BLACKROCK CAPITAL INVESTMENT CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The information contained in this section should be read in conjunction with our
consolidated financial statements and notes thereto appearing elsewhere in this
Annual Report.

Forward-looking statements

This report, and other statements that we may make, may contain forward-looking
statements with respect to future financial or business performance, strategies
or expectations. Forward-looking statements are typically identified by words or
phrases such as "trend," "opportunity," "pipeline," "believe," "comfortable,"
"expect," "anticipate," "current," "intention," "estimate," "position,"
"assume," "potential," "outlook," "continue," "remain," "maintain," "sustain,"
"seek," "achieve" and similar expressions, or future or conditional verbs such
as "will," "would," "should," "could," "may" or similar expressions.

Forward-looking statements are subject to numerous assumptions, risks and
uncertainties, which change over time. Forward-looking statements speak only as
of the date they are made, and we assume no duty to and do not undertake to
update forward-looking statements. Actual results could differ materially from
those anticipated in forward-looking statements and future results could differ
materially from historical performance.

In addition to factors previously identified elsewhere in the reports BlackRock
Capital Investment Corporation has filed with the Securities and Exchange
Commission (the "SEC") and those identified elsewhere in this report, including
the "Risk Factors" section, the following factors, among others, could cause
actual results to differ materially from forward-looking statements or
historical performance:
  • our future operating results;


  • our business prospects and the prospects of our portfolio companies;


  • the impact of investments that we expect to make;


  • our contractual arrangements and relationships with third parties;

• the dependence of our future success on the general economy and its impact

on the industries in which we invest;

• the financial condition and capacity of our current and potential assets

      portfolio companies to achieve their objectives;


  • our expected financings and investments;

• the adequacy of our liquidity and working capital, including our

ability to obtain continued financing on favorable terms;

• the timing of cash flows, if any, from our portfolio operations

      companies;


  • the impact of increased competition;

• the impact of COVID-19 on our portfolio companies and the markets in which

they operate, interest rates and the economy in general;

• the advisor’s ability to find suitable investments for us and

      monitor and administer our investments;


   •  changes in law and policy accompanying the new administration and
      uncertainty pending any such changes;

• increase in geopolitical unrest, terrorist attacks or acts of war, which may

harm the general economy, national and local financial and financial resources.

capital markets or specific sectors of our portfolio companies;

• changes and volatility in political, economic or industry conditions, the

interest rate, exchange rate or financial and capital management environment

      markets;


  • the unfavorable resolution of legal proceedings; and

• the impact of changes in tax legislation and, more generally, our tax position.


Overview

We were incorporated in Delaware on April 13, 2005 and commenced operations with
private funding on July 25, 2005, and completed our initial public offering on
July 2, 2007. Our investment objective is to generate both current income and
capital appreciation through debt and equity investments. We invest primarily in
middle-market companies in the form of senior debt securities and loans, and our
investment portfolio may include junior secured and unsecured debt securities
and loans, each of which may include an equity component.

We are externally managed and have elected to be regulated as a BDC under the
1940 Act. As a BDC, we are required to comply with certain regulatory
requirements. For instance, we generally have to invest at least 70% of our
total assets in "qualifying assets," including securities of private or thinly
traded public U.S. companies, cash, cash equivalents, U.S. Government securities
and high-quality debt investments that mature in one year or less.

Certain previously reported items may have been reclassified to conform to the current year’s presentation.


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Investments

Our level of investment activity can vary significantly from period to period depending on many factors, including the amount of debt and equity available to middle market companies, the level of merger activity and acquisition, the general economic environment and the competitive environment. for the types of investments we make.

As a BDC, we generally do not acquire any assets other than "qualifying assets"
specified in 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." Under
the relevant SEC rules, the term "eligible portfolio company" includes most
private companies, companies whose securities are not listed on a national
securities exchange, and certain public companies that have listed their
securities on a national securities exchange and have a market capitalization of
less than $250 million. These rules also permit us to include as qualifying
assets certain follow-on investments in companies that were eligible portfolio
companies at the time of initial investment but that no longer meet the
definition. As of December 31, 2021, approximately 11.7% of the total assets of
the Company were not qualifying assets under Section 55(a) of the 1940 Act.

Revenue

We generate revenues primarily in the form of interest on the debt we hold,
dividends on our equity interests and capital gains on the sale of warrants and
other debt or equity interests that we acquire in portfolio companies. Our
investments in fixed income instruments generally have an expected maturity of
three to ten years, although we have no lower or upper constraint on maturity,
and typically bear interest at a fixed or floating rate. Interest on our debt
securities is generally payable quarterly or semi-annually. In some cases, our
debt instruments and preferred stock investments may defer payments of cash
interest or dividends or pay interest or dividends in-kind. Any outstanding
principal amount of our debt securities and any accrued but unpaid interest will
generally become due at the maturity date. In addition, we may generate revenue
in the form of prepayment fees, commitment, origination, capital structuring
fees, and fees for providing significant managerial assistance.

Expenses

Our primary operating expenses include the payment of a Management Fee and,
depending on our operating results, Incentive Fees, interest and credit facility
fees, expenses reimbursable under the Current Management Agreement, professional
fees, administration fees and the allocable portion of overhead under the
administration agreement. The Management Fee and Incentive Fee compensate the
Advisor for work in identifying, evaluating, negotiating, closing and monitoring
our investments. Our Current Management Agreement with the Advisor provides that
we will reimburse the Advisor for costs and expenses incurred by the Advisor for
office space rental, office equipment and utilities allocable to the Advisor
under the Current Management Agreement, as well as any costs and expenses
incurred by the Advisor relating to any non-investment advisory, administrative
or operating services provided by the Advisor to us. We bear all other costs and
expenses of our operations and transactions.

Significant Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with GAAP. The preparation of these consolidated financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, as well as the reported amounts of revenues and expenses
during the reporting periods presented. Although management believes these
estimates and assumptions to be reasonable, actual results could differ from
those estimates and such differences could be material.

Management considers the significant accounting policies important to
understanding the consolidated financial statements. In addition to the
discussion below, our significant accounting policies are further described in
the notes to the consolidated financial statements. See Note 2 to the
consolidated financial statements for a description of significant accounting
policies and of recently issued accounting pronouncements. Management considers
Investments to be an area deemed a critical accounting policy as a result of the
judgments necessary for management to select valuation methodologies and to
select significant unobservable inputs to estimate fair value (see Note 2 to the
consolidated financial statements).


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Financial and operational highlights

At December 31, 2021:
Investment portfolio, at fair value: $552.6 million
Net assets: $349.7 million
Indebtedness, excluding deferred issuance costs: $197.3 million
Net asset value per share: $4.73

Portfolio activity for the year ended December 31, 2021: Cost of investments over the period, including PIK: $275.0 million
Sales, refunds and other outflows during the period: $250.6 million
Number of companies in portfolio at the end of the period: 86

Operating Results for the Year Ended December 31, 2021:
Net investment income per share: $0.27
Distributions declared per share: $0.40
Basic earnings (loss) per share: $0.90
Net investment income: $19.9 million
Net realized and unrealized gain/(loss): $46.6 million
Net increase (decrease) in net assets from operations: $66.5 million
Net investment income per share, as adjusted1: $0.29
Basic earnings (loss) per share, as adjusted1: $0.92
Net investment income, as adjusted1: $21.4 million
Net increase (decrease) in net assets from operations, as adjusted1: $68.0
million


As Adjusted1: The Company reports its financial results in accordance with GAAP;
however, management believes evaluating the Company's ongoing operating results
may be enhanced if investors have additional non-GAAP financial measures. See
"Supplemental Non-GAAP information" for further information on non-GAAP
financial measures and for as adjusted items, which are adjusted to remove the
accrued hypothetical liquidation basis incentive fee expense based on capital
gains that was recorded, as required by GAAP, and to include only the
incremental incentive fee based on income. Under the Current Management
Agreement, incentive fee expense based on income is calculated for each calendar
quarter and may be paid on a quarterly basis if certain thresholds are met.
Adjusted amounts reflect the fact that no Incentive Fee on capital gains was
realized and payable to the Advisor during the year ended December 31, 2021.
Amounts reflected the Company's ongoing operating results and reflect the
Company's financial performance over time.

Portfolio and investment activity

We invested approximately $275.0 million during the year ended December 31,
2021. The new investments consisted of senior secured loans secured by first
lien ($224.8 million, or 81.7%) or second lien ($47.8 million, or 17.4%), and
equity securities ($2.4 million, or 0.9%). Additionally, we received proceeds
from sales, repayments and other exits of approximately $250.6 million during
the year ended December 31, 2021.

Concentration of our assets in an issuer, industry or sector may present certain
risks. To the extent that we assume large positions in the securities of a small
number of issuers, our net asset value may fluctuate to a greater extent than
that of a diversified investment company as a result of changes in the financial
condition or the market's assessment of the issuer. At December 31, 2021, our
portfolio of $552.6 million (at fair value) consisted of 86 portfolio companies
and was invested approximately 93% in senior secured loans, 5% in unsecured or
subordinated debt securities, 2% in equity investments and less than 1% in
senior secured notes. Our average investment by portfolio company at amortized
cost was approximately $7.1 million at December 31, 2021. Our largest portfolio
company investment at fair value was approximately $37.3 million and our five
largest portfolio company investments by value comprised approximately 21% of
our portfolio at December 31, 2021. At December 31, 2020, our portfolio of
$479.0 million (at fair value) consisted of 55 portfolio companies and was
invested 77% in senior secured loans, 13% in unsecured or subordinated debt
securities, 10% in equity investments and less than 1% in senior secured notes.
Our average investment by portfolio company at amortized cost was approximately
$11.0 million at December 31, 2020. Our largest portfolio company investment at
fair value was approximately $36.2 million and our five largest portfolio
company investments by value comprised approximately 31% of our portfolio at
December 31, 2020.

In addition, we may, from time to time, invest a substantial portion of our
assets in the securities of issuers in any single industry or sector of the
economy or in only a few issuers. A downturn in an industry or sector in which
we are concentrated could have a larger impact on us than on a company that does
not concentrate in that particular industry or sector. Our Advisor monitors
industry and sector


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uncertainties on an ongoing basis, including substantial regulatory challenges
in the healthcare sector, volatility and extensive government regulation in the
financial services sector, cyclical risks associated with the overall economy
and events outside of our control, including public health crises such as
COVID-19 which may have resulted or may continue to result in a negative impact
to certain industries, including significant reductions in demand for certain
goods and services, reductions in business activity and financial transactions,
supply chain interruptions and overall economic and financial market instability
both globally and in the U.S. (see Note 5 to the consolidated financial
statements and Part I. Item 1A. Risk Factors), among various other industry and
sector uncertainties due to certain exposures. At December 31, 2021, our top
three industry concentrations at fair value consisted of Diversified Financial
Services (13.6%), Internet Software & Services (11.2%) and Road & Rail (10.5%).
At December 31, 2020, our top three industry concentrations at fair value
consisted of Diversified Financial Services (19.3%), Road & Rail (10.0%) and
Thrift & Mortgage Finance (7.8%) (see Note 5 to the consolidated financial
statements).

The fair market value and cost-weighted average yields December 31, 2021 and December 31, 2020 were the following:

                                         December 31, 2021                  

December 31, 2020

                                   Fair Value             Cost          Fair Value                Cost
Weighted Average Yield(1)
Total portfolio                             8.5 %              7.6 %             8.7 %                 7.4 %
Senior secured loans                        9.0 %              9.0 %             9.5 %                 9.5 %
Other debt securities(2)                    1.9 %              1.1 %             7.3 %                 5.3 %
Debt and income producing
equity securities                           8.7 %              8.4 %             8.9 %                 8.5 %


(1) Calculated as (a) the declared annual interest rate or the yield earned plus the net amount

the annual amortization of the original issue discount, divided by (b) the amortization

    cost or at fair value of each category, as applicable. The calculation
    excludes exit fees that are receivable upon repayment of certain loan
    investments.

(2) The decrease in December 31, 2020 for December 31, 2021 is mainly

attributable to the fact that a majority of securities in this category are on

not run, after the scheduled release in First Boston Construction Holdings,

LLC in 2021.


For the years ended December 31, 2021 and 2020, the total return based on net
asset value was 23.57% and (20.61)%, respectively, and the total return based on
market price was 64.33% and (35.70)%, respectively. Total returns are historical
and are calculated by determining the percentage change in the net asset value
or market price with all distributions reinvested, if any. Distributions are
assumed to be reinvested in accordance with our dividend reinvestment plan and
do not reflect brokerage commissions.

The Advisor generally employs a grading system for our entire portfolio. The
Advisor grades all loans on a scale of 1 to 4. This system is intended to
reflect the performance of the borrower's business, the collateral coverage of
the loans and other factors considered relevant. Generally, the Advisor assigns
only one loan grade to each portfolio company for all loan investments in that
portfolio company; however, the Advisor will assign multiple ratings when
appropriate for different investments in one portfolio company. The following is
a description of the conditions associated with each investment rating:

Grade 1: Investments in portfolio companies whose performance is substantially
within or above the Advisor's original base case expectations and whose risk
factors are neutral to favorable to those at the time of the original investment
or subsequent restructuring.

Class 2: Investments in portfolio companies that perform materially below the advisor’s initial base case expectations or risk factors have increased since the time of the initial investment or subsequent restructuring. No loss of return on investment or principal (or invested capital) is expected.

Class 3: Investments in portfolio companies that perform significantly below the advisor’s initial baseline scenario expectations or risk factors have increased significantly since the time of the initial investment or subsequent restructuring. Some loss of investment return is expected, but no loss of capital (or invested capital) is expected.

Class 4: Investments in portfolio companies that perform significantly below the advisor’s initial base case expectations or risk factors have increased significantly since the time of the initial investment or subsequent restructuring. Some loss of principal (or invested capital) is expected.

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The Advisor monitors and, when appropriate, changes the investment ratings
assigned to each investment in our portfolio. In connection with our valuation
process, the Advisor and Board of Directors review these investment ratings on a
quarterly basis. Our weighted average investment rating was 1.21 at December 31,
2021 and 1.90 at December 31, 2020. The following is a distribution of the
investment ratings of our portfolio companies at December 31, 2021 and 2020:

                                     December 31,      December 31,
                                         2021              2020
                 Grade 1             $ 474,466,652     $ 189,012,640
                 Grade 2                49,356,296       198,713,376
                 Grade 3                         -        38,605,618
                 Grade 4                22,579,310        51,136,642
                 Not Rated(1)            6,161,736         1,557,200
                 Total investments   $ 552,563,994     $ 479,025,476


(1) Category Not Rated at December 31, 2021 mainly consists of

residual interests in Stitch Holdings, LP and AGY Equity, LLC. Not

Category rated at December 31, 2020 mainly consists of

residual interest in AGY Equity, LLC. For calculation purposes

our weighted average investment rating, the Unrated category is excluded.


Results of operations

Results comparisons are for the years ended December 31, 2021, 2020 and 2019.

Investment income

                                                                  Year Ended
                                       December 31, 2021       December 31, 2020       December 31, 2019
Investment income(1)
Interest and fees on senior secured
loans                                 $        43,782,088     $        40,269,786     $        40,757,083
Interest and fees on other debt
securities                                        722,862              18,628,369              21,455,510
Interest earned on short-term
investments, cash equivalents                       5,732                  26,846                 113,615
Dividends and fees on equity
securities                                      1,734,338               8,190,499              15,792,313
Total investment income               $        46,245,020     $        

67,115,500 $78,118,521

(1) Certain information from prior periods has been reclassified to conform to the

presentation of the current period. The reclassification does not affect the

the consolidated financial position of the Company or the consolidated results of

operations as indicated above.


Total investment income for the year ended December 31, 2021 decreased $20.9
million, or 31.1%, as compared to the year ended December 31, 2020. The primary
reasons for the decrease year over year is a $13.1 million decrease in
investment income due to our unsecured debt investment in Gordon Brothers
Finance Company ("GBFC") going on non-accrual status during the second half of
2020, and a decrease in dividend income year over year. The decrease in dividend
income is comprised of i) a $4.2 million decrease from BCIC Senior Loan
Partners, LLC ("Senior Loan Partners"), primarily due to the disposal of
underlying portfolio company investments in Senior Loan Partners during late
2020 and throughout 2021 (see Note 5 to the consolidated financial statements);
and ii) a $2.3 million decrease associated with GBFC preferred stock going on
non-accrual status during the second half of 2020. Excluding fee income and
other income, total investment income decreased by approximately 31.6%,
primarily attributable to a 22.9% decrease in the average investment portfolio
for the year ended December 31, 2021, at amortized cost, as compared to the year
ended December 31, 2020. The decrease in portfolio size is primarily due to
desirable exits during 2020 and 2021, primarily in junior capital exposure as
discussed above and other non-core assets.

Total investment income for the year ended December 31, 2020 decreased $11.0
million, or 14.1%, as compared to the year ended December 31, 2019. Excluding
fee income and other income, total investment income decreased by approximately
13.2%, primarily attributable to a decrease in dividend income year over year, a
lower rate environment, and a 1.3% decrease in the average investment portfolio
for the year ended December 31, 2020, at amortized cost, as compared to the year
ended December 31, 2019. The decrease in dividend income is due to a $5.0
million decrease in dividend income from Senior Loan Partners year over year,
and our preferred stock investment in GBFC going on non-accrual status during
the second half of 2020. The decrease in portfolio size is primarily due to net
exits during 2020.


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Expenses

                                                                  Year Ended
                                       December 31, 2021       December 31, 2020       December 31, 2019
Operating expenses
Interest and other debt expenses      $        11,620,899     $        15,584,214     $        15,558,648
Management fees                                 7,784,188              10,799,832              12,425,101
Incentive fees on income                          249,385               6,304,333               8,751,521
Incentive fees on capital gains                 1,544,569                       -                       -
Administrative expenses                         1,354,283               1,457,979               1,403,419
Professional fees                               1,100,008               1,964,252               2,093,064
Insurance expense                                 809,356                 650,432                 446,233
Director fees                                     622,500                 652,250                 729,750
Investment advisor expenses                       350,000                 350,000                 350,000
Other operating expenses                        1,011,273               1,433,054               1,354,699
Total expenses, before incentive
fee waiver                                     26,446,461              39,196,346              43,112,435
Incentive fee waiver                              (79,383 )            (6,304,333 )            (6,901,924 )
Total expenses, net of incentive
fee waiver                            $        26,367,078     $        32,892,013     $        36,210,511



Total expenses, net of incentive fee waiver, decreased $6.5 million, or 19.8%,
for the year ended December 31, 2021 from the comparable period in 2020,
primarily due to decreases in interest and other debt expenses and management
fees, which were partially offset by an increase in accrued incentive fees on
capital gains in 2021 as required by GAAP. Total expenses, net of incentive fee
waiver, decreased $3.3 million, or 9.2%, for the year ended December 31, 2020
from the comparable period in 2019, primarily due to a decrease in net incentive
fees on income and a decrease in management fees.

Interest and other debt expenses decreased approximately $4.0 million, or 25.4%,
for the year ended December 31, 2021 from the comparable period in 2020,
primarily due to a significant decrease in the average debt outstanding year
over year, and a lower rate environment (see Note 4 to the consolidated
financial statements).

Management fees decreased approximately $3.0 million, or 27.9%, for the year
ended December 31, 2021 from the comparable period in 2020 due to a decrease in
the total assets on which management fees are calculated (in arrears), and a
decrease in the management fee rate effective May 2, 2020 (see Note 3 to the
consolidated financial statements). The decrease in average quarterly total
assets was primarily due to the desired reduction in junior capital exposure and
non-core assets during 2020 and 2021. Management fees decreased approximately
$1.6 million, or 13.1%, for the year ended December 31, 2020 from the comparable
period in 2019 due to a decline in the total assets on which management fees are
calculated (in arrears), and a decrease in the management fee rate effective May
2, 2020 (see Note 3 to the consolidated financial statements). The decrease in
total assets was primarily due to net sales, repayments and valuation
depreciation during 2020.

For the years ended December 31, 20212020 and 2019, the advisor waived the income incentive fee of $0.1 million, $6.3 million and $6.9 millionrespectively, resulting in net incentive bonuses of $0.2 millionzero and $1.8 millionrespectively.

The Company is required under GAAP to accrue a hypothetical liquidation basis
incentive fee on capital gains, based upon net realized capital gains and
unrealized capital appreciation and depreciation on investments held at the end
of each period (see Note 3 to the consolidated financial statements). The
accrued incentive fee on capital gains was approximately $1.5 million at
December 31, 2021. However, no incentive fee on capital gains was realized and
payable to the Advisor during the year ended December 31, 2021.

Net investment income

Net investment income was $19.9 million, $34.2 million and $41.9 million for the
years ended December 31, 2021, 2020 and 2019, respectively. For the year ended
December 31, 2021, net investment income decreased approximately $14.4 million,
or 41.9%, compared to 2020, due to a decrease in total investment income of
$20.9 million, partially offset by a decrease in total expenses of $6.5 million.
For the year ended December 31, 2020, net investment income decreased $7.7
million, or 18.3%, compared to 2019, due to a decrease in total investment
income of $11.0 million, partially offset by a decrease in total expenses of
$3.3 million.

Net realized gain or loss

Net realized gain (loss) on investments was $(19.1) million, $(116.0) million
and $(24.9) million for the years ended December 31, 2021, 2020 and 2019,
respectively. Net realized gain (loss) of $(19.1) million for the year ended
December 31, 2021 was primarily due to a $(22.0) million realized loss on the
exit of our Senior Loan Partners investment, an $(18.5) million realized loss on
the restructure of Advanced Lighting Technologies, LLC, and exits of our
investments in Red Apple Stores Inc., First Boston Construction Holdings,


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LLC, and Advantage Insurance Inc.; partially offset by a realized gain of $22.0
million on the sale of SVP - Singer Holdings, LP. Substantially all of the net
realized losses were reflected in unrealized depreciation in prior periods. Net
realized gain (loss) of $(116.0) million for the year ended December 31, 2020
was primarily due to the restructure of AGY Holding Corp., resulting in a
realized loss of $(59.2) million, the sale of our equity investment in U.S. Well
Services, Inc., resulting in a realized loss of $(43.8) million, and sale of our
debt investment in Sur La Table, Inc., which resulted in a realized loss of
$(12.3) million. Net realized gain (loss) of $(24.9) million for the year ended
December 31, 2019 was primarily due to i) the restructure of Westmoreland
Resource Partners, LP, ii) the partial sale of U.S. Well Services, Inc., Class A
common stock, iii) the exit of our second lien debt and equity investments in
Vertellus Holdings, LLC and V Global, LLC (collectively, "Vertellus"), as well
as the partial sales of our first lien debt investment in Vertellus and
preferred equity investment in Advantage Insurance Inc. Substantially all of the
net realized losses were reflected in unrealized depreciation in prior periods.

Net change in unrealized appreciation or amortization

For the years ended December 31, 2021, 2020 and 2019, the change in net
unrealized appreciation or depreciation on investments and foreign currency
translation was a decrease in net unrealized depreciation of $65.7 million and
an increase in net unrealized depreciation of $(22.1) million, and $(23.9)
million, respectively. The decrease in net unrealized depreciation for the year
ended December 31, 2021 was primarily due to i) the reversal of previously
recognized depreciation of $25.8 million, related to the exit of our investment
in Senior Loan Partners; ii) the reversal of previously recognized depreciation
of $24.3 million, including foreign currency translation, related to the exits
of our investments in Red Apple Stores Inc., SVP - Singer Holdings, LP, First
Boston Construction Holdings, LLC, and Advantage Insurance Inc., and the
restructure of Advanced Lighting Technologies, LLC; iii) decrease in valuation
depreciation of $4.2 million in our investment in St. George Warehousing &
Trucking Co. of California, Inc., as well as an overall increase in valuation
across our portfolio. The increase in net unrealized depreciation for the year
ended December 31, 2020 was primarily due to a $(85.4) million increase in
valuation depreciation in our investments in GBFC and Senior Loan Partners,
partially offset by a $64.0 million reversal of previously recognized
depreciation related to the sale of our equity investment in U.S. Well Services,
Inc. and the restructure of AGY Holding Corp. The increase in net unrealized
depreciation for the year ended December 31, 2019 was primarily due to i) a
$(35.0) million increase in valuation depreciation in our investments in AGY
Holding Corp. and U.S. Well Services Inc., ii) a $(4.2) million increase in
valuation depreciation in our equity investments in Senior Loan Partners and
First Boston Construction Holdings, LLC, partially offset by iii) a $19.2
million reversal of previously recognized net unrealized depreciation upon
restructuring of our debt investment in Westmoreland Resource Partners, LP, and
the exit of our second lien debt and equity investments in Vertellus.

Net increase or decrease in net assets resulting from operations

The net increase or (decrease) in net assets resulting from operations was $66.5
million, $(103.9) million and $(6.9) million for the years ended December 31,
2021, 2020 and 2019, respectively. As compared to the year ended December 31,
2020, the increase in 2021 is primarily due to an increase in net realized and
unrealized gain (loss) of $184.7 million, partially offset by a decrease in net
investment income of $14.4 million. As compared to the year ended December 31,
2019, the decrease in 2020 is primarily due to an increase in net realized and
unrealized gain (loss) of $(89.3) million, and a decrease in net investment
income of $(7.7) million.

Additional Non-GAAP Information

We report our financial results on a GAAP basis; however, management believes
that evaluating our ongoing operating results may be enhanced if investors have
additional non-GAAP basis financial measures. Management
reviews non-GAAP financial measures to assess ongoing operations and, for the
reasons described below, considers them to be effective indicators, for both
management and investors, of our financial performance over time. Management
does not advocate that investors consider such non-GAAP financial measures in
isolation from, or as a substitute for, financial information prepared in
accordance with GAAP.

After March 6, 2017, Incentive Fees based on income are calculated for each
calendar quarter and may be paid on a quarterly basis if certain thresholds are
met. In addition, as previously disclosed, the Advisor, in consultation with the
Company's Board of Directors, had agreed to waive Incentive Fees based on income
from March 7, 2017 to June 30, 2019. BCIA had agreed to honor such waiver. The
Advisor had voluntarily waived a portion of its Incentive Fees based on income
from July 1, 2019 through September 30, 2021.

We record our liability for Incentive Fee based on capital gains by performing a
hypothetical liquidation basis calculation at the end of each reporting period,
as required by GAAP, which assumes that all unrealized capital appreciation and
depreciation is realized as of the reporting date. It should be noted that
Incentive Fees based on capital gains (if any) are not due and payable until the
end of the annual measurement period, or every June 30. The incremental
Incentive Fee disclosed for a given period is not necessarily indicative of
actual full year results. Changes in the economic environment, financial markets
and other parameters used in determining such estimates could cause actual
results to differ and such differences could be material. There can be no
assurance that unrealized capital appreciation and depreciation will be realized
in the future, or that any accrued capital gains Incentive Fee will become
payable. Incentive


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Fee amounts on capital gains actually paid by the Company will specifically
exclude consideration of unrealized capital appreciation, consistent with
requirements under the Advisers Act and the Current Management Agreement. See
Note 3 to the consolidated financial statements for a more detailed description
of the Company's Incentive Fee.

Computations for all periods are derived from our consolidated financial
statements as follows:

                                                               Year Ended
                                            December 31,      December 31,      December 31,
                                                2021              2020              2019
GAAP Basis:
Net Investment Income                       $  19,877,942     $  34,223,487     $  41,908,010
Net Investment Income per share                      0.27              0.49              0.61
Addback: GAAP incentive fee based on
capital gains                                   1,544,569                 -                 -
Addback: GAAP incentive fee based on
Income net of incentive fee waiver                170,002                 - 

1,849,597

Pre-Incentive Fee1:
Net Investment Income                       $  21,592,513     $  34,223,487     $  43,757,607
Net Investment Income per share                      0.29              0.49              0.64
Less: Incremental incentive fee based on         (170,002 )               -        (1,849,597 )
Income net of incentive fee waiver
As Adjusted2:
Net Investment Income                       $  21,422,511     $  34,223,487     $  41,908,010
Net Investment Income per share                      0.29              0.49              0.61



Pre-incentive fee1: Amounts are adjusted to remove all inducement fees. These costs have been recorded but are not due and payable at the closing date.

As Adjusted2: Amounts are adjusted to remove the GAAP accrual for incentive fee
based on capital gains, and to include only the incremental incentive fee based
on income. Adjusted amounts reflect the fact that no Incentive Fee on capital
gains was realized and payable to the Advisor during the years ended
December 31, 2021, 2020 and 2019, respectively. Under the Current Management
Agreement, incentive fee based on income is calculated for each calendar quarter
and may be paid on a quarterly basis if certain thresholds are met. Amounts
reflected the Company's ongoing operating results and reflect the Company's
financial performance over time.

Financial position, liquidity and capital resources

During the year ended December 31, 2021, we generated operating cash flows
primarily from interest and fees received on senior secured loans and other debt
securities, as well as from sales of selected portfolio company investments or
repayments of principal. Net cash used in operating activities for the year
ended December 31, 2021 was $(0.6) million. Our primary use of cash from
operating activities during the year primarily consisted of $(21.6) million in
net purchases of investments, excluding PIK capitalization.

Net cash used by financing activities for the year ended December 31, 2021 was
$(10.0) million. Our uses of cash consisted of cash distributions paid of
$(22.3) million, purchases of treasury stock of $(2.2) million, and payment of
debt issuance costs of approximately $(0.8) million. Our source of cash from
financing activities consisted of $15.2 million in net debt borrowings under the
Credit Facility.

During the year ended December 31, 2020, we generated operating cash flows
primarily from interest and fees received on senior secured loans and other debt
securities, as well as from sales of selected portfolio company investments or
repayments of principal. Net cash provided by operating activities for the year
ended December 31, 2020 was $170.6 million. Our primary source of cash from
operating activities during the year consisted of proceeds from net disposition
of investments of $140.5 million.

Net cash used by financing activities for the year ended December 31, 2020 was
$(162.0) million. Our uses of cash from financing activities consisted of cash
distributions paid of $(22.8) million, purchases of treasury stock of $(3.6)
million, and $(135.6) million in debt repayments under the Credit Facility, net
of borrowings.

In the normal course of business, we may enter into guarantees on behalf of
portfolio companies. Under these arrangements, we would be required to make
payments to third parties if the portfolio companies were to default on their
related payment obligations. There were no such guarantees outstanding at
December 31, 2021 and 2020. In addition, from time to time, we may provide for a
commitment to a portfolio company for investment in an existing or new security.
At December 31, 2021 and 2020, we were obligated to existing portfolio companies
for unfunded commitments of $49.4 million across 35 portfolio companies and
$24.3 million across 14 portfolio companies, respectively.

From December 31, 2021we have analyzed cash and cash equivalents and availability under our credit facility and believe there is sufficient liquidity to meet all of our obligations, fund unfunded commitments as needed and deploy new capital in new and existing holding companies.

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Contractual obligations

A summary of our principal contractual payment obligations for the repayment of outstanding borrowings to December 31, 2021 is as follows:

                                                          Payments Due By Period (dollars in millions)
                                                        Less than 1
                                         Total             year            1-3 years         3-5 years       After 5 years
Credit Facility(1)                    $      54.0       $         -       $          -      $      54.0     $             -
2022 Convertible Notes                      143.8             143.8                  -                -                   -
Interest and Debt Related Payables            0.6               0.6                  -                -                   -


(1) To December 31, 2021, $211.0 million has not been drawn on our credit

       Facility.


Distributions

Our quarterly distributions, if any, are determined by our Board of Directors.
Distributions are declared considering our estimate of annual taxable income
available for distribution to stockholders and the amount of taxable income
carried over from the prior year for distribution in the current year. We cannot
assure stockholders that they will receive any distributions at all or
distributions at a particular level. The following table lists the quarterly
distributions per share from our common stock since December 2019:
           Distribution Amount
                Per Share
               Outstanding             Record Date          Payment Date
          $          0.14           December 18, 2019     January 8, 2020
          $          0.14             March 17, 2020       April 7, 2020
          $          0.10              June 1, 2020         July 7, 2020
          $          0.10            August 18, 2020     September 29, 2020
          $          0.10           November 18, 2020    December 30, 2020
          $          0.10             March 17, 2021       April 7, 2021
          $          0.10             June 16, 2021         July 7, 2021
          $          0.10           September 15, 2021    October 6, 2021
          $          0.10           December 16, 2021     January 6, 2022
          $          0.10             March 17, 2022       April 7, 2022


The tax characteristics of all distributions are disclosed to shareholders on Form 1099-DIV or Form 1042-S after the end of the calendar year.

We have elected to be taxed as a RIC under Subchapter M of the Code. In order to
maintain favorable RIC tax treatment, we must distribute annually to our
stockholders at least 90% of our ordinary income and realized net short-term
capital gains in excess of realized net long-term capital losses, if any, out of
the assets legally available for distribution. In order to avoid certain excise
taxes imposed on RICs, we must distribute during each calendar year an amount at
least equal to the sum of:

• 98% of our ordinary income (without taking into account capital gains or

losses) for the calendar year;

• 98.2% of the amount by which our capital gains exceed our capital losses

(adjusted for certain ordinary losses) for the period of one year generally

ending on October 31 of the calendar year; and

• certain undistributed amounts from prior years on which we have not paid any we

federal income tax.


We may, at our discretion, carry forward taxable income in excess of calendar
year distributions and pay a 4% excise tax on this income. If we choose to do
so, all other things being equal, this would increase expenses and reduce the
amounts available to be distributed to our stockholders. We will accrue excise
tax on estimated taxable income as required. In addition, although we currently
intend to distribute realized net capital gains (i.e., net long-term capital
gains in excess of short-term capital losses), if any, at least annually, out of
the assets legally available for such distributions, we may in the future decide
to retain such capital gains for investment. There was no provision for federal
excise taxes recorded for the years ended December 31, 2021, 2020 and 2019.

The final tax characterization of distributions is determined after the fiscal
year and is reported on Form 1099 and in the Company's annual report to
stockholders. Distributions can be characterized as ordinary income, capital
gains and/or return of capital. To the extent that distributions exceed the
Company's current and accumulated earnings and profits, the excess may be
treated as a non-taxable return of capital. Distributions that exceed a
Company's taxable income but do not exceed the Company's current and accumulated
earnings and profits, may be classified as ordinary income which is taxable to
stockholders.


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The Company estimates the source of its distributions as required by Section
19(a) of the 1940 Act. On a quarterly basis, for any payment of dividends
estimated to be paid from any other source other than net investment income
accrued for current period or certain cumulative periods based on the Section
19(a) requirement, the Company posts a Section 19(a) notice through the
Depository Trust Company's Legal Notice System and its website, as well as sends
its registered stockholders a printed copy of such notice along with the
dividend payment. The estimates of the source of the distribution are interim
estimates based on GAAP that are subject to revision, and the exact character of
the distributions for tax purposes cannot be determined until the final books
and records are finalized for the calendar year. Therefore, these estimates are
made solely in order to comply with the requirements of Section 19(a) of the
1940 Act and should not be relied upon for tax reporting or any other purposes
and could differ significantly from the actual character of distributions for
tax purposes. For the $0.10 dividend paid on January 6, 2022, the Company
estimates that approximately $0.08 was from net investment income and
approximately $0.02 was a return of capital. For Consolidated Statements of
Changes in Net Assets, sources of distribution to stockholders are adjusted on
an annual basis, if necessary, and calculated in accordance with federal income
tax regulations.

We maintain an "opt out" dividend reinvestment plan for our common stockholders.
As a result, except as discussed below, if we declare a distribution,
stockholders' cash distributions will be automatically reinvested in additional
shares of our common stock, unless they specifically "opt out" of the dividend
reinvestment plan as to receive cash distributions. Additionally, if the Company
makes a distribution to be paid in cash or in stock at the election of
stockholders as of the applicable dividend record date (a "Cash/Stock
Distribution"), the terms are subject to the amended Plan dated May 13, 2020
described below (see Note 7 to the consolidated financial statements).

On March 6, 2018, the Board of Directors of the Company adopted amendments to
the Company's dividend reinvestment plan (the "Plan"). Under the terms of the
amended Plan, if the Company declares a dividend or determines to make a capital
gain or other distribution, the reinvestment plan agent will acquire shares for
the participants' accounts, depending upon the following circumstances, (i)
through receipt of additional unissued but authorized shares from the Company
("newly issued shares") and/or (ii) by purchase of outstanding shares on the
open market ("open-market purchases"). If, on the distribution payment date, the
last quarterly net asset value per share ("NAV") is equal to or less than the
closing market price per share on such distribution payment date (such condition
often referred to as a "market premium"), the reinvestment plan agent will
invest the distribution amount in newly issued shares on behalf of the
participants. The number of newly issued shares to be credited to each
participant's account will be determined by dividing the dollar amount of the
distribution by the greater of (i) the NAV or (ii) 95% of the closing market
price on the distribution payment date. If, on the distribution payment date,
the NAV is greater than the closing market price per share on such distribution
payment date (such condition often referred to as a "market discount"), the
reinvestment plan agent may, upon notice from the Company, either (a) invest the
distribution amount in newly issued shares on behalf of the participants or (b)
invest the distribution amount in shares acquired on behalf of the participants
in open-market purchases.

On May 13, 2020, the Board of Directors of the Company adopted further
amendments to the Plan. Under the terms of the amended Plan, if the Company
makes a Cash/Stock Distribution, each stockholder will be required to elect
whether to receive the distribution in cash or in shares of the Company's common
stock ("Common Shares"), pursuant to such notices, forms or other documentation
as may be provided to the stockholder by the Company (the "Election Forms"). If
the stockholder is a Plan participant and elects to receive the Cash/Stock
Distribution in cash, the stockholder will be deemed to have elected not to
participate in the Plan solely with respect to such Cash/Stock Distribution and
will receive the distribution in cash subject to any rules applicable to the
distribution that may limit the portion of the distribution the Company is
required to pay in cash. If the stockholder is a Plan participant and elects to
receive the Cash/Stock Distribution in stock, the stockholder will receive the
distribution in newly issued Common Shares. The number of newly issued Common
Shares credited to the stockholders' account in either case will be determined
by dividing the dollar amount of the distribution (or portion of the
distribution to be paid in Common Shares) by the price per Common Share
determined in accordance with the Election Forms rather than pursuant to the
formula(s) otherwise applicable under the Plan. This feature of the Plan means
that, under certain circumstances, we may issue shares of our common stock at a
price below NAV per share, which could cause our stockholders to experience
dilution. We may not be able to achieve operating results that will allow us to
make distributions at a specific level or to increase the amount of these
distributions from time to time. Also, we may be limited in our ability to make
distributions due to the asset coverage test applicable to us as a BDC under the
1940 Act and due to provisions in our existing and future debt arrangements.

If we do not distribute a certain percentage of our income annually, we will
suffer adverse tax consequences, including possible loss of favorable RIC tax
treatment. In addition, in accordance with U.S. GAAP and tax regulations, we
include in income certain amounts that we have not yet received in cash, such as
payment-in-kind interest, which represents contractual interest added to the
loan balance that becomes due at the end of the loan term, or the accretion of
original issue or market discount. Since we may recognize income before or
without receiving cash representing such income, we may have difficulty meeting
the requirement to distribute at least 90% of our investment company taxable
income to obtain tax benefits as a RIC and may be subject to income or excise
taxes. In order to satisfy the annual distribution requirement applicable to
RICs, we may have the ability to declare a large portion of a dividend in shares
of our common stock instead of in cash. As long as a sufficient portion of such
dividend is paid in cash and certain requirements are met, the entire
distribution would generally be treated as a dividend for U.S. federal income
tax purposes.


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RECENT DEVELOPMENTS

On March 1, 2022, the Company's Board of Directors declared a distribution of
$0.10 per share, payable on April 7, 2022 to stockholders of record at the close
of business on March 17, 2022.

Notice is hereby given in accordance with Section 23(c) of the 1940 Act that
from time to time the Company may purchase shares of its common stock in the
open market at prevailing market prices.

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