Alcentra Capital Corp (Form: 10-Q, Received: 05/07/2018 17:28:49)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 1-36447

ALCENTRA CAPITAL CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Maryland	46-2961489
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

200 Park Avenue, 7 ^th Floor
New York, NY	10166
(Address of Principal Executive Offices)	(Zip Code)

(212) 922-8240

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨ (do not check if a smaller reporting company)	Smaller reporting company	¨

Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 13,753,054 shares of the Registrant’s common stock outstanding as of May 4, 2018.

ALCENTRA CAPITAL CORPORATION

TABLE OF CONTENTS

	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Financial Statements of Alcentra Capital Corporation:

Consolidated Statements of Assets and Liabilities as of March 31, 2018 (unaudited) and December 31, 2017	3

Consolidated Statements of Operations for the Three Months Ended March 31, 2018 (unaudited) and 2017 (unaudited)	4

Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31, 2018 (unaudited) and 2017 (unaudited)	5

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 (unaudited) and 2017 (unaudited)	6

Consolidated Schedule of Investments as of March 31, 2018 (unaudited) and December 31, 2017	7

Notes to Unaudited Consolidated Financial Statements	12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3. Quantitative and Qualitative Disclosures About Market Risk	41

Item 4. Controls and Procedures	42

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	43

Item 1A. Risk Factors	43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3. Defaults Upon Senior Securities	43

Item 4. Mine Safety Disclosures	43

Item 5. Other Information	43

Item 6. Exhibits	43

SIGNATURES

Alcentra Capital Corporation and Subsidiary

Consolidated Statements of Assets and Liabilities

	As of March 31, 2018 (Unaudited)			As of December 31, 2017
Assets
Portfolio investments, at fair value
Non-controlled, non-affiliated investments, at fair value (cost of $249,671,529 and $265,675,598, respectively)	$	235,987,908		$	252,325,403
Non-controlled, affiliated investments, at fair value (cost of $50,590,919 and $51,734,635, respectively)		18,721,815			19,972,905
Controlled, affiliated investments, at fair value (cost $15,806,300 and $15,806,301, respectively)		15,477,140			15,256,237
Cash		13,421,745			13,882,956
Dividends and interest receivable		1,634,770			1,942,300
Receivable for investments sold		644,733			669,733
Deferred financing costs		410,260			514,241
Deferred tax asset		4,932,473			4,934,962
Income tax asset		669,331			748,408
Prepaid expenses and other assets		45,517			79,005
Total Assets	$	291,945,692		$	310,326,150

Liabilities
Credit facility payable	$	55,403,273		$	89,703,273
Notes payable (net of deferred note offering costs of $1,125,471 and $1,252,165, respectively)		53,874,529			53,747,835
Payable for investments purchased		16,621,902			—
Other accrued expenses and liabilities		917,732			447,589
Directors’ fees payable		72,250			68,917
Professional fees payable		551,938			548,455
Interest and credit facility expense payable		1,527,558			1,248,791
Management fee payable		1,234,863			1,265,172
Income-based incentive fees payable		1,294,985			1,294,985
Distributions payable		2,560,130			3,561,305
Unearned structuring fee revenue		660,983			725,653
Consulting Fees payable		43,149			—
Total Liabilities	$	134,763,292		$	152,611,975

Commitments and Contingencies (Note 12)

Net Assets
Common stock, par value $0.001 per share (100,000,000 shares authorized, 14,010,374 and 14,222,945 shares issued and outstanding, respectively)		14,010			14,223
Additional paid-in capital		205,060,309			206,570,701
Accumulated net realized loss		(11,450,970	)		(11,436,155	)
Undistributed net investment income		5,665,152			4,449,122
Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for deferred taxes of $3,775,784 and $3,778,273 as of March 31, 2018 and December 31, 2017, respectively		(42,106,101	)		(41,883,716	)
Total Net Assets		157,182,400			157,714,175
Total Liabilities and Net Assets	$	291,945,692		$	310,326,150

Net Asset Value Per Share	$	11.22		$	11.09

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Statements of Operations

	For the three months ended March 31, 2018 (Unaudited)			For the three months ended March 31, 2017 (Unaudited)
Investment Income:
From non-controlled, non-affiliated investments:
Interest income from portfolio investments	$	5,742,386		$	7,004,677
Paid-in-kind interest income from portfolio investments		199,650			348,192
Other income from portfolio investments		1,507,304			609,965
Dividend income from portfolio investments		30,756			27,520
From non-controlled, affiliated investments:
Interest income from portfolio investments		77,453			251,778
Paid in-kind income from portfolio investments		123,126			387,036
Other income from portfolio investments		—			—
From controlled, affiliated investments:
Interest income from portfolio investments		500,890			405,835
Paid in-kind income from portfolio investments		—			166,445
Other income from portfolio investments		—			—
Total investment income		8,181,565			9,201,448

Expenses:
Management fees		1,234,863			1,249,569
Income-based incentive fees		—			653,911
Professional fees		354,070			266,339
Valuation services		63,971			101,396
Interest and credit facility expense		1,694,887			1,526,907
Amortization of deferred financing costs		103,981			285,563
Directors’ fees		96,202			68,136
Insurance expense		55,988			64,481
Amortization of deferred note offering costs		126,694			98,410
Consulting Fees		305,038			—
Other expenses		369,711			294,120
Total expenses		4,405,405			4,608,832
Net investment income	$	3,776,160		$	4,592,616

Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments
Net realized gain (loss) on:
Non-controlled, non-affiliated investments		(14,815	)		(1,049,239	)
Non-controlled, affiliated investments		—			—
Controlled, affiliated investments		—			—
Net realized gain (loss) from portfolio investments		(14,815	)		(1,049,239	)
Net change in unrealized appreciation (depreciation) on:
Non-controlled, non-affiliated investments		(333,426	)		(1,116,201	)
Non-controlled, affiliated investments		(107,374	)		(818,281	)
Controlled, affiliated investments		220,904			146,999
Net change in unrealized appreciation (depreciation) from portfolio investments		(219,896	)		(1,787,483	)
Benefit/(Provision) for taxes on unrealized gain (loss) on investments		(2,489	)		(724,816	)
Net realized gain (loss) and net change in unrealized appreciation (depreciation) from portfolio investments		(237,200	)		(3,561,538	)
Net Increase (Decrease) in Net Assets Resulting from Operations	$	3,538,960		$	1,031,078

Basic and diluted:
Net investment income per share	$	0.27		$	0.34
Earnings per share	$	0.25		$	0.08
Weighted Average Shares of Common Stock Outstanding		14,198,651			13,438,800
Dividends declared per common share	$	0.180		$	0.370

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Statements of Changes in Net Assets

	For the three months ended March 31, 2018 (Unaudited)			For the three months ended March 31, 2017 (Unaudited)
Increase (decrease) in net assets resulting from operations
Net investment income	$	3,776,160		$	4,592,616
Net realized gain (loss) on investments		(14,815	)		(1,049,239	)
Net change in unrealized appreciation (depreciation) on investments		(219,896	)		(1,787,483	)
Benefits/(Provision) for taxes on unrealized gain (loss) on investments		(2,489	)		(724,816	)
Net increase (decrease) in net assets resulting from operations		3,538,960			1,031,078

Capital transactions
Repurchase of common stock (212,571 and 14,574 shares, respectively)		(1,510,605	)		(165,514	)
Net increase (decrease) in net assets resulting from capital transactions		(1,510,605	)		(165,514	)

Distributions to shareholders from:
Net investment income		(2,560,130	)		(4,568,600	)
Realized gains		—			(403,112	)
Total distributions to shareholders		(2,560,130	)		(4,971,712	)

Total increase (decrease) in net assets		(531,775	)		(4,106,148	)

Net assets at beginning of period		157,714,175			184,524,591
Net assets at end of period (including undistributed net investment income of $5,665,152 and $4,914,081, respectively)	$	157,182,400		$	180,418,443

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Statements of Cash Flows

	For the three months ended March 31, 2018 (Unaudited)			For the three months ended March 31, 2017 (Unaudited)
Cash Flows from Operating Activities
Net increase/(decrease) in net assets resulting from operations	$	3,538,960		$	1,031,078

Adjustments to reconcile net increase/(decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized loss from portfolio investments		14,815			1,049,239
Net change in unrealized (appreciation) depreciation of portfolio investments		219,896			1,787,483
Deferred tax asset		2,489			(246,876	)
Paid in-kind interest income from portfolio investments		(322,776	)		(901,673	)
Accretion of discount on debt securities		(176,258	)		(980,595	)
Purchases of portfolio investments		(29,996,191	)		(31,193,265	)
Net proceeds from sales/return of capital of portfolio investments		47,628,196			23,183,083
Amortization of deferred financing costs		103,981			285,563
Amortization of deferred note offering costs		126,694			98,410
(Increase) decrease in operating assets:
Dividends and interest receivable		307,530			1,474,828
Receivable for investments sold		25,000			1,433,730
Income tax asset		79,077			(795,587	)
Prepaid expenses and other assets		33,488			50,128
Increase (decrease) in operating liabilities:
Payable for investments purchased		16,621,902			71,221
Other accrued expenses and liabilities		470,143			40,499
Directors' fees payable		3,333			(14,000	)
Professional fees payable		3,483			85,846
Interest and credit facility expense payable		278,767			556,184
Management fee payable		(30,309	)		1,249,568
Income-based incentive fees payable		—			(222,526	)
Unearned structuring fee revenue		(64,670	)		(64,825	)
Consulting Fees payable		43,149			—
Income tax		—			(182,699	)
Net cash provided by (used in) operating activities		38,910,699			(2,205,186	)

Cash Flows from Financing Activities
Financing costs paid		—			(12,000	)
Offering costs paid		—			(2,357	)
Proceeds from credit facility payable		12,700,000			30,100,000
Repayments of credit facility payable		(47,000,000	)		(22,300,000	)
Distributions paid to shareholders		(3,561,305	)		(4,586,816	)
Repurchase of common stock		(1,510,605	)		(165,514	)
Net cash provided by (used in) financing activities		(39,371,910	)		3,033,313
Increase (decrease) in cash and cash equivalents		(461,211	)		828,127
Cash at beginning of period		13,882,956			3,891,606
Cash and Cash Equivalents at End of Period	$	13,421,745		$	4,719,733

Supplemental and non-cash financing activities:
Cash paid during the period for interest	$	1,416,120		$	970,723
Accrued offering costs	$	2,485		$	2,485
Accrued distributions payable	$	2,560,130		$	4,971,712

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments

As of March 31, 2018

(Unaudited)

		Spread								No. Shares/
		Above	Base Rate			Interest			Maturity	Principal						% of Net
Company(+) ***	Industry	Index	Floor			Rate			Date	Amount		Cost ⁽¹⁾		Fair Value		Assets

Investments in Non-Controlled, Non-Affiliated Portfolio Companies — 150.13%

Senior Secured - First Lien — 98.05%

Black Diamond Rentals ⁽³⁾	Oil & Gas Services	12% Cash, 2% PIK ⁽²⁾					14.00	%	7/9/2018		5,937,501	$	5,937,501	$	4,875,828		3.10	%
		4% Cash, 10% PIK					14.00	%	7/9/2018		2,344,955		2,316,612		2,344,955		1.49	%
													8,254,113		7,220,783		4.59	%

CGGR Operations Holdings Corporation ^(3),(4)	Business Services	LIBOR + 11.5%		1.00	%		13.19	%	10/2/2023		13,431,579		13,308,006		13,431,578		8.55	%
		LIBOR + 7.0%		1.00	%		8.69	%	9/30/2022		9,768,421		9,680,502		9,768,421		6.21	%
													22,988,508		23,199,999		14.76	%

Champion ONE ^(3),(4)	Technology & Telecom	LIBOR + 10.5%		1.00	%		12.19	%	3/17/2022		6,937,500		6,879,612		6,937,500		4.41	%
Cirrus Medical Staffing, Inc. ^(3),(4),(5)	Business Services	LIBOR + 8.25%		1.00	%		9.94	%	10/19/2022		11,381,818		11,336,118		11,381,818		7.24	%
Healthcare Associates of Texas, LLC ^(3),(4),(5)	Healthcare Services	LIBOR + 8.0%		1.00	%		9.69	%	11/8/2022		26,068,500		26,068,500		26,068,500		16.59	%
Integrated Efficiency Solutions, Inc. ^(3),(4),(6)	Industrial Services	LIBOR + 9.25%		1.00	%		10.94	%	6/30/2022		19,250,000		19,191,073		19,250,000		12.25	%
Lugano Diamonds & Jewelry, Inc ^(3),(4)	Retail	LIBOR + 10.0%		0.75	%		11.69	%	10/24/2021		8,000,000		7,377,140		7,516,542		4.78	%
Lumileds ^(4),(7)	High Tech Industries	LIBOR + 3.50%					5.19	%	6/30/2024		2,000,000		2,035,000		2,031,560		1.29	%
NTI Holdings, LLC ^(3),(4),(5)	Telecommunications	LIBOR + 8.0%		1.00	%		9.65	%	3/30/2021		15,021,334		14,810,339		14,896,401		9.48	%
Palmetto Moon LLC ⁽³⁾	Retail	11.5% Cash, 1.0% PIK					12.50	%	10/31/2021		4,830,031		4,810,008		4,830,031		3.07	%
Pharmalogics Recruiting, LLC ^(3),(5)	Business Services	10.25% Cash					10.25	%	1/31/2022		9,900,000		9,819,480		9,900,000		6.30	%
Red Ventures LLC ^(4),(7)	Business Services	LIBOR + 4.0%					5.65	%	11/8/2024		2,000,000		2,025,000		2,020,210		1.29	%
Superior Controls, Inc. ^(3),(4),(5)	Wholesale/Distribution	LIBOR + 7.25%		1.00	%		8.94	%	3/22/2021		14,825,000		14,779,205		14,825,000		9.43	%
Weight Watchers International, Inc. ^(4),(7)	Consumer Services	LIBOR + 4.75%					6.45	%	11/29/2024		2,000,000		2,035,000		2,028,440		1.29	%
West Corporation ^(4),(7)	Telecommunications	LIBOR + 3.50%					5.40	%	10/10/2024		2,000,000		1,997,500		2,005,320		1.28	%
Total Senior Secured - First Lien													154,406,596		154,112,104		98.05	%

Senior Secured - Second Lien — 13.10%

Asurion ^(4),(7)	Insurance	LIBOR + 6.0%					7.65	%	8/4/2025		3,000,000	$	3,093,750	$	3,087,000		1.97	%

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments (continued)

As of March 31, 2018

(Unaudited)

		Spread								No. Shares/
		Above	Base Rate			Interest			Maturity	Principal						% of Net
Company(+) ***	Industry	Index	Floor			Rate			Date	Amount		Cost ⁽¹⁾		Fair Value		Assets

BayMark Health Services, Inc. ^(3),(4)	Healthcare Services	LIBOR + 8.25%		1.0	%		10.27	%	3/1/2025		7,000,000	$	6,930,792	$	7,000,000		4.45	%
Mayfield Agency Borrower Inc. ^(4),(7)	Insurance	LIBOR + 8.50%					10.38	%	2/28/2026		1,778,000		1,751,467		1,782,445		1.13	%
Medsurant Holdings, LLC ⁽³⁾	High Tech Industries	13% Cash					13.00	%	6/30/2020		8,729,395		8,687,196		8,729,395		5.55	%
Total Senior Secured - Second Lien													20,463,205		20,598,840		13.10	%
Senior Subordinated — 25.55%

Acuity Technologies Holding Company, LLC ^(3),(8)	High Tech Industries	12.25% Cash					12.25	%	11/19/2021		10,000,000	$	10,000,000	$	10,000,000		6.36	%
Black Diamond Rentals ^(2),(3)	Oil & Gas Services	4% Cash					4.00	%	7/9/2018		8,009,188		8,009,188		4,004,594		2.55	%
GST Autoleather ^(2),(3),(9)	Automotive Business Services	11% Cash, 2.0% PIK					13.00	%	1/11/2021		8,496,238		8,496,239		1		—
Media Storm, LLC ^(2),(3)	Media & Entertainment	10% PIK					10.00	%	8/28/2019		2,454,545		2,454,545		1		—
Pharmalogic Holdings Corp. ⁽³⁾	Healthcare Services	12% Cash					12.00	%	9/1/2021		16,122,103		16,096,448		16,122,103		10.26	%
Security Alarm Financing Enterprises L. P. ^(3),(4),(10)	Security	LIBOR + 13.00%, 0.69% PIK		1.00	%		14.69	%	6/19/2020		10,037,381		9,903,469		10,037,380		6.38	%
Total Senior Subordinated													54,959,889		40,164,079		25.55	%

CLO/Structured Credit — 3.40%

BlueMountain CLO 2016-3 Ltd. ^(4),(7)	USD CLO	LIBOR + 6.85%					8.69	%	11/15/2027		2,000,000	$	2,042,500	$	2,042,500		1.30	%
Goldentree Loan Management US CLO 2 Ltd. ^(4),(7)	USD CLO	LIBOR + 4.70%					6.27	%	11/28/2030		2,000,000		1,945,000		1,945,000		1.24	%
OZLM Funding IV Ltd. ^(4),(7)	USD CLO	LIBOR + 6.30%					8.04	%	7/22/2025		1,350,000		1,360,125		1,360,125		0.86	%
Total CLO/Structured Credit													5,347,625		5,347,625		3.40	%

Equity/Other — 10.03%

Champion ONE, Common Shares ^(2),(3)	Technology & Telecom										11,250	$	1,125,000	$	938,913		0.60	%
IGT, Preferred Shares ^(2),(3)	Industrial Services	11% PIK					11.00	%	12/10/2019		1,110,922		1,110,923		—		—
Common Shares ^(2),(3)											44,000		44,000		—		—
Preferred AA Shares ⁽³⁾		15% PIK					15.00	%	12/10/2019		326,789		326,789		326,789		0.21	%
													1,481,712		326,789		0.21	%

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments (continued)

As of March 31, 2018

(Unaudited)

		Spread						No. Shares/
		Above	Base Rate	Interest			Maturity	Principal						% of Net
Company(+) ***	Industry	Index	Floor	Rate			Date	Amount		Cost ⁽¹⁾		Fair Value		Assets

Integrated Efficiency Solutions, Inc. Preferred Shares ^(2),(3),(6)	Industrial Services								1,079,365	$	1,100,000	$	2,058,646		1.31	%
Lugano Diamonds & Jewelry, Inc, Warrants ^(2),(3)	Retail								666,615		666,615		1,000,000		0.63	%
Metal Powder Products, LLC, Common Shares ^(2),(3)	Industrial Manufacturing								500,000		500,000		719,046		0.46	%
My Alarm Center, LLC, Common Shares ^(2),(3)	Security								129,582		256,793		—		—
Junior Preferred Shares ^(2),(3)									2,420		2,366,549		1,253,570		0.80	%
Senior Preferred Shares ^(2),(3)		8% PIK			8.00	%	7/14/2022		2,998,437		2,862,059		2,862,059		1.82	%
											5,485,401		4,115,629		2.62	%

NTI Holdings, LLC, Preferred Shares ^(2),(3)	Telecommunications								424,621		547,349		1,679,748		1.07	%

Warrants ^(2),(3)									417,823		224,689		1,035,867		0.66	%
											772,038		2,715,615		1.73	%

Palmetto Moon LLC, Common Shares ^(2),(3)	Retail								434,145		434,145		329,633		0.21	%
Superior Controls, Inc., Preferred Shares ^(2),(3)	Wholesale/Distribution								400,000		400,000		789,192		0.50	%
Tunnel Hill Class B Common Units ^(2),(3),(11)	Waste Services								98,418		2,529,303		2,771,797		1.76	%
Total Equity/Other											14,494,214		15,765,260		10.03	%
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies											249,671,529		235,987,908		150.13	%
Investments in Non-Controlled, Affiliated Portfolio Companies — 11.91% ^*

Senior Secured - First Lien — —

Show Media, Inc. ^(2),(3)	Media & Entertainment	8% Cash, 3% PIK			11.00	%	12/31/2018		4,153,393	$	4,153,393	$	1		—
Total Senior Secured - First Lien											4,153,393		1		—

Senior Secured - Second Lien — 3.48%

Southern Technical Institute, Inc. ^(2),(3)	Education	15% PIK			15.00	%	12/2/2020		8,451,041	$	8,451,041	$	1		—
Xpress Global Systems, LLC ^(3),(4)	Transportation Logistics	15% PIK			15.00	%	7/9/2020		5,455,263		5,245,400		3,509,422		2.23	%

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments (continued)

As of March 31, 2018

(Unaudited)

		Spread								No. Shares/
		Above	Base Rate			Interest			Maturity	Principal						% of Net
Company(+) ***	Industry	Index	Floor			Rate			Date	Amount		Cost ⁽¹⁾		Fair Value		Assets

		LIBOR + 11.0%		1.00	%		12.69	%	7/9/2020		1,964,871	$	1,940,054	$	1,964,872		1.25	%
													7,185,454		5,474,294		3.48	%
Total Senior Secured - Second Lien													15,636,495		5,474,295		3.48	%
Senior Subordinated — 0.76%

Battery Solutions, Inc. ⁽³⁾	Environmental/Recycling Services	6% Cash, 8% PIK					14.00	%	11/6/2021		1,194,400	$	1,194,400	$	1,194,401		0.76	%
Total Senior Subordinated													1,194,400		1,194,401		0.76	%
Equity/Other — 7.67%

Battery Solutions, Inc., Class A and F Units ^(2),(3)	Environmental/Recycling Services										5,000,000	$	1,058,000	$	1,277,000		0.81	%
Class E Units ⁽³⁾		8% PIK					8.00	%	11/6/2021		4,221,893		4,221,893		4,221,893		2.69	%
													5,279,893		5,498,893		3.50	%

Conisus, LLC, Common Shares ^(2),(3)	Media: Advertising, Printing & Publishing										4,914,556		—		—		—
Preferred Equity ⁽³⁾		12% PIK					12.00	%			12,677,834		12,677,834		6,554,225		4.17	%
													12,677,834		6,554,225		4.17	%

Show Media, Inc., Units ^(2),(3)	Media & Entertainment										4,092,210		3,747,428		—		—
Southern Technical Institute, Inc., Class A Units ^(2),(3)	Education										3,164,063		2,167,000		—		—
Preferred Shares ^(2),(3)		15.75% PIK					15.75	%	3/30/2026		5,135,209		5,024,209		—		—

Warrants ^(2),(3)											221,267		221,267		—		—
													7,412,476		—		—

Xpress Global Systems, LLC, Warrants ^(2),(3)	Transportation Logistics										489,000		489,000		—		—
Total Equity/Other													29,606,631		12,053,118		7.67	%
Total Investments in Non-Controlled, Affiliated Portfolio Companies													50,590,919		18,721,815		11.91	%

Investments in Controlled, Affiliated Portfolio Companies — 9.85%**

Senior Secured - First Lien — 8.91%

FST Technical Services, LLC ⁽³⁾	Technology & Telecom	14% Cash					14.00	%	6/30/2019		13,999,758	$	13,999,758	$	13,999,758		8.91	%
Total Senior Secured - First Lien													13,999,758		13,999,758		8.91	%

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments (continued)

As of March 31, 2018

(Unaudited)

		Spread						No. Shares/
		Above	Base Rate	Interest			Maturity	Principal							% of Net
Company(+) ***	Industry	Index	Floor	Rate			Date	Amount		Cost ⁽¹⁾		Fair Value			Assets

Equity/Other — 0.94%

FST Technical Services, LLC, Common Class B Shares ^(2),(3)	Technology & Telecom	9% PIK			9.00	%			1,750,000	$	1,806,542	$	1,477,382			0.94	%
Total Equity/Other											1,806,542		1,477,382			0.94	%
Total Investments in Controlled, Affiliated Portfolio Companies											15,806,300		15,477,140			9.85	%
Total Investments											316,068,748		270,186,863			171.89	%
Liabilities In Excess Of Other Assets													(113,004,463	)		(71.89	)%
Net Assets												$	157,182,400			100.00	%

⁽⁺⁾

All portfolio companies listed are qualifying assets.

Denotes investments in which the Company is an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the three months ended March 31, 2018 in these affiliated investments are as follows:

											Change in
	Fair Value at								Interest/		Unrealized					Fair Value at
	December 31,		Gross		Gross		Transfers		Dividend/		Appreciation			Realized		March 31,
Name of Issuers	2017		Addition		Reductions		In/Out		Other Income		(Depreciation)			Gain (Loss)		2018
Battery Solutions, Inc.	$	7,820,167	$	-	$	-	$	-	$	155,069	$	1		$	-	$	6,693,294
Conisus, LLC		6,678,442		-		-		-		-		(124,217	)		-		6,554,225
Show Media, Inc.		1		-		-		-		-		-			-		1
Southern Technical Institute, Inc.		1		-		-		-		-		-			-		1
Xpress Global Systems, LLC		5,474,294		-		-		-		45,510		16,842			-		5,474,294
	$	19,972,905	$	-	$	-	$	-	$	200,579	$	(107,374	)	$	-	$	18,721,815

^**

Denotes investments in which the Company is an “Affiliated Person” and exceeding a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the three months ended March 31, 2018 in these affiliated and controlled investments are as follows:

											Change in
	Fair value at								Interest/		Unrealized				Fair Value at
	December 31,		Gross		Gross		Transfers		Dividend/		Appreciation		Realized		March 31,
Name of Issuers	2017		Additions		Reductions		In/Out		Other Income		(Depreciation)		Gain (Loss)		2018
FST Technical Services, LLC	$	15,256,237	$	-	$	-		-	$	500,890	$	220,904	$	-	$	15,477,140
	$	15,256,237	$	-	$	-		-	$	500,890	$	220,904	$	-	$	15,477,140

^***

Pledged as collateral under the Credit Facility with ING Capital LLC.

⁽¹⁾

The cost of debt securities is adjusted for accretion of discount/amortization of premium and interest paid-in-kind on such securities.

⁽²⁾

Non-income producing security.

⁽³⁾

Security is classified as Level 3 in the Company’s fair value hierarchy (see Note 3).

⁽⁴⁾

The principal balance outstanding for all floating rate loans is indexed to LIBOR or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement.

⁽⁵⁾

The investment has an unfunded commitment as of March 31, 2018 which is excluded from the presentation (see Note 12).

⁽⁶⁾

The investment was formerly known as LRI Holding, Inc. On July 20, 2017, the name was changed to Integrated Efficiency Solutions, Inc.

⁽⁷⁾

Security is classified as Level 2 in the Company’s fair value hierarchy (see Note 3).

⁽⁸⁾

The investment was formerly known as QRC Holdings, LLC. On February 8, 2018, the name was changed to Acuity Technologies Holding Company, LLC.

⁽⁹⁾

On October 3, 2017, GST AutoLeather, Inc., or GST, filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.

⁽¹⁰⁾

When the LIBOR rate exceeds 1.00% the remaining portion of interest becomes PIK.

⁽¹¹⁾

The investment was formerly known as City Carting Holding Company, Inc. On June 3, 2016, City Carting combined with Tunnel Hill Partners, L.P.

Abbreviation Legend

PIK - Payment-In-Kind

See notes to unaudited consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments
As of December 31, 2017

Company (+)(^)***	Industry	Spread Above Index	Base Rate Floor		Interest Rate		Maturity Date		No. Shares/ Principal Amount		Cost (1)			Fair Value			% of Net Assets
Investments in Non-Controlled, Non-Affiliated Portfolio Companies — 159.99%
Senior Secured – First Lien — 103.57%
Black Diamond Rentals	Oil & Gas Services	12% Cash, 2% PIK (2)				14.00 %		7/9/2018		5,937,501		$	5,937,501		$	4,875,828		3.09 %
		4% Cash, 10% PIK				14.00 %		7/9/2018		2,288,381			2,246,806			2,288,400		1.45 %
													8,184,307			7,164,228		4.54 %
CGGR Operations Holdings Corporation (3)	Business Services	11.5%		1.00 %		12.50 %		10/2/2023		13,431,579			13,302,663			13,431,578		8.52 %
		7.0%		1.00 %		8.00 %		9/30/2022		9,768,421			9,675,645			9,768,421		6.19 %
													22,978,308			23,199,999		14.71 %
Champion ONE (3)	Technology & Telecom	LIBOR + 10.5%		1.00 %		11.83 %		3/17/2022		7,078,125			7,020,027			7,078,125		4.49 %
Cirrus Medical Staffing, Inc. (3),(4)	Business Services	LIBOR + 8.25%		1.00 %		9.61 %		10/19/2022		18,600,000			18,510,539			18,600,000		11.79 %
Healthcare Associates of Texas, LLC (3),(4)	Healthcare Services	LIBOR + 8.0%		1.00 %		9.39 %		11/8/2022		23,334,250			23,334,250			23,334,250		14.80 %
IGT (3),(4)	Industrial Services	LIBOR + 8.50%		1.00 %		9.86 %		12/10/2019		7,783,012			7,743,557			7,783,012		4.94 %
Integrated Efficiency Solutions, Inc. (3),(5)	Industrial Services	LIBOR + 9.25%		1.00 %		10.59 %		6/30/2022		19,500,000			19,436,803			19,500,000		12.36 %
Lugano Diamonds & Jewelry, Inc. (3)	Retail	LIBOR + 10.0%		0.75 %		11.34 %		10/24/2021		8,000,000			7,349,002			7,483,890		4.75 %
NTI Holdings, LLC (3),(4)	Telecommunications	LIBOR + 8.0%		1.00 %		9.57 %		3/30/2021		15,097,584			14,869,193			14,961,923		9.49 %
Palmetto Moon LLC	Retail	11.5% Cash, 1.0% PIK				12.50 %		10/31/2021		5,378,909			5,357,837			5,378,909		3.41 %
Pharmalogics Recruiting, LLC (4)	Business Services	10.25% Cash				10.25 %		1/31/2022		9,925,000			9,845,384			9,925,000		6.29 %
Stancor, Inc. (3)	Wholesale/ Distribution	LIBOR + 8.00%		0.75 %		9.37 %		8/19/2019		4,105,932			4,105,932			4,105,932		2.60 %
Superior Controls, Inc. (3),(4)	Wholesale/ Distribution	LIBOR + 8.75%		1.00 %		10.09 %		3/22/2021		14,825,000			14,775,976			14,825,000		9.40 %
Total Senior Secured – First Lien													163,511,115			163,340,268		103.57 %
Senior Secured – Second Lien — 5.54%
Medsurant Holdings, LLC	High Tech Industries	13.00% Cash				13.00 %		6/30/2020		8,729,396		$	8,677,481		$	8,729,396		5.54 %
Total Senior Secured – Second Lien													8,677,481			8,729,396		5.54 %
Senior Subordinated — 40.88%
Black Diamond Rentals (2)	Oil & Gas Services	4% Cash				4.00 %		7/9/2018		8,009,188		$	8,009,188		$	4,004,594		2.54 %
GST Autoleather (2),(6)	Automotive Business Services	11% Cash, 2.0% PIK				13.00 %		1/11/2021		8,496,238			8,496,239			—		—
Media Storm, LLC (2)	Media & Entertainment	10% PIK				10.00 %		8/28/2019		2,454,545		$	2,454,545		$	1		—
Metal Powder Products LLC (3)	Industrial Manufacturing	LIBOR + 11.25%, 1.0% PIK		0.75 %		13.59 %		11/5/2021		8,333,733			8,333,734			8,500,408		5.39 %
NextCare Holdings, Inc.	Healthcare Services	10% Cash, 4% PIK				14.00 %		12/31/2018		15,833,365			15,731,616			15,833,365		10.04 %
Pharmalogic Holdings Corp.	Healthcare Services	12% Cash				12.00 %		9/1/2021		16,122,103			16,093,930			16,122,103		10.22 %
QRC Holdings, LLC	High Tech Industries	12.25% Cash				12.25 %		11/19/2021		10,000,000			10,000,000			10,000,000		6.34 %
Security Alarm Financing Enterprises L. P. (3),(7)	Security	LIBOR + 13.00%, 0.34% PIK		1.00 %		14.34 %		6/19/2020		10,019,787			9,873,536			10,019,780		6.35 %
Total Senior Subordinated													78,992,788			64,480,251		40.88 %

See notes to consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments continued
As of December 31, 2017

Company (+)(^)***	Industry	Spread Above Index	Base Rate Floor		Interest Rate		Maturity Date		No. Shares/ Principal Amount		Cost (1)			Fair Value			% of Net Assets
Equity/Other — 10.00%
Champion ONE, Common Shares (2)	Technology & Telecom									11,250		$	1,125,000		$	984,332		0.62 %
IGT, Preferred Shares (2)	Industrial Services	11% PIK				11.00 %		12/10/2019		1,110,922			1,110,923			—		—
Common Shares (2)										44,000			44,000			—		—
Preferred AA Shares		15% PIK				15.00 %		12/10/2019		326,789			326,789			326,789		0.21 %
													1,481,712			326,789		0.21 %
Integrated Efficiency Solutions, Inc. Preferred Shares (2),(5)	Industrial Services									1,079,365			1,100,000			2,058,646		1.31 %
Lugano Diamonds & Jewelry, Inc, Warrants (2)	Retail									666,615			666,615			1,000,000		0.63 %
Metal Powder Products, LLC, Common Shares (2)	Industrial Manufacturing									500,000			500,000			719,047		0.46 %
My Alarm Center, LLC, Common Shares (2)	Security									129,582			256,793			—		—
Junior Preferred Shares (2)										2,420			2,366,549			1,253,570		0.79 %
Senior Preferred Shares (2)		8% PIK				8.00 %		7/14/2022		2,998,437			2,862,059			2,862,059		1.81 %
													5,485,401			4,115,629		2.60 %
NTI Holdings, LLC, Preferred Shares (2)	Telecommunications									424,621			547,349			1,679,748		1.06 %
Warrants (2)										417,823			224,689			1,035,867		0.66 %
													772,038			2,715,615		1.72 %
Palmetto Moon LLC, Common Shares (2)	Retail									434,145		$	434,145		$	329,633		0.21 %
Superior Controls, Inc., Preferred Shares (2)	Wholesale/ Distribution									400,000			400,000			754,000		0.48 %
Tunnel Hill Class B Common Units (2),(8)	Waste Services									98,418			2,529,303			2,771,797		1.76 %
Total Equity/Other													14,494,214			15,775,488		10.00 %
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies													265,675,598			252,325,403		159.99 %
Investments in Non-Controlled, Affiliated Portfolio Companies — 12.67%*
Senior Secured – First Lien —
Show Media, Inc. (2)	Media & Entertainment	8% Cash, 3% PIK				11.00 %		12/31/2018		4,153,393		$	4,153,393		$	1		—
Total Senior Secured – First Lien													4,153,393			1		—
Senior Secured – Second Lien — 3.47%
Southern Technical Institute, Inc.	Education	15% PIK				15.00 %		12/2/2020		8,451,041		$	8,451,041		$	1		—
Xpress Global Systems, LLC (3)	Transportation Logistics	15% PIK				15.00 %		7/9/2020		5,455,263			5,222,687			3,509,422		2.22 %
		LIBOR + 11.0%		1.00 %		12.33 %		7/9/2020		1,964,872			1,979,609			1,964,872		1.25 %
													7,202,296			5,474,294		3.47 %
Total Senior Secured – Second Lien													15,653,337			5,474,295		3.47 %
Senior Subordinated — 1.53%
Battery Solutions, Inc.	Environmental/ Recycling Services	6% Cash, 8% PIK				14.00 %		11/6/2021		2,404,598		$	2,404,598		$	2,404,598		1.53 %
Total Senior Subordinated													2,404,598			2,404,598		1.53 %

See notes to consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments continued
As of December 31, 2017

Company (+)(^)***	Industry	Spread Above Index	Base Rate Floor	Interest Rate		Maturity Date		No. Shares/ Principal Amount		Cost (1)			Fair Value			% of Net Assets
Equity/Other — 7.67%
Battery Solutions, Inc., Class A and F Units (2)	Environmental/ Recycling Services								5,000,000		$	1,058,000		$	1,277,000		0.81 %
Class E Units		8% PIK			8.00 %		11/6/2021		4,138,569			4,138,569			4,138,569		2.62 %
												5,196,569			5,415,569		3.43 %
Conisus, LLC, Common Shares (2)	Media: Advertising, Printing & Publishing								4,914,556			—			—		—
Preferred Equity		12% PIK			12.00 %				12,677,834			12,677,834			6,678,442		4.24 %
												12,677,834			6,678,442		4.24 %
Show Media, Inc., Units (2)	Media & Entertainment								4,092,210			3,747,428			—		—
Southern Technical Institute, Inc., Class A Units (2)	Education								3,164,063		$	2,167,000		$	—		—
Preferred Shares		15.75% PIK			15.75 %		3/30/2026		5,135,209			5,024,209			—		—
Warrants (2)									221,267			221,267			—		—
												7,412,476			—		—
Xpress Global Systems, LLC, Warrants (2)	Transportation Logistics								489,000			489,000			—		—
Total Equity/Other												29,523,307			12,094,011		7.67 %
Total Investments in Non-Controlled, Affiliated Portfolio Companies												51,734,635			19,972,905		12.67 %
Investments in Controlled, Affiliated Portfolio Companies — 9.67%**
Senior Secured – First Lien — 8.87%
FST Technical Services, LLC	Technology & Telecom	12% Cash, 5% PIK			17.00 %		6/30/2019		13,999,758		$	13,999,758		$	13,999,758		8.87 %
Total Senior Secured – First Lien												13,999,758			13,999,758		8.87 %
Equity/Other — 0.80%
FST Technical Services, LLC, Common Class B Shares (2)	Technology & Telecom	9% PIK			9.00 %				1,750,000		$	1,806,543		$	1,256,479		0.80 %
Total Equity/Other												1,806,543			1,256,479		0.80 %
Total Investments in Controlled, Affiliated Portfolio Companies												15,806,301			15,256,237		9.67 %
Total Investments												333,216,534			287,554,545		182.33 %
Liabilities In Excess Of Other Assets															(129,840,370 )		(82.33 )%
Net Assets														$	157,714,175		100.00 %

(+)

All portfolio companies listed are qualifying assets.

(^)

All investments are level 3 investments and are therefore valued using unobservable inputs.

Denotes investments in which the Company is an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 5% but less than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2017 in these affiliated investments are as follows:

Name of Issuers	Fair Value at December 31, 2016			Gross Addition			Gross Reductions			Transfers In/Out			Paid-in-kind/ Interest/ Dividend/ Other Income			Fair Value at December 31, 2017
Battery Solutions, Inc.		$	6,517,046		$	—		$	—		$	—		$	650,999		$	7,820,167
Conisus, LLC			—			—			—			—			1,121,469			6,678,442
Show Media, Inc.			2,077,000			—			—			—			95,164			1
Southern Technical Institute, Inc.			13,500,157			—			—			—			1,205,438			1
Xpress Global Systems, LLC			—			—			—			7,475,203			455,272			5,474,294
		$	22,094,203		$	—		$	—		$	7,475,203		$	3,528,342		$	19,972,905

See notes to consolidated financial statements

Alcentra Capital Corporation and Subsidiary

Consolidated Schedule of Investments continued
As of December 31, 2017

Denotes investments in which the Company is an “Affiliated Person” and exceeding a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2017 in these affiliated and controlled investments are as follows:

Name of Issuers	Fair value at December 31, 2016			Gross Additions			Gross Reductions			Transfers In/Out		Interest/ Dividend/ Other Income			Fair Value at December 31, 2017
FST Technical Services, LLC		$	14,456,630		$	—		$	—		—		$	2,349,538		$	15,256,237
		$	14,456,630		$	—		$	—		—		$	2,349,538		$	15,256,237

***

Pledged as collateral under the Credit Facility with ING Capital LLC.

(1)

The cost of debt securities is adjusted for accretion of discount/amortization of premium and interest paid-in-kind on such securities.

(2)

Non-income producing security.

(3)

The principal balance outstanding for all floating rate loans is indexed to LIBOR or an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower’s option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement.

(4)

The investment has an unfunded commitment as of December 31, 2017 which is excluded from the presentation (see Note 12).

(5)

The investment was formerly known as LRI Holding, Inc. On July 20, 2017, the name was changed to Integrated Efficiency Solutions, Inc.

(6)

Security is in default.

(7)

When the LIBOR rate exceeds 1.00% the remaining portion of interest becomes PIK.

(8)

The investment was formerly known as City Carting Holding Company, Inc. On June 3, 2016, City Carting combined with Tunnel Hill Partners, L.P.

Abbreviation Legend
PIK — Payment-In-Kind

See notes to consolidated financial statements

ALCENTRA CAPITAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

Organization and Purpose

Alcentra Capital Corporation (the “Company” or “Alcentra”) was formed as a Maryland corporation on June 6, 2013, is an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”) and is applying the guidance of Accounting Standards Codification (“ASC”) Topic 946, Financial Services Investment Companies . Alcentra is managed by Alcentra NY, LLC (the “Adviser” or “Alcentra NY”), a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). In addition, for U.S. federal income tax purposes, Alcentra has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its tax year ending December 31, 2014.

The Company was formed for the purpose of acquiring certain assets held by BNY Mellon-Alcentra Mezzanine III, L.P. (the “Partnership”). The Partnership is a Delaware limited partnership, which commenced operations on May 14, 2010 (the “Commencement Date”). BNY Mellon-Alcentra Mezzanine III (GP), L.P. (the “General Partner”), a Delaware limited liability company, is the General Partner of the Partnership. BNY Mellon-Alcentra Mezzanine Partners (the “Manager”), a division of Alcentra NY and an affiliate of the General Partner, manages the investment activities of the Partnership. Alcentra NY, together with certain of its affiliated companies (the "Alcentra Group"), is an indirect, majority owned subsidiary of The Bank of New York Mellon Corporation.

On May 8, 2014 (commencement of operations), the Company acquired all of the assets of the Partnership other than its investment in the shares of common stock and warrants to purchase common stock of GTT Communications (the “Fund III Acquired Assets”) for $64.4 million in cash and $91.5 million in shares of Alcentra’s common stock. Concurrent with Alcentra’s acquisition of the Fund III Acquired Assets from the Partnership, Alcentra also purchased for $29 million in cash certain debt investments (the “Warehouse Portfolio”) from Alcentra Group. The Warehouse Portfolio debt investments were originated by the investment professionals of the Adviser and purchased by Alcentra Group using funds under a warehouse credit facility provided by The Bank of New York Mellon Corporation in anticipation of the initial public offering of Alcentra’s shares of common stock. Except for the $1,500 seed capital provided by Alcentra NY in exchange for 100 shares of Alcentra's common stock, the Company had no assets or operations prior to the acquisition of the investment portfolios of the Partnership and as a result, the Partnership is considered a predecessor entity of the Company.

On May 14, 2014, Alcentra completed its initial public offering (the “IPO”), at a price of $15.00 per share. Through the IPO the Company sold 6,666,666 shares for gross proceeds of approximately $100 million. Alcentra used $94.2 million of the proceeds from the IPO to fund the purchase of the warehouse portfolio, and the cash portion of the consideration paid to Fund III. On June 6, 2014, Alcentra sold 750,000 shares through the underwriters’ exercise of the overallotment option for gross proceeds of $11,250,000.

On April 8, 2014, the Company formed Alcentra BDC Equity Holdings, LLC, a wholly-owned subsidiary for tax purposes (the “Taxable Subsidiary”). The Taxable Subsidiary allows us to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code. The financial statements of this entity are consolidated into the financial statements of Alcentra. All intercompany balances and transactions have been eliminated.

On May 22, 2017 Alcentra Capital Corporation completed an underwritten primary offering of 808,161 shares of its common stock at a public offering price of $13.68 per share for proceeds of approximately $10,853,602, after paying the sales load and offering expenses.

The Company’s investment objective is to generate both current income and, to a lesser extent, capital appreciation primarily by making direct investments in lower middle and middle market companies, which we define as companies having annual earnings, before interest , taxes, depreciation and amortization, or EBITDA of between $5 million and $75 million, and/or revenues of between $10 million and $250 million, although we may make investments in larger or smaller companies and other types of investments. These investments are in the form of first lien, second lien, unitranche and, to a lesser extent given the current credit environment, mezzanine debt and equity investments.We expect to source investments primarily through the network of relationships that the principals of its investment adviser have developed with financial sponsor firms, financial institutions, middle-market companies, management teams and other professional intermediaries.

Upon commencement of operations, the Company also entered into an administration and custodian agreement (the “Administration Agreement”) with State Street Bank and Trust Company (the “Administrator”).

Summary of Significant Accounting Policies

Basis of Presentation – The accompanying financial statements of the Company have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain financial information that is normally included in annual financial statements, including certain financial statement notes, prepared in accordance with GAAP, is not required for interim reporting purposes and have been omitted. In the opinion of management, the unaudited financial results included herein contain all adjustments considered necessary for the fair presentation of financial statements for the interim periods included herein. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2018.

The accounting records of the Company are maintained in United States dollars.

Use of Estimates – The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material. The most significant estimates relate to the valuation of the Company’s portfolio investments.

Consolidation – In accordance with Regulation S-X Article 6.03 and ASC Topic 810 - Consolidation, the Company generally will not consolidate its interest in any operating company other than in investment company subsidiaries, certain financing subsidiaries, and controlled operating companies substantially all of whose business consists of providing services to the Company.

Portfolio Investment Classification – The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in which the Company owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation. Under the 1940 Act, “Affiliate Investments” are defined as investments in which the Company owns between 5% and 25% of the voting securities and does not have rights to maintain greater than 50% of the board representation. “Non-controlled, non-affiliate investments” are defined as investments that are neither Control Investments or Affiliate Investments.

Cash – At March 31, 2018, cash balances totaling $13.4 million exceeded FDIC insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company’s cash deposits are held by the Administrator and management believes that the risk of loss associated with any uninsured balance is remote.

Deferred Financing Costs – Deferred financing costs consist of fees and expenses paid in connection with the credit facility (as defined in Note 10) and are capitalized at the time of payment. These costs are amortized using the straight line method, which approximate the effective interest method over the term of the Credit Facility.

Deferred Note Offering Costs – Deferred note offering costs consist of fees and expenses paid in connection with the Notes (as defined in Note 9) and are capitalized at this time as these fees and expenses were incurred before the issuance commenced. These costs are amortized using the straight line method, which approximate the effective interest method over the term of the Notes.

Valuation of Portfolio Investments – Portfolio investments are carried at fair value as determined by the Board of Directors (the ‘‘Board’’) of Alcentra .

The methodologies used in determining these valuations include:

(1) Preferred shares/membership units and common shares/membership units

In determining estimated fair value for common shares/membership units and preferred shares, the Company makes assessments of the methodologies and value measurements which market participants would use in pricing comparable investments, based on market data obtained from independent sources as well as from the Company’s own assumptions and taking into account all material events and circumstance which would affect the estimated fair value of such investments. Several types of factors, circumstances and events could affect the estimated fair value of the investments. These include but are not limited to the following:

(i) Any material changes in the (a) competitive position of the portfolio investment, (b) legal and regulatory environment within which the portfolio investment operates, (c) management or key managers of the portfolio investment, (d) terms and/or cost of financing available to the portfolio investment, and (e) financial position or operating results of the investment; (ii) pending disposition by the Company of the major portfolio investment; and (iii) sales prices of recent public or private transactions in identical or comparable investments.

One or a combination of the following valuation techniques are used to fair value these investments: Market Approach and Income Approach. The Market Approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The Income Approach uses valuation techniques to convert future amounts to a present amount (i.e., discounting estimated future cash flows to a net present value amount).

(2) Debt

The fair value of performing debt investments is typically derived utilizing a market yield analysis. In a market yield analysis, a price is ascribed to each debt investment based upon an assessment of current and expected market yields for similar debt investments and risk profiles. Additional consideration is given to current contractual interest rates, relative maturities and other key terms and risks associated with a debt investment.

The Company considers many factors in evaluating the most suitable point within the range of fair values, including, but not limited to, the following:

the portfolio company’s underlying operating performance and any related trends;

the improvement or decline in the underlying credit quality measured on the basis of a loan-to-enterprise value ratio and total outstanding debt to EBITDA ratio; and

changes or issues related to the portfolio company’s customer/supplier concentration, regulatory developments and other portfolio company specific considerations.

(3) Warrants

Where warrants are considered to be in the money, their incremental value is included within the valuation of the investments.

Valuation techniques are applied consistently from period to period, except when circumstances warrant a change to a different valuation technique that will provide a better estimate of fair value. The valuation process begins with each investment being initially valued by the investment professionals of the Adviser. Preliminary valuation conclusions are then documented and discussed with senior investment professionals of the Adviser. The Investment Committee of the Adviser reviews the valuation of the investment professionals and then determines the recommended fair value of each investment in good faith based on the input of the investment professionals.

With respect to the Company’s valuation process, the Board undertakes a similar multi-step valuation process each quarter, as described below:

•

Alcentra’s quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Adviser responsible for the portfolio investment;

•

preliminary valuation conclusions will then be documented and discussed with Alcentra’s senior management and the Adviser;

•

Independent valuation firms engaged by the valuation committee of the board of directors prepare preliminary valuations on a selected basis and submit the reports to the board of directors; and

•

the valuation committee of the board of directors then reviews these preliminary valuations and makes a recommendation to the board of directors with respect thereto: and

•

the board of directors then discusses valuations and approves the fair value of each such investment in good faith, based on the input of the Adviser, the independent valuation firms and the valuation committee.

The valuation committee of the board of directors has authorized the engagement of independent valuation firms to provide Alcentra with valuation assistance. Alcentra intends to have independent valuation firms provide it with valuation assistance on a portion of its portfolio on a quarterly basis and its entire portfolio will be reviewed at least annually by independent valuation firms; however, our Board does not have de minimis investments of less than 1% of our gross assets (up to an aggregate of 10% of our gross assets) independently reviewed. The valuation committee of the board of directors is ultimately and solely responsible for the valuation of its portfolio investments at fair value as approved in good faith pursuant to its valuation policy and a consistently applied valuation process.

Because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a readily available market for the securities existed or from those which will ultimately be realized.

Organizational and Offering Costs – Organization expenses, including reimbursement payments to the Adviser, are expensed on the Company’s Consolidated Statements of Operations. These expenses consist principally of legal and accounting fees incurred in connection with the organization of the Company and have been expensed as incurred. Offering expenses consist principally of underwriter’s fee, legal, accounting, printing fees and other related expenses associated with the filing of a registration statement. Offering costs are offset against proceeds of the offering in paid-in capital in excess of par in the Consolidated Statements of Changes in Net Assets. $1.56 million of offering costs were incurred with the initial public offering.

Paid-In-Capital – The Company records the proceeds from the sale of its common stock on a net basis to (i) capital stock and (ii) paid in capital in excess of par value, excluding all commissions

Earnings and Net Asset Value Per Share – Earnings per share is calculated based upon the weighted average number of shares of common stock outstanding during the reported period. Net Asset Value per share is calculated using the number of shares outstanding as of the end of the period.

Investments – Investment security transactions are accounted for on a trade date basis. Cost of portfolio investments represents the actual purchase price of the securities acquired including capitalized legal, brokerage and other fees as well as the value of interest and dividends received in-kind and the accretion of original issue discounts. Fees may be charged to the issuer by the Company in connection with the origination of a debt security financing. Such fees are reflected as a discount to the cost of the portfolio security and the discount is accreted into income over the life of the related debt security.

Original Issue Discount – When the Company receives warrants with a nominal or discounted exercise price upon origination of a debt or preferred stock investment, a portion of the cost basis is allocated to the warrants. When the investment is made concurrently with the sale of a substantial amount of equity, the value of the warrants is based on the sales price. The value of the warrants is recorded as original issue discount (“OID”) to the value of the debt or preferred stock investment and the OID is amortized over the life of the investment.

Interest and Dividend Income – Interest is recorded on the accrual basis to the extent that the Company expects to collect such amounts. The Company accrues paid in-kind interest (“PIK”) by recording income and an increase to the cost basis of the related investments. Dividend income is recorded on ex-dividend date. Dividends in-kind are recorded as an increase in cost basis of investments and as income.

Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when principal or interest cash payments are past due 30 days or more and/or when it is no longer probable that principal or interest cash payments will be collected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in management’s judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interest payments received on non-accrual designated investments may be recognized as income or applied to principal depending on management’s judgment. There were four non-accrual investments as of March 31, 2018 and three non-accrual investment as of December 31, 2017.

Other Income – The Company may also receive structuring or closing fees in connection with its investments. Such upfront fees are accreted into income over the life of the investment. These fees are non-recurring in nature.

Prepayment penalties received by the Company for debt instruments paid back to the Company prior to the maturity date are recorded as income upon receipt.

Income Taxes – The Company has elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code, and to operate in a manner so as to qualify for the tax treatment applicable to RIC’s. To obtain and maintain our qualification for taxation as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, the Company must distribute to its stockholders, for each taxable year, at least 90% of ‘‘investment company taxable income,’’ which is generally net ordinary taxable income plus the excess of realized net short-term capital gains over realized net long-term capital losses, or the Annual Distribution Requirement. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that are timely distributed to stockholders as dividends.

The Taxable Subsidiary permits the Company to hold equity investments in portfolio companies which are “pass through” entities for tax purposes and continue to comply with the “source income” requirements contained in RIC tax provisions of the Code. The Taxable Subsidiary is not consolidated with the Company for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of its ownership of certain portfolio investments. The income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in the Company’s consolidated financial statements. For the three months ended March 31, 2018 and March 31, 2017, the Company recognized a benefit (provision) for income tax on unrealized gain (loss) on investments of $0 million and $(0.7) million, respectively, for the Taxable Subsidiaries. As of March 31, 2018 and December 31, 2017, $4.9 million and $4.9 million, respectively, was included in the deferred tax asset on the Consolidated Statements of Assets and Liabilities.

Indemnification – In the normal course of business, the Company enters into contractual agreements that provide general indemnifications against losses, costs, claims and liabilities arising from the performance of individual obligations under such agreements. The Company has had no prior claims or payments pursuant to such agreements. The Company’s individual maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. However, based on management’s experience, the Company expects the risk of loss to be remote.

Recently Issued Accounting Standards - In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended rules (together, “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X was August 1, 2017. The Company has adopted and implemented the amendments to Regulation S-X.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which will amend FASB ASC 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of ASU 2016-18 on its consolidated financial statements and disclosures.

In December 2016, the FASB issued ASU 2016-19, Technical Corrections and Improvements. As part of this guidance, ASU 2016-19 amends FASB ASC 820 to clarify the difference between a valuation approach and a valuation technique. The amendment also requires an entity to disclose when there has been a change in either or both a valuation approach and/or a valuation technique. ASU 2016-19 is effective on a prospective basis for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. The Company has evaluated the impact of ASU 2016-19 on its consolidated financial statements and disclosures and determined that the adoption of ASU 2016-19 has not had a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which will amend FASB ASC 310-20. The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium, generally requiring the premium to be amortized to the earliest call date. For public business entities, the amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is evaluating the impact of ASU 2017-08 on its consolidated financial statements and disclosures.

In May 2014, the FASB issued ASC 606, Revenue From Contracts With Customers, originally effective for public business entities with annual reporting periods beginning after December 15, 2016. On August 12, 2015, the FASB issued an ASU, Revenue From Contracts With Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASC 606 for one year. ASC 606 provides accounting guidance related to revenue from contracts with customers. For public business entities, ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company has evaluated the impact of ASC 606 and does not currently believe that the application of ASC 606 will have a material impact on its consolidated financial statements and disclosures.

Fair Value of Portfolio Investments

The Company accounts for its investments in accordance with FASB Accounting Standards Codification Topic 820 (“ASC Topic 820”), Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value. ASC Topic 820 established a fair value hierarchy which prioritizes and ranks the level of market price observability used in measuring investments at fair value.

Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily-available actively quoted prices or for which fair value can be measured from actively-quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories (from highest to lowest) based on inputs:

Level 1 – Quoted prices (unadjusted) are available in active markets for identical investments that the Company has the ability to access as of the reporting date. The type of investments which would generally be included in Level 1 includes listed equity securities and listed derivatives. As required by ASC Topic 820, the Company, to the extent that it holds such investments, does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Level 2 – Pricing inputs are observable for the investments, either directly or indirectly, as of the reporting date, but are not the same as those used in Level 1. Fair Value is based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant judgment or estimation by the Company. The types of investments which would generally be included in this category include debt and equity securities issued by private entities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of March 31, 2018 are as follows:

	Level 1		Level 2		Level 3		Total
Senior Secured - First Lien	$	—	$	8,085,530	$	160,026,333	$	168,111,863
Senior Secured - Second Lien		—		4,869,445		21,203,690		26,073,135
Subordinated Debt		—		—		41,358,480		41,358,480
CLO/Structured Credit		—		5,347,625		—		5,347,625
Equity/Other		—		—		29,295,760		29,295,760
Total Investments	$	—	$	18,302,600	$	251,884,263	$	270,186,863

The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of December 31, 2017 are as follows:
	Level 1		Level 2		Level 3		Total
Senior Secured - First Lien	$	—	$	—	$	177,340,027	$	177,340,027
Senior Secured - Second Lien		—		—		14,203,691		14,203,691
Subordinated Debt		—		—		66,884,849		66,884,849
Equity/Other		—		—		29,125,978		29,125,978
Total Investments	$	—	$	—	$	287,554,545	$	287,554,545

The changes in investments classified as Level 3 are as follows for the three months ended March 31, 2018 and March 31, 2017.

As of March 31, 2018:

	Senior			Senior
	Secured -			Secured -			Senior			Equity/
	First Lien			Second Lien			Subordinated			Other			Total
Balance as of January 1, 2018	$	177,340,027		$	14,203,691		$	66,884,849		$	29,125,978		$	287,554,545
Amortized discounts/premiums		65,851			(6,335	)		116,605			-			176,121
Paid in-kind interest		69,813			-			169,640			83,323			322,776
Net realized gain (loss)		8,185			-			-			(23,000	)		(14,815	)
Net change in unrealized appreciation (depreciation)		(116,675	)		76,334			(283,272	)		86,459			(237,154	)
Purchases		4,781,840			6,930,000			(854	)		-			11,710,986
Sales/Return of capital		(22,122,708	)		-			(25,528,488	)		23,000			(47,628,196	)
Transfers in		-			-			-			-			-
Transfers out		-			-			-			-			-
Balance as of March 31, 2018	$	160,026,333		$	21,203,690		$	41,358,480		$	29,295,760		$	251,884,263

Net change in unrealized appreciation (depreciation) from investments still held as of March 31, 2018	$	(31,130	)	$	76,334		$	(14,848	)	$	86,459		$	116,815

As of March 31, 2017:

	Senior			Senior
	Secured -			Secured -			Senior			Equity/
	First Lien			Second Lien			Subordinated			Other			Total
Balance as of January 1, 2017	$	95,684,153		$	84,864,909		$	74,050,349		$	21,673,539		$	276,272,950
Amortized discounts/premiums		87,244			872,973			20,378			-			980,595
Paid in-kind interest		216,925			150,383			263,160			271,205			901,673
Net realized gain (loss)		-			-			-			(1,049,239	)		(1,049,239	)
Net change in unrealized appreciation (depreciation)		(867,897	)		(4,147,651	)		(197,548	)		3,425,613			(1,787,483	)
Purchases		26,509,556			1,096,609			2,287,080			1,300,020			31,193,265
Sales/Return of capital		(600,278	)		(18,631,777	)		(267	)		(3,950,761	)		(23,183,083	)
Transfers in		-			-			-			-			-
Transfers out		-			-			-			-			-
Balance as of March 31, 2017	$	121,029,703		$	64,205,446		$	76,423,152		$	21,670,377		$	283,328,678

Net change in unrealized appreciation (depreciation) from investments still held as of March 31, 2017	$	(867,899	)	$	(3,520,217	)	$	(197,548	)	$	2,125,614		$	(2,460,050	)

The following is a summary of the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy as of March 31, 2018 and December 31, 2017, respectively.

As of March 31, 2018:

	Fair Value at				Range
Assets at Fair Value	March 31, 2018		Valuation Technique	Unobservable Input	of Inputs		Weighted Average

Senior Secured - First Lien	$	160,026,333	Yield to Maturity	Comparable Market Rate		8.7% - 14.0%		10.9	%

Senior Secured - Second Lien	$	21,203,690	Yield to Maturity	Comparable Market Rate		10.3% - 15.0%		12.4	%

Senior Subordinated	$	41,358,480	Yield to Maturity	Comparable Market Rate		4.0% - 14.7%		12.0	%

Preferred Ownership	$	19,746,122	Market Approach	Enterprise Value/ LTM EBITDA Multiple		4.5x - 13.0x		9.3	x

Common Ownership/ Common Warrants	$	9,549,638	Market Approach	Enterprise Value/ LTM EBITDA Multiple		4.5x - 13.0x		7.7	x

Total	$	251,884,263

As of December 31, 2017:

	Fair Value at
Assets at Fair Value	December 31, 2017		Valuation Technique	Unobservable Input	Range of Inputs		Weighted Average

Senior Secured - First Lien	$	177,340,027	Yield to Maturity	Comparable Market Rate		8.0% - 17.0%		10.9	%

Senior Secured - Second Lien	$	14,203,691	Yield to Maturity	Comparable Market Rate		12.3% - 25.0%		15.0	%

Senior Subordinated	$	66,884,849	Yield to Maturity	Comparable Market Rate		4.0% - 14.7%		12.7	%

Preferred Ownership	$	19,751,824	Market Approach	Enterprise Value/ LTM EBITDA Multiple		4.5x - 13.0x		9.3	x

Common Ownership/ Common Warrants	$	9,374,154	Market Approach	Enterprise Value/ LTM EBITDA Multiple		4.5x - 13.0x		8.3	x

Total	$	287,554,545

Share Transactions

On November 2, 2017, the Board of Directors approved a $2.5 million open market stock repurchase program. Pursuant to the program, we are authorized to repurchase up to $2.5 million in aggregate of our common stock in the open market. The timing, manner, price and amount of any share repurchases will be determined by our management, in its discretion, based upon the evaluation of economic conditions, stock price, applicable legal and regulatory requirements and other factors. Repurchases under the program are authorized through November 2, 2018.

On November 16, 2017, the Board of Directors approved to expand the open market stock repurchase program to $5.0 million and extend the length of the program to January 31, 2019.

The following tables set forth the number of shares of common stock repurchased by the Company under its share repurchase program for the three months ended March 31, 2018 and 2017:

As of March 31, 2018:

Month Ended	Shares Repurchased		Repurchase Price Per Share		Aggregate Consideration for Repurchased Shares
January 2018		16,786		$8.01 - $8.22	$	136,949
March 2018		195,785		$6.05 - $7.24		1,373,656
Total		212,571			$	1,510,605

As of March 31, 2017:

Month Ended		Shares Repurchased				Repurchase Price Per Share				Aggregate Consideration for Repurchased Shares
January 31, 2017			14,574				$12.13 - $12.49			$	165,514

Distributions

The Company intends to make quarterly distributions of available net investment income determined on a tax basis to its stockholders. Distributions to stockholders are recorded on the record date. The amount, if any, to be distributed to stockholders is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, will be distributed at least annually. If the Company does not distribute (or are not deemed to have distributed) at least 98% of the Company's annual ordinary income in the calendar year earned, the Company will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual ordinary income exceed the distributions from such taxable income for the year. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, the Company accrues excise taxes, if any, on estimated excess taxable income. As of March 31, 2018 and December 31, 2017, the Company accrued $329,574 and $250,496, respectively, for any unpaid potential excise tax liability and have included these amounts within income tax asset or liability on the accompanying Consolidated Statements of Assets and Liabilities.

The following table reflects the Company’s dividends declared and paid on its common stock for the three months ended March 31, 2018:

Date Declared		Record Date		Payment Date		Amount Per Share
March 8, 2018		March 30, 2018		April 4, 2018		$	0.180

The following table reflects the Company’s dividends declared and paid on its common stock for the three months ended March 31, 2017:

Date Declared	Record Date	Payment Date	Amount Per Share
March 9, 2017	March 31, 2017	April 6, 2017	$	0.340
March 9, 2017	March 31, 2017	April 6, 2017	$	0.030

The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the stockholders who have not “opted out” of the DRIP no later than the record date will have their cash dividend automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the common stock on the NASDAQ Global Select Market on the dividend payment date. Shares purchased in the open market to satisfy the DRIP requirements will be valued upon the average price of the applicable shares purchased by the plan administrator, before any associated brokerage or other costs.

Related Party Transactions

Management Fee

Under the Investment Advisory Agreement, the Company has agreed to pay Alcentra NY an annual base management fee based on its gross assets as well as an incentive fee based on its performance. The base management fee is calculated at an annual rate as follows: 1.75% of its gross assets (i.e., total assets held before deduction of any liabilities), including assets purchased with borrowed funds or other forms of leverage and excluding cash and cash equivalents (such as investments in U.S. Treasury Bills), if its gross assets are below $625 million; 1.625% if its gross assets are between $625 million and $750 million; and 1.5% if its gross assets are greater than $750 million. The various management fee percentages (i.e. 1.75%, 1.625% and 1.5%) would apply to the Company's entire gross assets in the event its gross assets exceed the various gross asset thresholds. The base management fee will be payable quarterly in arrears and shall be calculated based on the average value of the Company’s gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters.

The incentive fee consists of two parts. The first part, which is calculated and payable quarterly in arrears, equals 20% of the Company's ‘‘pre-incentive fee net investment income’’ for the immediately preceding quarter, subject to a hurdle rate of 2% per quarter, and is subject to a ‘‘catch-up’’ feature. The “catch-up” feature is intended to provide the Adviser with an incentive fee of 50% of the Company’s “pre-incentive fee net investment income” as if a preferred return did not apply when our net investment income exceeds 2.5% in any quarter.

The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of our pre-incentive fee net investment income is payable except to the extent 20.0% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding quarters. In other words, any ordinary income incentive fee that is payable in a calendar quarter is limited to the lesser of (i) 20.0% of the amount by which our pre-incentive fee net investment income for such calendar quarter exceeds the 2.0% hurdle, subject to the “catch-up” provision, and (ii) (x) 20.0% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding calendar quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the amount, if positive, of the sum of pre-incentive fee net investment income, realized gains and losses and unrealized appreciation and depreciation for our then current and 11 preceding calendar quarters. In addition, the portion of such incentive fee that is attributable to deferred interest (such as PIK interest or OID) is paid to the Adviser, without any interest thereon, only if and to the extent that the Company actually receives such interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write-off or similar treatment of the investment giving rise to any deferred interest accrual. Any reversal of such accounts would reduce net income for the quarter by the net amount of the reversal (after taking into account the reversal of incentive fees payable) and would result in a reduction and possible elimination of the incentive fees for such quarter. There is no accumulation of amounts on the hurdle rate or preferred return from quarter to quarter, and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle, and there is no delay of payment if prior quarters are below the quarterly hurdle.

The second part is calculated and payable in arrears as of the end of each calendar year (or, upon termination of the Investment Advisory Agreement, as of the termination date) and equals 20% of our aggregate cumulative realized capital gains from inception through the end of each calendar year, computed net of aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of such year, less the aggregate amount of any previously paid capital gain incentive fees. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial assistance and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable for administrative services under the Investment Advisory Agreement, and any interest expense and any distributions paid on any issued and outstanding preferred stock, but excluding the incentive fee and any offering expenses and other expenses not charged to operations but excluding certain reversals to the extent such reversals have the effect of reducing previously accrued incentive fees based on the deferral of non-cash interest). Pre-incentive fee net investment income excludes, 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 until the Company has received such income in cash.

For the three months ended March 31, 2018, the Company recorded expenses for base management fees of $1,234,863, of which $0 was waived by the Adviser and $1,234,863 was payable at March 31, 2018. For the three months ended March 31, 2017, the Company recorded expenses for base management fees of $1,249,569, of which $0 was waived by the Adviser and $2,551,159 was payable at March 31, 2017.

For the three months ended March 31, 2018 and March 31, 2017, the Company incurred incentive fees of $0 and $653,911, respectively, of which $0 and $0 was waived by the Adviser and $1,294,985 and $1,849,135 was payable at March 31, 2018 and March 31, 2017, respectively. For the three months ended March 31, 2018 and March 31, 2017, the Company incurred capital gains incentive fees of $0, of which $0 was waived by the Adviser.

Directors' Fees

The independent directors of the Company each receive an annual fee of $40,000. They also receive $2,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending in person each board of directors meeting and $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting telephonically. They also receive $1,000 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with each committee meeting attended in person and each telephonic committee meeting. The chairman of the audit committee, the nominating and corporate governance committee, the valuation committee and the compensation committee will receive an annual fee of $10,000, $5,000, $5,000 and $5,000, respectively. The Lead Independent Director will receive an annual fee of $15,000. The Company has obtained directors’ and officers’ liability insurance on behalf of its directors and officers.

For the three months ended March 31, 2018 and March 31, 2017 the Company recorded directors' fee expense of $96,202 and $68,136, respectively, of which $72,250 and $81,000 was payable at March 31, 2018 and March 31, 2017, respectively.

Purchases and Sales (Investment Transactions)

Investment purchases, sales and principal payments/paydowns are summarized below for the three months ended March 31, 2018 and March 31, 2017.

	For the three months ended March 31,
	2018		2017
Investment purchases, at cost (including PIK interest and dividends)	$	30,318,967	$	32,094,938
Investment sales, proceeds (including principal payments/paydown proceeds)		47,628,196		23,183,083

Alcentra Capital InterNotes®

On January 30, 2015, the Company entered into a Selling Agent Agreement with Incapital LLC, as purchasing agent for the Company's issuance of $40.0 million of Alcentra Capital InterNotes®. On January 25, 2016, the Company entered into an additional Selling Agent Agreement with Incapital LLC, as purchasing agent for the Company’s issuance of up to $15 million of Alcentra Capital InterNotes®.

These notes are direct unsecured obligations and each series of notes will be issued by a separate trust (administered by U.S. Bank). These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.

During the three months ended March 31, 2018, the Company issued $0 million in aggregate principal amount of the Alcentra Capital InterNotes® for net proceeds of $0 million. For the three months ended March 31, 2018 and 2017, the Company borrowed an average of $55.0 million and $55.0 million with a weighted average interest rate of 6.47% and 6.47%, respectively.

The following table summarizes the Alcentra Capital InterNotes® issued and outstanding during the three months ended March 31, 2018.

Tenor at Origination	Principal Amount		Interest Rate		Weighted Average
(in years)	(000’s omitted)		Range		Interest Rate			Maturity Date Range
5	$	53,582		6.25% - 6.50%		6.38	%		February 15, 2020 - June 15, 2021
7		1,418		6.50% - 6.75%		6.63	%		January 15, 2022 - April 15, 2022
	$	55,000

In connection with the issuance of the Alcentra Capital InterNotes®, the Company incurred $1.196 million of fees which are being amortized over the term of the notes and are included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of March 31, 2018. During the three months ended March 31, 2018 the Company recorded $0.126 million of interest costs and amortization of offering costs on the Alcentra Capital InterNotes® as interest expense.

10.

Credit Facility/Line of Credit

On May 8, 2014, the Company entered into a senior secured revolving credit agreement (the “Credit Facility”) with ING Capital LLC (“ING”), as administrative agent, collateral agent and lender, and the lenders from time to time party thereto, to provide liquidity in support of its investment and operational activities. The Credit Facility had an initial commitment of $80 million with an accordion feature that allowed for an increase in the total commitments up to $160 million, subject to certain conditions and the satisfaction of specified financial covenants. The Credit Facility was amended on August 11, 2015 to increase the accordion feature to allow for a future increase of the total commitments up to $250 million, subject to satisfaction of certain conditions at the time of any such future increase. As amended, the Credit Facility has a maturity date of August 11, 2020 and bears interest, at our election, at a rate per annum equal to (i) 2.25% plus the highest of a prime rate, the Federal Funds rate plus 0.5%, three month LIBOR plus 1%, and zero or (ii) 3.25% plus the one, three or six month LIBOR rate, as applicable.

On March 2, 2016, the Company amended certain provisions of the Credit Facility relating to the treatment of approximately $38.6 million in aggregate principal amount of outstanding Notes that mature prior to the Credit Facility. Among other things, the amendments to the Credit Facility provide that, in the nine-month period prior to the maturity of these particular Notes, which mature between February 15 and April 15, 2020, the Company's ability to borrow under the Credit Facility will be reduced by and in the amount of such Notes still outstanding during such time. The Credit Facility is secured primarily by the Company’s assets. Costs of $3.8 million were incurred in connection with obtaining and amending the Credit Facility, which have been recorded as deferred financing costs on the Consolidated Statements of Assets and Liabilities and are being amortized over the life of the Credit Facility.

Amounts available to borrow under the Credit Facility are subject to a minimum borrowing /collateral base that applies an advance rate to certain investments held by the Company. The Company is subject to limitations with respect to the investments securing the Credit Facility, including, but not limited to, restrictions on sector concentrations, loan size, portfolio company leverage which may affect the borrowing base and therefore amounts available to borrow.

The Company pays a commitment fee between 0.5% and 1.0% per annum based on the size of the unused portion of the Credit Facility. This fee is included in interest expense on the Company’s Consolidated Statements of Operations.

The Company has made customary representations and warranties and is required to comply with various covenants and reporting requirements. These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility. On March 9, 2018, the Company entered into Amendment No. 6 (the “Amendment”) to its Credit Facility. The Credit Facility was amended to modify certain financial covenants to (i) reduce the stockholders’ equity that the Company is required to maintain for the period from December 31, 2017 to June 30, 2018, (ii) reduce the asset coverage ratio that the Company is required to maintain from 2.25 to 2.00 for the period from December 31, 2017 to June 30, 2018, and (iii) reduce the net worth that the Company is required to maintain from $149,559,368 to $126,201,991 for the period from December 31, 2017 to June 30, 2018. The Credit Facility also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, and certain change in control events. As of March 31, 2018, and after giving effect to the Amendment, the Company was in compliance in all material respects with the terms of the Credit Facility.

As of March 31, 2018 and December 31, 2017, the Company had United States dollar borrowings of $55.4 million and $89.7 million outstanding under the Credit Facility, respectively. For the three months ended March 31, 2018 and March 31, 2017, the Company borrowed an average of $56.4 million and $38.9 million, respectively, with a weighted average interest rate of 4.91% and 4.27%, respectively.

11.

Market and Other Risk Factors

At March 31, 2018, a portion of the Company’s portfolio investments are comprised of non-publicly-traded securities. The non-publicly-traded securities trade in an illiquid marketplace. The portfolio is comprised of investments in the 21 industries listed in Note 13. Risks affecting these industries include, but are not limited to, increasing competition, rapid changes in technology, government actions and changes in economic conditions. These risk factors could have a material effect on the ultimate realizable value of the Company’s investments.

The Company estimates the fair value of investments for which observable market prices in active markets do not exist based on the best information available, which may differ significantly from values that would have otherwise been used had a ready market for the investments existed and the differences could be material.

Market conditions may deteriorate, which may negatively impact the estimated fair value of the Company’s investments or the amounts which are ultimately realized for such investments.

The above events are beyond the control of the Company and cannot be predicted. Furthermore, the ability to liquidate investments and realize value is subject to significant limitations and uncertainties. There may also be risk associated with the concentration of investments in one geographic region or in certain industries.

12.

Commitments and Contingencies

In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. In addition, the Company has agreed to indemnify its officers, directors, employees, agents or any person who serves on behalf of the Company from any loss, claim, damage, or liability which such person incurs by reason of his performance of activities of the Company, provided they acted in good faith. The Company expects the risk of loss related to its indemnifications to be remote.

The Company’s investment portfolio may contain debt investments that are in the form of lines of credit and unfunded delayed draw commitments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of March 31, 2018 and December 31, 2017, the Company had $12.4 million and $17.2 million in unfunded commitments under loan and financing agreements, respectively. As of March 31, 2018 and December 31, 2017, the Company’s unfunded commitment under loan and financing agreements are presented below.

	As of
	March 31, 2018		December 31, 2017

Cirrus Medical Staffing, Inc.	$	2,618,182	$	4,000,000
Healthcare Associates of Texas, LLC		4,000,000		6,900,000
IGT		-		500,000
NTI Holdings, LLC		1,258,540		1,258,540
Pharmalogics Recruiting, LLC		2,000,000		2,000,0000
Superior Controls, Inc.		2,500,000		2,500,000
Total	$	12,376,722	$	17,158,540

13.

Classification of Portfolio Investments

As of March 31, 2018, the Company’s portfolio investments were categorized as follows:

Industry	Cost		Fair Value		% of Net Assets*
Healthcare Services	$	49,095,740	$	49,190,603		31.30	%
Business Services		46,169,106		46,502,027		29.58	%
Technology & Telecom		23,810,912		23,353,553		14.86	%
Industrial Services		21,772,785		21,635,435		13.76	%
High Tech Industries		20,722,196		20,760,955		13.21	%
Telecommunications		17,579,877		19,617,336		12.48	%
Wholesale/Distribution		15,179,205		15,614,192		9.93	%
Security		15,388,870		14,153,009		9.00	%
Retail		13,287,908		13,676,206		8.70	%
Oil & Gas Services		16,263,301		11,225,377		7.14	%
Environmental/Recycling Services		6,474,293		6,693,294		4.26	%
Media: Advertising, Printing & Publishing		12,677,834		6,554,225		4.17	%
Transportation Logistics		7,674,454		5,474,294		3.48	%
USD CLO		5,347,625		5,347,625		3.40	%
Insurance		4,845,217		4,869,445		3.10	%
Waste Services		2,529,303		2,771,797		1.76	%
Consumer Services		2,035,000		2,028,440		1.29	%
Industrial Manufacturing		500,000		719,046		0.47	%
Media & Entertainment		10,355,366		2		0.0	%
Automotive Business Services		8,496,239		1		0.0	%
Education		15,863,517		1		0.0	%
Total	$	316,068,748	$	270,186,863		171.89	%

Investment Type
Senior Secured - First Lien	$	172,559,747	$	168,111,863		106.95	%
Senior Subordinated		56,154,289		41,358,480		26.31	%
Equity/Other		45,907,387		29,295,760		18.64	%
Senior Secured - Second Lien		36,099,700		26,073,135		16.59	%
CLO/Structured Credit		5,347,625		5,347,625		3.40	%
Total	$	316,068,748	$	270,186,863		171.89	%

*Fair value as a percentage of Net Assets

Geographic Region
Southeast	$	93,534,143	$	72,546,667		46.15	%
South		61,512,509		53,181,960		33.84	%
Northeast		48,441,597		45,660,945		29.05	%
Midwest		40,555,021		34,187,044		21.75	%
West		41,654,345		34,031,063		21.65	%
Canada		22,988,508		23,199,999		14.76	%
US		5,347,625		5,347,625		3.40	%
Netherlands		2,035,000		2,031,560		1.29	%
Total	$	316,068,748	$	270,186,863		171.89	%

As of December 31, 2017, the Company’s portfolio investments were categorized as follows:

Industry	Cost		Fair Value		% of Net Assets*
Healthcare Services	$	55,159,796	$	55,289,718		35.06	%
Business Services		51,334,231		51,724,999		32.80	%
Industrial Services		29,762,072		29,668,447		18.81	%
Technology & Telecom		23,951,328		23,318,694		14.79	%
Wholesale/Distribution		19,281,908		19,684,932		12.48	%
High Tech Industries		18,677,481		18,729,396		11.88	%
Telecommunications		15,641,231		17,677,538		11.21	%
Retail		13,807,599		14,192,432		9.00	%
Security		15,358,937		14,135,409		8.96	%
Oil & Gas Services		16,193,495		11,168,822		7.08	%
Industrial Manufacturing		8,833,734		9,219,455		5.85	%
Environmental/Recycling Services		7,601,167		7,820,167		4.96	%
Media: Advertising, Printing & Publishing		12,677,834		6,678,442		4.22	%
Transportation Logistics		7,691,296		5,474,294		3.47	%
Waste Services		2,529,303		2,771,797		1.76	%
Media & Entertainment		10,355,366		2		0.0	%
Education		15,863,517		1		0.0	%
Automotive Business Services		8,496,239		—		0.0	%
Total	$	333,216,534	$	287,554,545		182.33	%

Geographic Region
Southeast	$	99,474,605	$	78,667,734		49.88	%
Northeast		57,107,756		54,446,210		34.52	%
West		57,327,891		49,593,273		31.45	%
South		56,444,310		48,087,167		30.49	%
Midwest		39,883,664		33,560,162		21.28	%
Canada		22,978,308		23,199,999		14.71	%
Total	$	333,216,534	$	287,554,545		182.33	%

Investment Type
Senior Secured - First Lien	$	181,664,266	$	177,340,027		112.44	%
Senior Subordinated		81,397,386		66,884,849		42.41	%
Equity/Other		45,824,064		29,125,978		18.47	%
Senior Secured - Second Lien		24,330,818		14,203,691		9.01	%
Total	$	333,216,534	$	287,554,545		182.33	%

*Fair value as a percentage of Net Assets

14.

Financial Highlights

The following per share data and financial ratios have been derived from information provided in the consolidated financial statements of the Company. The following is a schedule of financial highlights for the three months ended March 31, 2018 and March 31, 2017.

	For the three months ended			For the three months ended
	March 31, 2018			March 31, 2017
	(Unaudited)			(Unaudited)
Per share data ⁽¹⁾
Net asset value, beginning of period	$	11.09		$	13.72

Net investment income (loss)		0.27			0.34
Net realized and unrealized gains (losses) ⁽⁷⁾		0.04			(0.21	)
Benefit (Provision) for taxes on unrealized appreciation (depreciation) on investments		0.00			(0.05	)
Net increase (decrease) in net assets resulting from operations		0.31			0.08

Distributions to shareholders: ⁽²⁾
From net investment income		(0.18	)		(0.34	)
Net realized gains		0.00			(0.03	)
Total dividend distributions declared		(0.18	)		(0.37	)


Net asset value, end of period	$	11.22		$	13.43
Market value per share, end of period	$	6.96		$	13.74

Total return based on net asset value ⁽³⁾⁽⁴⁾		2.8	%		0.6	%
Total return based on market value ⁽³⁾⁽⁴⁾		(14.9	)%		17.9	%

Shares outstanding at end of period		14,010,374			13,437,059

Ratio/Supplemental Data:
Net assets, at end of period	$	157,182,400		$	180,418,443
Ratio of total expenses before waiver to average net assets ⁽⁵⁾		10.76	%		10.24	%
Ratio of interest expenses to average net assets ⁽⁵⁾		4.63	%		4.03	%
Ratio of incentive fees to average net assets ⁽⁵⁾		—	%		1.45	%
Ratio of net expenses to average net assets ⁽⁵⁾		10.76	%		10.24	%
Ratio of net investment income (loss) before waiver to average net assets ⁽⁵⁾		10.32	%		10.21	%
Ratio of net investment income (loss) after waiver to average net assets ⁽⁵⁾		10.32	%		10.21	%

Total Credit Facility payable outstanding	$	55,403,273		$	46,933,273
Total Notes payable outstanding	$	55,000,000		$	55,000,000

Asset coverage ratio ⁽⁶⁾		2.4			2.8
Portfolio turnover rate ⁽⁴⁾		11	%		8	%

(1)

The per share data was derived by using the average shares outstanding during the period.

(2)

The per share data for distributions is the actual amount of distributions paid or payable per share of common stock outstanding during the entire period.

(3)

Returns are historical and are calculated by determining the percentage change in net asset value or market value with all distributions reinvested. Distributions are assumed to be reinvested at prices obtained under the Company’s dividend reinvestment plan.

(4)

Not Annualized.

(5)

Annualized, except for consulting fees.

(6)

Asset coverage ratio is equal to (i) the sum of (A) net assets at the end of the period and (B) debt outstanding at the end of the period, divided by (ii) total debt outstanding at the end of the period.

(7)

The amount shown at this caption is the balancing figure derived from the other figures in the schedule. The amount shown at this caption for a share outstanding throughout the year may not agree with the change in the aggregate gains and losses in portfolio securities for the year because of the timing of purchases or sales of the Company's shares in relation to fluctuating market values for the portfolio.

15.

Unconsolidated Significant Subsidiaries

In accordance with the SEC’s Regulation S-X and GAAP, we have a subsidiary that is not required to be consolidated. We have a certain unconsolidated significant subsidiary, FST Technical Services, LLC ("FST") that pursuant to Rule 4-08(g) of Regulation S-X, summarized financial information is presented below in aggregate as of and for the three months ended March 31, 2018 and as of and for the year ended December 31, 2017.

	As of			For the three months ended
Balance Sheet	March 31, 2018		Income Statement	March 31, 2018

Current Assets		7,254,001	Net Sales		4,044,685
Noncurrent Assets		18,367,144	Gross Profit		1,314,079
Current Liabilities		1,782,310	Net Income/EBITDA		708,274
Noncurrent Liabilities		14,003,599

	As of			For the year ended
Balance Sheet	December 31, 2017		Income Statement	December 31, 2017

Current Assets		6,276,379	Net Sales		19,716,632
Noncurrent Assets		18,281,690	Gross Profit		6,534,303
Current Liabilities		1,022,247	Net Income/EBITDA		3,339,407
Noncurrent Liabilities		14,003,599

In addition to the risks associated with our investments in general, there are unique risks associated with our investment in this entity.

The business and growth of FST depends in large part on the continued trend toward outsourcing of certain services in the semiconductor and biopharmaceutical industries. There can be no assurance that this trend in outsourcing will continue, as companies may elect to perform such services internally. A significant change in the direction of this trend generally, or a trend in the semiconductor and biopharmaceutical industry not to use, or to reduce the use of, outsourced services such as those provided by it, could significantly decrease its revenues and such decreased revenues could have a material adverse effect on it or its results operations or financial condition.

16.

Subsequent Events

The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued.

Subsequent to March 31, 2018, the following activity occurred:

On April 2, 2018, Cirrus Medical Staffing paid down $290,909 of its revolver.

On April 4, 2018, Alcentra paid a dividend to shareholders of record as of March 30, 2018 of $0.18 per share.

On April 4, 2018, Superior Controls paid back $3 million of its 1st lien debt.

On April 30, 2018, Cirrus Medical Staffing paid down $363,636 of its revolver.

On May 4, 2018, the Board of Directors approved the 2018 second quarter dividend of $0.18 per share for shareholders of record June 29, 2018 and payable July 5, 2018.

As of May 4, 2018, $3.2 million of common stock had been repurchased by the Company through the $5.0 million share repurchase program.

On May 4, 2018, the Adviser agreed to a permanent 25 basis point reduction, effective as of May 1, 2018, across all of the base management fee breakpoints under the Company’s investment advisory agreement. The Adviser has also agreed to an additional temporary 25 basis point reduction, from May 1, 2018 to April 30, 2019, across all of these base management fee breakpoints.

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

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements, which relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including statements as to:

•

our future operating results, including the performance of our existing investments;

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the introduction, withdrawal, success and timing of business initiatives and strategies;

•

changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

•

the relative and absolute investment performance and operations of our investment adviser;

•

the impact of increased competition;

•

the impact of investments we intend to make and future acquisitions and divestitures;

•

our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;

•

the unfavorable resolution of any future legal proceedings;

•

our business prospects and the prospects of our portfolio companies;

•

our regulatory structure and tax status;

•

the adequacy of our cash resources and working capital;

•

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

•

the impact of interest rate volatility on our results, particularly because we use leverage as part of our investment strategy;

•

the ability of our portfolio companies to achieve their objective;

•

the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our investment adviser;

•

the impact of activist shareholders on professional fees and management distractions;

•

our contractual arrangements and relationships with third parties;

•

our ability to access capital and any future financings by us;

•

the ability of our investment adviser to attract and retain talented professionals; and

•

the impact of changes to tax legislation and, generally, our tax position.

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” “plan” or similar words.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained in this quarterly report on Form 10-Q.

Overview

Alcentra Capital Corporation (the “Company”, “Alcentra”, “ACC”, “we”, “us” or “our”) was formed as a Maryland corporation on June 4, 2013 as an externally managed, non-diversified closed-end management investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). Alcentra is managed by Alcentra NY, LLC (the “Adviser”, or “Alcentra NY”), registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). State Street Bank and Trust Company (“State Street”) provides us with financial reporting, post-trade compliance, and treasury services. In addition, for U.S. federal income tax purposes, Alcentra has elected to be treated as a regulated investment company (“RIC”), commencing with tax year ended December 31, 2014, under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

BNY Mellon-Alcentra Mezzanine III, L.P. (the “Partnership” or “Fund III”) is a Delaware limited partnership, which commenced operations on May 14, 2010. The Partnership was formed for the purpose of seeking current income and long-term capital appreciation by making investments in senior debt securities, mezzanine debt securities, and common and preferred equity securities with equity rights or participations in U.S.-based middle market companies. BNY Mellon-Alcentra Mezzanine III (GP), L.P. (the “General Partner”), a Delaware limited liability company, is the General Partner of the Partnership. BNY Mellon-Alcentra Mezzanine Partners (the “Manager”), a division of Alcentra NY, LLC (“Alcentra Group”) and an affiliate of the General Partner, manages the investment activities of the Partnership. Alcentra NY, LLC is a majority-owned, indirect subsidiary of The Bank of New York Mellon Corporation.

On May 14, 2014, Alcentra completed its initial public offering (the “Offering”), at a price of $15.00 per share. Through its initial public offering the Company sold 6,666,666 shares for gross proceeds of approximately $100,000,000. On June 6, 2014, Alcentra sold 750,000 shares through the underwriters' exercise of the overallotment option for gross proceeds of $11,250,000.

Immediately prior to the Offering, Fund III sold all of its assets other than its investment in the shares of common stock and warrants to purchase common stock of GTT Communications (the “Fund III Acquired Assets”) to the Company for $64.4 million in cash and $91.5 million in shares of the Company's common stock. Concurrent with the acquisition of the Fund III Acquired Assets from Fund III, the Company also purchased for $29 million in cash certain additional investments (the “Warehouse Portfolio”) from Alcentra Group. The Warehouse Portfolio consisted of approximately $29 million in debt investments originated by the investment professionals of the Manager and purchased by Alcentra Group using funds under a warehouse credit facility provided by The Bank of New York Mellon Corporation in anticipation of the Offering.

The Company entered into a senior secured term loan agreement (the “Bridge Facility”) with ING Capital LLC as lender that it used to fund the purchase of the Warehouse Portfolio and to fund the cash portion of the consideration paid to Fund III. In May 2014, the Company used $94.2 million of the proceeds from the Offering to repay the Bridge Facility in full.

On May 22, 2017 Alcentra Capital Corporation completed an underwritten primary offering of 808,161 shares of its common stock at a public offering price of $13.68 per share for proceeds of approximately $10.9 million after deducting sales load and offering expenses.

Our investment objective is to generate primarily current income and, to a lesser extent, capital appreciation through debt and equity investments, respectively by targeting lower middle and middle-market companies (typically those with $5.0 million to up to $75 million of EBITDA) through first lien, second lien, unitranche and, to a lesser extent given the current credit environment, mezzanine debt and equity investments.

We arerequired to comply with certain regulatory requirements such as not acquiring any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets. Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private operating companies, operating companies whose securities are not listed on a national securities exchange, and certain public operating companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized and with their principal place of business in the United States.

Portfolio Composition and Investment Activity

Portfolio Composition

We invest primarily in lower-middle and middle-market companies (typically those with $5.0 million to up to $75 million of EBITDA) through first lien, second lien, unitranche and, to a lesser extent given the current credit environment, mezzanine debt. We have expanded our investment strategy to include larger middle market companies and investments that have more seniority in a portfolio company’s capital structure, a security interest in the company’s collateral, and floating rate exposure that generally have more of a propensity to withstand changes in the economy, capital markets or other factors affecting such portfolio company. This expansion is a reflection of the current conditions of the debt capital markets combined with the Adviser’s view that we are in the later stages of the credit cycle. We are executing this portfolio rotation to focus on stabilizing net asset value per share and minimizing credit losses associated with our historic focus on unsecured mezzanine debt and equity investment. The rotation to having a larger percentage of our portfolio in the senior part of the capital structure provides added protections, rights and remedies in case of a downturn in the economy or specific company performance issues. The addition of collateral also enhances our creditor rights during a workout or bankruptcy proceeding relative to other unsercured creditors. Lastly, more floating rate debt investments, versus fixed rate mezzanine debt, should reduce our exposure to interest rate increases. We believe that these measures are in the best interests of our stockholders; however, these shifts will likely result in a decrease in the weighted average yield on our investment portfolio. Although we expect that these measures will mitigate our investment-related risks to an extent, we also expect the weighted average yields on our portfolio will decrease as a result of the change in our investment strategy. We believe these measures are in the best interests of our stockholders to preserve the principal amounts of our loans.

Additionally, we will seek to increase the diversification of our portfolio through several measures including, but not limited to syndication of larger exposures to single issuers, the addition of “club” and syndicated loans that may, or may not be rated, through both primary and secondary market purchases and through co-investment with other funds sponsored by our Adviser in accordance with our recently approved co-investment application by the SEC. We will also utilize our new risk rating system, implemented in the third quarter of 2017, to guide the implementation of our diversification strategy and provide enhanced transparency to our stockholders.

During the three months ended March 31, 2018, we invested $29.6 million in debt investments, including one new portfolio company, two add on investments, six broadly syndicated loans and three rated CLO debt securities. These investments consisted of first lien debt ($12.4 million or 41.9%), second lien debt ($11.8 million or 40.0%), and CLO debt securities ($5.3 million or 18.1%). During the three months ended March 31, 2018 we received proceeds from sales or repayments, including principal, return of capital dividends and net realized gains (losses), of $47.6 million. During the three months ended March 31, 2017, we invested $31.9 million in debt and equity investments, including two new portfolio companies and five add on investments. These investments consisted of senior secured loans ($20.5 million, or 84.7%), subordinated notes ($2.6 million, or 10.7%), and equity securities ($1.1 million, or 4.7%). During the three months ended March 31, 2017 we received proceeds from sales or repayments, including principal, return of capital dividends and net realized gains (losses), of $22.2 million.

As of March 31, 2018, we had $270.2 million (at fair value) invested in 28 companies, 6 syndicated loans, and 3 CLOs. Our portfolio included approximately 62.2% of first lien debt, 9.7% of second lien debt, 15.3% of subordinated debt, 2.0% of CLOs, and 10.8% of equity investments at fair value. At March 31, 2018, our average portfolio company investment at amortized cost and fair value was approximately $7.9 million and $5.5 million, respectively, and our largest portfolio company investment by amortized cost and fair value was approximately $26.1 million and $26.1 million, respectively. At March 31, 2018, 67.0% of our debt investments bore interest based on floating rates (subject to interest rate floors), such as LIBOR, and 33.0% bore interest at fixed rates.

As of December 31, 2017, we had $287.6 million (at fair value) invested in 29 companies. Our portfolio included approximately 61.7% of first lien debt, 4.9% of second lien debt, 23.3% of subordinated debt and 10.1% of equity investments at fair value. At December 31, 2017, our average portfolio company investment at amortized cost and fair value was approximately $11.5 million and $9.9 million, respectively, and our largest portfolio company investment by amortized cost and fair value was approximately $23.3 million and $23.3 million, respectively. At December 31, 2017, 53.5% of our debt investments bore interest based on floating rates (subject to interest rate floors), such as LIBOR, and 46.5% bore interest at fixed rates.

The weighted average yield on debt investments as of March 31, 2018 and December 31, 2017 was 10.6% and 11.3%, respectively. The weighted average yield was computed using the effective interest rates for all of our debt investments, including accretion of original issue discount but excluding investments on non-accrual status, if any. The weighted average yield of our debt investments is not the same as a return on investment for our stockholders but, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our and our subsidiaries’ fees and expenses. There can be no assurance that the weighted average yield will remain at its current level.

Our investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require us to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of March 31, 2018 we had 5 such investments with an aggregate unfunded commitment of $12.4 million and at December 31, 2017 we had 6 such investments with an aggregate unfunded commitment of $17.2 million.

The following table shows the portfolio composition by investment type at fair value and cost with the corresponding percentage of total investments:

	Fair Value								Cost
	31-Mar-18				31-Dec-17				31-Mar-18				31-Dec-17
	(dollars in thousands)
Senior Secured - First Lien	$	168,112	62.2	%	$	177,340	61.7	%	$	172,560	54.6	%	$	181,664	54.5	%
Senior Secured - Second Lien		26,073	9.7	%		14,204	4.9	%		36,100	11.4	%		24,331	7.3	%
Senior Subordinated		41,358	15.3	%		66,885	23.3	%		56,154	17.8	%		81,397	24.4	%
CLO/Structured Credit		5,348	2.0	%		0	-	%		5,348	1.7	%		0	-	%
Equity/Other		29,296	10.8	%		29,126	10.1	%		45,907	14.5	%		45,824	13.8	%
Total	$	270,187	100.0	%	$	287,555	100	%	$	316,069	100.0	%	$	333,216	100	%

The following table shows portfolio composition by geographic region at fair value and cost with the corresponding percentage of total investments. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business.

	Fair Value								Cost
	31-Mar-18				31-Dec-17				31-Mar-18				31-Dec-17
	(dollars in thousands)
Southeast	$	72,547	26.9	%	$	78,668	27.4	%	$	93,534	29.6	%	$	99,475	29.9	%
South		53,182	19.7	%		48,087	16.7	%		61,513	19.5	%		56,444	16.9	%
Northeast		45,661	16.9	%		54,446	18.9	%		48,442	15.3	%		57,108	17.1	%
Midwest		34,187	12.7	%		33,560	11.7	%		40,555	12.8	%		39,884	12.0	%
West		34,031	12.6	%		49,593	17.2	%		41,654	13.2	%		57,327	17.2	%
Canada		23,200	8.6	%		23,200	8.1	%		22,989	7.3	%		22,978	6.9	%
US CLO		5,348	2.0	%				%		5,348	1.7	%		0	-	%
Netherlands		2,031	0.8	%		0	-	%		2,034	0.6	%		0	-	%
Total	$	270,187	100.0	%	$	287,555	100.0	%	$	316,069	100.0	%	$	333,217	100.0	%

The following table shows the detailed industry composition of our portfolio at fair value and cost as a percentage of total investments:

	Fair Value						Cost
	March 31, 2018			December 31, 2017			March 31, 2018			December 31, 2017
Healthcare Services		18.21	%		19.23	%		15.53	%		16.55	%
Business Services		17.21	%		17.99	%		14.61	%		15.41	%
Technology & Telecom		8.64	%		8.10	%		7.53	%		7.19	%
Industrial Services		8.01	%		10.32	%		6.89	%		8.93	%
High Tech Industries		7.68	%		6.51	%		6.56	%		5.61	%
Telecommunications		7.26	%		6.15	%		5.56	%		4.69	%
Wholesale/Distribution		5.78	%		6.85	%		4.80	%		5.79	%
Security		5.24	%		4.92	%		4.87	%		4.61	%
Retail		5.06	%		4.94	%		4.20	%		4.14	%
Oil & Gas Services		4.15	%		3.88	%		5.15	%		4.86	%
Environmental/Recycling Services		2.48	%		2.72	%		2.05	%		2.28	%
Media: Advertising, Printing & Publishing		2.43	%		2.32	%		4.01	%		3.80	%
Transportation Logistics		2.03	%		1.90	%		2.43	%		2.31	%
USD CLO		1.98	%		0.00	%		1.69	%		0.00	%
Insurance		1.80	%		0.00	%		1.53	%		0.00	%
Waste Services		1.03	%		0.96	%		0.80	%		0.76	%
Consumer Services		0.75	%		0.00	%		0.64	%		0.00	%
Industrial Manufacturing		0.26	%		3.21	%		0.16	%		2.65	%
Media & Entertainment		0.00	%		0.00	%		3.28	%		3.11	%
Automotive Business Services		0.00	%		0.00	%		2.69	%		2.55	%
Education		0.00	%		0.00	%		5.02	%		4.76	%
Grand Total		100.00	%		100.00	%		100.00	%		100.00	%

Portfolio Asset Quality

We will generally not accrue interest on loans and debt securities if principal or interest cash payments are past due 30 days or we have reason to doubt our ability to collect such interest. As of March 31, 2018 and December 31, 2017, we had four and three loans on non accrual respectively.

Results of Operations

Comparison of three months ended March 31, 2018 and March 31, 2017

Investment Income

For the three months ended March 31, 2018, total investment income was $8.2 million, a decrease of $1.0 million, or (10.9)% over the $9.2 million of total investment income for the three months ended March 31, 2017. This decrease was due to the continued yield compression in the markets, the previously announced conversion of debt to equity in Conisus LLC, and the loss of income from GST Autoleather, My Alarm Center, LLC, Southern Technical Institute, and Media Storm LLC. There was non-recurring income, in the form of a prepayment penalty, which offset the overall decline.

We generate revenue in the form of interest income on debt investments and capital gains and distributions, if any, on investment securities that we may acquire in portfolio companies. Our debt investments typically have a term of five to seven years and bear interest at a fixed or floating rate. Our investment strategy will continue to focus on more floating rate investments to protect against rising interest rates. Interest on our debt securities is generally payable quarterly. Payments of principal on our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments may pay interest in-kind, or PIK, however, we will continue to avoid PIK features in new portfolio investments. Any outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the maturity date. The level of interest income we receive is directly related to the balance of interest-bearing investments multiplied by the weighted average yield of our investments. We expect that the total dollar amount of interest and any dividend income that we earn to increase as the size of our investment portfolio increases. In addition, we may generate revenue in the form of prepayment fees, commitment, loan origination, structuring or due diligence fees, fees for providing significant managerial assistance and consulting fees. All of these fees, net of any out-of-pocket expenses are passed on as income to our shareholders.

Expenses

For the three months ended March 31, 2018, total expenses were $4.4 million, which was a decrease of $0.2 million, or 4.4%, over the $4.6 million for the three months ended March 31, 2017. Interest and financing expenses for the three months ended March 31, 2018 were $1.9 million, and $1.9 million for the three months ended March 31, 2017. The base management fee decreased $0.01 million, or 1.2%, to $1.234 million for the three months ended March 31, 2018 due to lower average total assets less cash and cash equivalents than the comparable period in 2017. The incentive fee for the three months ended March 31, 2018 was $0, and $0.654 in the comparable period in 2017. The administrative service fee, professional fees and other general and administrative expenses totaled $1.245 million of which $0.305 million was comprised of consulting fees which are non-recurring expenses for the three months ended March 31, 2018 compared to a total of $0.794 million for the three months ended March 31, 2017. The consulting fees were incurred as we explore lowering our cost of capital and the overall capital structure.

Net Investment Income

Net investment income for the three months ended March 31, 2018 was $3.8 million, a decrease of $0.8. million, or 17.8%, compared to net investment income of $4.6 million during the three months ended March 31, 2017.

Net Increase (Decrease) in Net Assets Resulting From Operations

For the three months ended March 31, 2018, the net realized loss from portfolio investments was $0.015 million. For the three months ended March 31, 2017, realized losses of $1.0 million were largely due to the secondary sale of Wholesome Sweeteners.

During the three months ended March 31, 2018, we recorded a net change in unrealized depreciation from portfolio investments of $0.2 million. During the three months ended March 31, 2017, the net change in unrealized depreciation from portfolio investments of $1.8 million attributable to net unrealized depreciation on debt investments.

As a result of these events, our net increase in net assets resulting from operations during the three months ended March 31, 2018 was $3.5 million, an increase of $2.5 million, or 243.2%, compared to a net increase in net assets resulting from operations of $1.03 million during the three months ended March 31, 2017.

Provision for Taxes on Unrealized Appreciation on Investments

We have a direct wholly owned subsidiary that has elected to be a taxable entity (the "Taxable Subsidiary"). The Taxable Subsidiary permit us to hold equity investments in portfolio companies which are "pass through" entities for tax purposes and continue to comply with the "source income" requirements contained in RIC tax provisions of the Code. The Taxable Subsidiary is not consolidated with us for income tax purposes and may generate income tax expense, benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. The income tax expense, or benefit, if any, and related tax assets and liabilities are reflected in our consolidated financial statements. For the three months ended March 31, 2018, we recognized a provision for income tax on unrealized loss on investments of $0.002 million.

Liquidity and Capital Resources

As of March 31, 2018, we had $13.4 million in cash and cash equivalents and our net assets totaled $157.2 million.

Our liquidity and capital resources are derived from the capital contributions and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and other operating expenses we incur, as well as distributions to our stock holders. We expect to use these capital resources as well as proceeds from turnover within our portfolio, borrowings under the Credit Facility and from public and private offerings of securities to finance our investment activities.

Although we expect to fund the growth of our investment portfolio through the net proceeds from future public and private equity offerings and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act, our plans to raise capital may not be successful. In this regard, if our common stock trades at a price below our then-current net asset value per share, we may be limited in our ability to raise equity capital given that we cannot sell our common stock at a price below net asset value per share unless our stockholders approve such a sale and our board of directors makes certain determinations in connection therewith.

Cash Flows

For the three months ended March 31, 2018, we experienced a net decrease in cash and cash equivalents in the amount of $0.5 million. During that period, $38.9 million was provided in cash from operating activities, primarily due to the return of capital of portfolio investments of approximately $47.6 million. This was partially offset by proceeds from the purchases of portfolio investments in of approximately $30.0 million. During the same period, financing activities decreased cash by $0.5 million primarily due to the repayments of the credit facility.

For the three months ended March 31, 2017, we experienced a net increase in cash and cash equivalents in the amount of $0.8 million. During that period, we used $2.2 million in cash from operating activities, primarily due to the purchase of portfolio investments of approximately $31.2 million. This was partially offset by proceeds from the return of capital of portfolio investments in of approximately $23.2 million. During the same period, financing activities increased cash by $4.7 million primarily due to the proceeds from the credit facility.

Capital Resources

On May 8, 2014, we entered into a senior secured revolving credit agreement (the “Credit Facility”) with ING Capital LLC, as administrative agent, collateral agent and a lender, and the lenders from time to time party thereto. The Credit Facility has outstanding commitments of $135 million, with an accordion feature that allows for an increase in total commitments up to $250 million, subject to satisfaction of certain conditions at the time of any such future increase. The Credit Facility has a maturity date of August 11, 2020 and a revolving period that expires on August 11, 2019. Amounts available to borrow under the Credit Facility are subject to a minimum borrowing base that applies an advance rate to certain portfolio investments. Borrowings under the Credit Facility bear interest, at our election, at a rate per annum equal to (i) 3.25% plus the one, three or six month LIBOR rate, as applicable, or (ii) 2.25% plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero. We pay a commitment fee ranging from 0.5% to 1.0% per annum based on the size of the unused portion of the Credit Facility. The Credit Facility is secured by a first priority security interest in all of our portfolio investments, the equity interests in certain of our direct and indirect subsidiaries, and substantially all of our other assets.

The Credit Facility also contains customary terms and conditions, including, without limitation, affirmative and negative covenants, including, without limitation, information reporting requirements, a minimum stockholders’ equity, a minimum asset coverage ratio of 2.00 to 1 for the period from December 31, 2017 to June 30, 2018 and 2.25% to 1 at any other time, a minimum interest coverage ratio of 2.50 to 1 as of the last day of any fiscal quarter, a minimum liquidity test, a minimum net worth of $126,201,991 from December 31, 2017 through June 30, 2018 and $149,559,368 at any other time, and maintenance of RIC and BDC status. See “Item 9B — Other Information — Amendment to the Credit Facility.” The Credit Facility also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, and certain change in control events.

As of March 31, 2018, we are in compliance with all covenants of the Credit Facility and there was $55.4 million outstanding.

Also, as a business development company, we generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 200%. We were in compliance with the asset coverage ratios at all times. As of March 31, 2018 our asset coverage ratio was 242%.

Regulated Investment Company Status and Distributions

We have elected to be treated as a RIC under Subchapter M of the Code beginning the fiscal year ending December 31, 2014. If we qualify as a RIC, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to stockholders on a timely basis.

Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation until realized. Dividends declared and paid by us in a year may differ from taxable income for that year as such dividends may include the distribution of current year taxable income or the distribution of prior year taxable income carried forward into and distributed in the current year. Distributions also may include returns of capital.

To qualify for RIC tax treatment, we must, among other things, distribute, with respect to each taxable year, at least 90% of our investment company net taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any). If we qualify as a RIC, we will also be subject to a federal excise tax, based on distributive requirements of our taxable income on a calendar year basis.

We intend to distribute to our stockholders between 90% and 100% of our annual taxable income (which includes our taxable interest and fee income).

Investment Advisory Agreement

Under the Advisory Agreement, Alcentra pays Alcentra NY, LLC (the “Adviser”) a base management fee calculated at an annual rate as follows: 1.75% of its gross assets (i.e., total assets held before deduction of any liabilities), including assets purchased with borrowed funds or other forms of leverage and excluding cash and cash equivalents (such as investments in U.S. Treasury Bills), if its gross assets are below $625 million; 1.625% of its total gross assets if our gross assets are between $625 million and $750 million; and 1.5% of its gross assets if its assets are greater than $750 million. These various management fee percentages (i.e. 1.75%, 1.625% and 1.5%) would apply to ACC’s entire gross assets in the event its gross assets exceed the various gross asset thresholds.

In addition, ACC pays the Adviser an incentive fee under the Advisory Agreement which consists of two parts. The first part, which is calculated and payable quarterly in arrears, equals 20% of ACC’s “pre-incentive fee net investment income” for the immediately preceding quarter, subject to a hurdle rate of 2% per quarter (8% annualized), and is subject to a “catch-up” feature. The second part is calculated and payable in arrears as of the end of each calendar year (or, upon termination of the Advisory Agreement, as of the termination date) and equals 20% of ACC’s aggregate cumulative realized capital gains from inception through the end of each calendar year, computed net of aggregate cumulative realized capital losses and aggregate cumulative unrealized capital depreciation through the end of such year, less the aggregate amount of any previously paid capital gain incentive fees.

Critical Accounting Policies

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. See “Note 2 - Summary of Significant Accounting Policies” in the notes to our financial statements for a description of our significant accounting policies.

Valuation of portfolio investments

We generally invest in illiquid loans and securities including debt of lower-middle and middle-market companies and, to a lesser extent, equity investments in such companies. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by our board of directors. Such determination of fair values may involve subjective judgments and estimates, although we engage independent valuation providers to review the valuation of each portfolio investment that does not have a readily available market quotation at least once annually. With respect to unquoted securities, we value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies and other factors.

Because there is not a readily available market for substantial amount of the investments in our portfolio, we value most of our portfolio investments at fair value as determined in good faith by our board of directors using a documented valuation policy and a consistently applied valuation process. 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 our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

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

•

Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Adviser responsible for the portfolio investment;

•

Preliminary valuation conclusions are then documented and discussed with our Adviser’s Investment Committee;

•

Independent valuation firms engaged by the valuatioon committee of our board of directors will prepare valuations on a selected basis and submit reports to the board of directors;

•

The valuation committee of our board of directors then reviews these preliminary valuations; and

•

The board of directors then discusses valuations and approves the fair value of each investment in our portfolio in good faith, based the input of Adviser, the independent valuation firm and the valuation committee.

As part of our valuation procedures, we risk rate all of our investments. In general, our investment rating system uses a scale of 1 to 5. Our internal rating is not an exact system, but it is used internally to estimate the probability, among other things, of: (i) default on our investments and (ii) loss of our principal. In general, our internal rating system may also assist our board of directors in its determination of the fair value of our investments. Our internal risk rating system generally encompasses both qualitative and quantitative aspects of our portfolio companies.

Rating	Definition

1	The investment has an acceptable level of risk and the company is generally performing with risk factors being neutral to favorable. All investments in new investments and certain restructured investments are initially assessed a grade of 1.

2	The investment is performing with risk factors being neutral to slightly unfavorable since the time of underwriting.

3	The investment is performing below expectations. With respect to debt investments, the company is generally out of compliance with certain covenants, current or future interest payments could be impacted. With respect to equity investments, dividend payments or return of capital could be impacted.

4	The investment is performing materially below expectations. With respect to debt investments, debt covenants are out of compliance and interest payments are, or expected to be, delinquent and the principal amount of the debt investment is not expected to be repaid in full. With respect to equity investments, dividend payments are not expected to be paid and the principal amount of the equity investment is not expected to be returned.

5	The investment is performing substantially below expectations. With respect to debt investments, interest payments are not being made and the investment is on non-accrual. With respect to equity investments, dividend payments are not being paid or accrued and principal amount of the equity investment is not expected to be returned.

Our internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments. A review of each investment is made regularly and any changes will be made to the internal performance ratings accordingly. In connection with our valuation process, our board of directors along with the valuation committee of our board of directors will review these internal performance ratings on a quarterly basis.

Rating Summary – March 31, 2018
(dollars in thousands)

Risk Rating	Cost	% of Cost		FMV	% of FMV
1	145,546	49	%	150,315	60	%
2	79,425	27	%	77,989	31	%
3	25,419	9	%	17,026	7	%
4	12,678	4	%	6,554	2	%
5	34,715	11	%	0	0	%
	297,783	100.0	%	251,884	100.0	%

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, we do not accrue PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. We will not accrue interest on loans and debt securities if principal or interest cash payments are past due 30 days or more and/or we have reason to doubt our ability to collect such interest.

Loan origination fees, original issue discount and market discount or premium are capitalized, and we then accrete or amortize such amounts using the effective interest method as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination is recorded as interest income. We record prepayment premiums on loans and debt securities as interest income.

Recent Developments

Subsequent to March 31, 2018, the following activity occurred:

On April 2, 2018, Cirrus Medical Staffing paid down $290,909 of its revolver.

On April 4, 2018, Alcentra paid a dividend to shareholders of record as of March 30, 2018 of $0.18 per share.

On April 4, 2018, Superior Controls paid back $3 million of its 1st lien debt.

On April 30, 2018, Cirrus Medical Staffing paid down $363,636 of its revolver.

On May 4, 2018, the Board of Directors approved the 2018 second quarter dividend of $0.18 per share for shareholders of record June 29, 2018 and payable July 5, 2018.

As of May 4, 2018, $3.2 million of common stock had been repurchased by the Company through the $5.0 million share repurchase program.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. For the three months ended March 31, 2018, 20 loans in the portfolio bore interest at floating rates, or 67% of the fair value of our portfolio. For the year ended December 31, 2017, 12 of the loans in the portfolio bore interest at floating rates, or 54% of the fair value of our portfolio. Assuming that the Statement of Assets and Liabilities as of March 31, 2018, were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical one or two percent increase in LIBOR would have less than a 2% effect on our portfolio. Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase in net assets resulting from operations, or net income. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate. We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contacts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio of investments. We have not engaged in any hedging activities to date.

Changes in interest rates will affect our cost of funding. Our interest expense will be affected by changes in certain published indices such as the LIBOR rate in connection with the Credit Facility.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of various members of management, including its Chief Executive Officer (“CEO”) and its Chief Financial Officer (“CFO”), has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.

(b) Changes in Internal Control Over Financial Reporting

Management did not identify any change in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not currently subject to any material legal proceedings, nor, to its knowledge, is any material legal proceeding threatened against it. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of its rights under contracts with its portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon its financial condition or results of operations.

Item 1A. Risk Factors

There has been no material change in the information provided under the heading “Risk Factors” in the Company’s annual report on Form 10-K filed with the SEC on March 14, 2018. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial may materially affect its business, financial condition and/or operating results.

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

Stock Repurchase Program

On November 2, 2017, our board of directors authorized a $2.5 million discretionary open-market share repurchase program under which we may repurchase shares of our common stock in the open market until the earlier of (i) November 2, 2018 or (ii) the repurchase of $2.5 million in aggregate amount of our common stock. On November 16, 2017, our board of directors authorized an extension of, and an increase in the amount of shares of our common stock that may be repurchased under, the discretionary share repurchase program until the earlier of (i) January 31, 2019 or (ii) the repurchase of $5.0 million in aggregate amount of our common stock. The timing and number of shares to be repurchased will depend on a number of factors, including market conditions and alternative investment opportunities. The $5.0 million share repurchase program may be suspended, terminated or modified at any time for any reason and does not obligate us to acquire any specific number of shares of our common stock.

The following table summarizes our share repurchases under our stock repurchase program for the three months ended March 31, 2018:

	Jan			Feb		Mar
	2018			2018		2018
Dollar amount repurchased		136,949			-		1,373,656
Shares repurchased		16,786			-		195,785
Average price per share (including commission)	$	8.16			N/A	$	7.02
Weighted average discount to net asset value		27.3	%		N/A		37.5	%

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On May 1, 2018, T. Ulrich Brechbuhl stepped down as a member of our board of directors in order to accept his appointment as Counselor to the Office of the Secretary of State. Subsequently, our board of directors approved the decrease in the size of the board of directors from six to five members.

On May 4, 2018, Paul Hatfield, the Co-Chief Investment Officer at the Adviser, resigned as the chairman and a member of our board of directors. Our board of directors appointed Vijay Rajguru, the Co-Chief Investment Officer at the Adviser, to the vacancy created by Mr. Hatfield’s resignation and elected him as the chairman of our board of directors. Mr. Rajguru was recently appointed to head up the Adviser's US direct lending efforts and his transition onto our board of directors is a direct outgrowth of this new appointment as well as the logistical and administrative benefits relating to board meetings and related duties given the significant amount of time that he spends in the US.

On May 4, 2018, the Adviser agreed to a permanent 25 basis point reduction, effective as of May 1, 2018, across all of the base management fee breakpoints under our investment advisory agreement. Concurrently therewith, the Adviser agreed to an additional temporary 25 basis point reduction, from May 1, 2018 to April 30, 2019, across all of these base management fee breakpoints.

On May 4, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the board of directors, approved the applicability of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act, to us. As a result, our asset coverage requirements for senior securities under the 1940 Act will be changed from 200% to 150%, effective as of May 4, 2019.

Item 6. Exhibits

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

Exhibit Number		Description

10.1		Amended And Restated Investment Advisory Agreement between Alcentra Capital Corporation and Alcentra NY, LLC*

10.2		Fee Waiver Letter between Alcentra Capital Corporation and Alcentra NY, LLC*

11.1		Computation of Per Share Earnings (included in the Registrant’s statement of operations)

31.1		Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 7, 2018

	By:	/s/ David Scopelliti
		Name: David Scopelliti
		Title: Chief Executive Officer and President

	By:	/s/ Ellida McMillan
		Name: Ellida McMillan
		Title: Chief Financial Officer, Chief Operating Officer, Secretary, and Treasurer

Exhibit 10.1

AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT

BETWEEN

ALCENTRA CAPITAL CORPORATION

AND

ALCENTRA NY, LLC

This Amended and Restated Investment Advisory Agreement (this “ Agreement ”) made this 4th day of May, 2018, by and between ALCENTRA CAPITAL CORPORATION, a Maryland corporation (the “ Company ”), and ALCENTRA NY, LLC, a Delaware limited liability company (the “ Adviser ”).

WHEREAS, the Company is a newly organized closed-end management investment fund that intends to elect to be treated as a business development company (“ BDC ”) under the Investment Company Act of 1940, as amended (the “ Investment Company Act ”); and

WHEREAS, the Adviser is registered under the Investment Advisers Act of 1940, as amended (the “ Advisers Act ”); and

WHEREAS, the Company desires to retain the Adviser to furnish investment advisory and certain administrative services to the Company on the terms and conditions hereinafter set forth, and the Adviser wishes to be retained to provide such services;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the parties hereby agree as follows:

Duties of the Adviser .

(a) The Company hereby employs the Adviser to act as the investment adviser to the Company and to manage the investment and reinvestment of the assets of the Company, subject to the supervision of the Board of Directors of the Company, (the “ Board ”), and provide certain administrative services to the Company as set forth herein for the period and upon the terms herein set forth, (i) in accordance with the investment objective, policies and restrictions that are set forth in the reports and/or registration statements that the Company files with the Securities and Exchange Commission (the “ SEC ”) from time to time; (ii) in accordance with all other applicable federal and state laws, rules and regulations, and the Company’s charter and by-laws; and (iii) in accordance with the Investment Company Act. Without limiting the generality of the foregoing, the Adviser shall, during the term and subject to the provisions of this Agreement (A) determine the composition of the portfolio of the Company, the nature and timing of the changes therein and the manner of implementing such changes; (B) identify, evaluate and negotiate the structure of the investments made by the Company; (C) execute, close, monitor and service the Company’s investments; (D) determine the securities and other assets that the Company shall purchase, retain, or sell; (E) perform due diligence on prospective portfolio companies; (F) provide the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its funds; (G) provide on the Company’s behalf significant managerial assistance to those portfolio companies that have requested such assistance; and (H) provide the Company with office facilities, equipment, clerical, bookkeeping and record keeping services at such office facilities and such other services as the Adviser, subject to review by the Board, shall from time to time determine to be necessary or useful to the Company’s operations. The Adviser shall have the power and authority on behalf of the Company to effectuate its investment decisions for the Company, including the execution and delivery of all documents relating to the Company’s investments and the placing of orders for other purchase or sale transactions on behalf of the Company. In the event that the Company determines to obtain debt financing, the Adviser shall arrange for such financing on the Company’s behalf, subject to the oversight and approval of the Board.

(b) The Adviser hereby accepts such employment and agrees during the term hereof to render the services described herein for the compensation provided herein.

(c) The Adviser is hereby authorized to enter into one or more sub-advisory agreements with other investment advisers (each, a “ Sub-Adviser ”) pursuant to which the Adviser may obtain the services of the Sub-Adviser(s) to assist the Adviser in fulfilling its responsibilities hereunder. Specifically, the Adviser may retain a Sub-Adviser to recommend specific securities or other investments based upon the Company’s investment objective and policies, and work, along with the Adviser, in structuring, negotiating, arranging or effecting the acquisition or disposition of such investments and monitoring investments on behalf of the Company, subject to the oversight of the Adviser and the Company. The Adviser and not the Company shall be responsible for any compensation payable to any Sub-Adviser. Any sub-advisory agreement entered into by the Adviser shall be in accordance with the requirements of the Investment Company Act and other applicable federal and state law.

(d) The Adviser shall, for all purposes herein provided, be deemed to be an independent contractor and, except as expressly provided or authorized herein, shall have no authority to act for or represent the Company in any way or otherwise be deemed an agent of the Company.

(e) Subject to review by and the overall control of the Board, the Adviser shall keep and preserve for the period required by the Investment Company Act any books and records relevant to the provision of its investment advisory services to the Company and shall specifically maintain all books and records with respect to the Company’s portfolio transactions and shall render to the Board such periodic and special reports as the Board may reasonably request. The Adviser agrees that all records that it maintains for the Company are the property of the Company and shall surrender promptly to the Company any such records upon the Company’s request, provided that the Adviser may retain a copy of such records.

Company’s Responsibilities and Expenses Payable by the Company .

All personnel of the Adviser, except for the Company’s Chief Compliance Officer and principal financial officer, when and to the extent engaged in providing investment advisory and management services hereunder, and the compensation and routine overhead expenses of such personnel allocable to such services, shall be provided and paid for by the Adviser and not by the Company. The Company’s Chief Compliance Officer and principal financial officer and their respective staffs shall be employed by the Adviser; however the Company will reimburse the Adviser for the compensation to such employees. The Company shall bear all other out-of-pocket costs and expenses of its operations and transactions, including (without limitation) fees and expenses relating to: future offering expenses; the cost of calculating the Company’s net asset value; the cost of effecting sales and repurchases of shares of the Company’s common stock and other securities; management and incentive fees payable pursuant to this Agreement; fees payable to third parties relating to, or associated with, making investments and valuing investments (including third-party valuation firms); interest payments and other costs related to borrowings; transfer agent and custodial fees; fees and expenses associated with marketing efforts (including attendance at investment conferences and similar events); federal and state registration fees; any exchange listing fees; federal, state and local taxes; independent directors’ fees and expenses; brokerage commissions; costs of proxy statements, stockholders’ reports and notices; costs of preparing government filings, including periodic and current reports with the SEC; fidelity bond, liability insurance and other insurance premiums; and printing, mailing, independent accountants and outside legal costs and all other direct expenses incurred by either the Adviser or the Company in connection with administering the Company’s business.

Compensation of the Adviser .

The Company agrees to pay, and the Adviser agrees to accept, as compensation for the services provided by the Adviser hereunder, a base management fee (“ Base Management Fee ”) and an incentive fee (“ Incentive Fee ”) as hereinafter set forth. The Adviser may agree to temporarily or permanently waive, in whole or in part, the Base Management Fee and/or the Incentive Fee. See Appendix A for examples of how these fees are calculated.

(a) The Base Management Fee shall be calculated at an annual rate of 1.50% of the Company’s gross assets, including assets purchased with borrowed funds or other forms of leverage, but excluding any cash and cash equivalents so long as the Company’s gross assets are less than or equal to $625,000,000. If the Company’s gross assets are greater than or equal to $625,000,001 but less than or equal to $750,000,000, the Base Management Fee shall be calculated at an annual rate of 1.40% of the Company’s gross assets, including assets purchased with borrowed funds or other forms of leverage, but excluding any cash and cash equivalents. If the Company’s gross assets are greater than or equal to $750,000,001, the Base Management Fee shall be calculated at an annual rate of 1.25% of the Company’s gross assets, including assets purchased with borrowed funds or other forms of leverage, but excluding any cash and cash equivalents. For purposes of this Agreement, the term “ cash and cash equivalents ” will have the meaning ascribed to it from time to time in the notes to the financial statements that the Company files with the SEC prepared in accordance with generally accepted accounting principles. The Base Management Fee shall be payable quarterly in arrears, and shall be calculated based on the average value of the Company’s gross assets, excluding cash and cash equivalents, at the end of the two most recently completed calendar quarters. The Base Management Fee for any partial month or quarter shall be appropriately prorated. The provisions of this Section 3(a), including the 1.50%, 1.40% and 1.25% annual rates used in connection with the calculation of the Base Management Fee, shall be effective as of May 1, 2018 and apply to the calculation of the Base Management Fee commencing on such date and thereafter in the manner and at the points in time specified above. In calculating the Base Management Fee for the quarter ending June 30, 2018, the Base Management Fee for such period shall be appropriately prorated to reflect the applicable annual rate of the Base Management Fee in effect prior to May 1, 2018, and the applicable annual rate of the Base Management Fee in effect from May 1, 2018 through June 30, 2018. Appendix B sets forth the annual rates of the Base Management Fee that were effective prior to May 1, 2018, and became effective as of May 1, 2018.

(b) The Incentive Fee shall consist of two parts, as follows:

(i)

The first part, the ordinary income component, shall be calculated and payable quarterly in arrears based on the Company’s “ Pre-Incentive Fee Net Investment Income ’’ for the immediately preceding quarter. For this purpose, ‘‘ Pre-Incentive Fee Net Investment Income ’’ means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, managerial assistance and consulting fees or other fees that the Company receives from portfolio companies) accrued during the quarter, minus the Company’s operating expenses for the quarter (including the Base Management Fee, administrative expenses payable to the Adviser pursuant to this Agreement, and any interest expense and any distributions paid on any issued and outstanding preferred stock, but excluding the Incentive Fee and any offering expenses and other expenses not charged to operations but excluding certain reversals to the extent such reversals have the effect of reducing previously accrued incentive fees based on the deferral of non-cash interest). Pre-Incentive Fee Net Investment Income excludes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind 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. Pre-Incentive Fee Net Investment Income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding quarter, shall be compared to a ‘‘ hurdle rate ’’ of 2.0% per quarter (8.0% annualized), subject to a ‘‘ catch-up ’’ provision measured as of the end of each quarter as set forth in more detail below. The Company will pay the Adviser the Incentive Fee with respect to the Company’s Pre-Incentive Fee Net Investment Income for each quarter is as follows:

No incentive fee is payable to the Adviser in any quarter in which the Company’s Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 2.0% (the “ hurdle ’’).

50.0% of the Company’s Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than or equal to 2.5% in any quarter (10.0% annualized) is payable to the Adviser. This portion of the Pre-Incentive Fee Net Investment Income (which exceeds the hurdle rate but is less than or equal to 2.5%) is referred to as the “ catch-up .”

20.0% of the amount of the Company’s Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.5% in any quarter (10.0% annualized) is payable to the Adviser once the hurdle is reached and the catch-up is achieved (20.0% of all Pre-Incentive Fee Net Investment Income thereafter is allocated to the Adviser).

Notwithstanding anything herein to the contrary, the ordinary income component of the Incentive Fee shall be subject to a total return requirement, and no Incentive Fee in respect of the Company’s Pre-Incentive Fee Net Investment Income will be payable except to the extent 20.0% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding quarters exceeds the cumulative Incentive Fees accrued and/or paid for the 11 preceding quarters. In other words, any ordinary income incentive fee that is payable in a calendar quarter will be limited to the lesser of (a) 20.0% of the amount by which the Company’s Pre-Incentive Fee Net Investment Income for such calendar quarter exceeds the 2.0% hurdle, subject to the catch-up provision, and (b) (x) 20.0% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding calendar quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “ cumulative net increase in net assets resulting from operations ” is the amount, if positive, of the sum of Pre-Incentive Fee Net Investment Income, realized gains and losses and unrealized appreciation and depreciation of the Company for the then current and 11 preceding calendar quarters. In addition, the portion of such incentive fee that is attributable to deferred interest (such as payment-in-kind interest or original issue discount) will be paid to the Adviser, together with interest thereon from the date of deferral to the date of payment, only if and to the extent the Company actually receives such interest in cash, and any accrual thereof will be reversed if and to the extent such interest is reversed in connection with any write-off or similar treatment of the investment giving rise to any deferred interest accrual. Any reversal of such accounts would reduce net income for the quarter by the net amount of the reversal (after taking into account the reversal of incentive fees payable) and would result in a reduction and possible elimination of the incentive fees for such quarter. There is no accumulation of amounts on the hurdle rate from quarter to quarter, and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle, and there is no delay of payment if prior quarters are below the quarterly hurdle. The Adviser has agreed to permanently waive any interest accrued on the portion of the incentive fee attributable to deferred interest (such as payment-in-kind interest or original issue discount).

(ii)

The second part of the incentive fee, the capital gains component, shall be determined and payable in arrears as of the end of each fiscal year (or upon termination of the Agreement, as of the termination date), commencing with the fiscal year ended December 31, 2014 and shall equal 20.0% of the Company’s aggregate realized capital gains, if any, on a cumulative basis from inception through the end of each fiscal year, computed net of all aggregate realized capital losses and unrealized aggregate capital depreciation on a cumulative basis through the end of such year, less the aggregate amount of any previously paid capital gains incentive fees, in each case calculated from the date of pricing of the initial public offering. If such amount is negative, then no capital gains incentive fee will be payable for such year. Additionally, if the Agreement is terminated as of a date that is not a calendar year end, the termination date will be treated as though it were a calendar year end for purposes of calculating and paying the capital gains incentive fee.

Covenants of the Adviser .

The Adviser covenants that it will maintain its registration as an investment adviser under the Advisers Act. The Adviser agrees that its activities will at all times be in compliance in all material respects with all applicable federal and state laws governing its operations and investments.

Brokerage Commissions .

The Adviser is hereby authorized, to the fullest extent now or hereafter permitted by law, to cause the Company to pay a member of a national securities exchange, broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another member of such exchange, broker or dealer would have charged for effecting that transaction, if the Adviser determines in good faith, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities, that such amount of commission is reasonable in relation to the value of the brokerage and/or research services provided by such member, broker or dealer, viewed in terms of either that particular transaction or its overall responsibilities with respect to the Company’s portfolio, and constitutes the best net results for the Company.

Other Activities of the Adviser .

The services of the Adviser to the Company are not exclusive, and the Adviser may engage in any other business or render similar or different services to others including, without limitation, the direct or indirect sponsorship or management of other investment based accounts or commingled pools of capital, however structured, having investment objectives similar to those of the Company, so long as its services to the Company hereunder are not materially impaired thereby, and nothing in this Agreement shall limit or restrict the right of any manager, partner, member (including its members and the owners of its members), officer or employee of the Adviser to engage in any other business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any fees or compensation in connection therewith (including fees for serving as a director of, or providing consulting services to, one or more of the Company’s portfolio companies, subject to applicable law). So long as this Agreement or any extension, renewal or amendment remains in effect, the Adviser shall be the only investment adviser for the Company, subject to the Adviser’s right to enter into sub-advisory agreements. The Adviser assumes no responsibility under this Agreement other than to render the services called for hereunder. It is understood that directors, officers, employees and stockholders of the Company are or may become interested in the Adviser and its affiliates, as directors, officers, employees, partners, stockholders, members, managers or otherwise, and that the Adviser and directors, officers, employees, partners, stockholders, members and managers of the Adviser and its affiliates are or may become similarly interested in the Company as stockholders or otherwise.

Responsibility of Dual Directors, Officers and/or Employees .

If any person who is a manager, partner, member, officer or employee of the Adviser is or becomes a director, officer and/or employee of the Company and acts as such in any business of the Company, then such manager, partner, member, officer and/or employee of the Adviser shall be deemed to be acting in such capacity solely for the Company, and not as a manager, partner, member, officer or employee of the Adviser or under the control or direction of the Adviser, even if paid by the Adviser.

Limitation of Liability of the Adviser; Indemnification .

The Adviser (and its officers, managers, partners, agents, employees, controlling persons and members, and any other person or entity affiliated with the Adviser) shall not be liable to the Company for any action taken or omitted to be taken by the Adviser in connection with the performance of any of its duties or obligations under this Agreement or otherwise as an investment adviser of the Company (except to the extent specified in Section 36(b) of the Investment Company Act concerning loss resulting from a breach of fiduciary duty (as the same is finally determined by judicial proceedings) with respect to the receipt of compensation for services, and the Company shall indemnify, defend and protect the Adviser (and its officers, managers, partners, agents, employees, controlling persons and members, and any other person or entity affiliated with the Adviser, each of whom shall be deemed a third party beneficiary hereof) (collectively, the “ Indemnified Parties ”) and hold them harmless from and against all damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) incurred by the Indemnified Parties in or by reason of any pending, threatened or completed action, suit, investigation or other proceeding (including an action or suit by or in the right of the Company or its security holders) arising out of or otherwise based upon the performance of any of the Adviser’s duties or obligations under this Agreement or otherwise as an investment adviser of the Company. Notwithstanding the preceding sentence of this Section 8 to the contrary, nothing contained herein shall protect or be deemed to protect the Indemnified Parties against or entitle or be deemed to entitle the Indemnified Parties to indemnification in respect of, any liability to the Company or its security holders to which the Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Adviser’s duties or by reason of the reckless disregard of the Adviser’s duties and obligations under this Agreement.

Effectiveness, Duration and Termination of Agreement .

This Agreement shall become effective as of the date above written. This Agreement shall remain in effect for two years from the date hereof , and thereafter shall continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (a) the vote of the Board, or by the vote of a majority of the outstanding voting securities of the Company and (b) the vote of a majority of the Company’s directors who are not parties to this Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the Investment Company Act) of any such party, in accordance with the requirements of the Investment Company Act and each of whom is an “independent director” under applicable NASDAQ Global Select Market listing standards. This Agreement may be terminated at any time, without the payment of any penalty, upon 60 days’ written notice, by the vote of persons holding a majority of the outstanding voting securities of the Company, or by the vote of the Board or by the Adviser. This Agreement shall automatically terminate in the event of its “assignment” (as such term is defined for purposes of Section 15(a)(4) of the Investment Company Act). The provisions of Paragraph 8 of this Agreement shall remain in full force and effect, and the Adviser shall remain entitled to the benefits thereof as well as any amounts under Section 3 hereof through the date of termination, notwithstanding any termination of this Agreement.

10.

Notices .

Any notice under this Agreement shall be given in writing, addressed and delivered or mailed, postage prepaid, to the other party at its principal office.

11.

Amendments .

This Agreement may be amended by mutual consent.

12.

Entire Agreement; Governing Law .

This Agreement contains the entire agreement of the parties and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof. Notwithstanding the place where this Agreement may be executed by any of the parties hereto, this Agreement shall be construed in accordance with the laws of the State of New York. For so long as the Company is regulated as a BDC under the Investment Company Act, this Agreement shall also be construed in accordance with the applicable provisions of the Investment Company Act. In such case, to the extent the applicable laws of the State of New York, or any of the provisions herein, conflict with the provisions of the Investment Company Act, the latter shall control. To the fullest extent permitted by law, in the event of any dispute arising out of the terms and conditions of this Agreement, the parties hereto consent and submit to the jurisdiction of the courts of the State of New York in the county of New York and of the U.S. District Court for the Southern District of New York.

13. Counterparts . This Agreement may be executed in counterparts by the parties hereto, each of which shall constitute an original counterpart, and all of which, together, shall constitute one Agreement

14. Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.

[ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the date above written.


ALCENTRA CAPITAL CORPORATION


By:	/s/ David Scopelliti
	Name:	David Scopelliti
	Title:	President and Chief Executive Officer




ALCENTRA NY, LLC


By:	/s/ Jack Yang
	Name:	Jack Yang
	Title:	President

Appendix A

Examples of Quarterly Incentive Fee Calculation

Example 1: Income Related Portion of Incentive Fee:

Alternative 1

Assumptions

Investment income (including interest, dividends, fees, etc.) = 1.25%
Hurdle rate ⁽¹⁾ = 2.0%
Management fee ⁽²⁾ = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) ⁽³⁾ = 0.20%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses) = 0.675%

Pre-incentive fee net investment income does not exceed hurdle rate, therefore there is no income-related incentive fee.

Alternative 2

Assumptions

Investment income (including interest, dividends, fees, etc.) = 2.9%
Hurdle rate ⁽¹⁾ = 2.0%
Management fee ⁽²⁾ = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) ⁽³⁾ = 0.20%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses) = 2.325%

Incentive fee = 50% × Pre-incentive fee net investment income (subject to “catch-up”) ⁽⁴⁾
= 50% × (2.325% – 2.0%)
= 0.1625%

Pre-incentive fee net investment income exceeds the hurdle rate, but does not fully satisfy the “catch-up” provision, therefore the income related portion of the incentive fee is 0.1625%.

Alternative 3

Assumptions

Investment income (including interest, dividends, fees, etc.) = 3.5%
Hurdle rate ⁽¹⁾ = 2.0%
Management fee ⁽²⁾ = 0.375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) ⁽³⁾ = 0.20%
Pre-incentive fee net investment income
(investment income – (management fee + other expenses) = 2.925%

Incentive fee = 50% × Pre-incentive fee net investment income
(subject to “catch-up”) ⁽⁴⁾

Incentive fee = 50% × “catch-up” + (20% × (Pre-Incentive Fee Net Investment
Income – 2.5%))

“Catch-up” = 2.5% – 2.0%
= 0. 5%

Incentive fee = (50% × 0.5%) + (20% × (2.925% – 2.5%))
= 0.25% + (20% × 0.425%)
= 0.25% + 0.085%
= 0.335%

Pre-incentive fee net investment income exceeds the hurdle rate, and fully satisfies the “catch-up” provision, therefore the income related portion of the incentive fee is 0.335%.

(1)

Represents 8.0% annualized hurdle rate.

(2)

Represents 1.50% annualized base management fee. For purposes of these examples, we have assumed the maximum amount of Base Management Fee, or 1.50% of the Company’s gross assets.

(3)

Excludes organizational and offering expenses.

(4)

The “catch-up” provision is intended to provide our Adviser with an incentive fee of 20% on 50% of pre-incentive fee net investment income as if a hurdle rate did not apply when our net investment income exceeds 2.5% in any fiscal quarter.

Example 2: Capital Gains Portion of Incentive Fee(*):

Alternative 1:

Assumptions

Year 1: $2.0 million investment made in Company A (“Investment A”), and $3.0 million investment made in Company B (“Investment B”)

Year 2: Investment A sold for $5.0 million and fair market value (“FMV”) of Investment B determined to be $3.5 million

Year 3: FMV of Investment B determined to be $2.0 million

Year 4: Investment B sold for $3.25 million

The capital gains portion of the incentive fee would be:

Year 1: None

Year 2: Capital gains incentive fee of $0.6 million—($3.0 million realized capital gains on sale of Investment A multiplied by 20%)

Year 3: None—$0.4 million (20% multiplied by ($3.0 million cumulative capital gains less $1.0 million cumulative capital depreciation)) less $0.6 million (previous capital gains fee paid in Year 2)

Year 4: Capital gains incentive fee of $50,000—$0.65 million ($3.25 million cumulative realized capital gains multiplied by 20%) less $0.6 million (capital gains incentive fee taken in Year 2)

Alternative 2

Assumptions

Year 1: $2.0 million investment made in Company A (“Investment A”), $5.25 million investment made in Company B (“Investment B”) and $4.5 million investment made in Company C (“Investment C”)

Year 2: Investment A sold for $4.5 million, FMV of Investment B determined to be $4.75 million and FMV of Investment C determined to be $4.5 million

Year 3: FMV of Investment B determined to be $5.0 million and Investment C sold for $5.5 million

Year 4: FMV of Investment B determined to be $6.0 million

Year 5: Investment B sold for $4.0 million

The capital gains incentive fee, if any, would be:

Year 1: None

Year 2: $0.4 million capital gains incentive fee—20% multiplied by $2.0 million ($2.5 million realized capital gains on Investment A less $0.5 million unrealized capital depreciation on Investment B)

Year 3: $0.25 million capital gains incentive fee ⁽¹⁾ —$0.65 million (20% multiplied by $3.25 million ($3.5 million cumulative realized capital gains less $0.25 million unrealized capital depreciation)) less $0.4 million capital gains incentive fee received in Year 2

Year 4: $0.05 million capital gains incentive fee—$0.7 million ($3.50 million cumulative realized capital gains multiplied by 20%) less $0.65 million cumulative capital gains incentive fee paid in Year 2 and Year 3

Year 5: None—$0.45 million (20% multiplied by $2.25 million (cumulative realized capital gains of $3.5 million less realized capital losses of $1.25 million)) less $0.7 million cumulative capital gains incentive fee paid in Year 2, Year 3 and Year 4 ⁽²⁾

The hypothetical amounts of returns shown are based on a percentage of our total net assets and assume no leverage. There is no guarantee that positive returns will be realized and actual returns may vary from those shown in this example.

(1)

As illustrated in Year 3 of Alternative 1 above, if a portfolio company were to be wound up on a date other than its fiscal year end of any year, it may have paid aggregate capital gains incentive fees that are more than the amount of such fees that would be payable if such portfolio company had been wound up on its fiscal year end of such year.

(2)

As noted above, it is possible that the cumulative aggregate capital gains fee received by our Adviser ($0.70 million) is effectively greater than $0.45 million (20% of cumulative aggregate realized capital gains less net realized capital losses or net unrealized depreciation ($2.25 million)).

Appendix B

Annual Rates for Base Management Fee Calculation - Effective Prior to May 1, 2018

Gross Asset Range	Annual Rate
Less than or equal to $625,000,000	1.75%
Greater than or equal to $625,000,001 but less than or equal to $750,000,000	1.65%
Greater than or equal to $750,000,001	1.50%

Annual Rates for Base Management Fee Calculation - Effective May 1, 2018

Gross Asset Range	Annual Rate
Less than or equal to $625,000,000	1.50%
Greater than or equal to $625,000,001 but less than or equal to $750,000,000	1.40%
Greater than or equal to $750,000,001	1.25%

Exhibit 10.2

Alcentra NY LLC

200 Park Avenue, 7th Floor
New York, NY 10166

May 4, 2018

David Scopelliti

President and Chief Executive Officer

Alcentra Capital Corporation

200 Park Avenue, 7th Floor

New York, NY 10166

Re: Voluntary Base Management Fee Waiver

Dear David:

Reference is hereby made to the Amended and Restated Investment Advisory Agreement (the “ Agreement ”), dated May 4, 2018, by and between Alcentra Capital Corporation and us. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Agreement.

We hereby agree that the Base Management Fee for the period commencing on May 1, 2018 and ending on April 30, 2019, will be calculated in accordance with the Agreement but as if the annual rates of 1.50%, 1.40%, and 1.25% specified in Section 3(a) of the Agreement were reduced to and replaced with 1.25%, 1.15%, and 1.00%, respectively, during such period. We agree to waive the Base Management Fee that we would otherwise be entitled to receive under the Agreement for this period to the extent it exceeds the Base Management Fee calculated in accordance with the foregoing.

[ Signature page to follow ]

Sincerely yours,

ALCENTRA NY LLC

By: /s/ Jack Yang

Name: Jack Yang

Title: President

Agreed and Accepted:

ALCENTRA CAPITAL CORPORATION

By: /s/ David Scopelliti

Name: David Scopelliti

Title: President and Chief Executive Officer

Exhibit 31.1

Certification of Chief Executive Officer of Alcentra Capital Corporation
pursuant to Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David Scopelliti, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Alcentra Capital Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2018

/s/ David Scopelliti

David Scopelliti
Chief Executive Officer

Exhibit 31.2

Certification of Chief Financial Officer of Alcentra Capital Corporation
pursuant to Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Ellida McMillan, certify that:

I have reviewed this Quarterly Report on Form 10-Q of Alcentra Capital Corporation;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2018

/s/ Ellida McMillan

Ellida McMillan
Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

In connection with this Quarterly Report of Alcentra Capital Corporation (the “Registrant”) on Form 10-Q for the period ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Scopelliti, the Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ David Scopelliti

Name: David Scopelliti
Date: May 7, 2018

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

In connection with this Quarterly Report of Alcentra Capital Corporation (the “Registrant”) on Form 10-Q for the period ended March 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ellida McMillan, the Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

/s/ Ellida McMillan

Name: Ellida McMillan
Date: May 7, 2018