American Capital Senior Floating (ACSF) 10-Q 2016 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended September 30, 2016

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 814-01025

AMERICAN CAPITAL SENIOR FLOATING, LTD.

(Exact name of registrant as specified in its charter)

Maryland		46-1996220
(State of Incorporation)		(I.R.S. Employer Identification No.)
	2 Bethesda Metro Center 14th Floor Bethesda, MD 20814
	(Address of principal executive offices)
	301-968-9310
	(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 and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically 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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨		Accelerated filer	x
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  x

The number of shares of the issuer's common stock, $.01 par value, outstanding as of November 2, 2016 was 10,000,100.

AMERICAN CAPITAL SENIOR FLOATING, LTD.

FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2016

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of September 30, 2016 (unaudited) and December 31, 2015	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2016 (unaudited) and September 30, 2015 (unaudited)	4
	Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2016 (unaudited) and September 30, 2015 (unaudited)	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 (unaudited) and September 30, 2015 (unaudited)	6
	Consolidated Schedule of Investments as of September 30, 2016 (unaudited)	7
	Consolidated Schedule of Investments as of December 31, 2015	14
	Notes to Consolidated Financial Statements (unaudited)	20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	47
Signatures		49

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share and per share data)

	September 30, 2016 (unaudited)			December 31, 2015
Assets:
Investments, fair value (cost of $248,541 and $261,875, respectively)	$	231,006		$	229,056
Cash and cash equivalents	4,724			2,474
Receivable for investments sold	4,975			3,096
Deferred financing costs	204			273
Interest receivable	545			583
Prepaid expenses and other assets	243			89
Receivable from affiliate (see notes 3 and 4)	283			234
Total assets	$	241,980		$	235,805
Liabilities:
Secured revolving credit facility payable (see note 7)	$	100,000		$	110,200
Payable for investments purchased	7,043			5,437
Distributions to stockholders payable (see note 10)	970			970
Management fee payable (see note 3)	1,520			536
Interest payable (see note 7)	26			52
Taxes payable (see note 8)	87			278
Payable to affiliate (see note 4)	167			217
Other liabilities and accrued expenses	183			186
Total liabilities	109,996			117,876
Commitments and contingencies (see note 11)
Net Assets:
Common stock, par value $0.01 per share; 10,000,100 issued and outstanding; 300,000,000 authorized	100			100
Paid-in capital in excess of par	150,903			150,903
Undistributed net investment income	1,784			1,560
Accumulated net realized loss from investments	(3,268		)	(1,815		)
Net unrealized depreciation on investments	(17,535		)	(32,819		)
Total net assets	131,984			117,929
Total liabilities and net assets	$	241,980		$	235,805
Net asset value per share outstanding	$	13.20		$	11.79

See notes to the consolidated financial statements.

3

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Investment Income:
Interest	$	4,589		$	4,987		$	13,206		$	14,608
Total investment income	4,589			4,987			13,206			14,608
Expenses:
Interest and commitment fee (see note 7)	642			667			1,900			1,986
Management fee (see note 3)	512			558			1,520			1,699
Professional fees	95			60			329			151
Insurance	111			116			331			349
Amortization of deferred financing costs	23			99			69			293
Other general and administrative expenses (see note 4)	358			303			1,154			1,011
Total expenses	1,741			1,803			5,303			5,489
Expense reimbursement (see notes 3 and 4)	(283		)	(193		)	(976		)	(665		)
Net expenses	1,458			1,610			4,327			4,824
Net investment income before taxes	3,131			3,377			8,879			9,784
Income tax (provision) benefit (see note 8)	(23		)	(33		)	75			(160		)
Net investment income	3,108			3,344			8,954			9,624
Net (loss) gain on investments:
Net realized (loss) gain on investments	(154		)	(5		)	(1,453		)	380
Net unrealized appreciation (depreciation) on investments	7,395			(10,537		)	15,284			(10,263		)
Income tax benefit	—			—			—			11
Net gain (loss) on investments	7,241			(10,542		)	13,831			(9,872		)
Net increase (decrease) in net assets resulting from operations (“Net Earnings (Loss)”)	$	10,349		$	(7,198	)	$	22,785		$	(248	)
Net investment income per share	$	0.31		$	0.33		$	0.90		$	0.96
Net Earnings (Loss) per share (see note 5)	$	1.03		$	(0.72	)	$	2.28		$	(0.02	)
Distributions to stockholders declared per share	$	0.29		$	0.29		$	0.87		$	0.87
Weighted average shares outstanding	10,000			10,000			10,000			10,000

See notes to consolidated financial statements.

4

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(unaudited, in thousands)

	Nine Months Ended September 30,
	2016			2015
Operations:
Net investment income	$	8,954		$	9,624
Net realized (loss) gain	(1,453		)	380
Net unrealized appreciation (depreciation) on investments	15,284			(10,252		)
Net Earnings (Loss)	22,785			(248		)
Distributions to stockholders:
From net investment income	(8,730		)	(8,720		)
Capital Transactions:
Distribution for income taxes waived	—			(11		)
Net decrease in net assets from capital transactions	—			(11		)
Net increase (decrease) in net assets	14,055			(8,979		)
Net assets beginning of period	117,929			144,235
Net assets end of period	$	131,984		$	135,256
Undistributed net investment income included in net assets	$	1,784		$	1,037
Common shares outstanding	10,000			10,000

See notes to consolidated financial statements.

5

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Nine Months Ended September 30,
	2016			2015
Cash Flows from Operating Activities:
Net Earnings (Loss)	$	22,785		$	(248	)
Adjustments to reconcile net increase in net assets resulting from operations:
Net realized loss (gain) on investments	1,453			(380		)
Net unrealized (appreciation) depreciation on investments	(15,284		)	10,263
Accretion of CLO interest income	(5,215		)	(5,570		)
Net amortization of discount on loans	(205		)	(49		)
Amortization of deferred financing costs	69			293
Purchase of investments	(59,349		)	(88,997		)
Proceeds from disposition of investments	76,650			103,371
(Increase) decrease in receivable for investments sold	(1,879		)	976
Increase (decrease) in payable for investments purchased	1,606			(3,231		)
Increase in receivable from affiliate	(49		)	(29		)
Decrease in interest receivable	38			44
Increase in prepaid expenses and other assets	(154		)	(168		)
Decrease in interest payable	(26		)	(18		)
Decrease in other liabilities and accrued expenses	(3		)	(7		)
Decrease in payable to affiliate	(50		)	(10		)
Increase (decrease) in management fee payable	984			(19		)
(Decrease) increase in taxes payable	(191		)	119
Net cash provided by operating activities	21,180			16,340
Cash Flows from Financing Activities:
Distributions to stockholders paid	(8,730		)	(10,650		)
Payments on revolving credit facility, net	(10,200		)	(5,200		)
Net cash used in financing activities	(18,930		)	(15,850		)
Net increase in cash and cash equivalents	2,250			490
Cash and cash equivalents at beginning of period	2,474			1,757
Cash and cash equivalents at end of period	$	4,724		$	2,247
Supplemental disclosure of cash flow information:
Cash paid for interest and commitment fees	$	1,927		$	2,004
Cash paid for income taxes	$	240		$	30
Distributions to stockholders declared and payable during the period	8,730			8,720
Supplemental disclosure of non-cash financing activity:
Distribution for income taxes waived	$	—		$	(11	)

See notes to consolidated financial statements.

6

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2016

(unaudited, in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
Non-Control/Non-Affiliate Investments
First Lien Floating Rate Loans —133.2% of Net Assets
24 Hour Fitness Worldwide, Inc. (5)	05/28/21	4.75	%	L+ 3.75	1.00%	Hotels, Restaurants & Leisure	$	1,957	$	1,952	$	1,888
Acosta, Inc. (5)	09/26/21	4.25	%	L+ 3.25	1.00%	Media	2,456		2,424		2,346
ADMI Corp. (5)	04/29/22	5.25	%	L+ 4.25	1.00%	Health Care Providers & Services	1,538		1,535		1,549
Aegis Toxicology Sciences Corporation (5)	02/24/21	5.50	%	L+ 4.50	1.00%	Health Care Providers & Services	1,629		1,622		1,483
Agrofresh Inc. (3), (5)	07/31/21	5.75	%	L+ 4.75	1.00%	Chemicals	642		641		641
Air Medical Group Holdings, Inc. (5)	04/28/22	4.25	%	L+ 3.25	1.00%	Health Care Providers & Services	1,975		1,979		1,961
Albertson's LLC (5)	12/21/22	4.75	%	L+ 3.75	1.00%	Food & Staples Retailing	988		964		999
AlixPartners, LLP (5)	07/28/22	4.50	%	L+ 3.50	1.00%	Diversified Financial Services	983		980		986
Alliant Holdings Intermediate, LLC (5)	08/12/22	5.25	%	L+ 4.00	1.00%	Insurance	499		494		502
Alliant Holdings Intermediate, LLC (5)	08/12/22	4.75	%	L+ 3.50	1.00%	Insurance	1,037		1,035		1,038
Allied Universal Holdco LLC (5)	07/28/22	5.00	%	L+ 4.50	1.00%	Commercial Services & Supplies	84		82		85
Allied Universal Holdco LLC (5)	07/28/22	5.50	%	L+ 4.50	1.00%	Commercial Services & Supplies	834		825		838
Altice France S. A. (3), (5)	01/15/24	5.00	%	L+ 4.25	0.75%	Media	1,496		1,482		1,514
American Tire Distributors, Inc. (5)	09/01/21	5.25	%	L+ 4.25	1.00%	Distributors	968		965		959
Amneal Pharmaceuticals LLC (5)	11/01/19	4.50	%	L+ 3.50	1.00%	Pharmaceuticals	985		985		989
AmWINS Group, LLC (5)	09/06/19	4.75	%	L+ 3.75	1.00%	Insurance	2,911		2,921		2,933
Anchor Glass Container Corporation (5)	07/01/22	4.75	%	L+ 3.75	1.00%	Containers & Packaging	2,423		2,412		2,442
APLP Holdings Limited Partnership (3), (5)	04/13/23	6.00	%	L+ 5.00	1.00%	Independent Power and Renewable Electricity Producers	468		455		474
AqGen Ascensus, Inc. (5)	12/05/22	5.50	%	L+ 4.50	1.00%	Capital Markets	1,489		1,435		1,482
Aquilex LLC (5)	12/31/20	5.00	%	L+ 4.00	1.00%	Commercial Services & Supplies	906		905		872
Ardent Legacy Acquisitions, Inc. (5)	08/04/21	6.50	%	L+ 5.50	1.00%	Health Care Providers & Services	330		327		328
Arnold and S. Bleichroeder Holdings, Inc. (5)	12/01/22	4.84	%	L+ 4.00	0.75%	Capital Markets	709		696		711
Ascend Learning, LLC (5)	07/31/19	5.50	%	L+ 4.50	1.00%	Diversified Consumer Services	583		581		586
Asurion, LLC (5)	08/04/22	5.00	%	L+ 4.00	1.00%	Commercial Services & Supplies	2,150		2,130		2,164
Avaya Inc. (5)	05/29/20	6.25	%	L+ 5.25	1.00%	Software	988		831		734
BJ's Wholesale Club, Inc. (5)	09/26/19	4.50	%	L+ 3.50	1.00%	Food & Staples Retailing	1,427		1,428		1,433
Blackboard Inc. (5)	10/04/18	4.75	%	L+ 3.75	1.00%	Software	2,417		2,417		2,415
BWay Intermediate Company, Inc. (5)	08/14/20	5.50	%	L+ 4.50	1.00%	Containers & Packaging	2,350		2,335		2,367
Calceus Acquisition, Inc. (5)	01/31/20	5.00	%	L+ 4.00	1.00%	Textiles, Apparel & Luxury Goods	2,319		2,326		1,979

See notes to consolidated financial statements.

7

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2016

(unaudited, in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
First Lien Floating Rate Loans (continued) —133.2% of Net Assets
Camp International Holding Company (5)	08/18/23	4.75	%	L+ 3.75	1.00%	Transportation Infrastructure	$	2,450	$	2,464	$	2,451
Candy Intermediate Holdings, Inc. (5)	06/15/23	5.50	%	L+ 4.50	1.00%	Food Products	1,796		1,793		1,811
Carecore National, LLC (5)	03/05/21	5.50	%	L+ 4.50	1.00%	Health Care Providers & Services	2,004		2,004		1,971
CB Poly Investments, LLC (5)	08/16/23	6.25	%	L+ 5.25	1.00%	Commercial Services & Supplies	1,500		1,485		1,513
CCM Merger Inc. (5)	08/06/21	4.50	%	L+ 3.50	1.00%	Hotels, Restaurants & Leisure	819		815		821
CEC Entertainment, Inc. (5), (7)	02/12/21	4.00	%	L+ 3.00	1.00%	Hotels, Restaurants & Leisure	744		720		736
Checkout Holding Corp. (5)	04/09/21	4.50	%	L+ 3.50	1.00%	Media	2,444		2,443		2,228
CHG Healthcare Services, Inc. (5)	06/07/23	4.75	%	L+ 3.75	1.00%	Health Care Providers & Services	663		663		671
Community Health Systems, Inc. (3), (5)	12/31/19	3.75	%	L+ 2.75	1.00%	Health Care Providers & Services	1,496		1,426		1,471
CityCenter Holdings, LLC (5)	10/16/20	4.25	%	L+ 3.25	1.00%	Hotels, Restaurants & Leisure	1,461		1,467		1,473
CNT Holdings III Corp (5)	01/22/23	5.25	%	L+ 4.25	1.00%	Internet & Catalog Retail	697		693		702
Compuware Corporation (5)	12/15/21	6.25	%	L+ 5.25	1.00%	Software	955		936		953
Cotiviti Corporation (3), (5)	09/28/23	3.61	%	L+ 2.75	1.75%	Professional Services	766		761		769
CPG International Inc. (5)	09/30/20	4.75	%	L+ 3.75	1.00%	Building Products	1,923		1,923		1,929
CPI Buyer, LLC (5)	08/16/21	5.50	%	L+ 4.50	1.00%	Trading Companies & Distributors	965		955		960
CT Technologies Intermediate Holdings, Inc. (5)	12/01/21	5.25	%	L+ 4.25	1.00%	Health Care Technology	494		492		489
Dell International LLC (5)	09/07/23	4.00	%	L+ 3.25	0.75%	Technology Hardware, Storage & Peripherals	2,000		1,990		2,014
Dell Software Group (5)	09/27/22	7.00	%	L+ 6.00	1.00%	Software	2,000		1,985		1,987
Deltek, Inc. (5)	06/25/22	5.00	%	L+ 4.00	1.00%	Software	2,872		2,867		2,889
Dole Food Company, Inc. (5)	11/01/18	4.51	%	L+ 3.50	1.00%	Food Products	2,493		2,490		2,503
Duff & Phelps Corporation (5)	04/23/20	4.75	%	L+ 3.75	1.00%	Capital Markets	2,400		2,401		2,409
Eastern Power, LLC (5)	10/02/21	5.00	%	L+ 4.00	1.00%	Independent Power and Renewable Electricity Producers	932		927		943
Electrical Components International, Inc. (5)	05/28/21	5.75	%	L+ 4.75	1.00%	Electrical Equipment	1,813		1,816		1,816
Emerald Expositions Holding, Inc. (5)	06/17/20	4.75	%	L+ 3.75	1.00%	Media	2,457		2,471		2,468
Epicor Software Corporation (5)	06/01/22	4.75	%	L+ 3.75	1.00%	Software	1,987		1,971		1,963
Erie Acquisition Holdings, Inc. (5), (7)	03/01/23	5.81	%	L+ 4.75	1.00%	Commercial Services & Supplies	498		488		502
EWT Holdings III Corp. (5)	01/15/21	4.75	%	L+ 3.75	1.00%	Machinery	973		969		975
Expro Finservices S.à r.l. (3), (5)	09/02/21	5.75	%	L+ 4.75	1.00%	Energy Equipment & Services	1,960		1,939		1,653
Fairmount Minerals, Ltd. (5)	09/05/19	4.50	%	L+ 3.50	1.00%	Metals & Mining	424		425		380
FHC Health Systems, Inc. (5)	12/23/21	5.00	%	L+ 4.00	1.00%	Health Care Providers & Services	1,496		1,474		1,464

See notes to consolidated financial statements.

8

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2016

(unaudited, in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
First Lien Floating Rate Loans (continued) —133.2% of Net Assets
Filtration Group Corporation (5)	11/20/20	4.25	%	L+ 3.25	1.00%	Industrial Conglomerates	$	990	$	990	$	996
Fitness International, LLC (5), (7)	07/01/20	6.00	%	L+ 5.00	1.00%	Hotels, Restaurants & Leisure	1,750		1,727		1,752
Gates Global LLC (5)	07/06/21	4.25	%	L+ 3.25	1.00%	Machinery	1,456		1,455		1,437
Global Tel*Link Corporation (5)	05/23/20	5.00	%	L+ 3.75	1.25%	Diversified Telecommunications Services	1,654		1,635		1,606
Gold Merger Co., Inc. (5)	07/27/23	4.75	%	L+ 3.75	1.00%	Health Care Providers & Services	1,000		1,004		1,009
Gruden Acquisition, Inc. (5)	08/18/22	5.75	%	L+ 4.75	1.00%	Road & Rail	331		328		299
HFOTC LLC (5), (7)	08/19/21	4.25	%	L+ 3.25	1.00%	Oil, Gas & Consumable Fuels	1,491		1,434		1,469
HGIM Corp. (5)	06/18/20	5.50	%	L+ 4.50	1.00%	Marine	1,455		1,458		920
Hyland Software, Inc. (5)	07/01/22	4.75	%	L+ 3.75	1.00%	Software	2,464		2,446		2,483
Immucor, Inc. (5)	08/17/18	5.00	%	L+ 3.75	1.25%	Health Care Equipment & Supplies	977		981		954
Indra Holdings Corp. (5)	05/01/21	5.25	%	L+ 4.25	1.00%	Textiles, Apparel & Luxury Goods	1,190		1,183		1,006
Informatica Corporation (5)	08/05/22	4.50	%	L+ 3.50	1.00%	Software	1,980		1,976		1,931
Information Resources, Inc. (5)	09/30/20	4.75	%	L+ 3.75	1.00%	Professional Services	1,931		1,940		1,941
Inmar, Inc. (5)	01/27/21	4.25	%	L+ 3.25	1.00%	Commercial Services & Supplies	2,697		2,679		2,683
Ion Media Networks, Inc. (5)	12/18/20	4.75	%	L+ 3.75	1.00%	Media	1,897		1,905		1,907
IPC Corp. (5)	08/06/21	5.50	%	L+ 4.50	1.00%	Software	1,477		1,472		1,396
Jaguar Holding Company II (5)	08/18/22	4.25	%	L+ 3.25	1.00%	Life Sciences Tools & Services	1,481		1,475		1,488
Jazz Acquisition, Inc. (5)	06/19/21	4.50	%	L+ 3.50	1.00%	Aerospace & Defense	1,956		1,960		1,815
Jo-Ann Stores, Inc. (5)	09/29/23	6.00	%	L+ 5.00	1.00%	Specialty Retail	500		490		493
Kronos Acquisition Intermediate Inc. (3), (5)	08/26/22	6.00	%	L+ 5.00	1.00%	Household Products	990		969		992
Landry's Inc. (5)	09/21/23	4.00	%	L+ 3.25	0.75%	Hotels, Restaurants & Leisure	750		746		755
Landslide Holdings, Inc. (5)	09/27/22	5.50	%	L+ 4.50	1.00%	Software	700		693		706
Learning Care Group (US) No. 2 Inc. (5)	05/05/21	5.00	%	L+ 4.00	1.00%	Diversified Consumer Services	987		987		989
Liberty Cablevision of Puerto Rico LLC (5)	01/07/22	4.50	%	L+ 3.50	1.00%	Media	1,000		993		990
Life Time Fitness, Inc. (5)	06/10/22	4.25	%	L+ 3.25	1.00%	Hotels, Restaurants & Leisure	867		861		869
Manitowoc Foodservice, Inc. (3), (5)	03/03/23	5.75	%	L+ 4.75	1.00%	Machinery	696		683		706
McGraw-Hill Global Education Holdings, LLC (5)	05/04/22	5.00	%	L+ 4.00	1.00%	Media	998		993		1,005
Mediware Information Systems, Inc. (5)	09/28/23	5.75	%	L+ 4.75	1.00%	Health Care Technology	500		495		504
Meter Readings Holdings, LLC (5)	08/29/23	6.75	%	L+ 5.75	1.00%	Electronic Equipment, Instruments & Components	667		657		667
Mitchell International, Inc. (5)	10/13/20	4.50	%	L+ 3.50	1.00%	Software	2,383		2,391		2,386
Moneygram International, Inc. (3), (5)	03/27/20	4.25	%	L+ 3.25	1.00%	IT Services	597		572		581

See notes to consolidated financial statements.

9

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2016

(unaudited, in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
First Lien Floating Rate Loans (continued) —133.2% of Net Assets
MPH Acquisition Holdings LLC (5)	06/07/23	5.00	%	L+ 4.00	1.00%	Health Care Providers & Services	$	478	$	476	$	485
National Financial Partners Corp. (5)	07/01/20	4.50	%	L+ 3.50	1.00%	Insurance	2,448		2,458		2,457
NVA Holdings, Inc. (5)	08/14/21	5.50	%	L+ 4.50	1.00%	Health Care Providers & Services	622		620		624
NVLX Acquisition, LLC (5)	12/05/21	6.00	%	L+ 5.00	1.00%	Containers & Packaging	499		496		503
Omnitracs, LLC (5)	11/25/20	4.75	%	L+ 3.75	1.00%	Internet Software & Services	995		979		993
Onex Carestream Finance LP (5)	06/07/19	5.00	%	L+ 4.00	1.00%	Health Care Equipment & Supplies	1,634		1,638		1,523
Opal Acquisition, Inc. (5)	11/27/20	5.00	%	L+ 4.00	1.00%	Health Care Providers & Services	2,900		2,885		2,720
Ortho-Clinical Diagnostics S.A. (3), (5)	06/30/21	4.75	%	L+ 3.75	1.00%	Health Care Providers & Services	2,451		2,395		2,403
Peabody Energy Corporation (3), (5), (9)	09/24/20	5.75	%	L+ 3.25	1.00%	Oil, Gas & Consumable Fuels	771		662		611
PetSmart, Inc. (5)	03/11/22	4.25	%	L+ 3.25	1.00%	Specialty Retail	489		487		490
Phillips-Medisize Corporation (5)	06/16/21	4.75	%	L+ 3.75	1.00%	Health Care Equipment & Supplies	1,199		1,198		1,201
Plaskolite, LLC (5)	11/03/22	5.75	%	L+ 4.75	1.00%	Chemicals	920		914		923
Plaze, Inc. (5)	07/31/22	5.25	%	L+ 4.25	1.00%	Chemicals	828		827		830
PODS, LLC (5)	02/02/22	4.50	%	L+ 3.50	1.00%	Road & Rail	995		984		1,002
Power Buyer, LLC (5)	05/06/20	4.25	%	L+ 3.25	1.00%	Construction & Engineering	995		994		994
Presidio, Inc. (5)	02/02/22	5.25	%	L+ 4.25	1.00%	IT Services	1,330		1,330		1,331
Press Ganey Holdings, Inc. (5)	09/29/23	4.25	%	L+ 3.25	1.00%	Health Care Technology	400		398		401
PrimeLine Utility Services LLC (5)	11/14/22	6.50	%	L+ 5.50	1.00%	Construction & Engineering	1,110		1,100		1,117
Quikrete Holdings, Inc. (5)	09/28/20	4.00	%	L+ 3.00	1.00%	Constructions Materials	586		588		592
Ravago Holdings America, Inc. (5)	07/13/23	5.00	%	L+ 4.00	1.00%	Trading Companies & Distributors	499		494		501
Renaissance Learning, Inc. (5)	04/09/21	4.50	%	L+ 3.50	1.00%	Software	1,950		1,949		1,947
RGIS Services, LLC (5)	10/18/17	5.50	%	L+ 4.25	1.25%	Commercial Services & Supplies	1,506		1,503		1,404
Riverbed Technology, Inc. (5)	04/25/22	5.00	%	L+ 4.00	1.00%	Communications Equipment	1,975		1,975		1,997
Road Infrastructure Investment Holdings, Inc. (5)	06/13/23	5.00	%	L+ 4.00	1.00%	Chemicals	800		798		808
Scientific Games International, Inc. (3), (5)	10/01/21	6.00	%	L+ 5.00	1.00%	Hotels, Restaurants & Leisure	980		973		983
Sears Roebuck Acceptance Corp. (3), (5)	06/30/18	5.50	%	L+ 4.50	1.00%	Multiline Retail	980		972		962
Securus Technologies Holdings, Inc. (5)	04/30/20	4.75	%	L+ 3.50	1.25%	Diversified Telecommunications Services	1,871		1,853		1,853
Sedgwick Claims Management Services, Inc. (5)	03/01/21	5.25	%	L+ 4.25	1.00%	Insurance	499		493		504
Shearer's Foods, LLC (5)	06/30/21	5.25	%	L+ 4.25	1.00%	Food Products	496		492		496
Solera, LLC (3), (5)	03/03/23	5.75	%	L+ 4.75	1.00%	Software	498		484		503

See notes to consolidated financial statements.

10

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2016

(unaudited, in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
First Lien Floating Rate Loans (continued) —133.2% of Net Assets
Sterigenics-Nordion Holdings, LLC (5)	05/16/22	4.25	%	L+ 3.25	1.00%	Life Sciences Tools & Services	$	898	$	890	$	902
STS Operating, Inc. (5)	02/12/21	4.75	%	L+ 3.75	1.00%	Trading Companies & Distributors	1,906		1,914		1,735
Surgery Center Holdings, Inc. (5)	11/03/20	4.75	%	L+ 3.75	1.00%	Health Care Providers & Services	1,965		1,958		1,969
Syniverse Holdings, Inc. (5)	04/23/19	4.00	%	L+ 3.00	1.00%	Wireless Telecommunication Services	1,466		1,442		1,301
TCH-2 Holdings, LLC (5)	05/06/21	5.50	%	L+ 4.50	1.00%	Internet Software & Services	545		527		546
Thermasys Corp. (5)	05/03/19	5.25	%	L+ 4.00	1.25%	Machinery	444		445		366
Travelport Finance (Luxembourg) S.à r.l. (3), (5)	09/02/21	5.00	%	L+ 4.00	1.00%	Internet Software & Services	1,923		1,906		1,934
Turbocombustor Technology, Inc. (5)	12/02/20	5.50	%	L+ 4.50	1.00%	Aerospace & Defense	3,404		3,383		2,970
U.S. Renal Care, Inc. (5)	12/30/22	5.25	%	L+ 4.25	1.00%	Health Care Providers & Services	496		492		478
USI, Inc. (5)	12/27/19	4.25	%	L+ 3.25	1.00%	Insurance	1,940		1,951		1,945
VF Holding Corp. (5)	06/30/23	4.75	%	L+ 3.75	1.00%	Internet Software & Services	1,000		995		1,005
Weight Watchers International, Inc. (3), (5)	04/02/20	4.00	%	L+ 3.25	0.75%	Diversified Consumer Services	990		837		753
William Morris Endeavor Entertainment, LLC (5)	05/06/21	5.25	%	L+ 4.25	1.00%	Media	1,950		1,948		1,962
WP CPP Holdings, LLC (5)	12/28/19	4.50	%	L+ 3.50	1.00%	Aerospace & Defense	2,416		2,412		2,373
Total First Lien Floating Rate Loans							$	179,882	$	178,510	$	175,744
Second Lien Floating Rate Loans —12.4% of Net Assets
Advantage Sales & Marketing Inc. (5)	07/25/22	7.50	%	L+ 6.50	1.00%	Professional Services	$	1,000	$	995	$	954
Ameriforge Group Inc. (6), (9)	12/21/20	8.75	%	L+ 7.50	1.25%	Energy Equipment & Services	500		456		80
Applied Systems, Inc.	01/24/22	7.50	%	L+ 6.50	1.00%	Software	969		965		980
Asurion, LLC (5)	03/03/21	8.50	%	L+ 7.50	1.00%	Commercial Services & Supplies	1,000		990		997
Camp International Holding Company  (5)	08/18/24	8.25	%	L+ 7.25	1.00%	Transportation Infrastructure	1,008		1,008		1,012
Checkout Holding Corp. (5)	04/11/22	7.75	%	L+ 6.75	1.00%	Media	1,000		1,002		725
Del Monte Foods, Inc. (3), (5)	08/18/21	8.25	%	L+ 7.25	1.00%	Food Products	1,500		1,499		1,130
EWT Holdings III Corp.	01/15/22	8.50	%	L+ 7.50	1.00%	Machinery	1,000		997		999
Filtration Group Corporation(5)	11/22/21	8.25	%	L+ 7.25	1.00%	Industrial Conglomerates	126		125		127
Jazz Acquisition, Inc. (5)	06/19/22	7.75	%	L+ 6.75	1.00%	Aerospace & Defense	1,250		1,255		1,050
Jonah Energy LLC (5), (6)	05/12/21	7.50	%	L+ 6.50	1.00%	Oil, Gas & Consumable Fuels	500		495		448
Mitchell International, Inc. (5)	10/11/21	8.50	%	L+ 7.50	1.00%	Software	750		707		735
NVA Holdings, Inc. (5)	08/14/22	8.00	%	L+ 7.00	1.00%	Health Care Providers & Services	1,500		1,508		1,501
Second Lien Floating Rate Loans (continued) —12.4% of Net Assets

See notes to consolidated financial statements.

11

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2016

(unaudited, in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
Ranpak Corp. (5)	10/03/22	8.25	%	L+ 7.25	1.00%	Containers & Packaging	$	1,375	$	1,374	$	1,275
Sedgwick Claims Management Services, Inc. (5)	02/28/22	6.75	%	L+ 5.75	1.00%	Insurance	2,500		2,413		2,480
Solenis International, L.P. (5)	07/31/22	7.75	%	L+ 6.75	1.00%	Chemicals	500		498		489
U.S. Renal Care, Inc. (5)	12/29/23	9.00	%	L+ 8.00	1.00%	Health Care Providers & Services	1,000		986		970
WP CPP Holdings, LLC (5)	04/30/21	8.75	%	L+ 7.75	1.00%	Aerospace & Defense	493		500		447
Total Second Lien Floating Rate Loans							$	17,971	$	17,773	$	16,399
CLO Equity —29.4% of Net Assets
Apidos CLO XIV, Income Notes (3), (4), (6)	04/15/25	15.53	%				$	5,900	$	4,193	$	3,551
Apidos CLO XVIII, Income Notes (3), (4), (6)	07/22/26	12.70	%				2,500		1,813		1,467
Ares XXIX CLO Ltd., Subordinated Notes (3), (4), (6)	04/17/26	9.80	%				4,750		3,624		2,483
Avery Point II CLO, Income Notes (3), (4), (6)	07/17/25	24.19	%				3,200		2,028		1,043
Babson 2015-1, Income Notes (3), (4), (6)	04/20/27	16.71	%				2,500		1,981		1,845
Betony CLO, Ltd., Subordinated Notes (3), (4), (6)	04/15/27	10.43	%				2,500		1,953		1,256
Blue Hill CLO, Ltd., Subordinated Notes (3), (4), (6)	01/15/26	14.32	%				5,400		4,017		1,730
Blue Hill CLO, Ltd., Subordinated Fee Notes (3), (4), (6)	01/15/26	40.20	%				99		66		63
Carlyle Global Market Strategies CLO 2015-3, LTD., Subordinated Notes (3), (4), (6)	07/28/28	22.17	%				3,000		2,325		2,472
Cent CLO 18 Limited, Subordinated Notes (3), (4), (6)	07/23/25	13.12	%				4,675		3,301		2,303
Cent CLO 19 Limited, Subordinated Notes (3), (4), (6)	10/29/25	12.03	%				2,750		2,043		1,446
Dryden 30 Senior Loan Fund, Subordinated Notes (3), (4), (6)	11/15/25	22.42	%				2,500		1,502		1,295
Dryden 31 Senior Loan Fund, Subordinated Notes (3), (4), (6)	04/18/26	13.83	%				5,250		3,566		2,712
Galaxy XVI CLO, Ltd., Subordinated Notes (3), (4), (6)	11/17/25	15.08	%				2,750		1,960		1,418
Halcyon Loan Advisors Funding 2014-1 Ltd., Subordinated Notes (3), (4), (6)	04/18/26	52.96	%				3,750		2,705		1,392
Highbridge Loan Management 2013-2, Ltd., Subordinated Notes (3), (4), (6)	10/20/24	21.79	%				1,000		681		667
Magnetite VIII, Limited, Subordinated Notes (3), (4), (6)	04/15/26	14.38	%				3,000		2,392		2,102
Neuberger Berman CLO XV, Ltd., Subordinated Notes (3), (4), (6)	10/15/25	15.74	%				3,410		2,153		1,938
Octagon Investment Partners XIV, Ltd., Income Notes (3), (4), (6)	01/15/24	12.91	%				5,500		3,440		1,903
Octagon Investment Partners XX, Ltd., Subordinated Notes (3), (4), (6)	08/12/26	8.86	%				2,500		1,926		1,374
OZLM VI, Ltd., Subordinated Notes (3), (4), (6)	04/17/26	38.19	%				2,000		1,022		1,200
CLO Equity (continued) —29.4% of Net Assets

See notes to consolidated financial statements.

12

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

SEPTEMBER 30, 2016

(unaudited, in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
OZLM VII, Ltd., Subordinated Notes (3), (4), (6)	07/17/26	38.56	%				$	1,000	$	529	$	622
THL Credit Wind River 2014-1 CLO Ltd., Subordinated Notes (3), (4), (6)	04/18/26	17.54	%				4,000		3,038		2,574
Total CLO Equity							$	73,934	$	52,258	$	38,856
Common Equity —0.0% of Net Assets
New Millennium Holdco, Inc. (9,446 shares) (5), (6), (10)						Health Care Providers & Services	$	—	$	—	$	7
Total Common Equity							$	—	$	—	$	7
Total Non-Control/Non-Affiliate Investments (8) — 175% of Net Assets							$	271,787	$	248,541	$	231,006
Liabilities in Excess of Other Assets — (75.0%) of Net Assets											(99,022		)
Net Assets — 100.0%											$	131,984

(1) For each debt investment we have provided the weighted-average interest rate in effect as of September 30, 2016. For each CLO investment we have provided the accounting yield as of September 30, 2016 determined using the effective interest method that will be applied to the current amortized cost of the investment as adjusted for credit impairments, if any, in the following quarter. See Note 2 in this Quarterly Report on Form 10-Q regarding the recognition of Investment Income on CLOs.

(2) Floating rate debt investments typically accrue interest at a predetermined spread relative to an index, typically the London Interbank Offered Rate (“LIBOR” or “L”) or the prime index rate (“PRIME” or “P”), and reset monthly, quarterly or semi-annually. These instruments may be subject to a LIBOR or PRIME rate floor.

(3) Investments that are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2016, qualifying assets represented 76% of total assets.

(4) These securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions that are exempt from registration, normally to qualified institutional buyers.

(5) Assets are held at ACSF Funding and are pledged as collateral for the Credit Facility.

(6) Fair value was determined using significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.

(7) All or a portion of this position has not settled as of September 30, 2016.

(8) Net estimated unrealized loss for federal income tax purposes is $(20,301) as of September 30, 2016 based on a tax cost of $251,306. Estimated aggregate gross unrealized loss for federal income tax purposes as of September 30, 2016 is $(21,537); estimated aggregate gross unrealized gain for federal income tax purposes as of September 30, 2016 is $1,236.

(9) Investment is on non-accrual as of September 30, 2016 and therefore considered non-income producing. All subsequent cash received from investment will be used to reduce its cost basis until the investment is placed back on accrual status or the cost basis has been collected.

(10) Common stock is non-income producing.

See notes to consolidated financial statements.

13

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

(in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor		Industry	Par Amount		Cost		Fair Value
Non-Control/Non-Affiliate Investments
First Lien Floating Rate Loans —143.8% of Net Assets
24 Hour Fitness Worldwide, Inc. (5)	05/28/2021	4.75	%	L+ 3.75	1.00	%	Hotels, Restaurants & Leisure	$	1,972	$	1,966	$	1,846
Acosta, Inc. (5)	09/26/2021	4.25	%	L+ 3.25	1.00	%	Media	2,475		2,438		2,361
ADMI Corp. (5)	04/29/2022	5.50	%	L+ 4.50	1.00	%	Health Care Providers & Services	547		546		548
Aegis Toxicology SciencesCorporation (5)	02/24/2021	5.50	%	L+ 4.50	1.00	%	Health Care Providers & Services	1,642		1,633		1,384
Agrofresh Inc. (3), (5)	07/31/2021	5.75	%	L+ 4.75	1.00	%	Chemicals	647		646		638
Air Medical Group Holdings, Inc. (5)	04/28/2022	4.50	%	L+ 3.50	1.00	%	Health Care Providers & Services	1,990		1,995		1,932
Albertson's LLC (5)	03/21/2019	5.50	%	L+ 4.50	1.00	%	Food & Staples Retailing	993		989		991
AlixPartners, LLP (5)	07/28/2022	4.50	%	L+ 3.50	1.00	%	Diversified Financial Services	1,995		1,990		1,984
Alliant Holdings Intermediate, LLC (5)	08/12/2022	4.50	%	L+ 3.50	1.00	%	Insurance	1,045		1,042		1,022
American Tire Distributors, Inc. (5)	09/01/2021	5.25	%	L+ 4.25	1.00	%	Distributors	1,478		1,472		1,459
Amneal Pharmaceuticals LLC (5)	11/01/2019	4.50	%	L+ 3.50	1.00	%	Pharmaceuticals	992		992		976
AmWINS Group, LLC (5)	09/06/2019	5.25	%	L+ 4.25	1.00	%	Insurance	2,934		2,946		2,932
Anchor Glass Container Corporation (5)	07/01/2022	4.54	%	L+ 3.50	1.00	%	Containers & Packaging	963		959		962
AqGen Ascensus, Inc. (5), (7)	12/05/2022	5.50	%	L+ 4.50	1.00	%	Capital Markets	941		885		885
Aquilex LLC (5)	12/31/2020	5.00	%	L+ 4.00	1.00	%	Commercial Services & Supplies	968		966		929
Ardent Legacy Acquisitions, Inc. (5)	08/04/2021	6.50	%	L+ 5.50	1.00	%	Health Care Providers & Services	332		329		331
Arnhold and S. Bleichroeder Holdings, Inc. (5)	12/01/2022	4.75	%	L+ 4.00	0.75	%	Capital Markets	714		700		698
Ascend Learning, LLC (5)	07/31/2019	5.50	%	L+ 4.50	1.00	%	Diversified Consumer Services	588		586		586
Asurion, LLC (5)	05/24/2019	5.00	%	L+ 3.75	1.25	%	Commercial Services & Supplies	943		943		886
Asurion, LLC (5)	08/04/2022	5.00	%	L+ 4.00	1.00	%	Commercial Services & Supplies	1,244		1,238		1,141
Avaya Inc. (5)	05/29/2020	6.25	%	L+ 5.25	1.00	%	Software	997		806		700
BJ's Wholesale Club, Inc. (5)	09/26/2019	4.50	%	L+ 3.50	1.00	%	Food & Staples Retailing	1,471		1,472		1,414
Blackboard Inc. (5)	10/04/2018	4.75	%	L+ 3.75	1.00	%	Software	2,435		2,436		2,345
Blue Coat Holdings, Inc. (5)	05/20/2022	4.50	%	L+ 3.50	1.00	%	Communications Equipment	2,000		2,001		1,938
BWay Intermediate Company, Inc. (5)	08/14/2020	5.50	%	L+ 4.50	1.00	%	Containers & Packaging	2,456		2,437		2,369
C.H.I. Overhead Doors, Inc. (5)	07/29/2022	4.75	%	L+ 3.75	1.00	%	Building Products	332		332		327
Calceus Acquisition, Inc. (5)	01/31/2020	5.00	%	L+ 4.00	1.00	%	Textiles, Apparel & Luxury Goods	2,337		2,345		2,092
CAMP International Holding Company (5)	05/31/2019	4.75	%	L+ 3.75	1.00	%	Transportation Infrastructure	1,960		1,980		1,908
Carecore National, LLC (5)	03/05/2021	5.50	%	L+ 4.50	1.00	%	Health Care Providers & Services	2,047		2,047		1,781
CCM Merger, Inc. (5)	08/06/2021	4.50	%	L+ 3.50	1.00	%	Hotels, Restaurants & Leisure	883		877		880
Checkout Holding Corp. (5)	04/09/2021	4.50	%	L+ 3.50	1.00	%	Media	2,463		2,461		1,982
CityCenter Holdings, LLC (5)	10/16/2020	4.25	%	L+ 3.25	1.00	%	Hotels, Restaurants & Leisure	1,774		1,783		1,764
Compuware Corporation (5)	12/15/2021	6.25	%	L+ 5.25	1.00	%	Software	2,972		2,906		2,780

See notes to consolidated financial statements.

14

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

DECEMBER 31, 2015

(in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor		Industry	Par Amount		Cost		Fair Value
First Lien Floating Rate Loans (continued) —143.8% of Net Assets
Cotiviti Corporation (5)	05/14/2021	4.50	%	L+ 3.50	1.00	%	Professional Services	$	1,111	$	1,102	$	1,078
CPG International Inc. (5)	09/30/2020	4.75	%	L+ 3.75	1.00	%	Building Products	1,938		1,938		1,831
CPI Buyer, LLC (5)	08/16/2021	5.50	%	L+ 4.50	1.00	%	Trading Companies & Distributors	988		976		949
CT Technologies Intermediate Holdings, Inc. (5)	12/01/2021	5.25	%	L+ 4.25	1.00	%	Health Care Technology	498		495		482
Dell International LLC (5)	04/29/2020	4.00	%	L+ 3.25	0.75	%	Technology Hardware, Storage & Peripherals	2,488		2,495		2,472
Deltek, Inc. (5)	06/25/2022	5.00	%	L+ 4.00	1.00	%	Software	2,872		2,866		2,845
Dole Food Company, Inc. (5)	11/01/2018	4.50	%	L+ 3.50	1.00	%	Food Products	2,513		2,509		2,502
Duff & Phelps Corporation (5)	04/23/2020	4.75	%	L+ 3.75	1.00	%	Capital Markets	3,421		3,423		3,356
DynCorp International Inc. (5)	07/07/2016	6.25	%	L+ 4.50	1.75	%	Aerospace & Defense	2,189		2,191		2,097
Electrical Components International, Inc. (5)	05/28/2021	5.75	%	L+ 4.75	1.00	%	Electrical Equipment	1,970		1,974		1,964
Emerald Expositions Holding, Inc. (5)	06/17/2020	4.75	%	L+ 3.75	1.00	%	Media	2,622		2,640		2,587
Epicor Software Corporation (5)	06/01/2022	4.75	%	L+ 3.75	1.00	%	Software	995		993		974
eResearchTechnology, Inc. (5)	05/08/2022	5.50	%	L+ 4.50	1.00	%	Life Sciences Tools & Services	995		991		978
Evergreen Acqco 1 LP (5)	07/09/2019	5.00	%	L+ 3.75	1.25	%	Multiline Retail	621		623		509
EWT Holdings III Corp. (5)	01/15/2021	4.75	%	L+ 3.75	1.00	%	Machinery	980		976		965
Expro Finservices S.à r.l. (3), (5)	09/02/2021	5.75	%	L+ 4.75	1.00	%	Energy Equipment & Services	1,975		1,950		1,334
Fairmount Minerals, Ltd. (5)	09/05/2019	4.50	%	L+ 3.50	1.00	%	Metals & Mining	2,933		2,945		1,463
Filtration Group Corporation (5)	11/23/2020	4.25	%	L+ 3.25	1.00	%	Industrial Conglomerates	998		998		973
Fitness International, LLC (5)	07/01/2020	5.50	%	L+ 4.50	1.00	%	Hotels, Restaurants & Leisure	1,288		1,279		1,194
Gates Global LLC (5)	07/06/2021	4.25	%	L+ 3.25	1.00	%	Machinery	1,489		1,487		1,400
Global Tel*Link Corporation (5)	05/23/2020	5.00	%	L+ 3.75	1.25	%	Diversified Telecommunications Services	1,685		1,662		1,239
Gruden Acquisition, Inc. (5)	08/18/2022	5.75	%	L+ 4.75	1.00	%	Road & Rail	333		330		320
HGIM Corp. (5)	06/18/2020	5.50	%	L+ 4.50	1.00	%	Marine	1,466		1,470		872
Hyland Software, Inc. (5)	07/01/2022	4.75	%	L+ 3.75	1.00	%	Software	2,482		2,461		2,451
Immucor, Inc. (5)	08/19/2018	5.00	%	L+ 3.75	1.25	%	Health Care Equipment & Supplies	985		990		940
Indra Holdings Corp. (5)	05/01/2021	5.25	%	L+ 4.25	1.00	%	Textiles, Apparel & Luxury Goods	1,190		1,181		1,113
Informatica Corporation (5)	08/05/2022	4.50	%	L+ 3.50	1.00	%	Software	1,995		1,990		1,926
Information Resources, Inc. (5)	09/30/2020	4.75	%	L+ 3.75	1.00	%	Professional Services	1,955		1,965		1,945
Inmar, Inc. (5)	01/27/2021	4.25	%	L+ 3.25	1.00	%	Commercial Services & Supplies	1,970		1,956		1,927
Ion Media Networks, Inc. (5)	12/18/2020	4.75	%	L+ 3.75	1.00	%	Media	1,965		1,975		1,941
IPC Corp. (5)	08/06/2021	5.50	%	L+ 4.50	1.00	%	Software	1,489		1,482		1,404
Jaguar Holding Company I (5)	08/18/2022	4.25	%	L+ 3.25	1.00	%	Life Sciences Tools & Services	1,493		1,485		1,454
Jazz Acquisition, Inc. (5)	06/19/2021	4.50	%	L+ 3.50	1.00	%	Aerospace & Defense	1,971		1,975		1,791
Key Safety Systems, Inc. (5)	08/29/2021	4.75	%	L+ 3.75	1.00	%	Auto Components	1,481		1,475		1,444
Kronos Acquisition Intermediate Inc. (3), (5)	08/26/2022	6.00	%	L+ 5.00	1.00	%	Household Products	998		974		971
La Frontera Generation, LLC (5)	09/30/2020	4.50	%	L+ 3.50	1.00	%	Independent Power and Renewable Electricity Producers	1,783		1,792		1,693

See notes to consolidated financial statements.

15

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

DECEMBER 31, 2015

(in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor		Industry	Par Amount		Cost		Fair Value
First Lien Floating Rate Loans (continued) —143.8% of Net Assets
Landmark Aviation FBO Canada, Inc. (3), (5)	10/25/2019	4.75	%	L+ 3.75	1.00	%	Aerospace & Defense	$	75	$	75	$	75
Landslide Holdings, Inc. (5)	02/25/2020	5.00	%	L+ 4.00	1.00	%	Software	983		979		963
Language Line, LLC (5)	07/07/2021	6.50	%	L+ 5.50	1.00	%	Commercial Services & Supplies	956		947		953
Learning Care Group (US) No. 2 Inc. (5)	05/05/2021	5.00	%	L+ 4.00	1.00	%	Diversified Consumer Services	1,016		1,016		1,012
Leonardo Acquisition Corp. (5)	01/29/2021	4.25	%	L+ 3.25	1.00	%	Internet & Catalog Retail	2,940		2,950		2,930
Life Time Fitness, Inc. (5)	06/10/2022	4.25	%	L+ 3.25	1.00	%	Hotels, Restaurants & Leisure	498		495		486
LM U.S. Member LLC (5)	10/25/2019	4.75	%	L+ 3.75	1.00	%	Aerospace & Defense	1,895		1,902		1,889
Mallinckrodt International Finance S.A. (3), (5), (7)	03/19/2021	3.25	%	L+ 2.50	0.75	%	Pharmaceuticals	570		532		555
Mitchell International, Inc. (5), (7)	10/13/2020	4.50	%	L+ 3.50	1.00	%	Software	2,401		2,411		2,283
Moneygram International, Inc. (3), (5)	03/27/2020	4.25	%	L+ 3.25	1.00	%	IT Services	602		571		552
National Financial Partners Corp. (5)	07/01/2020	4.50	%	L+ 3.50	1.00	%	Insurance	2,466		2,480		2,376
New Millennium Holdco, Inc. (5)	12/21/2020	7.50	%	L+ 6.50	1.00	%	Health Care Providers & Services	323		323		299
Onex Carestream Finance LP (5)	06/07/2019	5.00	%	L+ 4.00	1.00	%	Health Care Equipment & Supplies	1,708		1,713		1,547
Opal Acquisition, Inc. (5)	11/27/2020	5.00	%	L+ 4.00	1.00	%	Health Care Providers & Services	2,934		2,917		2,453
Ortho-Clinical Diagnostics Holdings Luxembourg S.À R.L. (3), (5)	06/30/2021	4.75	%	L+ 3.75	1.00	%	Health Care Providers & Services	1,970		1,968		1,682
P2 Lower Acquisition, LLC (5)	10/22/2020	5.50	%	L+ 4.50	1.00	%	Health Care Providers & Services	1,895		1,890		1,876
Peabody Energy Corporation (3), (5)	09/24/2020	4.25	%	L+ 3.25	1.00	%	Oil, Gas & Consumable Fuels	990		903		475
PetSmart, Inc. (5)	03/11/2022	4.25	%	L+ 3.25	1.00	%	Specialty Retail	995		991		971
Phillips-Medisize Corporation (5)	06/16/2021	4.75	%	L+ 3.75	1.00	%	Health Care Equipment & Supplies	1,208		1,207		1,181
Plaskolite, LLC (5)	11/03/2022	5.75	%	L+ 4.75	1.00	%	Chemicals	550		545		547
Plaze, Inc. (5)	07/31/2022	5.25	%	L+ 4.25	1.00	%	Chemicals	832		831		828
Presidio, Inc. (5)	02/02/2022	5.25	%	L+ 4.25	1.00	%	IT Services	1,340		1,340		1,311
PrimeLine Utility Services LLC (5)	11/14/2022	6.50	%	L+ 5.50	1.00	%	Construction & Engineering	1,000		990		993
Quikrete Holdings, Inc. (5)	09/28/2020	4.00	%	L+ 3.00	1.00	%	Constructions Materials	2,086		2,093		2,066
RCHP, Inc. (5)	04/23/2019	6.00	%	L+ 5.00	1.00	%	Health Care Providers & Services	1,970		1,957		1,947
Renaissance Learning, Inc. (5)	04/09/2021	4.50	%	L+ 3.50	1.00	%	Software	1,965		1,964		1,887
RGIS Services, LLC (5)	10/18/2017	5.50	%	L+ 4.25	1.25	%	Commercial Services & Supplies	2,931		2,923		2,089
Riverbed Technology, Inc. (5)	04/25/2022	6.00	%	L+ 5.00	1.00	%	Communications Equipment	993		988		990
Scientific Games International, Inc. (3), (5)	10/01/2021	6.00	%	L+ 5.00	1.00	%	Hotels, Restaurants & Leisure	988		979		903
Sears Roebuck Acceptance Corp. (3), (5)	06/30/2018	5.50	%	L+ 4.50	1.00	%	Multiline Retail	987		976		931
Securus Technologies Holdings, Inc (5)	04/30/2020	4.75	%	L+ 3.50	1.25	%	Diversified Telecommunications Services	1,885		1,864		1,371
Shearer's Foods, LLC (5), (7)	06/30/2021	5.25	%	L+ 4.25	1.00	%	Food Products	500		495		494

See notes to consolidated financial statements.

16

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

DECEMBER 31, 2015

(in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor		Industry	Par Amount		Cost		Fair Value
First Lien Floating Rate Loans (continued) —143.8% of Net Assets
Spin Holdco Inc. (5)	11/14/2019	4.25	%	L+ 3.25	1.00	%	Diversified Consumer Services	$	2,442	$	2,442	$	2,352
Sterigenics-Nordion Holdings, LLC (5)	05/16/2022	4.25	%	L+ 3.25	1.00	%	Life Sciences Tools & Services	905		896		882
STS Operating, Inc. (5)	02/12/2021	4.75	%	L+ 3.75	1.00	%	Trading Companies & Distributors	1,965		1,975		1,886
Surgery Center Holdings, Inc. (5)	11/03/2020	5.25	%	L+ 4.25	1.00	%	Health Care Providers & Services	1,980		1,972		1,962
Syniverse Holdings, Inc. (5)	04/23/2019	4.00	%	L+ 3.00	1.00	%	Wireless Telecommunication Services	1,500		1,468		1,107
Thermasys Corp. (5)	05/03/2019	5.25	%	L+ 4.00	1.25	%	Machinery	453		454		400
TPF II Power, LLC (5)	10/02/2021	5.50	%	L+ 4.50	1.00	%	Independent Power and Renewable Electricity Producers	984		978		966
Travelport Finance (Luxembourg) S.à r.l. (3), (5)	09/02/2021	5.75	%	L+ 4.75	1.00	%	Internet Software & Services	1,980		1,960		1,943
Turbocombustor Technology, Inc. (5)	12/02/2020	5.50	%	L+ 4.50	1.00	%	Aerospace & Defense	3,430		3,406		3,018
Tyche Holdings, LLC (5)	11/12/2021	4.75	%	L+ 3.75	1.00	%	IT Services	1,832		1,827		1,820
U.S. Renal Care, Inc. (5), (7)	12/30/2022	5.25	%	L+ 4.25	1.00	%	Health Care Providers & Services	500		495		497
Univision Communications Inc. (5)	03/01/2020	4.00	%	L+ 3.00	1.00	%	Media	1,488		1,489		1,459
USI, Inc. (5)	12/27/2019	4.25	%	L+ 3.25	1.00	%	Insurance	1,955		1,968		1,899
USIC Holdings, Inc. (5)	07/10/2020	4.00	%	L+ 3.00	1.00	%	Construction & Engineering	1,455		1,460		1,370
Weight Watchers International, Inc. (3),(5)	04/02/2020	4.00	%	L+ 3.25	0.75	%	Diversified Consumer Services	997		810		741
William Morris Endeavor Entertainment, LLC (5)	05/06/2021	5.25	%	L+ 4.25	1.00	%	Media	1,965		1,963		1,936
WP CPP Holdings, LLC (5)	12/28/2019	4.50	%	L+ 3.50	1.00	%	Aerospace & Defense	2,435		2,431		2,272
Total First Lien Floating Rate Loans								$	182,373	$	181,367	$	169,580
Second Lien Floating Rate Loans —19.1% of Net Assets
Advantage Sales & Marketing Inc. (5)	07/25/2022	7.50	%	L+ 6.50	1.00	%	Professional Services	$	1,000	$	994	$	902
Ameriforge Group Inc. (6), (9)	12/21/2020	8.75	%	L+ 7.50	1.25	%	Energy Equipment & Services	500		489		42
Applied Systems, Inc.	01/24/2022	7.50	%	L+ 6.50	1.00	%	Software	980		975		912
Asurion, LLC (5)	03/03/2021	8.50	%	L+ 7.50	1.00	%	Commercial Services & Supplies	1,000		989		860
CAMP International Holding Company	11/29/2019	8.25	%	L+ 7.25	1.00	%	Transportation Infrastructure	1,000		1,000		974
Checkout Holding Corp. (5)	04/11/2022	7.75	%	L+ 6.75	1.00	%	Media	1,000		1,002		573
Cotiviti Corporation (5)	05/13/2022	8.00	%	L+ 7.00	1.00	%	Professional Services	1,250		1,240		1,236
Del Monte Foods, Inc. (3), (5)	08/18/2021	8.25	%	L+ 7.25	1.00	%	Food Products	1,500		1,499		1,235
EWT Holdings III Corp.	01/15/2022	8.50	%	L+ 7.50	1.00	%	Machinery	1,000		996		965
Filtration Group Corporation (5)	11/22/2021	8.25	%	L+ 7.25	1.00	%	Industrial Conglomerates	126		125		123
Jazz Acquisition, Inc. (5)	06/19/2022	7.75	%	L+ 6.75	1.00	%	Aerospace & Defense	1,250		1,255		1,125
Jonah Energy LLC (5)	05/12/2021	7.50	%	L+ 6.50	1.00	%	Oil, Gas & Consumable Fuels	500		494		318
Landslide Holdings, Inc.	02/25/2021	8.25	%	L+ 7.25	1.00	%	Software	1,000		994		920
P2 Lower Acquisition, LLC	10/22/2021	9.50	%	L+ 8.50	1.00	%	Health Care Providers & Services	500		498		495

See notes to consolidated financial statements.

17

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

DECEMBER 31, 2015

(in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor		Industry	Par Amount		Cost		Fair Value
Second Lien Floating Rate Loans (continued) —19.1% of Net Assets
Performance Food Group, Inc. (5)	11/14/2019	6.25	%	L+ 5.25	1.00	%	Food & Staples Retailing	$	2,038	$	2,030	$	2,038
Ranpak Corp. (5)	10/03/2022	8.25	%	L+ 7.25	1.00	%	Containers & Packaging	1,375		1,374		1,363
Road Infrastructure Investment, LLC (5)	09/30/2021	7.75	%	L+ 6.75	1.00	%	Chemicals	2,000		2,008		1,860
Sedgwick Claims Management Services, Inc. (5)	02/28/2022	6.75	%	L+ 5.75	1.00	%	Insurance	2,000		1,963		1,820
Solenis International, L.P. (5)	07/31/2022	7.75	%	L+ 6.75	1.00	%	Chemicals	500		498		402
TWCC Holding Corp. (5)	06/26/2020	7.00	%	L+ 6.00	1.00	%	Media	2,000		1,993		1,997
Tyche Holdings, LLC (5)	11/11/2022	9.00	%	L+ 8.00	1.00	%	IT Services	1,500		1,501		1,474
U.S. Renal Care, Inc. (5), (7)	12/29/2023	9.00	%	L+ 8.00	1.00	%	Health Care Providers & Services	500		490		493
WP CPP Holdings, LLC (5)	04/30/2021	8.75	%	L+ 7.75	1.00	%	Aerospace & Defense	493		502		448
Total Second Lien Floating Rate Loans								$	25,012	$	24,909	$	22,575
CLO Equity —31.3% of Net Assets
Apidos CLO XIV, Income Notes (3), (4), (6)	04/15/2025	14.32	%					$	5,900	$	4,616	$	3,524
Apidos CLO XVIII, Income Notes (3), (4), (6)	07/22/2026	12.39	%					2,500		1,936		1,351
Ares XXIX CLO Ltd., Subordinated Notes (3), (4), (6)	04/17/2026	11.04	%					4,750		3,947		2,612
Avery Point II CLO, Limited, Income Notes (3), (4), (6)	07/17/2025	14.09	%					3,200		2,351		1,286
Babson 2015-1, Income Notes (3), (4), (6)	04/20/2027	16.32	%					2,500		2,161		1,716
Blue Hill CLO, Ltd., Subordinated Notes (3), (4), (6)	01/15/2026	11.86	%					5,400		4,315		1,520
Blue Hill CLO, Ltd., Subordinated Fee Notes (3), (4), (6)	01/15/2026	27.45	%					100		74		62
Betony CLO, Ltd., Subordinated Notes (3), (4), (6)	04/15/2027	11.90	%					2,500		2,096		1,289
Carlyle Global Market Strategies CLO 2015-3, Ltd., Subordinated Notes (3), (4), (6)	07/28/2028	21.83	%					3,000		2,491		2,436
Cent CLO 18 Limited, Subordinated Notes (3), (4), (6)	07/23/2025	12.26	%					4,675		3,595		2,296
Cent CLO 19 Limited, Subordinated Notes (3), (4), (6)	10/29/2025	10.67	%					2,750		2,184		1,431
Dryden 30 Senior Loan Fund, Subordinated Notes (3), (4), (6)	11/15/2025	17.79	%					2,500		1,676		1,205
Dryden 31 Senior Loan Fund, Subordinated Notes (3), (4), (6)	04/18/2026	11.21	%					5,250		4,008		2,373
Galaxy XVI CLO, Ltd., Subordinated Notes (3), (4), (6)	11/17/2025	11.31	%					2,750		2,123		1,344
Halcyon Loan Advisors Funding 2014-1 Ltd., Subordinated Notes (3), (4), (6)	04/18/2026	20.65	%					3,750		3,045		1,474
Highbridge Loan Management 2013-2, Ltd., Subordinated Notes (3), (4), (6)	10/20/2024	22.16	%					1,000		728		665
Magnetite VIII, Limited, Subordinated Notes (3), (4), (6)	04/15/2026	13.42	%					3,000		2,557		2,133
Neuberger Berman CLO XV, Ltd., Subordinated Notes (3), (4), (6)	10/15/2025	9.14	%					3,410		2,414		1,495

See notes to consolidated financial statements.

18

AMERICAN CAPITAL SENIOR FLOATING, LTD.

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)

DECEMBER 31, 2015

(in thousands)

Description	Maturity	Interest Rate (1)		Basis  Point Spread Above Index (2)	LIBOR Interest Rate Floor	Industry	Par Amount		Cost		Fair Value
CLO Equity (continued) —31.3% of Net Assets
Octagon Investment Partners XIV, Ltd., Income Notes (3), (4), (6)	01/15/2024	9.49	%				$	5,500	$	3,924	$	2,790
Octagon Investment Partners XX, Ltd., Subordinated Notes (3), (4), (6)	08/12/2026	10.46	%				2,500		2,121		1,548
THL Credit Wind River 2014-1 CLO Ltd., Subordinated Notes (3), (4), (6)	04/18/2026	13.54	%				4,000		3,237		2,304
Total CLO Equity							$	70,935	$	55,599	$	36,854
Common Equity —0% of Net Assets
New Millennium Holdco, Inc. (9,446 shares) (5), (6), (10)						Health Care Providers & Services	$	—	$	—	$	47
Total Common Equity							$	—	$	—	$	47
Total Non-Control/Non-Affiliate Investments (8) — 194.2% of net assets							$	278,320	$	261,875	$	229,056
Liabilities in Excess of Other Assets — (94.2%)											(111,127		)
Net Assets — 100.0%											$	117,929

(1) For each debt investment we have provided the weighted-average interest rate in effect as of December 31, 2015. For each CLO investment we have provided the accounting yield as of December 31, 2015 determined using the effective interest method that will be applied to the current amortized cost of the investment as adjusted for credit impairments, if any, in the following quarter. See Note 2 in this Quarterly Report on Form 10-Q regarding the recognition of Investment Income on CLOs.

(2) Floating rate debt investments typically accrue interest at a predetermined spread relative to an index, typically LIBOR or PRIME, and reset monthly, quarterly or semi-annually. These instruments may be subject to a LIBOR or PRIME rate floor.

(3) Investments that are not “qualifying assets” under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying assets unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of December 31, 2015, qualifying assets represented 79% of total assets.

(4) These securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions that are exempt from registration, normally to qualified institutional buyers.

(5) Assets are held at ACSF Funding and are pledged as collateral for the Credit Facility.

(6) Fair value was determined using significant unobservable inputs and are classified as Level 3 in the fair value hierarchy.

(7) All or a portion of this position has not settled as of December 31, 2015.

(8) Net estimated unrealized loss for federal income tax purposes is $(38,561) as of December 31, 2015 based on a tax cost of $267,617. Estimated aggregate gross unrealized loss for federal income tax purposes as of December 31, 2015 is $(38,671); estimated aggregate gross unrealized gain for federal income tax purposes as of December 31, 2015 is $110.

(9) Investment is on non-accrual as of December 31, 2015 and therefore considered non-income producing. All subsequent cash received from investment will be used to reduce its cost basis until the investment is placed back on accrual status or the cost basis has been collected.

(10) Common stock is non-income producing.

See notes to consolidated financial statements.

19

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except share and per share amounts)

Note 1. Organization

American Capital Senior Floating, Ltd. (which is referred to as “ACSF”, “we”, “us” and “our”) was organized in February 2013 as a Maryland corporation and commenced operations on October 15, 2013. We are structured as an externally managed, non-diversified closed-end investment management company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In November 2013, we formed a wholly-owned special purpose financing vehicle, ACSF Funding I, LLC, a Delaware limited liability company (“ACSF Funding”).

In January 2014, we completed an initial public offering (“IPO”) of 10,000,000 shares of common stock at the public offering price of $15.00 per share for gross proceeds of $150,000. Upon completion of the IPO, we became externally managed by American Capital ACSF Management, LLC (our “Manager”), an indirect subsidiary of American Capital Asset Management, LLC (“ACAM”), which is a wholly-owned portfolio company of American Capital, Ltd. (“American Capital”). Prior to the completion of our IPO, we were wholly-owned by ACAM. Following completion of the IPO, ACAM owned approximately 3% of our outstanding common stock, the maximum amount permissible under the 1940 Act. In conjunction with the IPO, our Manager paid the underwriting commissions of $7,952. Our common stock is listed on the NASDAQ Global Select Market, where it trades under the symbol “ACSF”. We have elected to be treated as a BDC under the 1940 Act and to be taxed as a regulated investment company (“RIC”), as defined in Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

Investment Objective

Our investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve our capital. We actively manage a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to large-market U.S.-based companies (collectively, “Senior Floating Rate Loans” or “SFRLs”) which are commonly referred to as leveraged loans. We also invest in equity tranches of collateralized loan obligations (“CLOs”) which are securitized vehicles collateralized primarily by SFRLs and we may invest in debt tranches of CLOs. In addition, we may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. Additionally, we may from time to time hold or invest in other equity investments and other debt or equity securities generally arising from a restructuring of Senior Floating Rate Loan positions previously held by us.

Note 2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements 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 Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management, all adjustments which are of a normal recurring nature and considered necessary for the fair presentation of the financial statements for the interim period have been included. The current period's results of operations are not necessarily indicative of results that ultimately may be achieved for the year. The unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015.

The consolidated financial statements include our accounts and those of our wholly-owned subsidiary, ACSF Funding. Intercompany accounts and transactions have been eliminated in consolidation. The accounts of ACSF Funding are prepared for the same reporting period as ours using consistent accounting policies. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the consolidated financial statements are issued.

Use of Estimates

The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of income and expenses during the reported period. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ.

20

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

Investment Classification

As required by the 1940 Act, investments are classified by level of control. “Control Investments” are defined as investments in portfolio companies that we are deemed to control, as defined in the 1940 Act. “Affiliate Investments” are investments in those companies that are affiliated companies, as defined in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.

Generally, under the 1940 Act, we are deemed to control a company in which we have invested if we own more than 25% of the voting securities of such company. We are deemed to be an affiliate of a company if we own 5% or more of the voting securities of such company.

As of September 30, 2016 and December 31, 2015, all of our investments were Non-Control/Non-Affiliate investments.

Fair Value Measurements

We value our investments in accordance with the 1940 Act and Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), as determined in good faith by our Board of Directors. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Due to the uncertainty inherent in the valuation process, estimates of fair value may differ significantly from the values that would have been used had a ready market for our investments existed, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on the investments to be different than the valuations currently assigned.

We undertake a multi-step valuation process to determine the fair value of our investments in accordance with ASC 820. The valuation process begins with the development of a preliminary valuation recommendation for each investment as determined in accordance with our valuation policy by a group of our Manager’s valuation, accounting and finance professionals, which is independent of our Manager's investment team. To prepare the proposed valuation, the group reviews information provided by a nationally recognized independent pricing service, broker-dealers, and may consult with the investment team and other internal resources of our Manager and its affiliates. The preliminary valuation recommendations are then presented to the Investment Committee and reviewed and approved by our Audit and Compliance Committee. The valuation recommendations are then reviewed by our Board of Directors for final approval.

Securities Transactions

Securities transactions are recorded on the trade date. The trade date for loans purchased in the “primary market” is considered the date on which the loan allocations are determined. The trade date for loans and other investments purchased in the “secondary market” is the date on which the transaction is entered into. The trade date for primary CLO equity transactions and any other security transaction entered outside conventional channels is the date we have determined all material terms have been defined for the transaction and (a) we have obtained a right to demand the securities purchased and incur an obligation to pay the price of the securities purchased or (b) we have obtained a right to collect the proceeds of a sale and incurred an obligation to deliver the securities sold. Cost is determined based on consideration given, adjusted for amortization of original issuance discounts (“OID”), market discounts and premiums.

Realized Gain or Loss and Unrealized Appreciation or Depreciation

Realized gain or loss from an investment is recorded at the time of disposition and calculated using the weighted average cost method. Unrealized appreciation or depreciation reflects the changes in fair value of investments as determined in compliance with the valuation policy as discussed in Note 6 in this Quarterly Report on Form 10-Q.

Income Taxes

As a RIC under Subchapter M of the Code, we are not subject to U.S. federal income tax on the portion of our taxable income distributed to our stockholders as a dividend. We intend to distribute 100% of our taxable income, within the Subchapter M rules, and therefore do not anticipate incurring corporate-level U.S. federal or state income tax. As a RIC, we are also subject to a nondeductible federal excise tax if we do not distribute at least 98% of net ordinary income, 98.2% of any capital gain net income and any recognized and undistributed taxable income from prior years.

ASC Topic 740, Accounting for Uncertainty in Income Taxes (“ASC 740”), provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or provision in the current year. Determinations regarding ASC 740 may be subject to review and adjustment at

21

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

a later date based upon factors, including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. We are not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will change materially in the next 12 months.

Investment Income

For debt investments, we record interest income on the accrual basis to the extent that such amounts are expected to be collected. OID and purchased discounts and premiums are accreted into interest income using the effective interest method, where applicable. Loan origination fees are deferred and accreted into interest income using the effective interest method. We record prepayment premiums on loans and other investments as interest income when such amounts are received. We stop accruing interest on investments when it is determined that interest is no longer collectible. As of September 30, 2016, we had two loans on non-accrual status.

Interest income on CLO equity investments is recognized using the effective interest method as required by FASB ASC Subtopic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”). Under ASC 325-40, at the time of purchase, we estimate the future expected cash flows and determine the effective yield of an investment based on these estimated cash flows and our cost basis. Subsequent to the purchase, these estimated cash flows are updated quarterly and a revised yield is calculated prospectively in accordance with ASC 320-10-35, Investment-Debt and Equity Securities. In the event that the fair value of an investment decreases below its current amortized cost basis, we may be required to write down the current amortized cost basis for a credit loss or to fair value depending on our hold expectations for the investment. Current amortized cost basis less the amount of any write down (“Reference Amount”) is used to calculate the effective yield used for interest income recognition purposes over the remaining life of the investment. We are precluded from reversing write downs for any subsequent increase in the expected cash flows of an investment with the effect of increasing total interest income over the life of the investment and increasing the realized loss recorded on the sale or redemption of the investment by the amount of the credit loss write down. In estimating these cash flows, there are a number of assumptions that are subject to uncertainties and contingencies. These include the amount and timing of principal payments (including prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations. In addition, interest payment shortfalls due to delinquencies on the underlying loans and the timing and magnitude of projected credit losses on the loans underlying the securities have to be estimated. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimates and interest income. As a result, actual results may differ significantly from these estimates. During the three months ended September 30, 2016, we recorded $0.2 million in credit loss write downs to the current amortized cost basis on our CLO equity investments on one CLO equity investment. During the nine months ended September 30, 2016, we recorded $1.3 million in credit loss write downs to current amortized cost basis on four CLO equity investments. During both the three and nine months ended September 30, 2015, we recorded no credit loss write downs to the current amortized cost basis on our CLO equity investments.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and highly liquid financial instruments with original maturities of 90 days or less, including those held in overnight sweep bank deposit accounts. Cash and cash equivalents are carried at cost, which approximates fair value. We place our cash and cash equivalents with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation insured limit.

Consolidation

As permitted under Article 6 of Regulation S-X and as explained by ASC 946-810-45, Financial Services - Investment Companies - Consolidation, we will generally not consolidate an investment in a company other than an investment company subsidiary or a controlled operating company whose business consists primarily of providing services to us. Accordingly, we have consolidated the results of ACSF Funding in our consolidated financial statements.

Deferred Financing Costs

Deferred financing costs represent fees and other direct expenses incurred in connection with the issuance of debt. These costs are capitalized and amortized into interest expense over the estimated average life of the borrowings.

Distributions to Stockholders

Distributions to stockholders are recorded on the ex-dividend date.

Other General and Administrative Expenses

Other general and administrative expenses include audit and tax, professional fees, board of directors' fees, rent, IT system costs, custody, transfer agent and other operating expenses. These expenses are recognized on an accrual basis.

22

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

New Accounting Pronouncements

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which makes targeted improvements to the recognition, measurement, presentation and disclosure of certain financial instruments. ASU 2016-01 focuses primarily on the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for certain financial instruments. Among its provisions for public business entities, ASU 2016-01 eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost, requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables). ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU 2016-01 and do not believe its adoption will have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the financial instruments impairment guidance so that an entity is required to measure expected credit losses for financial assets based on historical experience, current conditions, and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses. ASU 2016-13 also amends the guidance in FASB ASC Subtopic No. 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets related to the subsequent measurement of accretable yield recognized as interest income over the life of a beneficial interest in securitized financial assets under the effective yield method. ASU 2016-13 is effective for public business entities that meet the U.S. GAAP definition of an SEC filer, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2016-13 on the recognition of interest income on our investments in CLO equity.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”), which addresses the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under ASC 230, Statement of Cash Flows, and other topics. The Update provides guidance on eight specific cash flow issues including the statement cash flows treatment of beneficial interests in securitized financial transactions as well as the treatment of debt prepayment and extinguishment costs. ASU 2016-15 also provides guidance on the predominance principle to clarify when cash receipts and cash payments should be separated into more than one class of cash flows. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact of ASU 2016-15 on our consolidated statements of cash flows.

Note 3. Management Agreement

Our management agreement with our Manager, has a current renewal term expiring January 15, 2017. Under the management agreement, our Manager has agreed to provide investment advisory services to us, in addition to providing personnel, facilities and additional services necessary for our operations. Unless terminated earlier, the management agreement will automatically renew following the expiration of its current term for successive one year periods if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, and, in either case if also approved by a majority of our directors who are not “Interested Persons” as defined under the 1940 Act. Our Board of Directors and a majority of our directors who are not “Interested Persons”, as defined under the 1940 Act, have approved a renewal of the management agreement until January 15, 2017 and, subject to stockholder approval, an amendment and restatement of the management agreement, as described below.

Pursuant to the management agreement, our Manager has agreed to be responsible for certain of our operating expenses in excess of 0.75% of our consolidated net assets, less net unrealized appreciation or depreciation, each as determined under GAAP at the end of the most recently completed fiscal quarter for the first 24 months following the date of our IPO (the “Expense Cap”). Operating expenses subject to this reimbursement include both (i) our operating expenses reimbursed to our Manager and its affiliates for the expenses related to our operations incurred on our behalf and (ii) our operating expenses directly incurred by us, excluding the management fee, interest costs, taxes and accrued costs and fees related to actual, pending or threatened litigation, each as determined under GAAP for the most recently completed fiscal quarter. As a result of this Expense Cap, any reimbursements to our Manager and its affiliates could be reduced or eliminated, and in certain instances, our Manager could be required to reimburse us so that our other expenses do not exceed the Expense Cap. Our Manager has agreed to extend the Expense Cap until the date of our 2016 Annual Meeting of Stockholders, at which time we expect to submit to a vote of stockholders an amendment and

23

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

restatement of the management agreement which would (i) extend the Expense Cap through December 31, 2020, (ii) subject to the Expense Cap, provide for reimbursement by us to our Manager for certain compensation expenses related to legal, compliance and internal audit personnel of our Manager and its affiliates who provide services to us necessary for our operations that are not required to be provided by our Manager under the management agreement and (iii) make certain other immaterial changes. Following the expiration of the Expense Cap, we will be fully responsible for the payment of our operating expenses. For the three and nine months ended September 30, 2016, our Manager was responsible for $283 and $976, respectively, of operating expenses as a result of the Expense Cap. For the three and nine months ended September 30, 2015, our Manager was responsible for $193 and $665, respectively, of operating expenses as a result of the Expense Cap.

Our Manager receives a management fee from us that is payable quarterly in arrears. The management fee is calculated at an annual rate of 0.80% of our total consolidated assets, excluding cash and cash equivalents and net unrealized appreciation or depreciation, each as determined under GAAP at the end of the most recently completed fiscal quarter. There is no incentive compensation paid to our Manager under the management agreement. For the three and nine months ended September 30, 2016, we recognized management fee expenses of $512 and $1,520, respectively. For the three and nine months ended September 30, 2015, we recognized management fee expenses of $558 and $1,699, respectively.

Since our Manager has no employees, it has entered into an administrative agreement with both its parent and American Capital pursuant to which our Manager will be provided with personnel, services and resources necessary for our Manager to perform its obligations under the management agreement as well as provide certain additional services.

Note 4. Related Party Transactions

Administrative Services Agreement and Management Agreement

Our Manager has entered into an administrative services agreement whereby our Manager has agreed to reimburse American Capital and its affiliates for certain expenses incurred on our behalf. Pursuant to our management agreement, we are responsible for reimbursing our Manager, American Capital and its affiliates for expenses incurred on our behalf, excluding employment-related expenses of our and our Manager’s officers and any employees of American Capital or its affiliates who provide services to us pursuant to the management agreement or to our Manager pursuant to the administrative services agreement. In addition, our Manager or one of its affiliates may pay for or incur certain expenses and then allocate these expenses to us. For the three and nine months ended September 30, 2016, we recognized expenses of $222 and $562, respectively, pursuant to the management agreement. For the three and nine months ended September 30, 2015, we recognized expenses of $236 and $720, respectively, pursuant to the management agreement. Refer to Note 3 in this Quarterly Report on Form 10-Q for additional information on the management agreement.

Securities Transactions

We may, from time to time, purchase securities from, or sell securities to affiliates of our Manager at fair market value on the trade date. During the three months ended September 30, 2016, there were no purchases or sales of securities to affiliates of our manager. During the nine months ended September 30, 2016, there were $1,729 in purchases of securities from affiliates of our Manager and no sales of securities to affiliates of our Manager. During the three and nine months ended September 30, 2015, there were no purchases or sales of securities to affiliates of our Manager.

Note 5. Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016		2015
Numerator — Net Earnings (Loss)	$	10,349	$	(7,198	)	$	22,785	$	(248	)
Denominator — weighted average shares	10,000,100		10,000,100			10,000,100		10,000,100
Net Earnings (Loss) per share — basic and diluted	$	1.03	$	(0.72	)	$	2.28	$	(0.02	)

24

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

Note 6. Investments

We value our investments at fair value in accordance with ASC 820, which defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Due to the uncertainty inherent in the valuation process, estimates of fair value may differ significantly from the values that would have been used had a ready market for our investments existed, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on the investments to be different than the valuations currently assigned.

ASC 820 provides a framework for measuring the fair value of assets and liabilities and provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings. When available, we determine the fair value of our investments using unadjusted quoted prices from active markets. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment's fair value measurement. We use judgment and consider factors specific to the investment when determining the significance of an input to a fair value measurement. Our policy is to recognize transfers in and out of levels as of the beginning of each reporting period. The three levels of the fair value hierarchy and investments that fall into each of the levels are described below:

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

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This may include valuations based on executed trades, broker quotations that constitute an executable price, and alternative pricing sources supported by observable inputs which, in each case, are either directly or indirectly observable for the asset in connection with market data at the measurement date.

Level 3: Inputs are unobservable and cannot be corroborated by observable market data. In certain cases, investments classified within Level 3 may include securities for which we have obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on.

The valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs. Our Senior Floating Rate Loans are predominately valued based on evaluated prices from a nationally recognized independent pricing service or from third-party brokers who make markets in such debt investments. When possible, we make inquiries of third-party pricing sources to understand their use of significant inputs and assumptions. We review the third-party fair value estimates and perform procedures to validate their reasonableness, including an analysis of the range and dispersion of third-party estimates, frequency of pricing updates, comparison of recent trade activity for similar securities, and review for consistency with market conditions observed as of the measurement date.

There may be instances when independent or third-party pricing sources are not available, or cases where we believe that the third-party pricing sources do not provide sufficient evidence to support a market participant's view of the fair value of the debt investment being valued. These instances may result from an investment in a less liquid loan such as a middle market loan, a mezzanine loan or unitranche loan, or a loan to a company that has become financially distressed. In these instances, we may estimate the fair value based on a combination of a market yield valuation methodology and evaluated pricing discussed above, or solely based on a market yield valuation methodology. Under the market yield valuation methodology, we estimate the fair value based on a discounted cash flow technique. For these debt investments, the unobservable inputs used in the market yield valuation methodology to measure fair value reflect management's best estimate of assumptions that would be used by market participants when pricing the investment in a hypothetical transaction, including estimated remaining life, current market yield and interest rate spreads of similar loans and securities as of the measurement date. We will estimate the remaining life based on market data for the average life of similar loans. However, if we have information that the loan is expected to be repaid in the near term, we would use an estimated remaining life based on the expected repayment date. The average life to be used to estimate the fair value of our loans may be shorter than the legal maturity of the loans since many loans are prepaid prior to the maturity date. The interest rate spreads used to estimate the fair value of our loans is based on current interest rate spreads of similar loans. If there is a significant deterioration of the credit quality of a loan, we may consider other factors that a hypothetical market participant would use to estimate fair value, including the anticipated proceeds that would be received in a liquidation.

We estimate the fair value of our CLO equity investments using a combination of third-party broker quotes, purchases or sales of the same or similar securities, and cash flow forecasts subject to assumptions that a market participant would use regarding the investments' underlying collateral, including, but not limited to, assumptions for default and recovery rates, reinvestment spreads and prepayment rates. Cash flow forecasts are discounted using market participant's market yield assumptions

25

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

that are derived from multiple sources, including, but not limited to, third-party broker quotes, industry research reports and transactions of securities and indices with similar structures and risk characteristics. We weight the use of third-party broker quotes, if any, when determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance and other market indices. For the nine months ended September 30, 2016, there were no changes to our valuation techniques or to the types of unobservable inputs used in the valuation process compared to the year ended December 31, 2015.

The following fair value hierarchy tables set forth our investments measured at fair value on a recurring basis by level as of September 30, 2016 and December 31, 2015:

	September 30, 2016
	Total		Level 1		Level 2		Level 3
First lien floating rate loans	$	175,744	$	—	$	175,744	$	—
Second lien floating rate loans	16,399		—		15,871		528
CLO equity	38,856		—		—		38,856
Common equity	7		—		—		7
Total Investments	$	231,006	$	—	$	191,615	$	39,391

	December 31, 2015
	Total		Level 1		Level 2		Level 3
First lien floating rate loans	$	169,580	$	—	$	169,580	$	—
Second lien floating rate loans	22,575		—		22,216		359
CLO equity	36,854		—		—		36,854
Common equity	47		—		—		47
Total Investments	$	229,056	$	—	$	191,796	$	37,260

The following table provides a summary of the changes in fair value of Level 3 assets for the nine months ended September 30, 2016 as well as the portion of net unrealized appreciation (depreciation) for the nine months ended September 30, 2016 related to those assets still held as of September 30, 2016:

	First Lien Floating Rate Loans		Second Lien Floating Rate Loans			CLO Equity			Common Equity			Total
Beginning Balance – December 31, 2015	$	—	$	359		$	36,854		$	47		$	37,260
Purchases	—		—			1,493			—			1,493
Repayments (1)	—		(33		)	(10,049		)	—			(10,082		)
Amortization of discount/premium (2)	—		1			5,215			—			5,216
Net unrealized appreciation (depreciation)	—		201			5,343			(40		)	5,504
Ending Balance – September 30, 2016	$	—	$	528		$	38,856		$	7		$	39,391
Net change in net unrealized appreciation (depreciation) attributable to our Level 3 assets still held as of September 30, 2016	$	—	$	201		$	5,343		$	(40	)	$	5,504

(1) Includes cash distributions from CLO equity investments.

(2) Includes income accrual from CLO equity investments determined using the effective interest method.

26

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

The following table provides a summary of the changes in fair value of Level 3 assets for the nine months ended September 30, 2015 as well as the portion of net unrealized depreciation for the nine months ended September 30, 2015 related to those assets still held as of September 30, 2015:

	First Lien Floating Rate Loans			Second Lien Floating Rate Loans			CLO Equity			Total
Beginning Balance – December 31, 2014	$	5,678		$	3,240		$	51,577		$	60,495
Purchases	—			—			8,206			8,206
Sales	—			—			(2,283		)	(2,283		)
Repayments (1)	(11		)	—			(9,960		)	(9,971		)
Amortization of discount/premium (2)	2			—			5,570			5,572
Transfers out (3)	(6,892		)	(3,240		)	—			(10,132		)
Transfers in (3)	1,249			493			—			1,742
Realized gains, net	—			—			278			278
Net unrealized depreciation	(26		)	(197		)	(8,116		)	(8,339		)
Ending Balance – September 30, 2015	$	—		$	296		$	45,272		$	45,568
Net change in net unrealized depreciation attributable to our Level 3 assets still held as of September 30, 2015	$	—		$	(197	)	$	(7,900	)	$	(8,097	)

(1) Includes cash distributions from CLO equity investments.

(2) Includes income accrual from CLO equity investments determined using the effective interest method.

(3) Investments were transferred into and out of Level 3 and Level 2 due to changes in the quantity and quality of inputs obtained to support the fair value of each investment. Transfers into and out of the levels are recognized at the beginning of each quarterly period.

     The following table summarizes the significant unobservable inputs used in the determination of fair value for our Level 3 investments by category of investment and valuation technique as of September 30, 2016: 

					Range
	Fair Value as of September 30, 2016		Valuation Techniques/ Methodology	Unobservable Inputs	Minimum	Maximum	Weighted Average
Second lien floating rate loans	528		Third-party vendor pricing service	Bid/Ask	16	90	78
CLO equity	38,856		Discounted Cash Flow	Discount rate Prepayment rate Default rate	11.8% 25.0% 1.8%	26.8% 25.0% 4.3%	18.5% 25.0% 2.5%
Common equity	7		Third-party vendor pricing service	Bid/Ask	1	1	1
Total	$	39,391

The following table summarizes the significant unobservable inputs used in the determination of fair value for our Level 3 investments by category of investment and valuation technique as of December 31, 2015:

					Range
	Fair Value as of December 31, 2015		Valuation Techniques/ Methodology	Unobservable Inputs	Minimum	Maximum	Weighted Average
Second lien floating rate loans	$	359	Third-party vendor pricing service	Bid/Ask	8	64	57
CLO equity	36,854		Discounted Cash Flow	Discount rate Prepayment rate Default rate	16.5% 30.0% 1.5%	29.0% 33.3% 1.7%	21.3% 30.2% 1.6%
Common equity	47		Third-party vendor pricing service	Bid/Ask	5	5	5
Total	$	37,260

27

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

The significant unobservable inputs used in the fair value measurement of CLO equity include the default and prepayment rates used to establish projected cash flows and the discount rate applied in the valuation models to those projected cash flows. An increase in any one of these individual inputs in isolation would likely result in a decrease to fair value. However, given the interrelationship between these inputs, overall market conditions would likely have a more significant impact on our Level 3 fair values than changes in any one unobservable input.

28

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

We use the Global Industry Classification Standard (“GICS®”) to classify the industry groupings of our SFRL investments. The GICS® was developed by MSCI, an independent provider of global indexes and benchmark-related products and services, and Standard & Poor’s, an independent international financial data and investment services company and provider of global equity indexes. The following table shows the SFRL portfolio composition by industry grouping at fair value as a percentage of total Senior Floating Rate Loans as of September 30, 2016 and December 31, 2015. Our investments in CLO equity are excluded from the table.

	September 30, 2016	December 31, 2015
Software	12.5%	11.6%
Health Care Providers & Services	12.0%	9.2%
Media	7.9%	7.7%
Insurance	6.2%	5.2%
Commercial Services & Supplies	5.8%	4.6%
Hotels, Restaurants & Leisure	4.8%	3.7%
Aerospace & Defense	4.5%	6.6%
Containers & Packaging	3.4%	2.4%
Food Products	3.1%	2.2%
Capital Markets	2.4%	2.6%
Machinery	2.3%	1.9%
Internet Software & Services	2.3%	1.0%
Chemicals	1.9%	2.2%
Health Care Equipment & Supplies	1.9%	1.9%
Professional Services	1.9%	2.7%
Transportation Infrastructure	1.8%	1.5%
Diversified Telecommunications Services	1.8%	1.4%
Trading Companies & Distributors	1.7%	1.5%
Textiles, Apparel & Luxury Goods	1.6%	1.7%
Oil, Gas & Consumable Fuels	1.3%	0.4%
Food & Staples Retailing	1.3%	2.3%
Life Sciences Tools & Services	1.3%	1.7%
Diversified Consumer Services	1.2%	2.4%
Construction & Engineering	1.1%	1.2%
Technology Hardware, Storage & Peripherals	1.0%	1.3%
Communications Equipment	1.0%	1.5%
Building Products	1.0%	1.1%
IT Services	1.0%	2.7%
Electrical Equipment	1.0%	1.0%
Independent Power and Renewable	0.7%	1.4%
Diversified Financial Services	0.5%	1.0%
Internet & Catalog Retail	0.4%	1.5%
Constructions Materials	0.3%	1.1%
Other	7.1%	7.8%
Total	100.0%	100.0%

29

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

Note 7. Debt

Secured Revolving Credit Facility

On October 29, 2015, ACSF Funding amended and restated its secured revolving credit facility with Bank of America, N.A. (as amended and restated, the “Credit Facility”) to extend the maturity date from December 18, 2015 to December 18, 2018, to decrease the commitment amount from $140,000 to $135,000 and to eliminate the commitment fee when the facility is at least 90% utilized. ACSF Funding may make draws under the Credit Facility from time to time to purchase or acquire certain eligible assets. The Credit Facility is secured by ACSF Funding’s assets pursuant to a security agreement and contains customary financial and negative covenants and events of default. As of September 30, 2016 and December 31, 2015, the fair value of the assets pledged as collateral in ACSF Funding were $174,299 and $187,895, respectively. The Credit Facility is non-recourse to ACSF. Amounts drawn under the Credit Facility bear interest at a rate per annum equal to either (a) LIBOR plus 1.80%, or (b) 0.80% plus the highest of (i) the Federal funds rate plus 0.50%, (ii) Bank of America, N.A.’s prime rate or (iii) one-month LIBOR plus 1%. ACSF Funding may borrow, prepay and reborrow loans under the Credit Facility at any time prior to November 18, 2018, the commitment termination date, subject to certain terms and conditions, including maintaining a borrowing base. Any outstanding balance on the Credit Facility as of the commitment termination date must be repaid by the maturity date unless otherwise extended. Following the amendment to the Credit Facility on October 29, 2015, if ACSF Funding terminates the commitment amount in whole or in part prior to December 18, 2017, ACSF Funding will be required to pay a make-whole fee equal to the sum of the present values of all future spread amounts that would have been payable in respect of the total commitments (or terminated portion thereof) during the period from the termination date through December 18, 2017.

ACSF Funding is required to pay a commitment fee in an amount equal to 0.75% on the actual daily unused amount of the current lender commitments under the Credit Facility to the extent the outstanding amount of committed loans is less than an amount equal to 90% of the aggregate commitments from October 29, 2015 to the commitment termination date, payable quarterly in arrears.

As of September 30, 2016, there was $100,000 outstanding under the Credit Facility, which had a fair value of $100,000 and an interest rate of 2.27%. As of December 31, 2015, there was $110,200 outstanding under the Credit Facility, which had a fair value of $110,200 and an interest rate of 2.02%. The fair value of the Credit Facility is determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions and is measured with Level 3 inputs. As of September 30, 2016 and December 31, 2015, ACSF Funding was in compliance with all covenants of the Credit Facility, including compliance with a borrowing base that applies various advance rates of up to 80% on the investments pledged as collateral by ACSF Funding.

For the three and nine months ended September 30, 2016, we incurred interest and commitment fees on the Credit Facility of $642 and $1,900, respectively. For the three and nine months ended September 30, 2015, we incurred interest and commitment fees on the Credit Facility of $667 and $1,986, respectively.

30

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

The following table outlines key statistics related to our debt financing for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2016	2015	2016	2015
Average debt outstanding	$98,496	$125,008	$99,873	$126,727
Weighted average annual interest rate	2.27%	2.00%	2.24%	1.99%
Commitment fee as a percent of average debt outstanding	0.31%	0.12%	0.29%	0.11%
Amortization of deferred financing costs as a percent of average debt outstanding	0.10%	0.31%	0.10%	0.30%
Total annualized cost of funding as a percent of average debt outstanding	2.68%	2.43%	2.63%	2.40%
Maximum amount of debt outstanding	$102,000	$128,800	$114,300	$134,600

Note 8. Taxes

Tax Sharing Agreement

For the period prior to our IPO, during which we were treated as a taxable corporation under Subchapter C of the Code (“C corporation”) for tax purposes, we had a tax sharing agreement with American Capital and other members of its consolidated tax group, under which such members bore their full share of their individual tax obligation and members were compensated for their losses and other tax benefits that were able to be used by other members of the consolidated tax group based on their pro-forma stand-alone federal income tax return.

We applied for retroactive relief under IRC Section 9100 to make a “deemed sale election” whereby we will treat our net unrealized gains (“Net Built-in Gain”) on the date of our IPO as recognized for tax purposes in our final pre-IPO C corporation federal tax return. In March 2016, we received retroactive relief approval from the IRS to make a “deemed sale election”. The late election statement was filed by American Capital along with its amended 2014 federal consolidated income tax return on May 17, 2016. We have therefore treated the Net Built-in Gain on the date of our IPO as recognized for tax purposes in our final pre-IPO C corporation federal tax return. The federal estimated tax sharing payment that we owed to American Capital attributed to our Net Built-in Gain was $563. The entire amount was treated as a deemed capital contribution to us.

Income Taxes

We have elected to be treated as a RIC for income tax purposes beginning with the date of our IPO. In order to qualify as a RIC, among other things, we are required to distribute annually at least 90% of our ordinary income, including net short term gains in excess of net long term losses. So long as we qualify as a RIC, we are not subject to the entity level taxes on earnings timely distributed to our stockholders. We intend to make sufficient annual distributions to substantially eliminate our corporate level income taxes.

Income determined under GAAP differs from income determined under tax because of both temporary and permanent differences in income and expense recognition, including (i) unrealized gains and losses associated with debt investments marked to fair value for GAAP but excluded from taxable income until realized or settled, (ii) timing difference on income recognition for our CLO equity investments, (iii) premium amortization and gain adjustments attributable to the Net Built-in Gain recognized upon our IPO and (iv) capital losses in excess of capital gains do not reduce taxable income, and generally can be carried forward to offset capital gains.

At our discretion, we may delay distributions of a portion of our current year taxable income to the subsequent year and pay 4% excise taxes on such deferred distributions as calculated under the Code. If we anticipate paying excise taxes, we accrue excise taxes on a quarterly basis based on our estimates. For the three months ended September 30, 2016, we recorded an excise tax provision of $23. For the nine months ended September 30, 2016, we recorded an excise tax benefit of $75. For the three and nine months ended September 30, 2015, we recorded an excise tax provision of $33 and $173, respectively.

31

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

Note 9. Consolidated Financial Highlights

	Nine Months Ended September 30,
	2016			2015
Per Share Data:
Net asset value, beginning of period	$	11.79		$	14.42
Net investment income	0.90			0.96
Net realized and unrealized (loss) gain on investments	1.38			(0.98		)
Net Earnings	2.28			(0.02		)
Distributions to stockholders	(0.87		)	(0.87		)
Net asset value, end of period	$	13.20		$	13.53
Per share market value, end of period	$	11.03		$	11.09
Total return based on market value (1), (5)	22.37		%	(2.74		)%
Total return based on net asset value (1), (5)	22.10		%	0.47		%
Ratios to Average Net Assets:
Net investment income (2)	9.81		%	8.90		%
Operating expenses (2), (3)	2.41		%	2.35		%
Interest and related expenses (2)	2.15		%	2.11		%
Total expenses (2), (3)	4.56		%	4.46		%
Supplemental Data:
Net assets, end of period	$	131,984		$	135,256
Shares outstanding, end of period	10,000,100			10,000,100
Average debt outstanding	$	98,496		$	126,727
Asset coverage per unit, end of period (4)	2,320			2,084
Portfolio turnover ratio (5)	26.68		%	32.97		%

(1) Total return is based on the change in market price or net asset value per share during the period and takes into account distributions reinvested in accordance with the dividend reinvestment and stock purchase plan.

(2) Annualized for periods less than one year.

(3) The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets are shown net of the reimbursement for the Expense Cap. The ratio of operating expenses to average net assets and the ratio of total expenses to average net assets would be 3.47% and 5.62%, respectively, without the Expense Cap for the nine months ended September 30, 2016 and 2.97% and 5.08%, respectively, without the Expense Cap for the nine months ended September 30, 2015.

(4) The asset coverage ratio for a class of senior securities representing indebtedness is calculated on our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by the senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the asset coverage per unit.

(5) Not annualized for periods less than one year.

Note 10. Capital Transactions

On August 3, 2016, we declared a monthly cash distribution to stockholders of $0.097 per share for each of August, September and October 2016. On October 31, 2016, we declared a monthly cash distribution to stockholders of $0.097 per share for each of November 2016, December 2016 and January 2017. Since our January 2014 IPO, we have declared a total of $34.5 million in distributions to stockholders, or $3.454 per share.

Note 11. Commitments and Contingencies

In the ordinary course of business, we may be a party to certain legal proceedings, including actions brought against us and others with respect to investment transactions. The outcomes of any such legal proceedings are uncertain and, as a result of these proceedings, the values of the investments to which they relate could decrease. We were not subject to any material litigation against us as of September 30, 2016 or December 31, 2015.

We did not engage in any off-balance sheet activities as of September 30, 2016 or December 31, 2015.

32

AMERICAN CAPITAL SENIOR FLOATING, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

(in thousands, except share and per share amounts)

Note 12. Subsequent Events

On October 31, 2016, we declared a monthly cash distribution to stockholders of $0.097 per share for each of November 2016, December 2016 and January 2017. The monthly cash distributions will be paid to common stockholders of record as set forth in the table below:

	Distribution per Share	Record Date	Ex-Dividend Date	Payment Date
November 2016	$0.097	November 22, 2016	November 18, 2016	December 2, 2016
December 2016	$0.097	December 23, 2016	December 21, 2016	January 5, 2017
January 2017	$0.097	January 23, 2017	January 19, 2017	February 2, 2017

33

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 financial statements and notes thereto appearing elsewhere in this report.

Forward-Looking Statements

Some of the statements in this report constitute forward-looking statements, which relate to future events or our future performance or financial condition. We generally use words such as “anticipates,” “believes,” “expects,” “intends” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason, including any factors set forth in “Risk Factors” and elsewhere in this report. The forward-looking statements contained herein involve risks and uncertainties, including statements as to: (i) our future operating results; (ii) our business prospects and the prospects of our portfolio companies; (iii) the impact of investments that we expect to make; (iv) our contractual arrangements and relationships with third-parties; (v) the dependence of our future success on the general economy and its impact on the industries in which we invest; (vi) the ability of our portfolio companies to achieve their objectives; (vii) our expected financings and investments; (viii) the adequacy of our cash resources and working capital; and (ix) the timing of cash flows, if any, from the operations of our portfolio companies.

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

Overview

American Capital Senior Floating, Ltd. (“ACSF”, “we”, “our” and “us”), a Maryland corporation organized in February 2013 that commenced operations on October 15, 2013, is an externally managed, non-diversified closed-end investment management company. We have elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). In addition, for tax purposes we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On January 15, 2014, we priced our initial public offering (“IPO”), selling 10.0 million shares of common stock, at a price of $15.00 per share for net proceeds of $149.2 million. Our common stock is listed on the NASDAQ Global Select Market, where it trades under the symbol “ACSF”. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), and intend to take advantage of the exemption for emerging growth companies allowing us to temporarily forgo the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We do not intend to take advantage of other disclosure or reporting exemptions for emerging growth companies under the JOBS Act.

Our investment activities are managed by American Capital ACSF Management, LLC (our “Manager”) for an annual base management fee of 0.80% of our total consolidated assets, excluding cash and cash equivalents and net unrealized appreciation or depreciation, at the end of the most recently completed fiscal quarter. There is no incentive compensation paid to our Manager. However, in connection with our IPO, our Manager agreed that our annual other operating expenses, as defined in our management agreement, will generally not exceed 75 basis points of ACSF’s quarter end consolidated net assets, excluding unrealized gains or losses (“Expense Cap”) for the first 24 months following our IPO. Our Manager has agreed to extend the Expense Cap until the date of our 2016 Annual Meeting of Stockholders, at which time we expect to submit to a vote of stockholders an amendment and restatement of the management agreement which would (i) extend the Expense Cap through December 31, 2020, (ii) subject to the Expense Cap, provide for reimbursement by us to our Manager for certain compensation expenses related to legal, compliance and internal audit personnel of our Manager and its affiliates who provide services to us necessary for our operations that are not required to be provided by our Manager under the management agreement and (iii) make certain other immaterial changes. Following the expiration of the Expense Cap, we will be fully responsible for the payment of our operating expenses.

34

Investments

Our investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve our capital. We actively manage a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to large-market U.S.-based companies (collectively, “Senior Floating Rate Loans" or “Loan Portfolio”) which are commonly referred to as leveraged loans. Standard and Poor's (“S&P”) defines large-market loans as loans to issuers with earnings before interest, taxes, depreciation and amortization (“EBITDA”) of greater than $50 million. Senior Floating Rate Loans are typically collateralized by a company's assets and structured with first lien or second lien priority on collateral, providing for greater security and potential recovery in the event of default compared to other subordinated fixed-income products. We also invest in equity tranches of collateralized loan obligations (“CLOs”) which are securitized vehicles collateralized primarily by Senior Floating Rate Loans and we may invest in debt tranches of CLOs. In addition, we may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. Additionally, we may from time to time hold or invest in other equity investments and other debt or equity securities generally arising from a restructuring of Senior Floating Rate Loan positions previously held by us. Under normal market conditions, we will invest at least 80% of our assets in Senior Floating Rate Loans.

Our level of investment activity can vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to U.S. based large-market private companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” as defined by Section 55(a) of the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies”. The definition of “eligible portfolio company” includes private operating companies and certain public companies whose securities are listed on a national securities exchange but whose market capitalization is less than $250 million, in each case organized under the laws of and with their principal place of business located in the United States. Investments in debt and equity tranches of CLOs are deemed nonqualified assets for BDC compliance purposes; therefore, under normal market conditions, we intend to limit our CLO investments to 20% of our portfolio.

Investment Income

We generate investment income primarily in the form of interest income from the investment securities we hold and capital gains, if any, on investment securities that we may sell. Our debt investments generally have a stated term of three to seven years and typically bear interest at a floating rate usually determined on the basis of a benchmark LIBOR, commercial paper rate, or the prime rate. Interest on our debt investments is generally payable quarterly but may be paid monthly or semi-annually.

Expenses

We do not have any employees and do not pay our officers any cash or non-cash equity compensation. We pay, or reimburse our Manager and its affiliates, for expenses related to our operations incurred on our behalf, excluding employment-related expenses of our and our Manager's officers and any employees of American Capital or the parent company of our Manager who provide services to us pursuant to the management agreement or to our Manager pursuant to the administrative services agreement. However, in accordance with the terms of our management agreement, our Manager agreed to limit the amount of operating expenses subject to reimbursement by us to the amount of the Expense Cap (See “Management Agreement” in this Quarterly Report on Form 10-Q for further discussion).

During periods of asset growth, we generally expect our general and administrative operating expenses to decline as a percentage of our total assets and increase during periods of asset declines. Interest expense and costs relating to future offerings of securities, among others, may also increase or reduce overall operating expenses based on portfolio performance, interest rate benchmarks, and offerings of our securities relative to comparative periods, among other factors.

Current Market Conditions

Economic and market conditions can impact our business and our investments in multiple ways, including the financial condition of the portfolio companies in which we invest, our investment returns, our funding costs, our access to the capital markets and our access to credit. The leveraged loan market has grown substantially in recent years with the amount of total leveraged loans outstanding exceeding $870 billion as of September 30, 2016. Growth has largely been a function of the resilient performance of the asset class across multiple credit cycles coupled with the changing regulatory and investor landscape and the attractive floating rate nature of the assets. Despite the size and liquidity of the loan market, there continues to be volatility in the loan market as a result of (i) the dynamic correlation between retail fund flows, and (ii) the financial performance of the underlying issuers that comprise the asset class. Despite uncertainties regarding economic and market conditions, the new issue loan pipeline in the leveraged loan market remains active, with first lien and second lien transactions that support leveraged buyouts, strategic acquisitions, plant expansions, recapitalizations and refinancings for large to mid-sized borrowers.

35

During the nine months ended September 30, 2016, technical factors in the leveraged loan market improved as retail outflows moderated, CLO issuance increased and loan market outstandings were essentially flat. The technical environment contributed to a rebound in loan prices, as the average bid of the S&P/LSTA Leveraged Loan Index improved to 95.12 as of September 30, 2016,up from the December 31, 2015 average bid price of 91.26. Similarly, technical factors resulted in an improvement in CLO equity prices from the prior quarter. CLO fair values as of September 30, 2016 benefited from an improvement in loan prices and stronger bids from investors.

Portfolio and Investment Activity

As of September 30, 2016, our portfolio was comprised of 76% first lien loans, 7% second lien loans and 17% CLO equity, measured at fair value. The Loan Portfolio consisted of 140 portfolio companies in 46 industries, and the CLO portfolio included 22 CLOs managed by 16 collateral managers with vintages ranging from 2012-2015. Our Loan Portfolio consisted of all floating rate investments with 100% having LIBOR floors ranging between 0.75% and 1.75%. The weighted average LIBOR floor in our Loan Portfolio was 1% as of September 30, 2016. The following table depicts a summary of the portfolio as of September 30, 2016:

($ in thousands)	Cost		Fair Value		Cumulative Net Unrealized Appreciation (Depreciation)			Yield at Cost
Investment Portfolio:
First lien floating rate loans	$	178,510	$	175,744	$	(2,766	)	5.13	%
Second lien floating rate loans	17,773		16,399		(1,374		)	8.21	%
Total Senior Floating Rate Loans	196,283		192,143		(4,140		)	5.41	%
CLO equity	52,258		38,856		(13,402		)	9.45	%
Common equity	—		7		7			—	%
Total Investment Portfolio	$	248,541	$	231,006	$	(17,535	)	6.26	%

The portfolio is actively managed, with an annualized turnover ratio of 33.01% and 35.64%, respectively, for the three and nine months ended September 30, 2016. During the three and nine months ended September 30, 2016, Loan Portfolio rotation was reflective of the active management style, which seeks to optimize the portfolio based on current market conditions by rotating into positions that have better relative values. The average yield during the three months ended September 30, 2016 on the Loan Portfolio, CLO equity and Investment Portfolio was 5.37%, 10.83% and 6.51%, respectively. The average yield during the nine months ended September 30, 2016 on the Loan Portfolio, CLO equity and Investment Portfolio was 5.40%, 10.64% and 6.51%, respectively. The following tables depict the portfolio activity for the three and nine months ended September 30, 2016:

	Three Months Ended September 30, 2016															Nine Months Ended September 30, 2016
($ in thousands)	First Lien			Second Lien			CLO Equity			Common Equity			Total			First Lien			Second Lien			CLO Equity			Common Equity			Total
Fair value, beginning of period	$	173,898		$	16,463		$	37,021		$	35		$	227,417		$	169,580		$	22,575		$	36,854		$	47		$	229,056
Purchases	15,701			2,515			—			—			18,216			52,719			5,137			1,493			—			59,349
Sales	(12,082		)	—			—			—			(12,082		)	(33,147		)	(1,504		)	—			—			(34,651		)
Repayments (1)	(5,256		)	(3,147		)	(3,365		)	—			(11,768		)	(21,118		)	(10,832		)	(10,049		)	—			(41,999		)
Non-cash income accrual (2)	65			7			1,910			—			1,982			187			18			5,215			—			5,420
Net realized gains (losses)	(177		)	23			—			—			(154		)	(1,497		)	44			—			—			(1,453		)
Net unrealized appreciation (depreciation)	3,595			538			3,290			(28		)	7,395			9,020			961			5,343			(40		)	15,284
Fair value,end of period	$	175,744		$	16,399		$	38,856		$	7		$	231,006		$	175,744		$	16,399		$	38,856		$	7		$	231,006

(1) Repayments for CLO equity reflect the amount of cash distributions from CLO investments received during the three and nine months ended September 30, 2016.

(2) Non-cash income accrual includes amortization/accretion of discount/premium on the Loan Portfolio and income accrued on the CLO equity using the effective interest method during the three and nine months ended September 30, 2016.

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	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
	Loan Portfolio	CLO Equity	Total Portfolio	Loan Portfolio	CLO Equity	Total Portfolio
Portfolio companies, beginning of period	134	22	156	128	20	148
Purchases (new)	14	—	14	46	2	48
Purchases (add-on to existing)	6	—	6	19	—	19
Complete exit	(8)	—	(8)	(34)	—	(34)
Portfolio companies, end of period	140	22	162	140	22	162

The following table depicts the weighted average portfolio yield by activity type during the three and nine months ended September 30, 2016:

	Three Months Ended September 30, 2016								Nine Months Ended September 30, 2016
	First Lien		Second Lien		CLO Equity		Total		First Lien		Second Lien		CLO Equity		Total
Beginning yield	5.06	%	8.27	%	11.16	%	6.59	%	5.03	%	7.90	%	10.04	%	6.37	%
Purchases	5.40	%	8.02	%	—	%	5.22	%	5.32	%	8.52	%	37.75	%	5.90	%
Sales	(4.61	)%	—	%	—	%	(4.54	)%	(4.91	)%	(8.98	)%	—	%	(4.88	)%
Repayments	(4.80	)%	(8.67	)%	(18.30	)%	(9.78	)%	(5.32	)%	(7.76	)%	(15.68	)%	(8.47	)%
Repricing/Reforecast	0.24	%	—	%	(2.17	)%	(1.90	)%	(0.15	)%	(0.25	)%	(0.53	)%	(0.41	)%
Ending yield	5.13	%	8.21	%	9.45	%	6.26	%	5.13	%	8.21	%	9.45	%	6.26	%

As of December 31, 2015, our portfolio was comprised of 74% first lien loans, 10% second lien loans and 16% CLO equity, measured at fair value. The Loan Portfolio consisted of 128 portfolio companies in 46 industries, and the CLO portfolio included 20 CLOs managed by 15 collateral managers. Our Loan Portfolio consisted of all floating rate investments with 100% having LIBOR floors ranging between 0.75% and 1.75%. The weighted average LIBOR floor in our Loan Portfolio was 1.01% as of December 31, 2015. The following table depicts a summary of the portfolio as of December 31, 2015:

($ in thousands)	Cost		Fair Value		Cumulative Net Unrealized Depreciation			Yield at Cost
Investment Portfolio:
First lien floating rate loans	$	181,367	$	169,580	$	(11,787	)	5.03	%
Second lien floating rate loans	24,909		22,575		(2,334		)	7.90	%
Total Senior Floating Rate Loans	206,276		192,155		(14,121		)	5.38	%
CLO equity	55,599		36,854		(18,745		)	10.04	%
Common equity	—		47		47			—	%
Total Investment Portfolio	$	261,875	$	229,056	$	(32,819	)	6.37	%

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The portfolio is actively managed, with a turnover ratio of 20.92% and 44.08%, respectively, for the three and nine months ended September 30, 2015. The average yield during the three months ended September 30, 2015 on the Loan Portfolio, CLO equity and Investment Portfolio was 5.27%, 14.7% and 7.15%, respectively. The average yield during the nine months ended September 30, 2015 on the Loan Portfolio, CLO equity and Investment Portfolio was 5.33%, 14.13% and 7.03%, respectively. The following tables depict the portfolio activity for the three and nine months ended September 30, 2015:

	Three Months Ended September 30, 2015												Nine Months Ended September 30, 2015
($ in thousands)	First Lien			Second Lien			CLO Equity			Total			First Lien			Second Lien			CLO Equity			Total
Fair value, beginning of period	$	190,427		$	27,914		$	53,850		$	272,191		$	194,952		$	29,841		$	51,577		$	276,370
Purchases	11,954			1,959			—			13,913			76,340			4,451			8,206			88,997
Sales	(4,995		)	(2,959		)	—			(7,954		)	(55,335		)	(6,724		)	(2,283		)	(64,342		)
Repayments (1)	(7,615		)	(841		)	(3,433		)	(11,889		)	(27,312		)	(1,757		)	(9,960		)	(39,029		)
Non-cash income accrual (2)	20			5			1,988			2,013			38			11			5,570			5,619
Net realized gains (losses)	19			(24		)	—			(5		)	104			(2		)	278			380
Net unrealized appreciation (depreciation)	(2,860		)	(544		)	(7,133		)	(10,537		)	(1,837		)	(310		)	(8,116		)	(10,263		)
Fair value, end of period	$	186,950		$	25,510		$	45,272		$	257,732		$	186,950		$	25,510		$	45,272		$	257,732

(1) Repayments for CLO equity reflect the amount of cash distributions from CLO investments received during the three and nine months ended September 30, 2015.

(2) Non-cash income accrual includes amortization/accretion of discount/premium on the Loan Portfolio and income accrued on the CLOs using the effective interest method during the three and nine months ended September 30, 2015.

	Three Months Ended September 30, 2015			Nine Months Ended September 30, 2015
	Loan Portfolio	CLO Equity	Total Portfolio	Loan Portfolio	CLO Equity	Total Portfolio
Portfolio companies - beginning of period	127	19	146	117	16	133
Purchases (new)	12	—	12	55	4	59
Purchases (add-on to existing)	2	—	2	10	—	10
Complete exit	(12)	—	(12)	(45)	(1)	(46)
Portfolio companies - end of period	127	19	146	127	19	146

The following table depicts the weighted average portfolio yield by activity type during the three and nine months ended September 30, 2015:

	Three Months Ended September 30, 2015								Nine Months Ended September 30, 2015
	First Lien		Second Lien		CLO Equity		Total		First Lien		Second Lien		CLO Equity		Total
Beginning yield	4.90	%	7.79	%	14.69	%	7.19	%	4.98	%	7.81	%	13.64	%	6.92	%
Purchases	4.91	%	7.13	%	—	%	4.57	%	4.99	%	8.32	%	16.99	%	5.89	%
Sales	(3.87	)%	(7.24	)%	—	%	(5.11	)%	(4.97	)%	(8.10	)%	(18.93	)%	(5.76	)%
Repayments	(5.16	)%	(8.15	)%	(14.67	)%	(8.15	)%	(5.54	)%	(8.23	)%	(14.13	)%	(7.88	)%
Repricing/Reforecast	0.17	%	—	%	(1.82	)%	(1.63	)%	(0.20	)%	—	%	(1.05	)%	(0.79	)%
Ending yield	4.90	%	7.85	%	12.95	%	6.81	%	4.90	%	7.85	%	12.95	%	6.81	%

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As of September 30, 2016, approximately 70% of our Loan Portfolio, at fair value, was comprised of loans with a facility rating by S&P of at least “B” or higher. The following chart shows the S&P facility credit rating of our Loan Portfolio at fair value as of September 30, 2016:

First Lien Second Lien

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Results of Operations

Operating results for the three and nine months ended September 30, 2016 and 2015 were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2016			2015			2016			2015
Investment income:
First lien floating rate loans	$	2,323		$	2,429		$	6,784		$	7,262
Second lien floating rate loans	356			570			1,206			1,776
CLO equity	1,910			1,988			5,216			5,570
Total investment income	4,589			4,987			13,206			14,608
Expenses:
Interest and other debt related costs	665			766			1,969			2,279
Management fee	512			558			1,520			1,699
Other expenses, net	281			286			838			846
Net expenses	1,458			1,610			4,327			4,824
Net investment income before taxes	3,131			3,377			8,879			9,784
Income tax (provision) benefit	(23		)	(33		)	75			(160		)
Net investment income	3,108			3,344			8,954			9,624
Net realized and unrealized (loss) gain on investments:
Net realized (loss) gain on investments	(154		)	(5		)	(1,453		)	380
Net unrealized appreciation (depreciation) on investments	7,395			(10,537		)	15,284			(10,263		)
Income tax benefit	—			—			—			11
Net gain (loss) on investments	7,241			(10,542		)	13,831			(9,872		)
Net Earnings (Loss)	$	10,349		$	(7,198	)	$	22,785		$	(248	)

Investment Income

Investment income decreased $0.4 million, or 8.0%, to $4.6 million for the three months ended September 30, 2016 over the comparable period in 2015. The decrease was a result of a smaller investment portfolio, on average, during the third quarter of 2016 compared to the comparable period in 2015. Investment income decreased $1.4 million, or 9.6%, to $13.2 million for the nine months ended September 30, 2016 over the comparable period in 2015, due to a smaller investment portfolio, on average, during the first nine months of 2016 compared to the comparable period in 2015.

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Net Expenses

Net expenses decreased $0.2 million, or 9.4%, to $1.5 million for the three months ended September 30, 2016 over the comparable period in 2015. The decline was driven by a reduction of interest expense due to less debt outstanding and lower management fees as a result of lower Net Assets during the third quarter of 2016 compared to the comparable period in 2015. Net expenses decreased $0.5 million, or 10.3%, to $4.3 million for the nine months ended September 30, 2016 over the comparable period in 2015. The decline was driven by a reduction of interest expense due to less debt outstanding and lower management fees as a result of lower Net Assets during the comparable period in 2016.

The following table outlines the costs associated with our debt financing during the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2016			2015			2016			2015
Interest expense	$	572		$	638		$	1,699		$	1,911
Commitment fees	70			29			201			75
Amortization of deferred financing costs	23			99			69			293
Total Debt Financing Costs	$	665		$	766		$	1,969		$	2,279
Average debt outstanding	$	98,496		$	125,008		$	99,873		$	126,727
Average cost of funds (1)	2.68		%	2.43		%	2.63		%	2.40		%
Weighted average interest rate	2.27		%	2.00		%	2.24		%	1.99		%

(1) Includes interest, unfunded commitment fees and amortization of debt financing costs

Net Realized Gain (Loss)

Sales and repayments of investments during the three months ended September 30, 2016 totaled $23.9 million resulting in net realized losses of $0.2 million. Sales and repayments of investments during the nine months ended September 30, 2016 totaled $76.7 million resulting in net realized losses of $1.5 million.

Sales and repayments of investments during the three months ended September 30, 2015 totaled $19.8 million resulting in net realized gains of less than $0.1 million. Sales and repayments of investments during the nine months ended September 30, 2015 totaled $103.4 million resulting in net realized gains of $0.4 million.

Net Unrealized Appreciation (Depreciation)

During the three months ended September 30, 2016, we recognized net unrealized appreciation on the investment portfolio of $7.4 million driven by net unrealized appreciation of $4.1 million on the Loan Portfolio and $3.3 million of net unrealized appreciation on the CLO Portfolio. The primary driver for the increase in fair value of the Loan Portfolio was higher prices in the broadly syndicated U.S. loan market as a result of improved loan issuance and tightening yields during the quarter. The increase in fair value of the CLO Portfolio was a result of tightening spreads and increasing trades in CLO equity.

During the nine months ended September 30, 2016, we recognized net unrealized appreciation on the investment portfolio of $15.3 million driven by net unrealized appreciation of $9.9 million on the Loan Portfolio and $5.4 million of net unrealized appreciation on the CLO Portfolio. The primary driver for the increase in fair value of the Loan Portfolio was higher prices in the broadly syndicated U.S. loan market as a result of improved inflows and tightening yields during the nine months ended September 30, 2016. The increase in fair value of the CLO Portfolio was a result of tightening spreads and increasing trades in CLO equity.

Income Taxes

We have elected be treated as a RIC for income tax purposes beginning with the date of our IPO. In order to qualify as a RIC, among other things, we are required to meet certain source of income and asset diversification requirements; additionally, we must distribute annually at least 90% of our ordinary income, including net short term gains in excess of net long term losses. So long as we qualify as a RIC, we generally are not subject to the entity level taxes on earnings timely distributed to our stockholders. At our discretion, we may delay distributions of a portion of our current year taxable income to the subsequent year and pay 4% excise taxes on such deferred distributions as calculated under the Code. If we anticipate paying excise taxes, we accrue excise taxes on a quarterly basis based on our estimates.

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Financial Condition, Liquidity and Capital Resources

Liquidity and capital resources arise primarily from our Credit Facility and cash flows from operations. In addition, we may use proceeds from any follow-on equity offerings of common stock and other supplementary financing mechanisms as additional sources of capital and liquidity.

In order to qualify as a RIC, we must annually distribute in a timely manner to our stockholders at least 90% of our taxable ordinary income. In addition, we must also distribute in a timely manner to our stockholders all of our taxable ordinary and capital income in order to not be subject to income taxes. Accordingly, our ability to retain earnings is limited.    

Equity Capital

As a BDC, we are generally not able to issue or sell our common stock at a price below our net asset value per share, exclusive of any underwriting discount, except (i) with the prior approval of a majority of our stockholders, (ii) in connection with a rights offering to our existing stockholders or (iii) under such other circumstances as the SEC may permit. As of September 30, 2016, our net asset value was $13.20 per share and our closing market price was $11.03 per share.

Debt Capital

As of September 30, 2016, we had $100.0 million in borrowings outstanding on our Credit Facility and our debt to equity ratio was 0.76x. The fair value of assets pledged as collateral on our Credit Facility as of September 30, 2016 were $174.3 million. As of September 30, 2016, we had approximately $39.7 million of available liquidity consisting of $4.7 million of cash and cash equivalents and $35.0 million of available capacity on our Credit Facility.

As a BDC, we are permitted to issue “senior securities,” as defined in the 1940 Act, in any amount as long as immediately after such issuance our asset coverage is at least 200%, or equal to or greater than our asset coverage prior to such issuance, after taking into account the payment of debt with proceeds from such issuance. Asset coverage is defined in the 1940 Act as the ratio of the value of the total assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. However, if our asset coverage is below 200%, we may also borrow amounts up to 5% of our total assets for temporary purposes even if that would cause our asset coverage ratio to further decline. As of September 30, 2016 and December 31, 2015, our asset coverage was 232% and 207%, respectively.

Operating and Financing Cash Flows

For the nine months ended September 30, 2016, net cash provided by operating activities was $21.2 million and was primarily due to net proceeds from the disposition of investments of $76.7 million and increase in payable for investments purchased of $1.6 million, offset by $59.3 million of investment purchases. For the nine months ended September 30, 2016, net cash used in financing activities was $18.9 million and was used to reduce debt outstanding by $10.2 million and pay $8.7 million of distributions to stockholders. For the nine months ended September 30, 2015, net cash provided by operating activities was $16.3 million and was primarily from the collection of interest on our investment portfolio and net proceeds from purchases and sales of investments. For the nine months ended September 30, 2015, net cash used in financing activities was $15.9 million and was attributed to $10.6 million for distributions to stockholders and a net decrease in debt outstanding of $5.2 million.

Contractual Obligations

A summary of our contractual payment obligations as of September 30, 2016 are as follows:

	Payments Due by Period (in thousands)
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
Credit Facility	$	100,000	$	—	$	100,000	$	—	$	—

Off-Balance Sheet Arrangements

We do not currently engage in off-balance sheet arrangements.

Distributions to Stockholders

When determining distributions to stockholders, our Board of Directors considers estimated taxable income, GAAP income and economic performance. Actual taxable income may differ from GAAP income due to temporary and permanent differences in income and expense recognition and changes in unrealized appreciation and depreciation on investments. The specific tax characteristics will be reported to stockholders on Form 1099 after the end of the calendar year. We currently expect distributions to stockholders for 2016 to be from ordinary taxable income.

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The table below details the distributions to stockholders declared on our shares of common stock since the completion of our IPO:

Quarterly Declaration Date	Ex-Dividend Date	Record Date	Payment Date	Per Share Amount	Total Amount
March 17, 2014	March 27, 2014	March 31, 2014	April 10, 2014	$0.180	$1,800
June 18, 2014	June 26, 2014	June 30, 2014	July 10, 2014	$0.280	$2,800
September 17, 2014	September 26, 2014	September 30, 2014	October 10, 2014	$0.280	$2,800
December 18, 2014	December 29, 2014	December 31, 2014	January 9, 2015	$0.290	$2,900
March 19, 2015	March 27, 2015	March 31, 2015	April 6, 2015	$0.290	$2,900
Monthly Declaration Date	Ex-Dividend Date	Record Date	Payment Date	Per Share Amount	Total Amount
March 19, 2015	April 17, 2015	April 21, 2015	May 4, 2015	$0.097	$970
May 4, 2015	May 20, 2015	May 22, 2015	June 2, 2015	$0.097	$970
May 4, 2015	June 17, 2015	June 19, 2015	July 2, 2015	$0.097	$970
May 4, 2015	July 22, 2015	July 24, 2015	August 4, 2015	$0.097	$970
August 3, 2015	August 19, 2015	August 21, 2015	September 2, 2015	$0.097	$970
August 3, 2015	September 18, 2015	September 22, 2015	October 2, 2015	$0.097	$970
August 3, 2015	October 21, 2015	October 23, 2015	November 3, 2015	$0.097	$970
November 2, 2015	November 18, 2015	November 20, 2015	December 2, 2015	$0.097	$970
November 2, 2015	December 22, 2015	December 24, 2015	January 5, 2016	$0.097	$970
November 2, 2015	January 20, 2016	January 22, 2016	February 2, 2016	$0.097	$970
February 8, 2016	February 17, 2016	February 19, 2016	March 2, 2016	$0.097	$970
February 8, 2016	March 21, 2016	March 23, 2016	April 4, 2016	$0.097	$970
February 8, 2016	April 19, 2016	April 21, 2016	May 3, 2016	$0.097	$970
May 2, 2016	May 19, 2016	May 23, 2016	June 2, 2016	$0.097	$970
May 2, 2016	June 21, 2016	June 23, 2016	July 5, 2016	$0.097	$970
May 2, 2016	July 19, 2016	July 21, 2016	August 2, 2016	$0.097	$970
August 3, 2016	August 19, 2016	August 23, 2016	September 2, 2016	$0.097	$970
August 3, 2016	September 20, 2016	September 22, 2016	October 4, 2016	$0.097	$970
August 3, 2016	October 19, 2016	October 21, 2016	November 2, 2016	$0.097	$970
October 31, 2016	November 18, 2016	November 22, 2016	December 2, 2016	$0.097	$970
October 31, 2016	December 21, 2016	December 23, 2016	January 5, 2017	$0.097	$970
October 31, 2016	January 19, 2017	January 23, 2017	February 2, 2017	$0.097	$970
Inception to Date Total				$3.454	$34,540

We maintain an “opt out” dividend reinvestment and stock purchase plan for our common stockholders. As a result, if we declare a distribution, then stockholders' cash distributions will be automatically reinvested in additional shares of our common stock, unless they, or their nominees on their behalf, specifically “opt out” of the dividend reinvestment and stock purchase plan so as to receive cash distributions.

Critical Accounting Policies

The preparation of consolidated financial statements and related disclosures in conformity with 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 consolidated financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. The following is a summary of our accounting policies that are most affected by judgments, estimates and assumptions, which relate to the estimation of fair value of portfolio investments and revenue recognition.

Valuation of Portfolio Investments

We value our investments in accordance with the 1940 Act and Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), as determined in good faith by our Board of Directors.

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We undertake a multi-step valuation process to determine the fair value of our investments in accordance with ASC 820. The valuation process begins with the development of a preliminary valuation recommendation for each investment as determined in accordance with our valuation policy by a group of our Manager’s valuation, accounting and finance professionals, which is independent of our Manager's investment team. To prepare the proposed valuation, the group reviews information provided by a nationally recognized independent pricing service, broker-dealers, and may consult with the investment team and other internal resources of our Manager and its affiliates. The preliminary valuation recommendations are then presented to the Investment Committee and reviewed and approved by our Audit and Compliance Committee. The valuation recommendations are then reviewed by our Board of Directors for final approval. There were no changes to our valuation techniques or to the types of unobservable inputs used in the valuation process compared to the year ended December 31, 2015.

ASC 820 provides a framework for measuring the fair value of assets and liabilities and provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings. When available, we determine the fair value of our investments using unadjusted quoted prices from active markets. Where inputs for an asset or liability fall into more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment's fair value measurement. We use judgment and consider factors specific to the investment when determining the significance of an input to a fair value measurement. Our policy is to recognize transfers in and out of levels as of the beginning of each reporting period. The three levels of the fair value hierarchy and investments that fall into each of the levels are described below:

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

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. This may include valuations based on executed trades, broker quotations that constitute an executable price, and alternative pricing sources supported by observable inputs which, in each case, are either directly or indirectly observable for the asset in connection with market data at the measurement date.

Level 3: Inputs are unobservable and cannot be corroborated by observable market data. In certain cases, investments classified within Level 3 may include securities for which we have obtained indicative quotes from broker-dealers that do not necessarily represent prices the broker may be willing to trade on.

The valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs. Our Senior Floating Rate Loans are predominately valued based on evaluated prices from a nationally recognized independent pricing service or from third-party brokers who make markets in such debt investments. When possible, we make inquiries of third-party pricing sources to understand their use of significant inputs and assumptions. We review the third-party fair value estimates and perform procedures to validate their reasonableness, including an analysis of the range and dispersion of third-party estimates, frequency of pricing updates, comparison of recent trade activity for similar securities, and review for consistency with market conditions observed as of the measurement date.

There may be instances when independent or third-party pricing sources are not available, or cases where we believe that the third-party pricing sources do not provide sufficient evidence to support a market participant's view of the fair value of the debt investment being valued. These instances may result from an investment in a less liquid loan such as a middle market loan, a mezzanine loan or unitranche loan, or a loan to a company that has become financially distressed. In these instances, we may estimate the fair value based on a combination of a market yield valuation methodology and evaluated pricing discussed above, or solely based on a market yield valuation methodology. Under the market yield valuation methodology, we estimate the fair value based on a discounted cash flow technique. For these debt investments, the unobservable inputs used in the market yield valuation methodology to measure fair value reflect management's best estimate of assumptions that would be used by market participants when pricing the investment in a hypothetical transaction, including estimated remaining life, current market yield and interest rate spreads of similar loans and securities as of the measurement date. We will estimate the remaining life based on market data for the average life of similar loans. However, if we have information that the loan is expected to be repaid in the near term, we would use an estimated remaining life based on the expected repayment date. The average life to be used to estimate the fair value of our loans may be shorter than the legal maturity of the loans since many loans are prepaid prior to the maturity date. The interest rate spreads used to estimate the fair value of our loans is based on current interest rate spreads of similar loans. If there is a significant deterioration of the credit quality of a loan, we may consider other factors that a hypothetical market participant would use to estimate fair value, including the anticipated proceeds that would be received in a liquidation.

We estimate the fair value of our CLO equity investments using a combination of third-party broker quotes, purchases or sales of the same or similar securities, and cash flow forecasts subject to assumptions that a market participant would use regarding the investments' underlying collateral, including, but not limited to, assumptions for default and recovery rates, reinvestment spreads and prepayment rates. Cash flow forecasts are discounted using market participant's market yield assumptions that are derived from multiple sources, including, but not limited to, third-party broker quotes, industry research reports and transactions of securities and indices with similar structures and risk characteristics. We weight the use of third-party broker quotes,

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if any, when determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes and the correlation of changes in broker quotes with underlying performance and other market indices.

Investment Income

For debt investments, we record interest income on the accrual basis to the extent that such amounts are expected to be collected. OID and purchased discounts and premiums are accreted into interest income using the effective interest method, where applicable. Loan origination fees are deferred and accreted into interest income using the effective interest method. We record prepayment premiums on loans and other investments as interest income when such amounts are received. We stop accruing interest on investments when it is determined that interest is no longer collectible.

Interest income on CLO equity investments is recognized using the effective interest method as required by FASB ASC Subtopic 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets (“ASC 325-40”). Under ASC 325-40, at the time of purchase, we estimate the future expected cash flows and determine the effective yield of an investment based on these estimated cash flows and our cost basis. Subsequent to the purchase, these estimated cash flows are updated quarterly and a revised yield is calculated prospectively in accordance with ASC 320-10-35, Investment-Debt and Equity Securities. In the event that the fair value of an investment decreases below its current amortized cost basis, we may be required to write down the current amortized cost basis for a credit loss or to fair value depending on our hold expectations for the investment. Current amortized cost basis less the amount of any write down (“Reference Amount”) is used to calculate the effective yield used for interest income recognition purposes over the remaining life of the investment. We are precluded from reversing write downs for any subsequent increase in the expected cash flows of an investment with the effect of increasing total interest income over the life of the investment and increasing the realized loss recorded on the sale or redemption of the investment by the amount of the credit loss write down. In estimating these cash flows, there are a number of assumptions that are subject to uncertainties and contingencies. These include the amount and timing of principal payments (including prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations. In addition, interest payment shortfalls due to delinquencies on the underlying loans and the timing and magnitude of projected credit losses on the loans underlying the securities have to be estimated. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimates and interest income. As a result, actual results may differ significantly from these estimates.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in interest rates. As of September 30, 2016, all of our debt investments bore interest at floating rates, and we expect that our investment portfolio will, in the future, primarily include floating rate debt investments. The interest rates on our debt investments are usually based on a floating LIBOR, and the debt investments typically contain interest rate reset provisions that adjust applicable interest rates to current rates on a periodic basis. As of September 30, 2016, 100% of the debt investments in our portfolio had interest rate floors between 0.75% and 1.75%, which, in the current interest rate environment where LIBOR is approximately 0.85%, has effectively converted most of those floating rate debt investments to fixed rate debt investments. In contrast, our Credit Facility has a floating interest rate provision with no LIBOR floor, and therefore, our cost of funds will fluctuate with changes in short-term interest rates.

Assuming no changes to our consolidated statement of assets and liabilities as of September 30, 2016, the following table shows the approximate annualized impact to the components of our results of operations from hypothetical base rate changes in interest rates to our Loan Portfolio and debt financing.

($ in thousands except per share data) Basis point increase (1)	Interest income		Interest expense		Net increase to Net Earnings		Net increase per share
300	$	5,527	$	3,000	$	2,527	$	0.25
200	$	3,581	$	2,000	$	1,581	$	0.16
100	$	1,635	$	1,000	$	635	$	0.06

⁽¹⁾ A decline in interest rates would not have a material impact on our consolidated financial statements.

Although management believes that this measure is indicative of our sensitivity to interest rates, it does not reflect any potential impact to the fair value of our investments as a result of changes to interest rates, nor does it adjust for potential changes in the credit market, credit quality, size and composition of the assets in our consolidated statements of assets and liabilities and other business developments that could affect the net increase/(decrease) in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

The above sensitivity analysis does not include our CLO equity investments. CLO equity investments are levered structures that are collateralized primarily with first lien floating rate loans that may have LIBOR floors and are levered primarily with floating rate debt that does not have a LIBOR floor. The residual cash flows available to the equity holders of the CLOs will

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decline as interest rates increase until interest rates surpass the LIBOR floors on the floating rate loans. However, the revenue recognized on our CLO equity investments is calculated using the effective interest method which incorporates a forward LIBOR curve in the projected cash flows. Any change to interest rates that is not in-line with the forward LIBOR curve used in the projections, in either the timing or magnitude of the change, will cause actual distributions to differ from the current projections and will impact the related revenue recognized from these investments.

The below graph illustrates the forward LIBOR curve utilized in the projected cash flows from our CLO equity investments as of September 30, 2016⁽¹⁾.

(1) Forward LIBOR curve used to develop the cash flows incorporated in the September 30, 2016 valuations and the cash flows used to calculate the effective yield as of September 30, 2016. Source: Bloomberg as of October 19, 2016.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2016, 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) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated 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 such possible controls and procedures.

Changes in Internal Control over Financial Reporting

There have been no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our quarter ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be a party to certain ordinary routine litigation incidental to our business, including the enforcement of our rights under contracts with our portfolio companies. We are not currently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us.

Item 1A. Risk Factors

You should carefully consider the risks described below and all other information contained in this quarterly report on Form 10-Q, including our interim financial statements and the related notes thereto before you decide to invest in ACSF. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and performance.

If any of the following risks actually occur, our business, financial condition or results of operations could be materially

adversely affected. If that happens, the trading price of our securities could decline, and you may lose all or part of your investment. In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which are not the only risks facing our Company.

Risks Related to Our Business and Structure

Our Manager is expected to change as a result of a change in its ownership

Our Manager is an indirect subsidiary of a wholly-owned portfolio company of American Capital.  On May 23, 2016, American Capital announced that it had entered into a merger agreement (the “Merger Agreement”) with Ares Capital Corporation (“Ares Capital”), under which Ares Capital will acquire American Capital in a cash and stock transaction (the “Acquisition”), subject to each party’s shareholder approval, customary regulatory approvals and other closing conditions.  In accordance with the 1940 Act and the terms of our management agreement with our Manager, the management agreement will automatically terminate upon consummation of the Acquisition as a result of the ultimate change in ownership of our Manager.  Under the Merger Agreement, American Capital agreed to cause our Manager to use commercially reasonable efforts to obtain as promptly as possible the approval of our Board of Directors and our shareholders of a new investment advisory contract with an affiliate of Ares Capital on substantially similar terms as the management agreement with our Manager and a temporary advisory contract with the affiliate of Ares Capital in the event that shareholder approval is not obtained prior to the closing of the Acquisition.  A process is under way involving the disinterested members of our Board of Directors reviewing such information as may be reasonably necessary for our Board of Directors to evaluate the terms of the proposed new investment advisory contract with Ares Capital’s affiliate.  We cannot assure you that we will enter into a new investment advisory contract with an Ares Capital affiliate in connection with the Acquisition or that we will have continued access to the same senior management and/or key personnel.  Any change in our Manager could materially adversely affect our ability to implement our business strategy and have an adverse impact on our business, financial condition, results of operations or cash flows.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits, Financial Statement Schedules

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

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Exhibit Number	Description
*3.1	American Capital Senior Floating, Ltd. Articles of Amendment and Restatement, incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
*3.2	American Capital Senior Floating, Ltd. Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.2 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
*4.1	Instruments defining the rights of holders of securities: See Article VI of our Articles of Amendment and Restatement, incorporated herein by reference to Exhibit 3.1 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
*4.2	Instruments defining the rights of holders of securities: See Article VII of our Amended and Restated Bylaws, incorporated herein by reference to Exhibit 3.2 of Form 10-Q for the quarter ended March 31, 2014 (File No. 814-01025), filed May 15, 2014.
*4.3	Form of Certificate of Common Stock, incorporated herein by reference to Exhibit 2.d.3 of Amendment No. 1 to Form N-2 (Registration Statement No. 333-190357), filed December 20, 2013.
31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Previously filed

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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.

			AMERICAN CAPITAL SENIOR FLOATING, LTD.
Date:	November 4, 2016	By:	/s/ John R. Erickson
			John R. Erickson Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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