SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the
Registrant ☒ Filed by a Party other than the
Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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Goldman
Sachs BDC, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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☒
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transactions applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identity the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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GOLDMAN SACHS BDC, INC.
200 West Street
New York, New
York 10282
May 22, 2018
Dear Stockholder:
You are cordially invited to attend the 2018 Annual Meeting of Stockholders (the Meeting) of Goldman Sachs BDC, Inc. (the
Company) to be held on Friday, June 15, 2018, at 10:00 a.m. (Eastern time), at the offices of Goldman Sachs Asset Management, L.P., located at 30 Hudson Street, Jersey City, New Jersey 07302. Please note that if you plan to attend
the Meeting in person, photographic identification will be required for admission.
The Meeting is being held (i) to elect one
Class I director of the Company, who will serve until the 2021 annual meeting of stockholders or until her successor is duly elected and qualified, (ii) to ratify the selection of PricewaterhouseCoopers LLP as the Companys
independent registered public accounting firm for the fiscal year ending December 31, 2018 and (iii) to approve the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act of 1940,
as amended, to the Company, which would permit the Company to double the maximum amount of leverage that it is permitted to incur by reducing the asset coverage requirement applicable to the Company from 200% to 150%.
A formal Notice of Annual Meeting and Proxy Statement setting forth in detail the matters to come before the Meeting are attached hereto, and
a proxy card is enclosed for your use. You should read the Proxy Statement carefully. You will also receive separate proxy materials for the 2018 Special Meeting of Stockholders, which will be held on the same date and at the same location as the
Meeting. Please be certain to vote each proxy card that you receive from us.
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE MEETING,
YOUR VOTE IS VERY IMPORTANT.
If you do not plan to be present in person at the Meeting, you can vote by signing, dating and returning the enclosed proxy card promptly or by using the Internet or telephone voting options as described on your
proxy card. If you have any questions regarding the proxy materials, please contact the Company at (800)
621-2550.
Your prompt response will help reduce proxy costswhich are paid by the Company and
indirectly by its stockholdersand will also mean that you can avoid receiving
follow-up
phone calls and mailings.
Sincerely,
/s/ Brendan McGovern
Brendan McGovern
Chief Executive Officer and President
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE OR USE THE INTERNET OR TELEPHONE VOTING OPTIONS TO CAST YOUR VOTE AS SOON AS
POSSIBLE. YOUR VOTE IS IMPORTANT.
GOLDMAN SACHS BDC, INC.
200 West Street
New York, New
York 10282
NOTICE OF ANNUAL MEETING
To Be Held On Friday, June 15, 2018
May 22, 2018
Notice is hereby
given to the owners of shares of common stock (the Stockholders) of Goldman Sachs BDC, Inc. (the Company) that:
The 2018 Annual Meeting of Stockholders (the Meeting) will be held on Friday, June 15, 2018, at 10:00 a.m. (Eastern
time), at the offices of Goldman Sachs Asset Management, L.P. (GSAM), located at 30 Hudson Street, Jersey City, New Jersey 07302, for the following purposes (the Proposals):
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to elect one Class I director of the Company, who will serve until the 2021 annual meeting of the stockholders or until her successor is duly elected and qualified;
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2.
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to ratify the selection of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2018; and
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3.
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to approve the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act of 1940, as amended, to the Company, which would permit the Company to double the maximum
amount of leverage that it is permitted to incur by reducing the asset coverage requirement applicable to the Company from 200% to 150%.
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The matters referred to above are discussed in the Proxy Statement attached to this Notice. On May 1, 2018, the Board of Directors of the
Company, including each of the independent directors, unanimously recommended that you vote
FOR
each of the Proposals.
If Proposal 3 is approved by the Stockholders, the Company and GSAM intend to reduce the base management fees payable under the investment
management agreement between the Company and GSAM to annual rate of 1.00% (0.25% per quarter) of the average value of the Companys gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) at the
end of each of the two most recently completed calendar quarters beginning immediately following stockholder approval. If Proposal 3 is not approved by Stockholders, the Company will continue to operate within the 200% asset coverage
requirement until (1) such time as it receives Stockholder approval of a similar proposal at a future meeting or (2) one year after the Board of Directors approves application of the modified asset coverage requirements to the Company.
Until such time, the Company would continue to operate in accordance with its current investment strategy.
Stockholders of record at the
close of business on Thursday, May 10, 2018 are entitled to receive notice of, and to vote at, the Meeting and at any postponements or adjournments thereof. Each Stockholder is invited to attend the Meeting in person. Please note that if you
plan to attend the Meeting in person, photographic identification will be required for admission.
Your vote is extremely important to us. If you will not attend the Meeting in person, we urge you
to sign, date and promptly return the enclosed proxy card in the envelope provided, which is addressed for your convenience and needs no postage if mailed in the United States. You may also vote easily and quickly by Internet or by telephone. In the
event there are not sufficient votes for a quorum or to approve the Proposals at the time of the Meeting, the Meeting may be postponed or adjourned in order to permit further solicitation of proxies by the Board of Directors of the Company.
By Order of the Board of Directors
of Goldman Sachs BDC, Inc.
/s/ Caroline Kraus
Caroline Kraus
Secretary
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
To secure the largest possible representation at the Meeting, please mark your proxy card, sign it, date it, and return it in the postage-paid
envelope provided (unless you are voting by Internet or by telephone).
If you sign, date and return a proxy card but give no voting instructions, your shares will be voted FOR all of the proposals indicated on the card.
If you
prefer, you may instead vote via the Internet or by telephone. To vote in this manner, you should refer to the directions below.
To vote
via the Internet, please access the website found on your proxy card and follow the
on-screen
instructions on the website.
To vote by telephone, Stockholders within the United States should call the toll-free number found on the proxy card and follow the recorded
instructions. Stockholders outside the United States should vote via the Internet or by submitting a proxy card instead.
You may revoke
your proxy at any time at or before the Meeting (1) by notifying the Secretary of the Company in writing at the Companys principal executive offices, (2) by submitting a properly executed, later-dated proxy or (3) by attending
the Meeting and voting in person.
ANNUAL MEETING
OF
GOLDMAN SACHS BDC,
INC.
200 West Street
New
York, New York 10282
PROXY STATEMENT
May 22, 2018
This Proxy
Statement is furnished in connection with the solicitation of proxies by and on behalf of the Board of Directors (the Board) of Goldman Sachs BDC, Inc. (the Company) for use at the 2018 Annual Meeting of Stockholders (the
Meeting), to be held at the offices of Goldman Sachs Asset Management, L.P. (GSAM), located at 30 Hudson Street, Jersey City, New Jersey 07302, on Friday, June 15, 2018, at 10:00 a.m. (Eastern time), and any postponement
or adjournment thereof. Much of the information in this Proxy Statement is required under rules of the Securities and Exchange Commission (the SEC), and some of it is technical in nature. If there is anything you do not understand,
please contact the Company at (800)
621-2550.
This Proxy Statement, the accompanying Notice of
Annual Meeting and proxy card and the Companys Annual Report on Form
10-K
for the year ended December 31, 2017 are being mailed to stockholders (the Stockholders) of the Company of
record as of Thursday, May 10, 2018 (the Record Date) on or about May 24, 2018.
PURPOSE OF THE MEETING
At the Meeting, you will be asked to vote on the following proposals:
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To elect one Class I director of the Company who will serve until the 2021 annual meeting of the stockholders or until her successor is duly elected and qualified (Proposal 1);
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To ratify the selection of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2018 (Proposal 2); and
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To approve the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act of 1940, as amended (the 1940 Act), to the Company (Proposal 3), which
would permit the Company to double the maximum amount of leverage that it is permitted to incur by reducing the asset coverage requirement applicable to the Company from 200% to 150%.
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If Proposal 3 is approved by the Stockholders, the Company and GSAM intend to reduce the base management fees payable under the investment
management agreement (the Investment Management Agreement) between the Company and GSAM to an annual rate of 1.00%
(0.25% per quarter) of the average value of the Companys gross assets (excluding cash and cash equivalents,
but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters beginning immediately following stockholder approval. If Proposal 3 is not approved by Stockholders, the Company will
continue to operate within the 200% asset coverage requirement until (1) such time as it receives Stockholder
1
approval of a similar proposal at a future meeting or (2) one year after the Board approves application of the modified asset coverage requirements to the Company. Until such time, the
Company would continue to operate in accordance with its current investment strategy.
INFORMATION REGARDING THIS SOLICITATION
It is expected that the solicitation of proxies will be primarily by mail. The Companys officers, and personnel of the Companys
investment adviser, GSAM, and the Companys transfer agent and any authorized proxy solicitation agent, may also solicit proxies by telephone, email, facsimile, Internet or in person. If the Company records votes through the Internet or by
telephone, it will use procedures designed to authenticate Stockholders identities to allow Stockholders to authorize the voting of their shares in accordance with their instructions and to confirm that their identities have been properly
recorded.
The Company will pay the expenses associated with this Proxy Statement and solicitation, in a manner agreed upon by the Board.
The Company has engaged Computershare Inc. and Broadridge Financial Services, Inc. to assist in the distribution of the proxy materials and tabulation of proxies. The cost of such services with respect to the Company is estimated to be approximately
$80,000, plus reasonable
out-of-pocket
expenses.
To vote
by mail, sign, date and promptly return the enclosed proxy card in the accompanying postage
pre-paid
envelope. To vote by Internet or telephone, please use the control number on your proxy card and follow the
instructions as described on your proxy card. If you have any questions regarding the proxy materials, please contact the Company at (800)
621-2550.
If the enclosed proxy card is properly executed and
received prior to the Meeting and has not been revoked, the shares represented thereby will be voted in accordance with the instructions marked on the returned proxy card or, if no instructions are marked, the proxy card will be voted
FOR each of the Proposals described in this Proxy Statement; and in the discretion of the persons named as proxies in connection with any other matter that may properly come before the Meeting or any adjournment(s) or postponement(s)
thereof.
Any person giving a proxy may revoke it at any time before it is exercised (1) by notifying the Secretary of the
Company in writing at the Companys principal executive offices, (2) by submitting a properly executed, later-dated proxy or (3) by attending the Meeting and voting in person.
If (i) you are a member of a household in which multiple Stockholders share the same address, (ii) your shares are held in
street name and (iii) your broker or bank has received consent to household material, then your broker or bank may send to your household only one copy of this Proxy Statement, unless your broker or bank previously received contrary
instructions from a Stockholder in your household. If you are part of a household that has received only one copy of this Proxy Statement, the Company will deliver promptly a separate copy of this Proxy Statement to you upon written or oral request.
To receive a separate copy of this Proxy Statement, please contact the Company by calling (toll-free) (800)
621-2550
or by mail to the Companys principal executive offices at Goldman Sachs BDC, Inc., 200
West Street, New York, New York 10282.
If your shares are held with certain banks, trust companies, brokers, dealers, investment advisers and other financial intermediaries (each, an Authorized Institution) and you would like
to receive a separate copy of future proxy statements, notices of internet availability of proxy materials, prospectuses or annual reports or you are now receiving multiple copies of these documents and would like to receive a single copy in the
future, please contact your Authorized Institution.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING TO BE HELD ON FRIDAY, JUNE 15, 2018
This Proxy Statement is available online at www.proxyvote.com (please have
the control number found on your proxy card ready when you visit this website).
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INFORMATION REGARDING SECURITY OWNERSHIP
Control Persons and Principal Stockholders
The following table sets forth, as of May 21, 2018, certain ownership information with respect to shares of the Companys common
stock for the nominee and each of the Companys current directors, executive officers and directors and executive officers as a group, and each person known to the Company to beneficially own 5% or more of the outstanding shares of the
Companys common stock. With respect to persons known to the Company to beneficially own 5% or more of the outstanding shares of the Companys common stock, such knowledge is based on beneficial ownership filings made by the holders
with the SEC and other information known to the Company. The percentage ownership is based on 40,175,405 shares of common stock outstanding as of May 21, 2018.
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Name and Address
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Type of Ownership
(4)
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Shares Owned
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Percentage
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Beneficial owners of 5% or more
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The Goldman Sachs Group, Inc.
(1)
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Beneficial
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6,483,653
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16.1
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%
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Interested Director
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Kaysie Uniacke
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Beneficial
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10,000
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*
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Nominee for Independent Director
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Susan B. McGee
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Independent Directors
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Jaime Ardila
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Beneficial
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13,850
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*
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Ross J. Kari
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Beneficial
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5,000
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*
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Ann B. Lane
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Beneficial
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6,890
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*
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Executive Officers
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Brendan McGovern
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Beneficial
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35,000
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*
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Jon Yoder
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Beneficial
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5,000
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*
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Jonathan Lamm
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Beneficial
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5,000
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*
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Maya Teufel
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Caroline Kraus
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Salvatore Lentini
(2)
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Beneficial
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30,810
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*
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David Yu
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Beneficial
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8,000
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*
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Jordan Walter
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Carmine Rossetti
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All executive officers and directors as a group (13 persons)
(3)
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Beneficial
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119,550
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*
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(1)
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Based on a Schedule 13G/A filed with the SEC on February 14, 2018. The address of The Goldman Sachs Group, Inc. (Group Inc.), a Delaware corporation, is 200 West Street, New York, New York 10282. The
shares of the Companys common stock shown in the above table as being owned by Group Inc. include 652,354 shares held directly by Goldman, Sachs & Co. LLC (Goldman Sachs), a wholly owned subsidiary of Group Inc. Group Inc.
disclaims beneficial ownership of such shares except to the extent of its pecuniary interest therein. Each of Group Inc. and Goldman Sachs has indicated its intention to vote the Companys shares over which it has voting discretion in the same
manner and proportion as shares of the Company over which Group Inc. or Goldman Sachs does not have voting discretion.
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2,031 of the shares in the table above are held in trust for the benefit of Mr. Lentinis children, and Mr. Lentini disclaims beneficial ownership of such shares except to the extent of his pecuniary
interest therein.
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The address for the nominee and each of the Companys directors and executive officers is c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New York 10282.
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Beneficial ownership has been determined in accordance with Rule
13d-3
under the Securities Exchange Act of 1934, as amended (the Exchange Act).
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Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act, the Companys directors and executive officers and any persons holding more than 10%
of the Companys common stock are required to report their beneficial ownership and any changes therein to the SEC and the Company. Specific due dates for those reports have been established, and the Company is required to report in this proxy
statement any failure to file such reports by those due dates. Based on the Companys review of Forms 3, 4 and 5 filed by such persons and information provided by the Companys directors and executive officers, the Company believes that,
with respect to the fiscal year ended December 31, 2017, all Section 16(a) filing requirements applicable to such persons were met in a timely manner.
Dollar Range of Equity Securities Beneficially Owned by Directors
The following table sets out the dollar range of the Companys equity securities beneficially owned by the nominee and each of the
Companys directors as of May 21, 2018. Beneficial ownership is determined in accordance with Rule
16a-1(a)(2)
under the Exchange Act. The Company is not part of a family of investment
companies, as that term is defined in the 1940 Act.
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Name of Director
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Dollar Range of
Equity Securities
in the Company
(1)(2)
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Interested Director
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Kaysie Uniacke
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over $100,000
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Nominee for Independent Director
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Susan B. McGee
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None
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Independent Directors
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Jaime Ardila
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over $100,000
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Ross J. Kari
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over $100,000
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Ann B. Lane
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over $100,000
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(1)
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Dollar ranges are as follows: none, $1 $10,000, $10,001 $50,000, $50,001 $100,000, or over $100,000.
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(2)
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Dollar ranges were determined using the number of shares beneficially owned as of May 21, 2018 multiplied by the closing sales price of the Companys common stock as reported on the New York Stock Exchange
(the NYSE) on May 21, 2018.
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4
PROPOSAL 1
ELECTION OF DIRECTOR
The
Board is divided into three classes with staggered three-year terms. At each annual meeting of Stockholders, the successors to the class of directors whose term expires at such meeting will be elected to hold office for a term expiring at the annual
meeting of Stockholders held in the third year following the year of their election. At the Meeting, you will be asked to elect one Class I director to serve until the 2021 annual meeting of stockholders or until her successor is duly elected
and qualified or until her earlier death, resignation, removal or disqualification. In addition, the Board has adopted polices which provide that (a) no director shall hold office for more than 15 years and (b) a director shall retire as
of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement has been adopted by a majority of the other directors. These policies may be changed by the directors without a
stockholder vote.
Information concerning the nominee and other relevant factors is provided below. Using the enclosed proxy card or
voting by the Internet or by telephone, a Stockholder may vote his or her shares for or against, or abstain from voting with respect to, the election of the nominee. If the enclosed proxy card is properly executed and received prior to the Meeting
(and has not been revoked) but no instructions are marked, the proxies will vote FOR the nominee.
Ms. Susan B.
McGee has consented to her nomination and has agreed to serve if elected. If, at the time of the Meeting, for any reason, Ms. McGee is not available for election or is not able to serve as a director, the persons named as proxies intend to
exercise their voting power in favor of such person as is nominated by the Board as a substitute.
ON MAY 1, 2018, THE BOARD,
INCLUDING EACH OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDED THAT YOU VOTE FOR THE NOMINEE LISTED ABOVE.
Information about the
Nominee and Directors
Set forth below is the name of the nominee for Class I director, as well as each of the continuing
directors, and their addresses, ages, terms of office, principal occupations for at least the past five years and any other directorships they hold in companies which are subject to the reporting requirements of the Exchange Act or are registered as
investment companies under the 1940 Act. Directors who (1) are not deemed to be interested persons, as defined in the 1940 Act, of the Company, (2) meet the definition of independent directors under the corporate
governance standards of the NYSE and (3) meet the independence requirements of Section 10A(m)(3) of the Exchange Act are referred to as Independent Directors. Ms. Uniacke is deemed to be an interested person of
the Company and is referred to as the Interested Director.
Ms. McGee has been nominated for election as a Class I
director to serve until the 2021 annual meeting of stockholders. The nominee is not being proposed for election pursuant to any agreement or understanding between Ms. McGee and the Company.
5
Class I Director Nominee
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Name, Age and
Address
(1)
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Position with the
Company
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Term of Office and
Length of Service
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Principal Occupation(s)
During Past 5 Years
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Other
Directorships
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Nominee for Independent Director
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Susan B. McGee (59)
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Class I Director
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Director effective June 1, 2018; term expires 2021 if elected
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To date, Ms. McGee has held senior management positions with U.S. Global Investors, Inc. (an investment management firm), including Chief Compliance Officer (2016Present), President (1998Present) and General Counsel
(1997Present). She has also been Vice President of the U.S. Global Investors Funds (2016Present). She plans to retire from U.S. Global Investors, Inc. and the U.S. Global Investors Funds on or about June 1, 2018.
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None
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Continuing Directors not up for re-election at the
Meeting
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Name, Age and
Address
(1)
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Position with the
Company
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Term of Office and
Length of Service
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Principal Occupation(s)
During Past 5 Years
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Other
Directorships
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Independent Directors
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Jaime Ardila (62)
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Class II Director
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Chairman of the Board of Directors since January 2018; Director since February 2016; term expires 2019
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Mr. Ardila is retired. He is Director, Accenture plc (2013Present) and Director, Ecopetrol (2016Present); and formerly held
senior management positions with General Motors Company (an automobile manufacturer) (19841996 and 19982016), most recently as Executive Vice President, and President of General Motors South America region (20102016).
Chairman of the Boardthe Company and Goldman Sachs Private Middle Market Credit
LLC, a privately offered business development company (GS PMMC).
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Accenture plc (a management consulting services company); Ecopetrol (an integrated oil company)
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Name, Age and
Address
(1)
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Position with the
Company
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Term of Office and
Length of Service
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Principal Occupation(s)
During Past 5 Years
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Other
Directorships
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Ross J. Kari (59)
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Class III Director
|
|
Director since August 2015; term expires 2020
|
|
Mr. Kari is retired. He is Director, Summit Bank (2014Present). Formerly, he was Executive Vice President and Chief Financial
Officer, Federal Home Loan Mortgage Corporation (Freddie Mac) (20092013); and was a Member of the Board of Directors of KKR Financial Holdings, LLC (20072014).
Directorthe Company and GS PMMC.
|
|
None
|
|
|
|
|
|
Ann B. Lane (63)
|
|
Class III Director
|
|
Director since February 2016; term expires 2020
|
|
Ms. Lane is retired. Formerly, she was Director, Dealertrack Technologies, Inc. (an automotive software solutions and services company)
(20072015); and Managing Director,
Co-Head
of Syndicated & Leveraged Finance and Head of Loan Syndications Capital Markets, JPMorgan Chase & Co. (a financial services company)
(20002005).
Directorthe Company and GS PMMC.
|
|
None
|
7
|
|
|
|
|
|
|
|
|
Name, Age and
Address
(1)
|
|
Position with the
Company
|
|
Term of Office and
Length of Service
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Other
Directorships
|
Interested Director*
|
|
|
|
|
|
|
|
|
Kaysie Uniacke (57)
|
|
Class II Director
|
|
Director since January 2014; term expires 2019
|
|
Chair of the BoardGoldman Sachs Asset Management International (2013Present); DirectorGoldman Sachs Funds, plc
(2013Present); Advisory DirectorGroup Inc. (2013Present); Global Chief Operating OfficerGSAM (20072012); Partner, Goldman Sachs (20022012); and Managing DirectorGoldman Sachs (19972002).
Directorthe Company, GS PMMC and Goldman Sachs Middle Market Lending Corp., a
privately offered business development company (GS MMLC).
|
|
None
|
*
|
Ms. Uniacke is considered to be an Interested Director because she holds positions with Goldman Sachs and owns securities issued by Group Inc. Ms. Uniacke holds comparable positions with certain
other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
|
(1)
|
Each nominee and director may be contacted by writing to the nominee or director, c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New York 10282.
|
The significance or relevance of a nominees or directors particular experience, qualifications, attributes and/or skills is
considered by the Board on an individual basis. Experience, qualifications, attributes and/or skills common to all nominees and directors include the ability to critically review, evaluate and discuss information provided to them and to interact
effectively with the other directors and with representatives of GSAM and its affiliates, other service providers, legal counsel and the Companys independent registered public accounting firm, the capacity to address financial and legal issues
and exercise reasonable business judgment, and a commitment to the representation of the interests of the Company and the Stockholders. The Governance and Nominating Committees charter contains certain other factors that are considered by the
Governance and Nominating Committee in identifying and evaluating potential nominees to serve as Independent Directors. Based on Ms. McGees experience, qualifications, attributes and/or skills, considered individually and with respect to
the experience, qualifications, attributes and/or skills of the other directors, the Board has concluded that she should serve as, and be nominated for election by the Stockholders as, a Class I director. Below is a brief discussion of the
experience, qualifications, attributes and/or skills of the nominee, as well as of the continuing directors, that led the Board to conclude that such individual should serve as a director.
8
Class I Director Nominee
Nominee for Independent Director
Susan
B. McGee
. Ms. McGee was elected to the Board on May 1, 2018, with such election to be effective as of June 1, 2018. She is also expected to serve on the Board of Directors of GS PMMC. To date, Ms. McGee has worked for 26
years at U.S. Global Investors, Inc., an investment management firm, where she held several senior management positions, including President, General Counsel and Chief Compliance Officer. She has also been involved in the governance of the U.S.
Global Investors Funds, serving as Vice President. She plans to retire from U.S. Global Investors, Inc. and the U.S. Global Investors Funds on or about June 1, 2018. In addition, Ms. McGee serves on the Board of Governors of the Investment
Company Institute and as Chairperson of the Investment Company Institute Small Funds Committee. She is also a member of the Board of Directors of the San Antonio Sports Foundation, a
not-for-profit
organization. Based on the foregoing, Ms. McGee is experienced with financial and investment matters.
Continuing Directors not up for
re-election
at the Meeting
Independent Directors
Jaime
Ardila
. Mr. Ardila was elected as one of the Companys directors in February 2016 and as Chairman of the Board in January 2018. Mr. Ardila is retired. He also serves as director and as Chairman of the Board of Directors of GS
PMMC. Mr. Ardila is a member of the Board of Directors of Accenture plc, a management consulting services company, where he serves as Chair of the Finance Committee and a member of the Audit Committee, and as a member of the Board of Directors
of Ecopetrol, an integrated oil company, where he serves as Chair of the Audit Committee and a member of the Business Committee and the Corporate Governance and Sustainability Committee. Previously, Mr. Ardila worked for 29 years at General
Motors Company, an automobile manufacturer, where he held several senior management positions, most recently as Executive Vice President of the company and President of General Motors South America region. Mr. Ardila joined General Motors
in 1984. From 1996 to 1998, Mr. Ardila served as the managing director, Colombian Operations, of N M Rothschild & Sons Ltd, before rejoining General Motors in 1998. Based on the foregoing, Mr. Ardila is experienced with financial
and investment matters.
Ross J. Kari
. Mr. Kari was elected as one of the Companys directors in August 2015.
Mr. Kari is retired. He also serves on the Board of Directors of GS PMMC. Previously, Mr. Kari was Executive Vice President and Chief Financial Officer of Federal Home Loan Mortgage Corporation (Freddie Mac), where he worked for four
years. Previously, he held senior management positions at SAFECO Corporation, a personal insurance company, Federal Home Loan Bank of San Francisco, and Wells Fargo & Company, where he began his career and worked for 19 years. Mr. Kari
also serves as a Director and a member of the Audit Committee and ALCO Chairman of Summit Bank. Based on the foregoing, Mr. Kari is experienced with financial and investment matters.
Ann B. Lane
. Ms. Lane was elected as one of the Companys directors in February 2016. Ms. Lane is retired. She also
serves on the Board of Directors of GS PMMC. Ms. Lane was a Director of Dealertrack Technologies, Inc., an automotive software solutions and services company, from 2007 to 2015. Previously, she worked for five years at JPMorgan Chase &
Co., a financial services company, as a Managing Director and
Co-Head
of Syndicated & Leveraged Finance and Head of Loan Syndications Capital Markets. Prior to joining JPMorgan Chase & Co.,
Ms. Lane held several senior management positions at Citigroup, Inc., a financial services company, where she worked for 18 years. Based on the foregoing, Ms. Lane is experienced with financial and investment matters.
9
Interested Director
Kaysie Uniacke
. Ms. Uniacke was elected as one of the Companys directors in January 2014. Ms. Uniacke is the chair of
the board of Goldman Sachs Asset Management International, serves on the boards of the Goldman Sachs Luxembourg and Dublin family of funds, several GSAM-managed pooled vehicles organized in the Cayman Islands, GS PMMC and GS MMLC and is an advisory
director to Group Inc. Previously, she was global chief operating officer of GSAMs portfolio management business until 2012 and served on the Investment Management Division Client and Business Standards Committee. Prior to this, she was
president of Goldman Sachs Trust, the GS mutual fund family, and was head of the Fiduciary Management business within Global Manager Strategies, responsible for business development and client service globally. Earlier in her career,
Ms. Uniacke managed GSAMs U.S. and Canadian Distribution groups. In that capacity, she was responsible for overseeing all North American institutional and third-party sales channels, marketing and client service functions, for which
client assets exceeded $200 billion. Before that, Ms. Uniacke was head of GSAMs Global Cash Services business, where she was responsible for overseeing the management of assets exceeding $100 billion. Ms. Uniacke worked at
Goldman Sachs from 1983 to 2012, where she was named managing director in 1997 and partner in 2002. Ms. Uniacke serves on the board of
Person-to-Person,
a
non-profit
organization that supports the working poor in lower Fairfield County, CT. Based on the foregoing, Ms. Uniacke is experienced with financial and investment matters.
Compensation of Directors
From
January 1, 2017 to December 31, 2017, each Independent Director was compensated with a $130,000 annual fee for his or her services as director. In addition, the Chairman of the Board earned an annual fee of $40,000 and the director
designated as the audit committee financial expert, as defined in Item 407 of Regulation
S-K,
earned an annual fee of $10,000 for their additional services in these capacities.
Effective January 1, 2018, each of the Independent Directors receives an annual fee as compensation for his or her services as a director
of $100,000. In addition, the Chairman of the Board earns an additional annual fee of $33,000 and the director designated as the audit committee financial expert, as defined in Item 407 of Regulation
S-K,
earns an additional annual fee of $11,000 for their additional services in these capacities. The Independent Directors are reimbursed for travel and other expenses incurred in connection with attending
Board and committee meetings. The Company may also pay the incidental costs of a director to attend training or other types of conferences relating to the business development company (BDC) industry. In addition, the Company purchases
directors and officers liability insurance on behalf of the directors.
It is the responsibility of the Independent Directors
to review their own compensation and recommend to all of the directors the appropriate level of compensation. This level of compensation may be adjusted from time to time. In conducting their review, the Independent Directors use such information as
they deem relevant, including compensation paid to directors of other BDCs of similar size and the time and effort required of the directors in fulfilling their responsibilities to the Company.
10
The following table shows information regarding the compensation earned by the Independent
Directors for the fiscal year ended December 31, 2017. No compensation is paid by the Company to any Interested Director or executive officer of the Company.
|
|
|
|
|
|
|
|
|
|
|
Total Compensation
From the Company
(1)(2)
|
|
|
Total Compensation
From the Goldman Sachs
Fund Complex
(1)
|
|
Interested Director
|
|
|
|
|
|
|
|
|
Kaysie Uniacke
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Independent Directors
|
|
|
|
|
|
|
|
|
Jaime Ardila
|
|
$
|
130,000
|
|
|
$
|
150,000
|
|
Ross Kari
(4)
|
|
$
|
140,000
|
|
|
$
|
165,000
|
|
Ann B. Lane
|
|
$
|
130,000
|
|
|
$
|
150,000
|
|
|
|
|
Former Independent Director
|
|
|
|
|
|
|
|
|
Ashok N. Bakhru
(5)
|
|
$
|
170,000
|
|
|
$
|
678,000
|
|
Janet F. Clark
(6)
|
|
$
|
130,000
|
|
|
$
|
150,000
|
|
(1)
|
Reflects compensation earned during the year ended December 31, 2017. For the Independent Directors, the Goldman Sachs Fund Complex includes the Company and GS PMMC.
|
(2)
|
The Company did not award any portion of the fees earned by its directors in stock or options during the year ended December 31, 2017. The Company does not have a profit-sharing plan, and directors do not receive
any pension or retirement benefits from us.
|
(3)
|
Ms. Uniacke is an Interested Director and, as such, receives no compensation from the Company or the Goldman Sachs Fund Complex for her service as director or trustee.
|
(4)
|
Includes compensation as audit committee financial expert.
|
(5)
|
Pursuant to the Companys corporate governance guidelines, Mr. Bakhru retired from the Board as of December 31, 2017. Prior to his retirement, Mr. Bakhru was an Independent Director and served as a
member of the Audit Committee, Governance and Nominating Committee, Compensation Committee, Compliance Committee and Contract Review Committee. Total Compensation From the Company includes compensation for past services as Chairman of
the Board. For Mr. Bakhru, Total Compensation From the Goldman Sachs Fund Complex includes compensation for past services on behalf of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust, each an
open-end
management investment company (as well as GS PMMC).
|
(6)
|
Ms. Clark resigned from the Board effective as of the conclusion of the meeting of the Board held on May 1, 2018. Prior to her resignation, Ms. Clark was an Independent Director and was a member of the
Audit Committee, the Governance and Nominating Committee, the Compensation Committee, the Compliance Committee and the Contract Review Committee.
|
Board Composition and Leadership Structure
The Companys business and affairs are managed under the direction of the Board. Pending the effectiveness of Ms. McGees
election to the Board on June 1, 2018, the Board consists of four members, three of whom are Independent Directors. The Board elects the Companys officers, who serve at the discretion of the Board. The responsibilities of the Board
include quarterly valuation of the Companys assets, corporate governance activities, oversight of the Companys financing arrangements and oversight of its investment activities.
The Boards role in the management of the Company is one of oversight. Oversight of the Companys investment activities extends to
oversight of the risk management processes employed by GSAM as part of its
day-to-day
management of the Companys investment activities. The Board reviews risk
management processes at both regular and special Board meetings throughout the year, consulting with appropriate representatives of GSAM as necessary and periodically requesting the production of risk management reports or presentations. The
11
goal of the Boards risk oversight function is to ensure that the risks associated with the Companys investment activities are accurately identified, thoroughly investigated and
responsibly addressed. Stockholders should note, however, that the Boards oversight function cannot eliminate all risks or ensure that particular events do not adversely affect the value of the Companys investments. The Board also has
primary responsibility for the valuation of the Companys assets.
The Board has established an Audit Committee, Governance and
Nominating Committee, Compensation Committee, Compliance Committee and Contract Review Committee. The scope of each committees responsibilities is discussed in greater detail below. Ms. McGee has been appointed to serve on each of the
above committees effective as of June 1, 2018.
Jaime Ardila, an Independent Director, serves as Chairman of the Board. The Board
believes that it is in the best interests of the Stockholders for Mr. Ardila to lead the Board because of his familiarity with the Companys portfolio companies, his broad corporate background and experience with financial and investment
matters and his significant senior management experience, as described above. Mr. Ardila generally acts as a liaison between management, officers and attorneys between meetings of the Board and presides over all executive sessions of the
Independent Directors without management. The Board believes that its leadership structure is appropriate because the structure allocates areas of responsibility among the individual directors and the committees in a manner that enhances effective
oversight. The Board also believes that its size creates an efficient corporate governance structure that provides opportunity for direct communication and interaction between management and the Board.
The Board had 10 formal meetings in 2017. Each continuing director that was a member of the Board during the fiscal year ended
December 31, 2017 attended at least 75% of the aggregate number of meetings of the Board and of the respective committees on which he or she served. To promote effectiveness of the Board, directors are strongly encouraged to attend regularly
scheduled Board meetings in person.
One of the Companys directors attended the 2017 Annual Meeting of Stockholders.
Committees of the Board
Audit Committee
The current members of the Audit Committee are Mr. Ardila, Mr. Kari and Ms. Lane, each of whom is an Independent
Director. Mr. Ardila simultaneously serves on the audit committees of more than three public companies, and the Board has determined that his simultaneous service on the audit committees of other public companies does not impair his ability to
effectively serve on the Audit Committee. Mr. Kari serves as Chairman of the Audit Committee. The Board and the Audit Committee have determined that Mr. Kari is an audit committee financial expert, as defined in Item 407 of
Regulation
S-K.
The Audit Committee is responsible for overseeing matters relating to the
appointment and activities of the Companys auditors, audit plans and procedures, various accounting and financial reporting issues and changes in accounting policies, and reviewing the results and scope of the audit and other services provided
by the independent public accountants. The Audit Committee is also responsible for aiding the Board in fair value pricing debt and equity securities that are not publicly traded or for which current market values are not readily available. The Audit
Committees charter is available on the Companys website (
https://www.goldmansachsbdc.com
).
The Audit Committee held
five formal meetings in 2017.
12
Governance and Nominating Committee
The current members of the Governance and Nominating Committee are Mr. Ardila, Mr. Kari and Ms. Lane, each of whom is an
Independent Director. Mr. Ardila serves as the Chairman of the Governance and Nominating Committee. The Governance and Nominating Committee is responsible for identifying, researching and nominating Independent Directors for election by the
Stockholders, selecting nominees to fill vacancies on the Board or a committee of the Board, developing and recommending to the Board a set of corporate governance principles and overseeing the evaluation of the Board and management.
All candidates nominated for an Independent Director position must meet applicable independence requirements and have the capacity to address
financial and legal issues and exercise reasonable business judgment. The Governance and Nominating Committee considers a variety of criteria in evaluating candidates (including candidates nominated by a Stockholder), including (1) experience
in business, financial or investment matters or in other fields of endeavor; (2) financial literacy and/or whether he or she is an audit committee financial expert, as defined in Item 407 of Regulation
S-K;
(3) reputation; (4) ability to attend scheduled Board and committee meetings; (5) general availability to attend to Board business on short notice; (6) actual or potential business, family
or other conflicts bearing on either the candidates independence or the business of the Company; (7) length of potential service; (8) commitment to the representation of the interests of the Company and the Stockholders;
(9) commitment to maintaining and improving his or her skills and education; (10) experience in corporate governance and best business practices; and (11) the diversity that he or she would bring to the Boards composition.
The Governance and Nominating Committee considers nominees properly recommended by a Stockholder. The Companys bylaws provide that for
any nomination to be properly brought by a Stockholder for a meeting, such Stockholder must comply with advance notice requirements and provide the Company with certain information. Generally, to be timely, a Stockholders notice must be
received at the Companys principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding annual meeting of Stockholders. The Companys bylaws further provide that
nominations of persons for election to the Board at a special meeting may be made only by or at the direction of the Board and, provided that the Board has determined that directors will be elected at the meeting, by a Stockholder who is entitled to
vote at the meeting and who has complied with the advance notice provisions of the bylaws. The Governance and Nominating Committees charter is available on the Companys website (
https://www.goldmansachsbdc.com
).
The Governance and Nominating Committee held three formal meetings in 2017.
Compensation Committee
The
current members of the Compensation Committee are Mr. Ardila, Mr. Kari and Ms. Lane, each of whom is an Independent Director. The Compensation Committee is responsible for determining, or recommending to the Board for determination,
the compensation, if any, of the Companys chief executive officer and all other executive officers. The Compensation Committee also assists the Board with matters related to compensation generally, except with respect to compensation of the
directors. As discussed in Compensation of Directors, below, it is the responsibility of the Independent Directors to review their own compensation and recommend to all of the directors the appropriate level of compensation. As none of
the Companys executive officers currently is compensated by the Company, the Compensation Committee does not produce and/or review a report on executive compensation practices. The Compensation Committees charter is available on the
Companys website (
https://www.goldmansachsbdc.com
).
The Compensation Committee did not hold any formal meetings in 2017.
13
Compliance Committee
The current members of the Compliance Committee are Mr. Ardila, Mr. Kari and Ms. Lane, each of whom is an Independent Director.
Mr. Ardila serves as Chairman of the Compliance Committee. The Compliance Committee is responsible for overseeing the Companys compliance processes, and insofar as they relate to services provided to us, the compliance processes of the
investment adviser, underwriters (if any), administrator and transfer agent, except that compliance processes relating to the accounting and financial reporting processes and certain related matters are overseen by the Audit Committee. In addition,
the Compliance Committee provides assistance to the full Board with respect to compliance matters. The Compliance Committees charter is available on the Companys website (
https://www.goldmansachsbdc.com
).
The Compliance Committee held five formal meetings in 2017.
Contract Review Committee
The
current members of the Contract Review Committee are Mr. Ardila, Mr. Kari and Ms. Lane, each of whom is an Independent Director. Mr. Ardila serves as Chairman of the Contract Review Committee. The Contract Review Committee is
responsible for overseeing the processes of the Board for reviewing and monitoring performance under the Companys investment management, placement agent (if any), principal underwriting (if any) and certain other agreements with GSAM and its
affiliates. The Contract Review Committee also provides appropriate assistance to the Board in connection with the Boards approval, oversight and review of the Companys other service providers, including the Companys
custodian/accounting agent, transfer agent, printing firms, and professional firms (other than the Companys independent auditor, which is the responsibility of the Audit Committee). The Contract Review Committees charter is available on
the Companys website (
https://www.goldmansachsbdc.com
).
The Contract Review Committee had one formal meeting in 2017.
Information about Executive Officers who are not Directors
Set forth below is certain information about the Companys executive officers who are not directors:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Positions with the Company
|
Brendan McGovern
|
|
|
47
|
|
|
Chief Executive Officer and President
|
Jon Yoder
|
|
|
44
|
|
|
Chief Operating Officer
|
Jonathan Lamm
|
|
|
44
|
|
|
Chief Financial Officer and Treasurer
|
Maya Teufel
|
|
|
45
|
|
|
Chief Compliance Officer
|
Salvatore Lentini
|
|
|
45
|
|
|
Executive Vice President
|
David Yu
|
|
|
36
|
|
|
Executive Vice President and Head of Research
|
Jordan Walter
|
|
|
37
|
|
|
Executive Vice President
|
Carmine Rossetti
|
|
|
39
|
|
|
Principal Accounting Officer
|
The address for each executive officer is c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York,
New York 10282. Each officer holds office at the pleasure of the Board until the next election of officers or until his or her successor is duly elected and qualifies.
Brendan McGovern
. Mr. McGovern was appointed as the Companys chief executive officer and president in March 2013.
Mr. McGovern heads GSAMs Private Credit Group, is the chief executive officer and president of GS PMMC and GS MMLC and also serves as
co-head
and senior portfolio manager of the GSAM Credit
Alternatives portfolio management team. He is also the Chair and a voting member of the Private Credit Groups Investment Committee, which is responsible for evaluating and approving all of the Companys investments. Mr. McGovern
joined the firm in 2006. Prior to joining the firm, Mr. McGovern served as a managing director in
14
the Global Investment Group at Amaranth Advisors, where he
co-headed
the funds private placement efforts for both debt and equity linked products in
the United States. He is also on the board of directors for the Oxalosis and Hyperoxaluria Foundation.
Jon Yoder
. Mr. Yoder
was appointed as the Companys chief operating officer in March 2013. Mr. Yoder is the chief operating officer of GS PMMC and GS MMLC and a member of GSAMs Private Credit Group with a focus on sourcing, structuring and executing
privately negotiated debt financings. He is also a voting member of the Private Credit Groups Investment Committee, which is responsible for evaluating and approving all of the Companys investments. Mr. Yoder joined the firm in
2005. Prior to joining the firm, he was a member of the mergers and acquisitions and private equity groups at Paul, Weiss, Rifkind, Wharton & Garrison, LLP.
Jonathan Lamm
. Mr. Lamm was appointed as the Companys chief financial officer and treasurer in March 2013. Mr. Lamm is
also the chief financial officer and treasurer of GS PMMC and GS MMLC and chief operating officer of the GSAM Credit Alternatives portfolio management team, responsible for the operations of the business, including business financials,
infrastructure support, and IT project management, as well as the continuous improvement of the control environment. Mr. Lamm is secretary and a
non-voting
member of the Private Credit Groups
Investment Committee, which is responsible for evaluating and approving all of the Companys investments. He joined the firm in 2002. Prior to joining the firm, Mr. Lamm worked in the securities audit practice at Deloitte & Touche
LLP.
Maya Teufel
. Ms. Teufel was appointed as the Companys chief compliance officer in December 2016. Ms. Teufel
is also the chief compliance officer of GS PMMC, GS MMLC and Goldman Sachs Trust II. Prior to joining GSAM in September 2016, she was, from November 2013 to August 2016, the General Counsel and Chief Compliance Officer of Emerging Global Advisors,
LLC (currently part of Ameriprise Financial). While at Emerging Global Advisors, Ms. Teufel also held the position of fund chief compliance officer from October 2015 to August 2016. Prior to joining Emerging Global Advisors, she was, from July
2005 to November 2013, Vice President, Corporate Counsel at Prudential Insurance Company of America, a subsidiary of Prudential Financial Inc., an insurance and financial services company. Prior to Prudential, Ms. Teufel was an associate in the
mergers and acquisitions groups of Sullivan & Cromwell LLP and Gibson, Dunn & Crutcher LLP.
Salvatore Lentini
.
Mr. Lentini was appointed as an executive vice president of the Company in March 2013. Mr. Lentini is executive vice president of GS PMMC and GS MMLC and
co-head
and senior portfolio manager of the
GSAM Credit Alternatives portfolio management team and also serves as its head of liquid credit and trading. Mr. Lentini is also a voting member of Private Credit Groups Investment Committee, which is responsible for evaluating and
approving all of the Companys investments. Mr. Lentini joined the firm in 2006. Prior to joining the firm, Mr. Lentini was a managing director in the Global Investments Group at Amaranth Advisors, where he was responsible for trading
all credit products within the United States. Before joining Amaranth, he was responsible for trading high yield and crossover debt at the Royal Bank of Scotland (RBS). Earlier, Mr. Lentini traded high yield fixed income for PaineWebber.
David Yu
. Mr. Yu was appointed as an executive vice president and Head of Research of the Company in March 2013. Mr. Yu is
executive vice president and Head of Research of GS PMMC and GS MMLC and a member of the GSAM Private Credit Group with a focus on sourcing, structuring and executing privately negotiated debt financings and serves as its Head of Research.
Mr. Yu is a voting member of the Private Credit Groups Investment Committee, which is responsible for evaluating and approving all of the Companys investments. Mr. Yu joined the firm in 2006. Prior to joining the firm,
Mr. Yu was an associate in the Global Investments Group at Amaranth Advisors, where he similarly worked with public and private issuers to structure and execute debt and equity financings. Prior to joining Amaranth, he worked in the Leveraged
Finance and Sponsor Coverage Group at CIBC World Markets.
Jordan Walter
. Mr. Walter was appointed as an executive vice
president of the Company in February 2018. Mr. Walter is executive vice president of GS PMMC and GS MMLC and a member of the GSAM Credit
15
Alternatives team with a focus on sourcing, structuring and executing privately negotiated debt financings. He is also a voting member of the Private Credit Groups Investment Committee,
which is responsible for evaluating and approving all of the Companys investments. Mr. Walter joined the firm in 2014. Prior to joining the firm, Mr. Walter was a vice president at MCG Capital where he originated and managed middle
market debt and equity investments. Prior to joining MCG Capital, Mr. Walter was in the Financial Management Program at General Electric.
Carmine Rossetti
. Mr. Rossetti was appointed as principal accounting officer of the Company in May 2017. Mr. Rossetti is also
the principal accounting officer of GS PMMC and GS MMLC and head of the GSAM Hedge Fund and BDC Fund Controller teams. Mr. Rossetti is responsible for fund accounting and financial reporting oversight as well as the continuous improvement of
the control environment. Mr. Rossetti joined Goldman Sachs in 2004. Prior to joining Goldman Sachs, he worked in the audit practice at Ernst & Young LLP.
Certain Relationships and Related Party Transactions
Investment Management Agreement
The Company is party to the Investment Management Agreement, pursuant to which the Company pays GSAM, a wholly owned subsidiary of Group Inc.,
a fee for investment management services consisting of a management fee based on the Companys gross assets (excluding cash and cash equivalents but including assets purchased with borrowed amounts) and an incentive fee based on the performance
of the Companys investments. Certain of the Companys officers are also officers and employees of GSAM.
For the year ended
December 31, 2017, the Company paid GSAM a total of $28.66 million in fees (excluding fees that are accrued but not paid) pursuant to the Investment Management Agreement, which consisted of $17.59 million in management fees and
$11.07 million in incentive fees.
License Agreement
The Company is party to a license agreement with an affiliate of Goldman Sachs pursuant to which the Company has been granted a
non-exclusive,
royalty-free license to use the Goldman Sachs name. Under this agreement, the Company does not have a right to use the Goldman Sachs name if GSAM or another affiliate of Goldman Sachs is
not the Companys investment adviser or if the Companys continued use of such license results in a violation of applicable law, results in a regulatory burden or has adverse regulatory consequences. Other than with respect to this limited
license, the Company has no legal right to the Goldman Sachs name.
Co-Investment
Opportunities
The Company has in the past
co-invested,
and in the future may
co-invest,
on a concurrent basis with other funds managed by GSAM and its affiliates, but not if such
co-investment
is impermissible under existing regulatory guidance,
applicable regulations or GSAMs allocation procedures. Certain types of negotiated
co-investments
may be made only if the Company receives an order from the SEC permitting the Company to do so. On
January 4, 2017, the SEC granted the Company, GS PMMC and GS MMLC, as well as certain other funds managed by GSAM in the future, the exemptive relief to make negotiated
co-investments,
subject to certain
terms and conditions in the exemptive relief.
Related Party Transaction Review Policy
The Audit Committee conducts quarterly reviews of any potential related party transactions brought to its attention and, during these reviews,
it also considers any conflicts of interest brought to its attention pursuant to the Companys Code of Ethics. Each of the Companys directors and executive officers is instructed and periodically reminded to inform GSAM Compliance of any
potential related party transactions. In addition, each such director and executive officer completes a questionnaire on an annual basis designed to elicit information about any potential related party transactions.
16
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
At a meeting of the Board held on December 4, 2017, the Audit Committee selected and recommended, and the Board, including a majority of
the Independent Directors notified the selection of PricewaterhouseCoopers LLP to act as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2018. This selection is presented for
ratification by the Stockholders. If the Stockholders fail to ratify the selection of PricewaterhouseCoopers LLP to serve as the independent registered public accounting firm for the year ending December 31, 2018, the Audit Committee and the
Board will reconsider the continued retention of PricewaterhouseCoopers LLP.
Representatives of PricewaterhouseCoopers LLP are expected
to be present at the Meeting and will be available to respond to appropriate questions from Stockholders if necessary. Representatives of PricewaterhouseCoopers LLP will be given the opportunity to make statements at the Meeting, if they so desire.
Audit Fees
The aggregate
audit fees billed by PricewaterhouseCoopers LLP for the years ended December 31, 2017 and December 31, 2016 were $761,500 and $570,000, respectively.
Fees included in the audit fees category are those associated with the annual audits of financial statements, review of the financial
statements included in the Companys Form
10-Qs
and services that are normally provided in connection with statutory and regulatory filings.
Audit-Related Fees
No
audit-related fees were billed by PricewaterhouseCoopers LLP for the years ended December 31, 2017 and December 31, 2016.
Audit-related fees are for any services rendered to the Company that are reasonably related to the performance of the audits or reviews of the
Companys financial statements (but not reported as audit fees above). These services include attestation services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.
The aggregate audit-related fees billed by PricewaterhouseCoopers LLP to GSAM, and any entity controlling, controlled by, or under common
control with, GSAM, that provides ongoing services to the Company, for engagements directly related to the Companys operations and financial reporting, for the years ended December 31, 2017 and December 31, 2016 were $1,133,433 and
$1,157,616, respectively. These amounts represent fees PricewaterhouseCoopers LLP billed to GSAM for services related to the SSAE 16 report.
Tax
Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for services rendered to the Company for tax compliance, tax advice
and tax planning for the years ended December 31, 2017 and December 31, 2016 were $12,500 and $12,500, respectively.
Fees
included in the tax fees category comprise all services performed by professional staff in the independent registered public accountants tax division except those services related to the audits. This category comprises fees for tax compliance
services provided in connection with the preparation and review of the Companys tax returns.
17
No tax fees were billed by the Companys independent registered public accountant to GSAM,
or any entity controlling, controlled by, or under common control with, GSAM, that provides ongoing services to the Company, for engagements directly related to the Companys operations and financial reporting, for the years ended
December 31, 2017 and December 31, 2016.
All Other Fees
No fees were billed by PricewaterhouseCoopers LLP for products and services provided to the Company, other than the services reported in
Audit Fees, Audit Related Fees, and Tax Fees above, for the years ended December 31, 2017 and December 31, 2016.
No other fees were billed by the Companys independent registered public accountant to GSAM, or any entity controlling, controlled by, or
under common control with, GSAM, that provides ongoing services to the Company, for engagements directly related to the Companys operations and financial reporting, for the years ended December 31, 2017 and December 31, 2016.
Aggregate
Non-Audit
Fees
No
non-audit
fees were billed to GSAM and service affiliates by PricewaterhouseCoopers LLP for
non-audit
services for the years ended December 31, 2017 and December 31, 2016. This includes any
non-audit
services required to be
pre-approved
or
non-audit
services that did not require
pre-approval
since they did not directly relate to the Companys
operations or financial reporting.
Pre-Approval
of Audit and
Non-Audit
Services Provided to the Company
The Audit and
Non-Audit
Services
Pre-Approval
Policy (the Policy) adopted by the Audit Committee sets forth the procedures and the conditions pursuant to which services performed by an independent auditor for the Company may be
pre-approved.
Services may be
pre-approved
specifically by the Audit Committee as a whole or, in certain circumstances, by the Audit Committee Chairman or the person
designated as the audit committee financial expert. In addition, subject to specified cost limitations, certain services may be
pre-approved
under the provisions of the Policy. The Policy provides that the
Audit Committee will consider whether the services provided by an independent auditor are consistent with the SECs rules on auditor independence. The Policy provides for periodic review and
pre-approval
by the Audit Committee of the services that may be provided by the independent auditor.
De Minimis Waiver
. The
pre-approval
requirements of the Policy may be waived with respect to the provision of
non-audit
services that are permissible for an independent auditor to perform, provided
(1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues subject to
pre-approval
that was paid to the independent auditors during the
fiscal year in which the services are provided; (2) such services were not recognized by the Company at the time of the engagement to be
non-audit
services; and (3) such services are promptly brought
to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee to whom authority to grant such approvals has been delegated by the Audit Committee,
pursuant to the
pre-approval
provisions of the Policy.
Pre-Approval
of
Non-Audit
Services Provided to GSAM.
The Policy provides that, in addition to requiring
pre-approval
of audit and
non-audit
services provided to the Company, the Audit Committee will
pre-approve
those
non-audit
services provided to GSAM (and entities controlling, controlled by or under common control with GSAM that provide ongoing services to the Company)
where the engagement relates directly to the operations or financial reporting of the Company.
18
The Audit Committee has considered these fees and the nature of the services rendered, and has
concluded that they are compatible with maintaining the independence of PricewaterhouseCoopers LLP. The Audit
Committee did not approve any of the audit-related, tax, or other
non-audit
fees described
above pursuant to the
de minimis
exceptions set forth in Rule
2-01(c)(7)(i)(C)
and Rule
2-01(c)(7)(ii)
of Regulation
S-X.
PricewaterhouseCoopers LLP did not provide any audit-related services, tax services or other
non-audit
services to GSAM or any entity controlling, controlled by or
under common control with GSAM that provides ongoing services to the Company that the Audit Committee was required to approve pursuant to Rule
2-01(c)(7)(ii)
of Regulation
S-X.
The Audit Committee considered whether the provision of
non-audit
services rendered to GSAM or any entity controlling, controlled by, or under common control with
GSAM that provides ongoing services to the Company that were not
pre-approved
by the Audit Committee because the engagement did not relate directly to the operations and financial reporting of the Company is
compatible with maintaining PricewaterhouseCoopers LLPs independence.
ON MAY 1, 2018, THE BOARD, INCLUDING EACH OF
THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDED THAT YOU VOTE FOR THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018.
19
Audit Committee Report
(1)
The following is the report of the Audit Committee of Goldman Sachs BDC, Inc. (the Company) with respect to the Companys
audited financial statements for the fiscal year ended December 31, 2017 (the Audited Financial Statements).
The Audit
Committee has: (a) reviewed and discussed the Audited Financial Statements with the management of the Company; (b) discussed with the independent auditor the matters required to be discussed by Auditing Standard 1301 (Communications with
Audit Committees), as adopted by the Public Company Accounting Oversight Board (PCAOB); and (c) received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB Ethics and
Independence Rule 3526 regarding the independent auditors communications with the Audit Committee concerning independence, and has discussed with the independent auditor the auditors independence.
The members of the Audit Committee are not, and do not represent themselves to be, professionally engaged in the practice of auditing or
accounting and are not employed by the Company for accounting, financial management or internal control purposes. Moreover, the Audit Committee relies on and makes no independent verification of the facts presented to it or representations made by
management or the Companys independent auditor. Accordingly, the Audit Committees oversight does not provide an independent basis to determine that management has maintained appropriate accounting and/or financial reporting principles
and policies, or internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committees considerations and discussions referred to above do not provide
assurance that the audit of the Companys financial statements has been carried out in accordance with the standards of the PCAOB or that the financial statements are presented in accordance with generally accepted accounting principles.
Based on its consideration of the Audited Financial Statements and the discussions referred to above with management and the Companys
independent auditor, and subject to the limitations on the responsibilities and role of the Audit Committee set forth in the charter and those discussed above, the Audit Committee recommended to the Board of Directors that the Audited Financial
Statements be accepted by the Board of Directors and included in the Companys Annual Report on Form
10-K
for the last fiscal year for filing with the SEC.
February 28, 2018
The
Audit Committee
Ross J. Kari, Chairman
Jaime Ardila
Janet F. Clark
Ann B. Lane
20
(1)
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The material in this report is not soliciting material, is not deemed filed with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
|
PROPOSAL 3
APPROVAL OF APPLICATION OF REDUCED ASSET COVERAGE
REQUIREMENTS TO THE COMPANY
Background
and 1940 Act Requirements
The Company is a
closed-end
management investment company that has
elected to be regulated as a BDC under the 1940 Act. Section 61(a) of the 1940 Act applies asset coverage requirements which limit the ability of BDCs to incur leverage. Prior to the passage of the Small Business Credit Availability Act (the
SBCA Act) on March 23, 2018, these asset coverage requirements prohibited a BDC from issuing debt securities or preferred stock (collectively referred to as senior securities) unless, immediately after such issuance, the
BDC had asset coverage of at least 200%. For purposes of the 1940 Act, asset coverage means the ratio of (1) the total assets of a BDC, less all liabilities and indebtedness not represented by senior securities, to
(2) the aggregate amount of senior securities representing indebtedness (plus, in the case of senior securities represented by preferred stock, the aggregate involuntary liquidation preference of such BDCs preferred stock). As a result of
these historical asset coverage requirements (which limited BDCs to a 1:1 debt to equity ratio), we believe that BDCs operate at lower levels of leverage than many private investment funds focused on similar asset classes, collateralized loan
obligations, specialty finance companies and other operating companies.
The SBCA Act, among other things, amended Section 61(a) of
the 1940 Act to add a new Section 61(a)(2) which reduces the asset coverage requirements applicable to BDCs from 200% to 150% (a 2:1 debt to equity ratio), so long as the BDC meets certain disclosure and approval requirements.
Section 61(a)(2) provides that before the reduced asset coverage requirements are effective with respect to a BDC, the application of that section of the 1940 Act to such BDC must be approved by either (1) a required majority,
as defined in the Section 57(o) of the 1940 Act, of such BDCs board of directors or (2) a majority of votes cast at a special or annual meeting of such BDCs stockholders at which a quorum is present.
The Board has decided to seek the approval of Stockholders at the Meeting to reduce the Companys asset coverage requirements so that the
reduced asset coverage requirements for senior securities in Section 61(a)(2) of the 1940 Act will apply to the Company. If this Proposal 3 is approved by the Stockholders at the Meeting, commencing on the first date after such approval, the
Company will be required to maintain asset coverage for its senior securities of 150% rather than 200%, which would permit the Company to double the maximum amount of leverage that it is permitted to incur.
Recommendation and Rationale
On
May 1, 2018, the Board unanimously recommended that the Stockholders vote in favor of the application of the reduced asset coverage requirements in Section 61(a)(2) of the 1940 Act to the Company. The Board concluded that Proposal 3 is in
the best interests of the Company and the Stockholders. In doing so, the Board considered and evaluated various factors, including the following (each, as discussed more fully below):
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the additional flexibility to manage capital to take advantage of attractive investment opportunities;
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the potential impact (both positive and negative) on net investment income, return to stockholders and net asset value;
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the additional flexibility to make required regulated investment company distributions without violating the 1940 Act; and
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the impact on advisory fees payable by the Company to the Adviser and the related conflicts of interest.
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21
Flexibility to manage capital to take advantage of attractive investment opportunities
The Company cannot predict when attractive investment opportunities will present themselves, and attractive opportunities may arise at a time
when market conditions are not favorable to raising additional equity capital. If the Company is not able to access additional capital (either at all or on favorable terms) when attractive investment opportunities arise, the Companys ability
to grow over time and to continue to pay distributions to Stockholders could be adversely affected. Based on the Companys balance sheet as of March 31, 2018, reducing the asset coverage requirements applicable to the Company from 200% to
150% would allow the Company to borrow nearly $727 million in additional capital. This amount would provide additional flexibility to pursue attractive investment opportunities. The Board believes that the greater deal flow that may be achieved
with this additional capital would enable the Company to participate more meaningfully in the private debt markets and to make larger loans to its portfolio companies with no loss of diversification of the overall portfolio. With more capital, the
Company expects that it would, over time, be a more meaningful capital provider to the middle market and be able to better compete for high-quality investment opportunities with other companies having greater resources than the Company currently
has.
In addition, the Board believes that the capital made available by incurring additional leverage would allow the Company to better
manage its capital and to only undertake equity capital raises when market conditions are optimal for doing so.
The Board noted that over
50% of the Companys total assets at fair value were invested in first-lien senior secured or first-lien,
last-out
unitranche debt as of March 31, 2018, and that a portfolio comprised of such assets
is well suited to take advantage of additional leverage. As a result, with additional leverage, the Company may continue to seek investments in lower risk, lower yielding loans.
The Board further noted that the increase in total assets available for investment as a result of incurring additional leverage would increase
the assets available for investment in assets considered
non-qualifying
assets for purposes of Section 55 of the 1940 Act, which will also give the Company greater flexibility when evaluating
investment opportunities.
Potential impact on net investment income, return to stockholders and net asset value
The Board also considered the potential impact of additional leverage on the Companys net investment income, noting that any increases
would be magnified if the Company employed additional leverage. Thus, the Board noted that additional leverage may allow the Company to maintain its historical distribution rate while investing in lower risk, lower yielding loans than the
Companys current portfolio. Similarly, the Board considered that, if the value of the Companys assets increases, additional leverage could cause net asset value to increase more rapidly than it otherwise would have if the Company
did not employ such additional leverage.
However, the Board noted that the converse was also true and, if the Companys net
investment income or the value of the Companys assets decreased, additional leverage would cause the Companys income and/or net asset value to decline more sharply than it otherwise would have if the Company did not employ such
additional leverage, increasing the risk of investing in the Companys common stock. In addition, the Company would have to service any additional debt that it incurs, including interest expense on debt and dividends on preferred stock, that
the Company may issue, as well as the fees and costs related to the entry into or amendments to debt facilities. These expenses (which may be higher than the expenses on the Companys current borrowings due to the rising interest rate
environment) would decrease net investment income, and the Companys ability to pay such expenses will depend largely on the Companys financial performance and will be subject to prevailing economic conditions and competitive
pressures. Additionally, the Companys credit facility currently contains a covenant limiting the Companys asset coverage to 200%. The Company may not be able to amend its credit facility to change this covenant and if the Company is
successful in amending the credit facility, it will incur
22
costs to do so and the other terms of such amended facility, such as interest rate, may not be as favorable to the Company as the current terms.
Effect of Leverage on Return to Stockholders
The following table illustrates the effect of leverage on returns from an investment in the Companys common stock assuming that the
Company employs (1) its actual asset coverage ratio as of March 31, 2018, (2) a hypothetical asset coverage ratio of 200% and (3) a hypothetical asset coverage ratio of 150%, each at various annual returns on the Companys
portfolio as of March 31, 2018, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.
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Assumed Return on the Companys Portfolio
(Net of Expenses)
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(10.00
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)%
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(5.00
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)%
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0.00
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%
|
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5.00
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%
|
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10.00
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%
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Corresponding return to common stockholder assuming actual asset coverage as of March 31,
2018 (237%)
(1)
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(20.54
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)%
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(11.67
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)%
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(2.79
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)%
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6.08
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%
|
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14.95
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%
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Corresponding return to common stockholder assuming 200% asset coverage
(2)
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(24.28
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)%
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(14.06
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)%
|
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|
(3.83
|
)%
|
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6.40
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%
|
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16.62
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%
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Corresponding return to common stockholder assuming 150% asset coverage
(3)
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(38.11
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)%
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(22.89
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)%
|
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|
(7.66
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)%
|
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7.57
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%
|
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22.79
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%
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(1)
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Based on (i) $1,289.74 million in total assets including debt issuance costs as of March 31, 2018, (ii) $530 million in outstanding indebtedness as of March 31, 2018, (iii) $726.71 million
in net assets as of March 31, 2018, and (iv) an annualized average interest rate on the Companys indebtedness, as of March 31, 2018, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of 3.83%.
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(2)
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Based on (i) $1,486.45 million in total assets including debt issuance costs on a pro forma basis as of March 31, 2018, after giving effect of a hypothetical asset coverage ratio of 200%, (ii)
$726.71 million in outstanding indebtedness on a pro forma basis as of March 31, 2018, after giving effect of a hypothetical asset coverage ratio of 200%, (iii) $726.71 million in net assets as of March 31, 2018, and (iv) an
annualized average interest rate on the Companys indebtedness, as of March 31, 2018, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of 3.83%.
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(3)
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Based on (i) $2,213.16 million in total assets including debt issuance costs on a pro forma basis as of March 31, 2018, after giving effect of a hypothetical asset coverage ratio of 150%, (ii)
$1,453.42 million in outstanding indebtedness on a pro forma basis as of March 31, 2018, after giving effect of a hypothetical asset coverage ratio of 150%, (iii) $726.71 million in net assets as of March 31, 2018, and
(iv) an annualized average interest rate on the Companys indebtedness, as of March 31, 2018, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of 3.83%.
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Effect of Leverage on Expenses
The following table is intended to assist Stockholders in understanding the fees and expenses that an investor in the Companys common
stock will bear, directly or indirectly, assuming that the Company employs (1) its actual asset coverage ratio and actual base management fee rate as of March 31, 2018, (2) a hypothetical asset coverage ratio of 200% and the actual base
management fee rate as of March 31, 2018 and (3) a hypothetical asset coverage ratio of 150% and the expected reduction in the base management fee payable to GSAM to an annual rate of 1.00% (0.25% per quarter) of the average value of the
Companys gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters.
The Company cautions that some of the percentages indicated in the table below are estimates and may vary. The expenses shown in the table
under annual expenses are based on estimated amounts for the current
23
fiscal year. The following table should not be considered a representation of the Companys future expenses. Actual expenses may be greater or less than shown. Except where the context
suggests otherwise, Stockholders will indirectly bear such fees or expenses.
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Estimated Annual Expenses
(as percentage of net assets attributable to common
stock)
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Actual asset
coverage as of
March 31, 2018
(237%)
(1)
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200% asset
coverage
(2)
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150% asset
coverage
(3)
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Base management fees
(4)
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2.68
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%
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3.10
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%
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3.08
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%
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Incentive fees payable under the Investment Management Agreement (20% of investment income and
capital gains)
(5)
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2.61
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%
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2.92
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%
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4.27
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%
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Interest payments on borrowed funds
(6)
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2.77
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%
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3.77
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%
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7.45
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%
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Other expenses
(7)
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1.19
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%
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1.23
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%
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1.29
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%
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Acquired fund fees and expenses
(8)
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1.11
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%
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1.11
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%
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1.11
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%
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Total annual expenses
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10.36
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%
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12.12
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%
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17.20
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%
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(1)
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Expenses for the Actual asset coverage as of March 31, 2018 (237%) column are based on actual expenses incurred for the three months ended March 31, 2018, annualized for a full year.
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(2)
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Expenses for the 200% asset coverage column are based on annualized pro forma expenses for the three months ended March 31, 2018, which assume a hypothetical asset coverage ratio of 200%. The maximum
amount of borrowings that could be incurred by the Company is presented for comparative and informational purposes only and such information is not a representation of the amount of borrowings that the Company intends to incur or that would be
available to the Company to be incurred
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(3)
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Expenses for the 150% asset coverage column are based on annualized pro forma expenses for the three months ended March 31, 2018, which assume a hypothetical asset coverage ratio of 150% and the
expected reduction in the base management fee from an annual rate of 1.50% (0.375% per quarter) to an annual rate 1.00% (0.25% per quarter) of the average value of the Companys gross assets (excluding cash and cash equivalents, but including
assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters. The maximum amount of borrowings that could be incurred by the Company is presented for comparative and informational purposes only and
such information is not a representation of the amount of borrowings that the Company intends to incur or that would be available to the Company to be incurred.
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(4)
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For the 200% asset coverage and 150% asset coverage columns, the Companys management fee is calculated at an annual rate of 1.50% (0.375% per quarter) and 1.00% (0.25% per quarter),
respectively, of the average value of the Companys gross assets (excluding cash or cash equivalents (such as investments in money market funds), but including assets purchased with borrowed amounts) at the end of each of the two most recently
completed calendar quarters. For purposes of the 200% asset coverage and 150% asset coverage columns, the table assumes average gross assets (excluding cash and cash equivalents) of $1,479.52 million and
$2,206.23 million, respectively. See Impact on advisory fees paid by the Company below.
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(5)
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For purposes of the 200% asset coverage column, the table above assumes average gross assets (excluding cash and cash equivalents) of $1,479.52 million, total debt of $726.71 million, interest
income calculated by applying the ratio of total interest income for the three months ended March 31, 2108 to the total investment, at fair value as of March 31, 2018 to the pro forma assets as of March 31,
2018 and (iv) interest expense on incremental pro forma leverage of 3.63%, which was the interest rate on the Companys revolving credit facility as of March 31, 2018. For purposes of the 150% asset coverage column, the
table above assumes average gross assets (excluding cash and cash equivalents) of $2,206.23 million, total debt of $1,453.42 million, interest income calculated by applying the ratio of total interest income for the three
months ended March 31, 2108 to the total investment, at fair value as of March 31, 2018 to the pro forma assets as of March 31, 2018 and (iv) interest expense on incremental pro forma leverage is 3.63%, which was the
interest rate on the Companys revolving credit facility as of March 31, 2018. See Impact on advisory fees paid by the Company below.
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(6)
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For the three months ended March 31, 2018, the Revolving Credit Facility bore a weighted average interest
rate of 3.63% and the $115 million of 4.50% Convertible Notes due 2022 (the Convertible Notes) bore interest at an annual rate of 4.50%, resulting in a weighted average interest rate on the Companys total debt of 3.83%. For
purposes of the 200% asset coverage column, the table above assumes total debt
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24
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outstanding of $726.71 million (the maximum amount of borrowings that could be incurred by the Company under the current 200% asset coverage requirement), which is comprised of
$611.71 million under the Revolving Credit Facility bearing a weighted average interest rate as of March 31, 2018 of 3.63% and the $115.00 million of the Convertible Notes. For purposes of the 150% asset coverage column,
the table above assumes total debt outstanding of $1,453.42 million (the maximum amount of borrowings that could be incurred by the Company under the proposed 150% asset coverage requirement), which is comprised of $1,338.42 million under
the Revolving Credit Facility bearing a weighted average interest rate as of March 31, 2018 of 3.63% and the $115.00 million of the Convertible Notes.
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(7)
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Other Expenses includes overhead expenses, including payments under the administration agreement with the Companys administrator, and is estimated to reflect the Companys estimate of such
expenses for the current fiscal year under the respective asset coverage scenario.
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(8)
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Stockholders indirectly bear the expenses of underlying funds or other investment vehicles in which the Company invests that (1) are investment companies or (2) would be investment companies under section 3(a)
of the 1940 Act but for the exceptions to that definition provided for in sections 3(c)(1) and 3(c)(7) of the 1940 Act (Acquired Funds). This amount includes the fees and expenses of the Senior Credit Fund, LLC (the Companys joint
venture with the Regents of the University of California) and a money market fund managed by an affiliate of Group Inc., which were the Companys only Acquired Funds as of March 31, 2018, and assumes that such fees and expenses remain
consistent with those incurred for the three months ended March 31, 2018.
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Example.
The following example
demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in the Companys common stock, assuming (1) actual asset coverage (237%) as of
March 31, 2018, (2) a hypothetical asset coverage ratio of 200% and (3) a hypothetical asset coverage ratio of 150%, assuming that the Companys annual operating expenses remain at the levels set forth in the table above for the
respective asset coverage ratio, except for the incentive fee based on income. Transaction expenses are not included in the following example.
An
investor would pay the following expenses on a $1,000 investment in the Companys common stock:
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1 year
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3 years
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5 years
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10 years
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Based on the Actual Asset Coverage (237%) as of March 31, 2018
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Assuming a 5% annual return (none of which is subject to the incentive fee based on capital gains)
(1)
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$
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76
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$
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223
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$
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361
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$
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676
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|
Assuming a 5% annual return resulting entirely from net realized capital gains (all of which is
subject to the incentive fee based on capital gains)
(2)
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$
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86
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$
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252
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$
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408
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$
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760
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Based on 200% Asset Coverage
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Assuming a 5% annual return (none of which is subject to the incentive fee based on capital gains)
(1)
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$
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90
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$
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259
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$
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414
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$
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748
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Assuming a 5% annual return resulting entirely from net realized capital gains (all of which is
subject to the incentive fee based on capital gains)
(2)
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$
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100
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$
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287
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$
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459
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$
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828
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Based on 150% Asset Coverage
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Assuming a 5% annual return (none of which is subject to the incentive fee based on capital gains)
(1)
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$
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124
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$
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344
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$
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530
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$
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880
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Assuming a 5% annual return resulting entirely from net realized capital gains (all of which is
subject to the incentive fee based on capital gains)
(2)
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$
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134
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$
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371
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$
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572
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$
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949
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(1)
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Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation.
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(2)
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Assumes no unrealized capital depreciation and a 5% annual return resulting entirely from net realized capital gains and not otherwise deferrable under the terms of the Investment Management Agreement and therefore
subject to the incentive fee based on capital gains. Because the Companys investment strategy involves investments that generate primarily current income, the Company believes that a 5% annual return resulting entirely from net realized
capital gains is unlikely.
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25
The foregoing table is to assist Stockholders in understanding the various costs and expenses
that an investor in the Companys common stock will bear directly or indirectly. While the example assumes a 5% annual return, the Companys performance will vary and may result in a return greater or less than 5%. The incentive fee under
the Investment Management Agreement, which, assuming a 5% annual return, would either not be payable or would have an insignificant impact on the expense amounts shown above, is not included in the example. The example assumes reinvestment of all
distributions at net asset value. In addition, while the example assumes reinvestment of all dividends and distributions at net asset value, under certain circumstances, reinvestment of dividends and other distributions under the Companys
dividend reinvestment plan may occur at a price per share that differs from net asset value.
While the above tables assume an asset
coverage ratio of 150%, management, in consultation with the Board, will determine the appropriate level of leverage for the Company based on a variety of factors. As such, even if Proposal 3 is approved, the Company may continue to operate
with lower levels of leverage (i.e., higher asset coverage ratios).
Additional flexibility to make required regulated investment company distributions
without violating the 1940 Act
Prior to the passage of the SBCA Act, the 1940 Act prohibited BDCs from declaring any dividend or other
distribution to holders of any class of capital stock, in the case of debt securities, or common stock, in the case of preferred stock, unless the asset coverage with respect to such senior securities was at least 200%. By lowering the asset
coverage requirement to 150%, the Company will have additional flexibility, subject to compliance with the covenants under any debt facilities, to continue making the distributions to Stockholders required to maintain its qualification as a
regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. This additional flexibility may be helpful in circumstances where the value of the Companys assets, and thus the Companys asset coverage,
declines, but the level of the Companys net investment income remains relatively constant (i.e., the Company continues to have cash available to make any necessary distributions to Stockholders). If the Company were to fail to make required
distributions and no longer qualify as a regulated investment company, the Company would be subject to corporate-level U.S. federal income taxes.
Impact on advisory fees paid by the Company
As the base management fee payable to GSAM pursuant to the Investment Management Agreement is calculated at an annual rate of 1.50% (0.375% per
quarter) of the average value of the Companys gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters, incurring
additional leverage would increase the management fee payable to GSAM. As such, if Proposal 3 is approved by the Stockholders, the Company and GSAM intend to reduce the base management fees payable under the Investment Management Agreement to 1.00%
(0.25% per quarter) of the average value of the Companys gross assets (excluding cash and cash equivalents, but including assets purchased with borrowed amounts) at the end of each of the two most recently completed calendar quarters beginning
immediately following stockholder approval. If Proposal 3 is not approved by the Stockholders, the base management fees will not be reduced.
The Board noted that application of the lower base management fee rate during fiscal year 2017 and during the first quarter of 2018 would have
resulted in a reduction of management fees and an increase of incentive fees payable by the Company with a net impact in savings to stockholders of approximately $4.76 million, or $0.12 per share, and approximately $1.28 million, or $0.03
per share, respectively, resulting in a meaningful increase in net investment income and stockholder return on equity. As a result of the expected reduction of the base management fees, in the event that Proposal 3 is approved by the Stockholders,
aggregate fees payable to GSAM under the Investment Management Agreement may decrease, increase or remain unchanged depending on the amount of additional leverage incurred, irrespective of the return on the incremental assets. The Board also noted
that sourcing additional investment opportunities to deploy any additional capital will require additional time and effort on the part of GSAM and its investment personnel.
26
In addition, as additional leverage would magnify positive returns, if any, on the Companys
portfolio, as noted above, the Companys net investment income may exceed the quarterly hurdle rate for the incentive fee on income payable to GSAM pursuant to the Investment Management Agreement at a lower average return on the Companys
portfolio. Thus, if the Company incurs additional leverage, GSAM may receive additional incentive fees without any corresponding increase (and potentially with a decrease) in the Companys performance.
Other Considerations
The Board also
noted that holders of any senior securities, including any additional senior securities that Company may be able to issue as a result of the reduced asset coverage requirements, will have fixed-dollar claims on the Companys assets that are
superior to the claims of the Stockholders. In the case of a liquidation event, holders of these senior securities would receive proceeds to the extent of their fixed claims before any distributions are made to the Stockholders, and the issuance of
additional senior securities may result in fewer proceeds remaining for distribution the Stockholders if the assets purchased with the capital raise from such issuances decline in value.
The Board also considered the disclosure requirements that would apply to certain of the Companys filings with the SEC under the
Exchange Act if this Proposal 3 is approved and determined that such incremental disclosure would not impose material additional expenses on the Company.
Based on its consideration of each of the above factors and such other information as the Board deemed relevant, the Board concluded that
Proposal 3 is in the best interests of the Company and the Stockholders and recommended that the Stockholders approve this Proposal.
ON MAY 1, 2018, THE BOARD, INCLUDING EACH OF THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDED THAT YOU VOTE FOR THE
APPROVAL OF THE APPLICATION OF THE REDUCED ASSET COVERAGE REQUIREMENTS IN SECTION 61(A)(2) OF THE 1940 ACT TO THE COMPANY.
27
OTHER BUSINESS
The management of the Company does not know of any other matters to be brought before the Meeting. If such matters are properly brought before
the Meeting, proxies that do not contain specific instructions to the contrary will be voted in accordance with the judgment of Caroline Kraus and Neena Reddy, who are the persons named as proxy.
VOTE REQUIRED FOR THE ELECTION OF THE DIRECTOR AND
APPROVAL OF OTHER MATTERS AT THE MEETING
A quorum for the transaction of business at the Meeting is established by the presence, in person or by proxy, of holders representing a
majority of the votes entitled to be cast at the Meeting. Stockholders of record at the close of business on the Record Date are entitled to receive notice of, and to vote at, the Meeting and at any postponements or adjournments thereof. There were
40,175,405 shares of the Companys common stock outstanding on May 21, 2018. Each share of common stock is entitled to one vote. Cumulative voting is not permitted.
Election of Director
The election of the
nominee requires a majority of the votes cast by all Stockholders present, in person or by proxy, at the Meeting, provided that if, as of the tenth (10th) day preceding the date the Company first mails the notice of such meeting to the Stockholders,
the number of nominees for the directorships (or, if applicable, the directorships of a particular class of directors) exceeds the number of such directors to be elected, such directors shall be elected by the vote of a plurality of the votes cast.
Under the Companys bylaws, a majority of votes cast means that the number of votes cast for a directors election exceeds the number of votes cast against that directors election (with abstentions
and broker
non-votes
not counted as a vote cast either for or against that directors election).
Ratification of Auditor
Approval of
Proposal 2, the ratification of the selection of PricewaterhouseCoopers LLP to serve as the Companys independent registered public accounting firm, requires a majority of the votes by all Stockholders present, in person or by proxy, at the
Meeting.
Approval of Reduced Asset Coverage Requirements
Approval of Proposal 3, the approval of the application of the reduced asset coverage requirements in Section 61(a)(2) of the 1940 Act to
the Company, which would permit the Company to double the maximum amount of leverage that it is permitted to incur by reducing the asset coverage requirement applicable to the Company from 200% to 150%, requires a majority of the votes cast by all
Stockholders present, in person or by proxy, at the Meeting.
Broker
Non-Votes
Broker
non-votes
are shares held in an account with an Authorized Institution for which the
broker indicates that instructions have not been received from the beneficial owners or other persons entitled to vote, and the broker does not have discretionary voting authority with respect to a
non-routine
proposal. As broker
non-votes
are entitled to vote on Proposal 2, broker
non-votes
will be counted as shares present for purposes of determining whether a quorum is
present.
Proposals 1 and 3 are
non-routine
matters. As a result, if you hold shares in
street name through a broker, bank or other nominee, your broker, bank or nominee will
not
be permitted to exercise voting discretion with respect to Proposal 1, the election of one Class I director, or Proposal 3, the
approval of the application of the
28
reduced asset coverage requirements in Section 61(a)(2) of the 1940 Act to the Company. Therefore, if you do not vote and you do not give your broker or other nominee specific instructions
on how to vote for you, then your shares will have no effect on Proposal 1 or Proposal 3.
Proposal 2, the ratification of the selection
of PricewaterhouseCoopers LLP to serve as the Companys independent registered public accounting firm, is a routine matter. As a result, if you beneficially own your shares and you do not provide your broker or nominee with voting instructions,
then your broker, bank or nominee will be able to vote your shares for you on Proposal 2.
Abstentions
Abstentions will be counted as shares present for purposes of determining whether a quorum is present, but will not be voted for or against the
Proposal for which the proxy card has been marked Abstain. Accordingly, abstentions will have no effect on Proposal 1 or Proposal 3, and the effect of a vote against Proposal 2.
Adjournment
If less than a quorum is
present at the Meeting or if an insufficient number of votes is present for the approval of the Proposals, the chairman of the Meeting shall have the power to adjourn the Meeting from time to time without notice other than announcement at the
Meeting.
A vote may be taken on any Proposal(s) prior to any such adjournment if there are sufficient votes for approval of such
Proposal.
COMMUNICATIONS WITH THE BOARD
All interested parties, including Stockholders, may send communications to the Board, the Independent Directors, the Chairman or any other
individual director, by addressing such communication to the Board, the Independent Directors, the Chairman or to the individual director, c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New York 10282.
ANNUAL AND QUARTERLY REPORTS
Copies of the Companys Annual Reports on Form
10-K,
Quarterly Reports on Form
10-Q
and Current Reports on Form
8-K
are available, without charge, on its website at
https://www.goldmansachsbdc.com
or upon request by writing to the Company or by
calling the Company toll-free at (800)
621-2550.
Please direct your written request to Caroline Kraus, Secretary, at the Company, c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New
York 10282. Copies of such reports are also posted and are available without charge on the SECs website at
www.sec.gov
.
CORPORATE GOVERNANCE
Code of Ethics
The Company has adopted a Code of Ethics pursuant to Rule
17j-1
under the 1940 Act and the
Company has also approved GSAMs Code of Ethics that it adopted in accordance with Rule
17j-1
and Rule
204A-1
under the Investment Advisers Act of 1940, as amended.
These Codes of Ethics establish, among other things, procedures for personal investments and restrict certain personal securities transactions, including transactions in securities that are held by the Company. Personnel subject to each code may
invest in securities for their personal
29
investment accounts, so long as such investments are made in accordance with the codes requirements. The Codes of Ethics can be reviewed and copied at the SECs Public Reference Room
in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at
(202) 551-8090
or
(800) SEC-0330.
The Codes
of Ethics are also available on the EDGAR Database on the SECs Internet site (
http://www.sec.gov
). Copies may also be obtained after paying a duplicating fee by writing the SECs Public Reference Section, Washington, DC 20549-0102,
or by electronic request to
publicinfo@sec.gov
.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics which applies to, among others, the Companys Chief Executive Officer and
Chief Financial Officer. The Company intends to disclose any material amendment to or waivers of required provisions of the Code of Business Conduct and Ethics on a current report on Form
8-K
or on the
Companys website. The Code of Business Conduct and Ethics can be accessed via the Companys website (
https://www.goldmansachsbdc.com
).
Corporate Governance Guidelines and Director Charter
The Company has adopted a Corporate Governance Guidelines and Director Charter which applies to, among other things, the authority and duties
of the directors, the composition of the Board and the election and role of the Chairman of the Board. The Corporate Governance Guidelines and Director Charter can be accessed via the Companys website (
https://www.goldmansachsbdc.com
).
ADDITIONAL INFORMATION
The principal address of the Companys investment adviser is Goldman Sachs Asset Management, L.P., 200 West Street, New York, New
York 10282.
The principal address of the Companys administrator is State Street Bank and Trust Company, One Lincoln Street, Boston,
Massachusetts 02111.
STOCKHOLDER PROPOSALS
The Company expects that the 2019 Annual Meeting of Stockholders will be held in June 2019, but the exact date, time and location of such
meeting have yet to be determined. A Stockholder who intends to present a proposal at that annual meeting, including nomination of a director, must submit the proposal in writing to the Secretary of the Company at the Company, c/o Goldman Sachs
Asset Management, L.P., 200 West Street, New York, New York 10282. Notices of intention to present proposals, including nomination of a director, at the 2019 Annual Meeting of Stockholders must be received by the Company no earlier than
February 15, 2019 and no later than March 17, 2019. In order for a proposal to be considered for inclusion in the Companys proxy statement for the 2019 Annual Meeting of Stockholders, the Company must receive the proposal no later
than January 24, 2019. The submission of a proposal does not guarantee its inclusion in the Companys proxy statement or presentation at the meeting unless certain securities law requirements are met. The Company reserves the right to
reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
Stockholders who do not expect to be present at the Meeting and who wish to have their shares voted are requested to vote by mail, Internet or telephone.
If you choose to vote by mail, please sign and date the enclosed proxy card and return it in the enclosed envelope. No postage is required if mailed in the United States. If you choose to vote by Internet or telephone, please use the control number
on the proxy card and follow the instructions on the proxy card. If you have any questions regarding the proxy materials please contact the Company at (800)
621-2550.
30
PROXYSTMTANNUAL-BDC 2018
EVERY STOCKHOLDERS VOTE IS IMPORTANT
|
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EASY VOTING OPTIONS:
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VOTE ON THE INTERNET
Log on to:
www.proxy-direct.com
or scan the QR code
Follow the on-screen instructions
available 24 hours
|
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VOTE BY PHONE
Call
1-800-337-3503
Follow the
recorded instructions
available 24 hours
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VOTE BY MAIL
Vote, sign and date this Proxy
Card and return
in the
postage-paid envelope
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VOTE IN PERSON
Attend Stockholder Meeting
30 Hudson
St,
Jersey City, NJ 07302
on
June 15, 2018
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Please detach at perforation before mailing.
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PROXY
|
|
GOLDMAN SACHS BDC, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 15, 2018
|
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THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
.
The
undersigned stockholder(s) of Goldman Sachs BDC, Inc. (the Company), revoking previous proxies, hereby appoints Caroline Kraus and Neena Reddy, or any one of them, true and lawful attorneys with power of substitution of each, to vote all
shares of common stock, par value $0.001 per share, of Goldman Sachs BDC, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders (Annual Meeting) to be held on June 15
,
2018, at 10:00 a.m.
Eastern Time, at the offices of Goldman Sachs Asset Management, L.P. (GSAM), located at 30 Hudson Street, Jersey City, NJ 07302 and at any postponement or any adjournment thereof as indicated on the reverse side of this card, and to
otherwise represent the undersigned at the Annual Meeting with all powers possessed by the undersigned if personally present at the Annual Meeting.
Receipt of the Notice of Annual Meeting and the accompanying Proxy Statement is hereby acknowledged by the undersigned. If this Proxy is executed but
no instructions are given, the votes entitled to be cast by the undersigned will be cast FOR each of the Proposals. Additionally, in their discretion, the proxy holders named above are authorized to vote upon such other matters as may
properly come before the Annual Meeting or any adjournment or postponement thereof.
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VOTE VIA THE INTERNET: www.proxy-direct.com
VOTE VIA THE TELEPHONE:
1-800-337-3503
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PLEASE SIGN, DATE AND RETURN THE PROXY PROMPTLY USING
THE ENCLOSED ENVELOPE.
GOL_29721_050218_A
EVERY STOCKHOLDERS VOTE IS IMPORTANT
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of the Stockholders of Goldman Sachs BDC, Inc.
to Be Held on June 15, 2018, at 10:00 a.m. (Eastern Time)
The Proxy Statement for this meeting is available at:
https://www.proxy-direct.com/gld-29721
IF YOU VOTE ON THE INTERNET OR BY TELEPHONE,
YOU NEED NOT RETURN THIS PROXY CARD
Please
detach at perforation before mailing.
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TO VOTE MARK BLOCKS BELOW IN BLUE OR BLACK INK AS SHOWN IN THIS EXAMPLE:
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☒
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A
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|
Proposals THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDED THAT YOU VOTE FOR EACH OF THE PROPOSALS.
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1.
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To elect one Class I Director of the Company:
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FOR
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AGAINST
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ABSTAIN
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01 Susan B. McGee
|
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☐
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☐
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☐
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2.
|
|
To ratify the selection of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for the
fiscal year ending December 31, 2018.
|
|
☐
|
|
☐
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|
☐
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3.
|
|
To approve the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act of 1940,
as amended, to the Company, which would permit the Company to double the maximum amount of leverage that it is permitted to incur by reducing the asset coverage requirement applicable to the Company from 200% to 150%.
|
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☐
|
|
☐
|
|
☐
|
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B
|
|
Authorized Signatures This section must be completed for your vote to be counted. Sign and Date Below
|
Note
: Please sign exactly as your name(s) appear(s) on this proxy card, and date
it. When shares are held jointly, each holder should sign. When signing as attorney, executor, administrator, trustee, officer of corporation or other entity or in another representative capacity, please give the full title under the signature.
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Date (mm/dd/yyyy) Please print date below
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Signature 1 Please keep signature within the box
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Signature 2 Please keep signature within the box
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/ /
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