What changed in this filing

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Item 9A. Controls and Procedures

2022-03-17 compared with 2021-03-29 · 1115 added, 83 removed, 171 unchanged (88% of the section changed)

20 unchanged sentences

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

17 unchanged sentences

000-56205) filed on September 23, 2020 and incorporated herein by reference).

Certificate of Designation of Series A Convertible Preferred Stock (previously filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (File No.

814-01360) filed on August 25, 2021 and incorporated herein by reference).

Amended and Restated Bylaws (filed herewith).

Description of Securities (filed herewith).

Description of Securities (previously filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K filed on March 29, 2021 and incorporated herein by reference).

Form of Investment Advisory Agreement (previously filed as Exhibit 10.1 to the Company’s Registration Statement on Form 10 (File No.

14 unchanged sentences

000-56205) filed on September 23, 2020 and incorporated herein by reference).

Loan and Servicing Agreement, dated March 15, 2021, by and among the Company, FBCC Lending I, LLC, Franklin BSP Capital Adviser L.L.C., Morgan Stanley Asset Funding, Inc., as administrative agent, and U.S.

Bank National Association as collateral agent, account bank and collateral custodian (previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 17, 2021 and incorporated herein by reference).

Revolving Credit Agreement, dated as of April 22, 2021, by and among the Company, the other Fund Borrowers party thereto, the Lenders party thereto, Morgan Stanley Asset Funding, Inc., as administrative agent and sole lead arranger, and Morgan Stanley Bank, N.A., as the letter of credit issuer and lender (previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on August 11, 2021 and incorporated herein by reference).

First Amendment to Loan and Servicing Agreement, dated as of July 1, 2021, by and among FBCC Lending I, LLC, the Company, Morgan Stanley Bank, N.A., and Morgan Stanley Asset Funding, Inc (previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 12, 2021 and incorporated herein by reference).

Form of Subscription Agreement for Series A Preferred Stock (previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (File No.

814-01360) filed on August 25, 2021 and incorporated herein by reference) .

Second Amendment to Loan and Servicing Agreement, dated as of December 15, 2021, by and among FBCC Lending I, LLC, the Company, Morgan Stanley Bank, N.A., and Morgan Stanley Asset Funding, Inc.

(filed herewith).

Third Amendment to Loan and Servicing Agreement, dated as of January 31, 2022, by and among FBCC Lending I, LLC, the Company, Morgan Stanley Bank, N.A., Canadian Imperial Bank of Commerce, and Morgan Stanley Asset Funding, Inc.

(filed herewith).

Code of Business Conduct and Ethics (filed herewith).

Subsidiaries of the Registrant (filed herewith).

Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14 (a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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Franklin BSP Capital Corporation

INDEX TO FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Audited Financial Statements:

Statement of Assets and Liabilities as of December 31, 2020

Statement of Operations for the period from January 29, 2020 (date of inception) to December 31, 2020

Statement of Changes in Net Assets for the period from January 29, 2020 (date of inception) to December 31, 2020 F-4

Notes to Financial Statements

Audited Consolidated Financial Statements:

Consolidated Statement s of Assets and Liabilities as of December 31, 2021 and 2020

Consolidated Statements of Operations for the year ended December 31, 2021 and for the period from January 29, 2020 (date of inception) to December 31, 2020

Consolidated Statements of Changes in Net Assets for the year ended December 31, 2021 and for the period from January 29, 2020 (date of inception) to December 31, 2020

Consolidated Statement of Cash Flows for the year ended December 31, 2021

Consolidated Schedule of Investments as of December 31, 2021

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholder and the Board of Directors of

To the Shareholders and the Board of Directors of

Franklin BSP Capital Corporation

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin BSP Capital Corporation (the “Company”), as of December 31, 2020, and the related statements of operations and changes in net assets for the period from January 29, 2020 (date of inception) to December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and changes in its net assets for the period from January 29, 2020 (date of inception) to December 31, 2020, in conformity with U.S.

We have audited the accompanying consolidated statements of assets and liabilities of Franklin BSP Capital Corporation (the “Company”), as of December 31, 2021 and 2020, including the consolidated schedule of investments as of December 31, 2021, and the related consolidated statements of operations and changes in net assets for the year ended December 31, 2021 and for the period from January 29, 2020 (date of inception) to December 31, 2020, and the consolidated statement of cash flows for the year ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and changes in its net assets for the year ended December 31, 2021 and for the period from January 29, 2020 (date of inception) to December 31, 2020, and its cash flows for the year ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

1 unchanged sentence

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our procedures included confirmation of investments owned as of December 31, 2021, by correspondence with the custodian, brokers or the underlying investee or by other appropriate auditing procedures where replies from brokers were not received.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

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FRANKLIN BSP CAPITAL CORPORATION

Statement of Assets and Liabilities

December 31, 2020

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollars in thousands, except share and per share data)

December 31, December 31,

Investments, at fair value:

Control Investments, at fair value (amortized cost of $55,154 and $0, respectively) $ 55,154 $ —

Affiliate Investments, at fair value (amortized cost of $13, and $0, respectively) 116 —

Non-affiliate Investments, at fair value (amortized cost of $460,025 and $0, respectively) 462,030 —

Investments, at fair value (amortized cost of $515,192 and $0, respectively) 517,300 —

Cash and cash equivalents 12,860 2

Deferred offering costs (See Note 2) 603,128

Deferred offering costs 127 603

Interest receivable 2,324 —

Receivable for unsettled trades 166 —

Capital call receivable 8,402 —

Prepaid expenses and other assets 74 —

Total assets $ 541,253 $ 605

Due to affiliate (See Note 3) 1,016,643

Debt (net of deferred financing costs of $2,360 and $0, respectively) $ 237,540 $ —

Short-term borrowings 41,302 —

Management fees payable 526 —

Accounts payable and accrued expenses 2,261 —

Payable for unsettled trades 15,226 —

Interest and debt fees payable 474 —

Other liabilities 2,959 1,017

Total liabilities 300,288 1,017

Commitments and contingencies (See Note 4)

Preferred stock, $0.001 par value, 50,000,000 shares authorized;

none issued and outstanding —

Commitments and Contingencies (Note 6)

Redeemable convertible preferred stock Series A, $0.001 par value, 50,000,000 shares authorized;

5,000 issued and outstanding at December 31, 2021, and none issued and outstanding at December 31, 2020 4,992 —

Net Assets attributable to common stock:

Common stock, $0.001 par value, 450,000,000 shares authorized;

100 shares issued and outstanding 0 (1)

15,260,764 issued and outstanding at December 31, 2021, and 100 issued and outstanding at December 31, 2020 15 0 (1)

Additional paid in capital 231,200 2

Accumulated net loss (413,515)

Total net assets (412,015)

Total liabilities and net assets $ 604,628

Net asset value per share $ (4,120)

Total distributable gain (loss) 4,758 (414)

Total net assets attributable to common stock 235,973 (412)

Total liabilities, redeemable convertible preferred stock, and net assets attributable to common stock $ 541,253 $ 605

Net asset value per share attributable to common stock $ 15.46 $ (4,120.15)

(1) Less than $1.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

Statement of Operations

For the period from January 29, 2020 (date of inception) to December 31, 2020

Total income —

Organization costs (See Note 2) 296,678

Professional services fees 116,837

Total expenses 413,515

Net loss (413,515)

Net decrease in net assets resulting from operations $ (413,515)

The accompanying notes are an integral part of these financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share and per share data)

For the year ended December 31, For the period from January 29, 2020 (date of inception) to December 31,

Investment income:

From control investments

Interest income $ 12 $ —

Total investment income from control investments 12 —

From affiliate investments

Interest income 61 —

Total investment income from affiliate investments 61 —

From non-affiliate investments

Interest income 11,864 —

Fee and other income 307 —

Total investment income from non-affiliate investments 12,171 —

Interest from cash and cash equivalents 1 —

Total investment income 12,245 —

Operating expenses:

Management fees 1,109 —

Organization costs — 297

Incentive fee on income 711 —

Incentive fee on capital gains 409 —

Interest and debt fees 3,539 —

Professional fees 1,281 117

Other general and administrative 979 —

Amortization of offering costs 596 —

Administrative services 113 —

Directors' fees 386 —

Total expenses before incentive fee waiver 9,123 414

Incentive fee waiver (1,120) —

Expenses, net of incentive fee waiver 8,003 414

Net investment income (loss) before income taxes 4,242 (414)

Income tax expense, including excise tax 99 —

Net investment income (loss) 4,143 (414)

Realized and unrealized gain:

Net realized gain

Affiliate investments 567 —

Non-affiliate investments 51 —

Total net realized gain 618 —

Net change in unrealized appreciation on investments

Affiliate investments 103 —

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

Statement of Changes in Net Assets

For the period from January 29, 2020 (date of inception) to December 31, 2020

Net loss $ (413,515)

Net decrease in net assets resulting from operations (413,515)

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share and per share data)

For the year ended December 31, For the period from January 29, 2020 (date of inception) to December 31,

Non-affiliate investments 2,005 —

Total net change in unrealized appreciation on investments 2,108 —

Net realized and unrealized gain 2,726 —

Net increase (decrease) in net assets resulting from operations attributable to common stockholders $ 6,869 $ (414)

Per share information - basic and diluted

Net investment income (loss) $ 0.78 $ (4,133.15)

Net increase (decrease) in net assets resulting from operations attributable to common stockholders $ 1.30 $ (4,133.15)

Weighted average common shares outstanding 5,301,096 100

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(dollars in thousands, except share and per share data)

For the year ended December 31, For the period from January 29, 2020 (date of inception) to December 31,

Net investment income (loss) $ 4,143 $ (414)

Net realized gain from investments 618 —

Net change in unrealized appreciation on investments 2,108 —

Net increase (decrease) in net assets resulting from operations attributable to common stockholders 6,869 (414)

Common Stockholder distributions:

Common stockholder distributions (2,293) —

Net decrease in net assets from common stockholder distributions

Capital share transactions:

Issuance of common stock 1,500

Net increase in net assets from capital share transactions 1,500

Total decrease in net assets (412,015)

Net assets at beginning of period —

Net assets at end of period $ (412,015)

Net asset value per common share attributable to Franklin BSP Capital Corporation $ (4,120)

Issuance of common stock, net of issuance costs 231,019 2

Reinvestment of common stockholder distributions 790 —

Net increase in net assets attributable to common stock from capital share transactions 231,809 2

Total increase (decrease) in net assets attributable to common stock 236,385 (412)

Net assets at beginning of year attributable to common stock (412) —

Net assets at end of year attributable to common stock $ 235,973 $ (412)

Net asset value per share attributable to common stock $ 15.46 $ (4,120.15)

Common shares outstanding at end of period 15,260,764 100

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

Notes to Financial Statements

For the period ended December 31, 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

(dollars in thousands, except share and per share data)

For the year ended December 31,

Operating activities

Net increase in net assets resulting from operations attributable to common stockholders $ 6,869

Adjustments to reconcile net increase in net assets resulting from operations attributable to common stockholders to net cash used in operating activities:

Payment-in-kind interest income (120)

Net accretion of discount on investments (356)

Amortization of deferred financing costs 647

Amortization of deferred offering costs 476

Sales and repayments of investments 8,723

Purchases of investments (522,821)

Net realized gain from investments

Net change in unrealized appreciation on investments (2,108)

(Increase) decrease in operating assets:

Interest receivable (2,324)

Receivable for unsettled trades (166)

Prepaid expenses and other assets (74)

Increase (decrease) in operating liabilities:

Management fees payable 526

Accounts payable and accrued expenses 2,261

Payable for unsettled trades 15,226

Interest and debt fees payable 474

Other liabilities 1,942

Net cash (used in) operating activities (491,443)

Financing activities

Proceeds from issuance of shares of common stock 222,617

Proceeds from issuance of shares of redeemable convertible preferred stock, net 4,992

Proceeds from debt 239,900

Proceeds from short-term borrowings 41,302

Payments of financing costs (3,007)

Common stockholder distributions (1,503)

Net cash provided by financing activities 504,301

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of year 2

Cash and cash equivalents, end of year $ 12,860

Supplemental information:

Interest paid during the year $ 2,348

Taxes, including excise tax, paid during the year $ 99

Distributions reinvested $ 790

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

(dollars in thousands, expect share and per share data)

December 31, 2021

Portfolio Company (f) (g) Industry Investment Coupon Rate/ Maturity (i) Principal/ Numbers of Shares Amortized Cost Fair Value % of Net Assets (b)

Senior Secured First Lien Debt - 172.5% (b)

1236904 BC, Ltd.

Absolute Software Corp.

(a) (c) (h) Software/Services L+6.00% (6.75%), 7/1/2027 20,069 19,693 19,701 8.4 %

Acrisure, LLC (h) Financials L+4.25% (4.75%), 2/16/2027 4,628 4,594 4,620 2.0 %

ADCS Clinics Intermediate Holdings, LLC (c) (h) Healthcare L+6.25% (7.25%), 5/7/2027 5,815 5,706 5,711 2.4 %

ADCS Clinics Intermediate Holdings, LLC (c) Healthcare L+6.25% (7.25%), 5/7/2027 895 895 879 0.4 %

Armada Parent, Inc.

American Rock Salt Company, LLC (h) Chemicals L+4.00% (4.75%), 6/9/2028 2,060 2,055 2,052 0.9 %

Aveanna Healthcare, LLC (a) (h) Healthcare L+3.75% (4.25%), 7/17/2028 5,626 5,599 5,592 2.4 %

Aventine Holdings, LLC (c) (m) Media/Entertainment 10.25%, 6/18/2027 10,198 9,944 9,944 4.2 %

Aventine Holdings, LLC (c) (n) Media/Entertainment L+6.00% (6.75%), 6/18/2027 11,434 11,206 11,207 4.8 %

BCPE Oceandrive Buyer, Inc.

Chudy Group, LLC (c) (h) Healthcare L+5.75% (6.75%), 6/30/2027 8,880 8,755 8,758 3.7 %

Cobblestone Intermediate Holdco, LLC (c) Consumer L+5.50% (6.25%), 1/29/2026 445 444 445 0.2 %

Cobblestone Intermediate Holdco, LLC (c) (h) Consumer L+5.25% (6.25%), 1/29/2026 5,980 5,944 5,980 2.5 %

Communication Technology Intermediate, LLC (c) Business Services L+5.75% (6.75%), 5/5/2027 2,654 2,654 2,654 1.1 %

Communication Technology Intermediate, LLC (c) (h) Business Services L+5.75% (6.75%), 5/5/2027 7,631 7,486 7,631 3.2 %

Division Holding Corp.

(h) Business Services L+4.75% (5.50%), 5/26/2028 3,780 3,744 3,782 1.6 %

FGT Purchaser, LLC (c) (h) Consumer L+5.50% (6.50%), 9/13/2027 9,756 9,569 9,571 4.1 %

FGT Purchaser, LLC (c) Consumer L+5.50% (6.50%), 9/13/2027 293 293 287 0.1 %

Florida Food Products, LLC (h) Food & Beverage L+5.00% (5.75%), 10/18/2028 12,728 12,477 12,505 5.3 %

Galway Borrower, LLC (c) (h) Financials L+5.25% (6.00%), 9/29/2028 11,986 11,768 11,755 5.0 %

Gogo Intermediate Holdings, LLC (a) (h) Telecom L+3.75% (4.50%), 4/28/2028 3,601 3,525 3,598 1.5 %

Gordian Medical, Inc.

(h) Healthcare L+6.25% (7.00%), 1/31/2027 4,450 4,335 4,413 1.9 %

Green Energy Partners/Stonewall, LLC Utilities L+6.00% (6.50%), 11/12/2026 4,661 4,569 4,614 2.0 %

IG Investments Holdings, LLC (c) (h) Business Services L+6.00% (6.75%), 9/22/2028 8,099 7,942 7,943 3.4 %

IG Investments Holdings, LLC (c) Business Services L+6.00% (6.75%), 9/22/2027 316 316 310 0.1 %

Kissner Milling Co., Ltd.

Industrials 4.88%, 5/1/2028 2,275 2,275 2,190 0.9 %

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

(dollars in thousands, expect share and per share data)

December 31, 2021

Portfolio Company (f) (g) Industry Investment Coupon Rate/ Maturity (i) Principal/ Numbers of Shares Amortized Cost Fair Value % of Net Assets (b)

Knowledge Pro Buyer, Inc.

Liquid Tech Solutions Holdings, LLC (c) (h) Industrials L+4.75% (5.50%), 3/20/2028 5,508 5,483 5,508 2.3 %

Medical Management Resource Group, LLC (c) (h) Healthcare L+5.75% (6.50%), 9/30/2027 7,341 7,200 7,200 3.1 %

Mirra-Primeaccess Holdings, LLC (c) (h) Healthcare L+6.50% (7.50%), 7/29/2026 21,611 21,203 21,611 9.2 %

Odessa Technologies, Inc.

Pie Buyer, Inc.

Pilot Air Freight, LLC (c) Transportation L+5.25% (6.25%), 7/25/2024 937 937 937 0.4 %

Pilot Air Freight, LLC (c) (h) Transportation L+5.25% (6.25%), 7/25/2024 3,612 3,568 3,612 1.5 %

Pluralsight, LLC (c) (h) Software/Services L+8.00% (9.00%), 4/6/2027 7,499 7,361 7,362 3.1 %

Pluralsight, LLC (c) (h) Software/Services L+8.00% (9.00%), 4/6/2027 2,680 2,629 2,631 1.1 %

Point Broadband Acquisition, LLC (c) (h) Telecom L+6.00% (7.00%), 9/29/2028 8,795 8,582 8,583 3.6 %

Relativity Oda, LLC (c) (h) Software/Services L+7.50% (8.50%) PIK, 5/12/2027 2,062 2,016 2,021 0.9 %

Roadsafe Holdings, Inc.

RSC Acquisition, Inc.

Saturn SHC Buyer Holdings, Inc.

SCIH Salt Holdings, Inc.

(h) Industrials L+4.00% (4.75%), 3/16/2027 1,113 1,108 1,101 0.5 %

Sherlock Buyer Corp.

Simplifi Holdings, Inc.

SitusAMC Holdings Corp.

Skillsoft Corp.

(a) (h) Technology L+4.75% (5.50%), 7/14/2028 628 619 629 0.3 %

STRIPER BUYER, LLC (c) (h) Paper & Packaging L+5.50% (6.25%), 12/30/2026 4,960 4,913 4,960 2.1 %

SunMed Group Holdings, LLC (c) (h) Healthcare L+5.75% (6.50%), 6/16/2028 3,903 3,839 3,840 1.6 %

SunMed Group Holdings, LLC (c) Healthcare L+5.75% (6.50%), 6/16/2027 41 41 41 0.0 %

Tecta America Corp.

(h) Industrials L+4.25% (5.00%), 4/6/2028 3,900 3,865 3,895 1.7 %

Therapy Brands Holdings, LLC (c) (h) Healthcare L+4.00% (4.75%), 5/18/2028 1,454 1,448 1,454 0.6 %

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

(dollars in thousands, expect share and per share data)

December 31, 2021

Portfolio Company (f) (g) Industry Investment Coupon Rate/ Maturity (i) Principal/ Numbers of Shares Amortized Cost Fair Value % of Net Assets (b)

Trinity Air Consultants Holdings Corp.

Triple Lift, Inc.

TSL Engineered Products, LLC (c) (h) Industrials L+4.75% (5.50%), 1/7/2028 3,136 3,107 3,136 1.3 %

US Oral Surgery Management Holdco, LLC (c) (h) Healthcare L+5.50% (6.25%), 11/18/2027 5,495 5,387 5,387 2.3 %

US Oral Surgery Management Holdco, LLC (c) Healthcare L+5.50% (6.25%), 11/18/2027 193 193 189 0.1 %

US Salt Investors, LLC (c) (h) Chemicals L+5.50% (6.25%), 7/19/2028 8,662 8,497 8,500 3.6 %

Vensure Employer Services, Inc.

Westwood Professional Services, Inc.

WHCG Purchaser III, Inc.

WIN Holdings III Corp.

Subtotal Senior Secured First Lien Debt $ 405,509 $ 407,074 172.5 %

Senior Secured Second Lien Debt - 22.9% (b)

American Rock Salt Company, LLC (h) Chemicals L+7.25% (8.00%), 6/11/2029 6,010 5,950 6,025 2.6 %

Asp Ls Acquisition Corp.

(h) Transportation L+7.50% (8.25%), 4/30/2029 935 926 939 0.4 %

Corelogic, Inc.

(h) Business Services L+6.50% (7.00%), 6/4/2029 4,645 4,602 4,677 2.0 %

Mercury Merger Sub, Inc.

Proofpoint, Inc.

RealPage, Inc.

Tecta America Corp.

Therapy Brands Holdings, LLC (c) (h) Healthcare L+6.75% (7.50%), 5/18/2029 1,370 1,357 1,370 0.6 %

TRC Cos, Inc.

USIC Holdings, Inc.

Victory Buyer, LLC (c) Industrials L+7.00% (7.50%), 11/15/2029 14,304 14,161 14,161 6.0 %

Subtotal Senior Secured Second Lien Debt $ 53,561 $ 54,001 22.9 %

Subordinated Debt- 10.3% (b)

Luna Sub 2, LLC (c) (k) Financials L+7.75% (9.00%), 12/31/2028 24,500 24,412 24,412 10.3 %

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

(dollars in thousands, expect share and per share data)

December 31, 2021

Portfolio Company (f) (g) Industry Investment Coupon Rate/ Maturity (i) Principal/ Numbers of Shares Amortized Cost Fair Value % of Net Assets (b)

Subtotal Subordinated Debt $ 24,412 $ 24,412 10.3 %

Equity/Other - 13.5% (b) (d)

Luna Sub 2, LLC (c) (e) (k) Financials 29,908,561 30,742 30,742 13.0 %

Jakks Pacific, Inc.

Point Broadband Acquisition, LLC (c) (e) Telecom 954,667 955 955 0.4 %

Subtotal Equity/Other $ 31,710 $ 31,813 13.5 %

Total Investments- 219.2% (b) $ 515,192 $ 517,300 219.2 %

(a) All of the Company's investments, except the investments noted by this footnote, are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act").

Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets.

At December 31, 2021, qualifying assets represent 94.5% of the Company's total assets.

The significant majority of all investments held are deemed to be illiquid.

(b) Percentages are based on net assets attributable to common stock as of December 31, 2021.

(c) The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors (as defined below) as required by the 1940 Act.

Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements).

(d) All amounts are in thousands except share amounts.

(e) Non-income producing at December 31, 2021.

(f) The Company has various unfunded commitments to portfolio companies.

Please refer to Note 6 - Commitments and Contingencies for details of these unfunded commitments.

(g) Unless otherwise indicated, all investments in the consolidated schedule of investments are non-affiliated, non-controlled investments.

(h) The Company's investment or a portion thereof is pledged as collateral under the MS Credit Facility (as defined in Note 5).

(i) The majority of the investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate ("LIBOR" or "L") or Prime ("P") and which reset daily, monthly, quarterly, or semiannually.

For each, the Company has provided the spread over LIBOR or Prime and the current interest rate in effect at December 31, 2021.

Certain investments are subject to a LIBOR or Prime interest rate floor.

For fixed rate loans, a spread above a reference rate is not applicable.

For floating rate securities the all-in rate is disclosed within parentheses.

(j) The provisions of the 1940 Act classify investments further based on the level of ownership that the company maintains in a particular portfolio company.

As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when the Company owns less than 5% of a portfolio company’s voting securities and “affiliated” when the Company owns 5% or more of a portfolio company’s voting securities.

The Company classifies this investment as “affiliated”.

(k) The provisions of the 1940 Act classify investments based on the level of control that the Company maintains in a particular portfolio company.

As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when the Company owns 25% or less of the portfolio company’s voting securities and/or does not have the power to exercise control over the management or policies of such portfolio company.

A company is generally presumed to be “controlled” when the Company owns more than 25% of the portfolio company’s voting securities and/or has the power to exercise control over the management or policies of such portfolio company.

The Company classifies this investment as “controlled”.

(l) The Company purchased the investment, pursuant to a repurchase agreement with a rate of 0.8 basis points per day with Macquarie US Trading LLC, dated December 30, 2021, due February 28, 2022.

(m) The Company purchased the investment, pursuant to a repurchase agreement with a rate of 0.8 basis points per day with Macquarie US Trading LLC, dated December 22, 2021, due February 18, 2022.

(n) The Company purchased the investment, pursuant to a repurchase agreement with a rate of 0.8 basis points per day with Macquarie US Trading LLC, dated December 22, 2021, due February 18, 2022.

(o) The Company purchased the investment, pursuant to a repurchase agreement with a rate of 0.8 basis points per day with Macquarie US Trading LLC, dated December 10, 2021, due February 08, 2022.

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

(dollars in thousands, expect share and per share data)

December 31, 2021

The following table shows the portfolio composition by industry grouping based on fair value at December 31, 2021:

At December 31, 2021

Investments at Fair Value Percentage of Total Portfolio

Healthcare $ 104,748 20.3 %

Financials 81,582 15.8 %

Business Services 68,962 13.3 %

Industrials 63,811 12.3 %

Software/Services 61,346 11.9 %

Media/Entertainment 36,969 7.1 %

Consumer 29,945 5.8 %

Food & Beverage 24,533 4.7 %

Chemicals 16,577 3.2 %

Telecom 13,136 2.5 %

Transportation 5,488 1.1 %

Paper & Packaging 4,960 1.0 %

Utilities 4,614 0.9 %

Technology 629 0.1 %

Total $ 517,300 100.0 %

The accompanying notes are an integral part of these consolidated financial statements.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Note 1 - Organization

Franklin BSP Capital Corporation (the “Company”) is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company (a “BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”) and intends to elect to be treated for U.S.

federal income tax purposes, and to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

The Company was formed as a Delaware limited liability company on January 29, 2020 and converted to a Delaware corporation on September 23, 2020 pursuant to which Franklin BSP Capital Corporation succeeded to the business of Franklin BSP Capital L.L.C.

The Company commenced investment operations on January 7, 2021.

The Company is managed by Franklin BSP Capital Adviser L.L.C.

(the “Adviser”), a Delaware limited liability company and an affiliate of Benefit Street Partners L.L.C.

(“Benefit Street Partners”).

(“Benefit Street Partners” or “BSP”) pursuant to an investment advisory agreement (the “Investment Advisory Agreement”).

The Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended.

1 unchanged sentence

The Company’s investment objective is to generate both current income capital and capital appreciation through debt and equity investments.

The Company intends to invest primarily in first and second lien senior secured loans, and to a lesser extent, mezzanine loans, unsecured loans and equity of predominantly private U.S.

The Company invests primarily in first and second lien senior secured loans, and to a lesser extent, mezzanine loans, unsecured loans and equity of predominantly private U.S.

middle market companies.

1 unchanged sentence

The Company also may purchase interests in loans or corporate bonds through secondary market transactions.

On October 1, 2020, BSP Fund Holdco (Debt Strategy) L.P., a wholly-owned subsidiary of Benefit Street Partners, purchased 100 shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”), which represented all of the issued and outstanding shares of Common Stock, for an aggregate purchase price of $1,500.

The shares of Common Stock were sold in reliance upon the available exemptions from registration requirements of Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The Company is conducting a private placement of shares of its common stock, par value $0.01 per share (the “Common Stock”), to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).

Each investor in the private placement will make a capital commitment (the “Capital Commitments”) to purchase shares of Common Stock pursuant to a subscription agreement (a “Subscription Agreement”).

Investors will be required to make capital contributions to purchase shares of Common Stock (the “Drawdown Purchase Price”) each time the Company delivers a drawdown notice (the “Drawdown Notice”), which will be delivered at least ten business days prior to the required funding date, in an aggregate amount not to exceed their respective Capital Commitments.

The Company is also conducting a private placement of shares of its preferred stock designated as series A convertible preferred stock (the “Series A Preferred Stock”) in reliance on exemption from the registration requirements of the Securities Act.

See Note 10 - Preferred Stock for the terms of such preferred stock, including liquidation preference, distributions, and rights regarding conversion to shares of Common Stock.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The following is a summary of significant accounting policies followed by the Company in the preparation of its financial statements.

The following is a summary of significant accounting policies followed by the Company in the preparation of its consolidated financial statements.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The Company is an investment company and accordingly applies specific accounting and financial reporting requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Topic 946, Financial Services-Investment Companies .

The consolidated financial statements reflect all adjustments, both normal and recurring which, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition for the periods presented.

The Company is an investment company and accordingly applies specific accounting and financial reporting requirements under Financial Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies .

We have also formed and expect to continue to form consolidated subsidiaries (the "Consolidated Holding Companies").

The Company consolidates the following subsidiaries for accounting purposes:

FBCC Lending I, LLC, and FBCC EEF Holdings LLC.

All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in these financial statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in these consolidated financial statements.

Actual results could differ from those estimates.

Consolidation

As provided under ASC 946, the Company will generally not consolidate its investment in a company other than a substantially or wholly-owned investment company or controlled operating company whose business consists of providing services to the Company.

Accordingly, the Company consolidated the accounts of the Company's substantially wholly-owned subsidiaries in its consolidated financial statements.

Valuation of Portfolio Investments

Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value.

On a quarterly basis, the Company performs an analysis of each investment to determine fair value as follows:

Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date.

The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets.

When doing so, the Company determines whether the quote obtained is readily available according to U.S.

GAAP to determine the fair value of the security.

If determined to be readily available, the Company uses the quote obtained.

Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate.

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business).

The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted).

The measurement is based on the value indicated by current market expectations about those future amounts.

In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant:

available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors.

When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

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

• Each portfolio company or investment will be valued by the Adviser, with assistance from one or more independent valuation firms engaged by the Company's board of directors (the “Board of Directors”);

• The independent valuation firm(s) conduct independent appraisals and make an independent assessment of the value of each investment;

• The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and independent valuation firm (to the extent applicable).

Because there is not a readily available market value for most of the investments in its portfolio, the Company values substantially all of its portfolio investments at fair value as determined in good faith by its Board of Directors, as described herein.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company's investments may fluctuate from period to period.

Additionally, the fair value of the Company's investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize.

Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities.

If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which the Company has recorded it.

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act.

Under the 1940 Act, “Control” is defined as the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.

In addition, in accordance with Section 2(a)(9) of the 1940 Act, any person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company.

Any person who does not so own more than 25% of the voting securities of any company shall be presumed not to control such company.

Any person who does not so own more than 25% of the voting securities of any company and/or does not have the power to exercise control over the management or policies of such portfolio company shall be presumed not to control such company.

Consistent with the 1940 Act, “Affiliated Investments” are defined as those investments in companies in which the Company owns 5% or more of the voting securities.

Consistent with the 1940 Act, “Non-affiliated Investments” are defined as investments that are neither Control Investments nor Affiliated Investments.

Cash and Cash Equivalents

5 unchanged sentences

Offering costs consist of costs incurred in connection with the offering of common shares of the Company.

Offering costs are capitalized as a deferred charge and amortized to expense on a straight-line basis over 12 months from the commencement of operations, which has not yet occurred.

Offering costs are capitalized as a deferred charge and amortized to expense on a straight-line basis over 12 months from the commencement of operations.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

The Company will bear the organization and offering expenses incurred in connection with the formation of the Company and the offering of shares of its Common Stock, including the out-of-pocket expenses of the Adviser and its agents and affiliates.

2 unchanged sentences

To the extent the Company’s capital commitments later increase, the Adviser or its affiliates may be reimbursed for past payments of excess organization and offering costs made on the Company’s behalf provided that the total organization and offering costs borne by the Company do not exceed 0.10% of total capital commitments and provided further that the Adviser or its affiliates may not be reimbursed for payment of excess organization and offering expenses that were incurred more than three years prior to the proposed reimbursement.

From the period January 29, 2020 (date of inception) to December 31, 2020, there have been no reimbursements from the Adviser.

The Company intends to elect to be treated for federal income tax purposes as a RIC under Subchapter M of the Code.

For the year ended December 31, 2021, and the period ended December 31, 2020, there were no reimbursements from the Adviser.

In connection with the Company’s private placement of shares of it’s Series A Preferred Stock, the Company incurred various offering costs.

These costs are capitalized as a deferred cost and included within redeemable convertible preferred stock Series A on the consolidated statement of assets and liabilities as the preferred shares are issued.

The costs are not subject to reimbursement from the Adviser.

Deferred Financing Costs

Financing costs incurred in connection with the Company’s revolving credit facilities are capitalized and amortized into expense using the straight-line method, which approximates the effective yield method over the life of the respective facility.

See Note 5 - Borrowings.

Convertible Preferred Stock

We record shares of convertible preferred stock based on proceeds received net of offering costs on the date of issuance.

Redeemable preferred stock (including preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity and is reported separately from liabilities and net assets attributable to common stock within the consolidated statements of assets and liabilities.

Distributions

The Company’s Board of Directors authorizes and declares cash distributions payable on a quarterly basis to stockholders of record on each record date.

The amount of each such distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions.

The Company calculates each stockholder’s specific distribution amount for the quarter using record and declaration dates.

The distributions are payable by the fifth day following each record date.

From time to time, the Company may also pay interim distributions, including capital gains distributions, at the discretion of the Company’s Board of Directors.

The Company’s distributions may exceed earnings, especially during the period before it has substantially invested the proceeds from the offering.

As a result, a portion of the distributions made by the Company may represent a return of capital for U.S.

federal income tax purposes.

A return of capital is a return of each stockholder’s investment rather than earnings or gains derived from the Company’s investment activities.

The Company may fund cash distributions to stockholders from any sources of funds available to the Company, including advances from the Adviser that are subject to reimbursement, as well as offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets, and non-capital gain proceeds from the sale of assets.

The Company has not established limits on the amount of funds it may use from available sources to make distributions.

See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.

Revenue Recognition

Interest Income

Investment transactions are accounted for on the trade date.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis.

Discount and premium on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method.

The amortized cost of investments represents the original cost adjusted for the accretion of discount and amortization of premium on investments.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Fee income, such as structuring fees, origination, closing, amendment fees, commitment, termination, and other upfront fees are generally non-recurring and are recognized as income when earned, either upon receipt or amortized into income.

Upon the re-payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment, and other upfront fees are recorded as income.

Payment-in-Kind Interest

The Company may hold debt investments in its portfolio that contain payment-in-kind (“PIK”) interest and dividend provisions.

PIK interest, which represents contractually deferred interest that add to the investment balance that is generally due at maturity, is recorded on the accrual basis to the extent such amounts are expected to be collected.

Non-accrual Income

Investments may be placed on non-accrual status when principal or interest payments are past due and/or when there is reasonable doubt that principal or interest will be collected.

Accrued interest, which may include un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status.

Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status.

Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome.

Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.

Net Realized Gain or Loss and Net Change in Unrealized Appreciation or Depreciation

Gain or loss on the sale of investments is calculated using the specific identification method.

The Company measures realized gain or loss by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized.

Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when a gain or loss is realized.

The Company has elected to be treated for federal income tax purposes as a RIC under Subchapter M of the Code.

Generally, a RIC is not subject to federal income taxes in respect of each taxable year if it distributes dividends for federal income tax purposes to stockholders of an amount generally equal to at least 90% of “investment company taxable income,” as defined in the Code, and determined without regard to any deduction for dividends paid.

6 unchanged sentences

However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities on-going analysis of and changes to tax laws, regulations and interpretations thereof.

See Note 13 - Income Tax Information and Distributions to Stockholders for additional information.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting if certain criteria are met.

The guidance is effective from March 12, 2020 through December 31, 2022.

The Company adopted ASU 2020-04 for the period ended September 30, 2021 and there was no impact to the accompanying financial statements and related disclosures.

Note 3 - Fair Value of Financial Instruments

The Company’s fair value measurements are classified into a fair value hierarchy in accordance with ASC Topic 820, Fair Value Measurement, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value.

Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment.

Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

The Company determines fair value based on quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment.

This alternative approach also reflects the contractual terms of the derivatives, if any, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.

The guidance defines three levels of inputs that may be used to measure fair value:

• Level 1—Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

• Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the above hierarchy requires significant judgment and factors specific to the asset or liability.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter.

For investments for which Level 1 inputs, such as quoted prices, were not available at December 31, 2021, the investments were valued at fair value as determined in good faith using the valuation policy approved by the Board of Directors using Level 2 and Level 3 inputs.

The Company evaluates the source of inputs, including any markets in which the Company's investments are trading, in determining fair value.

Due to the inherent uncertainty in the valuation process, the estimate of fair value of the Company’s investment portfolio at December 31, 2021 may differ materially from values that would have been used had a ready market for the securities existed.

In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by the Board of Directors.

Portfolio investments are reported on the consolidated statements of assets and liabilities at fair value.

On a quarterly basis the Company performs an analysis of each investment to determine fair value as described below.

Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date.

The Company may also obtain quotes with respect to certain of the Company's investments from pricing services or brokers or dealers in order to value assets.

When doing so, the Company determines whether the quote obtained is readily available according to U.S.

GAAP to determine the fair value of the security.

If determined readily available, the Company uses the quote obtained.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate.

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business).

The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted).

The measurement is based on the value indicated by current market expectations about those future amounts.

In following these approaches, the types of factors that the Company may take into account in fair value pricing the Company's investments include, as relevant:

When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.

As part of the Company's quarterly valuation process, the Adviser may be assisted by one or more independent valuation firms engaged by the Company.

The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and the independent valuation firm(s) (to the extent applicable).

Determination of fair values involves subjective judgments and estimates.

Accordingly, the notes to the consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations on the consolidated financial statements.

For discussion of the fair value measurement of the Company's borrowings, refer to Note 5 - Borrowings.

The following table presents fair value measurements of investments, by major class, as of December 31, 2021, according to the fair value hierarchy:

Fair Value Measurements

Level 1 Level 2 Level 3 Total

Senior Secured First Lien Debt $ — $ 48,991 $ 358,083 $ 407,074

Senior Secured Second Lien Debt — 11,641 42,360 54,001

Subordinated Debt — — 24,412 24,412

Equity/Other — — 31,813 31,813

Total $ — $ 60,632 $ 456,668 $ 517,300

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended December 31, 2021:

Senior Secured First Lien Debt Senior Secured Second Lien Debt Subordinated Debt Equity/Other Total

Balance as of January 1, 2021 $ — $ — $ — $ — $ —

Paid-in-kind interest income 111 — 9 — 120

Net unrealized gains 1,336 276 — 104 1,716

Purchases 362,573 42,074 24,999 31,709 461,355

Market discount / premium 302 10 9 — 321

Sales and redemptions (6,311) — (1,148) — (7,459)

Net realized gains from investments 72 — 543 — 615

Balance as of December 31, 2021 $ 358,083 $ 42,360 $ 24,412 $ 31,813 $ 456,668

Net change in unrealized appreciation for the period relating to those Level 3 assets that were still held by the Company at the end of the period:

$ 1,336 $ 276 $ — $ 104 $ 1,716

For the year ended December 31, 2021, there were no transfers between levels of the fair value hierarchy.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

The composition of the Company’s investments as of December 31, 2021, at amortized cost and fair value, were as follows:

Investments at Amortized Cost Investments at Fair Value Fair Value

Percentage of

Total Portfolio

Senior Secured First Lien Debt $ 405,509 $ 407,074 78.7 %

Senior Secured Second Lien Debt 53,561 54,001 10.4

Subordinated Debt 24,412 24,412 4.7

Equity/Other 31,710 31,813 6.2

Total $ 515,192 $ 517,300 100.0 %

The Company commenced investment operations on January 7, 2021 and, as a result, did not have investments as of December 31, 2020.

Significant Unobservable Inputs

The following table summarizes the significant unobservable inputs used to value the majority of the Level 3 investments as of December 31, 2021.

The table is not intended to be all-inclusive, but instead identifies the significant unobservable inputs relevant to the determination of fair values.

Asset Category Fair Value Primary Valuation Technique Unobservable Inputs Minimum Maximum Weighted Average (a)

Senior Secured First Lien Debt $ 218,428 Discounted Cash Flow Market Yield 6.25% 9.87% 7.63%

Senior Secured First Lien Debt (c)

98,540 N/A N/A N/A N/A N/A

Senior Secured First Lien Debt 41,115 Yield Analysis Market Yield 5.60% 8.78% 7.19%

Senior Secured Second Lien Debt (c)

21,136 N/A N/A N/A N/A N/A

Senior Secured Second Lien Debt 11,569 Discounted Cash Flow Market Yield 7.00% 7.25% 7.13%

Senior Secured Second Lien Debt 9,655 Yield Analysis Market Yield 8.03% 10.67% 8.77%

Subordinated Debt (b)(c)

24,412 N/A N/A N/A N/A N/A

Equity/Other (c)

31,697 N/A N/A N/A N/A N/A

Equity/Other (b)

116 Discounted Cash Flow Market Yield 9.75% 9.75% 9.75%

Total $ 456,668

______________

(a) Weighted averages are calculated based on fair value of investments.

(b) This asset category contains one investment.

Level 3 inputs to the valuation methodology are unobservable and significant to overall fair value measurement.

The inputs into the determination of fair value require significant management judgment or estimation.

Financial instruments that are included in this category include investments in privately held entities where the fair value is based on unobservable inputs.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

The income and market approaches were used in the determination of fair value of certain Level 3 assets as of December 31, 2021.

The significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment, which include both future principal and interest payments.

An increase in the discount rate or market yield would result in a decrease in the fair value.

Included in the consideration and selection of discount rates is risk of default, rating of the investment, call provisions and comparable company investments.

The significant unobservable inputs used in the market approach are based on market comparable transactions and market multiples of publicly traded comparable companies.

Increases or decreases in market comparable transactions or market multiples would result in an increase or decrease, respectively, in the fair value.

Valuations of loans, corporate debt, and other debt obligations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions.

The significant inputs are generally determined based on relative value analysis, which incorporate comparisons to other debt instruments for which observable prices or broker quotes are available.

Other valuation methodologies are used as appropriate including market comparables, transactions in similar instruments and recovery/liquidation analysis.

The Company also considers the use of EBITDA multiples, revenue multiples, tangible net asset value multiples, TBV multiples, and other relevant multiples on its debt and equity investments to determine any credit gains or losses in certain instances.

Increases or decreases in either of these inputs in isolation may result in a significantly lower or higher fair value measurement of the respective subject instrument.

As of December 31, 2021 , the Company had no portfolio companies on non-accrual status.

Refer to Note 2 - Summary of Significant Accounting Policies - for additional details regarding the Company’s non-accrual policy.

The Company commenced investment operations on January 7, 2021 and, as a result, did not have investments as of December 31, 2020.

Note 4 - Related Party Transactions

Investment Advisory Agreement

The Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser in which the Adviser, subject to the overall supervision of the Company’s board of directors (the “Board of Directors”), manages the day-to-day operations of, and provides investment advisory services to the Company.

The Company entered into an Investment Advisory Agreement with the Adviser in which the Adviser, subject to the overall supervision of the Company’s Board of Directors, manages the day-to-day operations of, and provides investment advisory services to the Company.

Pursuant to the Investment Advisory Agreement, the Company pays the Adviser a fee for investment advisory and management services consisting of two components - a base management fee (the “Management Fee”) and an incentive fee, which will consist of two components (together, the “Incentive Fee”).

Management Fee

The Management Fee is payable quarterly in arrears and is calculated based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters, where gross assets includes the total assets of the Company, including any borrowings for investment purposes.

Prior to a liquidity event, the Management Fee payable under the Investment Advisory Agreement will be calculated at an annual rate of 0.5% of the Company’s average gross assets.

A “1iquidity event” is defined as any of:

(1) a merger or another transaction approved by the Board of Directors in which the Company’s stockholders will receive cash or shares of a publicly traded company (or a company that becomes publicly traded concurrently with the closing of such transaction), which may include an entity advised by the Adviser or its affiliates, (2) an initial public offering (“IPO”) or a listing (an “Exchange Listing”) of the Common Stock on a national securities exchange, or (3) the sale of all or substantially all of the Company’s assets either on a complete portfolio basis or individually followed by a liquidation.

After a liquidity event, the Management Fee payable under the Investment Advisory Agreement will be calculated at an annual rate of 1.50% of the Company’s average gross assets, provided, that the Management Fee will be calculated at an annual rate of 1.00% of the Company’s average gross assets purchased with borrowed funds above 1.0x debt-to-equity (equivalent to $1 of debt outstanding for each $1 of equity), and provided further that for a period of 15 months commencing on the date of the closing of a Liquidity Event, the Adviser will irrevocably waive Management Fees in excess of 0.5% of the Company’s average gross assets.

Any fees waived under the Investment Advisory Agreement are not subject to reimbursement to the Adviser.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

As of December 31, 2021, and December 31, 2020, $0.5 million and $0 was payable to the Adviser for Management Fees, respectively.

For the year ended December 31, 2021 and for the period ended December 31, 2020, the Company incurred $1.1 million and $0, respectively, in Management Fees under the Investment Advisory Agreement.

Incentive Fee

The Company will also pay the Adviser an Incentive Fee consisting of two parts, which are described below.

Notwithstanding anything herein to the contrary, the Adviser will waive all Incentive Fees for the first twelve calendar quarters of operations of the Company.

The incentive fee consists of two parts.

The first part is referred to as the “incentive fee on income” and it is calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter.

“Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees, other than fees for providing managerial assistance, such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses for the quarter (including the Management Fee, expenses payable under the Administration Agreement (as defined below) and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount debt instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash.

Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

For purposes of computing the Company’s Pre-Incentive Fee Net Investment Income, the calculation methodology will look through total return swaps as if the Company owned the referenced assets directly.

For periods ending on or prior to the date of the closing of a Liquidity Event, the incentive fee on income with respect to the Company’s Pre-Incentive Fee Net Investment Income will be calculated as follows:

• No incentive fee on income in any calendar quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the preferred return rate of 1.50%, or 6.00% annualized (the “Preferred Return”), on net assets;

• 100% of Pre-Incentive Fee Net Investment Income, if any, that exceeds the Preferred Return but is less than or equal to 1.765% in any calendar quarter (7.06% annualized).

This portion of the incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 15% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches 1.765% (7.06% annualized) in any calendar quarter;

• For any quarter in which Pre-Incentive Fee Net Investment Income exceeds 1.765% (7.06% annualized), the incentive fee on income equals 15% of the amount of Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved.

For any period ending after the closing of a Liquidity Event, the incentive fee on income for each quarter will be calculated as follows:

• No incentive fee on income in any calendar quarter in which Pre-Incentive Fee Net Investment Income does not exceed the Preferred Return of 1.50%, or 6.00% annualized, on net assets;

• 100% of Pre-Incentive Fee Net Investment Income, if any, that exceeds the Preferred Return but is less than or equal to 1.8175% in any calendar quarter (7.27% annualized), which portion of the incentive fee on income is referred to as the “catch up” and is intended to provide the Adviser with an incentive fee of 17.5% on all of Pre-Incentive Fee Net Investment Income when Pre-Incentive Fee Net Investment Income reaches 1.8175% (7.27% annualized) in any calendar quarter;

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

• For any quarter in which Pre-Incentive Fee Net Investment Income exceeds 1.8175% (7.27% annualized), the incentive fee on income equals 17.5% of the amount of Pre-Incentive Fee Net Investment Income, as the Preferred Return and catch-up will have been achieved.

Notwithstanding the foregoing, for a period of 15 months commencing on the date of the closing of a Liquidity Event, the Adviser will irrevocably waive any incentive fee on income otherwise payable in excess of any amounts calculated at the pre-IPO or pre-Exchange Listing rates.

Any fees waived under the Investment Advisory Agreement are not subject to reimbursement to the Adviser.

For the year ended December 31, 2021 and for the period ended December 31, 2020, the Company incurred $0.7 million and $0, respectively, in incentive fees on income, none of which was payable to the Adviser under the Investment Advisory Agreement.

The second part of the incentive fee, referred to as the “incentive fee on capital gains during operations,” is an incentive fee on capital gains earned on cumulative realized capital gains of the Company net of cumulative realized capital losses and unrealized capital depreciation and is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, if earlier).

Prior to a Liquidity Event, this fee equals 15% of the Company’s incentive fee capital gains, which equals realized capital gains of the Company on a cumulative basis from the date of the Company’s election to be regulated as a BDC, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains during operations.

Following a Liquidity Event, the incentive fee on capital gains during operations equals 17.5% of the Company’s incentive fee capital gains calculated as described above, on a cumulative basis from the date of the Company’s election to be regulated as a BDC.

GAAP requires that the incentive fee accrual be calculated assuming a hypothetical liquidation of the Company based upon investments held at the end of each period.

In such a calculation, in order to calculate the accrual for the capital gains incentive fee in accordance with GAAP for a given period, the Company includes unrealized appreciation in calculating the accrual for the capital gains incentive fee even though such unrealized appreciation is not included in in calculating the capital gains incentive fee payable under the Investment Advisory Agreement.

There can be no assurance that such unrealized appreciation will be realized in the future.

Accordingly, the accrual for the capital gains incentive fee, as calculated and accrued in accordance with GAAP, does not necessarily represent amounts that will be payable under the Investment Advisory Agreement.

For the year ended December 31, 2021 and for the period ended December 31, 2020, the Company accrued $0.4 million and $0, respectively, in incentive fees on capital gains in accordance with GAAP, none of which was payable to the Adviser under the Investment Advisory Agreement.

Administration Agreement

The Company entered into an administration agreement with Benefit Street Partners (the “Administration Agreement”), pursuant to which Benefit Street Partners (in such capacity, the “Administrator”) provides the Company with office facilities and certain administrative services necessary for the Company to conduct its business.

Pursuant to the Investment Advisory Agreement, the Company will pay the Adviser a fee for investment advisory and management services consisting of two components - a base management fee (the “Management Fee”) and an incentive fee, which will consist of two components (together, the “Incentive Fee”).

There were no management fees or incentive fees incurred during the period from January 29, 2020 (date of inception) to December 31, 2020.

As of December 31, 2021 and December 31, 2020, $0.7 million and $0 was payable to BSP under the Administration Agreement, respectively.

For the year ended December 31, 2021 and for the period ended December 31, 2020, the Company incurred $0.7 million and $0, respectively, in administrative service fees under the Administration Agreement, which are included in the other general and administrative on the consolidated statements of operations.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Co-Investment Relief

The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC.

The SEC staff has granted the Company exemptive relief that allows it to enter into certain negotiated co-investment transactions alongside with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with its investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”).

Pursuant to the Order, the Company is permitted to co-invest with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of its eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and the Company’s stockholders and do not involve overreaching in respect of the Company or the Company’s stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with the Company’s investment objective and strategies.

Due to Related Party

During the period from January 29, 2020 (date of inception) to December 31, 2020, the Company’s expenses were paid by a related party of the Adviser and will be reimbursed by the Company after the commencement of investment operations.

This payable is included as a “Due to affiliate” on the Statement of Assets and Liabilities.

Included within other liabilities on the consolidated statement of assets and liabilities as of December 31, 2021, and December 31, 2020, are $1.7 million and $1.0 million of payables to Affiliated Funds or the Adviser, respectively.

Note 5 - Borrowings

MS Credit Facility

On March 15, 2021, the Company, FBCC Lending I, LLC, a wholly-owned, special purpose financing subsidiary of the Company (“FBCC Lending”), and the Adviser, as the servicer, entered into a loan and servicing agreement (together with the other documents executed in connection therewith, the “MS Credit Facility”) with Morgan Stanley Asset Funding, Inc.

as administrative agent, Morgan Stanley Bank, N.A., as the lender, and U.S.

Bank National Association as collateral agent, account bank and collateral custodian, that provides for borrowings of up to $100.0 million on a committed basis.

Obligations under the MS Credit Facility are secured by a first priority security interest in substantially all of the assets of FBCC Lending, including its portfolio of investments and the Company’s equity interest in FBCC Lending.

The obligations of FBCC Lending under the MS Credit Facility are nonrecourse to the Company.

Any amounts borrowed under the Credit Facility will mature, and will be due and payable, on the maturity date, which is March 15, 2025.

Borrowings under the MS Credit Facility bear interest at three-month LIBOR, with a LIBOR floor of zero, plus a spread of 2.25%.

Interest is payable quarterly in arrears.

FBCC Lending is subject to a non-usage fee of 0.50% on the difference between total commitments and the greater of the (i) drawn amounts and (ii) minimum utilization requirement, and, in addition, after the ramp-up period, FBCC Lending would pay interest on undrawn amounts up to the minimum utilization requirement under the MS Credit Facility, at three-month LIBOR floor of zero, plus spread of 1.125%, if drawn amounts are less than such minimum utilization requirement.

On July 1, 2021, FBCC Lending amended the MS Credit Facility to, among other things, increase the maximum permissible borrowings under the MS Credit Facility from $100.0 million to $200.0 million on a committed basis.

On December 15, 2021, FBCC Lending amended the MS Credit Facility to, among other things, increase the maximum permissible borrowings under the MS Credit Facility from $200.0 million to $250.0 million on a committed basis.

MS Subscription Facility

On April 22, 2021, the Company entered into a revolving credit agreement (the “MS Subscription Facility”) with Morgan Stanley Asset Funding, Inc., as administrative agent and sole lead arranger, and Morgan Stanley Bank, N.A., as the letter of credit issuer and lender.

The MS Subscription Facility allows the Company to borrow up to $50.0 million, subject to certain restrictions, including availability under the borrowing base, which is based on unfunded capital commitments.

The amount of permissible borrowings under the MS Subscription Facility may be increased up to an aggregate of $150.0 million with the consent of the lenders.

The MS Subscription Facility has a maturity date of April 22, 2022, which may be extended for an additional two terms of not more than 12 months each with the consent of the administrative agent and lenders.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

The MS Subscription Facility bears interest at a rate of:

(i) with respect LIBOR Rate Loans, Adjusted LIBOR for the applicable interest period plus 2.00% per annum and (ii) with respect to Base Rate Loans, the greatest of (a) the Prime Rate in effect on such day plus 1.00% per annum, (b) the Federal Funds Rate in effect on such day plus 0.50%, plus 1.00% per annum and (c) except during any period of time during which LIBOR is unavailable, one-month Adjusted LIBOR plus, without duplication, 100 basis points per annum.

The Company paid an upfront fee and incurred other customary costs and expenses in connection with the MS Subscription Facility.

In addition, the Company will be subject to an unused commitment fee of 0.30%.

The following table represents facility borrowings as of December 31, 2021:

Maturity Date Total Aggregate Borrowing Capacity Total Principal Outstanding Less Deferred Financing Costs Amount per Consolidated Statements of Assets and Liabilities

MS Credit Facility 3/15/2025 $ 250,000 $ 190,000 $ (2,174) $ 187,826

MS Subscription Facility 4/22/2022 50,000 49,900 (186) 49,714

Total $ 300,000 $ 239,900 $ (2,360) $ 237,540

The weighted average annualized interest cost for all facility borrowings for the year ended December 31, 2021 was 2.32%.

The average daily debt outstanding for facility borrowings for the year ended December 31, 2021 was $106.9 million.

The maximum debt outstanding for facility borrowings for the year ended December 31, 2021 was $264.9 million.

Short-term Borrowings

From time to time, the Company finances the purchase of certain investments through repurchase agreements.

In the repurchase agreements, the Company enters into a trade to sell an investment and contemporaneously enter into a trade to buy the same investment back on a specified date in the future with the same counterparty.

Investments sold under repurchase agreements are accounted for as collateralized borrowings as the sale of the investment does not qualify for sale accounting under ASC Topic 860—Transfers and Servicing and remains as an investment on the consolidated statements of assets and liabilities.

The Company uses repurchase agreements as a short-term financing alternative.

As of December 31, 2021 and 2020, the Company had short-term borrowings outstanding of $41.3 million and $0, respectively.

For the year ended December 31, 2021 and for the period ended December 31, 2020, the Company recorded interest expense of $0.1 million and $0, respectively, in connection with short-term borrowings.

For the period October 29, 2021 through December 31, 2021 (period for which the Company had short-term borrowings), the Company had an average outstanding balance of short-term borrowings of $19.3 million and bore interest at a weighted average rate of 0.01%.

The following table represents interest and debt fees for the year ended December 31, 2021:

Year Ended December 31, 2021

Interest Rate Non-Usage Rate Interest Expense Deferred Financing Costs (1)

Other Fees (2)

MS Credit Facility L+2.25% 0.50 % $ 1,787 $ 365 $ 340

MS Subscription Facility L+2.00% 0.30 % 654 282 14

Short-term borrowings 97 — —

Total $ 2,538 $ 647 $ 354

(1) Amortization of deferred financing costs.

(2) Includes non-usage fees and custody fees.

As of December 31, 2020, the Company did not have any borrowings.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate fair value.

The fair value of short-term financial instruments such as cash and cash equivalents, due to affiliates, accounts payable, and short-term borrowings approximate their carrying value on the accompanying consolidated statements of assets and liabilities due to their short-term nature.

At December 31, 2021, the carrying amount of the Company's secured borrowings approximated their fair value.

The fair values of the Company's debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.

The fair value of the Company's borrowings is estimated based upon market interest rates for the Company's own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any.

As of December 31, 2021, the Company's borrowings would be deemed to be Level 3, as defined in Note 3 - Fair Value of Financial Instruments.

The fair values of the Company’s remaining financial instruments that are not reported at fair value on the accompanying consolidated statements of assets and liabilities are reported below:

Level Carrying Amount as of December 31, 2021 Fair Value as of December 31, 2021

MS Credit Facility 3 $ 190,000 $ 190,000

MS Subscription Facility 3 49,900 49,900

Total $ 239,900 $ 239,900

Note 6 - Commitments and Contingencies

In the ordinary course of business, the Company may enter into future funding commitments.

As of December 31, 2021, the Company had unfunded commitments on delayed draw term loans of $63.0 million, and unfunded commitments on revolver term loans of $27.8 million.

The Company maintains sufficient cash on hand, unfunded Capital Commitments, and available borrowings to fund such unfunded commitments.

As of December 31, 2021, the Company's unfunded commitments consisted of the following:

Portfolio Company Name Investment Type Commitment Type Total Commitment Remaining Commitment

ADCS Clinics Intermediate Holdings, LLC Senior Secured First Lien Debt Delayed Draw $ 1,522 $ 627

ADCS Clinics Intermediate Holdings, LLC Senior Secured First Lien Debt Revolver 533 533

Armada Parent, Inc.

Senior Secured First Lien Debt Delayed Draw 2,037 2,037

Armada Parent, Inc.

Senior Secured First Lien Debt Revolver 2,444 2,240

Aveanna Healthcare, LLC Senior Secured First Lien Debt Delayed Draw 1,312 1,312

Aventine Holdings, LLC Senior Secured First Lien Debt Delayed Draw 4,574 4,574

BCPE Oceandrive Buyer, Inc.

Senior Secured First Lien Debt Delayed Draw 5,198 5,198

BCPE Oceandrive Buyer, Inc.

Senior Secured First Lien Debt Delayed Draw 1,559 1,559

BCPE Oceandrive Buyer, Inc.

Senior Secured First Lien Debt Revolver 1,559 1,559

Chudy Group, LLC Senior Secured First Lien Debt Delayed Draw 1,484 1,484

Chudy Group, LLC Senior Secured First Lien Debt Revolver 371 371

Cobblestone Intermediate Holdco, LLC Senior Secured First Lien Debt Delayed Draw 2,794 2,350

Communication Technology Intermediate, LLC Senior Secured First Lien Debt Revolver 998 998

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Portfolio Company Name Investment Type Commitment Type Total Commitment Remaining Commitment

FGT Purchaser, LLC Senior Secured First Lien Debt Revolver 976 683

Galway Borrower, LLC Senior Secured First Lien Debt Delayed Draw 1,809 1,809

Galway Borrower, LLC Senior Secured First Lien Debt Revolver 861 861

Gogo Intermediate Holdings, LLC Senior Secured First Lien Debt Revolver 452 452

IG Investments Holdings, LLC Senior Secured First Lien Debt Revolver 632 316

Knowledge Pro Buyer, Inc.

Senior Secured First Lien Debt Delayed Draw 2,293 2,293

Knowledge Pro Buyer, Inc.

Senior Secured First Lien Debt Revolver 1,147 872

Luna Sub 2, LLC Subordinated Debt Delayed Draw 11,000 11,000

Medical Management Resource Group, LLC Senior Secured First Lien Debt Delayed Draw 3,016 3,016

Medical Management Resource Group, LLC Senior Secured First Lien Debt Revolver 603 603

Mirra-Primeaccess Holdings, LLC Senior Secured First Lien Debt Revolver 3,429 3,429

Odessa Technologies, Inc.

Senior Secured First Lien Debt Delayed Draw 1,217 1,217

Odessa Technologies, Inc.

Senior Secured First Lien Debt Revolver 1,704 1,704

Pie Buyer, Inc.

Senior Secured First Lien Debt Delayed Draw 2,468 1,876

Pie Buyer, Inc.

Senior Secured First Lien Debt Revolver 741 741

Pluralsight, LLC Senior Secured First Lien Debt Revolver 638 638

Point Broadband Acquisition, LLC Senior Secured First Lien Debt Delayed Draw 3,665 3,665

Relativity Oda, LLC Senior Secured First Lien Debt Revolver 196 196

Roadsafe Holdings, Inc.

Senior Secured First Lien Debt Delayed Draw 1,905 668

RSC Acquisition, Inc.

Senior Secured First Lien Debt Delayed Draw 4,164 3,581

Saturn SHC Buyer Holdings, Inc.

Senior Secured First Lien Debt Revolver 4,012 2,508

Sherlock Buyer Corp.

Senior Secured First Lien Debt Delayed Draw 1,454 1,454

Sherlock Buyer Corp.

Senior Secured First Lien Debt Revolver 581 581

Simplifi Holdings, Inc.

Senior Secured First Lien Debt Revolver 1,720 1,720

SunMed Group Holdings, LLC Senior Secured First Lien Debt Revolver 259 218

Therapy Brands Holdings, LLC Senior Secured First Lien Debt Delayed Draw 372 372

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Portfolio Company Name Investment Type Commitment Type Total Commitment Remaining Commitment

Therapy Brands Holdings, LLC Senior Secured Second Lien Debt Delayed Draw 577 577

Trinity Air Consultants Holdings Corp.

Senior Secured First Lien Debt Delayed Draw 3,001 3,001

Trinity Air Consultants Holdings Corp.

Senior Secured First Lien Debt Revolver 857 171

Triple Lift, Inc.

Senior Secured First Lien Debt Revolver 1,393 1,393

US Oral Surgery Management Holdco, LLC Senior Secured First Lien Debt Delayed Draw 2,176 1,983

US Oral Surgery Management Holdco, LLC Senior Secured First Lien Debt Revolver 527 527

US Salt Investors, LLC Senior Secured First Lien Debt Revolver 934 934

Vensure Employer Services, Inc.

Senior Secured First Lien Debt Delayed Draw 960 960

Westwood Professional Services, Inc.

Senior Secured First Lien Debt Delayed Draw 1,299 866

Westwood Professional Services, Inc.

Senior Secured First Lien Debt Revolver 162 162

WHCG Purchaser III, Inc.

Senior Secured First Lien Debt Delayed Draw 5,917 5,521

WHCG Purchaser III, Inc.

Senior Secured First Lien Debt Revolver 1,821 1,721

WIN Holdings III Corp.

Senior Secured First Lien Debt Revolver 1,908 1,670

$ 99,231 $ 90,801

Litigation and Regulatory Matters

5 unchanged sentences

Based on its history and experience, management feels that the likelihood of such an event is remote.

Note 7 - Economic Dependency

Under various agreements, the Company has engaged or will engage the Adviser and its affiliates to provide certain services that are essential to the Company, including asset management services, asset acquisition and disposition decisions, the sale of shares of the Company’s common stock available for issuance, as well as other administrative responsibilities for the Company including accounting services and investor relations.

As a result of these relationships, the Company is dependent upon the Adviser and its affiliates.

In the event that these companies were unable to provide the Company with the respective services, the Company would be required to find alternative providers of these services.

Note 8 - Capital

Investor Commitments

As of December 31, 2020, the Company had $136.0 million in total capital commitments from investors, all of which was unfunded.

On December 22, 2020, the Company delivered its first Drawdown Notice to investors for an aggregate amount of $20.0 million in exchange for 1,333,333 shares of the Company’s common stock.

The shares were issued on January 7, 2021.

On February 25, 2021, the Company delivered an additional Drawdown Notice to investors for an aggregate amount of $20.0 million in exchange for 1,333,333 shares of the Company’s common stock.

The shares were issued on March 11, 2021.

As of December 31, 2021 and December 31, 2020, the Company had $601.3 million and $136.0 million, respectively, in total capital commitments of Common Stock and Series A Preferred Stock, of which $365.2 million and $136.0 million, respectively, were unfunded.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

As of December 31, 2021 and December 31, 2020, the Company had $573.8 million and $136.0 million, respectively, in total capital commitments of Common Stock, of which $342.7 million and $136.0 million, respectively, were unfunded.

As of December 31, 2021 and December 31, 2020, the Company had $27.5 million and $0, respectively, in total capital commitments of Series A Preferred Stock, of which $22.5 million and $0, respectively, were unfunded.

Capital Drawdowns

The following tables summarizes the total shares issued and proceeds related to capital drawdowns of Common Stock for the year ended December 31, 2021 and period ended December 31, 2020:

Share Issue Date Shares Issued Net Proceeds Received

For the year ended December 31, 2021

January 7, 2021 1,333,333 $ 20,000

March 11, 2021 1,333,333 20,000

June 2, 2021 1,665,196 25,000

June 29, 2021 1,665,196 25,000

August 3, 2021 1,644,778 24,940

November 2, 2021 1,904,137 29,000

December 3, 2021 792,324 12,122

December 27, 2021 4,870,481 74,957

Total Capital Drawdowns 15,208,778 $ 231,019

Share Issue Date Shares Issued Net Proceeds Received

For the period ended December 31, 2020

October 1, 2020 100 $ 2

Total Capital Drawdowns 100 $ 2

The issuances of Common Stock described above were exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(a)(2) thereof and Regulation D thereunder.

The Company relied, in part, upon representations from investors in the relevant Subscription Agreements that each investor is an "accredited investor," as defined in Regulation D under the Securities Act.

The following tables summarizes the total shares issued and proceeds related to capital drawdowns of Series A Preferred Stock:

Share Issue Date Shares Issued Net Proceeds Received

For the year ended December 31, 2021

December 27, 2021 5,000 $ 4,992

Total Capital Drawdowns 5,000 $ 4,992

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Note 9 - Common Stock

The following table reflects the net assets activity for the period from January 29 (date of inception) to December 31, 2020:

Common stock - shares Common stock - par Additional paid in capital Accumulated net loss Total net assets

The following table reflects the net assets attributable to common stock activity for the year ended December 31, 2021 and for the period ended December 31, 2020:

Common stock - shares Common stock - par Additional paid in capital Total distributable earnings (loss) Total net assets attributable to common stock

Balance as of January 29, 2020 (date of inception) $ — $ — $ — $ — $ —

1 unchanged sentence

Issuance of common stock, net of issuance costs 100 — (1)

Balance as of December 31, 2020 100 $ — (1)

$ 2 $ (414) $ (412)

Net investment income

— — — 4,143 4,143

Net realized gain from investment transactions

— — — 618 618

Net change in unrealized appreciation on investments

— — — 2,108 2,108

Issuance of common stock, net of issuance costs 15,208,778 15 231,004 — 231,019

Distributions to stockholders — — — (2,293) (2,293)

Reinvested dividends 51,886 — 790 — 790

Balance as of December 31, 2021 15,260,764 $ 15 $ 231,796 $ 4,162 $ 235,973

(1) Less than $1.

The Company has adopted a distribution reinvestment plan (the “DRIP”) pursuant to which all cash dividends or distributions (“Distributions”) declared by the Board of Directors are reinvested on behalf of investors who do not elect to receive their Distributions in cash (the “Participants”).

As a result, if the Board of Directors declares a Distribution, then stockholders who have not elected to “opt out” of the DRIP will have their Distributions automatically reinvested in additional shares of the Company's common stock at a price equal to NAV per share as estimated in good faith by the Company on the payment date.

The timing and amount of Distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our Board of Directors.

The following table reflects the Common Stock activity for the year ended December 31, 2021:

Shares Sold $ 15,208,778 $ 231,019

Shares Issued through DRIP 51,886 790

Share Repurchases — —

15,260,664 $ 231,809

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Note 10 – Preferred Stock

On August 25, 2021, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation for the Series A Preferred Stock, which designates a total of 50.0 million shares of preferred stock as Series A Preferred Stock, par value $0.001 per share.

On the same day, the Company entered into subscription agreements (collectively, the “Preferred Subscription Agreements”) with certain investors (the “Investors,” and each, an “Investor”), pursuant to which the Investors made new capital commitments to purchase shares of the Company’s Series A Preferred Stock, in a total aggregate amount of $27.5 million.

Pursuant to their respective Preferred Subscription Agreements, each Investor is required to fund drawdowns to purchase shares of the Series A Preferred Stock up to the amount of their respective capital commitments on an as-needed basis, upon a minimum of 10 business days’ prior notice at a per-share price equal to the liquidation preference (the “Liquidation Preference”).

The sale and issuance of shares of Series A Preferred Stock is exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof and Regulation D thereunder.

The Company shall rely, in part, upon representations from the Investors in the relevant Preferred Subscription Agreements that each Investor is an “accredited investor,” as defined in Regulation D under the Securities Act.

On December 27, 2021, the Company issued 5,000 shares of Series A Preferred Stock.

The Company received approximately $5.0 million in total net proceeds from the sale of the Series A Preferred Stock and incurred approximately $0.01 million in stock offering costs as part of the sale.

As of December 31, 2021, there were 50.0 million shares of preferred stock authorized, par value $0.001 per share, of which 5,000 shares of Series A Preferred Stock were issued and outstanding.

No shares outstanding of Series A Preferred Stock are redeemable before December 31, 2026.

Each holder of Series A Preferred Stock is entitled to a Liquidation Preference of $1,000.00 per share plus all dividends accrued and unpaid thereon.

With respect to distributions, including the payment of dividends and distribution of the Company’s assets upon liquidation, dissolution, or winding-up, whether voluntary or involuntary, the Series A Preferred Stock will be senior to shares of Common Stock, will rank on parity with any other class or series of preferred stock that the Company is authorized to issue pursuant to its certificate of incorporation, whether such class or series is now existing or is created in the future, to the extent of the aggregate Liquidation Preference, which amount includes all accrued but unpaid dividends and will be subordinate to the rights of holders of our senior indebtedness.

Dividends are payable on each outstanding share of Series A Preferred Stock quarterly in arrears at a rate equal to (1) for each fiscal quarter ending on or before September 30, 2022 (the “Initial Dividend Period”), the dividends that would have been paid in respect of each share of Series A Preferred Stock if it had been converted into a share of the Company’s Common Stock, on the first day of such quarter (or the date of issuance in the case of shares of Series A Preferred Stock issued after the first day of such quarter) at the applicable Conversion Rate (as defined below) and (2) for each quarter after the Initial Dividend Period, the greater of (i) an amount equal to $10.00 per share, subject to proration if such share is not outstanding for the full quarter, and (ii) the dividends that would have been paid in respect of such share of Series A Preferred Stock if it had been converted into a share of Common Stock on the first day of such quarter (or the date of issuance in the case of shares of Series A Preferred Stock issued after the first day of such quarter) at the applicable Conversion Rate.

During the year ended December 31, 2021, no dividends were declared.

The Series A Preferred Stock is convertible (a) by the Company, in its sole discretion, at any time commencing on the closing date of a Liquidity Event, as defined by the Confidential Private Placement Memorandum of Franklin BSP Capital Corporation, dated September 2020, or (b) by the holders thereof at any time commencing six months following the closing date of a Liquidity Event, in each case, into the number of shares of Common Stock equal to (1) the Liquidation Preference divided by (2) the price paid by investors for shares of Common Stock at the time of the purchase of such share of Series A Preferred Stock or if the purchase of such share of Series A Preferred Stock did not occur concurrent with a sale of Common Stock by the Company at the net asset value per share of Common Stock determined within 48 hours (excluding Sundays and holidays) of the purchase of such share of Series A Preferred Stock (the “Conversion Rate”).

The Company has the right to redeem the Series A Preferred Stock at any time, and from time to time, on or after August 23, 2029 upon 90 days prior notice to holders of Series A Preferred Stock.

As of December 31, 2021, a Liquidity Event had not commenced.

The holders of the Preferred Stock are generally entitled to vote with the holders of the shares of Common Stock on all matters submitted for a vote to the common stockholders (voting together with the holders of shares of Common Stock as one class) on an as-converted basis, subject to certain limitations.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

The following table presents the activity in the Company’s Series A Preferred Stock for the period ended December 31, 2021:

Series A Preferred Stock Shares Amount

Beginning Balance, December 31, 2020 — $ —

Issuance of Preferred Stock 5,000 5,000

Dividends paid in Preferred Stock — —

Offering costs — (8)

Amortization of offering costs — 0 (1)

Ending Balance, December 31, 2021 5,000 $ 4,992

(1) Less than $1.

Note 11 - Earnings Per Share

Basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period.

Other potentially dilutive shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The Company had no potentially dilutive securities as of December 31, 2021.

The following information sets forth the computation of the weighted average basic net increase in net assets per share resulting from operations for the year ended December 31, 2021.

Year Ended December 31,

Numerator 2021

Net increase in net assets resulting from operations attributable to common stockholders $ 6,869

Distributed Earnings to Series A Redeemable Preferred Stock Dividends in current period —

Undistributed profit attributable to shares of common stock $ 6,869

Weighted average common shares outstanding 5,301,096

Basic and diluted earnings per share $ 1.30

Note 12 — Distributions

The following table reflects the distributions declared on shares of the Company’s Common Stock:

Date Declared Record Date Payment Date Amount Per Share

For the Year Ended December 31, 2021

October 28, 2021 October 28, 2021 November 15, 2021 $0.30

Note 13 — Income Tax Information and Distributions to Stockholders

The Company has elected to be treated for federal income tax purposes as a RIC under the Code.

Generally, a RIC is exempt from federal income taxes if it meets, certain quarterly asset diversification requirements, annual income tests, and distributes to stockholders its ‘‘investment company taxable income,’’ as defined in the Code, each taxable year.

Distributions declared prior to the filing of the previous year's tax return and paid up to one year after the previous tax year can be carried back to the prior tax year for determining the distributions paid in such tax year.

The Company intends to make sufficient distributions to maintain its RIC status each year.

The Company may also be subject to federal excise taxes of 4%.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus net realized short-term capital gains in excess of net realized long-term capital losses).

If the Company's expenses in a given taxable year exceed gross taxable income (e.g., as the result of large amounts of equity-based compensation), it would incur a net operating loss for that year.

However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to the RIC’s stockholders.

In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain.

A RIC may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC’s investment company taxable income, but may carry forward such net capital losses, and use them to offset capital gains indefinitely.

Due to these limits on the deductibility of expenses and net capital losses, the Company may for tax purposes have aggregate taxable income for several taxable years that it is required to distribute and that is taxable to stockholders even if such taxable income is greater than the aggregate net income the Company actually earned during those taxable years.

Such required distributions may be made from the Company cash assets or by liquidation of investments, if necessary.

The Company may realize gains or losses from such liquidations.

In the event the Company realizes net capital gains from such transactions, the Company may make a larger capital gain distribution than it would have made in the absence of such transactions.

The tax character of distributions for the fiscal year ended December 31, 2021 was as follows:

For the year ended December 31, 2021

Ordinary income distributions* $ 2,293 100.0 %

Capital gains distributions — —

Return of capital — —

Total distributions $ 2,293 100.0 %

*(Unaudited) Includes 92.62% interest-related dividends.

Interest-related dividends received by nonresident aliens and foreign corporations are generally eligible for exemption from U.S.

withholding tax in accordance with Sections 871(k) of the Code.

For the year ended December 31, 2021 the components of accumulated gain and losses on a tax basis were as follows:

For the year ended December 31, 2021

Undistributed ordinary income $ 3,036

Undistributed capital loss carryforward —

Total undistributed net earnings 3,036

Net unrealized gain on investments 2,108

Other accumulated loss on investments (386)

Total undistributed taxable income $ 4,758

As of December 31, 2021, the Company did not have any short-term or long-term capital loss carryforwards.

At December 31, 2021, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes are as follows:

December 31, 2021

Tax cost $ 515,192

Gross unrealized appreciation 2,407

Gross unrealized depreciation (299)

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

During the year ended December 31, 2021, as a result of permanent book-to-tax differences, the Company made reclassifications among components of net assets as follows:

Total distributable earnings Paid in capital

2021 $ 596 $ (596)

These differences primarily relate to non-deductible offering costs.

Aggregate stockholders’ equity was not affected by this reclassification.

Tax information for the fiscal year ended December 31, 2021 is an estimate and will not be finally determined until the

Company files its 2021 tax return.

The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes (“ASC Topic 740”), nor did the Company have any unrecognized tax benefits as of the periods presented herein.

The Company's current tax year and 2020 federal tax return remain subject to examination by the Internal Revenue Service.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Note 14 - Financial Highlights

The Company commenced investing operations on January 7, 2021.

Net asset value attributable to common stock, at the beginning of the period represents the initial price per share issued on that date.

The following is a schedule of financial highlights for the period from January 7, 2021 to December 31, 2021:

For the period from January 7, 2021 to December 31, 2021

Per share data:

Net asset value attributable to common stock, beginning of period $ 15.00

Results of operations (1)

Net investment income 0.78

Net realized and unrealized gain on investments 0.52

Net increase in net assets resulting from operations attributable to common stock 1.30

Common Stockholder distributions (2)

Common Stockholder distributions from net investment income (0.30)

Net decrease in net assets resulting from common stockholder distributions (0.30)

Capital share transactions

Issuance of common stock (3)

Net increase (decrease) in net assets resulting from capital share transactions —

Net asset value attributable to common stock, end of period $ 15.46

Common stock shares outstanding at end of period 15,260,764

Total return (5)

Ratio/Supplemental data attributable to common stock:

Total net assets attributable to common stock, end of year $ 235,973

Ratio of net investment income to average net assets attributable to common stock 3.49 %

Ratio of total expenses to average net assets attributable to common stock (6)

Ratio of incentive fees to average net assets attributable to common stock (7)

Ratio of net expenses to average net assets attributable to common stock (8)

Ratio of debt related expenses to average net assets attributable to common stock 2.98 %

Portfolio turnover rate (9)

(1) The per share data was derived by using the weighted average common shares outstanding during the period.

(2) The per share data for distributions reflects the actual amount of Common Stock distributions declared per share during the year.

(3) The issuance of Common Stock on a per share basis reflects the incremental net asset value attributable to Common Stock changes as a result of the issuance of shares of Common Stock.

(4) Represents the impact of calculating certain per share amounts based on weighted average common shares outstanding during

the period and certain per share amounts based on common shares outstanding as of year end.

(5) Total return is calculated assuming a purchase of shares of Common Stock at the current net asset value attributable to Common Stock on the first day and a sale at the current net asset value attributable to Common Stock on the last day of the periods reported.

Common Stock distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the DRIP.

(6) Ratio of total expenses to average net assets attributable to Common Stock is calculated using total operating expenses, including income tax expense over average net assets attributable to Common Stock.

(7) Represents gross incentive fees, prior to any incentive fee waivers.

Incentive fees for the first twelve calendar quarters are waived, refer to Note 4 - Related Party Transactions for additional details.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

(8) Ratio of net expenses to average net assets attributable to common stock is calculated using total operating expenses, including income tax expense, less applicable waivers over average net assets attributable to common stock.

(9) Portfolio turnover rate is calculated using the lesser of year-to-date purchases or sales over the average of the invested

assets at fair value.

Note 15 - Schedules of Investments and Advances to Affiliates

The following table presents the Schedule of Investments and Advances to Affiliates as of December 31, 2021:

Portfolio Company (1)

Type of Asset Industry Amount of dividends and interest included in income Beginning Fair Value at December 31, 2020

Gross additions* Gross reductions** Realized Gain/(Loss) Change in Unrealized Gain Fair Value at December 31, 2021

Control Investments

Luna Sub 2, LLC (2)

Equity/Other Financials $ — $ — $ 30,742 $ — $ — $ — $ 30,742

Luna Sub 2, LLC (2)

Subordinated Debt Financials 12 — 24,412 — — — 24,412

Total Control Investments $ 12 $ — $ 55,154 $ — $ — $ — $ 55,154

Affiliate Investments

Jakks Pacific, Inc.

Equity/Other Consumer $ 12 $ — $ 13 $ — $ — $ 103 $ 116

Jakks Pacific, Inc.

Senior Secured First Lien Debt Consumer 27 — 464 (489) 24 — —

Jakks Pacific, Inc.

Subordinated Debt Consumer 22 — 605 (1,147) 543 — —

Total Affiliate Investments $ 61 $ — $ 1,082 $ (1,636) $ 567 $ 103 $ 116

* Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company into this category from a different category.

** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities, and the movement of an existing portfolio company out of this category into a different category.

(1) The principal/share amount and ownership detail are shown in the consolidated schedules of investments.

(2) The fair value of investments with respect to securities for which market quotations are not readily available is determined in good faith by the Company's Board of Directors as required by the 1940 Act.

Such investments are valued using significant unobservable inputs (See Note 3 to the consolidated financial statements).

(3) Investment no longer held as of December 31, 2021.

FRANKLIN BSP CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts, percentages and as otherwise indicated)

For the year ended December 31, 2021

Note 16 - Subsequent Events

In preparing these financial statements, the Company’s management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

as administrative agent and U.S.

Bank National Association as collateral agent, account bank and collateral custodian, that provides for borrowings of up to $100 million on a committed basis.

The obligations of FBCC Lending under the MS Credit Facility are nonrecourse to the Company.

Any amounts borrowed under the Credit Facility will mature, and will be due and payable, on the maturity date, which is March 15, 2025.

Borrowings under the MS Credit Facility bear interest at three-month maturity London Interbank Offered Rate (“LIBOR”), with a LIBOR floor of 0.00%, plus a spread of 2.25%.

Interest is payable quarterly in arrears.

FBCC Lending is subject to a non-usage fee of 0.50% on the difference between total commitments and the greater of the (i) drawn amounts and (ii) minimum utilization requirement, and, in addition, after the ramp-up period, FBCC Lending would pay interest on undrawn amounts up to the minimum utilization requirement under the MS Credit Facility if drawn amounts are less than such minimum utilization requirement.

On January 31, 2022, the Company entered into a third amendment to the MS Credit Facility to, among other things, increase the maximum permissible borrowings from $250.0 million to $300.0 million on a committed basis, transition the benchmark rate to Adjusted Term SOFR and included the Canadian Imperial Bank of Commerce (“CIBC”) as a lender.

On February 4, 2022, the Company’s Board of Directors declared a distribution of $0.30 per share of Common Stock, which is payable on February 22, 2022 to stockholders of record as of January 31, 2022.

On February 4, 2022, the Company’s Board of Directors declared a distribution of $19.49 per share of Series A Preferred Stock, which is payable on February 22, 2022 to stockholders of record as of January 31, 2022.

On March 8, 2022, the Company entered into Preferred Subscription Agreements with certain Investors, pursuant to which the Investors made new capital commitments to purchase shares of the Company’s Series A Preferred Stock, in a total aggregate amount of approximately $50.0 million.

The sale and issuance of shares of Series A Preferred Stock is exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof and Regulation D thereunder.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures