GBDC 10-Q Quarterly Report Dec. 31, 2014 | Alphaminr
GOLUB CAPITAL BDC, Inc.
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GBDC 10-Q Quarter ended Dec. 31, 2014

Balance Sheet
Cash Flow
Income Statement
Debt
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10-Q 1 v400181_10q.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 814-00794

Golub Capital BDC, Inc.

(Exact name of registrant as specified in its charter)

Delaware 27-2326940
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

150 South Wacker Drive, Suite 800

Chicago, IL 60606

(Address of principal executive offices)

(312) 205-5050

(Registrant's telephone number, including area code)

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

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

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

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

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

As of February 6, 2015, the Registrant had 47,171,518 shares of common stock, $0.001 par value, outstanding.

Part I. Financial Information
Item 1. Financial Statements 3
Consolidated Statements of Financial Condition as of December 31, 2014 (unaudited) and September 30, 2014 3
Consolidated Statements of Operations for the three months ended December 31, 2014 (unaudited) and 2013 (unaudited) 4
Consolidated Statements of Changes in Net Assets for the three months ended December 31, 2014 (unaudited) and 2013 (unaudited) 5
Consolidated Statements of Cash Flows for the three months ended December 31, 2014 (unaudited) and 2013 (unaudited) 6
Consolidated Schedules of Investments as of December 31, 2014 (unaudited) and September 30, 2014 7
Notes to Consolidated Financial Statements (unaudited) 25
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 55
Item 3. Quantitative And Qualitative Disclosures About Market Risk 82
Item 4. Controls and Procedures 83
Part II.  Other Information
Item 1. Legal Proceedings 84
Item 1A. Risk Factors 84
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 84
Item 3. Defaults Upon Senior Securities 84
Item 4. Mine Safety Disclosures 84
Item 5. Other Information 84
Item 6. Exhibits 85

2

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(In thousands, except share and per share data)

December 31, 2014 September 30, 2014
Assets (unaudited)
Investments, at fair value
Non-controlled/non-affiliate company investments $ 1,357,614 $ 1,309,701
Non-controlled affiliate company investments 3,407 3,080
Controlled affiliate company investments 39,705 34,831
Total investments, at fair value (cost of $1,391,805 and $1,337,580, respectively) 1,400,726 1,347,612
Cash and cash equivalents 5,740 5,135
Restricted cash and cash equivalents 35,686 74,808
Interest receivable 6,185 5,791
Deferred financing costs 9,436 9,515
Receivable from investments sold 2,232 -
Other assets 578 527
Total Assets $ 1,460,583 $ 1,443,388
Liabilities
Debt $ 714,650 $ 697,150
Secured borrowings, at fair value (proceeds of $376 and $384, respectively) 380 389
Interest payable 4,455 3,196
Management and incentive fees payable 5,853 8,451
Accounts payable and accrued expenses 1,468 1,397
Accrued trustee fees 59 66
Total Liabilities 726,865 710,649
Commitments and contingencies (Note 8)
Net Assets
Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2014 and September 30, 2014 - -
Common stock, par value $0.001 per share, 100,000,000 shares authorized, 47,171,518 and 47,119,498 shares issued and outstanding as of December 31, 2014 and September 30, 2014, respectively 47 47
Paid in capital in excess of par 721,364 720,479
Undistributed net investment income 3,106 3,627
Net unrealized appreciation (depreciation) on investments and secured borrowings 11,583 12,694
Net realized gain (loss) on investments (2,382 ) (4,108 )
Total Net Assets 733,718 732,739
Total Liabilities and Total Net Assets $ 1,460,583 $ 1,443,388
Number of common shares outstanding 47,171,518 47,119,498
Net asset value per common share $ 15.55 $ 15.55

See Notes to Consolidated Financial Statements.

3

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(In thousands, except share and per share data)

Three months ended December 31,
2014 2013
Investment income
From non-controlled/non-affiliate company investments:
Interest income $ 26,769 $ 24,157
Dividend income 18 16
Fee income 208 829
Total investment income from non-controlled/non-affiliate company investments 26,995 25,002
From non-controlled affiliate company investments:
Interest income - 225
Fee income - 171
Total investment income from non-controlled affiliate company investments - 396
From controlled affiliate company investments:
Interest income 550 181
Total investment income from controlled affiliate company investments 550 181
Total investment income 27,545 25,579
Expenses
Interest and other debt financing expenses 5,694 4,092
Base management fee 4,821 3,824
Incentive fee 1,071 3,032
Professional fees 629 658
Administrative service fee 607 582
General and administrative expenses 166 131
Total expenses 12,988 12,319
Net investment income 14,557 13,260
Net gain (loss) on investments and secured borrowings
Net realized gains (losses):
Non-controlled/non-affiliate company investments 1,726 (4,994 )
Net realized gains (losses): 1,726 (4,994 )
Net unrealized appreciation (depreciation):
Non-controlled/non-affiliate company investments (1,412 ) 6,133
Non-controlled affiliate company investments 327 274
Controlled affiliate company investments (26 ) 240
Net unrealized appreciation (depreciation) (1,111 ) 6,647
Net change in unrealized depreciation (appreciation) on secured borrowings - (76 )
Net gain (loss) on investments and secured borrowings 615 1,577
Net increase in net assets resulting from operations $ 15,172 $ 14,837
Per Common Share Data
Basic and diluted earnings per common share $ 0.32 $ 0.34
Dividends and distributions declared per common share $ 0.32 $ 0.32
Basic and diluted weighted average common shares outstanding 47,121,194 43,285,250

See Notes to Consolidated Financial Statements.

4

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Statements of Changes in Net Assets (unaudited)
(In thousands, except share data)

Net Unrealized
Appreciation
Common Stock Paid in Capital (Depreciation) on
Par in Excess Undistributed Net Investments and Net Realized Gain Total
Shares Amount of Par Investment Income Secured Borrowings (Loss) on Investments Net Assets
Balance at September 30, 2013 43,282,932 $ 43 $ 652,669 $ 2,725 $ 9,225 $ (6,426 ) $ 658,236
Issuance of common stock, net of offering and underwriting costs - - - - - - -
Net increase in net assets resulting from operations - - - 13,260 6,571 (4,994 ) 14,837
Distributions to stockholders:
Stock issued in connection with dividend reinvestment plan 42,643 - 758 - - - 758
Dividends and distributions - - - (13,850 ) - - (13,850 )
Balance at December 31, 2013 43,325,575 $ 43 $ 653,427 $ 2,135 $ 15,796 $ (11,420 ) $ 659,981
Balance at September 30, 2014 47,119,498 $ 47 $ 720,479 $ 3,627 $ 12,694 $ (4,108 ) $ 732,739
Issuance of common stock, net of offering and underwriting costs - - - - - - -
Net increase in net assets resulting from operations - - - 14,557 (1,111 ) 1,726 15,172
Distributions to stockholders:
Stock issued in connection with dividend reinvestment plan 52,020 - 885 - - - 885
Dividends and distributions - - - (15,078 ) - - (15,078 )
Balance at December 31, 2014 47,171,518 $ 47 $ 721,364 $ 3,106 $ 11,583 $ (2,382 ) $ 733,718

See Notes to Consolidated Financial Statements.

5

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(In thousands)

Three Months Ended December 31,
2014 2013
Cash flows from operating activities
Net increase in net assets resulting from operations $ 15,172 $ 14,837
Adjustments to reconcile net increase in net assets resulting from operations  to net cash (used in) provided by operating activities
Amortization of deferred financing costs 1,047 439
Accretion of discounts and amortization of premiums (1,670 ) (1,865 )
Net realized (gain) loss on investments (1,726 ) 4,994
Net change in unrealized (appreciation) depreciation on investments 1,111 (6,647 )
Net change in unrealized appreciation (depreciation) on secured borrowings - 76
Proceeds from (fundings of) revolving loans, net 90 277
Fundings of investments (131,470 ) (256,213 )
Proceeds from principal payments and sales of portfolio investments 80,941 103,570
PIK interest (390 ) 653
Changes in operating assets and liabilities:
Interest receivable (394 ) 138
Receivable for investments sold (2,232 ) -
Other assets (51 ) 73
Interest payable 1,259 1,882
Management and incentive fees payable (2,598 ) 1,172
Payable for investments purchased - (2,020 )
Accounts payable and accrued expenses 71 (265 )
Accrued trustee fees (7 ) -
Net cash (used in) provided by operating activities (40,847 ) (138,899 )
Cash flows from investing activities
Net change in restricted cash and cash equivalents 39,122 (1,384 )
Net cash (used in) provided by investing activities 39,122 (1,384 )
Cash flows from financing activities
Borrowings on debt 33,550 215,350
Repayments of debt (16,050 ) (50,250 )
Capitalized debt financing costs (968 ) (1,581 )
Proceeds from secured borrowings - 16,448
Repayments on secured borrowings (9 ) (11,010 )
Dividends and distributions paid (14,193 ) (13,092 )
Net cash (used in) provided by financing activities 2,330 155,865
Net change in cash and cash equivalents 605 15,582
Cash and cash equivalents, beginning of period 5,135 16,309
Cash and cash equivalents, end of period $ 5,740 $ 31,891
Supplemental information:
Cash paid during the period for interest $ 3,383 $ 1,592
Dividends and distributions declared during the period 15,078 13,850

See Notes to Consolidated Financial Statements.

6

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Investments
United States
Debt investments
Aerospace and Defense
ILC Dover, LP One stop P + 4.50% 7.75 % 03/2019 $ 600 $ 593 0.1 % $ 564
ILC Dover, LP^ One stop L + 5.50% 6.50 % 03/2020 18,477 18,357 2.4 17,923
ILC Industries, Inc. (3) One stop L + 4.75% N/A (4) 07/2020 - (31 ) - -
ILC Industries, Inc.*^ One stop L + 4.75% 5.75 % 07/2020 28,331 28,069 3.8 28,331
NTS Technical Systems (3) One stop L + 5.50% N/A (4) 11/2018 - (30 ) - -
NTS Technical Systems*^ One stop L + 5.50% 6.75 % 11/2018 18,823 18,540 2.6 18,823
NTS Technical Systems (3) One stop L + 5.50% N/A (4) 11/2018 - (63 ) - -
Tresys Technology Holdings, Inc. One stop L + 6.75% 8.00 % 12/2017 188 182 - 188
Tresys Technology Holdings, Inc. One stop L + 6.75% 8.00 % 12/2017 3,899 3,841 0.3 1,950
Whitcraft LLC Subordinated debt N/A 12.00 % 12/2018 1,877 1,858 0.3 1,877
72,195 71,316 9.5 69,656
Automobile
American Driveline Systems, Inc. Senior loan L + 5.50% 7.17 % 01/2016 306 303 - 267
American Driveline Systems, Inc.* Senior loan L + 5.50% 7.00 % 01/2016 2,790 2,771 0.3 2,511
K&N Engineering, Inc. (3) Senior loan L + 4.25% N/A (4) 07/2019 - (4 ) - -
K&N Engineering, Inc.^ Senior loan L + 4.25% 5.25 % 07/2019 2,905 2,855 0.4 2,905
K&N Engineering, Inc. (3) Senior loan L + 4.25% N/A (4) 07/2019 - (18 ) - -
Take 5 Oil Change, L.L.C. (3) Senior loan L + 5.25% N/A (4) 07/2018 - (7 ) - -
Take 5 Oil Change, L.L.C.^ Senior loan L + 5.25% 6.25 % 07/2018 4,860 4,831 0.7 4,860
10,861 10,731 1.4 10,543
Banking
HedgeServ Holding L.P.^ One stop L + 8.25% 5.25% cash/4.00% PIK 02/2019 17,416 17,277 2.4 17,416
HedgeServ Holding L.P. (3) One stop L + 4.25% N/A (4) 02/2019 - (8 ) - -
Prommis Fin Co. (6) Senior loan P + 10.00% 13.25 % 06/2015 82 81 - 2
Prommis Fin Co.* (6) Senior loan N/A 2.25% cash/11.5% PIK 06/2015 119 119 - 3
17,617 17,469 2.4 17,421
Beverage, Food and Tobacco
ABP Corporation Senior loan P + 3.50% 7.25 % 09/2018 209 203 - 209
ABP Corporation* Senior loan L + 4.75% 6.00 % 09/2018 4,783 4,719 0.7 4,783
ARG IH Corporation (Arby's)^ Senior loan L + 3.75% 4.75 % 11/2020 2,331 2,306 0.3 2,328
Atkins Nutritionals, Inc*^ One stop L + 5.00% 6.25 % 01/2019 23,873 23,695 3.2 23,574
Atkins Nutritionals, Inc* One stop L + 8.50% 9.75 % 04/2019 21,636 21,343 2.9 21,527
C. J. Foods, Inc. (3) One stop L + 5.50% N/A (4) 05/2019 - (9 ) - -
C. J. Foods, Inc. (3) One stop L + 5.50% N/A (4) 05/2019 - (12 ) - -
C. J. Foods, Inc. One stop L + 5.50% 6.50 % 05/2019 3,216 3,174 0.4 3,216
Candy Intermediate Holdings, Inc. (Ferrara Candy)^ Senior loan L + 6.25% 7.50 % 06/2018 4,875 4,775 0.6 4,717
Diversified Foodservice Supply, Inc. (3) Senior loan L + 4.50% N/A (4) 12/2018 - (3 ) - -
Diversified Foodservice Supply, Inc.* Senior loan L + 4.50% 5.75 % 12/2018 4,556 4,520 0.6 4,556
Firebirds International, LLC (3) One stop L + 6.25% N/A (4) 05/2018 - (2 ) - -
Firebirds International, LLC* One stop L + 6.25% 7.50 % 05/2018 1,090 1,077 0.2 1,090
Firebirds International, LLC One stop L + 6.25% 7.50 % 05/2018 304 299 - 304
Firebirds International, LLC (3) One stop L + 6.25% N/A (4) 05/2018 - (4 ) - -
First Watch Restaurants, Inc. (3) One stop L + 7.50% N/A (4) 12/2018 - (22 ) - -
First Watch Restaurants, Inc.*^ One stop L + 7.50% 8.75 % 12/2018 14,327 14,174 2.0 14,327
First Watch Restaurants, Inc.^ One stop L + 7.50% 8.75 % 12/2018 1,748 1,743 0.2 1,748
IT'SUGAR LLC Senior loan L + 7.50% 9.00 % 04/2018 7,547 7,445 1.0 7,547
IT'SUGAR LLC Subordinated debt N/A 5.00 % 10/2017 1,707 1,707 0.3 1,847
Julio & Sons Company One stop L + 5.50% 6.50 % 09/2017 426 417 0.1 426
Julio & Sons Company* One stop L + 5.50% 6.50 % 09/2017 6,960 6,903 0.9 6,960
Julio & Sons Company (3) One stop L + 5.50% N/A (4) 09/2017 - (31 ) - -
Northern Brewer, LLC One stop P + 9.25% 8.50% cash/4.00% PIK 02/2018 683 672 0.1 475
Northern Brewer, LLC One stop P + 9.25% 8.50% cash/4.00% PIK 02/2018 6,386 6,272 0.6 4,470
Tate's Bake Shop, Inc. (3) Senior loan L + 4.75% N/A (4) 08/2019 - (4 ) - -
Tate's Bake Shop, Inc.^ Senior loan L + 4.75% 5.75 % 08/2019 3,000 2,972 0.4 3,000
Tate's Bake Shop, Inc. (3) Senior loan L + 4.75% N/A (4) 08/2019 - (5 ) - -
Uinta Brewing Company (3) One stop L + 6.00% N/A (4) 08/2019 - (7 ) - -
Uinta Brewing Company^ One stop L + 6.00% 7.00 % 08/2019 3,228 3,198 0.5 3,228
112,885 111,515 15.0 110,332
Building and Real Estate
Accruent, LLC* One stop L + 6.25% 7.28 % 11/2019 4,757 4,710 0.6 4,709
Brooks Equipment Company, LLC (3) One stop L + 5.75% N/A (4) 08/2020 - (19 ) - -
Brooks Equipment Company, LLC*^ One stop L + 5.75% 6.75 % 08/2020 26,776 26,401 3.7 26,776
ITEL Laboratories, Inc. (3) Senior loan L + 4.75% N/A (4) 06/2018 - (1 ) - -

See Notes to Consolidated Financial Statements.

7

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) – (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
ITEL Laboratories, Inc.* Senior loan L + 4.75% 6.00 % 06/2018 754 747 0.1 754
32,287 31,838 4.4 32,239
Cargo Transport
RP Crown Parent (RedPrairie Corp)* Senior loan L + 5.00% 6.00 % 12/2018 1,965 1,939 0.3 1,836
Containers, Packaging and Glass
Fort Dearborn Company* Senior loan P + 3.25% 5.90 % 10/2017 7 6 - 7
Fort Dearborn Company*^ Senior loan L + 4.25% 5.25 % 10/2017 498 496 0.1 498
Fort Dearborn Company* Senior loan P + 3.75% 6.45 % 10/2018 24 24 - 24
Fort Dearborn Company*^ Senior loan L + 4.75% 5.75 % 10/2018 2,174 2,163 0.3 2,174
Packaging Coordinators, Inc.*^ Senior loan L + 4.25% 5.25 % 08/2021 14,962 14,820 2.0 14,514
Packaging Coordinators, Inc. Second Lien L + 8.00% 9.00 % 08/2022 10,000 9,904 1.3 9,750
27,665 27,413 3.7 26,967
Diversified Conglomerate Manufacturing
Chase Industries, Inc.*^ One stop L + 5.75% 6.75 % 09/2020 21,038 20,838 2.9 21,038
Chase Industries, Inc. (3) One stop L + 5.75% N/A (4) 09/2020 - (21 ) - -
Chase Industries, Inc. (3) One stop L + 5.75% N/A (4) 09/2020 - (46 ) - -
ICCN Acquisition Corp. (3) One stop L + 5.25% N/A (4) 03/2019 - (4 ) - -
ICCN Acquisition Corp.^ One stop L + 5.25% 6.25 % 03/2019 3,988 3,929 0.5 3,988
ICCN Acquisition Corp. (3) One stop L + 5.25% N/A (4) 03/2019 - (13 ) - -
Metal Spinners, Inc.* Senior loan L + 7.50% 9.00 % 04/2015 1,280 1,277 0.2 1,280
Metal Spinners, Inc.* Senior loan L + 7.50% 9.00 % 04/2015 2,499 2,493 0.3 2,499
Onicon Incorporated (3) One stop L + 4.50% N/A (4) 12/2017 - (10 ) - (12 )
Onicon Incorporated* One stop L + 4.50% 5.84 % 12/2017 3,328 3,286 0.4 3,279
Onicon Incorporated One stop P + 3.50% 5.84 % 12/2017 1,237 1,221 0.2 1,218
Pasternack Enterprises, Inc.* Senior loan L + 5.00% 6.25 % 12/2017 1,079 1,073 0.1 1,079
Plex Systems, Inc. (3) One stop L + 7.50% N/A (4) 06/2018 - (26 ) - -
Plex Systems, Inc.*^ One stop L + 7.50% 8.75 % 06/2018 18,797 18,415 2.6 18,797
Sunless Merger Sub, Inc. (3) Senior loan L + 5.25% N/A (4) 07/2016 - (1 ) - (22 )
Sunless Merger Sub, Inc.* Senior loan L + 5.25% 6.50 % 07/2016 1,786 1,779 0.2 1,340
TIDI Products, LLC (3) One stop L + 6.50% N/A (4) 07/2017 - (10 ) - -
TIDI Products, LLC*^ One stop L + 6.50% 7.75 % 07/2018 16,677 16,463 2.3 16,677
Vintage Parts, Inc.* One stop L + 4.50% 5.75 % 12/2015 3,924 3,902 0.5 3,924
Vintage Parts, Inc.* One stop L + 4.50% 5.75 % 12/2015 54 54 - 54
Vintage Parts, Inc.* One stop L + 4.50% 5.75 % 12/2015 820 823 0.1 820
76,507 75,422 10.3 75,959
Diversified Conglomerate Service
Accellos, Inc. (3) One stop L + 5.75% N/A (4) 07/2020 - (19 ) - -
Accellos, Inc.^ One stop L + 5.75% 6.76 % 07/2020 31,035 30,679 4.2 31,035
Aderant North America, Inc.* Senior loan L + 4.25% 5.25 % 12/2018 4,220 4,192 0.6 4,220
Agility Recovery Solutions Inc. (3) One stop L + 6.75% N/A (4) 09/2018 - (5 ) - -
Agility Recovery Solutions Inc.* One stop L + 6.75% 8.00 % 09/2018 8,076 7,952 1.1 8,076
Bomgar Corporation (3) One stop L + 6.00% N/A (4) 05/2019 - (17 ) - -
Bomgar Corporation* One stop L + 6.00% 7.00 % 05/2020 29,350 28,886 4.0 29,350
Daxko, LLC (3) One stop L + 7.75% N/A (4) 03/2019 - (22 ) - -
Daxko, LLC One stop L + 7.75% 8.75 % 03/2019 16,840 16,579 2.3 16,840
DISA Holdings Acquisition Subsidiary Corp. Senior loan P + 3.50% 6.75 % 12/2020 138 127 - 127
DISA Holdings Acquisition Subsidiary Corp.^ Senior loan P + 3.50% 6.75 % 12/2020 4,637 4,592 0.6 4,591
Integration Appliance, Inc. One stop L + 8.25% 9.50 % 09/2018 719 711 0.1 719
Integration Appliance, Inc. One stop L + 8.25% 9.50 % 09/2018 5,396 5,295 0.7 5,396
Integration Appliance, Inc. One stop L + 8.25% 9.50 % 06/2019 7,914 7,737 1.1 7,914
Marathon Data Operating Co., LLC (3) One stop L + 6.25% N/A (4) 08/2017 - (6 ) - -
Marathon Data Operating Co., LLC One stop L + 6.25% 7.50 % 08/2017 4,584 4,523 0.6 4,584
NetSmart Technologies, Inc.* One stop L + 7.52% 8.77 % 12/2017 8,014 7,964 1.1 8,014
NetSmart Technologies, Inc. One stop L + 7.48% 8.73 % 12/2017 633 629 0.1 633
PC Helps Support, LLC (3) Senior loan L + 5.25% N/A (4) 09/2017 - (2 ) - -
PC Helps Support, LLC Senior loan L + 5.00% 6.28 % 09/2017 1,674 1,661 0.2 1,674
Secure-24, LLC (3) One stop L + 6.00% N/A (4) 08/2017 - (4 ) - -
Secure-24, LLC* One stop L + 6.00% 7.25 % 08/2017 10,406 10,239 1.4 10,406
Secure-24, LLC^ One stop L + 6.00% 7.25 % 08/2017 1,522 1,505 0.2 1,522
SoftWriters, Inc. (3) One stop L + 4.75% N/A (4) 05/2019 - (2 ) - (5 )
SoftWriters, Inc. (3) One stop L + 4.75% N/A (4) 05/2019 - (3 ) - (9 )
SoftWriters, Inc. One stop L + 4.75% 5.75 % 05/2019 6,395 6,372 0.9 6,331
Source Medical Solutions, Inc. Second Lien L + 8.00% 9.00 % 03/2018 9,294 9,157 1.2 9,015
Vendavo, Inc. (3) One stop L + 8.50% N/A (4) 10/2019 - (15 ) - (16 )
Vendavo, Inc. One stop L + 8.50% 9.50 % 10/2019 15,501 15,167 2.1 15,308
166,348 163,872 22.5 165,725

See Notes to Consolidated Financial Statements.

8

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) – (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Electronics
Appriss Holdings, Inc. (3) Senior loan L + 4.75% 5.75 % 11/2020 36 (7 ) - 7
Appriss Holdings, Inc.* Senior loan L + 4.75% 5.75 % 11/2020 18,190 17,922 2.5 18,008
ECI Acquisition Holdings, Inc. (3) One stop L + 6.25% N/A (4) 03/2019 - (16 ) - -
ECI Acquisition Holdings, Inc.^ One stop L + 6.25% 8.00 % 03/2019 22,159 21,810 3.0 22,159
ECI Acquisition Holdings, Inc. (3) One stop L + 6.25% N/A (4) 03/2019 - (75 ) - -
Rogue Wave Holdings, Inc.*^ One stop L + 9.04% 10.04 % 12/2018 10,481 10,374 1.4 10,481
Sloan Company, Inc., The (3) One stop L + 7.50% N/A (4) 10/2018 - (13 ) - -
Sloan Company, Inc., The*^ One stop L + 7.50% 8.75 % 10/2018 12,943 12,820 1.8 12,943
Sparta Holding Corporation (3) One stop L + 5.25% N/A (4) 07/2020 - (35 ) - -
Sparta Holding Corporation*^ One stop L + 6.75% 6.25% cash/1.50% PIK 07/2020 23,299 23,031 3.2 23,299
Syncsort Incorporated (3) Senior loan L + 4.75% N/A (4) 03/2019 - (3 ) - -
Syncsort Incorporated (3) Senior loan L + 4.75% N/A (4) 03/2019 - (12 ) - -
Syncsort Incorporated* Senior loan L + 4.75% 5.75 % 03/2019 6,127 6,076 0.8 6,127
Systems Maintenance Services Holding, Inc.^ Senior loan L + 4.00% 5.00 % 10/2019 2,643 2,633 0.4 2,643
Taxware, LLC*^ Second Lien L + 8.38% 9.38 % 10/2019 19,979 19,694 2.7 19,979
Watchfire Enterprises, Inc. Second Lien L + 8.00% 9.00 % 10/2021 9,435 9,276 1.3 9,435
125,292 123,475 17.1 125,081
Finance
Ascensus, Inc. (3) One stop L + 4.00% N/A (4) 11/2018 - (15 ) - -
Ascensus, Inc.^ One stop L + 4.00% 5.00 % 12/2019 4,182 4,113 0.6 4,182
Ascensus, Inc.^ One stop L + 8.00% 9.00 % 12/2020 6,337 6,149 0.9 6,337
Pillar Processing LLC* (6) Senior loan L + 5.50% 5.73 % 11/2018 447 445 - -
Pillar Processing LLC* (6) Senior loan N/A 14.50 % 05/2019 2,377 2,368 - -
13,343 13,060 1.5 10,519
Grocery
MyWebGrocer, Inc. (3) One stop L + 8.75% N/A (4) 05/2018 - (15 ) - -
MyWebGrocer, Inc.^ One stop L + 8.75% 6.00% cash/4.00% PIK 05/2018 14,271 14,072 1.9 14,271
Teasdale Quality Foods, Inc.* Senior loan L + 4.25% 5.25 % 10/2020 4,686 4,595 0.6 4,593
18,957 18,652 2.5 18,864
Healthcare, Education and Childcare
Advanced Pain Management Holdings, Inc. (3) Senior loan L + 5.00% N/A (4) 02/2018 - (7 ) - -
Advanced Pain Management Holdings, Inc.* Senior loan L + 5.00% 6.25 % 02/2018 7,084 7,039 1.0 7,084
Advanced Pain Management Holdings, Inc. Senior loan L + 5.00% 6.25 % 02/2018 485 480 0.1 485
Agilitas USA, Inc.^ Senior loan L + 4.00% 5.00 % 10/2020 2,464 2,441 0.3 2,440
Avatar International, LLC (3) One stop L + 4.94% N/A (4) 09/2016 - (3 ) - -
Avatar International, LLC* One stop L + 7.89% 6.19% cash/2.95% PIK 09/2016 7,633 7,589 0.7 4,961
Avatar International, LLC One stop L + 7.89% 6.19% cash/2.95% PIK 09/2016 1,647 1,640 0.1 1,070
California Cryobank, LLC One stop P + 4.25% 7.50 % 08/2019 86 84 - 86
California Cryobank, LLC^ One stop L + 5.50% 6.50 % 08/2019 1,550 1,536 0.2 1,550
California Cryobank, LLC One stop L + 5.50% 6.50 % 08/2019 43 41 - 43
Certara L.P. One stop P + 5.00% 8.25 % 12/2018 1,027 1,010 0.1 1,027
Certara L.P.*^ One stop L + 6.25% 7.25 % 12/2018 26,760 26,446 3.6 26,760
CLP Healthcare Services, Inc.^ Senior loan L + 4.75% 5.75 % 12/2020 4,451 4,406 0.6 4,429
CPI Buyer, LLC (Cole-Parmer)*^ Senior loan L + 4.50% 5.50 % 08/2021 14,000 13,475 1.9 13,790
Data Innovations LLC One stop L + 7.74% 8.74 % 05/2019 8,778 8,607 1.2 8,778
Delta Educational Systems* Senior loan P + 4.75% 8.00 % 12/2016 1,646 1,629 0.2 1,580
Delta Educational Systems (3) Senior loan L + 6.00% N/A (4) 12/2016 - - - (3 )
Encore Rehabilitation Services, LLC (3) One stop L + 6.00% N/A (4) 06/2017 - (8 ) - -
Encore Rehabilitation Services, LLC One stop L + 6.00% 7.25 % 06/2017 4,936 4,870 0.7 4,936
G & H Wire Company, Inc. (3) Senior loan L + 5.75% N/A (4) 12/2017 - (6 ) - -
G & H Wire Company, Inc.*^ Senior loan L + 5.75% 6.75 % 12/2017 12,870 12,746 1.8 12,870
Global Healthcare Exchange, LLC (3) One stop L + 7.50% N/A (4) 03/2020 - (22 ) - (38 )
Global Healthcare Exchange, LLC*^ One stop L + 7.50% 8.50 % 03/2020 37,161 36,314 5.0 36,604
GSDM Holdings Corp. Senior loan L + 4.25% 5.32 % 06/2019 767 764 0.1 767
IntegraMed America, Inc. One stop L + 7.25% 8.50 % 09/2017 406 396 0.1 406
IntegraMed America, Inc.*^ One stop L + 7.25% 8.50 % 09/2017 15,095 14,906 2.1 15,095
Joerns Healthcare, LLC One stop L + 5.00% 6.00 % 05/2020 9,770 9,682 1.3 9,660
Maverick Healthcare Group, LLC* Senior loan L + 5.50% 7.25 % 12/2016 1,979 1,957 0.3 1,939
Northwestern Management Services, LLC Senior loan P + 4.00% 7.25 % 10/2017 114 105 - 114
Northwestern Management Services, LLC* Senior loan L + 5.25% 6.50 % 10/2017 3,952 3,906 0.5 3,952
Northwestern Management Services, LLC Senior loan L + 5.25% 6.50 % 10/2017 47 44 - 47
Onsite Holding Corp. (3) One stop L + 5.25% N/A (4) 06/2020 - (41 ) - -
Onsite Holding Corp.*^ One stop L + 5.25% 6.25 % 06/2020 26,921 26,705 3.7 26,921
Paradigm Management Services, LLC^ Senior loan L + 4.50% 5.51 % 01/2019 2,740 2,720 0.4 2,740
Pentec Acquisition Sub, Inc. (3) Senior loan L + 5.25% N/A (4) 05/2017 - (2 ) - -
Pentec Acquisition Sub, Inc.* Senior loan L + 5.25% 6.50 % 05/2018 1,705 1,685 0.2 1,705

See Notes to Consolidated Financial Statements.

9

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) – (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Pyramid Healthcare, Inc.^ One stop P + 4.50% 7.75 % 08/2019 254 249 - 254
Pyramid Healthcare, Inc.^ One stop L + 5.75% 6.75 % 08/2019 7,588 7,527 1.0 7,588
Radiology Partners, Inc. (3) One stop L + 5.00% N/A (4) 09/2020 - (7 ) - -
Radiology Partners, Inc.*^ One stop L + 5.00% 6.00 % 09/2020 17,166 16,906 2.3 17,166
Radiology Partners, Inc. (3) One stop L + 5.00% N/A (4) 09/2020 - (44 ) - -
Reliant Pro ReHab, LLC Senior loan P + 4.00% 7.25 % 06/2017 119 112 - 119
Reliant Pro ReHab, LLC* Senior loan L + 5.00% 6.00 % 06/2017 3,280 3,251 0.4 3,280
Renaissance Pharma (U.S.) Holdings Inc. Senior loan P + 3.00% 6.25 % 05/2018 118 115 - 118
Renaissance Pharma (U.S.) Holdings Inc.*^ Senior loan L + 4.00% 5.00 % 05/2018 4,006 3,959 0.5 4,006
Southern Anesthesia and Surgical (3) One stop L + 5.50% N/A (4) 11/2017 - (9 ) - -
Southern Anesthesia and Surgical One stop L + 5.50% 6.50 % 11/2017 5,997 5,899 0.8 5,997
Southern Anesthesia and Surgical (3) One stop L + 5.50% N/A (4) 11/2017 - (37 ) - -
Spear Education, LLC (3) One stop L + 5.50% N/A (4) 08/2019 - (6 ) - -
Spear Education, LLC*^ One stop L + 5.50% 6.50 % 08/2019 6,005 5,964 0.8 6,005
Spear Education, LLC One stop L + 5.50% N/A (4) 08/2019 - - - -
Surgical Information Systems, LLC^ Senior loan L + 3.50% 4.50 % 09/2018 2,018 2,014 0.3 2,018
U.S. Anesthesia Partners, Inc. One stop L + 5.00% 6.00 % 12/2019 5,985 5,957 0.8 5,985
WIL Research Company, Inc.* Senior loan L + 4.50% 5.75 % 02/2018 774 768 0.1 751
Young Innovations, Inc. (3) Senior loan L + 4.25% N/A (4) 01/2018 - (3 ) - -
Young Innovations, Inc.*^ Senior loan L + 4.25% 5.25 % 01/2019 5,430 5,400 0.7 5,430
254,857 251,149 33.9 250,515
Home and Office Furnishings, Housewares, and Durable Consumer
Plano Molding Company, LLC^ Senior loan L + 4.25% 5.25 % 10/2018 1,971 1,960 0.3 1,971
WII Components, Inc. Senior loan L + 4.50% N/A (4) 07/2018 - - - -
WII Components, Inc.* Senior loan L + 4.50% 5.50 % 07/2018 1,123 1,118 0.2 1,123
Zenith Products Corporation (6) One stop P + 3.75% 7.00 % 09/2013 81 48 - 40
Zenith Products Corporation* (6) One stop P + 5.50% 8.75 % 09/2013 4,376 3,926 0.3 2,188
7,551 7,052 0.8 5,322
Insurance
Captive Resources Midco, LLC (3) One stop L + 5.00% N/A (4) 01/2019 - (15 ) - -
Captive Resources Midco, LLC*^ One stop L + 5.00% 6.50 % 01/2019 19,603 19,437 2.7 19,603
19,603 19,422 2.7 19,603
Investment Funds and Vehicles
Senior loan Fund LLC (7)(8) Subordinated debt L + 8.00% 8.16 % 05/2020 28,871 28,871 3.9 28,871
Leisure, Amusement, Motion Pictures and Entertainment
Competitor Group, Inc. One stop P + 6.75% 9.76 % 11/2018 884 874 0.1 760
Competitor Group, Inc.* One stop L + 9.25% 9.00% cash/1.50% PIK 11/2018 12,840 12,697 1.6 11,556
Octane Fitness, LLC (3) One stop L + 5.25% N/A (4) 10/2018 - (3 ) - -
Octane Fitness, LLC* One stop L + 5.25% 6.50 % 10/2018 7,972 7,941 1.1 7,972
Pride Manufacturing Company, LLC* Senior loan L + 6.00% 7.75 % 11/2015 452 450 0.1 452
Self Esteem Brands, LLC (3) Senior loan L + 4.00% N/A (4) 02/2020 - (4 ) - -
Self Esteem Brands, LLC^ Senior loan L + 4.00% 5.00 % 02/2020 7,299 7,260 1.0 7,299
Starplex Operating, L.L.C. One stop L + 7.00% 8.00 % 12/2017 192 179 - 192
Starplex Operating, L.L.C.*^ One stop L + 7.00% 8.00 % 12/2017 10,054 9,900 1.4 10,054
Titan Fitness, LLC (3) One stop L + 6.50% N/A (4) 09/2019 - (21 ) - -
Titan Fitness, LLC* One stop L + 6.50% 7.75 % 09/2019 13,568 13,319 1.8 13,568
Titan Fitness, LLC (3) One stop L + 6.50% N/A (4) 09/2019 - (21 ) - -
53,261 52,571 7.1 51,853
Mining, Steel, Iron and Non-Precious Metals
Benetech, Inc. One stop P + 7.75% 11.00 % 10/2017 273 265 - 273
Benetech, Inc.* One stop L + 9.00% 10.25 % 10/2017 4,950 4,915 0.7 4,950
5,223 5,180 0.7 5,223
Oil and Gas
Drilling Info, Inc. (3)(5) One stop L + 5.00% N/A (4) 06/2018 - (1 ) - -
Drilling Info, Inc. (5) ^ One stop L + 5.00% 6.00 % 06/2018 1,307 1,299 0.2 1,307
Drilling Info, Inc. (3)(5) One stop L + 5.00% N/A (4) 06/2018 - (6 ) - -
1,307 1,292 0.2 1,307
Personal and Non-Durable Consumer Products
C.B. Fleet Company, Incorporated (3) Senior loan L + 4.50% N/A (4) 10/2020 - (10 ) - (8 )
C.B. Fleet Company, Incorporated (3) Senior loan L + 4.50% N/A (4) 10/2020 - (22 ) - (18 )
C.B. Fleet Company, Incorporated^ Senior loan L + 4.50% 5.50 % 10/2020 5,659 5,590 0.8 5,602
Massage Envy, LLC (3) One stop L + 7.25% N/A (4) 09/2018 - (12 ) - -
Massage Envy, LLC* One stop L + 7.25% 8.50 % 09/2018 15,999 15,752 2.2 15,999
Rug Doctor LLC (3) Senior loan L + 5.25% N/A (4) 12/2016 - (8 ) - -
Rug Doctor LLC* Senior loan L + 5.25% 6.25 % 12/2016 5,296 5,261 0.7 5,296

See Notes to Consolidated Financial Statements.

10

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) – (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Team Technologies Acquisition Company^ Senior loan L + 5.00% 6.25 % 12/2017 4,819 4,781 0.7 4,819
Team Technologies Acquisition Company Senior loan P + 3.75% 7.00 % 12/2017 152 150 - 152
31,925 31,482 4.4 31,842
Personal, Food and Miscellaneous Services
Affordable Care Inc. (3) Senior loan L + 4.50% N/A (4) 12/2017 - (2 ) - -
Affordable Care Inc.^ Senior loan L + 4.50% 5.50 % 12/2018 4,006 3,973 0.5 4,006
Focus Brands Inc.^ Second Lien L + 9.00% 10.25 % 08/2018 11,195 11,099 1.5 11,278
Ignite Restaurant Group, Inc (Joe's Crab Shack)^ One stop L + 7.00% 8.00 % 02/2019 6,155 6,070 0.8 6,155
PetVet Care Centers LLC (3) Senior loan L + 4.50% N/A (4) 12/2019 - (25 ) - (14 )
PetVet Care Centers LLC (3) Senior loan L + 4.50% N/A (4) 12/2020 - (46 ) - (25 )
PetVet Care Centers LLC*^ Senior loan L + 4.50% 5.50 % 12/2020 11,941 11,719 1.6 11,821
R.G. Barry Corporation* Senior loan L + 5.00% 6.00 % 09/2019 6,787 6,703 0.9 6,787
Vetcor Merger Sub LLC One stop L + 6.50% 7.75 % 12/2017 472 467 0.1 472
Vetcor Merger Sub LLC*^ One stop L + 6.50% 7.75 % 12/2017 5,825 5,786 0.8 5,825
Vetcor Merger Sub LLC (3) One stop L + 6.50% N/A (4) 12/2017 - (1 ) - -
Vetcor Merger Sub LLC^ One stop L + 6.50% 7.75 % 12/2017 370 370 0.1 370
Vetcor Merger Sub LLC^ One stop L + 6.50% 7.75 % 12/2017 571 571 0.1 571
Vetcor Merger Sub LLC^ One stop L + 6.50% 7.75 % 12/2017 382 382 0.1 382
Vetcor Merger Sub LLC One stop L + 6.50% 7.75 % 12/2017 646 646 0.1 646
Vetcor Merger Sub LLC One stop L + 6.50% 7.75 % 12/2017 62 62 - 62
48,412 47,774 6.6 48,336
Printing and Publishing
Market Track, LLC (3) One stop L + 6.00% N/A (4) 10/2019 - (17 ) - -
Market Track, LLC*^ One stop L + 6.00% 7.25 % 10/2019 29,197 28,963 4.0 29,197
Market Track, LLC One stop L + 6.00% 7.25 % 10/2019 1,213 1,197 0.2 1,213
30,410 30,143 4.2 30,410
Retail Stores
Benihana, Inc. (3) One stop L + 5.50% N/A (4) 07/2018 - (57 ) - -
Benihana, Inc.*^ One stop L + 5.50% 6.75 % 01/2019 15,554 15,168 2.1 15,554
Boot Barn, Inc.*^ One stop L + 5.75% 6.75 % 05/2019 8,939 8,727 1.2 8,939
Boot Barn, Inc.* One stop L + 5.75% 6.75 % 05/2019 2,827 2,803 0.4 2,827
Capital Vision Services, LLC (3) One stop L + 6.00% N/A (4) 12/2019 - (21 ) - (9 )
Capital Vision Services, LLC*^ One stop L + 6.00% 7.00 % 12/2019 26,785 26,540 3.6 26,619
Capital Vision Services, LLC^ One stop L + 6.00% 7.00 % 12/2019 1,510 1,497 0.2 1,500
Capital Vision Services, LLC One stop L + 6.00% 7.00 % 12/2019 1,521 1,515 0.2 1,512
Capital Vision Services, LLC One stop L + 6.00% 7.00 % 12/2019 773 763 0.1 763
DentMall MSO, LLC One stop L + 5.00% 6.00 % 07/2019 678 655 0.1 678
DentMall MSO, LLC One stop L + 5.00% 6.00 % 07/2019 10,328 10,235 1.4 10,328
DTLR, Inc.*^ One stop L + 8.00% 11.00 % 12/2015 15,675 15,623 2.1 15,675
Express Oil Change, LLC Senior loan L + 4.75% 6.12 % 12/2017 149 147 - 149
Express Oil Change, LLC* Senior loan P + 3.50% 6.75 % 12/2017 1,918 1,906 0.3 1,918
Express Oil Change, LLC Senior loan P + 3.50% 6.75 % 12/2017 109 108 - 109
Floor & Decor Outlets of America, Inc.*^ One stop L + 6.50% 7.75 % 05/2019 11,216 11,114 1.5 11,216
Marshall Retail Group, LLC, The (3) One stop L + 6.00% N/A (4) 08/2019 - (26 ) - -
Marshall Retail Group, LLC, The (3) One stop L + 6.00% N/A (4) 08/2020 - (11 ) - -
Marshall Retail Group, LLC, The^ One stop L + 6.00% 7.00 % 08/2020 12,424 12,278 1.7 12,424
Paper Source, Inc. One stop L + 6.25% N/A (4) 09/2018 - (10 ) - -
Paper Source, Inc.*^ One stop L + 6.25% 7.25 % 09/2018 12,545 12,450 1.7 12,545
Restaurant Holding Company, LLC Senior loan L + 7.75% 8.75 % 02/2019 4,964 4,922 0.6 4,368
Rubio's Restaurants, Inc*^ Senior loan L + 4.75% 6.00 % 11/2018 9,353 9,346 1.3 9,353
Sneaker Villa, Inc. One stop P + 7.00% 11.50 % 12/2017 1,253 1,236 0.2 1,253
Sneaker Villa, Inc. One stop L + 8.50% 10.00 % 12/2017 4,404 4,318 0.6 4,404
Sneaker Villa, Inc.^ One stop L + 8.50% 10.00 % 12/2017 627 618 0.1 627
Sneaker Villa, Inc.^ One stop L + 8.50% 10.00 % 12/2017 1,230 1,214 0.2 1,230
Sneaker Villa, Inc. (3) One stop L + 8.50% N/A (4) 12/2017 - (15 ) - -
Sneaker Villa, Inc.^ One stop L + 8.50% 10.00 % 12/2017 4,234 4,196 0.6 4,191
Sneaker Villa, Inc. One stop L + 8.50% 10.00 % 12/2017 1,253 1,230 0.2 1,228
Specialty Catalog Corp. (3) One stop L + 6.00% N/A (4) 07/2017 - (4 ) - -
Specialty Catalog Corp. One stop L + 6.00% 7.50 % 07/2017 4,502 4,471 0.6 4,502
Vision Source L.P. One stop L + 6.00% 7.00 % 08/2019 205 202 - 198
Vision Source L.P.*^ One stop L + 6.00% 7.00 % 08/2019 17,715 17,607 2.4 17,537
172,691 170,745 23.4 171,638
Telecommunications
Arise Virtual Solutions, Inc. (3) One stop L + 5.50% N/A (4) 12/2018 - (10 ) - -
Arise Virtual Solutions, Inc.*^ One stop L + 5.50% 6.75 % 12/2018 13,781 13,672 1.9 13,781
Hosting.com Inc. Senior loan P + 3.25% 6.50 % 12/2017 27 26 - 27
Hosting.com Inc.* Senior loan L + 4.50% 5.75 % 12/2017 843 834 0.1 843
ITC Global, Inc. One stop P + 5.50% 8.42 % 07/2018 867 856 0.1 867

See Notes to Consolidated Financial Statements.

11

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) – (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
ITC Global, Inc.* One stop L + 6.75% 7.75 % 07/2018 8,280 8,214 1.1 8,280
ITC Global, Inc.^ One stop L + 6.75% 7.75 % 07/2018 1,413 1,401 0.2 1,413
25,211 24,993 3.4 25,211
Textile and Leather
5.11, Inc.*^ Senior loan L + 5.00% 6.00 % 02/2020 1,029 1,024 0.1 1,027
Southern Tide, LLC (3) One stop L + 6.75% N/A (4) 06/2019 - (8 ) - -
Southern Tide, LLC^ One stop L + 6.75% 7.75 % 06/2019 4,085 4,049 0.6 4,085
5,114 5,065 0.7 5,112
Utilities
PowerPlan Consultants, Inc. (3) Senior loan L + 4.25% N/A (4) 10/2018 - (1 ) - -
PowerPlan Consultants, Inc.*^ Senior loan L + 4.25% 5.28 % 10/2019 3,310 3,269 0.5 3,310
3,310 3,268 0.5 3,310
Total debt investments United States $ 1,363,668 $ 1,345,709 183.1 % $ 1,343,695
Fair Value as a percentage of Principal Amount 98.5 %

See Notes to Consolidated Financial Statements.

12

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) - (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Shares / of Fair
Type Index (1) Rate (2) Date Contracts Cost Net Assets Value
Equity Investments (9)
Aerospace and Defense
NTS Technical Systems Common stock N/A N/A N/A 2 $ 1,506 0.2 % $ 1,829
Tresys Technology Holdings, Inc. Common stock N/A N/A N/A 295 295 - -
Whitcraft LLC Common stock N/A N/A N/A 1 670 0.1 513
Whitcraft LLC Warrant N/A N/A N/A - - - 100
2,471 0.3 2,442
Automobile
K&N Engineering, Inc. Preferred stock A N/A N/A N/A - - - 10
K&N Engineering, Inc. Preferred stock B N/A N/A N/A - - - 10
K&N Engineering, Inc. Common stock N/A N/A N/A - - - 77
- - 97
Beverage, Food and Tobacco
Atkins Nutritionals, Inc. LLC interest N/A N/A N/A 57 746 0.2 1,250
C. J. Foods, Inc. Preferred stock A N/A N/A N/A - 157 - 161
First Watch Restaurants, Inc. Common stock N/A N/A N/A 8 816 0.1 898
Goode Seed Co-Invest, LLC LLC units N/A N/A N/A 356 356 0.1 415
Julio & Sons Company LLC interest N/A N/A N/A 521 521 0.1 469
Northern Brewer, LLC LLC interest N/A N/A N/A 438 362 - -
Richelieu Foods, Inc. LP interest N/A N/A N/A 220 220 - 173
Tate's Bake Shop, Inc. LP interest N/A N/A N/A - 462 0.1 462
Uinta Brewing Company LP interest N/A N/A N/A - 462 0.1 462
4,102 0.7 4,290
Buildings and Real Estate
Brooks Equipment Company, LLC Common stock N/A N/A N/A 102 1,020 0.2 1,020
Containers, Packaging and Glass
Packaging Coordinators, Inc. Common stock N/A N/A N/A 25 2,065 0.4 2,631
Packaging Coordinators, Inc. Common stock N/A N/A N/A 48 1,563 0.3 2,394
3,628 0.7 5,025
Diversified Conglomerate Manufacturing
Chase Industries, Inc. Common stock N/A N/A N/A 1 1,186 0.2 1,186
ICCN Acquisition Corp. Preferred stock N/A N/A N/A - 162 - 177
ICCN Acquisition Corp. Common stock N/A N/A N/A - - - -
Sunless Merger Sub, Inc. LP interest N/A N/A N/A - 160 - -
TIDI Products, LLC LLC units N/A N/A N/A 353 207 - 325
1,715 0.2 1,688
Diversified Conglomerate Service
Daxko, LLC LLC units N/A N/A N/A 219 219 - 239
DISA Holdings Acquisition Subsidiary Corp. Common stock N/A N/A N/A - 154 - 154
Marathon Data Operating Co., LLC Preferred stock N/A N/A N/A 1 264 0.1 616
Marathon Data Operating Co., LLC Common stock N/A N/A N/A 1 264 - 43
PC Helps Support, LLC Common stock N/A N/A N/A 1 7 - 12
PC Helps Support, LLC Preferred stock N/A N/A N/A - 61 - 74
Secure-24, LLC LLC units N/A N/A N/A 263 263 0.1 339
Vendavo, Inc. Preferred stock N/A N/A N/A 827 827 0.1 827
2,059 0.3 2,304
Electronics
ECI Acquisition Holdings, Inc. Common stock N/A N/A N/A 9 873 0.1 994
Sparta Holding Corporation Common stock N/A N/A N/A 1 566 0.1 566
Sparta Holding Corporation Common stock N/A N/A N/A 235 6 - 6
1,445 0.2 1,566
Grocery
MyWebGrocer, Inc. LLC units N/A N/A N/A 1,418 1,446 0.2 1,446

See Notes to Consolidated Financial Statements.

13

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) - (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Shares / of Fair
Type Index (1) Rate (2) Date Contracts Cost Net Assets Value
Healthcare, Education and Childcare
Advanced Pain Management Holdings, Inc. Common stock N/A N/A N/A 67 67 0.1 603
Advanced Pain Management Holdings, Inc. Preferred stock N/A N/A N/A 8 829 0.1 956
Avatar International, LLC LP interest N/A N/A N/A 1 741 - -
California Cryobank, LLC Common stock A N/A N/A N/A - 28 - 30
California Cryobank, LLC Common stock B N/A N/A N/A - - - -
Certara L.P. LP interest N/A N/A N/A - 635 0.1 717
Dialysis Newco, Inc. LLC units N/A N/A N/A 871 - 0.2 1,687
Encore Rehabilitation Services, LLC LLC interest N/A N/A N/A 270 270 0.2 922
G & H Wire Company, Inc. LP interest N/A N/A N/A - 102 - 123
Global Healthcare Exchange, LLC Common stock N/A N/A N/A - 5 - 19
Global Healthcare Exchange, LLC Preferred stock N/A N/A N/A - 481 0.1 511
IntegraMed America, Inc. Common stock N/A N/A N/A 1 804 0.1 731
Northwestern Management Services, LLC Common stock N/A N/A N/A 3 3 - 51
Northwestern Management Services, LLC LLC units N/A N/A N/A - 249 - 291
Pentec Acquisition Sub, Inc. Preferred stock N/A N/A N/A 1 116 - 140
Radiology Partners, Inc. LLC units N/A N/A N/A 43 85 - 85
Reliant Pro ReHab, LLC Preferred stock N/A N/A N/A 2 183 0.2 971
Southern Anesthesia and Surgical Common stock N/A N/A N/A 487 487 0.1 689
Spear Education, LLC Preferred stock N/A N/A N/A - 86 - 86
Spear Education, LLC Common stock N/A N/A N/A 1 1 - 1
Surgical Information Systems, LLC Common stock N/A N/A N/A 4 414 0.1 503
Young Innovations, Inc. Preferred stock N/A N/A N/A - 236 - 261
N/A N/A N/A 5,822 1.3 9,377
Home and Office Furnishings, Housewares, and Durable Consumer
Top Knobs USA, Inc. Common stock N/A N/A N/A 3 27 - 198
Insurance
Captive Resources Midco, LLC LLC units N/A N/A N/A 1 86 - 203
Investment Funds and Vehicles
Senior Loan Fund LLC (7)(8) LLC interest N/A N/A N/A 10,937 10,937 1.5 10,834
Leisure, Amusement, Motion Pictures and Entertainment
Competitor Group, Inc. LLC interest N/A N/A N/A 708 713 - 14
LMP TR Holdings, LLC LLC units N/A N/A N/A 712 712 0.1 672
Starplex Operating, L.L.C. Common stock N/A N/A N/A 1 183 - 263
Titan Fitness, LLC Common stock N/A N/A N/A 6 583 0.1 655
2,191 0.2 1,604
Personal and Non-Durable Consumer Products
C.B. Fleet Company, Incorporated LLC units N/A N/A N/A 2 174 - 174
Hygenic Corporation, The LP interest N/A N/A N/A 1 61 - 127
Massage Envy, LLC LLC interest N/A N/A N/A 749 749 0.1 773
Team Technologies Acquisition Company Common stock N/A N/A N/A - 148 0.1 255
1,132 0.2 1,329
Personal Transportation
PODS Funding Corp.  II Warrant N/A N/A N/A 271 - 0.3 2,308
Personal, Food and Miscellaneous Services
R.G. Barry Corporation Preferred stock N/A N/A N/A - 161 - 161
Printing and Publishing
Market Track, LLC Preferred stock N/A N/A N/A - 145 - 183
Market Track, LLC Common stock N/A N/A N/A 1 145 0.1 239
290 0.1 422

See Notes to Consolidated Financial Statements.

14

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (unaudited) - (continued)
December 31, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Shares / of Fair
Type Index (1) Rate (2) Date Contracts Cost Net Assets Value
Retail Stores
Barcelona Restaurants, LLC (8)(10) LP interest N/A N/A N/A 1,996 1,996 0.5 3,407
Benihana, Inc. LLC units N/A N/A N/A 43 699 0.1 718
Capital Vision Services, LLC LLC interest N/A N/A N/A 402 17 0.1 559
DentMall MSO, LLC Common stock N/A N/A N/A 2 - - -
DentMall MSO, LLC Preferred stock N/A N/A N/A 2 97 - 101
Express Oil Change, LLC LLC interest N/A N/A N/A 81 81 - 82
Marshall Retail Group LLC, The Common stock N/A N/A N/A 15 154 - 154
Paper Source, Inc. LLC interest N/A N/A N/A 8 1,387 0.2 1,309
PetPeople Enterprise, LLC LP interest N/A N/A N/A 889 889 0.1 1,065
Rubio's Restaurants, Inc. Preferred stock N/A N/A N/A 199 945 0.2 1,615
Sneaker Villa, Inc. LLC interest N/A N/A N/A 4 411 0.1 479
Vision Source L.P. Common stock N/A N/A N/A 9 386 0.1 727
7,062 1.4 10,216
Telecommunications
ITC Global, Inc. Preferred stock N/A N/A N/A 17 311 - 318
Textiles and Leather
Southern Tide, LLC LLC interest N/A N/A N/A 2 191 - 183
Total equity investments United States $ 46,096 7.8 % $ 57,031
Total United States $ 1,391,805 190.9 % $ 1,400,726
Total Investments $ 1,391,805 190.9 % $ 1,400,726
Cash, Restricted Cash and Cash Equivalents
Cash and Restricted Cash $ 10,350 1.4 % $ 10,350
BlackRock Liquidity Funds T-Fund Institutional Shares (CUSIP 09248U718) 15,035 2.1 15,035
JPM Offshore Money Market Account (ISIN LU0103813712) 4,087 0.6 4,087
US Bank Money Market Account (CUSIP 9AMMF05B2) 11,954 1.6 11,954
Total Cash, Restricted Cash and Cash Equivalents $ 41,426 5.7 % $ 41,426
Total Investments and Cash, Restricted Cash and Cash Equivalents $ 1,433,231 196.6 % $ 1,442,152

* Denotes that all or a portion of the loan secures the notes offered in the 2010 Debt Securitization (as defined in Note 7).
^ Denotes that all or a portion of the loan secures the notes offered in the 2014 Debt Securitization (as defined in Note 7).
(1) The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate ("LIBOR" or "L") or Prime ("P") and which reset daily, quarterly or semiannually.  For each, the Company has provided the spread over LIBOR or Prime and the weighted average current interest rate in effect as of December 31, 2014. Certain investments are subject to a LIBOR or Prime interest rate floor.  For fixed rate loans, a spread above a reference rate is not applicable.
(2) For portfolio companies with multiple interest rate contracts, the interest rate shown is a weighted average current interest rate in effect as of December 31, 2014.
(3) The negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.  The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.
(4) The entire commitment was unfunded as of December 31, 2014.  As such, no interest is being earned on this investment.
(5) The sale of a portion of this loan does not qualify for sale accounting under ASC Topic 860 - Transfers and Servicing , and therefore, the entire one stop loan asset remains in the Consolidated Schedule of Investments.  (See Note 7 in the accompanying notes to the consolidated financial statements.)
(6) Loan was on non-accrual status as of December 31, 2014, meaning that the Company has ceased recognizing interest income on the loan.
(7) As defined in the Investment Company Act of 1940, as amended (the "1940 Act"), the Company is deemed to be both an "Affiliated Person" of and "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement).  See Note 5 in the accompanying notes to the consolidated financial statements for transactions during the three months ended December 31, 2014 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control.
(8) The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act.  Under the 1940 Act, the Company may not acquire any any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets.
(9) Non-income producing securities.
(10) As defined in the 1940 Act, the Company is deemed to be an "Affiliated Person" of the portfolio company as the Company along with affiliated entities owns five percent or more of the portfolio company's voting securities.  See Note 5 in the accompanying notes to the financial statements for transactions during the three months ended December 31, 2014 in which the issuer was an Affiliated Person (but not a portfolio company that the Company is deemed to control).

See Notes to Consolidated Financial Statements.

15

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Investments
United States
Debt investments
Aerospace and Defense
ILC Dover, LP One stop P + 4.50% 7.75 % 03/2019 $ 360 $ 352 0.1 % $ 360
ILC Dover, LP^ One stop L + 5.50% 6.50 % 03/2020 18,594 18,467 2.5 18,594
ILC Industries, Inc. (3) One stop L + 4.75% N/A (4) 07/2020 - (32 ) - (25 )
ILC Industries, Inc.*^ One stop L + 4.75% 5.75 % 07/2020 28,510 28,234 3.9 28,296
Novetta Solutions LLC Senior loan P + 3.00% 6.25 % 03/2017 184 178 - 184
Novetta Solutions LLC* Senior loan L + 5.00% 6.25 % 03/2017 1,697 1,673 0.2 1,697
NTS Technical Systems (3) One stop L + 6.00% N/A (4) 11/2018 - (30 ) - -
NTS Technical Systems*^ One stop L + 6.00% 7.25 % 11/2018 18,871 18,572 2.6 18,871
NTS Technical Systems (3) One stop L + 6.00% N/A (4) 11/2018 - (63 ) - -
Tresys Technology Holdings, Inc. One stop L + 6.75% 8.00 % 12/2017 188 181 - 188
Tresys Technology Holdings, Inc. One stop L + 6.75% 8.00 % 12/2017 3,899 3,836 0.3 2,339
Whitcraft LLC Subordinated debt N/A 12.00 % 12/2018 1,877 1,857 0.3 1,877
74,180 73,225 9.9 72,381
Automobile
American Driveline Systems, Inc. Senior loan L + 5.50% 7.22 % 01/2016 331 328 - 292
American Driveline Systems, Inc.* Senior loan L + 5.50% 7.00 % 01/2016 2,797 2,774 0.3 2,517
K&N Engineering, Inc. (3) Senior loan L + 4.25% N/A (4) 07/2019 - (7 ) - (2 )
K&N Engineering, Inc.*^ Senior loan L + 4.25% 5.25 % 07/2019 6,816 6,721 0.9 6,782
K&N Engineering, Inc. (3) Senior loan L + 4.25% N/A (4) 07/2019 - (19 ) - (2 )
Take 5 Oil Change, L.L.C. (3) Senior loan L + 5.25% N/A (4) 07/2018 - (7 ) - -
Take 5 Oil Change, L.L.C.^ Senior loan L + 5.25% 6.25 % 07/2018 4,872 4,840 0.7 4,872
14,816 14,630 1.9 14,459
Banking
HedgeServ Holding L.P.^ One stop L + 8.25% 5.25% cash/4.00% PIK 02/2019 17,240 17,092 2.4 17,240
HedgeServ Holding L.P. (3) One stop L + 4.25% N/A (4) 02/2019 - (8 ) - -
Prommis Fin Co. (6) Senior loan P + 10.00% 13.25 % 06/2015 85 84 - 2
Prommis Fin Co.* (6) Senior loan N/A 2.25% cash/11.5% PIK 06/2015 124 124 - 3
17,449 17,292 2.4 17,245
Beverage, Food and Tobacco
ABP Corporation Senior loan P + 3.50% 7.25 % 09/2018 84 77 - 84
ABP Corporation* Senior loan L + 4.75% 6.00 % 09/2018 4,796 4,727 0.7 4,796
Ameriqual Group, LLC* Senior loan L + 6.00% 6.50% cash/1.00% PIK 03/2016 1,693 1,676 0.2 1,625
Ameriqual Group, LLC* Senior loan L + 9.00% 9.00% cash/1.50% PIK 03/2016 831 826 0.1 686
ARG IH Corporation (Arby's)^ Senior loan L + 3.75% 4.75 % 11/2020 2,337 2,311 0.3 2,339
Atkins Nutritionals, Inc*^ One stop L + 5.00% 6.25 % 01/2019 23,873 23,683 3.2 23,754
Atkins Nutritionals, Inc* One stop L + 8.50% 9.75 % 04/2019 21,636 21,326 3.0 21,744
C. J. Foods, Inc. One stop L + 5.50% 6.50 % 05/2019 86 77 - 86
C. J. Foods, Inc. (3) One stop L + 5.50% N/A (4) 05/2019 - (12 ) - -
C. J. Foods, Inc. One stop L + 5.50% 6.50 % 05/2019 3,224 3,179 0.4 3,224
Candy Intermediate Holdings, Inc. (Ferrara Candy)^ Senior loan L + 6.25% 7.50 % 06/2018 4,887 4,780 0.6 4,747
Diversified Foodservice Supply, Inc. (3) Senior loan L + 4.50% N/A (4) 12/2018 - (3 ) - -
Diversified Foodservice Supply, Inc.* Senior loan L + 4.50% 5.75 % 12/2018 4,556 4,518 0.6 4,556
Firebirds International, LLC (3) One stop L + 6.25% N/A (4) 05/2018 - (2 ) - -
Firebirds International, LLC* One stop L + 6.25% 7.50 % 05/2018 1,096 1,081 0.1 1,096
Firebirds International, LLC One stop L + 6.25% 7.50 % 05/2018 304 299 0.1 304
Firebirds International, LLC (3) One stop L + 6.25% N/A (4) 05/2018 - (5 ) - -
First Watch Restaurants, Inc. (3) One stop L + 7.50% N/A (4) 12/2018 - (24 ) - -
First Watch Restaurants, Inc.*^ One stop L + 7.50% 8.75 % 12/2018 11,293 11,165 1.5 11,293
First Watch Restaurants, Inc.*^ One stop P + 6.50% 9.75 % 12/2018 3,070 3,035 0.4 3,070
First Watch Restaurants, Inc. One stop L + 7.50% 8.75 % 12/2018 1,749 1,744 0.2 1,749
IT'SUGAR LLC Senior loan L + 7.50% 9.00 % 04/2018 7,566 7,456 1.0 7,566
IT'SUGAR LLC Subordinated debt N/A 5.00 % 10/2017 1,707 1,707 0.3 1,833
Julio & Sons Company One stop L + 5.50% 6.50 % 09/2016 277 271 - 277
Julio & Sons Company* One stop L + 5.50% 6.50 % 09/2016 6,978 6,935 1.0 6,978
Julio & Sons Company (3) One stop L + 5.50% N/A (4) 09/2016 - (26 ) - -
Northern Brewer, LLC One stop P + 9.25% 8.50% cash/4.00% PIK 02/2018 676 665 0.1 541
Northern Brewer, LLC One stop P + 9.25% 8.50% cash/4.00% PIK 02/2018 6,363 6,244 0.7 5,090
Richelieu Foods, Inc. Senior loan P + 4.00% 7.25 % 11/2015 101 96 - 101
Richelieu Foods, Inc.* Senior loan L + 5.00% 6.75 % 11/2015 1,854 1,839 0.3 1,854
Tate's Bake Shop, Inc. (3) Senior loan L + 4.75% N/A (4) 08/2019 - (4 ) - (4 )
Tate's Bake Shop, Inc.^ Senior loan L + 4.75% 5.75 % 08/2019 3,008 2,978 0.4 2,978
Tate's Bake Shop, Inc. (3) Senior loan L + 4.75% N/A (4) 08/2019 - (5 ) - (6 )

See Notes to Consolidated Financial Statements.

16

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Uinta Brewing Company (3) One stop L + 6.00% N/A (4) 08/2019 - (8 ) - (8 )
Uinta Brewing Company^ One stop L + 6.00% 7.00 % 08/2019 3,236 3,204 0.4 3,203
117,281 115,810 15.6 115,556
Building and Real Estate
Brooks Equipment Company, LLC (3) One stop L + 5.75% N/A (4) 08/2020 - (20 ) - (20 )
Brooks Equipment Company, LLC*^ One stop L + 5.75% 6.75 % 08/2020 27,150 26,753 3.7 26,946
ITEL Laboratories, Inc. (3) Senior loan L + 4.75% N/A (4) 06/2018 - (1 ) - -
ITEL Laboratories, Inc.* Senior loan L + 4.75% 6.00 % 06/2018 756 749 0.1 756
27,906 27,481 3.8 27,682
Cargo Transport
RP Crown Parent (RedPrairie Corp)* Senior loan L + 5.00% 6.00 % 12/2018 1,970 1,942 0.3 1,923
Containers, Packaging and Glass
Fort Dearborn Company* Senior loan L + 4.25% 5.25 % 10/2017 16 16 - 16
Fort Dearborn Company*^ Senior loan L + 4.25% 5.25 % 10/2017 511 508 0.1 511
Fort Dearborn Company* Senior loan L + 4.75% 5.75 % 10/2018 63 63 - 63
Fort Dearborn Company*^ Senior loan L + 4.75% 5.75 % 10/2018 2,180 2,168 0.3 2,180
Packaging Coordinators, Inc.*^ Senior loan L + 4.25% 5.25 % 08/2021 15,000 14,852 2.1 15,032
Packaging Coordinators, Inc. Second lien L + 8.00% 9.00 % 08/2022 10,000 9,901 1.4 9,950
27,770 27,508 3.9 27,752
Diversified Conglomerate Manufacturing
Chase Industries, Inc.*^ One stop P + 4.50% 7.75 % 09/2020 21,037 20,828 2.8 20,827
Chase Industries, Inc. One stop P + 4.50% 7.75 % 09/2020 277 255 - 255
Chase Industries, Inc. (3) One stop L + 5.75% N/A (4) 09/2020 - (48 ) - (49 )
ICCN Acquisition Corp. (3) One stop L + 5.25% N/A (4) 03/2019 - (4 ) - -
ICCN Acquisition Corp.^ One stop L + 5.25% 6.25 % 03/2019 3,998 3,936 0.5 3,998
ICCN Acquisition Corp. (3) One stop L + 5.25% N/A (4) 03/2019 - (14 ) - -
Metal Spinners, Inc.* Senior loan L + 7.50% 9.00 % 04/2015 1,294 1,288 0.2 1,294
Metal Spinners, Inc.* Senior loan L + 7.50% 9.00 % 04/2015 2,536 2,524 0.3 2,536
Onicon Incorporated (3) One stop L + 4.50% N/A (4) 12/2017 - (10 ) - -
Onicon Incorporated One stop L + 4.50% 5.50 % 12/2017 3,141 3,100 0.4 3,141
Pasternack Enterprises, Inc.* Senior loan L + 5.00% 6.25 % 12/2017 1,126 1,119 0.2 1,126
Plex Systems, Inc. (3) Senior loan L + 7.50% N/A (4) 06/2018 - (26 ) - -
Plex Systems, Inc.*^ Senior loan L + 7.50% 8.75 % 06/2018 18,797 18,409 2.6 18,797
Sunless Merger Sub, Inc. (3) Senior loan L + 5.25% N/A (4) 07/2016 - - - (26 )
Sunless Merger Sub, Inc.* Senior loan L + 5.25% 6.50 % 07/2016 1,816 1,813 0.2 1,271
TIDI Products, LLC (3) One stop L + 6.50% N/A (4) 07/2017 - (11 ) - -
TIDI Products, LLC* One stop L + 6.50% 7.75 % 07/2018 12,631 12,441 1.7 12,631
Vintage Parts, Inc.* One stop L + 4.50% 5.75 % 12/2015 4,049 4,022 0.6 4,049
Vintage Parts, Inc.* One stop L + 4.50% 5.75 % 12/2015 56 56 - 56
Vintage Parts, Inc.* One stop L + 4.50% 5.75 % 12/2015 846 850 0.1 846
71,604 70,528 9.6 70,752
Diversified Conglomerate Service
Accellos, Inc. (3) One stop L + 5.75% N/A (4) 07/2020 - (20 ) - -
Accellos, Inc.^ One stop L + 5.75% 6.75 % 07/2020 31,113 30,740 4.2 31,113
Aderant North America, Inc.* Senior loan L + 4.25% 5.25 % 12/2018 4,220 4,190 0.6 4,220
Agility Recovery Solutions Inc. (3) One stop L + 6.75% N/A (4) 09/2018 - (6 ) - -
Agility Recovery Solutions Inc.* One stop L + 6.75% 8.00 % 09/2018 8,128 7,995 1.1 8,128
Bomgar Corporation (3) One stop L + 6.00% N/A (4) 05/2019 - (18 ) - (20 )
Bomgar Corporation* One stop L + 6.00% 7.00 % 05/2020 29,423 28,935 4.0 29,129
Daxko, LLC (3) One stop L + 7.75% N/A (4) 03/2019 - (24 ) - -
Daxko, LLC One stop L + 7.75% 8.75 % 03/2019 16,840 16,564 2.3 16,840
EAG, INC. (Evans Analytical Group)* Senior loan L + 4.00% 5.00 % 07/2017 2,401 2,377 0.3 2,401
Integration Appliance, Inc. Senior loan L + 8.25% 9.50 % 09/2018 719 711 0.1 719
Integration Appliance, Inc. Senior loan L + 8.25% 9.50 % 09/2018 5,396 5,288 0.7 5,396
Integration Appliance, Inc. Senior loan L + 8.25% 9.50 % 06/2019 7,914 7,727 1.1 7,914
Marathon Data Operating Co., LLC (3) One stop L + 6.25% N/A (4) 08/2017 - (6 ) - -
Marathon Data Operating Co., LLC One stop L + 6.25% 7.50 % 08/2017 4,595 4,528 0.6 4,595
Navex Global, Inc. (3) One stop L + 5.50% N/A (4) 12/2016 - (19 ) - -
Navex Global, Inc.* One stop L + 5.50% 6.50 % 12/2016 19,045 18,718 2.6 19,045
NetSmart Technologies, Inc.* One stop L + 7.53% 8.78 % 12/2017 8,068 8,012 1.1 8,068
NetSmart Technologies, Inc. One stop L + 7.52% 8.77 % 12/2017 637 629 0.1 637
PC Helps Support, LLC (3) Senior loan L + 5.25% N/A (4) 09/2017 - (2 ) - -
PC Helps Support, LLC Senior loan L + 5.25% 6.51 % 09/2017 1,707 1,692 0.2 1,707
Secure-24, LLC (3) One stop L + 6.25% N/A (4) 08/2017 - (5 ) - -
Secure-24, LLC* One stop L + 6.25% 7.50 % 08/2017 10,433 10,249 1.4 10,433

See Notes to Consolidated Financial Statements.

17

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Secure-24, LLC^ One stop L + 6.25% 7.50 % 08/2017 1,526 1,507 0.2 1,526
SoftWriters, Inc. (3) One stop L + 5.00% N/A (4) 05/2019 - (2 ) - -
SoftWriters, Inc. (3) One stop L + 5.00% N/A (4) 05/2019 - (3 ) - -
SoftWriters, Inc. One stop L + 5.00% 6.00 % 05/2019 6,411 6,387 0.9 6,411
Source Medical Solutions, Inc. Second lien L + 8.00% 9.00 % 03/2018 9,294 9,146 1.3 9,294
167,870 165,290 22.8 167,556
Electronics
ECI Acquisition Holdings, Inc. (3) One stop L + 6.25% N/A (4) 03/2019 - (17 ) - -
ECI Acquisition Holdings, Inc.^ One stop L + 6.25% 7.25 % 03/2019 22,215 21,844 3.0 22,215
ECI Acquisition Holdings, Inc. (3) One stop L + 6.25% N/A (4) 03/2019 - (79 ) - -
Rogue Wave Holdings, Inc.*^ One stop L + 8.08% 9.10 % 12/2018 10,613 10,500 1.4 10,613
Sloan Company, Inc., The (3) One stop L + 7.50% N/A (4) 10/2018 - (13 ) - -
Sloan Company, Inc., The*^ One stop L + 7.50% 8.75 % 10/2018 13,027 12,895 1.8 13,027
Sparta Holding Corporation (3) One stop L + 5.25% N/A (4) 07/2020 - (37 ) - (30 )
Sparta Holding Corporation*^ One stop L + 6.75% 6.25% cash/1.50% PIK 07/2020 23,358 23,075 3.2 23,124
Syncsort Incorporated (3) Senior loan L + 4.75% N/A (4) 03/2019 - (3 ) - -
Syncsort Incorporated (3) Senior loan L + 4.75% N/A (4) 03/2019 - (13 ) - -
Syncsort Incorporated* Senior loan L + 4.75% 5.75 % 03/2019 6,143 6,089 0.8 6,143
Systems Maintenance Services Holding, Inc.^ Senior loan L + 4.00% 5.00 % 10/2019 2,650 2,639 0.4 2,650
Taxware, LLC*^ Second lien L + 8.38% 9.38 % 10/2019 19,979 19,678 2.7 19,979
Watchfire Enterprises, Inc. Second lien L + 8.00% 9.00 % 10/2021 9,435 9,270 1.3 9,435
107,420 105,828 14.6 107,156
Finance
Ascensus, Inc. (3) One stop L + 4.00% N/A (4) 11/2018 - (16 ) - -
Ascensus, Inc.^ One stop L + 4.00% 5.00 % 12/2019 4,193 4,120 0.6 4,193
Ascensus, Inc.^ One stop L + 8.00% 9.00 % 12/2020 6,337 6,142 0.9 6,337
Pillar Processing LLC* (6) Senior loan L + 5.50% 5.72 % 11/2018 447 445 - -
Pillar Processing LLC* (6) Senior loan N/A 14.50 % 05/2019 2,377 2,368 - -
13,354 13,059 1.5 10,530
Grocery
MyWebGrocer, Inc. (3) Senior loan L + 4.75% N/A (4) 05/2018 - (12 ) - -
MyWebGrocer, Inc.^ Senior loan L + 8.75% 6.00% cash/4.00% PIK 05/2018 14,271 14,093 1.9 14,271
Teasdale Quality Foods, Inc.* Senior loan L + 4.50% 5.75 % 05/2018 2,674 2,653 0.4 2,674
16,945 16,734 2.3 16,945
Healthcare, Education and Childcare
Advanced Pain Management Holdings, Inc. (3) Senior loan L + 5.00% N/A (4) 02/2018 - (8 ) - -
Advanced Pain Management Holdings, Inc.* Senior loan L + 5.00% 6.25 % 02/2018 7,102 7,054 1.0 7,102
Advanced Pain Management Holdings, Inc. Senior loan L + 5.00% 6.25 % 02/2018 486 481 0.1 486
Avatar International, LLC (3) One stop L + 4.94% N/A (4) 09/2016 - (4 ) - -
Avatar International, LLC* One stop L + 7.89% 6.19% cash/2.95% PIK 09/2016 7,611 7,560 0.7 4,947
Avatar International, LLC One stop L + 7.89% 6.19% cash/2.95% PIK 09/2016 1,642 1,634 0.1 1,067
California Cryobank, LLC One stop P + 4.25% 7.50 % 08/2019 86 84 - 84
California Cryobank, LLC^ One stop L + 5.50% 6.50 % 08/2019 1,550 1,535 0.2 1,535
California Cryobank, LLC (3) One stop L + 5.50% N/A (4) 08/2019 - (2 ) - (2 )
Certara L.P. (3) One stop L + 6.25% N/A (4) 12/2018 - (18 ) - -
Certara L.P.*^ One stop L + 6.25% 7.25 % 12/2018 22,948 22,722 3.1 22,948
Data Innovations LLC One stop L + 7.69% 8.69 % 05/2019 8,800 8,619 1.2 8,800
Delta Educational Systems* Senior loan P + 4.75% 8.00 % 12/2016 1,646 1,627 0.2 1,646
Delta Educational Systems Senior loan L + 6.00% N/A (4) 12/2016 - - - -
Encore Rehabilitation Services, LLC (3) One stop L + 6.00% N/A (4) 06/2017 - (9 ) - -
Encore Rehabilitation Services, LLC One stop L + 6.00% 7.25 % 06/2017 4,969 4,895 0.7 4,969
G & H Wire Company, Inc. (3) Senior loan L + 5.75% N/A (4) 12/2017 - (6 ) - -
G & H Wire Company, Inc.*^ Senior loan L + 5.75% 6.75 % 12/2017 12,902 12,766 1.8 12,902
Global Healthcare Exchange, LLC (3) One stop L + 9.00% N/A (4) 03/2020 - (23 ) - -
Global Healthcare Exchange, LLC One stop L + 9.00% 10.00 % 03/2020 20,087 19,723 2.7 20,087
GSDM Holdings Corp. Senior loan L + 4.25% 5.25 % 06/2019 627 624 0.1 627
Hospitalists Management Group, LLC Senior loan L + 5.00% 6.77 % 05/2018 910 896 0.1 864
Hospitalists Management Group, LLC Senior loan L + 5.00% 6.51 % 05/2017 3,672 3,608 0.5 3,489
Hospitalists Management Group, LLC Senior loan L + 5.00% 6.50 % 05/2017 427 421 0.1 406
IntegraMed America, Inc. (3) One stop L + 7.25% 8.50 % 09/2017 811 800 0.1 811
IntegraMed America, Inc.*^ One stop L + 7.25% 8.50 % 09/2017 15,587 15,376 2.1 15,587
Joerns Healthcare, LLC One stop L + 5.00% 6.00 % 05/2020 9,794 9,702 1.3 9,782
Maverick Healthcare Group, LLC* Senior loan L + 5.50% 7.25 % 12/2016 1,989 1,964 0.3 1,949
Northwestern Management Services, LLC Senior loan P + 4.00% 7.25 % 10/2017 114 104 - 114
Northwestern Management Services, LLC* Senior loan L + 5.25% 6.50 % 10/2017 3,964 3,913 0.5 3,964

See Notes to Consolidated Financial Statements.

18

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Northwestern Management Services, LLC Senior loan L + 5.25% 6.50 % 10/2017 47 44 - 47
Onsite Holding Corp. (3) One stop L + 5.25% N/A (4) 06/2020 - (42 ) - -
Onsite Holding Corp.*^ One stop L + 5.25% 6.25 % 06/2020 26,921 26,696 3.7 26,921
Paradigm Management Services, LLC^ Senior loan L + 4.50% 5.50 % 01/2019 2,740 2,719 0.4 2,740
Pentec Acquisition Sub, Inc. (3) Senior loan L + 5.25% N/A (4) 05/2017 - (2 ) - -
Pentec Acquisition Sub, Inc.* Senior loan L + 5.25% 6.50 % 05/2018 1,776 1,754 0.2 1,776
Pyramid Healthcare, Inc. (3) One stop L + 5.75% N/A (4) 08/2019 - (5 ) - (4 )
Pyramid Healthcare, Inc.^ One stop L + 5.75% 6.75 % 08/2019 7,607 7,542 1.0 7,550
Radiology Partners, Inc. (3) One stop L + 5.00% N/A (4) 09/2020 - (8 ) - (8 )
Radiology Partners, Inc.*^ One stop L + 5.00% 6.00 % 09/2020 17,209 16,937 2.3 17,037
Radiology Partners, Inc. (3) One stop L + 5.00% N/A (4) 09/2020 - (46 ) - (46 )
Reliant Pro ReHab, LLC Senior loan P + 4.00% 7.25 % 06/2017 10 3 - 10
Reliant Pro ReHab, LLC*^ Senior loan L + 5.00% 6.00 % 06/2017 7,615 7,547 1.0 7,615
Renaissance Pharma (U.S.) Holdings Inc. Senior loan P + 3.00% 6.25 % 05/2018 63 59 - 63
Renaissance Pharma (U.S.) Holdings Inc.*^ Senior loan L + 4.00% 5.00 % 05/2018 4,090 4,039 0.6 4,090
Southern Anesthesia and Surgical (3) One stop L + 5.50% N/A (4) 11/2017 - (10 ) - -
Southern Anesthesia and Surgical One stop L + 5.50% 6.50 % 11/2017 6,012 5,905 0.8 6,012
Southern Anesthesia and Surgical (3) One stop L + 5.50% N/A (4) 11/2017 - (40 ) - -
Spear Education, LLC (3) One stop L + 5.50% N/A (4) 08/2019 - (6 ) - (6 )
Spear Education, LLC*^ One stop L + 5.50% 6.50 % 08/2019 6,005 5,961 0.8 5,960
Spear Education, LLC One stop L + 5.50% N/A (4) 08/2019 - - - -
Surgical Information Systems, LLC^ Senior loan L + 3.50% 4.51 % 09/2018 2,060 2,055 0.3 2,060
U.S. Anesthesia Partners, Inc. One stop L + 5.00% 6.00 % 12/2019 6,000 5,970 0.8 5,970
WIL Research Company, Inc.* Senior loan L + 4.50% 5.75 % 02/2018 776 769 0.1 753
Young Innovations, Inc. (3) Senior loan L + 4.25% N/A (4) 01/2018 - (3 ) - -
Young Innovations, Inc.*^ Senior loan L + 4.25% 5.25 % 01/2019 5,443 5,412 0.7 5,443
222,098 219,288 29.6 218,147
Home and Office Furnishings, Housewares, and Durable Consumer
Plano Molding Company, LLC^ Senior loan L + 4.25% 5.25 % 10/2018 1,984 1,972 0.3 1,984
WII Components, Inc. Senior loan L + 4.50% N/A (4) 07/2018 - - - -
WII Components, Inc.* Senior loan L + 4.50% 5.50 % 07/2018 1,183 1,177 0.2 1,177
Zenith Products Corporation One stop P + 1.75% 5.00 % 09/2013 29 29 - 25
Zenith Products Corporation* One stop P + 3.50% 6.75 % 09/2013 3,684 3,684 0.3 1,842
6,880 6,862 0.8 5,028
Insurance
Captive Resources Midco, LLC (3) One stop L + 5.00% N/A (4) 01/2019 - (16 ) - -
Captive Resources Midco, LLC*^ One stop L + 5.00% 6.50 % 01/2019 19,653 19,477 2.7 19,653
19,653 19,461 2.7 19,653
Investment Funds and Vehicles
Senior Loan Fund LLC (7)(8) Subordinated debt L + 8.00% 8.16 % 05/2020 25,589 25,589 3.5 25,589
Leisure, Amusement, Motion Pictures and Entertainment
Competitor Group, Inc. One stop P + 6.75% 9.76 % 11/2018 884 873 0.1 769
Competitor Group, Inc.* One stop L + 8.75% 9.00% cash/1.00% PIK 11/2018 12,807 12,654 1.6 11,526
Octane Fitness, LLC (3) One stop L + 5.25% N/A (4) 10/2018 - (3 ) - -
Octane Fitness, LLC* One stop L + 5.25% 6.50 % 10/2018 8,034 8,001 1.1 8,034
Pride Manufacturing Company, LLC* Senior loan L + 6.00% 7.75 % 11/2015 493 490 0.1 493
Self Esteem Brands, LLC (3) Senior loan L + 4.00% N/A (4) 02/2020 - (5 ) - -
Self Esteem Brands, LLC^ Senior loan L + 4.00% 5.00 % 02/2020 7,462 7,420 1.0 7,462
Starplex Operating, L.L.C. One stop P + 6.25% 9.50 % 12/2017 311 298 - 311
Starplex Operating, L.L.C.*^ One stop L + 7.50% 9.00 % 12/2017 10,079 9,912 1.4 10,079
Titan Fitness, LLC (3) One stop L + 6.50% N/A (4) 09/2019 - (22 ) - -
Titan Fitness, LLC* One stop L + 6.50% 7.75 % 09/2019 13,603 13,340 1.9 13,603
Titan Fitness, LLC (3) One stop L + 6.50% N/A (4) 09/2019 - (22 ) - -
53,673 52,936 7.2 52,277
Mining, Steel, Iron and Non-Precious Metals
Benetech, Inc. One stop P + 7.75% 11.00 % 10/2017 162 154 - 162
Benetech, Inc.* One stop L + 9.00% 10.25 % 10/2017 5,020 4,982 0.7 5,020
5,182 5,136 0.7 5,182
Oil and Gas
Drilling Info, Inc. (3) (5) One stop L + 5.00% N/A (4) 06/2018 - (1 ) - -
Drilling Info, Inc. (5) ^ One stop L + 5.00% 6.00 % 06/2018 1,325 1,315 0.2 1,325
Drilling Info, Inc. (3)(5) One stop L + 5.00% N/A (4) 06/2018 - (4 ) - -
1,325 1,310 0.2 1,325

See Notes to Consolidated Financial Statements.

19

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Personal and Non-Durable Consumer Products
Hygenic Corporation, The Senior loan P + 3.75% 6.79 % 10/2017 142 140 - 142
Hygenic Corporation, The*^ Senior loan L + 4.75% 6.00 % 10/2018 4,538 4,494 0.6 4,538
Massage Envy, LLC (3) One stop L + 7.25% N/A (4) 09/2018 - (12 ) - -
Massage Envy, LLC* One stop L + 7.25% 8.50 % 09/2018 15,999 15,735 2.2 15,999
Rug Doctor LLC Senior loan L + 5.25% 6.25 % 12/2016 465 455 0.1 465
Rug Doctor LLC* Senior loan L + 5.25% 6.25 % 12/2016 5,365 5,326 0.7 5,365
Team Technologies Acquisition Company^ Senior loan L + 5.00% 6.25 % 12/2017 4,831 4,790 0.7 4,831
Team Technologies Acquisition Company Senior loan P + 3.75% 7.00 % 12/2017 182 179 - 182
31,522 31,107 4.3 31,522
Personal, Food and Miscellaneous Services
Affordable Care Inc. (3) Senior loan L + 4.75% N/A (4) 12/2017 - (2 ) - -
Affordable Care Inc.^ Senior loan L + 4.75% 6.00 % 12/2018 3,347 3,324 0.5 3,347
El Pollo Loco Inc^ Senior loan L + 4.25% 5.25 % 10/2018 5,149 5,100 0.7 5,168
Focus Brands Inc.^ Second lien L + 9.00% 10.25 % 08/2018 11,194 11,091 1.5 11,306
Ignite Restaurant Group, Inc (Joe's Crab Shack)^ One stop L + 7.00% 8.00 % 02/2019 6,170 6,080 0.8 6,077
R.G. Barry Corporation* Senior loan L + 5.00% 6.00 % 09/2019 6,830 6,741 0.9 6,761
Vetcor Merger Sub LLC One stop L + 6.50% 7.75 % 12/2017 199 194 - 199
Vetcor Merger Sub LLC*^ One stop L + 6.50% 7.75 % 12/2017 5,847 5,805 0.8 5,847
Vetcor Merger Sub LLC (3) One stop L + 6.50% N/A (4) 12/2017 - (7 ) - -
Vetcor Merger Sub LLC^ One stop L + 6.50% 7.75 % 12/2017 371 371 0.1 371
Vetcor Merger Sub LLC^ One stop L + 6.50% 7.75 % 12/2017 573 573 0.1 573
Vetcor Merger Sub LLC^ One stop L + 6.50% 7.75 % 12/2017 384 384 0.1 384
40,064 39,654 5.5 40,033
Printing and Publishing
Market Track, LLC (3) One stop L + 6.00% N/A (4) 10/2019 - (18 ) - -
Market Track, LLC*^ One stop L + 6.00% 7.25 % 10/2019 29,270 29,024 4.0 29,270
Market Track, LLC One stop L + 6.00% 7.25 % 10/2019 1,217 1,199 0.2 1,217
30,487 30,205 4.2 30,487
Retail Stores
Benihana, Inc. (3) One stop L + 5.50% N/A (4) 07/2018 - (61 ) - -
Benihana, Inc.*^ One stop P + 4.25% 7.50 % 01/2019 15,554 15,145 2.1 15,554
Boot Barn, Inc.*^ One stop L + 5.75% 7.00 % 05/2019 24,430 24,143 3.3 24,430
Boot Barn, Inc.* One stop L + 5.75% 7.00 % 05/2019 7,726 7,657 1.1 7,726
Capital Vision Services, LLC One stop P + 6.25% 9.50 % 12/2017 475 466 0.1 475
Capital Vision Services, LLC*^ One stop L + 7.25% 8.50 % 12/2017 15,354 15,219 2.1 15,354
Capital Vision Services, LLC^ One stop L + 7.25% 8.50 % 12/2017 1,231 1,219 0.2 1,231
Capital Vision Services, LLC One stop L + 7.25% 8.50 % 12/2017 1,459 1,453 0.2 1,459
DentMall MSO, LLC One stop L + 5.00% 6.00 % 07/2019 179 153 - 179
DentMall MSO, LLC One stop L + 5.00% 6.00 % 07/2019 10,354 10,257 1.4 10,354
DTLR, Inc.*^ One stop L + 8.00% 11.00 % 12/2015 15,892 15,824 2.2 15,892
Express Oil Change, LLC Senior loan L + 4.75% 6.33 % 12/2017 221 219 - 221
Express Oil Change, LLC* Senior loan P + 3.50% 6.75 % 12/2017 1,945 1,932 0.3 1,945
Express Oil Change, LLC Senior loan P + 3.50% 6.75 % 12/2017 110 109 - 110
Floor & Decor Outlets of America, Inc.*^ One stop L + 6.50% 7.75 % 05/2019 11,244 11,137 1.5 11,244
Marshall Retail Group, LLC, The (3) One stop L + 6.00% N/A (4) 08/2019 - (27 ) - (22 )
Marshall Retail Group, LLC, The (3) One stop L + 6.00% N/A (4) 08/2020 - (11 ) - (9 )
Marshall Retail Group, LLC, The^ One stop L + 6.00% 7.00 % 08/2020 12,424 12,271 1.7 12,299
Paper Source, Inc. One stop P + 5.00% 7.92 % 09/2018 508 498 0.1 508
Paper Source, Inc.*^ One stop L + 6.25% 7.25 % 09/2018 12,576 12,476 1.7 12,576
Restaurant Holding Company, LLC Senior loan L + 7.75% 8.75 % 02/2019 4,976 4,932 0.6 4,429
Rubio's Restaurants, Inc*^ Senior loan L + 4.75% 6.00 % 11/2018 9,376 9,369 1.3 9,376
Sneaker Villa, Inc. One stop P + 7.00% 11.50 % 12/2017 1,002 984 0.1 1,002
Sneaker Villa, Inc. One stop L + 8.50% 10.00 % 12/2017 4,433 4,340 0.6 4,433
Sneaker Villa, Inc.^ One stop L + 8.50% 10.00 % 12/2017 627 617 0.1 627
Sneaker Villa, Inc.^ One stop L + 8.50% 10.00 % 12/2017 1,237 1,221 0.2 1,237
Sneaker Villa, Inc. (3) One stop L + 8.50% N/A (4) 12/2017 - (16 ) - -
Sneaker Villa, Inc.^ One stop L + 8.50% 10.00 % 12/2017 4,260 4,219 0.6 4,217
Sneaker Villa, Inc. One stop L + 8.50% 10.00 % 12/2017 752 727 0.1 727
Specialty Catalog Corp. (3) One stop L + 6.00% N/A (4) 07/2017 - (5 ) - -
Specialty Catalog Corp. One stop L + 6.00% 7.50 % 07/2017 4,658 4,623 0.6 4,658
Vision Source L.P. One stop L + 6.00% 7.25 % 08/2019 273 270 - 270
Vision Source L.P.*^ One stop L + 6.00% 7.00 % 08/2019 17,759 17,645 2.4 17,671
181,035 179,005 24.6 180,173
Telecommunications
Arise Virtual Solutions, Inc. (3) One stop L + 6.00% N/A (4) 12/2018 - (11 ) - -

See Notes to Consolidated Financial Statements.

20

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Principal / Par of Fair
Type Index (1) Rate (2) Date Amount Cost Net Assets Value
Arise Virtual Solutions, Inc.*^ One stop L + 6.00% 7.25 % 12/2018 13,869 13,753 1.9 13,869
Hosting.com Inc. (3) Senior loan L + 4.50% N/A (4) 12/2017 - (1 ) - -
Hosting.com Inc.* Senior loan L + 4.50% 5.75 % 12/2017 861 851 0.1 861
ITC Global, Inc. (3) One stop L + 6.75% 7.75 % 07/2018 289 277 - 289
ITC Global, Inc.* One stop L + 6.75% 7.75 % 07/2018 8,345 8,274 1.1 8,345
ITC Global, Inc.^ One stop L + 6.75% 7.75 % 07/2018 1,423 1,411 0.2 1,423
24,787 24,554 3.3 24,787
Textile and Leather
5.11, Inc.*^ Senior loan L + 5.00% 6.00 % 02/2020 1,031 1,026 0.1 1,032
Southern Tide, LLC (3) One stop L + 6.75% N/A (4) 06/2019 - (8 ) - -
Southern Tide, LLC^ One stop L + 6.75% 7.75 % 06/2019 4,096 4,057 0.6 4,096
5,127 5,075 0.7 5,128
Utilities
PowerPlan Consultants, Inc. (3) Senior loan L + 4.25% N/A (4) 10/2018 - (1 ) - -
PowerPlan Consultants, Inc.*^ Senior loan L + 4.25% 5.26 % 10/2019 3,583 3,538 0.5 3,583
3,583 3,537 0.5 3,583
Total debt investments United States $ 1,309,570 $ 1,293,046 176.4 % $ 1,292,851
Fair Value as a percentage of Principal Amount 98.7 %

See Notes to Consolidated Financial Statements.

21

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Shares / of Fair
Type Index (1) Rate (2) Date Contracts Cost Net Assets Value
Equity Investments (9)
Aerospace and Defense
NTS Technical Systems Common stock N/A N/A N/A 2 $ 1,506 0.2 % $ 1,597
Tresys Technology Holdings, Inc. Common stock N/A N/A N/A 295 295 - 3
Whitcraft LLC Common stock N/A N/A N/A 1 670 0.1 409
Whitcraft LLC Warrant N/A N/A N/A - - - 80
2,471 0.3 2,089
Automobile
K&N Engineering, Inc. Preferred stock A N/A N/A N/A - - - 9
K&N Engineering, Inc. Preferred stock B N/A N/A N/A - - - 9
K&N Engineering, Inc. Common stock N/A N/A N/A - - - 69
- - 87
Beverage, Food and Tobacco
Atkins Nutritionals, Inc. LLC interest N/A N/A N/A 57 746 0.2 1,038
C. J. Foods, Inc. Common stock N/A N/A N/A 157 157 - 157
First Watch Restaurants, Inc. Common stock N/A N/A N/A 8 816 0.1 908
Goode Seed Co-Invest, LLC LLC units N/A N/A N/A 356 356 0.1 408
Julio & Sons Company LLC interest N/A N/A N/A 521 521 0.1 445
Northern Brewer, LLC LLC interest N/A N/A N/A 438 362 - 8
Richelieu Foods, Inc. LP interest N/A N/A N/A 220 220 - 166
Tate's Bake Shop, Inc. LP interest N/A N/A N/A - 462 0.1 462
Uinta Brewing Company LP interest N/A N/A N/A - 462 0.1 462
4,102 0.7 4,054
Buildings and Real Estate
Brooks Equipment Company, LLC Common stock N/A N/A N/A 102 1,021 0.1 1,021
Containers, Packaging and Glass
Packaging Coordinators, Inc. Common stock N/A N/A N/A 25 2,065 0.3 2,536
Packaging Coordinators, Inc. Common stock N/A N/A N/A 48 1,563 0.3 2,212
3,628 0.6 4,748
Diversified Conglomerate Manufacturing
Chase Industries, Inc. Common stock N/A N/A N/A 1 1,186 0.2 1,186
ICCN Acquisition Corp. Preferred stock N/A N/A N/A - 162 - 172
ICCN Acquisition Corp. Common stock N/A N/A N/A - - - 2
Oasis Outsourcing Holdings, Inc. LLC interest N/A N/A N/A 1,088 860 0.2 1,679
Sunless Merger Sub, Inc. LP interest N/A N/A N/A - 160 - 4
TIDI Products, LLC LLC units N/A N/A N/A 315 157 0.1 263
2,525 0.5 3,306
Diversified Conglomerate Service
Daxko, LLC LLC units N/A N/A N/A 219 219 - 230
Marathon Data Operating Co., LLC Preferred stock N/A N/A N/A 1 264 0.1 604
Marathon Data Operating Co., LLC Common stock N/A N/A N/A 1 264 - 57
Navex Global, Inc. LP interest N/A N/A N/A - 666 0.2 1,604
PC Helps Support, LLC Common stock N/A N/A N/A 1 7 - -
PC Helps Support, LLC Preferred stock N/A N/A N/A - 61 - 70
Secure-24, LLC LLC units N/A N/A N/A 263 263 0.1 275
1,744 0.4 2,840
Electronics
ECI Acquisition Holdings, Inc. Common stock N/A N/A N/A 9 873 0.1 966
Sparta Holding Corporation Common stock N/A N/A N/A 1 567 0.1 567
Sparta Holding Corporation Common stock N/A N/A N/A 235 6 - 6
1,446 0.2 1,539
Grocery
MyWebGrocer, Inc. LLC units N/A N/A N/A 1,315 1,322 0.2 1,322
Healthcare, Education and Childcare
Advanced Pain Management Holdings, Inc. Common stock N/A N/A N/A 67 67 0.1 768
Advanced Pain Management Holdings, Inc. Preferred stock N/A N/A N/A 8 829 0.1 901
Avatar International, LLC LP interest N/A N/A N/A 1 741 - 3
California Cryobank, LLC Common stock N/A N/A N/A - 28 - 28
California Cryobank, LLC Common stock N/A N/A N/A - - - -
Certara L.P. LP interest N/A N/A N/A - 635 0.1 679

See Notes to Consolidated Financial Statements.

22

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Shares / of Fair
Type Index (1) Rate (2) Date Contracts Cost Net Assets Value
Dialysis Newco, Inc. LLC units N/A N/A N/A 871 - 0.2 1,557
Encore Rehabilitation Services, LLC LLC interest N/A N/A N/A 270 270 0.1 783
G & H Wire Company, Inc. LP interest N/A N/A N/A - 102 - 124
Global Healthcare Exchange, LLC Common stock N/A N/A N/A - 4 - 31
Global Healthcare Exchange, LLC Preferred stock N/A N/A N/A - 398 0.1 418
Hospitalists Management Group, LLC Common stock N/A N/A N/A - 38 - 4
IntegraMed America, Inc. Common stock N/A N/A N/A 1 701 0.1 701
Northwestern Management Services, LLC Common stock N/A N/A N/A 3 3 - 49
Northwestern Management Services, LLC LLC units N/A N/A N/A 0 249 0.1 285
Pentec Acquisition Sub, Inc. Preferred stock N/A N/A N/A 1 116 - 83
Radiology Partners, Inc. LLC units N/A N/A N/A 43 85 - 85
Reliant Pro ReHab, LLC Preferred stock N/A N/A N/A 2 183 0.1 883
Southern Anesthesia and Surgical Common stock N/A N/A N/A 487 487 0.1 697
Spear Education, LLC Preferred stock N/A N/A N/A - 86 - 86
Spear Education, LLC Common stock N/A N/A N/A 1 1 - 1
Surgical Information Systems, LLC Common stock N/A N/A N/A 4 414 0.1 554
Young Innovations, Inc. Preferred stock N/A N/A N/A - 236 - 277
5,673 1.2 8,997
Home and Office Furnishings, Housewares, and Durable Consumer
Top Knobs USA, Inc. Common stock N/A N/A N/A 3 35 - 213
Insurance
Captive Resources Midco, LLC LLC units N/A N/A N/A 1 86 - 191
Investment Funds and Vehicles
Senior Loan Fund LLC (7)(8) LLC interest N/A N/A N/A 9,318 9,318 1.3 9,242
Leisure, Amusement, Motion Pictures and Entertainment
Competitor Group, Inc. LLC interest N/A N/A N/A 708 713 - 43
LMP TR Holdings, LLC LLC units N/A N/A N/A 712 712 0.1 712
Starplex Operating, L.L.C. Common stock N/A N/A N/A 1 183 - 241
Titan Fitness, LLC Common stock N/A N/A N/A 6 582 0.1 649
2,190 0.2 1,645
Personal and Non-Durable Consumer Products
Hygenic Corporation, The LP interest N/A N/A N/A 1 61 - 116
Massage Envy, LLC LLC interest N/A N/A N/A 749 749 0.1 757
Team Technologies Acquisition Company Common stock N/A N/A N/A - 148 - 225
958 0.1 1,098
Personal Transportation
PODS Funding Corp.  II Warrant N/A N/A N/A 271 - 0.2 1,599
Personal, Food and Miscellaneous Services
R.G. Barry Corporation Preferred stock N/A N/A N/A - 161 - 161
Printing and Publishing
Market Track, LLC Preferred stock N/A N/A N/A - 145 - 178
Market Track, LLC Common stock N/A N/A N/A 1 145 0.1 245
290 0.1 423
Retail Stores
Barcelona Restaurants, LLC (8)(10) LP interest N/A N/A N/A 1,996 1,996 0.4 3,080
Benihana, Inc. LLC units N/A N/A N/A 43 699 0.1 747
Capital Vision Services, LLC LLC interest N/A N/A N/A 402 17 0.1 520
DentMall MSO, LLC Common stock N/A N/A N/A 2 - - -
DentMall MSO, LLC Preferred stock N/A N/A N/A 2 97 - 97
Express Oil Change, LLC LLC interest N/A N/A N/A 81 81 - 79
Marshall Retail Group LLC, The Common stock N/A N/A N/A 15 154 - 154
Paper Source, Inc. LLC interest N/A N/A N/A 8 1,387 0.2 1,417
PetPeople Enterprise, LLC LP interest N/A N/A N/A 889 889 0.1 889
Rubio's Restaurants, Inc. Preferred stock N/A N/A N/A 199 945 0.2 1,430

See Notes to Consolidated Financial Statements.

23

Golub Capital BDC, Inc. and Subsidiaries
Consolidated Schedule of Investments (continued)
September 30, 2014
(In thousands)

Spread Percentage
Investment Above Interest Maturity Shares / of Fair
Type Index (1) Rate (2) Date Contracts Cost Net Assets Value
Sneaker Villa, Inc. LLC interest N/A N/A N/A 4 411 0.1 511
Vision Source L.P. Common stock N/A N/A N/A 9 386 0.1 760
Vision Source L.P. Common stock N/A N/A N/A - - - -
7,062 1.3 9,684
Telecommunications
ITC Global, Inc. Preferred stock N/A N/A N/A 17 311 0.1 311
Textiles and Leather
Southern Tide, LLC LLC interest N/A N/A N/A 2 191 - 191
Total equity investments United States $ 44,534 7.5 % $ 54,761
Total United States $ 1,337,580 183.9 % $ 1,347,612
Total Investments $ 1,337,580 183.9 % $ 1,347,612
Cash, Restricted Cash and Cash Equivalents
Cash and Restricted Cash $ 42,744 5.8 % $ 42,744
US Bank Money Market Account (cusip 9AMMF05B2) 37,199 5.1 37,199
Total Cash, Restricted Cash and Cash Equivalents $ 79,943 10.9 % $ 79,943
Total Investments and Cash, Restricted Cash and Cash Equivalents $ 1,417,523 194.80 % $ 1,427,555

* Denotes that all or a portion of the loan secures the notes offered in the 2010 Debt Securitization (as defined in Note 7).
^ Denotes that all or a portion of the loan secures the notes offered in the 2014 Debt Securitization (as defined in Note 7).
(1) The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate ("LIBOR" or "L") or Prime ("P") and which reset daily, quarterly or semiannually.  For each, the Company has provided the spread over LIBOR or Prime and the weighted average current interest rate in effect as of September 30, 2014. Certain investments are subject to a LIBOR or Prime interest rate floor.  For fixed rate loans, a spread above a reference rate is not applicable.
(2) For portfolio companies with multiple interest rate contracts, the interest rate shown is a weighted average current interest rate in effect as of September 30, 2014.
(3) The negative fair value is the result of the capitalized discount on the loan or the unfunded commitment being valued below par.  The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan.
(4) The entire commitment was unfunded as of September 30, 2014.  As such, no interest is being earned on this investment.
(5) The sale of a portion of this loan does not qualify for sale accounting under ASC Topic 860 - Transfers and Servicing , and therefore, the entire one stop loan asset remains in the Consolidated Schedule of Investments.  (See Note 7 in the accompanying notes to the consolidated financial statements.)
(6) Loan was on non-accrual status as of September 30, 2014, meaning that the Company has ceased recognizing interest income on the loan.
(7) As defined in the 1940 Act, the Company is deemed to be both an "Affiliated Person" of and "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Note 5 in the accompanying notes to the consolidated financial statements for transactions during the year ended September 30, 2014 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control.
(8) The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act.  Under the 1940 Act, the Company may not acquire any any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets.
(9) Non-income producing securities.
(10) As defined in the 1940 Act, the Company is deemed to be an "Affiliated Person" of the portfolio company as the Company along with affiliated entities owns five percent or more of the portfolio company's voting securities.  See Note 5 in the accompanying notes to the financial statements for transactions during the year ended September 30, 2014 in which the issuer was an Affiliated Person (but not a portfolio company that the Company is deemed to control).

See Notes to Consolidated Financial Statements.

24

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Note 1. Organization

Golub Capital BDC, Inc. (“GBDC” and, collectively with its subsidiaries, the “Company”) is an externally managed, closed-end, non-diversified management investment company. GBDC has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the "1940 Act"). In addition, for U.S. federal income tax purposes, GBDC has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company’s investment strategy is to invest primarily in senior secured, one stop (a loan that combines characteristics of traditional first lien senior secured loans and second lien or subordinated loans), second lien and subordinated (a loan that ranks senior only to a borrower’s equity securities and ranks junior to all of such borrower’s other indebtedness in priority of payment) loans of, and warrants and minority equity securities in, U.S. middle market companies that are, in most cases, sponsored by private equity firms. The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with GC Advisors LLC (the “Investment Adviser”), under which the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to, the Company. Under an administration agreement (the “Administration Agreement”) the Company is provided with certain services by an administrator (the “Administrator”), which is currently Golub Capital LLC.

Note 2. Significant Accounting Policies and Recent Accounting Updates

Basis of presentation: The Company is an investment company as defined in the accounting and reporting guidance under Accounting Standards Codification (“ASC”) Topic 946 – Financial Services – Investment Companies (“ASC Topic 946”).

The accompanying interim consolidated financial statements of the Company and related financial information have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications consisting solely of normal accruals that are necessary for the fair presentation of financial results as of and for the periods presented. All intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation.

Fair value of financial instruments: The Company applies fair value to all of its financial instruments in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC Topic 820”) . ASC Topic 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC Topic 820, the Company has categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument rather than an entity-specific measure. Therefore, when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that management believes market participants would use in pricing the financial instrument at the measurement date.

The availability of observable inputs can vary depending on the financial instrument and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new, whether the product is traded on an active exchange or in the secondary market and the current market conditions. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for financial instruments classified as Level 3.

25

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Any changes to the valuation methodology are reviewed by management and the Company’s board of directors (the “Board”) to confirm that the changes are appropriate. As markets change, new products develop and the pricing for products becomes more or less transparent, the Company will continue to refine its valuation methodologies. See further description of fair value methodology in Note 6.

Use of estimates: The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Consolidation: As provided under Regulation S-X and ASC Topic 946, the Company will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries in its consolidated financial statements. The Company does not consolidate its noncontrolling interest in Senior Loan Fund LLC (“SLF”). See further description of the Company’s investment in SLF in Note 4.

Assets related to transactions that do not meet ASC Topic 860 — Transfers and Servicing (“ASC Topic 860”) requirements for accounting sale treatment are reflected in the Company’s consolidated statements of financial condition as investments. Those assets are owned by special purpose entities, including Golub Capital BDC 2010-1 LLC ("2010 Issuer"), Golub Capital BDC CLO 2014 LLC (“2014 Issuer”), Golub Capital BDC Funding LLC ("Funding") and Golub Capital BDC Revolver Funding, LLC (“Revolver Funding”), that are consolidated in the Company’s consolidated financial statements. The creditors of the special purpose entities have received security interests in such assets and such assets are not intended to be available to the creditors of GBDC (or any affiliate of GBDC).

Cash and cash equivalents: Cash and cash equivalents are highly liquid investments with an original maturity of three months or less at the date of acquisition. The Company deposits its cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits.

Restricted cash and cash equivalents: Restricted cash and cash equivalents include amounts that are collected and are held by trustees who have been appointed as custodians of the assets securing certain of the Company’s financing transactions. Restricted cash is held by the trustees for payment of interest expense and principal on the outstanding borrowings or reinvestment into new assets. In addition, restricted cash and cash equivalents include amounts held within the Company’s small business investment companies (“SBICs”). The amounts held within the SBICs are generally restricted to the originations of new loans from the SBICs and the payment of U.S. Small Business Administration (“SBA”) debentures and related interest expense.

Revenue recognition:

Investments and related investment income: Interest income is accrued based upon the outstanding principal amount and contractual interest terms of debt investments. For the three months ended December 31, 2014 and 2013, the Company earned interest of $27,319 and $24,563, respectively. As of December 31, 2014 and September 30, 2014, the Company had interest receivable of $6,185 and $5,791, respectively.

Loan origination fees, original issue discount and market discount or premium are capitalized, and the Company accretes or amortizes such amounts over the life of the loan as interest income. For the three months ended December 31, 2014 and 2013, interest income included $1,670 and $1,908, respectively, of accretion of discounts. For the three months ended December 31, 2014 and 2013, the Company received loan origination fees of $3,062 and $2,982, respectively.

26

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

For investments with contractual payment-in-kind (“PIK”) interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, the Company will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible. For the three months ended December 31, 2014, the Company recorded PIK income of $502 and received PIK payments in cash of $201. For the three months ended December 31, 2013, the Company recorded PIK income of $413 and received PIK payments in cash of $1,750.

In addition, the Company may generate revenue in the form of amendment, structuring or due diligence fees, fees for providing managerial assistance, consulting fees and prepayment premiums on loans. The Company records these fees as fee income when received. All other income is recorded into income when earned. For the three months ended December 31, 2014 and 2013, fee income included $147 and $1,000, respectively, of prepayment premiums.

For the three months ended December 31, 2014 and 2013, the Company received interest and fees in cash, which excludes capitalized loan origination fees, in the amounts of $25,156 and $25,130, respectively.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. For the three months ended December 31, 2014, the Company recorded dividend income of $18 and return of capital distributions of $8. For the three months ended December 31, 2013, the Company recorded dividend income of $16 and return of capital distributions of $1,350.

Investment transactions are accounted for on a trade-date basis. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the cost basis of investment, without regard to unrealized gains or losses previously recognized. The Company reports current period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

Non-accrual loans: A loan may be left on accrual status during the period the Company is pursuing repayment of the loan. Management reviews all loans that become 90 days or more past due on principal and interest, or when there is reasonable doubt that principal or interest will be collected, for possible placement on non-accrual status. When a loan is placed on non-accrual status, unpaid interest credited to income is reversed. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, payments are likely to remain current. The total fair value of non-accrual loans was $2,233 and $5 as of December 31, 2014 and September 30, 2014, respectively.

Partial loan sales: The Company follows the guidance in ASC Topic 860 when accounting for loan participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a “participating interest”, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain on the Company’s consolidated statements of financial condition and the proceeds are recorded as a secured borrowing until the definition is met. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value. See Note 7 for additional information.

27

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Income taxes: The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90% of investment company taxable income, as defined by the Code, for each tax year. The Company has made, and intends to continue to make, the requisite distributions to its stockholders, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to its stockholders.

Depending on the level of taxable income earned in a tax year, the Company may choose to retain taxable income in excess of current year dividend distributions, and would distribute such taxable income in the next tax year. The Company would then pay a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the three months ended December 31, 2014 and 2013, no amount was recorded for U.S. federal excise tax.

The Company accounts for income taxes in conformity with ASC Topic 740 — Income Taxes (“ASC Topic 740”). ASC Topic 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. There were no material uncertain income tax positions through December 31, 2014. The 2011 through 2014 tax years remain subject to examination by U.S. federal and most state tax authorities.

Dividends and distributions: Dividends and distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend or distribution is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for investment.

The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Board authorizes and the Company declares a cash distribution, then stockholders who have not “opted out” of the DRIP will have their cash distribution automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash dividend. The Company may use newly issued shares under the guidelines of the DRIP (if the Company’s shares are trading at a premium to net asset value), or the Company may purchase shares in the open market in connection with the obligations under the plan. In particular, if the Company’s shares are trading at a significant discount to net asset value and the Company is otherwise permitted under applicable law to purchase such shares, the Company intends to purchase shares in the open market in connection with any obligations under the DRIP.

In the event the market price per share of the Company’s common stock on the date of a distribution exceeds the most recently computed net asset value per share of the common stock, the Company will issue shares of common stock to participants in the DRIP at the greater of the most recently computed net asset value per share of common stock or 95% of the current market price per share of common stock (or such lesser discount to the current market price per share that still exceeds the most recently computed net asset value per share of common stock).

28

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Share Repurchase Plan: On August 5, 2014, the Board approved a share repurchase program (the “Program”) which allows the Company to repurchase up to $50,000 of the Company’s outstanding common stock on the open market at prices below the Company’s NAV as reported in its then most recently published consolidated financial statements. The Program may be implemented at the discretion of management. The shares may be purchased from time to time at prevailing market prices, through open market transactions, including block transactions. The Company did not make any repurchases of its common stock during the three months ended December 31, 2014.

Deferred financing costs: Deferred financing costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. As of December 31, 2014 and September 30, 2014, the Company had deferred financing costs of $9,436 and $9,515, respectively. These amounts are amortized and included in interest expense in the consolidated statements of operations over the estimated average life of the borrowings. Amortization expense for the three months ended December 31, 2014 and 2013 was $1,047 and $439, respectively.

Deferred offering costs: Deferred offering costs consist of fees paid in relation to legal, accounting, regulatory and printing work completed in preparation of equity offerings. Deferred offering costs are charged against the proceeds from equity offerings when received. As of December 31, 2014 and September 30, 2014, deferred offering costs, which are included in other assets on the consolidated statements of financial condition, were $247 and $247, respectively.

Recent accounting pronouncements: In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605) . Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim reporting periods beginning after December 15, 2016, and early application is not permitted. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.

In August 2014, FASB issued ASU 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and Financial Liabilities of a Consolidated Collateralized Financing Entity, containing new guidance for fair valuing the financial assets and financial liabilities of a consolidate collateralized financing entity. This guidance is effective for annual and interim periods beginning after December 15, 2015. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.

Note 3. Related Party Transactions

Investment Advisory Agreement: Under the Investment Advisory Agreement, the Investment Adviser manages the day-to-day operations of, and provides investment advisory services to, GBDC. The Board most recently reapproved the Investment Advisory Agreement in May 2014. The Investment Adviser is a registered investment adviser with the Securities and Exchange Commission (the “SEC”). The Investment Adviser receives fees for providing services, consisting of two components, a base management fee and an Incentive Fee (as defined below).

The base management fee is calculated at an annual rate equal to 1.375% of average adjusted gross assets at the end of the two most recently completed calendar quarters (including assets purchased with borrowed funds and securitization-related assets, leverage, unrealized depreciation or appreciation on derivative instruments and cash collateral on deposit with custodian but adjusted to exclude cash and cash equivalents so that investors do not pay the base management fee on such assets) and is payable quarterly in arrears. Additionally, the Investment Adviser is voluntarily excluding assets funded with secured borrowing proceeds from the base management fee. The base management fee is adjusted, based on the actual number of days elapsed relative to the total number of days in such calendar quarter, for any share issuances or repurchases during such calendar quarter. For purposes of the Investment Advisory Agreement, cash equivalents means U.S. government securities and commercial paper instruments maturing within 270 days of purchase (which is different than the GAAP definition, which defines cash equivalents as U.S. government securities and commercial paper instruments maturing within 90 days of purchase). To the extent that the Investment Adviser or any of its affiliates provides investment advisory, collateral management or other similar services to a subsidiary of the Company, the base management fee will be reduced by an amount equal to the product of (1) the total fees paid to the Investment Adviser by such subsidiary for such services and (2) the percentage of such subsidiary’s total equity, including membership interests and any class of notes not exclusively held by one or more third parties, that is owned, directly or indirectly, by the Company.

29

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

The Company has structured the calculation of the Incentive Fee to include a fee limitation such that an Incentive Fee for any quarter can only be paid to the Investment Adviser if, after such payment, the cumulative Incentive Fees paid to the Investment Adviser since April 13, 2010, the effective date of the Company’s election to become a BDC, would be less than or equal to 20.0% of the Company’s Cumulative Pre-Incentive Fee Net Income (as defined below).

The Company accomplishes this limitation by subjecting each quarterly Incentive Fee payable under the Income and Capital Gain Incentive Fee Calculation (as defined below) to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in any quarter is equal to the difference between (a) 20.0% of Cumulative Pre-Incentive Fee Net Income and (b) cumulative Incentive Fees of any kind paid to the Investment Adviser by GBDC since April 13, 2010. To the extent the Incentive Fee Cap is zero or a negative value in any quarter, no Incentive Fee would be payable in that quarter. If, for any relevant period, the Incentive Fee Cap calculation results in the Company paying less than the amount of the Incentive Fee calculated above, then the difference between the Incentive Fee and the Incentive Fee Cap will not be paid by GBDC and will not be received by the Investment Adviser as an Incentive Fee either at the end of such relevant period or at the end of any future period. “Cumulative Pre-Incentive Fee Net Income” is equal to the sum of (a) Pre-Incentive Fee Net Investment Income (as defined below) for each period since April 13, 2010 and (b) cumulative aggregate realized capital gains, cumulative aggregate realized capital losses, cumulative aggregate unrealized capital depreciation and cumulative aggregate unrealized capital appreciation since April 13, 2010.

“Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the calendar quarter (including the base management fee, taxes, any expenses payable under the Investment Advisory Agreement and the Administration Agreement, any expenses of securitizations and any interest expense and dividends paid on any 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 market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities, accrued income that the Company has not yet received in cash.

Incentive Fees are calculated and payable quarterly in arrears (or, upon termination of the Investment Advisory Agreement, as of the termination date).

The income and capital gains incentive fee calculation (the “Income and Capital Gain Incentive Fee Calculation”) has two parts, the income component (the “Income Incentive Fee”) and the capital gains component (the “Capital Gain Incentive Fee” and, together with the Income Incentive Fee, the “Incentive Fee”). The Income Incentive Fee is calculated quarterly in arrears based on the Company’s Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter.

For the three months ended December 31, 2014 and 2013, the Income Incentive Fee incurred was $932 and $3,032, respectively.

30

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the Income Incentive Fee, it is possible that an Incentive Fee may be calculated under this formula with respect to a period in which the Company has incurred a loss. For example, if the Company receives Pre-Incentive Fee Net Investment Income in excess of the hurdle rate (as defined below) for a calendar quarter, the Income Incentive Fee will result in a positive value and an Incentive Fee will be paid unless the payment of such Incentive Fee would cause the Company to pay Incentive Fees on a cumulative basis that exceed the Incentive Fee Cap. Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any Incentive Fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed “hurdle rate” of 2.0% quarterly. If market interest rates rise, the Company may be able to invest funds in debt instruments that provide for a higher return, which would increase Pre-Incentive Fee Net Investment Income and make it easier for the Investment Adviser to surpass the fixed hurdle rate and receive an Incentive Fee based on such net investment income.

The Company’s Pre-Incentive Fee Net Investment Income used to calculate this part of the Incentive Fee is also included in the amount of its total assets (excluding cash and cash equivalents but including assets purchased with borrowed funds and securitization-related assets, unrealized depreciation or appreciation on derivative instruments and cash collateral on deposit with custodian) used to calculate the 1.375% base management fee annual rate.

The Company calculates the Income Incentive Fee with respect to its Pre-Incentive Fee Net Investment Income quarterly, in arrears, as follows:

· Zero in any calendar quarter in which the Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate;
· 100% of the Company’s 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 2.5% in any calendar quarter. This portion of the Company’s Pre-Incentive Fee Net Investment Income (which exceeds the hurdle rate but is less than 2.5%) is referred to as the “catch-up” provision. The catch-up is meant to provide the Investment Adviser with 20.0% of the Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply if the Company’s Pre-Incentive Fee Net Investment Income exceeds 2.5% in any calendar quarter; and
· 20.0% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.5% in any calendar quarter.

The sum of these calculations yields the “Income Incentive Fee”. This amount is appropriately adjusted for any share issuances or repurchases during the quarter.

The Capital Gain Incentive Fee equals (a) 20.0% of the Company’s Capital Gain Incentive Fee Base (as defined below), if any, calculated in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), which commenced with the calendar year ending December 31, 2010, less (b) the aggregate amount of any previously paid Capital Gain Incentive Fees. On August 5, 2014, the Company amended the Investment Advisory Agreement, effective as of June 30, 2014, to provide that the Capital Gain Incentive Fee Base is reduced by the amount of any unamortized deferred financing costs, if and to the degree that such costs exceed unrealized capital appreciation. The Company’s “Capital Gain Incentive Fee Base” equals (1) the sum of (i) realized capital gains, if any, on a cumulative positive basis from the date the Company elected to become a BDC through the end of each calendar year, (ii) all realized capital losses on a cumulative basis and (iii) all unrealized capital depreciation on a cumulative basis less (2) all unamortized deferred financing costs, if and to the extent such costs exceed all unrealized capital appreciation on a cumulative basis.

31

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

· The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in the Company’s portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.
· The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in the Company’s portfolio when sold and (b) the accreted or amortized cost basis of such investment.
· The aggregate unrealized capital depreciation is calculated as the sum of the differences, if negative, between (a) the valuation of each investment in the Company’s portfolio as of the applicable Capital Gain Incentive Fee calculation date and (b) the accreted or amortized cost basis of such investment.

The Capital Gain Incentive Fee payable as calculated under the Investment Advisory Agreement (as described above) for the three months ended December 31, 2014 and 2013 was $0 for each period. However, in accordance with GAAP, we are required to include the aggregate unrealized capital appreciation on investments in the calculation and accrue a capital gain incentive fee on a quarterly basis, as if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Advisory Agreement. If the Capital Gain Incentive Fee Base, adjusted as required by GAAP to include unrealized appreciation, is positive at the end of a period, then GAAP requires the Company to accrue a capital gain Incentive fee equal to 20% of such amount, less the aggregate amount of the actual Capital Gain Incentive Fees paid and capital gain incentive fees accrued under GAAP in all prior periods. If such amount is negative, then there is no accrual for such period. The resulting accrual under GAAP in a given period may result in additional expense if such cumulative amount is greater than in the prior period or a reversal of previously recorded expense if such cumulative amount is less than in the prior period. There can be no assurance that such unrealized capital appreciation will be realized in the future. Since inception through December 31, 2014, the Company has not made any Capital Gain Incentive Fee payments. For the three months ended December 31, 2014 and 2013, the Company accrued a capital gain incentive fee under GAAP of $139 and $0, respectively.

The sum of the Income Incentive Fee and the Capital Gain Incentive Fee is the “Incentive Fee.”

As described above, the Incentive Fee will not be paid at any time if, after such payment, the cumulative Incentive Fees paid to date would be greater than the Incentive Fee Cap.

Administration Agreement: Under the Administration Agreement, the Administrator furnishes GBDC with office facilities and equipment, provides GBDC with clerical, bookkeeping and record keeping services at such facilities and provides GBDC with other administrative services as the Administrator, subject to review by the Board, determines necessary to conduct the Company’s day-to-day operations. GBDC reimburses the Administrator the allocable portion (subject to the review and approval of the Board) of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, fees and expenses associated with performing compliance functions and GBDC’s allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs. The Board reviews such expenses to determine that these expenses are reasonable and comparable to administrative services charged by unaffiliated third party asset managers. Under the Administration Agreement, the Administrator also provides on the Company’s behalf significant managerial assistance to those portfolio companies to which the Company is required to provide such assistance and will be paid an additional amount based on the cost of the services provided, not to exceed the amount the Company receives from such portfolio companies.

Included in accounts payable and accrued expenses is $607 and $548 as of December 31, 2014 and September 30, 2014, respectively, for accrued allocated shared services under the Administration Agreement. The administrative service fee expense under the Administration Agreement for the three months ended December 31, 2014 and 2013 was $607 and $582, respectively.

32

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Other related party transactions: The Administrator pays for certain unaffiliated third-party expenses incurred by the Company. Such expenses include postage, printing, office supplies and rating agency fees. These expenses are not marked-up and represent the same amount the Company would have paid had the Company paid the expenses directly. These expenses are subsequently reimbursed in cash.

Total expenses reimbursed to the Administrator during the three months ended December 31, 2014 and 2013 were $156 and $323, respectively.

As of December 31, 2014 and September 30, 2014, included in accounts payable and accrued expenses were $302 and $156, respectively, for accrued expenses paid on behalf of the Company by the Administrator.

During the three months ended December 31, 2014 and 2013, the Company sold $15,825 and $0, respectively, of investments to SLF at fair value.

Note 4. Investments

Investments as of December 31, 2014 and September 30, 2014 consisted of the following:

As of December 31, 2014 As of September 30, 2014
Par Cost Fair Value Par Cost Fair Value
Senior secured $ 251,822 $ 248,688 $ 245,689 $ 268,136 $ 265,042 $ 262,859
One stop 1,019,488 1,005,455 1,005,954 952,359 939,765 940,729
Second lien 59,903 59,130 59,457 59,902 59,086 59,964
Subordinated debt 3,584 3,565 3,724 3,584 3,564 3,710
Subordinated notes in SLF (1) 28,871 28,871 28,871 25,589 25,589 25,589
LLC equity interests in SLF (1) N/A 10,937 10,834 N/A 9,318 9,242
Equity N/A 35,159 46,197 N/A 35,216 45,519
Total $ 1,363,668 $ 1,391,805 $ 1,400,726 $ 1,309,570 $ 1,337,580 $ 1,347,612

(1) SLF's proceeds from the subordinated notes and LLC equity interests invested in SLF were utilized by SLF to invest in senior secured loans.

33

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

The following tables show the portfolio composition by geographic region at cost and fair value as a percentage of total investments in portfolio companies. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business.

As of December 31, 2014 As of September 30, 2014
Cost:
United States
Mid-Atlantic $ 312,180 22.4 % $ 306,582 22.9 %
Midwest 283,557 20.4 274,923 20.6
West 272,259 19.6 288,915 21.6
Southeast 330,084 23.7 283,935 21.2
Southwest 115,857 8.3 116,105 8.7
Northeast 77,868 5.6 67,120 5.0
Total $ 1,391,805 100.0 % $ 1,337,580 100.0 %
Fair Value:
United States
Mid-Atlantic $ 307,130 21.9 % $ 302,159 22.4 %
Midwest 287,231 20.5 278,527 20.7
West 274,042 19.6 291,587 21.6
Southeast 333,988 23.8 288,565 21.4
Southwest 118,187 8.5 117,923 8.8
Northeast 80,148 5.7 68,851 5.1
Total $ 1,400,726 100.0 % $ 1,347,612 100.0 %

34

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

The industry compositions of the portfolio at cost and fair value were as follows:

As of December 31, 2014 As of September 30, 2014
Cost:
Aerospace and Defense $ 73,787 5.3 % $ 75,696 5.6 %
Automobile 10,731 0.8 14,630 1.1
Banking 17,469 1.3 17,292 1.3
Beverage, Food and Tobacco 115,617 8.3 119,912 9.0
Buildings and Real Estate 32,858 2.4 28,502 2.1
Cargo Transport 1,939 0.2 1,942 0.1
Containers, Packaging and Glass 31,041 2.2 31,136 2.3
Diversified Conglomerate Manufacturing 77,137 5.5 73,053 5.5
Diversified Conglomerate Service 165,931 11.9 167,034 12.5
Electronics 124,920 9.0 107,274 8.0
Finance 13,060 0.9 13,059 1.0
Grocery 20,098 1.4 18,056 1.3
Healthcare, Education and Childcare 256,971 18.5 224,961 16.8
Home and Office Furnishings, Housewares and Durable Consumer 7,079 0.5 6,897 0.5
Insurance 19,508 1.4 19,547 1.5
Investment Funds and Vehicles 39,808 2.9 34,907 2.6
Leisure, Amusement, Motion Pictures and Entertainment 54,762 3.9 55,126 4.1
Mining, Steel, Iron and Non-Precious Metals 5,180 0.4 5,136 0.4
Oil and Gas 1,292 0.1 1,310 0.1
Personal and Non-Durable Consumer Products 32,614 2.3 32,065 2.4
Personal, Food and Miscellaneous Services 47,935 3.4 39,815 3.0
Personal Transportation - - - -
Printing and Publishing 30,433 2.2 30,495 2.3
Retail Stores 177,807 12.8 186,067 13.9
Telecommunications 25,304 1.8 24,865 1.9
Textiles and Leather 5,256 0.4 5,266 0.4
Utilities 3,268 0.2 3,537 0.3
Total $ 1,391,805 100.0 % $ 1,337,580 100.0 %

As of December 31, 2014 As of September 30, 2014
Fair Value:
Aerospace and Defense $ 72,098 5.1 % $ 74,470 5.5 %
Automobile 10,640 0.8 14,546 1.1
Banking 17,421 1.2 17,245 1.3
Beverage, Food and Tobacco 114,622 8.2 119,610 8.9
Buildings and Real Estate 33,259 2.4 28,703 2.1
Cargo Transport 1,836 0.1 1,923 0.1
Containers, Packaging and Glass 31,992 2.3 32,500 2.4
Diversified Conglomerate Manufacturing 77,647 5.5 74,058 5.5
Diversified Conglomerate Service 168,029 12.0 170,397 12.6
Electronics 126,647 9.0 108,695 8.1
Finance 10,519 0.8 10,530 0.8
Grocery 20,310 1.4 18,267 1.3
Healthcare, Education and Childcare 259,892 18.6 227,144 16.8
Home and Office Furnishings, Housewares and Durable Consumer 5,520 0.4 5,241 0.4
Insurance 19,806 1.4 19,844 1.5
Investment Funds and Vehicles 39,705 2.8 34,830 2.6
Leisure, Amusement, Motion Pictures and Entertainment 53,457 3.8 53,922 4.0
Mining, Steel, Iron and Non-Precious Metals 5,223 0.4 5,182 0.4
Oil and Gas 1,307 0.1 1,325 0.1
Personal and Non-Durable Consumer Products 33,171 2.4 32,620 2.4
Personal, Food and Miscellaneous Services 48,497 3.5 40,194 3.0
Personal Transportation 2,308 0.2 1,599 0.1
Printing and Publishing 30,832 2.2 30,910 2.3
Retail Stores 181,854 13.0 189,857 14.1
Telecommunications 25,529 1.8 25,098 1.9
Textiles and Leather 5,295 0.4 5,319 0.4
Utilities 3,310 0.2 3,583 0.3
Total $ 1,400,726 100.0 % $ 1,347,612 100.0 %

35

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Senior Loan Fund LLC:

The Company co-invests with RGA Reinsurance Company (“RGA”) in senior secured loans through SLF, an unconsolidated Delaware LLC. SLF is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF must be approved by the SLF investment committee consisting of two representatives of each of the Company and RGA (with unanimous approval required from (i) one representative of each of the Company and RGA or (ii) both representatives of each of the Company and RGA).

SLF is capitalized with subordinated notes and LLC equity interest subscriptions from its members. As of December 31, 2014, the Company and RGA owned 87.5% and 12.5%, respectively, of both the outstanding subordinated notes and LLC equity interests. Additionally, SLF has entered into a senior secured revolving credit facility (as amended, the “SLF Credit Facility”) with Wells Fargo Bank, N.A., through its wholly-owned subsidiary Senior Loan Fund II LLC (“SLF II”) which as of December 31, 2014 allowed SLF II to borrow up to $150,000 at any one time outstanding, subject to leverage and borrowing base restrictions. As of December 31, 2014, SLF had subordinated note commitments from the Company and RGA totaling $100,000, of which approximately $32,995 and $29,245 in aggregate principal amount was funded at December 31, 2014 and September 30, 2014, respectively. As of September 30, 2014, SLF had LLC equity interest subscriptions from the Company and RGA totaling $25,000, of which approximately $12,499 and $9,318 in aggregate was called and contributed as of December 31, 2014 and September 30, 2014, respectively.

As of December 31, 2014 and September 30, 2014, SLF had total assets at fair value of $126,370 and $107,228, respectively. As of December 31, 2014 and September 30, 2014, SLF’s portfolio was comprised of first lien senior secured loans to 38 and 31 different borrowers, respectively. As of December 31, 2014 and September 30, 2014, none of these loans was on non-accrual status. The portfolio companies in SLF are in industries similar to those in which the Company may invest directly. Additionally, as of December 31, 2014 and September 30, 2014, SLF had commitments to fund various undrawn revolvers and delayed draw investments to its portfolio companies totaling $7,602 and $10,136, respectively.

Below is a summary of SLF’s portfolio, followed by a listing of the individual loans in SLF’s portfolio as of December 31, 2014 and September 30, 2014:

As of
December 31,
2014 		As of
September 30,
2014
Senior secured loans (1) $ 122,516 $ 103,695
Weighted average current interest rate on senior secured loans (2) 5.3 % 5.2 %
Number of borrowers in SLF 38 31
Largest loan to a single borrower (1) $ 8,208 $ 8,229
Total of five largest loans to borrowers (1) $ 30,468 $ 31,132

(1) At principal/par amount.

(2) Computed as the (a) annual stated interest rate on accruing senior secured loans, divided by (b) total senior secured loans at principal/par amount.

36

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

SLF Loan Portfolio as of December 31, 2014

Current
Maturity Interest Principal/Par Fair
Portfolio Company Business Description Investment Type Date Rate (1) Amount Value (2)
1011778 B.C. ULC (Burger King Worldwide, Inc. ) Beverage, Food and Tobacco Senior Loan 10/2021 4.5 % $ 3,000 $ 2,996
5.11, Inc. (3) Textiles and Leather Senior Loan 02/2020 6.0 3,282 3,279
Acosta, Inc. Diversified Conglomerate Service Senior Loan 09/2021 5.0 3,000 3,005
ACTIVE Network, Inc. Electronics Senior Loan 11/2020 5.5 1,980 1,943
ARG IH Corporation (3) Beverage, Food and Tobacco Senior Loan 11/2020 4.8 2,145 2,143
Atrium Innovations Personal and Non Durable Consumer Products Senior Loan 02/2021 4.3 3,547 3,437
BJ's Wholesale Club, Inc. Retail Stores Senior Loan 09/2019 4.5 2,977 2,930
Blue Coat Systems, Inc. Electronics Senior Loan 05/2019 4.0 1,985 1,938
BMC Software, Inc. Electronics Senior Loan 09/2020 5.0 1,911 1,865
Brasa (Holdings) Inc. Personal, Food and Miscellaneous Services Senior Loan 07/2019 5.0 8,208 8,153
Brickman Group Ltd. LLC Farming and Agriculture Senior Loan 12/2020 4.0 1,995 1,943
Connect Merger Sub, Inc. Telecommunications Senior Loan 04/2020 4.8 3,965 3,924
Dell, Inc. Electronics Senior Loan 04/2020 4.5 1,980 1,979
Dialysis Newco, Inc. Healthcare, Education and Childcare Senior Loan 04/2021 4.5 2,488 2,475
Diversified Foodservice Supply, Inc. (3) Beverage, Food and Tobacco Senior Loan 12/2018 5.8 4,194 4,194
EAG, INC. (Evans Analytical Group) Diversified Conglomerate Service Senior Loan 07/2017 5.0 2,366 2,366
Federal-Mogul Corporation Automobile Senior Loan 04/2021 4.8 3,990 3,969
GSDM Holdings Corp. (3) Healthcare, Education and Childcare Senior Loan 06/2019 5.3 1,795 1,795
Hygenic Corporation, The Personal and Non Durable Consumer Products Senior Loan 10/2018 6.0 4,527 4,527
K&N Engineering, Inc. (3) Automobile Senior Loan 07/2019 5.3 3,894 3,894
Mister Car Wash Holdings, Inc. Automobile Senior Loan 08/2021 5.0 2,992 3,001
National Veterinary Associates, Inc. Personal, Food and Miscellaneous Services Senior Loan 08/2021 4.8 998 989
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 6.0 2,053 2,011
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 6.0 360 346
Paradigm Management Services, LLC (3) Healthcare, Education and Childcare Senior Loan 01/2019 5.5 6,247 6,247
Payless ShoeSource, Inc. Retail Stores Senior Loan 03/2021 5.0 1,990 1,831
Plano Molding Company, LLC (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 10/2018 5.3 1,815 1,815
Print Payroll Services, LLC Diversified/Conglomerate Service Senior Loan 06/2019 5.7 2,943 2,943
Print Payroll Services, LLC Diversified/Conglomerate Service Senior Loan 06/2019 5.7 568 568
Reliant Pro ReHab, LLC (3) Healthcare, Education and Childcare Senior Loan 06/2017 6.0 4,296 4,296
Rug Doctor LLC (3) Personal and Non Durable Consumer Products Senior Loan 12/2016 6.3 4,875 4,875
Scientific Games International, Inc. Hotels, Motels, Inns, and Gaming Senior Loan 10/2020 6.0 3,965 3,918
Self Esteem Brands, LLC (3) Leisure, Amusement, Motion Pictures, Entertainment Senior Loan 02/2020 5.0 6,185 6,185
Smashburger Finance LLC Beverage, Food and Tobacco Senior Loan 05/2018 5.5 968 968
Syncsort Incorporated (3) Electronics Senior Loan 03/2019 5.8 4,953 4,953
Systems Maintenance Services Holding, Inc. (3) Electronics Senior Loan 10/2019 5.0 2,433 2,433
Take 5 Oil Change, L.L.C. (3) Automobile Senior Loan 07/2018 6.3 1,426 1,426
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 3,452 3,452
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 6.8 403 403
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 165 165
W3 Co. Oil and Gas Senior Loan 03/2020 5.8 2,977 2,873
WII Components, Inc. (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 07/2018 5.5 3,223 3,223
$ 122,516 $ 121,676

(1) Represents the weighted average annual current interest rate as of December 31, 2014. All interest rates are payable in cash.

(2) Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not included in the Board's valuation process described elsewhere herein.

(3) The Company also holds a portion of the first lien senior secured loan in this portfolio company.

37

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

SLF Loan Portfolio as of September 30, 2014

Current
Maturity Interest Principal/Par Fair
Portfolio Company Business Description Investment Type Date Rate (1) Amount Value (2)
5.11, Inc. (3) Textiles and Leather Senior Loan 02/2020 6.0 % $ 3,290 $ 3,294
ACTIVE Network, Inc. Electronics Senior Loan 11/2020 5.5 1,985 1,975
ARG IH Corporation (3) Beverage, Food and Tobacco Senior Loan 11/2020 4.8 2,151 2,152
Atrium Innovations Personal and Non Durable Consumer Products Senior Loan 02/2021 4.3 3,556 3,498
BJ's Wholesale Club, Inc. Retail Stores Senior Loan 09/2019 4.5 2,985 2,944
Blue Coat Systems, Inc. Electronics Senior Loan 05/2019 4.0 1,990 1,958
BMC Software, Inc. Electronics Senior Loan 09/2020 5.0 1,915 1,886
Brasa (Holdings) Inc. Personal, Food and Miscellaneous Services Senior Loan 07/2019 5.0 8,229 8,215
Connect Merger Sub, Inc. Telecommunications Senior Loan 04/2020 4.8 3,975 3,943
Dell, Inc. Electronics Senior Loan 04/2020 4.5 1,985 1,974
Dialysis Newco, Inc. Healthcare, Education and Childcare Senior Loan 04/2021 4.5 2,494 2,491
Diversified Foodservice Supply, Inc. (3) Beverage, Food and Tobacco Senior Loan 12/2018 5.8 4,194 4,194
El Pollo Loco Inc. (3) Personal, Food and Miscellaneous Services Senior Loan 10/2018 5.3 4,740 4,758
Federal-Mogul Corporation Automobile Senior Loan 04/2021 4.8 4,000 3,972
GSDM Holdings Corp. (3) Healthcare, Education and Childcare Senior Loan 06/2019 5.3 1,800 1,800
Nuveen Investments, Inc. Finance Senior Loan 05/2017 4.2 3,000 2,997
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 5.8 2,058 2,058
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 5.8 468 468
Paradigm Management Services, LLC (3) Healthcare, Education and Childcare Senior Loan 01/2019 5.5 6,247 6,247
Payless ShoeSource, Inc. Retail Stores Senior Loan 03/2021 5.0 1,995 1,925
Plano Molding Company, LLC (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 10/2018 5.3 1,827 1,827
Print Payroll Services, LLC Diversified Conglomerate Service Senior Loan 06/2019 5.6 2,950 2,950
Rug Doctor LLC (3) Personal and Non Durable Consumer Products Senior Loan 12/2016 6.3 4,939 4,939
Rug Doctor LLC (3) Personal and Non Durable Consumer Products Senior Loan 12/2016 6.3 428 428
Scientific Games International, Inc. Hotels, Motels, Inns, and Gaming Senior Loan 10/2020 4.3 3,975 3,905
Self Esteem Brands, LLC (3) Leisure, Amusement, Motion Pictures, Entertainment Senior Loan 02/2020 5.0 6,324 6,324
Smashburger Finance LLC Beverage, Food and Tobacco Senior Loan 05/2018 5.5 970 970
Syncsort Incorporated (3) Electronics Senior Loan 03/2019 5.8 4,966 4,966
Systems Maintenance Services Holding, Inc. (3) Electronics Senior Loan 10/2019 5.0 2,439 2,439
Take 5 Oil Change, L.L.C. (3) Automobile Senior Loan 07/2018 6.3 1,429 1,429
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 3,461 3,461
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 6.8 386 386
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 165 165
W3 Co. Oil and Gas Senior Loan 03/2020 5.8 2,985 2,981
WII Components, Inc. (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 07/2018 5.5 3,394 3,378
WII Components, Inc. (3) (4) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 07/2018 N/A (5) - (1 )
$ 103,695 $ 103,296

(1) Represents the weighted average annual current interest rate as of September 30, 2014. All interest rates are payable in cash.

(2) Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not included in the Board's valuation process described elsewhere herein.

(3) The Company also holds a portion of the first lien senior secured loan in this portfolio company.

(4) The negative fair value is the result of the unfunded commitment being valued below par.

(5) The entire commitment was unfunded at September 30, 2014. As such, no interest is being earned on this investment.

The Company has committed to fund $87,500 of subordinated notes and $21,875 of LLC equity interest subscriptions to SLF. The amortized cost and fair value of the subordinated notes held by the Company was $28,871 and $28,871, respectively, as of December 31, 2014, and $25,589 and $25,589, respectively, as of September 30, 2014. As of December 31, 2014, the subordinated notes pay a weighted average interest rate of three-month London Interbank Offered Rate (“LIBOR”) plus 8.0%. For the three months ended December 31, 2014 and 2013, the Company earned interest income on the subordinated notes of $550 and $181, respectively. As of December 31, 2014 and September 30, 2014, $10,937 and $9,318 of the Company’s LLC equity interest subscriptions had been called and contributed. For the three months ended December 31, 2014 and 2013, the Company received $0 and $0 in dividend income from the LLC equity interests.

38

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Below is certain summarized financial information for SLF as of December 31, 2014 and September 30, 2014 and for the three months ended December 31, 2014 and 2013:

As of
December 31,
2014 		As of
September 30,
2014
Selected Balance Sheet Information:
Investments in loans receivable, at fair value $ 121,676 $ 103,296
Cash and other assets 4,694 3,932
Total assets $ 126,370 $ 107,228
Senior credit facility $ 74,750 $ 66,600
Payable for open trades 4,950 -
Other liabilities 1,294 822
Total liabilities 80,994 67,422
Subordinated notes and members' equity 45,376 39,806
Total liabilities and net assets $ 126,370 $ 107,228

Three months ended December 31,
2014 2013
Selected Statement of Operations Information:
Interest income $ 1,600 $ 333
Fee income 2 -
Total investment income 1,602 333
Interest expense 1,108 206
Administrative service fee 47 16
Management and incentive fees - -
Other expenses 25 9
Total expenses 1,180 231
Net investment income 422 102
Net change in unrealized appreciation (depreciation) on investments and subordinated notes (452 ) 642
Net increase (decrease) in net assets $ (30 ) $ 744

39

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Note 5. Transactions with Affiliated Companies

An affiliated company is a company in which the Company has an ownership of 5% or more of its voting securities. A controlled affiliate is a company in which the Company owns more than 25% of its voting securities. Transactions related to our investments with both controlled and non-controlled affiliates for the three months ended December 31, 2014 were as follows:

Portfolio Fair value at Purchases Redemptions Sales Discount Net realized Net unrealized Fair value at Interest and Dividend
Company September 30, 2014 (cost) (cost) (cost) accretion gains / (losses) gains / (losses) December 31, 2014 fee income income
Controlled Affiliates
Senior Loan Fund LLC * $ 34,831 $ 4,900 $ - $ - $ - $ - $ (26 ) $ 39,705 $ 550 $ -
Non-Controlled Affiliates
Barcelona Restaurants, LLC 3,080 - - - - - 327 3,407 - -
Total Controlled and
Non-Controlled Affiliates $ 37,911 $ 4,900 $ - $ - $ - $ - $ 301 $ 43,112 $ 550 $ -

* Together with RGA, the Company co-invests through SLF. SLF is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF must be approved by the SLF investment committee consisting of two representatives of the Company and RGA (with unanimous approval required from (i) one representative of each of the Company and RGA or (ii) both representatives of each of the Company and RGA). Therefore, although the Company owns more than 25% of the voting securities of SLF (even though these "voting securities" do not afford the Company the right to elect directors of SLF or any other special rights), the Company does not believe that it has control over SLF for purposes of the 1940 Act or otherwise.

Note 6. Fair Value Measurements

The Company follows ASC Topic 820 for measuring fair value. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the assets or liabilities or market and the assets’ or liabilities’ complexity. The Company’s fair value analysis includes an analysis of the value of any unfunded loan commitments. Assets and liabilities are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the asset or liability as of the measurement date. The three levels are defined as follows:

Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the assets or liabilities.

Level 3: Inputs include significant unobservable inputs for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value are based upon the best information available and may require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or a liability’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The Company assesses the levels of assets and liabilities at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfers. There were no transfers among Level 1, 2 and 3 of the fair value hierarchy for assets and liabilities during the three months ended December 31, 2014 and 2013. The following section describes the valuation techniques used by the Company to measure different assets and liabilities at fair value and includes the level within the fair value hierarchy in which the assets and liabilities are categorized.

40

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Investments

Level 1 investments are valued using quoted market prices. Level 2 investments are valued using market consensus prices that are corroborated by observable market data and quoted market prices for similar assets and liabilities. Level 3 investments are valued at fair value as determined in good faith by the Board, based on input of management, the audit committee and independent valuation firms that have been engaged at the direction of the Board to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing twelve-month period under a valuation policy and a consistently applied valuation process. This valuation process is conducted at the end of each fiscal quarter, with approximately 25% (based on fair value) of the Company’s valuations of debt and equity investments without readily available market quotations subject to review by an independent valuation firm. All investments as of December 31, 2014 and September 30, 2014, with the exception of money market funds included in cash and cash equivalents (Level 1 investments), were valued using Level 3 inputs of the fair value hierarchy.

When determining fair value of Level 3 debt and equity investments, the Company may take into account the following factors, where relevant: 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 and discounted cash flows, the markets in which the portfolio company does business, comparisons to publicly traded securities, and changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made and other relevant factors. The primary method for determining enterprise value uses a multiple analysis whereby appropriate multiples are applied to the portfolio company’s net income before net interest expense, income tax expense, depreciation and amortization (“EBITDA”). The enterprise value analysis is performed to determine the value of equity investments and to determine if debt investments are credit impaired. If debt investments are credit impaired, the Company will use the enterprise value analysis or a liquidation basis analysis to determine fair value. For debt investments that are not determined to be credit impaired, the Company uses a market interest rate yield analysis to determine fair value.

In addition, for certain debt investments, the Company may base its valuation on indicative bid and ask prices provided by an independent third party pricing service. Bid prices reflect the highest price that the Company and others may be willing to pay. Ask prices represent the lowest price that the Company and others may be willing to accept. The Company generally uses the midpoint of the bid/ask range as its best estimate of fair value of such investment.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company may realize significantly less than the value at which such investment had previously been recorded.

The Company’s investments are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded.

41

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Secured Borrowings

The Company has elected the fair value option under ASC Topic 825 — Financial Instruments relating to accounting for debt obligations at their fair value for its secured borrowings which arose due to partial loan sales which did not meet the criteria for sale treatment under ASC Topic 860. The Company reports changes in the fair value of its secured borrowings as a component of the net change in unrealized (appreciation) depreciation on secured borrowings in the consolidated statements of operations. The net gain or loss reflects the difference between the fair value and the principal amount due on maturity.

All secured borrowings as of December 31, 2014 and September 30, 2014 were valued using Level 3 inputs under the fair value hierarchy, and the Company’s approach to determining fair value of Level 3 secured borrowings is consistent with its approach to determining fair value of the Level 3 investments that are associated with these secured borrowings as previously described.

The following tables present fair value measurements of the Company’s investments and secured borrowings and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of December 31, 2014 and September 30, 2014:

As of December 31, 2014: Fair Value Measurements Using
Description Level 1 Level 2 Level 3 Total
Assets:
Debt investments (1) $ - $ - $ 1,343,695 $ 1,343,695
Equity investments (1) - - 57,031 57,031
Money market funds (1)(2) 31,076 - - 31,076
Total assets: $ 31,076 $ - $ 1,400,726 $ 1,431,802
Secured borrowings: $ - $ - $ 380 $ 380

As of September 30, 2014: Fair Value Measurements Using
Description Level 1 Level 2 Level 3 Total
Assets:
Debt investments (1) $ - $ - $ 1,292,851 $ 1,292,851
Equity investments (1) - - 54,761 54,761
Money market funds (1)(2) 37,199 - - 37,199
Total assets: $ 37,199 $ - $ 1,347,612 $ 1,384,811
Secured borrowings: $ - $ - $ 389 $ 389

(1) Refer to the consolidated schedules of investments for further details.
(2) Incuded in cash and cash equivalents and restricted cash and cash equivalents on the consolidated statements of financial condition.

42

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

The net change in unrealized appreciation (depreciation) for the three months ended December 31, 2014 and 2013 reported within the net change in unrealized appreciation (depreciation) on investments in the Company’s consolidated statements of operation attributable to the Company’s Level 3 assets held as of December 31, 2014 and 2013 was $869 and $3,104, respectively.

The following table presents the changes in investments and secured borrowings measured at fair value using Level 3 inputs for the three months ended December 31, 2014 and 2013:

Three months ended December 31, 2014 Three months ended
December 31, 2014
Debt Investments Equity Investments Total Investments Secured borrowings
Fair value, beginning of period $ 1,292,851 $ 54,761 $ 1,347,612 $ 389
Net change in unrealized appreciation (depreciation) on investments (1,817 ) 706 (1,111 ) -
Realized gain (loss) on investments (46 ) 1,772 1,726 -
Fundings of revolving loans, net (90 ) - (90 ) -
Fundings of investments 128,335 3,135 131,470 -
PIK interest 390 - 390 -
Proceeds from principal payments and sales of portfolio investments (77,598 ) (3,343 ) (80,941 ) -
Repayments on secured borrowings - - - (9 )
Accretion of discounts and amortization of premiums 1,670 - 1,670 -
Fair value, end of period $ 1,343,695 $ 57,031 $ 1,400,726 $ 380

Three months ended December 31, 2013 Three months ended
December 31, 2013
Debt Investments Equity Investments Total Investments Secured borrowings
Fair value, beginning of period $ 990,172 $ 34,473 $ 1,024,645 $ 8,809
Net change in unrealized appreciation on investments 2,058 4,589 6,647 -
Net change in unrealized appreciation on secured borrowings - - - 76
Realized gain / (loss) gain on investments (4,522 ) (472 ) (4,994 ) -
Fundings of revolving loans, net (277 ) - (277 ) -
Fundings of investments 250,848 5,365 256,213 -
PIK interest (653 ) - (653 ) -
Proceeds from principal payments and sales of portfolio investments (102,220 ) (1,350 ) (103,570 ) -
Proceeds from secured borrowings - - - 16,448
Repayments on secured borrowings - - - (11,010 )
Amortization of discount and premium 1,908 - 1,908 43
Fair value, end of period $ 1,137,314 $ 42,605 $ 1,179,919 $ 14,366

43

Golub Capital BDC, Inc. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(In thousands, except shares and per share data)

The following table presents quantitative information about the significant unobservable inputs of the Company’s Level 3 investments and secured borrowings as of December 31, 2014 and September 30, 2014.

Quantitative information about Level 3 Fair Value Measurements
Fair value as of
December 31,
2014 		Valuation Techniques Unobservable Input Range (Weighted Average)
Assets:
Senior secured loans (1)(2)(3) $ 197,924 Market rate approach Market interest rate 4.5% - 30.8% (6.5%)
Market comparable companies EBITDA multiples 5.0x - 18.2x (10.4x)
Subordinated Notes of SLF $ 28,871 Market rate approach Market interest rate 8.2%
One stop loans (1)(4)(5) $ 948,965 Market rate approach Market interest rate 5.0% - 50.3% (8.2%)
Market comparable companies EBITDA multiples (6) 5.0x - 30.0x (9.8x)
Revenue multiples (6) 0.8x - 46.1x (8.8x)
Subordinated and second lien loans (1)(7) $ 42,153 Market rate approach Market interest rate 5.0% - 12.0% (9.6%)
Market comparable companies EBITDA multiples 9.0x - 16.3x (12.4x)
Equity securities (8) $ 46,197 Market comparable companies EBITDA multiples (9) 4.5x - 17.7x (10.0x)
Revenue multiples (9) 2.8x - 46.10x (15.2x)
Liabilities:
Secured borrowings (10) $ 380 Market rate approach Market interest rate 6.0%
Market comparable companies EBITDA multiples 30.0x

(1) The fair value of this asset class was determined using the market rate approach as the investments in this asset class were determined not to be credit impaired using the market comparable companies approach. The unobservable inputs for both valuation techniques have been presented, but the fair value as of December 31, 2014 was determined using the market rate approach.
(2) Excludes $47,760 of loans at fair value, which the Company valued using indicative bid and ask prices provided by an independent third party pricing service.
(3) Excludes $5 of non-accrual loans at fair value, which the Company valued on a liquidation basis.
(4) Excludes $54,761 of loans at fair value, which the Company valued using indicative bid and ask prices provided by an independent third party pricing service.
(5) Excludes $2,228 of non-accrual loans at fair value, which the Company valued on a liquidation basis.
(6) The Company valued $786,404 and $162,561 of one stop loans using EBITDA and revenue multiples, respectively. All one stop loans were also valued using the market rate approach.
(7) Excludes $21,028 of loans at fair value, which the Company valued using indicative bid and ask prices provided by an independent third party pricing service.
(8) Excludes $10,834 of LLC equity interests in SLF at fair value, which the Company valued using the net asset value.
(9) The Company valued $43,155 and $3,042 of equity investments using EBITDA and revenue multiples, respectively.
(10) The fair value of the secured borrowings was determined using the market rate approach as the corresponding investments were determined not to be credit impaired using the market comparable companies approach. The unobservable inputs for both valuation techniques have been presented, but the fair value as of December 31, 2014 was determined using the market rate approach.

44

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Quantitative information about Level 3 Fair Value Measurements
Fair value as of
September 30,
2014 		Valuation Techniques Unobservable Input Range (Weighted Average)
Assets:
Senior secured loans (1)(2)(3) $ 227,431 Market rate approach Market interest rate 4.5% - 33.8% (7.3%)
Market comparable companies EBITDA multiples (4) 5.0x - 14.8x (9.1x)
Revenue multiples (4) 0.8x - 4.3x (3.1x)
Subordinated Notes of SLF $ 25,589 Discounted cash flow analysis Discount rate 8.0%
One stop loans (1)(5)(6) $ 883,582 Market rate approach Market interest rate 5.0% - 43.3% (8.2%)
Market comparable companies EBITDA multiples (7) 5.5x - 30.0x (9.8x)
Revenue multiples (7) 2.8x - 11.0x (6.1x)
Subordinated and second lien loans (8) $ 42,418 Market rate approach Market interest rate 9.0% - 12.0% (8.9%)
Market comparable companies EBITDA multiples 9.0x - 16.3x (12.4x)
Equity securities (9) $ 45,519 Market comparable companies EBITDA multiples (10) 4.5x - 18.0x (10.0x)
Revenue multiples (10) 2.8x - 3.8x (3.5x)
Liabilities:
Secured borrowings (11) $ 389 Market rate approach Market interest rate 6.0%
Market comparable companies EBITDA multiples 30.0x

(1) The fair value of this asset class was determined using the market rate approach as the investments in this asset class were determined not to be credit impaired using the market comparable companies approach. The unobservable inputs for both valuation techniques have been presented, but the fair value as of September 30, 2014 was determined using the market rate approach.
(2) Excludes $35,423 of loans at fair value, which the Company valued using indicative bid and ask prices provided by an independent third party pricing service.
(3) Excludes $5 of non-accrual loans at fair value, which the Company valued on a liquidation basis.
(4) The Company valued $180,334 and $47,097 of senior secured loans using EBITDA and revenue multiples, respectively. All senior secured loans were also valued using the market rate approach.
(5) Excludes $55,280 of loans at fair value, which the Company valued using indicative bid and ask prices provided by an independent third party pricing service.
(6) Excludes $1,867 of loans at fair value, which the Company valued on a liquidation basis.
(7) The Company valued $800,306 and $83,276 of one stop loans using EBITDA and revenue multiples, respectively. All one stop loans were also valued using the market rate approach.
(8) Excludes $21,256 of loans at fair value, which the Company valued using indicative bid and ask prices provided by an independent third party pricing service.
(9) Excludes $9,242 of LLC equity interests in SLF at fair value, which the Company valued using the net asset value.
(10) The Company valued $43,518 and $2,001 of equity securities using EBITDA and revenue multiples, respectively.
(11) The fair value of the secured borrowings was determined using the market rate approach as the corresponding investments were determined not to be credit impaired using the market comparable companies approach. The unobservable inputs for both valuation techniques have been presented, but the fair value as of September 30, 2014 was determined using the market rate approach.

The above tables are not intended to be all-inclusive but rather to provide information on significant unobservable inputs and valuation techniques used by the Company.

The significant unobservable inputs used in the fair value measurement of the Company’s debt and equity investments and secured borrowings are EBITDA multiples, revenue multiples and market interest rates. The Company uses EBITDA multiples and, to a lesser extent revenue multiples, on its debt and equity investments and secured borrowings to determine any credit gains or losses. Significant increases or decreases in either of these inputs in isolation would result in a significantly lower or higher fair value measurement. The Company uses market interest rates for loans to determine if the effective yield on a loan is commensurate with the market yields for that type of loan. If a loan’s effective yield is significantly less than the market yield for a similar loan with a similar credit profile, then the resulting fair value of the loan may be lower.

Other Financial Assets and Liabilities

ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. As a result, with the exception of the line item titled “debt” which is reported at cost, all assets and liabilities approximate fair value on the consolidated statements of financial condition due to their short maturity. Fair value of the Company’s debt is estimated using Level 3 inputs by discounting remaining payments using comparable market rates or market quotes for similar instruments at the measurement date, if available.

45

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

The following are the carrying values and fair values of the Company’s debt as of December 31, 2014 and September 30, 2014. Fair value is estimated using Level 3 inputs by discounting remaining payments using applicable market rates or market quotes for similar instruments at the measurement date, if available.

As of December 31, 2014 As of September 30, 2014
Carrying Value Fair Value Carrying Value Fair Value
Debt $ 714,650 $ 711,536 $ 697,150 $ 693,869

Note 7. Borrowings

In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing. On September 13, 2011, the Company received exemptive relief from the SEC allowing it to modify the asset coverage requirement to exclude the SBA debentures from this calculation. As such, the Company’s ratio of total consolidated assets to outstanding indebtedness may be less than 200%. This provides the Company with increased investment flexibility but also increases its risks related to leverage. As of December 31, 2014, the Company’s asset coverage for borrowed amounts was 244.4%.

Debt Securitizations : On July 16, 2010, the Company completed a $300,000 term debt securitization (“2010 Debt Securitization”). The notes (“2010 Notes”) offered in the 2010 Debt Securitization were issued by the 2010 Issuer, a subsidiary of Golub Capital BDC 2010-1 Holdings LLC (“Holdings”), a direct subsidiary of the Company, and the Class A 2010 Notes and Class B 2010 Notes are secured by the assets held by the 2010 Issuer. The 2010 Debt Securitization was executed through a private placement of $174,000 of Aaa/AAA Class A 2010 Notes of the 2010 Issuer which, as amended, bear interest at three-month LIBOR plus 1.74%. The $10,000 face amount of Class B 2010 Notes bears interest at a rate of three-month LIBOR plus 2.40%, and the $116,000 face amount of Subordinated 2010 Notes does not bear interest. In partial consideration for the loans transferred to the 2010 Issuer as part of the 2010 Debt Securitization, Holdings retained all of the Class B and Subordinated 2010 Notes totaling $10,000 and $116,000, respectively, and all of the membership interests in the 2010 Issuer, which Holdings initially purchased for two hundred and fifty dollars. On February 15, 2013, the Company amended the 2010 Debt Securitization to issue an additional $29,000 in Class A 2010 Notes, $2,000 in Class B 2010 Notes and $19,000 in Subordinated 2010 Notes. The additional Class A 2010 Notes of the 2010 Issuer were sold through a private placement and the additional Class B 2010 Notes and additional Subordinated 2010 Notes were retained by Holdings. On November 15, 2013, Holdings sold the $12,000 of Class B 2010 Notes and on November 20, 2013, the transaction closed and proceeds of $11,999 were received. The Class A 2010 Notes and Class B 2010 Notes are included in the December 31, 2014 and September 30, 2014 consolidated statements of financial condition as debt of the Company. As of December 31, 2014 and September 30, 2014, the Subordinated 2010 Notes were eliminated in consolidation.

Through July 20, 2015, all principal collections received on the underlying collateral may be used by the 2010 Issuer to purchase new collateral under the direction of the Investment Adviser in its capacity as collateral manager of the 2010 Issuer and in accordance with the Company’s investment strategy, allowing the Company to maintain the leverage in the 2010 Debt Securitization. The 2010 Notes are scheduled to mature on July 20, 2023. As part of the 2010 Debt Securitization, the Company entered into a master loan sale agreement with Holdings and the 2010 Issuer under which the Company agreed to sell or contribute certain senior secured and second lien loans (or participation interests therein) to Holdings, and Holdings agreed to sell or contribute such loans (or participation interests therein) to the 2010 Issuer and to purchase or otherwise acquire the Subordinated 2010 Notes. The 2010 Notes are the secured obligations of the 2010 Issuer, and an indenture governing the 2010 Notes includes customary covenants and events of default.

46

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

As of December 31, 2014 and September 30, 2014, there were 84 and 85 portfolio companies with a total fair value of $345,621 and $337,763, respectively, securing the 2010 Notes. The pool of loans in the 2010 Debt Securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

The interest charged under the 2010 Debt Securitization is based on three-month LIBOR, which as of December 31, 2014 was 0.2%. For the three months ended December 31, 2014 and 2013, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the 2010 Debt Securitization were as follows:

For the three months ended December 31,
2014 2013
Stated interest expense $ 1,104 $ 1,069
Amortization of debt issuance costs 228 142
Total interest and other debt financing expenses $ 1,332 $ 1,211
Cash paid for interest expense $ 1,093 $ 1,004
Annualized average stated interest rate 2.0 % 2.0 %
Average outstanding balance $ 215,000 $ 208,478

The classes, amounts, ratings and interest rates (expressed as a spread to three-month LIBOR) of the Class A and B 2010 Notes are as follows:

Description Class A 2010 Notes Class B 2010 Notes
Type Senior Secured Floating Rate Senior Secured Floating Rate
Amount Outstanding $203,000 $12,000
Moody's Rating "Aaa" "Aa"
S&P Rating "AAA" "AA"
Interest Rate LIBOR + 1.74% LIBOR + 2.40%
Stated Maturity July 20, 2023 July 20, 2023

On June 5, 2014, the Company completed a $402,569 term debt securitization (“2014 Debt Securitization”). The notes (“2014 Notes”) offered in the 2014 Debt Securitization were issued by the 2014 Issuer, a wholly-owned subsidiary of the Company, and are secured by a diversifed portfolio of senior secured and second lien loans held by the 2014 Issuer. The 2014 Debt Securitization was executed through a private placement of $191,000 of Aaa/AAA Class A-1 2014 Notes which bear interest at three-month LIBOR plus 1.75%, $20,000 of Aaa/AAA Class A-2 2014 Notes which bear interest at a rate of three-month LIBOR plus 1.45% through December 4, 2015 and three-month LIBOR plus 1.95% thereafter and $35,000 of Aa2/AA Class B 2014 Notes which bear interest at a rate of three-month LIBOR plus 2.50%. The $37,500 face amount of Class C 2014 Notes bear interest at a rate of three-month LIBOR plus 3.50%, and the LLC equity interests do not bear interest. In partial consideration for the loans transferred to the 2014 Issuer as part of the 2014 Debt Securitization, the Company received $119,069 of LLC equity interests in the 2014 Issuer. The Company retained all of the Class C 2014 Notes and LLC equity interests totaling $37,500 and $119,069, respectively. The Class A-1, Class A-2 and Class B 2014 Notes are included in the December 31, 2014 consolidated statements of financial condition as debt of the Company. As of December 31, 2014, the Class C 2014 Notes and LLC equity interests were eliminated in consolidation.

47

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Through April 28, 2018, all principal collections received on the underlying collateral may be used by the 2014 Issuer to purchase new collateral under the direction of the Investment Adviser in its capacity as collateral manager of the 2014 Issuer and in accordance with the Company’s investment strategy, allowing the Company to maintain the initial leverage in the 2014 Debt Securitization. The 2014 Notes are scheduled to mature on April 25, 2026. As part of the 2014 Debt Securitization, the Company entered into a master loan sale agreement with the 2014 Issuer under which the Company agreed to sell or contribute certain senior secured and second lien loans (or participation interests therein) to the 2014 Issuer and to purchase or otherwise acquire the LLC equity interestsissued by the 2014 Issuer. The 2014 Notes are the secured obligations of the 2014 Issuer, and an indenture governing the 2014 Notes includes customary covenants and events of default.

As of December 31, 2014 and September 30, 2014, there were 74 and 69 portfolio companies with a total fair value of $398,515 and $371,764, respectively, securing the 2014 Notes. The pool of loans in the 2014 Debt Securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

The interest charged under the 2014 Debt Securitization is based on three-month LIBOR, which as of December 31, 2014 was 0.2%. For the three months December 31, 2014 and 2013, the components of interest expense, cash paid for interest, annualized average interest rates and average outstanding balances for the 2014 Debt Securitization were as follows:

For the three months ended December 31,
2014 2013
Stated interest expense $ 1,290 N/A
Amortization of debt issuance costs 160 N/A
Total interest and other debt financing expenses $ 1,450 N/A
Cash paid for interest expense $ 2,011 N/A
Annualized average stated interest rate 2.1 % N/A
Average outstanding balance $ 246,000 N/A

The classes, amounts, ratings and interest rates (expressed as a spread to three-month LIBOR) of the Class A-1, A-2 and B 2014 Notes are as follows:

Description Class A-1 2014 Notes Class A-2 2014 Notes Class B 2014 Notes
Type Senior Secured Floating Rate Senior Secured Floating Rate Senior Secured Floating Rate
Amount Outstanding $191,000 $20,000 $35,000
Moody's Rating "Aaa" "Aaa" "Aa2"
S&P Rating "AAA" "AAA" "AA"
Interest Rate LIBOR + 1.75% LIBOR + 1.45% (1) LIBOR + 2.50%
Stated Maturity April 25, 2026 April 25, 2026 April 25, 2026

(1) The Class A-2 Notes bear interest at three-month LIBOR plus 1.45% through December 4, 2015 and three-month LIBOR plus 1.95% thereafter.

The Investment Adviser serves as collateral manager to the 2010 Issuer and the 2014 Issuer under separate collateral management agreements and receives a fee for providing these services. The total fees payable by the Company under its Investment Advisory Agreement are reduced by an amount equal to the total aggregate fees that are paid to the Investment Adviser by the 2010 Issuer and the 2014 Issuer for rendering such collateral management services.

48

Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

SBA Debentures : On August 24, 2010, GC SBIC IV, L.P. (“SBIC IV”), a wholly-owned subsidiary of the Company, received approval for a license from the SBA to operate as an SBIC. On December 5, 2012, GC SBIC V, L.P. (“SBIC V”), a wholly owned subsidiary of the Company, received a license from the SBA to operate as an SBIC. SBICs are subject to a variety of regulations and oversight by the SBA concerning the size and nature of the companies in which they may invest as well as the structures of those investments.

The licenses allow the Company’s SBICs to obtain leverage by issuing SBA-guaranteed debentures, subject to issuance of a capital commitment by the SBA and customary procedures. These debentures are non-recourse to the Company, have interest payable semiannually and a ten-year maturity. The interest rate is fixed at the time of issuance at a market-driven spread over U.S. Treasury Notes with ten-year maturities.

Under present SBIC regulations, the maximum amount of SBA-guaranteed debentures that may be issued by multiple licensees under common management is $225,000 and the maximum amount that may be issued by a single SBIC licensee is $150,000. As of December 31, 2014, SBIC IV and SBIC V had $150,000 and $58,750 of outstanding SBA-guaranteed debentures, respectively, leaving incremental borrowing capacity of $16,250 for SBIC V under present SBIC regulations. As of September 30, 2014, SBIC IV and SBIC V had $150,000 and $58,750, respectively, of outstanding SBA-guaranteed debentures.

SBIC IV and SBIC V may each borrow up to two times the amount of its regulatory capital, subject to customary regulatory requirements. As of December 31, 2014, the Company had committed and funded $75,000 to SBIC IV and SBIC IV had SBA-guaranteed debentures of $150,000 outstanding that mature between March 2021 and September 2024. As of December 31, 2014, the Company had committed and funded $37,500 to SBIC V, and SBIC V had SBA-guaranteed debentures of $58,750 outstanding that mature between September 2023 and September 2024.

The interest rate on $208,750 of outstanding debentures is fixed at an average annualized interest rate of 3.7%. For the three months ended December 31, 2014 and 2013, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the SBA debentures were as follows:

For the three months ended December 31,
2014 2013
Stated interest expense $ 1,936 $ 1,593
Amortization of debt issuance costs 487 225
Total interest and other debt financing expenses $ 2,423 $ 1,818
Cash paid for interest expense $ - $ -
Annualized average stated interest rate 3.7 % 3.5 %
Average outstanding balance $ 208,750 $ 182,546

Revolving Credit Facility: On July 21, 2011, Funding, a wholly-owned subsidiary of the Company, entered into a senior secured revolving credit facility (as amended, the “Credit Facility”) with Wells Fargo Securities, LLC, as administrative agent, and Wells Fargo Bank, N.A., as lender, which as of December 31, 2014 allowed Funding to borrow up to $150,000 at any one time outstanding, subject to leverage and borrowing base restrictions.

On October 17, 2014, the Company and Funding amended the Credit Facility to, among other things, extend the reinvestment period during which Funding can draw under the Credit Facility from October 21, 2014 to November 22, 2015, and extended the stated maturity date from October 22, 2018 to October 17, 2019.

On December 18, 2014, the Company and Funding amended the Credit Facility to, among other things, allow for the addition of a second lender under the facility.

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Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Through the reinvestment period, the Credit Facility bears interest at one-month LIBOR plus 2.25% per annum. After the reinvestment period, the rate will reset to one-month LIBOR plus 2.75% per annum for the remaining term of the Credit Facility. In addition to the stated interest expense on the Credit Facility, the Company is required to pay a non-usage fee rate between 0.50% and 2.00% per annum depending on the size of the unused portion of the Credit Facility.

The Credit Facility is collateralized by all of the assets held by Funding, and the Company has pledged its interests in Funding as collateral to Wells Fargo Bank, N.A., as the collateral agent, under an ancillary agreement to secure the obligations of the Company as the transferor and servicer under the Credit Facility. Both the Company and Funding have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. Borrowing under the Credit Facility is subject to the leverage restrictions contained in the 1940 Act.

The Company plans to transfer certain loans and debt securities it has originated or acquired from time to time to Funding through a purchase and sale agreement and may cause Funding to originate or acquire loans in the future, consistent with the Company’s investment objectives.

As of December 31, 2014 and September 30, 2014, the Company had outstanding debt under the Credit Facility of $44,900 and $27,400, respectively. For the three months ended December 31, 2014 and 2013, the Company had borrowings on the Credit Facility of $33,550 and $186,600 and repayments on the Credit Facility of $16,050 and $50,250, respectively. For the three months ended December 31, 2014 and 2013, the components of interest expense, cash paid for interest, annualized average interest rates and average outstanding balances for the Credit Facility were as follows:

For the three months ended December 31,
2014 2013
Stated interest expense $ 142 $ 640
Facility fees 162 168
Amortization of debt issuance costs 149 71
Total interest and other debt financing expenses $ 453 $ 879
Cash paid for interest expense $ 270 $ 584
Annualized average stated interest rate 2.4 % 2.5 %
Average outstanding balance $ 23,059 $ 103,564

Revolver: On November 22, 2013, Revolver Funding, a wholly owned subsidiary of the Company, entered into a $15,000 revolving line of credit (“Revolver”), which may be increased up to $30,000, with The PrivateBank and Trust Company (“PrivateBank”).

Effective November 24, 2014, the Company and Revolver Funding amended the Revolver to, among other things,(a) extended the stated maturity date from November 22, 2019 to November 22, 2020 and (b) extended the term under which borrowings under the Revolver bear an interest rate of either one-month, two-month or three-month LIBOR plus 3.50% per annum or PrivateBank’s prime rate plus 1.50% per annum through November 22, 2015 from November 22, 2014 and one-month, two-month or three-month LIBOR plus 2.50% per annum or PrivateBank’s prime rate plus 0.50% per annum for the period subsequent to November 22, 2015.

The Revolver is collateralized by all of the assets held by Revolver Funding. Both the Company and Revolver Funding have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. Borrowing under the Revolver is subject to the leverage restrictions contained in the 1940 Act. In addition, the Company pays a fee of 0.25% per annum on any unused portion of the Revolver.

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Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

As of December 31, 2014 and September 30, 2014, the Company had no outstanding debt under the Revolver. For the three months ended December 31, 2014 and 2013, the Company had no borrowings and repayments on the Revolver. For the three months ended December 31, 2014 and 2013, the components of interest expense, cash paid for interest, annualized average interest rates and average outstanding balances for the Revolver were as follows:

For the three months ended December 31,
2014 2013
Stated interest expense $ - $ -
Facility fees 9 -
Amortization of debt issuance costs 23 6
Total interest and other debt financing expenses $ 32 $ 6
Cash paid for interest expense $ 9 $ 4
Annualized average stated interest rate N/A N/A
Average outstanding balance $ - $ -

The average total debt outstanding (including the debt under the 2010 Debt Securitization, the 2014 Debt Securitization, SBA debentures, Credit Facility and Revolver) for the three months ended December 31, 2014 and 2013 was $692,809 and $494,588, respectively.

For the three months ended December 31, 2014 and 2013, the effective annualized average interest rate, which includes amortization of debt financing costs and non-usage facility fees, on the Company’s total debt outstanding (excluding secured borrowings) was 3.3% and 3.1%, respectively.

A summary of the Company’s maturity requirements for borrowings as of December 31, 2014 is as follows:

Payments Due by Period
Less Than More Than
Total 1 Year 1-3 Years 3-5 Years 5 Years
2010 Debt Securitization $ 215,000 $ - $ - $ - $ 215,000
2014 Debt Securitization 246,000 - - - 246,000
SBA debentures 208,750 - - - 208,750
Credit Facility 44,900 - - 44,900 -
Revolver - - - - -
Total borrowings $ 714,650 $ - $ - $ 44,900 $ 669,750

Secured Borrowings: Certain partial loan sales do not qualify for sale accounting under ASC Topic 860 because these sales do not meet the definition of a “participating interest”, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment on the consolidated statement of financial condition and the portion sold is recorded as a secured borrowing in the liabilities section of the consolidated statement of financial condition. For these partial loan sales, the interest earned on the entire loan balance is recorded within “interest income” and the interest earned by the buyer in the partial loan sale is recorded within “interest and other debt financing expenses” in the consolidated statement of operations.

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Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

As of December 31, 2014 and September 30, 2014, the Company recognized secured borrowings at fair value of $380 and $389, respectively, and the fair values of the loans that are associated with these secured borrowings was $1,307 and $1,325, respectively. These secured borrowings were the result of the Company’s completion of partial loan sales of one stop loans associated with two portfolio companies that did not meet the definition of a “participating interest”. As a result, sale treatment was not allowed and these partial loan sales were treated as secured borrowings.

During the three months ended December 31, 2014, there were no partial loan sales, no fundings on revolving and delayed draw secured borrowings and repayments on secured borrowings totaled $9. During the three months ended December 31, 2013, there were two partial loan sales totaling $8,227, net fundings on revolving secured borrowings totaling $93 and repayments on secured borrowings totaled $2,882. For the three months ended December 31, 2014, the effective annualized average interest rate on secured borrowings, which includes amortization of original issuance costs, was 4.5%, interest expense was $4, and amortization of original issue discount was an amount less than $1. For the three months ended December 31, 2013, the effective annualized average interest rate on secured borrowings, which includes amortization of original issuance costs, was 7.4%, interest expense was $135 and amortization of original issue discount was $43.

Note 8. Commitments and Contingencies

Commitments: The Company had outstanding commitments to fund investments totaling $131,842 and $124,548 under various undrawn revolvers and other credit facilities as of December 31, 2014 and September 30, 2014, respectively.

Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide general indemnifications. The Company’s maximum exposure under these arrangements is unknown, as these involve future claims that may be made against the Company but that have not occurred. The Company expects the risk of any future obligations under these indemnifications to be remote.

Off-balance sheet risk: Off-balance sheet risk refers to an unrecorded potential liability that may result in a future obligation or loss, even though it does not appear on the consolidated statements of financial condition. The Company has entered and, in the future, may again enter into derivative instruments that contain elements of off-balance sheet market and credit risk. Derivative instruments can be affected by market conditions, such as interest rate volatility, which could impact the fair value of the derivative instruments. If market conditions move against the Company, it may not achieve the anticipated benefits of the derivative instruments and may realize a loss. The Company minimizes market risk through monitoring its investments and borrowings.

Concentration of credit and counterparty risk: Credit risk arises primarily from the potential inability of counterparties to perform in accordance with the terms of the contract. The Company has engaged and, in the future, may engage again in derivative transactions with counterparties. In the event that the counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk of default depends on the creditworthiness of the counterparties or issuers of the instruments. The Company’s maximum loss that it could incur related to counterparty risk on its derivative instruments is the value of the collateral for that respective derivative instrument. It is the Company’s policy to review, as necessary, the credit standing of each counterparty.

Legal proceedings: In the normal course of business, the Company may be subject to legal and regulatory proceedings that are generally incidental to its ongoing operations. While there can be no assurance of the ultimate disposition of any such proceedings, the Company does not believe any disposition will have a material adverse effect on the Company’s consolidated financial statements.

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Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Note 9. Financial Highlights

The financial highlights for the Company are as follows:

Three months ended December 31,
Per share data (1) : 2014 2013
Net asset value at beginning of period $ 15.55 $ 15.21
Dividends and distributions declared (0.32 ) (0.32 )
Net investment income 0.31 0.31
Net realized gain (loss) on investments 0.04 (0.12 )
Net change in unrealized appreciation (depreciation) on investments (0.03 ) 0.15
Net asset value at end of period $ 15.55 $ 15.23
Per share market value at end of period $ 17.93 $ 19.11
Total return based on market value (2) 14.42 % 12.18 %
Total return based on average net asset value/members' equity * 8.18 % 8.92 %
Shares outstanding at end of period 47,171,518 43,325,575
Ratios/Supplemental Data:
Ratio of expenses (without incentive fees) to average net assets/members' equity * 6.42 % 5.58 %
Ratio of incentive fees to average net assets/members' equity * 0.58 % 1.82 %
Ratio of total expenses to average net assets/members' equity * 7.00 % 7.40 %
Ratio of net investment income to average net assets/members' equity 7.85 % 7.97 %
Net assets at end of period $ 733,718 $ 659,981
Average debt outstanding $ 692,809 $ 494,588
Average debt outstanding per share $ 14.69 $ 11.42
Asset coverage ratio (3) 244.38 % 266.88 %
Portfolio turnover * 23.40 % 36.52 %

* Annualized for a period less than one year.
(1) Based on actual number of shares outstanding at the end of the corresponding period or the weighted average shares outstanding for the period, unless otherwise noted, as appropriate.
(2) Total return based on market value assumes dividends are reinvested.
(3) In accordance with the 1940 Act, with certain limited exceptions, the Company is only allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing. On September 13, 2011, the Company received exemptive relief from the SEC allowing it to modify the asset coverage requirement to exclude the SBA debentures from this calculation. As such, the Company’s ratio of total consolidated assets to outstanding indebtedness may be less than 200%. This provides the Company with increased investment flexibility but also increases its risks related to leverage.

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Golub Capital BDC, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(In thousands, except shares and per share data)

Note 10. Earnings Per Share

The following information sets forth the computation of the net increase in net assets per share resulting from operations for the three months ended December 31, 2014 and 2013:

Three months ended December 31,
2014 2013
Earnings available to stockholders $ 15,172 $ 14,837
Basic and diluted weighted average shares outstanding 47,121,194 43,285,250
Basic and diluted earnings per common share $ 0.32 $ 0.34

Note 11. Dividends and Distributions

The Company’s dividends and distributions are recorded on the record date. The following table summarizes the Company’s dividend declarations and distributions during the three months ended December 31, 2014 and 2013:

Amount Cash DRIP Shares DRIP Shares
Date Declared Record Date Payment Date Per Share Distribution Issued Value
Three months ended December 31, 2014
11/17/2014 12/18/2014 12/29/2014 $ 0.32 $ 14,193 52,020 $ 885
Three months ended December 31, 2013
11/26/2013 12/17/2013 12/27/2013 $ 0.32 $ 13,092 42,643 $ 758

Note 12. Subsequent Events

On February 3, 2015, the Company’s Board declared a quarterly distribution of $0.32 per share payable on March 27, 2015 to holders of record as of March 20, 2015.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with our interim and unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us,” “our” and “Golub Capital BDC” refer to Golub Capital BDC, Inc. and its consolidated subsidiaries.

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including statements as to:

· our future operating results;
· our business prospects and the prospects of our portfolio companies;
· the effect of investments that we expect to make and the competition for those investments;
· our contractual arrangements and relationships with third parties;
· actual and potential conflicts of interest, GC Advisors LLC, or GC Advisors, and other affiliates of Golub Capital Incorporated and Golub Capital LLC, collectively, Golub Capital;
· the dependence of our future success on the general economy and its effect on the industries in which we invest;
· the ability of our portfolio companies to achieve their objectives;
· the use of borrowed money to finance a portion of our investments;
· the adequacy of our financing sources and working capital;
· the timing of cash flows, if any, from the operations of our portfolio companies;
· general economic trends and other external factors;
· the ability of GC Advisors to locate suitable investments for us and to monitor and administer our investments;
· the ability of GC Advisors or its affiliates to attract and retain highly talented professionals;
· our ability to qualify and maintain our qualification as a Regulated Investment Company, or RIC, and as a business development company;
· general price and volume fluctuations in the stock markets;
· the impact on our business of Dodd-Frank and the rules and regulations issued thereunder; and
· the effect of changes to tax legislation and our tax position.

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” ”predict,” “potential,” “plan” or similar words. The forward looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth elsewhere in this quarterly report on Form 10-Q and as “Risk Factors” in our annual report on Form 10-K for the year ended September 30, 2014.

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We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements and future results could differ materially from historical performance. Although we undertake no obligation to revise or update any forward-looking statements except as required by law, 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 have filed or in the future may file with the Securities and Exchange Commission, or the SEC, including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K. This quarterly report on Form 10-Q contains statistics and other data that have been obtained from or compiled from information made available by third-party service providers. We have not independently verified such statistics or data.

Overview

We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated as a RIC under Subchapter M of the Internal Revenue Code of 1986 as amended, or the Code. As a business development company and a RIC, we are also subject to certain constraints, including limitations imposed by the 1940 Act and the Code. We were formed in November 2009 to continue and expand the business of our predecessor, Golub Capital Master Funding LLC, which commenced operations in July 2007, in making investments in senior secured, one stop (a loan that combines characteristics of traditional first lien senior secured loans and second lien or subordinated loans), second lien and subordinated (a loan that ranks senior only to a borrower’s equity securities and ranks junior to all of such borrower’s other indebtedness in priority of payment) loans and warrants and minority equity securities of middle market companies that are, in most cases, sponsored by private equity firms.

Our shares are currently listed on The NASDAQ Global Select Market under the symbol “GBDC”.

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through debt and minority equity investments. We intend to achieve our investment objective by (1) accessing the established loan origination channels developed by Golub Capital, a leading lender to middle market companies with over $10.0 billion in capital under management as of December 31, 2014, (2) selecting investments within our core middle market company focus, (3) partnering with experienced private equity firms, or sponsors, in many cases with whom we have invested alongside in the past, (4) implementing the disciplined underwriting standards of Golub Capital and (5) drawing upon the aggregate experience and resources of Golub Capital.

Our investment activities are managed by GC Advisors and supervised by our board of directors of which a majority of the members are independent of us.

Under an investment advisory agreement, or the Investment Advisory Agreement, which was most recently reapproved by our board of directors in May 2014, we have agreed to pay GC Advisors an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. Under an administration agreement, or the Administration Agreement, we are provided with certain administrative services by an administrator, or the Administrator, which is currently Golub Capital LLC. Under the Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion (subject to the review and approval of our independent directors) of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement.

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We seek to create a diverse portfolio that includes senior secured, one stop, second lien and subordinated loans and warrants and minority equity securities by investing approximately $5.0 to $30.0 million of capital, on average, in the securities of middle market companies. We may also selectively invest more than $30.0 million in some of our portfolio companies and generally expect that the size of our individual investments will vary proportionately with the size of our capital base.

We generally invest in securities that have been rated below investment grade by independent rating agencies or that would be rated below investment grade if they were rated. These securities, which may be referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. In addition, many of our debt investments have floating interest rates that reset on a periodic basis and typically do not fully pay down principal prior to maturity, which may increase our risk of losing part or all of our investment.

As of December 31, 2014 and September 30, 2014, our portfolio at fair value was comprised of the following:

As of December 31, 2014 As of September 30, 2014
Investments Percentage of Investments Percentage of
Investment at Fair Value Total at Fair Value Total
Type (In thousands) Investments (In thousands) Investments
Senior secured $ 245,689 17.5 % $ 262,859 19.5 %
One stop 1,005,954 71.8 940,729 69.8
Second lien 59,457 4.2 59,964 4.4
Subordinated debt 3,724 0.3 3,710 0.3
Subordinated notes in SLF (1) 28,871 2.1 25,589 1.9
LLC equity interests in SLF (1) 10,834 0.8 9,242 0.7
Equity 46,197 3.3 45,519 3.4
Total $ 1,400,726 100.0 % $ 1,347,612 100.0 %

(1) SLF's proceeds from the subordinated notes and LLC equity interests invested in SLF were utilized by SLF to invest in senior secured loans.

One stop loans include loans to technology companies undergoing strong growth due to new services, increased adoption and/or entry into new markets. We refer to loans to these companies as late stage lending loans. Other targeted characteristics of late stage lending businesses include strong customer revenue retention rates, a diversified customer base and backing from growth equity or venture capital firms. In some cases, the borrower’s high revenue growth is supported by a high level of discretionary spending. As part of the underwriting of such loans and consistent with industry practice, we may adjust our characterization of the earnings of such borrowers for a reduction or elimination of such discretionary expenses, if appropriate. As of December 31, 2014, one stop loans included $162.6 million of late stage lending loans at fair value. During the three months ended December 31, 2014,  we recharacterized $47.1 million of late stage lending loans at fair value from senior secured loans to one stop loans.

As of December 31, 2014 and September 30, 2014, we had debt and equity investments in 147 and 145 portfolio companies, respectively, and investments in subordinated notes and Limited Liability Company, or LLC, equity interests in SLF. For the three months ended December 31, 2014 and 2013, our income producing debt investments, which represented nearly 100% of our total debt investments, had a weighted average annualized income yield (which is calculated as income from interest and fees excluding amortization of capitalized fees and discounts divided by the average fair value of earning investments) of 7.8% and 8.6%, respectively, and a weighted average annualized investment income yield (which is calculated as income from interest, fees and amortization of capitalized fees and discounts divided by average fair value of earning investments) of 8.3% and 9.3%, respectively.

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Revenues: We generate revenue in the form of interest and fee income on debt investments and capital gains and distributions, if any, on portfolio company investments that we originate or acquire. Our debt investments, whether in the form of senior secured, one stop, second lien or subordinated loans, typically have a term of three to seven years and bear interest at a fixed or floating rate. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. In some cases, our investments provide for deferred interest payments or payment-in-kind, or PIK, interest. The principal amount of loans and any accrued but unpaid interest generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums on loans as fee income. Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded as dividend income on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Distributions received from LLC, and limited partnership, or LP, investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

We recognize realized gains or losses on investments based on the difference between the net proceeds from the disposition and the cost basis of the investment or derivative instrument, without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments and derivative instruments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in the consolidated statements of operations.

Partial loan sales: We follow the guidance in Accounting Standards Codification, or ASC, Topic 860 – Transfers and Servicing , or ASC Topic 860, when accounting for loan participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a “participating interest”, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales, which do not meet the definition of a participating interest, remain on our consolidated statements of assets and liabilities and the proceeds are recorded as a secured borrowing until the definition is met.

Expenses: Our primary operating expenses include the payment of fees to GC Advisors under the Investment Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement and other operating costs described below. We bear all out-of-pocket costs and expenses of our operations and transactions, including:

· organizational expenses;
· calculating our net asset value (including the cost and expenses of any independent valuation firm);
· fees and expenses incurred by GC Advisors payable to third parties, including agents, consultants or other advisors, in monitoring financial and legal affairs for us and in monitoring our investments and performing due diligence on our prospective portfolio companies or otherwise relating to, or associated with, evaluating and making investments, which fees and expenses may include, among other items, due diligence reports, appraisal reports, any studies that may be commissioned by GC Advisors and travel and lodging expenses;
· interest payable on debt, if any, incurred to finance our investments and expenses related to unsuccessful portfolio acquisition efforts;
· offerings of our common stock and other securities;
· investment advisory and management fees, including any incentive fees;
· administration fees and expenses, if any, payable under the Administration Agreement (including payments based upon our allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our chief compliance officer, chief financial officer and their respective staffs);

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· fees payable to third parties, including agents, consultants or other advisors, relating to, or associated with, evaluating and making investments in portfolio companies, including costs associated with meeting financial sponsors;
· transfer agent, dividend agent and custodial fees and expenses;
· U.S. federal and state registration and franchise fees;
· all costs of registration and listing our shares on any securities exchange;
· U.S. federal, state and local taxes;
· independent directors’ fees and expenses;
· costs of preparing and filing reports or other documents required by the SEC or other regulators;
· costs of any reports, proxy statements or other notices to stockholders, including printing costs;
· costs associated with individual or group stockholders;
· costs associated with compliance under the Sarbanes-Oxley Act of 2002, as amended;
· our allocable portion of any fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;
· direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs;
· proxy voting expenses; and
· all other expenses incurred by us or the Administrator in connection with administering our business.

We expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.

GC Advisors, as collateral manager for Golub Capital BDC 2010-1 LLC, or the 2010 Issuer, a wholly-owned subsidiary of ours, under a collateral management agreement, or the 2010 Collateral Management Agreement, is entitled to receive an annual fee in an amount equal to 0.35% of the principal balance of the portfolio loans held by the 2010 Issuer at the beginning of the collection period relating to each payment date, which is payable in arrears on each payment date. This fee, which is less than the management fee payable under the Investment Advisory Agreement, is paid directly by the 2010 Issuer to GC Advisors and offset against such management fee. Accordingly, the 1.375% management fee paid by us to GC Advisors under the Investment Advisory Agreement on all of our assets, including those indirectly held through the 2010 Issuer, is reduced, on a dollar-for-dollar basis, by an amount equal to such 0.35% fee paid to GC Advisors by the 2010 Issuer. Under the 2010 Collateral Management Agreement, the term ‘‘collection period’’ refers to a quarterly period running from the day after the end of the prior collection period to the fifth business day of the calendar month in which a payment date occurs. This fee may be waived by the collateral manager. The 2010 Collateral Management Agreement does not include any incentive fee payable to GC Advisors. In addition, the 2010 Issuer paid Wells Fargo Securities, LLC a structuring and placement fee for its services in connection with the initial structuring and subsequent amendment of a $350.0 million term debt securitization, or the 2010 Debt Securitization. The 2010 Issuer also agreed to pay ongoing administrative expenses to the trustee, collateral manager, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2010 Debt Securitization.

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GC Advisors, as collateral manager for Golub Capital BDC CLO 2014 LLC, or the 2014 Issuer, a wholly-owned subsidiary of ours, under a collateral management agreement, or the 2014 Collateral Management Agreement, is entitled to receive an annual fee in an amount equal to 0.25% of the principal balance of the portfolio loans held by the 2014 Issuer at the beginning of the collection period relating to each payment date, which is payable in arrears on each payment date. This fee, which is less than the management fee payable under the Investment Advisory Agreement, is paid directly by the 2014 Issuer to GC Advisors and offset against such management fee. Accordingly, the 1.375% management fee paid by us to GC Advisors under the Investment Advisory Agreement on all of our assets, including those indirectly held through the 2014 Issuer, is reduced, on a dollar-for-dollar basis, by an amount equal to such 0.25% fee paid to GC Advisors by the 2014 Issuer. Under the 2014 Collateral Management Agreement, the term ‘‘collection period’’ refers to a quarterly period running from the day after the end of the prior collection period to the tenth business day prior to the payment date. This fee may be waived by the collateral manager. The 2014 Collateral Management Agreement does not include any incentive fee payable to GC Advisors. In addition, the 2014 Issuer paid Wells Fargo Securities, LLC a structuring and placement fee for its services in connection with the initial structuring of a $403.0 million term debt securitization, or the 2014 Debt Securitization. The 2014 Issuer also agreed to pay ongoing administrative expenses to the trustee, collateral manager, independent accountants, legal counsel, rating agencies and independent managers in connection with developing and maintaining reports, and providing required services in connection with the administration of the 2014 Debt Securitization.

The administrative expenses of each of the 2010 Issuer and the 2014 Issuer are paid on each payment date in two parts: (1) a component that is paid in a priority to other amounts distributed by the 2010 Issuer or the 2014 Issuer, as applicable, subject to a cap equal to the sum of 0.04% per annum of the adjusted principal balance of the portfolio loans and other assets held by the 2010 Issuer or the 2014 Issuer, as applicable, on the last day of the collection period relating to such payment date, plus $150,000 per annum, and (2) a component that is paid in a subordinated position relative to other amounts distributed by the 2010 Issuer or the 2014 Issuer, as applicable, equal to any amounts that exceed the aforementioned administrative expense cap. We believe that these administrative expenses approximate the amount of ongoing fees and expenses that we would be required to pay in connection with a traditional secured credit facility. Our common stockholders indirectly bear all of these expenses.

Recent Developments

On February 3, 2015, our board of directors declared a quarterly distribution of $0.32 per share of our common stock payable on March 27, 2015 to holders of record as of March 20, 2015.

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Consolidated Results of Operations

Consolidated operating results for the three months ended December 31, 2014 and 2013 are as follows:

For the three months ended December 31, Variances
2014 2013 2014 vs. 2013
(In thousands)
Interest income $ 25,099 $ 22,474 $ 2,625
Income from accretion of discounts and origination fees 1,670 1,908 (238 )
Interest income from subordinated notes in SLF 550 181 369
Dividend income 18 16 2
Fee income 208 1,000 (792 )
Total investment income 27,545 25,579 1,966
Total expenses 12,988 12,319 669
Net investment income 14,557 13,260 1,297
Net realized gains (losses) on investments 1,726 (4,994 ) 6,720
Net change in unrealized appreciation (depreciation) on investments and secured borrowings (1,111 ) 6,571 (7,682 )
Net income $ 15,172 $ 14,837 $ 335
Average earning portfolio company investments, at fair value $ 1,372,572 $ 1,089,469 $ 283,103
Average debt outstanding (1) $ 692,809 $ 494,588 $ 198,221

(1) For the three months ended December 31, 2014, we have excluded $0.4 million of secured borrowings, at fair value, which were the result of participations and partial loan sales that did not meet the definition of a "participating interest", as defined in the guidance to ASC Topic 860.

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. As a result, quarterly comparisons of net income may not be meaningful.

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Investment Income

Investment income increased from the three months ended December 31, 2013 to the three months ended December 31, 2014 by $2.0 million primarily as a result of an increase in the average earning investment balance, which is the annual average balance of accruing loans in our investment portfolio, of $283.1 million. These increases were partially offset by a decline in the weighted average annualized investment income yield of 1.0% and a decline in fee income of $0.8 million.

The decrease in the weighted average annualized investment income yield from the three months ended December 31, 2013 to the three months ended December 31, 2014 was driven primarily by interest rate compression on new investments and the change in asset mix of our portfolio. Higher yielding second lien and subordinated debt investments decreased from 9.9% of the portfolio as of December 31, 2013 to 4.5% of the portfolio as December 31, 2014 with an offsetting increase in lower yielding senior secured and one stop investments.

The annualized income yield by security type for the three months ended December 31, 2014 and 2013 was as follows:

For the three months ended December 31,
2014 2013
Senior secured 6.3 % 7.2 %
One stop 8.0 % 8.7 %
Second lien 9.5 % 11.6 %
Subordinated debt 8.4 % 13.9 %
Subordinated notes in SLF (1) 8.3 % 4.3 %

(1) SLF's proceeds from the subordinated notes invested in SLF were utilized by SLF to invest in senior secured loans.

Annualized income yields on senior secured and one stop investments have declined, as shown in the table above, for the three months ended December 31, 2014 compared to the three months ended December 31, 2013 primarily due to a general trend of interest rate compression on new investments. The decrease in yield on second lien debt is primarily attributable to repayments of high yielding second lien investments since December 31, 2013 and the inclusion of $0.4 million of prepayment fees during the three months ended December 31, 2013. The decrease in yield on subordinated debt is primarily due to repayments in subordinated debt investments and the lower current yield on the two remaining subordinated debt investments as of December 31, 2014 as shown in the Consolidated Schedule of Investments. The income yield on subordinated notes of SLF increased for the three months ended December 31, 2014 compared to the three months ended December 31, 2013 as the spread on the subordinated notes was increased to the London Interbank Offered Rate, or LIBOR, plus 8.0% from LIBOR plus 4.0% subsequent to the closing of SLF’s senior secured revolving credit facility, or, as amended, the SLF Credit Facility, with Wells Fargo Bank, N.A, in January 2014.

For additional details on investment yields and asset mix, refer to the “ Liquidity and Capital Resources - Portfolio Composition, Investment Activity and Yield” section below.

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Expenses

The following table summarizes our expenses:

For the three months ended December 31, Variances
2014 2013 2014 vs. 2013
(In thousands)
Interest and other debt financing expenses $ 5,694 $ 4,092 $ 1,602
Base management fee 4,821 3,824 997
Incentive fee 1,071 3,032 (1,961 )
Professional fees 629 658 (29 )
Administrative service fee 607 582 25
General and administrative expenses 166 131 35
Total expenses $ 12,988 $ 12,319 $ 669

Interest expense and debt facility fees increased by $1.6 million from the three months ended December 31, 2013 to the three months ended December 31, 2014 primarily due to an increase in weighted average of outstanding borrowings from $494.6 million for the three months ended December 31, 2013 to $692.8 million for the three months ended December 31, 2014. The increase in our debt was driven by the issuance of $246.0 million of notes pursuant to the 2014 Debt Securitization as well as the increase in our use of debt under our Small Business Administration, or SBA, debentures through small business investment companies, or SBICs, which had outstanding balances of $208.8 million as of December 31, 2014 and $196.3 million as of December 31, 2013. These increases were partially offset by a decrease in our use of debt under the senior secured revolving credit facility, or the Credit Facility, entered into by Golub Capital BDC Funding LLC, or Funding, a wholly-owned subsidiary of ours, with Wells Fargo Securities, LLC, as administrative agent, and Wells Fargo Bank, N.A., as lender, to $44.9 million as of December 31, 2014 from an outstanding balance of $165.9 million as of December 31, 2013.

Amortization of debt issuance costs increased by $0.6 million from the three months ended December 31, 2013 to the three months ended December 31, 2014 primarily due to additional capitalized debt issuance costs associated with the 2014 Debt Securitization The increase in our effective annualized average interest rate on our outstanding debt from 3.1% for the three months ended December 31, 2013 to 3.3% for the three months ended December 31, 2014 was primarily the result of the increase in amortization of debt issuance costs and the issuance of new SBA debentures at higher interest rates. The interest rates on the SBA debentures are fixed at the time of issuance at a market driven spread over U.S. Treasury Notes with ten-year maturities.

The base management fee increased as a result of a sequential increase in average assets from December 31, 2013 to December 31, 2014. The administrative service fee remained relatively stable from the three months ended December 31, 2013 to the three months ended December 31, 2014 due to efficiencies gained by the Administrator in servicing a growing portfolio.

Incentive fee expense decreased by $2.0 million from the three months ended December 31, 2013 to the three months ended December 31, 2014 as the interest rate compression on new investments and the change in asset mix of our portfolio caused a decline in our pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets. Due to this decline, we were not fully through the catch-up provision of the incentive fee calculation. For the three months ended December 31, 2014, incentive fee expense as a percentage of Pre-Incentive Fee Net Investment Income was 6.9% compared to 18.6% for the three months ended December 31, 2013.

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The Administrator pays for certain expenses incurred by us. These expenses are subsequently reimbursed in cash. Total expenses reimbursed by us to the Administrator for the three months ended December 31, 2014 and 2013 were $0.2 million and $0.3 million, respectively.

As of December 31, 2014 and September 30, 2014, included in accounts payable and accrued expenses were $0.3 million and $0.2 million, respectively, for accrued expenses paid on behalf of us by the Administrator.

Net Realized and Unrealized Gains and Losses

The following table summarizes our net realized and unrealized gains (losses) for the periods presented:

For the three months ended December 31, Variances
2014 2013 2014 vs. 2013
(In thousands)
Net realized gain (loss) on investments $ 1,727 $ (4,994 ) $ 6,721
Net realized gain (loss) 1,727 (4,994 ) 6,721
Unrealized appreciation on investments 6,896 13,772 (6,876 )
Unrealized (depreciation) on investments (7,981 ) (7,366 ) (615 )
Unrealized appreciation on investments in SLF (1) - 651 (651 )
Unrealized (depreciation) on investments in SLF (1) (26 ) (410 ) 384
Unrealized (appreciation) on secured borrowings - 6 (6 )
Unrealized depreciation on secured borrowings - (82 ) 82
Net change in unrealized appreciation (depreciation) on investments, investments in SLF and secured borrowings $ (1,111 ) $ 6,571 $ (7,682 )

(1) Unrealized appreciation and (depreciation) on investments in SLF include our investments in the subordinated notes and LLC equity interests in SLF.

For the three months ended December 31, 2014, we had a net realized gain of $1.7 million primarily due to the sale of two equity investments.

During the three months ended December 31, 2014, we had $6.9 million in unrealized appreciation on 73 portfolio company investments, which was offset by $8.0 million in unrealized depreciation on 120 portfolio company investments. Unrealized appreciation during the three months ended December 31, 2014 resulted from an increase in fair value primarily due to the rise in market prices associated with portfolio company investments. Unrealized depreciation primarily resulted from the amortization of discounts, negative credit related adjustments that caused a reduction in fair value and the reversal of the net unrealized appreciation on the equity investments sold during the three months ended December 31, 2014. Additionally, we had less than $1,000 in net unrealized depreciation on secured borrowing proceeds for the three months ended December 31, 2014. The unrealized depreciation resulted from the amortization of discounts associated with the investments funded by the secured borrowing proceeds.

For the three months ended December 31, 2014, we had $26,000 in unrealized depreciation on our investment in SLF LLC equity interests. The unrealized depreciation on the SLF LLC equity interests was primarily driven by negative market yield adjustments associated with broadly syndicated loans in SLF’s investment portfolio. For the three months ended December 31, 2014, we had no unrealized appreciation or depreciation on our investment in SLF subordinated notes.

For the three months ended December 31, 2013, we had net realized losses on investments totaling $5.0 million primarily due to the sale of our investment in one underperforming portfolio company and the write off of two non-accrual portfolio company investments.

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During the three months ended December 31, 2013, we had $13.8 million in unrealized appreciation on 64 portfolio company investments, which was partially offset by $7.4 million in unrealized depreciation on 115 portfolio company investments. Unrealized appreciation during the three months ended December 31, 2013 resulted from an increase in fair value primarily due to the rise in market prices and a reversal of prior period unrealized depreciation associated with the portfolio company investment sales and write-offs. Unrealized depreciation primarily resulted from the amortization of discounts and negative credit related adjustments that caused a reduction in fair value. Additionally, we had $0.1 million in net unrealized depreciation on secured borrowing proceeds related to two portfolio company investments for the three months ended December 31, 2013. The unrealized depreciation resulted from the amortization of discounts and the rise in market prices associated with the investments funded by the secured borrowing proceeds.

For the three months ended December 31, 2013, we had $0.6 million in unrealized appreciation on our investment in SLF LLC equity interests, which was partially offset by $0.4 million in unrealized depreciation on our investment in SLF subordinated notes. The unrealized depreciation was the result of the lower yielding contractual rate compared to comparable market pricing of subordinated notes. Unrealized appreciation on the SLF LLC equity interests was driven by positive credit-related adjustments associated with SLF’s investment portfolio as well the offsetting impact of the pricing on the subordinated notes.

Liquidity and Capital Resources

For the three months ended December 31, 2014, we experienced a net increase in cash and cash equivalents of $0.6 million. During the period, we used $40.8 million in operating activities primarily as a result of fundings of portfolio investments of $131.5 million. This was partially offset by proceeds from principal payments and sales of portfolio investments of $80.9 million and net investment income of $14.6 million. During the same period, cash provided by investment activities of $39.1 million was driven by the decrease in restricted cash and cash equivalents. Lastly, cash provided by financing activities was $2.3 million, primarily driven by borrowings on debt of $33.6 million that were partially offset by repayments of debt of $16.1 million and distributions paid of $14.2 million.

For the three months ended December 31, 2013, we experienced a net increase in cash and cash equivalents of $15.6 million. During the period we used $138.9 million in operating activities, primarily as a result of fundings of portfolio investments of $256.2 million. This was partially offset by proceeds from principal payments and sales of portfolio investments of $103.6 million and net investment income of $13.3 million. During the same period, cash used in investment activities of $1.4 million was driven by the increase in restricted cash and cash equivalents. Lastly, cash provided by financing activities was $155.9 million, primarily driven by borrowings on debt of $215.4 million that were partially offset by repayments of debt of $50.2 million and distributions paid of $13.1 million.

As of December 31, 2014 and September 30, 2014, we had cash and cash equivalents of $5.7 million and $5.1 million, respectively. In addition, we had restricted cash and cash equivalents of $35.7 million and $74.8 million as of December 31, 2014 and September 30, 2014, respectively. Cash and cash equivalents are available to fund new investments, pay operating expenses and pay distributions. As of December 31, 2014, $17.6 million of our restricted cash and cash equivalents could be used to fund new investments that meet the investment guidelines established in the 2010 Debt Securitization and the 2014 Debt Securitization, or collectively, the Debt Securitizations, which are described in further detail in Note 7 to our consolidated financial statements, and for the payment of interest expense on the notes issued in the Debt Securitizations. $3.9 million of such restricted cash and cash equivalents can be used to fund investments that meet the guidelines under the Credit Facility as well as for the payment of interest expense and revolving debt of the Credit Facility. $0.2 million of such restricted cash and cash equivalents can be used to fund investments that meet the guidelines under the $15.0 million revolving line of credit, or the Revolver, entered into by Golub Capital BDC Revolver Funding, LLC, or Revolver Funding, our wholly-owned subsidiary, with PrivateBank and Trust Company on November 22, 2013, as well as for the payment of interest expense and revolving debt of the Revolver. The remaining $14.0 million of restricted cash and cash equivalents can be used to fund new investments that meet the regulatory and investment guidelines established by the SBA for our SBICs, which are described in further detail in Note 7 to our consolidated financial statements, and for interest expense and fees on our outstanding SBA debentures.

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As of December 31, 2014 and September 30, 2014, we had outstanding commitments to fund investments totaling $131.8 million and $124.5 million, respectively. These amounts may or may not be funded to the borrowing party now or in the future. The unfunded commitments relate to loans with various maturity dates, but the entire amount was eligible for funding to the borrowers as of December 31, 2014 and September 30, 2014, respectively, subject to the terms of each loan’s respective credit agreement.

As of December 31, 2014, the Credit Facility, as amended, allows Funding to borrow up to $150.0 million at any one time outstanding, subject to leverage and borrowing base restrictions. As of December 31, 2014 and September 30, 2014, subject to leverage and borrowing base restrictions, we had approximately $105.1 million and $122.6 million, respectively, of remaining commitments and $59.3 million and $70.0 million, respectively, of availability on the Credit Facility. As of December 31, 2014 and September 30, 2014, we had $44.9 million and $27.4 million outstanding under the Credit Facility, respectively. As of December 31, 2014 and September 30, 2014, the Revolver allows Revolver Funding to borrow up to $15.0 million at any one time outstanding, subject to leverage and borrowing base restrictions. As of December 31, 2014 and September 30, 2014, subject to leverage and borrowing base restrictions, we had $15.0 million and $15.0 million, respectively, of remaining commitments and $1.7 million and $1.2 million, respectively, of availability on the Revolver. As of both December 31, 2014 and September 30, 2014, we had no borrowings outstanding under the Revolver.

On July 16, 2010, we completed the 2010 Debt Securitization, as amended on February 15, 2013, in which the 2010 Issuer issued an aggregate of $350.0 million of notes, the 2010 Notes, including $203.0 million of Class A 2010 Notes, which bear interest at a rate of three-month LIBOR plus 1.74%, $12.0 million of Class B 2010 Notes, which bear interest at a rate of three-month LIBOR plus 2.40%, and $135.0 million face amount of Subordinated 2010 Notes that do not bear interest. On November 15, 2013, we sold $12.0 million of Class B 2010 Notes and, on November 20, 2013, the transaction closed and proceeds of $12.0 million were received. The Class A 2010 Notes and Class B 2010 Notes of the 2010 Debt Securitization are included in the December 31, 2014 and September 30, 2014 consolidated statements of financial condition as our debt.

On June 5, 2014, we completed the 2014 Debt Securitization in the which the 2014 Issuer issued an aggregate of $402.6 million of securities including $191.0 million of Class A-1 2014 Notes, which bear interest at a rate of three-month LIBOR plus 1.75%, $20.0 million of Class A-2 2014 Notes, which bear interest at a rate of three-month LIBOR plus 1.45% through December 4, 2015 and three-month LIBOR plus 1.95% thereafter, $35.0 million of Class B 2014 Notes, which bear interest at a rate of three-month LIBOR plus 2.50%, $37.5 million of Class C 2014 Notes, which bear interest at a rate of three-month LIBOR plus 3.50%, and $119.1 million of LLC equity that does not bear interest. We retained all of the Class C 2014 Notes and LLC equity interests totaling $37.5 million and $119.1 million, respectively. The Class A-1, Class A-2 and Class B 2014 Notes are included in the December 31, 2014 and September 30, 2014 consolidated statements of financial condition as our debt and the Class C 2014 Notes and LLC equity interests were eliminated in consolidation. As of December 31, 2014 and September 30, 2014, we had outstanding debt under the 2014 Debt Securitization of $246.0 million. As of December 31, 2013, the 2014 Debt Securitization had not been completed.

Under present SBIC regulations, the maximum amount of SBA-guaranteed debentures that may be issued by multiple licensees under common management is $225.0 million and the maximum amount that a single SBIC licensee may issue is $150.0 million. As of December 31, 2014, GC SBIC IV, L.P., or SBIC IV, and GC SBIC V, L.P., or SBIC V, each a wholly-owned subsidiary of us, had $150.0 million and $58.8 million, respectively, of outstanding SBA-guaranteed debentures leaving incremental borrowing capacity of $16.2 million for SBIC V under present SBIC regulations. As of September 30, 2014, SBIC IV and SBIC V had $150.0 million and $58.8 million, respectively, of outstanding SBA-guaranteed debentures.

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SBIC IV and SBIC V may each borrow up to two times the amount of its regulatory capital, subject to customary regulatory requirements. As of December 31, 2014, we had committed and funded $75.0 million to SBIC IV, and had SBA-guaranteed debentures of $150.0 million outstanding that mature between March 2021 and September 2024. As of December 31, 2014, we had committed and funded $37.5 million to SBIC V and had SBA-guaranteed debentures of $58.8 million outstanding that mature between September 2023 and September 2024.

In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing. On September 13, 2011, we received exemptive relief from the SEC allowing us to modify the asset coverage requirement to exclude the SBA debentures from this calculation. As such, our ratio of total consolidated assets to outstanding indebtedness may be less than 200%. This provides us with increased investment flexibility but also increases our risks related to leverage. As of December 31, 2014, our asset coverage for borrowed amounts was 244.4% (excluding the SBA debentures).

Although we expect to fund the growth of our investment portfolio through the net proceeds from future securities offerings and through our dividend reinvestment plan as well as future borrowings, to the extent permitted by the 1940 Act, we cannot assure you that our efforts to raise capital will be successful. In addition to capital not being available, it also may not be available on favorable terms.

We believe that our existing cash and cash equivalents and available borrowings as of December 31, 2014 will be sufficient to fund our anticipated requirements through at least December 31, 2015.

Portfolio Composition, Investment Activity and Yield

As of December 31, 2014 and September 30, 2014, we had investments in 147 and 145 portfolio companies, respectively, with a total fair value of $1,361.0 million and $1,312.8 million, respectively, and had investments in subordinated notes and LLC equity interests in SLF with a total fair value of $39.7 million and $34.8 million, respectively. The following table shows the asset mix of our new origination commitments for the three months ended December 31, 2014 and 2013:

For the three months ended December 31,
2014 2013
(In thousands) Percentage of
Commitments 		(In thousands) Percentage of
Commitments
Senior secured $ 77,297 52.8 % $ 35,404 12.3 %
One stop 62,747 42.9 203,245 70.4
Second lien - - 20,534 7.1
Subordinated notes in SLF (1) 3,281 2.2 24,216 8.4
LLC equity interests in SLF (1) 1,619 1.1 3,459 1.2
Equity securities 1,516 1.0 1,905 0.6
Total new investment commitments $ 146,460 100.0 % $ 288,763 100.0 %

(1) SLF's proceeds from the subordinated notes and LLC interests invested in SLF were utilized by SLF to invest in senior secured loans. As of December 31, 2014, SLF funded senior secured loans to 38 different borrowers.

The asset mix of new origination commitments may fluctuate quarter-over-quarter due to a variety of factors. During the three months ended December 31, 2014, we experienced an increase in the amount of senior secured originations as we closed a few larger senior secured investments. However, consistent with our origination mix in fiscal year ended September 30, 2014, we continue to expect the majority of our originations will be in one stop investments for the fiscal year ended September 30, 2015. For the three months ended December 31, 2014 and 2013, we had approximately $60.2 million and $99.1 million, respectively, in proceeds from principal payments and return of capital distributions of portfolio companies. For the three months ended December 31, 2014 and 2013, we had sales of securities in seven and three portfolio companies, respectively, aggregating approximately $20.7 million and $4.5 million, respectively, in net proceeds.

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The following table shows the par, amortized cost and fair value of our portfolio of investments by asset class:

As of December 31, 2014 (1) As of September 30, 2014 (1)
Amortized Fair Amortized Fair
Par Cost Value Par Cost Value
(In thousands)
Senior secured:
Performing $ 248,797 $ 245,675 $ 245,684 $ 265,103 $ 262,021 $ 262,854
Non-accrual (2) 3,025 3,013 5 3,033 3,021 5
One stop:
Performing 1,015,031 1,001,481 1,003,726 952,359 939,765 940,729
Non-accrual (2) 4,457 3,974 2,228 - - -
Second lien:
Performing 59,903 59,130 59,457 59,902 59,086 59,964
Non-accrual (2) - - - - - -
Subordinated debt:
Performing 3,584 3,565 3,724 3,584 3,564 3,710
Non-accrual (2) - - - - - -
Subordinated notes in SLF: (3)
Performing 28,871 28,871 28,871 25,589 25,589 25,589
Non-accrual (2) - - - - - -
LLC equity interests in SLF: (3) N/A 10,937 10,834 N/A 9,318 9,242
Equity: N/A 35,159 46,197 N/A 35,216 45,519
Total $ 1,363,668 $ 1,391,805 $ 1,400,726 $ 1,309,570 $ 1,337,580 $ 1,347,612

(1) Nine and 11 of our loans included a feature permitting a portion of the interest due on such loan to be PIK interest as of December 31, 2014 and September 30, 2014, respectively.
(2) We refer to a loan as non-accrual when we cease recognizing interest income on the loan because we have stopped pursuing repayment of the loan or, in certain circumstances, it is past due 90 days or more on principal and interest or our management has reasonable doubt that principal or interest will not be collected. See "—Critical Accounting Policies—Revenue Recognition."
(3) SLF's proceeds from the subordinated notes and LLC equity interests invested in SLF were utilized by SLF to invest in senior secured loans.

The following table shows the weighted average rate, spread over LIBOR of floating rate, fixed rate and fees of investments originated and the weighted average rate of sales and payoffs of portfolio companies during the three months ended December 31, 2014 and 2013:

For the three months ended December 31,
2014 2013
Weighted average rate of new investment fundings 6.8 % 7.2 %
Weighted average spread over LIBOR of new floating rate investment fundings 5.8 % 6.1 %
Weighted average rate of new fixed rate investment fundings N/A N/A
Weighted average fees of new investment fundings 1.8 % 1.2 %
Weighted average rate of sales and payoffs of portfolio companies 6.5 % 9.6 %

For the three months ended December 31, 2014 and 2013, the weighted average annualized income yield on the fair value of income producing loans in our portfolio was 7.8% and 8.3%, respectively. As of December 31, 2014, 97.4% and 97.1% of our debt portfolio at fair value and at cost, respectively, had interest rate floors that limit the minimum applicable interest rates on such loans. As of September 30, 2014, 97.6% and 97.2% of our debt portfolio at fair value and at cost, respectively, had interest rate floors that limit the minimum applicable interest rates on such loans.

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As of December 31, 2014, the median earnings before interest, taxes, depreciation and amortization, or EBITDA, for our portfolio companies was $23.6 million. The median EBITDA is based on the most recently reported trailing twelve-month EBITDA received from our portfolio companies. The median EBITDA of our portfolio companies excludes underlying borrowers in SLF.

As part of the monitoring process, GC Advisors regularly assesses the risk profile of each of our investments and rates each of them based on an internal system developed by Golub Capital and its affiliates. This system is not generally accepted in our industry or used by our competitors. It is based on the following categories, which we refer to as GC Advisors’ internal performance rating:

Internal Performance Ratings
Rating Definition
5 Involves the least amount of risk in our portfolio. The borrower is performing above expectations, and the trends and risk factors are generally favorable.
4 Involves an acceptable level of risk that is similar to the risk at the time of origination. The borrower is generally performing as expected, and the risk factors are neutral to favorable.
3 Involves a borrower performing below expectations and indicates that the loan’s risk has increased somewhat since origination. The borrower may be out of compliance with debt covenants; however, loan payments are generally not past due.
2 Involves a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due).
1 Involves a borrower performing substantially below expectations and indicates that the loan’s risk has substantially increased since origination. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 1 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered.

Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

For any investment rated 1, 2 or 3, GC Advisors will increase its monitoring intensity and prepare regular updates for the investment committee, summarizing current operating results and material impending events and suggesting recommended actions.

GC Advisors monitors and, when appropriate, changes the internal performance ratings assigned to each investment in our portfolio. In connection with our valuation process, GC Advisors and our board of directors review these internal performance ratings on a quarterly basis.

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The following table shows the distribution of our investments on the 1 to 5 internal performance rating scale at fair value as of December 31, 2014 and September 30, 2014:

As of December 31, 2014 As of September 30, 2014
Internal Investments Percentage of Investments Percentage of
Performance at Fair Value Total at Fair Value Total
Rating (In thousands) Investments (In thousands) Investments
5 $ 155,411 11.1 % $ 129,806 9.7 %
4 1,135,019 81.0 1,144,232 84.9
3 99,707 7.1 68,944 5.1
2 10,584 0.8 4,625 0.3
1 5 0.0 * 5 0.0 *
Total $ 1,400,726 100.0 % $ 1,347,612 100.0 %

* Represents an amount less than 0.1%.

Senior Loan Fund LLC

We co-invest with RGA Reinsurance Company, or RGA, in senior secured loans through SLF, an unconsolidated Delaware LLC. SLF is capitalized as transactions are completed and all portfolio and investment decisions in respect to SLF must be approved by the SLF investment committee consisting of two representatives of each of us and RGA (with unanimous approval required from (i) one representative of each of us and RGA or (ii) both representatives of each of us and RGA).

SLF is capitalized with subordinated notes and LLC equity interest subscriptions from its members. As of December 31, 2014, we and RGA owned 87.5% and 12.5%, respectively, of both the outstanding subordinated notes and LLC equity interests. As of December 31, 2014, SLF had subordinated note commitments from us and RGA totaling $100.0 million, of which approximately $33.0 million and $29.2 million in aggregate principal amount was funded as of December 31, 2014 and September 30, 2014, respectively. As of December 31, 2014, SLF had LLC equity interest subscriptions from us and RGA totaling $25.0 million, of which approximately $12.5 million and $9.3 million in aggregate was called and contributed as of December 31, 2014 and September 30, 2014, respectively.

As of December 31, 2014, the SLF Credit Facility, as amended, which SLF entered into through its wholly-owned subsidiary, Senior Loan Fund II, or SLF II, allows SLF II to borrow up to $150.0 million subject to leverage and borrowing base restrictions. The reinvestment period of the SLF Credit Facility ends April 11, 2015, and the stated maturity date is April 11, 2019. As of December 31, 2014 and September 30, 2014, SLF II had outstanding debt under the SLF Credit Facility of $74.8 million and $66.6 million, respectively.

Through the reinvestment period, the SLF Credit Facility bears interest at one-month LIBOR plus a rate between 1.75% and 2.25%, depending on the composition of the collateral asset portfolio, per annum. After the reinvestment period, the rate will reset to one-month LIBOR plus 2.75% per annum for the remaining term of the SLF Credit Facility.

As of December 31, 2014 and September 30, 2014, SLF had total assets at fair value of $126.4 million and $107.2 million, respectively. As of December 31, 2014 and September 30, 2014, SLF’s portfolio was comprised of first lien senior secured loans to 38 and 31 different borrowers, respectively. As of both December 31, 2014 and September 30, 2014, none of these loans was on non-accrual status. The portfolio companies in SLF are in industries similar to those in which we may invest directly. Additionally, as of December 31, 2014 and September 30, 2014, SLF had commitments to fund various undrawn revolving credit and delayed draw loans to its portfolio companies totaling $7.6 million and $10.1 million, respectively.

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Below is a summary of SLF’s portfolio, followed by a listing of the individual loans in SLF’s portfolio as of December 31, 2014 and September 30, 2014:

As of December 31, 2014 As of September 30, 2014
(Dollars in thousands)
Senior secured loans (1) $ 122,516 $ 103,695
Weighted average current interest rate on senior secured loans (2) 5.3 % 5.2 %
Number of borrowers in SLF 38 31
Largest loan to a single borrower (1) $ 8,208 $ 8,229
Total of five largest loans to borrowers (1) $ 30,468 $ 31,132

(1) At principal amount.
(2) Computed as (a) the sum of (i) the annual stated interest rate on each accruing senior secured loan multiplied by (ii) each loan's principal amount divided by (b) total senior secured loans at principal amount.

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SLF Loan Portfolio as of December 31, 2014

Current
Maturity Interest Principal/Par Fair
Portfolio Company Business Description Investment Type Date Rate (1) Amount Value (2)
(In thousands)
1011778 B.C. ULC (Burger King Worldwide, Inc. ) Beverage, Food and Tobacco Senior Loan 10/2021 4.5 % $ 3,000 $ 2,996
5.11, Inc. (3) Textiles and Leather Senior Loan 02/2020 6.0 3,282 3,279
Acosta, Inc. Diversified Conglomerate Service Senior Loan 09/2021 5.0 3,000 3,005
ACTIVE Network, Inc. Electronics Senior Loan 11/2020 5.5 1,980 1,943
ARG IH Corporation (3) Beverage, Food and Tobacco Senior Loan 11/2020 4.8 2,145 2,143
Atrium Innovations Personal and Non Durable Consumer Products Senior Loan 02/2021 4.3 3,547 3,437
BJ's Wholesale Club, Inc. Retail Stores Senior Loan 09/2019 4.5 2,977 2,930
Blue Coat Systems, Inc. Electronics Senior Loan 05/2019 4.0 1,985 1,938
BMC Software, Inc. Electronics Senior Loan 09/2020 5.0 1,911 1,865
Brasa (Holdings) Inc. Personal, Food and Miscellaneous Services Senior Loan 07/2019 5.0 8,208 8,153
Brickman Group Ltd. LLC Farming and Agriculture Senior Loan 12/2020 4.0 1,995 1,943
Connect Merger Sub, Inc. Telecommunications Senior Loan 04/2020 4.8 3,965 3,924
Dell, Inc. Electronics Senior Loan 04/2020 4.5 1,980 1,979
Dialysis Newco, Inc. Healthcare, Education and Childcare Senior Loan 04/2021 4.5 2,488 2,475
Diversified Foodservice Supply, Inc. (3) Beverage, Food and Tobacco Senior Loan 12/2018 5.8 4,194 4,194
EAG, INC. (Evans Analytical Group) Diversified Conglomerate Service Senior Loan 07/2017 5.0 2,366 2,366
Federal-Mogul Corporation Automobile Senior Loan 04/2021 4.8 3,990 3,969
GSDM Holdings Corp. (3) Healthcare, Education and Childcare Senior Loan 06/2019 5.3 1,795 1,795
Hygenic Corporation, The Personal and Non Durable Consumer Products Senior Loan 10/2018 6.0 4,527 4,527
K&N Engineering, Inc. (3) Automobile Senior Loan 07/2019 5.3 3,894 3,894
Mister Car Wash Holdings, Inc. Automobile Senior Loan 08/2021 5.0 2,992 3,001
National Veterinary Associates, Inc. Personal, Food and Miscellaneous Services Senior Loan 08/2021 4.8 998 989
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 6.0 2,053 2,011
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 6.0 360 346
Paradigm Management Services, LLC (3) Healthcare, Education and Childcare Senior Loan 01/2019 5.5 6,247 6,247
Payless ShoeSource, Inc. Retail Stores Senior Loan 03/2021 5.0 1,990 1,831
Plano Molding Company, LLC (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 10/2018 5.3 1,815 1,815
Print Payroll Services, LLC Diversified/Conglomerate Service Senior Loan 06/2019 5.7 2,943 2,943
Print Payroll Services, LLC Diversified/Conglomerate Service Senior Loan 06/2019 5.7 568 568
Reliant Pro ReHab, LLC (3) Healthcare, Education and Childcare Senior Loan 06/2017 6.0 4,296 4,296
Rug Doctor LLC (3) Personal and Non Durable Consumer Products Senior Loan 12/2016 6.3 4,875 4,875
Scientific Games International, Inc. Hotels, Motels, Inns, and Gaming Senior Loan 10/2020 6.0 3,965 3,918
Self Esteem Brands, LLC (3) Leisure, Amusement, Motion Pictures, Entertainment Senior Loan 02/2020 5.0 6,185 6,185
Smashburger Finance LLC Beverage, Food and Tobacco Senior Loan 05/2018 5.5 968 968
Syncsort Incorporated (3) Electronics Senior Loan 03/2019 5.8 4,953 4,953
Systems Maintenance Services Holding, Inc. (3) Electronics Senior Loan 10/2019 5.0 2,433 2,433
Take 5 Oil Change, L.L.C. (3) Automobile Senior Loan 07/2018 6.3 1,426 1,426
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 3,452 3,452
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 6.8 403 403
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 165 165
W3 Co. Oil and Gas Senior Loan 03/2020 5.8 2,977 2,873
WII Components, Inc. (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 07/2018 5.5 3,223 3,223
$ 122,516 $ 121,676

(1) Represents the weighted average annual current interest rate as of December 31, 2014. All interest rates are payable in cash.
(2) Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not included in the board of directors' valuation process described elsewhere herein.
(3) We also hold a portion of the first lien senior secured loan in this portfolio company.

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SLF Loan Portfolio as of September 30, 2014

Current
Maturity Interest Principal/Par Fair
Portfolio Company Business Description Investment Type Date Rate (1) Amount Value (2)
(In thousands)
5.11, Inc. (3) Textiles and Leather Senior Loan 02/2020 6.0 % $ 3,290 $ 3,294
ACTIVE Network, Inc. Electronics Senior Loan 11/2020 5.5 1,985 1,975
ARG IH Corporation (3) Beverage, Food and Tobacco Senior Loan 11/2020 4.8 2,151 2,152
Atrium Innovations Personal and Non Durable Consumer Products Senior Loan 02/2021 4.3 3,556 3,498
BJ's Wholesale Club, Inc. Retail Stores Senior Loan 09/2019 4.5 2,985 2,944
Blue Coat Systems, Inc. Electronics Senior Loan 05/2019 4.0 1,990 1,958
BMC Software, Inc. Electronics Senior Loan 09/2020 5.0 1,915 1,886
Brasa (Holdings) Inc. Personal, Food and Miscellaneous Services Senior Loan 07/2019 5.0 8,229 8,215
Connect Merger Sub, Inc. Telecommunications Senior Loan 04/2020 4.8 3,975 3,943
Dell, Inc. Electronics Senior Loan 04/2020 4.5 1,985 1,974
Dialysis Newco, Inc. Healthcare, Education and Childcare Senior Loan 04/2021 4.5 2,494 2,491
Diversified Foodservice Supply, Inc. (3) Beverage, Food and Tobacco Senior Loan 12/2018 5.8 4,194 4,194
El Pollo Loco Inc. (3) Personal, Food and Miscellaneous Services Senior Loan 10/2018 5.3 4,740 4,758
Federal-Mogul Corporation Automobile Senior Loan 04/2021 4.8 4,000 3,972
GSDM Holdings Corp. (3) Healthcare, Education and Childcare Senior Loan 06/2019 5.3 1,800 1,800
Nuveen Investments, Inc. Finance Senior Loan 05/2017 4.2 3,000 2,997
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 5.8 2,058 2,058
Paradigm DKD Group, LLC Buildings and Real Estate Senior Loan 11/2018 5.8 468 468
Paradigm Management Services, LLC (3) Healthcare, Education and Childcare Senior Loan 01/2019 5.5 6,247 6,247
Payless ShoeSource, Inc. Retail Stores Senior Loan 03/2021 5.0 1,995 1,925
Plano Molding Company, LLC (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 10/2018 5.3 1,827 1,827
Print Payroll Services, LLC Diversified Conglomerate Service Senior Loan 06/2019 5.6 2,950 2,950
Rug Doctor LLC (3) Personal and Non Durable Consumer Products Senior Loan 12/2016 6.3 4,939 4,939
Rug Doctor LLC (3) Personal and Non Durable Consumer Products Senior Loan 12/2016 6.3 428 428
Scientific Games International, Inc. Hotels, Motels, Inns, and Gaming Senior Loan 10/2020 4.3 3,975 3,905
Self Esteem Brands, LLC (3) Leisure, Amusement, Motion Pictures, Entertainment Senior Loan 02/2020 5.0 6,324 6,324
Smashburger Finance LLC Beverage, Food and Tobacco Senior Loan 05/2018 5.5 970 970
Syncsort Incorporated (3) Electronics Senior Loan 03/2019 5.8 4,966 4,966
Systems Maintenance Services Holding, Inc. (3) Electronics Senior Loan 10/2019 5.0 2,439 2,439
Take 5 Oil Change, L.L.C. (3) Automobile Senior Loan 07/2018 6.3 1,429 1,429
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 3,461 3,461
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 6.8 386 386
U.S. Water Services, Inc. Utilities Senior Loan 08/2018 5.8 165 165
W3 Co. Oil and Gas Senior Loan 03/2020 5.8 2,985 2,981
WII Components, Inc. (3) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 07/2018 5.5 3,394 3,378
WII Components, Inc. (3) (4) Home and Office Furnishings, Housewares, and Durable Consumer Senior Loan 07/2018 N/A (5) - (1 )
$ 103,695 $ 103,296

(1) Represents the weighted average annual current interest rate as of September 30, 2014. All interest rates are payable in cash.
(2) Represents the fair value in accordance with ASC Topic 820. The determination of such fair value is not included in our board of directors' valuation process described elsewhere herein.
(3) We also hold a portion of the senior loan in this portfolio company.
(4) The negative fair value is the result of the unfunded commitment being valued below par.
(5) The entire commitment was unfunded as of September 30, 2014. As such, no interest is being earned on this investment.

We have committed to fund $87.5 million of subordinated notes and $21.9 million of LLC equity interest subscriptions to SLF. The amortized cost and fair value of the subordinated notes in SLF held by us were $28.9 million and $28.9 million, respectively, as of December 31, 2014, and $25.6 million and $25.6 million, respectively, as of September 30, 2014. The subordinated notes pay a weighted average interest rate of three-month LIBOR plus 8.0%. For the three months ended December 31, 2014 and 2013, we earned interest income of $0.6 million and $0.2 million, respectively, on the subordinated notes.

For the three months ended December 31, 2014 and 2013, we earned an annualized total return on our weighted average capital invested in SLF of 5.7% and 8.5%, respectively. The annualized total return on weighted average capital invested is calculated by dividing total income earned on our investments in SLF subordinated notes and LLC equity interests by the combined daily average of our investments in (1) the principal of the SLF subordinated notes and (2) the net asset value of the SLF LLC equity interests.

Below is certain summarized financial information for SLF as of December 31, 2014 and September 30, 2014 and for the three months ended December 31, 2014 and 2013:

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As of December 31, 2014 As of September 30, 2014
(In thousands)
Selected Balance Sheet Information, at fair value
Investments in loans receivable, net of discount for loan origination fees $ 121,676 $ 103,296
Cash and other assets 4,694 3,932
Total assets $ 126,370 $ 107,228
Senior credit facility $ 74,750 $ 66,600
Payable for open trades 4,950 -
Other liabilities 1,294 822
Total liabilities 80,994 67,422
Subordinated notes and members' equity 45,376 39,806
Total liabilities and net assets $ 126,370 $ 107,228

Three months ended December 31,
2014 2013
(In thousands)
Selected Statement of Operations Information:
Interest income $ 1,600 $ 333
Fee income 2 -
Total investment income 1,602 333
Interest expense 1,108 206
Administrative service fee 47 16
Management and incentive fees - -
Other expenses 25 9
Total expenses 1,180 231
Net investment income 422 102
Net change in unrealized appreciation (depreciation) on investments and subordinated notes (452 ) 642
Net increase (decrease) in net assets $ (30 ) $ 744

SLF has elected to fair value the subordinated notes issued to us and RGA under ASC Topic 825 – Financial Instruments, or ASC Topic 825. The subordinated notes are valued by calculating the net present value of the future expected cash flow streams using an appropriate risk-adjusted discount rate model. For the three months ended December 31, 2014 and 2013, SLF recognized $0.0 million and $0.5 million in unrealized depreciation, respectively, on the subordinated notes. The following table presents the difference between fair value and the aggregate contractual principal amounts of subordinated notes for which the fair value option has been elected as of December 31, 2014 and September 30, 2014:

As of December 31, 2014
(In thousands)
Par Value Carrying Value Fair Value Unrealized Appreciation /
(Depreciation)
Subordinated notes $ 32,995 $ 32,995 $ 32,995 $ -

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As of September 30, 2014
(In thousands)
Par Value Carrying Value Fair Value Unrealized Appreciation /
(Depreciation)
Subordinated notes $ 29,245 $ 29,245 $ 29,245 $ -

Contractual Obligations and Off-Balance Sheet Arrangements

A summary of our significant contractual payment obligations as of December 31, 2014 is as follows:

Payments Due by Period (In millions)
Less Than More Than
Total 1 Year 1-3 Years 3-5 Years (1) 5 Years (1)
2010 Debt Securitization $ 215.0 $ - $ - $ - $ 215.0
2014 Debt Securitization 246.0 - - - 246.0
SBA debentures 208.8 - - - 208.8
Credit Facility 44.9 - - 44.9 -
Revolver - - - - -
Unfunded commitments (2) 131.8 131.8 - - -
Total contractual obligations (3) $ 846.5 $ 131.8 $ - $ 44.9 $ 669.8

(1) The notes offered in the 2010 Debt Securitization are scheduled to mature on July 20, 2023, and the notes offered in the 2014 Debt Securitization are scheduled to mature on April 25, 2026. The SBA debentures are scheduled to mature between March 2021 and September 2024. The Credit Facility is scheduled to mature on October 17, 2019. The Revolver is scheduled to mature on November 22, 2020.
(2) Unfunded commitments represent all amounts unfunded as of December 31, 2014. These amounts may or may not be funded to the borrowing party now or in the future. The unfunded commitments relate to loans with various maturity dates, but we are showing this amount in the less than one year category as this entire amount was eligible for funding to the borrowers as of December 31, 2014.
(3) Total contractual obligations exclude $0.4 million of secured borrowings.

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, 2014 and September 30, 2014, we had outstanding commitments to fund investments totaling $131.8 million and $124.5 million, respectively.

We have certain contracts under which we have material future commitments. We have entered into the Investment Advisory Agreement with GC Advisors in accordance with the 1940 Act. Under the Investment Advisory Agreement, GC Advisors provides us with investment advisory and management services. For these services, we pay (1) a management fee equal to a percentage of the average adjusted value of our gross assets and (2) an incentive fee based on our performance. To the extent that GC Advisors or any of its affiliates provides investment advisory, collateral management or other similar services to a subsidiary of ours, we reduce the base management fee by an amount equal to the product of (1) the total fees paid to GC Advisors by such subsidiary for such services and (2) the percentage of such subsidiary’s total equity that is owned, directly or indirectly, by us.

Under the Administration Agreement, the Administrator furnishes us with office facilities and equipment, provides us with clerical, bookkeeping and record keeping services at such facilities and provides us with other administrative services necessary to conduct our day-to-day operations. We reimburse the Administrator for the allocable portion (subject to the review and approval of our board of directors) of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs. The Administrator also provides on our behalf significant managerial assistance to those portfolio companies to which we are required to offer to provide such assistance.

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If any of the contractual obligations discussed above is 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 receive under our Investment Advisory Agreement and our Administration Agreement. Any new investment advisory agreement would also be subject to approval by our stockholders.

Distributions

In order to qualify as a RIC and to avoid corporate-level U.S. federal income 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 meet the annual distribution requirements of the U.S. federal excise tax rules. We intend to make quarterly distributions to our stockholders as 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 U.S. federal income tax consequences, including the possible loss of our qualification as a RIC. 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 stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a dividend payment 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, our 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.

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Related Party Transactions

We have entered into a number of business relationships with affiliated or related parties, including the following:

· We entered into an Investment Advisory Agreement with GC Advisors. Mr. Lawrence Golub, our chairman, is a manager of GC Advisors, and Mr. David Golub, our chief executive officer, is a manager of GC Advisors, and each of Messrs. Lawrence Golub and David Golub owns an indirect pecuniary interest in GC Advisors.

· Golub Capital LLC provides, and other affiliates of Golub Capital have historically provided, us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement.

· We have entered into a license agreement with Golub Capital LLC, pursuant to which Golub Capital LLC has granted us a non-exclusive, royalty-free license to use the name “Golub Capital.”

· Under a staffing agreement, or the Staffing Agreement, Golub Capital LLC has agreed to provide GC Advisors with the resources necessary to fulfill its obligations under the Investment Advisory Agreement. The Staffing Agreement provides that Golub Capital LLC will make available to GC Advisors experienced investment professionals and access to the senior investment personnel of Golub Capital LLC for purposes of evaluating, negotiating, structuring, closing and monitoring our investments. The Staffing Agreement also includes a commitment that the members of GC Advisors’ investment committee will serve in such capacity. Services under the Staffing Agreement are provided on a direct cost reimbursement basis.

· GC Advisors serves as collateral manager to the 2010 Issuer and the 2014 Issuer under collateral management agreements and receives a fee for providing these services that is offset against the base management fee payable by us under the Investment Advisory Agreement.

GC Advisors also sponsors or manages, and may in the future sponsor or manage, other investment funds, accounts or investment vehicles (together referred to as “accounts”) that have investment mandates that are similar, in whole and in part, with ours. For example, GC Advisors presently serves as the investment adviser to Golub Capital Investment Corporation, a private BDC that commenced operations on December 31, 2014, which primarily focuses on investing in senior secured and one stop loans.  In addition, our officers and directors serve in similar capacities for Golub Capital Investment Corporation. GC Advisors and its affiliates may determine that an investment is appropriate for us and for one or more of those other accounts. In such event, depending on the availability of such investment and other appropriate factors, and pursuant to GC Advisors’ allocation policy, GC Advisors or its affiliates may determine that we should invest side-by-side with one or more other accounts. We do not intend to make any investments if they are not permitted by applicable law and interpretive positions of the SEC and its staff, or if they are inconsistent with GC Advisors’ allocation procedures.

In addition, we have adopted a formal code of ethics that governs the conduct of our and GC Advisors’ officers, directors and employees. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the General Corporation Law of the State of Delaware.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

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Fair Value Measurements

We value investments for which market quotations are readily available at their market quotations. However, a readily available market value is not expected to exist for many of the investments in our portfolio, and we value these portfolio investments at fair value as determined in good faith by our board of directors under our valuation policy and process. We may seek pricing information with respect to certain of our investments from pricing services or brokers or dealers in order to value such investments. We also employ independent third party valuation firms for all of our investments for which there is not a readily available market value.

Valuation methods may include comparisons of the portfolio companies to peer companies that are public, 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, discounted cash flow, the markets in which the portfolio company does business and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from values that may ultimately be received or settled.

Our board of directors is ultimately and solely responsible for determining, in good faith, the fair value of investments that are not publicly traded, whose market prices are not readily available on a quarterly basis or any other situation where portfolio investments require a fair value determination.

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

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

The factors that are taken into account in fair value pricing investments include: available current market data, including relevant and applicable market trading and transaction comparables; applicable market yields and multiples; security covenants; call protection provisions; information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments, its earnings and discounted cash flows and the markets in which it does business; comparisons of financial ratios of peer companies that are public; comparable merger and acquisition transactions; and the principal market and enterprise values.

Determination of fair values involves subjective judgments and estimates. Under current auditing standards, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

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We follow ASC Topic 820 Fair Value Measurements and Disclosures for measuring fair value. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the assets or liabilities or market and the assets’ or liabilities’ complexity. Our fair value analysis includes an analysis of the value of any unfunded loan commitments. Assets and liabilities are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the asset or liability as of the measurement date. The three levels are defined as follows:

Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the assets or liabilities.

Level 3: Inputs include significant unobservable inputs for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value are based upon the best information available and may require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or a liability’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and we consider factors specific to the asset or liability. We assess the levels of assets and liabilities at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfers. There were no transfers among Level 1, 2 and 3 of the fair value hierarchy for assets and liabilities during the three months ended December 31, 2014 and 2013. The following section describes the valuation techniques used by us to measure different assets and liabilities at fair value and includes the level within the fair value hierarchy in which the assets and liabilities are categorized.

Valuation of Investments

Level 1 investments are valued using quoted market prices. Level 2 investments are valued using market consensus prices that are corroborated by observable market data and quoted market prices for similar assets and liabilities. Level 3 investments are valued at fair value as determined in good faith by our board of directors, based on input of management, the audit committee and independent valuation firms that have been engaged at the direction of our board of directors to assist in the valuation of each portfolio investment without a readily available market quotation at least once during a trailing twelve-month period under a valuation policy and a consistently applied valuation process. This valuation process is conducted at the end of each fiscal quarter, with approximately 25% (based on fair value) of our valuations of debt and equity investments without readily available market quotations subject to review by an independent valuation firm. All investments as of December 31, 2014 and September 30, 2014, with the exception of money market funds included in cash and cash equivalents (Level 1 investments), were valued using Level 3 inputs of the fair value hierarchy.

When determining fair value of Level 3 debt and equity investments, we may take into account the following factors, where relevant: 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 and discounted cash flows, the markets in which the portfolio company does business, comparisons to publicly traded securities, and changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made and other relevant factors. The primary method for determining enterprise value uses a multiple analysis whereby appropriate multiples are applied to the portfolio company’s EBITDA. The enterprise value analysis is performed to determine the value of equity investments and to determine if debt investments are credit impaired. If debt investments are credit impaired, we will use the enterprise value analysis or a liquidation basis analysis to determine fair value. For debt investments that are not determined to be credit impaired, we use a market interest rate yield analysis to determine fair value.

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In addition, for certain debt investments, we may base our valuation on indicative bid and ask prices provided by an independent third party pricing service. Bid prices reflect the highest price that we and others may be willing to pay. Ask prices represent the lowest price that we and others may be willing to accept. We generally uses the midpoint of the bid/ask range as our best estimate of fair value of such investment.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a market existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize significantly less than the value at which such investment had previously been recorded.

Our investments are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded.

Valuation of Secured Borrowings

We have elected the fair value option under ASC Topic 825 relating to accounting for debt obligations at their fair value for our secured borrowings which arose due to partial loan sales which did not meet the criteria for sale treatment under ASC Topic 860. All secured borrowings as of December 31, 2014 and September 30, 2014 were valued using Level 3 inputs under the fair value hierarchy, and our approach to determining fair value of Level 3 secured borrowings is consistent with our approach to determining fair value of the Level 3 investments that are associated with these secured borrowings as previously described.

Valuation of Other Financial Assets and Liabilities

Fair value of our debt is estimated using Level 3 inputs by discounting remaining payments using comparable market rates or market quotes for similar instruments at the measurement date, if available.

Revenue Recognition:

Our revenue recognition policies are as follows:

Investments and Related Investment Income: Interest income is accrued based upon the outstanding principal amount and contractual interest terms of debt investments. Premiums, discounts, and origination fees are amortized or accreted into interest income over the life of the respective debt investment. For investments with contractual PIK interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, we do not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not likely to be collectible. In addition, we may generate revenue in the form of amendment, structuring or due diligence fees, fees for providing managerial assistance, consulting fees and prepayment premiums on loans and record these fees as fee income when received. Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. Distributions received from LLC and LP investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

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We account for investment transactions on a trade-date basis. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the cost basis of investment, without regard to unrealized gains or losses previously recognized. We report changes in fair value of investments from the prior period that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in our consolidated statement of operations.

Non-accrual: Loans may be left on accrual status during the period we are pursuing repayment of the loan. Management reviews all loans that become past due 90 days or more on principal and interest or when there is reasonable doubt that principal or interest will not be collected for possible placement on non-accrual status. We generally reverse accrued interest when a loan is placed on non-accrual. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. We restore non-accrual loans to accrual status when past due principal and interest is paid and, in our management’s judgment, are likely to remain current. The total fair value of our non-accrual loans was $2.2 million as of December 31, 2014 and $5,000 as of September 30, 2014.

Partial loan sales: We follow the guidance in ASC Topic 860, when accounting for loan participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the definition of a “participating interest”, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales that do not meet the definition of a participating interest remain on our statements of assets and liabilities and the proceeds are recorded as a secured borrowing until the definition is met. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value.

Income taxes :

We have elected to be treated as a RIC under Subchapter M of the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, we are required to meet certain source of income and asset diversification requirements, and timely distribute to our stockholders at least 90% of investment company taxable income, as defined by the Code, for each tax year. We have made and intend to continue to make the requisite distributions to our stockholders, which will generally relieve us from U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, we may choose to retain taxable income in excess of current year distributions into the next tax year in an amount less than what would trigger payments of federal income tax under Subchapter M of the Code. We would then pay a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we accrue excise tax, if any, on estimated excess taxable income as taxable income is earned.

Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified within capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, most significantly changes in interest rates. Many of the loans in our portfolio have floating interest rates, and we expect that our loans in the future may also have floating interest rates. These loans are usually based on a floating LIBOR and typically have interest rate reset provisions that adjust applicable interest rates under such loans to current market rates on a quarterly basis. The loans that are subject to the floating LIBOR rates are also subject to a minimum base rate, or floor, that we charge on our loans if the current market rates are below the respective floors. As of December 31, 2014 and September 30, 2014, the weighted average LIBOR floor on the loans subject to floating interest rates was 1.12% and 1.15%, respectively. In addition, the Class A and B 2010 Notes issued as a part of the 2010 Debt Securitization and the Class A-1, A-2 and B 2014 Notes issued as part of the 2014 Debt Securitization have floating interest rate provisions based on three-month LIBOR that resets quarterly, the Credit Facility has a floating interest rate provision based on one-month LIBOR that resets daily and the Revolver has a floating interest rate provision based on, at the election of Revolver Funding, either one-month, two-month or three-month LIBOR or PrivateBank’s prime rate that resets at contract maturity. As of December 31, 2014 and September 30, 2014, the weighted average LIBOR floor on the secured borrowings, which reset quarterly, was 1.00% and 1.00%, respectively. We expect that other credit facilities into which we enter in the future may have floating interest rate provisions.

Assuming that the interim and unaudited consolidated statement of financial condition as of December 31, 2014 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates.

Net increase
Increase (decrease) in Increase (decrease) in (decrease) in
Change in interest rates interest income interest expense investment income
(in thousands)
Down 25 basis points $ (73 ) $ (1,265 ) $ 1,192
Up 50 basis points 147 2,530 (2,383 )
Up 100 basis points 2,426 5,060 (2,634 )
Up 200 basis points 15,449 10,123 5,326
Up 300 basis points 28,649 15,186 13,463

Although we believe that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit market, credit quality, the size and composition of the assets in our portfolio and other business developments, including borrowing under the Debt Securitizations, the Credit Facility, the Revolver or other borrowings, that could affect net increase in net assets resulting from operations, or net income. Accordingly, we can offer no assurances that actual results would not differ materially from the analysis above.

We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as interest rate swaps, futures, options and forward contracts to the limited extent permitted under the 1940 Act and applicable commodities laws. 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.

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Item 4: Controls and Procedures.

As of the period covered by this report, we, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on our evaluation, our management, including the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective in timely alerting management, including the chief executive officer and chief financial officer, of material information about us required to be included in our periodic SEC filings. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, are based upon certain assumptions about the likelihood of future events and can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. There has not been any change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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Part II – Other Information

Item 1: Legal Proceedings.

Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, we are currently not a party to any pending material legal proceedings.

Item 1A: Risk Factors.

None.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3: Defaults Upon Senior Securities.

None.

Item 4: Mine Safety Disclosures.

None.

Item 5: Other Information.

None.

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Item 6: Exhibits.

EXHIBIT INDEX

Number Description
10.1 Thirteenth Amendment to Loan and Servicing Agreement, dated October 17, 2014, by and among Golub Capital BDC Funding LLC, as the Borrower; Golub Capital BDC, Inc., as Transferor and Servicer; Wells Fargo Securities, LLC, as the Administrative Agent; the lenders from time to time party thereto; the lender agents from time to time party thereto; and Wells Fargo Bank, N.A., as the Collateral Agent, the Account Bank, and the Collateral Custodian (amending the Loan and Servicing Agreement, dated as of July 21, 2011) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 814-00794), filed on October 22, 2014).
10.2 Amendment No. 1 to Credit Agreement, dated as of November 24, 2014, by and among Golub Capital BDC Revolver Funding LLC, as the borrower; Golub Capital BDC, Inc., as servicer; and The PrivateBank and Trust Company as lender and administrative agent (amending the Credit Agreement, dated as of November 22, 2013) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 814-00794), filed on November 26, 2014).
10.3 Amended and Restated Loan and Servicing Agreement, dated as of December 18, 2014, by and among Golub Capital BDC Funding LLC, as the Borrower; Golub Capital BDC, Inc., as Transferor and Servicer; Wells Fargo Securities, LLC, as the Administrative Agent; the lenders from time to time party thereto; the lender agents from time to time party thereto; and Wells Fargo Bank, N.A., as the Collateral Agent, the Account Bank, and the Collateral Custodian (amending the Loan and Servicing Agreement, dated as of July 21, 2011) (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 814-00794), filed on January 2, 2015).
31.1 Certifications by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2 Certifications by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Golub Capital BDC, Inc.
Dated: February 6, 2015 By /s/ David B. Golub
David B. Golub
Chief Executive Officer
(Principal Executive Officer)
Dated: February 6, 2015 By /s/ Ross A. Teune
Ross A. Teune
Chief Financial Officer
(Principal Accounting and Financial Officer)

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