N-2/A 1 v336950_n2a.htm N-2/A

As filed with the Securities and Exchange Commission on March 18, 2013

Registration No. 333-173026

 

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



 

FORM N-2



 

   
x   REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
     x   PRE-EFFECTIVE AMENDMENT NO. 10
     o   POST-EFFECTIVE AMENDMENT NO.

   
o   REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940


 

GARRISON CAPITAL INC.

(Exact name of Registrant as Specified in Charter)



 

1350 Avenue of the Americas
New York, New York 10019

(Address of Principal Executive Offices)

Registrant’s Telephone Number, including Area Code: (212) 372-9500

Julian Weldon
Garrison Capital Inc.
1350 Avenue of the Americas
New York, New York 10019
(212) 372-9500

(Name And Address of Agent for Service)



 

Copies of information to:

 
Thomas J. Friedmann
David J. Harris
William J. Tuttle
Dechert LLP
1900 K Street, N.W.
Washington, DC 20006
Telephone: (202) 261-3300
Facsimile: (202) 261-3333
  Paul K. Risko
John A. MacKinnon
Sidley Austin LLP
787 Seventh Avenue
New York, NY 10019
Telephone: (212) 839-5300
Facsimile: (212) 839-5959


 

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than Securities offered in connection with a dividend reinvestment plan, check the following box. o

It is proposed that this filing will become effective (check appropriate box):

o when declared effective pursuant to section 8(c).

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

   
Title of Securities Being Registered   Proposed Maximum Aggregate
Offering Price(1)
  Amount of Registration Fee(2)(3)
Common Stock, par value $0.001 per share   $ 125,000,000     $ 14,512.50  

(1) Includes the underwriters’ over-allotment option to purchase additional shares.
(2) Estimated pursuant to Rule 457(o) solely for the purpose of determining the registration fee.
(3) Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 


 
 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS

Subject to Completion

Preliminary Prospectus dated March 19, 2013

5,333,334 Shares

Garrison Capital Inc.

Common Stock



 

We are a recently-organized, externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Our investment objective is to provide our stockholders with current income and capital appreciation through debt and minority equity investments in middle-market companies.

Garrison Capital Advisers LLC serves as our investment adviser. Garrison Capital Administrator LLC serves as our administrator. These entities are affiliated with Garrison Investment Group, an alternative investment and asset management firm founded in March 2007 with approximately $3.1 billion of committed and invested capital under management as of December 31, 2012.

This is an initial public offering of our shares of common stock. All of the 5,333,334 shares of common stock offered by this prospectus are being sold by us.

We currently expect that the initial public offering price per share of our common stock will be $15.00 per share. Our common stock has been approved for quotation on The NASDAQ Global Select Market under the symbol “GARS.”

We are an “emerging growth company” within the meaning of the recently enacted Jumpstart Our Business Startups Act.

Immediately prior to the closing of this offering, we expect to sell 126,901 shares of common stock to our directors, officers, investment adviser and the employees of our investment adviser and its affiliates at the initial public offering price per share in a private placement. We will receive the full proceeds of this private placement, and no underwriting discounts or commissions will be paid in respect of these shares.

This prospectus contains important information you should know before investing in our common stock. Please read it before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission. We maintain a website at http://www.garrisoncapitalbdc.com and intend to make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available, free of charge, on or through our website. You may also obtain such information and make stockholder inquiries by contacting us at Garrison Capital Inc., 1350 Avenue of the Americas, New York, New York 10019, Attention: Investor Relations, or by calling us collect at (212) 372-9500. The Securities and Exchange Commission also maintains a website at http://www.sec.gov that contains this information.

Our shares of common stock have no history of public trading. Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their net asset value. If our shares trade at a discount to our net asset value, it may increase the risk of loss for purchasers in this offering. This risk of loss may be greater for investors expecting to sell their shares in a relatively short period of time after the completion of our initial public offering. Assuming an initial public offering price of $15.00 per share, purchasers in this offering will experience no immediate dilution. See “Dilution” for more information.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Investing in our common stock involves a high degree of risk, including the risk of a total loss of such investment. We are subject to special risks and, before buying any shares, you should read the discussion of the material risks of investing in our common stock, including the risk of leverage, in “Risk Factors” beginning on page 20 of this prospectus.



 

   
  Per Share   Total
Public offering price   $ 15.00     $ 80,000,010.00  
Sales load (underwriting discounts and commissions)   $ 1.05     $ 5,600,000.70  
Proceeds, before expenses, to us(1)   $ 13.95     $ 74,400,009.30  

(1) We estimate that we will incur approximately $0.6 million in expenses, or approximately $0.11 per share, in connection with this offering, including the fees and expenses incident to securing any required review by the Financial Industry Regulatory Authority, Inc. (see “Underwriting”). All of these offering expenses will be borne indirectly by investors in our common stock. We estimate that the net proceeds to us after expenses will be $73,800,009.30, or approximately $13.84 per share. The underwriters may also exercise their option to purchase up to an additional 800,000 shares from us, at the public offering price, less the sales load, for 30 days after the date of this prospectus to cover over-allotments, if any. If the underwriters exercise this option in full, the total sales load will be $6,440,000.70, and the total proceeds to us, before expenses, will be $85,560,009.30.

The shares will be ready for delivery on or about           , 2013.



 

Joint Book-Running Managers

 
Baird   Oppenheimer & Co.

Co-Lead Managers

     
William Blair   Janney Montgomery Scott   Stephens Inc.   Wunderlich Securities

Co-Managers

       
J.J.B. Hilliard, W.L.
Lyons, LLC
  Ladenburg
Thalmann & Co. Inc.
  National Securities
Corporation
  Capital One
Southcoast
  Natixis


 

The date of this prospectus is            , 2013.


 
 

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TABLE OF CONTENTS

 
Prospectus Summary     1  
The Offering     10  
Fees and Expenses     16  
Risk Factors     20  
Special Note Regarding Forward-Looking Statements     45  
Use of Proceeds     46  
Distributions     47  
Capitalization     48  
Dilution     49  
Selected Financial and Other Information     50  
Management’s Discussion and Analysis of Financial Condition and Results of Operations     52  
The Company     66  
Portfolio Companies     78  
Management     83  
Certain Relationships     89  
Control Persons and Principal Stockholders     92  
The Adviser and the Administrator     94  
Determination of Net Asset Value     106  
Dividend Reinvestment Plan     108  
Description of Shares     110  
Shares Eligible for Future Sale     115  
Regulation     116  
Brokerage Allocation and Other Practices     123  
Tax Matters     124  
Underwriting     131  
Custodian, Transfer and Distribution Paying Agent and Registrar     136  
Legal Matters     136  
Independent Registered Public Accounting Firm     136  
Additional Information     137  
Index to Financial Statements     F-1  

* * * * *

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information in this prospectus is accurate only as of the date on the front of this prospectus. Our business, financial condition and prospects may have changed since that date. To the extent required by applicable law, we will update this prospectus during the offering period to reflect material changes to the disclosure herein.

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PROSPECTUS SUMMARY

This summary highlights some of the information in this prospectus. It is not complete and may not contain all of the information that you may want to consider. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in this prospectus. Except where the context suggests otherwise, the terms:

“we,” “us,” “our” and “Garrison Capital” refer to Garrison Capital LLC, a Delaware limited liability company, and its consolidated subsidiaries for the periods prior to the consummation of the BDC Conversion, and refer to Garrison Capital Inc., a Delaware corporation, and its consolidated subsidiaries for the periods after the consummation of the BDC Conversion;
“Garrison Capital Advisers” or the “investment adviser” refers to Garrison Capital Advisers LLC, a Delaware limited liability company;
“Garrison Capital Administrator” or the “administrator” refers to Garrison Capital Administrator LLC, a Delaware limited liability company; and
“Garrison Investment Group” refers to Garrison Investment Group LP, a Delaware limited partnership, and its affiliates.

On October 9, 2012, we converted from a limited liability company into a corporation. In this conversion, Garrison Capital Inc. succeeded to the business of Garrison Capital LLC and its consolidated subsidiaries, and the members of Garrison Capital LLC became stockholders of Garrison Capital Inc. In this prospectus, we refer to these transactions as the “BDC Conversion.” Unless otherwise indicated, the disclosure in this prospectus gives effect to the BDC Conversion.

Garrison Capital

We are a recently-organized, externally managed, non-diversified, closed-end management investment company that has filed an election to be treated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, for tax purposes we intend to elect to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code, for the period from October 9, 2012 to December 31, 2012 and to qualify annually thereafter.

Our investment objective is to generate current income and capital appreciation by making investments generally in the range of $10 million to $25 million primarily in debt securities and loans of U.S. based middle-market companies, which we define as those having annual earnings before interest, taxes and depreciation, or EBITDA, of between $5 million and $30 million. Our goal is to generate attractive risk-adjusted returns by assembling a broad portfolio of investments.

We invest primarily in (1) first lien senior secured loans, (2) second lien senior secured loans, (3) “one-stop” senior secured or “unitranche” loans, (4) subordinated or mezzanine loans and (5) to a lesser extent, selected equity co-investments in middle-market companies. We use the term “one-stop” or “unitranche” to refer to a loan that combines characteristics of traditional first lien senior secured loans and second lien or subordinated loans. We use the term “mezzanine” to refer to a loan that ranks senior only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness.

We believe that the middle market offers attractive risk-adjusted returns for debt investors. Historically, we believe there has been a persistent scarcity of available capital relative to demand, which, from a lender’s perspective, has generally resulted in more favorable transaction structures, including enhanced covenant protection and increased pricing relative to larger companies. We further believe that the turmoil in the markets has exacerbated this scarcity of capital, as many traditional lenders to middle-market companies have exited the business or focused their attention on larger borrowers. In addition, middle-market companies traditionally have exhibited lower default rates and improved recoveries compared to larger borrowers and typically offer greater access to key senior managers, which we believe further enhances the attractiveness of lending to this market segment and facilitates due diligence investigations and regular monitoring.

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As of December 31, 2012, we held investments in 49 portfolio companies with a fair value of $220.1 million, including investments in 45 portfolio companies held through Garrison Funding 2012-1 LLC, our wholly-owned indirect subsidiary, or GF 2012-1. The investments held by GF 2012-1 as of December 31, 2012 consisted of senior secured loans fair valued at $202.5 million and related indebtedness of $125.0 million. As of that date, the loans held by GF 2012-1 (held at fair value), together with cash and other assets held by GF 2012-1, equaled approximately $276.2 million.

As of December 31, 2012, our portfolio had an average investment size of approximately $4.3 million, a weighted average yield of 9.62% and a weighted average maturity of 46 months. In this prospectus, weighted average yield is calculated based on the fair value of the investments and interest expected to be received using the current rate of interest at the balance sheet date to maturity, excluding the effects of future scheduled principal amortizations, and the calculation of weighted average maturity excludes the effects of future scheduled principal amortization. See “— Formation Transactions — Our Formation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Formation Transactions — Our Formation.”

Going forward, we intend to pursue a strategy focused on originating and investing in first lien, second lien, unitranche and mezzanine loans. Accordingly, over time we expect that syndicated first lien senior secured loans will represent a smaller percentage of our investment portfolio as we grow our business and our existing senior secured investments are repaid or sold in the secondary market and we reinvest the proceeds of such repayments or sales. Under the provisions of the 1940 Act, our board of directors may change our operating policies and strategies without prior notice or stockholder approval, although the board of directors cannot change our election to be treated as a business development company under the 1940 Act without prior stockholder approval. Examples of policies and strategies that the board could elect to change include the selection of the investment adviser and the focus of our investments in first lien, second lien, unitranche and mezzanine loans. However, our board of directors has no current intention or expectation of changing any of the policies or strategies described in this prospectus.

Our Investment Adviser

Our investment activities are managed by our investment adviser, Garrison Capital Advisers. Our investment adviser is responsible for sourcing potential investments, conducting research and diligence on prospective investments and equity sponsors, analyzing investment opportunities, structuring our investments and monitoring our investments and portfolio companies on an ongoing basis. Garrison Capital Advisers was organized in November 2010 and is a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act. See “The Offering — Investment Advisory Agreement” for a discussion of the fees that will be payable by us to our investment adviser.

Garrison Capital Advisers is an affiliate of Garrison Investment Group. Garrison Capital Advisers has entered into a staffing agreement, or the Staffing Agreement, with Garrison Investment Group under which Garrison Investment Group has agreed to make experienced investment professionals available to Garrison Capital Advisers and to provide access to the senior investment personnel of Garrison Investment Group. We believe that the Staffing Agreement will provide our investment adviser with access to investment opportunities, which we refer to in the aggregate as deal flow, generated by Garrison Investment Group in the ordinary course of its business and commits the members of Garrison Investment Group’s investment committee to serve as members of our investment committee. Garrison Investment Group has conducted due diligence on more than 500 middle-market companies since July 2007.

Garrison Investment Group

Garrison Investment Group is an alternative investment and asset management firm founded in March 2007 by Steven Stuart and Joseph Tansey. As of December 31, 2012, Garrison Investment Group had approximately $3.1 billion of committed and invested capital under management and a team of 62 employees, including 36 investment professionals. Garrison Investment Group is headquartered in New York, New York. Garrison Investment Group invests opportunistically in the debt of middle-market companies, primarily in the areas of corporate finance, real estate finance and structured finance.

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Since the formation of Garrison Investment Group, Messrs. Stuart and Tansey together with their team of investment professionals, including Rafael Astruc, Brian Chase, Terence Moore and Mitch Drucker, have been investors and lenders to middle-market companies. These investment professionals have significant experience investing in a broad range of industries and types of debt over the course of several economic cycles.

Before joining Garrison Investment Group, Messrs. Stuart and Tansey were Managing Directors at Fortress Investment Group LLC, or Fortress, and were also partners of the Drawbridge Special Opportunities Fund, or Drawbridge, one of Fortress’ hybrid hedge funds, from its inception in August 2002 to March 2007. Drawbridge focused primarily on investments in opportunistic debt and equity securities and asset-based transactions. The responsibilities of these individuals included sourcing, evaluating, structuring, managing and monitoring corporate, structured finance and real estate investments, including both debt and equity. Messrs. Stuart and Tansey have 26 and 17 years of investment experience, respectively.

Market Opportunity

We pursue an investment strategy focused on investing in first lien, second lien, unitranche and mezzanine loans of, and, to a lesser extent, warrants and minority positions in equity securities in, U.S. middle-market companies. We find investing in middle-market companies attractive for the following reasons:

Reduced Competition.  We believe that, since 2007, dislocations in the corporate financing markets have reduced the amount of credit available to middle-market companies. In particular, we believe that much of the traditional lending community for lower middle-market companies, such as commercial/regional banks and commercial finance companies, have contracted their origination activities in the wake of these credit dislocations or focused on more liquid asset classes. When implementation begins later this year, Basel III, published by the Basel Committee on Banking Supervision, is expected to limit the ability of commercial banking institutions to hold non-investment grade leveraged loans on their balance sheets.

Attractive Relative Value Proposition.  We believe that directly originated middle-market loans often exhibit superior default and loss characteristics to syndicated loans, which are often structured with higher levels of debt and a lower percentage of contributed equity. Meanwhile, reduced access to, and availability of, credit typically increases the interest rates, or pricing, of loans made to U.S. middle-market borrowers, thereby creating an attractive risk-return dynamic for lenders.

Conservative Capital Structure and Increased Percentage of Equity Contributed.  Since the 2007 downturn, we believe that lenders have generally required borrowers to hold more equity as a percentage of their total capitalization and less senior and total leverage than was customary in the years leading up to the credit crisis, resulting in a greater amount of equity to protect lenders against future economic downturns. Lower leverage levels in mergers and acquisitions executed in the middle market suggest that middle-market companies should have more cash flows available to them to service their debt.

Long-Term Capital Solutions.  We believe that many middle-market companies seek to execute transactions with permanent capital vehicles, such as us, rather than execute high-yield bond transactions or borrow capital from hedge funds and other non-permanent vehicles.

We believe these factors, taken together, should increase lending opportunities for us.

Competitive Strengths

Experienced Management Team.  We are managed by our investment adviser, which has access through the Staffing Agreement to the resources and expertise of the investment professionals at Garrison Investment Group. Garrison Investment Group is led by Messrs. Stuart and Tansey. Garrison Investment Group’s investment professionals have substantial experience in identifying and executing financing transactions across a broad range of industries and types of financings and have developed related proprietary sourcing and servicing channels. Our seven member investment committee has combined investment experience of more than 150 years.

Access to Deal Flow.  Through the Staffing Agreement, our investment adviser has access to extensive contacts throughout the middle-market, which it utilizes to source and originate loans. The investment professionals of Garrison Investment Group maintain direct dialogue with their contacts at financial sponsors,

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banks, corporate advisory firms, crisis managers, industry consultants, attorneys, investment banks, middle-market companies, other “club” investors and other potential sources of lending opportunities. Garrison Investment Group’s senior professionals have cultivated relationships with other middle-market lending platforms that we believe will provide us with an additional source of deal flow.

Disciplined Investment and Underwriting Process.  Our investment adviser utilizes the established investment processes developed by Garrison Investment Group to analyze investment opportunities, including structuring loans with appropriate covenants and pricing loans based on its knowledge of the middle market and on its rigorous underwriting standards. Our investment adviser focuses on capital preservation by extending loans to portfolio companies with assets that it believes will retain sufficient value to repay us even in depressed markets or under liquidation scenarios.

Active Asset Management Approach.  Our investment adviser employs a rigorous credit monitoring system for our portfolio, which enhances the ability of our investment adviser to manage any problems and assist borrowers before operating issues result in financial deterioration. In addition, this process enables our investment adviser to identify credit and market trends, thereby allowing us to modify underwriting terms for new loans before other lenders have identified such trends. In the event of restructurings, we expect that our investment adviser will manage syndicates of lenders, creditor committees and other creditors and advisors to protect our position.

Investment Strategy

We seek to create a broad portfolio consisting of investments generally in the range of $10 million to $25 million primarily in debt securities and loans of U.S. based middle-market companies. The companies to which we extend credit typically are moderately leveraged, and, in most cases, do not have their loans rated by national rating agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade. In addition, our investments typically range in maturity from one to six years and that our overall portfolio will have a weighted average life of approximately five years. However, we may make investments in securities with any maturity or duration.

We invest opportunistically in middle-market loans that we believe have attractive risk adjusted returns. We will also, to a lesser extent, make select equity investments in non-investment grade companies. We expect the majority of our focus to generally be centered upon traditional direct lending but at times will seek to enhance returns by purchasing loans in the secondary market, which purchases we refer to as capital markets activities, and extending credit for certain restructuring of financially troubled companies, which we refer to as special situations. We organize these lending opportunities in three categories.

Traditional Direct Lending.  We focus on direct origination of first lien senior secured loans, second lien senior secured loans and unitranche loans as well as select mezzanine loans. With respect to these loans, we identify lending opportunities through the extensive origination network to which we have access and serve as either sole lender or as a partner with like minded creditors. We expect that we will typically extend first and second lien secured term loans, the proceeds of which may be used to refinance existing indebtedness or support acquisitions, growth initiatives, general corporate liquidity or operational turnarounds.

Capital Markets Activities.  We may also acquire loans in the secondary market, generally at favorable discounts or seek to refinance outstanding loans through anchoring or co-anchoring a new issuance of debt. We believe the experience of the investment professionals to whom our investment adviser has access will allow us to react quickly in executing acquisitions of loans in the secondary market on favorable terms and permit us to refinance loans on a streamlined basis. We acquired investments in 40 of our 49 portfolio companies as of December 31, 2012 in the secondary market, but we expect the portion of our investments sourced in this manner to decline over time.

Special Situations.  We may also extend credit for out-of-court restructurings, rescue financings, debtor-in-possession financings and acquisition financings. We expect that, in extending credit to special situations borrowers, we will seek to structure our investments to remain high in borrower’s capital structure, generate returns through the duration of the loan and obtain call protection or opportunities for enhanced returns through equity participation.

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Organizational Structure

The following shows a simplified organizational chart reflecting our relationship with our investment adviser and administrator and our ownership interests in GF 2012-1 and Garrison Funding 2012-1 Manager LLC, our wholly-owned direct subsidiary, or GF 2012-1 Manager, immediately following the refinancing of the Debt Securitization, as defined below, on May 21, 2012 and as of the date of this prospectus:

[GRAPHIC MISSING]

Formation Transactions

Our Formation.  We were formed in November 2010 to invest primarily in (1) first lien senior secured loans, (2) second lien senior secured loans, (3) “one-stop” senior secured or “unitranche” loans, (4) subordinated or mezzanine loans and (5) to a lesser extent, selected equity co-investments and warrants in middle-market companies.

On November 5, 2010, GF 2010-1 completed a $300 million debt securitization, or Debt Securitization. The transaction was executed through a private placement of: (1) $189.5 million of Aaa/AAA Class A Notes, or the Class A Notes, which bore interest at the three-month London Interbank Offered Rate, or LIBOR, plus 2.40%; (2) $12.0 million of Aa2/AA Class B Notes, or the Class B Notes, which bore interest at the three-month LIBOR plus 3.75%; and (3) $18.0 million of A2/A Class C Notes, or the Class C Notes, which bore interest at the three-month LIBOR plus 4.75%; and (4) $80.5 million of subordinated notes, which did not have a stated interest rate. All of the classes of notes were scheduled to mature on November 20, 2017. We refer to the Class A Notes, the Class B Notes and the Class C Notes, collectively, as the Secured Notes and the subordinated notes together with the residual equity interests in GF 2010-1 as the Subordinated Notes. The Subordinated Notes represent the residual interest in GF 2010-1. Immediately following completion of the Debt Securitization, Garrison Capital CLO Ltd. owned all of the Subordinated Notes.

In December 2010 we completed an $80 million private placement, the proceeds of which were used to invest in U.S. middle-market companies in accordance with our investment strategy. Subsequently, certain open-ended funds affiliated with our investment adviser contributed 100% of the stock of Garrison Capital CLO Ltd. to us as of December 31, 2010 in exchange for $80.6 million in fair value of limited liability company units, or units, in Garrison Capital LLC. An independent third-party valuation firm was engaged to provide positive assurance regarding the fair value of the Subordinated Notes that were contributed to us as of the date of such contribution. As a result of these contributions, we indirectly held through our ownership of the capital stock of Garrison Capital CLO Ltd. all of the Subordinated Notes in GF 2010-1.

Refinancing of Debt Securitization.   On May 21, 2012, GF 2012-1, our wholly-owned indirect subsidiary formed on April 19, 2012, entered into a $150 million credit facility, or, as amended on June 18, 2012 and August 6, 2012, the Credit Facility, with the lenders party thereto, Natixis, New York Branch, as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent and custodian.

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Under the Credit Facility, the lenders have agreed to extend credit to GF 2012-1 in an aggregate principal amount of $150 million, consisting of $125 million of term loans, or the Class A-T Loans, and $25 million of revolving loans, or the Class A-R Loans. The ability of GF 2012-1 to draw under the revolving loans terminates on November 21, 2013, and the Credit Facility matures on February 21, 2020. The Credit Facility is secured by all of the assets held by GF 2012-1.

Under the Credit Facility, GF 2012-1 has a reinvestment period through November 21, 2013 and GF 2012-1 may directly originate new loans, which was previously prohibited in GF 2010-1 under the Debt Securitization.

Through February 20, 2013, Class A-T Loans and Class A-R Loans under the Credit Facility will bear interest at an annual rate equal to a cost of funds rate plus 2.75% or 3.25%, respectively, depending on the credit quality of the loans securing the Credit Facility. The cost of funds rate is capped at LIBOR plus 0.50%.

Regardless of the credit quality of the loans securing the Credit Facility, from February 20, 2013 to November 21, 2013, the Credit Facility bears interest at an annual rate equal to a cost of funds rate plus 3.25%. In addition, the Class A-R Loans under the Credit Facility bear a 1.25% annual fee on any undrawn portion of the loans.

On November 21, 2013, the Credit Facility will become subject to a margin rate increase of 0.25%. From November 21, 2013 to February 21, 2020, the Credit Facility is subject to further incremental margin rate increases of 0.25% on each six-month anniversary date, but in no event will the margin rate exceed 4.50%. Under certain circumstances, the application of the margin rate increase may be accelerated. See “Risk Factors — Risks Relating to our Business and Structure — We depend upon key personnel of Garrison Investment Group and its affiliates.”

We used the proceeds from the initial draw of $125 million under the Credit Facility together with cash on hand to redeem the Secured Notes and the Subordinated Notes in accordance with the indenture governing such notes. In connection with the execution of the documents governing the Credit Facility, a majority of the loans and other assets held by GF 2010-1 pursuant to the Debt Securitization were sold or contributed to GF 2012-1. Following the closing of the Credit Facility, no assets remained in Garrison Capital CLO Ltd. and GF 2010-1, and we have commenced dissolution procedures for Garrison Capital CLO Ltd. and expect to dissolve GF 2010-1 as soon as practicable.

GF 2012-1 Manager, our direct subsidiary and the owner of 100% of the limited liability company interests of GF 2012-1, serves as collateral manager to GF 2012-1 and has entered into a sub-collateral management agreement with Garrison Capital Advisers. Garrison Capital Advisers is not entitled to receive a fee under the sub-collateral management agreement.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Credit Facility.”

BDC Conversion.  On October 9, 2012, Garrison Capital LLC converted into a Delaware corporation, Garrison Capital Inc. As part of this conversion, all of the outstanding units in Garrison Capital LLC were converted into an aggregate of 10,707,221 shares of common stock in Garrison Capital Inc. Of the 10,707,221 shares issued in the BDC Conversion, 5,440,554 shares were issued to eight funds affiliated with our investment adviser in exchange for their units in Garrison Capital LLC.

Since the BDC Conversion and our election to be treated as a business development company, we are subject to restrictions on our ability to acquire certain types of assets. See “Operating and Regulatory Structure.”

Recent Developments

Reverse Stock Split.  On February 25, 2013, we declared a reverse stock split, or the Reverse Stock Split, which resulted in the conversion of one share of common stock into 0.9805106 shares of common stock. All amounts related to shares/units and share/unit price have been retroactively restated. As a result, the 10,707,221 shares of common stock issued in the BDC Conversion have been retroactively restated to 10,498,544 shares and, of those shares, 5,334,521 shares were issued to and are held by eight funds affiliated with our investment adviser in exchange for their units in Garrison Capital LLC.

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Distribution-in-Kind.  On February 25, 2013, our board of directors approved a distribution-in-kind, or the Distribution-in-Kind, in the amount of approximately $10.0 million or $0.95 per share. Assets distributed were Next Generation Vending, LLC, Priority Revolving Loan in the amount of $2.0 million, Next Generation Vending, LLC, Revolver in the amount of approximately $0.8 million, Next Generation Vending, LLC, Term Loan in the amount of approximately $6.8 million and approximately $0.4 million of accrued interest, which represents the fair value and accrued interest of these investments as of December 31, 2012.

Distribution.  On February 25, 2013, our board of directors approved a distribution, or the Distribution, in the amount of $2.4 million or $0.23 a share, which was paid on March 13, 2013 to stockholders of record as of February 25, 2013.

Operating and Regulatory Structure

Our investment activities are managed by Garrison Capital Advisers and supervised by our board of directors, a majority of whom are independent of Garrison Capital, Garrison Capital Advisers and their respective affiliates.

As a business development company, we are required to comply with certain regulatory requirements. For example, we note that any affiliated investment vehicle formed in the future and managed by our investment adviser may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. If our investment adviser undertakes to manage a new fund in the future, we will not invest in any portfolio company in which that fund has a pre-existing investment, although we may co-invest with such affiliate on a concurrent basis, subject to compliance with existing regulatory guidance, applicable regulations, our allocation procedures and/or exemptive relief issued by the SEC. See “Regulation.”

Also, as a business development company, we are generally prohibited from acquiring assets other than qualifying assets unless, after giving effect to any acquisition, at least 70% of our total assets are qualifying assets. Qualifying assets generally include securities of eligible portfolio companies, cash, cash equivalents, U.S. government securities and high-quality debt instruments maturing in one year or less from the time of investment. Under the rules of the 1940 Act, “eligible portfolio companies” include (1) private U.S. operating companies, (2) public U.S. operating companies whose securities are not listed on a national securities exchange (e.g., the New York Stock Exchange) or registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and (3) public U.S. operating companies having a market capitalization of less than $250 million. Public U.S. operating companies whose securities are quoted on the over-the-counter bulletin board and through Pink Sheets LLC are not listed on a national securities exchange and therefore are eligible portfolio companies. See “Regulation.”

We intend to elect to be treated for U.S. federal income tax purposes as a RIC under the Code for the period from our corporate conversion on October 9, 2012 through December 31, 2012 and to qualify annually thereafter. In order to be treated as a RIC, we must satisfy certain source of income, asset diversification and distribution requirements. See “Tax Matters.”

Following completion of this offering, an affiliate of Garrison Investment Group may apply for a license to form a Small Business Investment Company, or SBIC. If such an application were made and approved and the Small Business Administration, or SBA, so permits, we anticipate that the SBIC license would be transferred to a wholly-owned subsidiary of ours that would be formed just prior to such transfer. Following such transfer, the SBIC subsidiary would be allowed to issue SBA-guaranteed debentures, subject to the required capitalization of the SBIC subsidiary. SBA-guaranteed debentures carry long-term fixed interest rates that are generally lower than rates on comparable bank and other debt. See “Regulation — Small Business Investment Company Regulations.” We expect that any SBIC subsidiary would engage in an investment strategy substantially similar to ours. We cannot assure you that we or any affiliate or Garrison Investment Group will apply for an SBIC license or that any such application would be approved.

In addition, in the future, we may from time to time securitize loans to generate cash for funding new investments. To securitize loans, we would expect to create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. We would then expect to sell interests in the subsidiary on a non-recourse basis to

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purchasers who we would expect to be willing to accept a lower interest rate to invest in investment grade loan pools, and we would retain a portion of the equity in any such securitized pool of loans.

Use of Leverage

As a business development company, we are permitted under the 1940 Act to borrow funds to finance a portion of our investments. As of December 31, 2012, we had $125.0 million of debt outstanding under the Credit Facility. We consolidate our financial results with those of GF 2012-1 and GF 2012-1 Manager for financial reporting purposes.

The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in our securities. In the future, we may borrow from, and issue senior securities, to banks, insurance companies and other lenders. If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our equity stake in a leveraged investment. See “Risk Factors — Risks Relating to our Business and Structure — We intend to continue to finance our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.”

We measure our compliance with the leverage test applicable to business development companies under the 1940 Act on a consolidated basis. We expect to continue to use leverage to finance a portion of our investments in the future, consistent with the rules and regulations under the 1940 Act. We expect that we would incur such leverage through either a traditional credit facility or a securitization vehicle, rather than through an issuance of preferred stock.

Conflicts of Interest

We are prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our independent directors and, in some cases, of the Securities and Exchange Commission, or the SEC. Any person that owns, directly or indirectly, five percent or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any security from or to, or entering into certain “joint” transactions (which could include investments in the same portfolio company) with such affiliates, absent the prior approval of our independent directors. Our investment adviser and its affiliates, including persons that control, or are under common control with, us or our investment adviser, are also considered to be our affiliates under the 1940 Act. We are generally prohibited from buying or selling any security from or to, or entering into “joint” transactions with, such affiliates without prior approval of our independent directors or, if granted, exemptive relief from the SEC.

We may, however, invest alongside other clients of our investment adviser and its affiliates in certain circumstances where doing so is consistent with applicable law, SEC staff interpretations and/or exemptive relief issued by the SEC. For example, we may invest alongside such accounts consistent with guidance promulgated by the staff of the SEC permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that our investment adviser, acting on our behalf and on behalf of other clients, negotiates no term other than price. We may also invest alongside our investment adviser’s other clients as otherwise permissible under regulatory guidance, applicable regulations and the allocation policy of Garrison Investment Group and our investment adviser. Under this allocation policy, a fixed calculation, based on the type of investment, will be applied to determine the amount of each opportunity to be allocated to us. This allocation policy will be periodically approved by our investment adviser and reviewed by our independent directors. We expect that these determinations will be made similarly for other accounts sponsored or managed by our investment adviser and its affiliates. If sufficient securities or loan amounts are available to satisfy our and each such account’s proposed demand, we expect that the opportunity will be allocated in accordance with our investment adviser’s pre-transaction determination. Where there is an insufficient amount of an investment opportunity to satisfy us and other accounts sponsored or managed by our investment adviser or its affiliates, the allocation policy further provides that allocations among us and such other accounts will generally be made pro rata based on the amount that each such party would have invested if sufficient securities or loan amounts were available. However, we cannot assure you that investment opportunities will be allocated to us fairly or equitably in the short-term or over time.

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We, Garrison Investment Group and our investment adviser have submitted an exemptive relief application to the SEC to permit greater flexibility to negotiate the terms of co-investments if our board of directors determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by our investment adviser or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions, as well as regulatory requirements and other relevant factors. See “Certain Relationships.” We cannot assure you, however, that we will obtain such approvals or exemptive relief or develop opportunities that comply with such limitations.

In situations where co-investment with other accounts managed by our investment adviser or its affiliates is not permitted or appropriate, Garrison Investment Group and our investment adviser will need to decide which client will proceed with the investment. Our investment adviser’s allocation policy provides, in such circumstances, for investments to be allocated on a rotational basis to assure that all clients of our investment adviser and its affiliates have fair and equitable access to such investment opportunities. Moreover, except in certain circumstances, we will be unable to invest in any issuer in which a fund managed by our investment adviser or its affiliates has previously invested. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates. These restrictions may limit the scope of investment opportunities that would otherwise be available to us.

See “Risk Factors — Risks Relating to our Business and Structure — There are significant potential conflicts of interest that could affect our investment returns” and “Certain Relationships.”



 

Company Information

Our principal executive offices are located at 1350 Avenue of the Americas, New York, New York 10019, telephone number (212) 372-9500. Our corporate website is located at www.garrisoncapitalbdc.com. Information on our website is not incorporated into or a part of this prospectus.

Summary Risk Factors

Investing in our Company involves a high degree of risk and you could lose all or part of your investment. Certain of these risks are referenced below.

We have a limited operating history.
The lack of experience of our investment adviser in operating under the constraints imposed on us as a business development company and RIC may hinder the achievement of our investment objectives.
Regulations governing our issuance of senior securities and other aspects of our operation as a business development company will affect our ability to, and the way in which we, raise additional debt or equity capital.
We intend to continue to finance our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.
We are subject to risks associated with the Credit Facility.
There are significant potential conflicts of interest that could affect our investment returns.
We have not yet identified the investments we will acquire using the proceeds of this offering.
We are subject to risks associated with investments in middle-market companies.
We may expose ourselves to risks if we engage in hedging transactions.
Investing in our shares may involve an above average degree of risk and is intended for long-term investors.

See “Risk Factors” beginning on page 20 for more information on these and other risks you should carefully consider before deciding to invest in shares of our common stock.

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THE OFFERING

Common Stock Offered by Us    
    5,333,334 shares, excluding 800,000 shares of common stock issuable pursuant to the over-allotment option granted to the underwriters.
Concurrent Private Placement    
    Immediately prior to the closing of this offering, we expect to sell 126,901 shares of common stock to our directors, officers and the employees and affiliates of our investment adviser and its affiliates at the initial public offering price per share in a private placement. We will receive the full proceeds of this private placement, and no underwriting discounts or commissions will be paid in respect of these shares. We refer to this private placement as the Concurrent Private Placement.
Common Stock to be Outstanding After this Offering    
    15,958,779 shares (including 126,901 shares sold in the Concurrent Private Placement), excluding 800,000 shares of common stock issuable pursuant to the over-allotment option granted to the underwriters.
Use of Proceeds    
    We calculate that the net proceeds we receive from the sale of shares of our common stock in this offering and the Concurrent Private Placement will be approximately $75.7 million (or approximately $86.9 million if the underwriters fully exercise their over-allotment option), assuming an initial public offering price of $15.00 per share, after deducting the underwriting discounts and commissions of approximately $5.6 million (or approximately $6.4 million if the underwriters fully exercise their over-allotment option) and estimated offering expenses of approximately $0.6 million incurred by us. We plan to invest the net proceeds of this offering and the Concurrent Private Placement in accordance with our investment objective and the strategies described in this prospectus and for general corporate purposes, including payment of operating expenses.
    We anticipate that substantially all of the net proceeds of this offering and the Concurrent Private Placement will be invested within six to 12 months of the closing of this offering, in accordance with our investment objective and strategies, depending on the availability of appropriate investment opportunities and market conditions. Pending such investments, we intend to invest the remaining net proceeds of this offering and the Concurrent Private Placement primarily in cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the date of investment. These securities may have lower yields than our other investments and, accordingly, may result in lower distributions, if any, during such period. See “Use of Proceeds.”
Proposed NASDAQ Global Select Market symbol    
    “GARS”

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Trading at a Discount    
    Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their net asset value. The possibility that our shares may trade at a discount to our net asset value is separate and distinct from the risk that our net asset value per share may decline.
Distributions    
    We intend to distribute quarterly distributions to our stockholders out of assets legally available for distribution. Our quarterly distributions, if any, will be determined by our board of directors.
    We expect quarterly distributions to be paid from income generated by interest and dividend income earned on our portfolio although they may also include a return of capital. The specific tax characteristics of our distributions each year will be reported to stockholders after the end of the calendar year. We do not currently intend that our quarterly distributions will include a return of capital.
    We intend to declare a distribution of approximately $0.35 per share, payable at or near the end of the second calendar quarter of 2013. This distribution is contingent upon the completion of our initial public offering during the first calendar quarter of 2013. We anticipate that this distribution, if made, will be paid from income primarily generated by interest and dividend income earned on our investment portfolio. No assurance can be given that we will be able to declare such an initial distribution or distributions in future periods, and our ability to declare and pay distributions will be subject to a number of factors, including our results of operations. See “Distributions.”
Investment Advisory Agreement    
    Under an investment advisory agreement with Garrison Capital Advisers, or the Investment Advisory Agreement, we pay Garrison Capital Advisers a base management fee and an incentive fee for its services.
    Management Fee
The base management fee is calculated at an annual rate of 1.75% of our gross assets, excluding cash and cash equivalents but including assets purchased with borrowed funds. Our investment adviser has agreed to waive its base management fee from the date of this prospectus through September 30, 2013. In addition, our investment adviser waived certain portions of the base management fee for periods from October 9, 2012 through the date of this prospectus. For purposes of the Investment Advisory Agreement, cash equivalents means U.S. government securities and commercial paper maturing within 270 days of purchase.
    Income-Based Incentive Fee
The incentive fee consists of two components that are independent of each other (except as provided in the

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    Incentive Fee Cap and Deferral Mechanism described below), with the result that one component may be payable even if the other is not. The first component of the incentive fee, which is income-based and payable quarterly in arrears, equals 20% of the amount, if any, that our “Pre-Incentive Fee Net Investment Income” exceeds a 2.00% quarterly (8.00% annualized) Hurdle Rate (as defined under “Fees and Expenses”) subject to a “catch-up” feature and the Incentive Fee Cap and Deferral Mechanism described below. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, distribution income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense and any distributions 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 a payment-in kind, or PIK, interest and zero coupon securities), accrued income that we have not yet received in cash. “Pre-Incentive Fee Net Investment Income” does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. The portion of such incentive fee that is attributable to deferred interest (such as PIK interest or original issue discount) is paid to our investment adviser, together with any other interest accrued on the loan from the date of deferral to the date of payment, only if and to the extent we actually receive such interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write-off or similar treatment of the investment giving rise to any deferred interest accrual.
    Capital Gains-Based Incentive Fee
The second component of the incentive fee, which is capital gains-based, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and equals 20% of our cumulative aggregate realized capital gains through the end of each year, computed net of our aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of such calendar year, less the aggregate amount of any previously paid capital gains incentive fees and subject to the Incentive Fee Cap and Deferral Mechanism. The second component of the incentive fee is not subject to any minimum return to

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    stockholders. With respect to 2012, the period for such calculation commenced on October 9, 2012 and ended on December 31, 2012.
    Incentive Fee Cap and Deferral Mechanism
We have structured the calculation of these incentive fees to include a fee limitation such that, following the pricing of this offering, no incentive fee will be paid to our investment adviser for any fiscal quarter if, after such payment, the cumulative incentive fees paid to our investment adviser for the period that includes such fiscal quarter and the 11 full preceding fiscal quarters, which we refer to in this prospectus as the Incentive Fee Look-back Period, would exceed 20.0% of our Cumulative Pre-Incentive Fee Net Return (as defined below) during the applicable Incentive Fee Look-back Period.
    The Incentive Fee Look-back Period will commence on April 1, 2013. Prior to April 1, 2016, the Incentive Fee Look-back Period will consist of fewer than 12 full fiscal quarters.
    In this prospectus, Cumulative Pre-Incentive Fee Net Return refers to the sum of (a) Pre-Incentive Fee Net Investment Income for each quarter during the Incentive Fee Look-back Period and (b) the sum of cumulative realized capital gains, cumulative realized capital losses, cumulative unrealized capital depreciation and cumulative unrealized capital appreciation during the applicable Incentive Fee Look-back Period.
    See “The Adviser and the Administrator — Investment Advisory Agreement — Incentive Fee.”
    Waiver of Certain Fees
Our investment adviser also has agreed to waive its incentive fee, if any, from the date of this prospectus through September 30, 2013. With respect to the capital gains-based component of the incentive fee, this waiver applies only to realized capital gains on assets sold between the date of this prospectus and September 30, 2013. In addition, our investment adviser waived its incentive fee for periods from October 9, 2012 through the date of this prospectus. See “The Adviser and the Administrator — Investment Advisory Agreement — Management Fee.”
Taxation    
    We intend to elect to be treated for U.S. federal income tax purposes as a RIC for the period from October 9, 2012 through December 31, 2012 and to qualify annually thereafter. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as distributions. To obtain RIC status and the associated tax benefits, we must meet specified source-of-income and asset diversification requirements and

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    distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of assets legally available for distribution. See “Distributions” and “Tax Matters.”
Leverage    
    As a business development company, we are permitted under the 1940 Act to borrow funds to finance a portion of our investments. We consolidate our financial results with those of GF 2012-1 and GF 2012-1 Manager for financial reporting purposes and measure our compliance with the leverage test applicable to business development companies under the 1940 Act on a consolidated basis. As of December 31, 2012, we had $125.0 million of debt outstanding under the Credit Facility. “Risk Factors — Risks Relating to our Business and Structure — We intend to continue to finance our investments with borrowed money, which will magnify the potential for gain or loss or amounts invested and may increase the risk of investing in us and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Credit Facility.”
Dividend Reinvestment Plan    
    We have adopted an “opt out” dividend reinvestment plan for our stockholders. As a result, if we declare a dividend or other distribution, then stockholders’ cash distributions will be reinvested automatically in additional shares of our common stock, unless our stockholders specifically “opt out” of the dividend reinvestment plan, so as to receive cash dividends or other distributions. If a stockholder specifically “opts-out” of the dividend reinvestment plan, that stockholder will receive cash dividends or other distributions. Stockholders who receive distributions in the form of shares of common stock will be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. See “Dividend Reinvestment Plan.”
Administration Agreement    
    We entered into an administration agreement, or the Administration Agreement, on October 9, 2012 with Garrison Capital Administrator. Under this agreement, we reimburse Garrison Capital Administrator for our allocable portion of overhead and other expenses incurred by Garrison Capital Administrator in performing its obligations, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services, as well as providing us with other administrative services. To the extent that our administrator outsources any of its functions, we pay the fees associated with such functions on a direct basis without any profit to Garrison Capital Administrator. See “The Adviser and the Administrator — Administration Agreement.”
License Arrangements    
    We have entered into a license agreement with Garrison Investment Group LP, which we refer to as the “License Agreement,” pursuant to which Garrison Investment

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    Group LP has agreed to grant us a non-exclusive license to use the name “Garrison.” See “The Adviser and the Administrator — License Agreement.”
Anti-Takeover Provisions    
    Our certificate of incorporation and bylaws, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from making an acquisition proposal for us. These anti-takeover provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the market price for our common stock. See “Description of Shares.” In addition, our board of directors is divided into three classes of directors serving staggered three-year terms. This structure is intended to increase the likelihood of continuity of management, which may be necessary for us to realize the full value of our investments. A staggered board of directors also may serve to deter hostile takeovers or proxy contests, as may certain other measures adopted by us. See “Description of Shares.”
Custodian and Transfer Agent    
    Deutsche Bank Trust Company Americas serves as our custodian, and American Stock Transfer & Trust Company, LLC will serve as our transfer and dividend paying agent and registrar. See “Custodian, Transfer Agent, Dividend Paying Agent and Registrar.”
Available Information    
    We have filed with the SEC a registration statement on Form N-2 under the Securities Act of 1933, as amended, or the Securities Act, which contains additional information about us and the shares of our common stock being offered by this prospectus. After completion of this offering, we will be required to file periodic reports, proxy statements and other information with the SEC. This information will be available at the SEC’s public reference room in Washington, D.C. and on the SEC’s website at http://www.sec.gov.
    We maintain a website at http://www.garrisoncapitalbdc.com and intend to make all of our annual, quarterly and current reports, proxy statements and other information available, free of charge, on or through our website. You may also obtain such information by contacting us, in writing at: 1350 Avenue of the Americas, New York, New York 10019, Attention: Investor Relations, or by telephone at (212) 372-9500.

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FEES AND EXPENSES

The following table is intended to assist you in understanding the costs and expenses that an investor in this offering will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “us” or “Garrison Capital,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Garrison Capital.

 
Stockholder transaction expenses:
        
Sales load (as a percentage of offering price)     7.00 %(1) 
Offering expenses (as a percentage of offering price)     0.75 %(2) 
Dividend reinvestment plan fees     0.0 %(3) 
Total stockholder transaction expenses (as a percentage of offering price)     7.75 % 
Annual expenses (as a percentage of net assets attributable to common stock):
        
Base management fees     2.79 %(4) 
Incentive fees payable under Investment Advisory Agreement (20% of Pre-Incentive Fee Net Investment Income and 20% of realized capital gains)     0.0 %(5) 
Interest payments on borrowed funds     3.26 %(6) 
Other expenses     1.16 %(7) 
Total annual expenses     7.21%  

Example

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses remain at the levels set forth in the table above.

       
  1 year   3 years   5 years   10 years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return   $ 143     $ 271     $ 392     $ 674  

(1) The underwriting discount and commission with respect to shares sold in this offering, which is a one-time fee paid to the underwriters, is the only sales load paid in connection with this offering.
(2) Amount reflects estimated offering expenses of approximately $0.6 million.
(3) The expenses of the dividend reinvestment plan, which consist primarily of the expenses of American Stock Transfer & Trust Company, LLC, are included in “other expenses.” See “Dividend Reinvestment Plan.”
(4) Our base management fee under the Investment Advisory Agreement is based on our gross assets, excluding cash and cash equivalents but including assets purchased with borrowed funds and is payable quarterly in arrears. Our investment adviser has agreed to waive its base management fee from the date of this prospectus through September 30, 2013. See “The Adviser and the Administrator — Investment Advisory Agreement — Management Fee” and footnote 5 below. The amount reflected in the table above does not give effect to this base management fee waiver or the waiver of certain portions of the base management fee for periods from October 9, 2012 through the date of this prospectus. The management fee referenced in the table above is based on $125.0 million of indebtedness expected to be outstanding immediately after the closing of this offering and the Concurrent Private Placement and assumes that there are no cash and cash equivalents and all cash and cash equivalents are fully invested. The SEC requires that the “Management fees” percentage be calculated as a percentage of net assets attributable to common stockholders, rather than total assets, including assets that have been funded with borrowed monies because common stockholders bear all of this cost. The estimate of our base management fees

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assumes net assets of $239.4 million and leverage of $125.0 million, which reflects our net assets and leverage pro forma as of December 31, 2012, after giving effect to this offering and the Concurrent Private Placement.
(5) The incentive fee consists of two components that are independent of each other (except as provided in the Incentive Fee Cap and Deferral Mechanism described below), with the result that one component may be payable even if the other is not.

We have structured the calculation of these incentive fees, which we refer to as the “Income and Capital Gain Incentive Fee Calculations,” to include a fee limitation such that, following the pricing of this offering, no incentive fee will be paid to our investment adviser for any fiscal quarter if, after such payment, the cumulative incentive fees paid to our investment adviser for the period that includes such fiscal quarter and the 11 full preceding fiscal quarters, which we refer to in this prospectus as the Incentive Fee Look-back Period, would exceed 20.0% of our Cumulative Pre-Incentive Fee Net Return during the applicable Incentive Fee Look-back Period. The Incentive Fee Look-back Period will commence on April 1, 2013. Prior to April 1, 2016, the Incentive Fee Look-back Period will consist of fewer than 12 full fiscal quarters. For example, at the end of our first full fiscal quarter after the offering, the Incentive Fee Look-back Period will consist of one full fiscal quarter and our Cumulative Pre-Incentive Fee Net Return will equal the sum of (a) the Pre-Incentive Fee Net Investment Income during that fiscal quarter and (b) our realized capital gains, realized capital losses, unrealized capital depreciation and unrealized capital appreciation, if any, during such fiscal quarter. Similarly, at the end of our second full fiscal quarter after the offering, the Incentive Fee Look-back Period will consist of two full fiscal quarters and our Cumulative Pre-Incentive Fee Net Return will equal the sum of (a) the Pre-Incentive Fee Net Investment Income during those two fiscal quarters and (b) our cumulative realized capital gains, cumulative realized capital losses, cumulative unrealized capital depreciation and cumulative unrealized capital appreciation, with “cumulative” meaning occurring during the two full fiscal quarters elapsed since April 1, 2013. The deferral component of the Incentive Fee Cap and Deferral Mechanism may cause incentive fees that accrued during one fiscal quarter to be paid to our investment adviser at any time during the 11 full fiscal quarters following such initial full fiscal quarter.

We accomplish this limitation by subjecting each incentive fee payable to a cap, which we refer to in this prospectus to as the Incentive Fee Cap. The Incentive Fee Cap in any quarter is equal to (a) 20.0% of Cumulative Pre-Incentive Fee Net Return during the Incentive Fee Look-back Period less (b) cumulative incentive fees of any kind paid to our investment adviser by us during the Incentive Fee Look-back Period. To the extent the Incentive Fee Cap is zero or a negative value in any quarter, we will pay no incentive fee to our investment adviser in that quarter. We will only pay incentive fees to the extent allowed by the Incentive Fee Cap and Deferral Mechanism. To the extent that the payment of incentive fees is limited by the Incentive Fee Cap and Deferral Mechanism, the payment of such fees may be deferred and paid up to three years after their date of deferment subject to applicable limitations included in the Investment Advisory Agreement.

The first component of the incentive fee, which is income-based and payable quarterly in arrears, equals 20% of the amount, if any, that our “Pre-Incentive Fee Net Investment Income” exceeds a 2.00% quarterly (8.00% annualized) hurdle rate (the “Hurdle Rate”), subject to a “catch-up” provision measured at the end of each calendar quarter and the Incentive Fee Cap and Deferral Mechanism described below. The operation of the first component of the incentive fee for each quarter is as follows:

no incentive fee is payable to our investment adviser in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the Hurdle Rate of 2.00% (8.00% annualized);
100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle Rate but is less than 2.50% in any calendar quarter (10.00% annualized) is payable to our investment adviser. We refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the Hurdle Rate but is

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less than 2.50%) as the “catch-up.” The effect of the “catch-up” provision is that, if such Pre-Incentive Fee Net Investment Income exceeds 2.50% in any calendar quarter, our investment adviser will receive 20% of such Pre-Incentive Fee Net Investment Income as if the Hurdle Rate did not apply; and
20% of the amount of such Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.50% in any calendar quarter (10.00% annualized) is payable to our investment adviser (once the Hurdle Rate is reached and the catch-up is achieved).

The portion of such incentive fee that is attributable to deferred interest (such as PIK interest or original issue discount) is paid to our investment adviser, together with any other interest accrued on the loan from the date of deferral to the date of payment, only if and to the extent we actually receive such interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write-off or similar treatment of the investment giving rise to any deferred interest accrual. Any reversal of such amounts would reduce net income for the quarter by the net amount of the reversal (after taking into account the reversal of incentive fees payable) and would result in a reduction and possibly elimination of the incentive fees for such quarter. For the avoidance of doubt, no interest is paid to Garrison Capital Advisers on amounts accrued and not paid in respect of deferred interest.

There is no accumulation of amounts on the Hurdle Rate from quarter to quarter and, accordingly, there is no clawback of amounts previously paid if subsequent quarters are below the quarterly Hurdle Rate and there is no delay of payment if prior quarters are below the quarterly Hurdle Rate. Since the Hurdle Rate is fixed, as interest rates rise, it will be easier for our investment adviser to surpass the Hurdle Rate and receive an incentive fee based on Pre-Incentive Fee Net Investment Income.

The second component of the incentive fee, which is capital gains-based, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), commencing on December 31, 2012, and equals 20% of our cumulative aggregate realized capital gains through the end of each year, computed net of our aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of such year, less the aggregate amount of any previously paid capital gains incentive fees and subject to the Incentive Fee Cap and Deferral Mechanism. The capital gains component of the incentive fee is not subject to any minimum return to stockholders. We will accrue the capital gains incentive fee if, on a cumulative basis, the sum of net realized gains/(losses) plus net unrealized appreciation/(depreciation) is positive. With respect to 2012, the period for such calculation commenced on October 9, 2012 and ended on December 31, 2012.

As described above, we will not pay any incentive fee at any time when, after such payment, the cumulative incentive fees paid to date would exceed 20% of the Cumulative Pre-Incentive Fee Net Return during the Incentive Fee Look-back Period.

Our investment adviser also has agreed to waive its incentive fee, if any, from the date of this prospectus through September 30, 2013. With respect to the capital gains-based component of the incentive fee, this waiver applies only to realized capital gains on assets sold between the date of this prospectus and September 30, 2013. In addition, our investment adviser waived its incentive fee for periods from October 9, 2012 through the date of this prospectus. For a more detailed discussion of the calculation of this fee, see “The Adviser and the Administrator — Investment Advisory Agreement — Management Fee.” The amount reflected in the table is based on amounts that would have been incurred during the year ended December 31, 2012, assuming the Investment Advisory Agreement had been in effect during the entire year and does not give effect to the incentive fee waiver.

(6) Our stockholders bear directly or indirectly the costs of borrowings under the Credit Facility and other debt instruments. The borrowing costs included in the table above are estimated based on our outstanding indebtedness as of December 31, 2012, which consisted of $125.0 million of indebtedness outstanding under the Credit Facility and the annual fee on the $25.0 million undrawn portion of the Class A-R Loans. At December 31, 2012, the weighted average interest rate of the Class A-T Loans and the Class A-R Loans was 3.25% and 1.25%, and the weighted average effective interest rate, including the effects of deferred debt issuance costs, was 3.53% and 2.50%, respectively. Deferred debt issuance costs include

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structuring and other facility fees, as well as legal fees, rating agency fees and all other direct and incremental costs associated with the Credit Facility, which costs we amortize fully over the life of the loans. For purposes of the example above, the deferred debt issuance costs are assumed to reoccur annually. We expect to continue to use leverage to finance a portion of our investments in the future, consistent with the rules and regulations under the 1940 Act.
(7) Includes our overhead expenses, including payments under the Administration Agreement, based on our allocable portion of overhead and other expenses incurred by Garrison Capital Administrator in performing its obligations under the Administration Agreement. See “The Adviser and the Administrator —  Administration Agreement.” “Other expenses” are estimated based on a proposed offering size of $80 million.

The example above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the Investment Advisory Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. This illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our expenses and returns to our investors would be higher. If the 5% annual return were derived entirely from capital gains, you would pay expenses on a $1,000 investment of $152, $294, $427 and $724 over periods of one year, three years, five years and ten years, respectively. In addition, the example assumes inclusion of a 7.00% sales load in the first year, offering expenses of approximately $0.6 million and reinvestment of all dividends and other distributions at net asset value. Participants in our dividend reinvestment plan will receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the distribution. See “Dividend Reinvestment Plan” for additional information regarding our dividend reinvestment plan.

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RISK FACTORS

Before you invest in our shares, you should be aware of various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide whether to make an investment in our common stock. The risks set out below are not the only risks we face. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Relating to our Business and Structure

We have a limited operating history.

We were organized in November 2010. We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially. We anticipate that it will take us six to 12 months following the date of this prospectus to invest substantially all of the net proceeds of this offering and the Concurrent Private Placement in accordance with our investment objective and strategies, in part because privately negotiated investments in illiquid securities or private middle-market companies require substantial due diligence and structuring. During this period, we intend to invest the remaining net proceeds of this offering and the Concurrent Private Placement in short-term investments, such as cash and cash equivalents. We expect we will earn yields substantially lower than the interest income that we anticipate receiving from investments in the future. As a result, any distributions we make during this period may be substantially lower than the distributions that we expect to pay when our portfolio is fully invested.

The lack of experience of our investment adviser in operating under the constraints imposed on us as a business development company and RIC may hinder the achievement of our investment objectives.

The 1940 Act and the Code impose numerous constraints on the operations of business development companies and RICs that do not apply to other investment vehicles managed by Garrison Investment Group and its affiliates. Business development companies are required, for example, to invest at least 70% of their total assets primarily in securities of U.S. private or thinly-traded public companies, cash, cash equivalents, U.S. government securities and other high-quality debt instruments that mature in one year or less from the date of investment. Subject to certain exceptions for follow-on investments and distressed companies, an investment in an issuer that has outstanding securities listed on a national securities exchange may be treated as qualifying assets only if such issuer has a common equity market capitalization that is less than $250 million at the time of such investment. Moreover, qualification for taxation as a RIC requires satisfaction of source-of-income, asset diversification and distribution requirements. Neither we nor our investment adviser has long term experience operating under these constraints, which may hinder our ability to take advantage of attractive investment opportunities and to achieve our investment objective. As a result, we cannot assure you that our investment adviser will be able to operate our business under these constraints. Any failure to do so could subject us to enforcement action by the SEC, cause us to fail to satisfy the requirements associated with RIC status, cause us to fail the 70% test described above or otherwise have a material adverse effect on our business, financial condition or results of operations.

We may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could be found to be in violation of the 1940 Act provisions applicable to business development companies and possibly lose our status as a business development company, which would have a material adverse effect on our business, financial condition and results of operations. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inopportune times in order to come into compliance with the 1940 Act. If we need to dispose of such investments quickly, it may be difficult to dispose of such investments on favorable terms, or at all. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss or otherwise for less than we could have received if we were able to sell them at a later time.

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We depend upon key personnel of Garrison Investment Group and its affiliates.

We are an externally managed business development company, and therefore we do not have any internal management capacity or employees. We depend on the diligence, skill and network of business contacts of our investment adviser to achieve our investment objective. We expect that our investment adviser will evaluate, negotiate, structure, close and monitor our investments in accordance with the terms of the Investment Advisory Agreement.

Our investment adviser is an affiliate of Garrison Investment Group and, in turn, depends upon access to the investment professionals and other resources of Garrison Investment Group and its affiliates to fulfill its obligations to us under the Investment Advisory Agreement. Garrison Capital Advisers also depends upon Garrison Investment Group to obtain access to deal flow generated by the professionals of Garrison Investment Group. Under the Staffing Agreement, Garrison Investment Group has agreed to provide our investment adviser with the resources necessary to fulfill these obligations. The Staffing Agreement provides that Garrison Investment Group will make available to Garrison Capital Advisers experienced investment professionals and access to the senior investment personnel of Garrison Investment Group for purposes of evaluating, negotiating, structuring, closing and monitoring our investments. We are not a party to the Staffing Agreement and cannot assure you that Garrison Investment Group will fulfill its obligations under the agreement. If Garrison Investment Group fails to perform, we cannot assure you that Garrison Capital Advisers will enforce the Staffing Agreement, that such agreement will not be terminated by either party or that we will continue to have access to the investment professionals of Garrison Investment Group and its affiliates or their market knowledge and deal flow.

We depend upon the senior professionals of Garrison Investment Group to maintain relationships with potential sources of lending opportunities, and we intend to rely to a significant extent upon these relationships to provide us with potential investment opportunities. We cannot assure you that these individuals will continue to indirectly provide investment advice to us. If these individuals, including the members of our investment committee, do not maintain their existing relationships with Garrison Investment Group, maintain existing relationships or develop new relationships with other sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom the senior professionals of Garrison Investment Group have relationships are not obligated to provide us with investment opportunities. Therefore, we cannot assure you that such relationships will generate investment opportunities for us.

In addition, under certain circumstances, including if both Steven Stuart and Joseph Tansey cease to be employees or act in a management capacity of Garrison Investment Group prior to November 21, 2013, our ability to reinvest under the Credit Facility will be terminated, the Credit Facility will be subject to a rate increase of 0.25% on the six-month anniversary of such event with incremental rate increases of 0.25% on each six-month anniversary of such date, and the lenders may terminate any undrawn amounts under the revolving loans and require GF 2012-1 to apply available amounts to the repayment of principal of the loans under the Credit Facility.

If our investment adviser is unable to manage our investments effectively, we may be unable to achieve our investment objective.

Our ability to achieve our investment objective depends on our ability to manage our business and to grow our business. This depends, in turn, on our investment adviser’s ability to identify, invest in and monitor companies that meet our investment criteria. This, in turn, depends on the ability of Garrison Investment Group to identify, invest in and monitor companies that meet our investment criteria. The achievement of our investment objectives on a cost-effective basis will depend upon our investment adviser’s execution of our investment process, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms. Our investment adviser has substantial responsibilities under the Investment Advisory Agreement. The personnel of Garrison Investment Group who are made available to our investment adviser under the Staffing Agreement are engaged in other business activities and may be called upon to provide managerial assistance to our portfolio companies, either of which could distract them, divert their time and attention such that they could no longer dedicate a significant portion of their time to our businesses or otherwise slow our rate of investment. Any failure to manage our business and our future growth effectively could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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The highly competitive market for investment opportunities in which we operate may limit our investment opportunities.

A number of entities continue to compete with us to make the types of investments that we plan to make in middle-market companies. We compete with public and private funds, including other business development companies, commercial and investment banks, commercial financing companies, and, to the extent they provide an alternative form of financing, private equity funds. Additionally, as competition for investment opportunities increases, alternative investment vehicles, such as hedge funds and collateralized loan obligations, may frequently invest in middle-market companies. As a result of these new entrants, competition for investment opportunities in middle-market companies has intensified, and we expect the trend to continue. Many of our potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we cannot assure you that we will be able to identify and make investments that are consistent with our investment objective.

Entrants in our industry compete on several factors, including price, flexibility in transaction structuring, customer service, reputation, market knowledge and speed in decision-making. We do not intend to compete primarily based on the interest rates we offer, and we believe that some of our competitors may make loans with interest rates that are lower than the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may reduce our net investment income and increase our risk of credit loss.

Current market conditions have materially and adversely affected debt and equity capital markets in the United States and around the world.

Since mid-2007, the global capital markets have experienced a period of disruption resulting in increasing spreads between the yields realized on riskier debt securities and those realized on securities perceived to be risk-free, such as U.S. treasuries, and a lack of liquidity in parts of the debt capital markets, significant write-offs in the financial services sector relating to subprime mortgages and the re-pricing of credit risk in the syndicated loan market. A prolonged period of market illiquidity or uncertainty regarding U.S. government deficit and spending levels, including negotiation of federal spending cuts, and implementation of global fiscal austerity measures may lead to a general decline in economic conditions, which could materially and adversely affect the broader financial and credit markets and reduce the availability of debt and equity capital for the market as a whole and to financial firms in particular. To the extent that we wish to incur indebtedness to fund new investments, to renew or refinance existing indebtedness, including the Credit Facility, which is currently scheduled to mature no later than February 21, 2020, to obtain other lines of credit or to issue senior securities during such unfavorable economic conditions, including future recessions, the debt capital that will be available to us, if at all, may be at a higher cost, and on terms and conditions that may be less favorable, than we expect, which could negatively affect our financial performance and results. In addition, although we may be able to refinance the Credit Facility through a collateralized loan obligation through Natixis, New York Branch, we cannot assure you that we will be able to complete such a transaction on satisfactory terms or at all. A prolonged period of market illiquidity may also cause us to reduce the volume of loans we originate and/or fund below historical levels and adversely affect the value of our portfolio investments, which could have a material and adverse effect on our business, financial condition, and results of operations.

We intend to elect to be treated as a RIC for the period from October 9, 2012 to December 31, 2012 and to qualify annually thereafter. If we are unable to qualify as a RIC, we will be subject to corporate-level income tax.

We intend to elect to be treated as a RIC under the Code for the period from October 9, 2012 to December 31, 2012 and to qualify annually thereafter. To qualify as a RIC under the Code and obtain RIC tax benefits, we must meet certain income source, asset diversification and annual distribution requirements. The annual distribution requirement for a RIC is satisfied if we distribute at least 90% of our ordinary income and

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realized net short term capital gains in excess of realized net short term capital losses, if any, to our stockholders on an annual basis. To the extent we use preferred stock or debt financing in the future, we may be subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under preferred stock or loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to qualify for RIC tax benefits. If we fail to make sufficient distributions, as a result of contractual restrictions or otherwise, we may fail to qualify for such benefits and, thus, may be subject to corporate-level income tax. To qualify as a RIC, we must also meet certain asset diversification requirements at the end of each calendar quarter. Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because we anticipate that most of our investments will be in the debt of relatively illiquid middle-market private companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If we fail to qualify for RIC tax benefits for any reason and remain or become subject to corporate-level income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders.

Our returns will be reduced by any U.S. corporate income tax that our subsidiaries pay.

Some of the income and fees that we recognize will not satisfy the 90% Income Test described in the “Tax Matters” section of this prospectus. In order to ensure that such income and fees do not disqualify us as a RIC for a failure to satisfy the 90% Income Test or for other reasons, we may be required to recognize certain income and fees indirectly through one or more entities treated as corporations for U.S. federal income tax purposes. Such corporations will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce our return on such income and fees. In addition, we may invest in partnerships, including qualified publicly traded partnerships and limited liability companies treated as partnerships for tax purposes, which may result in our being subject to state, local or foreign income, franchise or withholding liabilities.

Non-U.S. stockholders may be adversely affected by a scheduled change in U.S. federal income tax law.

Under a provision applicable for taxable years of RICs before January 1, 2014, properly designated dividends received by a Non-U.S. stockholder are generally exempt from U.S. federal withholding tax when they (a) are paid in respect of “qualified net interest income” (generally, U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we are at least a 10% stockholder, reduced by expenses that are allocable to such income), or (b) are paid in connection with “qualified short-term capital gains” (generally, the excess of net short-term capital gain over long-term capital loss for such taxable year). If such provision is not extended, non-U.S. stockholders will be subject to 30% U.S. federal withholding tax on distributions other than actual or deemed distributions of our net capital gains unless reduced under an applicable tax treaty. There can be no assurance that the provision will be extended, and we may also choose not to designate some or all of the distributions potentially eligible for the exemption.

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

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

As a result, we may have difficulty meeting the tax requirement to distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to obtain RIC tax benefits. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax benefits and thus be subject to corporate level income tax. See “Tax Matters — Taxation as a RIC.”

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Regulations governing our operation as a business development company, including those related to the issuance of senior securities, will affect our ability to, and the way in which we, raise additional debt or equity capital.

In the future, we expect that we will require a substantial amount of capital in addition to the proceeds of this offering and the Concurrent Private Placement. We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we will be permitted as a business development company to issue senior securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this ratio. If that happens, we may be required to sell a portion of our investments at a time when such sales may be disadvantageous and, depending on the nature of our leverage, repay a portion of our indebtedness. We do not currently anticipate issuing debt securities or preferred stock during the 12 months following our initial public offering.

Our board of directors may decide to issue common stock to finance our operations rather than issuing debt or other senior securities. As a business development company, we are not generally able to issue and sell our common stock at a price below current net asset value per share. We may, however, issue or sell our common stock, at a price below the current net asset value of the common stock, or sell warrants, options or rights to acquire such common stock, at a price below the current net asset value of the common stock if our board of directors determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale within the preceding 12 months. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our board of directors, closely approximates the market value of such securities (less any distributing commission or discount). We also may conduct rights offerings at prices per share less than the net asset value per share, subject to the requirements of the 1940 Act. If we raise additional funds by issuing additional common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time would decrease, and our stockholders may experience dilution.

We intend to continue to finance our investments with borrowed money, which will magnify the potential for gain or loss on amounts invested and may increase the risk of investing in us.

The use of leverage, including through the issuance of senior securities, magnifies the potential for gain or loss on amounts invested. We have incurred leverage in the past through the Debt Securitization and currently through the Credit Facilty and, from time to time, intend to incur additional leverage to the extent permitted under the 1940 Act. The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in our securities. In the future, we may borrow from, and issue senior securities, to banks, insurance companies and other lenders. Holders of these senior securities will have fixed dollar claims on our assets that are superior to the claims of our common stockholders, and we would expect such holders to seek recovery against our assets in the event of a default. We may pledge up to 100% of our assets and may grant a security interest in all of our assets under the terms of any debt instruments into which we may enter. In addition, under the terms of any credit facility or other debt instrument we enter into, we are likely to be required by its terms to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses.

If the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our equity stake in a leveraged investment. Similarly, any decrease in our revenue or income will cause our net income to decline more sharply than it would have had we not borrowed. Such a decline would also negatively affect our ability to make distributions on our common stock or preferred stock. Our ability to service our debt will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of our use of leverage, including interest expenses and any increase in the management fee payable to our investment adviser.

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As a business development company, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%. If this ratio declines below 200%, we cannot incur additional debt and could be required to sell a portion of our investments to repay some debt when it is disadvantageous to do so. This could have a material adverse effect on our operations, and we may not be able to make distributions. The amount of leverage that we employ will depend on our investment adviser’s and our board of directors’ assessment of market and other factors at the time of any proposed borrowing. Immediately upon completion of this offering and the Concurrent Private Placement (assuming net proceeds to us of $75.7 million), we expect to have leverage of $125.0 million and an asset coverage ratio of 291.5%. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us.

In addition, the terms governing the Credit Facility and any indebtedness that we incur in the future could impose financial and operating covenants that restrict our business activities, including limitations that may hinder our ability to finance additional loans and investments or make the distributions required to maintain our status as a RIC under the Code.

The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

         
  Assumed Return on Our Portfolio (Net of Expenses)
     -10%   -5%   0%   5%   10%
Corresponding return to common stockholder(1)     -18 %      -10 %      -2 %      6 %      14 % 

(1) Assumes $381.7 million in total assets on a pro forma basis, $125.0 million of debt outstanding under the Credit Facility, $239.4 million in net assets as of December 31, 2012 on a pro forma basis and an average cost of funds of 3.53% and 2.50%, which were the weighted average effective interest rates of the Class A-T Loans and the Class A-R Loans, respectively, for the period ended December 31, 2012, and includes the effects of the amortization of deferred debt issuance costs.

Based on our outstanding indebtedness of $125.0 million as of December 31, 2012 and an average cost of funds of 3.53% and 2.50%, which were the weighted average effective interest rates of the Class A-T Loans and the Class A-R Loans, respectively, as of that date, our investment portfolio must experience an annual return of at least 1.32% to cover annual interest payments on the Credit Facility.

In addition to issuing securities to raise capital as described above, we may in the future seek to securitize our loans to generate cash for funding new investments. To securitize loans, we may create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. This could include the sale of interests in the subsidiary on a non-recourse basis to purchasers who we would expect to be willing to accept a lower interest rate to invest in investment grade loan pools, and we would retain a portion of the equity in any such securitized pool of loans. An inability to securitize part of our loan portfolio could limit our ability to grow our business, fully execute our business strategy and increase our earnings. Moreover, the successful securitization of part of our loan portfolio might expose us to losses with respect to the remaining loans in which we do not sell interests because they will tend to be those that are riskier and more apt to generate losses.

Any failure on our part to maintain our status as a business development company would reduce our operating flexibility.

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

We are subject to risks associated with the Credit Facility.

On May 21, 2012, GF 2012-1, our wholly-owned indirect subsidiary, entered into the Credit Facility, which is a structured warehouse credit facility. As a result of the Credit Facility, we are subject to a variety of risks, including those set forth below.

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Our interests in GF 2012-1 are subordinated.

We own, through GF 2012-1 Manager, our wholly-owned direct subsidiary, 100% of the equity interests in GF 2012-1. We consolidate the financial statements of GF 2012-1 in our consolidated financial statements and treat the indebtedness of GF 2012-1 as our leverage. Our equity interests in GF 2012-1 are subordinated in priority of payment to every other obligation of GF 2012-1 and are subject to certain payment restrictions set forth in the Credit Facility. We receive cash distributions on our equity interests in GF 2012-1 only if GF 2012-1 has made all required cash interest payments to the lenders. We cannot assure you that distributions on the assets held by GF 2012-1 will be sufficient to make any distributions to us or that such distributions will meet our expectations.

Our equity interests in GF 2012-1 rank behind all of the secured and unsecured creditors, known or unknown, of GF 2012-1, including the lenders under the Credit Facility. Consequently, to the extent that the value of GF 2012-1’s portfolio of loan investments has been reduced as a result of conditions in the credit markets, defaulted loans, capital gains and losses on the underlying assets, prepayment or changes in interest rates, the return on our investment in GF 2012-1 could be reduced. Accordingly, our investment in GF 2012-1 may be subject to up to 100% loss. The documents for the Credit Facility do not provide for recourse to us.

The interests of the lenders of the Credit Facility may not be aligned with our interests, and we may have no control over remedies.

The loans held by GF 2012-1 are subject to certain requirements, including certain coverage and quality tests and concentration limitations. Upon an event of default under the Credit Facility, the lenders may exercise certain remedies, including requiring lender approval for certain actions by GF 2012-1 with respect to investments, terminating the ability of GF 2012-1 to draw on the Credit Facility and declaring all outstanding amounts payable by GF 2012-1 immediately due and payable.

We cannot assure you that we would receive any payments upon an acceleration of the amounts payable by GF 2012-1. Any failure of GF 2012-1 to make payments on our equity interests in GF 2012-1, whether as a result of an event of default or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows and may result our inability to make distributions sufficient to allow our qualification as a RIC.

GF 2012-1 may fail to meet certain requirements, which would have an adverse effect on the time or amount of payments to us.

Under the Credit Facility, there are two coverage tests applicable to the collateral loans. The first such test compares the amount of interest received on the collateral loans held by GF 2012-1 to the amount of interest payable on the loans under the Credit Facility in respect of the amounts drawn thereunder. To meet this first test, at any time, the aggregate amount of interest received on the collateral loans must equal at least 150% of the aggregate amount of interest payable on the loans under the Credit Facility. The second such test compares the aggregate principal amount of the collateral loans to the aggregate outstanding principal amount of the loans under the Credit Facility in respect of the amounts drawn thereunder. To meet this second test at any time, the aggregate principal amount of the collateral loans must equal at least 176% of the aggregate outstanding principal amount on the loans under the Credit Facility. If these coverage tests are not satisfied on any date on which compliance is measured, GF 2012-1 will be required to apply available amounts to the repayment of principal of the loans under the Credit Facility to the extent necessary to satisfy the applicable coverage tests and, as a result, GF 2012-1 will have reduced funds available for GF 2012-1 to make additional investments or to make distributions on our equity interests in GF 2012-1. Dates on which compliance is measured include each day collateral loans are purchased, originated or sold and the last day of each calendar month. Furthermore, if under the second coverage test the aggregate principal amount of the collateral loans equals 125% or less of the aggregate outstanding principal amount on the loans under the Credit Facility and remains so for five business days, an event of default will be deemed to have occurred.

Restructurings of investments held by GF 2012-1 may decrease their value and reduce distributions we may receive from GF 2012-1.

During periods of economic uncertainty and recession, the incidence of amendments, waivers, modifications and restructurings of investments may increase. Such amendments, waivers, modifications and other restructurings could change the terms of the investments and in some cases may result in GF 2012-1

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holding assets not meeting its criteria for investments. This could adversely impact the coverage tests under the Credit Facility. Any amendment, waiver, modification or other restructuring that reduces GF 2012-1’s compliance with certain financial tests will make it more likely that GF 2012-1 will need to utilize cash to pay down the unpaid principal amount of the loans under the Credit Facility to cure any breach in such test instead of making payments on our equity interests in GF 2012-1. Any such use of cash would reduce distributions available and delay the timing of payments to us.

We cannot assure you that any particular restructuring strategy pursued by GF 2012-1 Manager or any successor collateral manager will maximize the value of or recovery on any investment. Any restructuring could fundamentally alter the nature of the related investment, and restructurings may not be subject to the same underwriting standards that are employed in connection with the origination or initial acquisition of investments. Any restructuring could alter, reduce or delay the payment of interest or principal on any investment, which could delay the timing and reduce the amount of payments made to GF 2012-1 and, indirectly, us. Restructurings of investments might also result in extensions of the terms thereof, which could delay the timing of payments made to GF 2012-1 and, indirectly, us.

We may not receive cash from GF 2012-1.

We receive cash from GF 2012-1 only to the extent that we receive distributions on our equity interests in GF 2012-1 and collateral management fees payable under the collateral management agreement. GF 2012-1 may make payments on our equity interests and collateral management fees only to the extent permitted by the payment priority provisions of the Credit Facility. The Credit Facility generally provides that payments on our equity interests may not be made on any payment date unless all amounts owing to the lenders and other secured parties are paid in full. In addition, if GF 2012-1 does not meet the asset coverage tests or the interest coverage test set forth in the documents governing the Credit Facility, cash would be diverted from us first to pay the lenders in amounts sufficient to cause such tests to be satisfied. In the event that we do not receive cash from GF 2012-1, we could be unable to make distributions to our stockholders in amounts sufficient to maintain our status as a RIC, or at all. We also could be forced to sell investments in portfolio companies at less than their fair value in order to continue making such distributions.

The ability to sell investments held by GF 2012-1 is limited.

The Credit Facility places restrictions on GF 2012-1’s ability to sell performing investments. For example, sales of investments must satisfy minimum pricing requirements. As a result of these restrictions, there may be times or circumstances during which GF 2012-1 is unable to sell investments or take other actions that might be in our best interests.

GF 2012-1 is subject to various conflicts of interest involving Deutsche Bank Trust Company Americas and Natixis, New York Branch.

Deutsche Bank Trust Company Americas is the collateral agent and custodian and Natixis, New York Branch is the administrative agent and a lender with respect to the Credit Facility. Various potential and actual conflicts of interest may arise as a result of the investment banking, commercial banking, asset management, financing and financial advisory services and products provided by affiliates of Deutsche Bank Trust Company Americas, or, collectively, the Deutsche Bank Companies, or by affillates of Natixis, New York Branch and/or asset-backed commercial paper conduits, for which Natixis, New York Branch, provides liquidity support, or, collectively, the Natixis Companies, to us and GF 2012-1. When acting as collateral agent, custodian, administrative agent, lender or in other service capacities, as the case may be, with respect to investments held by GF 2012-1, the Deutsche Bank Companies and the Natixis Companies are entitled to fees and expenses senior in priority to payments to the distributions on our equity interests in GF 2012-1. In addition, the Deutsche Bank Companies or the Natixis Companies may act as trustee for other classes of securities issued by one of our portfolio companies or make or administer loans to such portfolio companies and would owe fiduciary duties to the holders of such other classes of securities, which classes of securities may have differing interests from us, and may take actions that are adverse to us, including restructuring a loan, exercising remedies under a loan, foreclosing on collateral, requiring additional collateral, charging significant fees or placing the obligor in bankruptcy. The Deutsche Bank Companies or the Natixis Companies might act as a counterparty under swaps or any other derivative agreements for transactions involving issuers of investments held by GF 2012-1 and could take actions adverse to the interests of GF 2012-1, including

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demanding collateralization of its exposure under such agreements (if provided for thereunder) or terminating such swaps or agreements in accordance with the terms thereof. As a result of all such transactions or arrangements between the Deutsche Bank Companies or the Natixis Companies and issuers of investments held by GF 2012-1 or their respective affiliates, the Deutsche Bank Companies or the Natixis Companies may have interests that are contrary to the interests of GF 2012-1.

Since we are using debt to finance our investments, and we may use additional debt financing subsequent to this offering, changes in interest rates may affect our cost of capital and net investment income.

Since we are using debt to finance investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we cannot assure you that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates when we have debt outstanding, our cost of funds will increase, which could reduce our net investment income. We expect that our investments will be financed primarily with equity and medium to long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. These activities may limit our ability to benefit from lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.

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

Because we expect to distribute substantially all of our ordinary income and net realized capital gains to our stockholders, we will need additional capital to finance our growth and such capital may not be available on favorable terms, or at all.

We will need additional capital to fund growth in our investment portfolio once we have fully invested the proceeds of this offering. We may issue debt or equity securities or borrow from financial institutions in order to obtain this additional capital. A reduction in the availability of new capital could limit our ability to grow. We will be required to distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders to maintain our RIC status. As a result, these earnings will not be available to fund new investments. If we fail to obtain additional capital to fund new investments, this could limit our ability to grow, which may have an adverse effect on the value of our securities.

We may not replicate the historical results achieved by other entities managed or sponsored by members of our investment committee or by Garrison Investment Group or its affiliates.

Our primary focus in making investments generally differs from that of many of the investment funds, accounts or other investment vehicles that are or have been managed by members of our investment committee or sponsored by Garrison Investment Group or its affiliates. In addition, investors in our common stock are not acquiring an interest in any such investment funds, accounts or other investment vehicles that are or have been managed by members of our investment committee or sponsored by Garrison Investment Group or its affiliates. We cannot assure you that we will replicate the historical results achieved by members of the investment committee, and we caution you that our investment returns could be substantially lower than the returns achieved by them in prior periods. Additionally, all or a portion of the prior results may have been achieved in particular market conditions which may never be repeated. Moreover, current or future market volatility and regulatory uncertainty may have an adverse impact on our future performance.

There are significant potential conflicts of interest that could affect our investment returns.

As a result of our arrangements with Garrison Investment Group and our investment committee, there may be times when Garrison Investment Group or such persons have interests that differ from those of our stockholders, giving rise to a conflict of interest.

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There may be conflicts related to obligations our investment committee, our investment adviser or its affiliates have to other clients.

The members of our investment committee serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by our investment adviser or its affiliates. Similarly, our investment adviser or its affiliates may have other clients with similar, different or competing investment objectives. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best interests of us or our stockholders. For example, the members of our investment committee have, and will continue to have, management responsibilities for other investment funds, accounts or other investment vehicles managed or sponsored by our investment adviser and its affiliates. Our investment objective overlaps or may overlap with the investment objectives of such affiliated investment funds, accounts or other investment vehicles. As a result, those individuals may face conflicts in the allocation of investment opportunities among us and other investment funds or accounts advised by or affiliated with our investment adviser. Our investment adviser will seek to allocate investment opportunities among eligible accounts in a manner that is fair and equitable over time and consistent with its allocation policy. However, we cannot assure you that such opportunities will be allocated to us fairly or equitably in the short-term or over time. Where we are able to co-invest consistent with the requirements of the 1940 Act, if sufficient securities or loan amounts are available to satisfy our and each such account’s proposed demand, the opportunity will be allocated in accordance with our investment adviser’s pre-transaction determination. If there is an insufficient amount of an investment opportunity to satisfy our demand and that of other accounts sponsored or managed by our investment adviser or its affiliates, the allocation policy further provides that allocations among us and such other accounts will generally be made pro rata based on the amount that each such party would have invested if sufficient loan amounts were available. However, there can be no assurance that we will be able to participate in all suitable investment opportunities. Where we are unable to co-invest consistent with the requirements of the 1940 Act, our investment adviser’s allocation policy provides for investments to be allocated on a rotational basis to assure that all clients have fair and equitable access to such investment opportunities.

Our investment committee, our investment adviser or its affiliates may, from time to time, possess material non-public information, limiting our investment discretion.

Principals of our investment adviser and its affiliates and members of our investment committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities of which are purchased or sold on our behalf. If we obtain material nonpublic information with respect to such companies, or we become subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us.

Our incentive fee structure may create incentives for our investment adviser that are not fully aligned with the interests of our stockholders and may induce our investment adviser to make speculative investments.

In the course of our investing activities, we pay management and incentive fees to our investment adviser. The incentive fee payable by us to our investment adviser may create an incentive for our investment adviser to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The management fee is based on our gross assets excluding cash and cash equivalents. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through direct investments. Because the management fee is based on our gross assets, our investment adviser will benefit when we incur debt or use leverage. The use of leverage will increase the likelihood of default, which would disfavor the holders of our common stock, including investors in this offering.

Additionally, under the incentive fee structure, our investment adviser may benefit when capital gains are recognized and, because our investment adviser determines when a holding is sold, our investment adviser controls the timing of the recognition of such capital gains. Our board of directors is charged with protecting our interests by monitoring how our investment adviser addresses these and other conflicts of interest associated with its management services and compensation. While they are not expected to review or approve each investment or realization, our independent directors will periodically review our investment adviser’s services and fees as well as its portfolio management decisions and portfolio performance. In connection with

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these reviews, our independent directors will consider whether such fees and our expenses (including those related to leverage) remain appropriate. As a result of this arrangement, our investment adviser or its affiliates may from time to time have interests that differ from those of our stockholders, giving rise to a conflict.

Unlike that portion of the incentive fee based on income, there is no Hurdle Rate applicable to the incentive fee based on net capital gains. As a result, our investment adviser may seek to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. This practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

In addition, under the terms of the Incentive Fee Cap and Deferral Mechanism, the amount of incentive fees earned by our investment adviser will depend, in part, upon the timing of capital gains or losses in our investment portfolio, as well as the timing of our recognition of income. Depending on the circumstances, there may be a lag of as long as 12 fiscal quarters between the occurrence of an event giving rise to an obligation to pay incentive fees to the investment adviser and the payment of such incentive fees. Therefore, investors who acquire our shares of common stock after this offering may pay indirectly to our investment adviser incentive fees in respect of income or capital gains that were received by or paid to us prior to such investor becoming a stockholder. As a result, such investors may not participate in the income or capital gains giving rise to such indirect expense.

The valuation process for certain of our portfolio holdings creates a conflict of interest.

We expect to make many portfolio investments in the form of securities that are not publicly traded. As a result, our board of directors will determine the fair value of these securities in good faith as described elsewhere in this prospectus. In connection with that determination, investment professionals from our investment adviser will provide our board of directors with portfolio company valuations based upon the most recent portfolio company financial statements available and projected financial results of each portfolio company. In addition, certain members of our board of directors, including Messrs. Astruc, Chase and Tansey, have an indirect pecuniary interest in our investment adviser. The participation of our investment adviser’s investment professionals in our valuation process, and the indirect pecuniary interest in our investment adviser by certain members of our board of directors, could result in a conflict of interest as the management fee paid to our investment adviser is based, in part, on our gross assets.

We have conflicts related to other arrangements with our investment adviser or its affiliates.

We have entered into a license agreement with Garrison Investment Group under which Garrison Investment Group has granted us a non-exclusive, royalty-free license to use the name “Garrison”. See “The Adviser and the Administrator — License Agreement.” In addition, we will pay to Garrison Capital Administrator our allocable portion of overhead and other expenses incurred by Garrison Capital Administrator in performing its obligations under the Administration Agreement, such as rent and our allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs. This will create conflicts of interest that our board of directors must monitor.

The Investment Advisory Agreement with Garrison Capital Advisers, the Administration Agreement with Garrison Capital Administrator and the sub-collateral management agreement between GF 2012-1 Manager and Garrison Capital Advisers were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.

The Investment Advisory Agreement, the Administration Agreement and the sub-collateral management agreement were negotiated between related parties. Consequently, their terms, including fees payable to our investment adviser, may not be as favorable to us as if they had been negotiated with an unaffiliated third party. In addition, we may choose not to enforce, or to enforce less vigorously, our rights and remedies under these agreements because of our desire to maintain our ongoing relationship with our investment adviser, our administrator, the collateral manager and their respective affiliates. Any such decision, however, would breach our fiduciary obligations to our stockholders.

Our ability to enter into transactions with our affiliates will be restricted, which may limit the scope of investments available to us.

We are prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our independent directors and, in some cases, of the SEC. Any person that owns, directly

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or indirectly, five percent or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any security from or to, or entering into certain “joint” transactions (which could include investments in the same portfolio company) with such affiliates, absent the prior approval of our independent directors. Our investment adviser and its affiliates, including persons that control, or are under common control with, us or our investment adviser, are also considered to be our affiliates under the 1940 Act, and we are generally prohibited from buying or selling any security from or to, or entering into “joint” transactions with such affiliates without prior approval of our independent directors and, in some cases, exemptive relief from the SEC.

We may, however, invest alongside other clients of our investment adviser and its affiliates in certain circumstances where doing so is consistent with applicable law, SEC staff interpretations and/or exemptive relief issued by the SEC. For example, we may invest alongside such accounts consistent with guidance promulgated by the staff of the SEC permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that our investment adviser, acting on our behalf and on behalf of other clients, negotiates no term other than price. We may also invest alongside our investment adviser’s other clients as otherwise permissible under regulatory guidance, applicable regulations and the allocation policy of Garrison Investment Group and our investment adviser. Under this allocation policy, a fixed calculation, based on the type of investment, will be applied to determine the amount of each opportunity to be allocated to us. This allocation policy will be periodically approved by our investment adviser and reviewed by our independent directors. We expect that these determinations will be made similarly for other accounts sponsored or managed by our investment adviser and its affiliates. If sufficient securities or loan amounts are available to satisfy our and each such account’s proposed demand, we expect that the opportunity will be allocated in accordance with our investment adviser’s pre-transaction determination. Where there is an insufficient amount of an investment opportunity to satisfy us and other accounts sponsored or managed by our investment adviser or its affiliates, the allocation policy further provides that allocations among us and such other accounts will generally be made pro rata based on the amount that each such party would have invested if sufficient securities or loan amounts were available. However, we cannot assure you that investment opportunities will be allocated to us fairly or equitably in the short-term or over time.

We, Garrison Investment Group and our investment adviser have submitted an exemptive relief application to the SEC to permit greater flexibility to negotiate the terms of co-investments if our board of directors determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by our investment adviser or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions, as well as regulatory requirements and other relevant factors. See “Certain Relationships.” We cannot assure you, however, that we will obtain such approvals or exemptive relief or develop opportunities that comply with such limitations.

In situations where co-investment with other accounts managed by our investment adviser or its affiliates is not permitted or appropriate, Garrison Investment Group and our investment adviser will need to decide which client will proceed with the investment. Our investment adviser’s allocation policy provides, in such circumstances, for investments to be allocated on a rotational basis to assure that all clients have fair and equitable access to such investment opportunities. Moreover, except in certain circumstances, we will be unable to invest in any issuer in which a fund managed by our investment adviser or its affiliates has previously invested. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates. These restrictions may limit the scope of investment opportunities that would otherwise be available to us.

We will be exposed to risks associated with changes in interest rates.

Interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net investment income. An increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates and also could increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the market value of our common stock.

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Many of our portfolio investments will be recorded at fair value as determined in good faith by our board of directors. As a result, there will be uncertainty as to the value of our portfolio investments.

Many of our portfolio investments will take the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable, and we value these securities at fair value as determined in good faith by our board of directors, including to reflect significant events affecting the value of our securities. As discussed in more detail under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies,” most, if not all, of our investments (other than cash and cash equivalents) are classified as Level 3 under Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, or ASC 820. This means that our portfolio valuations are based on unobservable inputs and our own assumptions about how market participants would price the asset or liability in question. Inputs into the determination of fair value of our portfolio investments requires significant management judgment or estimation. Even if observable market data are available, such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information. We have retained the services of several independent service providers to review the valuation of these securities. The types of factors that the board of directors may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities, including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. In addition, the determination of fair value and thus the amount of unrealized losses we may incur in any year, is, to a degree, subjective, in that it is based on unobservable inputs and certain assumptions. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.

We adjust quarterly the valuation of our portfolio to reflect our board of directors’ determination of the fair value of each investment in our portfolio. Any changes in fair value are recorded in our consolidated statement of operations as net change in unrealized appreciation or depreciation.

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

We generally make investments in private companies. Substantially all of these investments are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.

Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation.

As a business development company, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by our board of directors under our valuation policy and process. As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments:

a comparison of the portfolio company’s securities to publicly traded securities;
the enterprise value of the portfolio company;
the nature and realizable value of any collateral;
the portfolio company’s ability to make payments and its earnings;

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the markets in which the portfolio company does business; and
changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors.

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation. We record decreases in the market values or fair values of our investments as unrealized depreciation. Declines in prices and liquidity in the corporate debt markets may result in significant net unrealized depreciation in our portfolio. The effect of all of these factors on our portfolio may reduce our net asset value by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We have not yet identified the investments we will acquire using the proceeds of this offering.

While we currently hold a portfolio of investments directly and through GF 2012-1, we have not yet identified additional potential investments for our portfolio that we will acquire with the proceeds of this offering and the Concurrent Private Placement. Privately negotiated investments in illiquid securities or loans to private middle-market companies require substantial due diligence and structuring, and we cannot assure you that we will achieve our anticipated investment pace. As a result, you will be unable to evaluate any future investments prior to purchasing our shares of common stock. Additionally, our investment adviser will select our investments subsequent to the closing of this offering, and our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our common stock.

During this period, we will invest these amounts in cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the date of investment. We expect these temporary investments to earn yields substantially lower than the income that we expect to receive in respect of investments in first lien, second lien, unitranche and mezzanine loans and equity securities. As a result, any distributions we make during this period may be substantially smaller than the distributions that we expect to pay when our portfolio is fully invested.

We may experience fluctuations in our quarterly results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including the interest rate payable on the debt securities and loans we acquire, the default rate on such securities, the level of our expenses, variations in, and the timing of the recognition of, realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

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

We and our portfolio companies are subject to regulation at the local, state and federal level. We are also subject to federal, state and local laws and regulations and are subject to judicial and administrative decisions that affect our operations, including maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure proceedings and other trade practices. If these laws, regulations or decisions change, or if we expand our business into additional jurisdictions, we may have to incur significant expenses in order to comply or we might have to restrict our operations. New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we or our portfolio companies are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect. In particular, on July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, became law. The scope of the Dodd-Frank Act impacts many aspects of the financial services industry, and it requires the development and adoption of many implementing regulations over the next several years. The effects of the Dodd-Frank Act on the financial services industry will depend, in large part, upon the extent to which regulators exercise the authority granted to them and the approaches taken in implementing regulations. While the impact of the

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Dodd-Frank Act on us and our portfolio companies may not be known for an extended period of time, the Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry or affecting taxation that are proposed or pending in the U.S. Congress, may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. In addition, if we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.

Additionally, changes to the laws and regulations governing our operations related to permitted investments may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities. Such changes could result in material differences to the strategies and plans set forth in this prospectus and may shift our investment focus from the areas of expertise of our investment adviser to other types of investments in which our investment adviser may have little or no expertise or experience. Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.

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

We may engage in currency or interest rate hedging transactions to the extent such transactions are permitted under the 1940 Act and applicable commodities law. If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions, including the risk of counterparty default. In this regard, we may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for us to realize a gain on a net basis if the values of the underlying portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price.

While we may enter into transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates or counterparty default may result in poorer overall investment performance than if we had not engaged in any hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek or be able to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge position and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.

Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

Our board of directors has the authority to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval (except as required by the 1940 Act). However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a business development company. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock. Nevertheless, the effects of any such changes may adversely affect our business and impact our ability to make distributions.

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Risks Related to our Investments

Our investments may be risky, and you could lose all or part of your investment.

We invest primarily in (1) first lien senior secured loans, (2) second lien senior secured loans, (3) “one-stop” senior secured or “unitranche” loans, (4) subordinated or mezzanine loans and (5), to a lesser extent, selected equity co-investments in middle-market companies.

Secured Loans.  When we extend first lien senior secured, second lien senior secured and unitranche loans, we generally take a security interest in the available assets of these portfolio companies, including the equity interests of their subsidiaries. We expect this security interest to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. Also, in the case of first lien senior secured loans, our lien may be subordinated to claims of other creditors and, in the case of second lien senior secured loans, our lien will be subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the loan. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and interest payments according to the loan’s terms, or at all, or that we will be able to collect on the loan should we be forced to enforce our remedies.

Mezzanine Loans.  Our mezzanine investments generally are subordinated to senior loans and will generally be unsecured. This may result in an above average amount of risk and volatility or a loss of principal. These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our stockholders to non-cash income as described above under “We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.” Since we will not receive any substantial repayments of principal prior to the maturity of our mezzanine debt investments, such investments are riskier than amortizing loans.

Equity Investments.  We expect to make selected equity investments. In addition, when we invest in first lien, second lien, unitranche or mezzanine loans, we may acquire warrants to purchase equity securities. Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

We are subject to risks associated with middle-market companies.

Investing in middle-market companies involves a number of significant risks, including:

these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns;
they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
generally little public information exists about these companies, and we are required to rely on our investment adviser to obtain adequate information to evaluate the potential returns from investing in these companies;

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they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and our investment adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and
they may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.

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

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond the asset diversification requirements associated with our qualification as a RIC under the Code and the requirements under the documents governing the Credit Facility, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies.

Our portfolio may be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.

Our portfolio may be concentrated in a limited number of portfolio companies and industries. Beyond the asset diversification requirements associated with our qualification as a RIC under the Code and the requirements of the documents governing the Credit Facility, we do not have fixed guidelines for diversification. As a result, the aggregate returns we realize may be significantly and adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Additionally, while we are not targeting any specific industries, our investments may be concentrated in relatively few industries. As a result, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize.

We may hold the debt securities and loans of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings.

Leveraged companies may experience bankruptcy or similar financial distress. The bankruptcy process has a number of significant inherent risks. Many events in a bankruptcy proceeding are the product of contested matters and adversary proceedings and are beyond the control of the creditors. A bankruptcy filing by a portfolio company may adversely and permanently affect such portfolio company. If the proceeding is converted to a liquidation, the value of the issuer may not equal the liquidation value that was believed to exist at the time of our investment. The duration of a bankruptcy proceeding is also difficult to predict, and a creditor’s return on investment can be adversely affected by delays until a plan of reorganization or liquidation ultimately becomes effective. The administrative costs in connection with a bankruptcy proceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors. Because the standards for classification of claims under bankruptcy law are vague, our influence with respect to the class of securities or other obligations we own may be lost by increases in the number and amount of claims in the same class or by different classification and treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even to identify, any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for taxes) may be substantial, eroding the value of any recovery by holders of other securities of the bankrupt entity.

Depending on the facts and circumstances of our investments and the extent of our involvement in the management of a portfolio company, upon the bankruptcy of a portfolio company, a bankruptcy court may recharacterize our debt investments as equity interests and subordinate all or a portion of our claim to that of other creditors. This could occur even though we may have structured our investment as senior debt.

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Economic recessions or downturns could impair the ability of our portfolio companies to repay loan and increase our costs, which, in turn, could increase our non-performing assets, decrease the value of our portfolio, reduce our volume of new loans and otherwise harm our operating results.

The U.S. economy and that of most other countries are or have recently been in a recessionary period. Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. Therefore, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from making new investments, increase credit losses and harm our operating results, which could have an adverse effect on our financial condition and results of operations.

We may be subject to risks associated with syndicated loans.

As of the date of this prospectus, our investments consist primarily of syndicated loans. Under the documentation for such loans, a financial institution or other entity typically is designated as the administrative agent and/or collateral agent. This agent is granted a lien on any collateral on behalf of the other lenders and distributes payments on the indebtedness as they are received. The agent is the party responsible for administering and enforcing the loan and generally may take actions only in accordance with the instructions of a majority or two-thirds in commitments and/or principal amount of the associated indebtedness. In most cases, we do not expect to hold a sufficient amount of the indebtedness to be able to compel any actions by the agent. For example, in many cases, the investments held by GF 2012-1 represent less than the amount of associated indebtedness sufficient to compel such actions or represent subordinated debt which is precluded from acting and, consequently, GF 2012-1 would only be able to direct such actions if instructions from GF 2012-1 were made in conjunction with other holders of associated indebtedness that together with GF 2012-1 compose the requisite percentage of the related indebtedness then entitled to take action. Conversely, if holders of the required amount of the associated indebtedness other than GF 2012-1 desire to take certain actions, such actions may be taken even if GF 2012-1 did not support such actions. Furthermore, if an investment is subordinated to one or more senior loans made to the applicable obligor, the ability of us or GF 2012-1 to exercise such rights may be subordinated to the exercise of such rights by the senior lenders. Accordingly, we may be precluded from directing such actions unless we act together with other holders of the indebtedness. If we are unable to direct such actions, we cannot assure you that the actions taken will be in our best interests.

If an investment is a syndicated revolving loan or delayed drawdown loan, other lenders may fail to satisfy their full contractual funding commitments for such loan, which could create a breach of contract, result in a lawsuit by the obligor against the lenders and adversely affect the fair market value of our investment.

There is a risk that a loan agent may become bankrupt or insolvent. Such an event would delay, and possibly impair, any enforcement actions undertaken by holders of the associated indebtedness, including attempts to realize upon the collateral securing the associated indebtedness and/or direct the agent to take actions against the related obligor or the collateral securing the associated indebtedness and actions to realize on proceeds of payments made by obligors that are in the possession or control of any other financial institution. In addition, we may be unable to remove the agent in circumstances in which removal would be in our best interests. Moreover, agented loans typically allow for the agent to resign with certain advance notice.

We may not realize gains from our equity investments.

When we invest in mezzanine loans or senior secured loans, we may also invest in the equity securities of the borrower or acquire warrants or other equity securities as well. In addition, we may invest directly in the equity securities of portfolio companies. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not realize gains from our equity interests, and any gains that we do realize on the disposition of such equity interests may not be sufficient to offset any other losses we experience.

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Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio, and our ability to make follow-on investments in certain portfolio companies may be restricted.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to:

increase or maintain in whole or in part our equity ownership percentage;
exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or
attempt to preserve or enhance the value of our investment.

We will have the discretion to make any follow-on investments, subject to the availability of capital resources, the limitations of the 1940 Act and the requirements associated with our status as a RIC. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful portfolio company. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we do not want to increase our exposure to the portfolio company, because we prefer other opportunities or because we are inhibited by compliance with business development company requirements or the desire to maintain our tax status.

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

Although we may do so in the future, we do not currently anticipate taking controlling equity positions in our portfolio companies. In addition, we may not be in a position to control any portfolio company by investing in its debt securities or loans. As a result, we will be subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the debt and equity investments that we will typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and we may therefore suffer a decrease in the value of our investments.

Defaults by our portfolio companies will harm our operating results.

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

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

We generally intend to invest a portion of our capital in first lien, second lien and unitranche loans and, to a lesser extent, mezzanine loans and equity securities of U.S. middle-market companies. The portfolio companies usually have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying senior creditors, the portfolio company may not have sufficient assets to use for repaying its obligation to us in full, or at all. In the case of debt ranking equally with debt securities in which we invest, we would have to share any distributions on an equal and ratable basis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

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Additionally, certain loans that we make to portfolio companies may be secured on a second-priority basis by the same collateral securing senior secured debt of such companies. The first-priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by first-priority liens on the collateral will generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before us.

In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second-priority liens after payment in full of all obligations secured by the first-priority liens on the collateral. If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the second-priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of such senior debt. Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first-priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first-priority liens:

the ability to cause the commencement of enforcement proceedings against the collateral;
the ability to control the conduct of such proceedings;
the approval of amendments to collateral documents;
releases of liens on the collateral; and
waivers of past defaults under collateral documents.

We may not have the ability to control or direct such actions, even if our rights are adversely affected.

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

Our investment adviser’s liability will be limited under the Investment Advisory Agreement and the sub-collateral management agreement, and we have agreed to indemnify our investment adviser against certain liabilities, which may lead our investment adviser to act in a riskier manner on our behalf than it would when acting for its own account.

Under the Investment Advisory Agreement and the sub-collateral management agreement, our investment adviser will not assume any responsibility to us, including GF 2012-1 Manager, other than to render the services called for under those agreements, and it will not be responsible for any action of our board of directors or GF 2012-1 Manager, as applicable, in following or declining to follow our investment adviser’s advice or recommendations. Our investment adviser maintains a contractual, as opposed to a fiduciary, relationship with us. Under the terms of the Investment Advisory Agreement and the sub-collateral management agreement, our investment adviser, its officers, members, personnel, any person controlling or

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controlled by our investment adviser will not be liable to us, any subsidiary of ours, our directors, our stockholders or any subsidiary’s stockholders or partners for acts or omissions performed in accordance with and pursuant to the Investment Advisory Agreement and the sub-collateral management agreement, except those resulting from acts constituting gross negligence, willful misconduct, bad faith or reckless disregard of our investment adviser’s duties under the Investment Advisory Agreement and the sub-collateral management agreement. In addition, we have agreed to indemnify our investment adviser and each of its officers, directors, members, managers and employees from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement and the sub-collateral management agreement, except where attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person’s duties under the Investment Advisory Agreement and the sub-collateral management agreement. These protections may lead our investment adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account.

Our investment adviser may be paid incentive compensation even if we incur a net loss, and we cannot recover any portion of the incentive fee previously paid.

Our investment adviser is entitled to incentive compensation for each fiscal quarter in an amount equal to a percentage of our Pre-Incentive Fee Net Investment Income, subject to the Hurdle Rate, a catch-up provision and the Incentive Fee Cap and Deferral Mechanism. Our Pre-Incentive Fee Net Investment Income excludes realized and unrealized capital losses that we may incur in the fiscal quarter, even if such capital losses result in a net loss for that quarter. Thus, we may be required to pay our investment adviser incentive compensation for a fiscal quarter even if we incur a net loss. In addition, if we pay the capital gains portion of the incentive fee and thereafter experience additional realized capital losses or unrealized capital depreciation, we will not be able to recover any portion of the incentive fee previously paid.

We may not apply or be approved for an SBIC license.

Following completion of this offering, an affiliate of Garrison Investment Group may apply for a license to form an SBIC. If such an application is made and approved and the SBA so permits, we anticipate that the SBIC license would be transferred to a wholly-owned subsidiary of ours that would be formed just prior to such transfer. Following such transfer, we anticipate that the SBIC subsidiary would be allowed to issue SBA-guaranteed debentures, subject to the required capitalization of the SBIC subsidiary. SBA guaranteed debentures carry long-term fixed rates that are generally lower than rates on comparable bank and other debt. We cannot assure you that Garrison Investment Group will make an application for an SBIC license, be successful in receiving an SBIC license from the SBA or that the SBA will permit such license to be transferred to us. If we do receive an SBIC license, there is no minimum amount of SBA-guaranteed debentures that must be allocated to us.

Our portfolio companies may prepay loans, which prepayment may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields.

The loans in our investment portfolio generally are prepayable at any time, most of them at no premium to par. It is not clear at this time when each loan may be prepaid. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital. As market conditions change frequently, it is unknown when, and if, this may be possible for each portfolio company. In the case of some of these loans, having the loan prepaid may reduce the achievable yield for us if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations.

The disposition of our investments may result in contingent liabilities.

We currently expect that a significant portion of our investments will involve private securities. In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such

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investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities. These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through our return of certain distributions previously made to us.

Provisions of the General Corporation Law of the State of Delaware and our certificate of incorporation and bylaws could deter takeover attempts and have an adverse effect on the price of our common stock and the rights of our common stockholders.

The General Corporation Law of the State of Delaware, or the DGCL, contains provisions that may discourage, delay or make more difficult a change in control of us or the removal of our directors. Our certificate of incorporation and bylaws contain provisions that limit liability and provide for indemnification of our directors and officers. These provisions and others also may have the effect of deterring hostile takeovers or delaying changes in control or management. We are subject to Section 203 of the DGCL, the application of which is subject to any applicable requirements of the 1940 Act. This section generally prohibits us from engaging in mergers and other business combinations with stockholders that beneficially own 15% or more of our voting stock, or with their affiliates, unless our directors or stockholders approve the business combination in the prescribed manner. If our board of directors does not approve a business combination, Section 203 of the DGCL may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer.

We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our certificate of incorporation classifying our board of directors in three classes serving staggered three-year terms, and provisions of our certificate of incorporation authorizing our board of directors to classify or reclassify shares of our preferred stock in one or more classes or series, to cause the issuance of additional shares of our stock and to amend our certificate of incorporation, without stockholder approval, to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our certificate of incorporation and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders. In addition, if we issue preferred stock, such securities would rank “senior” to common stock in our capital structure, resulting in preferred stockholders having separate voting rights, dividend and liquidation rights, and possibly other rights, preferences or privileges more favorable than those granted to holders of our common stock.

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

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

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

Our administrator has the right, under the Administration Agreement, to resign at any time upon not less than 60 days’ notice, whether we have found a replacement or not. If our administrator resigns, we may not be able to find a new administrator or hire internal management with similar expertise and ability to provide

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the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and administrative activities is likely to suffer if we are unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by our administrator. Even if we are able to retain a comparable service provider or individuals to perform such services, whether internal or external, their integration into our business and lack of familiarity with our operations may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.

Investments in securities of foreign companies, if any, may involve significant risks in addition to the risks inherent in U.S. investments.

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

In addition, any investments that we make that are denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we cannot assure you that we will, in fact, hedge currency risk, or, that if we do, such strategies will be effective.

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

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

We are an “emerging growth company,” and we do not know if such status will make our common stock less attractive to investors.

We currently are, and following the completion of this offering expect to remain, an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, signed into law on April 5, 2012 until the earliest of:

the last day of our fiscal year ending December 31, 2018;
the last day of the fiscal year in which our total annual gross revenues first exceed $1 billion;
the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt; and
the last day of a fiscal year in which we (1) have an aggregate worldwide market value of our common stock held by non-affiliates of $700 million or more, computed at the end of each fiscal year as of the last business day of our most recently completed second fiscal quarter, and (2) have been an Exchange Act reporting company for at least one year (and filed at least one annual report under the Exchange Act).

Although we are still evaluating the JOBS Act, we currently intend to take advantage of some of the reduced regulatory and disclosure requirements permitted by the JOBS Act and, as a result, some investors may consider our common stock less attractive, which could reduce the market value of our common stock. For example, while we are an emerging growth company, we intend to take advantage of exemption from the

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provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. This may increase the risk that material weaknesses or other deficiences in our internal control over financial reporting go undetected. See “Regulation — JOBS Act.”

Efforts to comply with Section 404 of the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with Section 404 of the Sarbanes-Oxley Act may adversely affect us and the market price of our common stock.

Under current SEC rules, beginning with our fiscal year ending December 31, 2013, we will be required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, and related rules and regulations of the SEC and, under the JOBS Act, beginning with the first fiscal year in which we no longer qualify as an emerging growth company, our independent registered public accounting firm must audit this report. We will be required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting.

As a result, we expect to incur additional expenses in the near term that may negatively impact our financial performance and our ability to make distributions. This process also will result in a diversion of management’s time and attention. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations, and we may not be able to ensure that the process is effective or that our internal control over financial reporting is or will be effective in a timely manner. In the event that we are unable to maintain or achieve compliance with Section 404 of the Sarbanes-Oxley Act and related rules, we and the market price of our common stock may be adversely affected.

Risks Relating to this Offering

We cannot assure you that we will be able to deploy the proceeds of our initial public offering and the Concurrent Private Placement within the timeframe we have contemplated.

We anticipate that approximately all of the net proceeds of our initial public offering and the Concurrent Private Placement will be invested in portfolio companies in accordance with our investment objective and the strategies described in this prospectus within six to 12 months of the closing of this offering. We cannot assure you, however, that we will be able to locate a sufficient number of suitable investment opportunities to allow us to deploy those proceeds successfully in that timeframe. To the extent we are unable to invest those proceeds within our contemplated timeframe after the completion of our initial public offering, our investment income and, in turn, our results of operations will likely be materially adversely affected. Delays in investing the proceeds of this offering may cause us to underperform other investment vehicles pursuing similar strategies.

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

We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. In addition, due to the asset coverage test applicable to us as a business development company, we may be limited in our ability to make distributions. Finally, if more stockholders opt to receive cash dividends and other distributions rather than participate in our dividend reinvestment plan, we may be forced to liquidate some of our investments and raise cash in order to make distribution payments. All distributions will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable business development company regulations and such other factors as our board of directors may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future.

Investing in our shares may involve an above average degree of risk and is intended for long-term investors.

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

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long-term investors and should not be treated as a trading vehicle. Our shares may trade at a price that is less than the offering price. This risk may be greater for investors who sell their shares in a relatively short period of time after completion of this offering.

The market price of our common stock may fluctuate significantly.

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

significant volatility in the market price and trading volume of securities of business development companies or other companies in our sector, which are not necessarily related to the operating performance of these companies;
changes in regulatory policies or tax guidelines, particularly with respect to RICs or business development companies;
any loss of RIC status;
changes in earnings or variations in operating results;
changes in the value of our portfolio of investments;
any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
the inability of our investment adviser to employ additional experienced investment professionals or the departure of any of the investment adviser’s key personnel, including Messrs. Stuart and Tansey;
operating performance of companies comparable to us;
general economic trends and other external factors; and
loss of a major funding source.

We may allocate the net proceeds from this offering in ways with which you may not agree.

We will have significant flexibility in investing the net proceeds of this offering. Accordingly, we may use the net proceeds from this offering in ways with which you may not agree or for purposes other than those contemplated at the time of the offering.

Prior to this offering, there has been no public market for our common stock, and we cannot assure you that the market price of our shares will not decline following the offering.

We cannot assure you that a trading market will develop for our common stock after this offering or, if one develops, that such trading market can be sustained. Shares of closed-end investment companies, including business development companies, offered in an initial public offering often trade at a discount to the initial offering price due to underwriting discounts and related offering expenses. Also, shares of closed-end investment companies, including business development companies, frequently trade at a discount from net asset value. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our common stock will trade at, above or below net asset value.

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

Upon completion of this offering and the Concurrent Private Placement, we will have 15,958,779 shares of common stock outstanding (or 16,758,779 shares of common stock if the underwriters’ over-allotment option is fully exercised). Following this offering, sales of substantial amounts of our common stock or the availability of such shares for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of equity securities should we desire to do so.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this prospectus constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this prospectus involve risks and uncertainties, including statements as to:

our future operating results;
changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;
our business prospects and the prospects of our prospective portfolio companies;
the impact of investments that we expect to make;
the impact of increased competition;
our contractual arrangements and relationships with third parties;
the dependence of our future success on the general economy and its impact on the industries in which we invest;
the ability of our prospective portfolio companies to achieve their objectives;
the relative and absolute performance of our investment adviser;
our expected financings and investments;
the adequacy of our cash resources and working capital;
our ability to make distributions to our stockholders;
the timing of cash flows, if any, from the operations of our prospective portfolio companies; and
the impact of future acquisitions and divestitures.

We use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in this prospectus.

We have based the forward-looking statements included in this prospectus on information available to us on the date of this prospectus, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

The “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with this offering or any periodic reports we file under the Exchange Act.

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USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of shares of our common stock in this offering and the Concurrent Private Placement will be approximately $75.7 million (or approximately $86.9 million if the underwriters fully exercise their over-allotment option). This assumes, in each case, an initial public offering price of $15.00 per share, after deducting the underwriting discounts and commissions of approximately $5.6 million (or approximately $6.4 million if the underwriters fully exercise their over-allotment option) and estimated offering expenses of approximately $0.6 million incurred by us. The amount of net proceeds may be more or less than the amount described in this prospectus depending on the public offering price of the common stock and the actual number of shares of common stock we sell in the offering, both of which will be determined at pricing. We may change the size of this offering based on demand and market conditions.

Separately, immediately prior to the closing of this offering, we expect to sell 126,901 shares of common stock to our directors, officers and the employees and affiliates of our investment adviser and its affiliates at the initial public offering price per share in the Concurrent Private Placement. We will receive the full proceeds of this Concurrent Private Placement, and no underwriting discounts or commissions will be paid in respect of these shares.

We plan to invest the net proceeds of this offering and the Concurrent Private Placement in accordance with our investment objective and strategies described in this prospectus and for general corporate purposes, including payment of operating expenses. We anticipate that substantially all of the net proceeds of this offering and the Concurrent Private Placement will be invested within six to 12 months of the closing of this offering, in accordance with our investment objective and strategies, depending on the availability of appropriate investment opportunities and market conditions. We cannot assure you we will achieve our targeted investment pace.

Pending these investments, we intend to invest the remaining net proceeds of this offering and the Concurrent Private Placement primarily in cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the date of investment. These securities may have lower yields than our other investments and, accordingly, may result in lower distributions, if any, during such period. See “Regulation — Temporary Investments” for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objective.

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DISTRIBUTIONS

We intend to make quarterly distributions to our stockholders. The timing and amount of our quarterly distributions, if any, will be determined by our board of directors. Any distributions to our stockholders will be declared out of assets legally available for distribution. We expect quarterly distributions to be paid from income generated by interest and dividend income earned on our portfolio although they may also include a return of capital. The specific tax characteristics of our distributions each year will be reported to stockholders after the end of the calendar year. We do not currently intend that our quarterly distributions will include a return of capital.

We intend to declare a distribution of approximately $0.35 per share, payable at or near the end of the second calendar quarter of 2013. This distribution is contingent upon the completion of our initial public offering during the first calendar quarter of 2013. We anticipate that this distribution, if made, will be paid from income primarily generated by interest and dividend income earned on our investment portfolio. No assurance can be given that we will be able to declare such an initial distribution or distributions in future periods, and our ability to declare and pay distributions will be subject to a number of factors, including our results of operations.

We intend to elect to be treated as a RIC under Subchapter M of the Code for the period from October 9, 2012 to December 31, 2012 and intend to qualify annually thereafter. To obtain RIC tax benefits, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we currently intend to distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years on which we paid no U.S. federal income tax.

In addition, although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In such event, the consequences of our retention of net capital gains are as described under “Tax Matters.”

We cannot assure you that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or to the extent distributions are limited by the terms of any of our borrowings, including the Credit Facility. See “Risk Factors — Risks Relating to our Business and Structure — We are subject to risks associated with the Credit Facility.”

Any distributions will be at the sole discretion of our board of directors, and the amount, if any, of distributions will depend upon a number of factors, including our actual and projected results of operations, liquidity, cash flows and financial condition, the revenue we actually receive from our investments, our operating expenses, our debt service requirements, prohibitions and other limitations under our financing arrangements and such other factors as our board of directors deems relevant.

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

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CAPITALIZATION

The following table sets forth:

the actual capitalization of Garrison Capital Inc. on a consolidated basis as of December 31, 2012;
the pro forma capitalization of Garrison Capital Inc. on a consolidated basis as adjusted to reflect the Distribution-in-Kind.
the pro forma capitalization of Garrison Capital Inc. on a consolidated basis as adjusted to reflect the sale of 5,333,334 shares of our common stock in this offering at an assumed public offering price of $15.00 per share after deducting the underwriting discounts and commissions of approximately $5.6 million and estimated offering expenses of approximately $0.6 million incurred by us and the sale of 126,901 shares in the Concurrent Private Placement at the same assumed offering price per share.

     
  As of December 31, 2012
     Garrison Capital Inc.
     Actual   Pro Forma(1)   Pro Forma
As Adjusted(2)
     (Audited)   (Unaudited)   (Unaudited)
     (dollars in thousands except
per unit and per share data)
Assets:
                          
Cash and cash equivalents   $ 21,681     $ 21,681     $ 97,385  
Cash and cash equivalents, restricted accounts     69,902       69,902       69,902  
Investments at fair value     220,106       210,516       210,516  
Other assets     4,300       3,899       3,899  
Total assets   $ 315,989     $ 305,998     $ 381,702  
Liabilities:
                          
Senior secured term loan payable   $ 125,000     $ 125,000     $ 125,000  
Due to counterparties     15,742       15,742       15,742  
Interest payable     510       510       510  
Other liabilities     1,068       1,068       1,068  
Total liabilities   $ 142,320     $ 142,320     $ 142,320  
Stockholders’ equity:
                          
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 10,498,544 shares issued and outstanding, actual; and 15,958,779 shares issued and outstanding, pro forma(3)   $ 10     $ 10     $ 16  
Capital in excess of par and accumulated earnings     173,659       163,668       239,366  
Total stockholders’ equity     173,669       163,678       239,382  
Net asset value per share     16.54       15.59       15.00  

(1) Adjusts the actual (audited) information to give effect to the Distribution-in-Kind of Garrison Capital Inc.’s investment in Next Generation Vending, LLC, as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments.”
(2) Adjusts the pro forma information to give effect to this offering and the Concurrent Private Placement and the application of the proceeds therefrom, as described under “Use of Proceeds.”
(3) Reflects the Reverse Stock Split of one share of common stock into 0.9805106 shares of common stock, as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments.”

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DILUTION

The dilution to investors in this offering is represented by the difference between the offering price per share and the pro forma net asset value per share after this offering. Net asset value per share is determined by dividing our net asset value, which is our total tangible assets less total liabilities, by the number of outstanding shares of common stock.

As of December 31, 2012, we had 10,498,544 shares of common stock outstanding, and our net asset value was $173.7 million, or approximately $16.54 per share of common stock. After giving effect to the Distribution-in-Kind, our pro forma net asset value is $163.7 million, or $15.59 per share of common stock. After giving effect to the sale of the shares to be sold in this offering and the deduction of discounts and estimated expenses of this offering and the Concurrent Private Placement, our pro forma net asset value would have been approximately $239.4 million, or $15.00 per share, representing an immediate decrease in net asset value of $0.00 per share, or 0%, to shares sold in this offering. Therefore, based on an initial public offering price of $15.00 per share, purchasers in this offering will experience no immediate dilution.

The following table illustrates the dilution to the shares on a per share basis:

 
Assumed initial public offering price per share   $ 15.00  
Net asset value as of December 31, 2012   $ 16.54  
Decrease in net assets attributable to Distribution-in-Kind   $ (0.95 ) 
Net asset value upon completion of the Distribution-in-Kind   $ 15.59  
Increase in net asset value attributable to this offering and the Concurrent Private Placement   $ (0.59 ) 
Pro forma net asset value after this offering and the Concurrent Private Placement   $ 15.00  
Dilution to new stockholders (without exercise of the underwriters’ over-allotment option)   $ 0.00  

The following table sets forth information with respect to the shares prior to and following this offering and the Concurrent Private Placement (without exercise of the underwriters’ over-allotment option):

         
  Shares Purchased   Total Consideration(1)   Average
Price
Per Share
     Number   %   Amount   %
Shares outstanding as of December 31, 2012     10,498,544       65.8 %      163,678,164       66.6 %    $ 15.59  
Shares to be sold in this offering     5,333,334       33.4 %      80,000,010       32.6 %    $ 15.00  
Shares to be sold in the Concurrent Private Placement     126,901       0.8 %      1,903,510       0.8 %    $ 15.00  
Total     15,958,779       100.0 %      245,581,684       100.0 %    $ 15.39  

(1) Total consideration of $163,678,164 after giving effect to the Distribution-in-Kind.

The pro forma net asset value upon completion of this offering and the Concurrent Private Placement is calculated as follows:

 
Numerator:
        
Net asset value upon completion of the Distribution-in-Kind   $ 163,678,164  
Assumed proceeds from this offering and the Concurrent Private Placement (after deduction of underwriting discounts and commissions and offering expenses incurred by us)   $ 75,703,519  
Net asset value upon completion of this offering and the Concurrent Private Placement   $ 239,381,683  
Denominator:
        
Shares outstanding as of December 31, 2012     10,498,544  
Shares included in this offering and the Concurrent Private Placement     5,460,235  

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SELECTED FINANCIAL AND OTHER INFORMATION

The selected financial and other information below should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto. Financial information as of December 31, 2012, December 31, 2011 and December 31, 2010, for the years ended December 31, 2012 and December 31, 2011 and for the period from December 17, 2010 (commencement of operations) to December 31, 2010 has been derived from our consolidated financial statements that were audited by Ernst & Young LLP, an independent registered public accounting firm.

     
  Year ended
December 31, 2012
(audited)
  Year ended
December 31, 2011
(audited)
  Period from
December 17, 2010
(commencement of
operations) through
December 31, 2010
(audited)
     (dollars in thousands)     
Income statement data:
                 
Net investment income (loss)   $ 8,322     $ 15,778     $ (375 ) 
Net expenses (net of waivers)     15,328       11,445       375  
Net realized and unrealized gain/(loss) on investments     (3,947 )      (4,939 )       
Other data:
                          
Weighted average yield (unaudited)(1)     9.62 %      8.93 %      7.32 % 
Number of portfolio companies at period end     49       72       74  

     
  At December 31, 2012 (audited)   At December 31, 2011
(audited)
  At December 31, 2010
(audited)
     (dollars in thousands except per unit data)     
Balance sheet data:
                          
Investments, fair value   $ 220,106     $ 320,779     $ 283,828  
Cash and cash equivalents     21,681       47,928       80,000  
Cash and cash equivalents, restricted accounts     69,902       16,993       21,354  
Total assets     315,989       391,139       392,332  
Senior secured term loan and notes payable     125,000       218,478       218,304  
Net assets/Members’ capital     173,669       171,072       160,233  
Per unit data:
                          
Net asset value per common share/Members’ capital per unit(2)   $ 16.54     $ 16.29     $ 15.26  

(1) In this prospectus, weighted average yield is calculated based on the fair value of the investments and interest expected to be received using the current rate of interest at the balance sheet date to maturity, excluding the effects of future scheduled principal amortizations.
(2) Based on 10,498,544 shares of common stock of Garrison Capital Inc. outstanding as of December 31, 2012 and 10,498,544 units of Garrison Capital LLC outstanding as of December 31, 2011 and December 31, 2010. Each of the outstanding units of Garrison Capital LLC was converted into one share of common stock of Garrison Capital Inc. in connection with the BDC Conversion. We subsequently declared the Reverse Stock Split on February 25, 2013, which resulted in the conversion of one share of common stock into 0.9805106 shares of common stock. All amounts related to shares/units and share/unit price have been retroactively restated. As a result, the 10,707,221 shares of common stock issued in the BDC conversion have been retroactively restated to 10,498,544 shares.

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  2012
(Unaudited)
     Quarter ended
March 31, 2012
  Quarter ended
June 30,
2012
  Quarter
ended
September 30, 2012
  Quarter
ended
December 31,
2012
     (dollars in thousands)
Net realized and unrealized gain/(loss) on investments   $ 3,918     $ (2,518 )    $ (4 )    $ (5,344 ) 
Total investment income     6,725       5,911       5,858       5,156  
Net investment income     3,748       51       3,489       1,034  
Net income (loss)     7,666       (2,468 )      3,485       (4,309 ) 

       
  2011
(Unaudited)
     Quarter ended
March 31, 2011
  Quarter ended
June 30,
2011
  Quarter ended
September 30, 2011
  Quarter
ended
December 31, 2011
     (dollars in thousands)
Net realized and unrealized gain/(loss) on investments   $ 2,147     $ (1,116 )    $ (9,008 )    $ 3,038  
Total investment income     5,818       6,973       7,175       7,256  
Net investment income     2,487       4,520       4,516       4,255  
Net income (loss)     4,634       3,404       (4,492 )      7,293  

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Selected Financial and Other Information” and the financial statements and the related notes thereto appearing elsewhere in this prospectus. On October 9, 2012, Garrison Capital LLC converted into Garrison Capital Inc. and filed an election to be treated as a business development company under the 1940 Act. For periods prior to the BDC Conversion, the discussion and analysis contained in this section refers to the consolidated financial condition, results of operations and cash flows of Garrison Capital LLC. The information in this section contains forward-looking statements that involve risks and uncertainties. Please see “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

We are a recently-organized, externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company under the 1940 Act. In addition, for tax purposes we intend to elect to be treated as a RIC under Subchapter M of the Code for the period from October 9, 2012 to December 31, 2012 and to qualify annually thereafter.

Our investment objective is to generate current income and capital appreciation by making investments generally in the range of $10 million to $25 million primarily in debt securities and loans of U.S. based middle-market companies. Our goal is to generate attractive risk-adjusted returns by assembling a broad portfolio of investments.

We invest primarily in (1) first lien senior secured loans, (2) second lien senior secured loans, (3) “one- stop” senior secured or “unitranche” loans, (4) subordinated or mezzanine loans and (5) to a lesser extent, selected equity co-investments in middle-market companies.

We believe that the middle market offers attractive risk-adjusted returns for debt investors. Historically, we believe there has been a persistent scarcity of available capital relative to demand, which, from a lender’s perspective, has generally resulted in more favorable transaction structures, including enhanced covenant protection and increased pricing relative to larger companies. We further believe that the turmoil in the markets has exacerbated this scarcity of capital, as many traditional lenders to middle-market companies have exited the business or focused their attention on larger borrowers. In addition, middle-market companies traditionally have exhibited lower default rates and improved recoveries compared to larger borrowers and typically offer greater access to key senior managers, which we believe further enhances the attractiveness of lending to this market segment and facilitates due diligence investigations and regular monitoring.

As of December 31, 2012, we held investments in 49 portfolio companies with a fair value of $220.1 million, including investments in 45 portfolio companies held through GF 2012-1. The investments held by GF 2012-1 as of December 31, 2012 consisted of senior secured loans fair valued at $202.5 million and related indebtedness of $125.0 million. As of that date, the loans held by GF 2012-1 (held at fair value), together with cash and other assets held by GF 2012-1, equaled approximately $276.2 million. As of December 31, 2012, our portfolio had an average investment size of approximately $4.3 million, a weighted average yield of 9.62% and a weighted average contractual maturity of 46 months.

As of December 31, 2011, we held investments in 72 portfolio companies with a fair value of $320.8 million, including investments in 70 portfolio companies held indirectly through GF 2010-1. The investments held by GF 2010-1 as of December 31, 2011 consisted of syndicated secured loans fair valued at $278.1 million and related indebtedness of $219.5 million. As of that date, the loans held by GF 2010-1 (held at fair value), together with cash and other assets held by GF 2010-1, equaled approximately $299.1 million. As of December 31, 2011, our portfolio had an average investment size of approximately $4.0 million, a weighted average yield of 8.93% and a weighted average contractual maturity of 47 months.

As of December 31, 2010, we held an investment portfolio of syndicated secured loans fair valued at $283.8 million and related indebtedness of $219.5 million. As of that date, this portfolio consisted of 74 investments with an average investment size of approximately $3.7 million, a weighted average yield of 7.32% and a weighted average contractual maturity of 48 months.

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Going forward, we intend to pursue a strategy focused on originating and investing in first lien, second lien, unitranche and mezzanine loans. Accordingly, over time we expect that syndicated first lien senior secured loans will represent a smaller percentage of our investment portfolio as we grow our business and our existing senior secured investments are repaid or sold in the secondary market and we reinvest the proceeds of such repayments or sales.

Revenues.  We generate revenue in the form of interest earned on the securities that we hold and capital gains and distributions, if any, on the warrants or other equity interests that we may acquire in portfolio companies. We expect our debt investments, whether in the form of senior secured, unitranche or mezzanine loans, to have a term of one to seven years and typically to bear interest at a fixed or floating rate. Interest is generally payable quarterly or semiannually, with the amortization of principal generally being deferred for several years from the date of the initial investment. In some cases, loans may have a PIK feature. The principal amount of the debt securities and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance and possibly consulting fees. Loan origination fees, original issue discount and market discount are recorded as a reduction of par value, and we then accrete such amounts into interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination fees are recorded as interest income. We record prepayment premiums on loans and debt securities as interest income when we receive such amounts.

Expenses.  Our primary operating expenses include the payment of (1) the base management fee and incentive fee to our investment adviser; (2) the allocable portion of overhead under the Administration Agreement; (3) the interest expense on our outstanding debt, if any, and (4) other operating costs as detailed below. Our investment advisory fee compensates our investment adviser for its work in identifying, evaluating, negotiating, consummating and monitoring our investments. See “The Adviser and the Administrator — Investment Advisory Agreement — Management Fees.” We bear all other costs and expenses of our operations and transactions, including:

our organization;
calculating our net asset value and net asset value per share (including the cost and expenses of any independent valuation firm);
fees and expenses, including travel expenses, incurred by Garrison Capital Advisers or payable to third parties in performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;
interest payable on debt, if any, incurred to finance our investments;
the costs of this and all future offerings of common shares and other securities, if any;
the base management fee and any incentive fee;
distributions on our shares;
administration fees payable to Garrison Capital Administrator under the Administration Agreement;
transfer agent and custody fees and expenses;
the allocated costs incurred by Garrison Capital Administrator as our administrator in providing managerial assistance to those portfolio companies that request it;
amounts payable to third parties relating to, or associated with, evaluating, making and disposing of investments;
brokerage fees and commissions;
registration fees;
listing fees;
taxes;
independent director fees and expenses;
costs associated with our reporting and compliance obligations under the 1940 Act and applicable U.S. federal and state securities laws;

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the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;
costs of holding stockholder meetings;
our fidelity bond;
directors and officers/errors and omissions liability insurance, and any other insurance premiums;
litigation, indemnification and other non-recurring or extraordinary expenses;
direct costs and expenses of administration and operation, including audit and legal costs;
fees and expenses associated with marketing efforts;
dues, fees and charges of any trade association of which we are a member; and
all other expenses reasonably incurred by us or Garrison Capital Administrator in connection with administering our business, such as the allocable portion of overhead under our Administration Agreement, including rent and our allocable portion of the costs and expenses of our chief compliance officer, chief financial officer and their respective staffs.

Formation Transactions

Our Formation.  We were formed in November 2010 to invest primarily in (1) first lien senior secured loans, (2) second lien senior secured loans, (3) “one-stop” senior secured or “unitranche” loans, (4) subordinated or mezzanine loans and (5) to a lesser extent, selected equity co-investments in middle-market companies.

On November 5, 2010, GF 2010-1 completed the Debt Securitization.

In December 2010 we completed an $80 million private placement, the proceeds of which were used to invest in U.S. middle-market companies in accordance with our investment strategy. Subsequently, certain open-ended funds affiliated with our investment adviser contributed 100% of the stock of Garrison CLO Ltd., which in turn owns all of the Subordinated Notes, to us as of December 31, 2010 in exchange for $80.6 million in fair value of units in Garrison Capital LLC. An independent third-party valuation firm was engaged to provide positive assurance regarding the fair value of the Subordinated Notes that were contributed to us as of the date of such contribution. As a result of these contributions, we indirectly held through our ownership of the capital stock of Garrison Capital CLO Ltd. all of the Subordinated Notes in GF 2010-1.

Refinancing of Debt Securitization.  On May 21, 2012, GF 2012-1 entered into the Credit Facility to refinance the Debt Securitization. We indirectly own all of the equity interests in GF 2012-1. See “— Credit Facility.”

BDC Conversion.  On October 9, 2012, Garrison Capital LLC converted into a Delaware corporation, Garrison Capital Inc. As part of this conversion, all of the outstanding units in Garrison Capital LLC were converted into an aggregate of 10,707,221 shares of common stock in Garrison Capital Inc. Of the 10,707,221 shares issued in the BDC Conversion, 5,440,554 shares were issued to eight funds affiliated with our investment adviser in exchange for their units in Garrison Capital LLC.

Recent Developments

Reverse Stock Split.  On February 25, 2013, we declared the Reverse Stock Split, which resulted in the conversion of one share of common stock into 0.9805106 shares of common stock. All amounts related to shares/units and share/unit price have been retroactively restated. As a result, the 10,707,221 shares of common stock issued in the BDC Conversion have been retroactively restated to 10,498,544 shares and, of those shares, 5,334,521 shares were issued to and are held by eight funds affiliated with our investment adviser in exchange for their units in Garrison Capital LLC.

Distribution-in-Kind.  On February 25, 2013, our board of directors approved the Distribution-in-Kind in the amount of approximately $10.0 million or $0.95 per share. Assets distributed were Next Generation Vending, LLC, Priority Revolving Loan in the amount of $2.0 million, Next Generation Vending, LLC, Revolver in the amount of approximately $0.8 million, Next Generation Vending, LLC, Term Loan in the amount of approximately $6.8 million and approximately $0.4 million of accrued interest, which represents the fair value and accrued interest of these investments as of December 31, 2012.

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Distribution.  On February 25, 2013, our board of directors approved the Distribution in the amount of $2.4 million or $0.23 a share, which was paid on March 13, 2013 to stockholders of record as of February 25, 2013.

Calculation of Net Asset Value

As of December 31, 2012, our total assets were $316.0 million, and our net assets were $173.7 million. Our board of directors has retained one or more independent valuation firms to review the valuation of each portfolio investment that does not have a readily available market quotation at least once during each 12-month period. The independent valuation firms retained by our board of directors provide a valuation review on 25% of our investments for which market quotations are not readily available each quarter to ensure that the fair value of each investment for which a market quote is not readily available is reviewed by an independent valuation firm at least once during each 12-month period. However, our board of directors does not intend to have de minimis investments of less than 0.5% of our total assets (up to an aggregate of 10% of our total assets) independently reviewed. Our board of directors is ultimately and solely responsible for determining the fair value of our assets using a documented valuation policy and consistently applied valuation process. See “Determination of Net Asset Value.”

Investment Activity and Yield

As of December 31, 2012, we held investments in 49 portfolio companies, including investments in 45 portfolio companies held indirectly through GF 2012-1. As of December 31, 2012, our portfolio had an average investment size of approximately $4.3 million, a weighted average yield of 9.62% and a weighted average maturity of 46 months. In addition, our senior secured debt investments had a weighted average stated interest rate of 8.81%. As of December 31, 2012, a majority of loans in our portfolio had interest rate floors that limit minimum interest rates on such loans. As of December 31, 2012, our investments had a fair value of $220.1 million.

As of December 31, 2011, we held investments in 72 portfolio companies, including investments in 70 portfolio companies held indirectly through GF 2010-1. As of December 31, 2011, our portfolio had an average investment size of approximately $4.0 million, a weighted average yield of 8.93% and a weighted average maturity of 47 months. In addition, our senior secured debt investments had a weighted average stated interest rate of 7.16% as of December 31, 2011. As of December 31, 2011, a majority of loans in our portfolio had interest rate floors that limit minimum interest rates on such loans. As of December 31, 2011, our investments had a fair value of $320.8 million.

As of December 31, 2010, through GF 2010-1, we held an investment portfolio of syndicated secured loans fair valued at $283.8 million and related indebtedness of $219.5 million. As of that date, this portfolio consisted of 74 investments with an average investment size of approximately $3.7 million, a weighted average yield of 7.32% and a weighted average maturity of 48 months.

Credit Facility

On May 21, 2012, GF 2012-1 entered into the Credit Facility, with the lenders party thereto, Natixis, New York Branch, as administrative agent, and Deutsche Bank Trust Company Americas, as collateral agent and custodian.

Under the Credit Facility, the lenders have agreed to extend credit to GF 2012-1 in an aggregate principal amount of $150 million, consisting of $125 million of term loans and $25 million of revolving loans. The documents for the Credit Facility do not provide for recourse to us. The ability of GF 2012-1 to draw under the revolving loans terminates on November 21, 2013, and the Credit Facility matures on February 21, 2020. The Credit Facility is secured by all of the assets held by GF 2012-1.

Under the Credit Facility, GF 2012-1 has a reinvestment period through November 21, 2013 and GF 2012-1 may directly originate new loans in GF 2012-1, which was previously prohibited in GF 2010-1 under the Debt Securitization.

Through February 20, 2013, Class A-T Loans and Class A-R Loans under the Credit Facility will bear interest at an annual rate equal to a cost of funds rate plus 2.75% or 3.25%, respectively, depending on the credit quality of the loans securing the Credit Facility. The cost of funds rate is capped at LIBOR plus 0.50%.

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Regardless of the credit quality of the loans securing the Credit Facility, from February 20, 2013 to November 21, 2013, the Credit Facility bears interest at an annual rate equal to a cost of funds rate plus 3.25%. In addition, the Class A-R Loans bear a 1.25% annual fee on any undrawn portion of the loans.

On November 21, 2013, the Credit Facility will become subject to a margin rate increase of 0.25%. From November 21, 2013 to February 21, 2020, the Credit Facility is subject to further incremental margin rate increases of 0.25% on each six-month anniversary date, but in no event will the margin rate exceed 4.50%. Under certain circumstances, the application of the margin rate increase may be accelerated. See “Risk Factors — Risks Relating to our Business and Structure — We depend upon key personnel of Garrison Investment Group and its affiliates.”

Under the Credit Facility, there are two coverage tests applicable to the collateral loans. The first such test compares the amount of interest received on the collateral loans held by GF 2012-1 to the amount of interest payable on the loans under the Credit Facility in respect of the amounts drawn thereunder. To meet this first test, at any time, the aggregate amount of interest received on the collateral loans must equal at least 150% of the aggregate amount of interest payable on the loans under the Credit Facility. The second such test compares the aggregate principal amount of the collateral loans to the aggregate outstanding principal amount of the loans under the Credit Facility in respect of the amounts drawn thereunder. To meet this second test at any time, the aggregate principal amount of the collateral loans must equal at least 176% of the aggregate outstanding principal amount on the loans under the Credit Facility. If the coverage tests are not satisfied on any date on which compliance is measured, GF 2012-1 will be required to apply available amounts to the repayment of principal of the loans under the Credit Facility to the extent necessary to satisfy the applicable coverage tests and, as a result, there may be reduced funds available for GF 2012-1 to make additional investments or to make distributions on our equity interests in GF 2012-1. Dates on which compliance is measured include each day collateral loans are purchased, originated or sold and the last day of each calendar month. Furthermore, if under the second coverage test the aggregate principal amount of the collateral loans equals 125% or less of the aggregate outstanding principal amount on the loans under the Credit Facility and remains so for five business days, an event of default will be deemed to have occurred. As of December 31, 2012, GF 2012-1 was in compliance with all of the coverage tests, and the custodian has asserted that all of the coverage tests were met.

We used the proceeds from the initial draw of $125 million under the Credit Facility together with cash on hand to redeem the Secured Notes and the Subordinated Notes in accordance with the indenture governing the notes. In connection with the execution of the documents governing the Credit Facility, a majority of the loans and other assets owned or financed under such indenture were sold or contributed to GF 2012-1. Following the closing of the Credit Facility, no assets remained in Garrison Capital CLO Ltd. and GF 2010-1, and we have commenced dissolution procedures for Garrison Capital CLO Ltd. and expect to dissolve GF 2010-1 as soon as practicable.

GF 2012-1 Manager serves as collateral manager to GF 2012-1 and has entered into a sub-collateral management agreement with Garrison Capital Advisers. Garrison Capital Advisers is not entitled to receive a fee under the sub-collateral management agreement.

In connection with the Credit Facility, GF 2012-1 has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. Effective upon our election to be treated as a business development company, our borrowings under the Credit Facility will be subject to the leverage restrictions contained in the 1940 Act.

Under the investment company rules and regulations pursuant to the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, codified in FASB ASC Topic 946, Financial Services-Investment Companies, or ASC 946, we are precluded from consolidating any entity other than another investment company. We generally consolidate any investment company when we own 100% of its partners’ or members’ capital or equity units. ASC 946 also provides an exception to the aforementioned if the investment company has an investment in a controlled operating company that provides substantially all of its services to the investment company. Prior to the date of this prospectus, Garrison Capital CLO Ltd., the intermediate holding company of GF 2010-1, was a 100% owned subsidiary. Furthermore, prior to the refinancing of the Debt Securitization it owned 100% of the Subordinated Notes of GF 2010-1, which is also

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deemed to be an investment company. As a result, we consolidated the accounts of both of these entities into our financial statements. As a result of this consolidation, the Secured Notes were treated as our indebtedness.

As of the date of this prospectus, GF 2012-1 Manager, the intermediate holding company and collateral manager of GF 2012-1, is a 100% owned subsidiary. Furthermore, GF 2012-1 Manager owns 100% of the equity interests in GF 2012-1, which is also deemed to be an investment company. As a result, we consolidated the accounts of both of these entities into our financial statements. As a result of this consolidation, the outstanding amounts drawn under the Credit Facility are treated as our indebtedness.

As of December 31, 2012, GF 2012-1 held investments in 45 portfolio companies with a total fair value of $202.5 million.

Small Business Investment Company

Following completion of this offering, an affiliate of Garrison Investment Group may apply for a license to form an SBIC. If such an application were made and approved and the SBA so permits, we anticipate that the SBIC license would be transferred to a wholly-owned subsidiary of ours that would be formed just prior to such transfer. The SBIC subsidiary will be able to rely on an exclusion from the definition of investment company under the 1940 Act. As such, this SBIC subsidiary will not elect to be treated as a business development company, nor registered as an investment company under the 1940 Act. We expect that any SBIC subsidiary would engage in an investment strategy substantially similar to ours and will make similar types of investments in accordance with SBIC regulations. We cannot assure you that we or any affilate of Garrsion Investment Group will apply for an SBIC license or that any such application would be approved.

To the extent that we, through the wholly-owned subsidiary, have an SBIC license, the SBIC subsidiary will be allowed to issue SBA-guaranteed debentures, subject to the required capitalization of the SBIC subsidiary. SBA guaranteed debentures carry long-term fixed rates that are generally lower than rates on comparable bank and other debt. Under the regulations applicable to SBICs, an SBIC may have outstanding debentures guaranteed by the SBA generally in an amount of up to twice its regulatory capital, which generally equates to the amount of its equity capital. The SBIC regulations currently limit the amount that an SBIC subsidiary may borrow to a maximum of $150 million, assuming that it has at least $75 million of equity capital. In addition, if we are able to obtain financing under the SBIC program, our SBIC subsidiary will be subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants. In the event an affiliate of Garrison Investment Group applies for a license to form a SBIC, we cannot be certain such approval will be granted or, if granted, the timing of approval for an SBIC license.

Results of Operations

The consolidated results of operations set forth below include historical financial information prior to our election, effective as of October 9, 2012, to become a business development company and our intended election to be treated as a RIC for the period from October 9, 2012 through December 31, 2012. As a business development company and a RIC, we are also subject to certain constraints on our operations, including limitations imposed by the 1940 Act and the Code. Also, the management fee that we pay to Garrison Capital Advisers under the Investment Advisory Agreement following the completion of the BDC Conversion is determined by reference to a formula that differs materially from the management fee paid by us in prior periods and certain material portions of the management fee were waived from October 9, 2012 to the date of this prospectus.

In addition, our portfolio of investments consists primarily of syndicated secured loans, and, over time, we expect that such loans will represent a smaller percentage of our investment portfolio as we grow our business, these investments are repaid and we invest in a different mix of assets. The results of operations described below are not indicative of the results we report in future periods. In addition, net income can vary substantially from period to period for various reasons, including the recognition of realized gains and losses and unrealized appreciation and depreciation.

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Investment Income (Loss)

Investment income for the years ended December 31, 2012 and December 31, 2011 and for the period from December 17, 2010 (commencement of operations) to December 31, 2010 was $23.6 million, $27.2 million and $0, respectively.

Investment income decreased by $(3.6) million for 2012 from 2011 due to a decrease in interest income in the amount of $(1.6) million, a decrease in the net accretion from the amortization of discounts in the amount of $(1.7) million and a decrease in other income in the amount of $(0.3) million.

The decrease in interest income was largely driven by the decrease in the average portfolio investment balance for 2012 when compared to 2011 which was partially offset by an increase in the weighted average yield of our debt investments to 9.62% in 2012 from 8.93% in 2011. The decrease in other income was primarily driven by the recognition of fees earned on the early repayment of one portfolio investment in 2011.

Expenses

Total expenses for the years ended December 31, 2012 and December 31, 2011 and for the period from December 17, 2010 (commencement of operations) to December 31, 2010 were $15.3 million, $11.4 million and $0.4 million, respectively. Total expenses for the year ended December 31, 2012 includes total fee and expense waivers of $367,951 comprised of $288,343 of management fees waived by the investment adviser, $31,191 of directors’ fees and $48,417 of administration expenses waived by the administrator.

Total expenses for the year ended December 31, 2012 reflect a loss on the refinancing of senior secured notes in the amount $(3.4) million. In connection with the execution of the Credit Facility and the refinancing of GF 2010-1, the GF 2010-1 Notes were redeemed in accordance with the indenture governing such notes, which resulted in a loss due to the write off of deferred debt issuance costs in the amount of $(2.4) million and the recognition of $(1.0) million of unamortized original issue discount.

Total expenses for the year ended December 31, 2012 also reflect a loss on the write off of deferred offering costs for the year ended December 31, 2012 in the amount $(1.7) million related to legal, accounting, regulatory and printing work completed through October 10, 2012.

The following table summarizes our expenses, excluding the loss on refinancing of senior secured notes and the loss on the write off of deferred offering costs discussed above for the years ended December 31, 2012 and 2011 and for the period from December 17, 2010 (commencement of operations) to December 31, 2010:

     
  Year Ended December 31, 2012   Year Ended
December 31, 2011
  December 17, 2010
(commencement of
operations) to
December 31, 2010
     (dollars in thousands)
Interest   $ 6,155     $ 7,280     $  
Management fees (net of waivers)     2,277       1,804        
Professional fees     983       828       375  
Directors’ fees (net of waivers)     262       191        
Administrator expenses (net of waivers)     200       203        
Rating fees     127       611        
Other expenses     294       528        
     $ 10,299     $ 11,445     $ 375  

Interest expense decreased by ($1.1) million for 2012 from 2011 primarily due to a decrease in average debt outstanding as part of the refinancing of the Debt Securitization on May 21, 2012. As of December 31, 2012 the Company had $125,000,000 of debt outstanding compared to $219,500,000 as of December 31, 2011.

Management fees increased by $0.5 million for 2012 from 2011 primarily due to the increase in average net assets and a decrease in average cash held during the year ended December 31, 2012 and to a lesser extent the change in the calculation of management fees. Management fees are calculated as 1.75% of gross

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assets, excluding cash and cash equivalents but including assets purchased with borrowed funds (as defined in the financial statements). From October 9, 2012 through the date of this prospectus, the investment adviser waived that portion of the management fee due under the Investment Advisory Agreement in excess of a management fee equal to an annual rate of 1.50% of the average of the value of our net assets, including cash and cash equivalents (as defined in the financial statements), calculated at the end of the two most recently completed calendar quarters.

Professional fees increased by $0.2 million for the year ended December 31, 2012 from the year ended December 31, 2011 primarily due to an increase in tax and legal fees incurred during the year ended December 31, 2012 when compared to the year ended December 31, 2011.

Ratings fees decreased by ($0.5) million for the year ended December 31, 2012 from the year ended December 31, 2011 due to ratings fees incurred in the year ended December 31, 2011 which did not recur.

Other expenses decreased by $(0.2) million for the year ended December 31, 2012 from the year ended December 31, 2011 primarily due to expenses related to our organization and incorporation which were recognized during the year ended December 31, 2011 which did not recur in the year ended December 31, 2012.

Net Realized and Unrealized Gain (Loss) on Investments

For the year ended December 31, 2012, we realized net gains on investments of $3.4 million. Net realized gains for 2012 primarily resulted from the early full repayment of 39 portfolio investments and the sale of eight portfolio investments.

For the year ended December 31, 2011 and for the period from December 17, 2010 (commencement of operations) to December 31, 2010, we realized net gains on investments of $3.5 million and $0, respectively. Net realized gains for 2011 primarily resulted from the early full repayment of 33 portfolio investments and the sale of two portfolio investments.

For the year ended December 31, 2012, the net change in unrealized depreciation on investments was $(7.3) million. The net change in unrealized depreciation for 2012 was primarily driven by negative credit related adjustments of four portfolio investments in the amount of $(9.7) million, offset by $1.9 million due to the reversal of prior period unrealized depreciation due to the early repayments and sales of portfolio investments, and $0.5 million as a result of the increase in the fair value of the remaining portfolio of investments primarily due to a rise in market prices for loan assets as a result of the general improvement in the credit markets.

For the year ended December 31, 2011 and for the period from December 17, 2010 (commencement of operations) to December 31, 2010, the net change in unrealized depreciation on investments was $(8.4) million and $0, respectively. The net change in unrealized depreciation for 2011 was primarily driven by the negative credit related adjustment of one portfolio investment in the amount of $(1.7) million, $(0.3) million due to the reversal of prior period unrealized appreciation due to the early repayments and sales of portfolio investments, and $(6.4) million attributable to a net decrease in the market value of investments as a result of general declines in the credit markets.

Net Increase in Net Assets from Operations

We declared the Reverse Stock Split on February 25, 2013, which resulted in the conversion of one share of common stock into 0.9805106 shares of common stock. All amounts related to shares/units, share/unit prices, earnings per share/per unit and distributions per share/per unit have been retroactively restated.

We had a net asset value per common share outstanding on December 31, 2012 of $16.54. We had a net asset value per members’ capital units outstanding on December 31, 2011 of $16.29.

Based on 10,498,544 basic weighted average shares outstanding, the net increase in net assets from operations per share for the year ended December 31, 2012 was $0.42. We declared and paid a dividend on December 27, 2012 in the amount of $1,776,940 or $0.17 a share.

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We had a net asset value per unit on December 31, 2010 of $15.26. Based on 10,498,544 units outstanding, the net increase in members’ capital from operations per unit for the year ended December 31, 2011 was $1.03.

Liquidity and Capital Resources

As a business development company, we expect to distribute substantially all of our net income to our stockholders. We will generate cash primarily from the net proceeds of this offering and future offerings of equity securities and cash flows from operations, including interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less. We have borrowed funds under the Credit Facility and, to the extent permitted under the 1940 Act, we may also borrow funds subsequent to this offering to the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our board of directors determines that leveraging our portfolio would be in the best interest of us and our stockholders. We do not intend to borrow additional money to fund our investments until such time as we have invested substantially all of the proceeds of the offering. We expect that our primary use of funds will be investments in portfolio companies, cash distributions to holders of our common stock and the payment of operating expenses.

As of December 31, 2012, 2011 and 2010, we had cash and cash equivalents of $21.7 million, $47.9 million and $80 million, respectively. Also as of December 31, 2012, 2011 and 2010, we had cash and cash equivalents, restricted of $69.9 million, held by GF 2012-1, and $17.0 million and $21.4 million, held by GF 2010-1, respectively. For purposes of U.S. generally accepted accounting principles, or U.S. GAAP, we consider cash equivalents to be highly liquid financial instruments with original maturities of three months or less and cash held in overnight sweep deposit accounts.

During the year ended December 31, 2012, cash and cash equivalents decreased by $26.2 million as a result of net cash used in financing activities in the amount of $101.1 million, offset by cash provided by operating activities in the amount of $74.9 million.

During the year ended December 31, 2012, cash used in financing activities resulted from the principal repayment of all of the outstanding Secured Notes in the amount of $219.5 million, offset by proceeds from borrowings on the Credit Facility in the amount of $125.0 million and reduced by costs associated with the issuance of the Credit Facility in the amount of $3.2 million and distributions to our stockholders in the amount of $1.8 million. Net cash provided by operating activities resulted primarily from repayments and sales of investments in the amount of $191.3 million and $35.5 million, respectively, and net investment income in the amount of $8.3 million, offset by purchases of investments in the amount of $128.4 million, and an increase in cash and cash equivalents, restricted accounts in the amount of $52.9 million.

Our cash and cash equivalents, as of December 31, 2011, were comprised primarily of the proceeds of the $80 million private placement that occurred in December 2010. During the year ended December 31, 2011, cash and cash equivalents decreased by $32.1 million, primarily as a result of the purchase of investments in the amount of $211.7 million, offset in part by repayments and sales of investments in the amount of $155.5 million and $17.6 million, respectively, and net investment income in the amount of $15.8 million.

Inflation

Inflation has not had a significant effect on our results of operations in any of the reporting periods presented in our financial statements. However, our portfolio companies may, from time to time, experience the impact of inflation on their operating results.

Off-Balance Sheet Arrangements

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of December 31, 2012, December 31, 2011 and December 31, 2010, we had $2.0 million, $1.6 million and $0 outstanding commitments to fund investments, respectively.

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Contractual Obligations

A summary of our significant contractual payment obligations as of December 31, 2012 is as follows:

         
  Payments Due by Period (in millions)
     Total   Less Than
1 Year
  1 – 3 Years   3 – 5 Years   More Than
5 Years
Secured Loans   $ 125.0     $     —     $     —     $     —     $ 125.0  
Unfunded commitments(1)   $ 2.0     $ 2.0     $     —     $     —     $     —  
Total contractual obligations   $ 127.0     $ 2.0     $     —     $     —     $ 125.0  

(1) Unfunded commitments represent all amounts unfunded as of December 31, 2012. These amounts may or may not be funded to the borrowing party in the future. The unfunded commitments related to a senior secured revolving loan to Next Generation Vending, LLC and Global Traffic Technologies, LLC with a maturity date of 2016 and 2014, respectively. We reflect this amount in the less than one-year category because the entire amount was eligible for funding as of December 31, 2012.

We have certain contracts under which we have material future commitments. Under the Investment Advisory Agreement, Garrison Capital Advisers has agreed to provide us with investment advisory and management services. We have agreed to pay for these services (1) a base management fee equal to a percentage of the average adjusted value of our gross assets and (2) an incentive fee based on our performance. See “The Adviser and the Administrator — Investment Advisory Agreement — Management Fee.”

We entered into the Administration Agreement on October 9, 2012 with Garrison Capital Administrator as our administrator. Under the Administration Agreement, Garrison Capital Administrator will agree to furnish us with office facilities and equipment, provide us clerical, bookkeeping and record keeping services and provide us with other administrative services necessary to conduct our day-to-day operations. See “The Adviser and the Administrator — Administration Agreement.”

If any of the contractual obligations discussed above are terminated, our costs under any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Advisory Agreement and our Administration Agreement. Any new investment advisory agreement would also be subject to approval by our stockholders.

Both the Investment Advisory Agreement and the Administration Agreement may be terminated by either party without penalty upon no fewer than 60 days’ written notice to the other.

Distributions

In order to qualify as a RIC and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under the Code, to distribute at least 90% of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our stockholders on an annual basis. Additionally, we must distribute at least 98% of our ordinary income and 98.2% of our capital gain net income (both long-term and short-term) to avoid a U.S. federal excise tax. We intend to make quarterly distributions to our stockholders. Our quarterly distributions will be determined by our board of directors.

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of our distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements applicable to us as a business development company under the 1940 Act. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including the possible loss of our RIC status. We cannot assure stockholders that they will receive any distributions.

To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may be the original capital invested by the

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stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a distribution carefully and should not assume that the source of any distribution is our ordinary income or gains.

We have adopted an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts out” of our dividend reinvestment plan. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions, stockholders participating in our dividend reinvestment plan will not receive any corresponding cash distributions with which to pay any such applicable taxes.

Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. During the period covered by our financial statements, all of the loans in our portfolio had floating interest rates, and we expect that our loans in the future will also have floating interest rates. These loans are usually based on a floating LIBOR and typically have interest rate re-set provisions that adjust applicable LIBOR under such loans to current market rates on a quarterly basis. In addition, the Credit Facility has a floating interest rate provision based on a cost of funds that approximates LIBOR and we expect that any other credit facilities into which we enter in the future may have floating interest rate provisions.

Assuming that the balance sheet as of December 31, 2012 covered by this analysis were to remain constant and that no actions are taken to alter our existing interest rate sensitivity, a hypothetical immediate 1% change in interest rates may affect net income by more than 1% over a one-year horizon. Although management believes that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit markets, the size, credit quality or composition of the assets in our portfolio and other business developments, including indebtedness under the Credit Facility or other borrowing, that could affect net increase in net assets resulting from operations, or net income. Accordingly, we cannot assure you that actual results would not differ materially from the statement above.

We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts, and the collateral manager may engage in similar hedging activities with respect to the obligations of GF 2012-1. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates. We, our investment adviser and the collateral manager have not hedged any of the obligations of GF 2012-1.

Critical Accounting Policies

The preparation of our financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. We have identified the following as critical accounting policies.

Basis for Consolidation

Under the investment company rules and regulations pursuant to the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, codified in ASC 946, we are precluded from consolidating any entity other than another investment company. We generally consolidate any investment company when we own 100% of its partners’ or members’ capital or equity units. ASC 946 also provides an exception to the aforementioned if the investment company has an investment in a controlled operating company that provides substantially all of its services to the investment company. GF 2012-1 Manager owns a 100% equity interest in GF 2012-1, which is deemed to be an investment company, and also provides collateral management services solely to GF 2012-1. As such, we have consolidated the accounts of these entities into our financial statements. As a result of this consolidation, the amounts outstanding under the Credit Facility are treated as our indebtedness. Garrison Capital CLO Ltd. and Garrison Capital Equity Holdings LLC are 100% owned investment companies. Furthermore, Garrison Capital CLO owns a 100%

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interest in GF 2010-1, which is deemed to be an investment company. As such, GARS has consolidated the accounts of these entities into its financial statements.

Valuation of Portfolio Investments

We value our investments in accordance with ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value. ASC 820’s definition of fair value focuses on exit price in the principal, or most advantageous, market and prioritizes the use of market-based inputs over entity-specific inputs within a measurement of fair value.

Our portfolio consists of primarily debt investments. The fair value of our investments is initially determined by investment professionals of our investment adviser and ultimately determined by our board of directors on a quarterly basis. Our investment adviser generally uses various approaches, including proprietary models that consider the analyses of independent valuation agents as well as credit risk, liquidity, market credit spreads, other applicable factors for similar transactions, bid quotations obtained from other financial institutions that trade in similar investments or based on prices provided by independent third party pricing services.

The types of factors that our board of directors may take into account when verifying the price initially determined by our investment adviser and determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities, including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business and other relevant factors.

Our board of directors has retained several independent valuation firms to review the valuation of each portfolio investment that does not have a readily available market quotation at least once during each 12-month period. However, our board of directors does not intend to have de minimis investments of less than 0.5% of our total assets (up to an aggregate of 10% of our total assets) independently reviewed. Our board of directors is ultimately and solely responsible for determining the fair value of our assets using a documented valuation policy and consistently applied valuation process.

Due to the nature of our strategy, our portfolio includes relatively illiquid investments that are privately held. Inputs into the determination of fair value of our portfolio investments require significant management judgment or estimation. This means that our portfolio valuations are based on unobservable inputs and our own assumptions about how market participants would price the asset or liability in question. Valuations of privately held investments are inherently uncertain and they may fluctuate over short periods of time and may be based on estimates. The determination of fair value by our board of directors may differ materially from the values that would have been used if a ready market for these investments existed. Our net asset value could be materially affected if the determinations regarding the fair value of our investments were materially higher or lower than the values that we ultimately realized upon the disposal of such investments.

The valuation process is conducted at the end of each fiscal quarter, with a portion of our valuations of portfolio companies without market quotations subject to review by the independent valuation firms each quarter. When an external event with respect to one of our portfolio companies, such as a purchase transaction, public offering or subsequent equity sale occurs, we expect to use the pricing indicated by the external event to corroborate our valuation.

With respect to investments for which market quotations are not readily available, our board of directors will undertake a multi-step valuation process each quarter, as described below:

Our quarterly valuation process begins with each portfolio company or investment being initially valued by investment professionals of our investment adviser responsible for credit monitoring.
Preliminary valuation conclusions are then documented and discussed with our senior management and our investment adviser.
The audit committee of the board of directors reviews these preliminary valuations.
At least once annually, the valuation for each portfolio investment is reviewed by an independent valuation firm.

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The board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith.

See “Determination of Net Asset Value.”

Investment Transactions and Related Investment Income and Expense

We record our investment transactions on a trade date basis, which is the date when we have determined that all material terms have been defined for the transactions. These transactions could possibly settle on a subsequent date depending on the transaction type. All related revenue and expenses attributable to these transactions are reflected on the consolidated statement of operations commencing on the trade date unless otherwise specified by the transaction documents. Realized gains and losses on investment transactions are recorded on the specific identification method.

We accrue interest income if we expect that ultimately we will be able to collect it. Generally, when an interest default occurs on a loan in our portfolio, or if our management otherwise believes that the issuer of the loan will not be able to service the loan and other obligations, we will place the loan on non-accrual status and will cease recognizing interest income on that loan until all principal and interest is current through payment or until a restructuring occurs, such that the interest income is deemed to be collectible. However, we remain contractually entitled to this interest. We may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection. Accrued interest is written off when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated. As of December 31, 2012, there was one investment in default, which was placed on non-accrual status. Any original issue discounts, as well as any other purchase discounts or premiums on debt investments, are accreted or amortized and included in interest income over the maturity periods of the investments.

Interest expense is recorded on an accrual basis and is adjusted for amortization on the senior secured notes. Certain expenses related to, but not limited to, rating fees, due diligence, valuation expenses and independent collateral appraisals may arise when we make certain investments. These expenses are recognized in the consolidated statement of operations within ratings fees and other expenses as they are incurred.

Loan Origination, Facility, Commitment and Amendment Fees

We may receive loan origination, facility, commitment and amendment fees in addition to interest income from the loans during the life of the investment. We may receive origination fees upon the origination of an investment. Origination fees are initially deferred and reduced from the cost basis of the investment and subsequently accreted into interest income over the remaining stated term of the loan. Facility fees, sometimes referred to as asset management fees, are accrued as a percentage periodic fee on the base amount (either the funded facility amount or the committed principal amount). Commitment fees are based upon the undrawn portion committed by us and are recorded on an accrual basis. Amendment fees are paid in connection with loan amendments and waivers and are recognized upon completion of the amendments or waivers, generally when such fees are receivable. Any such fees are included in interest income on the consolidated statement of operations. For the years ended December 31, 2012 and December 31, 2011 and the period from December 17, 2010 (commencement of operations) to December 31, 2010, other income in the amount of $381,375, $698,119 and $0, respectively, was included in interest income.

Recent Accounting Pronouncements

On May 12, 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, or ASU 2011-04. ASU 2011-04 amends ASC 820 (formerly FASB Statement No. 157), and will require entities to change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 clarifies the application of existing fair value measurement and disclosure requirements related to the application of the highest and best use and valuation premise concepts for financial and nonfinancial instruments, measuring the fair value of an instrument classified in shareholder’s equity and disclosures about fair value measurements. ASU 2011-04 changes the measurement of the fair value of financial instruments that are managed within a portfolio and the application of premiums and discounts in a fair value measurement related to size as a characteristic of the reporting entity’s holding rather than a characteristic of the asset or liability. ASU 2011-04 also requires additional

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disclosures about fair value measurements categorized within Level 3 of the fair value hierarchy including the valuation processes used by the reporting entity, the sensitivity of the fair value to changes in unobservable inputs (applicable only to public companies), and the interrelationships between those unobservable inputs, if any. Lastly, ASU 2011-04 requires entities to disclose any amounts (not just significant) transferred between Level 1 and Level 2 of the fair value hierarchy (applicable to only public companies). All the amendments to ASC 820 made by ASU 2011-04 are effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a material impact on our consolidated financial statements, except it enhanced the disclosures around fair value of investments.

Senior Securities

Information about our senior securities is shown in the following table as of December 31, 2012, 2011 and 2010. Ernst & Young LLP’s report on the senior securities table at December 31, 2012, 2011 and 2010 is attached as an exhibit to the registration statement of which this prospectus is a part.

       
Class and Year   Total Amount
Outstanding
Exclusive of
Treasury
Securities(1)
  Asset
Coverage
per Unit(2)
  Involuntary
Liquidating
Preference
per Unit(3)
  Average
Market Value
per Unit(4)
December 31, 2012   $ 125,000,000     $ 2,389             N/A  
December 31, 2011   $ 219,500,000     $ 1,775             N/A  
December 31, 2010   $ 219,500,000     $ 1,730             N/A  

(1) Total amount of each class of senior securities outstanding at the end of the period presented.
(2) Asset coverage per unit is the ratio of the carrying value of our total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness.
(3) The amount to which such class of senior security would be entitled upon the voluntary liquidation of the issuer in preference to any security junior to it. The “—” in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of senior securities.
(4) Not applicable because senior securities are not registered for public trading.

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THE COMPANY

Overview

We are a recently-organized, externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company under the 1940 Act. In addition, for tax purposes we intend to elect to be treated as a RIC under Subchapter M of the Code for the period from October 9, 2012 to December 31, 2012 and to qualify annually thereafter.

Our investment objective is to generate current income and capital appreciation by making investments generally in the range of $10 million to $25 million primarily in debt securities and loans of U.S. based middle-market companies. Our goal is to generate attractive risk-adjusted returns by assembling a broad portfolio of investments.

We invest primarily in (1) first lien senior secured loans, (2) second lien senior secured loans, (3) “one-stop” senior secured or “unitranche” loans, (4) subordinated or mezzanine loans and (5) to a lesser extent, selected equity co-investments in middle-market companies. We use the term “one-stop” or “unitranche” to refer to a loan that combines covenant and security characteristics of traditional first lien senior secured loans with the interest rate of second lien or subordinated loans. We use the term “mezzanine” to refer to a loan that ranks senior only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness.

We believe that the middle market offers attractive risk-adjusted returns for debt investors. Historically, we believe there has been a persistent scarcity of available capital relative to demand, which, from a lender’s perspective, has generally resulted in more favorable transaction structures, including enhanced covenant protection and increased pricing relative to larger companies. We further believe that the turmoil in the markets has exacerbated this scarcity of capital, as many traditional lenders to middle-market companies have exited the business or focused their attention on larger borrowers. In addition, middle-market companies traditionally have exhibited lower default rates and improved recoveries compared to larger borrowers and typically offer greater access to key senior managers, which we believe further enhances the attractiveness of lending to this market segment and facilitates due diligence investigations and regular monitoring.

As of December 31, 2012, we held investments in 49 portfolio companies with a fair value of $220.1 million, including investments in 45 portfolio companies held indirectly through GF 2012-1. The investments held by GF 2012-1 as of December 31, 2012 consisted of senior secured loans fair valued at $202.5 million and related indebtedness of $125.0 million. As of that date, the loans held by GF 2012-1 (held at fair value), together with cash and other assets held by GF 2012-1, equaled approximately $276.2 million. As of December 31, 2012, our portfolio had an average investment size of approximately $4.3 million, a weighted average yield of 9.62% and a weighted average maturity of 46 months.

As of December 31, 2011, we held investments in 72 portfolio companies with a fair value of $320.8 million, including investments in 70 portfolio companies held indirectly through GF 2010-1. The investments held by GF 2010-1 as of December 31, 2011 consisted of syndicated secured loans fair valued at $278.1 million and related indebtedness of $219.5 million. As of that date, the loans held by GF 2010-1 (held at fair value), together with cash and other assets held by GF 2010-1, equaled approximately $299.1 million. As of December 31, 2011, our portfolio had an average investment size of approximately $4.0 million, a weighted average yield of 8.93% and a weighted average maturity of 47 months. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Going forward, we intend to pursue a strategy focused on originating and investing in first lien, second lien, unitranche and mezzanine loans. Accordingly, over time we expect that syndicated first lien senior secured loans will represent a smaller percentage of our investment portfolio as we grow our business and our existing senior secured investments are repaid or sold in the secondary market and we reinvest the proceeds of such repayments or sales.

Our Investment Adviser

Our investment activities are managed by our investment adviser, Garrison Capital Advisers. Our investment adviser is responsible for sourcing potential investments, conducting research and diligence on prospective investments and equity sponsors, analyzing investment opportunities, structuring our investments

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and monitoring our investments and portfolio companies on an ongoing basis. Garrison Capital Advisers was organized in November 2010 and is a registered investment adviser under the Advisers Act. Under the Investment Advisory Agreement, we pay our investment adviser a base management fee and an incentive fee for its services. See “The Adviser and the Administrator” for a discussion of the base management fee and incentive fee payable by us to our investment adviser.

Garrison Capital Advisers is an affiliate of Garrison Investment Group. Garrison Capital Advisers has entered into the Staffing Agreement with Garrison Investment Group under which Garrison Investment Group has agreed to make experienced investment professionals available to Garrison Capital Advisers and to provide access to the senior investment personnel of Garrison Investment Group. We believe that the Staffing Agreement provides our investment adviser with access to deal flow generated by Garrison Investment Group in the ordinary course of business and commits the members of Garrison Investment Group’s investment committee to serve as members of our investment committee. In addition, Garrison Investment Group is obligated under the Staffing Agreement to allocate investment opportunities among its managed affiliates fairly and equitably over time in accordance with its allocation policy. See “Certain Relationships.” Our investment adviser capitalizes on the significant deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Garrison Investment Group’s investment professionals. Garrison Investment Group has conducted due diligence on more than 500 middle-market companies since July 2007.

Garrison Capital Administrator

Garrison Capital Administrator, an affiliate of our investment adviser, provides certain administrative services and facilities necessary for us to operate, including, office facilities and equipment and clerical, bookkeeping and record-keeping services. Garrison Capital Administrator oversees our financial reporting as well as prepares our reports to stockholders and reports required to be filed with the SEC. Garrison Capital Administrator also manages the determination and publication of our net asset value and the preparation and filing of our tax returns and generally monitors the payment of our expenses and the performance of administrative and professional services rendered to us by others. Garrison Capital Administrator may retain third parties to assist in providing administrative services to us. To the extent that Garrison Capital Administrator outsources any of its functions, we pay the fees associated with such functions on a direct basis without any profit to Garrison Capital Administrator. Garrison Capital Administrator has retained SEI Investments Global Fund Services, Inc. to provide certain accounting and administrative services to it.

About Garrison Investment Group

Garrison Investment Group is an alternative investment and asset management firm founded in March 2007 by Steven Stuart and Joseph Tansey. As of December 31, 2012, Garrison Investment Group had approximately $3.1 billion of committed and invested capital under management and a team of 62 employees, including 36 investment professionals. Garrison Investment Group is headquartered in New York, New York. Garrison Investment Group invests opportunistically in the debt of middle-market companies, primarily in the areas of corporate finance, real estate finance and structured finance.

Since the formation of Garrison Investment Group, Messrs. Stuart and Tansey together with their team of investment professionals, including Rafael Astruc, Brian Chase, Terence Moore and Mitch Drucker, have been investors and lenders to middle-market companies. These investment professionals have significant experience investing in a broad range of industries and types of debt over the course of several economic cycles.

Before joining Garrison Investment Group, Messrs. Stuart and Tansey were Managing Directors at Fortress Investment Group LLC, or Fortress, and were also partners of the Drawbridge Special Opportunities Fund, one of Fortress’ hybrid hedge funds, from its inception in August 2002 to March 2007. Drawbridge focused primarily on investments in opportunistic debt and equity securities and asset-based transactions. The responsibilities of these individuals included sourcing, evaluating, structuring, managing and monitoring corporate, structured finance and real estate investments, including both debt and equity. Messrs. Stuart and Tansey have 26 and 17 years of investment experience, respectively.

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Market Opportunity

We believe that the current credit and asset market dynamics are favorable for us. We intend to pursue an investment strategy focused on investing in first lien, second lien, unitranche and mezzanine loans of, and, to a lesser extent, warrants and minority equity securities in, U.S. middle-market companies. As the investment environment changes, our investment adviser intends to adapt its investment focus dynamically to investments that it perceives to have attractive risk-return characteristics. We find middle-market investing attractive for the following reasons:

Reduced Competition.  We believe that, since 2007, dislocations in the corporate financing markets have reduced the amount of credit available to middle-market companies. We believe that much of the traditional lending community for lower middle-market companies, such as commercial/regional banks and commercial finance companies, have contracted their origination activities in the wake of this period of credit dislocation or focused on more liquid asset classes. In addition, a 2010 Congressional Oversight Panel report concluded that 3,000 small U.S. banks either have or may need to curtail lending due to financial stresses, further restricting access to capital for middle-market borrowers, and, when implementation begins later this year, Basel III, published by the Basel Committee on Banking Supervision, is expected to limit the ability of commercial banking institutions to hold non-investment grade leveraged loans on their balance sheets.

Attractive Relative Value Proposition.  We believe that directly originated middle-market loans often exhibit superior default and loss characteristics to syndicated loans, which are often structured with higher levels of debt and a lower percentage of equity contributed. For example, in 2009 middle-market borrowers had a default rate of 4.1% compared to a default rate of 8.6% for large capitalization companies; middle-market companies have a recovery rate of approximately 86.1% as compared to 81.0% for large capitalization companies. The following chart shows the changes in default rates since 2000 and the significant decrease in such rates from mid-2010 through December 2012.

[GRAPHIC MISSING]

Source: S&P IQ LCD Quarterly Review, Fourth Quarter 2012.

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We expect that a substantial backlog of buyout commitments will drive demand for leveraged buyouts over the next several years, which should, in turn, create leveraged lending opportunities for us in the middle market. Meanwhile, reduced access to, and availability of, credit typically increases the interest rates, or pricing, of loans made to U.S. middle-market borrowers, thereby creating an attractive risk-return dynamic for lenders. We believe that the debt of such borrowers typically carries high interest rates and offers attractive up-front fees and prepayment penalties but is not sufficiently attractive to the syndicated debt markets, thereby providing us with many lending opportunities. The following chart highlights the relatively higher increase in interest rates since mid-2008 for single B rated leveraged loans to middle-market borrowers compared to larger corporate borrowers:

Average Nominal Spread of Single B Leveraged Loans
Excludes all facilities in default

[GRAPHIC MISSING]

Source: Standard & Poor’s Q4 2012 High-End Middle Market Lending Review.

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Conservative Capital Structure and Increased Percentage of Equity Contributed.  We believe that lenders generally are requiring borrowers to hold more equity as a percentage of their total capitalization and less senior and total leverage than was customary in the years leading up to the credit crisis, creating a greater amount of equity to protect lenders against future economic downturns. Lower leverage levels in mergers and acquisitions executed in the middle market suggest that middle-market companies should have more cash flows available to them to service their debt. In addition, middle-market companies typically have simpler capital structures than larger borrowers, which streamlines the initial structuring and underwriting process and, in our experience, contributes to improved returns to lenders in restructurings. The following chart illustrates that the average equity contribution to middle-market leveraged buyout loans as a percent of total transaction value since 1997 has increased. The vertical axis of the chart represents the purchase price expressed as a multiple of EBITDA:

Purchase Price Breakdown

[GRAPHIC MISSING]

Source: Standard & Poor’s Q4 2012 High-End Middle Market Lending Review.

Long-Term Capital Solutions.  We believe that many middle-market companies seek to execute transactions with permanent capital vehicles, such as us, rather than execute high-yield bond transactions or borrow capital from hedge funds and other non-permanent vehicles. In addition, we believe that many middle-market companies are positively disposed towards seeking capital from a small number of providers with access to permanent capital that can satisfy their specific needs and serve as value-added financial partners with an understanding of and longer-term view oriented towards the growth of such businesses.

When combined with decreased availability of debt financing for middle-market companies generally, we believe these factors should increase lending opportunities for us.

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Competitive Strengths

Experienced Management Team.  We are managed by our investment adviser, which has access through the Staffing Agreement to the resources and expertise of the investment professionals at Garrison Investment Group. Garrison Investment Group is led by Messrs. Stuart and Tansey. Garrison Investment Group’s investment professionals have substantial experience in identifying and executing financing transactions across a broad range of industries and types of financings and have developed related proprietary sourcing and servicing channels. Our seven member investment committee has combined investment experience of more than 150 years.

Access to Deal Flow.  Through the Staffing Agreement, our investment adviser has access to extensive contacts throughout the middle-market, which it utilizes to source and originate loans. The investment professionals of Garrison Investment Group maintain direct dialogue with their contacts at financial sponsors, banks, corporate advisory firms, crisis managers, industry consultants, attorneys, investment banks, middle-market companies, other “club” investors and other potential sources of lending opportunities. In addition, we anticipate that a portion of our deal flow will be generated through non-traditional channels, such as Garrison Investment Group’s real estate and structured finance teams whose contacts typically share opportunities with a limited group of potential lenders, thereby creating a less competitive process for such lending opportunities. Furthermore, Garrison Investment Group’s senior professionals have cultivated relationships with other middle-market lending platforms that we believe will provide us with an additional source of deal flow. We believe that the breadth of these relationships enables us to be selective in originating or acquiring loans and afford us opportunities to review certain lending proposals in the U.S. middle-market in advance of other potential lenders as well as the opportunity to match the terms offered by other lenders, which should allow for selectivity in the transactions we pursue.

Disciplined Investment and Underwriting Process.  Our investment adviser utilizes the established investment processes developed by Garrison Investment Group to analyze investment opportunities and structure loans. Our investment adviser intends to structure loans with appropriate covenants to allow for renegotiation of loan and pricing terms in the event that a portfolio company fails to satisfy its covenants and to price loans based on its knowledge of the middle market and on its rigorous underwriting standards. Our investment adviser focuses on capital preservation by extending loans to portfolio companies with assets that it believes will retain sufficient value to repay us even in depressed markets or under liquidation scenarios. The professionals employed by Garrison Investment Group have extensive experience in structuring and underwriting middle-market loans and in evaluating collateral positions to minimize credit risk as a lender.

Active Asset Management Approach.  Our investment adviser employs a rigorous credit monitoring system for our portfolio. Garrison Investment Group formally reviews its entire portfolio of loans with our investment committee on a monthly basis. The goal of this review is to enhance the ability of our investment adviser to manage any problems and assist borrowers before operating issues result in financial deterioration. In addition, this process should enable our investment adviser to identify credit and market trends, thereby allowing us to modify underwriting terms for new loans before other lenders have identified such trends. In the event of restructurings, we expect that our investment adviser will manage syndicates of lenders, creditor committees and other creditors and advisors to protect our position. Where necessary, our investment adviser intends to take an active role in any restructuring negotiations and to utilize its extensive industry experience and industry contacts to benefit lenders.

Investment Criteria/Guidelines

Our investment objective is to generate current income and capital appreciation by making investments generally in the range of $10 million to $25 million primarily in debt securities and loans of middle-market companies. We may also selectively make investments in amounts larger than $25 million in certain of our portfolio companies. We generally expect that the size of our individual investments will vary proportionately with the size of our capital base. Our goal is to generate attractive risk-adjusted returns by assembling a broad portfolio of investments.

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Target businesses will typically exhibit some or all of the following characteristics:

annual EBITDA between $5 million and $30 million;
annual revenue between $50 million and $200 million;
a U.S. base of operations;
an experienced management team executing a long-term growth strategy;
discernable downside protection through recurring revenue or strong tangible asset coverage;
defensible niche product/service;
products and services with distinctive competitive advantages or other barriers to entry;
stable and predictable free cash flows;
existing indebtedness that may be refinanced on attractive terms;
low technology and market risk;
strong customer relationships; and
low to moderate capital expenditure requirements.

While we believe that the criteria listed above are important in identifying and investing in prospective portfolio companies, not all of these criteria will be met by each prospective portfolio company.

Investment Strategy

We seek to create a broad portfolio consisting of investments generally in the range of $10 million to $25 million primarily in debt securities and loans of U.S. based middle-market companies. The companies to which we extend credit typically are moderately leveraged, and, in most cases, do not have their loans rated by national rating agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade. In addition, our investments typically range in maturity from one to six years and our overall portfolio will have a weighted average life of approximately five years. However, we may make investments in securities with any maturity or duration.

We invest opportunistically in middle-market loans that we believe have attractive risk adjusted returns. We will also, to a lesser extent, make select equity investments in non-investment grade companies, which may be in the form of warrants. We expect the majority of our focus to generally be centered upon traditional direct lending but at times will seek to enhance returns by purchasing loans in the secondary market, which purchases we refer to as capital markets activities, and extending credit for certain restructuring of financially troubled companies, which we refer to as special situations. We organize these lending opportunities in three categories.

Traditional Direct Lending.  We focus on direct origination of first lien senior secured loans, second lien senior secured loans and unitranche loans as well as select mezzanine loans. With respect to these loans, we identify lending opportunities through the extensive origination network to which we have access and will serve as either sole lender or as a partner with like minded creditors. We expect that we will typically extend first and second lien secured term loans, the proceeds of which may be used to refinance existing indebtedness, support acquisitions, growth initiatives, general corporate liquidity or operational turnarounds.

Capital Markets Activities.  We may also acquire loans in the secondary market at favorable discounts or seek to refinance outstanding loans through anchoring or co-anchoring a new issuance of debt. We believe the experience of the investment professionals to whom our investment adviser has access will allow us to react quickly in executing acquisitions of loans in the secondary market on favorable terms and permit us to refinance loans on a streamlined basis. Investments in 40 of our 49 portfolio companies as of December 31, 2012 were acquired in the secondary market.

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Special Situations.  We may also extend credit for out-of-court restructurings, rescue financings, debtor-in-possession financings and acquisition financings. We expect that, in extending credit to special situations borrowers, we will seek to structure our investments to remain high in the borrower’s capital structure, generate returns through the duration of the loan and obtain call protection or opportunities for enhanced returns through equity participation.

We expect that, from time to time, our investments will include certain non-qualifying assets, including assets of non-U.S. companies, certain publicly traded companies and, to a lesser extent and subject to certain limits under the 1940 Act, registered or unregistered investment companies, to the extent permissible under the 1940 Act. See “Risk Factors — Risks Relating to our Business and Structure — The lack of experience of our investment adviser is operating under the constraints imposed on us as a business development company and RIC may hinder the achievement of our investment objectives.” and “Regulation — Qualifying Assets.”

Due Diligence

We believe it is critical to conduct extensive due diligence on investment targets, and in evaluating new investments. We, through our investment adviser, will conduct a rigorous due diligence process that draws from our investment adviser’s investment experience, industry expertise and network of contacts. Our investment adviser intends to conduct extensive due diligence and perform thorough credit analysis on each potential portfolio company investment. In conducting due diligence, we expect that our investment adviser will use publicly available information and private information provided by borrowers, their financial sponsors and their advisors. Our investment adviser expects to use its relationships with former and current management teams, consultants, competitors and investment bankers to gain further insights into businesses and industries, generally, and our potential portfolio companies, specifically.

Our due diligence will typically include the following elements (although not all elements will necessarily form part of each due diligence review):

thorough review of historical and prospective financial information, including an analysis of collateral coverage, cash flow and valuation multiples and quality of earnings;
review of capital structure, including leverage and equity amounts and participants;
analysis of the business of the prospective portfolio company, including drivers of growth, customer and supplier concentrations, fixed versus variable costs and sensitivity analyses (with a focus on downside scenario analysis);
analysis of the industry in which the prospective portfolio company operates, including its competitive position, industry size and growth rates, competitive outlook, barriers to entry, and technological, regulatory and similar considerations;
interviews with management, employees, customers and vendors and analysis of management’s track record, quality, breadth and depth;
preparation or review of material contracts and loan documents;
when appropriate, background checks on key managers and research relating to the company’s business, industry, markets, products and services; and
third-party research relating to the company’s management, industry, markets, products and services and competitors.

Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants as well as other outside advisers, as appropriate.

Investment Committee

Upon the completion of due diligence and a decision to proceed with an investment in a company, the principals leading the investment present the investment opportunity to our investment adviser’s investment committee, which determines whether to pursue the potential investment. All new investments are required to be reviewed by the investment committee of our investment adviser, which currently consists of the following seven members: Joseph Tansey, Steven Stuart, Rafael Astruc, Brian Chase, Mitch Drucker, Susan George and

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Terence Moore. As our investment adviser adds senior investment professionals subsequent to this offering, our investment adviser may add them to its investment committee. The members of our investment committee receive no compensation from us. These members are employees or partners of Garrison Investment Group and will receive no direct compensation from our investment adviser.

Investment Structure

When our investment adviser or, in the case of GF 2012-1, the collateral manager, determines that a prospective portfolio company is suitable for investment, it will work with the company’s management and its other capital providers to structure an investment. Our investment adviser intends to negotiate among these parties to agree how our investment should be structured relative to the other capital in the portfolio company’s capital structure.

We expect to structure our loans as follows:

Secured Loans.  We typically structure these loans, which include unitranche loans, with either a first or second lien security interest in the portfolio company’s assets that will support the repayment of such loans. First and second lien senior secured loans may provide for moderate loan amortization in the early years of the loan, with the majority of the amortization deferred until loan maturity but in all cases amortization will be based on the free cash flows generated by the portfolio company and available for debt service. Unitranche loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred until loan maturity. Unitranche loans also generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. In these cases, maturity extension or restructuring could be necessary to preserve collateral and enterprise value. Secured loans may include a PIK interest feature although we expect that a majority of the interest will be cash pay.

Special Situations Loans.  These loans can be either secured or unsecured and often support an operational or financial restructuring. These loans can also include situations that require unusual speed to closing or structural flexibility. In some cases we structure these loans as secured debtor-in-possession or bankruptcy exit loans. We seek to obtain security interests in the assets of the portfolio company borrowers that serve as collateral in support of the repayment of such loans. Such collateral may take the form of first-priority or second-priority liens on the assets of the portfolio company borrower. Our special situation loans may provide for moderate loan amortization in the early years of the loan, with the majority of the amortization deferred until loan maturity, and may include a PIK interest feature although we expect that a majority of the interest will be cash pay.

Unsecured Loans.  We typically structure unsecured loans as subordinated loans that provide for relatively high, fixed interest rates and provide us with significant current interest income. These loans typically have interest-only payments (often representing a combination of cash pay and payment-in-kind interest) in the early years, with the amortization of principal deferred to maturity. Mezzanine loans, which are often unsecured, generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. We expect that mezzanine loans will typically provide for a portion of the interest to be paid-in-kind. In these cases, maturity extension or restructuring could be necessary to preserve collateral and enterprise value.

Warrants and Minority Equity Securities.  In some cases, we may receive nominally priced warrants or options to buy a minority equity interest in the portfolio company in connection with a loan. As a result, if a portfolio company appreciates in value, we may achieve additional investment return. We may also structure warrants to include provisions protecting our rights as a minority-interest holder, as well as a “put,” or right to sell such securities back to the issuer upon the occurrence of specified events. In many cases, we may seek to obtain registration rights in connection with these equity interests, which may include demand and “piggy-back” registration rights.

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We intend to tailor the terms of each investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects its rights and manages risk while creating incentives for the portfolio company to achieve its business plan and improve its operating results. We typically seek to limit the downside potential of our investments by:

investing between $10 million and $25 million per transaction;
maintaining an emphasis on capital preservation;
requiring a targeted unlevered annual effective yield of between 10% and 15%, excluding any warrants or other equity interests received by us as part of such investment;
making investments which afford us a significant capital cushion in the form of junior capital and/or asset coverage as well as adequate lender protections in loan documentation; and
selecting investments that our investment adviser believes have a low probability of loss.

We expect to hold most of our investments to maturity or repayment but may sell some investments earlier if liquidity event occurs, such as a sale, recapitalization or worsening of the credit quality of the portfolio company.

Ongoing Monitoring

We view active portfolio monitoring as a vital part of the investment process. Our investment adviser monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company.

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

assessment of success in adhering to portfolio company’s business plan and compliance with covenants;
periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;
comparisons to other portfolio companies in the industry, if any;
attendance at and participation in board meetings; and
review of monthly and quarterly financial statements and financial projections for portfolio companies.

Our investment adviser assigns an internal rating for each of our portfolio companies. The rating scale is a numeric scale of 1 to 4 based on the credit attributes and prospects of the portfolio company’s business. In general, we use the ratings as follows:

a rating of 1 denotes a high quality investment with no loss of principal expected;
a rating of 2 denotes a moderate to high quality investment with no loss of principal expected;
a rating of 3 denotes a moderate quality investment with market rates of expected loss of principal and potential non-compliance with financial covenants; and
a rating of 4 denotes a low quality investment with an expected loss of principal. In case of risk grade 4 loans, our investment adviser will assign a recovery value to the loan.

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Investments

We seek to create a diverse portfolio that includes senior secured, unitranche, mezzanine and unsecured loans and warrants and minority equity securities by making investments generally in the range of $10 million to $25 million in U.S. based middle-market companies. Set forth below is a list of our ten largest portfolio company investments as of December 31, 2012, as well as the top ten industries in which we were invested as of December 31, 2012, in each case calculated as a percentage of our total investments as of such date.

   
Portfolio Company   Fair Value of
Investment
  Percentage of
Total Investments
     (dollars in thousands)  
Kranos Acquisition Corp.   $ 9,911       4.5 % 
Apple & Eve, LLC     9,901       4.5 % 
Holley Performance Products Inc.     9,875       4.5 % 
Global Traffic Technologies, LLC     9,842       4.5 % 
Next Generation Vending, LLC(1)     9,590       4.4 % 
ConvergeOne Holdings Corp.     8,163       3.7 % 
Sqwincher Corporation (The)     7,793       3.5 % 
Worley Claims Services, LLC     7,749       3.5 % 
Roberts-Gordon LLC     7,666       3.5 % 
Centiv Holding Company     7,641       3.4 % 
     $ 88,131       40.0%  

   
Industry   Fair Value of Investment   Percentage of
Total Investments
     (dollars in thousands)  
Food Stores – Retail   $ 34,315       15.6 % 
Miscellaneous Services     33,147       15.1 % 
Miscellaneous Manufacturing     21,573       9.8 % 
Communications     20,133       9.1 % 
Automotive     14,907       6.8 % 
National Security     13,544       6.2 % 
Electrical Equipment     11,092       5.0 % 
Health Services     11,041       5.0 % 
Transportation Services     8,287       3.8 % 
Insurance Agents     7,749       3.5 % 
     $ 175,788       79.9%  

(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments.”

Managerial Assistance

As a business development company, we offer, and must provide upon request, managerial assistance to our portfolio companies. This assistance could involve monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Garrison Capital Administrator or an affiliate of Garrison Capital Administrator provides such managerial assistance on our behalf to portfolio companies that request this assistance. We may receive fees for these services and will reimburse Garrison Capital Administrator or an affiliate of Garrison Capital Administrator for its allocated costs in providing such assistance, subject to the review and approval by our board of directors, including our independent directors. See “The Adviser and the Administrator — Administration Agreement.”

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Competition

Our primary competitors to provide financing to middle-market companies include public and private funds, including other business development companies, commercial and investment banks, commercial financing companies, and, to the extent they provide an alternative form of financing, private equity funds. Assuming the economic recovery continues, we expect that we may face enhanced competition in the future. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company and that the Code will impose on us as a RIC. For additional information concerning the competitive risks we face, see “Risk Factors — Risks Relating to our Business and Structure — The highly competitive market for investment opportunities in which we operate may limit our investment opportunities.”

Administration

We do not have any direct employees, and our day-to-day operations will be managed by our investment adviser. We have a chief executive officer, chief financial officer and chief compliance officer and, to the extent necessary, our board of directors may elect to hire additional personnel going forward. Our officers are employees of Garrison Investment Group LP, an affiliate of our investment adviser, and our allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs will be paid by us pursuant to the Administration Agreement. Some of our executive officers described under “Management of the Company” are also officers of Garrison Capital Advisers. See “The Adviser and the Administrator — Administration Agreement.”

Properties

Our executive offices are located at 1350 Avenue of the Americas, New York, New York 10019 and are provided by our administrator pursuant to our Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.

Legal Proceedings

None of our investment adviser, our administrator, Garrison Investment Group or us is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our investment adviser or administrator.

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PORTFOLIO COMPANIES

The following table sets forth certain information as of December 31, 2012 for each portfolio company in which we had an investment. Other than these investments, our only formal relationships with our portfolio companies are the managerial assistance that we may provide upon request and the board observer or participation rights we may receive in connection with our investment. See “Regulation — Managerial Assistance to Portfolio Companies.” We do not “control” and are not an “affiliate” of any of our portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, we would “control” a portfolio company if we owned more than 25% of its voting securities and would be an “affiliate” of a portfolio company if we owned five percent or more of its voting securities.

As of December 31, 2012, we held investments in 49 portfolio companies with a fair value of $220.1 million, including investments in 45 portfolio companies held indirectly through GF 2012-1. The investments held by GF 2012-1 as of December 31, 2012 consisted of primarily senior secured loans fair valued at $202.5 million and related indebtedness of $125.0 million. As of that date, our portfolio had an average investment size of approximately $4.3 million, a weighted average yield of 9.62% and a weighted average maturity of 46 months. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We do not believe that there are any material differences in the underwriting standards that were used to evaluate these investments and the underwriting standards described in this prospectus that we expect to implement. However, over time we expect that syndicated first lien senior secured loans will represent a smaller percentage of our investment portfolio as we grow our business and our syndicated senior secured investments are repaid or sold in the secondary market and we reinvest the proceeds of such repayments or sales.

               
               
Name and Address
of Portfolio Company
  Industry   Type of Investment   Interest Rate(1)   Maturity Date   Principal Due at Maturity   Amortized Cost   Fair Value of Investment   Percentage of Class Held*
AccentCare, Inc.
135 Technology Drive
Suite 500
Irvine, CA 92618
  Health Services   Senior Secured
Term Loan
  6.50%
(LIBOR + 5.00%,
1.50% Floor)
  12/22/2016   $1,510,833   $1,505,679   $944,271   *
Alpha Packaging Holdings, Inc.
1555 Page Industrial Blvd.
St. Louis, MO 63132
  Miscellaneous Manufacturing   Senior Secured Tranche B Term Loan   6.75%
(LIBOR + 5.00%,
1.75% Floor)
  09/17/2016   $3,176,875   $3,114,921   $3,018,031   *
Apple & Eve, LLC
2 Seaview Blvd.
Port Washington, NY 11050
  Food Stores – 
Retail
  Senior Secured
Term Loan
  13.75%
(LIBOR +
12.50%,
1.25% Floor)
  12/11/2017   $10,000,000   $9,901,095   $9,901,199   *
Arclin US Holdings Inc.(2)
5865 McLaughlin Road
Unit 3
Mississauga, ON L5R 1B8, Canada
  Chemicals   Senior Secured
Term Loan
2nd Lien
  7.75%
(LIBOR + 6.00%,
1.75% Floor)
  01/15/2015   $2,612,097       *
          Senior Secured
Term Loan
2nd Lien
  8.25%
(BASE RATE + 5.00%)
  01/15/2015   $13,499       *
          TOTAL             $2,625,596   $2,559,288   $2,625,596   *
Arctic Glacier USA, Inc.
1654 Marthaler Lane
West St. Paul, MN 55118
  Miscellaneous Manufacturing   Senior Secured
Term Loan
  8.50%
(LIBOR + 7.00%,
1.50% Floor)
  07/27/2018   $4,737,500   $4,606,039   $4,761,188   *
Ascensus, Inc.
200 Dryden Road
Dresher, PA 19025
  Miscellaneous Services   Senior Secured Initial Term Loan   8.00%
(LIBOR + 6.75%,
1.25% Floor)
  12/21/2018   $4,000,000   $3,920,401   $3,940,000     
Aspect Software, Inc.(4)
300 Apollo Drive
Chelmsford, MA 01824
  Communications   Senior Secured Tranche B Term Loan   7.00%
(LIBOR + 5.25%,
1.75% Floor)
  05/07/2016   $4,968,421