SEC Filing | Portman Ridge Finance Corporation

View:

Download DOC

Download PDF

Download XLS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Amendment No. 1)

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

For the quarterly period ended March 31, 2019

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

For the transition period from to

Commission File No. 814-00735

Portman Ridge Finance Corporation

(Exact name of Registrant as specified in its charter)

Delaware	20-5951150

(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification Number)

650 Madison Avenue, 23rd Floor

New York, New York 10022

(Address of principal executive offices)

(212) 891-2880

(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨

Emerging growth company	¨

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 7(a)(2)(B) of the Securities Act. ¨

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	PTMN	The NASDAQ Global Select Market
6.125% Notes due 2022	KCAPL	The NASDAQ Global Select Market

The number of outstanding shares of common stock of the registrant as of May 7, 2019 was 37,356,061.

EXPLANATORY NOTE

This Amendment No. 1 to the Form 10-Q (this “Amendment”) amends the Quarterly Report on Form 10-Q of Portman Ridge Finance Corporation for the period ended March 31, 2019 (the “Form 10-Q”) filed earlier today on May 10, 2019. The Amendment is being filed to include the names of two portfolio companies omitted from the Consolidated Schedule of Investments as of March 31, 2019 (the “Consolidated Schedule of Investments”) due to a clerical error. No other changes have been made to the Consolidated Schedule of Investments.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Item 1. “Consolidated Financial Statements,” of Part I. “Financial Information,” of the Form 10-Q is hereby amended and restated in its entirety. This Amendment does not amend or otherwise update any other information in the Form 10-Q. This Amendment should be read in conjunction with the Form 10-Q. This Amendment does not modify or update the Form 10-Q and the disclosure made therein in any way other than as described above

In addition, new certifications by our principal executive officer and principal financial officer are filed as exhibits to this Amendment.

TABLE OF CONTENTS

		Page

	Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Consolidated Balance Sheets as of March 31, 2019 (unaudited) and December 31, 2018	4

	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2019 and 2018	5

	Consolidated Statements of Changes in Net Assets (unaudited) for the three months ended March 31, 2019 and 2018	6

	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2019 and 2018	7

	Consolidated Schedule of Investments as of March 31, 2019 (unaudited) and December 31, 2018	8

	Consolidated Financial Highlights (unaudited) for the three months ended March 31, 2019 and 2018	28

	Notes to Consolidated Financial Statements (unaudited)	29

	Part II. Other Information

Item 6.	Exhibits	65

Signatures		66

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED BALANCE SHEETS

	As of March 31, 2019			As of December 31, 2018
		(unaudited)
ASSETS
Investments at fair value:
Short-term investments (cost: 2019 - $44,120,648; 2018 - $44,756,478)	$	44,120,648		$	44,756,478
Debt securities (amortized cost: 2019 - $164,699,256; 2018 - $162,264,482)		152,196,382			147,861,744
CLO Fund Securities managed by affiliates (amortized cost: 2019 - $4,416,048; 2018 - $4,407,106)		4,400,213			4,473,840
CLO Fund Securities managed by non-affiliates (amortized cost: 2019 - $49,883,910; 2018 - $51,073,520)		41,204,802			39,851,160
Equity securities (cost: 2019 - $29,326,114; 2018 - $21,944,430)		16,835,340			14,504,687
Asset Manager Affiliates (cost: 2019 - $17,791,230; 2018 - $17,791,230)		—			3,470,000
Joint Venture (cost: 2019 - $24,914,858; 2018 - $24,914,858)		23,707,969			18,390,440
Total Investments at Fair Value (cost: 2019 - $335,152,064; 2018 - $327,152,104)		282,465,354			273,308,349
Cash		3,288,010			5,417,125
Restricted cash		1,466,002			3,907,341
Interest receivable		877,156			1,342,970
Due from affiliates		928,098			1,007,631
Operating lease right-of-use asset		3,181,469			—
Other assets		570,370			481,265
Total Assets	$	292,776,459		$	285,464,681

LIABILITIES
6.125% Notes Due 2022 (net of offering costs of: 2019-$2,071,220; 2018 - $2,207,342)	$	75,335,980		$	75,199,858
Great Lakes KCAP Funding I, LLC Revolving Credit Facility (net of offering costs of: 2019-$1,327,960; 2018 - $1,155,754)		42,543,122			25,200,331
Operating lease liability		3,553,359			—
Payable for open trades		23,624,746			23,204,564
Accounts payable and accrued expenses		3,898,900			3,591,910
Accrued interest payable		134,324			131,182
Due to affiliates		—			115,825
Total Liabilities		149,090,431			127,443,670

STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share, 100,000,000 common shares authorized; 37,526,568 issued, and 37,331,709 outstanding at March 31, 2019, and 37,521,705 issued, and 37,326,846 outstanding at December 31, 2018		373,317			373,268
Capital in excess of par value		307,099,763			306,784,387
Total distributable (loss) earnings		(163,787,052	)		(149,136,644	)

Total Stockholders' Equity		143,686,028			158,021,011

Total Liabilities and Stockholders' Equity	$	292,776,459		$	285,464,681

NET ASSET VALUE PER COMMON SHARE	$	3.85		$	4.23

See accompanying notes to consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended March 31,
	2019			2018

Investment Income:
Interest from investments in debt securities	$	2,936,796		$	3,398,197
Payment-in-kind investment income		2,022			362,937
Interest from cash and time deposits		35,669			49,205
Investment income on CLO Fund Securities managed by affiliates		132,446			1,833,667
Investment income on CLO Fund Securities managed by non-affiliates		1,681,274			99,361
Dividends from Asset Manager Affiliates		—			320,000
Investment income - Joint Venture		950,000			700,000
Capital structuring service fees		61,203			63,110

Total investment income		5,799,410			6,826,477

Expenses:
Interest and amortization of debt issuance costs		1,800,926			1,863,848
Compensation		3,688,578			1,207,337
Professional fees		1,668,122			714,410
Insurance		88,651			78,022
Administrative and other		748,320			502,118

Total expenses		7,994,597			4,365,735

Net Investment (Loss) Income		(2,195,187	)		2,460,742
Realized And Unrealized (Losses) Gains On Investments:
Net realized (losses) gains from investment transactions		(13,349,430	)		3,101
Net change in unrealized (depreciation) appreciation on:
Debt securities		1,899,864			(442,884	)
Equity securities		(5,051,031	)		63,596
CLO Fund Securities managed by affiliates		(82,569	)		(220,819	)
CLO Fund Securities managed by non-affiliates		2,543,252			349,355
Asset Manager Affiliates investments		—			314,000
Joint Venture Investment		5,317,529			251,376

Total net change in unrealized appreciation (depreciation)		4,627,045			314,624

Net realized and unrealized (depreciation) appreciation on investments		(8,722,385	)		317,725

Realized losses on extinguishments of Debt		—			(169,074	)
Net (Decrease) Increase In Stockholders’ Equity Resulting From Operations	$	(10,917,572	)	$	2,609,393

Net (Decrease) Increase In Stockholders' Equity Resulting from Operations per Common Share:
Basic:	$	(0.29	)	$	0.07
Diluted:	$	(0.29	)	$	0.07
Net Investment (Loss) Income Per Common Share:
Basic:	$	(0.06	)	$	0.07
Diluted:	$	(0.06	)	$	0.07

Weighted Average Shares of Common Stock Outstanding—Basic		37,335,094			37,350,411
Weighted Average Shares of Common Stock Outstanding—Diluted		37,335,094			37,350,411

See accompanying notes to consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS⁽¹⁾

(unaudited)

	Three Months Ended March 31,
	2019			2018

Operations:
Net investment (loss) income	$	(2,195,187	)	$	2,460,742
Net realized (losses) gains from investment transactions		(13,349,430	)		3,101
Realized losses from extinguishments of debt		—			(169,074	)
Net change in unrealized appreciation on investments		4,627,045			314,624
Net (decrease) increase in stockholders’ equity resulting from operations		(10,917,572	)		2,609,393

Stockholder distributions:		(3,732,836	)		(3,716,297	)

Capital share transactions:
Issuance of common stock for:
Dividend reinvestment plan		56,489			51,560
Stock based compensation		258,936			252,855

Net increase in net assets resulting from capital share transactions		315,425			304,415

Net assets at beginning of period		158,021,011			181,804,576

Net assets at end of period	$	143,686,028		$	181,002,087

Net asset value per common share	$	3.85		$	4.85
Common shares outstanding at end of period		37,331,709			37,354,479

(1) Refer to note 9 "Stockholders' Equity" for additional information on changes in components of Stockholders' Equity

See accompanying notes to consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended March 31,
	2019			2018

OPERATING ACTIVITIES:
Net (decrease) increase in stockholder's equity resulting from operations	$	(10,917,572	)	$	2,609,393
Adjustments to reconcile net (decrease) increase in stockholder’s equity resulting from operations to net cash (used in) provided by in operations:
Net realized losses (gains) on investment transactions		13,349,430			(3,101	)
Net change in unrealized appreciation from investments		(4,627,045	)		(314,624	)
Purchases of investments		(35,189,571	)		(52,140,700	)
Proceeds from sales and redemptions of investments		19,050,340			84,965,082
Net accretion of investments		(1,744,332	)		(1,886,762	)
Amortization of debt issuance costs		227,366			170,035
Realized losses on extinguishments of debt		—			169,074
Net amortization of operating lease		3,098			—
Payment-in-kind interest income		(2,022	)		(362,937	)
Stock-based compensation		258,936			252,855
Changes in operating assets and liabilities:
Increase (decrease) in payable for open trades		420,182			(25,262,689	)
Decrease in receivable for open trades		—			2,993,750
Decrease (increase) in interest and dividends receivable		465,814			(394,858	)
Increase in accrued interest payable		3,142			72,161
(Increase) decrease in other assets		(89,105	)		7,151
Decrease (increase) in due from affiliates		79,532			(1,436,404	)
(Decrease) increase in due to affiliates		(115,825	)		94,977
Decrease (increase) in accounts payable and accrued expenses		681,979			(1,295,838	)

Net cash (used in) provided by operating activities		(18,145,653	)		8,236,565

FINANCING ACTIVITIES:
Debt issuance costs		(263,450	)		(1,353,761	)
Distributions to stockholders		(3,676,349	)		(3,664,438	)
Repayment 7.375 Notes Due 2019		—			(20,000,000	)
Borrowings under Great Lakes KCAP Funding LLC, Revolving Credit Facility		23,000,000			20,000,000
Repayment of Great Lakes KCAP Funding LLC, Revolving Credit Facility		(5,485,002	)		(172,256	)

Net cash provided by (used in) financing activities		13,575,199			(5,190,455	)

CHANGE IN CASH AND RESTRICTED CASH		(4,570,454	)		3,046,110
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		9,324,466			2,034,095

CASH AND RESTRICTED CASH, END OF PERIOD	$	4,754,012		$	5,080,205

Supplemental Information:
Interest paid during the period	$	1,570,418		$	1,693,813
Dividends paid during the period under the dividend reinvestment plan	$	56,489		$	51,560
Supplemental non-cash information:
Realized loss on Asset Manager Affiliates	$	3,470,000		$	—
Amounts per balance sheet
Cash	$	3,288,010		$	1,933,851
Restricted cash		1,466,002			3,146,354
Total Cash and Restricted cash	$	4,754,012		$	5,080,205

See accompanying notes to consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2019

Debt Securities Portfolio

Portfolio Company / Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²
Advanced Lighting Technologies, Inc.^(5)(8)(13) Consumer goods: Durable	Junior Secured Loan — Second Lien Notes 9.6% Cash, 10.0% PIK, 3 month LIBOR(2.60%) + 7.00%; LIBOR Floor 1.00% , Due 10/23		6/13/2012	$	1,007,062	$	1,007,062	$	2,474

AlixPartners, LLP^(8)(13) Services: Business	Senior Secured Loan — 2017 Refinancing Term Loan 5.2% Cash, 1 month LIBOR(2.50%) + 2.75%; LIBOR Floor 1.00% , Due 4/24		12/28/2018		994,924		956,531		989,699

Asurion, LLC (fka Asurion Corporation)^(8)(13) Banking, Finance, Insurance & Real Estate	Senior Secured Loan — Amendment No. 14 Replacement B-4 Term Loan 5.5% Cash, 1 month LIBOR(2.50%) + 3.00% , Due 8/22		12/28/2018		1,503,083		1,448,764		1,497,987

BMC Acquisition, Inc. (aka BenefitMall)^(8)(13)(14) Banking, Finance, Insurance & Real Estate	Senior Secured Loan — Initial Term Loan 8.1% Cash, 6 month LIBOR(2.88%) + 5.25%; LIBOR Floor 1.00% , Due 12/24		1/2/2018		2,962,500		2,961,067		2,888,437

Bristol Hospice, L.L.C.^(8)(13)(14) Healthcare & Pharmaceuticals	Junior Secured Loan — Initial Term Loan (Second Lien) 9.7% Cash, 1 month LIBOR(2.50%) + 7.25%; LIBOR Floor 1.00% , Due 1/24		3/29/2019		8,800,000		8,743,583		8,756,000

BW NHHC Holdco Inc.^(8)(13)(14) Healthcare & Pharmaceuticals	Senior Secured Loan — Initial Term Loan (First Lien) 7.5% Cash, 1 month LIBOR(2.49%) + 5.00% , Due 5/25		5/16/2018		1,985,000		1,958,871		1,937,023

Carestream Health, Inc.^(8)(13) Healthcare & Pharmaceuticals	Junior Secured Loan — Extended Term Loan (Second Lien) 12.0% Cash, 1 month LIBOR(2.50%) + 9.50%; LIBOR Floor 1.00% , Due 6/21		10/7/2014		1,510,955		1,497,587		1,488,291

Child Development Schools, Inc.^(8)(14) Services: Business	Senior Secured Loan — Term Loan 6.8% Cash, 3 month LIBOR(2.52%) + 4.25% , Due 5/23		6/6/2018		4,726,027		4,716,164		4,714,212

Community Care Health Network, Inc. (aka Matrix Medical Network)^(8)(14) Healthcare & Pharmaceuticals	Senior Secured Loan — Closing Date Term Loan 7.2% Cash, 1 month LIBOR(2.50%) + 4.75%; LIBOR Floor 1.00% , Due 2/25		2/9/2018		1,985,000		1,980,821		1,871,458

Corsair Gaming, Inc.⁽⁸⁾ High Tech Industries	Junior Secured Loan — Term Loan (Second Lien) 11.1% Cash, 3 month LIBOR(2.60%) + 8.50%; LIBOR Floor 1.00% , Due 8/25		9/29/2017		5,000,000		4,938,888		4,929,000

Portfolio Company/ Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²
Corsair Gaming, Inc.^(8)(14) High Tech Industries	Senior Secured Loan — Term Loan (First Lien) 6.9% Cash, 3 month LIBOR(2.60%) + 4.25%; LIBOR Floor 1.00% , Due 8/24		9/29/2017		1,984,926		1,980,728		1,965,077

CSM Bakery Solutions Limited (fka CSM Bakery Supplies Limited)⁽⁸⁾ Beverage, Food and Tobacco	Junior Secured Loan — Term Loan (Second Lien) 10.6% Cash, 3 month LIBOR(2.80%) + 7.75%; LIBOR Floor 1.00% , Due 7/21		5/23/2013		3,000,000		3,005,685		2,812,500

CT Technologies Intermediate Holdings, Inc. (Smart Holdings Corp.) (aka HealthPort)^(8)(13)(14) Healthcare & Pharmaceuticals	Senior Secured Loan — New Term Loan Facility 6.7% Cash, 1 month LIBOR(2.50%) + 4.25%; LIBOR Floor 1.00% , Due 12/21		11/19/2014		3,953,793		3,948,258		3,432,387

Decolin Inc.^(3)(13)(14) Textiles and Leather	Senior Secured Loan — Initial Term Loan 7.0% Cash, 1 month LIBOR(2.50%) + 4.50%; LIBOR Floor 1.00% , Due 12/23		1/26/2018		2,190,363		2,181,554		2,090,482

Digitran Innovations B.V. (Pomeroy Solutions Holding Company, Inc.)^(8)(13)(14) High Tech Industries	Senior Secured Loan — Term Loan 10.1% Cash, 3 month LIBOR(2.61%) + 7.50%; LIBOR Floor 1.50% , Due 7/24		12/10/2018		4,974,937		4,927,919		4,912,751

Drew Marine Group Inc.^(8)(13)(14) Transportation: Cargo	Junior Secured Loan — Term Loan (Second Lien) 9.5% Cash, 1 month LIBOR(2.50%) + 7.00%; LIBOR Floor 1.00% , Due 5/21		11/19/2013		4,000,000		4,000,568		4,000,400

Drilling Info Holdings, Inc.^(8)(13)(14) High Tech Industries	Senior Secured Loan — Initial Term Loan (First Lien) 6.7% Cash, 1 month LIBOR(2.50%) + 4.25% , Due 7/25		2/12/2019		2,485,239		2,479,579		2,479,026

Evergreen North America Acquisition, LLC (f/k/a Industrial Services Acquisition, LLC)^(8)(13)(14) Environmental Industries	Senior Secured Loan — Term Loan 7.6% Cash, 3 month LIBOR(2.63%) + 5.00%; LIBOR Floor 1.00% , Due 6/22		6/21/2016		1,087,683		1,091,368		1,087,683

First American Payment Systems, L.P.^(8)(13)(14) Banking, Finance, Insurance & Real Estate	Junior Secured Loan — Term Loan (Second Lien) 13.1% Cash, 3 month LIBOR(2.64%) + 10.50%; LIBOR Floor 1.00% , Due 7/24		1/4/2017		1,500,000		1,468,354		1,409,400

Flexera Software LLC (fka Flexera Software, Inc.)⁽⁸⁾ High Tech Industries	Junior Secured Loan — Initial Term Loan (Second Lien) 9.8% Cash, 1 month LIBOR(2.50%) + 7.25%; LIBOR Floor 1.00% , Due 2/26		1/25/2018		1,099,654		1,111,069		1,092,781

Portfolio Company/ Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²
GI Advo Opco, LLC^{(5)(8)(13)(14)} Healthcare & Pharmaceuticals	Senior Secured Loan — Term Loan 9.5% Cash, Due 11/21		11/19/2015		180,304		179,431		-

GK Holdings, Inc. (aka Global Knowledge)^(8)(13) Services: Business	Junior Secured Loan — Initial Term Loan (Second Lien) 12.9% Cash, 3 month LIBOR(2.60%) + 10.25%; LIBOR Floor 1.00% , Due 1/22		1/30/2015		1,500,000		1,487,894		1,344,450

Global Tel*Link Corporation^(8)(13) Telecommunications	Junior Secured Loan — Loan (Second Lien) 10.7% Cash, 1 month LIBOR(2.50%) + 8.2%, Due 11/26		5/21/2013		5,000,000		4,918,578		4,906,500

Global Tel*Link Corporation^(8)(13)(14) Telecommunications	Junior Secured Loan — Loan (Second Lien) 10.7% Cash, 1 month LIBOR(2.50%) + 8.2%, Due 11/26		5/21/2013		2,000,000		1,966,427		1,962,600

Global Tel*Link Corporation^(8)(13)(14) Telecommunications	Senior Secured Loan — Term Loan (First Lien) 6.7% Cash, 1 month LIBOR(2.50%), Due 11/25		5/21/2013		1,470,104		1,466,908		1,453,051

Grupo HIMA San Pablo, Inc.^(8)(13) Healthcare & Pharmaceuticals	Senior Secured Loan — Term B Loan (First Lien) 9.8% Cash, 3 month LIBOR(2.75%) + 7.00%; LIBOR Floor 1.50% , Due 1/18		1/30/2013		2,776,116		2,776,116		2,685,892

Grupo HIMA San Pablo, Inc.^(5)(8)(13) Healthcare & Pharmaceuticals	Junior Secured Loan — Term Loan (Second Lien) 13.8% Cash, Due 7/18		1/30/2013		7,191,667		7,169,109		4,536,036

Harland Clarke Holdings Corp. (fka Clarke American Corp.)^(8)(13)(14) Media: Advertising, Printing & Publishing	Senior Secured Loan — Initial Term Loan 7.4% Cash, 3 month LIBOR(2.60%) + 4.75%; LIBOR Floor 1.00% , Due 11/23		6/18/2013		2,774,851		2,792,996		2,538,989

Hoffmaster Group, Inc.^(8)(13)(14) Forest Products & Paper	Junior Secured Loan — Initial Term Loan (Second Lien) 12.0% Cash, 1 month LIBOR(2.50%) + 9.50%; LIBOR Floor 1.00% , Due 11/24		5/6/2014		1,600,000		1,566,065		1,554,080

Infobase Holdings, Inc.^(8)(13)(14) High Tech Industries	Senior Secured Loan — Term Loan 7.2% Cash, 3 month LIBOR(2.68%) + 4.50%; LIBOR Floor 1.00% , Due 12/22		12/13/2017		3,991,640		3,958,355		3,951,724

Ivanti Software, Inc. (fka LANDesk Group, Inc.)^(8)(13) High Tech Industries	Junior Secured Loan — Loan (Second Lien) 11.5% Cash, 1 month LIBOR(2.50%) + 9.00%; LIBOR Floor 1.00% , Due 1/25		3/10/2017		3,228,619		3,228,619		3,102,057

Kellermeyer Bergensons Services, LLC⁽⁸⁾ Services: Business	Senior Secured Loan — 2018 Replacement Term Loan (First Lien) 7.4% Cash, 3 month LIBOR(2.63%) + 4.75%; LIBOR Floor 1.00% , Due 10/21		10/31/2014		2,088,206		2,085,776		2,068,994

Portfolio Company/ Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²
MB Aerospace Holdings II Corp.^(8)(13)(14) Aerospace and Defense	Senior Secured Loan — Initial Term Loan (First Lien) 6.0% Cash, 1 month LIBOR(2.50%) + 3.50%; LIBOR Floor 1.00% , Due 1/25		5/10/2013		1,234,375		1,229,225		1,206,602

Navex Topco, Inc.^(8)(13)(14) Electronics	Junior Secured Loan — Initial Term Loan (Second Lien) 9.5% Cash, 1 month LIBOR(2.50%) + 7.00% , Due 9/26		12/4/2018		6,700,000		6,633,298		6,566,000

Pinstripe Holdings, LLC (Aka Cielo)^(8)(13)(14) Services: Consumer	Senior Secured Loan — Initial Term Loan 8.5% Cash, 1 month LIBOR(2.50%) + 6.00%; LIBOR Floor 1.00% , Due 1/25		1/17/2019		5,000,000		4,902,799		4,900,000

Playpower, Inc.^(8)(13)(14) Construction & Building	Senior Secured Loan — Initial Term Loan (First Lien) 7.4% Cash, 3 month LIBOR(2.60%) + 4.75%; LIBOR Floor 1.00% , Due 6/21		6/23/2015		1,524,087		1,529,905		1,524,392

PSC Industrial Holdings Corp.^(8)(13) Environmental Industries	Junior Secured Loan — Initial Term Loan (Second Lien) 10.98% Cash, 1 month LIBOR(2.48%) + 8.50%; LIBOR Floor 1.00% , Due 10/25		10/5/2017		3,000,000		2,950,892		2,865,000

PVHC Holding Corp^(8)(13)(14) Chemicals, Plastics and Rubber	Senior Secured Loan — Initial Term Loan 7.36% Cash, 3 month LIBOR(2.61%) + 4.75%; LIBOR Floor 1.00% , Due 8/24		8/10/2018		2,865,600		2,851,108		2,793,960

Q Holding Company (fka Lexington Precision Corporation)^(8)(13)(14) Chemicals, Plastics and Rubber	Senior Secured Loan — Term B Loan 7.50% Cash, 1 month LIBOR(2.50%) + 5.00%; LIBOR Floor 1.00% , Due 12/21		12/16/2016		1,974,227		1,995,570		1,951,721

Ravn Air Group, Inc.^(8)(13)(14) Aerospace and Defense	Senior Secured Loan — Initial Term Loan 7.6% Cash, 3 month LIBOR(2.61%) + 5.00%; LIBOR Floor 1.00% , Due 7/21		7/29/2015		1,867,866		1,867,866		1,867,866

Robertshaw US Holding Corp. (fka Fox US Bidco Corp.) ^(8)(13) Capital Equipment	Junior Secured Loan — Initial Term Loan (Second Lien) 10.5% Cash, 1 month LIBOR(2.50%) + 8.00%; LIBOR Floor 1.00% , Due 2/26		2/15/2018		3,000,000		2,974,023		2,777,100

Roscoe Medical, Inc.^(5)(8)(13) Healthcare & Pharmaceuticals	Junior Secured Loan — Term Loan (Second Lien) 11.3% Cash, Due 9/19		3/26/2014		1,700,000		1,698,495		816,000

Roscoe Medical, Inc.^{(5)(8)(13)(14)} Healthcare & Pharmaceuticals	Junior Secured Loan — Term Loan (Second Lien) 11.3% Cash, Due 9/19		3/26/2014		5,000,000		4,995,580		2,400,000

Portfolio Company/ Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²
Salient CRGT Inc.^(8)(13)(14) High Tech Industries	Senior Secured Loan — Initial Term Loan 8.2% Cash, 1 month LIBOR(2.50%) + 5.75%; LIBOR Floor 1.00% , Due 2/22		2/27/2017		1,828,971		1,845,166		1,761,117

SCSG EA Acquisition Company, Inc.⁽⁸⁾ Healthcare & Pharmaceuticals	Junior Secured Loan — Initial Term Loan (Second Lien) 11.0% Cash, 3 month LIBOR(2.80%) + 8.25%; LIBOR Floor 1.00% , Due 9/24		8/18/2017		1,000,000		991,578		985,000

SCSG EA Acquisition Company, Inc.^(8)(14) Healthcare & Pharmaceuticals	Junior Secured Loan — Initial Term Loan (Second Lien) 11.0% Cash, 3 month LIBOR(2.80%) + 8.25%; LIBOR Floor 1.00% , Due 9/24		8/18/2017		5,000,000		4,961,208		4,925,000

Sierra Enterprises, LLC (aka Lyons Magnus)^(8)(13)(14) Beverage, Food and Tobacco	Senior Secured Loan — Tranche B-1 Term Loan (First Lien) 6.0% Cash, 1 month LIBOR(2.50%) + 3.50%; LIBOR Floor 1.00% , Due 11/24		11/3/2017		2,962,575		2,950,127		2,947,762

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(5)(8)(13) Environmental Industries	Junior Secured Loan — Restructured Term Loan 1.0% Cash, 8.3% PIK, Due 10/22		6/25/2013		2,035,770		1,984,160		-

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(5)(8)(13) Environmental Industries	Senior Secured Loan — Term Loan 1.0% Cash, 3 month LIBOR(2.82%) + 12.00% , Due 10/22		6/25/2013		339,788		339,788		47,634

Tank Partners Holdings, LLC^(8)(13) Energy: Oil & Gas	Senior Unsecured Bond — TankConvert, 10.0% PIK, Due 2/22		2/15/2019		456,974		456,974		456,974

Tex-Tech Industries, Inc.^(8)(13) Textiles and Leather	Junior Secured Loan — Term Loan (Second Lien) 11.5% Cash, 1 month LIBOR(2.50%) + 9.00%; LIBOR Floor 1.00% , Due 8/24		8/24/2017		8,008,000		7,961,681		7,847,840

Time Manufacturing Acquisition, LLC^(8)(13)(14) Capital Equipment	Senior Secured Loan — Term Loan 7.7% Cash, 6 month LIBOR(2.69%) + 5.00%; LIBOR Floor 1.00% , Due 2/23		2/3/2017		3,437,374		3,438,848		3,421,562

TLE Holdings, LLC^(8)(13)(14) Services: Consumer	Senior Secured Loan — Term Loan 8.0% Cash, 1 month LIBOR(2.50%) + 5.50%; LIBOR Floor 1.00% , Due 6/24		3/29/2019		5,732,229		5,702,583		5,703,568

TronAir Parent Inc.^(8)(13)(14) Aerospace and Defense	Senior Secured Loan — Initial Term Loan (First Lien) 7.6% Cash, 12 month LIBOR(2.82%) + 4.75%; LIBOR Floor 1.00% , Due 9/23		9/30/2016		984,848		982,924		961,015

TRSO I, Inc.^(8)(13) Energy: Oil & Gas	Junior Secured Loan — Term Loan (Second Lien) 14.0% Cash, Due 12/19		12/24/2012		1,000,000		997,911		1,000,000

Portfolio Company/ Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²
Verdesian Life Sciences, LLC^(8)(13)(14) Environmental Industries	Senior Secured Loan — Initial Term Loan 7.7% Cash, 3 month LIBOR(2.74%) + 5.00%; LIBOR Floor 1.00% , Due 7/20		6/25/2014		2,041,874		2,007,410		1,837,687

WireCo WorldGroup Inc. ^(8)(13) Capital Equipment	Junior Secured Loan — Initial Term Loan (Second Lien) 11.5% Cash, 1 month LIBOR(2.50%) + 9.00%; LIBOR Floor 1.00% , Due 9/24		8/9/2016		3,000,000		2,969,008		2,889,900

Zest Acquisition Corp.^(8)(13) Healthcare & Pharmaceuticals	Junior Secured Loan — Initial Term Loan (Second Lien) 10.0% Cash, 1 month LIBOR(2.49%) + 7.50%; LIBOR Floor 1.00% , Due 3/26		3/8/2018		3,500,000		3,480,435		3,281,241

Total Investment in Debt Securities (106% of net asset value at fair value)				$	165,747,211	$	164,699,256	$	152,196,382

Equity Securities Portfolio

Portfolio Company / Principal Business	Investment¹⁵	Initial Acquisition Date		Percentage Ownership/Shares			Cost		Fair Value²
Advanced Lighting Technologies, Inc,^(8)(13) Consumer goods: Durable	Warrants		6/13/2012		1.90	%	$	-	$	1,000

Advanced Lighting Technologies, Inc.^(8)(13) Consumer goods: Durable	Membership Interests		6/13/2012		0.40	%		181,999		1,000

Aerostructures Holdings L.P.^(8)(13) Aerospace and Defense	Partnership Interests		2/28/2007		1.16	%		157,717		50,000

BCP Great Lakes Holdings LP^(10)(17)(18) Limited Partnership	Partnership Interests		12/11/2018		55.6	%		15,185,556		14,966,706

Caribe Media Inc. (fka Caribe Information Investments Incorporated)^(8)(13) Media: Advertising, Printing & Publishing	Common		12/18/2006		1.17	%		359,765		108,675

eInstruction Acquisition, LLC^(3)(8)(13) Services: Business	Membership Units		7/2/2007		1.10	%		1,079,617		1,000

FP WRCA Coinvestment Fund VII, Ltd.⁽¹³⁾ Capital Equipment	Class A Shares		2/2/2007		0.41	%		1,500,000		624,000

New Millennium Holdco, Inc. (Millennium Health, LLC)^(8)(13) Healthcare & Pharmaceuticals	Common		10/7/2014		0.20	%		1,953,299		1,000

Roscoe Investors, LLC^(8)(13) Healthcare & Pharmaceuticals	Class A Units		3/26/2014		1.56	%		1,000,000		-

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(8)(13) Environmental Industries	Class B Units		6/25/2013		1.56	%		-		1,000

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(8)(13) Environmental Industries	Class B Equity		6/25/2013		1.56	%		-		1,000

Tank Partners Holdings, LLC^(8)(10)(13) Energy: Oil & Gas	Class A Units		8/28/2014		48.5	%		6,228,000		568,905

Ohene Holdings B.V.- Digitran Pomeroy⁽¹³⁾ Services: Business	Warrants		8/28/2014		0.2	%		-		1,000

TRSO II, Inc.^(8)(13) Energy: Oil & Gas	Common Stock		12/24/2012		5.40	%		1,680,161		510,054

Total Investment in Equity Securities (12% of net asset value at fair value)							$	29,326,114	$	16,835,340

CLO Fund Securities

CLO Subordinated Investments

Portfolio Company	Investment^15,11	Initial Acquisition Date	Percentage Ownership			Amortized Cost		Fair Value
Katonah III, Ltd.^(3)(12)(13)	Subordinated Securities, effective interest N/M, 5/15 maturity ⁽¹⁶⁾	12/11/2006		23.1	%	$	1,287,155	$	369,280
Catamaran CLO 2013- 1 Ltd.^(3)(13)	Subordinated Securities, effective interest 21.1%, 1/28 maturity	6/4/2013		23.3	%		6,371,659		7,506,434
Catamaran CLO 2014-1 Ltd.^(3)(13)	Subordinated Securities, effective interest 13.5%, 4/30 maturity	5/6/2014		22.2	%		10,316,641		9,112,278
Dryden 30 Senior Loan Fund^(3)(13)	Subordinated Securities, effective interest 27.2%, 12/29 maturity	10/10/2013		6.8	%		1,468,739		2,014,262
Catamaran CLO 2014-2 Ltd.^(3)(13)	Subordinated Securities, effective interest 10.1%, 11/25 maturity	8/15/2014		24.9	%		6,316,361		2,591,820
Catamaran CLO 2015-1 Ltd.^(3)(13)	Subordinated Securities, effective interest 11.3%, 10/26 maturity	5/5/2015		9.9	%		4,303,600		3,157,769
Catamaran CLO 2016-1 Ltd.^(3)(13)	Subordinated Securities, effective interest 9.1%, 4/27 maturity	12/21/2016		24.9	%		9,620,439		7,502,959
Catamaran CLO 2018-1 Ltd^(3)(13)	Subordinated Securities, effective interest 14.5%, 10/31 maturity	9/27/2018		24.8	%		10,199,316		8,950,000

Total Investment in CLO Subordinated Securities						$	49,883,910	$	41,204,802

CLO Rated-Note Investment

Portfolio Company	Investment¹⁵	Initial Acquisition Date	Percentage Ownership			Amortized Cost		Fair Value
Great Lakes KCAP F3C Senior, LLC (fka KCAP F3C Senior Funding, LLC)^(6)(13)	Class E Notes, 10.13% Cash, 3 month LIBOR (2.63%) + 7.50%, Due 12/29	10/24/2017		27.4	%		4,416,048		4,400,213

Total Investment in CLO Rated-Note						$	4,416,048	$	4,400,213

Total Investment in CLO Fund Securities (32% of net asset value at fair value)						$	54,299,958	$	45,605,015

Asset Manager Affiliates

Portfolio Company / Principal Business	Investment¹⁵	Initial Acquisition Date	Percentage Ownership			Cost		Fair Value²
Asset Manager Affiliates^(8)(13)(17)	Asset Management Company	12/11/2006		100	%	$	17,791,230	$	-

Total Investment in Asset Manager Affiliates (% of net asset value at fair value)						$	17,791,230	$	-

Joint Ventures

Portfolio Company / Principal Business	Investment¹⁵	Initial Acquisition Date	Percentage Ownership			Cost		Fair Value
KCAP Freedom 3 LLC^(9)(13)	Joint Venture	7/19/2017		60	%	$	24,914,858	$	23,707,969

Total Investment in Joint Ventures (16% of net asset value at fair value)						$	24,914,858	$	23,707,969

Short-term Investments

Short-term Investments	Investment¹⁵	Initial Acquisition Date	Yield			Par /Amortized Cost		Fair Value²
US Bank Money Market Account⁽⁷⁾⁽⁸⁾	Money Market Account	N/A		0.20	%	$	24,121,902	$	24,121,902

US Treasury Bill (Cusip:912796UV9)⁽⁸⁾	U.S. Government Obligation			2.29	%		19,998,746		19,998,746
Total Short-term Investments (31% of net asset value at fair value)						$	44,120,648	$	44,120,648

Total Investments⁴						$	335,152,064	$	282,465,354

A majority of the variable rate loans in the Company’s investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The Borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at March 31, 2019. As noted in the table above, 78% (based on par) of debt securities contain floors which range between 1.00% and 1.50%.

Reflects the fair market value of all investments as of March 31, 2019 as determined by the Company’s Board of Directors.

Non-U.S. company or principal place of business outside the U.S.

⁴

The aggregate cost of investments for federal income tax purposes is approximately $335 million. The aggregate gross unrealized appreciation is approximately $0.1 million, the aggregate gross unrealized depreciation is approximately $52.8 million, and the net unrealized depreciation is approximately $52.7 million.

⁵

Loan or debt security is on non-accrual status and therefore is considered non-income producing.

⁶

An affiliate CLO Fund managed by an Asset Manager Affiliate (as such term is defined in the notes to the consolidated financial statements).

⁷

Money market account.

⁸

Qualified asset for purposes of section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Qualifying assets represent approximately 70.3% of the total assets at March 31, 2019.

⁹

As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). Other than for purposes of the 1940 Act, the Company does not believe that it has control over this portfolio company.

¹⁰

Non-voting.

¹¹

CLO Subordinated Investments are entitled to periodic distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s investments less contractual payments to debt holders and fund expenses. The estimated annualized effective yield indicated is based upon a current projection of the amount and timing of these distributions. Such projections are updated on a quarterly basis and the estimated effective yield is adjusted prospectively.

¹²

Notice of redemption has been received for this security.

¹³

Fair value of this investment was determined using significant unobservable inputs.

¹⁴

As of March 31, 2019, this investment is owned by Great Lakes KCAP Funding I, LLC and was pledged to secure Great Lakes KCAP Funding I, LLC’s debt obligation pursuant to its senior secured revolving credit facility (the “Revolving Credit Facility”) with the Company, as the servicer, certain institutional lenders, State Bank and Trust Company, as the administrative agent, lead arranger and bookrunner, and CIBC Bank USA, as documentation agent.

¹⁵

The Company's investments are generally acquired in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) and, therefore, are generally subject to limitations on resale, and may be deemed to be “restricted securities'' under the Securities Act of 1933.

¹⁶

The remaining collateral in this CLO Fund portfolio is illiquid and not producing meaningful cash flows, and thus, the Company’s investment in the CLO Subordinated securities are not currently receiving periodic cash distributions. Accordingly, the Company is no longer recording any investment income from these investments, and has thus noted the effective interest as not meaningful, or N/M. The fair value of the investment reflects the Company’s estimated share of the fair value of the underlying collateral.

¹⁷

¹⁸

Ownership of LP interest held through the holding company BCP Great Lakes Fund, LP.

See accompanying notes to consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of December 31, 2018

Debt Securities Portfolio

Portfolio Company / Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²

Advanced Lighting Technologies, Inc.^(5)(8)(13) Consumer goods: Durable	Junior Secured Loan — Second Lien Notes 9.8% Cash, 10.0% PIK, 3 month LIBOR(2.80%) + 7.00%; LIBOR Floor 1.00% , Due 10/23		6/13/2012	$	1,007,062	$	958,499	$	362,240

AlixPartners, LLP^(8)(13) Services: Business	Senior Secured Loan — 2017 Refinancing Term Loan 5.3% Cash, 1 month LIBOR(2.52%) + 2.75%; LIBOR Floor 1.00% , Due 4/24		12/28/2018		997,462		957,563		957,563

Asurion, LLC (fka Asurion Corporation)^(8)(13) Banking, Finance, Insurance & Real Estate	Senior Secured Loan — Amendment No. 14 Replacement B-4 Term Loan 5.5% Cash, 1 month LIBOR(2.52%)+ 3.00%; LIBOR Floor 1.00% , Due 8/22		12/28/2018		1,520,851		1,463,819		1,460,001

BMC Acquisition, Inc. (aka BenefitMall)^(8)(13)(14) Banking, Finance, Insurance & Real Estate	Senior Secured Loan — Initial Term Loan 7.8% Cash, 6 month LIBOR(2.59%) + 5.25%; LIBOR Floor 1.00% , Due 12/24		1/2/2018		2,970,000		2,968,502		2,942,082

BW NHHC Holdco Inc.^(8)(13)(14) Healthcare & Pharmaceuticals	Senior Secured Loan — Initial Term Loan (First Lien) 7.5% Cash, 1 month LIBOR(2.47%) + 5.00% , Due 5/25		5/16/2018		1,990,000		1,962,751		1,950,200

Carestream Health, Inc.^(8)(13) Healthcare & Pharmaceuticals	Junior Secured Loan — Extended Term Loan (Second Lien) 12.0% Cash, 1 month LIBOR(2.52%) + 9.50%; LIBOR Floor 1.00% , Due 6/21		10/7/2014		1,510,955		1,496,079		1,480,736

Child Development Schools, Inc.^(8)(13)(14) Services: Business	Senior Secured Loan — Term Loan 6.7% Cash, 3 month LIBOR(2.50%) + 4.25% , Due 5/23		6/6/2018		4,794,521		4,783,918		4,782,534

Community Care Health Network, Inc. (aka Matrix Medical Network)^(8)(14) Healthcare & Pharmaceuticals	Senior Secured Loan — Closing Date Term Loan 7.3% Cash, 1 month LIBOR(2.52%) + 4.75%; LIBOR Floor 1.00% , Due 2/25		2/9/2018		1,990,000		1,985,635		1,873,784

Corsair Gaming, Inc.⁽⁸⁾ High Tech Industries	Junior Secured Loan — Term Loan (Second Lien) 11.3% Cash, 3 month LIBOR(2.80%) + 8.50%; LIBOR Floor 1.00% , Due 8/25		9/29/2017		5,000,000		4,936,538		4,929,000

Corsair Gaming, Inc.^(8)(14) High Tech Industries	Senior Secured Loan — Term Loan (First Lien) 7.1% Cash, 3 month LIBOR(2.80%) + 4.25%; LIBOR Floor 1.00% , Due 8/24		9/29/2017		1,989,954		1,985,554		1,968,678

Portfolio Company / Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²

CSM Bakery Solutions Limited (fka CSM Bakery Supplies Limited)⁽⁸⁾ Beverage, Food and Tobacco	Junior Secured Loan — Term Loan (Second Lien) 10.2% Cash, 3 month LIBOR(2.41%) + 7.75%; LIBOR Floor 1.00% , Due 7/21		5/23/2013		3,000,000		3,006,304		2,841,300

CT Technologies Intermediate Holdings, Inc. (Smart Holdings Corp.) (aka HealthPort)^(8)(14) Healthcare & Pharmaceuticals	Senior Secured Loan — New Term Loan Facility 6.8% Cash, 1 month LIBOR(2.52%) + 4.25%; LIBOR Floor 1.00% , Due 12/21		11/19/2014		3,964,063		3,958,001		3,306,683

Decolin Inc.^(3)(13)(14) Textiles and Leather	Senior Secured Loan — Initial Term Loan 7.0% Cash, 1 month LIBOR(2.51%) + 4.50%; LIBOR Floor 1.00% , Due 12/23		1/26/2018		2,190,363		2,181,096		2,092,454

Dell International L.L.C. (EMC Corporation)^(8)(13) High Tech Industries	Senior Secured Loan — Refinancing Term B Loan 4.5% Cash, 1 month LIBOR(2.53%) + 2.00%; LIBOR Floor 0.75% , Due 9/23		12/28/2018		2,000,000		1,930,000		1,930,000

Digitran Innovations B.V. (Pomeroy Solutions Holding Company, Inc.)^(8)(13)(14) High Tech Industries	Senior Secured Loan — Term Loan 10.3% Cash, 3 month LIBOR(2.81%) + 7.50%; LIBOR Floor 1.50% , Due 7/24		12/10/2018		4,987,469		4,938,132		4,937,594

Drew Marine Group Inc.^(8)(13)(14) Transportation: Cargo	Junior Secured Loan — Term Loan (Second Lien) 9.5% Cash, 1 month LIBOR(2.52%) + 7.00%; LIBOR Floor 1.00% , Due 5/21		11/19/2013		4,000,000		4,000,634		4,000,400

Evergreen North America Acquisition, LLC (f/k/a Industrial Services Acquisition, LLC)^(8)(13)(14) Environmental Industries	Senior Secured Loan — Term Loan 7.8% Cash, 3 month LIBOR(2.81%) + 5.00%; LIBOR Floor 1.00% , Due 6/22		6/21/2016		1,103,728		1,107,755		1,103,728

First American Payment Systems, L.P.^(8)(13)(14) Banking, Finance, Insurance & Real Estate	Junior Secured Loan — Term Loan (Second Lien) 13.0% Cash, 3 month LIBOR(2.54%) + 10.50%; LIBOR Floor 1.00% , Due 7/24		1/4/2017		1,500,000		1,466,870		1,399,200

Flexera Software LLC (fka Flexera Software, Inc.)⁽⁸⁾ High Tech Industries	Junior Secured Loan — Initial Term Loan (Second Lien) 9.8% Cash, 1 month LIBOR(2.53%) + 7.25%; LIBOR Floor 1.00% , Due 2/26		1/25/2018		1,099,654		1,111,477		1,090,032

GI Advo Opco, LLC^{(5)(8)(13)(14)} Healthcare & Pharmaceuticals	Senior Secured Loan — Term Loan 9.5% Cash, Due 11/21		11/19/2015		180,304		179,431		117,919

Portfolio Company / Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²

GK Holdings, Inc. (aka Global Knowledge)^(8)(13) Services: Business	Junior Secured Loan — Initial Term Loan (Second Lien) 13.1% Cash, 3 month LIBOR(2.80%) + 10.25%; LIBOR Floor 1.00% , Due 1/22		1/30/2015		1,500,000		1,486,831		1,376,250

Global Tel*Link Corporation^(8)(13) Telecommunications	Junior Secured Loan — Loan (Second Lien) 11.0% Cash, 3 month LIBOR(2.71%) + 8.25% , Due 11/26		5/21/2013		5,000,000		4,915,960		4,912,500

Global Tel*Link Corporation^(8)(13)(14) Telecommunications	Junior Secured Loan — Loan (Second Lien) 11.0% Cash, 3 month LIBOR(2.71%) + 8.25% , Due 11/26		5/21/2013		2,000,000		1,965,349		1,965,000

Global Tel*Link Corporation^(8)(13)(14) Telecommunications	Senior Secured Loan — Term Loan (First Lien) 7.0% Cash, 3 month LIBOR(2.71%) + 4.25% , Due 11/25		12/7/2017		1,473,788		1,470,466		1,466,419

Grupo HIMA San Pablo, Inc.^(8)(13) Healthcare & Pharmaceuticals	Senior Secured Loan — Term B Loan (First Lien) 9.5% Cash, 3 month LIBOR(2.52%) + 7.00%; LIBOR Floor 1.50% , Due 1/18		1/30/2013		2,813,058		2,813,058		2,728,666

Grupo HIMA San Pablo, Inc.^(5)(13)(14) Healthcare & Pharmaceuticals	Junior Secured Loan — Term Loan (Second Lien) 13.8% Cash, Due 7/18		1/30/2013		7,191,667		7,169,109		4,789,650

Harland Clarke Holdings Corp. (fka Clarke American Corp.)^(8)(13)(14) Media: Advertising, Printing & Publishing	Senior Secured Loan — Initial Term Loan 7.6% Cash, 3 month LIBOR(2.80%) + 4.75%; LIBOR Floor 1.00% , Due 11/23		6/18/2013		2,817,177		2,836,587		2,564,688

Hoffmaster Group, Inc.^(8)(13)(14) Forest Products & Paper	Junior Secured Loan — Initial Term Loan (Second Lien) 12.0% Cash, 1 month LIBOR(2.52%) + 9.50%; LIBOR Floor 1.00% , Due 11/24		5/6/2014		1,600,000		1,564,583		1,553,920

Infobase Holdings, Inc.^(8)(13)(14) High Tech Industries	Senior Secured Loan — Term Loan 7.1% Cash, 3 month LIBOR(2.63%) + 4.50%; LIBOR Floor 1.00% , Due 12/22		12/13/2017		4,017,393		3,981,675		3,977,219

Ion Media Networks, Inc.^(8)(13) Media: Advertising, Printing & Publishing	Senior Secured Loan — Term B-3 Loan 5.3% Cash, 1 month LIBOR(2.53%) + 2.75%; LIBOR Floor 1.00% , Due 12/20		12/28/2018		3,000,000		2,917,500		2,917,500

Ivanti Software, Inc. (fka LANDesk Group, Inc.)^(8)(13) High Tech Industries	Junior Secured Loan — Loan (Second Lien) 11.4% Cash, 1 month LIBOR(2.35%) + 9.00%; LIBOR Floor 1.00% , Due 1/25		3/10/2017		3,228,619		3,228,619		3,071,062

Portfolio Company / Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²

Jane Street Group, LLC^(8)(13) Banking, Finance, Insurance & Real Estate	Senior Secured Loan — Dollar Term Loan (2018) 5.5% Cash, 1 month LIBOR(2.50%) + 3.00% , Due 8/22		12/28/2018		2,992,500		2,932,650		2,932,650

Kellermeyer Bergensons Services, LLC⁽⁸⁾ Services: Business	Senior Secured Loan — 2018 Replacement Term Loan (First Lien) 7.5% Cash, 3 month LIBOR(2.71%) + 4.75%; LIBOR Floor 1.00% , Due 10/21		10/31/2014		2,093,452		2,090,784		2,096,069

MB Aerospace Holdings II Corp.^(8)(13)(14) Aerospace and Defense	Senior Secured Loan — Initial Term Loan (First Lien) 6.0% Cash, 1 month LIBOR(2.52%) + 3.50%; LIBOR Floor 1.00% , Due 1/25		5/10/2013		1,237,500		1,232,118		1,149,390

Navex Topco, Inc.^(8)(13)(14) Electronics	Junior Secured Loan — Initial Term Loan (Second Lien) 9.5% Cash, 1 month LIBOR(2.53%) + 7.00% , Due 9/26		12/4/2018		3,000,000		3,007,500		3,007,500

Playpower, Inc.^(8)(13)(14) Construction & Building	Senior Secured Loan — Initial Term Loan (First Lien) 7.6% Cash, 3 month LIBOR(2.80%) + 4.75%; LIBOR Floor 1.00% , Due 6/21		6/23/2015		1,393,745		1,400,223		1,394,163

PSC Industrial Holdings Corp.^(8)(13) Environmental Industries	Junior Secured Loan — Initial Term Loan (Second Lien) 10.96% Cash, 1 month LIBOR(2.46%) + 8.50%; LIBOR Floor 1.00% , Due 10/25		10/5/2017		3,000,000		2,949,039		2,940,300

PVHC Holding Corp^(8)(13)(14) Chemicals, Plastics and Rubber	Senior Secured Loan — Initial Term Loan 7.57% Cash, 3 month LIBOR(2.82%) + 4.75%; LIBOR Floor 1.00% , Due 8/24		8/10/2018		2,872,800		2,859,340		2,859,872

Q Holding Company (fka Lexington Precision Corporation)^(8)(13)(14) Chemicals, Plastics and Rubber	Senior Secured Loan — Term B Loan 7.5% Cash, 1 month LIBOR(2.52%) + 5.00%; LIBOR Floor 1.00% , Due 12/21		12/16/2016		1,979,381		2,002,724		1,941,773

Ravn Air Group, Inc.^(8)(13)(14) Aerospace and Defense	Senior Secured Loan — Initial Term Loan 7.8% Cash, 3 month LIBOR(2.81%) + 5.00%; LIBOR Floor 1.00% , Due 7/21		7/29/2015		1,894,549		1,894,549		1,894,549

Robertshaw US Holding Corp. (fka Fox US Bidco Corp.) ^(8)(13) Capital Equipment	Junior Secured Loan — Initial Term Loan (Second Lien) 10.6% Cash, 1 month LIBOR(2.56%) + 8.00%; LIBOR Floor 1.00% , Due 2/26		2/15/2018		3,000,000		2,973,097		2,775,000

Roscoe Medical, Inc.^(8)(13) Healthcare & Pharmaceuticals	Junior Secured Loan — Term Loan (Second Lien) 11.3% Cash, Due 9/19		3/26/2014		1,700,000		1,697,733		1,525,750

Portfolio Company / Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²

Roscoe Medical, Inc.^(8)(13)(14) Healthcare & Pharmaceuticals	Junior Secured Loan — Term Loan (Second Lien) 11.3% Cash, Due 9/19		3/26/2014		5,000,000		4,993,345		4,487,500

SCSG EA Acquisition Company, Inc.⁽⁸⁾ Healthcare & Pharmaceuticals	Junior Secured Loan — Initial Term Loan (Second Lien) 10.6% Cash, 3 month LIBOR(2.40%) + 8.25%; LIBOR Floor 1.00% , Due 9/24		8/18/2017		1,000,000		991,195		990,400

SCSG EA Acquisition Company, Inc.^(8)(14) Healthcare & Pharmaceuticals	Junior Secured Loan — Initial Term Loan (Second Lien) 10.6% Cash, 3 month LIBOR(2.40%) + 8.25%; LIBOR Floor 1.00% , Due 9/24		8/18/2017		5,000,000		4,959,445		4,952,000

Sierra Enterprises, LLC (aka Lyons Magnus)^(8)(13)(14) Beverage, Food and Tobacco	Senior Secured Loan — Tranche B-1 Term Loan (First Lien) 6.0% Cash, 1 month LIBOR(2.52%) + 3.50%; LIBOR Floor 1.00% , Due 11/24		11/3/2017		2,970,056		2,957,029		2,955,206

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(5)(8)(13) Environmental Industries	Junior Secured Loan — Restructured Term Loan 1.0% Cash, 8.3% PIK, 3 month LIBOR (2.80%) + 5.50% , Due 10/22		6/25/2013		2,035,770		1,941,220		560,855

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(8)(13)(14) Environmental Industries	Senior Secured Loan — Term Loan 14.8% Cash, 3 month LIBOR(2.82%) + 12.00% , Due 10/22		6/25/2013		339,788		339,788		339,788

Tank Partners Holdings, LLC^(5)(8)(13) Energy: Oil & Gas	Senior Secured Loan — Loan 3.0% Cash, 12.5% PIK, 1 month PRIME (5.00%)+7.5%; PRIME Floor 3.00% , Due 8/19		8/28/2014		15,295,083		14,149,836		7,398,223

Tex-Tech Industries, Inc.^(8)(13) Textiles and Leather	Junior Secured Loan — Term Loan (Second Lien) 11.5% Cash, 1 month LIBOR (2.52%) + 9.00%; LIBOR Floor 1.00% , Due 8/24		8/24/2017		8,008,000		7,959,567		7,847,840

Time Manufacturing Acquisition, LLC^(8)(13)(14) Capital Equipment	Senior Secured Loan — Term Loan 7.6% Cash, 6 month LIBOR(2.63%) + 5.00%; LIBOR Floor 1.00% , Due 2/23		2/3/2017		3,446,143		3,447,715		3,430,291

TronAir Parent Inc.^(8)(13)(14) Aerospace and Defense	Senior Secured Loan — Initial Term Loan (First Lien) 7.6% Cash, 6 month LIBOR(2.82%) + 4.75%; LIBOR Floor 1.00% , Due 9/23		9/30/2016		987,374		985,337		954,001

TRSO I, Inc.^(8)(13) Energy: Oil & Gas	Junior Secured Loan — Term Loan (Second Lien) 14.0% Cash, Due 12/19		12/24/2012		1,000,000		997,207		1,000,000

Portfolio Company / Principal Business	Investment Interest Rate¹ / Maturity¹⁵	Initial Acquisition Date		Principal		Amortized Cost		Fair Value²

Verdesian Life Sciences, LLC^(8)(13)(14) Environmental Industries	Senior Secured Loan — Initial Term Loan 7.5% Cash, 1 month LIBOR(2.53%) + 5.00%; LIBOR Floor 1.00% , Due 7/20		6/25/2014		2,075,305		2,033,378		1,993,123

Weiman Products, LLC^(8)(13)(14) Consumer goods: Non-durable	Senior Secured Loan — Term Loan 7.3% Cash, 3 month LIBOR(2.80%) + 4.50%; LIBOR Floor 1.00% , Due 11/21		11/22/2013		1,440,525		1,434,568		1,440,525

WireCo WorldGroup Inc. ^(8)(13) Capital Equipment	Junior Secured Loan — Initial Term Loan (Second Lien) 11.5% Cash, 1 month LIBOR(2.52%) + 9.00%; LIBOR Floor 1.00% , Due 9/24		8/9/2016		3,000,000		2,967,619		2,957,100

Zest Acquisition Corp.^(8)(13) Healthcare & Pharmaceuticals	Junior Secured Loan — Initial Term Loan (Second Lien) 10.0% Cash, 1 month LIBOR(2.45%) + 7.50%; LIBOR Floor 1.00% , Due 3/26		3/8/2018		3,500,000		3,479,741		3,430,000

(103% of net asset value at fair value)				$	164,541,812	$	162,264,482	$	147,861,744

Equity Securities Portfolio

Portfolio Company / Principal Business	Investment¹⁵	Initial Acquisition Date		Percentage Ownership/Shares			Cost		Fair Value²

Advanced Lighting Technologies, Inc,^(8)(13) Consumer goods: Durable	Warrants		6/13/2012		1.90	%	$	-	$	1,000

Advanced Lighting Technologies, Inc.^(8)(13) Consumer goods: Durable	Membership Interests		6/13/2012		0.40	%		181,999		1,000

Aerostructures Holdings L.P.^(8)(13) Aerospace and Defense	Partnership Interests		2/28/2007		1.16	%		157,717		50,000

BCP Great Lakes Holding LP⁽¹⁷⁾ Limited Partnership	Partnership Interests		12/11/2018		55.6	%		12,466,667		12,466,667

Caribe Media Inc. (fka Caribe Information Investments Incorporated)^(8)(13) Media: Advertising, Printing & Publishing	Common		12/18/2006		1.17	%		359,765		108,675

eInstruction Acquisition, LLC^(3)(13) Services: Business	Membership Units		7/2/2007		1.10	%		1,079,617		1,000

FP WRCA Coinvestment Fund VII, Ltd.⁽¹³⁾ Capital Equipment	Class A Shares		2/2/2007		0.41	%		1,500,000		669,000

New Millennium Holdco, Inc. (Millennium Health, LLC)⁽¹³⁾ Healthcare & Pharmaceuticals	Common		10/7/2014		0.20	%		1,953,299		1,000

Perseus Holding Corp.^(8)(13) Hotel, Gaming & Leisure	Common		4/5/2007		0.19	%		400,000		1,000

Roscoe Investors, LLC^(8)(13) Healthcare & Pharmaceuticals	Class A Units		3/26/2014		1.56	%		1,000,000		653,000

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(8)(13) Environmental Industries	Class B Units		6/25/2013		1.56	%		-		1,000

Stafford Logistics, Inc.(dba Custom Ecology, Inc.)^(8)(10)(13) Environmental Industries	Class B Equity		6/25/2013		1.56	%		-		1,000

Tank Partners Holdings, LLC^(8)(13) Aerospace and Defense	Unit		8/28/2014		15.5	%		980,000		1,000

Tank Partners Holdings, LLC^(8)(13) Aerospace and Defense	Warrants		8/28/2014		1.04	%		185,205		1,000

TRSO II, Inc.^(8)(13) Energy: Oil & Gas	Common Stock		12/24/2012		5.40	%		1,680,161		548,345

Total Investment in Equity Securities (10% of net asset value at fair value)							$	21,944,430	$	14,504,687

CLO Fund Securities

CLO Subordinated Investments

Portfolio Company	Investment^15,11	Initial Acquisition Date		Percentage Ownership			Amortized Cost		Fair Value
Katonah III, Ltd.^(3)(12)(13)	Subordinated Securities, effective interest N/M, 5/15 maturity ¹⁶		12/11/2006		23.1	%	$	1,287,155	$	369,280
Catamaran CLO 2013- 1 Ltd.^(3)(13)	Subordinated Securities, effective interest 21.9%, 1/28 maturity		6/4/2013		23.3	%		6,378,611		7,016,733
Catamaran CLO 2014-1 Ltd.^(3)(13)	Subordinated Securities, effective interest 13.6%, 4/30 maturity		5/6/2014		25.1	%		11,740,622		9,777,251
Dryden 30 Senior Loan Fund^(3)(13)	Subordinated Securities, effective interest 27.0%, 12/29 maturity		10/10/2013		6.8	%		1,438,701		1,913,925
Catamaran CLO 2014-2 Ltd.^(3)(13)	Subordinated Securities, effective interest 10.4%, 11/25 maturity		8/15/2014		24.9	%		6,314,484		2,158,200
Catamaran CLO 2015-1 Ltd.^(3)(13)	Subordinated Securities, effective interest 11.4%, 10/26 maturity		5/5/2015		9.9	%		4,353,347		3,048,698
Catamaran CLO 2016-1 Ltd.^(3)(13)	Subordinated Securities, effective interest 9.1%, 4/27 maturity		12/21/2016		24.9	%		9,717,150		7,067,073
Catamaran CLO 2018-1 Ltd^(3)(13)	Subordinated Securities, effective interest 14.5%, 10/31 maturity		9/27/2018		24.8	%		9,843,450		8,500,000
Total Investment in CLO Subordinated Securities							$	51,073,520	$	39,851,160

CLO Rated-Note Investment

Portfolio Company	Investment¹⁵	Initial Acquisition Date		Percentage Ownership			Amortized Cost		Fair Value
KCAP 2017-1A^(6)(13)	Class E Notes, 10.29% Cash, 3 month LIBOR (2.79%) + 7.50%, Due 12/29		10/24/2017		27.4	%		4,407,106		4,473,840

Total Investment in CLO Rated-Note							$	4,407,106	$	4,473,840

Total Investment in CLO Fund Securities (31% of net asset value at fair value)							$	55,480,626	$	44,325,000

Asset Manager Affiliates

Portfolio Company / Principal Business	Investment¹⁵	Initial Acquisition Date		Percentage Ownership			Cost		Fair Value²
Asset Manager Affiliates^(8)(13)(17)	Asset Management Company		12/11/2006		100	%	$	17,791,230	$	3,470,000

Total Investment in Asset Manager Affiliates (2% of net asset value at fair value)							$	17,791,230	$	3,470,000

Joint Ventures

Portfolio Company / Principal Business	Investment¹⁵	Initial Acquisition Date		Percentage Ownership			Cost		Fair Value
KCAP Freedom 3 LLC^(9)(13)	Joint Venture		7/19/2017		60	%	$	24,914,858	$	18,390,440

Total Investment in Joint Ventures (13% of net asset value at fair value)							$	24,914,858	$	18,390,440

Short-term Investments

Short-term Investments	Investment¹⁵	Initial Acquisition Date		Yield			Par /Amortized Cost		Fair Value²
US Bank Money Market Account⁽⁷⁾⁽⁸⁾	Money Market Account		N/A		0.20	%	$	34,757,129	$	34,757,129

US Treasury Bill (Cusip:912796UH0)⁽⁸⁾	U.S. Government Obligation				1.04	%		9,999,349		9,999,349
Total Short-term Investments (31% of net asset value at fair value)							$	44,756,478	$	44,756,478
Total Investments⁴							$	327,152,104	$	273,308,349

¹	A majority of the variable rate loans in the Company’s investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The Borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at December 31, 2018. As noted in the table above, 81% (based on par) of debt securities contain floors which range between 0.75% and 3.00%.
²	Reflects the fair market value of all investments as of December 31, 2018, as determined by the Company’s Board of Directors.
³	Non-U.S. company or principal place of business outside the U.S.
⁴	The aggregate cost of investments for federal income tax purposes is approximately $327 million. The aggregate gross unrealized appreciation is approximately $0 million, the aggregate gross unrealized depreciation is approximately $53.8 million, and the net unrealized depreciation is approximately $53.8 million.
⁵	Loan or debt security is on non-accrual status and therefore is considered non-income producing.
⁶	An affiliate CLO Fund managed by an Asset Manager Affiliate (as such term is defined in the notes to the consolidated financial statements).
⁷	Money market account.
⁸	Qualified asset for purposes of section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). Qualifying assets represent approximately 72.0% of the total assets at December 31, 2018.

⁹	As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). Other than for purposes of the 1940 Act, the Company does not believe that it has control over this portfolio company.
¹⁰	Non-voting.
¹¹	CLO Subordinated Investments are entitled to periodic distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s investments less contractual payments to debt holders and fund expenses. The estimated annualized effective yield indicated is based upon a current projection of the amount and timing of these distributions. Such projections are updated on a quarterly basis and the estimated effective yield is adjusted prospectively.
¹²	Notice of redemption has been received for this security.
¹³	Fair value of this investment was determined using significant unobservable inputs.
¹⁴	As of December 31, 2018, this investment is owned by KCAP Funding I, LLC and was pledged to secure KCAP Funding I, LLC’s debt obligation pursuant to its senior secured revolving credit facility (the “Revolving Credit Facility”) with the Company, as the servicer, certain institutional lenders, State Bank and Trust Company, as the administrative agent, lead arranger and bookrunner, and CIBC Bank USA, as documentation agent.
¹⁵	The Company's investments are generally acquired in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) and, therefore, are generally subject to limitations on resale, and may be deemed to be “restricted securities'' under the Securities Act of 1933.
¹⁶	The remaining collateral in these CLO Fund portfolios are illiquid and not producing meaningful cash flows, and thus, the Company’s investment in the CLO Subordinated securities are not currently receiving periodic cash distributions. Accordingly, the Company is no longer recording any investment income from these investments, and has thus noted the effective interest as not meaningful, or N/M. The fair value of the investment reflects the Company’s estimated share of the fair value of the underlying collateral.
¹⁷	As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company.

See accompanying notes to consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(unaudited)

	Three Months Ended March 31,
	2019⁴			2018⁴

Per Share Data:
Net asset value, at beginning of period	$	4.23		$	4.87
Net investment (loss) income¹		(0.06	)		0.07
Net realized (losses) gains from investments¹		(0.36	)		-
Net change in unrealized appreciation on investments¹		0.13			-
Net (decrease) increase in net assets resulting from operations		(0.29	)		0.07

Net decrease in net assets resulting from distributions:		(0.10	)		(0.10	)
Net increase in net assets relating to stock-based transactions: Stock based compensation		0.01			0.01

Net asset value, end of period	$	3.85		$	4.85
Total net asset value return²		(6.6	)%		1.6	%

Ratio/Supplemental Data:
Per share market value at beginning of period	$	3.46		$	3.41
Per share market value at end of period	$	3.62		$	3.14
Total market return³		7.5	%		(5.0	)%
Shares outstanding at end of period		37,331,709			37,354,479
Net assets at end of period	$	143,686,028		$	181,002,087
Portfolio turnover rate⁶		6.9	%		28.6	%
Average par debt outstanding	$	101,476,204		$	106,795,129
Asset coverage ratio		216	%		270	%
Ratio of net investment (loss) income to average net assets⁵		(5.8	)%		5.4	%
Ratio of total expenses to average net assets⁵		21.2	%		9.6	%
Ratio of interest expense to average net assets⁵		4.8	%		4.1	%
Ratio of non-interest expenses to average net assets⁵		16.4	%		5.5	%

Based on weighted average number of common shares outstanding-basic for the period.

Total net asset value return (not annualized) equals the change in the net asset value per share over the beginning of period net asset value per share plus distributions, divided by the beginning net asset value per share.

Total market return (not annualized) equals the change in the ending market price, over the beginning of period price per share plus distributions, divided by the beginning market price.

⁴

Totals may not sum due to rounding.

⁵

Annualized.

⁶

Portfolio turnover rate equals the year-to-date sales and paydowns over the average of the invested assets at fair value.

See accompanying notes to consolidated financial statements.

PORTMAN RIDGE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

ORGANIZATION

Portman Ridge Finance Corporation (“Portman Ridge” or the “Company”), formerly known as KCAP Financial, Inc., is an externally managed, non-diversified closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company was formed as a Delaware limited liability company on August 8, 2006 and, prior to the issuance of shares of the Company’s common stock in its initial public offering (“IPO”), converted to a corporation incorporated in Delaware on December 11, 2006.

During the third quarter of 2017, the Company formed a joint venture with Freedom 3 Opportunities LLC (“Freedom 3 Opportunities”), an affiliate of Freedom 3 Capital LLC, to create KCAP Freedom 3 LLC (the "Joint Venture"). The Company and Freedom 3 Opportunities LLC contributed approximately $37 million and $25 million, respectively, in assets to the Joint Venture, which in turn used the assets to capitalize a new fund (KCAP FC3 Senior Funding, L.L.C. or the "Fund") managed by KCAP Management, LLC, one of the Company's indirectly wholly-owned Asset Manager Affiliate subsidiaries. In addition, the Fund used cash on hand and borrowings under a credit facility to purchase approximately $184 million of loans from the Company and the Company used the proceeds from such sale to redeem approximately $147 million in debt issued by KCAP Senior Funding. The Joint Venture may originate loans from time to time and sell them to the Fund.

The Company originates, structures, and invests in secured term loans, bonds or notes and mezzanine debt primarily in privately-held middle market companies but may also invest in other investments such as loans to publicly-traded companies, high-yield bonds, and distressed debt securities (collectively the “Debt Securities Portfolio”). The Company also invests in joint ventures and debt and subordinated securities issued by collateralized loan obligation funds (“CLO Fund Securities”). In addition, from time to time the Company may invest in the equity securities of privately held middle market companies and may also receive warrants or options to purchase common stock in connection with its debt investments.

The Company has elected to be treated and intends to continue to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a RIC, the Company must, among other things, meet certain source-of-income, and asset diversification and annual distribution requirements. As a RIC, the Company generally will not have to pay corporate-level U.S. federal income taxes on any income that it distributes in a timely manner to its stockholders.

On March 29, 2018, the Company’s Board of Directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act (“SBCA”). As a result, the Company’s asset coverage requirement for senior securities changed from 200% to 150%, effective as of March 29, 2019. However, despite the SBCA, we will continue to be prohibited by the indentures governing our 6.125% Notes (each, as defined and discussed in Note 6 - “Borrowings” below) from making distributions on our common stock if our asset coverage, as defined in the 1940 Act, falls below 200%. In any such event, we would be prohibited from making distributions required in order to maintain our status as a RIC.

LibreMax Transaction

On November 8, 2018, the Company entered into an agreement with LibreMax Intermediate Holdings, LP (“LibreMax”) under which Commodore Holdings, LLC (“Commodore”), a wholly-owned subsidiary of the Company, sold the Company’s wholly-owned asset manager subsidiaries Katonah Debt Advisors, LLC (“Katonah Debt Advisors”), Trimaran Advisors, L.L.C. (“Trimaran Advisors”), and Trimaran Advisors Management, L.L.C. (“Trimaran Advisors Management” and, together with Katonah Debt Advisors and Trimaran Advisors, the “Disposed Manager Affiliates”), for a cash purchase price of approximately $37.9 million (the “LibreMax Transaction”). The LibreMax Transaction closed on December 31, 2018. As of March 31, 2019, the Company’s remaining wholly-owned asset management subsidiaries (the “Asset Manager Affiliates”) were comprised of Commodore, Katonah Management Holdings, LLC, Katonah X Management LLC, Katonah 2007-1 Management, LLC and KCAP Management, LLC. Prior to their sale in the LibreMax Transaction, the Disposed Manager Affiliates represented substantially all of the Company’s investment in the Asset Manager Affiliates.

The Externalization Agreement

On December 14, 2018, the Company entered into a stock purchase and transaction agreement (the “Externalization Agreement”) with BC Partners Advisors L.P. (“BCP”), an affiliate of BC Partners, through which Sierra Crest Investment Management LLC (the “Adviser”), an affiliate of BC Partners LLP (“BC Partners”), became the Company’s investment adviser pursuant to an investment advisory Agreement (the “Advisory Agreement”) with the Company. At a special meeting of the Company’s stockholders (the “Special Meeting”) held on February 19, 2019, the Company’s stockholders approved the Advisory Agreement. The transactions contemplated by the Externalization Agreement closed on April 1, 2019 (the “Closing”), and the Company commenced operations as an externally managed BDC managed by the Adviser on that date.

Pursuant to the Externalization Agreement with BCP, the Adviser became the Company’s investment adviser in exchange for a cash payment from BCP, or its affiliate, of $25 million, or $0.669672 per share of the Company’s common stock, directly to the Company’s stockholders. In addition, the Adviser (or its affiliate) will use up to $10 million of the incentive fee actually paid to the Adviser prior to the second anniversary of the Closing to buy newly issued shares of the Company’s common stock at the most recently determined net asset value per share of the Company’s common stock at the time of such purchase. For the period of one year from the first day of the first quarter following the quarter in which the Closing occurred, the Adviser will permanently forego up to the full amount of the incentive fees earned by the Adviser without recourse against or reimbursement by the Company, to the extent necessary in order to achieve aggregate net investment income per common share of the Company for such one-year period to be at least equal to $0.40 per share, subject to certain adjustments.

On the date of the Closing, the Company changed its name from KCAP Financial, Inc. to Portman Ridge Finance Corporation and on April 2, 2019, began trading on the NASDAQ Global Select Market under the symbol “PTMN.”

On April 1, 2019, in connection with the Closing, all of the Company’s then-current directors resigned from their positions on the Board, with the exceptions of Dean Kehler and Christopher Lacovara. Prior to their resignations, the Board approved an increase in the size of the Board from seven members to eight members and appointed the following new individuals to serve on the Board: Graeme Dell; Alexander Duka; Ted Goldthorpe; George Grunebaum; David Moffitt; and Robert Warshauer. Additionally, in connection with the Closing all of the Company’s then-current officers resigned from their positions with the exceptions of Edward Gilpin and Daniel Gilligan. Effective as of the Closing, Ted Goldthorpe was appointed as President and Chief Executive Officer and Patrick Schafer was appointed as Chief Investment Officer of the Company.

About the Adviser

The Adviser is an affiliate of BC Partners. LibreMax owns a minority stake in the Adviser. Subject to the overall supervision of the Board, the Adviser is responsible for managing the Company’s business and activities, including sourcing investment opportunities, conducting research, performing diligence on potential investments, structuring the Company’s investments, and monitoring the Company’s portfolio companies on an ongoing basis through a team of investment professionals.

The Adviser seeks to invest on behalf of the Company in performing, well-established middle market businesses that operate across a wide range of industries (i.e., no concentration in any one industry). The Adviser employs fundamental credit analysis, targeting investments in businesses with relatively low levels of cyclicality and operating risk. The holding size of each position will generally be dependent upon a number of factors including total facility size, pricing and structure, and the number of other lenders in the facility. The Adviser has experience managing levered vehicles, both public and private, and seeks to enhance the Company’s returns through the use of leverage with a prudent approach that prioritizes capital preservation. The Adviser believes this strategy and approach offers attractive risk/return with lower volatility given the potential for fewer defaults and greater resilience through market cycles.

The Adviser is affiliated with BC Partners, a leading buyout firm with a 30-year history investing across Europe and North America which has more than $24 billion in assets under management in private equity, private credit and real estate strategies. The assets under management for BC Partners are based on actively managed commitments of its managed funds and relevant vehicles formed for the purpose of co-investing alongside such funds. BC Partners operates a private equity investment platform (“BCP PE”) a credit investment platform (“BCP Credit”) and a real estate investment platform (“BCP RE”) as fully integrated businesses. The investment activity of the Company will take place primarily within the BCP Credit platform. Integration with the broader BC Partners platform allows BCP Credit to leverage a team of investment professionals across its private equity platform including its operations team. The BCP Credit Investment Team (the “Investment Team”) is led by Ted Goldthorpe who sits on both the BCP Credit and BCP PE investment committees. BCP Credit currently manages a private fund in the BCP Credit platform along with several separate managed accounts focused on credit investments and BC Partners Lending Corporation, a private BDC.

Advisory Agreement

The Adviser provides management services to the Company pursuant to the Advisory Agreement. Under the terms of the Advisory Agreement, the Adviser is responsible for the following:

•

managing the Company’s assets in accordance with our investment objective, policies and restrictions;

•

determining the composition of the Company’s portfolio, the nature and timing of the changes to the portfolio and the manner of implementing such changes;

•

identifying, evaluating and negotiating the structure of the Company’s investments;

•

monitoring the Company’s investments;

•

determining the securities and other assets that the Company will purchase, retain or sell;

•

assisting the Board with its valuation of the Company’s assets;

•

directing investment professionals of the Adviser to provide managerial assistance to the Company’s portfolio companies;

•

performing due diligence on prospective portfolio companies;

•

exercising voting rights in respect of portfolio securities and other investments for the Company;

•

serving on, and exercising observer rights for, boards of directors and similar committees of our portfolio companies; and

•

providing the Company with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of capital.

The Adviser’s services under the Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.

Term

On April 1, 2019, the Company entered into the Advisory Agreement with the Adviser. Unless earlier terminated as described below, the Investment Advisory Agreement will remain in effect until April 1, 2021, a period of two years from the date it first became effective and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a majority of the outstanding shares, and, in each case, a majority of the independent directors.

The Advisory Agreement will automatically terminate within the meaning of the 1940 Act and related Securities and Exchange Commission (“SEC”) guidance and interpretations in the event of its assignment. In accordance with the 1940 Act, without payment of any penalty, we may terminate the Advisory Agreement with the Adviser upon 60 days’ written notice. The decision to terminate the agreement may be made by a majority of the Board or the stockholders holding a majority of the outstanding shares of our common stock. See “Advisory Agreement—Removal of Adviser” below. In addition, without payment of any penalty, the Adviser may generally terminate the Advisory Agreement upon 60 days’ written notice and, in certain circumstances, the Adviser may only be able to terminate the Advisory Agreement upon 120 days’ written notice.

Removal of Adviser

The Adviser may be removed by the Board or by the affirmative vote of a Majority of the Outstanding Shares. “Majority of the Outstanding Shares” means the lesser of (1) 67% or more of the outstanding shares of our common stock present at a meeting, if the holders of more than 50% of the outstanding shares of our common stock are present or represented by proxy or (2) a majority of outstanding shares of our common stock.

Compensation of Adviser

Pursuant to the terms of the Advisory Agreement, the Company pays the Adviser (i) a base management fee (the “Base Management Fee”) and (ii) an incentive fee (the “Incentive Fee”). For the period from the date of the Advisory Agreement (the “Effective Date”) through the end of the first calendar quarter after the Effective Date, the Base Management Fee will be calculated at an annual rate of 1.50% of the Company’s gross assets, excluding cash and cash equivalents, but including assets purchased with borrowed amounts, as of the end of such calendar quarter. Subsequently, the Base Management Fee will be 1.50% of the Company’s average gross assets, excluding cash and cash equivalents, but including assets purchased with borrowed amounts, at the end of the two most recently completed calendar quarters; provided, however, that the Base Management Fee will be 1.00% of the Company’s average gross assets, excluding cash and cash equivalents, but including assets purchased with borrowed amounts, that exceed the product of (i) 200% and (ii) the value of the Company’s net asset value at the end of the most recently completed calendar quarter. The Incentive Fee consists of two parts: (1) a portion based on the Company’s pre-incentive fee net investment income (the “Income-Based Fee”) and (2) a portion based on the net capital gains received on the Company’s portfolio of securities on a cumulative basis for each calendar year, net of all realized capital losses and all unrealized capital depreciation on a cumulative basis, in each case calculated from the Effective Date, less the aggregate amount of any previously paid capital gains Incentive Fee (the “Capital Gains Fee”). The Income-Based Fee is 17.50% of pre-incentive fee net investment income with a 7.00% hurdle rate. The Capital Gains Fee is 17.50%.

Pre-incentive fee net investment income means dividends (including reinvested dividends), interest and fee income accrued by the Company during the calendar quarter, minus operating expenses for the quarter (including the management fee, expenses payable under the administration agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind(“PIK”) interest and zero coupon securities), accrued income that the Company may not have received in cash. The Adviser is not obligated to return the incentive fee it receives on PIK interest that is later determined to be uncollectible in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

To determine the income incentive fee, pre-incentive fee net investment income is expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a calendar quarter in which the Company incurs a loss. For example, if the Company receives pre-incentive fee net investment income in excess of the quarterly hurdle rate, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that calendar quarter due to realized capital losses and unrealized capital depreciation. In addition, because the quarterly hurdle rate is calculated based on our net assets, decreases in the Company’s net assets due to realized capital losses or unrealized capital depreciation in any given calendar quarter may increase the likelihood that the hurdle rate is reached and therefore the likelihood of the Company paying an incentive fee for the subsequent quarter. The Company’s net investment income used to calculate this component of the incentive fee is also included in the amount of the Company’s gross assets used to calculate the management fee because gross assets are total assets (including cash received) before deducting liabilities (such as declared dividend payments).

The second component of the incentive fee, the capital gains incentive fee, payable at the end of each calendar year in arrears, equals 17.50% of cumulative realized capital gains through the end of such calendar year commencing with the calendar year ending December 31, 2019, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, in each case calculated from the Effective Date, less the aggregate amount of any previously paid capital gains incentive fee for prior periods. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. In no event will the capital gains incentive fee payable pursuant to the Investment Advisory Agreement be in excess of the amount permitted by the Investment Advisers Act of 1940, as amended (the “Advisers Act”) including Section 205 thereof.

The fees that are payable under the Investment Advisory Agreement for any partial period will be appropriately prorated.

Limitations of Liability and Indemnification

Under the Advisory Agreement, the Adviser, its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with the Adviser, including without limitation its managing member, will not be liable to the Company for acts or omissions performed in accordance with and pursuant to the Advisory Agreement, except those resulting from acts constituting criminal conduct, gross negligence, willful misfeasance, bad faith or reckless disregard of the duties that the Adviser owes to the Company under the Advisory Agreement. In addition, as part of the Advisory Agreement, the Company has agreed to indemnify the Adviser and each of its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with the Adviser, including without limitation its general partner, and the Administrator from and against any damages, liabilities, costs and expenses, including reasonable legal fees and other expenses reasonably incurred, in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under the Advisory Agreement or otherwise as an investment adviser of the Company, except where attributable to criminal conduct, gross negligence, willful misfeasance, bad faith or reckless disregard of such person’s duties under the Advisory Agreement.

Board Approval of the Advisory Agreement

On December 12, 2018, the then-current Board of the Company held an in-person meeting to consider and approve the Advisory Agreement and related matters. The Board of Directors was provided the information required to consider the Advisory Agreement, including: (a) the nature, quality and extent of the advisory and other services to be provided to the Company by the Adviser; (b) comparative data with respect to advisory fees or similar expenses paid by other BDCs with similar investment objectives; (c) the Company projected operating expenses and expense ratio compared to BDCs with similar investment objectives; (d) any existing and potential sources of indirect income to the Adviser from its relationship with the Company and the profitability of that relationship; (e) information about the services to be performed and the personnel performing such services under the Advisory Agreement; (f) the organizational capability and financial condition of the Adviser and its affiliates; (g) the Adviser’s practices regarding the selection and compensation of brokers that may execute our portfolio transactions and the brokers’ provision of brokerage and research services to the Adviser; and (h) the possibility of obtaining similar services from other third-party service providers or continuing to operate as an internally managed BDC.

The Board of Directors, including a majority of independent directors, will oversee and monitor the Company’s investment performance and, beginning with the second anniversary of the effective date of the Advisory Agreement, will annually review the compensation we pay to the Adviser.

Administration Agreement

Under the terms of the administration agreement (the “Administration Agreement”) between the Company and BC Partners Management LLC (the “Administrator”), the Administrator will perform, or oversee the performance of, required administrative services, which includes providing office space, equipment and office services, maintaining financial records, preparing reports to stockholders and reports filed with the SEC, and managing the payment of expenses and the performance of administrative and professional services rendered by others. The Company will reimburse the Administrator for services performed for us pursuant to the terms of the Administration Agreement. In addition, pursuant to the terms of the Administration Agreement, the Administrator may delegate its obligations under the Administration Agreement to an affiliate or to a third party and the Company will reimburse the Administrator for any services performed for it by such affiliate or third party.

Payments under the Administration Agreement are equal to an amount that reimburses the Administrator for its costs and expenses in performing its obligations and providing personnel and facilities (including rent, office equipment and utilities) for the Company’s use under the Administration Agreement, including an allocable portion of the compensation paid to the Company’s chief compliance officer and chief financial officer and their respective staff who provide services to the Company. The Board, including the independent directors, will review the general nature of the services provided by the Administrator as well as the related cost to the Company for those services and consider whether the cost is reasonable in light of the services provided.

On April 1, 2019, the Board approved the Administration Agreement with the Administrator. Unless earlier terminated as described below, the Administration Agreement will remain in effect until April 1, 2021, a period of two years from the date it first became effective and will remain in effect from year-to-year thereafter if approved annually by a majority of the Board or by the holders of a Majority of the Outstanding Shares, and, in each case, a majority of the independent directors.

The Company may terminate the Administration Agreement, without payment of any penalty, upon 60 days’ written notice. The decision to terminate the agreement may be made by a majority of the Board or the stockholders holding a Majority of the Outstanding Shares. In addition, the Adviser may terminate the Administration Agreement, without payment of any penalty, upon 60 days’ written notice.

Payment of Our Expenses under the Advisory and Administration Agreements

Except as specifically provided below, the Company anticipates that all investment professionals and staffs of the Adviser, when and to the extent engaged in providing investment advisory and management services to the Company, and the compensation and routine overhead expenses (including rent, office equipment and utilities), of such personnel allocable to such services, will be provided and paid for by the Adviser. The Company will bear an allocable portion of the compensation paid by the Adviser (or its affiliates) to the Company’s chief compliance officer and chief financial officer and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to our business affairs). The Company will also bear all other costs and expenses of our operations, administration and transactions, including, but not limited to (i) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Advisory Agreement; (ii) an allocable portion of overhead and other expenses incurred by the Adviser (or its affiliates) in performing its administrative obligations under the Advisory Agreement, and (iii) all other expenses of our operations and transactions including, without limitation, those relating to:

•

the cost of calculating the Company’s net asset value, including the cost of any third-party valuation services;

•

the cost of effecting any sales and repurchases of the Company’s common stock and other securities;

•

fees and expenses payable under any dealer manager or placement agent agreements, if any;

•

administration fees payable under the Administration Agreement and any sub-administration agreements, including related expenses;

•

debt service and other costs of borrowings or other financing arrangements;

•

costs of hedging;

•

expenses, including travel expense, incurred by the Adviser, or members of the investment team, or payable to third parties, performing due diligence on prospective portfolio companies and, if necessary, enforcing our rights;

•

transfer agent and custodial fees;

•

fees and expenses associated with marketing efforts;

•

federal and state registration fees, any stock exchange listing fees and fees payable to rating agencies;

•

federal, state and local taxes;

•

independent directors’ fees and expenses including certain travel expenses;

•

costs of preparing financial statements and maintaining books and records and filing reports or other documents with the SEC (or other regulatory bodies) and other reporting and compliance costs, including registration and listing fees, and the compensation of professionals responsible for the preparation of the foregoing;

•

the costs of any reports, proxy statements or other notices to stockholders (including printing and mailing costs), the costs of any stockholder or director meetings and the compensation of personnel responsible for the preparation of the foregoing and related matters;

•

commissions and other compensation payable to brokers or dealers;

•

research and market data;

•

fidelity bond, directors and officers errors and omissions liability insurance and other insurance premiums;

•

direct costs and expenses of administration, including printing, mailing, long distance telephone and staff;

•

fees and expenses associated with independent audits, outside legal and consulting costs;

•

costs of winding up our affairs;

•

costs incurred by either the Administrator or us in connection with administering our business, including payments under the Administration Agreement;

•

extraordinary expenses (such as litigation or indemnification); and

•

costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws.

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required for annual consolidated financial statements. The unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto in the Company’s Form 10-K for the year ended December 31, 2018, as filed with the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”).

The consolidated financial statements reflect all adjustments, both normal and recurring which, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition for the periods presented. Furthermore, the preparation of the consolidated financial statements requires the Company to make significant estimates and assumptions including with respect to the fair value of investments that do not have a readily available market value. Actual results could differ from those estimates, and the differences could be material. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for the full year. Certain prior period amounts have been reclassified to conform to the current year presentation.

The Company consolidates the financial statements of its wholly-owned special purpose financing subsidiaries Great Lakes KCAP Funding I LLC, Kolhberg Capital Funding LLC I, KCAP Senior Funding I, LLC and KCAP Funding I Holdings, LLC in its consolidated financial statements as they are operated solely for investment activities of the Company. The creditors of KCAP Senior Funding I, LLC received security interests in the assets which are owned by Great Lakes KCAP Funding I, LLC and such assets are not intended to be available to the creditors of KCAP Financial, Inc., or any other affiliate. All of the borrowings of Kolhberg Capital Funding LLC I, and KCAP Senior Funding I, LLC have been fully repaid.

In accordance with Article 6 of Regulation S-X under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company does not consolidate portfolio company investments, including those in which it has a controlling interest (e.g., the Asset Manager Affiliates), unless the portfolio company is another investment company.

The Asset Manager Affiliates previously qualified as a “significant subsidiary” and, as a result, the Company is required to include additional financial information regarding the Asset Manager Affiliates in its filings with the SEC. This additional financial information regarding the Asset Manager Affiliates does not directly impact the financial position or results of operations of the Company. Summarized financial information regarding the Asset Manager Affiliates is set forth in Note 5 to these financial statements.

The determination of the tax character of distributions is made on an annual (full calendar-year) basis at the end of the year based upon our taxable income for the full year and the distributions paid during the full year. Therefore, an estimate of tax attributes made on a quarterly basis may not be representative of the actual tax attributes of distributions for a full year.

It is the Company’s primary investment objective to generate current income and capital appreciation by lending directly to privately-held middle market companies. During the quarter ended March 31, 2019, the Company provided approximately $35.2 million to portfolio companies to support their growth objectives. Approximately $2.7 million of this support was contractually obligated. See also Note 8 – Commitments and Contingencies. As of March 31, 2019, the Company held loans it has made to 51 investee companies with aggregate principal amounts of approximately $165.7 million. The details of such loans have been disclosed on the consolidated schedule of investments as well as in Note 4 – Investments. In addition to providing loans to investee companies, from time to time the Company assists investee companies in securing financing from other sources by introducing such investee companies to sponsors or by, among other things, leading a syndicate of lenders to provide the investee companies with financing. During the three months month period ended March 31, 2019, the Company did not engage in any such or similar activities.

Recently adopted accounting pronouncements

In March 2017, the FASB issued an Accounting Standards Update, ASU 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”) which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of ASU 2017-08 did not have a material impact on the financial position or results of operations of the Company.

In February 2016, the FASB issued ASU 2016-02, Leases, and several amendments (collectively, “ASU 2016-02”), which requires lessees to recognize assets and liabilities arising from most operating leases on the consolidated statements of financial condition. For operating leases, a lessee is required to do the following: (a) recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial condition; (b) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis and (c) classify all cash payments within operating activities in the statement of cash flows. The guidance is effective for fiscal periods beginning after December 15, 2018. Early application is permitted. The Company recorded a right of use asset (net of previously deferred rent expense) of approximately $3.3 million and a lease liability of approximately $3.7 million upon adoption of this standard.

Pending Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The standard will modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted upon issuance of this ASU 2018-13. We are permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. We are currently evaluating the impact of adopting ASU 2018-13 on our consolidated financial statements.

Investments

Investment transactions are recorded on the applicable trade date. Realized gains or losses are determined using the specific identification method.

Valuation of Portfolio Investments. The Company’s Board of Directors is ultimately and solely responsible for making a good faith determination of the fair value of portfolio investments on a quarterly basis. Debt and equity securities for which market quotations are readily available are generally valued at such market quotations. Debt and equity securities that are not publicly traded or whose market price is not readily available are valued by the Board of Directors based on detailed analyses prepared by management and, in certain circumstances, third parties with valuation expertise. Valuations are conducted by management on 100% of the investment portfolio at the end of each quarter. The Company follows the provisions of ASC 820: Fair Value Measurements and Disclosures (“ASC 820: Fair Value”). This standard defines fair value, establishes a framework for measuring fair value, and expands disclosures about assets and liabilities measured at fair value. ASC 820: Fair Value defines “fair value” as 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.

The Company utilizes an independent valuation firm to provide third party valuation consulting services. Each quarter the independent valuation firm will perform third party valuations of the Company’s investments in material illiquid securities such that they are reviewed at least once during a trailing 12-month period. These third party valuation estimates are considered as one of the relevant data points in the Company’s determination of fair value. The Company intends to continue to engage an independent valuation firm in the future to provide certain valuation services, including the review of certain portfolio assets, as part of the quarterly and annual year-end valuation process.

The Board of Directors may consider other methods of valuation than those set forth below to determine the fair value of Level III investments as appropriate in conformity with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may differ materially from the values that would have been used had a readily available market existed for such investments. Further, such investments may be generally subject to legal and other restrictions on resale or otherwise be less liquid than publicly traded securities. In addition, changes in the market environment and other events may occur over the life of the investments that may cause the value realized on such investments to be different from the currently assigned valuations.

The majority of the Company’s investment portfolio is composed of debt and equity securities with unique contract terms and conditions and/or complexity that requires a valuation of each individual investment that considers multiple levels of market and asset specific inputs, which may include historical and forecasted financial and operational performance of the individual investment, projected cash flows, market multiples, comparable market transactions, the priority of the security compared with those of other securities for such issuers, credit risk, interest rates, and independent valuations and reviews.

Debt Securities. To the extent that the Company’s investments are exchange traded and are priced or have sufficient price indications from normal course trading at or around the valuation date (financial reporting date), such pricing will be used to determine the fair value of the investments. Valuations from third party pricing services may be used as an indication of fair value, depending on the volume and reliability of the valuation, sufficient and reasonable correlation of bid and ask quotes, and, most importantly, the level of actual trading activity. However, if the Company has been unable to identify directly comparable market indices or other market guidance that correlate directly to the types of investments the Company owns, the Company will determine fair value using alternative methodologies such as available market data, as adjusted, to reflect the types of assets the Company owns, their structure, qualitative and credit attributes and other asset-specific characteristics.

The Company derives fair value for its illiquid investments that do not have indicative fair values based upon active trades primarily by using a present value technique that discounts the estimated contractual cash flows for the subject assets with discount rates imputed by broad market indices, bond spreads and yields for comparable issuers relative to the subject assets (the “Income Approach”). The Company also considers, among other things, recent loan amendments or other activity specific to the subject asset. Discount rates applied to estimated contractual cash flows for an underlying asset vary by specific investment, industry, priority and nature of the debt security (such as the seniority or security interest of the debt security) and are assessed relative to two indices, a leveraged loan index and a high-yield bond index, at the valuation date. The Company has identified these two indices as benchmarks for broad market information related to its loan and debt securities. Because the Company has not identified any market index that directly correlates to the loan and debt securities held by the Company and therefore uses these benchmark indices, these market indices may require significant adjustment to better correlate such market data for the calculation of fair value of the investment under the Income Approach. Such adjustments require judgment and may be material to the calculation of fair value. Further adjustments to the discount rate may be applied to reflect other market conditions or the perceived credit risk of the borrower. When broad market indices are used as part of the valuation methodology, their use is subject to adjustment for many factors, including priority, collateral used as security, structure, performance and other quantitative and qualitative attributes of the asset being valued. The resulting present value determination is then weighted along with any quotes from observable transactions and broker/pricing quotes. If such quotes are indicative of actual transactions with reasonable trading volume at or near the valuation date that are not liquidation or distressed sales, relatively more reliance will be put on such quotes to determine fair value. If such quotes are not indicative of market transactions or are insufficient as to volume, reliability, consistency or other relevant factors, such quotes will be compared with other fair value indications and given relatively less weight based on their relevancy. Other significant assumptions, such as coupon and maturity, are asset-specific and are noted for each investment in the Consolidated Schedules of Investments.

Equity Securities. The Company’s equity securities in portfolio companies for which there is no liquid public market are carried at fair value based on the enterprise value of the portfolio company, which is determined using various factors, including EBITDA (earnings before interest, taxes, depreciation and amortization) and discounted cash flows from operations, less capital expenditures and other pertinent factors, such as recent offers to purchase a portfolio company’s securities or other liquidation events. The determined fair values are generally discounted to account for restrictions on resale and minority ownership positions. In the event market quotations are readily available for the Company’s equity securities in public companies, those investments may be valued using the Market Approach (as defined below). In cases where the Company receives warrants to purchase equity securities, a market standard Black-Scholes model is utilized.

The significant inputs used to determine the fair value of equity securities include prices, EBITDA and cash flows after capital expenditures for similar peer comparables and the investment entity itself. Equity securities are classified as Level III, when there is limited activity or less transparency around inputs to the valuation given the lack of information related to such equity investments held in nonpublic companies. Significant assumptions observed for comparable companies are applied to relevant financial data for the specific investment. Such assumptions, such as model discount rates or price/earnings multiples, vary by the specific investment, equity position and industry and incorporate adjustments for risk premiums, liquidity and company specific attributes. Such adjustments require judgment and may be material to the calculation of fair value.

Asset Manager Affiliates. The Company’s investments in its wholly-owned asset management companies, the Asset Manager Affiliates, are carried at fair value, which is primarily determined utilizing the discounted cash flow approach, which incorporates different levels of discount rates depending on the hierarchy of fees earned (including the likelihood of realization of senior, subordinate and incentive fees) and prospective modeled performance. Such valuation takes into consideration an analysis of comparable asset management companies and the amount of assets under management. The Asset Manager Affiliates are classified as a Level III investment. Any change in value from period to period is recognized as net change in unrealized appreciation or depreciation. The Company sold substantially all of its investment in the Asset Manager Affiliates on December 31, 2018.

CLO Fund Securities. The Company typically makes a minority investment in the most junior class of securities of CLO Funds. The investments held by CLO Funds generally relate to non-investment grade credit instruments issued by corporations.

The Company’s investments in CLO Fund Securities are carried at fair value, which is based either on (i) the present value of the net expected cash inflows for interest income and principal repayments from underlying assets and cash outflows for interest expense, debt pay-down and other fund costs for the CLO Funds that are approaching or past the end of their reinvestment period and therefore are selling assets and/or using principal repayments to pay down CLO Fund debt (or will begin to do so shortly), and for which there continue to be net cash distributions to the class of securities owned by the Company, a Discounted Cash Flow approach, (ii) a discounted cash flow model that utilizes prepayment and loss assumptions based on historical experience and projected performance, economic factors, the characteristics of the underlying cash flow and comparable yields for similar securities or preferred shares to those in which the Company has invested, or (iii) indicative prices provided by the underwriters or brokers who arrange CLO Funds, a Market Approach. The Company recognizes unrealized appreciation or depreciation on the Company’s investments in CLO Fund Securities as comparable yields in the market change and/or based on changes in net asset values or estimated cash flows resulting from changes in prepayment or loss assumptions in the underlying collateral pool. As each investment in CLO Fund Securities ages, the expected amount of losses and the expected timing of recognition of such losses in the underlying collateral pool are updated and the revised cash flows are used in determining the fair value of the CLO Fund investment. The Company determines the fair value of its investments in CLO Fund Securities on a security-by-security basis.

Due to the individual attributes of each CLO Fund Security, they are classified as a Level III investment unless specific trading activity can be identified at or near the valuation date. When available, observable market information will be identified, evaluated and weighted accordingly in the application of such data to the present value models and fair value determination. Significant assumptions to the present value calculations include default rates, recovery rates, prepayment rates, investment/reinvestment rates and spreads and the discount rate by which to value the resulting underlying cash flows. Such assumptions can vary significantly, depending on market data sources which often vary in depth and level of analysis, understanding of the CLO market, detailed or broad characterization of the CLO market and the application of such data to an appropriate framework for analysis. The application of data points are based on the specific attributes of each individual CLO Fund Security’s underlying assets, historic, current and prospective performance, vintage, and other quantitative and qualitative factors that would be evaluated by market participants. The Company evaluates the source of market data for reliability as an indicative market input, consistency amongst other inputs and results and also the context in which such data is presented.

For rated note tranches of CLO Fund Securities (those above the junior class) without transactions to support a fair value for the specific CLO Fund and tranche, fair value is based on discounting estimated bond payments at current market yields, which may reflect the adjusted yield on the leveraged loan index for similarly rated tranches, as well as prices for similar tranches for other CLO Funds and also other factors such as indicative prices provided by underwriters or brokers who arrange CLO Funds, and the default and recovery rates of underlying assets in the CLO Fund, as may be applicable. Such model assumptions may vary and incorporate adjustments for risk premiums and CLO Fund specific attributes.

Joint Venture. The Company carries investments in joint ventures at fair value based upon the fair value of the investments held by the joint venture. See Note 4 below, for more information regarding the Joint Venture.

Cash. The Company defines cash as demand deposits. The Company places its cash with financial institutions and, at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit.

Restricted Cash. Restricted cash and cash equivalents (e.g., money market funds) consists of cash held for reinvestment and quarterly interest and principal distribution (if any) to holders of notes issued by Great Lakes KCAP Funding I, LLC.

Short-term investments. Short-term investments are generally comprised of money market accounts, time deposits, and U.S. treasury bills.

Interest Income. Interest income, including the amortization of premium and accretion of discount and accrual of payment-in-kind (“PIK”) interest, is recorded on the accrual basis to the extent that such amounts are expected to be collected. The Company generally places a loan or security on non-accrual status and ceases recognizing interest income on such loan or security when a loan or security becomes 90 days or more past due or if the Company otherwise does not expect the debtor to be able to service its debt obligations. For investments with PIK interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible (i.e. via a partial or full non-accrual). Loans which are on partial or full non-accrual remain in such status until the borrower has demonstrated the ability and intent to pay contractual amounts due or such loans become current. As of March 31, 2019, six of our investments were on non-accrual status.

Distributions from Asset Manager Affiliates. The Company records distributions from the Asset Manager Affiliates on the declaration date, which represents the ex-dividend date. Distributions in excess of tax-basis earnings and profits of the distributing affiliate company are recognized as tax-basis return of capital. For interim periods, the Company estimates the tax attributes of any distributions as being either from tax-basis earnings and profits (i.e., dividend income) or return of capital (i.e., adjustment to the Company’s cost basis in the Asset Manager Affiliates). The final determination of the tax attributes of distributions from the Asset Manager Affiliates is made on an annual (full calendar year) basis at the end of the year based upon taxable income and distributions for the full-year. Therefore, any estimate of tax attributes of distributions made on a quarterly basis may not be representative of the actual tax attributes of distributions for a full year.

Investment Income on CLO Fund Securities. The Company generates investment income from its investments in the most junior class of securities issued by CLO Funds (typically preferred shares or subordinated securities). The Company’s CLO Fund junior class securities are subordinated to senior note holders who typically receive a stated interest rate of return based on a floating rate index, such as the London Interbank Offered Rate (“LIBOR”) on their investment. The CLO Funds are leveraged funds and any excess cash flow or “excess spread” (interest earned by the underlying securities in the fund less payments made to senior note holders and less fund expenses and management fees) is paid to the holders of the CLO Fund’s subordinated securities or preferred shares.

GAAP-basis investment income on CLO equity investments is recorded using the effective interest method in accordance with the provisions of ASC 325-40, based on the anticipated yield and the estimated cash flows over the projected life of the investment. Yields are revised when there are changes in actual or estimated projected future cash flows due to changes in prepayments and/or re-investments, credit losses or asset pricing. Changes in estimated yield are recognized as an adjustment to the estimated yield prospectively over the remaining life of the investment from the date the estimated yield was changed. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from both the tax–basis investment income and from the cash distributions actually received by the Company during the period.

For non-junior class CLO Fund Securities, such as the Company’s investment in the Class E Notes of the Great Lakes KCAP F3C Senior, LLC, (formerly known as KCAP F3C Senior Funding, L.L.C.), interest is earned at a fixed spread relative to the LIBOR index.

Investment in Joint Venture. For three months ended March 31, 2019 and 2018, the Company recognized $950,000 and $700,000 in investment income from its investment in the Joint Venture. As of March 31, 2019 and December 31, 2018, the fair value of the Company’s investment in the Joint Venture was approximately $23.7 million and $18.4 million, respectively. The Company recognizes investment income on its investment in the Joint Venture based upon its share of the estimated earnings and profits of the Joint Venture. The final determination of the tax attributes of distributions from the Joint Venture is made on an annual (full calendar year) basis at year-end of the year based upon taxable income and distributions for the full year. Therefore, any estimate of tax attributes of distributions made on an interim basis may not be representative of the actual tax attributes of distributions for the full year.

Capital Structuring Service Fees. The Company may earn ancillary structuring and other fees related to the origination, investment, disposition or liquidation of debt and investment securities. Generally, the Company will capitalize loan origination fees, then amortize these fees into interest income over the term of the loan using the effective interest rate method, recognize prepayment and liquidation fees upon receipt and equity structuring fees as earned, which generally occurs when an investment transaction closes.

Debt Issuance Costs. Debt issuance costs represent fees and other direct costs incurred in connection with the Company’s borrowings. These amounts are capitalized and amortized using the effective interest method over the expected term of the borrowing.

Extinguishment of debt. The Company must derecognize a liability if and only if it has been extinguished through delivery of cash, delivery of other financial assets, delivery of goods or services, or reacquisition by the Company of its outstanding debt securities whether the securities are cancelled or held. If the debt contains a cash conversion option, the Company must allocate the consideration transferred and transaction costs incurred to the extinguishment of the liability component and the reacquisition of the equity component and recognize a gain or loss in the statement of operations.

Expenses. During the reporting period the Company was internally managed and expensed costs, as incurred, with regard to the running of its operations. Primary operating expenses include employee salaries and benefits, the costs of identifying, evaluating, negotiating, closing, monitoring and servicing the Company’s investments and related overhead charges and expenses, including rental expense, and any interest expense incurred in connection with borrowings. Through December 31, 2018, the Company and the Asset Manager Affiliates shared office space and certain other operating expenses. The Company entered into an Overhead Allocation Agreement with the Asset Manager Affiliates which provided for the sharing of such expenses based on an allocation of office lease costs and the ratable usage of other shared resources. Following the Closing, the Company will continue to bear the costs associated with the office lease entered into by the Company prior to the Closing.

Shareholder Distributions. Distributions to common stockholders are recorded on the ex-dividend date. The amount of distributions, if any, is determined by the Board of Directors each quarter.

The Company has adopted a dividend reinvestment plan (the DRIP) that provides for reinvestment of its distributions on behalf of its stockholders, unless a stockholder “opts out” of the DRIP to receive cash in lieu of having their cash distributions automatically reinvested in additional shares of the Company’s common stock.

EARNINGS (LOSSES) PER SHARE

In accordance with the provisions of ASC 260, “Earnings per Share” (“ASC 260”), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The following information sets forth the computation of basic and diluted net increase (decrease) in stockholders’ equity per share for the three months ended March 31, 2019 and 2018:

	(unaudited)
	Three Months Ended March 31,
	2019			2018

Net (decrease) increase in net assets resulting from operations	$	(10,917,572	)	$	2,609,393
Net increase in net assets allocated to unvested share awards		—			(20,773	)

Net (decrease) increase in net assets available to common stockholders	$	(10,917,572	)	$	2,588,620

Weighted average number of common and common stock equivalent shares outstanding for diluted shares computation		37,335,094			37,350,411

Net (decrease) increase in net assets per basic common shares:
Net (decrease) increase in net assets from operations	$	(0.29	)	$	0.07
Net (decrease) increase in net assets per diluted shares:
Net (decrease) increase in net assets from operations	$	(0.29	)	$	0.07

Share-based awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and included in the computation of both basic and diluted earnings per share. Grants of restricted stock awards to the Company’s employees and directors are considered participating securities when there are earnings in the period and the earnings per share calculations include outstanding unvested restricted stock awards in the basic weighted average shares outstanding calculation.

There were 30,000 and 35,000 options to purchase shares of common stock considered for the computation of the diluted per share information for the three months ended March 31, 2019 and 2018. Since the effects are anti-dilutive for both periods, the options were not included in the computation. These stock options were cancelled in connection with the Externalization.

INVESTMENTS

The following table shows the Company’s portfolio by security type at March 31, 2019 and December 31, 2018:

	March 31, 2019 (unaudited)							December 31, 2018
Security Type	Cost/Amortized Cost		Fair Value		%¹			Cost/Amortized Cost		Fair Value		%¹
Short-term investments²	$	44,120,648	$	44,120,648		16		$	44,756,478	$	44,756,478		17
Senior Secured Loan		75,534,527		73,489,758		26			86,040,921		77,616,209		28
Junior Secured Loan		88,707,755		78,249,650		28			76,223,561		70,245,535		26
Senior Unsecured Bond		456,974		456,974		-					—		—
CLO Fund Securities		54,299,958		45,605,015		16			55,480,626		44,325,000		16
Equity Securities		29,326,114		16,835,340		6			21,944,430		14,504,687		5
Asset Manager Affiliates³		17,791,230		—		—			17,791,230		3,470,000		1
Joint Venture		24,914,858		23,707,969		8			24,914,858		18,390,440		7
Total	$	335,152,064	$	282,465,354		100	%	$	327,152,104	$	273,308,349		100	%

Represents percentage of total portfolio at fair value.

Includes money market accounts and U.S. treasury bills.

Represents the equity investment in the Asset Manager Affiliates.

The industry concentrations based on the fair value of the Company’s investment portfolio as of March 31, 2019 and December 31, 2018, were as follows:

	March 31, 2019 (unaudited)							December 31, 2018
Industry Classification	Cost/Amortized Cost		Fair Value		%¹			Cost/Amortized Cost		Fair Value		%¹
Aerospace and Defense	$	4,237,732	$	4,085,483		1	%	$	5,434,927	$	4,049,940		1	%
Asset Management Company ²		17,791,230		—		—			17,791,230		3,470,000		1
Banking, Finance, Insurance & Real Estate		5,878,184		5,795,824		2			8,831,841		8,733,933		3
Beverage, Food and Tobacco		5,955,812		5,760,262		2			5,963,334		5,796,506		2
Capital Equipment		10,881,878		9,712,562		3			10,888,431		9,831,391		3
Chemicals, Plastics and Rubber		4,846,678		4,745,681		2			4,862,063		4,801,645		1
CLO Fund Securities		54,299,958		45,605,015		16			55,480,626		44,325,000		16
Construction & Building		1,529,905		1,524,392		1			1,400,223		1,394,163		1
Consumer goods: Durable		1,189,062		4,474		—			1,140,499		364,239		—
Consumer goods: Non-durable		—		—		—			1,434,568		1,440,525		1
Electronics		6,633,298		6,566,000		2			3,007,500		3,007,500		1
Energy: Oil & Gas		9,363,046		2,535,933		1			16,827,204		8,946,568		3
Environmental Industries		8,373,619		5,840,004		2			8,371,180		6,939,794		3
Forest Products & Paper		1,566,064		1,554,077		1			1,564,583		1,553,920		1
Healthcare & Pharmaceuticals		47,334,370		37,115,328		13			38,638,822		32,287,288		12
High Tech Industries		24,470,324		24,193,533		9			23,971,434		23,662,459		9
Hotel, Gaming & Leisure		—		—		—			400,000		1,000		—
Joint Venture		24,914,858		23,707,969		8			24,914,858		18,390,440		7
Limited Partnership		15,185,556		14,966,706		5			12,466,667		12,466,667		5
Media: Advertising, Printing & Publishing		3,152,760		2,647,664		1			6,113,852		5,590,863		2
Services: Business		10,325,983		9,119,357		2			10,398,713		9,213,417		3
Services: Consumer		10,605,382		10,603,568		4			—		—		—
Telecommunications		8,351,914		8,322,151		3			8,351,775		8,343,919		3
Textiles and Leather		10,143,234		9,938,322		4			10,140,662		9,940,294		4
Money Market Accounts		24,121,903		24,121,903		9			34,757,129		34,757,129		13
Transportation: Cargo		4,000,568		4,000,400		1			4,000,634		4,000,400		1
U.S. Government Obligations		19,998,746		19,998,746		7			9,999,349		9,999,349		4

Total	$	335,152,064	$	282,465,354		100	%	$	327,152,104	$	273,308,349		100	%

Calculated as a percentage of total portfolio at fair value.

Represents the equity investment in the Asset Manager Affiliates.

The Company may invest up to 30% of the investment portfolio in “non-qualifying” opportunistic investments, including investments in debt and equity securities of CLO Funds, distressed debt or debt and equity securities of large cap public companies. Within this 30% of the portfolio, the Company also may invest in debt of middle market companies located outside of the United States.

At March 31, 2019 and December 31, 2018, the total amount of non-qualifying assets was approximately 29.7% and 28.0% of total assets, respectively. The majority of non-qualifying assets were foreign investments which were approximately 16.5% and 16.5%, respectively, of the Company’s total assets (including the Company’s investments in CLO Funds, which are typically domiciled outside the U.S. and represented approximately 15.6% and 15.5% of its total assets on such dates, respectively).

Investments in CLO Fund Securities

The Company has made minority investments in the most junior class of securities (typically preferred shares or subordinated securities) of CLO Funds. These securities also are entitled to recurring distributions which generally equal the net remaining cash flow of the payments made by the underlying CLO Fund’s securities less contractual payments to senior bond holders, management fees and CLO Fund expenses. CLO Funds invest primarily in broadly syndicated non-investment grade loans, high-yield bonds and other credit instruments of corporate issuers. The underlying assets in each of the CLO Funds in which the Company has an investment are generally diversified secured or unsecured corporate debt. The CLO Funds are leveraged funds and any excess cash flow or “excess spread” (interest earned by the underlying securities in the fund less payments made to senior bond holders, fund expenses and management fees) is paid to the holders of the CLO Fund’s subordinated securities or preferred shares.

On October 31, 2017, the Company purchased an additional $4.3 million of notional amount of Subordinated Notes issued by Catamaran CLO 2014-1 at a cost of $5.4 million.

In December 2017, the Company purchased an additional $201,000 of notional amount of Subordinated Notes issued by Catamaran CLO 2013-1 at a cost of $201,000.

In December 2017, the Company sold $5.0 million par value of the Subordinated Notes of Catamaran CLO 2014-1 for $3.0 million.

In September 2018, the Company purchased $10 million par value of the Subordinated Notes of Catamaran CLO 2018-1 at a cost of approximately $9.5 million.

In December 2018, the Company received $2.5 million of notional amount of subordinated notes of Catamaran 2013-1 with a fair value of $1.4 million and $3.4 million of notional amount of subordinated notes of Catamaran 2014-1 with a fair value of $1.9 million, as consideration for the repayment of a portion of the loans to Trimaran Advisors.

On February 29, 2016, Katonah X CLO Ltd. was fully liquidated and all of its outstanding obligations were satisfied. The Company received approximately $1.0 million in connection therewith related to its investment in the subordinated securities issued by Katonah X CLO Ltd. Accordingly, the Company recorded a realized loss during the first quarter of 2016 of approximately $6.6 million on its investment in Katonah X CLO Ltd. and a corresponding unrealized gain of the same amount in order to reverse the approximately $6.6 million of previously recorded unrealized depreciation with respect to the investment.

On December 19, 2017, the Company, in its capacity as the holder of all of the outstanding preferred shares of Katonah 2007-1 CLO Ltd. (“Katonah 2007-1”), exercised its right to cause Katonah 2007-1 to redeem all of its outstanding indebtedness through the sale of its investments and otherwise wind up its business. Katonah 2007-1 was fully liquidated and dissolved in the fourth quarter of 2018. Accordingly, the Company recorded a realized loss during the fourth quarter of 2018 of approximately $10.1 million on its investment in Katonah 2007-1 and a corresponding unrealized gain of the same amount in order to reverse the previously recorded unrealized depreciation with respect to the investment.

Similarly, during the fourth quarter of 2018, each of Grant Grove CLO, Ltd., Trimaran CLO VII, Ltd., and Catamaran CLO 2012-1 Ltd. were fully liquidated and dissolved, and the Company recorded a realized loss of approximately $6.4 million and a corresponding unrealized gain of the same amount in order to revere the previously recorded unrealized depreciation with respect to these investments.

In the first quarter of 2019, the Company sold $2.0 million notional amount of subordinated notes of Catamaran CLO 2014-1 for $800,000.

With the exception of Katonah III, Ltd., as of December 31, 2018 all of the Company’s investments in CLO Fund securities were making distributions to the Company.

Affiliate Investments

The following table details investments in affiliates at March 31, 2019 (unaudited):

	Industry Classification	Fair Value at of December 31, 2018		Purchases/ (Sales) of or Advances/ (Distributions)		Net Accretion		Transfers In/(Out) of Affiliates		Unrealized Gain/(Loss)			Realized Gain/(Loss)			Fair Value at of March 31, 2019		Interest Income		Dividend Income

Asset Manager Affiliates^(4)(5)(7)	Asset Management Company	$	3,470,000	$	-		-		-		-		$	(3,470,000	)	$	-	$		$	-
Great Lakes KCAP F3C Senior, LLC Rated Notes⁽²⁾⁽⁴⁾	CLO Fund Securities		4,473,840		-		8,942		-		(82,569	)		-			4,400,213		123,249
BCP Great Lakes Fund LP⁽⁷⁾	Limited Partnership		12,466,667		2,718,889		.		-		(218,850	)		-			14,966,706		.		-
KCAP Freedom 3, LLC ⁽⁴⁾⁽⁶⁾	Joint Venture		18,390,440		-		-		-		5,317,529						23,707,969		-		950,000
Tank Partners Holdings, LLC⁽⁴⁾⁽⁵⁾	Energy: Oil & Gas		1,000		6,228,000		-		-		(4,495,095	)		(1,165,000	)		568,905		-		-

Total Affiliated Investments		$	38,801,947	$	8,946,889	$	8,942	$	-	$	521,015		$	(4,635,000	)	$	43,643,793	$	123,249	$	950,000

The following table details investments in affiliates at December 31, 2018:

	Industry Classification	Fair Value at of December 31, 2017		Purchases/ (Sales) of or Advances/ (Distributions)			Net Accretion			Transfers In/(Out) of Affiliates			Unrealized Gain/(Loss)			Realized Gain/(Loss)			Fair Value at of December 31, 2018		Interest Income			Dividend Income

Asset Manager Affiliates^(4)(5)(7)	Asset Management Company	$	38,849,000	$	(34,800,000	)		-			-			(579,000	)	$	-		$	3,470,000	$			$	1,246,510
Trimaran Advisors, LLC Revolving Credit Facility⁽⁴⁾⁽⁵⁾	Related Party Loans		-		-			-			-			-			-			-		1,170,825			-
Trimaran Advisors, LLC Related Party Loan ⁽⁴⁾⁽⁵⁾	Related Party Loans		8,359,051		(8,359,051	)		-			-			-			-			-		765,963
Trimaran Advisors, LLC Related Party Loan ⁽⁴⁾⁽⁵⁾	Related Party Loans		4,418,232		(4,418,232	)		-			-			-			-			-		229,380
Katonah 2007-I CLO, Ltd. ^(1)(2)(3)(4)	CLO Fund Securities		10,770,486		(10,676,556	)		271,658			-			9,754,423			(10,120,011	)		-		271,658			-
Trimaran CLO VII, Ltd. ^(1)(2)(3)(4)	CLO Fund Securities		10,000					(6,725	)		-			369,831			(373,105	)		-		(6,725	)		-
Catamaran CLO 2012-1, Ltd. ^(1)(2)(3)(4)	CLO Fund Securities		2,320,783		(2,596,571	)		264,746			-			3,527,018			(3,515,976	)		-		264,746			-
Catamaran CLO 2013-1, Ltd. ^(1)(2)(4)	CLO Fund Securities		6,923,699		147,497			1,213,807			(7,016,734	)		(1,268,269	)		-			-		1,213,807			-
Catamaran CLO 2014-1, Ltd. ^(1)(2)(4)	CLO Fund Securities		8,230,178		535,309			1,347,240			(9,777,251	)		(335,476	)		-			-		1,347,240			-
Catamaran CLO 2014-2, Ltd. ^(1)(2)(4)	CLO Fund Securities		4,500,962		(985,241	)		656,919			(2,158,200	)		(2,014,440	)		-			-		656,919			-
Catamaran CLO 2015-1, Ltd. ^(1)(2)(4)	CLO Fund Securities		3,569,600		(573,089	)		507,789			(3,048,696	)		(455,604	)		-			-		507,789			-
Catamaran CLO 2016-1, Ltd. ^(1)(2)(4)	CLO Fund Securities		8,530,685		(1,282,923	)		913,272			(7,067,073	)		(1,093,961	)		-			-		913,272			-
Catamaran CLO 2018-1, Ltd. ^(1)(2)(4)	CLO Fund Securities		-		9,500,000			343,450			(8,500,000	)		(1,343,450	)		-			-		343,450			-
KCAP F3C Senior Funding Rated Notes⁽²⁾⁽⁴⁾	CLO Fund Securities		4,632,000		-			37,298			-			(195,458	)		-			4,473,840		468,755
BCP Great Lakes Fund LP⁽⁷⁾	Limited Partnership		-		12,466,667			-			-			-			-			12,466,667		-			-
KCAP Freedom 3, LLC ⁽⁴⁾⁽⁶⁾	Joint Venture		21,516,000		-			-			-			(3,125,560	)		-			18,390,440		-			3,100,000
Tank Partners Holdings, LLC⁽⁴⁾⁽⁵⁾	Unit		-		-			-			980,000			(979,000	)		-			1,000		-			-

Total Affiliated Investments		$	122,630,676	$	(41,042,190	)	$	5,549,454		$	(36,587,954	)	$	2,261,054		$	(14,009,092	)	$	38,801,947	$	8,147,079		$	4,346,510

Non-U.S. company or principal place of business outside the U.S.

An affiliate CLO Fund managed by an Asset Manager Affiliate (as such term is defined in the notes to the consolidated financial statements).

Notice of redemption has been received for this security.

⁴

Fair value of this investment was determined using significant unobservable inputs.

⁵

Qualified asset for purposes of section 55(a) of the Investment Company Act of 1940.

⁶

⁷

Investment in Joint Venture:

During the third quarter of 2017, the Company and Freedom 3 Opportunities LLC (“Freedom 3 Opportunities”), an affiliate of Freedom 3 Capital LLC, entered into an agreement to create KCAP Freedom 3 LLC (the “Joint Venture”). The Company and Freedom 3 Opportunities contributed approximately $37 million and $25 million, respectively, in assets to the Joint Venture, which in turn used the assets to capitalize a new fund, Great Lakes KCAP F3C Senior Funding, L.L.C. (formerly known as KCAP F3C Senior Funding, L.L.C.) (the “Fund”) managed by KCAP Management, LLC, one of the Asset Manager Affiliates. In addition, the Fund used cash on hand and borrowings under a credit facility to purchase approximately $184 million of primarily middle-market loans from the Company and the Company used the proceeds from such sale to redeem approximately $147 million in debt issued by KCAP Senior Funding I, LLC (“KCAP Senior Funding”). The Fund invests primarily in middle-market loans and the Joint Venture partners may source middle-market loans from time-to-time for the Fund.

During the fourth quarter of 2017, the Fund was refinanced through the issuance of senior and subordinated notes. The Joint Venture purchased 100% of the subordinated notes issued by the Fund. In connection with the refinancing, the Joint Venture made a cash distribution to the Company of approximately $12.6 million. $11.8 million of this distribution was a return of capital, reducing the cost basis of its investment in the Joint Venture by that amount. The final determination of the tax attributes of distributions from the Joint Venture is made on an annual (full calendar year) basis at the end of the year, therefore, any estimate of tax attributes of distributions made on an interim basis may not be representative of the actual tax attributes of distributions for the full year.

The Company owns a 60% equity investment in the Joint Venture. The Joint Venture is structured as an unconsolidated Delaware limited liability company. All portfolio and other material decisions regarding the Joint Venture must be submitted to its board of managers, which is comprised of four members, two of whom were selected by the Company and two of whom were selected by Freedom 3 Opportunities, and must be approved by at least one member appointed by the Company and one appointed by Freedom 3 Opportunities. In addition, certain matters may be approved by the Joint Venture’s investment committee, which is comprised of one member appointed by the Company and one member appointed by Freedom 3 Opportunities.

In connection with the Externalization, during the first quarter of 2019, KCAP Management agreed to waive management fees it is otherwise entitled to receive for managing the Fund. In addition, the Joint Venture was restructured such that the Company is now entitled to receive a preferred distribution in an amount equal to the fees waived by KCAP Management. The impact of these transactions is a reduction in the fair value of the Asset Manager Affiliates and increase the fair value of the Company’s investment in the Joint Venture. The reduction in the fair value of the Asset Manager Affiliates was recognized as a realized loss on the Statement of Operations. The increase in the fair value of the Company’s investment in the Joint Venture was recognized as an unrealized gain in the Statement of Operations.

The Company has determined that the Joint Venture is an investment company under Accounting Standards Codification (“ASC”), Financial Services — Investment Companies (“ASC 946”), however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its interest in the Joint Venture because the Company does not control the Joint Venture due to allocation of the voting rights among the Joint Venture partners.

KCAP Freedom 3 LLC

Summarized Statement of Financial Condition

	As of		As of
	March 31, 2019		December 31, 2018
Investment at fair value	$	37,519,094	$	32,621,188
Total Assets	$	37,519,094	$	32,621,188

Total Liabilities	$	1,541,539	$	1,970,455
Total Equity		35,977,555		30,650,733
Total Liabilities and Equity	$	37,519,094	$	32,621,188

KCAP Freedom 3 LLC

Summarized Statement of Operations

	For the three months ended March 31, 2019		For the three months ended March 31, 2018
Investment income	$	1,151,386	$	1,195,818
Operating expenses		17,512		21,763
Net investment income		1,133,874		1,174,055
Unrealized appreciation on investments		5,326,822		503,920
Net income	$	6,460,696	$	1,677,975

KCAP Freedom 3 LLC

Schedule of Investments

March 31, 2019

Portfolio Company	Investment	Percentage Ownership by Joint Venture			Amortized Cost		Fair Value
Great Lakes KCAP F3C Senior, LLC^(1)(2)(3)	Subordinated Securities, effective interest 11.4%, 12/29 maturity		100.0	%	$	42,207,464	$	37,519,094

Total Investments					$	42,207,464	$	37,519,094

(1) CLO Subordinated Investments are entitled to periodic distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s investments less contractual payments to debt holders and fund expenses. The estimated annualized effective yield indicated is based upon a current projection of the amount and timing of these distributions. Such projections are updated on a quarterly basis and the estimated effective yield is adjusted prospectively.

(2) Fair value of this investment was determined using significant unobservable inputs, including default rates, prepayment rates, spreads, and the discount rate by which to value the resulting cash flows.

(3) Formerly known as KCAP F3C Senior Funding, LLC

KCAP Freedom 3 LLC

Schedule of Investments

December 31, 2018

Portfolio Company	Investment	Percentage Ownership by Joint Venture			Amortized Cost		Fair Value
KCAP F3C Senior Funding, LLC ⁽¹⁾⁽²⁾	Subordinated Securities, effective interest 11.5%, 12/29 maturity		100.0	%	$	42,636,380	$	32,621,188

Total Investments					$	42,636,380	$	32,621,188

Fair Value Measurements

The Company follows the provisions of ASC 820: Fair Value, which among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. This standard defines fair value and establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value and expands disclosures about assets and liabilities measured at fair value. ASC 820: Fair Value defines “fair value” as 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. This fair value definition focuses on an exit price in the principal, or most advantageous market, and prioritizes, within a measurement of fair value, the use of market-based inputs (which may be weighted or adjusted for relevance, reliability and specific attributes relative to the subject investment) over entity-specific inputs. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

ASC 820: Fair Value establishes the following three-level hierarchy, based upon the transparency of inputs to the fair value measurement of an asset or liability as of the measurement date:

Level I – Unadjusted quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed securities. As required by ASC 820: Fair Value, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably affect the quoted price.

Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Such inputs may be quoted prices for similar assets or liabilities, quoted markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or inputs that are derived principally from, or corroborated by, observable market information. Investments which are generally included in this category include illiquid debt securities and less liquid, privately held or restricted equity securities for which some level of recent trading activity has been observed.

Level III – Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs may be based on the Company’s own assumptions about how market participants would price the asset or liability or may use Level II inputs, as adjusted, to reflect specific investment attributes relative to a broader market assumption. These inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data for comparable performance or valuation measures (earnings multiples, discount rates, other financial/valuation ratios, etc.) are available, such investments are grouped as Level III if any significant data point that is not also market observable (private company earnings, cash flows, etc.) is used in the valuation methodology.

In certain cases, the inputs used to measure fair value may fall into 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. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the investment. A majority of the Company’s investments are classified as Level III. The Company evaluates the source of inputs, including any markets in which its investments are trading, in determining fair value. Inputs that are highly correlated to the specific investment being valued and those derived from reliable or knowledgeable sources will tend to have a higher weighting in determining fair value. The Company’s fair value determinations may include factors such as an assessment of each underlying investment, its current and prospective operating and financial performance, consideration of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, performance factors, and other investment or industry specific market data, among other factors.

The following table summarizes the fair value of investments by the above ASC 820: Fair Value fair value hierarchy levels as of March 31, 2019 (unaudited) and December 31, 2018, respectively:

	As of March 31, 2019 (unaudited)
	Level I		Level II		Level III		NAV		Total
Short Term investments	$	19,998,746	$	24,121,902	$	—	$	—	$	44,120,648
Debt securities		—		36,187,061		116,009,321		—		152,196,382
CLO Fund securities		—		—		45,605,015		—		45,605,015
Equity securities		—		—		1,868,634		14,966,706		16,835,340
Joint Venture		—		—		23,707,969		—		23,707,969
Total	$	19,998,746	$	60,308,963	$	187,190,939	$	14,966,706	$	282,465,354

	As of December 31, 2018
	Level I		Level II		Level III		NAV		Total
Short Term investments	$	9,999,349	$	34,757,129	$	—	$	—	$	44,756,478
Debt securities		—		41,120,073		106,741,671		—		147,861,744
CLO Fund securities		—		—		44,325,000		—		44,325,000
Equity securities		—		—		2,038,020		12,466,667		14,504,687
Asset Manager Affiliates		—		—		3,470,000		—		3,470,000
Joint Venture		—		—		18,390,440		—		18,390,440
Total	$	9,999,349	$	75,877,202	$	174,965,131	$	12,466,667	$	273,308,349

As a BDC, the Company is required to invest primarily in the debt and equity of non-public companies for which there is little, if any, market-observable information. As a result, a significant portion of the Company’s investments at any given time will likely be deemed Level III investments. Investment values derived by a third party pricing service are generally deemed to be Level III values. For those that have observable trades, the Company considers them to be Level II.

BCP Great Lakes Partnership LP (the “BCP Great Lakes Partnership”) has invested in BCP Great Lakes Holdings LP, a vehicle formed as a co-investment vehicle to facilitate the participation of certain co-investors to invest, directly or indirectly, in Great Lakes Funding LLC. The investment strategy of BCP Great Lakes Funding, LLC is to underwrite and hold senior, secured unitranche loans made to middle-market companies. The Company does not pay any advisory fees in connection with its investment in the BCP Great Lakes Partnership.

The fair value of the Company’s investment in the BCP Great Lakes Partnership at March 31, 2019 and December 31, 2018 was $15.0 million and $12.5 million. Fair value has been determined utilizing the practical expedient pursuant to ASC 820-10. Pursuant to the terms of the BGP Great Lakes Fund LP Amended and Restated Exempted Limited Partnership Agreement (the “BCP Great Lakes Partnership Agreement”) , the Company generally may not sell, exchange, assign, pledge or otherwise transfer its interest, in whole or in part, without the prior written consent of the General Partner which consent may be given or withheld in its sole and absolute discretion, and may be conditioned upon repayment of its share of indebtedness incurred by the Partnership.

In March 2019, the Company increased its aggregate commitment to the BCP Great Lakes Partnership to $50 million, subject to certain limitations (including that the Company is not obligated to fund capital calls if such funding would cause the Company to be out of compliance with certain provisions of the Investment Company Act of 1940). As of March 31, 2019 and December 31, 2018, the Company has a $34.8 million and $12.5 million, respectively unfunded commitment to the BCP Great Lakes Partnership.

Subject to the limitations noted above, values derived for debt and equity securities using comparable public/private companies generally utilize market-observable data from such comparables and specific, non-public and non-observable financial measures (such as earnings or cash flows) for the private, underlying company/issuer. Such non-observable company/issuer data is typically provided on a monthly or quarterly basis, is certified as correct by the management of the company/issuer and/or audited by an independent accounting firm on an annual basis. Since such private company/issuer data is not publicly available it is not deemed market-observable data and, as a result, such investment values are grouped as Level III assets.

Values derived for the Asset Manager Affiliates using comparable public/private companies utilize market-observable data and specific, non-public and non-observable financial measures (such as assets under management, historical and prospective earnings) for the Asset Manager Affiliates. The Company recognizes that comparable asset managers may not be fully comparable to the Asset Manager Affiliates and typically identifies a range of performance measures and/or adjustments within the comparable population with which to determine value. Since any such ranges and adjustments are entity specific they are not considered market-observable data and thus require a Level III grouping. Illiquid investments that have values derived through the use of discounted cash flow models and residual enterprise value models are grouped as Level III assets.

The Company’s policy for determining transfers between levels is based solely on the previously defined three-level hierarchy for fair value measurement. Transfers between the levels of the fair value hierarchy are separately noted in the tables below and the reason for such transfer described in each table’s respective footnotes. Certain information relating to investments measured at fair value for which the Company has used unobservable inputs to determine fair value is as follows:

	Year Ended March 31, 2019
	Debt Securities			CLO Fund Securities			Equity Securities			Asset Manager Affiliate			Joint Venture		Total
Balance, December 31, 2018	$	106,741,671		$	44,325,000		$	2,038,020		$	3,470,000		$	18,390,440	$	174,965,131
Transfers out of Level III¹		(6,470,154	)		—			—			—			—		(6,470,154	)
Transfers into Level III²		27,653,032			—			—			—			—		27,653,032
Net accretion		34,347			1,690,216			—			—			—		1,724,563
Purchases		136,501			—			6,228,000			—			—		6,364,501
Sales/Paydowns/Return of Capital		(8,012,847	)		(2,282,948	)		—						—		(10,295,795	)
Total realized loss included in earnings		(7,852,198	)		(587,936	)		(1,565,205	)		(3,470,000	)		—		(13,475,339	)
Change in unrealized gain (loss) included in earnings		3,778,969			2,460,683			(4,832,181	)		—			5,317,529		6,725,000
Balance, March 31, 2019	$	116,009,321		$	45,605,015		$	1,868,634		$	—		$	23,707,969	$	187,190,939
Changes in unrealized gains (losses) included in earnings related to investments still held at reporting date	$	(9,306,669	)	$	2,460,683		$	(4,832,181	)	$	—		$	5,317,529	$	(6,360,638	)

¹Transfers out of Level III represent a transfer of $6,470,154 relating to debt securities for which pricing inputs, other than their quoted prices in active markets were observable as of March 31, 2019.

²Transfers into Level III represent a transfer of $27,653,032 relating to debt securities for which pricing inputs, other than their quoted prices in active markets were unobservable as of March 31, 2019.

	Year Ended December 31, 2018
	Debt Securities			CLO Fund Securities			Equity Securities			Asset Manager Affiliate			Joint Venture			Total
Balance, December 31, 2017	$	69,885,455		$	51,678,673		$	4,414,684		$	38,849,000		$	21,516,000		$	186,343,812
Transfers out of Level III¹		(230,732	)		—			—			—			—			(230,732	)
Transfers into Level III²		16,474,663			—			—			—			—			16,474,663
Net accretion		125,614			5,878,260			—			—			—			6,003,874
Purchases		38,099,644			12,781,528			—			—			—			50,881,172
Sales/Paydowns/Return of Capital		(11,116,360	)		(19,033,322	)		(1,093,244	)		(34,800,000	)		—			(66,042,926	)
Total realized gain included in earnings		(51,674	)		(16,484,872	)		—			—			—			(16,536,546	)
Total unrealized gain (loss) included in earnings		(6,444,939	)		9,504,733			(1,283,420	)		(579,000	)		(3,125,560	)		(1,928,186	)
Balance, December 31, 2018	$	106,741,671		$	44,325,000		$	2,038,020		$	3,470,000		$	18,390,440		$	174,965,131
Changes in unrealized gains (losses) included in earnings related to investments still held at reporting date	$	(5,197,940	)	$	6,631,424		$	(1,283,420	)	$	(579,000	)	$	(3,125,560	)	$	(3,554,496	)

¹Transfers out of Level III represent a transfer of $230,732 relating to debt securities for which pricing inputs, other than their quoted prices in active markets were observable as of December 31, 2018.

²Transfers into Level III represent a transfer of $16,474,663 relating to debt securities for which pricing inputs, other than their quoted prices in active markets were unobservable as of December 31, 2018.

As of March 31, 2019 and December 31, 2018, the Company’s Level II portfolio investments were valued by a third party pricing services for which the prices are not adjusted and for which inputs are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or by inputs that are derived principally from, or corroborated by, observable market information. The fair value of the Company’s Level II portfolio investments was $60.3 million and $75.9 million as of March 31, 2019 and December 31, 2018, respectively.

As of March 31, 2019, the Company’s Level III portfolio investments had the following valuation techniques and significant inputs:

Type	Fair Value	Primary Valuation Methodology	Unobservable Inputs	Range of Inputs (Weighted Average)
Type	Fair Value	Primary Valuation Methodology	Unobservable Inputs	Range of Inputs (Weighted Average)
Debt Securities	$ 459,448	Enterprise Value	Average EBITDA Multiple	6.75x (0.04x)
Debt Securities	115,549,873	Income Approach	Implied Discount Rate	6.7% – 27.5% (11.5)%
Equity Securities	1,811,634	Enterprise Value	Average EBITDA Multiple / WACC	3.9x – 8.5x (6.1x) 21.30%
Equity Securities	57,000	Options Value	Qualitative Inputs⁽¹⁾
CLO Fund Securities	36,285,735	Discounted Cash Flow	Discount Rate	13.4%-13.9% (13.720%)
			Probability of Default	1%-2% (1.5%)
			Loss Severity	20%-34% (27.1%)
			Recovery Rate	66%-80% (72.9%)
			Prepayment Rate	10%-20% (15%)
	369,280	Liquidation Value	Qualitative Inputs⁽²⁾
	8,950,000	Market Approach	Third Party Quote	89.5%
Joint Venture	23,707,969	Enterprise Value	Underlying NAV of the CLO
Total Level III Investments	$ 187,190,939

¹ The qualitative inputs used in the fair value measurements of Equity Securities include estimates of the distressed liquidation value of the pledged collateral. In cases where Portman Ridge’s analysis ascribes no residual value to a portfolio company’s equity, Portman Ridge typically elects to mark its position at a nominal amount to account for the investment’s option value.

² The qualitative inputs used in the fair value measurements include the value of the pledged collateral.

As of December 31, 2018, the Company’s Level III portfolio investments had the following valuation techniques and significant inputs:

Type	Fair Value	Primary Valuation Methodology	Unobservable Inputs	Range of Inputs (Weighted Average)
Type	Fair Value	Primary Valuation Methodology	Unobservable Inputs	Range of Inputs (Weighted Average)
Debt Securities	$ 8,661,114	Enterprise Value	Average EBITDA	5.0x – 8.0x (5.2x)
	$ 8,661,114	Enterprise Value	Multiple / WACC	15.8%
	98,080,557	Income Approach	Implied Discount Rate	6.3% - 26.8% (11.8%)
Equity Securities	1,979,020	Enterprise Value	Average EBITDA Multiple	4.5x – 11.0x (9.5x)
Equity Securities	59,000	Options Value	Qualitative Inputs⁽¹⁾
CLO Fund Securities	35,455,720	Discounted Cash Flow	Discount Rate	13.5%-14.0% (13.9%)
			Probability of Default	0.75%-2% (1.4%)
			Loss Severity	20%-36 % (28.3%)
			Recovery Rate	63.5%-80% (71.7%)
			Prepayment Rate	10%-20% (15%)
	369,280	Liquidation Value	Qualitative Inputs⁽²⁾
	8,500,000	Market Approach	Third Party Quote	85.0%
Asset Manager Affiliate	3,470,000	Discounted Cash Flow	Discount Rate	4.0% - 10.0% (7.77%)
Joint Venture	18,390,440	Enterprise Value	Underlying NAV of the CLO
Total Level III Investments	$ 174,965,131

² The qualitative inputs used in the fair value measurements include the value of the pledged collateral.

The significant unobservable inputs used in the fair value measurement of the Company’s debt securities may include, among other things, broad market indices, the comparable yields of similar investments in similar industries, effective discount rates, average EBITDA multiples, and weighted average cost of capital. Significant increases or decreases in such comparable yields would result in a significantly lower or higher fair value measurement, respectively.

The significant unobservable inputs used in the fair value measurement of the Company’s equity securities include the EBITDA multiple of similar investments in similar industries and the weighted average cost of capital. Significant increases or decreases in such inputs would result in a significantly lower or higher fair value measurement.

Significant unobservable input used in the fair value measurement of the Company’s CLO Fund Securities include default rates, recovery rates, prepayment rates, spreads, and the discount rate by which to value the resulting underlying cash flows. Such assumptions can vary significantly, depending on market data sources which often vary in depth and level of analysis, understanding of the CLO market, detailed or broad characterization of the CLO market and the application of such data to an appropriate framework for analysis. The application of data points are based on the specific attributes of each individual CLO Fund Security’s underlying assets, historic, current and prospective performance, vintage, and other quantitative and qualitative factors that would be evaluated by market participants. The Company evaluates the source of market data for reliability as an indicative market input, consistency amongst other inputs and results and also the context in which such data is presented. Significant increases or decreases in probability of default and loss severity inputs in isolation would result in a significantly lower or higher fair value measurement, respectively. In general, a change in the assumption of the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity in an event of default. Significant increases or decreases in the discount rate in isolation would result in a significantly lower or higher fair value measurement.

The significant unobservable inputs used in the fair value measurement of the Asset Manager Affiliates is the discount rate used to present value prospective cash flows. Prospective revenues are generally based on a fixed percentage of the par value of CLO Fund assets under management and are recurring in nature for the term of the CLO Fund so long as the Asset Manager Affiliates manage the fund. As a result, the fees earned by the Asset Manager Affiliates are generally not subject to market value fluctuations in the underlying collateral. The discounted cash flow model incorporates different levels of discount rates depending on the hierarchy of fees earned (including the likelihood of realization of senior, subordinate and incentive fees) and prospective modeled performance. Significant increases or decreases in such discount rate would result in a significantly lower or higher fair value measurement, respectively.

The Company’s investment in the Joint Venture is carried at fair value based upon the fair value of the investments held by the Joint Venture.

5. ASSET MANAGER AFFILIATES

Wholly-Owned Asset Managers

On December 31, 2018, the Company’s wholly-owned subsidiary Commodore Holdings, LLC (“Commodore”) sold its wholly-owned asset management subsidiaries Katonah Debt Advisors, Trimaran Advisors and Trimaran Advisors Management, representing substantially all of the Company’s investment in the Asset Manager Affiliates. Commodore received cash proceeds of $37.9 million from the sale and distributed $33.8 million in cash to the Company. All of this cash distribution was recorded as a return of capital. No realized gain or loss was recognized due to this transaction.

The Asset Manager Affiliates manage CLO Funds primarily for third party investors that invest primarily in broadly syndicated loans, high yield bonds and other credit instruments issued by corporations. At March 31, 2019 and December 31, 2018, the Asset Manager Affiliates had approximately $300 million and $300 million of par value of assets under management, respectively, and the Company’s 100% equity interest in the Asset Manager Affiliates had a fair value of approximately $0 and $3.5 million, respectively.

Certain investments, and the future management fees of certain managed CLO Funds, had been pledged by the Asset Manager Affiliates to third-party lenders under borrowing arrangements undertaken to satisfy the risk retention requirements of the Dodd-Frank Act applicable to asset managers. In addition, certain of the Asset Manager Affiliates had provided a make-whole guaranty to these lenders in the event that the pledged assets and management fees were insufficient to satisfy the repayment of these borrowings. These borrowing arrangements were all satisfied prior to the sale of the Asset Manager Affiliates.

No distributions were declared during the three months ended March 31, 2019. For the three months ended March 31, 2018, the Asset Manager Affiliates declared cash distributions of $820,000 to the Company. Any distributions from the Asset Manager Affiliates out of their estimated tax-basis earnings and profits are recorded as “Dividends from Asset Manager Affiliates” on the Company’s statement of operations. The Company recognized $320,000 of Dividends from Asset Manager Affiliates, as reflected in the Company’s statement of operations in the first quarter of 2018, respectively. The difference between cash distributions received and the tax-basis earnings and profits of the distributing affiliate are recorded as an adjustment to the cost basis in the Asset Manager Affiliate (i.e., tax-basis return of capital). For the quarter ended March 31, 2018 the difference of $500,000, between cash distributions received and the tax-basis earnings and profits of the distributing affiliate, were recorded as an adjustment to the cost basis in the Asset Manager Affiliate (i.e. tax-basis return of capital). Distributions receivable, if any, are reflected in the “due from affiliates” account on the consolidated balance sheets.

The tax attributes of distributions received from the Asset Manager Affiliates are determined on an annual basis. The Company makes an estimate of the tax-basis earnings and profits of the Asset Manager Affiliates on a quarterly basis, and any quarterly distributions received in excess of the estimated earnings and profits are recorded as return of capital (reduction in the cost basis of the investment in Asset Manager Affiliate).

The Asset Manager Affiliates’ fair value is determined quarterly. The valuation is primarily determined utilizing a discounted cash flow model. See Note 2 - “Significant Accounting Policies” and Note 4 - “Investments” for further information relating to the Company’s valuation methodology.

In accordance with Rules 3-09, Rule 4-08(g) and 1-02 of Regulation S-X, additional financial information with respect to the Asset Manager Affiliates is required to be included in the Company’s SEC filings. The additional information regarding the Asset Manager Affiliates is set forth below. This additional financial information regarding the Asset Manager Affiliates does not directly impact the financial position, results of operations, or cash flows of the Company.

Asset Manager Affiliates

Summarized Balance Sheet

	As of		As of
	March 31, 2019		December 31, 2018
	(unaudited)
Cash	$	861,980	$	1,335,004
Other Assets		12,680		129,880
Total Assets	$	874,660	$	1,464,884

Other Liabilities	$	443,536	$	995,270
Total Liabilities		443,536		995,270
Total Equity		431,124		469,614
Total Liabilities and Equity	$	874,660	$	1,464,884

Asset Manager Affiliates

Summarized Statements of Operations Information (unaudited)

	For the three months ended
	March 31,
	2019			2018
Fee Revenue	$	-		$	3,059,660
Interest Income		-			686,586
Total Income		-			3,746,246
Operating Expenses		38,877			2,526,085
Interest Expense		-			1,177,518
Total Expenses		38,877			3,703,603
Income before unrealized gains on investments and income taxes		(38,877	)		42,643
Unrealized gains on investments		-			820,270
(Loss) Income before income taxes		(38,877	)		862,913
Income Tax (Benefit)		-			(126,954	)
Net (Loss) Income	$	(38,877	)	$	989,867

Except for KCAP Management, LLC, which is a disregarded entity whose tax results are included with the Company’s tax results, as separately regarded entities for tax purposes, the Asset Manager Affiliates are taxed at normal corporate rates. In order to maintain the Company’s RIC status, any tax-basis dividends paid by the Asset Manager Affiliates to the Company would generally need to be distributed to the Company’s shareholders. Generally, such tax-basis dividends of the Asset Manager Affiliates’ income which was distributed to the Company’s shareholders will be considered as qualified dividends for tax purposes. The Asset Manager Affiliates’ taxable net income will differ from GAAP net income because of deferred tax temporary differences and permanent tax adjustments. Deferred tax temporary differences may include differences for the recognition and timing of amortization and depreciation, compensation related expenses, and net loss carryforward, among other things. Permanent differences may include adjustments, limitations or disallowances for meals and entertainment expenses, penalties, tax goodwill amortization and net operating loss carryforward.

Goodwill amortization for tax purposes was created upon the purchase of 100% of the equity interests in Katonah Debt Advisors prior to the Company’s IPO in exchange for shares of the Company’s stock valued at $33 million. Although this transaction was a stock transaction rather than an asset purchase and thus no goodwill was recognized for GAAP purposes, such exchange was considered an asset purchase under Section 351(a) of the Code. At the time of the transfer, Katonah Debt Advisors had equity of approximately $1 million resulting in tax goodwill of approximately $32 million which was being amortized for tax purposes on a straight-line basis over 15 years.

Additional goodwill amortization for tax purposes was created upon the purchase of 100% of the equity interests in Trimaran Advisors by one of the Company’s affiliates, in exchange for shares of the Company’s stock valued at $25.5 million and cash of $13.0 million. The transaction was considered an asset purchase under Section 351(a) of the Code and resulted in tax goodwill of approximately $22.8 million, and tax basis intangible assets of $15.7 million, both of which were being amortized for tax purposes on a straight-line basis over 15 years.

Related Party Transactions

On February 26, 2013, the Company entered into a senior credit agreement (the “Trimaran Credit Facility”) with Trimaran Advisors, pursuant to which Trimaran Advisors may borrow from time to time up to $20 million from the Company in order to provide capital necessary to support one or more of Trimaran Advisors’ warehouse lines of credit and/or working capital in connection with Trimaran Advisors’ warehouse activities. The Trimaran Credit Facility, which expired on November 20, 2017 and bore interest at an annual rate of 9.0%. On April 15, 2013, the Trimaran Credit Facility was amended and upsized from $20 million to $23 million. Outstanding borrowings on the Trimaran Credit Facility were callable by the Company at any time. The Trimaran Credit Facility was fully repaid and terminated in the fourth quarter of 2018. At March 31, 2019 and December 31, 2018, there were no loans outstanding under the Trimaran Credit Facility. For the three months ended March 31, 2018 the Company recognized interest income of approximately $115,000, related to the Trimaran Credit Facility.

On October 30, 2017, the Company entered into a new term loan agreement with Trimaran Advisors, one of the Asset Manager Affiliates. Trimaran Advisors borrowed $8.4 million under this agreement, which bore interest at a rate of 10.5% annually, payable quarterly. The loan matures on April 30, 2030, can be repaid at any time, and must be repaid upon the occurrence of certain events. During the third quarter 2018 $2.1 million of the principal on this loan was repaid by Trimaran Advisors. During the fourth quarter of 2018, Trimaran Advisors repaid this loan in full. Repayment was comprised of $3.0 million of cash and $2.5 million notional amount of subordinated notes of Catamaran 2013-1 with a fair value of $1.4 million and $3.4 million of notional amount of subordinated notes of Catamaran 2014-1 with a fair value of $1.9 million.

On October 31, 2017, Trimaran Advisors capitalized Trimaran Risk Retention Holdings, LLC, a newly-formed wholly-owned subsidiary, with $8.4 million of equity capital. In turn, Trimaran Risk Retention Holdings capitalized Trimaran RR I, LLC, a wholly-owned subsidiary of Trimaran Risk Retention Holdings, LLC, with $8.4 million of equity capital. With this equity contribution and other borrowed funds, Trimaran RR II, LLC purchased $34.8 million notional amount of notes issued by Catamaran CLO 2014-1, Ltd. for aggregate consideration of $35.5 million. On December 21, 2017, the Company entered into another new term loan agreement with Trimaran Advisors, under which Trimaran Advisors borrowed $4.4 million, which also bore interest at a rate of 10.5% annually, payable quarterly. During the second quarter of 2018, this loan was repaid in full by Trimaran Advisors.

On December 21, 2017, Trimaran Advisors contributed $4.4 million of equity capital to Trimaran Risk Retention Holdings, LLC. In turn, Trimaran Risk Retention Holdings contributed $4.4 million of equity capital to Trimaran RR II. With this equity contribution and other borrowed funds, Trimaran RR I, LLC purchased $27.4 million notional amount of notes issued by Catamaran CLO 2015-1, Ltd. for aggregate consideration of $27.4 million.

On June 4, 2018, Trimaran RR I, LLC sold $31.4 million and $24.9 million, of notional amount of notes issued by Catamaran CLO 2014-1, Ltd and Catamaran 2013-1, Ltd, respectively. In December 2018, Trimaran RR I, LLC. distributed to Trimaran $2.5 million notional amount of subordinated notes issued by Catamaran 2013-1 with a fair value of $1.4 million, and a notional amount of $3.4 million of subordinated notes issued by Catamaran 2014-1 with a fair value of $1.9 million.

Administration Agreement

On April 1, 2019, the Company entered into the Administration Agreement with the Administrator. Under the terms of the Administration Agreement, the Administrator will perform the administrative services necessary for the operation of the Company, which includes office facilities, equipment, bookkeeping and recordkeeping services and such other services as the Administrator, subject to review by the Board, shall from time to time determine to be necessary or useful to perform its obligations under this Administration Agreement. See “Organization - Administration Agreement” in Note 1, above, for additional information about the Administration Agreement.

No person who is an officer, director, or employee of the Adviser or its affiliates and who serves as a director of the Company receives any compensation from the Company for his or her services as a director. However, the Company reimburses the Administrator (or its affiliates) for an allocable portion of the compensation paid by the Administrator (or its affiliates) to the Company’s Chief Compliance Officer and Chief Financial Officer and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to the business affairs of the Company).

The Administration Agreement was not in effect during the quarter ended March 31, 2019.

Investment Advisory Agreement

On April 1, 2019, the Company entered into the Advisory Agreement with the Adviser. Under the terms of the Advisory Agreement, the Adviser is responsible for managing the Company’s business and activities, including sourcing investment opportunities, conducting research, performing due diligence on potential investments, structuring its investments, monitoring its portfolio companies and provide managerial assistance to portfolio companies. See “Organization - Advisory Agreement” in Note 1, above, for additional information about the Advisory Agreement.

The Advisory Agreement was not in effect during the quarter ended March 31, 2019.

Co-investment Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term.

On October 23, 2018, the SEC issued an order granting an application for exemptive relief to an affiliate of the Adviser that allows BDCs managed by the Adviser, including the Company, to co-invest, subject to the satisfaction of certain conditions, in certain private placement transactions, with other funds managed by the Advisers or its affiliates, including BCP Special Opportunities Fund I LP, BC Partners Lending Corporation and any future funds that are advised by the Adviser or its affiliated investment advisers. Under the terms of the exemptive order, in order for the Company to participate in a co-investment transaction a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Company’s independent directors must conclude that (i) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching with respect of the Company or its stockholders on the part of any person concerned, and (ii) the proposed transaction is consistent with the interests of the Company’s stockholders and is consistent with the Company’s investment objectives and strategies and certain criteria established by the Board.

6. BORROWINGS

The Company’s debt obligations consist of the following:

	As of March 31, 2019 (unaudited)		As of December 31, 2018

6.125% Notes Due 2022 (net of offering costs of: 2019-$2,071,220; 2018 - $2,207,342)	$	75,335,980	$	75,199,858
Great Lakes KCAP Funding I, LLC Revolving Credit Facility (net of offering costs of: 2019 - $1,327,960; 2018 - $1,555,754)		42,543,122		25,200,331
	$	117,879,102	$	100,400,189

The weighted average stated interest rate and weighted average maturity on all our debt outstanding as of March 31, 2019 were 6.0% and 3.3 years, respectively, and as of December 31, 2018 were 6.0% and 3.6 years, respectively.

6.125% Notes Due 2022

During the third quarter of 2017, the Company issued $77.4 million in aggregate principal amount of unsecured 6.125% Notes due 2022 (the 6.125% “Notes Due 2022”). The net proceeds for these Notes, after the payment of underwriting expenses, were approximately $74.6 million. Interest on the 6.125% Notes Due 2022 is paid quarterly in arrears on March 30, June 30, September 30 and December 30, at a rate of 6.125%. The 6.125% Notes Due 2022 mature on September 30, 2022 and are unsecured obligations of the Company. The 6.125% Notes Due 2022 are subject to redemption in whole or in part at any time or from time to time, at the option of the Company, on or after September 30, 2019, at a redemption price per security equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to the date fixed for redemption. In addition, Due to the asset coverage test applicable to the Company as a BDC and a covenant that the Company agreed to in connection with the issuance of the 6.125% Notes Due 2022, the Company is limited in its ability to make distributions in certain circumstances. The indenture governing the 6.125% Notes Due 2022 contains certain restrictive covenants, including compliance with certain provisions of the 1940 Act relating to borrowing and dividends. At March 31, 2019, the Company was in compliance with all of its debt covenants.

For the three months ended March 31, 2019 and 2018, interest expense related to the 6.125% Notes Due 2022 was approximately $1.2 million and $1.2 million, respectively.

In connection with the issuance of the 6.125% Notes Due 2022, the Company incurred approximately $2.9 million of debt offering costs which are being amortized over the expected term of the facility on an effective yield method, of which approximately $2.1 million and $2.2 million remains to be amortized as of March 31, 2019 and December 31, 2018, respectively, and is included on the consolidated balance sheets as a reduction in the related debt liability.

Fair Value of 6.125% Notes Due 2022. The 6.125% Notes Due 2022 were issued via public offering during the third quarter of 2017 and are carried at cost, net of offering costs of $2.1 million and $2.2 million at March 31, 2019 and December 31, 2018. The fair value of the Company’s outstanding 6.125% Notes Due 2022 was approximately $78.6 million and $76.6 million at March 31, 2019 and December 31, 2018. The fair value was determined based on the closing price on March 31, 2019 for the 6.125% Notes Due 2022. The 6.125% Notes Due 2022 are categorized as Level I under the ASC 820 Fair Value.

Great Lakes KCAP Funding I, LLC

On March 1, 2018, Great Lakes KCAP Funding I, LLC (“Funding”), a wholly-owned subsidiary of the Company, entered into a senior secured revolving credit facility (the “Revolving Credit Facility”) with certain institutional lenders, State Bank and Trust Company, as the administrative agent, lead arranger and bookrunner, CIBC Bank USA, as documentation agent and the Company, as the servicer.

On March 31, 2019, the maximum commitment amount of the Revolving Credit Facility was increased to $57.5 million, subject to availability under the borrowing base. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to (i) in the case of LIBOR rate loans, an adjusted LIBOR rate for the applicable interest period plus 3.25% or (ii) in the case of base rate loans, the prime rate plus 3.25%. Funding will pay a fee on any undrawn amounts of 0.375% per annum; provided that if 50% or less of the Revolving Credit Facility is drawn, the fee will be 0.50% per annum.

The Company intends to use the proceeds from borrowings under the Revolving Credit Facility for general corporate purposes, including to acquire certain qualifying loans, and such other uses as permitted under the Loan and Security Agreement (the “Revolving Credit Agreement”).

The maturity date is the earlier of: (a) March 1, 2022 and (b) the date upon which all loans shall become due and payable in full, whether by acceleration or otherwise, as a result of a default by the Company, as defined in the Revolving Credit Facility.

Borrowings under the Revolving Credit Facility are repayable by the Company at any time.

The Revolving Credit Facility is secured by all of the assets held by Funding, and the Company has pledged its interests in Funding as collateral to State Bank and Trust Company, as the administrative agent, to secure the obligations of Funding under the Revolving Credit Facility. The Revolving Credit Agreement includes customary affirmative and negative covenants, including certain limitations on the incurrence of additional indebtedness and liens, as well as usual and customary events of default for revolving credit facilities of this nature. At March 31, 2019 and December 31, 2018, Funding was in compliance with all of its debt covenants.

As of March 31, 2019 and December 31, 2018, $43.9 million and $26.4 million principal amount of borrowings was outstanding under the Revolving Credit Facility.

Interest on borrowings under the Revolving Credit Facility is paid monthly. Borrowings under the Revolving Credit Facility are subject to redemption in whole or in part at any time or from time to time, at the option of the Funding.

For the three months ended March 31, 2019 and 2018, interest and fees expense related to the Revolving Credit Facility was approximately $0.4 million and $0.1 million.

The Company incurred approximately $1.7 million of debt offering costs in connection with the Revolving Credit Facility, which are being amortized over the expected term of the Revolving Credit Facility on an effective yield method, of which approximately $1.3 million remains to be amortized as of March 31, 2019, and is included on the consolidated balance sheets as a reduction in the related debt liability.

Fair Value of the Revolving Credit Facility. Borrowings under the Revolving Credit Facility are carried at cost, net of unamortized debt offering costs of $1.3 million at March 31, 2019. The fair value of the Revolving Credit Facility borrowings was approximately $43.9 million and $26.4 million at March 31, 2019 and December 31, 2018. The fair value was determined based on an analysis of the value of the pledged collateral and the amount of over-collateralization supporting the repayment of these borrowings. The Revolving Credit Facility borrowings are categorized as Level III under the ASC 820 Fair Value.

7.375% Notes Due 2019

On October 10, 2012, the Company issued $41.4 million in aggregate principal amount of unsecured 7.375% Notes due 2019 (the “7.375% Notes Due 2019”). The net proceeds for these Notes, after the payment of underwriting expenses, were approximately $39.9 million. As of December 31, 2018, there were no 7.375% Notes Due 2019 outstanding. Interest on the 7.375% Notes Due 2019 was paid quarterly in arrears on March 30, June 30, September 30 and December 30, at a rate of 7.375%, commencing December 30, 2012. The 7.375% Notes Due 2019 had a maturity date of September, 30, 2019 and were unsecured obligations of the Company. The 7.375% Notes Due 2019 were subject to redemption in whole or in part at any time or from time to time, at the option of the Company, on or after September 30, 2015, at a redemption price per security equal to 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to the date fixed for redemption. In addition, due to the asset coverage test applicable to the Company as a BDC and a covenant that the Company agreed to in connection with the issuance of the 7.375% Notes Due 2019, the Company was limited in its ability to make distributions in certain circumstances. The indenture governing the 7.375% Notes Due 2019 contains certain restrictive covenants, including compliance with certain provisions of the 1940 Act relating to borrowing and dividends.

For the three months ended March 31, 2018, interest expense related to the 7.375% Notes Due 2019 was approximately, $436,000.

During the second quarter of 2017, approximately $6.5 million par value of the 7.375% Notes Due 2019 was redeemed by the Company, resulting in a realized loss on extinguishment of approximately $107,000. The Company subsequently surrendered these notes to the Trustee for cancellation.

During the first quarter of 2018, approximately $20 million par value of the 7.375% Notes Due 2019 was redeemed by the Company, resulting in a realized loss on extinguishment of approximately $169,000. The Company subsequently surrendered these notes to the Trustee for cancellation.

During the fourth quarter of 2018, all of the remaining $7 million par value of the 7.375% Notes Due 2019 was redeemed by the Company, resulting in a realized loss on extinguishment of approximately $28,000. The Company subsequently surrendered these notes to the Trustee for cancellation.

7. DISTRIBUTABLE TAXABLE INCOME

Effective December 11, 2006, the Company elected to be treated as a RIC under the Code and adopted a December 31 tax-calendar year end. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to its stockholders as a dividend. The Company’s quarterly distributions, if any, are determined by the Board of Directors. The Company anticipates distributing substantially all of its taxable income and gains, within the Subchapter M rules, and thus the Company anticipates that it will not incur any federal or state income tax at the RIC level. As a RIC, the Company is also subject to a federal excise tax based on distributive requirements of its taxable income on a calendar year basis (e.g., calendar year 2019). Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, to the extent required.

The following reconciles net increase in net assets resulting from operations to taxable income for the three months ended March 31, 2019:

	Three Months Ended March 31,
	2019			2018
	(unaudited)			(unaudited)

Net (decrease) increase in net assets resulting from operations	$	(10,917,572	)	$	2,609,393
Net change in unrealized appreciation from investments		(4,627,045	)		(314,624	)
Excess capital losses over capital gains		13,349,430			165,973
Book/tax differences on CLO equity investments		(198,326	)		(787,949	)
Other book/tax differences		663,298			457,219
Taxable (loss) income before deductions for distributions	$	(1,730,215	)	$	2,130,012
Taxable (loss) income before deductions for distributions per weighted average basic shares for the period	$	(0.05	)	$	0.06
Taxable (loss) income before deductions for distributions per weighted average diluted shares for the period	$	(0.05	)	$	0.06

Dividends from Asset Manager Affiliates are recorded based upon a quarterly estimate of tax-basis earnings and profits of each Asset Manager Affiliate. Distributions in excess of the estimated tax-basis quarterly earnings and profits of each distributing Asset Manager Affiliate are recognized as tax-basis return of capital. The actual tax-basis earnings and profits and resulting dividend and/or return of capital for the year will be determined at the end of the tax year for each distributing Asset Manager Affiliate. For the three months ended March 31, 2019 and 2018, the Asset Manager Affiliates declared cash distributions of $0 and $820,000, respectively, to the Company. The Company recognized $0 and $320,000 of dividends from the Asset Manager Affiliates, as reflected in the Company’s statement of operations in the first quarter of 2019 and 2018, respectively. For the quarter ended March 31, 2018 the difference of $500,000 between cash distributions received and the tax-basis earnings and profits of the distributing affiliate, are recorded as an adjustment to the cost basis in the Asset Manager Affiliate (i.e. tax-basis return of capital).

Distributions to shareholders that exceed tax-basis distributable income (tax-basis net investment income and realized gains, if any) are reported as distributions of paid-in capital (i.e. return of capital). The tax character of distributions is made on an annual (full calendar-year) basis. The determination of the tax attributes of our distributions is made at the end of the year based upon our taxable income for the full year and the distributions paid during the full year. Therefore, a determination of tax attributes made on a quarterly basis may not be representative of the actual tax attributes of distributions for a full year.

At March 31, 2019, the Company had a net capital loss carryforward of $96.6 million to offset net capital gains. This net capital loss carryforward is not subject to expiration.

On March 20, 2019 the Company’s Board of Directors declared a distribution to shareholders of $0.10 per share for a total of $3.7 million. The record date was April 5, 2019 and the distribution was paid on April 26, 2019.

ASC Topic 740 Accounting for Uncertainty in Income Taxes (“ASC 740”) provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (the last three fiscal years) or expected to be taken in the Company’s current year tax return. The Company identifies its major tax jurisdictions as U.S. Federal and New York State, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof.

8. COMMITMENTS AND CONTINGENCIES

From time-to-time the Company is a party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the needs of the Company’s investment in portfolio companies. Such instruments include commitments to extend credit and may involve, in varying degrees, elements of credit risk in excess of amounts recognized on the Company’s balance sheet. Prior to extending such credit, the Company attempts to limit its credit risk by conducting extensive due diligence, obtaining collateral where necessary and negotiating appropriate financial covenants. As of March 31, 2019 and December 31, 2018, the Company had $35.9 million and $12.9 million outstanding commitments, respectively.

The Company has made an aggregate commitment to the BCP Great Lakes Partnership of $50 million, subject to certain limitations (including that the Company is not obligated to fund capital calls if such funding would cause the Company to be out of compliance with certain provisions of the Investment Company Act of 1940). As of March 31, 2019 and December 31, 2018, the Company had a $34.8 million and $12.5 million, respectively unfunded commitment to the BCP Great Lakes Partnership, subject to the limitations noted above. In the fourth quarter of 2018, the Company undertook the commitments under a lease obligation for its office space. Such obligation was previously with Katonah Debt Advisors. During 2018, the Company and the Asset Manager Affiliates shared the cost of such lease pursuant to an Overhead Allocation agreement. The Company’s portion of rent expense was approximately $193,000, and $94,000 for the quarter ended March 31, 2019 and 2018, respectively.

The following table summarizes the future minimum lease payments as of March 31, 2019:

	Payments Due by Period
Contractual Obligations	2019		2020		2021		2022		2023		More than 5 years
Operating lease obligations	$	590,065	$	800,436	$	800,436	$	800,436	$	800,436	$	333,515

9. STOCKHOLDERS’ EQUITY

The following table details the components of Stockholders’ Equity for the three months ended March 31, 2019 and 2018:

	Three Months Ended March 31, 2019
	Common Stock			Capital in Excess of Par Value		Total Distributable (loss) earnings			Total Stockholders' Equity
Balance, January 1, 2019	$	373,268		$	306,784,387	$	(149,136,644	)	$	158,021,011
Net investment loss		—			—		(2,195,187	)		(2,195,187	)
Net realized (losses) from investment transactions		—			—		(13,349,430	)		(13,349,430	)
Net change in unrealized appreciation on investments		—			—		4,627,045			4,627,045
Distributions to Stockholders		—			—		(3,732,836	)		(3,732,836	)
Reinvested Dividends		155			56,334		—			56,489
Stock-based compensation		(106	)		259,042		—			258,936
Balance, March 31, 2019	$	373,317		$	307,099,763	$	(163,787,052	)	$	143,686,028

	Three Months Ended March 31, 2018
	Common Stock		Capital in Excess of Par Value		Total Distributable (loss) earnings			Total Stockholders' Equity
Balance, January 1, 2018	$	373,392	$	329,789,716	$	(148,358,532	)	$	181,804,576
Net investment income (loss)		—		—		2,460,742			2,460,742
Net realized (losses) from investment transactions		—		—		3,101			3,101
Realized loss from extinguishment of debt		—		—		(169,074	)		(169,074	)
Net change in unrealized (depreciation) on investments		—		—		314,624			314,624
Distributions to Stockholders		—		—		(3,716,297	)		(3,716,297	)
Reinvested Dividends		153		51,407		—			51,560
Stock-based compensation		—		252,855		—			252,855
Balance, March 31, 2018	$	373,545	$	330,093,978	$	(149,465,436	)	$	181,002,087

During the three months ended March 31, 2019 and 2018, the Company issued 15,434 and 15,255 shares, respectively, of common stock under its dividend reinvestment plan. For the three months ended March 31, 2019, there were no grants of restricted stock, 10,571 shares were forfeited, and 113,382 shares vested. The total number of shares of the Company’s common stock outstanding as of March 31, 2019 and December 31, 2018 was 37,331,709 and 37,326,846, respectively.

10. EQUITY COMPENSATION PLANS

The Company had an equity incentive plan, established in 2006 and most recently amended, following approval by the Company’s Board of Directors and shareholders, on May 4, 2017 (the “Equity Incentive Plan”). The Company reserved 2,000,000 shares of common stock for issuance under the Equity Incentive Plan. In connection with the Closing, the Company terminated the Equity Incentive Plan and will no longer make grants pursuant to the plan. Prior to the Closing, restricted stock granted under the Equity Incentive Plan was granted at a price equal to the fair market value (market closing price) of the shares on the day such restricted stock is granted. Options granted under the Equity Incentive Plan were exercisable at a price equal to the fair market value (market closing price) of the shares on the day the option is granted.

Stock Options

The 2008 Non-Employee Director Plan was originally adopted by the Board and was approved by a vote of the Company’s shareholders at the 2008 Annual Shareholder Meeting (the “2008 Plan”). Effective June 10, 2011, the 2008 Plan was amended and restated in accordance with a resolution of the Board and approved by a vote of the Company’s shareholders at the 2011 Annual Shareholder Meeting (the “2011 Plan”). Effective May 4, 2017, the 2011 Plan was amended and restated in accordance with a resolution of the Board and approved by the Company’s shareholders at the 2017 Annual Shareholder Meeting (the “Non-Employee Director Plan”). In connection with the Closing, the Company terminated the 2008 Plan and will no longer make grants pursuant to the plan.

Immediately prior to the Closing, by virtue of the Externalization and subject to the execution of an option cancellation agreement, each option to purchase shares of the Company’s common stock granted under the 2008 Plan that was outstanding immediately prior to the Externalization was cancelled in exchange for a payment in cash to the holder thereof.

Information with respect to options granted, exercised and forfeited under the Equity Incentive Plan for the period January 1, 2018 through March 31, 2019 is as follows:

	Shares			Weighted Average Exercise Price per Share		Weighted Average Contractual Remaining Term (years)		Aggregate Intrinsic Value¹
Options outstanding at January 1, 2018		50,000		$	7.72		2.4	$	-
Granted		—			—
Exercised		—			—
Forfeited
Expired unexercised		(5,000	)		11.97
Cancelled		(15,000	)		11.97
Options outstanding at December 31, 2018		30,000		$	4.88		0.9	$	-
Granted		—			—
Exercised		—			—
Forfeited		—			—
Cancelled		(30,000	)		4.88		0.6

Outstanding at March 31, 2019		—		$	—		-	$	-

Total vested at March 31, 2019		—		$	—		-

¹	Represents the difference between the market value of shares of the Company on March 31, 2019 and the exercise price of the options.

The Company uses a Binary Option Pricing Model (American, call option) to establish the expected value of all stock option grants. For the three months ended March 31, 2019 and 2018, the Company did not recognize any non-cash compensation expense related to stock options. At March 31, 2019, the Company had no remaining compensation costs related to unvested stock based awards.

Restricted Stock

Awards of restricted stock granted under the Non-Employee Director Plan vest as follows: 50% of the shares vest on the grant date and the remaining 50% of the shares vest on the earlier of:

(i) the first anniversary of such grant, or

(ii) the date immediately preceding the next annual meeting of shareholders.

On May 4, 2017, 6,000 shares of restricted stock were awarded to the Company’s Board of Directors.

On May 3, 2018, 6,000 shares of restricted stock were awarded to the Company’s Board of Directors.

Immediately prior to the Closing, 3,000 shares of restricted stock outstanding and not previously forfeited under the Non-Employee Director Plan, all restrictions with respect to such restricted stock lapsed, and the holders of such restricted stock became entitled to receive a pro rata share of the payment due to stockholders of the Company pursuant to the Externalization Agreement.

On June 16, 2015, the Company received exemptive relief to repurchase shares of its common stock from its employees in connection with certain equity compensation plan arrangements. During the year ended December 31, 2018, the Company repurchased 26,681 shares, of common stock at an aggregate cost of approximately $86,000, in connection with the vesting of employee’s restricted stock, which is reflected as a reduction in Stockholders’ Equity at cost. These shares are not available to be reissued under the Company’s Equity Incentive Plan.

On June 23, 2015, the Company’s Board of Directors approved the grant of 190,166 shares, with a fair value of approximately $1.2 million, of restricted stock to the employees of the Company as partial compensation for their services. 25% of such awards will vest on each of the first four anniversaries of the grant date.

On September 19, 2017, the Company’s Board of Directors approved the grant of 133,620 shares of restricted stock to the employees of the Company as partial compensation for their services. 50% of such awards were scheduled to vest on the third anniversary of the grant date and the remaining 50% of the shares were scheduled to vest on the fourth anniversary of the grant date.

Immediately prior to the Closing, 110,382 shares of restricted stock outstanding and not previously forfeited under the Equity Incentive Plan and the 2008 Plan (as defined below) became fully vested, all restrictions with respect to such restricted stock lapsed, and the holders of such restricted stock became entitled to receive a pro rata share of the payment due to stockholders of the Company pursuant to the Externalization Agreement.

Information with respect to restricted stock granted, exercised and forfeited under the Plan for the period January 1, 2018 through March 31, 2019 is as follows:

	Non-vested Restricted Shares
Non-vested shares outstanding at January 1, 2018		297,199
Granted		6,000
Vested		(122,878	)
Forfeited		(56,368	)
Non-vested shares outstanding at December 31, 2018		123,953
Granted		—
Vested		(113,382	)
Forfeited		(10,571	)
Non-Vested Outstanding at March 31, 2019		—

On March 31, 2019, all of the remaining restricted shares vested. For the three months ended March 31, 2019, non-cash compensation expense related to restricted stock was approximately $259,000; all of which was expensed at the Company. For the three months ended March 31, 2018, non-cash compensation expense related to restricted stock was approximately $253,000; of this amount approximately $108,000 was expensed at the Company, and approximately was $145,000 was a reimbursable expense allocated to the Asset Manager Affiliates.

Distributions are paid on all outstanding shares of restricted stock, whether or not vested. In general, shares of unvested restricted stock were forfeited upon the recipient’s termination of employment.

11. OTHER EMPLOYEE COMPENSATION

The Company adopted a 401(k) plan (“401K Plan”) effective January 1, 2007. The 401K Plan was open to all full time employees. The 401K Plan permits an employee to defer a portion of their total annual compensation up to the Internal Revenue Service annual maximum based on age and eligibility. The Company made contributions to the 401K Plan of up to 2% of the Internal Revenue Service’s annual maximum eligible compensation, which fully vests at the time of contribution. Approximately $9,000 and $10,000 was expensed during the three months ended March 31, 2019 and 2018, respectively, related to the 401K Plan. This Plan was terminated effective March 31, 2019.

The Company has also adopted a deferred compensation plan (“Profit-Sharing Plan”) effective January 1, 2007. Employees are eligible for the Profit-Sharing Plan provided that they are employed and working with the Company to participate in at least 100 days during the year and remain employed as of the last day of the year. Employees do not make contributions to the Profit-Sharing Plan. On behalf of the employee, the Company may contribute to the Profit-Sharing Plan 1) up to 8.0% of all compensation up to the Internal Revenue Service annual maximum and 2) up to 5.7% excess contributions on any incremental amounts above the social security wage base limitation and up to the Internal Revenue Service annual maximum. Employees vest 100% in the Profit-Sharing Plan after five years of service. Approximately $25,000 was expensed during the three months ended March 31, 2018, related to the Profit-Sharing Plan. This Plan was terminated effective March 31, 2019, and no expense was recognized during the three months ended March 31, 2019.

12. SUBSEQUENT EVENTS

On April 1, 2019, the maximum commitment amount of the Revolving Credit Facility was increased from $57.5 million to $67.5 million.

The Company has evaluated events and transactions occurring subsequent to March 31, 2019 for items that should potentially be recognized or disclosed in these financial statements. Other than described above, management has determined that there are no other material subsequent events that would require adjustment to, or disclosure in, these consolidated financial statements.

PART II. Other Information

Item 6.

Exhibits

Reference is made to the Exhibit List filed as a part of this report beginning on page E-1. Each of such exhibits is incorporated by reference herein.

Table of Contents

SIGNATURES

Pursuant to the requirements 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.

	PORTMAN RIDGE FINANCE CORPORATION

Date: May 10, 2019	By	/s/ Edward Goldthorpe
		Edward Goldthorpe
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 10, 2019	By	/s/ Edward U. Gilpin
		Edward U. Gilpin
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

* * * * *

Table of Contents

Exhibit Index

Exhibit Number		Description of Document

3.1		Form of Certificate of Incorporation of Company (incorporated by reference to the exhibit included in Pre-Effective Amendment No. 1 on Form N-2, as filed on October 6, 2006 (File No. 333-136714)).

3.1.1		Certificate of Amendment to Certificate of Incorporation of Portman Ridge Finance Corporation (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, as filed on April 2, 2019 (File No. 814-00735)).

3.2		Second Amended and Restated Bylaws of KCAP Financial, Inc., dated as of December 12, 2018 (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, as filed on December 14, 2018 (File No. 814-0735)).

3.2.1		Amendment No. 1 to the Second Amended and Restated Bylaws of Portman Ridge Finance Corporation (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K, as filed on April 2, 2019 (File No. 814-00735)).

10.1		Investment Advisory Agreement, dated April 1, 2019, by and between the Company and Sierra Crest Investment Management LLC (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K, as filed on April 2, 2019 (File No. 814-00735)).

10.2		Incentive Fee Letter Agreement, dated April 1, 2019, by and between the Company and BC Partners Management LLC (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K, as filed on April 2, 2019 (File No. 814-00735)).

10.3		Administration Agreement, dated April 1, 2019, by and between the Company and BC Partners Management LLC (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K, as filed on April 2, 2019 (File No. 814-00735)).

10.4		Second Amendment to Loan and Security Agreement, dated as of March 27, 2019, by and among Great Lakes KCAP Funding I, LLC, KCAP Financial, Inc., the financial institutions party to the Agreement from time to time as lenders, Cadence Bank, N.A., CIBC Bank USA (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K, as filed on April 2, 2019 (File No. 814-00735)).

10.5		Third Amendment to Loan and Security Agreement, dated as of April 1, 2019, by and among Great Lakes KCAP Funding I, LLC, KCAP Financial, Inc., the financial institutions party to the Agreement from time to time as lenders, Cadence Bank, N.A., CIBC Bank USA (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K, as filed on April 2, 2019 (File No. 814-00735))

31.1**		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer Pursuant to 18 U. S. C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer Pursuant to 18 U. S. C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**	Submitted herewith.

E-1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED

I, Edward Goldthorpe, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2019 of Portman Ridge Finance Corporation (the “registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2019	By:	/ S / EDWARD GOLDTHORPE
		Edward Goldthorpe
		President and Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED

I, Edward U. Gilpin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2019 of Portman Ridge Finance Corporation (the “registrant”);

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2019	By:	/ S / Edward U. Gilpin
		Edward U. Gilpin
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Portman Ridge Finance Corporation (the “Company”) on Form 10-Q/A for the quarter ended March 31, 2019 (the “Report”), I, Edward Goldthorpe, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2019	By:	/ S / EDWARD GOLDTHORPE
		Edward Goldthorpe
		President and Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Portman Ridge Finance Corporation the “Company”) on Form 10-Q/A for the quarter ended March 31, 2019 (the “Report”), I, Edward U. Gilpin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2019	By:	/ S / Edward U. Gilpin
		Edward U. Gilpin
		Chief Financial Officer
		(Principal Financial Officer)