The net realized and unrealized gains and losses on investments during the year ended December 31, 2016, after applying the net impacts of movements in valuation on the underlying foreign currency forward contracts and cross currency swaps put in place to mitigate currency risk, were attributable to a tightening of credit spreads and a general improvement in market conditions experienced during the second half of 2016. These conditions helped to offset a portion of the net losses incurred during the first quarter of 2016, and losses related to underperforming investments. The net realized and unrealized losses on investments during the year ended December 31, 2015, after applying the net impacts of movements in valuation on the underlying foreign currency forward contracts and cross currency swaps put in place to mitigate currency risk, were partly attributable to declines in the fair values of the Company’s investments in securities of portfolio companies directly or indirectly related to the energy sector. During the year ended December 31, 2015, volatility in commodities, energy and equities impacted various credits contributing to increasing unrealized depreciation in the portfolio.

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The net change in unrealized appreciation (depreciation) on derivative instruments consisted of the following:



	Year Ended December 31,
(in thousands)	2017			2016			2015
Net change in unrealized appreciation (depreciation) on TRS:
Unsettled amounts at end of period:
Spread interest income	$	—		$	3,346		$	3,762
Realized gain (loss) on TRS assets	—			441			(571		)
Receipt of prior period unsettled amounts	(3,787		)	(3,191		)	(3,006		)
Unrealized appreciation (depreciation) on TRS assets	390			16,363			(10,302		)
	(3,397		)	16,959			(10,117		)
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts:
Unrealized appreciation	1,194			3,504			2,258
Unrealized depreciation	(3,401		)	—			(541		)
Net unrealized (appreciation) depreciation reversal related to net realized gains or losses upon maturity/termination ⁽¹⁾	(3,504		)	(1,717		)	(40,445		)
	(5,711		)	1,787			(38,728		)
Net change in unrealized appreciation (depreciation) on cross currency swaps:
Unrealized appreciation	—			18,554			8,247
Unrealized depreciation	(29,604		)	—			(304		)
Net unrealized (appreciation) depreciation reversal related to net realized gains or losses upon maturity/termination ⁽¹⁾	(26,497		)	—			—
	(56,101		)	18,554			7,943
Net change in unrealized appreciation (depreciation) on interest rate swaps:
Unrealized appreciation	633			2,841			6,021
Unrealized depreciation	—			—			—
Net unrealized (appreciation) depreciation reversal related to net realized gains or losses upon maturity/termination	(5,732		)	—			—
	(5,099		)	2,841			6,021
Total net change in unrealized (depreciation) appreciation on derivative instruments	$	(70,308	)	$	40,141		$	(34,881	)


⁽¹⁾	Represents the unrealized appreciation or depreciation recorded at the end of prior period.

The provision for taxes is attributable to investments held in our wholly-owned subsidiaries that are subject to U.S. federal, state and/or foreign income taxes.

We are not aware of any material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our investments, other than those described above in risk factors identified in Part II, Item 1A.

Adjusted net investment income

Our net investment income totaled $210.30 million ($1.54 per share), $210.10 million ($1.55 per share) and $176.69 million ($1.56 per share) for the years ended December 31, 2017, 2016 and 2015, respectively. As described above in “Investment advisory fees and performance-based incentive fees,” we accrue estimated performance-based incentive fees with respect to any net realized and unrealized appreciation in our Investment Portfolio and derivative instruments. The performance-based incentive fees are treated as an operating expense and therefore are a deduction in calculating our net investment income on a GAAP basis. However, our net realized and unrealized appreciation on our Investment Portfolio and derivative instruments that partly determine these fees are not included in net investment income. Therefore, in order to evaluate our net investment income without regard to realized and unrealized appreciation in our Investment Portfolio, including the impact of related accrued performance-based fees, we have developed a supplemental, non-GAAP measure, which we refer to as “adjusted net investment income,” which presents net investment income before the effects of unearned performance-based incentive fees.

In addition, the relative utilization of the TRS also caused variability in net investment income because earnings on assets within the TRS Portfolio are not included in the calculation of net investment income in accordance with GAAP. The TRS Portfolio accrued interest income and financing charges were included in the fair value of the TRS and were not recorded as realized gain or loss on derivative instruments until quarterly TRS settlement payments were finalized. If the TRS assets had

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instead been included in our Investment Portfolio as owned assets, the interest income and financing charges, or TRS net interest spread, would have been included in net investment income. We include the TRS net interest spread in our calculation of adjusted net investment income.

We believe that adjusted net investment income is useful to assess the sustainability of our distributions and operating performance. Adjusted net investment income is not necessarily indicative of cash flows available to fund cash needs and should not be considered as an alternative to net investment income as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make future distributions to our shareholders. Adjusted net investment income should not be construed as an historic performance measure or as more relevant or accurate than the current GAAP methodology in calculating net investment income and its applicability in evaluating our operating performance.

The following table shows the TRS interest income and financing charges for the years ended December 31, 2017, 2016 and 2015.



	Year Ended December 31,
(in thousands, except per share amounts)	2017			2016			2015
Interest and fee income included in TRS fair value	$	—		$	4,215		$	4,658
Financing charges included in TRS fair value	—			(869		)	(896		)
Subtotal	—			3,346			3,762
Interest and fee income included in TRS net realized gains	11,526			19,170			17,242
Financing charges included in TRS net realized gains ⁽¹⁾	(10,131		)	(6,109		)	(4,028		)
Less: amounts included in prior period fair value	(3,346		)	(3,762		)	(3,032		)
TRS net interest spread	$	(1,951	)	$	12,645		$	13,944
TRS net interest spread per share	$	(0.01	)	$	0.09		$	0.12


⁽¹⁾	Financing charge for the year ended December 31, 2017 includes a make-whole fee of $6.40 million.

The following table presents a reconciliation of our net investment income to adjusted net investment income for the years ended December 31, 2017, 2016 and 2015.



	Year Ended December 31,
(in thousands, except per share amounts)	2017			2016		2015
Net investment income (GAAP)	$	210,299		$	210,096	$	176,688
Add: Estimated unearned performance-based incentive fees	—			—		—
Add: TRS net interest spread	(1,951		)	12,645		13,944
Adjusted net investment income (non-GAAP)	$	208,348		$	222,741	$	190,632
Net investment income per share (GAAP)	$	1.54		$	1.55	$	1.56
Adjusted net investment income per share (non-GAAP)	$	1.52		$	1.65	$	1.68

Net Assets, Net Asset Value per Share, Annual Investment Return and Total Return Since Inception

Net assets decreased $274.23 million during the year ended December 31, 2017 and increased $165.31 million and $448.20 million during the years ended December 31, 2016 and 2015, respectively. The change in net assets during the years ended December 31, 2017, 2016 and 2015 was partially attributable to increases caused by capital transactions including (i) the issuance of shares of common stock in the Offering in 2016 and (ii) reinvestment of distributions in the combined amount of $96.99 million, $251.74 million and $723.87 million, respectively. Our operations resulted in net assets increasing $174.13 million and $243.12 million during the years ended December 31, 2017 and 2016, respectively, and decreasing $38.21 million during the year ended December 31, 2015. Net assets also decreased due to distributions to shareholders in the amount of $244.13 million, $244.95 million and $205.04 million and the repurchase of shares of common stock in the amount of $301.22 million, $84.59 million and $32.42 million during the years ended December 31, 2017, 2016 and 2015, respectively.

Our net asset value per share was $19.55, $20.09 and $20.10 on December 31, 2017, 2016 and 2015 respectively. After considering (i) the overall changes in net asset value per share, (ii) distributions paid of approximately $1.81 per share during the each of the years months ended December 31, 2017, 2016 and 2015, and (iii) the assumed reinvestment of those distributions in accordance with our distribution reinvestment plan, the total investment return was 6.4%, 9.4% and (0.9)% for shareholders who held our shares over the entire 12-month period ending December 31, 2017, 2016 and 2015 respectively.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note 2. “Significant Accounting Policies” to our consolidated financial statements describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. We consider the accounting policies listed below to be critical because they involve management judgments and assumptions, requires estimates about matters that are inherently uncertain and are important for understanding and evaluating our reported financial results.

These judgments affect (i) the reported amounts of assets and liabilities, (ii) our disclosure of contingent assets and liabilities as of the dates of the financial statements and (iii) the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially from the amounts reported based on these policies.

Valuation of Investments and Unrealized Gain (Loss) – Our investments consist primarily of investments in senior and subordinated debt of private U.S. companies and are presented in our consolidated financial statements at fair value. See Note 3. “Investments,” in our consolidated financial statements for more information on our investments. As described more fully in Note 2. “Significant Accounting Policies” and Note 5. “Fair Value of Financial Instruments” in our consolidated financial statements, a valuation hierarchy based on the level of independent, objective evidence available regarding value is used to measure the fair value of our investments. Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. With respect to our portfolio investments for which market quotations are not readily available, our Board is responsible for determining in good faith the fair value of our portfolio investments in accordance with, and the consistent application of, the valuation policy and procedures approved by the Board, based on, among other things, the input of KKR, audit committee and independent third-party valuation firms.

We utilize several valuation techniques that use unobservable inputs and assumptions in determining the fair value of our Level 3 investments. For senior debt, subordinated debt and structured products categorized as Level 3 investments, we initially value the investment at its transaction price and subsequently value using (i) market data for similar instruments (e.g., recent transactions or indicative broker quotes), (ii) comparisons to benchmarks, derivatives or indices and/or (iii) valuation models. Valuation models are based on yield analysis and discounted cash flow techniques, where the key inputs are based on relative value analyses and the assignment of risk-adjusted discounted rates derived from the analysis of similar credit investments from similar issuers. In addition, an illiquidity discount is applied where appropriate. The valuation techniques used by us for other types of assets and liabilities that are classified as Level 3 investments are described in Note 2 to our consolidated financial statements. The unobservable inputs and assumptions may differ by asset and in the application of our valuation methodologies. The reported fair value estimates could vary materially if we had chosen to incorporate different unobservable inputs and other assumptions.

We and our Board conduct our fair value determination process on a quarterly basis and any other time when a decision regarding the fair value of our portfolio investments is required. A determination of fair value involves subjective judgments and estimates. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair value of the our portfolio investments may differ significantly from the values that would have been determined had a readily available market value existed for such investments, and the differences could be material. Further, such investments are generally less liquid than publicly traded securities. If we were required to liquidate a portfolio investment that does not have a readily available market value in a forced or liquidation sale, we could realize significantly less than the fair value recorded by us.

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The table below presents information on the investments classified as Level 3 as of December 31, 2017 and 2016:



(in thousands)	December 31, 2017			December 31, 2016
Fair value of investments classified as Level 3	$	3,215,250		$	3,189,484
Total fair value of investments	$	3,969,097		$	4,025,293
% of fair value classified as Level 3	81.0		%	79.2		%
Number of positions classified as Level 3	114			126
Total number of positions	171			191
% of positions classified as Level 3	66.7		%	65.6		%

The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of December 31, 2017 and 2016 are described in Note 5. “Fair Value of Financial Instruments” in our consolidated financial statements, as well as, the directional impact to the valuation from an increase in various unobservable inputs.

As discussed in Note 2. “Significant Accounting Policies” in our consolidated financial statements, our independent third party valuation firm provides a valuation range from which valuation recommendations are formulated. If our Board had determined a fair value of our Level 3 investments that was 2% higher (lower) than the fair value recorded as of December 31, 2017, our earnings per share would have increased (decreased) by $0.47 and our net asset value per share would have increased (decreased) by $0.50.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of December 31, 2017.

Contractual Obligations

Investment Advisory Agreement – We have entered into the New Investment Advisory Agreement with KKR for the overall management of our investment activities. Pursuant to the New Investment Advisory Agreement, KKR earns a base management fee equal to an annual rate of 1.5% of our average gross assets (excluding deferred offering expenses and, from and after April 11, 2016, cash and short-term investments), and an incentive fee based on our performance. The incentive fee is comprised of the following two parts:


(i)	a subordinated incentive fee on pre-incentive fee net investment income, paid quarterly, if earned, computed as the sum of (a) 100% of quarterly pre-incentive fee net investment income in excess of 1.75% of average net assets but less than or equal to 2.1875% of average net assets, and (b) 20% of pre-incentive fee net investment income in excess of 2.1875% of average net assets, and

(ii)

an incentive fee on capital gains paid annually, if earned, equal to (A) 20% of all realized gains on a cumulative basis from inception, net of (1) all realized losses on a cumulative basis, (2) unrealized depreciation at year-end and (3) disregarding any net realized gains associated with the TRS interest spread, which represents the difference between (a) the interest and fees received on total return swaps, and (b) the financing fees paid to the total return swaps counterparty, less (B) the aggregate amount of any previously paid incentive fee on capital gains.

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Concurrent with the Listing, KKR agreed to certain waivers which may further reduce the amount of the investment advisory fees that are payable by us under the New Investment Advisory Agreement. Specifically, KKR agreed to irrevocably waive subordinated incentive fees that would otherwise be payable by us under the New Investment Advisory Agreement up to the amount that would cause the total subordinated fees paid in any calendar quarter (or partial calendar quarter for which the subordinated incentive fee is required to be calculated) to not exceed the amount that would be payable if the following revised definitions had applied in such period: (a) “look back period” as defined on or after December 31, 2017 to be the most recently completed quarter and the 11 preceding calendar quarters and (b) “cumulative net increase in net assets resulting from operations” as defined to remove the addition of management fees paid following the Listing

As of December 31, 2017, we had accrued a subordinated incentive fee on income of $8.42 million. See Note 6. “Related Party Transactions” in our consolidated financial statements for expanded discussion of the New Investment Advisory and Sub-Advisory Agreements.

Unfunded Commitments - Unfunded commitments to provide funds to portfolio companies are not recorded on our consolidated statements of assets and liabilities. Because these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We intend to use cash flow from scheduled and early principal repayments and proceeds from borrowings and securities offerings to fund these commitments. As of December 31, 2017, our unfunded investment commitments are as follows:



Category / Company ⁽¹⁾
Unfunded revolvers/delayed draw loan commitments:
Frontline Technologies Holdings, LLC	$	12,140
National Debt Relief LLC	3,763
Revere Superior Holdings, Inc	23,452
Revere Superior Holdings, Inc	4,574
Safety Technology Holdings, Inc.	421
Smart Modular Technologies, Inc.	444
Smile Brands, Inc.	3,589
SouthernCarlson	6,219
Total unfunded revolvers/delayed draw loan commitments	$	54,602
Unfunded term loans
Wheels Up Partners LLC	$	44,768
Total unfunded term loans	$	44,768
Unfunded equity commitments:
KKR BPT Holdings Aggregator, LLC	$	7,000
Rockport Group, LLC	8,046
Star Mountain SMB Multi-Manager Credit Platform, LP	17,213
Toorak Capital	15,020
Total unfunded equity commitments	$	47,279


⁽¹⁾	May be commitments to one or more entities affiliated with the named company.

We also have a commitment to provide up to $143.47 million of capital to SCJV. The capital commitment to SCJV can be satisfied with contributions of either cash or assets, and no capital commitment can be drawn without an affirmative vote by one of our representatives on SCJV’s board of managers.

We estimate we have sufficient liquidity in the form of cash on hand, borrowing capacity under our revolving credit facilities and scheduled and early principal repayments to fund such unfunded commitments when the need arises.

Borrowings - As discussed above under “Capital Resources and Liquidity – Borrowings,” we, either directly or through our wholly owned subsidiaries, have borrowing agreements with several lenders in connection with our revolving credit facilities and the 2014 Senior Secured Term Loan. As of December 31, 2017, the credit facilities provided for $538.12 million of undrawn borrowing capacity. (See — “Capital Resources and Liquidity — Borrowings” above and Note 10. “Borrowings” in our consolidated financial statements for expanded discussion of our borrowings.)

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A summary of our significant contractual payment obligations for the repayment of outstanding borrowings and interest expense and other fees related to our borrowings as of December 31, 2017 is as follows:



(in thousands)	Total		< 1 year		1-3 years		3-5 years		After 5 years
Senior Secured Revolving Credit Facility	$	615,000	$	—	$	—	$	615,000	$	—
SMBC Credit Facility	110,000		—		—		110,000		—
JPM Credit Facility	240,000		—		240,000		—		—
2014 Senior Secured Term Loan	385,000		4,000		381,000		—		—
2022 Notes	245,000		—		—		245,000		—
Interest and Credit Facilities Fees Payable⁽¹⁾	226,932		75,887		119,439		31,606		—
Total	$	1,821,932	$	79,887	$	740,439	$	1,001,606	$	—


⁽¹⁾	Estimated interest payments have been calculated based on interest rates of our borrowings as of December 31, 2017.

Related Party Transactions

We have entered into agreements with our Advisers and certain of their affiliates, whereby we agree to pay certain fees to, or reimburse certain expenses of, our Advisers and their affiliates for investment and advisory services, selling commissions and marketing support fees in connection with our Offering, and reimbursement of offering and administrative and operating fees and costs. See Note 6. “Related Party Transactions” in our consolidated financial statements and Part III—Item 13. “Certain Relationships and Related Transactions, and Director Independence” for a discussion of the various related party transactions, agreements and fees.

Impact of Recent Accounting Pronouncements

See Item 1. “Financial Statements” for a summary of the impact of any recent accounting pronouncements, if any.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are subject to financial market risks, in particular changes in interest rates. Future changes in interest rates will likely have effects on the interest income we earn on our portfolio investments, the fair value of our fixed income investments, the interest rates and interest expense associated with the money we borrow and the fair value of loan balances.

Subject to the requirements of the 1940 Act, we may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. Although hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates. As of December 31, 2017, we have two pay-fixed, receive-floating interest rate swaps which we pay an annual fixed rate of 0.84% to 1.36% and receive three-month LIBOR on an aggregate notional amount of $200 million. The interest rate swaps have quarterly settlement payments.

As of December 31, 2017, approximately 78.4% of our portfolio of debt investments, or approximately $2.73 billion measured at par value, featured floating or variable interest rates. The variable interest rate debt investments usually provide for interest payments based on three-month LIBOR (the base rate) and typically have durations of three months after which the base rates are reset to then prevailing three-month LIBOR. As of December 31, 2017, approximately 91.9% of our portfolio of variable interest rate debt investments, or approximately $2.51 billion measured at par value, featured minimum base rates, or base rate floors, and the weighted average base rate floor for such investments was 1.0%. Variable interest rate investments that feature a base rate floor generally reset to the then prevailing three-month LIBOR only if the reset base rate exceeds the base rate floor on the applicable interest rate reset date, in which cases, we may benefit through an increase in interest income from such interest rate adjustments. At December 31, 2017, we held an aggregate investment position of $220.40 million at par value in variable interest rate debt investments that featured variable interest rates without any minimum base rates, or approximately 8.1% of our portfolio of variable interest rate debt investments. In the case of these “no base rate floor” variable interest debt investments held in our portfolio, we may benefit from increases in the base rates that may subsequently result in an increase in interest income from such interest rate adjustments.

Because we borrow money to make investments, our net investment income is partially dependent upon the difference between the interest rates at which we invest borrowed funds and the interest rates at which we borrow funds. In periods of rising interest rates, if we have borrowed capital with floating interest rates, our interest expense will increase, which will increase our financing costs and may reduce our net investment income, especially to the extent we continue to acquire and hold fixed-rate debt investments. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

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Pursuant to the terms of our credit facilities and 2014 Senior Secured Term Loan, as discussed above (see “Capital Resources and Liquidity – Borrowings”), the majority of our borrowings as of December 31, 2017 provide for floating base rates based on short-term LIBOR. Therefore, if we were to completely draw down the unused commitments in each of our credit facilities, we expect that our weighted average direct interest rate would decrease by approximately 9 basis points, as compared to our current weighted average direct interest cost for borrowed funds. We expect that any further expansion of our current revolving credit facilities, or any future credit facilities that we or any subsidiary may enter into, will also be based on a floating base rate. As a result, we are subject to continuous risks relating to changes in market interest rates.

Based on our December 31, 2017 balance sheet, the following table shows the annual impact of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:



	As of December 31, 2017 (in millions)
Basis Point Change	Interest Income			Interest Expense			Net Investment Income ⁽¹⁾		Interest Rate Swap ⁽²⁾
Down 50 basis points	$	(0.931	)	$	(6.755	)	$	5.824	$	(1.000	)
Up 50 basis points	$	11.830		$	6.755		$	5.075	$	1.000
Up 100 basis points	$	23.660		$	13.510		$	10.150	$	2.000
Up 150 basis points	$	35.490		$	20.265		$	15.225	$	3.000
Up 200 basis points	$	47.320		$	27.020		$	20.300	$	4.000


⁽¹⁾	Excludes the impact of performance-based incentive fees. See Note 6. “Related Party Transactions” in our consolidated financial statements for more information on the performance-based incentive fees.


⁽²⁾	Excludes the impact of quarterly fixed rate payments on interest rate swaps. See Note 4. “Derivative Instruments” in our consolidated financial statements for more information on our open interest rate swaps as of the end of the reporting period.

The interest rate sensitivity analysis presented above does not consider the potential impact of the changes in fair value of our debt investments and the net asset value of our common stock in the event of sudden increases in interest rates associated with high yield corporate bonds. Approximately 21.6% of our debt investment portfolio was invested in fixed interest rate, high yield corporate debt investments as of December 31, 2017. Rising market interest rates will most likely lead to fair value declines for high yield corporate bonds and a decline in the net asset value of our common stock, while declining market interest rates will most likely lead to an increase in bond values.

As of December 31, 2017, approximately 33.8% of our fixed interest rate debt investments, or approximately $210.12 million measured at fair value, had prices that are generally available from third party pricing services. We consider these debt investments to be one of the more liquid subsets of our Investment Portfolio since these types of assets are generally broadly syndicated and owned by a wide group of institutional investors, business development companies, mutual funds and other investment funds. Additionally, this group of assets is susceptible to revaluation, or changes in bid-ask values, in response to sudden changes in expected rates of return associated with these investments. We have other fixed interest rate investments in the less liquid subset of our Investment Portfolio that are not included in this analysis.

We have computed a duration of approximately 4.6 for this liquid/fixed subset of our total portfolio. This implies that a sudden increase in the market’s expected rate of return of 100 basis points for this subset of our Investment Portfolio may result in a reduction in fair value of approximately 4.6%, all other financial and market factors assuming to remain unchanged. A 4.6% decrease in the valuation of this Investment Portfolio subset equates to a decrease of $9.67 million, or a 0.4% decline in net assets relative to $19.55 net asset value per share as of December 31, 2017.

Foreign Currency Risk

From time to time, we may make investments that are denominated in a foreign currency that are subject to the effects of exchange rate movements between the foreign currency of each such investment and the U.S. dollar, which may affect future fair values and cash flows, as well as, amounts translated into U.S. dollars for inclusion in our consolidated financial statements.

The table below presents the effect that a 10% immediate, unfavorable change in the foreign currency exchange rates (i.e. strengthening of the U.S. dollar) would have on the fair value of investments in our Investment Portfolio denominated in foreign currencies as of December 31, 2017, by foreign currency, all other valuation assumptions remaining constant. In addition, the table below presents the par value of our investments denominated in foreign currencies and the notional amount of foreign currency forward contracts in local currency in place as of December 31, 2017, to hedge against foreign currency risks.

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		Investments Denominated in Foreign Currencies							Hedges
		As of December 31, 2017					Reduction in Fair Value as of December 31, 2017 if 10% Adverse Change in Exchange Rate⁽²⁾		As of December 31, 2017
(in thousands)		Par Value/ Cost in Local Currency⁽¹⁾	Par Value/ Cost in US$⁽¹⁾		Fair Value				Net Foreign Currency Hedge Amount in Local Currency		Net Foreign Currency Hedge Amount in U.S. Dollars
Euros	€	368,174	$	441,389	$	309,257	$	30,926	€	281,785	$	311,287
Canadian Dollar	C$	35,641	28,354		27,640		2,764		C$	35,650	29,328
British Pound Sterling	£	6,231	9,237		9,119		912		£	27,722	34,401
Australian Dollar	A$	10,399	7,945		1,975		198		A$	2,736	2,112
Swedish Kronor	SEK	97,249	15,145		412		41		SEK	—	—
Total			$	502,070	$	348,403	$	34,841			$	377,128


⁽¹⁾	Amount represents the par value of debt investments and cost of equity investments denominated in foreign currencies.


⁽²⁾	Excludes effect, if any, of any foreign currency hedges.

As illustrated in the table above, we use derivative instruments from time to time, including foreign currency forward contracts and cross currency swaps, to manage the impact of fluctuations in foreign currency exchange rates. In addition, we have the ability to borrow in foreign currencies under our Senior Secured Revolving Credit Facility, which provides a natural hedge with regard to changes in exchange rates between the foreign currencies and U.S. dollar and reduces our exposure to foreign exchange rate differences. We are typically a net receiver of these foreign currencies as related for our international investment positions, and, as a result, our investments denominated in foreign currencies, to the extent not hedged, benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar.

As of December 31, 2017, the net contractual amount of our foreign currency forward contracts and cross currency swaps totaled $377.13 million, all of which related to hedging of our foreign currency denominated debt investments. As of December 31, 2017, we did not have any outstanding borrowings denominated in foreign currencies on our Senior Secured Revolving Credit Facility.

During the year ended December 31, 2017, our foreign currency transactions and foreign currency translation adjustment recorded in our consolidated statements of operations resulted in net realized and unrealized losses of $0.31 million. Our foreign currency forward contracts and cross currency swaps, employed for hedging purposes, generated net realized and unrealized losses of $51.49 million during the years ended December 31, 2017, respectively. We do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held; therefore, the fluctuations related to foreign exchange rate conversion are included with the net realized gain (loss) and unrealized appreciation (depreciation) on investments. See “Results of Operations — Net Change in Unrealized Appreciation or Depreciation” for additional information on the foreign currency exchange changes.


Item 8.	Financial Statements and Supplementary Data.

Information required by this Item is included herein beginning on page F-1.


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

None.


Item 9A.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in reports we file under the Exchange Act is recorded, processed, summarized and reported as specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance to our management and Board regarding the preparation and fair presentation of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on management’s assessment, we maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control Integrated Framework (2013)”.

Pursuant to rules established by the SEC, this annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

During the most recent fiscal quarter, there was no change in our internal controls over financial reporting (as defined under Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.


Item 9B.	Other Information

Not applicable.

Item 10. Directors, Executive Officers and Corporate Governance.

Information about the Board of Directors and Executive Officers

Pursuant to the Company’s bylaws the number of directors on the board of directors of the Company, which we refer to as the “Board,” may not be fewer than one, the minimum number required by the Maryland General Corporation Law or other applicable law. The Board is divided into three classes of directors serving staggered terms of three years each, with a term of office of one of the three classes of directors expiring at each annual meeting of shareholders. Each director will hold office for the term to which he or she is elected and until his or her successor is duly elected and qualified. At each annual meeting of the Company’s shareholders, the successors to the class of directors whose term expires at such meeting will be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. The Company believes that the longer time required to elect a majority of the Board will help to ensure the continuity and stability of the Company’s management and policies.

The role of the Board is to provide general oversight of the Company’s business affairs and to exercise all of the Company’s powers except those reserved for shareholders. The responsibilities of the Board also include, among other things, the oversight of the Company’s investment activities, the quarterly valuation of the Company’s assets, oversight of the Company’s financing arrangements and corporate governance activities.

The Board is currently composed of four directors, three of whom are not “interested persons” (as defined in the 1940 Act) of the Company or KKR. We refer to these individuals as the “Independent Directors.” Section 2(a)(19) of the 1940 Act defines an “interested person” to include, among other things, any person who has, or within the last two years has had, a material business or professional relationship with the Company. We refer to the members of the Board that are not Independent Directors as the “Interested Directors.” Based upon information requested from each director concerning his or her background, employment and affiliations, the Board has affirmatively determined that none of the Independent Directors has, or within the last two years has had, a material business or professional relationship with the Company or KKR.

In considering each director and the composition of the Board as a whole, the Board utilizes a diverse group of experiences, characteristics, attributes and skills that the Board believes enables a director to make a significant contribution to the Board, the Company and its shareholders. These experiences, characteristics, attributes and skills, which are more fully described below, include, but are not limited to, management experience, independence, financial expertise and experience serving as a director of other entities. The Board may also consider such other experiences, characteristics, attributes and skills as it deems appropriate, given the then-current needs of the Board and the Company. Although the Board does not have any formal policy regarding the amount of diversity needed on the Board, diversity is one of the factors considered by the Board in assessing the composition of the Board.

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Interested Director

Todd C. Builione, (43), has served as an Interested Director since March 2017. Mr. Builione joined KKR & Co. in 2013 and is a Member of KKR & Co. and President of KKR Credit & Capital Markets. Mr. Builione also serves on the KKR Global Risk Committee. Prior to joining KKR & Co., Mr. Builione served as President of Highbridge Capital Management, CEO of Highbridge’s Hedge Fund business and a member of the Investment and Risk Committees. Mr. Builione began his career at the Goldman Sachs Group, where he was predominantly focused on capital markets and mergers and acquisitions for financial institutions. He received a B.S., summa cum laude, Merrill Presidential Scholar, from Cornell University and a J.D., cum laude, from Harvard Law School. Mr. Builione serves on the Board of Directors of Marshall Wace, a liquid alternatives provider which formed a strategic partnership with KKR & Co. in 2015. Mr. Builione also serves on the Board of Directors of Harlem RBI (a community-based youth development organization located in East Harlem, New York), on the Advisory Council of Cornell University’s Dyson School of Applied Economics and Management, and on the Board of Directors of the Pingry School.

Mr. Builione was selected as an Interested Director because of his prior experience and familiarity with the markets we primarily target to invest in. Equally significant is his knowledge and prior experience in the management of large businesses in the areas we operate in, and portfolio risk management and analytics, both of which we believe are key qualifications for providing sound direction and leadership.

Independent Directors

Frederick Arnold, (63), has served as an Independent Director since 2011. In addition, Mr. Arnold served as an independent trustee for Corporate Capital Trust II from June 2015 to May 2016. Mr. Arnold serves as a member of the post-emergence board of directors of Lehman Brothers Holdings Inc., a member of the board of directors of Lehman Commercial Paper Inc. and a member of the board of directors of Syncora Holdings, Ltd. Mr. Arnold has held a series of senior financial positions, and most recently served as chief financial officer of Convergex Group, LLC from July 2015 until May 2017. Previously Mr. Arnold served as executive vice president, chief financial officer and a member of the executive committee of Capmark Financial Group, Inc. from September 2009 to January 2011. He also served as executive vice president of finance for Masonite Corporation, a manufacturing company, from February 2006 to September 2007. While at Willis Group from 2000 to 2003, Mr. Arnold served as chief financial and administrative officer of Willis North America, as group chief administrative officer of Willis Group Holdings Ltd. and as executive vice president of strategic development for Willis Group Holdings Ltd. He also served as a member of the Willis Group executive committee while holding the latter two positions. Prior to these roles, Mr. Arnold spent 20 years as an investment banker primarily at Lehman Brothers and Smith Barney, where he served as managing director and head of European corporate finance. During this time, his practice focused on originating and executing mergers and acquisitions and equity financings across a wide variety of industries and geographies. He also provides pro-bono transactional advice to the New York City Investment Partnership. Mr. Arnold received a J.D. from Yale University, M.A. from Oxford University and undergraduate degree, summa cum laude, from Amherst College.

Mr. Arnold was selected as one of our three Independent Directors because of his extensive leadership experience and financial expertise having been an international investment banker and chief financial officer.

Laurie Simon Hodrick, (55), has served as an Independent Director since April 2017. Ms. Hodrick is the A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business at Columbia Business School and currently serves as a Visiting Professor of Law and Rock Center for Corporate Governance Fellow at Stanford Law School and a Visiting Fellow at Stanford University’s Hoover Institution. Ms. Hodrick previously served as a Managing Director and Global Head of Alternative Investment Strategies at Deutsche Bank. Ms. Hodrick previously served as an Independent Director/Trustee on the Board for Merrill Lynch Investment Managers and served as a consultant to numerous companies. She received a B.A., summa cum laude, in Economics from Duke University and a Ph.D. in Economics from Stanford University.

Ms. Hodrick was selected as a director because of her 30 years of experience and expertise in valuation, asset management, mergers and acquisitions, capital markets, and liquidity and risk management.

James H. Kropp, (69), has served as an Independent Director since 2011. In addition, Mr. Kropp has served as an independent trustee for Corporate Capital Trust II since 2015. Mr. Kropp currently serves as Chief Investment Officer of SLKW Investments LLC, successor to i3 Funds, LLC, a position he has held since 2008. He is also Chief Financial Officer of Microproperties LLC, where he has served in this capacity since 2011. He was the interim Chief Financial Officer of TaxEase LLC, a property tax lender and tax lien investor from 2010 to February 2012. Since 1998, Mr. Kropp has been a director, Chairman of the Compensation Committee and Member of the Nominating/Corporate Governance committee of PS Business Parks, Inc., a public real estate investment trust whose shares are listed on the New York Stock Exchange. Mr. Kropp became an Independent Trustee of NYSE-listed American Homes 4 Rent and Chairman of its Audit Committee at its founding in November 2012. Mr. Kropp received a B.B.A. Finance from St. Francis College and completed the MBA/CPA preparation

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program from New York University. Mr. Kropp has, in the past, been licensed to serve in a variety of supervisory positions (including financial, options and compliance principal) by the National Association of Securities Dealers. He is a member of the American Institute of CPAs.

Mr. Kropp was selected as one of our three Independent Directors because of his prior experience on several investment fund committees. We believe Mr. Kropp’s direct experience with investments as a portfolio manager and registered investment adviser is valuable to the Board. He also has accounting, auditing and finance expertise which, we believe, is beneficial in providing leadership on the Audit Committee.

The following table sets forth certain information regarding the Interested Directors and Independent Directors. Unless otherwise noted, the address for each director is c/o KKR 555 California Street, 50th Floor, San Francisco CA 94104. In this annual report on Form 10-K, the term “Fund Complex” means the Company and Corporate Capital Trust II, a business development company sub-advised by KKR.



Name, Address and Age of Director	Position(s) Held with Company	Term of Office Length of Time Served	Principal Occupation Past Five Years	Number of Companies in Fund Complex Overseen by Director	Other Directorships Held by Director During Past Five Years
Interested Director
Todd C. Builione, 43	Director (Class 3) and Chief Executive Officer	Appointed March 2017	President of KKR Credit & Capital Markets, Sept. 2013-present; member of Global Risk Committee, Sept. 2013-present; President of Highbridge Capital Management, Mar. 2005-Sept. 2013	Two	Director, Marshall Wace
Independent Directors
Frederick Arnold, 63	Director (Class 2) and Chairman of the Board	Appointed January 2011	Chief Financial Officer, Convergex Group, LLC, July 2015-May 2017	One	Director, Lehman Brothers Holdings Inc.; Director, Lehman Commercial Paper Inc.; Director, Syncora Holdings Ltd.; Former Director, CIFC Corp.
Laurie Simon Hodrick, 55	Director (Class 1)	Appointed April 2017	A. Barton Hepburn Professor Emerita of Economics in the Faculty of Business, Columbia Business School (since 2018); Visiting Professor of Law and Rock Center for Corporate Governance Fellow, Stanford Law School (since 2015); Visiting Fellow, Hoover Institution, Stanford University (since 2015); Sole Member, ReidCourt LLC (since 2008); A. Barton Hepburn Professor of Economics in the Faculty of Business, Columbia Business School (1996-2017)	One	Director, Member of the Audit Committee, Member of the Investment Committee, Prudential Retail Mutual Funds

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Name, Address and Age of Director	Position(s) Held with Company	Term of Office Length of Time Served	Principal Occupation Past Five Years	Number of Companies in Fund Complex Overseen by Director	Other Directorships Held by Director During Past Five Years
James H. Kropp, 69	Director (Class 3)	Appointed January 2011	Chief Investment Officer, SLKW Investments LLC, successor to i3 Funds, LLC, Dec. 2008-present; Chief Financial Officer, Microproperties LLC, 2011-present	Two	Director, Chairman of the Compensation Committee, Member of the Nominating/Corporate Governance Committee, PS Business Parks, Inc., Glendale CA; Independent Trustee, Chairman of the Audit Committee, Member of the Governance Committee, and Member of the Independent Trustee Committee, American Homes 4 Rent; Independent Trustee, Corporate Capital Trust II

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The Company’s Executive Officers

The following table sets forth certain information regarding the Company’s executive officers. Unless otherwise noted, the address for each executive officer is c/o KKR 555 California Street, 50th Floor, San Francisco CA 94104:



Name, Address and Age of Officer	Position(s) Held with Company	Term of Office Length of Time Served	Principal Occupation Past Five Years	Number of Companies in Fund Complex Overseen by Officer	Other Directorships Held by Officer
Todd C. Builione, 43	Director (Class 3) and Chief Executive Officer	Appointed November 2017	President of KKR Credit & Capital Markets, Sept. 2013-present; member of Global Risk Committee, Sept. 2013-present; President of Highbridge Capital Management, Mar. 2005-Sept. 2013	Two	Director, Marshall Wace
Daniel Pietrzak, 42	Chief Investment Officer	Appointed November 2017	Member KKR Credit, member of Global Private Credit Investment Committee, Europe Direct Lending Committee and KKR Credit Portfolio Management Committee Jan 2016-Present. Managing Director and Co-head of Deutsche Bank Structured Finance April 2006- Dec. 2015	Two	Director, Home Partners of America, Director Toorak Capital Partners, Director Oodle, Director Pillarstone, Director Pepper
Ryan L.G. Wilson,40	Chief Operating Officer	Appointed November 2017	Director, KKR Credit, 2006- Present	Two
Thomas N. Murphy, 51	Chief Financial Officer	Appointed November 2017	Director, KKR Credit, 2009- Present	Two
Philip Davidson, 34	General Counsel and Secretary	Appointed November 2017	Director, KKR Credit, 2011- Present	Two
Annette O'Donnell Butner, 49	Chief Compliance Officer	Appointed November 2017	Managing Director, Chief Compliance Officer KKR Credit. 2009-Present	Two

Director Compensation

During the fiscal year ended December 31, 2017, the Independent Directors were entitled to receive annual compensation of $165,000. For the fiscal year ending December 31, 2018, the Independent Directors will be entitled to receive annual compensation of $175,000. Each Independent Director serves as chairman of one of the Board committees. During the fiscal year ending December 31, 2018, the chairman of the Audit Committee will receive compensation for his services as chair to the Audit Committee in the amount of $10,000. For the fiscal year ended December 31, 2017, there was no such compensation due or payable to the chairman of the Audit Committee for his services as chair. There are no pensions or retirement benefits to the Independent Directors at this time.

The Company also reimburses each of the Independent Directors for reasonable out-of-pocket expenses incurred in connection with attending Board and committee meetings. The table below sets forth the compensation received by each director from the Company for the fiscal year ended December 31, 2017. Other than as described below, none of the directors received compensation from the Fund Complex.

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Name of Director	Fees Earned or Paid in Cash		Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and Non-Qualified Deferred Compensation Earnings	All Other Compensation	Total
Interested Directors:
Thomas K. Sittema ⁽¹⁾	—		—	—	—	—	—	—
Erik A. Falk⁽²⁾	—		—	—	—	—	—	—
Todd C. Builione	—		—	—	—	—	—	—
Independent Directors:
Frederick Arnold	$	165,000	—	—	—	—	—	$	165,000
Laurie Simon Hodrick	117,857							117,857
James H. Kropp⁽⁴⁾	165,000		—	—	—	—	—	165,000
Kenneth C. Wright⁽³⁾	82,500		—	—	—	—	—	82,500

⁽¹⁾Mr. Sittema resigned from the Board effective on November 14, 2017.
⁽²⁾Mr. Falk resigned from the Board effective on March 20, 2017.
⁽³⁾Mr. Wright resigned from the Board effective on April 28, 2017.
⁽⁴⁾Mr. Kropp also received $65,000 in 2017 for serving as an independent trustee of Corporate Capital Trust II.

The table below shows the dollar range of equity securities of the Company that were beneficially owned by each director as of the close of business on March 12, 2018 stated as one of the following dollar ranges: None; $1-$10,000; $10,001-$50,000; $50,001-$100,000; or over $100,000. Other than as described below, none of the directors beneficially owned equity securities of other companies in the Fund Complex.



Name of Director		Dollar Range of Equity Securities Beneficially Owned⁽¹⁾
Interested Directors:
Todd C. Builione		Over $100,000
Independent Directors:
Frederick Arnold		$50,001-$100,000
Laurie Simon Hodrick		Over $100,000
James H. Kropp⁽²⁾		Over $100,000

⁽¹⁾ Beneficial ownership determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.” The dollar range of equity securities beneficially owned by directors is based on the Company’s net asset value of $19.55 per share as of December 31, 2017.

⁽²⁾ Mr. Kropp also beneficially owned over $100,000 of equity securities of Corporate Capital Trust II.

Risk Oversight and Board Structure

Board Leadership Structure

The Company’s business and affairs are managed under the direction of the Board. Among other things, the Board sets broad policies for the Company and approves the appointment of the Company’s investment advisers, administrator and officers. The role of the Board, and of any individual director, is one of oversight and not of management of the Company’s day-to-day affairs.

Under the Bylaws, the Board may designate one of the Company’s directors as chair to preside over meetings of the Board and meetings of shareholders, and to perform such other duties as may be assigned to him or her by the Board. The Company believes that the Board’s flexibility to determine its chair and reorganize its leadership structure from time to time is in the best interest of the Company and its shareholders.

Presently, Mr. Builione is an “interested person” by virtue of being the Company’s chief executive officer and his employment with KKR. The Company believes that this creates a firm link between management and the Board and provides unified leadership for carrying out the Company’s strategic initiatives and business plans. The Board has determined that the compositions of the Audit Committee, Nominating and Governance Committee and the Independent Director Committee are

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appropriate means to address any potential conflicts of interest that may arise from the chair’s status as an interested person of the Company. The Board, which reviews its leadership structure periodically as part of its annual self-assessment process, further believes that its structure is presently appropriate to enable it to exercise its oversight of the Company.

The Independent Directors play an active role on the Board. The Independent Directors compose a majority of the Board and are closely involved in all material deliberations related to the Company. The Board believes that, with these practices, the Independent Directors have an equal involvement in the actions and oversight role of the Board and equal accountability to the Company and its shareholders. The Independent Directors are expected to meet separately (1) as part of each regular Board meeting and (2) with the Company’s chief compliance officer, as part of at least one Board meeting each year. The Independent Director Committee may hold additional meetings at the request of any Independent Director. As described under the heading “-Information about the Board and Executive Officers,” the Board also established the Special Committee, which met to discuss items of interest to a majority of the Independent Directors.

Board Role in Risk Oversight

The Board oversees the Company’s business and operations, including certain risk management functions. Risk management is a broad concept comprising many disparate elements (for example, investment risk, issuer and counterparty risk, compliance risk, operational risk, and business continuity risk). The Board implements its risk oversight function both as a whole and through its committees. In the course of providing oversight, the Board and its committees receive reports on the activities of the Company, as well as KKR, including reports regarding the Company’s investment portfolio and financial accounting and reporting. The Board also receives a quarterly report from the Company’s chief compliance officer, who reports on the Company’s compliance with the federal and state securities laws and the Company’s internal compliance policies and procedures as well as those of KKR, the Company’s administrator and the Company’s transfer agent. The Audit Committee’s meetings with the Company’s independent public accounting firm also contribute to its oversight of certain internal control risks. In addition, the Board meets periodically with KKR to receive reports regarding the Company’s operations, including reports on certain investment and operational risks, and the Independent Directors are encouraged to communicate directly with senior members of the Company’s management.

The Board believes that its role in risk oversight is appropriate. The Company believes that there are robust internal processes in place and a strong internal control environment to identify and manage risks. However, not all risks that may affect the Company can be identified or processes and controls developed to eliminate or mitigate their occurrence or effects, and some risks are beyond the control of the Company, KKR and the Company’s service providers.

Board Meetings and Attendance

The Board met 14 times during the fiscal year ended December 31, 2017, including ten special meetings and four regular quarterly meetings. Each director attended at least 75% of the aggregate of all meetings of the Board to which they were invited during the fiscal year ended December 31, 2017. Mr. Kropp and Mr. Arnold attended all meetings of the Board held during 2017 and Ms. Hodrick attended all meetings of the Board since her appointment in April 2017. Mr. Builione attended all meetings of the Board held in 2017 other than one meeting. The Company does not have a formal policy regarding director attendance at an annual meeting of shareholders.

Committees of the Board

In addition to serving on the Board, the Company’s directors also serve on one or more of the following committees that have been established by the Board to handle certain designated responsibilities. The Board has designated a chairman of each committee. The Board may establish additional committees, change the membership of any committee, fill all vacancies, and designate alternate members to replace any absent or disqualified member of any committee, or to dissolve any committee as it deems necessary and in the Company’s best interest.

Audit Committee. The Company’s Audit Committee consists of all of the Independent Directors, each of whom meets the independence standards established by the Securities and Exchange Commission, which we refer to as the “SEC,” for audit committees and is not an “interested person” for purposes of the 1940 Act. James H. Kropp serves as chairman of the Audit Committee. The Board has determined that each of James H. Kropp, Laurie Hodrick and Frederick Arnold is an “audit committee financial expert” as that term is defined under Item 407 of Regulation S-K of the Exchange Act. The Audit Committee operates pursuant to a written charter and meets periodically as necessary. A copy of the Audit Committee’s charter is available on the Company’s website at www.corporatecapitaltrust.com. The Audit Committee is responsible for selecting, engaging and discharging the Company’s independent accountants, reviewing the plans, scope and results of the audit engagement with the Company’s independent accountants, approving professional services provided by the Company’s independent accountants (including compensation therefor), reviewing the independence of the Company’s independent accountants, reviewing the adequacy of the Company’s internal controls over financial reporting and evaluating the process for

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determining the fair value of the Company’s Level 3 investments for which there is little, if any, market activity. The Audit Committee held 14 meetings during 2017. Each member of the Audit Committee who served on such committee during the 2017 fiscal year attended at least 75% of the meetings to which they were invited.

Nominating and Governance Committee. The Company’s Nominating and Governance Committee consists of all of the Independent Directors, each of whom meets the independence standards established by the SEC for governance committees and is not an “interested person” for purposes of the 1940 Act. Frederick Arnold serves as chairman of the Nominating and Governance Committee. The Nominating and Governance Committee operates pursuant to a written charter and meets periodically as necessary. A copy of the Nominating and Governance Committee’s charter is available on the Company’s website at www.corporatecapitaltrust.com. The Nominating and Governance Committee is responsible for selecting, researching, and nominating directors for election by the Company’s shareholders, selecting nominees to fill vacancies on the Board or a committee of the Board, developing and recommending to the Board a set of corporate governance principles and overseeing the evaluation of the Board and the Company’s management. The Nominating and Governance Committee will consider shareholders’ proposed nominations for directors. A stockholder who desires to recommend a nominee must submit a request in writing pursuant to the relevant provisions of the Company’s Bylaws. The Nominating and Governance Committee will consider nominees recommended in writing by a stockholder (other than stockholder recommendations of himself or herself) to serve as directors, provided that (1) such person is a stockholder of the Company at the time he, she or it recommends such nominee and is entitled to vote at the meeting of shareholders at which directors will be elected; and (2) the Nominating and Governance Committee will make the final determination as to the qualifications of the individual to be nominated. The Nominating and Governance Committee will evaluate each nominee recommended by a stockholder to serve as director in the same manner as it would evaluate potential nominees identified by the committee. The Nominating and Governance Committee held five meetings during 2017. Each member of the Nominating and Governance Committee who served on such committee during the 2017 fiscal year attended at least 75% of the meetings to which they were invited.

Special Committee. As described under the heading “-Information about the Board and Executive Officers,” the Board established the Special Committee in November 2016. The Special Committee was disbanded by the Board in November 2017. The Special Committee consisted of Mr. Kropp and Mr. Arnold and Ms. Hodrick after her appointment in April 2017. The Special Committee was established to review, authorize and approve certain special projects as directed by the Board from time to time, as well as review, authorize and approve certain investment transactions with affiliates, in lieu of the Independent Director Committee. The Special Committee held three meetings during 2017.

Independent Director Committee. The Company’s Independent Director Committee consists of all of the Independent Directors. Laurie Hodrick serves as chairperson of the Independent Director Committee. Time is allotted at each quarterly meeting of the Board for the Independent Directors to meet and discuss any issues that they deem necessary or appropriate. The Independent Directors may also choose to meet independent of Interested Directors and management during the course of other meetings or other times as they see fit. The Independent Director Committee held eight meetings during 2017. The majority of these meetings were for the Independent Directors to consider making certain findings for specific potential investments, including those required under the conditions of the SEC’s exemptive relief order that expanded the Company’s ability to co-invest with certain of the affiliates of the Advisers and attention to the consideration of certain of the Company's contractual arrangements under Section 15(c) of the 1940 Act. Each member of the Independent Director Committee who served on such committee during the 2017 fiscal year attended at least 75% of the meetings to which they were invited.

Communications Between Shareholders and the Board

The Board welcomes communications from the Company’s shareholders. Shareholders may send communications to the Board or to any particular director to the following address: KKR 555 California Street, 50th Floor, San Francisco CA 94104 , Attention: Philip Davidson, Secretary. Shareholders should indicate clearly the director or directors to whom the communication is being sent so that each communication may be forwarded directly to the appropriate director(s).

Code of Ethics

The Company has adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Persons subject to these codes may invest in securities for their personal investment accounts, including securities that may be purchased or held by the Company, so long as such investments are made in accordance with the code’s requirements. A copy of the Company’s code of ethics is available on its website at www.corporatecapitaltrust.com. You may also read and copy the Company’s code of ethics at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the Company’s code of ethics is available on the EDGAR Database on the SEC’s website at www.sec.gov. You may also obtain copies of the Company’s code of ethics, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov , or by writing the SEC’s Public Reference Section, 100

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F Street, NE, Washington, DC 20549. Item 406 of Regulation S-K requires the Company to disclose whether it has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company has adopted such a code and is in compliance with Item 406 of Regulation S-K.

Compensation Discussion and Analysis

As an externally managed business development company, the Company relies on the services of KKR as investment adviser under the New Investment Advisory Agreement. KKR also provides administrative services to the Company under a administrative services agreement. In connection with its services, KKR has agreed to provide the Company with personnel to serve as the Company’s appointed officers. The Company’s appointed officers (who, while associated with KKR, serve on behalf of the Company) consist of the Company’s chief executive officer, chief investment officer, chief financial officer, chief operating officer, general counsel, and chief compliance officer. The Company does not pay any compensation to any of the Company’s officers.

Item 11. Executive Compensation.

Compensation Committee Report

As described herein, the Company’s executive officers are not compensated by the Company. Accordingly, the Company does not have a compensation committee of the Board. The Nominating and Governance Committee performs, to the extent that may be required, any duties typically delegated to a compensation committee of a board of directors. The Nominating and Governance Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, has recommended to the Board that the Compensation Discussion and Analysis be included in this Report.

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

The following table presents certain information as of March 9, 2018, with respect to the beneficial ownership of the shares of common stock of the Company, which we refer to as the “Shares,” by (1) each director, (2) each executive officer and (3) all of the Company’s directors and executive officers as a group. Based upon information furnished by the Company’s transfer agent and other information available to the Company, there are no persons known to the Company to beneficially own 5% or more of the issued and outstanding Shares. As of March 9, 2018, there were 127,130,589 issued and outstanding Shares.

Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act and includes voting or investment power with respect to the Shares. There are no Shares subject to options that are currently exercisable or exercisable within 60 days of this Amendment.

Unless otherwise indicated, to the Company’s knowledge, all persons named in the table below have sole voting power and sole investment power with respect to the Shares indicated as beneficially owned. In addition, unless otherwise indicated, the address for each person named below is 555 California Street, 50^th Floor, San Francisco, California 94104.



Name and Address of Beneficial Owner	Number of Shares Beneficially Owned	Percentage
Interested Directors:
Todd C. Builione	15,000	*
Independent Directors:
Frederick Arnold	5,000	*
Laurie Simon Hodrick	11,000	*
James H. Kropp	5,905	*
Executive Officers:
Todd C. Builione	15,000	*
Daniel Pietrzak	15,000	*
Ryan L.G. Wilson	6,000	*
Thomas Murphy	—	*
Philip Davidson	3,000	*
Annette O'Donnell Butner	—	*
Directors and Executive Officers as a group (9 persons)	60,905

* Less than one percent.

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

The Company is subject to certain regulatory requirements that restrict the Company’s ability to engage in certain related party transactions. The Company has policies and procedures in place for the review, approval and monitoring of transactions involving the Company and certain persons related to it, to ensure that it does not enter into any prohibited transactions. For example, the Bylaws provide that, among other things, the Company may not engage in certain transactions with KKR or a director of the Company or an affiliate thereof unless (a) such transaction complies with all applicable law and (b) a majority of the Company’s directors (including a majority of the Independent Directors) not otherwise interested in such transaction approve such transaction as fair and reasonable to the Company and on terms and conditions not less favorable to the Company than those available from non-affiliated third parties. In addition, the Independent Director Committee evaluates transactions between the Company and its affiliates that are subject to restrictions under Section 57 of the 1940 Act. The following is a description of transactions since the beginning of the Company’s last fiscal year and any currently proposed transaction in which the amount exceeds $120,000 and in which any related person had or will have a direct or indirect material interest.

Through November 2017, the Company was externally managed by the Advisers, which were responsible for sourcing potential investments, analyzing and conducting due diligence on prospective investment opportunities, structuring investments and ongoing monitoring of the Company’s investment portfolio. CNL also provided the administrative services necessary for the Company to operate. On November 14, 2017, shares of the Company’s common stock commenced trading on the New York Stock Exchange with the ticker symbol “CCT” (the “Listing”). Concurrent with the Listing, KKR acquired certain of CNL’s assets primarily used in its role as investment adviser to the Company, and in connection with that transaction, KKR became the sole investment adviser and administrator of the Company.

Investment Advisory Services

The Company has entered into the Advisory Agreement with KKR, pursuant to which KKR provides investment advisory services to the Company. The Company pays KKR a management fee under the Advisory Agreement consisting of a base management fee and a performance-based incentive fee. The Company also reimburses KKR for various expenses they incur in providing these services and performing their obligations under the agreements. Prior to the Listing, the Company was a party to the Former Investment Advisory Agreement with CNL for the overall management of the Company’s investment activities.

Administrative Services Agreements

The Company has entered into an administrative services agreement with KKR, pursuant to which KKR performs or oversees the performance of various administrative services that it requires, as well as personnel and facilities necessary for the Company’s business and these services. Prior to the Listing, the Company was a party to an administrative services agreement with CNL whereby CNL performed, and oversaw the performance of, various administrative services on behalf of the Company. For providing these services, facilities and personnel, the Company reimburses the administrator for administrative expenses it incurs in performing its obligations. However, such reimbursements are made at an amount equal to the lower of the administrator's actual costs or the amount that the Company would be required to pay for comparable administrative services in the same geographic location. The Company does not reimburse the administrator for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of the administrator. Effective in 2015, the Company no longer reimburses the administrator for certain personnel expenses for internal legal counsel and the Company’s chief compliance officer and chief financial officer, as described in the Administrative Services Agreement. The administrative service fees paid to the administrator under the administrative services agreement for the year ended December 31, 2017 are set forth in the table below.

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Payments to Related Parties

Related party fees, expenses and reimbursement of expenses incurred by the Company for the year ended December 31, 2017 is summarized below (in thousands):



Related Party	Source Agreement & Description	2017
CNL and KKR	Former Investment Advisory Agreement: Base management fees (investment advisory fees)	72,773
KKR	New Investment Advisory Agreement: Base management fees (investment advisory fees)	7,903
CNL and KKR	Former Investment Advisory Agreement: Subordinated incentive fee on income⁽¹⁾	9,780
KKR	New Investment Advisory Agreement: Subordinated incentive fee on income⁽¹⁾	6,359
KKR	New Investment Advisory Agreement: Investment expenses reimbursement⁽²⁾	3,491
CNL	Former Administrative Services Agreement: Administrative and compliance services	1,963
KKR	New Administrative Services Agreement: Administrative and compliance services	196


⁽¹⁾	Subordinated incentive fees on income are included in performance-based incentive fees in the consolidated statements of operations. During the year ended December 31, 2017, $12.63 million of subordinated incentive fees on income were paid to the Advisers. As of December 31, 2017 a subordinated incentive fee on income of $8.42 million was payable to the Advisers.

⁽²⁾

Includes fees related to transactional expenses related to prospective investments, including fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. Broken deal costs amounted to $0.71 million for the year ended December 31, 2017. Prior to November 14, 2017, these expenses were reimbursed pursuant to the Sub-Advisory Agreement.

Structuring Fees

KKR is obligated to remit to the Company any earned capital structuring fees based on the Company’s pro-rata portion of a co-investment transaction or originated investment in which the Company participates. As a result, the Company earned capital structuring fees of $10.24 million during the year ended December 31, 2017.

Indemnification

The New Investment Advisory Agreement contains, and the Former Investment Advisory Agreement and Sub-Advisory Agreement contained, indemnification provisions in favor of the Advisers, their directors, officers, persons associated with the Advisers, and their affiliates. In addition, the Company's article of incorporation provides certain indemnifications to the Company’s officers, directors, agents, and certain other persons. As of December 31, 2017, management believed that the risk of incurring of any losses for such indemnification was remote.

Directors and Officers

In addition to the foregoing, the disclosure under item 10 of this Annual Report on Form 10-K is incorporated by reference herein.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent shareholders also are required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.

Based solely upon a review of the copies of such statements furnished to the Company, and on written representations from the reporting persons, the Company believes that all Section 16(a) filing requirements applicable to the Company’s directors and officers were timely met during 2017.

Item 14. Principal Accounting Fees and Services.

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Fees to Auditors

The following table shows the audit fees and non-audit related fees accrued or paid to Deloitte & Touche LLP for professional services performed for the Company’s fiscal years ended December 31, 2017 and 2016.



Fiscal Year/Period	Audit Fees		Audit Related Fees⁽¹⁾		Tax Fees ⁽²⁾		All Other Fees ⁽³⁾
2017	$	795,000	$	81,780	$	60,442	$	—
2016	$	650,000	$	46,500	$	88,673	$	—

⁽¹⁾ “Audit-Related Fees” are those fees billed to the Company relating to audit services provided by Deloitte & Touche LLP, including those in connection with the provision of comfort letters submitted by Deloitte & Touche LLP related to the Company’s registration statements and broker-dealer activity pursuant to the Company’s offerings of Shares.

⁽²⁾ “Tax Fees” are those fees billed to the Company in connection with tax consulting services performed by Deloitte & Touche LLP, including primarily the review of the Company’s income tax returns.

⁽³⁾ “All Other Fees” are those fees billed to the Company in connection with permitted non-audit services performed by Deloitte & Touche LLP.

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accounting Firm

The Company maintains an auditor independence policy that, among other things, mandates that the Audit Committee review, negotiate and approve in advance the scope of work, any related engagement letter and the fees to be charged by the independent registered public accounting firm for audit services and permissible non-audit services for the Company, and for permissible non-audit services for the Company’s investment advisers and any affiliates thereof that provide services to the Company, if such non-audit services have a direct impact on the operations or financial reporting of the Company. All of the audit and non-audit services described above for which fees were incurred by the Company for the fiscal years ended December 31, 2017 and 2016, were pre-approved by the Audit Committee in accordance with its pre-approval policy.

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PART IV

Item 15. Exhibits and Financial Statement Schedules




a.	The following financial statements are filed as part of this report in Part II, Item 8:
		Page
	Report of Independent Registered Certified Public Accounting Firm	F-1
	Consolidated Statements of Assets and Liabilities	F-2
	Consolidated Statements of Operations	F-3
	Consolidated Statements of Changes in Net Assets	F-5
	Consolidated Statements of Cash Flows	F-6
	Consolidated Schedules of Investments	F-7
	Notes to Consolidated Financial Statements	F-43

b.	Except as described below, no financial statement schedules are being filed because the required information is not applicable or is presented in the consolidated financial statements or notes.

	At December 31, 2017, the Company’s investment in the Hilding Anders exceeded the 10% and 20% thresholds in at least one of the tests under Rule 3-09 and Rule 4-08(g) of Regulation S-X, and as such the audited financial statements of Hilding Anders are required to be filed as financial statement schedules herein within six months of Hilding Anders' fiscal year end, which is December 31. Accordingly, the financial statements of Hilding Anders will be filed via an amendment to this Annual Report on Form 10-K on or before June 30, 2018.

c.	The following exhibits are filed or incorporated as part of this report.

3.1	Third Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 14, 2017).
3.2	Third Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on November 14, 2017).
4.1	Form of Indenture (incorporated by reference to Exhibit 2(d)(2) of the Company's registration statement on Form N-2 (File No. 333-201499) filed on January 14, 2015).
4.2	Amended and Restated Distribution Reinvestment Plan, effective as of November 1, 2016 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 12, 2016).
4.3	Second Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 9, 2017).
4.4	Indenture, dated June 28, 2017, by and between The Bank of New York Mellon Trust Company, N.A. and the Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 5, 2017).
10.1	Form of Participating Broker Agreement (incorporated by reference to Exhibit 2(h)(2) filed with Pre-Effective Amendment No. 1 to the Company’s registration statement on Form N-2 (File No. 333-189544) filed on October 16, 2013).
10.2	Form of Intellectual Property License Agreement by and between the Registrant and CNL Intellectual Properties, Inc (incorporated by reference to Exhibit 2(k)(3) filed with Pre-Effective Amendment No. 2 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on February 18, 2011).
10.3	Administrative Services Agreement by and between the Registrant and CNL Fund Advisors Company (incorporated by reference to Exhibit 2(k)(2) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011).
10.4	Custodian Agreement (incorporated by reference to Exhibit 2(j) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011).
10.5	Investment Advisory Agreement by and between the Registrant and CNL Fund Advisors Company (incorporated by reference to Exhibit 2(g)(1) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011).

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10.6	Sub-Advisory Agreement by and among the Registrant, CNL Fund Advisors Company and KKR Asset Management LLC (incorporated by reference to Exhibit 2(g)(2) filed with Pre-Effective Amendment No. 3 to the Company’s registration statement on Form N-2 (File No. 333-167730) filed on March 29, 2011).
10.7	Limited Liability Company Agreement of CCT Funding LLC (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011).
10.8	Credit Agreement between CCT Funding LLC and Deutsche Bank AG, New York Branch (incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011). (confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC).
10.9	Custodial Agreement among the Registrant, CCT Funding LLC, Deutsche Bank AG, New York Branch and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011) (confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC).
10.10	Security Agreement between CCT Funding LLC and Deutsche Bank AG, New York Branch (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011).
10.11	Investment Management Agreement between the Registrant and CCT Funding LLC (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q filed on November 10, 2011).
10.12	First Amendment to Credit Agreement between CCT Funding LLC and Deutsche Bank AG, New York Branch (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on March 16, 2012) (confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC).
10.13	Amended and Restated Expense Support and Conditional Reimbursement Agreement by and among the Registrant, CNL Fund Advisors Company and KKR Asset Management LLC (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on March 16, 2012).
10.14	Amendment No. 1 to Investment Advisory Agreement by and between the Registrant and CNL Fund Advisors Company (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed on March 16, 2012).
10.15	Second Amendment to Credit Agreement between CCT Funding LLC and Deutsche Bank AG, New York Branch (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 24, 2012) (confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC).
10.16	ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, each dated as of November 15, 2012, by and between Halifax Funding LLC and The Bank of Nova Scotia (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 21, 2012).
10.17	Confirmation Letter Agreement, dated as of November 15, 2012, by and between Halifax Funding LLC and The Bank of Nova Scotia (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 21, 2012).
10.18	Amendment to Amended and Restated Expense Support and Conditional Reimbursement Agreement by and among the Registrant, CNL Fund Advisors Company and KKR Asset Management LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 7, 2013).
10.19	Third Amendment to Credit Agreement between CCT Funding LLC, the lenders referred to therein and Deutsche Bank AG, New York Branch (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 14, 2013) (confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC).
10.20	U.S. PB Agreement, dated as of June 4, 2013, by and between the Registrant and BNP Paribas Prime Brokerage, Inc (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 18, 2013).
10.21	Special Custody and Pledge Agreement, dated as of June 4, 2013, by and between the Registrant, BNP Paribas Prime Brokerage, Inc. and State Street Bank and Trust Company (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 18, 2013).
10.22	Control Agreement, dated as of July 22, 2013, by and among Halifax Funding LLC, The Bank of Nova Scotia, and State Street Bank and Trust Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 26, 2013).
10.23	Amending Agreement, dated as of July 22, 2013, by and among the Registrant, Halifax Funding LLC, The Bank of Nova Scotia, and The Bank of Nova Scotia Trust Company of New York (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 26, 2013).
10.24	Amended and Restated Committed Facility Agreement, dated as of August 29, 2013, by and between Paris Funding LLC and BNP Paribas Prime Brokerage, Inc (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 5, 2013).

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10.25	Amended and Restated Senior Secured Revolving Credit Agreement, dated as of April 15, 2016, among the Registrant, as borrower, the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and ING Capital LLC as syndication agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 18, 2016).
10.26	Guarantee and Security Agreement, dated as of September 4, 2013, and entered into among the Registrant, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent, and the other parties thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 10, 2013).
10.27	Control Agreement, dated as of September 4, 2013, among the Registrant, as borrower, JPMorgan Chase Bank, N.A., as collateral agent, and State Street Bank and Trust Company, as custodian (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 10, 2013).
10.28	Amending Agreement, dated as of November 12, 2013, by and between Halifax Funding LLC and The Bank of Nova Scotia (incorporated by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2013).
10.29	Fourth Amendment to Credit Agreement between CCT Funding LLC, the lenders referred to therein and Deutsche Bank AG, New York Branch (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed on January 31, 2014) (confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC).
10.30	Commitment Increase Agreement, dated as of March 31, 2014, among the Registrant, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and issuing bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 10, 2014).
10.31	Selected Dealer Agreement among the Registrant, CNL Securities Corp., CNL Fund Advisors Company, CNL Financial Group, LLC, KKR Asset Management LLC and Ameriprise Financial Services, Inc. (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K filed on March 20, 2014) (confidential portions of this exhibit have been omitted pursuant to a request for confidential treatment and filed separately with the SEC).
10.32	Omnibus Amendment to the Senior Secured Term Loan Agreement, dated as of May 19, 2014, among the Registrant, as borrower, the subsidiary guarantor party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 22, 2014).
10.33	Senior Secured Term Loan Agreement, dated as of May 20, 2014, among the Registrant, as borrower, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 22, 2014).
10.34	First Amendment Agreement, dated as of November 6, 2014, to the Amended and Restated Committed Facility Agreement dated August 29, 2013, between BNP Paribas Prime Brokerage, Inc. and Paris Funding LLC. (incorporated by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q filed on November 13, 2014).
10.35	Commitment Increase Agreement, dated as of November 24, 2014, by and among the Registrant, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and issuing bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 25, 2014).
10.36	Fifth Amendment to Credit Agreement between CCT Funding LLC, the lenders referred to therein and Deutsche Bank AG, New York Branch, as administrative agent (incorporated by reference to Exhibit 10.39 to the Company’s Current Report on Form 8-K filed on January 9, 2015).
10.37	Sixth Amendment to Credit Agreement, dated September 11, 2015, by and among CCT Funding LLC, Deutsche Bank AG, New York Branch, as administrative agent, and the lenders party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 16, 2015.)
10.38	Loan and Servicing Agreement, dated as of December 2, 2015, among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc. and Sumitomo Mitsui Banking Corporation (incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed on March 21, 2016).
10.39	Custody Agreement, dated as of December 2, 2015, among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc., Sumitomo Mitsui Banking Corporation and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K filed on March 21, 2016).
10.40	Securities Account Control Agreement, dated as of December 2, 2015, among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc., Sumitomo Mitsui Banking Corporation and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K filed on March 21, 2016).

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10.41	Loan and Security Agreement, dated as of November 29, 2016, among CCT SE I LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, the Registrant, as portfolio manager, the lenders party thereto and the collateral agent, collateral administrator and intermediary party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 2, 2016).
10.42	Amendment to Loan and Security Agreement, dated September 1, 2017, by and among CCT New York Funding LLC, Corporate Capital Trust, Inc., State Street Bank and Trust Company and JP Morgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017).
10.43	First Amendment dated as of September 20, 2017, by and among Corporate Capital Trust, Inc., the lenders parties thereto, and JP Morgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017.)
10.44	First Amendment to Loan and Servicing Agreement, dated September 20, 2017, by an among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc. and Sumitomo Mitsui Banking Corporation (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report of Form 10-Q filed on November 9, 2017).
10.45	First Amendment to Loan and Servicing Agreement, dated as of October 6, 2017, by and among Corporate Capital Trust, Inc., the lenders party thereto, and JP Morgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2017.)
10.46	Investment Advisory Agreement between the Registrant and KKR Credt Advisors (US) LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 14, 2017).
10.47	Second Amendment to Loan and Servicing Agreement by and among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc. and Sumitomo Mitsui Banking Corporation. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 28, 2017.)
10.48	Administrative Services Agreement between the Registrant and KKR Credit Advisors (US) LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 14, 2017).
14.1	Amended and Restated Code of Ethics (Filed herewith)
21.1	Subsidiaries of the Registrant (Filed herewith)
31.1	Certification of Chief Executive Officer (Filed herewith)
31.2	Certification of the Chief Financial Officer (Filed herewith)
32.1	Certification of the Chief Executive Officer and Chief Financial Officer (Filed herewith)


Item 16.	Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 14th day of March 2018.




	CORPORATE CAPITAL TRUST, INC.

	By:	/s/ Todd C. Builione
		TODD C. BUILLIONE
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Thomas N. Murphy
		THOMAS N. MURPHY
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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



Signature	Title	Date

/s/ Todd C. Builione	Director and Chief Executive Officer (Principal Executive Officer)	March 14, 2018
Todd C. Builione

/s/ Frederick Arnold	Independent Director and Chairman of the Board	March 14, 2018
Frederick Arnold

/s/ James H. Kropp	Independent Director	March 14, 2018
James H. Kropp

/s/ Laurie Simon Hodrick	Independent Director	March 14, 2018
Laurie Simon Hodrick

/s/ Thomas N. Murphy	Chief Financial Officer (Principal Financial and Accounting Officer)	March 14, 2018
Thomas N. Murphy

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and Board of Directors of

Corporate Capital Trust, Inc.

San Francisco, California

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying consolidated statements of assets and liabilities of Corporate Capital Trust, Inc. and subsidiaries (the “Company”), including the consolidated schedules of investments, as of December 31, 2017 and 2016, and the related consolidated statements of operations, cash flows, and changes in net assets for each of the three years in the period ended December 31, 2017, the consolidated financial highlights for each of the five years in the period ended December 31, 2017, and the related notes. In our opinion, the consolidated financial statements and consolidated financial highlights present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2017, and the financial highlights for each of the five years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2017 and 2016, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

San Francisco, California

March 14, 2018

We have served as the Company’s auditor since 2010.

F-1

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Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share amounts)



	December 31, 2017			December 31, 2016
Assets
Investments at fair value:
Non-controlled, non-affiliated investments (amortized cost of $3,319,093 and $3,797,345, respectively)—including $- and $345,774, respectively, of investments pledged to creditors (Note 10)	$	3,225,827		$	3,622,442
Non-controlled, affiliated investments (amortized cost of $298,489 and $187,703, respectively)	242,985			142,855
Controlled, affiliated investments (amortized cost of $540,609 and $341,875, respectively)	500,285			259,996
Total investments, at fair value (amortized cost of $4,158,191 and $4,326,923, respectively)	3,969,097			4,025,293
Cash	127,186			127,031
Cash denominated in foreign currency (cost of $3,724 and $5,314, respectively)	3,778			5,229
Restricted cash	51,181			14,353
Collateral on deposit with custodian	—			95,000
Dividends and interest receivable	42,517			53,484
Receivable for investments sold	2,320			49,324
Principal receivable	3,389			2,942
Unrealized appreciation on swap contracts	3,763			39,007
Unrealized appreciation on foreign currency forward contracts	1,194			3,504
Receivable from advisers	2,802			2,040
Deferred offering expense	—			402
Other assets	14,273			13,087
Total assets	4,221,500			4,430,696
Liabilities
Revolving credit facilities	965,000			1,219,000
Term loan payable, net	382,768			385,203
Unsecured notes payable, net	240,612			—
Repurchase agreement payable	—			23,454
Payable for investments purchased	47,097			22,205
Unrealized depreciation on swap contracts	29,604			251
Unrealized depreciation on foreign currency forward contracts	3,401			—
Accrued performance-based incentive fees	8,418			4,905
Accrued investment advisory fees	5,214			7,332
Shareholders’ distributions payable	46,959			—
Deferred tax liability	178			1,991
Other accrued expenses and liabilities	7,147			7,023
Total liabilities	1,736,398			1,671,364
Commitments and contingencies (Note 11)
Net Assets	$	2,485,102		$	2,759,332
Components of Net Assets
Common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 127,130,589 and 137,351,799 shares issued and outstanding at December 31, 2017 and 2016, respectively	$	127		$	137
Paid-in capital in excess of par value	2,799,400			3,012,234
Undistributed net investment income	37,633			39,566
Accumulated net realized losses	(134,874		)	(32,331		)
Accumulated net unrealized depreciation on investments, swap contracts, foreign currency forward contracts and foreign currency translation (net of provision for taxes of $178 and $1,991, respectively)	(217,184		)	(260,274		)
Net assets	$	2,485,102		$	2,759,332
Net asset value per share	$	19.55		$	20.09

See notes to consolidated financial statements.

F-2

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except share and per share amounts)



	Year Ended December 31,
	2017			2016			2015
Investment income
Interest income:
Non-controlled, non-affiliated investments (net of tax withholding, $527, $1,257 and $479, respectively)	$	327,256		$	337,850		$	248,362
Non-controlled, affiliated investments	6,185			—			2,237
Controlled, affiliated investments	5			—			—
Total interest income	333,446			337,850			250,599
Payment-in-kind interest income:
Non-controlled, non-affiliated investments	6,402			6,692			16,853
Non-controlled, affiliated investments	194			12,798			13,549
Controlled, affiliated investments	11,541			—			—
Total payment-in-kind interest income	18,137			19,490			30,402
Fee income:
Non-controlled, non-affiliated investments	17,829			13,582			18,305
Total fee income	17,829			13,582			18,305
Dividend and other income:
Non-controlled, non-affiliated investments	6,610			7,659			340
Non-controlled, affiliated investments	—			1,810			1,505
Controlled, affiliated investments	21,687			6,077			9,946
Total dividend and other income	28,297			15,546			11,791
Total investment income	397,709			386,468			311,097
Operating expenses
Investment advisory fees	80,676			82,736			70,298
Interest expense	65,501			51,519			36,311
Performance-based incentive fees	16,139			24,123			8,733
Professional services	5,592			2,876			2,913
Listing advisory fees	4,800			—			—
Investment adviser expenses	3,491			1,316			1,518
Administrative services	3,378			3,446			2,728
Custodian and accounting fees	1,724			1,569			1,309
Offering expenses	402			2,285			4,481
Director fees and expenses	565			495			569
Other	4,484			2,696			2,583
Total operating expenses	186,752			173,061			131,443
Net investment income before taxes	210,957			213,407			179,654
Income tax expense (benefit), including excise tax	658			3,311			2,966
Net investment income	210,299			210,096			176,688
Net realized and unrealized gains (losses)
Net realized gains (losses) on:
Non-controlled, non-affiliated investments	(77,979		)	(22,721		)	(29,310		)
Non-controlled, affiliated investments	—			(4,827		)	—
Controlled, affiliated investments	(17,243		)	—			—
Swap contracts	27,253			16,962			13,454
Foreign currency forward contracts	(12,006		)	7,344			70,096
Foreign currency transactions	716			597			(3,583		)
Net realized gains (losses)	(79,259		)	(2,645		)	50,657

See notes to consolidated financial statements.

F-3

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Operations, continued

(in thousands, except share and per share amounts)



	Year Ended December 31,
	2017			2016			2015
Net change in unrealized appreciation (depreciation) on:
Non-controlled, non-affiliated investments	$	81,637		$	45,797		$	(164,032	)
Non-controlled, affiliated investments	(10,656		)	38,701			(72,896		)
Controlled, affiliated investments	41,555			(86,358		)	4,479
Swap contracts	(64,597		)	38,354			3,847
Foreign currency forward contracts	(5,711		)	1,787			(38,728		)
Foreign currency translation	(1,026		)	(551		)	1,778
Provision for taxes	1,888			(2,066		)	—
Net change in unrealized appreciation (depreciation)	43,090			35,664			(265,552		)
Net realized and unrealized gains (losses)	(36,169		)	33,019			(214,895		)
Net increase (decrease) in net assets resulting from operations	$	174,130		$	243,115		$	(38,207	)
Net investment income per share	$	1.54		$	1.55		$	1.56
Diluted and basic earnings (loss) per share	$	1.27		$	1.80		$	(0.34	)
Weighted average number of shares of common stock outstanding (basic and diluted)	136,715,587			135,330,246			113,264,877
Distributions declared per share	$	1.81		$	1.81		$	1.81

See notes to consolidated financial statements.

F-4

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Changes in Net Assets

(in thousands, except share amounts)



	Year Ended December 31,
	2017			2016			2015
Operations
Net investment income	$	210,299		$	210,096		$	176,688
Net realized gains (losses) on investments, swap contracts, foreign currency forward contracts and foreign currency transactions	(79,259		)	(2,645		)	50,657
Net change in unrealized appreciation (depreciation) on investments, swap contracts, foreign currency forward contracts and foreign currency translation	43,090			35,664			(265,552		)
Net increase in net assets resulting from operations	174,130			243,115			(38,207		)
Distributions to shareholders from
Net investment income	(210,299		)	(210,096		)	(176,688		)
Net realized gains	—			—			(28,356		)
Distributions in excess of net investment income (Note 8)	(33,834		)	(34,854		)	—
Net decrease in net assets resulting from shareholders’ distributions	(244,133		)	(244,950		)	(205,044		)
Capital share transactions
Issuance of shares of common stock	—			127,596			618,505
Reinvestment of shareholders’ distributions	96,994			124,139			105,363
Repurchase of shares of common stock	(301,221		)	(84,590		)	(32,416		)
Net increase/(decrease) in net assets resulting from capital share transactions	(204,227		)	167,145			691,452
Total increase (decrease) in net assets	(274,230		)	165,310			448,201
Net assets at beginning of period	2,759,332			2,594,022			2,145,821
Net assets at end of period	$	2,485,102		$	2,759,332		$	2,594,022
Capital share activity
Shares issued from subscriptions	—			14,323,113			63,742,355
Shares issued from reinvestment of distributions	4,752,882			13,858,168			10,950,275
Shares repurchased	(15,010,297		)	(9,570,072		)	(3,394,021		)
Fractional share roundup	36,205			—			—
Net increase (decrease) in shares outstanding	(10,221,210		)	18,611,209			71,298,609
Undistributed net investment income at end of period	$	37,633		$	39,354		$	67,248

See notes to consolidated financial statements.

F-5

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)



	Year Ended December 31,
	2017			2016			2015
Operating Activities:
Net increase in net assets resulting from operations	$	174,130		$	243,115		(38,207		)
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments	(1,582,962		)	(1,669,095		)	(2,068,738		)
(Decrease) increase in payable for investments purchased	24,893			22,204			(34,888		)
Payment-in-kind interest capitalized	(15,914		)	(21,195		)	(29,730		)
Proceeds from sales of investments	517,147			614,546			303,077
Proceeds from principal payments	1,180,554			763,474			539,295
Net realized loss on investments	95,222			27,548			29,310
Net change in unrealized appreciation on investments	(112,536		)	1,860			232,449
Net change in unrealized (appreciation) depreciation on swap contracts	64,597			(38,354		)	(3,847		)
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts	5,711			(1,787		)	38,728
Net change in unrealized depreciation on foreign currency translation	1,026			551			(1,778		)
Amortization of premium/discount, net	(24,633		)	(20,164		)	(7,353		)
Amortization of deferred financing costs	4,512			4,150			3,233
Accretion of discount on term loan payable	408			398			384
Increase in short-term investments, net	(682		)	7,065			(6,442		)
Decrease (increase) in collateral on deposit with custodian	95,000			47,640			(26,940		)
Decrease (increase) in dividends and interest receivable	10,967			(6,953		)	(13,973		)
Decrease (increase) in receivable for investments sold	47,051			(23,678		)	(25,693		)
Increase in principal receivable	(447		)	(708		)	(814		)
Decrease in receivable from advisers	(762		)	(1,859		)	(181		)
(Increase) decrease in other assets	(1,896		)	1,524			421
Increase (decrease) in accrued investment advisory fees	(2,118		)	584			1,784
Increase (decrease) in accrued performance-based incentive fees	3,513			4,156			(4,359		)
Decrease in deferred tax liability	(1,888		)	2,066			—
Increase in other accrued expenses and liabilities	124			416			2,249
Net cash provided by (used in) operating activities	481,017			(42,496		)	(1,112,013		)
Financing Activities:
Proceeds from issuance of shares of common stock	—			127,596			618,505
Payments on repurchases of shares of common stock	(301,221		)	(84,590		)	(32,416		)
Distributions paid	(100,180		)	(120,811		)	(99,681		)
Repayments under term loan payable	(4,000		)	(4,000		)	(4,000		)
Borrowings under revolving credit facilities	1,008,500			1,125,000			1,114,792
Repayments of revolving credit facilities	(1,262,500		)	(938,792		)	(459,450		)
Borrowings under unsecured notes payable	245,000			—			—
Borrowings under repurchase agreement	—			24,726			—
Repayments under repurchase agreement	(24,726		)	—			—
Deferred financing costs paid	(6,497		)	(9,122		)	(3,556		)
Net cash used in financing activities	(445,624		)	120,007			1,134,194
Effect of exchange rate changes on cash	139			(102		)	46
Net increase (decrease) in cash	35,532			77,409			22,227
Cash, cash denominated in foreign currency and restricted cash, beginning of period	146,613			69,204			46,977
Cash, cash denominated in foreign currency and restricted cash, end of period	$	182,145		$	146,613		$	69,204
Supplemental disclosure of cash flow information and non-cash financing activities:
Cash paid for interest	$	59,180		$	47,011		$	32,041
Taxes paid, including excise tax	$	3,830		$	2,844		$	2,047
Distributions reinvested	$	96,994		$	124,139		$	105,363
Distributions payable	$	46,959		$	—		$	—

See notes to consolidated financial statements.

F-6

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
First Lien Senior Secured Loans—67.3%
Abaco Systems, Inc.	(f)(g)(2)	Capital Goods	L + 600		1.00	%	12/7/2021	$	65,015	$	62,924	$	62,168
ABB CONCISE Optical Group, LLC	(2)	Retailing	L + 500		1.00	%	6/15/2023	6,795		6,795		6,812
Accuride Corp.	(2)	Capital Goods	L + 525		1.00	%	11/17/2023	18,295		17,954		18,638
Acosta Holdco, Inc.	(3)	Commercial & Professional Services	L + 325		1.00	%	9/26/2021	8,000		7,576		7,067
Advantage Sales & Marketing, Inc.	(2)	Commercial & Professional Services	L + 325		1.00	%	7/23/2021	5,093		4,894		4,978
Agro Merchants Global, LP	(3)	Transportation	L + 375		1.00	%	12/6/2024	703		699		710
Alion Science & Technology Corp.	(3)	Capital Goods	L + 450		1.00	%	8/19/2021	2,766		2,764		2,771
AltEn, LLC	(f)(h)(i)(j)(4)	Energy	L + 900 PIK (L + 900 Max PIK)				9/12/2018	40,494		29,836		4,253
AM General, LLC	(f)(g)(3)	Automobiles & Components	L + 725		1.00	%	12/28/2021	87,604		86,514		88,813
Amtek Global Technology Pte, Ltd. (SGP)	(f)(k)(l)(5)(EUR)	Automobiles & Components	5.00	%			11/10/2019	€	82,055	91,286		98,454
Bay Club, Co.	(3)	Consumer Services	L + 650		1.00	%	8/31/2022	$	5,536	5,523		5,619
Cengage Learning, Inc.	(3)	Media	L + 425		1.00	%	6/7/2023	10,000		9,638		9,574
Charlotte Russe, Inc.	(i)(4)	Retailing	L + 550		1.25	%	5/22/2019	18,136		18,073		7,322
	(i)(4)		L + 550		1.25	%	5/22/2019	4,440		4,430		1,792

See notes to consolidated financial statements.

F-7

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Commercial Barge Line Co.	(3)	Transportation	L + 875	1.00	%	11/12/2020	$	7,502	$	6,411	$	4,383
CTI Foods Holding Co, LLC	(3)	Food, Beverage & Tobacco	L + 350	1.00	%	6/29/2020	3,762		3,556		3,344
Distribution International, Inc.	(2)	Retailing	L + 500	1.00	%	12/15/2021	28,243		23,308		24,024
Eacom Timber Corp. (CAN)	(f)(k)(l)(6)	Materials	L + 650	1.00	%	11/30/2023	73,209		72,484		72,727
EagleView Technology Corp.	(2)	Capital Goods	L + 425	1.00	%	7/15/2022	6,842		6,795		6,911
FleetPride Corporation	(2)	Capital Goods	L + 400	1.25	%	11/19/2019	8,088		8,078		8,076
Frontline Technologies Group, LLC	(f)(g)(2)	Software & Services	L + 650	1.00	%	9/18/2023	61,759		60,718		60,715
Greystone & Co, Inc.	(f)(g)(6)	Diversified Financials	L + 800	1.00	%	4/17/2024	37,781		37,431		38,473
Hunt Mortgage	(f)(g)(3)	Diversified Financials	L + 750	1.00	%	2/14/2023	60,619		59,790		60,292
JHT Holdings, Inc.	(f)(g)(2)	Capital Goods	L + 850	1.00	%	5/4/2022	29,080		28,628		30,560
Jo-Ann Stores, Inc.	(9)	Retailing	L + 500	1.00	%	10/20/2023	16,369		16,215		15,837
KeyPoint Government Solutions, Inc.	(f)(2)	Capital Goods	L + 600	1.00	%	4/18/2024	14,437		14,304		14,484
Koosharem, LLC	(g)(2)	Commercial & Professional Services	L + 650	1.00	%	5/15/2020	20,787		20,581		20,302
Matchesfashion, Ltd. (GBR)	(f)(g)(k)(l)(3)	Consumer Durables & Apparel	L + 462.50			10/16/2024	12,688		11,752		11,852

See notes to consolidated financial statements.

F-8

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date(c)	No. Shares/ Principal Amount(d)		Cost (e)		Fair Value
McGraw-Hill Global Education Holdings, LLC	(3)	Media	L + 400	1.00	%	5/4/2022	$	14,770	$	14,806	$	14,763
National Debt Relief, LLC	(f)(g)(2)	Diversified Financials	L + 675	1.00	%	5/31/2023	11,290		11,237		11,273
	(f)(g)(2)		L + 675	1.00	%	5/31/2023	7,526		7,489		7,510
NBG Home	(2)	Consumer Durables & Apparel	L + 550	1.00	%	4/26/2024	25,838		25,345		26,128
NCI, Inc.	(f)(g)(2)	Software & Services	L + 750	1.00	%	8/15/2024	84,394		83,381		83,595
New Enterprise Stone & Lime Co, Inc.	(f)(g)(2)	Capital Goods	L + 800	1.00	%	7/8/2021	102,461		101,693		109,584
	(f)(g)(2)		L + 800	1.00	%	7/8/2021	51,745		51,357		55,342
Nine West Holdings	(2)	Consumer Durables & Apparel	L + 1000	1.00	%	10/8/2019	16,195		15,558		14,697
P2 Energy Solutions, Inc.	(k)(2)	Software & Services	L + 400	1.00	%	10/30/2020	2,992		2,932		2,935
Pacific Union Financial, LLC	(f)(3)	Diversified Financials	L + 750	1.00	%	4/21/2022	72,404		71,728		71,976
PAE Holding Corp.	(6)	Capital Goods	L + 550	1.00	%	10/20/2022	3,254		3,246		3,279
Petroplex Acidizing, Inc.	(f)(h)(2)	Energy	L + 725, 1.75% PIK (1.75% Max PIK)	1.00	%	12/5/2019	22,609		22,609		21,669
	(f)(h)(i)		15.00% PIK (15.00% Max PIK)			12/5/2019	20,596		13,809		3,199
Proserv Acquisition, LLC	(f)(k)(2)	Energy	L + 537.50	1.00	%	12/22/2021	26,758		21,153		13,636
Proserv Acquisition, LLC (GBR)	(f)(k)(l)(2)		L + 537.50	1.00	%	12/22/2021	15,706		12,407		8,004

See notes to consolidated financial statements.

F-9

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Raley's	(3)	Food & Staples Retailing	L + 525	1.00	%	5/18/2022	$	11,003	$	10,734	$	11,127
RedPrairie Corp.	(3)	Software & Services	L + 300	1.00	%	10/12/2023	9,643		9,743		9,702
Revere Superior Holdings, Inc.	(f)(g)(2)	Software & Services	L + 675	1.00	%	11/21/2022	2,345		2,299		2,338
	(f)(2)		L + 675	1.00	%	11/21/2022	471		371		106
	(f)(g)(2)		L + 700	1.00	%	11/21/2022	65,665		65,019		65,380
Safety Technology Holdings, Inc.	(f)(3)	Technology Hardware & Equipment	L + 600	1.00	%	7/7/2022	7,409		7,236		7,517
	(f)(3)		L + 600	1.00	%	7/29/2022	1,188		1,160		1,212
Savers, Inc.	(2)	Retailing	L + 375	1.25	%	7/9/2019	11,183		10,607		10,546
Sequa Corp.	(2)	Materials	L + 500	1.00	%	11/28/2021	14,606		14,687		14,732
SIRVA Worldwide, Inc.	(2)	Commercial & Professional Services	L + 650	1.00	%	11/22/2022	21,843		21,372		22,062
SMART Global Holdings, Inc.	(f)(k)(7)	Semiconductors & Semiconductor Equipment	P + 300			8/9/2022	288		288		232
	(f)(k)(2)		L + 625	1.00	%	8/9/2022	20,302		19,922		20,466
Smile Brands Group, Inc.	(f)(2)	Health Care Equipment & Services	L + 625	1.00	%	8/15/2022	12,344		12,218		12,611
SouthernCarlson	(f)(2)	Capital Goods	L + 700	1.00	%	7/26/2021	3,109		3,079		3,140
	(f)(2)		L + 700	1.00	%	7/26/2022	38,253		37,812		38,080
	(f)(2)		L + 700	1.00	%	7/26/2022	5,182		5,133		5,234

See notes to consolidated financial statements.

F-10

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Staples Canada (CAN)	(f)(g)(k)(l)(8)(CAD)	Retailing	CDOR + 700	1.00	%	9/12/2023	C$	35,641	$	28,869	$	27,640
Sweet Harvest Foods Management Co	(f)(g)(2)	Food & Staples Retailing	L + 675	1.00	%	5/30/2023	$	27,021	26,895		26,745
ThreeSixty Group	(f)(g)(3)	Retailing	L + 700	1.00	%	3/31/2023	52,106		51,411		51,121
Transplace	(3)	Transportation	L + 425	1.00	%	10/9/2024	4,501		4,561		4,552
Utility One Source LP	(3)	Capital Goods	L + 550	1.00	%	4/18/2023	9,705		9,617		9,936
Vee Pak, Inc.	(f)(g)(2)	Household & Personal Products	L + 675	1.00	%	3/9/2023	39,800		39,268		38,236
Waste Pro USA, Inc.	(f)(g)(3)	Commercial & Professional Services	L + 750	1.00	%	10/15/2020	35,581		35,581		35,581
Wheels Up Partners, LLC	(f)(2)	Transportation	L + 855	1.00	%	1/26/2021	6,712		6,682		6,659
	(f)(2)		L + 855	1.00	%	8/26/2021	7,651		7,616		7,590
	(f)(2)		L + 710	1.00	%	6/30/2024	24,312		24,149		24,111
	(f)(2)		L + 710	1.00	%	11/1/2024	9,949		9,868		9,867
	(f)(2)		L + 710	1.00	%	12/21/2024	4,974		4,925		4,925
Willbros Group, Inc.	(f)(3)	Energy	L + 1175	1.25	%	12/15/2019	4,164		4,164		4,239
	(f)(g)(2)		L + 975	1.25	%	12/15/2019	25,599		25,599		26,062
WireCo WorldGroup, Inc.	(2)	Capital Goods	L + 550	1.00	%	9/29/2023	2,633		2,651		2,658
Z Gallerie, LLC.	(f)(6)	Retailing	L + 650	1.00	%	10/8/2020	31,704		31,507		29,230
Total First Lien Senior Secured Loans									$	1,712,750	$	1,672,178

See notes to consolidated financial statements.

F-11

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Second Lien Senior Secured Loans—38.0%
Abaco Systems, Inc.	(f)(g)(2)	Capital Goods	L + 1050	1.00	%	6/7/2022	$	63,371	$	62,398	$	58,040
Agro Merchants Global LP (CYM)	(f)(l)(3)	Transportation	L + 800	1.00	%	11/30/2025	20,000		19,502		19,500
Amtek Global Technology Pte. Ltd (SGP)	(f)(k)(l)*(EUR)	Automobiles & Components				11/10/2019	59,281		55,225		40,475
Belk, Inc	(f)(g)	Retailing	10.50%			6/12/2023	99,615		98,009		85,711
CTI Foods Holding Co., LLC	(3)	Food, Beverage & Tobacco	L + 725	1.00	%	6/28/2021	23,219		23,036		18,111
Culligan International Co	(f)(3)	Household & Personal Products	L + 850	1.00	%	12/13/2024	65,984		65,303		66,098
Emerald Performance Materials, LLC	(3)	Materials	L + 775	1.00	%	8/1/2022	2,041		2,035		2,044
Genoa (QoL)	(3)	Health Care Equipment & Services	L + 800	1.00	%	10/28/2024	10,828		10,682		11,018
Grocery Outlet, Inc.	(2)	Food & Staples Retailing	L + 825	1.00	%	10/21/2022	15,346		14,994		15,408
Higginbotham Insurance Agency, Inc.	(f)(3)	Insurance	L + 725	1.00	%	12/1/2025	18,696		18,509		18,509
iParadigms Holdings, LLC	(2)	Software & Services	L + 725	1.00	%	7/29/2022	21,868		21,750		21,431
MedAssets, Inc.	(f)(g)(3)	Health Care Equipment & Services	L + 975	1.00	%	4/20/2023	63,000		61,428		63,945
Misys, Ltd. (GBR)	(k)(l)(2)	Software & Services	L + 725	1.00	%	6/13/2025	8,403		8,343		8,450
NBG Home	(f)(2)	Consumer Durables & Apparel	L + 975	1.00	%	9/30/2024	34,205		33,720		34,366
NEP Broadcasting, LLC	(3)	Media	L + 700	1.00	%	1/23/2023	5,955		6,002		6,007
P2 Energy Solutions, Inc.	(k)(2)	Software & Services	L + 800	1.00	%	4/30/2021	71,312		70,163		65,963

See notes to consolidated financial statements.

F-12

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Petrochoice Holdings, Inc.	(f)(g)(6)	Capital Goods	L + 875		1.00	%	8/21/2023	$	65,000	$	63,458	$	62,812
Plaskolite, LLC	(f)(2)	Materials	L + 900		1.00	%	11/3/2023	33,543		32,703		33,879
Polyconcept North America, Inc.	(f)(3)	Consumer Durables & Apparel	L + 1000		1.00	%	2/16/2024	29,376		28,766		30,029
Sequa Corp.	(2)	Materials	L + 900		1.00	%	4/28/2022	20,976		20,789		21,264
Sparta Systems, Inc.	(f)(g)(2)	Software & Services	L + 825		1.00	%	7/27/2025	35,062		34,555		34,250
SquareTwo Financial Corp.	(f)(h)(i)(4)	Diversified Financials	L + 1000 PIK (L + 1000 Max PIK)		1.00	%	5/24/2019	6,685		6,458		618
Sungard Public Sector, LLC	(f)(g)(2)	Software & Services	L + 850		1.00	%	1/31/2025	16,109		15,961		16,089
Vencore, Inc.	(2)	Capital Goods	L + 875		1.00	%	5/23/2020	57,673		$	57,117	$	58,322
Vertafore, Inc.	(f)(3)	Software & Services	L + 900		1.00	%	6/30/2024	81,500		$	79,444	$	82,342
Vestcom International, Inc.	(f)(3)	Consumer Services	L + 850		1.00	%	4/28/2024	58,000		57,256		57,776
WireCo WorldGroup, Inc.	(2)	Capital Goods	L + 900		1.00	%	9/30/2024	11,226		11,158		11,296
Total Second Lien Senior Secured Loans										$	978,764	$	943,753
Other Senior Secured Debt—5.7%
Angelica Corp.	(f)(h)	Health Care Equipment & Services	10.00% PIK (10.00% Max PIK)				12/30/2022	$	34,205	$	33,568	$	34,205
Artesyn Technologies, Inc.	(m)	Technology Hardware & Equipment	9.75	%			10/15/2020	20,962		20,455		20,595
Cleaver-Brooks Inc	(m)	Capital Goods	7.88	%			3/1/2023	9,687		9,817		9,929
Direct ChassisLink, Inc.	(m)	Transportation	10.00	%			6/15/2023	17,425		18,706		19,385

See notes to consolidated financial statements.

F-13

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
DJO Finance, LLC	(m)	Health Care Equipment & Services	8.13%			6/15/2021	$	9,950	$	9,245	$	9,303
Guitar Center, Inc.	(m)	Retailing	6.50%			4/15/2019	5,377		5,107		4,974
Nesco	(m)	Capital Goods	6.88%			2/15/2021	9,125		5,962		7,756
Pattonair Holdings, Ltd.	(m)	Capital Goods	9.00%			11/1/2022	5,645		5,663		5,836
Rockport (Relay)	(f)(h)(i)(j)	Consumer Durables & Apparel	15.00% PIK (15.00% Max PIK)			7/31/2022	$	29,299	28,755		17,766
Vivint, Inc.		Commercial & Professional Services	7.63	%		9/1/2023	10,925		11,476		11,553
Total Other Senior Secured Debt									$	148,754	$	141,302
Total Senior Debt									$	2,840,268	$	2,757,233
Subordinated Debt—15.4%
Alion Science & Technology Corp.	(f)(g)(m)	Capital Goods	11.00	%		8/19/2022	$	68,603	$	67,822	$	66,816
Cemex Materials, LLC	(m)	Materials	7.70	%		7/21/2025	58,454		$	61,665	$	66,345
Cengage Learning, Inc.	(m)	Media	9.50	%		6/15/2024	15,000		13,557		13,575
ClubCorp Club Operations, Inc.	(m)	Consumer Services	8.50	%		9/15/2025	14,600		$	14,500	$	14,235
Exemplis Corp.	(f)(h)(2)	Commercial & Professional Services	L + 700, 4.00% PIK (4.00% Max PIK)			3/23/2020	13,017		13,017		13,017

See notes to consolidated financial statements.

F-14

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Hilding Anders (SWE)	(f)(h)(k)(l)(n)(EUR)	Consumer Durables & Apparel	13.00% PIK (13.00% Max PIK)				6/30/2021	€	99,748	$	109,308	$	90,604
	(f)(h)(i)(k)(l)(n)(EUR)		12.00% PIK (12.00% Max PIK)				12/31/2022	3,026		507		956
	(f)(h)(i)(k)(l)(n)(EUR)		12.00% PIK (12.00% Max PIK)				12/31/2023	22,230		939		1
	(f)(h)(i)(k)(l)(n)(EUR)		18.00% PIK (18.00% Max PIK)				12/31/2024	41,136		12,850		12,993
Home Partners of America, Inc.	(f)(j)(3)	Real Estate	L + 700		1.00	%	10/8/2022	$	75,000	73,744		76,500
Kenan Advantage Group, Inc./The	(m)	Transportation	7.88	%			7/31/2023	2,308		2,215		2,389
Vertiv Group Corp.	(m)	Technology Hardware & Equipment	9.25	%			10/15/2024	22,713		22,929		24,246
Total Subordinated Debt										$	393,053	$	381,677
Asset Based Finance—13.9%
AMPLIT JV LP, Limited Partnership Interest	(f)(k)	Diversified Financials						N/A		$	7,137	$	1,896
Bank of Ireland (IRL)	(f)(k)(l)(m)(2)	Banks	L + 1185				12/4/2027	$	15,105	15,105		15,105
Comet Aircraft SARL (LUX), Common Shares	(f)(k)(l)(n)	Capital Goods						549,451		48,692		35,760
Central Park Leasing Aggregator, L.P. (LUX), Partnership Interest	(f)(k)(l)	Capital Goods						N/A		64,177		72,045
LSF IX Java Investments Ltd. (IRL)	(f)(k)(l)(10)(EUR)	Diversified Financials	E + 315				12/3/2019	€	56,406	54,892		65,774
Montgomery Credit Holdings, LP, Limited Partnership Interest	(f)(k)	Diversified Financials						N/A		18,357		18,312
Orchard Marine, Ltd. (VGB), Class B Common Stock	(f)(j)(k)(l)	Transportation						1,964		3,069		—
Orchard Marine, Ltd. (VGB), Series A Preferred Stock	(f)(j)(k)(l)(o)	Transportation						58,920		57,962		21,009

See notes to consolidated financial statements.

F-15

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)	Cost (e)		Fair Value
Star Mountain SMB Multi-Manager Credit Platform, LP, Limited Partnership Interest	(f)(k)	Diversified Financials				N/A	$	56,504	$	63,075
Toorak Capital Partners, LLC, Membership Interest	(f)(k)(n)	Diversified Financials				N/A	46,140		53,531
Total Asset Based Finance							$	372,035	$	346,507
Strategic Credit Opportunities Partners, LLC—12.1%
Strategic Credit Opportunities Partners, LLC	(f)(k)(n)	Diversified Financials				294,027	$	294,028	$	300,652
Strategic Credit Opportunities Partners, LLC							$	294,028	$	300,652
Equity/Other—7.3%
Algeco/Scotsman Holdings SARL (LUX), Class B Limited Partnership Interests	(f)(k)(l)*	Consumer Durables & Apparel				301	$	3,007	$	6,255
Alion Science & Technology Corp., Class A Membership Interest	(f)*	Capital Goods				N/A	7,350		5,125
AltEn, LLC, Membership Units	(f)(j)*	Energy				2,384	2,955		—
Amtek Global Technology Pte. Ltd (SGP), Warrants	(f)(k)(l)*(EUR)	Automobiles & Components			12/31/2018	9,991	4,785		—
Angelica Corp., Limited Partnership Interest	(f)*	Health Care Equipment & Services				877,044	47,562		9,257
Belk, Inc., Units	(f)*	Retailing				1,642	7,846		2,349
Cengage Learning Holdings II, LP, Common Stock	(f)*	Media				227,802	7,529		3,681
Genesys Telecommunications Laboratories, Inc., Class A Shares	(f)*	Technology Hardware & Equipment				40,529	—		—
Genesys Telecommunications Laboratories, Inc., Class A1-A5 shares	(f)*					3,463,150	120		658
Genesys Telecommunications Laboratories, Inc., Ordinary Shares	(f)*					2,768,806	—		—
Genesys Telecommunications Laboratories, Inc., Ordinary Shares	(f)*					41,339	—		—
Genesys Telecommunications Laboratories, Inc., Preferred Shares	(f)*					1,050,465	—		—

See notes to consolidated financial statements.

F-16

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)	Cost (e)		Fair Value
Hilding Anders (SWE), Arle PIK Interest	(f)(h)(i)(k)(l)(n)(EUR)	Consumer Durables & Apparel			12/31/2022	3,834	$	—	$	—
Hilding Anders (SWE), Class A Common Stock	(f)(k)(l)(n)*(SEK)					4,503,411	132		3
Hilding Anders (SWE), Class B Common Stock	(f)(k)(l)(n)*(SEK)					574,791	25		—
Hilding Anders (SWE), Class C Common Stock	(f)(k)(l)(n)*(SEK)					213,201	—		—
Hilding Anders (SWE), Equity Options	(f)(k)(l)(n)*(SEK)				12/31/2020	236,160,807	14,988		409
Home Partners of America, Common Stock	(f)(j)*	Real Estate				100,044	101,876		122,652
Home Partners of America, Warrants	(f)(j)*				8/7/2024	2,675	292		805
Jones Apparel Holdings, Inc., Common Stock	(f)*	Consumer Durables & Apparel				5,451	872		—
Nine West Holdings, Inc., Common Stock	(f)*	Consumer Durables & Apparel				5,451	6,541		—
Keystone Australia Holdings, Pty. Ltd. (AUS), Residual Claim	(f)(k)(l)*(AUD)	Consumer Services				N/A	7,945		1,975
KKR BPT Holdings Aggregator, LLC, Membership Interest	(f)(k)(n)*	Diversified Financials				N/A	13,000		5,376
Louisiana-Pacific Corp, Lien Reserve Claim, Lien Reserve Claim	(f)*	Materials			9/15/2024	380	—		380
NBG Home, Common Stock	(f)*	Consumer Durables & Apparel				1,903	2,565		3,130
Petroplex Acidizing, Inc., Warrants	(f)*	Energy				8	—		—
Polyconcept North America, Inc., Class A-1 Units	(f)*	Consumer Durables & Apparel				29,376	2,938		2,719
PQ Corp., Class B Common Stock	*	Materials				270,885	3,337		4,456
Rockport (Relay), Class A Unit	(f)(j)*	Consumer Durables & Apparel				219,349	—		—
Sentry Holdings, Ltd. (JEY), Common Shares A	(f)(k)(l)*(GBP)	Insurance				16,450	—		—
Sentry Holdings, Ltd. (JEY), Preferred B Shares	(f)(k)(l)*(GBP)					6,113,719	9,064		8,948

See notes to consolidated financial statements.

F-17

Table of Contents

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)	Cost (e)		Fair Value
SquareTwo Financial Corp., Series A Preferred Stock	(f)(h)(i)	Diversified Financials	12.50% PIK (12.50% Max PIK)				16,044	$	5,457	$	—
Stuart Weitzman, Inc., Common Stock	(f)*	Consumer Durables & Apparel					5,451	—		—
Towergate (GBR), Ordinary Shares	(f)(k)(l)*(GBP)	Insurance					116,814	173		171
Willbros Group, Inc., Common Stock	*	Energy					2,810,814	7,760		3,991
Total Equity/Other								$	258,119	$	182,340
Total Investments, excluding Short Term Investments — 159.7%								$	4,157,503	$	3,968,409
Short Term Investments—0.0%
Goldman Sachs Financial Square Funds - Prime Obligations Fund	(p)		1.40	%			688,065	$	688	$	688
Total Short Term Investments								$	688	$	688
TOTAL INVESTMENTS — 159.7%(q)								$	4,158,191	$	3,969,097
LIABILITIES IN EXCESS OF OTHER ASSETS—(59.7%)										(1,483,995		)
NET ASSETS—100.0%										$	2,485,102

See notes to consolidated financial statements.

F-18

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)

A summary of outstanding financial instruments at December 31, 2017 is as follows:

Foreign Currency forward Contracts



Foreign Currency	Settlement Date	Counterparty	Amount and Transaction		US$ Value at Settlement Date			US$ Value at December 31, 2017			Unrealized Appreciation (Depreciation)
AUD	January 11, 2018	JP Morgan Chase Bank	A$	4,736 Sold	$	3,624		$	3,695		$	(71	)
AUD	January 11, 2018	JP Morgan Chase Bank	A$	2,000 Bought	(1,512		)	(1,560		)	48
CAD	September 11, 2018	State Street Bank and Trust Company	C$	35,650 Sold	29,328			28,429			899
EUR	January 11, 2018	JP Morgan Chase Bank	€	76,299 Sold	90,523			91,590			(1,067		)
EUR	July 8, 2019	JP Morgan Chase Bank	€	5,641 Sold	6,357			7,033			(676		)
EUR	July 8, 2019	JP Morgan Chase Bank	€	22,300 Sold	26,298			27,806			(1,508		)
GBP	January 11, 2018	JP Morgan Chase Bank	£	9,836 Bought	(13,036		)	(13,283		)	247
GBP	April 9, 2018	JP Morgan Chase Bank	£	8,433 Sold	11,345			11,424			(79		)
Total					$	152,927		$	155,134		$	(2,207	)

Cross currency swaps



Counterparty	Company Receives Fixed Rate	Company Pays Fixed Rate	Termination Date	Premiums Paid/(Received)		Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank	2.200% on USD notional amount of $188,109	0.000% on EUR notional amount of €177,545	12/31/2019	—		$	(26,362	)
JP Morgan Chase Bank	1.960% on USD notional amount of $36,092	0.500% on GBP notional amount of £29,125	6/30/2018	—		(3,242		)
				$	—	$	(29,604	)

Interest rate swaps



Counterparty	Notional Amount		Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/(Received)		Value		Unrealized Appreciation
JP Morgan Chase Bank	$	100,000	3-Month LIBOR	1.36	%	12/31/2020	$	—	$	2,282	$	2,282
JP Morgan Chase Bank	$	100,000	3-Month LIBOR	0.84	%	3/31/2019	—		1,481		1,481
							$	—	$	3,763	$	3,763

As of December 31, 2017, for the above contracts and/or agreements, the Company had sufficient cash and/or securities to cover commitments or collateral requirements, if any, of the relevant broker or exchange.

See notes to consolidated financial statements.

F-19

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)


(a)	Security may be an obligation of one or more entities affiliated with the named company.


(b)	Non-controlled/non-affiliated investments as defined by the Investment Company Act of 1940, as amended (“1940 Act”), unless otherwise indicated. Non-controlled/non-affiliated investments are investments that are neither controlled investments nor affiliated investments.


(c)	Represents maturity of debt securities and expiration of applicable equity investments.


(d)	Denominated in U.S. dollars unless otherwise noted.


(e)	Represents amortized cost for debt securities and cost for equity investments translated to U.S. dollars.


(f)	Investments classified as Level 3 whereby fair value was determined by the Company’s Board of Directors. (see Note 2).


(g)	Security or portion thereof was held within CCT New York Funding LLC (formerly, CCT SE I LLC) and was pledged as collateral supporting the amounts outstanding under the revolving credit facility with JPMorgan Chase Bank as of December 31, 2017.


(h)	The underlying credit agreement or indenture contains a PIK provision, whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. The interest rate in the schedule represents the current interest rate in effect for these investments.


(i)	Investment was on non-accrual status as of December 31, 2017.

(j)

Affiliated investment as defined by the 1940 Act, whereby the Company owns between 5% and 25% of the portfolio company’s outstanding voting securities and the investments are not classified as controlled investments. The aggregate fair value of non-controlled, affiliated investments at December 31, 2017 represented 9.8% of the Company’s net assets. Fair value as of December 31, 2017 along with transactions during the year ended December 31, 2017 in these affiliated investments were as follows (amounts in thousands):



	Fair Value at December 31, 2016		Year Ended December 31, 2017							Fair Value at December 31, 2017		Year Ended December 31, 2017
Non-Controlled, Affiliated Investments	Fair Value at December 31, 2016		Gross Additions (Cost)*		Gross Reductions (Cost)**		Net Unrealized Gain (Loss)			Fair Value at December 31, 2017		Net Realized Gain (Loss)		Interest Income***		Fee Income		Dividend Income
AltEn, LLC
Membership Units	$	—	$	—	$	—	$	—		$	—	$	—	$	—	$	—	$	—
Term Loan	8,733		—		—		(4,480		)	4,253		—		—		—		—
Home Partners of America, Inc.
Subordinated Debt	—		73,744		—		2,756			76,500		—		6,185		—		—
Common Stock	113,013		2,150		—		7,489			122,652		—		—		—		—
Warrants	607		—		—		198			805		—		—		—		—
Orchard Marine, Ltd.
Class B Common Stock	—		—		—		—			—		—		—		—		—
Series A Preferred Stock	20,502		6,137		—		(5,630		)	21,009		—		—		—		—
Rockport Company LLC
Term Loan	—		28,755		—		(10,989		)	17,766		—		194		—		—
Private Equity	—		—		—					—		—		—		—		—
Totals	$	142,855	$	110,786	$	—	$	(10,656	)	$	242,985	$	—	$	6,379	$	—	$	—



*	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
**	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
***	Includes payment-in-kind interest income.

See notes to consolidated financial statements.

F-20

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)

(k)

The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any assets other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The Company calculates its compliance with the qualifying assets test on a “look through” basis by disregarding the value of the Company’s total return swaps and treating each loan underlying the total return swaps as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 72.4% of the Company’s total assets represented qualifying assets as of December 31, 2017.


(l)	A portfolio company domiciled in a foreign country. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.


(m)	This security was acquired in a transaction that was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Rule 144A thereunder. This security may be resold only in transactions that are exempt from the registration requirements of the Securities Act, normally to qualified institutional buyers.

(n)

Controlled investment as defined by the 1940 Act, whereby the Company owns more than 25% of the portfolio company’s outstanding voting securities or maintains the ability to nominate greater than 50% of the board representation. The aggregate fair value of controlled at December 31, 2017 represented 20.1% of the Company’s net assets. Fair value as of December 31, 2017 along with transactions during the year ended December 31, 2017 in these controlled investments were as follows (amounts in thousands):



	Fair Value at December 31, 2016		Year Ended December 31, 2017								Fair Value at December 31, 2017		Year Ended December 31, 2017
Controlled Investments	Fair Value at December 31, 2016		Gross Additions (Cost)*		Gross Reductions (Cost)**			Net Unrealized Gain (Loss)			Fair Value at December 31, 2017		Net Realized Gain (Loss)			Interest Income***		Fee Income		Dividend Income
Comet Aircraft S.A.R.L	$	49,157	$	—	$	(926	)	$	(12,471	)	$	35,760	$	—		$	—	$	—	$	9,764
Guardian Investors, LLC	3,704		—		(8,860		)	5,156			—		(3,413		)	—		—		—
Hilding Anders
Subordinated Debt	84,693		11,138		(31,839		)	40,562			104,554		(9,389		)	11,546		—		—
Class A Common Stock	—		—		—			3			3		—			—		—		—
Class B Common Stock	—		—		—			—			—		—			—		—		—
Class C Common Stock	—		—		—			—			—		—			—		—		—
Equity Options	2,253		—		—			(1,844		)	409		—			—		—		—
Innovating Partners, LLC	4,372		—		(11,363		)	6,991			—		(4,441		)	—		—		—
KKR BPT Holdings Aggregator, LLC	9,835		1,000		(1,200		)	(4,259		)	5,376		—			—		—		—
Strategic Credit Opportunities Partners, LLC	98,998		201,628		—			26			300,652		—			—		—		11,314
Toorak Capital Partners, LLC	6,984		39,156		—			7,391			53,531		—			—		—		609
Totals	$	259,996	$	252,922	$	(54,188	)	$	41,555		$	500,285	$	(17,243	)	$	11,546	$	—	$	21,687



*	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
**	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
***	Includes payment-in-kind interest income.

See notes to consolidated financial statements.

F-21

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)


(o)	The issuer of this investment has elected to pay the stated dividend rate upon liquidation of the investment.


(p)	7-day effective yield as of December 31, 2017.

(q)

As of December 31, 2017, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $125,530; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $314,624; the net unrealized depreciation was $189,094; and the aggregate cost of securities for Federal income tax purposes was $4,158,191.



*	Non-income producing security.


(1)	Not used.


(2)	The interest rate on these investments is subject to a base rate of 3-Month LIBOR, which at December 31, 2017 was 1.69%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(3)	The interest rate on these investments is subject to a base rate of 1-Month LIBOR, which at December 31, 2017 was 1.56%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(4)	The interest rate on these investments is subject to a base rate of 12-Month LIBOR, which at December 31, 2017 was 2.11%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(5)	The interest rate on these investments is subject to a base rate of 3-month EURIBOR, which at December 31, 2017 was (0.33%). The current base rate for each investment may be different from the reference rate on December 31, 2017.


(6)	The interest rate on these investments is subject to a base rate of 2-Month LIBOR, which at December 31, 2017 was 1.62%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(7)	The interest rate on these investments is subject to a base rate of PRIME rate, which at December 31, 2017 was 4.50%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(8)	The interest rate on these investments is subject to a base rate of 3-Month Canadian Banker Acceptance Rate, which at December 31, 2017 was 1.54%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(9)	The interest rate on these investments is subject to a base rate of 6-Month LIBOR, which at December 31, 2017 was 1.84%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(10)	The interest rate on these investments is subject to a base rate of 1-month EURIBOR, which at December 31, 2017 was (0.37%). The current base rate for each investment may be different from the reference rate on December 31, 2017.

Abbreviations:

AUD - Australian Dollar; local currency investment amount is denominated in Australian Dollar. A$1 / US $0.780 as of December 31, 2017.

CAD - Canadian Dollar; local currency investment amount is denominated in Canadian Dollar. C$1 / US $0.796 as of December 31, 2017.

EUR - Euro; local currency investment amount is denominated in Euros. €1 / US $1.200 as of December 31, 2017.

GBP - British Pound Sterling; local currency investment amount is denominated in Pound Sterling. £1 / US $1.350 as of December 31, 2017.

SEK - Swedish Krona; local currency investment amount is denominated in Swedish Kronor. SEK1 / US $0.122 as of December 31, 2017.

AUS - Australia

CAN - Canada

CYM - Cayman Islands

GBR - United Kingdom

IRL - Ireland

JEY - Jersey

LUX - Luxembourg

SGP - Singapore

Corporate Capital Trust, Inc. and Subsidiaries

See notes to consolidated financial statements.

F-22

Consolidated Schedule of Investments (continued)

As of December 31, 2017

(in thousands, except share amounts)

Abbreviations (continued):

SWE - Sweden

VGB - British Virgin Islands

E = EURIBOR - Euro Interbank Offered Rate

L = LIBOR - London Interbank Offered Rate, typically 3-Month

PIK - PIK - Payment-in-kind; the issuance of additional securities by the borrower to settle interest payment obligations.

P = PRIME - U.S. Prime Rate

CDOR = Canadian Banker Acceptance Rate

See notes to consolidated financial statements.

F-23

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
First Lien Senior Secured Loans—56.1%
A10 Capital, LLC	(f)(g)(3)	Real Estate	L + 700	1.00	%	10/15/2021	$	27,659	$	27,339	$	27,936
Abaco Systems, Inc.	(f)(h)(2)	Capital Goods	L + 600	1.00	%	12/7/2021	65,678		63,136		64,364
ABILITY Network, Inc.	(2)	Health Care Equipment & Services	L + 500	1.00	%	5/14/2021	634		625		637
Accuride Corp.	(2)	Capital Goods	L + 700	1.00	%	11/3/2023	11,004		10,676		10,784
Agro Merchants NAI Holdings, LLC	(f)(h)(2)	Transportation	L + 700	1.00	%	10/1/2020	73,448		72,814		72,826
Algeco/Scotsman (LUX)	(f)(g)(i)(j)(k)	Consumer Durables & Apparel	15.75% PIK (15.75% Max PIK)			5/1/2018	41,958		32,642		8,024
AltEn, LLC	(f)(j)(k)(l)(3)	Energy	L + 900 (L + 900 Max PIK)			9/12/2018	36,567		29,836		8,733
AM General LLC	(f)(h)(2)	Automobiles & Components	L + 725	1.00	%	12/28/2021	97,338		95,880		95,878
American Freight, Inc.	(f)(2)	Retailing	L + 625	1.00	%	10/31/2020	32,036		31,925		32,036
Amtek Global Technology Pte. Ltd. (SGP)	(f)(g)(i)(5)(EUR)	Automobiles & Components	E + 900	1.00	%	11/10/2019	€	7,633	8,338		7,876
	(f)(g)(i)(5)(EUR)		E + 900	1.00	%	11/10/2019	56,564		57,986		58,366
	(f)(g)(i)(5)(EUR)		E + 900	1.00	%	11/10/2019	58,055		59,514		59,905
	(f)(g)(i)(5)(EUR)		E + 900	1.00	%	11/10/2019	8,078		8,281		8,336

See notes to consolidated financial statements.

F-24

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
BeyondTrust Software, Inc.	(f)(2)	Software & Services	L + 700	1.00	%	9/25/2019	$	11,926	$	11,841	$	11,548
Casual Dining BidCo, Ltd. (GBR)	(f)(g)(i)(2)(GBP)	Consumer Services	L + 825			12/11/2020	£	40,546	60,338		49,635
Centric Group, LLC	(f)(7)	Retailing	P + 575			10/14/2021	$	652	526		127
	(f)(3)		L + 675	1.00	%	10/14/2022	75,000		73,540		74,691
Charlotte Russe, Inc.	(2)	Retailing	L + 550	1.25	%	5/22/2019	4,478		4,463		2,723
	(2)		L + 550	1.25	%	5/22/2019	18,291		18,190		11,123
Dentix (SPN)	(f)(g)(i)(5)(EUR)	Health Care Equipment & Services	E + 825			12/14/2021	€	21,000	21,161		21,159
Distribution International, Inc.	(2)	Retailing	L + 500	1.00	%	12/15/2021	$	4,148	3,494		3,588
EagleView Technology Corp.	(2)	Software & Services	L + 425	1.00	%	7/15/2022	6,913		6,856		6,941
FleetPride Corp.	(2)	Capital Goods	L + 400	1.25	%	11/19/2019	888		786		844
Greystone & Co., Inc.	(f)(2)	Diversified Financials	L + 800	1.00	%	3/26/2021	33,080		32,685		32,746
Gymboree Corp.	(2)	Retailing	L + 350	1.50	%	2/23/2018	10		8		5
Imagine! Print Solutions, Inc.	(f)(2)	Media	L + 625	1.00	%	3/31/2023	14,888		14,345		14,888
iPayment, Inc.	(2)	Software & Services	L + 525	1.50	%	5/8/2017	11,885		11,871		11,469
Jacuzzi Brands, Inc.	(f)(2)	Capital Goods	L + 650	1.25	%	7/3/2019	16,132		15,970		15,909
	(f)(2)		L + 650	1.25	%	7/3/2019	15,000		14,700		14,792

See notes to consolidated financial statements.

F-25

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Jacuzzi Brands, Inc. (LUX)	(f)(i)(2)	Capital Goods	L + 650		1.25	%	7/3/2019	$	20,118	$	19,916	$	19,840
JHT Holdings, Inc.	(f)(h)(2)	Capital Goods	L + 850		1.00	%	5/4/2022	36,025		35,366		36,613
KeyPoint Government Solutions, Inc.	(f)(2)	Capital Goods	L + 650		1.25	%	11/13/2017	27,902		27,774		27,902
Keystone Australia Holdings, Pty. Ltd. (AUS)	(f)(g)(i)(k)(m)(AUD)	Consumer Services	15.00	%			8/7/2019	A$	31,021	27,501		11,813
Koosharem, LLC	(h)(2)	Commercial & Professional Services	L + 650		1.00	%	5/15/2020	$	19,006	18,882		17,224
Marshall Retail Group, LLC	(f)(2)	Retailing	L + 600		1.00	%	8/25/2020	16,468		16,354		14,825
MCS AMS Sub-Holdings, LLC	(h)(2)	Commercial & Professional Services	L + 650		1.00	%	10/15/2019	24,994		24,557		23,369
NEP Group, Inc.	(2)	Media	L + 325		1.00	%	1/22/2020	497		490		501
New Enterprise Stone & Lime Co., Inc.	(f)(h)(2)	Capital Goods	L + 850		1.00	%	3/19/2021	102,461		101,519		104,833
	(f)(h)(2)		L + 850		1.00	%	3/19/2021	51,745		51,269		52,943
Nine West Holdings, Inc.	(2)	Consumer Durables & Apparel	L + 375		1.00	%	10/8/2019	13,281		13,110		8,325
NMI Holdings, Inc.	(f)(g)(2)	Insurance	L + 750		1.00	%	11/15/2018	37,431		37,071		37,398
P & L Development, LLC	(f)(h)(j)(3)	Pharmaceuticals, Biotechnology & Life Sciences	L + 750, 1.00% PIK (1.00% Max PIK)		1.00	%	5/1/2020	56,312		55,918		56,892
Pacific Union Financial, LLC	(f)(3)	Diversified Financials	L + 800		1.00	%	5/31/2019	58,062		57,359		58,933

See notes to consolidated financial statements.

F-26

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Paradigm Acquisition Corp.	(2)	Health Care Equipment & Services	L + 500	1.00	%	6/2/2022	$	10,925	$	10,791	$	10,875
Petroplex Acidizing, Inc., 1.00%	(f)(j)(k)	Energy	15.00% PIK (15.00% Max PIK)			12/5/2019	17,740		13,809		1,012
	(f)(j)(2)		L + 725, 1.75% PIK (1.75% Max PIK)	1.00	%	12/5/2019	22,268		22,268		20,866
Plaskolite, LLC	(2)	Materials	L + 475	1.00	%	11/3/2022	8		8		8
Proserv Acquisition, LLC	(f)(g)(2)	Energy	L + 537.5	1.00	%	12/22/2021	27,033		21,357		17,266
Proserv Acquisition, LLC (GBR)	(f)(g)(i)(2)	Energy	L + 537.5	1.00	%	12/22/2021	15,867		12,535		10,134
Raley’s	(2)	Food & Staples Retailing	L + 625	1.00	%	5/18/2022	11,383		11,055		11,511
Safety Technology Holdings, Inc.	(f)(2)	Technology Hardware & Equipment	L + 600	1.00	%	7/7/2022	7,481		7,275		7,428
SARquavitae Servicios a la Dependencia, S.L. (LUX)	(f)(g)(i)(j)(5)(EUR)	Health Care Equipment & Services	E + 800 (2.00% Max PIK)	1.00	%	9/30/2022	€	28,297	29,240		29,965
	(f)(g)(i)(j)(5)(EUR)		E + 800 (2.00% Max PIK)	1.00	%	9/30/2022	14,306		14,782		15,149
	(f)(g)(i)(j)(5)(EUR)		E + 800 (2.00% Max PIK)	1.00	%	9/30/2022	3,131		3,235		3,316
Sequa Corp.	(2)	Capital Goods	L + 400	1.25	%	6/19/2017	$	7,352	6,763		6,983
SIRVA Worldwide, Inc.	(n)(2)	Commercial & Professional Services	L + 650	1.00	%	11/18/2022	22,773		22,204		22,375

See notes to consolidated financial statements.

F-27

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Smile Brands Group, Inc.	(f)(2)	Health Care Equipment & Services	L + 625	1.00	%	8/15/2018	$	12,469	$	12,320	$	12,709
SouthernCarlson	(f)(2)	Capital Goods	L + 700	1.00	%	6/30/2022	38,349		37,764		38,402
Tibco Software, Inc.	(3)	Software & Services	L + 550	1.00	%	12/4/2020	1,923		1,881		1,935
Traverse Midstream Partners, LLC	(f)(2)	Energy	L + 1000	1.00	%	11/10/2020	2,348		2,310		2,312
	(f)(2)		L + 1000	1.00	%	11/10/2020	15,263		15,012		15,027
	(f)(2)		L + 1000	1.00	%	11/10/2020	7,044		6,928		6,936
	(f)(2)		L + 1000	1.00	%	11/10/2020	11,741		11,545		11,559
TTM Technologies, Inc.	(g)(2)	Technology Hardware & Equipment	L + 425	1.00	%	5/31/2021	8,827		8,585		8,960
Waste Pro USA, Inc.	(f)(h)(2)	Transportation	L + 750	1.00	%	10/15/2020	35,948		35,948		36,127
Willbros Group, Inc.	(f)(h)(2)	Energy	L + 975	1.25	%	12/15/2019	25,599		25,599		25,078
Z Gallerie, Inc.	(f)(2)	Retailing	L + 650	1.00	%	10/8/2020	31,948		31,693		31,867
Total First Lien Senior Secured Loans									$	1,641,759	$	1,547,100
Second Lien Senior Secured Loans—38.9%
Abaco Systems, Inc.	(f)(h)(2)	Capital Goods	L + 1050	1.00	%	6/7/2022	$	63,371	$	62,243	$	63,400
Angelica Corporation	(f)(k)(4)	Health Care Equipment & Services	L + 875	1.25	%	8/20/2019	52,169		50,869		9,201
Applied Systems, Inc.	(2)	Software & Services	L + 650	1.00	%	1/24/2022	21,242		21,293		21,513

See notes to consolidated financial statements.

F-28

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Belk, Inc.	(f)(h)(2)	Retailing	10.50	%			6/12/2023	$	99,615	$	97,813	$	94,154
Bon-Ton Department Stores, Inc.	(f)(g)(2)	Retailing	L + 950		1.00	%	3/18/2021	13,529		13,272		13,036
CPI International, Inc.	(f)(3)	Capital Goods	L + 700		1.00	%	9/16/2017	28,000		27,741		28,000
CTI Foods Holding Co., LLC	(2)	Food, Beverage & Tobacco	L + 725		1.00	%	6/28/2021	23,219		22,994		21,129
Culligan International Co	(f)(2)	Household & Personal Products	L + 850		1.00	%	11/15/2024	37,500		36,753		36,750
EagleView Technology Corp.	(2)	Software & Services	L + 825		1.00	%	7/14/2023	33,000		32,565		32,949
Excelitas Technologies Corp.	(f)(j)(2)	Technology Hardware & Equipment	L + 975, 3.00% PIK (3.00% Max PIK)		1.00	%	4/29/2021	114,273		114,273		109,883
Genoa (QoL)	(2)	Health Care Equipment & Services	L + 800		1.00	%	10/28/2024	10,828		10,668		10,828
Greenway Medical Technologies	(2)	Health Care Equipment & Services	L + 825		1.00	%	11/4/2021	4,066		4,024		3,964
Grocery Outlet, Inc.	(2)	Food & Staples Retailing	L + 825		1.00	%	10/21/2022	40,346		39,268		40,459
iParadigms Holdings, LLC	(2)	Software & Services	L + 725		1.00	%	7/29/2022	22,595		22,456		21,804
MedAssets, Inc.	(f)(h)(3)	Health Care Equipment & Services	L + 975		1.00	%	4/19/2023	63,000		61,232		62,856
NEP Group, Inc.	(2)	Media	L + 875		1.25	%	7/22/2020	641		625		647
NewWave Communications, Inc.	(2)	Media	L + 800		1.00	%	10/30/2020	13,712		13,684		13,352
P2 Energy Solutions, Inc.	(2)	Software & Services	L + 800		1.00	%	4/30/2021	3,538		3,513		3,241
	(2)		L + 800		1.00	%	4/30/2021	74,312		72,776		68,088

See notes to consolidated financial statements.

F-29

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Petrochoice Holdings, Inc.	(f)(h)(2)	Capital Goods	L + 875		1.00	%	8/21/2023	$	65,000	$	63,272	$	64,541
Plaskolite, LLC	(f)(2)	Materials	L + 825		1.00	%	11/3/2023	33,543		32,605		33,879
Polyconcept North America, Inc.	(f)(3)	Consumer Durables & Apparel	L + 1000		1.00	%	12/31/2023	29,376		28,675		28,970
Press Ganey Holdings, Inc.	(3)	Health Care Equipment & Services	L + 800		1.00	%	10/21/2024	6,703		6,636		6,837
SI Organization, Inc.	(2)	Capital Goods	L + 875		1.00	%	5/23/2020	87,673		86,737		88,623
SquareTwo Financial Corp.	(f)(j)(2)	Diversified Financials	L + 1000 PIK (L + 1000 Max PIK)		1.00	%	5/24/2019	11,026		11,026		5,977
	(f)(j)(2)		L + 950 PIK (L + 950 Max PIK)		1.00	%	5/24/2019	2,852		2,807		2,852
Valeo Foods Group Ltd. (IRL)	(f)(g)(i)(3)(GBP)	Food, Beverage & Tobacco	L + 800		1.00	%	5/8/2023	£	29,125	43,749		36,074
Vertafore, Inc.	(f)(2)	Software & Services	L + 900		1.00	%	6/30/2024	$	81,500	79,179		82,722
Vestcom International, Inc.	(f)(2)	Consumer Services	L + 850		1.00	%	4/28/2024	58,000		57,135		57,130
WireCo WorldGroup, Inc.	(2)	Capital Goods	L + 950		1.00	%	7/12/2024	11,226		11,152		11,324
Total Second Lien Senior Secured Loans										$	1,131,035	$	1,074,183
Other Senior Secured Debt—4.9%
Artesyn Technologies, Inc.	(o)(p)	Technology Hardware & Equipment	9.75	%			10/15/2020	$	16,059	$	15,625	$	14,694
Calumet Specialty Products Partners, LP	(g)(o)(p)	Energy	11.50	%			1/15/2021	13,398		13,199		15,307

See notes to consolidated financial statements.

F-30

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Direct ChassisLink, Inc.	(o)(p)	Transportation	10.00	%			6/15/2023	$	5,726	$	5,821	$	5,912
Guitar Center, Inc.	(o)(p)	Retailing	6.50	%			4/15/2019	19,256		19,003		17,475
iPayment, Inc.	(f)(o)(p)	Software & Services	9.50	%			12/15/2019	4,611		4,611		4,217
Louisiana Public Facilities Authority	(f)(k)(2)	Energy	L + 1000		1.50	%	1/1/2020	34,330		33,586		13,026
	(f)(k)(p)(2)		L + 1000				1/1/2020	10,650		10,650		4,041
Maxim Crane, LP	(o)(p)	Capital Goods	10.13	%			8/1/2024	3,821		3,821		4,088
NESCO, LLC	(o)(p)	Capital Goods	6.88	%			2/15/2021	12,885		8,624		10,566
OAG Holdings, LLC	(f)(j)(k)	Energy	8.00%, 2.00% PIK (2.00% Max PIK)				12/20/2020	21,260		18,694		1,546
PQ Corp.	(o)(p)	Materials	6.75	%			11/15/2022	1,052		1,052		1,126
RedPrairie Corp.	(o)(p)	Software & Services	7.38	%			10/15/2024	13,805		13,805		14,305
Rockport Group, LLC	(f)	Consumer Durables & Apparel	9.50	%			7/31/2022	28,516		27,913		27,422
Towergate (GBR)	(g)(i)(o)(p)(GBP)	Insurance	8.75	%			4/2/2020	£	936	1,422		1,061
Total Other Senior Secured Debt										$	177,826	$	134,786
Total Senior Debt										$	2,950,620	$	2,756,069
Subordinated Debt—23.3%
Alion Science & Technology Corp.	(f)(h)(p)	Capital Goods	11.00	%			8/19/2022	$	68,603	$	67,706	$	65,471

See notes to consolidated financial statements.

F-31

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Block Communications, Inc.	(o)(p)	Media	7.25	%		2/1/2020	$	845	$	849	$	856
Builders FirstSource, Inc.	(g)(o)(p)	Capital Goods	10.75	%		8/15/2023	1,431		1,431		1,642
Cemex Materials, LLC	(o)(p)	Materials	7.70	%		7/21/2025	58,454		61,983		61,669
ClubCorp Club Operations, Inc.	(o)(p)	Consumer Services	8.25	%		12/15/2023	693		661		735
Datatel, Inc.	(o)(p)	Software & Services	9.00	%		9/30/2023	3,320		3,212		3,519
Exemplis Corp.	(f)(j)(2)	Commercial & Professional Services	L + 700, 4.00% PIK (4.00% Max PIK)			3/23/2020	19,398		19,398		19,689
GCI, Inc.	(o)	Telecommunication Services	6.75	%		6/1/2021	890		885		912
	(o)		6.88	%		4/15/2025	13,693		13,620		13,898
GCP Applied Technologies, Inc.	(g)(o)(p)	Materials	9.50	%		2/1/2023	911		911		1,045
Genesys Telecommunications Laboratories Inc.	(o)(p)	Software & Services	10.00	%		11/30/2024	17,516		17,516		18,611
Hilding Anders (SWE)	(f)(g)(i)(j)(q)(EUR)	Consumer Durables & Apparel	13.00% PIK (13.00% Max PIK)			6/30/2021	€	112,535	130,162		77,837
	(f)(g)(i)(j)(k)(q)(EUR)		12.00% PIK (12.00% Max PIK)			12/31/2022	2,733		507		505
	(f)(g)(i)(j)(k)(q)(EUR)		12.00% PIK (12.00% Max PIK)			12/31/2023	22,230		939		2
	(f)(g)(i)(j)(k)(q)(EUR)		18.00% PIK (18.00% Max PIK)			12/31/2024	34,358		12,697		6,349

See notes to consolidated financial statements.

F-32

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Hillman Group, Inc.	(o)(p)	Consumer Durables & Apparel	6.38	%			7/15/2022	$	559	$	540	$	525
Home Partners of America	(f)(3)	Real Estate	L + 700		1.00	%	6/8/2023	75,000		73,540		74,815
JC Penney Corp., Inc.	(g)(o)	Retailing	5.65	%			6/1/2020	8,354		6,003		8,239
Jo-Ann Stores, Inc.	(o)(p)	Retailing	8.13	%			3/15/2019	10,186		10,136		10,135
Kenan Advantage Group, Inc.	(o)(p)	Transportation	7.88	%			7/31/2023	25,773		25,624		26,031
Lightower Fiber, LLC	(f)	Telecommunication Services	10.00	%			2/12/2022	11,555		11,350		11,752
	(f)(j)		12.00% PIK (12.00% Max PIK)				8/12/2025	9,999		9,840		10,219
MultiPlan, Inc.	(o)(p)	Health Care Equipment & Services	7.13	%			6/1/2024	2,336		2,336		2,459
Platform Specialty Products Corp.	(g)(o)(p)	Materials	10.38	%			5/1/2021	2,747		2,747		3,042
PQ Corp.	(f)(p)(2)	Materials	L + 1075		1.00	%	5/1/2022	133,488		130,981		138,564
Riverbed Technology, Inc.	(o)(p)	Technology Hardware & Equipment	8.88	%			3/1/2023	10,662		10,763		11,302
Solera Holdings, Inc.	(o)(p)	Software & Services	10.50	%			3/1/2024	20,864		20,141		23,472
Surgery Center Holdings, Inc.	(g)(o)(p)	Health Care Equipment & Services	8.88	%			4/15/2021	5,972		6,021		6,360
TIBCO Software, Inc.	(o)(p)	Software & Services	11.38	%			12/1/2021	22,443		21,963		22,443

See notes to consolidated financial statements.

F-33

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Vertiv Co.	(o)(p)	Technology Hardware & Equipment	9.25	%		10/15/2024	$	19,178	$	19,178	$	20,329
Total Subordinated Debt									$	683,640	$	642,427
Asset Based Finance—12.5%
Central Park Leasing SARL (LUX), Partnership Interest	(f)(g)(i)*	Capital Goods					N/A		$	64,367	$	64,509
Comet Aircraft SARL (LUX), Common Shares	(f)(g)(i)(q)	Capital Goods					549,451		49,618		49,157
GA Capital Specialty Lending Fund, Limited Partnership Interest	(f)(g)	Diversified Financials					N/A		65,145		65,145
Guardian Investors, LLC, Membership Interest	(f)(g)(q)	Diversified Financials					N/A		8,860		3,704
Innovating Partners, LLC, Membership Interest	(f)(g)(q)	Diversified Financials					N/A		11,363		4,372
LSF IX Java Investments, Ltd (IRL), Facility B	(f)(g)(i)(r)(6)(EUR)	Diversified Financials	E + 315			12/3/2019	€	56,406	51,178		51,073
Orchard Marine, Ltd. (VGB), Class B Common Stock	(f)(g)(i)(l)*	Transportation					1,964		3,069		—
Orchard Marine, Ltd. (VGB), Series A Preferred Stock	(f)(g)(i)(j)(l)(t)		9.00	%			52,782		51,825		20,502
Star Mountain SMB Multi-Manager Credit Platform, LP, Limited Partnership Interest	(f)(g)	Diversified Financials					N/A		47,487		50,638
Trade Finance Funding I, Ltd. 2013 - 1A Class B (CYM)	(f)(g)(i)(p)	Diversified Financials	10.75	%		11/13/2018	$	28,221	28,221		28,221
Toorak Capital Partners, LLC, Membership Interest	(f)(g)(q)*	Diversified Financials					N/A		6,984		6,984
Total Asset Based Finance									$	388,117	$	344,305

See notes to consolidated financial statements.

F-34

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Strategic Credit Opportunities Partners, LLC—3.6%
Strategic Credit Opportunities Partners, LLC, Units	(f)(g)(q)*	Diversified Financials				$	92,400	$	92,400	$	98,998
Total Strategic Credit Opportunities Partners, LLC								$	92,400	$	98,998
Equity/Other—6.6%
Alion Science & Technology Corp., Class A Membership Interest	(f)*	Capital Goods				N/A		$	7,350	$	6,685
AltEn, LLC, Membership Units	(f)*	Energy				2,384		2,955		—
Amtek Global Technology Pte. Ltd. (SGP), Warrants	(f)(g)(i)*(EUR)	Automobiles & Components			12/31/2017	9,991		4,636		3,379
	(f)(g)(i)*(EUR)				12/31/2018	9,991		4,785		3,413
Belk, Inc., Units	(f)	Retailing				1,642		7,846		4,600
Cengage Learning Holdings II, LP, Common Stock	(f)	Media				227,802		7,529		4,985
Education Management Corp., Common Stock	(f)*	Consumer Services				3,779,591		1,047		—
Education Management Corp., Warrants	(f) *				1/5/2022	2,320,791		371		—
Excelitas Technologies Corp., Class A Membership Interest	(f)*	Technology Hardware & Equipment				N/A		5,636		5,421
Genesys Telecommunications Laboratories, Inc., Preferred Shares	(f)*	Software Services				1,050,465		—		—
Genesys Telecommunications Laboratories, Inc., Ordinary Shares	(f)*					2,768,806		—		—
Genesys Telecommunications Laboratories, Inc., Class A Shares	(f)*					40,529		—		—

See notes to consolidated financial statements.

F-35

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)	Cost (e)		Fair Value
Genesys Telecommunications Laboratories, Inc., Class A1 – A5 Shares	(f)					3,463,150	$	120	$	686
Genesys Telecommunications Laboratories, Inc., Ordinary Shares	(f)*					41,339	—		—
Hilding Anders (SWE), Arle PIK Interest	(f)(g)(i)(q)*(EUR)	Consumer Durables & Apparel				N/A	—		—
Hilding Anders (SWE), Class A Common Stock	(f)(g)(i)(q)*(SEK)					4,503,408	132		—
Hilding Anders (SWE), Class B Common Stock	(f)(g)(i)(q)*(SEK)					574,791	25		—
Hilding Anders (SWE), Class C Common Stock	(f)(g)(i)(q)*(SEK)					213,201	—		—
Hilding Anders (SWE), Equity Options	(f)(g)(i)(q)*(SEK)				12/31/2020	236,160,807	14,988		2,253
Home Partners of America, Inc., Common Stock	(f)(l)*	Real Estate				98,053	99,725		113,013
Home Partners of America, Inc., Warrants	(f)(l)*				8/7/2024	2,674	292		607
iPayment, Inc., Common Stock	(f)*	Software & Services				538,143	1,988		950
Jacuzzi Brands, Inc., Warrants	(f)*	Capital Goods			7/3/2019	49,888	—		1,400
Jones Apparel Group Holdings, Inc., Common Stock	(f)*	Consumer Durables & Apparel				5,451	872		3,025
Keystone Australia Holdings, Pty. Ltd. (AUS), Warrants	(f)(g)(i)(s)*(AUD)	Consumer Services				1,588,469	1,019		—
KKR BPT Holdings Aggregator, LLC, Membership Interest	(f)(g)(q)*	Diversified Financials				N/A	13,200		9,835
Nine West Holdings, Inc., Common Stock	(f)*	Consumer Durables & Apparel				5,451	6,541		—
OAG Holdings, LLC, Overriding Royalty Interest	(f)	Energy				N/A	2,354		—
Petroplex Acidizing, Inc., Warrants	(f)*	Energy			12/29/2026	8	—		—

See notes to consolidated financial statements.

F-36

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate		Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)	Cost (e)		Fair Value
Polyconcept North America Holdings, Inc., Class A-1 Units	(f)*	Consumer Durables & Apparel					29,376	$	2,938	$	2,708
PQ Corp., Class B Common Stock	(f)*	Materials					18,059	3,337		3,077
Sentry Holdings, Ltd. (JEY), Common Shares A	(f)(g)(i)*(GBP)	Insurance					16,450	—		—
Sentry Holdings, Ltd. (JEY), Preferred B Shares	(f)(g)(i)*(GBP)						6,113,719	9,064		6,962
SquareTwo Financial Corp., Series A Preferred Stock	(f)(k)	Diversified Financials	12.50	%			16,044	$	5,457	$	—
Stuart Weitzman, Inc., Common Stock	(f)*	Consumer Durables & Apparel					5,451	—		1,249
Towergate (GBR), Ordinary Shares	(f)(g)(i)*(GBP)	Insurance					116,814	173		133
Willbros Group, Inc., Common Stock	*	Energy					2,810,814	7,760		9,107
Total Equity/Other								$	212,140	$	183,488
Total Investments, excluding Short Term Investments — 145.9%								$	4,326,917	$	4,025,287
Short Term Investments—0.0%
Goldman Sachs Financial Square Funds—Prime Obligations Fund FST Preferred Shares	(u)		0.74	%			5,522	$	6	$	6
Total Short Term Investments								$	6	$	6
TOTAL INVESTMENTS — 145.9%(v)								$	4,326,923	$	4,025,293
LIABILITIES IN EXCESS OF OTHER ASSETS—(45.8%)										(1,265,961		)
NET ASSETS—100.0%										$	2,759,332

See notes to consolidated financial statements.

F-37

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Company (a)(b)	Footnotes	Industry	Interest Rate	Base Rate Floor	Maturity Date (c)	No. Shares/ Principal Amount (d)		Cost (e)		Fair Value
Collateral on Deposit with Custodian—3.4%
Bank of Nova Scotia—Certificate of Deposit					3/31/2017	$	95,000	$	95,000	$	95,000
Total Collateral on Deposit with Custodian								$	95,000	$	95,000
Derivative Instruments (Note 4)—1.5%
Cross currency swaps	(f)							$	—	$	26,497
Foreign currency forward contracts	(f)							—		3,504
Interest rate swaps	(f)							—		8,862
Total return swaps	(f)(g)							—		3,397
Total Derivative Instruments								$	—	$	42,260


(a)	Security may be an obligation of one or more entities affiliated with the named company.


(b)	Non-controlled/non-affiliated investments as defined by the 1940 Act, unless otherwise indicated. Non-controlled/non-affiliated investments are investments that are neither controlled investments nor affiliated investments.


(c)	Represents maturity of debt securities and expiration of applicable equity investments.


(d)	Denominated in U.S. dollars unless otherwise noted.


(e)	Represents amortized cost for debt securities and cost for equity investments translated to U.S. dollars.


(f)	Investments classified as Level 3 whereby fair value was determined by the Company’s Board of Directors (see Note 2).

(g)

The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act. A business development company may not acquire any assets other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The Company calculates its compliance with the qualifying assets test on a “look through” basis by disregarding the value of the Company’s total return swaps and treating each loan underlying the total return swaps as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 74.7% of the Company’s total assets represented qualifying assets as of December 31, 2016.


(h)	Security or portion thereof was held within CCT New York Funding LLC (formerly, CCT SE I LLC) and was pledged as collateral supporting the amounts outstanding under the revolving credit facility with JPMorgan Chase Bank as of December 31, 2016.


(i)	A portfolio company domiciled in a foreign country. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.


(j)	The underlying credit agreement or indenture contains a PIK provision, whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. The interest rate in the schedule represents the current interest rate in effect for these investments.


(k)	Investment was on non-accrual status as of December 31, 2016.

See notes to consolidated financial statements.

F-38

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)

(l)

Affiliated investment as defined by the 1940 Act, whereby the Company owns between 5% and 25% of the portfolio company’s outstanding voting securities and the investments are not classified as controlled investments. The aggregate fair value of non-controlled, affiliated investments at December 31, 2016 represented 8.3% of the Company’s net assets. Fair value as of December 31, 2015 and December 31, 2016 along with transactions during the year ended December 31, 2016 in these affiliated investments were as follows (amounts in thousands):



			Year Ended December 31, 2016										Year Ended December 31, 2016
Non-Controlled, Affiliated Investments	Fair Value at December 31, 2015		Gross Additions (Cost)*		Gross Reductions (Cost)**			Net Unrealized Gain (Loss)			Fair Value at December 31, 2016		Net Realized Gain (Loss)			Interest Income***		Fee Income		Dividend Income
AltEn, LLC
Membership Units	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—
Term Loan	9,353		—		—			(620		)	8,733		—			—		—		—
Hilding Anders ⁽¹⁾
Subordinated Debt	94,473		13,976		(149,132		)	40,683			—		(4,827		)	12,798		—		—
Class A Common Stock	—		—		(132		)	132			—		—			—		—		—
Class B Common Stock	—		—		(25		)	25			—		—			—		—		—
Equity Options	213		—		(14,988		)	14,775			—		—			—		—		—
Home Partners of America, Inc.
Common Stock	76,608		26,518		—			9,887			113,013		—			—		—		—
Warrants	370		—		—			237			607		—			—		—		—
Orchard Marine, Ltd.
Class B Common Stock	—		—		—			—			—		—			—		—		—
Series A Preferred Stock	38,082		8,838		—			(26,418		)	20,502		—			—		—		1,810
Totals	$	219,099	$	49,332	$	(164,277	)	$	38,701		$	142,855	$	(4,827	)	$	12,798	$	—	$	1,810



*	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.



**	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

***	Includes PIK interest income.

⁽¹⁾	The Company acquired additional shares of the outstanding voting securities of this portfolio company on December 31, 2016, resulting in the investments being classified as controlled investments as of December 31, 2016.

See notes to consolidated financial statements.

F-39

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)


(m)	The interest rate on this investment is comprised of a 7.00% cash payment plus an 8.00% redemption premium, to be paid upon redemption of the notes.


(n)	Position or portion thereof unsettled as of December 31, 2016.

(o)

Security or portion thereof is held within Paris Funding, LLC and is pledged as collateral supporting the amounts outstanding under the committed facility agreement with BNP Paribas Prime Brokerage, Inc. and eligible to be hypothecated as allowed under Rule 15c2-1(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) subject to the limits of the rehypothecation agreement by and between these parties. See Note 10 “Borrowings” for additional information.


(p)	This security was acquired in a transaction that was exempt from the registration requirements of the Securities Act, pursuant to Rule 144A thereunder. This security may be resold only in transactions that are exempt from the registration requirements of the Securities Act.

(q)

Controlled investment as defined by the 1940 Act, whereby the Company owns more than 25% of the portfolio company’s outstanding voting securities or maintains the ability to nominate greater than 50% of the board representation. The aggregate fair value of controlled at December 31, 2016 represented 6.3% of the Company’s net assets. Fair value as of December 31, 2015 and December 31, 2016 along with transactions during the year ended December 31, 2016 in these controlled investments were as follows (amounts in thousands):



			Year Ended December 31, 2016										Year Ended December 31, 2016
Controlled Investments	Fair Value at December 31, 2015		Gross Additions (Cost)*		Gross Reductions (Cost)**			Net Unrealized Gain (Loss)			Fair Value at December 31, 2016		Net Realized Gain (Loss)		Interest Income		Fee Income		Dividend Income
Comet Aircraft S.A.R.L	$	52,126	$	—	$	—		$	(2,969	)	$	49,157	$	—	$	—	$	—	$	4,001
Guardian Investors, LLC	11,821		—		(1,569		)	(6,548		)	3,704		—		—		—		894
Hilding Anders
Subordinated Debt	—		144,305		—			(59,612		)	84,693		—		—		—		—
Arle PIK Interest	—		—		—			—			—		—		—		—		—
Class A Common Stock	—		132		—			(132		)	—		—		—		—		—
Class B Common Stock	—		25		—			(25		)	—		—		—		—		—
Class C Common Stock	—		—		—			—			—		—		—		—		—
Equity Options	—		14,988		—			(12,735		)	2,253		—		—		—		—
Innovating Partners, LLC	16,826		—		(2,509		)	(9,945		)	4,372		—		—		—		1,182
KKR BPT Holdings Aggregator, LLC	7,125		3,700		—			(990		)	9,835		—		—		—		—
Strategic Credit Opportunities Partners, LLC	—		92,400		—			6,598			98,998		—		— —		—		—
Toorak Capital Partners, LLC	—		6,984		—			—			6,984		—		—		—		—
Totals	$	87,898	$	262,534	$	(4,078	)	$	(86,358	)	$	259,996	$	—	$	—	$	—	$	6,077



*	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
**	Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

See notes to consolidated financial statements.

F-40

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)


(r)	Security is pledged as collateral supporting the amounts outstanding under the repurchase agreement with Credit Suisse Securities (Europe) Limited. See Note 10. “Borrowings” for additional information.


(s)	Expiration date contingent on certain events pursuant to underlying agreements.


(t)	The issuer of this investment has elected to pay the stated dividend rate upon liquidation of the investment.


(u)	7-day effective yield as of December 31, 2016.

(v)

As of December 31, 2016, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $90,073; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $388,565; the net unrealized depreciation was $298,492; and the aggregate cost of securities for Federal income tax purposes was $4,323,785.



*	Non-income producing security.


(1)	Not used.


(2)	The interest rate on these investments is subject to a base rate of 3-Month LIBOR, which at December 31, 2016 was 1.00%. The current base rate for each investment may be different from the reference rate on December 31, 2016.


(3)	The interest rate on these investments is subject to a base rate of 1-Month LIBOR, which at December 31, 2016 was 0.77%. The current base rate for each investment may be different from the reference rate on December 31, 2016.


(4)	The interest rate on these investments is subject to a base rate of 12-Month LIBOR, which at December 31, 2016 was 1.69%. The current base rate for each investment may be different from the reference rate on December 31, 2016.


(5)	The interest rate on these investments is subject to the base rate of 3-month EURIBOR, which at December 31, 2016 was (0.32%). The current base rate for each investment may be different from the reference rate on December 31, 2016.


(6)	The interest rate on these investments is subject to the base rate of 1-month EURIBOR, which at December 31, 2016 was (0.37%). The current base rate for each investment may be different from the reference rate on December 31, 2016.


(7)	The interest rate on these investments is subject to the base rate of PRIME, which at December 31, 2016 was 3.75%. The current base rate for each investment may be different from the reference rate on December 31, 2016.

See notes to consolidated financial statements.

F-41

Corporate Capital Trust, Inc. and Subsidiaries

Consolidated Schedule of Investments (continued)

As of December 31, 2016

(in thousands, except share amounts)



Abbreviations:
AUD - Australian Dollar; local currency investment amount is denominated in Australian Dollar. A$1 / US $0.720 as of December 31, 2016.
EUR - Euro; local currency investment amount is denominated in Euros. €1 / US $1.052 as of December 31, 2016.
GBP - British Pound Sterling; local currency investment amount is denominated in Pound Sterling. £1 / US $1.234 as of December 31, 2016.
SEK - Swedish Krona; local currency investment amount is denominated in Swedish Kronor. SEK1 / US $0.109 as of December 31, 2016.
AUS - Australia
CAN - Canada
CYM - Cayman Islands
GBR - United Kingdom
IRL - Ireland
JEY - Jersey
LUX - Luxembourg
SGP - Singapore
SPN - Spain
SWE - Sweden
VGB - British Virgin Islands
E = EURIBOR - Euro Interbank Offered Rate
L = LIBOR - London Interbank Offered Rate
P = PRIME - U.S. Prime Rate
PIK - Payment-in-kind; the issuance of additional securities by the borrower to settle interest payment obligations.

See notes to consolidated financial statements.

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CORPORATE CAPITAL TRUST, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Principal Business and Organization

Corporate Capital Trust, Inc. (the “Company”) was incorporated under the general corporation laws of the State of Maryland on June 9, 2010. The Company is a non-diversified closed-end management investment company and regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment objective is to provide its shareholders with current income and, to a lesser extent, long-term capital appreciation, by investing primarily in the debt of privately owned U.S. companies with a focus on originated transactions sourced through the networks of its advisers. The Company commenced business operations on June 17, 2011 and investment operations on July 1, 2011. The Company has elected to be treated as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”) and operates in a manner so as to qualify for the tax treatment applicable to RICs.

Through November 2017, the Company was externally managed by CNL Fund Advisors Company (“CNL”) and KKR Credit Advisors (US) LLC (“KKR,” and together with CNL, the “Advisers”), which were responsible for sourcing potential investments, analyzing and conducting due diligence on prospective investment opportunities, structuring investments and ongoing monitoring of the Company’s investment portfolio. Both Advisers are registered as investment advisers with the Securities and Exchange Commission (“SEC”). CNL also provided the administrative services necessary for the Company to operate. On November 14, 2017, shares of the Company’s common stock commenced trading on the New York Stock Exchange with the ticker symbol “CCT” (the “Listing”). Concurrent with the Listing, KKR acquired certain of CNL’s assets primarily used in its role as investment adviser to the Company, and in connection with that transaction, KKR became the sole investment adviser of the Company.

As of December 31, 2017 the Company had various wholly owned subsidiaries including, among others, (i) Paris Funding LLC (“Paris Funding”), CCT Tokyo Funding LLC (“CCT Tokyo Funding”) and CCT New York Funding LLC (formerly CCT SE I LLC, “CCT New York Funding”), special purpose financing subsidiaries organized for the purpose of arranging secured debt financing with banks and borrowing money to invest in portfolio companies, (ii) Halifax Funding LLC (“Halifax Funding”), a special purpose financing subsidiary organized to enter into total return swaps (“TRS”) and (iii) FCF LLC, CCT Holdings LLC and CCT Holdings II LLC, (collectively, the “Taxable Subsidiaries”), wholly-owned subsidiaries which are taxed as corporations for federal income tax purposes and were organized to hold certain equity securities of portfolio companies organized as pass-through entities for U.S. tax purposes.

2. Significant Accounting Policies

Basis of Presentation – The accompanying consolidated financial statements of the Company are prepared in accordance with the instructions to Form 10-K and accounting principles generally accepted in the United States of America ("GAAP"). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC Topic 946” ).

Principles of Consolidation – Under ASC Topic 946, the Company is precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit the Company. In accordance therewith, the Company has consolidated the results of its wholly owned subsidiaries in its consolidated financial statements. All intercompany account balances and transactions have been eliminated in consolidation.

In accordance with the guidance for the consolidation of variable interest entities (each, a “VIE”), the Company analyzes its variable interests, including its equity investments, to determine if the entity in which it has a variable interest is a variable interest entity. The Company’s analysis includes both quantitative and qualitative reviews. The Company bases its quantitative analysis on the forecasted cash flows of the entity, and its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and financial agreements. The Company also uses its quantitative and qualitative analyses to determine if it is the primary beneficiary of the VIE, and if such determination is made, it will include the accounts of the VIE in its consolidated financial statements.

The Company does not consolidate its equity interest in Strategic Credit Opportunities Partners, LLC, a joint venture with Conway Capital, an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company, (“SCJV”). For a further description of the Company’s investment in SCJV, see Note 3. “Investments”.

Use of Estimates – The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the consolidated financial statements, (ii) the reported amounts of income and expenses during the reporting periods presented and

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2. Significant Accounting Policies (continued)

(iii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates.

Cash – Cash consists of demand deposits and foreign currency.

Restricted Cash – Amounts included in restricted cash represent collections of principal and interest on investments held in a segregated custody account as collateral for one of the Company’s credit facilities. The cash is released to the Company quarterly.

Valuation of Investments – The Company measures the value of its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), issued by FASB. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC Topic 820, the Company considers its principal market to be the market that has the greatest volume and level of activity.

ASC Topic 820 defines hierarchical levels directly related to the amount of subjectivity associated with the inputs used to determine fair values of assets and liabilities. The hierarchical levels and types of inputs used to measure fair value for each level are described as follows:

Level 1 – Quoted prices are available in active markets for identical investments as of the reporting date. Publicly listed equities and debt securities, publicly listed derivatives, money market/short-term investment funds and foreign currency are generally included in Level 1. The Company does not adjust the quoted price for these investments.

Level 2 – Valuation inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. In certain cases, debt and equity securities are valued on the basis of prices from orderly transactions for similar investments in active markets between market participants and provided by reputable dealers or independent pricing services. In determining the value of a particular investment, independent pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices, market transactions in comparable investments, and various relationships between investments. Investments generally included in this category are corporate bonds and loans, convertible debt indexed to publicly listed securities, foreign currency forward contracts, cross currency and interest rate swaps and certain over-the-counter derivatives.

Level 3 – Valuation inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant judgment or estimation. Investments generally included in this category are TRS agreements, illiquid corporate bonds and loans, unlisted common and preferred stock investments, and equity options that lack observable market pricing.

In certain cases, the inputs used to measure fair value may fall within different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Depending on the relative liquidity in the markets for certain investments, the Company may transfer assets to Level 3 if it determines that observable quoted prices, obtained directly or indirectly, are not available or reliable. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and the consideration of factors specific to the investment.

Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. With respect to the Company’s portfolio investments for which market quotations are not readily available, the Company’s board of Directors (the "Board") is responsible for determining in good faith the fair value of the Company’s portfolio investments in accordance with the valuation policy and procedures approved by the Board, based on, among other things, the input of the Company’s Advisers and management, its audit committee, and independent third-party valuation firms.

The Company and the Board conduct the fair value determination process on a quarterly basis and any other time when a decision regarding the fair value of the portfolio investments is required. A determination of fair value involves subjective judgments and estimates. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been determined had a readily available market value existed for such investments, and the differences could be material. Further, such investments are generally less liquid than publicly traded securities. If the Company were required to liquidate a portfolio

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2. Significant Accounting Policies (continued)

investment that does not have a readily available market value in a forced or liquidation sale, the Company could realize significantly less than the value recorded by the Company.

The Company and its Advisers undertake a multi-step valuation process each quarter for determining the fair value of the Company’s investments the market prices of which are not readily available, as described below:


•	Each portfolio company or investment is initially valued by the Company’s independent third party valuation firm (external valuation), which provides a valuation range and/or KKR (internal valuation).


•	Valuation recommendations are formulated and documented by KKR and reviewed by KKR’s valuation committee. The KKR valuation committee then provides its valuation recommendation for each portfolio investment, along with supporting documentation, to the Company.


•	After the Company’s management has substantially completed its review, it forwards the valuation recommendations and supporting documentation for audit committee review.


•	The Board then discusses the investment valuation recommendations with KKR and, based on those discussions and the related review process conducted by the Company’s audit committee, determines the fair value of the investments in good faith.

The valuation techniques used by the Company for the assets and liabilities that are classified as Level 3 in the fair value hierarchy are described below.

Senior Debt and Subordinated Debt: Senior debt and subordinated debt investments are initially valued at transaction price and are subsequently valued using (i) market data for similar instruments (e.g., recent transactions or indicative broker quotes), (ii) comparisons to benchmark derivative indices or (iii) valuation models. Valuation models are generally based on yield analysis and discounted cash flow techniques, where the key inputs are based on relative value analyses and the assignment of risk-adjusted discounted rates, based on the analysis of similar instruments from similar issuers. In addition, an illiquidity discount is applied where appropriate.

Equity/Other Investments: Equity/other investments are initially valued at transaction price and are subsequently valued using valuation models in the absence of readily observable market prices. Valuation models are generally based on (i) market and income (discounted cash flow) approaches, in which various internal and external factors are considered, and (ii) earnings before interest, taxes, depreciation and amortization (“EBITDA”) valuation multiples analysis. Factors include key financial inputs and recent public and private transactions for comparable investments. Key inputs used for the discounted cash flow approach include the weighted average cost of capital and assumed inputs used to calculate terminal values, such as EBITDA exit multiples. The fair value for a particular investment will generally be within the value range conclusions derived by the two approaches. Upon completion of the valuations conducted, an illiquidity discount is applied where appropriate.

The Company relies primarily on information provided by managers of private investment funds in valuing the Company’s investments in such funds. KKR monitors the valuation methodology used by the asset manager and/or issuer of the private investment fund. Following procedures adopted by the Board, in the absence of specific transaction activity in a particular private investment fund, the Board considers whether it is appropriate, in light of all relevant circumstances, to value the Company’s investment at the net asset value reported by the private investment fund at the time of valuation or to adjust the value to reflect a premium or discount.

Total Return Swaps: The Company valued its TRS in accordance with the TRS agreements between its wholly owned subsidiary and the TRS counterparty, which collectively established the TRS. Pursuant to the TRS agreements, the value of the TRS was based on (i) the increase or decrease in the value of the TRS assets relative to the notional amounts, (ii) collected and accrued interest income and fee income related to the TRS assets, (iii) TRS financing costs on the TRS settled notional amounts, and (iv) certain other expenses incurred under the TRS. The TRS assets were valued pursuant to the valuation algorithm specified in the TRS agreements, including reliance on indicative bid prices provided by independent third-party pricing services. Bid prices reflect the highest price that market participants may be willing to pay. On a quarterly basis, the Company’s Advisers reviewed, tested and compared (i) the indicative bid prices assigned to each TRS asset by the TRS counterparty with (ii) pricing inputs that are independently sourced by the Company’s management and/or its Advisers from third-party pricing services. Additionally, the Company’s Advisers reviewed the calculations of (i) collected and accrued interest, (ii) TRS financing costs, and (iii) realized gains and losses as included components of the TRS fair value. For additional disclosures on the Company’s TRS, including quantitative disclosures of the current period fair value components, see Note 4. “Derivative Instruments.”

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2. Significant Accounting Policies (continued)

The Company utilizes several valuation techniques that use unobservable pricing inputs and assumptions in determining the fair value of its Level 3 investments. The valuation techniques, as well as the key unobservable inputs that have a significant impact on the Company’s Level 3 valuations, are described in Note 5. “Fair Value of Financial Instruments.” The unobservable pricing inputs and assumptions may differ by asset and in the application of the Company’s valuation methodologies. The reported fair value estimates could vary materially if the Company had chosen to incorporate different unobservable pricing inputs and other assumptions.

Security Transactions, Realized/Unrealized Gains or Losses, and Income Recognition – Investment transactions are recorded on the trade date. The Company measures realized gains or losses from the sale of investments using the specific identification method. Realized gains or losses are measured by the difference between the net proceeds from the sale and the amortized cost basis of the investment without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The amortized cost basis of investments includes (i) the original cost and (ii) adjustments for the accretion/amortization of market discounts and premiums, original issue discount and loan origination fees. The Company reports changes in fair value of investments as a component of net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

Interest Income – Interest income is recorded on an accrual basis and includes amortization of premiums to par value and accretion of discounts to par value. Discounts and premiums to par value on securities purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. Generally, loan origination, closing, commitment and other fees received by the Company directly or indirectly from borrowers in connection with the closing of investments are accreted over the contractual life of the debt investment as interest income based on the effective interest method. Upon prepayment of a debt investment, any prepayment penalties and unamortized loan fees and discounts are recorded as interest income.

Certain of the Company’s investments in debt securities contain a contractual payment-in-kind (“PIK”) interest provision. The PIK provisions generally feature the obligation or the option at each interest payment date of making interest payments in (i) cash, (ii) additional debt securities or (iii) a combination of cash and additional debt securities. PIK interest, computed at the contractual rate specified in the investment’s credit agreement, is accrued as interest income and recorded as interest receivable up to the interest payment date. On the interest payment dates, the Company will capitalize the accrued interest receivable attributable to PIK as additional principal due from the borrower. When additional PIK securities are received on the interest payment date, they typically have the same terms, including maturity dates and interest rates as the original securities issued. PIK interest generally becomes due at maturity of the investment or upon the investment being called by the issuer.

If the portfolio company valuation indicates the value of the PIK investment is not sufficient to cover the contractual PIK interest, the Company will not accrue additional PIK interest income and will record an allowance for any accrued PIK interest receivable as a reduction of interest income in the period the Company determines it is not collectible.

Debt securities are placed on nonaccrual status when principal or interest payments are at least 90 days past due or when there is reasonable doubt that principal or interest will be collected. Generally, accrued interest is reversed against interest income when a debt security is placed on nonaccrual status. Interest payments received on debt securities on nonaccrual status may be recognized as interest income or applied to principal based on management’s judgment. Debt securities on nonaccrual status are restored to accrual status when past due principal and interest are paid and, in management’s judgment, such investments are likely to remain current on interest payment obligations. The Company may make exceptions to this treatment if the debt security has sufficient collateral value and is in the process of collection.

Fee Income – KKR or its affiliates may provide financial advisory services to portfolio companies and in return may receive fees for capital structuring services. KKR is obligated to remit to the Company any earned capital structuring fees based on the pro-rata portion of the Company’s investment in co-investment transactions and originated investments. These fees are generally nonrecurring and are recognized as fee income by the Company upon the investment closing date.

The Company may also receive fees for commitments, amendments and other services rendered to portfolio companies. Such fees are recognized as fee income when earned or the services are rendered.

Dividend Income – Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital.

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2. Significant Accounting Policies (continued)

Generally, the Company will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated earnings in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

Derivative Instruments – The Company’s derivative instruments include foreign currency forward contracts, cross currency swaps and interest rate swaps and, until June 30, 2017, the TRS. The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. TRS unrealized appreciation (depreciation) was composed of accrued interest income, net of accrued TRS financing charges owed, and the overall change in fair value of the TRS assets. Realized gains and losses that occur upon the cash settlement of the derivative instruments are included in net realized gains (losses) on derivative instruments in the condensed consolidated statements of operations. TRS realized gains and losses are composed of realized gains or losses on the TRS assets and the net interest and fees received or paid on the quarterly TRS settlement date.

Deferred Financing Costs – Financing costs, including upfront fees, commitment fees and legal fees related to the Company’s credit facilities and term loan and the TRS are deferred and amortized over the life of the related financing instrument using either the effective interest method or straight-line method. The amortization of deferred financing costs is included in interest expense in the consolidated statements of operations.

Paid In Capital – The Company recorded the proceeds from the sale of its common stock on a net basis to (i) capital stock and (ii) paid-in capital in excess of par value, excluding selling commissions and marketing support fees.

Foreign Currency Translation, Transactions and Gains/Losses – Foreign currency amounts are translated into U.S. dollars on the following basis: (i) at the exchange rate on the last business day of the reporting period for the fair value of investment securities, other assets and liabilities; and (ii) at the prevailing exchange rate on the respective recording dates for the purchase and sale of investment securities, income, expenses, gains and losses.

Net assets and fair values are presented based on the applicable foreign exchange rates described above and the Company does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held; therefore, fluctuations related to foreign exchange rate conversions are included with the net realized gains (losses) and unrealized appreciation (depreciation) on investments.

Net realized gains or losses on foreign currency transactions arise from sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded by the Company and the U.S. dollar equivalent of the amounts actually received or paid by the Company.

Unrealized appreciation (depreciation) from foreign currency translation for foreign currency forward contracts and cross currency swaps is included in net change in unrealized appreciation (depreciation) in derivative instruments in the consolidated statements of operations and is included with unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of assets and liabilities. Unrealized appreciation (depreciation) from foreign currency translation for other receivables or payables is presented as net change in unrealized appreciation (depreciation) in foreign currency translation in the consolidated statements of operations.

Management Fees – The Company incurs a base management fee (recorded as investment advisory fees) and performance-based incentive fees, including (i) a subordinated incentive fee on income and (ii) an incentive fee on capital gains, due to its Advisers pursuant to an investment advisory agreement described in Note 6. “Related Party Transactions.” The two components of performance-based incentive fees are combined and expensed in the consolidated statements of operations and accrued in the consolidated statements of assets and liabilities as accrued performance-based incentive fees. Pursuant to the terms of the investment advisory agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory agreement) based on the Company’s realized capitalized gains on a cumulative basis from inception, net of all realized capital losses on a cumulative basis and unrealized depreciation at year end, less the aggregate amount of any previously paid capital gains incentive fees. Although the terms of the investment advisory agreement do not provide for the inclusion of unrealized gains in the calculation of the incentive fee on capital gains, pursuant to an interpretation of an American Institute of Certified Public Accountants Technical Practice Aid for investment companies, for GAAP purposes, the Company includes unrealized gains in the calculation of the incentive fee on capital gains expense and related accrued incentive fee on capital gains. This accrual reflects the incentive fees that would be payable to the

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2. Significant Accounting Policies (continued)

Advisers if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Advisers are not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

Offering Expenses – Offering expenses incurred in connection with the Company’s Offering, including reimbursement payments to the Advisers, but excluding selling commissions and marketing support fees, were accumulated monthly during the Offering and capitalized as deferred offering expenses and then subsequently expensed over a 12-month period.

Earnings per Share – Earnings per share is calculated based upon the weighted average number of shares of common stock outstanding during the reporting period.

Distributions – Distributions to the Company’s shareholders are recorded as of the record date. Subject to the discretion of the Company’s Board and applicable legal restrictions, the Company intends to declare and pay such distributions on a quarterly basis.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of any distributions the Company declares in cash on behalf of its shareholders, unless a shareholder elects to receive cash. As a result, if the Company's Board authorizes, and the Company declares, a cash dividend, then the Company's shareholders who have not "opted out" of the Company's dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of the Company's common stock, rather than receiving the cash dividend. If the Company's shares are trading at a discount to net asset value and the Company is otherwise permitted under applicable law to purchase such shares, the Company may purchase shares in the open market in connection with the Company's obligations under the dividend reinvestment plan. However, the Company reserves the right to issue new shares of the Company's common stock in connection with the Company's obligations under the dividend reinvestment plan even if the Company's shares are trading below net asset value.

Federal Income Taxes – The Company has elected to be treated for federal income tax purposes, and intends to maintain its qualification annually, as a RIC under Subchapter M of the Code. Generally, a RIC is not subject to federal income taxes on distributed income and gains if it distributes at least 90% of its “Investment Company Taxable Income,” as defined in the Code. The Company intends to distribute sufficient amounts to maintain its RIC status and minimize income taxes on undistributed capital gains and investment company taxable income.

The Company is generally subject to nondeductible federal excise taxes if it does not distribute to its shareholders an amount at least equal to the sum of (i) 98% of its net ordinary income for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period generally ending on October 31 of the calendar year and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which the Company paid no federal income tax. The Company may pay a 4% nondeductible federal excise tax on under-distribution of capital gains and ordinary income.

The Taxable Subsidiaries hold certain of the Company’s portfolio investments. The Taxable Subsidiaries are consolidated for GAAP reporting purposes, and the portfolio investments held by such entities are included in the consolidated financial statements. The Taxable Subsidiaries may generate income tax expense, or benefit, and related tax assets and liabilities. As a result, any such income tax expense, or benefit and the related tax assets and liabilities are recorded in the Company’s consolidated financial statements. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. Similarly, certain foreign investments, which may be held outside of the Taxable Subsidiaries, might incur foreign income taxes and have deferred tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company recognizes in its consolidated financial statements the effect of a tax position when it is deemed more likely than not, based on the technical merits, that the position will be sustained upon examination. Tax benefits of positions not deemed to meet the more-likely-than-not threshold are recorded as a tax expense in the current year. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes – Overall –Recognition, nor did it have any unrecognized tax benefits for the periods presented herein. Although the Company and the Taxable Subsidiaries file foreign, federal and state tax returns, their major tax jurisdiction is federal.

Permanent book and tax basis differences are reclassified among the Company’s capital accounts, as appropriate on an annual basis. Additionally, the tax character and amount of distributions is determined in accordance with the Code which differs from GAAP.

Reclassifications – Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year presentation.

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2. Significant Accounting Policies (continued)

As of September 30, 2017, the Company has revised its investment categories to reclassify investments that were previously categorized as Structured Products and Equity/Other to three new categories of Asset Based Finance, Strategic Credit Opportunities Partners (“SCJV”) and Equity/Other. This revision separates the equity investment in the Company’s joint venture, SCJV, from other equity investments and better distinguishes between corporate equity investments and investments that are primarily collateralized by hard assets, financial assets or investments in specialty finance platforms that provide exposure to hard assets or financial assets. The Company’s Asset Based Finance investments may be in the form of debt, equity, derivatives or private placement funds. The Company has adjusted the presentation of its asset categories for all periods presented to conform to the current period presentation.

The following table provides additional details of the fair value of investments reclassified by category as of December 31, 2016 (in thousands):



	As Filed December 31, 2016		Adjustments			Adjusted December 31, 2016
Asset Category
Asset Based Finance	$	—	$	344,305		$	344,305
Strategic Credit Opportunities Partners, LLC	—		98,998			98,998
Structured Products	210,871		(210,871		)	—
Equity/Other	415,920		(232,432		)	183,488
Total	$	626,791	$	—		$	626,791

The Company also separately presented investment adviser expenses in the consolidated statements of operations. This expense was previously included with other operating expenses and has been reclassified for all periods presented.

On October 31, 2017, in anticipation of the Listing, the Company filed Articles of Amendment to its Articles of Incorporation with the State Department of Assessments and Taxation of the State of Maryland to effect a 1-for-2.25 reverse stock split of the Company’s shares of common stock. As a result of the reverse stock split, every 2.25 shares of the Company’s common stock issued and outstanding were automatically combined into one share of common stock. In connection with the reverse stock split, the Company eliminated all outstanding fractional shares by rounding up the numbers of fractional shares held by each of the Company’s shareholders to the nearest whole number of shares as of November 3, 2017. The reverse stock split did not modify the rights or preferences of the Company’s common stock. All prior year share amounts have been reclassified to reflect the reverse stock split. A summary of the Company’s net asset value and earnings per share after adjusting for the reverse stock split is as follows:



	As of December 31,
	2017		2016
Shares outstanding (as reported)	127,130,589		309,041,548
Shares outstanding (pro-forma)	N/A		137,351,799
Net asset value per share (as reported)	$	19.55	$	8.93
Net asset value per share (pro-forma)	N/A		20.09



	As of December 31,
	2017		2016		2015
Weighted average number of shares of common stock outstanding (as reported)	136,715,587		304,493,054		254,845,972
Weighted average number of shares of common stock outstanding (pro-forma)	N/A		135,330,246		113,264,877
Net investment income per share (as reported)	$	1.54	$	0.69	$	0.69
Net investment income per share (pro-forma)	N/A		1.55		1.56
Diluted and basic earnings per share (as reported)	$	1.27	$	0.80	$	(0.15	)
Diluted and basic earnings per share	N/A		1.80		(0.34		)

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2. Significant Accounting Policies (continued)

Recent Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this ASU supersedes the revenue recognition requirements in Revenue Recognition (Topic 605). Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No. 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the guidance in ASU No. 2014-09 and has the same effective date as the original standard. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, an update on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which includes amendments for enhanced clarification of the guidance. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Revenue from Contracts with Customers (Topic 606), the amendments in this update are of a similar nature to the items typically addressed in the technical corrections and improvements project. Additionally, in February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, an update clarifying that a financial asset is within the scope of Subtopic 610-20 if it is deemed an “in-substance non-financial asset.” The Company has evaluated the impact of ASU No. 2014-09, and does not expect it to have a material impact on the Company’s statement of operations.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU further clarifies how the predominance principle should be applied to cash receipts and payments relating to more than one class of cash flows. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. The ASU is to be applied retrospectively for each period presented. The Company does not expect this ASU to have a material impact on the Company’s consolidated statement of cash flows.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which modifies the presentation of the statement of cash flows and requires reconciliation to the overall change in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. As a result, the statement of cash flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The ASU is to be applied retrospectively for each period presented. The Company adopted this ASU on December 31, 2016 and the adoption has not materially impacted the presentation of the Company’s consolidated statement of cash flows.

3. Investments

The Company is engaged in a strategy to invest primarily in the debt of privately owned and thinly traded U.S. companies. The primary investment concentrations include (i) senior debt securities and (ii) subordinated debt securities. The Company’s investments may, in some cases, be accompanied by warrants, options or other forms of equity participation. The Company may separately purchase common or preferred equity interests in transactions, including non-controlling equity investments. Additionally, the Company may invest in convertible securities, derivatives and private investment funds. The Company may also co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring jointly controlled or non-controlling interests in certain investments in conjunction with participation by one or more third parties in such investment. The fair value of the Company’s investments will generally fluctuate with, among other things, changes in prevailing interest rates, the general supply of, and demand for, debt capital among private and public companies, general domestic and global economic conditions, the condition of certain financial markets, developments or trends in any particular industry and changes in the financial condition and credit quality of each security’s issuer.

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3. Investments (continued)

As of December 31, 2017 and 2016, the Company’s investment portfolio consisted of the following (in thousands):



	As of December 31, 2017
	Amortized Cost		Fair Value		Percentage of Investment Portfolio		Percentage of Net Assets
Asset Category
Senior Debt
First Lien Senior Secured Loans	$	1,712,750	$	1,672,178	42.1	%	67.3	%
Second Lien Senior Secured Loans	978,764		943,753		23.8		38.0
Other Senior Secured Debt	148,754		141,302		3.6		5.7
Total Senior Debt	2,840,268		2,757,233		69.5		111.0
Subordinated Debt	393,053		381,677		9.6		15.4
Asset Based Finance	372,035		346,507		8.7		13.9
Strategic Credit Opportunities Partners, LLC	294,028		300,652		7.6		12.1
Equity/Other	258,119		182,340		4.6		7.3
Subtotal	4,157,503		3,968,409		100.0	%	159.7
Short Term Investments	688		688				—
Total Investments	$	4,158,191	$	3,969,097			159.7	%



	As of December 31, 2016
	Amortized Cost		Fair Value		Percentage of Investment Portfolio		Percentage of Net Assets
Asset Category
Senior Debt
First Lien Senior Secured Loans	$	1,641,759	$	1,547,100	38.4	%	56.1	%
Second Lien Senior Secured Loans	1,131,035		1,074,183		26.7		38.9
Senior Secured Bonds	177,826		134,786		3.4		4.9
Total Senior Debt	2,950,620		2,756,069		68.5		99.9
Subordinated Debt	683,640		642,427		16.0		23.3
Asset Based Finance	388,117		344,305		8.5		12.5
Strategic Credit Opportunities Partners, LLC	92,400		98,998		2.5		3.6
Equity/Other	212,140		183,488		4.5		6.6
Subtotal	4,326,917		4,025,287		100.0	%	145.9
Short Term Investments	6		6				—
Total Investments	$	4,326,923	$	4,025,293			145.9	%

As of December 31, 2017, debt investments on non-accrual status represented 2.9% and 1.2% of total investments on an amortized cost basis and fair value basis, respectively. As of December 31, 2016, debt investments on non-accrual status represented 5.5% and 1.6% of total investments on an amortized cost basis and fair value basis, respectively. .

In May 2017, Amtek Global Technology Pte. Ltd. (“Amtek”), a portfolio company in which the Company has invested a total of $151.30 million as of December 31, 2017, based on amortized cost, was placed into receivership. The Company’s investments in Amtek include an investment in a portion of a term loan facility with a cost of $146.51 million (par of $141.34 million) and equity warrants with a cost of $4.78 million. On June 29, 2017, the Company and the other lenders to the term loan facility entered into an agreement among lenders (the “AAL”). The AAL effectively divided the amounts borrowed by Amtek into two facilities, Facility A and Facility B, with Facility A ranking first in order of priority. The Company’s portion of Facility A has a par amount of €82.06 million ($98.45 million as of December 31, 2017) and the Company’s portion of Facility B has a par amount of €59.28 million ($71.13 million as of December 31, 2017). Any principal payments received from or on behalf of Amtek will first be applied to Facility A and second to Facility B. Any interest payments received from or on behalf of Amtek will be applied first toward the payment of interest on Facility A at the rate of 5.0% annually and second to the repayment of Facility B. Facility B does not have a stated interest rate. Any payments applied to Facility B are expected to reduce the outstanding principal. As of December 31, 2017, the Company’s investments in Amtek have an aggregate fair value of $138.93 million.

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3. Investments (continued)

The industry composition, geographic dispersion, and local currencies of the Company’s investment portfolio as a percentage of total fair value of the Company’s investments, excluding short term investments and derivative instruments, as of December 31, 2017 and 2016 were as follows:



Industry Compositions	December 31, 2017		December 31, 2016
Capital Goods	19.3	%	21.2	%
Software & Services	11.4		8.7
Diversified Financials	10.0		8.0
SCJV	7.6		2.4
Retailing	6.7		7.9
Consumer Durables & Apparel	6.3		4.2
Automobiles & Components	5.8		5.9
Materials	5.5		6.0
Real Estate	5.0		5.4
Health Care Equipment & Services	3.6		4.9
Transportation	3.2		4.0
Commercial & Professional Services	2.9		2.1
Household & Personal Products	2.6		0.9
Energy	2.1		4.0
Consumer Services	2.0		3.0
Technology Hardware & Equipment	1.4		4.4
Food & Staples Retailing	1.3		1.3
Media	1.2		0.9
Insurance	0.7		1.1
Food, Beverage & Tobacco	0.5		1.4
Semiconductors & Semiconductor Equipment	0.5		—
Banks	0.4		—
Pharmaceuticals, Biotechnology & Life Sciences	—		1.4
Telecommunication Services	—		0.9
Total	100.0	%	100.0	%
Geographic Dispersion ⁽¹⁾
United States	84.4	%	83.7	%
Singapore	3.5		3.5
Luxembourg	2.9		4.7
Sweden	2.7		2.2
Canada	2.5		—
Ireland	2.0		2.2
United Kingdom	0.7		1.5
Virgin Islands, British	0.5		0.5
Cayman Islands	0.5		0.7
Jersey	0.2		—
Australia	0.1		0.3
Remaining Countries	—		0.7
Total	100.0	%	100.0	%
Local Currency
U.S. Dollar	91.3	%	88.7	%
Euro	7.8		8.6
Canadian Dollar	0.7		—
British Pound Sterling	0.2		2.3
Swedish Krona	—		0.1
Australian Dollar	—		0.3
Total	100.0	%	100.0	%


⁽¹⁾	The geographic dispersion is determined by the portfolio company’s country of domicile or the jurisdiction of the security’s issuer.

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3. Investments (continued)

Strategic Credit Opportunities Partners, LLC

In May 2016, SCJV, a joint venture between the Company and Conway Capital, LLC (“Conway”), an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company, was formed pursuant to the terms of a limited liability company agreement between the Company and Conway. Pursuant to the terms of the agreement, the Company and Conway each have 50% voting control of SCJV and are required to agree on all investment decisions as well as all other significant actions for SCJV. SCJV was formed to invest its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. The Company and Conway have agreed to provide capital to SCJV of up to $500 million in the aggregate. The Company and Conway will provide 87.5% and 12.5%, respectively, of the committed capital. As administrative agent of SCJV, the Company performs certain day-to-day management responsibilities on behalf of SCJV.

In August 2016, the Company and Conway completed the initial funding of SCJV. As part of the initial funding, the Company sold investments with a fair value of $247.24 million to SCJV, in exchange for cash and a $92.40 million equity interest in SCJV. The Company recognized a net realized loss of $(0.95) million in connection with the transaction. Conway completed its initial funding of SCJV with a cash contribution of $13.20 million. In December 2016, the Company sold investments with a fair value of $45.88 million to SCJV. The Company recognized a net realized gain of $1.03 million in connection with the transaction. In September 2017, the Company sold investments with a fair value of $373.05 million to SCJV, in exchange for cash and $201.63 million equity interest in SCJV. The Company recognized a net realized gain of $3.43 million in connection with the transaction.

On August 15, 2016, Charlotte Funding LLC (formerly CSCOP SE I LLC, “Charlotte Funding”), a wholly-owned subsidiary of SCJV, entered into a credit agreement (the “BAML Credit Agreement”), with Bank of America Merrill Lynch. The BAML Credit Agreement provides for a revolving credit facility which provides for up to $165.00 million in total commitments to Charlotte Funding (the “BAML Credit Facility”), and is secured by substantially all of the assets of Charlotte Funding. The stated borrowing rate under the BAML Credit Facility may take the form of either base rate loans or Eurocurrency rate loans and may be converted to either or during the term of the loan by delivering a notice to the BAML Credit Agreement administrative agent and State Street Bank and Trust Company, as collateral administrator, pursuant to the terms of the BAML Credit Agreement. Base rate loans shall bear interest at a rate per annum equal to the sum of (a) the fluctuating rate per annum equal to the highest of (i) the federal funds rate plus 1/2 of 1%, (ii) the prime rate set by Bank of America for such day and (iii) the 1-month LIBOR plus (b) 1.85%. Eurocurrency rate loans shall bear interest at the rate per annum equal to the sum of (a) LIBOR (or a comparable or successor rate approved by the BAML Credit Agreement administrative agent) plus (b) 1.85%. Charlotte Funding also pays a commitment fee for undrawn commitment in the amount between 0.75% and 1.75%. The BAML Credit Facility matures on August 15, 2018. As of December 31, 2017 and 2016, total outstanding borrowings under the BAML Credit Facility were $102.20 million and $152.00 million, respectively. On February 15, 2018, Charlotte Funding fully paid down and terminated the BAML Credit Agreement.

On September 29, 2017, Jersey City Funding LLC (“Jersey City Funding”), a wholly-owned subsidiary of SCJV, entered into a credit agreement (the “GS Credit Agreement”), with Goldman Sachs Bank. The GS Credit Agreement established a revolving credit facility which provides for up to $250 million in total commitments to Jersey City Funding (the “GS Credit Facility”), and is secured by substantially all of the assets of Jersey City Funding. The GS Credit Agreement contains an "accordion" feature that allows Jersey City Funding, under certain circumstances, to increase the size of the facility to a maximum of $400 million. The stated borrowing rate under the GS Credit Facility may take the form of either base rate loans or foreign currency rate loans and may be converted to either or during the term of the loan by delivering a notice to the GS Credit Agreement administrative agent and State Street Bank and Trust Company, as collateral administrator, pursuant to the terms of the GS Credit Agreement. The GS Credit Facility provides loans in U.S. dollars, Australian dollars, Euros and Pound Sterling. U.S. dollar loans will bear interest at the rate of LIBOR plus 2.25%. Foreign currency loans will bear interest at the floating rate plus the spread applicable to the specified currency as defined in the GS Credit Agreement. Jersey City Funding also pays a commitment fee of up to 0.50% on undrawn commitments. The GS Credit Facility matures on September 29, 2021. As of December 31, 2017, total outstanding borrowings under the GS Credit Facility were $166.02 million.

Below is a summary of SCJV’s portfolio, followed by a listing of the individual loans in SCJV’s portfolio as of December 31, 2017 and 2016 ($ in thousands):

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3. Investments (continued)



	As of December 31,
	2017			2016
Total debt investments⁽¹⁾	522,210			250,320
Weighted average current interest rate on debt investments ⁽²⁾	7.04		%	7.08		%
Number of portfolio companies in SCJV	35			36
Largest investment in a single portfolio company ⁽¹⁾	$	57,854		$	21,214
Unfunded Commitments	$	15,666		$	—


⁽¹⁾	At par amount.


⁽²⁾	Computed as the (a) annual stated interest rate on accruing debt, divided by (b) total debt at par amount.

Strategic Credit Opportunities Partners, LLC Portfolio

As of December 31, 2017 (in thousands)



Company (a)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date	No. Shares/ Principal Amount (b)		Cost		Fair Value
First Lien Senior Secured Loan—105.8%
A10 Capital, LLC	(c)(1)	Real Estate	L + 700	1.00	%	1/21/2022	$	32,688	$	33,310	$	33,015
Acosta Holdco, Inc.	(f)(1)	Commercial & Professional Services	L + 325	1.00	%	9/26/2021	4,002		3,797		3,536
American Freight, Inc.	(c)(1)	Retailing	L + 625	1.00	%	10/31/2020	31,709		31,709		31,709
Bay Club, Co.	(f)(1)	Consumer Services	L + 650	1.00	%	8/31/2022	8,887		8,953		9,021
Belk, Inc.	(2)	Retailing	L + 475	1.00	%	12/12/2022	4,153		3,742		3,422
Brand Energy	(2)	Capital Goods	L + 425	1.00	%	6/21/2024	7,961		7,942		8,003
Casual Dining Group, Ltd. (GBR)	(c)(d)(2)(GBP)	Consumer Services	L + 825, 0.5% PIK (0.5% Max PIK)			12/7/2020	40,595		50,466		50,312
Commercial Barge Line, Co.	(f)(1)	Transportation	L + 875	1.00	%	11/12/2020	$	7,032	6,757		4,108
David’s Bridal, Inc.	(2)	Retailing	L + 400	1.25	%	10/11/2019	3,167		3,023		2,780
Dentix (SPN)	(c)(d)(3)(EUR)	Health Care Equipment & Services	E + 825			12/1/2022	€	21,000	24,857		25,362
Harbor Freight Tools USA, Inc.	(1)	Retailing	L + 325	0.75	%	8/18/2023	2,636		2,646		2,657
KeyPoint Government Solutions, Inc.	(c)(f)(2)	Capital Goods	L + 600	1.00	%	4/18/2024	20,657		20,605		20,724
Koosharem, LLC	(f)(2)	Commercial & Professional Services	L + 650	1.00	%	5/15/2020	20,997		19,240		20,507
Marshall Retail Group, LLC	(c)(2)	Retailing	L + 600	1.00	%	8/25/2020	16,262		15,340		15,605

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3. Investments (continued)



Company (a)	Footnotes	Industry	Interest Rate		Base Rate Floor		Maturity Date	No. Shares/ Principal Amount (b)		Cost		Fair Value
MedAssets, Inc.	(1)	Health Care Equipment & Services	L + 450		1.00	%	10/20/2022	$	7,002	$	7,055	$	7,028
Netsmart Technologies, Inc.	(2)	Health Care Equipment & Services	L + 450		1.00	%	4/19/2023	1,956		1,967		1,981
NMI Holdings, Inc.	(c)(1)	Insurance	L + 675		1.00	%	11/10/2019	37,052		37,398		37,052
Raley’s	(f)(1)	Food & Staples Retailing	L + 525		1.00	%	5/18/2022	4,198		4,178		4,246
RedPrairie Corp.	(f)(1)	Software & Services	L + 300		1.00	%	10/12/2023	11,175		11,128		11,243
Savers, Inc.	(f)(2)	Retailing	L + 375		1.25	%	7/9/2019	9,844		9,110		9,283
Standard Aero, Ltd	(1)	Capital Goods	L + 375		1.00	%	7/7/2022	985		990		994
TIBCO Software, Inc.	(1)	Software & Services	L + 350		1.00	%	12/4/2020	19,087		18,626		19,167
Utility One Source LP	(f)(1)	Capital Goods	L + 550		1.00	%	4/18/2023	7,764		7,695		7,949
Vee Pak, LLC	(c)(f)(2)	Household & Personal Products	L + 675		1.00	%	3/9/2023	10,720		10,652		10,298
Total First Lien Senior Secured Loan										$	341,186	$	340,002
Second Lien Senior Secured Loan—26.0%
Grocery Outlet, Inc.	(2)	Food & Staples Retailing	L + 825		1.00	%	10/21/2022	$	30,000	$	30,281	$	30,122
Sungard Public Sector LLC	(c)(f)(2)	Software & Services	L + 850		1.00	%	1/31/2025	8,236		8,254		8,226
Vencore, Inc.	(f)(2)	Capital Goods	L + 875		1.00	%	5/23/2020	30,000		30,263		30,337
Total Second Lien Senior Secured Loan										$	68,798	$	68,685
Other Senior Secured Debt—6.5%
Artesyn Technologies, Inc.	(e)(f)	Technology Hardware & Equipment	9.75	%			10/15/2020	$	8,900	$	7,854	$	8,744
GCP Applied Technologies, Inc.	(e)	Materials	9.50	%			2/1/2023	4,796		5,367		5,324
Guitar Center, Inc.	(e)(f)	Retailing	6.50	%			4/15/2019	8,523		7,996		7,884
Total Other Senior Secured Debt										$	21,217	$	21,952
Total Senior Debt										$	431,201	$	430,639
Subordinated Debt—14.1%
GCI, Inc.		Telecommunication Services	6.88	%			4/15/2025	$	7,211	$	7,463	$	7,680
Hillman Group, Inc.	(e)	Consumer Durables & Apparel	6.38	%			7/15/2022	2,238		2,084		2,232
Kenan Advantage Group, Inc.	(e)(f)	Transportation	7.88	%			7/31/2023	7,692		7,529		7,961

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3. Investments (continued)



Company (a)	Footnotes	Industry	Interest Rate		Base Rate Floor	Maturity Date	No. Shares/ Principal Amount (b)	Cost		Fair Value
Solera Holdings, Inc.	(e)	Software & Services	10.50	%		3/1/2024	6,818	7,404		7,670
Total Subordinated Debt								$	24,480	$	25,543
Asset Based Finance—17.2%
GA Capital Specialty Lending Fund, Limited Partnership Interest		Diversified Financials					N/A	$	57,854	$	57,854
Total Asset Based Finance								$	57,854	$	57,854
TOTAL INVESTMENTS — 169.6%								$	513,535	$	514,036


(a)	Security may be an obligation of one or more entities affiliated with the named company.


(b)	Denominated in U.S. dollars unless otherwise noted.


(c)	Investments classified as Level 3 whereby fair value was determined by the Company's Board of Trustees (See Note 2).


(d)	A portfolio company domiciled in a foreign country. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.


(e)	This security was acquired in a transaction that was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Rule 144A thereunder. This security may be resold only in transactions that are exempt from the registration requirements of the Securities Act, normally to qualified institutional buyers.


(f)	This investment is held by both the Company and SCJV as of December 31, 2017.


(1)	The interest rate on these investments is subject to a base rate of 1-Month LIBOR, which at December 31, 2017 was 1.56%.The current base rate for each investment may be different from the reference rate on December 31, 2017.


(2)	The interest rate on these investments is subject to a base rate of 3-Month LIBOR, which at December 31, 2017 was 1.69%. The current base rate for each investment may be different from the reference rate on December 31, 2017.


(3)	The interest rate on these investments is subject to a base rate of 3-Month EURIBOR, which at December 31, 2017 was (0.33)%. The current base rate for each investment may be different from the reference rate on December 31, 2017.

Abbreviations:

GBP - British Pound Sterling; local currency investment amount is denominated in Pound Sterling. £1/US$ 1.350 as of December 31, 2017.

EUR - Euro; local currency investment amount is denominated in Euros. €1/US.$1.200 as of December 31, 2017.

GBR - United Kingdom

SPN - Spain

L - LIBOR - London Interbank Offered Rate, typically 1 or 3-Month

P - PRIME - U.S. Prime Rate

PIK - Payment-in-kind; the issuance of additional securities by the borrower to settle interest obligations.

E - EURIBOR - Euro Interbank Offered Rate

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3. Investments (continued)

Strategic Credit Opportunities Partners, LLC Portfolio

As of December 31, 2016 (in thousands)



Company (a)	Footnotes	Industry	Interest Rate	Base Rate Floor		Maturity Date	Principal Amount (b)		Cost		Fair Value
First Lien Senior Secured Loans —130.9%
ABILITY Network, Inc.	(e)(1)	Health Care Equipment & Services	L + 500	1.00	%	5/14/2021	$	8,812	$	8,713	$	8,856
Bay Club, Co.	(1)	Consumer Services	L + 650	1.00	%	8/31/2022	8,977		9,056		9,056
Belk, Inc.	(1)	Retailing	L + 475	1.00	%	12/12/2022	4,198		3,718		3,635
CityCenter Holdings, LLC	(2)	Real Estate	L + 325	1.00	%	10/16/2020	4,755		4,781		4,818
Commercial Barge Line, Co.	(1)	Transportation	L + 875	1.00	%	11/12/2020	7,417		7,050		7,021
David’s Bridal, Inc.	(1)	Retailing	L + 400	1.25	%	10/11/2019	6,792		6,367		6,025
Grocery Outlet, Inc.	(1)	Food & Staples Retailing	L + 400	1.00	%	10/21/2021	2,923		2,891		2,927
Gymboree Corp.	(e)(1)	Retailing	L + 350	1.50	%	2/23/2018	4,385		3,376		2,344
Harbor Freight Tools USA, Inc.	(1)	Retailing	L + 300	0.75	%	8/18/2023	2,677		2,688		2,719
inVentive Health, Inc.	(1)	Health Care Equipment & Services	L + 375	1.00	%	11/9/2023	8,750		8,833		8,842
Koosharem, LLC	(e)(1)	Commercial & Professional Services	L + 650	1.00	%	5/15/2020	21,214		18,858		19,225
MedAssets, Inc.	(3)	Health Care Equipment & Services	L + 550	1.00	%	10/19/2022	7,073		7,136		7,179
Neiman Marcus Group, LLC	(3)	Retailing	L + 325	1.00	%	10/25/2020	4,876		4,532		4,253
Netsmart Technologies, Inc.	(1)	Health Care Equipment & Services	L + 450	1.00	%	4/19/2023	1,976		1,988		1,987
RedPrairie Corp.	(3)	Software & Services	L + 350	1.00	%	10/12/2023	11,288		11,233		11,431
Riverbed Technology, Inc.	(3)	Technology Hardware & Equipment	L + 325	1.00	%	4/25/2022	7,971		8,042		8,040
Savers, Inc.	(1)	Retailing	L + 375	1.25	%	7/9/2019	9,948		8,835		9,258
Standard Aero, Ltd.	(1)	Capital Goods	L + 425	1.00	%	7/7/2022	995		1,002		1,004
TIBCO Software, Inc.	(e)(3)	Software & Services	L + 550	1.00	%	12/4/2020	19,232		18,698		19,347
TruGreen, LP	(3)	Consumer Services	L + 550	1.00	%	4/13/2023	9,950		10,111		10,112
Total First Lien Senior Secured Loans									$	147,908	$	148,079
Second Lien Senior Secured Loans—11.2%
Applied Systems, Inc.	(e)(1)	Software & Services	L + 650	1.00	%	1/24/2022	$	7,461	$	7,499	$	7,556

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3. Investments (continued)



Company (a)	Footnotes	Industry	Interest Rate		Base Rate Floor	Maturity Date	Principal Amount (b)		Cost		Fair Value
Misys, Ltd. (GBR)	(c)(e)	Software & Services	12.00	%		6/12/2019	4,866		5,064		5,177
Total Second Lien Senior Secured Loans									$	12,563	$	12,733
Senior Secured Bonds—20.7%
Artesyn Technologies, Inc.	(d)(e)	Technology Hardware & Equipment	9.75	%		10/15/2020	$	8,900	$	7,572	$	8,143
Calumet Specialty Products Partners, LP	(d)(e)	Energy	11.50	%		1/15/2021	6,579		7,433		7,517
Guitar Center, Inc.	(d)(e)	Retailing	6.50	%		4/15/2019	8,523		7,626		7,735
Total Senior Secured Bonds									$	22,631	$	23,395
Total Senior Debt									$	183,102	$	184,207
Subordinated Debt—56.9%
Builders FirstSource, Inc.	(d)(e)	Capital Goods	10.75	%		8/15/2023	$	6,564	$	7,460	$	7,533
Cequel Communications Holdings, LLC	(d)	Media	5.13	%		12/15/2021	7,426		7,496		7,556
ClubCorp Club Operations, Inc.	(d)(e)	Consumer Services	8.25	%		12/15/2023	2,773		2,900		2,939
GCI, Inc.	(e)	Telecommunication Services	6.88	%		4/15/2025	7,211		7,490		7,319
GCP Applied Technologies, Inc.	(d)(e)	Materials	9.50	%		2/1/2023	4,796		5,458		5,503
Hillman Group, Inc.	(d)(e)	Consumer Durables & Apparel	6.38	%		7/15/2022	2,238		2,057		2,104
Jo-Ann Stores, Inc.	(d)(e)	Retailing	8.13	%		3/15/2019	829		815		825
Kenan Advantage Group, Inc.	(d)(e)	Transportation	7.88	%		7/31/2023	7,692		7,507		7,769
Manitowoc Foodservice, Inc.		Capital Goods	9.50	%		2/15/2024	6,622		7,465		7,632
Platform Specialty Products Corp.	(d)(e)	Materials	10.38	%		5/1/2021	6,813		7,123		7,545
Solera Holdings, Inc.	(d)(e)	Software & Services	10.50	%		3/1/2024	6,818		7,474		7,670
Total Subordinated Debt									$	63,245	$	64,395
TOTAL INVESTMENTS — 219.7%									$	246,347	$	248,602


(a)	Security may be an obligation of one or more entities affiliated with the named company.


(b)	Denominated in U.S. dollars unless otherwise noted.


(c)	A portfolio company domiciled in a foreign country. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.


(d)	This security was acquired in a transaction that was exempt from the registration requirements of the Securities Act pursuant to Rule 144A thereunder. This security may be resold only in transactions that are exempt from the registration requirements of the Securities Act.


(e)	This investment is held by both the Company and SCJV as of December 31, 2016.

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3. Investments (continued)


(f)	The interest rate on these investments is subject to a base rate of 3-Month LIBOR, which at December 31, 2016 was 1.00%. The current base rate for each investment may be different from the reference rate on December 31, 2016.


(g)	The interest rate on these investments is subject to a base rate of 2-Month LIBOR, which at December 31, 2016 was 0.82%. The current base rate for each investment may be different from the reference rate on December 31, 2016.


(h)	The interest rate on these investments is subject to a base rate of 1-Month LIBOR, which at December 31, 2016 was 0.77%. The current base rate for each investment may be different from the reference rate on December 31, 2016.



Abbreviations:

GBR - United Kingdom

L - LIBOR - London Interbank Offered Rate, typically 3-Month

Below is selected balance sheet information for SCJV as of December 31, 2017 and 2016 (in thousands):



	December 31, 2017		December 31, 2016
Selected Balance Sheet Information
Total investments, at fair value	$	514,036	$	248,602
Cash and other assets	101,529		16,876
Total assets	$	615,565	$	265,478
Debt	$	268,221	$	152,000
Other liabilities	3,741		338
Total liabilities	$	271,962	$	152,338
Member’s equity	$	343,602	$	113,140

Below is selected statement of operations information for SCJV for the years ended December 31, 2017 and 2016 (in thousands):



	Year Ended December 31,
	2017			2016
Selected Statement of Operation Information
Total investment income	$	24,466		$	6,910
Expenses
Interest expense	6,480			1,553
Custodian and accounting fees	167			79
Administrative services	179			21
Professional services	51			94
Other	13			4
Total expenses	6,890			1,751
Net investment income	17,576			5,159
Net realized and unrealized losses	(4,615		)	2,381
Net increase in net assets resulting from operations	$	12,961		$	7,540

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4. Derivative Instruments

The following is a summary of the fair value and location of the Company’s derivative instruments in the consolidated statements of assets and liabilities held as of December 31, 2017 and 2016 (in thousands):



		Fair Value
Derivative Instrument	Statement Location	December 31, 2017			December 31, 2016
Cross currency swaps	Unrealized appreciation on swap contracts	$	—		$	26,748
Cross currency swaps	Unrealized depreciation on swap contracts	(29,604		)	(251		)
Foreign currency forward contracts	Unrealized appreciation on foreign currency forward contracts	1,194			3,504
Foreign currency forward contracts	Unrealized depreciation on foreign currency forward contracts	(3,401		)	—
Interest rate swaps	Unrealized appreciation on swap contracts	3,763			8,862
TRS	Unrealized appreciation on swap contracts	—			3,397
Total		$	(28,048	)	$	42,260

Net realized and unrealized gains and losses on derivative instruments recorded by the Company for the years ended December 31, 2017 and 2016 are in the following locations in the consolidated statements of operations (in thousands):



		Net Realized Gains (Losses)
		Year Ended December 31,
Derivative Instrument	Statement Location	2017			2016			2015
Cross currency swaps	Net realized gains on swap contracts	$	22,324		$	8,328		$	541
Foreign currency forward contracts	Net realized losses on foreign currency forward contracts	(12,006		)	7,344			70,096
Interest rate swaps	Net realized gains (losses) on swap contracts	1,915			(3,851		)	—
TRS	Net realized gains on swap contracts	3,014			12,485			12,913
Total		$	15,247		$	24,306		$	83,550

		Net Unrealized Gains (Losses)
		Year Ended December 31,
Derivative Instrument	Statement Location	2017			2016			2015
Cross currency swaps	Net change in unrealized appreciation (depreciation) on swap contracts	$	(56,101	)	$	18,554		$	7,943
Foreign currency forward contracts	Net change in unrealized appreciation (depreciation) on foreign currency forward contracts	(5,711		)	1,787			(38,728		)
Interest rate swaps	Net change in unrealized appreciation (depreciation) on swap contracts	(5,099		)	2,841			6,021
TRS	Net change in unrealized appreciation (depreciation) on swap contracts	(3,397		)	16,959			(10,117		)
Total		$	(70,308	)	$	40,141		$	(34,881	)

Offsetting of Derivative Instruments

The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation and depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the consolidated statements of assets and liabilities. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of December 31, 2017 and 2016 (in thousands):

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4. Derivative Instruments (continued)



	As of December 31, 2017
Counterparty	Derivative Assets Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Received ⁽¹⁾		Cash Collateral Received ⁽¹⁾		Net Amount of Derivative Assets ⁽²⁾
J.P. Morgan Chase Bank	$	4,058	$	—	$	—	$	—	$	4,058
State Street Bank and Trust Company	899		—		—		—		899
Total	$	4,957	$	—	$	—	$	—	$	4,957
Counterparty	Derivative Liabilities Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Pledged ⁽¹⁾		Cash Collateral Pledged⁽¹⁾		Net Amount of Derivative Liabilities ⁽³⁾
J.P. Morgan Chase Bank	$	33,005	$	—	$	—	$	—	$	33,005
Total	$	33,005	$	—	$	—	$	—	$	33,005
	As of December 31, 2016
Counterparty	Derivative Assets Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Received ⁽¹⁾		Cash Collateral Received ⁽¹⁾		Net Amount of Derivative Assets ⁽²⁾
Bank of Nova Scotia	$	3,397	$	—	$	—	$	—	$	3,397
J.P. Morgan Chase Bank	39,114		—		—		—		39,114
Total	$	42,511	$	—	$	—	$	—	$	42,511
Counterparty	Derivative Liabilities Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Pledged ⁽¹⁾		Cash Collateral Pledged⁽¹⁾		Net Amount of Derivative Liabilities ⁽³⁾
J.P. Morgan Chase Bank	$	251	$	—	$	—	$	—	$	251
Total	$	251	$	—	$	—	$	—	$	251


⁽¹⁾	In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.


⁽²⁾	Net amount of derivative assets represents the net amount due from the counterparty to the Company in the event of default.


⁽³⁾	Net amount of derivative liabilities represents the net amount due from the Company to the counterparty in the event of default.

Foreign Currency Forward Contracts and Cross Currency Swaps:

The Company may enter into foreign currency forward contracts and cross currency swaps from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit counterparty risk by only dealing with well-known counterparties.

Cross currency swaps are interest rate swaps in which interest cash flows are exchanged between two parties based on the notional amounts of two different currencies. These swaps are marked-to-market by recognizing the difference between the present value of cash flows of each leg of the swaps as unrealized appreciation or depreciation. Realized gain or loss is recognized when periodic payments are received or paid and the swaps are terminated. The entire notional value of a cross currency swap is subject to the risk that the counterparty to the swap will default on its contractual delivery obligations. The Company attempts to limit counterparty risk by only dealing with well-known counterparties.

The foreign currency forward contracts and cross currency swaps open at the end of the period are generally indicative of the volume of activity during the period.

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4. Derivative Instruments (continued)

As of December 31, 2017 and 2016, the Company’s open foreign currency forward contracts were as follows ($ in thousands):



As of December 31, 2017
Foreign Currency	Settlement Date	Counterparty	Amount and Transaction		US$ Value at Settlement Date			US$ Value at December 31, 2017			Unrealized Appreciation
AUD	January 11, 2018	JP Morgan Chase Bank	A$	4,736 Sold	$	3,624		$	3,695		$	(71	)
AUD	January 11, 2018	JP Morgan Chase Bank	A$	2,000 Bought	(1,512		)	(1,560		)	48
CAD	September 11, 2018	State Street Bank and Trust Company	C$	35,650 Sold	29,328			28,429			899
EUR	January 11, 2018	JP Morgan Chase Bank	€	76,299 Sold	90,523			91,590			(1,067		)
EUR	July 8, 2019	JP Morgan Chase Bank	€	5,641 Sold	6,357			7,033			(676		)
EUR	July 8, 2019	JP Morgan Chase Bank	€	22,300 Sold	26,298			27,806			(1,508		)
GBP	January 11, 2018	JP Morgan Chase Bank	£	9,836 Bought	(13,036		)	(13,283		)	247
GBP	April 9, 2018	JP Morgan Chase Bank	£	8,433 Sold	11,345			11,424			(79		)
Total					$	152,927		$	155,134		$	(2,207	)
As of December 31, 2016
Foreign Currency	Settlement Date	Counterparty	Amount and Transaction		US$ Value at Settlement Date			US$ Value at December 31, 2016			Unrealized Appreciation
AUD	Jan 12, 2017	JP Morgan Chase Bank	A$	3,655 Sold	$	2,720		$	2,637		$	83
AUD	April 7, 2017	JP Morgan Chase Bank	A$	14,071 Sold	10,554			10,131			423
EUR	January 12, 2017	JP Morgan Chase Bank	€	8,800 Sold	9,871			9,269			602
EUR	April 7, 2017	JP Morgan Chase Bank	€	141,500 Sold	150,242			149,673			569
EUR	July 7, 2017	JP Morgan Chase Bank	€	27,300 Sold	30,812			29,009			1,803
EUR	January 14, 2020	JP Morgan Chase Bank	€	21,000 Sold	23,747			23,723			24
Total					$	227,946		$	224,442		$	3,504

As of December 31, 2017 and 2016, the Company’s open cross currency swaps were as follows ($ in thousands).



As of December 31, 2017
Counterparty	Company Receives Fixed Rate	Company Pays Fixed Rate	Termination Date	Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank	2.200% on USD notional amount of $188,109	0.000% on EUR notional amount of €177,545	12/31/2019	$	(26,362	)
JP Morgan Chase Bank	1.960% on USD notional amount of $36,092	0.500% on GBP notional amount of £29,125	6/30/2018	(3,242		)
				$	(29,604	)

As of December 31, 2016
Counterparty	Company Receives Fixed Rate	Company Pays Fixed Rate	Termination Date	Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank	0.300% on USD notional amount of $9,342	1.975% on AUD notional amount of A$13,161	6/30/2017	$	(251	)
JP Morgan Chase Bank	0.759% on USD notional amount of $175,018	0.026% on EUR notional amount of €156,546	12/31/2017	8,040
JP Morgan Chase Bank	0.590% on USD notional amount of $57,684	1.006% on GBP notional amount of £37,537	12/31/2017	10,946
JP Morgan Chase Bank	0.913% on USD notional amount of $56,506	0.750% on GBP notional amount of £39,349	6/30/2017	7,762
				$	26,497

As of December 31, 2017 and 2016, the combined contractual notional balance of the Company’s foreign currency forward contracts and cross currency swaps totaled $377.13 million and $526.50 million, respectively, all of which related to economic hedging of the Company’s foreign currency denominated debt investments. The tables below display the Company’s foreign currency denominated debt investments and foreign currency forward contracts, summarized by foreign currency type as of December 31, 2017 and 2016 (in thousands).

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4. Derivative Instruments (continued)



	Debt Investments Denominated in Foreign Currencies As of December 31, 2017						Hedges As of December 31, 2017
(in thousands)	Par Value in Local Currency		Par Value in US$		Fair Value		Net Foreign Currency Hedge Amount in Local Currency		Net Foreign Currency Hedge Amount in U.S. Dollars
Euros	€	363,882	$	436,604	$	309,257	€	281,785	$	311,287
Canadian Dollars	C$	35,641	28,354		27,640		C$	35,650	29,328
British Pound Sterling	£	—	—		—		£	27,722	34,401
Australian Dollars	A$	—	—		—		A$	2,736	2,112
Total			$	464,958	$	336,897			$	377,128



	Debt Investments Denominated in Foreign Currencies As of December 31, 2016						Hedges As of December 31, 2016
(in thousands)	Par Value in Local Currency		Par Value in US$		Fair Value		Net Foreign Currency Hedge Amount in Local Currency		Net Foreign Currency Hedge Amount in U.S. Dollars
Euros	€	425,326	$	447,315	$	339,838	€	355,146	$	389,690
British Pound Sterling	£	70,607	87,136		86,770		£	76,886	114,190
Australian Dollars	A$	31,021	22,360		11,813		A$	30,887	22,616
Total			$	556,811	$	438,421			$	526,496

Interest Rate Swaps:

Interest rate swap contracts are privately negotiated agreements between the Company and a counterparty. Pursuant to interest rate swap agreements, the Company makes fixed-rate payments to a counterparty in exchange for payments on a floating benchmark interest rate. Payments received or made are recorded as realized gains or losses. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains or losses. The value of the swap is determined by changes in the relationship between two rates of interest. The Company is exposed to credit loss in the event of non-performance by the swap counterparty. Risk may also arise from movements in interest rates. The Company attempts to limit counterparty risk by dealing only with well-known counterparties.

The interest rate swaps open at the end of the period are generally indicative of the volume of activity during the period.

As of December 31, 2017 and 2016, the Company’s open interest rate swaps were as follows ($ in thousands).



As of December 31, 2017
Counterparty	Notional Amount		Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)		Value		Unrealized Appreciation
JP Morgan Chase Bank	$	100,000	3-Month LIBOR	1.36	%	12/31/2020	$	—	$	2,282	$	2,282
JP Morgan Chase Bank	$	100,000	3-Month LIBOR	0.84	%	3/31/2019	—		1,481		1,481
							$	—	$	3,763	$	3,763
As of December 31, 2016
Counterparty	Notional Amount		Company Receives Floating Rate	Company Pays Fixed Rate		Termination Date	Premiums Paid/ (Received)		Value		Unrealized Appreciation
JP Morgan Chase Bank	$	100,000	3-Month LIBOR	1.36	%	12/31/2020	$	—	$	1,687	$	1,687
JP Morgan Chase Bank	$	100,000	3-Month LIBOR	0.84	%	3/31/2019	—		1,443		1,443
JP Morgan Chase Bank	$	400,000	3-Month LIBOR	1.43	%	12/31/2020	—		5,732		5,732
							$	—	$	8,862	$	8,862

Equity Options and Warrants:

The Company holds equity options and warrants in certain portfolio companies in an effort to achieve additional investment returns. In holding equity options and warrants, the Company bears the risk of an unfavorable change in the value of the underlying equity interests. Equity options and warrants are recorded as investments at fair value in the consolidated statements of assets and liabilities. The aggregate fair value of equity options and warrants included in investments at fair value in the

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4. Derivative Instruments (continued)

Company’s consolidated statements of assets and liabilities represented 0.05% and 0.40% of the Company’s net assets as of each of December 31, 2017 and 2016, respectively.

Below is a summary of the Company’s investments in equity options and warrants as of December 31, 2017 and 2016 (in thousands, except share amounts):



			As of December 31, 2017
Company	Expiration Date	No. Shares	Cost		Fair Value
Amtek Global Technology Pte. Ltd., Warrants	12/31/2018	9,991	$	4,785	$	—
Hilding Anders, Equity Options	12/31/2020	236,160,807	14,988		409
Home Partners of America, Inc., Warrants	8/7/2024	2,675	292		805
Petroplex Acidizing, Inc., Warrants	12/29/2026	8	—		—
Total			$	20,065	$	1,214

			As of December 31, 2016
Company	Expiration Date	No. Shares	Cost		Fair Value
Amtek Global Technology Pte. Ltd., Warrants	12/31/2017	9,991	$	4,636	$	3,379
Amtek Global Technology Pte. Ltd., Warrants	12/31/2018	9,991	4,785		3,413
Education Management Corp., Warrants	1/5/2022	2,320,791	371		—
Hilding Anders, Equity Options	12/31/2020	236,160,807	14,988		2,253
Home Partners of America, Inc., Warrants	8/7/2024	2,674	292		607
Jacuzzi Brands, Inc., Warrants	7/3/2019	49,888	—		1,400
Keystone Australia Holdings, Pty. Ltd., Warrants	⁽¹⁾	1,588,469	1,019		—
Petroplex Acidizing, Inc., Warrants	12/29/2026	8	—		—
Total			$	26,091	$	11,052


⁽¹⁾	Expiration date contingent on certain events pursuant to underlying agreements.

The Company may enter into other derivative instruments and incur other exposures with other counterparties in the future. The derivative instruments held as of December 31, 2017 and 2016 generally reflect the volume of derivative activity throughout the periods presented.

Total Return Swaps:

On June 30, 2017, Halifax Funding terminated the TRS with the Bank of Nova Scotia (“BNS” or the “Counterparty”) in conjunction with the Company’s ongoing transition towards directly originated private credit investments, as TRS arrangements were primarily limited to the financing of traded investments. The TRS arrangement with BNS consisted of a set of TRS agreements, pursuant to which Halifax Funding selected a portfolio of single-name corporate loans and/or bonds (each, a “TRS asset” and together, the “TRS assets”) with a maximum aggregate notional amount of $500 million. Under the terms of the TRS agreements, each TRS asset included in the TRS portfolio constituted a separate total return swap transaction, although all calculations, payments and transfers required to be made under the TRS agreements were calculated and treated on an aggregate basis, based upon all such transactions.

Halifax Funding received quarterly from BNS (i) all collected interest and fees generated by the TRS assets and (ii) realized gains from the sale or principal payments/paydowns of TRS assets, if any. Halifax Funding paid to BNS (i) a financing charge on the TRS settled notional amount at a rate equal to the three- month LIBOR plus 1.40% per annum and (ii) realized losses, if any, related to the TRS assets. In addition, upon the termination of the TRS arrangement, Halifax Funding paid to BNS any net realized loss, on the liquidation of TRS assets.

Halifax Funding posted collateral in the form of certificates of deposit held by a custodian. Generally, the required collateral amount was at least 33.3% of the notional amount of each TRS asset at the time that such TRS asset is confirmed for acquisition by the Counterparty.

Upon the termination of the TRS, Halifax Funding recognized $5.50 million of net realized losses, including a make-whole fee of $6.40 million, an amount based on the spread that would have been earned by BNS over the life of the TRS agreements.

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4. Derivative Instruments (continued)

As of December 31, 2016, Halifax Funding had selected 47 underlying debt investment positions and had posted $95 million in collateral, which is recorded as collateral on deposit with custodian in the consolidated statements of assets and liabilities. The following table reconciles the TRS settled notional amount, upon which the financing charge to BNS was based, to the total, or trade basis, notional amount as of December 31, 2016 (in thousands).



	December 31, 2016
Settled notional amount	$	225,919
Unsettled additions	37,737
Unsettled deletions	(4,967		)
Total notional amount	$	258,689

The following table summarizes the fair value components of the TRS portfolio (in thousands):



	December 31, 2016
Interest and fee income	$	4,215
Financing charge	(869		)
Net realized gains	441
Net unrealized depreciation of TRS assets	(390		)
TRS total fair value	$	3,397

The following table summarizes the components of the net realized gains on derivative instruments relating to the TRS (in thousands):



	Year Ended December 31,
	2017			2016			2015
Interest and fee income	$	11,526		$	19,170		$	17,242
Financing charge ⁽¹⁾	(10,131		)	(6,109		)	(4,028		)
Net realized gains (losses)	1,619			(576		)	(301		)
Net realized gains on derivative instruments related to the TRS	$	3,014		$	12,485		$	12,913


⁽¹⁾	Financing charge for the year ended December 31, 2017 includes a make-whole fee of $6.40 million.

The following is a summary of the TRS assets as of December 31, 2016 (in thousands):



Company ^(a)	Industry	Interest Rate	LIBOR Floor		Maturity Date	Notional Amount		Fair Value		Unrealized Appreciation (Depreciation)
First Lien Senior Secured Loans
ABB CONCISE Optical Group, LLC	Retailing	L + 500	1.00	%	6/15/2023	$	6,795	$	6,928	$	133
ABILITY Network, Inc. (d)	Health Care Equipment & Services	L + 500	1.00	%	5/14/2021	11,370		11,402		32
Alion Science & Technology Corp.	Capital Goods	L + 450	1.00	%	8/19/2021	2,829		2,780		(49		)
Applied Systems, Inc. (c) (d)	Software & Services	L + 300	1.00	%	1/25/2021	648		646		(2		)
Aspen Dental Management, Inc.	Health Care Equipment & Services	L + 425	1.00	%	4/29/2022	2,515		2,544		29
Bay Club Co. (c)	Consumer Services	L + 650	1.00	%	8/31/2022	4,371		4,333		(38		)
CityCenter Holdings, LLC	Real Estate	L + 325	1.00	%	10/16/2020	10,252		10,360		108
Commercial Barge Line, Co.	Transportation	L + 875	1.00	%	11/12/2020	11,452		11,194		(258		)
CPI International, Inc.	Capital Goods	L + 325	1.00	%	11/17/2017	4,569		4,512		(57		)
CSM Bakery Products	Food, Beverage & Tobacco	L + 400	1.00	%	7/3/2020	4,838		4,403		(435		)
CTI Foods Holding Co., LLC	Food, Beverage & Tobacco	L + 350	1.00	%	6/29/2020	3,776		3,678		(98		)
Distribution International, Inc. (c) (d)	Retailing	L + 500	1.00	%	12/15/2021	9,783		9,013		(770		)
DJO Finance, LLC	Health Care Equipment & Services	L + 325	1.00	%	6/8/2020	8,735		8,303		(432		)
Emerald Expositions Holding, Inc. (c)	Media	L + 375	1.00	%	6/17/2020	4,291		4,290		(1		)

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4. Derivative Instruments (continued)



Company ^(a)	Industry	Interest Rate		LIBOR Floor		Maturity Date	Notional Amount		Fair Value		Unrealized Appreciation (Depreciation)
Emerald Performance Materials, LLC (c)	Materials	L + 350		1.00	%	7/30/2021	$	634	$	633	$	(1	)
Grocery Outlet, Inc.	Food & Staples Retailing	L + 400		1.00	%	10/21/2021	4,927		4,842		(85		)
Gymboree Corp. (d)	Retailing	L + 350		1.50	%	2/23/2018	918		534		(384		)
Heartland Dental Care, LLC (c)	Pharmaceuticals, Biotechnology & Life Sciences	L + 450		1.00	%	12/21/2018	1,034		1,027		(7		)
Hillman Group, Inc.	Consumer Durables & Apparel	L + 350		1.00	%	6/30/2021	9,779		9,786		7
HUB International, Ltd.	Insurance	L + 300		1.00	%	10/2/2020	5,981		6,121		140
inVentiv Health, Inc. (c)	Health Care Equipment & Services	L + 375		1.00	%	11/9/2023	5,541		5,493		(48		)
iPayment, Inc. (d)	Software & Services	L + 525		1.50	%	5/8/2017	13,563		13,170		(393		)
Koosharem, LLC (c) (d)	Commercial & Professional Services	L + 650		1.00	%	5/15/2020	1,802		1,800		(2		)
MCS AMS Sub-Holdings, LLC (d)	Commercial & Professional Services	L + 650		1.00	%	10/15/2019	10,824		12,428		1,604
Neiman Marcus Group, LLC	Retailing	L + 325		1.00	%	10/25/2020	8,707		7,637		(1,070		)
P2 Energy Solutions, Inc. (c)	Software & Services	L + 400		1.00	%	10/30/2020	4,638		4,386		(252		)
Plaskolite, LLC (c) (d)	Materials	L + 475		1.00	%	11/3/2022	3,232		3,205		(27		)
PQ Corp. (c)	Materials	L + 425		1.00	%	11/4/2022	696		694		(2		)
Riverbed Technology, Inc.	Technology Hardware & Equipment	L + 325		1.00	%	4/25/2022	4,853		4,902		49
Savers, Inc.	Retailing	L + 375		1.25	%	7/9/2019	6,704		6,598		(106		)
Sequa Corp. (c) (d)	Capital Goods	L + 400		1.25	%	6/19/2017	677		668		(9		)
TIBCO Software, Inc. (d)	Software & Services	L + 550		1.00	%	12/4/2020	10,700		10,946		246
Triple Point Technology, Inc.	Software & Services	L + 425		1.00	%	7/10/2020	6,871		6,631		(240		)
TRUGREEN LIMITED PARTNERSHIP	Consumer Services	L + 550		1.00	%	4/13/2023	4,894		5,023		129
Vertafore Inc (c)	Software & Services	L + 325		1.00	%	6/30/2023	1,039		1,034		(5		)
GYP Holdings III Corp.	Capital Goods	L + 375		1.00	%	4/1/2021	8,268		8,382		114
Total First Lien Senior Secured Loans							$	202,506	$	200,326	$	(2,180	)
Second Lien Senior Secured Loans
Applied Systems, Inc. (d)	Software & Services	L + 650		1.00	%	1/24/2022	$	7,706	$	7,698	$	(8	)
Emerald Performance Materials, LLC	Materials	L + 775		1.00	%	8/1/2022	2,043		2,035		(8		)
Grocery Outlet, Inc. (c) (d)	Food & Staples Retailing	L + 825		1.00	%	10/21/2022	5,011		4,996		(15		)
Misys, Ltd. (b)	Software & Services	12.00	%			6/12/2019	980		1,011		31
NEP Group, Inc. (d)	Media	L + 875		1.25	%	7/22/2020	8,166		8,260		94
P2 Energy Solutions, Inc. (c) (d)	Software & Services	L + 800		1.00	%	4/30/2021	3,038		3,038		—
Talbots, Inc. (c)	Retailing	L + 850		1.00	%	3/19/2021	3,013		2,988		(25		)
Total Second Lien Senior Secured Loans							$	29,957	$	30,026	$	69
Other Senior Secured Debt
Artesyn Technologies, Inc. (d)	Technology Hardware & Equipment	9.75	%			10/15/2020	$	3,640	$	3,185	$	(455	)
Direct ChassisLink, Inc. (d)	Transportation	10.00	%			6/15/2023	12,084		12,447		363
Total Other Senior Secured Debt							$	15,724	$	15,632	$	(92	)
Subordinated Debt
GCI, Inc. (d)	Telecommunication Services	6.75	%			6/1/2021	$	1,002	$	1,027	$	25
Solera Holdings, Inc. (d)	Software & Services	10.50	%			3/1/2024	9,500		11,288		1,788
Total Subordinated Debt							$	10,502	$	12,315	$	1,813
TOTAL							$	258,689	$	258,299	$	(390	)


(a)	Security may be an obligation of one or more entities affiliated with the named company.


(b)	The investment is not a qualifying asset as defined in Section 55(a) under the 1940 Act.


(c)	TRS asset position or portion thereof unsettled as of December 31, 2016.


(d)	This investment is held both by the Company and within the TRS as of December 31, 2016.

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5. Fair Value of Financial Instruments

The Company’s investments were categorized in the fair value hierarchy described in Note 2. “Significant Accounting Policies”, as follows as of December 31, 2017 and 2016 (in thousands):



	December 31, 2017
Description	Level 1		Level 2			Level 3		Total
Senior Debt	$	—	$	623,922		$	2,133,311	$	2,757,233
Subordinated Debt	—		120,790			260,887		381,677
Asset Based Finance	—		—			346,507		346,507
Strategic Credit Opportunities Partners, LLC	—		—			300,652		300,652
Equity/Other	4,456		3,991			173,893		182,340
Subtotal	4,456		748,703			3,215,250		3,968,409
Short term investments	688		—			—		688
Total investments	$	5,144	$	748,703		$	3,215,250	$	3,969,097

Derivative Instruments	Level 1		Level 2			Level 3		Total
Assets
Cross currency swaps	$	—	$	—		$	—	$	—
Foreign currency forward contracts	—		1,194			—		1,194
Interest rate swaps	—		3,763			—		3,763
TRS	—		—			—		—
Liabilities
Cross currency swaps	—		(29,604		)	—		(29,604		)
Foreign currency forward contracts	—		(3,401		)	—		(3,401		)
Interest rate swaps	—		—			—		—
TRS	—		—			—		—
Total	$	—	$	(28,048	)	$	—	$	(28,048	)

	December 31, 2016
Description	Level 1		Level 2			Level 3		Total
Senior Debt	$	—	$	589,472		$	2,166,597	$	2,756,069
Subordinated Debt	—		237,224			405,203		642,427
Asset Based Finance	—		—			344,305		344,305
Strategic Credit Opportunities Partners, LLC	—		—			98,998		98,998
Equity/Other	—		9,107			174,381		183,488
Subtotal	—		835,803			3,189,484		4,025,287
Short term investments	6		—			—		6
Total investments	$	6	$	835,803		$	3,189,484	$	4,025,293

Derivative Instruments	Level 1		Level 2			Level 3		Total
Assets
Cross currency swaps	$	—	$	26,748		$	—	$	26,748
Foreign currency forward contracts	—		3,504			—		3,504
Interest rate swaps	—		8,862			—		8,862
TRS	—		—			3,397		3,397
Liabilities
Cross currency swaps	—		(251		)	—		(251		)
Foreign currency forward contracts	—		—			—		—
Interest rate swaps	—		—			—		—
TRS	—		—			—		—
Total	$	—	$	38,863		$	3,397	$	42,260

There were no transfers between Level 1 and Level 2 during the years ended December 31, 2017 and year ended December 31, 2016.

The carrying value of cash and foreign currency is classified as Level 1 with respect to the fair value hierarchy. The carrying values of the Company’s collateral on deposit with custodian, term loan and revolving credit facilities approximate their fair value and are classified as Level 2 with regards to the fair value hierarchy.

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5. Fair Value of Financial Instruments (continued)

At December 31, 2017, the Company held 114 distinct investment positions classified as Level 3, representing an aggregate fair value of $3.22 billion and 81.0% of the total investment portfolio. At December 31, 2016, the Company held 126 distinct investment positions classified as Level 3, representing an aggregate fair value of $3.19 billion and 79.2% of the total investment portfolio. The ranges of unobservable inputs used in the fair value measurement of the Company’s Level 3 investments as of December 31, 2017 and 2016 were as follows ($ in thousands):

As of December 31, 2017

Asset Group

Fair Value⁽¹⁾⁽²⁾

Valuation
Techniques⁽³⁾

Unobservable Inputs

Range (Weighted
Average)⁽⁴⁾

Impact to
Valuation from
an Increase in
Input ⁽⁵⁾

Senior Debt

1,769,358

Discounted Cash Flow

Discount Rate

1.30% - 24.30% (11.00%)

Decrease

363,953

Waterfall

EBITDA Multiple

4.13x - 9.53x (6.89x)

Increase

Subordinated Debt

157,420

Waterfall

EBITDA Multiple

8.61x - 10.74x (9.51x)

Increase

13,950

Option Pricing Model

Implied Volatility

27.50% (27.50%)

Increase

89,517

Discounted Cash Flow

Discount Rate

9.10% - 14.30% (9.90%)

Decrease

Asset Based Finance

208,892

Discounted Cash Flow

Discount Rate

5.39% - 18.0% (12.0%)

Decrease

116,606

Waterfall

EBITDA Multiple

1.31x - 4.00x (2.76x)

Increase

21,009

Net Asset Value

N/A

Increase

Strategic Credit Opportunities Partners

300,652

Net Asset Value

N/A

Increase

Equity/Other

173,481

Waterfall

Iliquidity Discount

0.00% - 20.00% (10.68%)

Decrease

412

Option Pricing Model

Implied Volatility

27.50% (27.50%)

Increase

Total

3,215,250

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5. Fair Value of Financial Instruments (continued)

As of December 31, 2016

Asset Group

Fair Value⁽¹⁾⁽²⁾

Valuation

Techniques⁽³⁾

Unobservable Inputs

Range (Weighted

Average)⁽⁴⁾

Impact to

Valuation from

an Increase in
Input ⁽⁵⁾

Senior Debt

1,945,023

Discounted Cash Flow

Discount Rate

4.16% - 20.38% (10.71%)

Decrease

EBITDA Multiple

4.22x - 16.24x (9.12x)

Increase

Book Value Multiple

1.29x - 1.62x (1.45x)

Increase

Interest Rate Volatility

30.00% (30.00%)

Decrease

134,483

Discounted Cash Flow/
Price Given Sale

Discount Rate

11.47% (11.47%)

Decrease

Price Given Sale of Issuer

101.00% (101.00%)

Increase

8,733

Option Pricing Model/
Liquidation Analysis

EBITDA Multiple

4.22x (4.22x)

Increase

Implied Volatility

30.00% (30.00%)

Increase

Risk Free Rate

0.54% (0.54%)

Increase

Yield

0.00% (0.00%)

Decrease

Term

0.38 years (0.38 years)

Increase

Expected Recovery
Given Liquidation

13.35% (13.35%)

Increase

8,024

Option Pricing Model/
Quote/Liquidation
Analysis

EBITDA Multiple

7.25x (7.25x)

Increase

Implied Volatility

26.80% (26.80%)

Increase

Risk Free Rate

0.97% (0.97%)

Increase

Yield

0.00% (0.00%)

Decrease

Term

1.30 years (1.30 years)

Increase

Quote

5.85% (5.85%)

Increase

Expected Recovery
Given Liquidation

0.00% (0.00%)

Increase

1,546

Liquidation Analysis

Expected Recovery
Given Liquidation

7.30% (7.30%)

Increase

21,878

Waterfall

EBITDA Multiple

11.13x (11.13x)

Increase

46,910

Waterfall

Expected Recovery
Upon Sale of Issuer

16.80% - 100.00%
(32.85%)

Increase

Subordinated Debt

320,510

Discounted Cash Flow

Discount Rate

9.57% - 13.43% (11.85%)

Decrease

EBITDA Multiple

4.40x - 12.02x (9.04x)

Increase

Book Value Multiple

1.10x (1.10x)

Increase

Interest Rate Volatility

30.00% (30.00%)

Decrease

77,837

Waterfall

EBITDA Multiple

8.48x (8.48x)

Increase

6,856

Option Pricing Model

EBITDA Multiple

8.48x (8.48x)

Increase

Implied Volatility

25.00% (25.00%)

Increase

Risk Free Rate

1.50% (1.50%)

Increase

Yield

0.00% (0.00%)

Decrease

Term

3.50 years (3.50 years)

Increase

Asset Based Finance

136,527

Discounted Cash Flow

Discount Rate

9.39% - 14.51% (11.58%)

Decrease

122,767

Net Asset Value

N/A

Increase

85,011

Waterfall

Asset Appraisals

N/A

Increase

Strategic Credit Opportunities Partners

98,998

Net Asset Value

N/A

Increase

Equity/Other

—

Waterfall

Asset Appraisals

N/A

Increase

1,249

Discounted Cash Flow

Discount Rate

12.30% - 13.00%
(13.00%)

Decrease

52,721

Market Comparables

EBITDA Multiple

6.59x - 12.02x (9.94x)

Increase

Revenue Multiple

0.27x - 2.56x (1.87x)

Increase

Additional Discounts

0.00% - 15.00% (9.51%)

Decrease

Book Value Multiple

0.95x (0.95x)

Increase

120,411

Option Pricing Model

EBITDA Multiple

4.22x - 8.48x (5.46x)

Increase

Implied Volatility

20.20% - 42.50% (21.17%)

Increase

Risk Free Rate

0.54% - 1.50% (1.10%)

Increase

Yield

0.00% - 0.00% (0.00%)

Decrease

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5. Fair Value of Financial Instruments (continued)

Term

0.38 years - 3.50 years (1.97 years)

Increase

Additional Discounts

0.00% - 20.00% (10.00%)

Decrease

Total

3,189,484


⁽¹⁾	The TRS was valued in accordance with the TRS agreements as discussed in Note 2 “Significant Accounting Policies.” See Note 4 “Derivative Instruments” for quantitative disclosures of the fair value of the TRS.


⁽²⁾	Certain investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value.


⁽³⁾	For the assets and investments that have more than one valuation technique, the Company may rely on the stated techniques individually or in the aggregate based on a weight ascribed to each valuation technique, ranging from 0 – 100%. Indicative broker quotes obtained for valuation purposes are reviewed by the Company relative to other valuation techniques.


⁽⁴⁾	Weighted average amounts are based on the estimated fair values.


⁽⁵⁾	This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

The above tables represent the significant unobservable inputs as they relate to the Company’s determination of fair values for the majority of its investments categorized within Level 3 as of December 31, 2017 and 2016. In addition to the techniques and inputs noted in the tables above, according to the Company’s valuation policy, it may also use other valuation techniques and methodologies when determining the fair value estimates for the Company’s investments. Any significant increases or decreases in the unobservable inputs would result in significant increases or decreases in the fair value of the Company’s investments.

Investments that do not have a readily available market value are valued utilizing a market approach, an income approach (i.e. discounted cash flow approach), or both approaches, as appropriate. The market comparables approach uses prices, including third-party indicative broker quotes, and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) that are discounted based on a required or expected discount rate to derive a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors the Company may take into account to determine the fair value of its investments include, as relevant: available current market data, including an assessment of the credit quality of the security’s issuer, relevant and applicable market trading and transaction comparables, applicable market yields and multiples, illiquidity discounts, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, data derived from merger and acquisition activities for comparable companies, and enterprise values, among other factors.

The following tables provide reconciliations for the years ended December 31, 2017 and 2016 of investments for which Level 3 inputs were used in determining fair value (in thousands):

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5. Fair Value of Financial Instruments (continued)



	Year Ended December 31, 2017
	Senior Debt			Subordinated Debt			Asset Based Finance			Strategic Credit Opportunities Partners, LLC		Equity/Other			Total Return Swaps			Total
Fair value balance as of January 1, 2017	$	2,166,597		$	405,203		$	344,305		$	98,998	$	174,381		$	3,397		$	3,192,881
Additions⁽¹⁾	977,671			12,782			149,322			201,628		69,585			—			1,410,988
Net realized gains (losses)⁽²⁾	(80,685		)	(6,401		)	(7,853		)	—		(7,520		)	3,014			(99,445		)
Net change in unrealized appreciation (depreciation) ⁽³⁾	112,678			34,616			18,283			26		(43,118		)	—			122,485
Sales or repayments ⁽⁴⁾	(1,049,468		)	(185,966		)	(161,264		)	—		(19,435		)	(6,411		)	(1,422,544		)
Net discount accretion	6,518			653			3,714			—		—			—			10,885
Transfers into Level 3	—			—			—			—		—			—			—
Fair value balance as of December 31, 2017	$	2,133,311		$	260,887		$	346,507		$	300,652	$	173,893		$	—		$	3,215,250
Change in net unrealized appreciation (depreciation) in investments still held as of December 31, 2017 ⁽³⁾	$	(35,191	)	$	30,840		$	6,269		$	26	$	(49,585	)	$	—		$	(47,641	)


⁽¹⁾	Includes increases in the cost basis of investments resulting from new and add-on portfolio investments, the capitalization of PIK interest, or the exchange of one or more existing securities for one or more new securities.


⁽²⁾	Included in net realized gains (losses) in the consolidated statements of operations.


⁽³⁾	Included in net change in unrealized appreciation (depreciation) in the consolidated statements of operations.


⁽⁴⁾	Includes principal payments/paydowns on debt investments, collection of PIK interest, proceeds from sales of investments, distributions received on equity investments classified as return of capital or the exchange of one or more existing securities for one or more new securities.



	Year Ended December 31, 2016
	Senior Debt			Subordinated Debt			Asset Based Finance			Strategic Credit Opportunities Partners, LLC		Equity/Other			Total Return Swaps			Total
Fair value balance as of January 1, 2016	$	1,814,254		$	229,065		$	223,972		$	—	$	149,244		$	(13,562	)	$	2,402,973
Additions ⁽¹⁾	835,954			223,899			218,926			92,400		42,186			—			1,413,365
Net realized gains (losses) ⁽²⁾	(15,970		)	(8,621		)	—			—		5,371			12,485			(6,735		)
Net change in unrealized appreciation (depreciation) ⁽³⁾	(38,772		)	(2,558		)	(42,951		)	6,598		(13,375		)	16,959			(74,099		)
Sales or repayments⁽⁴⁾	(474,013		)	(38,128		)	(57,368		)	—		(14,284		)	(12,485		)	(596,278		)
Net discount accretion	5,526			1,546			1,726			—		—			—			8,798
Transfers into Level 3	39,618			—			—			—		5,239			—			44,857
Fair value balance as of December 31, 2016	$	2,166,597		$	405,203		$	344,305		$	98,998	$	174,381		$	3,397		$	3,192,881
Change in net unrealized appreciation (depreciation) in investments still held as of December 31, 2016 ⁽³⁾	$	(71,384	)	$	(10,879	)	$	(42,199	)	$	6,598	$	(829	)	$	16,959		$	(101,734	)


⁽¹⁾	Includes increases in the cost basis of investments resulting from new and add-on portfolio investments, the capitalization of PIK interest, or the exchange of one or more existing securities for one or more new securities.


⁽²⁾	Included in net realized gains (losses) in the consolidated statements of operations.


⁽³⁾	Included in net change in unrealized appreciation (depreciation) in the consolidated statements of operations.


⁽⁴⁾	Includes principal payments/paydowns on debt investments, collection of PIK interest, TRS settlement payments, proceeds from sales of investments, distributions received on equity investments classified as return of capital or the exchange of one or more existing securities for one or more new securities.

No securities were transferred into the Level 3 hierarchy and no securities were transferred out of the Level 3 hierarchy during the year ended December 31, 2017. Two securities were transferred into the Level 3 hierarchy and no securities were transferred out of the Level 3 hierarchy during the year ended December 31, 2016. These investments were transferred at fair

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5. Fair Value of Financial Instruments (continued)

value as of the beginning of the quarter in which they were transferred. The classification transfers between Level 3 and Level 2 were based on the observed changes in liquidity based on information supplied by a third party pricing source, whereby such liquidity information is routinely reviewed no less frequently than monthly. All realized and unrealized gains and losses are included in earnings and are reported as separate line items within the Company’s consolidated statements of operations.

6. Related Party Transactions

CNL and certain CNL affiliates received, and KKR receives, compensation or reimbursement for advisory services and other services in connection with the performance and supervision of administrative services and investment advisory activities.

Prior to the Listing, the Company was a party to an investment advisory agreement with CNL, as amended (the “Former Investment Advisory Agreement”) for the overall management of the Company’s investment activities. Prior to the Listing, the Company and CNL had entered into a sub-advisory agreement with KKR (the “Sub-Advisory Agreement”), under which KKR was responsible for the day-to-day management of the Company’s investment portfolio. CNL compensated KKR for advisory services that it provided to the Company with 50% of the base management fees and performance-based incentive fees that CNL received under the Former Investment Advisory Agreement. CNL earned a base management fee (referred to as an investment advisory fee) equal to an annual rate of 2% of the Company’s average gross assets as of the end of the two most recently completed months, computed and paid monthly. The computation of gross assets includes unrealized depreciation, appreciation and collateral posted with the custodian in connection with the TRS, and excludes deferred offering expenses. From and after April 1, 2016, the computation of gross assets also excludes cash and short-term investments. Concurrent with the Listing, the Company’s new investment advisory agreement (the “New Investment Advisory Agreement”) with KKR became effective. Under the terms of the New Investment Advisory Agreement, KKR earns a base management fee equal to an annual rate of 1.5% of the Company’s average gross assets, computed using the same method as under the Former Investment Advisory Agreement.

CNL also earned a performance-based incentive fee comprised of a subordinated incentive fee on income and an incentive fee on capital gains through the termination of the Former Investment Advisory Agreement on November 14, 2017. KKR earns similar performance-based incentive fees under the terms of the New Investment Advisory Agreement. The subordinated incentive fee on pre-incentive fee net investment income (as defined in the New Investment Advisory Agreement) is paid quarterly if earned, and is computed as the sum of (A) 100% of quarterly pre-incentive fee net investment income in excess of 1.75% of average net assets but less than or equal to 2.1875% of average net assets, and (B) 20% of pre-incentive fee net investment income in excess of 2.1875% of average net assets.

Beginning January 1, 2017, the subordinated incentive fee on income is subject to a total return requirement, which provides generally that no incentive fee will be payable except to the extent that 20.0% of the cumulative net increase in net assets resulting from operations over the then-current and three preceding calendar quarters (or, if four calendar quarters have not passed, then the time period since January 1, 2017) exceeds the cumulative incentive fees accrued and/or paid for the same period. Accordingly, any subordinated incentive fee on income that is payable in a calendar quarter will be limited to the lesser of (i) 20.0% of pre-incentive fee net investment income when pre-incentive fee net investment income exceeds the applicable quarterly hurdle rate for such calendar quarter, subject to the catch-up provision, and (ii) (x) 20.0% of the cumulative net increase in net assets resulting from operations for the then-current and three preceding calendar quarters minus (y) the cumulative incentive fees accrued and/or paid for the three preceding calendar quarters or period since January 1, 2017, whichever period is shorter. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the sum of pre-incentive fee net investment income, base management fees, realized gains and losses and unrealized appreciation and depreciation for the then-current and three preceding calendar quarters. There will be no accumulation of amounts on the hurdle rate from quarter to quarter and, accordingly, there will be no clawback of amounts previously paid if subsequent quarters are below the applicable quarterly hurdle rate and there will be no delay of payment if prior quarters are below the applicable quarterly hurdle rate.

Concurrently with the Listing, KKR agreed to certain waivers which may further reduce the amount of the investment advisory fees that are payable by the Company under the New Investment Advisory Agreement. Specifically, KKR agreed to irrevocably waive subordinated incentive fees that would otherwise be payable under the New Investment Advisory Agreement up to the amount that would cause the total subordinated fees paid in any calendar quarter (or partial calendar quarter for which the subordinated incentive fee is required to be calculated) to not exceed the amount that would be payable if the following revised definitions had applied in such period: (a) “look back period” as defined on or after December 31, 2017 to be the most recently completed quarter and the 11 preceding calendar quarters and (b) “cumulative net increase in net assets resulting from operations” as defined to remove the addition of management fees paid following the Listing.

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The incentive fee on capital gains is paid annually if earned, and is equal to (i) 20% of all realized gains on a cumulative basis from inception, net of (x) all realized losses on a cumulative basis, (y) unrealized depreciation at year end and (z) disregarding any net realized gains associated with the TRS interest spread (which represents the difference between (A) the interest and fees received on the TRS, and (B) the financing fees paid to the TRS Counterparty), less (ii) the aggregate amount of any previously paid incentive fee on capital gains.

The terms of the Former Investment Advisory Agreement entitled CNL (and indirectly KKR) to receive up to 5% of gross proceeds in connection with the Offering as reimbursement for organization and offering expenses incurred by the Advisers on behalf of the Company. The Company did not record any deferred offering expenses during the year ended December 31, 2017. During the year ended December 31, 2016 the Company recorded $0.76 million in deferred offering expenses related to the Offering, or 0.6% of gross offering proceeds of the Offering for the same period.

In addition, under the terms of the New Investment Advisory Agreement (and previously under the terms of the Sub-Advisory Agreement), KKR is entitled to reimbursement of certain expenses incurred on behalf of the Company including expenses incurred in connection with its investment operations and investment transactions.

Prior to the Listing, the Company was a party to an administrative services agreement with CNL (the "Former Administrative Services Agreement") whereby CNL performed, and oversaw the performance of, various administrative services on behalf of the Company. Administrative services included transfer agency oversight and supervisory services, shareholder communication services, general ledger accounting services, calculating the Company’s net asset value, maintaining required corporate and financial records, financial reporting for the Company and its subsidiaries, internal audit services, reporting to the Company’s Board and lenders, preparing and filing income tax returns, preparing and filing SEC reports, preparing, printing and disseminating shareholder reports, overseeing the payment of the Company’s expenses and shareholder distributions, administering the Company’s share repurchase program, and management and oversight of service providers in their performance of administrative and professional services rendered for the Company. CNL could also enter into agreements with its affiliates for the performance of select administrative services. The Company reimbursed CNL for the professional services and expenses it incurred in performing its administrative obligations on behalf of the Company. After the Listing, KKR replaced CNL as the sole investment adviser and entered into an administrative service agreement with the Company with similar terms.

Related party fees, expenses and expenses incurred on behalf of the Company during the years ended December 31, 2017, 2016 and 2015 are summarized below (in thousands):



		Year Ended December 31,
Related Party	Source Agreement & Description	2017		2016		2015
CNL Securities Corp.	Managing Dealer Agreement: Selling commissions and marketing support fees	$	—	$	9,649	$	61,357
CNL and KKR	Former Investment Advisory Agreement: Base management fees (investment advisory fees)	72,773		82,736		70,298
KKR	New Investment Advisory Agreement: Base management fees (investment advisory fees)	7,903		—		—
CNL and KKR	Former Investment Advisory Agreement: Subordinated incentive fee on income⁽¹⁾	9,780		24,123		8,733
KKR	New Investment Advisory Agreement: Subordinated incentive fee on income⁽¹⁾	6,359		—		—
CNL and KKR	Investment Advisory Agreement: Offering expenses reimbursement	—		1,079		3,477
KKR	New Investment Advisory Agreement: Investment expenses reimbursement⁽²⁾	3,491		1,316		1,518
CNL	Former Administrative Services Agreement: Administrative and compliance services	1,963		2,085		1,536
KKR	New Administrative Services Agreement: Administrative and compliance services	196		—		—

⁽¹⁾

Subordinated incentive fees on income are included in performance-based incentive fees in the consolidated statements of operations. During the years ended December 31, 2017, 2016 and 2015, $12.63 million, $19.97 million, and $13.09 million, respectively, of subordinated incentive fees on income were paid to the Advisers. As of December 31, 2017 and 2016, a subordinated incentive fee on income of $8.42 million and $4.91 million, respectively, was payable to the Advisers.


⁽²⁾	Includes fees related to transactional expenses related to prospective investments, including fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. Broken deal costs

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6. Related Party Transactions (continued)

amounted to $0.71 million, $0.52 million and $0.35 million for the years ended December 31, 2017, 2016 and 2015, respectively. Prior to November 14, 2017, these expenses were reimbursed pursuant to the Sub-Advisory Agreement.

KKR is obligated to remit to the Company any earned capital structuring fees based on the Company’s pro-rata portion of the co-investment transactions or originated investments in which the Company participates. As a result, the Company earned capital structuring fees of $10.24 million, $10.35 million and $7.61 million during the years ended December 31, 2017, 2016 and 2015. As of December 31, 2017 and 2016, $2.80 million and $2.04 million, respectively, of capital structuring fees were receivable from KKR.

Indemnification – The New Investment Advisory Agreement contains certain indemnification provisions in favor of KKR, its directors, officers, associated persons, and its affiliates. In addition, the Company’s articles of incorporation contain certain indemnification provisions in favor of the Company’s officers, directors, agents, and certain other persons. As of December 31, 2017, management believed that the risk of incurring any losses for such indemnification was remote.

7. Fee Income

Fee income, which is nonrecurring, consisted of the following (in thousands):



	Year Ended December 31,
Fee Income	2017		2016		2015
Capital structuring fees	$	10,243	$	10,352	$	7,610
Break-up fees	3,970		—		—
Amendment fees	1,744		1,827		9,689
Commitment fees	143		1,223		477
Consent fees	1,729		—		—
Other	—		180		529
Total	$	17,829	$	13,582	$	18,305

8. Distributions

The Company’s Board declared distributions for 31, 52 and 52 record dates in the years ended December 31, 2017, 2016 and 2015, respectively. Through October 2017, declared distributions were paid monthly. Beginning with the July 31, 2017 distribution, the Board began declaring distributions based on monthly, rather than weekly, record dates. On September 26, 2017, the Company announced that following the Listing, the Company currently expects that distributions will be declared and paid to shareholders of record on a quarterly basis instead of on a monthly basis. The total and the sources of declared distributions on a GAAP basis for the years ended December 31, 2017, 2016 and 2015 are presented in the tables below (in thousands, except per share amounts).



	Year Ended December 31,
	2017							2016						2015
	Per Share			Amount		Allocation		Per Share		Amount		Allocation		Per Share		Amount		Allocation
Total Declared Distributions	$	1.81	⁽¹⁾	$	244,133	100.0	%	$	1.81	$	244,950	100.0	%	$	1.81	$	205,044	100.0	%
From net investment income	1.56			210,299		86.1		1.55		210,096		85.8		1.56		176,688		86.2
From net realized gains	—			—		—		—		—		—		0.25		28,356		13.8
Distributions in excess of net investment income	0.25			33,834		13.9		0.26		34,854		14.2		—		—		—


⁽¹⁾	Includes a special cash distribution in the amount of $0.10125 per share.

Sources of distributions, other than net investment income and realized gains on a GAAP basis, include (i) the ordinary income component of prior year tax basis undistributed earnings and (ii) required adjustments to GAAP net investment income and realized gains, if any, in the current period to determine taxable income available for distributions. See Note 12. "Income Taxes" for a reconciliation of net increase in net assets resulting from operations to taxable income available for distributions. None of the distributions declared during the years ended December 31, 2017, 2016 and 2015 were classified as a tax basis return of capital.

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9. Share Transactions

The following table summarizes the total shares issued and proceeds received in connection with the Company’s Offering for the years ended December 31, 2017, 2016 and 2015 ($ in thousands except share and per share amounts).



	Year Ended December 31,
	2017			2016				2015
	Shares	Amount		Shares	Amount			Shares	Amount
Gross proceeds from offering⁽¹⁾	—	$	—	6,365,828	$	137,245		28,329,936	$	679,862
Commissions and marketing support fees	—	—		—	(9,649		)	—	(61,357		)
Net proceeds to company	—	—		6,365,828	127,596			28,329,936	618,505
Reinvestment of distributions	4,752,882	96,994		6,159,186	124,139			4,866,789	105,363
Net proceeds from offering	4,752,882	$	96,994	12,525,014	$	251,735		33,196,725	$	723,868
Average net proceeds per share	$20.41			$20.10				$21.81


⁽¹⁾	Following the close of the Offering in October 2016, the Company has continued to issue shares only pursuant to its distribution reinvestment plan.

In October 2016, the Company closed its Offering to new investors. As of December 31, 2017, the Company has sold or issued 148.90 million shares of common stock, including reinvestment of distributions, for total gross proceeds of $3.56 billion.

Prior to the Listing, the Company conducted quarterly tender offers pursuant to its share repurchase program. In anticipation of the Listing and the concurrent liquidity it was expected to provide, on August 10, 2017, the Company’s Board voted to terminate the Company’s share repurchase program following the completion of the Company’s tender offer, which commenced on July 17, 2017 and expired on August 21, 2017.

On November 14, 2017, the Company commenced a tender offer in connection with the Listing, or the listing tender offer, to purchase for cash up to $185 million in value of the Company's shares of common stock at a price of $20.01 per share. The listing tender offer expired on December 15, 2017. The Company accepted for purchase on a pro rata basis 9,245,377 shares of common stock, or approximately 13.9% of the shares tendered. The 9,245,377 shares of common stock accepted for purchase in the listing tender offer represented approximately 6.8% of the Company's issued and outstanding shares of common stock as of December 15, 2017.

The following table is a summary of the share repurchases completed during the years ended December 31, 2017, 2016 and 2015 ($ in thousands, except share and per share amounts):



Repurchase Date	Total Number of Shares Offered to Repurchase	Total Number of Shares Repurchased	Total Consideration		No. of Shares Repurchased/ Total Offer		Price Paid Per Share
2017:
January 17, 2017	3,383,256	1,647,860	$	33,369	49	%	$	20.25
May 24, 2017	3,414,328	1,711,985	34,745		50	%	$	20.30
August 24, 2017	3,424,376	2,405,073	48,107		70	%	$	20.00
December 18, 2017	9,245,377	9,245,377	185,000		100	%	$	20.01
Total	19,467,337	15,010,295	$	301,221	77	%
Repurchase Date	Total Number of Shares Offered to Repurchase	Total Number of Shares Repurchased	Total Consideration		No. of Shares Repurchased/ Total Offer		Price Paid Per Share
2016:
January 13, 2016	2,831,600	812,024	$	16,297	29	%	$	20.07
May 31, 2016	3,025,369	747,789	14,486		25	%	$	19.37
August 29, 2016	3,184,956	1,544,707	30,620		49	%	$	19.82
November 22, 2016	3,304,798	1,148,846	23,187		35	%	$	20.18
Total	12,346,723	4,253,366	$	84,590	34	%
Repurchase Date	Total Number of Shares Offered to Repurchase	Total Number of Shares Repurchased	Total Consideration		No. of Shares Repurchased/ Total Offer		Price Paid Per Share
2015:
March 2, 2015	1,971,143	246,744	$	5,452	13	%	$	22.10
May 29, 2015	2,186,474	223,086	4,889		10	%	$	21.92
August 28, 2015	2,410,970	485,965	10,573		20	%	$	21.76
December 1, 2015	2,627,270	552,659	11,502		21	%	$	20.81
Total	9,195,857	1,508,454	$	32,416	16	%

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10. Borrowings

The Company’s outstanding borrowings as of December 31, 2017 and 2016 were as follows (in thousands):



	As of December 31, 2017								As of December 31, 2016
	Total Aggregate Principal Amount Committed			Principal Amount Outstanding		Carrying Value			Total Aggregate Principal Amount Committed			Principal Amount Outstanding		Carrying Value
Senior Secured Revolving Credit Facility⁽¹⁾	$	958,000	⁽²⁾	$	615,000	$	615,000		$	928,000	⁽²⁾	$	799,000	$	799,000
BNP Credit Facility⁽¹⁾	—			—		—			200,000			183,000		183,000
SMBC Credit Facility⁽¹⁾	300,000			110,000		110,000			200,000			102,000		102,000
JPM Credit Facility⁽¹⁾	300,000			240,000		240,000			300,000			135,000		135,000
Total credit facilities	1,558,000			965,000		965,000			1,628,000			1,219,000		1,219,000
2014 Senior Secured Term Loan	385,000			385,000		382,768		⁽³⁾	389,000			389,000		385,203		⁽³⁾
2022 Notes	245,000			245,000		240,612		⁽⁴⁾	—			—		—
CS Facility⁽⁵⁾	—			—		—			23,454			23,454		23,454
Total borrowings	$	2,188,000		$	1,595,000	$	1,588,380		$	2,040,454		$	1,631,454	$	1,627,657


⁽¹⁾	Subject to borrowing base and leverage restrictions.


⁽²⁾	Includes an accordion feature that allows the Company under certain circumstances to increase the size of the Senior Secured Revolving Credit Facility to a maximum of $1.34 billion.


⁽³⁾	Comprised of outstanding principal less the unaccreted original issue discount of $0.58 million and $0.99 million and deferring financing costs of $1.65 million and $2.81 million as of December 31, 2017 and 2016, respectively.


⁽⁴⁾	Comprised of outstanding principal less deferred financing costs of $4.39 million as of December 31, 2017.


⁽⁵⁾	Borrowings denominated in Euros.

The weighted average stated interest rate and weighted average remaining years to maturity of the Company’s outstanding borrowings as of December 31, 2017 were 4.45% and 3.0 years, respectively, and as of December 31, 2016 were 3.22% and 3.4 years, respectively.

Senior Secured Revolving Credit Facility

In September 2013, the Company entered into a revolving credit facility (as amended, the “Senior Secured Revolving Credit Facility”) with certain lenders and JPMorgan Chase Bank, N.A., acting as administrative agent. The Senior Secured Revolving Credit Facility (the “Amendment”) provides for loans to be made in U.S. dollars and other foreign currencies up to an aggregate amount of $958 million, with an “accordion” feature that allows the Company, under certain circumstances, to increase the size of the facility to a maximum of $1.34 billion. Availability under the Senior Secured Revolving Credit Facility, as amended, will terminate on April 15, 2020 (the “Termination Date”) and the outstanding loans will mature on April 15, 2021. In addition, the Senior Secured Revolving Credit Facility, as amended, requires mandatory prepayment of interest and principal upon certain events during the term-out period commencing on the Termination Date. The Senior Secured Revolving Credit Facility is secured by substantially all of the Company’s portfolio investments and its cash and securities accounts, excluding those held by CCT Funding, Paris Funding, Halifax Funding, CCT Tokyo Funding and CCT New York Funding, and provides for a guaranty by certain other subsidiaries of the Company.

The stated borrowing rate under the Amendment is generally based on LIBOR plus an applicable spread of 2.00% or 2.25%, depending on collateral levels, or with respect to borrowings in foreign currencies, on a base rate applicable to such currency borrowing plus an applicable spread of 2.00% to 2.25%, depending on collateral levels. The Company also pays an annual commitment fee on any unused commitment amounts between 0.375% and 1.50%, depending on utilization levels.

The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the Senior Secured Revolving Credit Facility for the years ended December 31, 2017, 2016 and 2015

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were as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Stated interest expense	$	21,477		$	18,724		$	9,626
Unused commitment fees	1,533			869			1,413
Amortization of deferred financing costs	1,958			1,915			1,763
Total interest expense	$	24,968		$	21,508		$	12,802
Weighted average interest rate	3.39		%	2.86		%	2.77		%
Average borrowings	$	633,627		$	655,365		$	347,175

Deutsche Bank Credit Facility

CCT Funding was party to a revolving credit facility (as amended, the “Deutsche Bank Credit Facility”) with Deutsche Bank AG, New York Branch (“Deutsche Bank”), as the administrative agent and lender, which allowed CCT Funding to borrow up to $250 million. The Deutsche Bank Credit Facility was secured by the portfolio investments held in CCT Funding. The Deutsche Bank Credit Facility consisted of a Tranche E loan commitment (the “Tranche E Loans”) of $75 million and a Tranche F loan commitment (the “Tranche F Loans”) of $100 million. On September 8, 2016, the Tranche E loan commitment was reduced from $150 million to $75 million. The Company paid a make-whole fee of $0.24 million in connection with the commitment reduction. On December 28, 2016, the company terminated the Deutsche Bank Credit Facility with Deutsche Bank and paid a make-whole fee of $0.61 million.

Interest on the Tranche E Loans was charged at the rate of three-month LIBOR plus 1.85%. Interest on the Tranche F Loans was charged at the rate of three-month LIBOR plus 1.95%. CCT Funding also paid an annual commitment fee on any unused commitment amounts of 0.50%, plus an additional annual commitment fee of 1.95% on the excess, if any, of (i) 80% of the total commitment less (ii) the aggregate principal amount outstanding. The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the Deutsche Bank Credit Facility for the years ended December 31, 2016 and 2015 were as follows (in thousands):



	Year Ended December 31,
	2016				2015
Stated interest expense	$	5,855		⁽¹⁾	$	3,241		⁽¹⁾
Unused commitment fees	514				404
Amortization of deferred financing costs	498				309
Total interest expense	$	6,867			$	3,954
Weighted average interest rate	3.08		%		2.20		%
Average borrowings⁽²⁾	$	191,791			$	147,148


⁽¹⁾	Stated interest expense for the year ended December 31, 2016 includes a make-whole fee of $0.24 million incurred on the Tranche E Loans commitment reduction.


⁽²⁾	Average borrowings for the Deutsche Bank Credit Facility for the year ended December 31, 2016 are calculated through the termination date of the facility, or December 28, 2016.

BNP Credit Facility

Paris Funding was party to a revolving credit facility with BNP Paribas Prime Brokerage, Inc. (“BNP”) which allowed Paris Funding to borrow up to $200 million (as amended, the “BNP Credit Facility”). The BNP Credit Facility was used primarily to finance traded credit investments. On February 28, 2017, Paris Funding notified BNP of its intent to terminate the BNP Credit Facility on August 27, 2017. On June 30, 2017, Paris Funding terminated the BNP Credit Facility and paid a fee of $0.15 million, which was the estimated present value of the remaining unused commitment fees that would have been due to BNP through the previously notified termination date of August 27, 2017. The Company terminated the BNP Credit Facility in connection with the Company’s ongoing transition to directly originated private credit investments.

Interest on the BNP Credit Facility was charged at the rate of one month LIBOR plus 1.10% and is payable monthly. Paris Funding also paid an annual commitment fee on any unused commitment amounts of 0.40% or 0.50%, depending on utilization levels. The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the BNP Credit Facility for the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):

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	Year Ended December 31,
	2017			2016			2015
Stated interest expense	$	860		$	2,739		$	1,616
Unused commitment fees⁽¹⁾	421			126			355
Total interest expense	$	1,281		$	2,865		$	1,971
Weighted average interest rate	1.96		%	1.62		%	1.33		%
Average borrowings⁽²⁾	$	88,816		$	168,929		$	121,375


⁽¹⁾	Unused commitment fees for the year ended December 31, 2017 include a $0.15 million fee paid upon the termination of the BNP Credit Facility on June 30, 2017.


⁽²⁾	Average borrowings for the BNP Credit Facility for the year ended December 31, 2017 are calculated through the termination date of the facility, or June 30, 2017.

Paris Funding pledged certain of its assets as collateral to secure borrowings under the BNP Credit Facility. As of December 31, 2016, Paris Funding had investments with a fair value of $294.70 million pledged as collateral under the BNP Credit Facility. Under the terms of the BNP Credit Facility, BNP had the ability to borrow a portion of the pledged collateral (“Rehypothecated Securities”), provided that, among other things, the fair value of the borrowed collateral did not exceed the value of the loan against which the collateral was pledged and any single borrowed security did not represent the entire position of such security held by Paris Funding. Paris Funding could designate any security within the pledged collateral as ineligible to be a Rehypothecated Security, provided there were eligible securities within the segregated custody account in an amount equal to the outstanding borrowings owed by Paris Funding to BNP. Paris Funding could recall any Rehypothecated Security at any time and BNP was required to, to the extent commercially reasonable, return such security or equivalent security within a commercially reasonable period. In the event BNP did not return the security, Paris Funding had the right to, among other things, apply and set off an amount equal to 100% of the then-current fair market value of such Rehypothecated Securities against any outstanding borrowings owed to BNP under the BNP Credit Facility. Rehypothecated Securities were marked-to-market daily and if the value of all Rehypothecated Securities exceeds 100% of the outstanding borrowings owed by Paris Funding under the BNP Credit Facility, BNP could either reduce the amount of Rehypothecated Securities to eliminate such excess or deposit into the segregated custody account an amount of cash equal to such excess. Paris Funding continued to receive interest and the scheduled repayment of principal balances on Rehypothecated Securities. Paris Funding could receive a fee from BNP in connection with Rehypothecated Securities meeting certain criteria. Paris Funding did not recognize any fees on Rehypothecated Securities during the years ended December 31, 2017, 2016 and 2015.

SMBC Credit Facility

CCT Tokyo Funding is party to a revolving credit facility (as amended, the “SMBC Credit Facility”) with Sumitomo Mitsui Banking Corporation (“SMBC”), as the administrative agent, collateral agent, and lender, which allows CCT Tokyo Funding to borrow up to $300 million. The SMBC Credit Facility is secured by all of the assets held by CCT Tokyo Funding, including its portfolio of assets. Such pledged assets are held in a segregated custody account with Wells Fargo Bank, National Association (“Wells Fargo”). The end of the reinvestment period and the stated maturity date for the SMBC Credit Facility are December 2, 2018 and December 2, 2021, respectively. The reinvestment period and the stated maturity date are both subject to two one-year extensions by mutual agreement.

Amounts available to borrow under the SMBC Funding Facility are subject to a borrowing base that applies an advance rate to assets held by CCT Tokyo Funding. At the option of CCT Tokyo Funding, interest is charged at either the rate of three month LIBOR plus 1.75%, if the average advances outstanding are greater than $150 million, otherwise plus 2.00%, or the higher of the Prime Rate (as defined in the Loan and Servicing Agreement) or the Federal Funds rate plus 0.50%, plus 0.75% if the average advances outstanding are greater than $150 million, otherwise plus 1.00%. Interest is payable quarterly. Effective June 2, 2016, CCT Tokyo Funding began paying a quarterly non-usage fee of 0.35% on any unused commitment amounts if the average daily amount of the advances outstanding during a remittance period is equal to or greater than the lesser of (i) 50% of the borrowing base during the remittance period and (ii) $150 million (such lesser amount, the “Later Period Threshold Amount”). If the average daily amount of the advances outstanding during a remittance period is less than the Later Period Threshold Amount, CCT Tokyo Funding will pay a fee of 0.875% for any unused portion up to or equal to the difference of the Later Period Threshold Amount less the amount of advances outstanding in addition to the non-usage fee of 0.35% on any remaining unused portion.

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The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the SMBC Credit Facility for the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Stated interest expense	$	2,964		$	1,325		$	—
Unused commitment fees	494			232			—
Amortization of deferred financing costs	589			569			40
Total interest expense	$	4,047		$	2,126		$	40
Weighted average interest rate	3.02		%	2.57		%	—		%
Average borrowings	$	98,222		$	51,475		$	—

JPM Credit Facility

On November 29, 2016, CCT New York Funding entered into a revolving credit facility (the “JPM Credit Facility”) pursuant to a Loan and Security Agreement with the Company, as the portfolio manager, JPMorgan Chase Bank, National Association (“JPMorgan”), as administrative agent and lender, together with any additional lenders from time to time party thereto, and the collateral administrator, collateral agent and securities intermediary party thereto (as amended, the “Loan Agreement”). CCT New York Funding’s obligations to JPMorgan under the JPM Credit Facility are secured by a first priority security interest in substantially all of the assets of CCT New York Funding, including its portfolio of loans. The obligations of CCT New York Funding under the JPM Credit Facility are non-recourse to the Company.

The JPM Credit Facility provides for borrowings in an aggregate principal amount up to $300 million with an accordion feature which allows for the expansion of the borrowing limit up to $400 million, subject to consent from the lender and other customary conditions. Borrowings under the JPM Credit Facility are subject to compliance with a net asset value coverage ratio with respect to the value of CCT New York Funding’s portfolio and various eligibility criteria must be satisfied with respect to the acquisition of each loan in CCT New York Funding’s portfolio. Any amounts borrowed under the JPM Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on November 29, 2020.

Interest on the JPM Credit Facility is charged at the rate of three month LIBOR plus 3.00% and is payable quarterly. CCT New York Funding also pays an annual commitment fee on any unused commitment amounts of 0.50% through May 29, 2017, and 1.00% thereafter. CCT New York Funding also paid an upfront fee and incurred certain other customary costs and expenses in connection with obtaining the JPM Credit Facility. The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the JPM Credit Facility for the years ended December 31, 2017 and 2016 were as follows (in thousands):



	Year Ended December 31,
	2017			2016
Stated interest expense	$	9,163		$	265
Unused commitment fees	601			104
Amortization of deferred financing costs	437			39
Total interest expense	$	10,201		$	408
Weighted average interest rate	4.27		%	4.10		%
Average borrowings⁽¹⁾	$	214,751		$	73,182


⁽¹⁾	Average borrowings for the JPM Credit Facility for the year ended December 31, 2016 are calculated since the inception of the facility, or November 29, 2016.

2014 Senior Secured Term Loan

The Company is party to a senior secured term loan credit facility (the “2014 Senior Secured Term Loan”) with certain lenders and JPMorgan Chase Bank, N.A., as administrative agent. The 2014 Senior Secured Term Loan initially provided the Company with $398 million in gross proceeds. The 2014 Senior Secured Term Loan matures in May 2019, and generally bears interest at LIBOR plus 3.25% (with a LIBOR floor of 0.75%). The 2014 Senior Secured Term Loan includes an accordion feature permitting the Company to expand the facility if certain conditions are satisfied; provided, however, that the aggregate amount of the 2014 Senior Secured Term Loan is limited to the amount as determined from time to time which would not cause the covered debt amount (i.e., the Company’s aggregate debt under both the 2014 Senior Secured Term Loan and the Senior Secured Revolving Credit Facility, other permitted debt and certain other unsecured debt) to exceed the borrowing/collateral base. The 2014 Senior Secured Term Loan is secured by substantially all of the Company’s portfolio investments and its cash

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10. Borrowings (continued)

and securities accounts, excluding those held by CCT Funding, Paris Funding, Halifax Funding, CCT Tokyo Funding and CCT New York Funding.

Maturities of the 2014 Senior Secured Term Loan for each of the next two years, in aggregate, as of December 31, 2017 were as follows (in thousands):



2018	$	4,000
2019	381,000
	$	385,000

The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the 2014 Senior Secured Term Loan for the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Stated interest expense	$	17,578		$	16,047		$	16,039
Amortization of original discount	408			398			384
Amortization of deferred financing costs	1,157			1,128			1,088
Total interest expense	$	19,143		$	17,573		$	17,511
Weighted average interest rate	4.65		%	4.21		%	4.17		%
Average borrowings	$	387,471		$	391,484		$	395,477

2022 Notes

On June 28, 2017, the Company and The Bank of New York Mellon Trust Company, N.A. entered into an Indenture (the “Indenture”) relating to the Company’s issuance of $140 million aggregate principal amount of 5.00% senior unsecured notes due 2022. On August 31, 2017, the Company issued $105 million aggregate principal amount of the 2022 Notes as additional notes under the Indenture that form a single series with, have the same terms as, and trade interchangeably with, the previously issued notes, (such notes, collectively, the “2022 Notes”). The 2022 Notes will mature on June 28, 2022 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the applicable redemption price set forth in the Indenture. The 2022 Notes bear interest at a rate of 5.00% per year payable semi-annually on June 28th and December 28th of each year, commencing on December 28, 2017. The interest rate on the 2022 Notes is subject to adjustment in certain instances set forth in the Indenture (up to a maximum interest rate of 5.50%), based on the corporate ratings of the Company by Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc. and Standard & Poor’s Rating Services. The 2022 Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2022 Notes and rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The components of interest expense for the 2022 Notes for the year ended December 31, 2017 were as follows (in thousands):



	Year Ended December 31,
	2017
Stated interest expense	$	5,308
Amortization of deferred financing costs	371
Total interest expense	$	5,679
Weighted average interest rate	5.02		%
Average borrowings	$	209,064

In connection with each of the credit facilities, 2014 Senior Secured Term Loan and the 2022 Notes, the Company has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. As of December 31, 2017, 2016 and 2015, the Company believes it was in compliance with the covenant requirements for all of its credit facilities, 2014 Senior Secured Term Loan and the 2022 Notes.

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10. Borrowings (continued)

CS Facility

On June 30, 2016, the Company entered into a debt financing arrangement with Credit Suisse Securities (Europe) Limited (“CS”). The Company elected to structure the financing in the manner described more fully below in order to, among other things, obtain such financing at a lower cost than would be available through alternate arrangements.

On June 30, 2016, the Company purchased a portion of a Tranche B term loan issued by LSF IX Java Investments, Ltd (the “Tranche B Loan”) with a par value of €56.41 million from Credit Suisse AG. The company financed a portion of the purchase by entering into a repurchase transaction with CS effective as of June 30, 2016 (the “CS Facility”). Under the terms of the CS Facility, CS purchased the Tranche B Loan from the Company for a purchase price of €22.28 million. The Company, on a monthly basis, repurchased the Tranche B Loan from CS and subsequently resold the Tranche B Loan to CS. The final repurchase transaction occurred on June 30, 2017. The repurchase price paid to CS for each repurchase of the Tranche B Loan was equal to the purchase price paid by CS for the Tranche B Loan plus interest thereon accrued at EURIBOR plus a spread of 0.75% for the term of the first repurchase transaction and 1.50% for each subsequent repurchase transaction. The Company recorded interest expense of $0.18 million and $0.17 million for the CS Facility for the years ended December 31, 2017 and 2016, respectively. The Company has no further obligations under the CS Facility.

11. Commitments and Contingencies

Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s consolidated statements of assets and liabilities. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company has sufficient liquidity to fund these commitments. As of December 31, 2017, the Company’s unfunded commitments consisted of the following (in thousands):



Category / Company ⁽¹⁾
Unfunded revolvers/delayed draw loan commitments:
Frontline Technologies Holdings, LLC	$	12,140
National Debt Relief LLC	3,763
Revere Superior Holdings, Inc	23,452
Revere Superior Holdings, Inc	4,574
Safety Technology Holdings, Inc.	421
Smart Modular Technologies, Inc.	444
Smile Brands, Inc.	3,589
SouthernCarlson	6,219
Total unfunded revolvers/delayed draw loan commitments	$	54,602
Unfunded term loans
Wheels Up Partners LLC	$	44,768
Total unfunded term loans	$	44,768
Unfunded equity commitments:
KKR BPT Holdings Aggregator, LLC	$	7,000
Rockport Group, LLC	8,046
Star Mountain SMB Multi-Manager Credit Platform, LP	17,213
Toorak Capital	15,020
Total unfunded equity commitments	$	47,279


⁽¹⁾	May be commitments to one or more entities affiliated with the named company.

As of December 31, 2017, the Company also has an unfunded commitment to provide $143.47 million of capital to SCJV. The capital commitment can be satisfied with contributions of cash and/or investments. The capital commitments cannot be drawn without an affirmative vote by both the Company’s and Conway’s representatives on SCJV’s board of managers.

As of December 31, 2017, the Company’s unfunded debt commitments have a fair value of $(0.86) million. The Company funds its equity investments as it receives funding notices from the portfolio companies. As of December 31, 2017, the Company’s unfunded equity commitments have a fair value of zero.

In the normal course of business, the Company may enter into guarantees on behalf of portfolio companies. Under such arrangements, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. The Company has no such guarantees outstanding at December 31, 2017 and December 31, 2016.

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12. Income Taxes

Income and capital gain distributions are determined in accordance with the Code and federal tax regulations, which may differ from amounts determined in accordance with GAAP. The book-to-tax differences, which could be material, are primarily due to differing treatments of income and gains on various investment securities held by the Company and expenses incurred by the Company. Permanent book and tax differences, both in timing and character, result in reclassifications to (i) paid-in capital in excess of par value, (ii) undistributed net investment income, (iii) accumulated net realized gains (losses) and (iv) accumulated net unrealized depreciation on investments, derivative instruments and foreign currency translation, as appropriate. As of December 31, 2017 and 2016, the Company made the following reclassifications of permanent book and tax basis differences (in thousands):



Capital Accounts	2017			2016
Paid in capital in excess of par value	$	(8,617	)	$	(5,627	)
Distributions in excess of net investment income	31,901			7,172
Accumulated realized gains (losses)	(23,284		)	(1,545		)

As of December 31, 2017 and 2016, the components of tax basis accumulated earnings were as follows (in thousands):



	2017			2016
Undistributed ordinary income - net	$	42,127		$	98,473
Undistributed capital gains	—			—
Unrealized gains (losses) - net	(249,402		)	(262,018		)
Other temporary adjustments	(21,714		)	(45,911		)
Capital loss carryover	(85,435		)	(41,565		)
Total accumulated earnings - net	$	(314,424	)	$	(251,021	)

The following table reconciles net increase in net assets resulting from operations to estimated taxable income available for

distributions for years ended December 31, 2017, 2016 and 2015, (in thousands):



	Year Ended December 31,
	2017			2016			2015
Net (decrease) increase in net assets resulting from operations	$	174,130		$	243,115		$	(38,207	)
Net change in unrealized (appreciation) depreciation on investments	(112,536		)	1,860			232,449
Net change in unrealized appreciation on cross currency swaps	56,101			(18,554		)	(7,943		)
Net change in unrealized appreciation on interest rate swaps	5,099			(2,841		)	(6,021		)
Net change in unrealized (appreciation) depreciation on foreign currency translation	1,026			551			(1,778		)
Realized losses not currently deductible	53,766			1,779			21,802
Net investment (income) loss from Taxable Subsidiaries	(365		)	424			2,604
Offering expense	7,986			2,285			4,481
Taxable income from investments on non-accrual status	24,638			37,845			8,455
Income from partnerships	8,073			4,340			—
Non-deductible (taxable) tax expense (benefit)	(1,675		)	5,377			2,890
Other book-tax differences	673			44			(455		)
Estimated taxable income available for distributions	$	216,916		$	276,225		$	218,277

The tax character of shareholder distributions attributable to the fiscal years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):



	2017					2016					2015
Distributions Attributable to:	Amount		Percentage			Amount		Percentage			Amount		Percentage
Ordinary income	$	244,133	100.0	%	⁽¹⁾	$	244,950	100.0	%	⁽¹⁾	$	204,646	99.8	%	⁽¹⁾
Realized long term capital gains	—		—			—		—			398		0.2
Total	$	244,133	100.0	%		$	244,950	100.0	%		$	205,044	100.0	%
Paid distributions as a percentage of taxable income available for distributions	113%					89%					94%

⁽¹⁾ Including short term capital gains of $– for each of the years ended December 31, 2017, 2016 and 2015.

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12. Income Taxes (continued)

The Company is generally subject to nondeductible federal excise taxes if it does not distribute to its shareholders an amount at least equal to the sum of (i) 98% of its net ordinary income for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period generally ending on October 31 of the calendar year and (iii) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which the Company paid no federal income tax. For the years ended December 31, 2017, 2016 and 2015, the Company determined it had excess excise tax base income over the current year distributions. Accordingly, the Company recorded U.S. federal excise tax of $0.21 million, $3.31 million and $2.89 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The components of the provision for income taxes for the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):



	Year Ended December 31,
	2017			2016		2015
Current tax expense (benefit):
Federal, including excise tax	$	563		$	3,311	$	2,890
State	95			—		—
Foreign ⁽¹⁾	527			1,257		555
Total current tax expense (benefit)	1,185			4,568		3,445

Deferred tax expense (benefit):
Federal	144			—		—
State	34			—		—
Foreign	(2,066		)	2,066		—
Total deferred tax expense (benefit)	(1,888		)	2,066		—
Total tax expense (benefit)	$	(703	)	$	6,634	$	3,445


⁽¹⁾	For the years ended December 31, 2017, 2016 and 2015, $0.53 million, $1.26 million and $0.56 million, respectively, of the current foreign income tax expense represents foreign tax withholding and is recorded net against the related interest income in the consolidated statements of operations.

The significant components of the net deferred tax assets as of December 31, 2017 and 2016 were as follows (in thousands):



	As of December 31,
	2017			2016
Deferred tax assets:
Net operating losses	$	4,347		$	2,467
Partnership basis differences	8,842			—
Other	5,137			22
Subtotal deferred tax assets	18,326			2,489

Deferred tax liabilities:
Partnership basis differences	(1,695		)	(1,319		)
Other basis adjustments	—			(1,991		)
Subtotal deferred tax liabilities	(1,695		)	(3,310		)
Net deferred tax asset (liability) before valuation allowance	16,631			(821		)
Valuation allowance	(16,809		)	(1,170		)
Net deferred tax liability	$	(178	)	$	(1,991	)

A reconciliation of taxes computed at the statutory federal tax rate on net increase (decrease) in net assets from operations before income taxes to the provision (benefit) for income taxes is as follows (in thousands):

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12. Income Taxes (continued)



	Year Ended December 31,
	2017					2016					2015
Expected tax expense/(benefit) at federal statutory rate	$	60,946		35.0	%	$	85,090		35.0	%	$	(13,373	)	35.0	%
Foreign tax expense	(1,539		)	(0.9	)	3,323			1.4		555			(1.5	)
Federal income tax expense	707			0.4		—			—		—			—
State income tax expense	129			0.1		—			—		—			—
Change in tax rate	(388		)	(0.2	)	—			—		—			—
Change in valuation allowance	(15,638		)	(9.0	)	—			—		—			—
Benefit of RIC election	(45,133		)	(25.9	)	(85,090		)	(35.0	)	13,373			(35.0	)
Excise tax	213			0.1		3,311			1.3		2,890			(7.5	)
Total expense (benefit)	$	(703	)	(0.4	)%	$	6,634		2.7	%	$	3,445		(9.0	)%

The Company analyzed its material tax positions and determined it has not taken any uncertain tax positions.

The Company’s capital losses in excess of capital gains earned in a tax year may generally be carried forward and used to offset capital gains, subject to certain limitations. The Regulated Investment Company Modernization Act (the “RIC Modernization Act”) was enacted on December 22, 2010. Under the RIC Modernization Act, capital losses incurred by taxpayers in taxable years beginning after the date of enactment will be allowed to be carried forward indefinitely and are allowed to retain their character as either short-term or long-term losses. As such, the Company’s cumulative capital loss carryover as of December 31, 2017 of $85.44 million will not be subject to expiration.

For the year ended December 31, 2017, the Company had estimated taxable income in excess of the distributions made from such taxable income during the year. The undistributed taxable income for the year ended December 31, 2017 is estimated to be approximately $42.13 million, which will not be finalized until the 2017 tax returns are filed in 2018. For the years ended December 31, 2016 and 2015, the Company had taxable income in excess of the distributions made from such taxable income during the year, and therefore, the amounts carried forward to 2017 and 2016 were approximately $98.47 million and $69.85 million, respectively.

Important Tax Information (Unaudited)

For the year ended December 31, 2017, 81.7% of net investment income distributions qualified as interest related dividends, which are exempt from U.S. withholding tax applicable to non U.S. shareholders.

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13. Financial Highlights

The following is a schedule of financial highlights for one share of common stock during the years ended December 31, 2017, 2016, 2015, 2014 and 2013.



	Year Ended December 31,
	2017			2016			2015			2014			2013
OPERATING PERFORMANCE PER SHARE
Net asset value, beginning of year	$	20.09		$	20.10		$	22.03		$	22.50		$	21.93
Net investment income before expense support/ reimbursement⁽¹⁾	1.54			1.55			1.56			1.65			1.10
Expense support/reimbursement⁽¹⁾	—			—			—			—			(0.02		)
Net investment income⁽¹⁾	1.54			1.55			1.56			1.65			1.08
Net realized and unrealized gain (loss)⁽¹⁾⁽²⁾	(0.28		)	0.22			(1.77		)	(0.41		)	1.24
Net increase (decrease) resulting from investment operations	1.26			1.77			(0.21		)	1.24			2.32
Distributions from net investment income⁽³⁾	(1.56		)	(1.55		)	(1.56		)	(1.65		)	(1.07		)
Distributions from realized gains⁽³⁾	—			—			(0.25		)	(0.15		)	(0.60		)
Distributions in excess of net investment income⁽³⁾⁽⁴⁾	(0.25		)	(0.26		)	—			—			(0.19		)
Net decrease resulting from distributions to common shareholders	(1.81		)	(1.81		)	(1.81		)	(1.80		)	(1.86		)
Issuance of common stock above net asset value⁽⁵⁾	0.01			0.03			0.09			0.09			0.11
Repurchases of common stock⁽⁶⁾	—			—			—			—			—
Net increase resulting from capital share transactions	0.01			0.03			0.09			0.09			0.11
Net asset value, end of period	$	19.55		$	20.09		$	20.10		$	22.03		$	22.50
OPERATING PERFORMANCE PER SHARE
Total investment return-net asset value⁽⁷⁾	6.37		%	9.40		%	(0.90		)%	5.90		%	11.40		%
Total investment return-market value⁽⁸⁾	(7.11		)%	—			—			—			—
RATIOS/SUPPLEMENTAL DATA (all amounts in thousands except ratios)
Net assets, end of period	$	2,485,102		$	2,759,332		$	2,594,022		$	2,145,821		$	1,430,434
Average net assets⁽⁹⁾	$	2,749,653		$	2,698,040		$	2,428,271		$	1,783,121		$	1,036,498
Average borrowings⁽⁹⁾	$	1,496,641		$	1,476,426		$	1,011,175		$	572,484		$	339,271
Shares outstanding, end of period	127,131			137,352			129,080			97,392			63,566
Weighted average shares outstanding	136,716			135,330			113,265			78,842			46,447
Ratios to Average Net Assets:⁽⁸⁾
Total operating expenses before expense support/ reimbursement	6.82		%	6.54		%	5.54		%	5.56		%	6.61		%
Total operating expenses	6.82		%	6.54		%	5.54		%	5.56		%	6.72		%
Net investment income	7.65		%	7.79		%	7.28		%	7.30		%	4.82		%
Portfolio turnover rate	39		%	35		%	26		%	23		%	73		%
Asset coverage ratio⁽¹⁰⁾	2.56			2.54			2.61			3.27			2.96


⁽¹⁾	The per share data was derived by using the weighted average shares outstanding during the period.


⁽²⁾	The amount shown at this caption is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the year may not agree with the change in the aggregate gains and losses in portfolio securities for the year because of the timing of sales of the Company’s shares in relation to fluctuating market values for the portfolio.


⁽³⁾	The per share data for distributions is the actual amount of distributions paid or payable per share of common stock outstanding during the entire period; distributions per share are rounded to the nearest $0.01.


⁽⁴⁾	See Note 8. “Distributions” for further information on the source of distributions from other than net investment income and realized gains.

⁽⁵⁾

The continuous issuance of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date. The per share data was derived by computing (i) the sum of (A) the number of shares issued in connection with subscriptions and/or distribution reinvestment on each share transaction date times (B) the differences between the net proceeds per share and the net asset value per share on each share transaction date, divided by (ii) the total shares outstanding at the end of the period.

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⁽⁶⁾	The per share impact of the Company's repurchase of common stock is a reduction to net asset value of less than $0.01 per share during the applicable period.

⁽⁷⁾

Total investment return-net asset value is a measure of the change in total value for shareholders who held the Company’s common stock at the beginning and end of the period, including distributions declared during the period. Total investment return-net asset value is based on (i) net asset value per share on the first day of the period, (ii) the net asset value per share on the last day of the period, of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of monthly distributions, and (iii) distributions payable relating to one share, if any, on the last day of the period. The total investment return-net asset value calculation assumes that (i) monthly cash distributions are reinvested in accordance with the Company’s distribution reinvestment plan and (ii) the fractional shares issued pursuant to the distribution reinvestment plan are issued at the then current public offering price, net of sales load, on each monthly distribution payment date. The Company’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. Investment performance is presented without regard to sales load that may be incurred by shareholders in the purchase of the Company’s shares of common stock.

⁽⁸⁾


⁽⁹⁾	The computation of average net assets and average borrowings during the period is based on the daily value of net assets and borrowing balances, respectively.

⁽¹⁰⁾

Asset coverage ratio is equal to (i) the sum of (A) net assets at the end of the period and (B) debt outstanding at the end of the period, divided by (ii) total debt outstanding at the end of the period. For purposes of the asset coverage ratio test applicable to the Company as a business development company, the Company regards the TRS total notional amount at the end of the period, less the total amount of cash collateral posted by Halifax Funding under the TRS, as a senior security. These data are presented in Note 4. “Derivative Instruments” of the consolidated financial statements.

14. Significant Subsidiaries

In accordance with SEC Regulation S-X Rules 3-09 and 4-08(g), the Company must determine which of its unconsolidated controlled portfolio companies, if any, are considered “significant subsidiaries.” In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the asset test, the income test and the investment test. Rule 3-09 of Regulation S-X requires separate audited financial statements of an unconsolidated subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%.

After performing this analysis, the Company determined that for the year ended December 31, 2017, one of its portfolio companies, Hilding Anders, is a significant subsidiary at the 20% level and one of its portfolio companies, SCJV, is a significant subsidiary at the 10% level. None of the Company's portfolio companies are significant subsidiaries for the year ended December 31, 2016. The Company also determined that for the year ended December 31, 2015, two of its portfolio companies, Comet Aircraft S.A.R.L. (“Comet Aircraft”) and Innovating Partners, LLC ("Innovating Partners"), are significant subsidiaries at the 10% level.

Summary financial information for SCJV is presented in Note 3. "Investments". Summary financial information for the years ended December 31, 2017 and 2016 and for the period from February 20, 2015 (commencement of operations) through December 31, 2015 for Comet Aircraft, for the years ended December 31, 2017, 2016 and 2015 for Hilding Anders and for the years ended December 31, 2017 and 2016 and for the period from April 14, 2015 (commencement of operations) through December 31, 2015 for Innovating Partners have been included as follows (in thousands):

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14. Significant Subsidiaries (continued)



Comet Aircraft
	As of December 31,
Balance sheet items	2017			2016
Current assets	$	25,466		$	40,732
Noncurrent assets	555,127			634,791
Current liabilities	64,413			62,410
Noncurrent liabilities	566,944			654,202
Equity	(50,764		)	(41,089		)

							For the period from February 20, 2015 (commencement of operations) through December 31, 2015
	Year Ended December 31,
Statement of operations items	2017			2016
Total revenue	$	88,018		$	77,428		$	41,550
Total operating expense	97,641			93,892			62,174
Net operating loss	(9,623		)	(16,464		)	(20,624		)
Income tax expense	291			58			—
Net loss	(9,914		)	(16,522		)	(20,624		)


Hilding Anders
	As of December 31,
Balance sheet items	2017			2016
Current assets	$	396,744		$	346,043
Noncurrent assets	959,763			828,584
Current liabilities	307,928			283,921
Noncurrent liabilities	1,786,324			1,368,202
Equity	(737,745		)	(477,496		)


	Year Ended December 31,
Statement of operations items	2017			2016			2015
Total revenue	$	1,122,766		$	930,905		$	1,065,924
Total operating expense	1,284,782			1,029,626			1,065,735
Net operating income (loss)	(162,016		)	(98,721		)	189
Income tax expense	25,498			12,449			17,347
Net loss	(187,514		)	(111,170		)	(17,158		)

Innovating Partners
	As of December 31,
Balance sheet items ⁽¹⁾	2017			2016
Current assets	$	—		$	247
Noncurrent assets	—			4,902
Current liabilities	—			63
Equity	—			5,086

							For the period from April 14, 2015 (commencement of operations) through December 31, 2015
	Year Ended December 31,
Statement of operations items	2017			2016
Total revenue	$	346		$	1,784		$	7,360
Total operating expense	127			896			729
Net operating income	219			888			6,631
Net income (loss)	1,917			(10,427		)	7,473


⁽¹⁾	The Company disposed of its investment in Innovating Partners on December 31, 2017.

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Table of Contents

15. Selected Quarterly Financial Data (Unaudited)

The following is the quarterly results of operations for the years ended December 31, 2017 and 2016. The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period (in thousands, except per share amounts).



	Year Ended December 31, 2017			Quarter Ended
	Year Ended December 31, 2017			December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017
Total investment income	$	397,709		$	106,794		$	97,593		$	100,474		$	92,848
Net investment income	210,299			51,478			53,364			52,914			52,543
Net realized and unrealized gains (losses)	(36,169		)	(44,311		)	(8,083		)	(15,952		)	32,177
Net increase in net assets resulting from operations	174,130			7,167			45,281			36,962			84,720
Basic and diluted earnings per common share	1.27			0.05			0.33			0.27			0.62
Net asset value per common share at end of period	19.55			19.55			20.01			20.07			20.25

	Year Ended December 31, 2016			Quarter Ended
	Year Ended December 31, 2016			December 30, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Total investment income	$	386,468		$	101,752		$	97,418		$	98,447		$	88,851
Net investment income	210,096			53,360			53,164			52,237			51,335
Net realized and unrealized gains (losses)	33,019			(6,113		)	59,052			66,700			(86,620		)
Net increase (decrease) in net assets resulting from operations	243,115			47,247			112,216			118,937			(35,285		)
Basic and diluted earnings (losses) per common share	1.80			0.35			0.82			0.88			(0.27		)
Net asset value per common share at end of period	20.09			20.09			20.19			19.82			19.39

The sum of quarterly per share amounts does not necessarily equal per share amounts reported for the years ended December 31, 2017 and 2016. This is due to changes in the number of weighted-average shares outstanding and the effects of rounding for each period.

16. Subsequent Events

On January 16, 2018, CCT New York Funding entered into a second amendment to the JPM Credit Facility (the "Second Amendment"). The Second Amendment provides, among other changes, for a reduction in the unused fee from 1.00% to 0.70%, a reduction in the interest rate on advances to one-month LIBOR plus an annual spread of 2.50% and an extension of the scheduled maturity date for all amounts borrowed , and all accrued and unpaid interest thereunder, to January 16, 2021.

On February 15, 2018, Charlotte Funding, a wholly-owned subsidiary of SCJV, fully paid down and terminated the BAML Credit Agreement.

On February 26, 2018, the Company’s Board declared a distribution of $0.40219 to shareholders of record as of March 29, 2018, payable on or around April 6, 2018.

On February 26, 2018, the Company's Board declared a special distribution of $0.10125 to shareholders of record as of May 14, 2018, payable on or around May 21, 2018.

On March 12, 2018, Jersey City Funding, a wholly-owned subsidiary of SCJV, increased the aggregate loan commitment under the GS Credit Facility to $350 million.

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