FORWARD CURRENCY CONTRACTS

9 Months Ended

Sep. 30, 2022

FORWARD CURRENCY CONTRACTS

FORWARD CURRENCY CONTRACTS

NOTE 3 - FORWARD CURRENCY CONTRACTS

The Company may enter into foreign currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit counterparty risk by only dealing with well-known counterparties.

The Company utilizes forward foreign currency exchange contracts to protect itself against fluctuations in exchange rates. The Company may choose to renew contracts quarterly unless otherwise settled by the Company or the counterparty.

The following table provides a breakdown of our forward currency contracts for the three and nine months ended September 30, 2022 and 2021:

		Three months ended September 30,				Nine months ended September 30,
		2022		2021		2022		2021
Realized gain (loss) on forward currency contracts	$	—	$	1	$	(8)	$	(3)
Unrealized appreciation (depreciation) on forward currency contracts		10		187		10		186
Total net realized and unrealized gains (losses) on forward currency contracts	$	10	$	188	$	2	$	183

The value associated with unrealized gain or loss on open contracts is included in unrealized appreciation or depreciation on forward currency contracts within the consolidated statements of assets and liabilities. Open contracts as of September 30, 2022 were as follows:

Counterparty	Currency to be sold			Currency to be purchased			Settlement date	Unrealized appreciation		Unrealized depreciation
Morgan Stanley	C$	199	CAD	$	155	USD	10/28/22	$	10	$	—
Total								$	10	$	—

The following table is a summary of the average USD notional exposure to foreign currency forward contracts for the three and nine months ended September 30, 2022 and 2021:

	Three months ended September 30,				Nine months ended September 30,
Average USD notional outstanding		2022		2021		2022		2021
Forward currency contracts	$	125	$	13,980	$	186	$	4,754

The foreign currency forward contracts open at the end of the period are generally indicative of the volume of activity during the period. The value associated with unrealized gain or loss on open contracts is included in unrealized appreciation or depreciation on forward currency contracts within the consolidated statements of assets and liabilities.

Offsetting of Derivative Instruments

The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation or depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the consolidated statements of assets and liabilities. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of September 30, 2022.

	As of September 30, 2022
Counterparty ($ in thousands)	Derivative Assets Subject to Master Netting Agreement		Derivative Liabilities Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Received		Non-cash Collateral Pledged(1)		Cash Collateral Received(1)		Cash Collateral Pledged(1)		Net Amount of Derivative Assets(2)		Net Amount of Derivative Liabilities(3)
Morgan Stanley	$	10	$	—	$	—	$	—	$	—	$	—	$	—	$	10	$	—
Total	$	10	$	—	$	—	$	—	$	—	$	—	$	—	$	10	$	—

(1) In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.

(2) Net amount of derivative assets represents the net amount due from the counterparty to the Company in the event of default.

(3) Net amount of derivative liabilities represents the net amount due from the Company to the counterparty in the event of default.

As of December 31, 2021, the Company did not have any outstanding derivative instruments.