Unassociated Document

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 consolidated financial statements and related notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The consolidated financial statements and related footnotes reflect the financial performance of Golub Capital BDC LLC and its predecessor and wholly owned subsidiary, Golub Capital Master Funding LLC, or GCMF, which was formed on June 6, 2007.

On April 13, 2010, Golub Capital BDC LLC converted from a Delaware limited liability company into a Delaware corporation and elected to be treated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. In this conversion, which we refer to as the BDC Conversion, Golub Capital BDC, Inc. assumed the business activities of Golub Capital BDC LLC and became the sole surviving entity. As a result of the conversion, GCMF became a wholly owned subsidiary of Golub Capital BDC, Inc.

Except as otherwise specified, references to “we,” “us,” and “our” refer to Golub Capital BDC LLC and its consolidated subsidiary for the periods prior to the BDC Conversion, and refer to Golub Capital BDC, Inc. and its consolidated subsidiary for the periods after the BDC Conversion.

“Golub Capital” refers, collectively, to the activities and operations of Golub Capital Incorporated and Golub Capital Management LLC, which employs all of Golub Capital’s investment professionals, as well as our investment adviser, GC Advisors LLC, or GC Advisors, our administrator, GC Service Company, LLC, or GC Service, associated investment funds and their respective affiliates.

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. The forward-looking statements contained in this report involve risks and uncertainties, including statements as to:

our future operating results;

our business prospects and the prospects of our portfolio companies;

the effect of investments that we expect to make;

our contractual arrangements and relationships with third parties;

actual and potential conflicts of interest with GC Advisors and other affiliates of Golub Capital;

the dependence of our future success on the general economy and its effect on the industries in which we invest;

the ability of our portfolio companies to achieve their objectives;

the use of borrowed money to finance a portion of our investments;

the adequacy of our financing sources and working capital;

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

the ability of GC Advisors to locate suitable investments for us and to monitor and administer our investments;

the ability of GC Advisors or its affiliates to attract and retain highly talented professionals;

our ability to qualify and maintain our qualification as a RIC and as a business development company; and

the effect of changes to tax legislation and our tax position.

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” ”predict,” “potential,” “plan” or similar words. The forward looking statements contained in this quarterly report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” included in our amended registration statement on Form N-2 filed with the Securities and Exchange Commission, or SEC, on April 14, 2010.

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, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview

We are an externally managed, closed-end, non-diversified management investment company that has filed an election to be regulated as a business development company under the 1940 Act. In addition, for tax purposes we have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.

As a business development company, 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 and indebtedness of private U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. To qualify as a RIC, we must meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders at least 90% of our investment company taxable income, as defined by Code, for each year. Pursuant to this election, we generally do not have to pay corporate level taxes on any income that we distribute to our stockholders.

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through debt and minority equity investments. We intend to achieve our investment objective by (1) accessing the established loan origination channels developed by Golub Capital, a leading lender to middle-market companies with over $4 billion of capital as of March 31, 2010, (2) selecting investments within our core middle-market company focus, (3) partnering with experienced private equity firms, or sponsors, in many cases with whom we have invested alongside in the past, (4) implementing the disciplined underwriting standards of Golub Capital and (5) drawing upon the aggregate experience and resources of Golub Capital.

Subsequent to the BDC Conversion, our investment activities are managed by GC Advisors and supervised by our board of directors, a majority of whom are independent of us, GC Advisors and its affiliates. At a meeting of our board of directors held on March 5, 2010, our board of directors unanimously voted to approve the Investment Advisory Agreement. In reaching a decision to approve the Investment Advisory Agreement, the board of directors reviewed a significant amount of information and considered, among other things:

	•	the nature, quality and extent of the advisory and other services to be provided to us by GC Advisors, our investment adviser;
	•	the fee structures of comparable externally managed business development companies that engage in similar investing activities; and
	•	various other matters.

Based on the information reviewed and the discussions detailed above, the board of directors, including all of the directors who are not “interested persons” as defined in the 1940 Act, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and approved the Investment Advisory Agreement, as well as the Administration Agreement, as being in the best interests of our stockholders.

Under the Investment Advisory Agreement, we have agreed to pay GC Advisors an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. We have also entered into an administration agreement with GC Service under which we have agreed to reimburse GC Service for our allocable portion (subject to the review and approval of our independent directors) of overhead and other expenses incurred by GC Service in performing its obligations under the Administration Agreement.

As of March 31, 2010 our portfolio comprised primarily of senior secured loans; however, we intend to pursue an investment strategy focused on investing in unitranche, mezzanine and second lien loans and warrants and minority equity co-investments in middle-market companies. A unitranche loan refers to a loan that combines characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans. Accordingly, over time we expect that senior secured loans will represent a smaller percentage of our investment portfolio as we grow our business, these investments are repaid and we invest in a different mix of assets. In the short term, we expect to invest in a mix of mezzanine and senior secured loans to obtain a high level of current income and to preserve capital.

We seek to create a diverse portfolio that includes senior secured, unitranche, mezzanine and second lien loans and warrants and minority equity securities by investing approximately $10 to $25 million of capital, on average, in the securities of middle-market companies. We may also selectively invest more than $25 million in the securities of some portfolio companies and generally expect that the size of our individual investments will vary proportionately with the size of our capital base.

As of March 31, 2010, our portfolio comprised debt in 80 portfolio companies. For the three and six months ended March 31, 2010, our income producing assets, which represented 100% of our total portfolio, had a weighted average annualized interest income (which excludes income resulting from amortization of fees and discounts) yield of approximately 7.6% and 8.1% and a weighted average annualized investment income (which includes interest income and amortization of fees and discounts) yield of approximately 9.8% and 11.0%, respectively.

Revenues. We generate revenue in the form of interest income on debt investments and capital gains and distributions, if any, on investment securities that we acquire in portfolio companies. Our debt investments, whether in the form of senior secured, unitranche, mezzanine or second lien loans, typically have a term of three-to-ten years and bear interest at a fixed or floating rate. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. In some cases, our investments provide for deferred interest payments or payment-in-kind, or PIK interest. The principal amount of loans and any accrued but unpaid interest generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums on loans as interest income. When we receive principal payments on a loan in an amount that exceeds its carrying value, we also record the excess principal payment as interest income. Dividend income, if any, is recognized on an accrual basis to the extent that we expect to collect such amounts.

Expenses. After the BDC Conversion, primary operating expenses include the payment of fees to GC Advisors under the Investment Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement and other operating costs described below. Additionally, we pay interest expense on all outstanding debt. We bear all other out-of-pocket costs and expenses of our operations and transactions, including:

the cost of calculating our net asset value, including the cost of any third-party valuation services;

the cost of effecting sales and repurchases of shares of our common stock and other securities;

fees payable to third parties relating to making investments, including out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments;

transfer agent and custodial fees;

out-of-pocket fees and expenses associated with marketing efforts;

federal and state registration fees and any stock exchange listing fees;

U.S. federal, state and local taxes;

independent directors’ fees and expenses;

brokerage commissions;

fidelity bond, directors’ and officers’ liability insurance and other insurance premiums;

direct costs, such as printing, mailing, long distance telephone and staff;

costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws; and

other expenses incurred by either GC Service or us in connection with administering our business, including payments under the Administration Agreement that will be based upon our allocable portion (subject to the review and approval of our board of directors) of overhead.

Recent Developments

On April 13, 2010, Golub Capital BDC LLC converted from a Delaware limited liability company into a Delaware corporation and elected to be treated as a business development company under the 1940 Act. In this conversion, Golub Capital BDC, Inc. assumed the business activities of Golub Capital BDC LLC, and the members of Golub Capital BDC LLC became stockholders of Golub Capital BDC, Inc. As a result of the conversion, GCMF became a wholly owned subsidiary of Golub Capital BDC, Inc.

On April 14, 2010, we priced our initial public offering and sold 7,100,000 shares of our common stock at a price of $14.50 per share. Our shares began trading on April 15, 2010 on the Nasdaq Global Select Market under the symbol “GBDC”. Net of underwriting fees and offering costs, we raised a total of approximately $93.7 million. In addition, we sold 1,322,581 shares at $14.50 per share in a concurrent private placement, raising an additional $19.2 million in proceeds. GBDC has also granted the underwriters an option to purchase up to an additional 1,065,000 shares of common stock. As of March 31, 2010, on a pro forma basis after giving effect to the offering and the concurrent private placement and assuming no exercise of the underwriters’ over-allotment option, our net asset value was approximately $254.7 million, or approximately $14.63 per share.

Portfolio Composition, Investment Activity and Yield

At March 31, 2010 and September 30, 2009, we had investments in debt in 80 portfolio companies and 95 portfolio companies, respectively, with a total value of approximately $293.2 million and $376.3 million, respectively. For the three months and six months ended March 31, 2010 we originated 0 new investments.

For the three and six months ended March 31, 2010, we had approximately $32.7 million and $69.4 million in debt repayments in existing portfolio companies, respectively, and sold 0 securities. In addition, on December 23, 2009, we entered into a waiver and consent under the variable funding indenture, dated as of July 27, 2007, between GCMF, as issuer, and U.S. Bank National Association, as indenture trustee, or the Existing Credit Facility, pursuant to which we were permitted to distribute investments with a fair value and par value of approximately $13.5 million and $21.3 million to Golub Capital BDC LLC, free and clear of liens under the Existing Credit Facility. In January 2010, we then distributed these portfolio assets to the three equity members of GCMF, pro rata in accordance with the ownership interests in Golub Capital BDC LLC held by each of the equity members. The equity members are limited liability companies affiliated with Golub Capital. The members then made a cash contribution of $21.3 million to us, which was subsequently contributed to GCMF.

During the three and six months ended March 31, 2010, we had unrealized appreciation on 58 and 75 portfolio company investments totaling approximately $3.7 million and $13.9 million, respectively, which were offset by unrealized depreciation on 40 and 47 portfolio company investments totaling approximately -$1.8 million and -$12.8 million, respectively. During the three and six months ended March 31, 2009, we had unrealized appreciation on 44 and 63 portfolio company investments totaling approximately $4.9 million and $9.5 million, respectively, which was offset by unrealized depreciation on 65 and 81 portfolio company investments totaling approximately -$7.5 million and -$16.0 million, respectively.

The following table shows the cost and fair value of our portfolio of investments by asset class as of March 31, 2010 and September 30, 2009:

	As of March 31,				As of September 30,
	2010 (1)				2009 (1)
	Cost		Fair Value		Cost		Fair Value
	(Dollars in Thousands)

Senior Secured:
Performing	$	202,005	$	200,776	$	245,346	$	241,228
Non-accrual		-		-		10,295		7,252

One-Stop:
Performing		80,573		79,152		118,299		116,233
Non-accrual		-		-		2,771		1,124

Second Lien:
Performing		13,153		13,298		10,582		10,457
Non-accrual		-		-		-		-
Total	$	295,730	$	293,226	$	387,293	$	376,294

(1)

Two of our loans included a feature permitting a portion of the interest due on such loan to be PIK interest as of March 31, 2010 and September 30, 2009. PIK interest, which effectively operates as negative amortization of loan principal, represents contractual interest accrued and added to the principal balance of a loan and generally becomes due at maturity.

For the three and six months ended March 31, 2010 and for the year ended March 31, 2010 and for the year ended September 30, 2009, the weighted average annualized interest income (which excludes income resulting from amortization of fees and discounts) yield on the fair value of investments in our portfolio was approximately 7.58%, 8.10% and 8.05%, respectively. As of March 31, 2010, approximately 49.9% and 50.3% of our portfolio at fair value and at cost, respectively, had interest rate floors that limit the minimum applicable interest rates on such loans. As of September 30, 2009, approximately 47.6% and 47.1% of our portfolio at fair value and at cost, respectively, had interest rate floors that limit minimum interest rates on such loans.

GC Advisors regularly assesses the risk profile of each of our investments and rates each of them based on the following categories, which we refer to as GC Advisors’ investment performance rating:

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

The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as of March 31, 2010 and September 30, 2009:

	March 31, 2010					September 30, 2009
	Investments					Investments
	at Fair Value		Percentage of			at Fair Value		Percentage of
	(Dollars in		Total			(Dollars in		Total
Investment Performance Rating	Thousands)		Portfolio			Thousands)		Portfolio
5		79,824		27.2	%		91,419		24.3	%
4		137,249		46.8	%		223,687		59.4	%
3		72,293		24.7	%		61,188		16.3	%
2		3,860		1.3	%		-		0.0	%
1		-		0.0	%		-		0.0	%
Total		293,226		100.0	%		376,294		100.0	%

Consolidated Results of Operations

The consolidated results of operations set forth below relate to the historical financial information prior to our election to become a business development company and our election as a RIC. We do not believe that historical operating performance is necessarily indicative of the consolidated results of operations that we expect to report in future periods. Also, in future periods the management fee that we pay to GC Advisors under the Investment Advisory Agreement will be determined by reference to a formula that differs materially from the management fee paid by GCMF in prior periods. In addition, the portfolio of investments consisted primarily of senior secured and unitranche loans as of March 31, 2010, and we intend to pursue a strategy that is focused on unitranche, mezzanine and second lien loans and warrants and minority equity securities. As a business development company and a RIC, we are also subject to certain constraints on our operations, including limitations imposed by the 1940 Act and the Code. For the reasons described above, the results of operations described below may not be indicative of the results we report in future periods.

Consolidated operating results for the three and six months ended March 31, 2010 and 2009 are as follows:

	For the three months ended					For the six months ended
	March 31, 2010		March 31, 2009			March 31, 2010		March 31, 2009
	(Dollars in Thousands)

Total investment income	$	7,645	$	8,993		$	18,488	$	14,332
Total expenses		2,627		2,201			4,287		3,980
Net investment income		5,018		6,792			14,201		10,352
Net realized gains (losses)		-		-			-		(795	)
Net unrealized gains (losses)		1,925		(2,559	)		1,085		(6,474	)
Net increase in members' equity resulting
from operations	$	6,943	$	4,233		$	15,286	$	3,083

Average investments in securities, at fair value	$	308,678	$	417,929		$	331,994	$	326,326

Net income can vary substantially from period to period for various factors, including the recognition of realized gains and losses and unrealized appreciation and depreciations. As a result, quarterly comparisons of net income may not be meaningful.

Investment Income

Investment income decreased by $1.3 million, or 15%, for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009. The decrease in investment income was primarily attributable to a decrease in invested assets during the three months ended March 31, 2010. For the three months ended March 31, 2010, total investment income consisted of $5.9 million in interest income from investments and $1.7 million in income from the amortization of discounts and origination fees. For the three months ended March 31, 2009, total investment income consisted of $7.6 million in interest income and $1.4 million in income from the amortization of discounts and origination fees.

Investment income increased by $4.2 million, or 29%, for the six months ended March 31, 2010 as compared to the six months ended March 31, 2009. The increase in investment income was primarily due to the realization of discounts on loans that were paid off during the six months. For the six months ended March 31, 2010, total investment income consisted of $13.6 million in interest income from investments and $4.9 million in income from the amortization of discounts and origination fees. For the six months ended March 31, 2009, total investment income consisted of $12.5 million in interest income and $1.8 million in income from the amortization of discounts and origination fees.

Operating Expenses

Total operating expenses increased by $426,000, or 19.4%, to $2.6 million for the three months ended March 31, 2010 as compared to the three months ended March 31, 2009. This increase was primarily due to non-recurring organizational costs associated with our public offering. Management fees, which are calculated based on invested assets, were lower in the three months ended March 31, 2010 than in the three months ended March 31, 2009 due to a decrease in invested assets. Following the completion of the Offering, we will pay management fees under the Investment Advisory Agreement, which provides a different basis for the calculation of such fees as compared to amounts paid by GCMF. Accordingly, GCMF’s historic management fee expense amounts will not be directly comparable to our management fee expenses in future periods.

Total operating expenses increased by $307,000, or 7.7%, to $4.3 million for the six months ended March 31, 2010 as compared to the six months ended March 31, 2009. This increase was primarily due to non-recurring organizational costs associated with our public offering. Total management fees, which are calculated based on invested assets, were slightly higher in the six months ended March 31, 2010 as compared to the six months ended March 31, 2009 due to an increase in average invested assets.

Interest and other credit facility expenses were lower in the three and six months ended March 31, 2010 than the three and six months ended March 31, 2009 primarily due to lower interest expense on the Existing Credit Facility, which is calculated as a spread over LIBOR, resulting from a decrease in the average outstanding credit facility balance during the six months ended March 31, 2010.

Net Realized and Unrealized Gains and Losses

During the three and six months ended March 31, 2010, we had $0 in net realized loss and $3.7 million and $13.9 million in unrealized appreciation on 58 and 75 portfolio company investments, respectively. These amounts more than offset unrealized depreciation on 40 and 47 portfolio company investments totaling approximately -$1.8 million and -$12.8 million, respectively. Unrealized appreciation during the three and six months ended March 31, 2010 resulted from an increase in fair value primarily due to the rise in market prices and a reversal of prior period unrealized depreciation. Unrealized depreciation resulted from a reduction in fair value primarily due to market yield adjustments.

During the three and six months ended March 31, 2009, we had $0 and $795,000 in net realized loss and $5.0 million and $9.5 million in unrealized appreciation on 44 and 63 portfolio company investments, respectively. This was offset by unrealized depreciation on 65 and 81 portfolio company investments totaling approximately -$7.5 million and -$16.0 million, respectively. Unrealized appreciation during the three and six months ended March 31, 2009 resulted from an increase in fair value primarily due to the rise in market prices and a reversal of prior period unrealized depreciation. Unrealized depreciation resulted from a reduction in fair value primarily due to market yield adjustments.

Liquidity and Capital Resources

As of March 31, 2010 and September 30, 2009, we had cash and cash equivalents of $58.5 million and $30.6 million, respectively. Cash provided or used by operating activities for the six months ended March 31, 2010 and 2009 was $99.1 million and -$268.9 million, respectively. Cash provided by operations resulted primarily from income items described in “— Results of Operations” above.

As a business development company, we will have an ongoing need to raise additional capital for investment purposes. In the future, we expect to increase our liquidity and raise additional capital through offerings of debt or equity securities, sales of investments as well as borrowings under the New Credit Facility (defined below). Since the middle of 2007, global credit and other financial markets have suffered substantial stress, volatility, illiquidity and disruption. These events have significantly diminished overall confidence in the debt and equity markets and caused increasing economic uncertainty. A further deterioration in the financial markets or a prolonged period of illiquidity without improvement could materially impair our ability to raise equity capital or debt capital on commercially reasonable terms.

Credit Facilities. On July 27, 2007, GCMF entered into the Existing Credit Facility, which matures on December 29, 2010. As a result of a series of amendments, the Existing Credit Facility provided for potential borrowings of up to $500.0 million. Under the terms of the Existing Credit Facility, we were permitted to borrow up to 85% of the balances outstanding of pledged loans and investments, depending on the mix of assets and the rating and diversification of such assets. For advances under $300.0 million, our borrowings generally bear interest at an annual rate of LIBOR plus a margin ranging from 0.65% to 0.80%, depending on the diversity of the portfolio and type of collateral then in the portfolio. For borrowings above $300.0 million, our annual interest rate equals LIBOR plus a margin of between 1.15% and 1.45%, also depending on the diversity of the portfolio and the type of collateral then in the portfolio. As of March 31, 2010, and September 30, 2009, the blended interest rate payable on amounts outstanding under the Existing Credit Facility was 1.50% and 0.93%, respectively.

The Existing Credit Facility provides for customary borrowing conditions, restrictive covenants, events of default and remedies. It had a facility commitment termination date of December 29, 2008. As a result, we are no longer able to borrow under the Existing Credit Facility and are required to use all payments of interest and principal that we receive from our current investments as well as any proceeds received from the sale of investments, net of payment of specified operating expenses, to repay amounts outstanding under the Existing Credit Facility. As of March 31, 2010 and September 30, 2009, the Existing Credit Facility had approximately $210.4 million and $315.3 million in outstanding borrowings, respectively.

On March 15, 2010, we entered into an amendment and waiver to the Existing Credit Facility permitting us to complete the public offering and the other transactions. This amendment required us to repay at least $50.0 million in outstanding borrowings under the Existing Credit Facility upon closing of the Offering. A $50.0 million payment was made on April 20, 2010, reducing our outstanding borrowings under the Existing Credit Facility to $147.3 million.

We entered into a commitment letter with Wells Fargo Bank, N.A., an affiliate of the lead underwriter of our initial public offering, or Wells Fargo, on March 15, 2010 for a new credit facility, which we refer to as the New Credit Facility. Prior to entering into the New Credit Facility, we have agreed that a required majority (as defined in Section 57(o) of the 1940 Act) of our board of directors will approve the New Credit Facility on the basis that (1) the terms of the New Credit Facility, including the consideration to be paid or received, are reasonable and fair to the shareholders of the business development company and do not involve overreaching of us or our shareholders on the part of any person concerned; (2) the proposed transaction is consistent with the interests of our shareholders and is consistent with our policy set forth in filings made by us with the SEC; and (3) the directors record in their minutes and preserve in their records a description of the New Credit Facility, their findings, the information or materials upon which their findings were based, and the basis for such finding.

As currently contemplated, we anticipate the New Credit Facility will be a five-year facility consisting of a three-year reinvestment period and a two-year amortization period. We expect that the interest rate will be based on LIBOR plus a fixed margin. Similar to the Existing Credit Facility, the New Credit Facility is expected to be secured by liens on a portion of our assets. We expect that any security interests we grant will be set forth in a pledge and security agreement and evidenced by the filing of financing statements by the agent for the lenders. In addition, we expect that the custodian for the securities serving as collateral for such loan would include in its electronic systems notices indicating the existence of such security interests and, following notice of the occurrence of an event of default and during its continuance, will only accept transfer instructions with respect to any such securities from the lender or its designee. If we default under the terms of any debt instrument, the agent for the applicable lenders could assume control of the disposition of any or all of our assets, including the selection of such assets to be disposed and the timing of such disposition, which would have a material adverse effect on our business, financial condition, results of operations and cash flows. As currently contemplated, the New Credit Facility will provide for maximum borrowings of $175.0 million. Upon execution, we anticipate that we will be required to pay a structuring fee of approximately $2.6 million to Wells Fargo as well as all of the lender’s reasonable out-of-pocket expenses, including attorneys’ fees. We anticipate the terms of the New Credit Facility will require us to (1) make representations and warranties regarding the collateral as well as each of our businesses, (2) agree to certain indemnification obligations and (3) comply with various covenants, servicing procedures, limitations on acquiring and disposing of assets, reporting requirements and other customary requirements for similar credit facilities. Similar to the Existing Credit Facility, the New Credit Facility is also expected to contain customary event of default provisions covering payment defaults, change in control transactions, and failure to comply with both financial and operating covenants. Defaults under the New Credit Facility could result in the entire facility becoming due and payable, which would materially and adversely affect our liquidity, financial condition, results of operations and cash flows.

As currently contemplated, the closing of the New Credit Facility would be subject to a number of customary conditions, including the concurrent retirement of the Existing Credit Facility and negotiation of transaction documentation. On May 11, 2010, the deadline for completing transaction documentation was extended to July 15, 2010 from June 15, 2010. If we are successful in securing the New Credit Facility, we intend to use borrowings under the New Credit Facility to retire all debt outstanding and terminate the Existing Credit Facility, to make additional investments and for other general corporate purposes. We cannot assure you that we will be able to enter into the New Credit Facility on the terms contemplated by the commitment letter, or at all.

If we are unable to enter into the New Credit Facility or enter into a similar facility or we default under the Existing Credit Facility, we may be forced to sell a portion of our investments quickly and prematurely to meet our outstanding payment obligations under the Existing Credit Facility. If we are unable to enter into the New Credit Facility or we default under the Existing Credit Facility, it would have a material adverse effect on our business, financial condition, results of operations and cash flows.

On December 23, 2009, we entered into a waiver and consent under the Existing Credit Facility pursuant to which we were permitted to distribute investments with a fair value and par value of approximately $13.5 million and $21.3 million to Golub Capital BDC LLC, free and clear of liens under the Existing Credit Facility. In January 2010, we then distributed these portfolio assets to the three equity members of GCMF, pro rata in accordance with the ownership interests in Golub Capital BDC LLC held by each of the equity members. The equity members are limited liability companies affiliated with Golub Capital. The members then made a cash contribution of $21.3 million to us, which was subsequently contributed to GCMF.

Private Placement: On February 5, 2010, GEMS entered into an agreement to purchase 195 limited liability company interests in Golub Capital BDC LLC for cash, resulting in aggregate net cash proceeds to us of $25.0 million. The private placement settled on March 15, 2010.

On May 11, 2010, our board of directors declared a quarterly dividend of $0.24 per share payable on June 29, 2010 to holders of record as of June 22, 2010. The $0.24 dividend represents a $0.31 per share quarterly dividend prorated for the number of days remaining in the quarter after the close of our initial public offering on April 20, 2010.

Contractual Obligations and Off-Balance Sheet Arrangements

A summary of our significant contractual payment obligations for the repayment of outstanding borrowings under the Existing Credit Facility is as follows:

	Payments Due by Period (Millions)
			Less Than						More Than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Existing Credit
Facility (1)	$	210.4	$	210.4	$	0	$	0	$	0

(1)

Under the terms of the Existing Credit Facility, all outstanding borrowings under that facility ($210.4 million as of March 31, 2010) must be repaid on or before December 29, 2010. As part of the amendments to the Existing Credit Facility executed on March 15, 2010, we were required to repay at least $50.0 million of outstanding borrowings under the Existing Credit Facility upon closing of the Offering.

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of March 31, 2010 and September 30, 2009 we had outstanding commitments to fund investments totaling $19.7 million and $18.6 million, respectively. We hold as restricted cash an amount equal to our outstanding commitments to fund investments.

We have certain contracts under which we have material future commitments. We have entered into the Investment Advisory Agreement with GC Advisors in accordance with the 1940 Act. The Investment Advisory Agreement became effective upon the pricing of the initial public offering. Under the Investment Advisory Agreement, GC Advisors has agreed to provide us with investment advisory and management services. We have agreed to pay for these services (1) a management fee equal to a percentage of the average adjusted value of our gross assets and (2) an incentive fee based on our performance.

We have also entered into the Administration Agreement with GC Service as our administrator. The Administration Agreement became effective upon the pricing of the initial public offering. Under the Administration Agreement, GC Service has agreed to furnish us with office facilities and equipment, provide us clerical, bookkeeping and record keeping services at such facilities and provide us with other administrative services necessary to conduct our day-to-day operations. GC Service will also provide on our behalf significant managerial assistance to those portfolio companies to which we are required to provide such assistance.

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

Distributions

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

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

To the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a return of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a dividend payment carefully and should not assume that the source of any distribution is our ordinary income or gains.

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

Related Party Transactions

Prior to the closing of our initial public offering, we entered into a number of business relationships with affiliated or related parties, including the following:

•

In a private placement, GEMS entered into an agreement on February 5, 2010, to purchase 195 limited liability company interests in Golub Capital BDC LLC for cash, resulting in aggregate net cash proceeds to us of $25 million. Investors in GEMS include some employees and management of Golub Capital and its affiliates as well as a limited number of long-time investors in funds sponsored by affiliates of GC Advisors.

Concurrent with the pricing of our initial public, we entered into a number of business relationships with affiliated or related parties, including the following:

•

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

•

GC Service provides us with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our Administration Agreement. We reimburse GC Service for the allocable portion (subject to the review and approval of our board of directors) of overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs.

•

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

•

Certain existing investors in entities advised by affiliates of Golub Capital and certain of our officers and directors, their immediate family members or entities owned by, or family trusts for the benefit of, such persons purchased in a separate private placement an aggregate of 1,322,581 shares of common stock at the initial public offering price per share of $14.50. We received the full proceeds from the sale of these shares, and no underwriting discounts or commissions were paid in respect of these shares.

•

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

GC Advisors also manages, and may in the future manage, other accounts that have investment mandates that are similar, in whole and in part, with ours. GC Advisors and its affiliates may determine that an investment is appropriate for us and for one or more of those other accounts. In such event, depending on the availability of such investment and other appropriate factors, and pursuant to GC Advisors’ allocation policy, GC Advisors or its affiliates may determine that we should invest side-by-side with one or more other accounts. We will not make any investments if they are not permitted by applicable law and interpretive positions of the SEC and its staff, or if they are inconsistent with GC Advisors’ allocation procedures.

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

Critical Accounting Policies

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

Valuation of Portfolio Investments.

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

Valuation methods may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the company will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

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

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

•

Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of GC Advisors responsible for credit monitoring.

•

Preliminary valuation conclusions are then be documented and discussed with our senior management and GC Advisors.

•

The audit committee of our board of directors reviews these preliminary valuations.

•

At least once annually, the valuation for each portfolio investment is reviewed by an independent valuation firm.

•

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

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

Determination of fair values involves subjective judgments and estimates not verifiable by auditing procedures. Under current auditing standards, the notes to our financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

In January 2010, the FASB issued further guidance on improving disclosures about fair value measurements, which is effective for interim and annual reporting periods beginning after December 15, 2009. We adopted this guidance, and it did not have a material impact on our consolidated financial condition, results of operations or cash flows.

Revenue Recognition. Our revenue recognition policies are as follows:

Investments and Related Investment Income. We account for investment transactions on a trade-date basis. Our board of directors determines the fair value of our portfolio of investments. Interest is recognized on the accrual basis. For investments with contractual PIK interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the cost basis of investment, without regard to unrealized gains or losses previously recognized. We report changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in our consolidated statement of operations.

Non-accrual. We place loans on non-accrual status when principal and interest payments are past due by 90 days or more, or when there is reasonable doubt that we will collect principal or interest. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in our management’s judgment, are likely to remain current. The total fair value of our non-accrual loans were $0 and $8.4 million as of March 31, 2010 and September 30, 2009, respectively.

Item 3: Quantitative and Qualitative Disclosures About Market Risk.

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

Assuming that the balance sheet as of the periods covered by this analysis were to remain constant and that Management took no actions to alter our existing interest rate sensitivity, a hypothetical immediate 1% change in interest rates may affect net income by more than 1% over a one-year horizon. Although our management believes that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit market, credit quality, the size and composition of the assets in our portfolio and other business developments, including borrowings that could affect net increase in net assets resulting from operations, or net income. Accordingly, we can offer no assurances that actual results would not differ materially from the statement above.

We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.

Item 4: Controls and Procedures.

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

Part II – Other Information

Item 1: Legal Proceedings.

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

Item 1A: Risk Factors.

In addition to other information set forth in this report, you should carefully consider the “Risk Factors” discussed in our amended registration statement Form N-2 filed with the SEC on April 14, 2010 which could materially affect our business, financial condition and/or operating results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

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

On February 5, 2010, Golub Capital BDC LLC sold 195 limited liability company interests in Golub Capital BDC LLC to GEMS for cash, resulting in aggregate net cash proceeds to Golub Capital BDC LLC of $25.0 million. No underwriting discounts or commissions were paid in respect of these shares. These securities were offered and sold in reliance upon an exemption from registration under Rule 506 of Regulation D of the Securities Act of 1933, as amended, or the Securities Act, and Section 3(c)(7) of the 1940 Act. On April 13, 2010, Golub Capital BDC LLC converted into a Delaware corporation, Golub Capital BDC, Inc., and all of the outstanding limited liability company interests in Golub Capital BDC LLC were converted into 8,984,863 shares of common stock in Golub Capital BDC, Inc.

On April 20, 2010, we sold 1,322,581 shares of our common stock, par value $0.001, in a private placement concurrent with our initial public offering to certain existing investors in entities advised by affiliates of Golub Capital and to certain of our officers and directors, their immediate family members or entities owned by, or family trusts for the benefit of, such persons. We sold these shares at the initial public offering price of $14.50 per share and raised $19.2 million in cash proceeds. No underwriting discounts or commissions were paid in respect of these shares. These securities were offered and sold in reliance upon an exemption from registration under Rule 506 of Regulation D of the Securities Act.

We intend to use the net proceeds of the April 20, 2010 private placement and all of the proceeds from the February 5, 2010 private placement which have not yet been invested on the date of this report, together with the net proceeds of our initial public offering (after expenses) to (1) repay at least $50.0 million of the outstanding principal of, and accrued and unpaid interest on, the Existing Credit Facility and (2) invest the balance of the net proceeds in portfolio companies in accordance with our investment objective and the strategies described in our amended registration statement on Form N-2, filed with the SEC on April 14, 2010, and for general corporate purposes.

Item 3: Defaults Upon Senior Securities.

Not applicable

Item 4: Removed and Reserved.

None.

Item 5: Other Information.

None.

Item 6: Exhibits.

EXHIBIT INDEX


Number		Description
31.1		Certifications by President pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certifications by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

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

Part I.	Financial Information

Item 1.	Financial Statements

	Consolidated Statements of Financial Condition as of March 31, 2010 (unaudited) and September 30, 2009	1

	Consolidated Condensed Schedules of Investments as of March 31, 2010 (unaudited) and September 30, 2009	2-16

	Consolidated Statements of Operations for the three and six months ended March 31, 2010 (unaudited) and March 31, 2009 (unaudited)	17

	Consolidated Statements of Members’ Equity for six months ended March 31, 2010 (unaudited) and March 31, 2009 (unaudited)	18

	Consolidated Statements of Cash Flows for the six months ended March 31, 2010 (unaudited) and March 31, 2009 (unaudited)	19-20

	Notes to Consolidated Financial Statements (unaudited)	21-33

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quanitative and Qualitative Disclosures About Market Risk	49

Item 4.	Controls and Procedures	49

Part II.	Other Information

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Removed and Reserved	51

Item 5.	Other Information	51

Item 6.	Exhibits	51


	March 31, 2010		September 30, 2009
	(unaudited)
Assets
Investments in securities, at fair value (cost of $295,730 and	$	293,226	$	376,294
$387,293 respectively)
Cash and cash equivalents		24,802		-
Restricted cash and cash equivalents		33,679		30,614
Deferred offering costs		1,384		-
Interest receivable		1,708		2,198
Other assets		28		16

Total Assets	$	354,827	$	409,122

Liabilities and Members' Equity
Liabilities
Facility advances	$	210,444	$	315,306
Accrued deferred offering costs		1,384		-
Due to affiliates		1,135		934
Interest payable		148		130

Total Liabilities		213,111		316,370

Members' Equity		141,716		92,752

Total Liabilities and Members' Equity	$	354,827	$	409,122

Golub Capital BDC LLC and Subsidiary

Consolidated Condensed Schedule of Investments
March 31, 2010 (unaudited)
(In thousands)					Percentage of
	Principal Amount		Cost		Members' Equity			Fair Value

Investments in securities, at fair value1
Canada						141,769,190
Debt securities
Diversified Conglomerate Service
Open Text Corporation
Senior loan (2.54%, due 10/2013)	$	1,317	$	1,124		0.9	%	$	1,304

Leisure, Amusement, Motion Pictures, Entertainment
Extreme Fitness, Inc.
Senior loan (11.50%, due 3/2012)		4,649		4,649		3.3			4,649
Total Canada (cost $5,773)						4.2	%	$	5,953

United States
Debt securities
Aerospace and Defense
Thermal Solutions LLC
Senior loans (4.50%, due 3/2011-3/2012)	$	2,037	$	2,022		1.4	%	$	1,940

Automobile
CLP Auto Interior Corporation
Senior loan (5.00%, due 6/2013)		3,382		3,382		2.2			3,179
Driven Brands, Inc.
Senior loan (10.25%, due 10/2014)		6,089		6,089		4.3			6,089
						6.5			9,268

Banking
Bonddesk Group, LLC
Senior loan (3.23%, due 8/2012)		2,185		2,100		1.5			2,119
Prommis Solutions, Inc.
Senior loan (3.25%, due 2/2013)		1,651		1,651		1.1			1,519
						2.6			3,638

Beverage, Food and Tobacco
ABP Corporation
Senior loan (8.50%, due 2/2013)		2,334		2,286		1.6			2,334
Bertucci's Corporation
Senior loan (12.00%, due 7/2012)		1,974		1,911		1.4			1,974
Lone Star Beef Processors, L.P.
Senior loan (4.44%, due 5/2013)		3,640		3,614		2.5			3,567
						5.5			7,875

Note: For periods prior to November 2009, the financial statements only reflect the financial results of Golub Capital Master Funding LLC (GCMF).

See Notes to Unaudited Consolidated Financial Statements.

Golub Capital Master Funding LLC

Condensed Schedule of Investments
September 30, 2009
(In thousands)					Percentage of
	Principal Amount		Cost		Members' Equity			Fair Value

Investments in securities, at fair value1
Canada						92,751,528.00
Debt securities
Diversified Conglomerate Service
Open Text Corporation
Senior loan (2.50%, due 10/2013)	$	1,324	$	1,102		1.4	%	$	1,274

Leisure, Amusement, Motion Pictures, Entertainment
Extreme Fitness, Inc.
Senior loan (11.50%, due 3/2012)		4,649		4,649		5.0			4,649

Total Canada (cost $5,751)						6.4	%	$	5,923

United States
Debt securities
Aerospace and Defense
Thermal Solutions LLC
Senior loan (4.47%, due 3/2011)		2,142	$	2,122		2.2			2,038

Automobile
CLP Auto Interior Corporation
Senior loan (5.04%, due 6/2013)		3,418		3,418		3.3			3,042
Driven Brands, Inc.
Senior loan (10.25%, due 10/2014)		6,648		6,648		7.2			6,648
Qualitor Acquisition Corporation
Senior loan (7.00%, due 12/2011)		1,691		1,666		1.4			1,344
Second lien (9.00%, due 6/2013)		850		824		0.8			680
						12.7			11,714

Banking
Bonddesk Group, LLC
Senior loan (3.27%, due 8/2012)		2,609		2,486		2.7			2,478
Prommis Solutions, Inc.
Senior loan (3.43%, due 2/2013)		1,660		1,660		1.6			1,527
						4.3			4,005

Beverage, Food and Tobacco
ABP Corporation
Senior loan (8.50%, due 2/2013)		2,347		2,290		2.5			2,347
Bertucci's Corporation
Senior loan (12.00%, due 7/2012)		1,985		1,908		2.1			1,985
LBAC, Inc.
Senior loan (7.00%, due 11/2012)		6,405		6,002		6.6			6,149
Lone Star Beef Processors, L.P.
Senior loan (5.08%, due 5/2013)		3,700		3,670		3.9			3,626
						15.1			14,107

Golub Capital Master Funding LLC

Condensed Schedule of Investments (continued)
September 30, 2009
(In thousands)					Percentage of
	Principal Amount		Cost		Members' Equity			Fair Value

Investments in securities, at fair value1 (continued)
United States (continued)						92,751,528.00
Debt securities (continued)
Building and Real Estate
American Fire Protection Group, Inc.
Senior loan (9.00%, due 6/2011)	$	4,800	$	4,604		5.0	%	$	4,656
Architectural Testing, Inc.
Senior loan (9.50%, due 5/2013)		6,961		6,961		7.5			6,961
Best Lighting Products, Inc.
Senior loan (10.00%, due 8/2012)		2,545		2,446		2.7			2,545
Infiltrator Systems, Inc.
Senior loan (8.50%, due 9/2012)		3,841		3,537		3.7			3,457
ITEL Laboratories, Inc.
Senior loan (9.75%, due 3/2014)		8,901		8,811		9.2			8,545
KHKI Acquisition, Inc.
Senior loans (8.50%, due 3/2012-3/2013)		3,123		3,117		2.9			2,681
Tecta America Corporation
Senior loan (8.00%, due 12/2011)		2,055		2,055		2.1			1,991
Other		734		672		0.7			605
						33.8			31,441

Cargo Transport
Marquette Transportation Company, LLC
Senior loan (3.75%, due 3/2012)		4,550		4,378		4.4			4,095
Peco Pallet, Inc.
Senior loan (4.00%, due 6/2013)		4,492		4,270		4.5			4,177
RedPrairie Corporation
Senior loan (3.45%, due 7/2012)		1,721		1,456		1.8			1,670
Tangent Rail Services, Inc.
Senior loans (7.41%, due 9/2014)		9,484		9,484		10.0			9,295
						20.7			19,237

Chemicals, Plastics and Rubber
Celanese Holdings LLC
Senior loan (2.35%, due 4/2014)		992		822		1.0			941
Syrgis Holdings LLC
Senior loans (8.80%, due 8/2012-2/2014)		1,836		1,716		1.8			1,684
TAC Materials, Inc.
Senior loan (9.00%, due 7/2013)		2,771		2,771		1.2			1,124
						4.0			3,749


	Three months ended					Six months ended
	March 31, 2010		March 31, 2009			March 31, 2010		March 31, 2009
	(unaudited)		(unaudited)			(unaudited)		(unaudited)
Investment income
Interest	$	7,645	$	8,993		$	18,488	$	14,332

Total investment income		7,645		8,993			18,488		14,332

Expenses
Interest		862		1,268			1,552		2,566
Management fee		605		842			1,334		1,263
Professional fees relating to registration statement		601		-			601		-
Professional fees		494		-			669		13
Other expenses		65		91			131		138

Total expenses		2,627		2,201			4,287		3,980

Net investment income		5,018		6,792			14,201		10,352

Net gain (loss) on investments
Net realized loss on investments		-		-			-		(795	)
Net unrealized appreciation (depreciation)
on investments		1,925		(2,559	)		1,085		(6,474	)

Net gain (loss) on investments		1,925		(2,559	)		1,085		(7,269	)

Net income	$	6,943	$	4,233		$	15,286	$	3,083

Golub Capital BDC LLC and Subsidiary

Consolidated Statements of Changes in Members' Equity

(In thousands)

Golub Capital BDC LLC and Subsidiary

Consolidated Statements of Cash Flows

(In thousands)

Golub Capital BDC LLC and Subsidiary

Consolidated Statements of Cash Flows (continued)


(In thousands)

	Six months ended
	March 31, 2010		March 31, 2009
	(unaudited)		(unaudited)

Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	1,534	$	2,325

Supplemental disclosure of noncash activity
Obligations of Company assumed by members	$	896	$	147


Industry	March 31, 2010			September 30, 2009
Aerospace and Defense		0.7	%		0.5	%
Automobile		3.1			3.1
Banking		1.2			1.1
Beverage, Food and Tobacco		2.7			3.7
Buildings and Real Estate		10.2			8.4
Cargo Transport		4.6			5.1
Chemicals, Plastics and Rubber		0.9			1.0
Containers, Packaging and Glass		1.5			1.7
Diversified Conglomerate Manufacturing		5.6			4.4
Diversified Conglomerate Service		9.3			8.3
Diversified Natural Resources, Precious Metals and Minerals		2.8			2.6
Electronics		2.2			3.3
Farming and Agriculture		-			4.3
Finance		10.3			9.0
Grocery		0.4			0.3
Healthcare, Education and Childcare		16.0			14.0
Home and Office Furnishings, Housewares, and Duarable Consumer		2.7			2.4
Leisure, Amusement, Motion Pictures and Entertainment		5.2			4.2
Machinery (Non-Agriculture, Construction or Electric)		0.9			2.9
Oil and Gas		1.2			3.2
Personal and Non-Durable Consumer Products		1.4			1.1
Personal Food and Miscellaneous Services		2.8			2.3
Printing and Publishing		1.2			1.0
Retail Stores		6.1			4.8
Telecommunications		1.2			1.8
Textiles and Leather		1.6			2.0
Utilities		4.2			3.5
Total		100.0	%		100.0	%

Geographic Region	March 31, 2010			September 30, 2009
United States
Mid-Atlantic		27.1	%		24.9	%
Midwest		26.9			22.4
West		14.3			13.2
Southeast		15.2			20.4
Southwest		8.0			8.0
Northeast		6.5			9.5
Canada		2.0			1.6
Total		100.0	%		100.0	%

	As of March 31, 2010
	Fair Value Measurements Using
Description	Level 1		Level 2		Level 3		Total
Assets:
Debt securities	$	-	$	-	$	293,226	$	293,226
Money market funds (1)		31,263		-		-		31,263


	As of September 30, 2009
	Fair Value Measurements Using
Description	Level 1		Level 2		Level 3		Total
Assets:
Debt securities	$	-	$	-	$	376,294	$	376,294
Money market funds (1)		25,475		-		-		25,475

	Three months ended
	March 31, 2010
	Debt
	Securities

Balance at January 1, 2010	$	326,226

Net change in unrealized depreciation on investments		1,925
Funding on revolving loans, net		(3,951	)
Sales and redemptions		(32,729	)
Amortization		1,755

Balance at March 31, 2010	$	293,226


	Three months ended March 31,						Six months ended March 31,
	2010			2009			2010			2009

Members' equity at beginning of period	$	109,773		$	71,300		$	92,752		$	16,853
Members' equity at end of period		141,769			75,615			141,769			75,615
Average members' equity		126,701			75,045			111,170			51,500

Ratio of total expenses, including interest, to average members' equity (4)		8.4	%		11.9	%		7.7	%		15.5	%
Ratio of net investment income to average members' equity (1) (4)		16.0	%		36.7	%		25.6	%		40.3	%
Total return to members based on average members' equity (2) (3)		5.5	%		5.6	%		13.8	%		6.0	%

	Golub Capital BDC, Inc.

Dated: May 13, 2010	By	/s/ David B. Golub
		David B. Golub
		Chief Executive Officer
		(Principal Executive Officer)

Dated: May 13, 2010	By	/s/ Sean K. Coleman
		Sean K. Coleman
		Chief Financial Officer
		(Principal Accounting and Financial Officer)