MVC CAPITAL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

September 09, 2020 at 04:32 pm EDT

This report contains certain statements of a forward-looking nature relating to
future events or the future financial performance of the Company and its
investment portfolio companies. Words such as may, will, expect, believe,
anticipate, intend, could, estimate, might and continue, and the negative or
other variations thereof or comparable terminology, are intended to identify
forward-looking statements. Forward-looking statements are included in this
report pursuant to the "Safe Harbor" provision of the Private Securities
Litigation Reform Act of 1995. Such statements are predictions only, and the
actual events or results may differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those relating to adverse
conditions in the U.S. and international economies, competition in the markets
in which our portfolio companies operate, investment capital demand, pricing,
market acceptance, any changes in the regulatory environments in which we
operate, changes in our accounting assumptions that regulatory agencies,
including the SEC, may require or that result from changes in the accounting
rules or their application, competitive forces, adverse conditions in the credit
markets impacting the cost, including interest rates and/or availability of
financing, the results of financing and investing efforts, the ability to
complete transactions, the inability to implement our business strategies and
other risks identified below or in the Company's filings with the SEC. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events. The following analysis of the financial condition and
results of operations of the Company should be read in conjunction with the
Consolidated Financial Statements, the Notes thereto and the other financial
information included elsewhere in this report and the Company's annual report on
Form 10-K for the year ended October 31, 2019.

SELECTED CONSOLIDATED FINANCIAL DATA:


Financial information for the fiscal year ended October 31, 2019 is derived from
the consolidated financial statements included in the Company's annual report on
Form 10-K, which have been audited by Grant Thornton LLP, the Company's
independent registered public accounting firm. Quarterly financial information
is derived from unaudited financial data, but in the opinion of management,
reflects all adjustments (consisting only of normal recurring adjustments),
which are necessary to present fairly the results for such interim periods.





                                       45







                                    Selected Consolidated Financial Data

                                                   For the Nine        For the Nine
                                                   Month Period        Month Period
                                                       Ended               Ended             Year Ended
                                                   July 31, 2020       July 31, 2019      October 31, 2019
                                                    (Unaudited)         (Unaudited)
                                                            (In thousands, except per share data)
Operating Data:
Interest and related portfolio income:
Interest and dividend income                      $        20,517     $        21,774     $          29,605
Fee income                                                     59                  89                   102
Fee income - asset management                                 637


      640                   842
Other income                                                    5                   -                     -

Total operating income                                     21,218              22,503                30,549

Expenses:
Management fee                                              3,561               4,746                 6,408


Portfolio fees - asset management                             310                 261                   343
Management fee - asset management                             168                 219                   288
Administrative                                              4,115               3,422                 4,826
Interest and other borrowing costs                          6,194               7,277                 9,655
Loss on extinguishment of debt                                345                   -                     -
Settlement Expenses                                           325                   -                     -
Net Incentive compensation (Note 11)                            -                   -                     -

Total operating expenses                                   15,018              15,925                21,520

Expense waiver by Advisor                                    (113 )              (113 )                (150 )
Voluntary management fee waiver by Advisor                 (1,336 )            (1,780 )              (2,403 )
Total waiver by adviser                                    (1,449 )            (1,893 )              (2,553 )

Total net operating expenses                               13,569              14,032                18,967

Net operating gain before taxes                             7,649


    8,471                11,582

Tax expense, net                                                2                   2                     2

Net operating gain                                          7,647               8,469                11,580

Net realized and unrealized (loss) gain:
Net realized gain (loss) on investments                    (2,374 )             4,583                (7,106 )
Net unrealized (depreciation) appreciation on
investments                                               (43,726 )               207                11,842

Net realized and unrealized (loss) gain on
investments                                               (46,100 )             4,790                 4,736

Net (decrease) increase in net assets resulting
from operations                                   $       (38,453 )   $

13,259 $ 16,316



Per Share:
Net (decrease) increase in net assets per share
resulting from operations                         $         (2.17 )   $


     0.75     $            0.92
Dividends per share                               $        (0.510 )   $         0.450     $           0.620
Balance Sheet Data:
Portfolio at value                                $       220,851     $       339,405     $         340,245
Portfolio at cost                                         337,700             426,341               415,667
Total assets                                              281,570             369,233               362,163
Shareholders' equity                                      180,466             227,915               227,959
Shareholders' equity per share (net asset
value)                                            $         10.18     $         12.86     $           12.86
Common shares outstanding at period end                    17,725              17,725                17,725
Other Data:
Number of Investments funded in period                         11                   9                    12
Investments funded ($) in period                  $        11,616     $        41,020     $          47,463
Repayment/sales in period                                  93,396              34,199                39,083
Net investment activity in period                         (81,780 )


    6,821                 8,380




                                       46





                                                       2020                                        2019                                               2018
                                         Qtr 3         Qtr 2        Qtr 1       Qtr 4       Qtr 3       Qtr 2        Qtr 1        Qtr 4        Qtr 3        Qtr 2        Qtr 1
                                                                                         (In thousands, except per share data)


Quarterly Data (Unaudited):
Total operating income                     5,780         7,652       7,786       8,046       7,469        8,593        6,441        5,888        6,151        5,440        5,147

Management fee                             1,087         1,104       1,370       1,662       1,643        1,590        1,513        1,496        1,487        1,496        1,411


Portfolio fees - asset management             70            71         169          82          89           76           96          122          112          148          147
Management fee - asset management             52            52          64


        69          79           69           71           81           70           66           67
Administrative                             1,972           922       1,221       1,404         998          990        1,434          843        1,010          796        1,235
Interest, fees and other borrowing
costs                                      1,863         2,125       2,206

2,378 2,510 2,283 2,484 2,238 2,403

       2,981        3,117
Loss on extinguishment of debt                 -           345           -


         -           -            -            -            -            -            -        1,783
Settlement Expenses                          325             -           -           -           -            -            -            -            -            -            -
Net Incentive compensation                     -             -           -           -           -            -            -            -       (1,316 )     (1,012 )        267
Total waiver by adviser                     (446 )        (452 )      (551 )      (660 )      (654 )       (635 )       (604 )       (598 )       (595 )       (599 )       (390 )
Tax expense                                    1             -           1           -           1            1            -            1            -            1            -
Net operating income (loss) before
net realized and unrealized gains            856         3,485       3,306

3,111 2,803 4,219 1,447 1,705 2,980

       1,563       (2,490 )
Net (decrease) increase in net assets
resulting from operations                 (2,537 )     (40,332 )     4,416       3,057         348       15,964       (3,053 )     (2,220 )     (5,870 )     (3,393 )        950
Net (decrease) increase in net assets
resulting from operations per share        (0.14 )       (2.28 )      0.25

0.17 0.02 0.90 (0.17 ) (0.10 ) (0.32 ) (0.18 ) 0.05 Net asset value per share

$  10.18     $   10.49     $ 12.94     $ 12.86     $ 12.86     $  12.99     $  12.24     $  12.46     $  12.62     $  13.09     $  13.42




OVERVIEW



The Company is an externally managed, non-diversified, closed-end management
investment company that has elected to be regulated as a business development
company under the 1940 Act. The Company's investment objective is to seek to
maximize total return from capital appreciation and/or income.



On November 6, 2003, Mr. Tokarz assumed his positions as Chairman and Portfolio
Manager of the Company. He and the Company's investment professionals (who,
effective November 1, 2006, provide their services to the Company through the
Company's investment adviser, TTG Advisers) are seeking to implement our
investment objective (i.e., to maximize total return from capital appreciation
and/or income) through making a broad range of private investments in a variety
of industries.


The investments can include senior or subordinated loans, convertible debt and
convertible preferred securities, common or preferred stock, equity interests,
warrants or rights to acquire equity interests, and other private equity
transactions. During the fiscal year ended October 31, 2019, the Company made
six new investments and follow-on investments in six existing portfolio
companies totaling approximately $44.9 million. During the nine month period
ended July 31, 2020, the Company made follow-on investments in five existing
portfolio companies totaling approximately $11.5 million.



The Company's prior investment objective was to achieve long-term capital
appreciation from venture capital investments in information technology
companies. Accordingly, the Company's investments had focused on investments in
equity and debt securities of information technology companies. As of July 31,
2020, approximately 4.5% of the current fair value of our assets consisted of
Legacy Investments. We are, however, seeking to manage these Legacy Investments
to try and realize maximum returns. We generally seek to capitalize on
opportunities to realize cash returns on these investments when presented with a
potential "liquidity event," i.e., a sale, public offering, merger or other
reorganization.



Our new portfolio investments are made pursuant to our current objective and
strategy. We are concentrating our investment efforts on small and middle-market
companies that, in our view, provide opportunities to maximize total return from
capital appreciation and/or income though our current focus is more on yield
generating investments which can include, but is not limited to senior and
subordinated loans, convertible debt, common and preferred equity with a coupon
or liquidation preference and warrants or rights to acquire equity interests
(the "Yield-Focused Strategy"). We have continued the transition to the
Yield-Focused Strategy. We have done this through selling a number of equity
investments, including our 2017 sale of U.S. Gas, our then-largest portfolio
company. These sales and repayments have improved our liquidity position, which
provides us with flexibility to redeploy capital into debt or similar
income-producing investments. The Company continues to seek to monetize various
equity investments to further support the Yield-Focused Strategy. We participate
in the private equity business generally by providing negotiated long-term
equity and/or debt investment capital to privately-owned small and middle-market
companies. Our financings are generally used to fund growth, buyouts,
acquisitions, recapitalizations, note purchases and/or bridge financings. We
generally invest in private companies, though, from time to time, we may invest
in public companies that may lack adequate access to public capital.



                                       47







We may also seek to achieve our investment objective by establishing a
subsidiary or subsidiaries that would serve as general partner to a private
equity or other investment fund(s). In fact, during fiscal year 2006, we
established MVC Partners for this purpose. Furthermore, the Board of Directors
authorized the establishment of a PE Fund, for which an indirect wholly-owned
subsidiary of the Company serves as the GP and which may raise up to $250
million. On October 29, 2010, through MVC Partners and MVCFS, the Company
committed to invest approximately $20.1 million in the PE Fund. The PE Fund
closed on approximately $104 million of capital commitments. The Company's Board
of Directors authorized the establishment of, and investment in, the PE Fund for
a variety of reasons, including the Company's ability to make Non-Diversified
Investments through the PE Fund. As previously disclosed, the Company is
restricted in its ability to make Non-Diversified Investments. For services
provided to the PE Fund, the GP and MVC Partners are together entitled to
receive 25% of all management fees and other fees paid by the PE Fund and its
portfolio companies and up to 30% of the carried interest generated by the PE
Fund. Further, at the direction of the Board of Directors, the GP retained TTG
Advisers to serve as the portfolio manager of the PE Fund. In exchange for
providing those services, and pursuant to the Board of Directors' authorization
and direction, TTG Advisers is entitled to receive the balance of the fees and
any carried interest generated by the PE Fund and its portfolio companies. Given
this separate arrangement with the GP and the PE Fund, under the terms of the
Company's Advisory Agreement with TTG Advisers, TTG Advisers is not entitled to
receive from the Company a management fee or an incentive fee on assets of the
Company that are invested in the PE Fund. During the fiscal year ended October
31, 2012 and thereafter, MVC Partners was consolidated with the operations of
the Company as MVC Partners' limited partnership interest in the PE Fund is a
substantial portion of MVC Partners operations. Previously, MVC Partners was
presented as a portfolio company on the Schedule of Investments. The
consolidation of MVC Partners has not had any material effect on the financial
position or net results of operations of the Company. Also, during fiscal year
ended October 31, 2014, MVC Turf, Inc. ("MVC Turf") was consolidated with the
Company as MVC Turf was an MVC wholly-owned holding company. The consolidation
of MVC Turf did not have a material effect on the financial position or net
results of operations of the Company. On March 7, 2017, the Company exchanged
its shares of MVC Turf for approximately $3.8 million of additional subordinated
debt in Turf Products.  MVC Turf is no longer consolidated with the Company.
Please see Note 2 of our consolidated financial statements "Consolidation"


for
more information.



As a result of the closing of the PE Fund, consistent with the Board-approved
policy concerning the allocation of investment opportunities, the PE Fund
received a priority allocation of all private equity investments that would
otherwise be Non-Diversified Investments for the Company during the PE Fund's
investment period that ended on October 28, 2014. Additional capital may be
called for follow-on investments in existing portfolio companies of the PE Fund
or to pay operating expenses of the PE Fund until the partnership is no longer
extended.

Additionally, in pursuit of our objective, we may acquire a portfolio of existing private equity or debt investments held by financial institutions or other investment funds should such opportunities arise.





Furthermore, pending investments in portfolio companies pursuant to the
Company's principal investment strategy, the Company may invest in certain
securities on a short-term or temporary basis. In addition to cash-equivalents
and other money market-type investments, such short-term investments may include
exchange-traded funds and private investment funds offering periodic liquidity.



The impact of the coronavirus ("COVID-19") outbreak on the financial performance
of the Company's investments has been negative and its impact going forward will
depend on future developments, including the duration and spread of the outbreak
and related advisories and restrictions.  These developments and the impact of
COVID-19 on the financial markets and the overall economy are highly uncertain
and cannot be predicted. If the financial markets and/or the overall economy are
impacted for an extended period, the Company's future investment results may be
materially adversely affected.



                                       48





OPERATING INCOME



For the Nine month period ended July 31, 2020 and 2019. Total operating income
was approximately $21.2 million and approximately $22.5 million for the nine
month period ended July 31, 2020 and 2019, respectively, a decrease of
approximately $1.3 million.

For the Nine month period ended July 31, 2020





Total operating income was $21.2 million for the nine month period ended July
31, 2020. The decrease in operating income over the same period last year was
primarily due to loan repayments from the Company's portfolio companies. The
Company earned approximately $20.5 million in interest income from investments
in portfolio companies. Of the $20.5 million recorded in interest income,
approximately $6.2 million was "payment in kind" interest. The "payment in kind"
interest is computed at the contractual rate specified in each investment
agreement and may be added to the principal balance of each investment. The
Company's debt investments yielded annualized rates from 3.1% to 16.7%. The
Company also recorded fee income from asset management of the PE Fund and its
portfolio companies totaling approximately $637,000 and fee income from the
Company's portfolio companies of approximately $59,000, totaling approximately
$696,000 in fee income. Of the $637,000 of fee income from asset management
activities, 75% of the income is obligated to be paid to TTG Advisers. However,
under the PE Fund's agreements, a significant portion of the portfolio fees that
are paid by the PE Fund's portfolio companies to the GP and TTG Advisers is
subject to recoupment by the PE Fund in the form of an offset to future
management fees paid by the PE Fund.

For the Nine Month Period Ended July 31, 2019





Total operating income was $22.5 million for the nine month period ended July
31, 2019. The increase in operating income over the same period last year was
primarily due to the increase in dividend income and the increase in interest
earned on loans from the Company's portfolio companies, continuing the
transition to the Yield-Focused Strategy. The Company earned approximately $18.9
million in interest income from investments in portfolio companies. Of the $18.9
million recorded in interest income, approximately $4.3 million was "payment in
kind" interest. The "payment in kind" interest is computed at the contractual
rate specified in each investment agreement and may be added to the principal
balance of each investment. The Company's debt investments yielded annualized
rates from 5.0% to 16.0%. The Company also recorded fee income from asset
management of the PE Fund and its portfolio companies totaling approximately
$640,000 and fee income from the Company's portfolio companies of approximately
$89,000, totaling approximately $729,000 in fee income. Of the $640,000 of fee
income from asset management activities, 75% of the income is obligated to be
paid to TTG Advisers. However, under the PE Fund's agreements, a significant
portion of the portfolio fees that are paid by the PE Fund's portfolio companies
to the GP and TTG Advisers is subject to recoupment by the PE Fund in the form
of an offset to future management fees paid by the PE Fund.



OPERATING EXPENSES


For the Nine month period ended July 31, 2020 and 2019. Operating expenses, net
of Voluntary Waivers, were approximately $13.6 million and $14.0 million for the
nine month period ended July 31, 2020 and 2019, respectively, a decrease of
approximately $400,000.

For the Nine month period ended July 31, 2020


Operating expenses, net of the Voluntary Waivers (as described below), were
approximately $13.6 million or 8.80% of the Company's average net assets, when
annualized, for the nine month period ended July 31, 2020. Significant
components of operating expenses for the nine month period ended July 31, 2020
were interest and other borrowing costs of approximately $6.2 million and
management fee expense paid by the Company of approximately $2.2 million, which
is net of the voluntary management fee waiver of approximately $1.3 million.



                                       49


The approximately $400,000 decrease in the Company's net operating expenses for
the nine month period ended July 31, 2020 compared to the same period in 2019,
was primarily due to the approximately $1.1 million decrease in interest and
other borrowing costs and approximately $741,000 decrease in management fee
expense, net of the voluntary management fee waiver. These decreases were
partially offset by increases in legal fees by approximately $702,000 and
settlement expenses of $325,000. Operating expenses for the nine month period
ended July 31, 2020 includes approximately $345,000 in unamortized deferred
financing fees related to the Senior Notes II, which were expensed and presented
as loss on extinguishment of debt in the consolidated statements of operations
at the time $20.0 million of the Senior Notes II were redeemed. The portfolio
fees - asset management are payable to TTG Advisers for monitoring and other
customary fees received by the GP from portfolio companies of the PE Fund. To
the extent the GP or TTG Advisers receives advisory, monitoring, organization or
other customary fees from any portfolio company of the PE Fund or management
fees related to the PE Fund, 25% of such fees shall be paid to or retained by
the GP and 75% of such fees shall be paid to or retained by TTG Advisers. On
October 31, 2019, the Board approved the renewal of the Advisory Agreement for
the 2020 fiscal year. The Company and the Adviser agreed on an expense cap for
fiscal 2020 of 3.25% under the Modified Methodology. The amount of any payments
made by the GP of the PE Fund to TTG Advisers pursuant to the Portfolio
Management Agreement between the GP and TTG Advisers respecting the PE Fund
continues to be excluded from the calculation of the Company's expense ratio
under the Expense Limitation Agreement. In addition, for fiscal years 2010
through 2020, TTG Advisers voluntarily agreed to extend the Voluntary Waiver.
TTG Advisers also voluntarily agreed that any assets of the Company that are
invested in exchange-traded funds would not be taken into account in the
calculation of the base management fee due to TTG Advisers under the Advisory
Agreement. As of July 31, 2020, the Company did not have an investment in an
exchange traded fund. Under the Modified Methodology, for the nine month period
ended July 31, 2020, the Company's annualized expense ratio was 2.95%, (taking
into account the same carve outs as those applicable to the expense cap). In
addition, the Adviser agreed, effective November 1, 2017, to a revised
management fee structure that ties management fees to the NAV discount2as
follows: (A) If the Company's NAV discount is greater than 20%, the management
fee for the current quarter is reduced to 1.25%; (B) If the NAV discount is
between 10% and 20%, the management fee will be 1.50%; and (C) If the NAV
discount is less than 10% or eliminated, the 1.50% management fee would be
re-examined, but in no event would it exceed 1.75%. For the quarter ended July
31, 2020, the management fee was 1.25%.



Pursuant to the terms of the Advisory Agreement, during the nine month period
ended July 31, 2020, the provision for incentive compensation was unchanged from
$0 as of October 31, 2019, including both the pre-incentive fee net operating
income and the capital gain incentive fee.  The provision for incentive
compensation includes the Valuation Committee's determination to increase the
fair values of five of the Company's portfolio investments (Apex, GTM, JSC
Tekers, SMA and Trientis) by a total of approximately $2.8 million. The
provision also includes the Valuation Committee's determination to decrease the
fair values of eighteen of the Company's portfolio investments (Advantage, Black
Diamond, Custom Alloy, Dukane, Equus, Global Prairie, HTI, Initials, Jedson,
Legal Solutions, MVC Automotive, Powers, RuMe, Security Holdings, Tuf-Tug, Turf,
U.S. Spray and U.S. Gas) by a total of approximately $53.3 million. Also, for
the quarter ended July 31, 2020, no provision was recorded for the net operating
income portion of the incentive fee as pre-incentive fee net operating income
for the quarter did not exceed the hurdle rate.

For the Nine Month Period Ended July 31, 2019


Operating expenses, net of the Voluntary Waivers (as described below), were
approximately $14.0 million or 8.32% of the Company's average net assets, when
annualized, for the nine month period ended July 31, 2019. Significant
components of operating expenses for the nine month period ended July 31, 2019
were interest and other borrowing costs of approximately $7.3 million and
management fee expense paid by the Company of approximately $3.0 million, which
is net of the voluntary management fee waiver of approximately $1.8 million.


2 The NAV discount referred to herein is the average daily discount to NAV for a
quarter. The discount is determined using the most recently determined NAV per
share, which is typically the prior quarter end's NAV per share and the Company
stock closing price on any given day for the quarter.



                                       50


The approximately $700,000 decrease in the Company's net operating expenses for
the nine month period ended July 31, 2019 compared to the same period in 2018,
was primarily due to the approximately $1.8 million decrease in loss on
extinguishment of debt related to the unamortized deferred financing fees for
the Senior Notes that were expensed at the time they were repaid and an
approximately $1.2 million decrease in interest and other borrowing costs. These
decreases were partially offset by the $2.1 million difference in incentive
compensation expense for the nine month period ended July 31, 2019 when compared
to the same period in 2018. The portfolio fees - asset management are payable to
TTG Advisers for monitoring and other customary fees received by the GP from
portfolio companies of the PE Fund. To the extent the GP or TTG Advisers
receives advisory, monitoring, organization or other customary fees from any
portfolio company of the PE Fund or management fees related to the PE Fund, 25%
of such fees shall be paid to or retained by the GP and 75% of such fees shall
be paid to or retained by TTG Advisers. On October 30, 2018, the Board approved
the renewal of the Advisory Agreement for the 2019 fiscal year. The Company and
the Adviser agreed on an expense cap for fiscal 2019 of 3.25% under the Modified
Methodology. The amount of any payments made by the GP of the PE Fund to TTG
Advisers pursuant to the Portfolio Management Agreement between the GP and TTG
Advisers respecting the PE Fund continues to be excluded from the calculation of
the Company's expense ratio under the Expense Limitation Agreement. In addition,
for fiscal years 2010 through 2019, TTG Advisers voluntarily agreed to extend
the Voluntary Waiver. TTG Advisers also voluntarily agreed that any assets of
the Company that are invested in exchange-traded funds would not be taken into
account in the calculation of the base management fee due to TTG Advisers under
the Advisory Agreement. As of July 31, 2019, the Company did not have an
investment in an exchange traded fund. Under the Modified Methodology, for the
quarter ended July 31, 2019, the Company's annualized expense ratio was 2.66%,
(taking into account the same carve outs as those applicable to the expense
cap). In addition, the Adviser agreed, effective November 1, 2017, to a revised
management fee structure that ties management fees to the NAV discount3 as
follows: (A) If the Company's NAV discount is greater than 20%, the management
fee for the current quarter is reduced to 1.25%; (B) If the NAV discount is
between 10% and 20%, the management fee will be 1.50%; and (C) If the NAV
discount is less than 10% or eliminated, the 1.50% management fee would be
re-examined, but in no event would it exceed 1.75%. For the quarter ended July
31, 2019, the management fee was 1.25%.



Pursuant to the terms of the Advisory Agreement, during the nine month period
ended July 31, 2019, the provision for incentive compensation was unchanged from
$0 as of October 31, 2018, including both the pre-incentive fee net operating
income and the capital gain incentive fee.  The provision for incentive
compensation includes the Valuation Committee's determination to decrease the
fair values of ten of the Company's portfolio investments (Advantage, Highpoint,
Initials, Legal Solutions, MVC Environmental, RuMe, Trientis, U.S. Spray, U.S.
Gas and Equus) by a total of approximately $14.4 million. The provision also
includes the Valuation Committee's determination to increase the fair values of
eleven of the Company's portfolio investments (Array, Black Diamond, Custom
Alloy, Dukane, HTI, JSC Tekers, Security Holdings, Turf, Crius, Centile escrow
and MVC Automotive) by a total of approximately $11.9 million. Also, for the
quarter ended July 31, 2019, no provision was recorded for the net operating
income portion of the incentive fee as pre-incentive fee net operating income
for the quarter did not exceed the hurdle rate.

REALIZED GAINS AND LOSSES ON PORTFOLIO SECURITIES


For the Nine month period ended July 31, 2020 and 2019. Net realized losses were
approximately $2.4 million for the nine month period ended July 31, 2020 and net
realized gains of approximately $4.6 million for the nine month period ended
July 31, 2019, a decrease of approximately $7.0 million.

For the Nine month period ended July 31, 2020





Net realized losses for the nine month period ended July 31, 2020, were
approximately $2.4 million. The Company's net realized losses were primarily due
to the realized loss on the sale of the common shares of Equus. The loss was
partially offset by the realized gains on the sale of Focus Pointe, a portfolio
company of the PE Fund, of approximately $773,000 and proceeds received of
approximately $1.2 million from the PE Fund related to tax refunds and release
of escrow funds related to former PE Fund portfolio companies. The Company also
received carried interest payments from the PE Fund totaling approximately
$91,000 related to these transactions, which were recorded as additional
realized gains.


3 The NAV discount referred to herein is the average daily discount to NAV for a
quarter. The discount is determined using the most recently determined NAV per
share, which is typically the prior quarter end's NAV per share and the Company
stock closing price on any given day for the quarter.



                                       51

On December 5, 2019, the Company sold 162,999 preferred shares of Advantage for approximately $1.6 million, resulting in a realized loss of approximately $33,000.

On January 1, 2020, the Company received approximately $28,000 for the sale of the Array warrant which was recorded as a realized gain.

On March 30, 2020, the Company received approximately $1.3 million for the sale of the Apex warrant, which resulted in a realized loss of approximately $558,000.

On July 16, 2020, the Company sold the remaining 3,228,024 common shares of Equus for approximately $3.8 million, resulting in a realized loss of approximately $3.7 million.

During the nine month period ended July 31, 2020, the Company also recorded realized losses of approximately $11,000 from the Centile escrow and approximately $86,000 from the sale of U.S. Treasury obligations.

For the Nine Month Period Ended July 31, 2019





Net realized gains for the nine month period ended July 31, 2019, were
approximately $4.6 million. The Company's net realized gains were primarily due
to the realized gain on the sale of Plymouth Rock Energy, LLC ("Plymouth"), a
portfolio company of the PE Fund, which resulted in a realized gain of
approximately $5.0 million and a $3.2 million realized gain associated with the
redemption of the Custom Alloy series C preferred shares. These realized gains
were partially offset by the $3.8 million realized loss on the sale of the Crius
equity units and the approximately $219,000 realized loss on the sale of the
Equus common shares. The Company also received a carried interest payment from
the PE Fund of approximately $173,000 related to the sale of Plymouth, which was
recorded as additional realized gains.

During the nine month period ended July 31, 2019, the Company also recorded net realized gains of approximately $116,000 from its escrow receivables.

UNREALIZED APPRECIATION AND DEPRECIATION OF PORTFOLIO SECURITIES





For the Nine month period ended July 31, 2020 and 2019. The Company had a net
change in unrealized depreciation on portfolio investments of approximately
$43.7 million for the nine month period ended July 31, 2020 and approximately
$207,000 of unrealized appreciation for the nine month period ended July 31,
2019, a net decrease of approximately $43.9 million.

For the Nine month period ended July 31, 2020





The Company had a net change in unrealized depreciation on portfolio investments
of approximately $43.7 million for the nine month period ended July 31, 2020.
The net change in unrealized depreciation for the nine month period ended July
31, 2020 included the reversal of the unrealized appreciation on the PE Fund of
approximately $878,000 (as a result of the Company's sale of Focus Pointe) and
the reversal of the unrealized depreciation of the Equus common stock of
approximately $2.6 million. The net change also includes Valuation Committee
determination to decrease the fair value of the Company's investments in:
Advantage by approximately $705,000, Black Diamond by approximately $169,000,
Custom Alloy by approximately $8.1 million, Dukane by approximately $55,000,
Global Prairie by approximately $11,000, HTI by approximately $527,000, Initials
by approximately $646,000, Jedson by approximately $2.9 million, Legal Solutions
by approximately $882,000, MVC Automotive by approximately $5.9 million, MVC
Private Equity Fund L.P. by approximately $419,000, Powers by approximately $1.2
million, RuMe by approximately $11.9 million, Security Holdings by approximately
$14.7 million, Tuf-Tug by approximately $301,000, Turf by approximately
$401,000, U.S. Gas by approximately $1.9 million and U. S. Spray by
approximately $1.8 million. These changes in unrealized depreciation were
partially off-set by the Valuation Committee determination to increase the fair
value of the Company's investments in: Apex by approximately $1.5 million,
Foliofn, by approximately $6.4 million, GTM by approximately $417,000, JSC
Tekers by approximately $109,000, SMA by approximately $681,000 and Trientis by
approximately $44,000.



                                       52

For the Nine Month Period Ended July 31, 2019





The Company had a net change in unrealized appreciation on portfolio investments
of approximately $207,000 for the nine month period ended July 31, 2019. The net
change in unrealized appreciation for the nine month period ended July 31, 2019
was the result of the reversal of the unrealized depreciation of approximately
$4.6 million on the Crius equity units, reversal of the unrealized depreciation
of $3.0 million related to the MVC Environmental loan receivable reserve,
reversal of the unrealized appreciation on the PE Fund of approximately $5.3
million (as a result of the Company's sale of the Plymouth Rock Energy, LLC),
and the $2.4 million of unrealized appreciation due to the reversal of the
unrealized depreciation on the MVC Environmental letter of credit. The net
change also includes the Valuation Committee determination to increase the fair
value of the Company's investments in: the Array loan by approximately $62,000,
Black Diamond loan and warrant by a net total of approximately $885,000, Custom
Alloy second lien loans, series A preferred stock, series B preferred stock and
series C preferred stock by a net total of approximately $1.9 million, Dukane
loan by approximately $11,000, Foliofn preferred stock by $790,000, HTI loan by
approximately $192,000, JSC Tekers preferred stock by approximately $94,000,
Security Holdings equity and letter of credit by a net total of approximately
$2.5 million, Turf loans by approximately $233,000, MVC Automotive equity by
approximately $374,000 and the Centile escrow by $116,000. The value of Crius
stock was also increased by approximately $5.5 million based on its market
value. These changes in unrealized appreciation were partially off-set by the
Valuation Committee determination to decrease the fair value of the Company's
investments in: Advantage preferred stock by approximately $918,000, Highpoint
loan by approximately $51,000, Initials loan by approximately $688,000, Legal
Solutions loan by approximately $118,000, MVC Environmental loan and common
stock by a total of approximately $3.9 million, RuMe series B-1 preferred stock,
guarantee and letter of credit by a net total of approximately $2.2 million,
Trientis loan by approximately $121,000, U.S. Spray common stock by $3.1
million, U.S. Gas loan by approximately $1.6 million and the MVC Private Equity
Fund L.P. general partnership interest and limited partnership interest in the
PE Fund by a total of approximately $705,000. The value of Equus stock was also
decreased by approximately $1.7 million based on its market value.



PORTFOLIO INVESTMENTS



For the Nine month period ended July 31, 2020 and the Year Ended October 31,
2019. The cost of the portfolio investments held by the Company at July 31, 2020
and at October 31, 2019 was $337.7 million and $415.7 million, respectively, a
decrease of approximately $78.0 million. The aggregate fair value of portfolio
investments at July 31, 2020 and at October 31, 2019 was $220.9 million and
$340.2 million, respectively, a decrease of approximately $119.3 million. The
cost and fair value of cash, restricted cash and cash equivalents held by the
Company at July 31, 2020 and October 31, 2019 was $51.9 million and $11.7
million, respectively, representing an increase of approximately $40.2 million.

For the Nine month period ended July 31, 2020





During the nine month period ended July 31, 2020, the Company made follow-on
investments in five portfolio companies that totaled approximately $11.5
million. Specifically, on November 14, 2019 and February 28, 2020, the Company
loaned $50,000 and $300,000, respectively, to RuMe on its lines of credit,
increasing the balances to approximately $2.2 million and approximately
$727,000, respectively. On December 13, 2019 and February 3, 2020, the Company
loaned approximately $1.6 million and $1.7 million, respectively, to Jedson,
increasing the first lien loan to approximately $9.4 million. On January 10,
2020, the Company loaned approximately $3.8 million to Apex, increasing the
first lien loan to approximately $18.8 million at that time. The maturity date
of the loan was extended to May 15, 2020. The Company also received a warrant as
part of this investment. During the nine month period ended July 31, 2020,
Custom Alloy borrowed approximately $1.7 million on its revolving credit
facility, increasing the balance outstanding to approximately $3.7 million.
During the nine month period ended July 31, 2020, the Company loaned
approximately $2.5 million to Security Holdings, increasing its senior
subordinated loan outstanding amount to approximately $8.6 million.



                                       53

On November 1, 2019, U.S. Gas made a principal payment of approximately $32.8 million on its second lien loan.

On November 4, 2019, the Company received net proceeds of approximately $1.0 million related to the G3K Displays, Inc. settlement.

On November 5, 2019, the Company received proceeds of approximately $1.0 million related to the Centile escrow.





On November 8, 2019, the Company received proceeds of approximately $2.7 million
from the PE Fund related to the sale of Focus Pointe, a portfolio company of the
PE Fund. The Company's pro-rata share of the PE Fund's cost basis in the Focus
Pointe investment totaled approximately $1.9 million, resulting in a realized
gain of approximately $773,000. The Company also received a carried interest
payment from the PE Fund of approximately $48,000 related to the sale, which was
recorded as additional realized gains.



On November 8, 2019, the Company received proceeds of approximately $291,000
from the PE Fund related to tax refunds received by the PE Fund related to
Plymouth Rock Energy, LLC. The additional proceeds were recorded as realized
gains. The Company also received a carried interest payment from the PE Fund of
approximately $11,000 related to these proceeds, which was recorded as
additional realized gains.

On December 5, 2019, the Company sold 162,999 preferred shares of Advantage for approximately $1.6 million, resulting in a realized loss of approximately $33,000.





On January 1, 2020, Array repaid its second lien loan in full, including all
accrued interest totaling approximately $6.4 million. The Company also received
approximately $28,000 for the sale of the warrant which was recorded as a
realized gain.

On January 10, 2020, Essner repaid its first lien loan in full, including all accrued interest totaling approximately $3.6 million.

On January 31, 2020, Morey's repaid its second lien loan in full, including all accrued interest totaling approximately $16.8 million.





On February, 21, 2020, the Company received proceeds of approximately $878,000
from the PE Fund related to the release of escrow funds related to former PE
Fund portfolio companies AccuMed Corp., Focus Pointe Global and Plymouth Rock
Energy, LLC. The Company also received an approximately $32,000 carried interest
payment.



On March 30, 2020, Apex repaid its first lien loan in full including all accrued
interest, totaling approximately $18.9 million. The Company received a free
warrant as part of the approximately $3.9 million follow-on investment on
January 10, 2020 in which approximately $1.9 million of the approximately $3.9
million cost basis of the loan was allocated to the cost of the warrant. On
March 30, 2020, the Company also received approximately $1.3 million for the
sale of the warrant, which resulted in a realized loss of approximately $558,000
based on the allocated cost of the warrant. The net impact of the warrant
increased net assets by approximately $1.3 million.

On April 6, 2020, Turf senior subordinated loan and third lien loan were combined into a non-amortizing senior subordinated loan in the amount of $8,697,056 with a 10% cash interest rate and a maturity of October 7, 2023.





                                       54





On May 14, 2020, Foliofn announced it entered into an agreement to be acquired
by The Goldman Sachs Group, Inc..  The acquisition, while subject to regulatory
approval, is expected to close in the third calendar quarter of 2020.  If the
transaction closes, the Company expects to receive approximately $15 million in
proceeds.

On July 16, 2020, the Company sold the remaining 3,228,024 common shares of Equus for approximately $3.8 million, resulting in a realized loss of approximately $3.7 million.

During the nine month period ended July 31, 2020, Turf made a principal payment of $70,000 on its third lien loan.

During the nine month period ended July 31, 2020, U.S. Tech made principal payments on its loan totaling approximately $1.8 million.

During the nine month period ended July 31, 2020, IPCC made principal payments on its loan totaling $300,000.

During the nine month period ended July 31, 2020, Legal Solutions made $2.4 million in principal payments on its loan.





During the quarter ended January 31, 2020, the Valuation Committee increased the
fair value of the Company's investments in: Black Diamond by approximately
$256,000, Foliofn) by approximately $5.7 million, JSC Tekers by $350,000,
Trientis by approximately $72,000, Turf by approximately $60,000, MVC Private
Equity Fund L.P. by approximately $2.0 million, GTM by approximately $817,000,
MVC Automotive equity by approximately $486,000 and Apex by approximately $1.5
million. In addition, increases in the cost basis of the loans to Apex, Black
Diamond, Custom Alloy, Dukane, Global Prairie, GTM, Highpoint, HTI, Jedson,
Legal Solutions, Morey's, RuMe, Security Holdings, SMA and Tuf-Tug due to the
capitalization of PIK interest totaling approximately $1.8 million. The
Valuation Committee also decreased the fair value of the Company's investments
in: Advantage by approximately $129,000, Custom Alloy by approximately $387,000,
Dukane by approximately $45,000, Initials by approximately $103,000, RuMe by
approximately $1.6 million, Security Holdings by approximately $7.1 million,
Tuf-Tug by approximately $62,000, U.S. Gas by approximately $1.0 million and
U.S. Spray by approximately $260,000.



During the quarter ended April 30, 2020, the Valuation Committee decreased the
fair value of the Company's investments in: Advantage by approximately $835,000,
Black Diamond by approximately $628,000, Custom Alloy by approximately $7.2
million, Foliofn, by approximately $632,000, Global Prairie by approximately
$83,000, GTM by approximately $430,000, Highpoint by approximately $254,000, HTI
by approximately $1.2 million, Initials by approximately $519,000, IPCC by
approximately $160,000, Jedson by approximately $2.5 million, JSC Tekers by
approximately $733,000, Legal Solutions by approximately $386,000, MVC
Automotive by approximately $6.9 million, MVC Private Equity Fund L.P. by
approximately $2.8 million, Powers by approximately $1.5 million, RuMe by
approximately $3.1 million, Security Holdings by approximately $8.6 million, SMA
by approximately $28,000, Trientis by approximately $54,000, Tuf-Tug by
approximately $161,000, Turf by approximately $1.1 million and U.S. Spray by
approximately $570,000. There were also increases in the cost basis of the loans
to Black Diamond, Dukane, Global Prairie, GTM, Highpoint, HTI, Jedson, Legal
Solutions, RuMe, Security Holdings, SMA and Tuf-Tug due to the capitalization of
PIK interest totaling approximately $600,000.



During the quarter ended July 31, 2020, the Valuation Committee increased the
fair value of the Company's investments in: Advantage by approximately $259,000,
Black Diamond by approximately $203,000, Foliofn, by approximately $1.4 million,
Global Prairie by approximately $72,000, GTM by approximately $30,000, Highpoint
by approximately $254,000, HTI by approximately $627,000, IPCC by approximately
$160,000, JSC Tekers by approximately $492,000, MVC Automotive by approximately
$528,000, MVC Private Equity Fund L.P. by approximately $381,000, Powers by
approximately $345,000, Security Holdings by approximately $1.0 million, SMA by
approximately $709,000, Trientis by approximately $26,000 and Turf by
approximately $654,000. In addition, there were increases in the cost basis of
the loans to Black Diamond, Dukane, Global Prairie, GTM, Highpoint, HTI, Jedson,
Legal Solutions, Powers, Security Holdings, SMA and Tuf-Tug due to the
capitalization of PIK interest totaling approximately $1.2 million. The
Valuation Committee also decreased the fair value of the Company's investments
in: Custom Alloy by approximately $491,000, Dukane by approximately $10,000,
Initials by approximately $24,000, Jedson by approximately $356,000, Legal
Solutions by approximately $496,000, RuMe by approximately $7.2 million and
Tuf-Tug by approximately $78,000, U.S. Spray by approximately $1.0 million and
U.S. Gas by approximately $900,000.



                                       55





During the nine month period ended July 31, 2020, the Valuation Committee
decreased the fair value of the Company's investments in: Advantage by
approximately $705,000, Black Diamond by approximately $169,000, Custom Alloy by
approximately $8.1 million, Dukane by approximately $55,000, Global Prairie by
approximately $11,000, HTI by approximately $527,000, Initials by approximately
$646,000, Jedson by approximately $2.9 million, Legal Solutions by approximately
$882,000, MVC Automotive by approximately $5.9 million, MVC Private Equity Fund
L.P. by approximately $419,000, Powers by approximately $1.2 million, RuMe by
approximately $11.9 million, Security Holdings by approximately $14.7 million,
Tuf-Tug by approximately $301,000, Turf by approximately $401,000, U.S. Gas by
approximately $1.9 million and U. S. Spray by approximately $1.8 million. The
Valuation Committee also increased the fair value of the Company's investments
in: Apex by approximately $1.5 million, Foliofn, by approximately $6.4 million,
GTM by approximately $417,000, JSC Tekers by approximately $109,000, SMA by
approximately $681,000 and Trientis by approximately $44,000. In addition, there
were increases in the cost basis of the loans to Apex, Black Diamond, Custom
Alloy, Dukane, Global Prairie, GTM, Highpoint, HTI, Jedson, Legal Solutions,
Morey's, RuMe, Security Holdings, SMA and Tuf-Tug due to the capitalization of
PIK interest totaling approximately $3.6 million.



At July 31, 2020, the fair value of all portfolio investments was $220.9 million
with a cost basis of $337.7 million. At July 31, 2020, the fair value and cost
basis of investments made by the Company's former management team pursuant to
the prior investment objective ("Legacy Investments") were $12.8 million and
$15.0 million, respectively, and the fair value and cost basis of portfolio
investments made by the Company's current management team were $208.1 million
and $322.7 million, respectively. At October 31, 2019, the fair value of all
portfolio investments, exclusive of escrow receivables, was $340.2 million with
a cost basis of $415.7 million. At October 31, 2019, the fair value and cost
basis of the Legacy Investments were $6.4 million and $15.0 million,
respectively, and the fair value and cost basis of portfolio investments made by
the Company's current management team were $333.8 million and $400.7 million,
respectively.

For the Fiscal Year Ended October 31, 2019





During the fiscal year ended October 31, 2019, the Company made six new
investments, committing capital that totaled approximately $32.4 million.
Pursuant to an exemptive order received by the Company from the SEC (the
"Order"), that allows the Company to co-invest, subject to certain conditions,
with certain affiliated private funds as described in the Order, each of the
Company and the Private Fund co-invested in GTM ($1.9 million investment for the
Company). The Company also invested in Powers ($6.5 million), IPCC ($8.0
million), Jedson ($6.0 million), SMA ($7.0 million) and Global Prairie ($3.0
million).



During the fiscal year ended October 31, 2019, the Company made follow-on
investments in six portfolio companies that totaled approximately $12.5 million.
Specifically, on December 21, 2018, the Company loaned an additional $2.0
million to Custom Alloy in the form of a second lien loan with an interest rate
of 11% and a maturity date of December 23, 2019. During the fiscal year ended
October 31, 2019, the Company loaned approximately $1.4 million to RuMe and
received a new warrant. On June 7, 2019, the Company invested approximately $3.9
million in GTM increasing the second lien loan by $3.5 million and investing
approximately $420,000 for additional common shares. During the fiscal year
ended October 31, 2019, Custom Alloy borrowed approximately $2.1 million on its
revolving credit facility, which has a 15% interest rate and a maturity date of
April 30, 2020. On July 15, 2019, the Company loaned an additional $1.0 million
to HTI increasing its second lien loan to approximately $11.4 million as of
October 31, 2019. On September 10, 2019, the Company invested $1.0 million in
additional common equity of MVC Automotive. On September 26, 2019, the Company
loaned approximately $552,000 to Security Holdings, increasing its senior
subordinated loan to approximately $6.0 million as of October 31, 2019.



                                       56

On November 9, 2018, Custom Alloy repaid its first lien loan in full, including all accrued interest.

On November 13, 2018, Custom Alloy repaid its $1.4 million second lien loan in full, including all accrued interest.

On November 27, 2018, the Company funded approximately $3.0 million related to the MVC Environmental letter of credit, which was called by the beneficiary.





On December 27, 2018, the Company received proceeds of approximately $7.5
million from the PE Fund related to the sale of Plymouth Rock Energy, LLC, a
portfolio company of the PE Fund. The Company's pro-rata share of the PE Fund's
cost basis in the Plymouth Rock Energy, LLC investment totaled approximately
$2.5 million, resulting in a realized gain of approximately $5.0 million. The
Company also received a carried interest payment from the PE Fund of
approximately $173,000 related to the sale, which was recorded as additional
realized gains.

On December 27, 2018, the Company received a dividend of approximately $543,000 from the PE Fund related to Focus Pointe Global.





On February 7, 2019, Vistra Energy and Crius Energy Trust ("Crius") announced
that they entered into a definitive agreement pursuant to which Vistra Energy
will acquire Crius for cash consideration of CAN$7.57 per trust unit.  On
February 20, 2019, Vistra Energy agreed to increase its acquisition price for
Crius to CAN$8.80 per trust unit, an increase of CAN$1.23 per trust unit.



On April 26, 2019, RuMe made a principal payment on the revolver of $500,000 and
Morey's made a principal payment of approximately $591,000 on its second lien
loan.



On April 30, 2019, Custom Alloy redeemed its series A, B and C preferred shares
and consolidated its second lien loans in exchange for two second lien loans of
approximately $32.5 million and $6.1 million with interest rates of 15% and
maturity dates of April 30, 2022. The Company also funded approximately $595,000
as part of the transaction related to the $6.1 million second lien loan. The
Company realized a gain of approximately $3.2 million and approximately $2.3
million of PIK interest and dividends associated with the transaction. Also on
April 30, 2019, the Company provided Custom Alloy a $3.0 million line of credit
with a 15% interest rate and a maturity date of April 30, 2020 with no amount
outstanding as of that date.

On June 14, 2019, Array Information Technology, Inc. ("Array") made a principal payment of approximately $114,000 on its second lien loan.

On June 19, 2019, Essner Manufacturing, LP ("Essner") made a principal payment of approximately $78,000 on its first lien loan.

On July 1, 2019, Turf Products, LLC ("Turf") made a principal payment of $70,000 on its third lien loan.





On July 15, 2019, the Company's Crius trust units were sold for $6.71 per share
resulting in total proceeds of approximately $22.0 million. The Company realized
a loss of approximately $3.8 million as a result of this transaction.



On July 29, 2019, the Company sold 608,310 shares of Equus Total Return, Inc.
("Equus") common stock for approximately $1.0 million, resulting in a realized
loss of approximately $219,000.

On August 12, 2019, the Company sold 608,310 common shares of Equus totaling approximately $985,000 in proceeds and resulting in a realized loss of approximately $268,000.





                                       57







On August 12, 2019, the Company converted the MVC Environmental loan, unpaid
expenses and accrued interest to additional cost basis in the common stock of
MVC Environmental, resulting in a realized gain of approximately $1.4 million.



On September 13, 2019, the Company sold the common stock of MVC Environmental,
receiving proceeds of $45,000 which resulted in a realized loss of approximately
$14.4 million.



On October 1, 2019, Tin Roof repaid its $3.8 million loan in full, including all
accrued interest. Also during the fiscal year ended October 31, 2019, Tin Roof
made principal payments totaling approximately $99,000.



On October 17, 2019, the Company recorded a $1.6 million realized gain
associated with a settlement, which is expected to be paid in November 2019,
related to a former portfolio company, G3K Display, Inc. The Company incurred
costs of approximately $543,000 related to the settlement.



During the quarter ended January 31, 2019, the Valuation Committee increased the
fair value of the Company's investments in: Black Diamond loan and warrant by
approximately $767,000, Custom Alloy second lien loans, series A preferred
stock, series B preferred stock and series C preferred stock by a net total of
approximately $2.3 million, Dukane loan by $286, Foliofn preferred stock by
$32,000, Highpoint loan by approximately $252, HTI loan by approximately
$80,000, JSC Tekers preferred stock by approximately $82,000, Security Holdings
equity and letter of credit by a net total of $25,000, Turf loan by
approximately $15,000 and the Centile escrow by $49,000. In addition, increases
in the cost basis of the loans to HTI, Legal Solutions, RuMe, Dukane, Morey's,
Highpoint, Array, GTM, Tin Roof, Tuf-Tug and Security Holdings were due to the
capitalization of PIK interest totaling approximately $964,000. The Valuation
Committee also decreased the fair value of the Company's investments in:
Advantage preferred stock by approximately $244,000, Essner loan by
approximately $21,000, Initials loan by approximately $412,000, Legal Solutions
loan by approximately $118,000, MVC Automotive equity by approximately $117,000,
MVC Environmental loan by approximately $875,000 and common stock by
approximately $3.0 million, MVC Private Equity Fund L.P. general partnership
interest and limited partnership interest in the PE Fund by a total of
approximately $1.1 million, RuMe series B-1 preferred stock, guarantee and
letter of credit by a net total of approximately $308,000, Trientis loan by
approximately $77,000, U.S. Tech loan by approximately $23,000 and the U.S. Gas
loan by approximately $797,000.



During the quarter ended April 30, 2019, the Valuation Committee increased the
fair value of the Company's investments in: Array loan by approximately $62,000,
Black Diamond loan and warrant by a net total of approximately $126,000, Dukane
loan by approximately $10,000, Essner loan by approximately $21,000, Foliofn
preferred stock by $369,000, Highpoint loan by approximately $264, HTI loan by
approximately $65,000, Initials loan by approximately $5,000, MVC Automotive
equity by approximately $747,000, MVC Private Equity Fund L.P. general
partnership interest and limited partnership interest in the PE Fund by a total
of approximately $833,000, Security Holdings equity and letter of credit by a
net total of approximately $3.7 million, Trientis loan by approximately $40,000,
Turf loans by approximately $94,000, U.S. Tech loan by approximately $23,000,
U.S. Gas loan by approximately $357,000 and the Centile escrow by approximately
$29,000. In addition, increases in the cost basis of the loans to HTI, Legal
Solutions, RuMe, Dukane, Morey's, Highpoint, Array, GTM, Tin Roof, Tuf-Tug,
Security Holdings and the Custom Alloy preferred stock were due to the
capitalization of PIK interest/dividends totaling approximately $3.4 million.
The Valuation Committee also decreased the fair value of the Company's
investments in: Advantage preferred stock by approximately $674,000, Custom
Alloy loans by a total of approximately $504,000, JSC Tekers preferred stock by
approximately $48,000, RuMe series B-1 preferred stock and letter of credit by a
total of approximately $1.8 million and the U.S. Spray common stock by $3.1
million.



During the quarter ended July 31, 2019, the Valuation Committee increased the
fair value of the Company's investments in: Centile escrow by approximately
$38,000, Custom Alloy loans by a total of approximately $115,000, Dukane loan by
approximately $1,000, Foliofn preferred stock by $389,000, HTI loan by
approximately $47,000, JSC Tekers preferred stock by approximately $60,000 and
Turf loans by approximately $124,000. In addition, increases in the cost basis
of the loans to HTI, Legal Solutions, RuMe, Dukane, Morey's, Highpoint, Array,
GTM, Tin Roof, Tuf-Tug, Security Holdings, Jedson and Custom Alloy were due to
the capitalization of PIK interest/dividends totaling approximately $780,000.
The Valuation Committee also decreased the fair value of the Company's
investments in: Array loan by approximately $1,000, Black Diamond loan and
warrant by a net total of approximately $8,000, Highpoint loan by approximately
$51,000, Initials loan by approximately $281,000, MVC Automotive equity by
approximately $256,000, MVC Private Equity Fund L.P. general partnership
interest and limited partnership interest in the PE Fund by a total of
approximately $399,000, RuMe series B-1 preferred stock and letter of credit by
a total of approximately $113,000, Security Holdings equity and letter of credit
by a net total of approximately $1.2 million, Trientis loan by approximately
$84,000 and U.S. Gas loan by approximately $1.2 million.



                                       58





During the quarter ended October 31, 2019, the Valuation Committee increased the
fair value of the Company's investments in: Array loan by $622, Centile escrow
by approximately $50,000, Foliofn preferred stock by $569,000, JSC Tekers
preferred stock by $737,000, MVC Automotive equity by approximately $327,000,
MVC Private Equity Fund L.P. general partnership interest and limited
partnership interest in the PE Fund by a total of approximately $566,000,
Tuf-Tug loan and common stock by a total of approximately $78,000 and Turf loans
by approximately $69,000. In addition, increases in the cost basis of the loans
to HTI, Legal Solutions, RuMe, Dukane, Morey's, Highpoint, Array, GTM, Tuf-Tug,
Security Holdings, Jedson, SMA and Black Diamond were due to the capitalization
of PIK interest/dividends totaling approximately $747,000. The Valuation
Committee also decreased the fair value of the Company's investments in:
Advantage preferred stock by approximately $403,000, Black Diamond loan and
warrant by a net total of approximately $14,000, Custom Alloy loans by a total
of approximately $98,000, Dukane loan by approximately $9,000, Initials loan by
approximately $715,000, RuMe preferred stocks, warrants and letter of credit by
a net total of approximately $839,000, Security Holdings equity and letter of
credit by a net total of $227,000, Trientis loan by approximately $86,000, U.S.
Gas loan by approximately $857,000 and U.S. Spray common stock by $500,000.



During the fiscal year ended October 31, 2019, the Valuation Committee increased
the fair value of the Company's investments in: Array loan by approximately
$63,000, Black Diamond loan and warrant by a net total of approximately
$871,000, Custom Alloy second lien loans, series A preferred stock, series B
preferred stock and series C preferred stock by a net total of approximately
$1.8 million, Dukane loan by approximately $1,000, Foliofn preferred stock by
$1.4 million, HTI loan by approximately $192,000, JSC Tekers preferred stock by
approximately $831,000, Security Holdings equity and letter of credit by a net
total of approximately $2.2 million, Tuf-Tug loan and common stock by
approximately $78,000, Turf loans by approximately $302,000, MVC Automotive
equity by approximately $701,000 and the Centile escrow by $166,000. In
addition, increases in the cost basis of the loans to HTI, Legal Solutions,
RuMe, Dukane, Morey's, Highpoint, Array, GTM, Tin Roof, Tuf-Tug, Security
Holdings, Jedson, SMA and the Custom Alloy preferred stock were due to the
capitalization of PIK interest/dividends totaling approximately $5.9 million.
The Valuation Committee also decreased the fair value of the Company's
investments in: Advantage preferred stock by approximately $1.3 million,
Highpoint loan by approximately $51,000, Initials loan by approximately $1.4
million, Legal Solutions loan by approximately $118,000, MVC Environmental loan
and common stock by a total of approximately $3.9 million, RuMe series B-1
preferred stock, guarantee and letter of credit by a net total of approximately
$3.0 million, Trientis loan by approximately $208,000, U.S. Spray common stock
by $3.6 million, U.S. Gas loan by approximately $2.4 million and the MVC Private
Equity Fund L.P. general partnership interest and limited partnership interest
in the PE Fund by a total of approximately $140,000.



At October 31, 2019, the fair value of all portfolio investments, exclusive of
escrow receivables, was $340.2 million with a cost basis of $415.7 million. At
October 31, 2019, the fair value and cost basis of the Legacy Investments were
$6.4 million and $15.0 million, respectively, and the fair value and cost basis
of portfolio investments made by the Company's current management team was
$333.8 million and $400.7 million, respectively. At October 31, 2018, the fair
value of all portfolio investments, exclusive of escrow receivables, was $324.5
million with a cost basis of $409.6 million. At October 31, 2018, the fair value
and cost basis of the Legacy Investments was $5.0 million and $15.0 million,
respectively, and the fair value and cost basis of portfolio investments made by
the Company's current management team was $319.5 million and $394.6 million,
respectively.



                                       59





Portfolio Companies

During the nine month period ended July 31, 2020, the Company had investments in the following portfolio companies:

Advantage Insurance Inc.

Advantage, Puerto Rico, is a provider of specialty insurance, reinsurance and related services to business owners and high net worth individuals.





At October 31, 2019, the Company's investment in Advantage consisted of 750,000
shares of preferred stock at a cost basis of $7.5 million and a fair value of
approximately $7.5 million.

On December 5, 2019, the Company sold 162,999 preferred shares of Advantage for approximately $1.6 million, resulting in a realized loss of approximately $33,000.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the preferred stock by approximately $705,000.





At July 31, 2020, the Company's investment in Advantage consisted of 587,001
shares of preferred stock with a cost basis of approximately $5.9 million and a
fair value of approximately $5.2 million.

Apex Industrial Technologies, LLC

Apex, Cincinnati, Ohio, is a leading provider of automation vending equipment in industrial, retail and foodservice environments.


At October 31, 2019, the Company's investment in Apex consisted of a first lien
loan with an outstanding amount of approximately $15.0 million, a cost basis of
approximately $14.9 million and a fair value of approximately $15.0 million. The
first lien loan had an interest rate of 12% and a maturity date of December


31,
2019.



On January 10, 2020, the Company loaned Apex approximately $3.8 million,
increasing the first lien loan to approximately $18.8 million. The maturity date
of the loan was extended to May 15, 2020. The Company also received a warrant as
part of this investment.

During the nine month period ended July 31, 2020, the Valuation Committee increased the fair value of the loan by approximately $1.5 million.





On March 30, 2020, Apex repaid its first lien loan in full, including all
accrued interest totaling approximately $18.9 million. The Company received a
free warrant as part of the approximately $3.9 million follow-on investment on
January 10, 2020 in which approximately $1.9 million of the approximately $3.9
million cost basis of the loan was allocated to the cost of the warrant. On
March 30, 2020, the Company also received approximately $1.3 million for the
sale of the warrant, which resulted in a realized loss of approximately $558,000
based on the allocated cost of the warrant. The net impact of the warrant
increased net assets by approximately $1.3 million.

At July 31, 2020, the Company no longer held an investment in Apex.

Array Information Technology, Inc.

Array, Greenbelt, Maryland, is a leading IT services firm supporting multiple command and/or control groups within the U.S. Air Force, as well as various other federal, municipal and commercial customers.





At October 31, 2019, the Company's investment in Array consisted of a second
lien loan with an outstanding amount of approximately $6.3 million, a cost basis
of approximately $6.2 million and a fair value of approximately $6.3 million and
a warrant with a cost basis and fair value of $0. The second lien loan had an
interest rate of 12% cash and 4% PIK and a maturity date of October 3, 2023.



On January 1, 2020, Array repaid its second lien loan in full, including all
accrued interest totaling approximately $6.4 million. The Company also received
approximately $28,000 for the sale of the warrant which was recorded as a
realized gain.

At July 31, 2020, the Company no longer held an investment in Array.

Black Diamond Equipment Rental

Black Diamond, Morgantown, West Virginia, is a heavy equipment rental company.


At October 31, 2019, the Company's investment in Black Diamond consisted of a
second lien loan with an outstanding amount of approximately $7.5 million, a
cost basis of approximately $7.2 million and a fair value of approximately $7.6
million and a warrant with a cost basis of approximately $401,000 and a fair
value of approximately $960,000. The second lien loan had an interest rate of
12.5% and a maturity date of June 27, 2022.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by approximately $142,000 and the warrant by $27,000.


At July 31, 2020, the Company's investment in Black Diamond consisted of a
second lien loan with an outstanding amount of approximately $7.5 million, a
cost basis of approximately $7.3 million and a fair value of approximately $7.5
million and a warrant with a cost basis of approximately $401,000 and a fair
value of approximately $933,000.



Custom Alloy Corporation

Custom Alloy, High Bridge, New Jersey, manufactures time sensitive and mission critical butt-weld pipe fittings and forgings for the natural gas pipeline, power generation, oil/gas refining and extraction, and nuclear generation markets.


At October 31, 2019, the Company's investment in Custom Alloy consisted of a
second lien loan with a cost basis and outstanding balance of approximately
$32.5 million and a fair value of approximately $32.1 million, a second lien
loan with a cost basis, outstanding balance and a fair value of approximately
$6.1 million and a revolving credit facility with a cost basis, outstanding
balance and a fair value of approximately $2.1 million. The second lien loans
and revolving credit facility had interest rates of 15% and maturity dates of
April 30, 2022 and April 30, 2020, respectively.

During the nine month period ended July 31, 2020, Custom Alloy borrowed approximately $1.7 million on its revolving credit facility. The credit facility's maturity date was also extended to April 30, 2021.


During the nine month period ended July 31, 2020, the interest rates on the
second lien loans and revolver adjusted periodically from 12% cash and 3% PIK
for the quarter ended December 31, 2019 to 4% cash and 11% PIK for the quarter
ended March 31, 2020 to 0% cash to 15% PIK for the quarter ended June 30, 2020.
As of July 31, 2020 the interest rate on the loans was 12% cash and 3% PIK.



During the nine month period ended July 31, 2020, the Valuation Committee
decreased the fair values of the $33.1 million second lien loan by approximately
$6.5 million, the $6.3 million second lien loan by approximately $1.2 million
and the revolver by approximately $365,000.



At July 31, 2020, the Company's investment in Custom Alloy consisted of a second
lien loan with a cost basis and outstanding balance of approximately $33.1
million and a fair value of approximately $26.2 million, a second lien loan with
a cost basis and outstanding balance of approximately $6.3 million and a fair
value of approximately $5.0 million and a revolving credit facility with an
outstanding balance and cost basis of approximately $3.7 million and a fair
value of approximately $3.4 million.



Dukane IAS, LLC

Dukane, St. Charles, Illinois, is a global provider of plastic welding equipment.





At October 31, 2019, the Company's investment in Dukane consisted of a second
lien loan with an outstanding amount, a cost basis and a fair value of
approximately $4.5 million. The second lien loan had an interest rate of 13% and
a maturity date of November 17, 2020.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by $55,000.


At July 31, 2020, the Company's investment in Dukane consisted of a second lien
loan with an outstanding amount, a cost basis and a fair value of approximately
$4.6 million.



                                       61





Essner Manufacturing LP

Essner, Ft. Worth, Texas, manufactures and supplies complex assemblies, machined parts and precision sheet metal components to aerospace suppliers.





At October 31, 2019, the Company's investment in Essner consisted of a first
lien loan with an outstanding amount of approximately $3.6 million, a cost basis
of approximately $3.5 million and a fair value of approximately $3.6 million.
The first lien loan had an interest rate of 11.5% and a maturity date of
December 20, 2022.

On January 10, 2020, Essner repaid its first lien loan in full, including all accrued interest totaling approximately $3.6 million.

At July 31, 2020, the Company no longer held an investment in Essner.





Equus Total Return, Inc.



Equus is a publicly traded business development company and regulated investment
company listed on the New York Stock Exchange (NYSE:EQS). Consistent with the
Company's valuation procedures, the Company has been marking this investment to
its market price.



At October 31, 2019, the Company's investment in Equus consisted of 3,228,024
shares of common stock with a cost of approximately $7.5 million and a market
value of approximately $4.9 million.

On July 16, 2020, the Company sold the remaining 3,228,024 common shares of Equus for approximately $3.8 million, resulting in a realized loss of approximately $3.7 million.

At July 31, 2020, the Company no longer held an investment in Equus.

Foliofn, Inc.

Foliofn, Vienna, Virginia, a Legacy Investment, is a financial services technology company that offers investment solutions to financial services firms and investors.





At October 31, 2019, the Company's investment in Foliofn consisted of 5,802,259
shares of Series C preferred stock with a cost of $15.0 million and a fair value
of approximately $6.4 million.



On May 14, 2020, Foliofn announced it entered into an agreement to be acquired
by The Goldman Sachs Group, Inc..  The acquisition, while subject to regulatory
approval, is expected to close in the third calendar quarter of 2020.  If the
transaction closes, the Company expects to receive approximately $15 million in
proceeds.

During the nine month period ended July 31, 2020, the Valuation Committee increased the fair value of the preferred stock by $6.4 million.





At July 31, 2020, the Company's investment in Foliofn consisted of 5,802,259
shares of Series C preferred stock with a cost of $15.0 million and a fair value
of approximately $12.8 million.

Chris Ferguson, a representative of the Company, serves as a director of Foliofn.

Global Prairie PBC, Inc.

Global Prairie, Kansas City, Missouri, is a marketing firm focusing on quality of life sectors (healthcare, environmental, agriculture).





At October 31, 2019, the Company's investment in Global Prairie consisted of a
second lien loan with an outstanding amount of approximately $3.0 million, a
cost basis of approximately $2.9 million and a fair value of approximately $3.0
million. The second lien loan had an interest rate of 14% and a maturity date of
April 16, 2025.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by $11,000.


At July 31, 2020, the Company's investment in Global Prairie consisted of a
second lien loan with an outstanding amount of approximately $3.1 million, a
cost basis of approximately $3.0 million and a fair value of approximately

$3.1
million.

GTM Intermediate Holdings, Inc.

GTM, Anderson, South Carolina, is a leading supplier of proprietary medical solutions for emergency trauma care.


At October 31, 2019, the Company's investment in GTM consisted of a second lien
loan with an outstanding amount of approximately $5.1 million, a cost basis of
approximately $5.0 million and a fair value of approximately $5.1 million and 2
shares of common stock with a cost basis and fair value of $766,000. The second
lien loan had an interest rate of 12% and a maturity date of December 7, 2024.

During the nine month period ended July 31, 2020, the Valuation Committee increased the fair value of the common stock by $421,000 and decreased the fair value of the loan by approximately $4,000.





At July 31, 2020, the Company's investment in GTM consisted of a second lien
loan with an outstanding amount of approximately $5.1 million, a cost basis of
approximately $5.0 million and a fair value of approximately $5.1 million and 2
shares of common stock with a cost basis of approximately $766,000 and a fair
value of approximately $1.2 million.



Highpoint Global, LLC

Highpoint, Indianapolis, Indiana, is a government services firm focused on improving interactions between citizens and government organizations, particularly the Center for Medicare and Medicaid Services.





At October 31, 2019, the Company's investment in Highpoint consisted of a second
lien loan with an outstanding amount of approximately $5.2 million, a cost basis
of approximately $5.1 million and a fair value of approximately $5.2 million.
The loan had an interest rate of 14% and a maturity date of September 30, 2022.



At July 31, 2020, the Company's investment in Highpoint consisted of a second
lien loan with an outstanding amount of approximately $5.3 million, a cost basis
of approximately $5.2 million and a fair value of approximately $5.3 million.

HTI Technologies and Industries, Inc.

HTI, LaVergne, Tennessee, is a manufacturer of electric motor components and designer of small motor systems.


At October 31, 2019, the Company's investment in HTI consisted of a second lien
loan with an outstanding amount, cost basis and fair value of approximately
$11.4 million. The loan had an interest rate of 15.75% and a maturity date


of
September 15, 2024.

During the nine month period ended July 31, 2020, the interest rate on the loan increased to 16.75%.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by $527,000.





At July 31, 2020, the Company's investment in HTI consisted of a second lien
loan with an outstanding amount and cost basis of approximately $12.1 million
and a fair value of approximately $11.6 million.



Initials, Inc.

Initials, Clarkesville, Georgia, is a direct selling organization specializing in customized bags, organizational products and fashion accessories.





At October 31, 2019, the Company's investment in Initials consisted of a senior
subordinated loan with an outstanding amount and cost basis of approximately
$5.6 million and a fair value of approximately $1.3 million. The loan had an
interest rate of 15% and a maturity date of June 23, 2020.

During the nine month period ended July 31, 2020, the maturity date was extended to October 1, 2020.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by approximately $646,000.





At July 31, 2020, the Company's investment in Initials consisted of a senior
subordinated loan with an outstanding amount and cost basis of approximately
$5.6 million and a fair value of approximately $626,000. The Company reserved in
full against all of the accrued interest starting June 23, 2018.

International Precision Components Corporation

IPCC, Lake Forest, Illinois, is a leading plastic injection molder.


At October 31, 2019, the Company's investment in IPCC consisted of a second lien
loan with an outstanding amount of approximately $8.0 million, a cost basis of
approximately $7.9 million and a fair value of approximately $8.0 million. The
loan had an interest rate of 15.5% and a maturity date of October 3, 2024.

During the nine month period ended July 31, 2020, the interest rate on the second lien loan was reduced to 14%.

During the nine month period ended July 31, 2020, IPCC made principal payments on its loan totaling $300,000.





At July 31, 2020, the Company's investment in IPCC consisted of a second lien
loan with an outstanding amount of approximately $7.7 million, a cost basis of
approximately $7.6 million and a fair value of approximately $7.7 million.

Jedson Engineering, Inc.

Jedson, Cincinnati, Ohio, is a provider of engineering, procurement and construction management services.





At October 31, 2019, the Company's investment in Jedson consisted of a first
lien loan with an outstanding amount of approximately $6.0 million, a cost basis
of approximately $5.9 million and a fair value of approximately $6.0 million.
The loan had an interest rate of 15% and a maturity date of June 21, 2024.



On December 13, 2019 and February 3, 2020, the Company loaned approximately $1.6
million and $1.7 million, respectively, to Jedson, increasing the first lien
loan to approximately $9.4 million.

During the nine month period ended July 31, 2020, the maturity date was extended to June 30, 2022.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by approximately $2.9 million.





At July 31, 2020, the Company's investment in Jedson consisted of a first lien
loan with an outstanding amount of approximately $9.5 million, a cost basis of
approximately $9.3 million and a fair value of approximately $6.6 million.

JSC Tekers Holdings

JSC Tekers, Latvia, is a company focused on real estate management.





At October 31, 2019, the Company's investment in JSC Tekers consisted of
9,159,085 shares of preferred stock with a cost basis of $11.8 million and a
fair value of $4.9 million and 3,201 shares of common stock with a cost basis of
$4,500 and a fair value of $0.

During the nine month period ended July 31, 2020, the Valuation Committee increased the fair value of the preferred stock by $109,000.





At July 31, 2020, the Company's investment in JSC Tekers consisted of 9,159,085
shares of preferred stock with a cost basis of $11.8 million and a fair value of
$5.0 million and 3,201 shares of common stock with a cost basis of $4,500 and a
fair value of $0.

Legal Solutions Holdings, Inc.

Legal Solutions, Covina, CA, is a provider of record retrieval services to the California workers' compensation applicant attorney market.

At October 31, 2019, the Company's investment in Legal Solutions consisted of a senior subordinated loan with an outstanding balance, cost basis and a fair value of approximately $12.2 million. The senior subordinated loan had an interest rate of 15% and a maturity date of March 18, 2020.

During the nine month period ended July 31, 2020, Legal Solutions made $2.4 million in principal payments on its loan and the maturity date was extended to March 31, 2022.

During the nine month period ended July 31, 2020, the interest rate on the loan increased to 16%.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by $882,000.

At July 31, 2020, the Company's investment in Legal Solutions consisted of a senior subordinated loan with an outstanding balance and cost basis of approximately $10.1 million and a fair value of approximately $9.3 million.

Morey's Seafood International LLC

Morey's, Motley, Minnesota, is a manufacturer, marketer and distributor of fish and seafood products.





At October 31, 2019, the Company's investment in Morey's consisted of a second
lien loan that had an outstanding balance, cost basis and a fair value of $16.5
million. The loan had an interest rate of 13% and a maturity date of August


12,
2022.

On January 31, 2020, Morey's repaid its second lien loan in full, including all accrued interest totaling approximately $16.8 million.

At July 31, 2020, the Company no longer held an investment in Morey's.

MVC Automotive Group GmbH

MVC Automotive, an Austrian-based holding company, owns and operates ten Ford, Jaguar, Land Rover, Mazda, and Volvo dealerships located in Austria and the Czech Republic.





At October 31, 2019, the Company's investment in MVC Automotive consisted of an
equity interest with a cost of approximately $52.2 million and a fair value of
approximately $20.6 million and a bridge loan with an outstanding amount, cost
basis and fair value of approximately $7.1 million. The mortgage guarantee for
MVC Automotive was equivalent to approximately $4.0 million at October 31, 2019.
This guarantee was taken into account in the valuation of MVC Automotive. The
bridge loan had an interest rate of 6% and a maturity date of December 31, 2020.

During the nine month period ended July 31, 2020, the maturity date of the bridge loan was extended to December 31, 2021.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the equity interest by approximately $5.9 million.





At July 31, 2020, the Company's investment in MVC Automotive consisted of an
equity interest with a cost of approximately $52.2 million and a fair value of
approximately $14.7 million and a bridge loan with an outstanding amount, cost
basis and fair value of approximately $7.1 million. The mortgage guarantee for
MVC Automotive was equivalent to approximately $4.7 million at July 31, 2020.
This guarantee was taken into account in the valuation of MVC Automotive.

Michael Tokarz, Chairman of the Company, Scott Foote and Puneet Sanan, representatives of the Company, serve as directors of MVC Automotive.

MVC Private Equity Fund, L.P.

MVC Private Equity Fund, L.P., Purchase, New York, is a private equity fund
focused on control equity investments in the lower middle market.  MVC GP II, an
indirect wholly-owned subsidiary of the Company, serves as the GP to the PE Fund
and is exempt from the requirement to register with the Securities and Exchange
Commission as an investment adviser under Section 203 of the Investment Advisers
Act of 1940.  MVC GP II is wholly-owned by MVCFS, a subsidiary of the Company.
The Company's Board of Directors authorized the establishment of, and investment
in, the PE Fund for a variety of reasons, including the Company's ability to
participate in Non-Diversified Investments made by the PE Fund. As previously
disclosed, the Company is limited in its ability to make Non-Diversified
Investments.  For services provided to the PE Fund, the GP and MVC Partners are
together entitled to receive 25% of all management fees and other fees paid by
the PE Fund and its portfolio companies and up to 30% of the carried interest
generated by the PE Fund.  Further, at the direction of the Board of Directors,
the GP retained TTG Advisers to serve as the portfolio manager of the PE Fund.
In exchange for providing those services, and pursuant to the Board of
Directors' authorization and direction, TTG Advisers is entitled to the
remaining 75% of the management and other fees generated by the PE Fund and its
portfolio companies and any carried interest generated by the PE Fund.  A
significant portion of the portfolio fees that are paid by the PE Fund's
portfolio companies to the GP and TTG Advisers is subject to recoupment by the
PE Fund in the form of an offset to future management fees paid by the PE Fund.
Given this separate arrangement with the GP and the PE Fund, under the terms of
the Company's Advisory Agreement with TTG Advisers, TTG Advisers is not entitled
to receive from the Company a management fee or an incentive fee on assets of
the Company that are invested in the PE Fund. The PE Fund's term will end on
October 29, 2016; unless the GP, in its sole discretion, extends the term of the
PE Fund for two additional periods of one year each.



                                       65


On October 29, 2010, through MVC Partners and MVCFS, the Company committed to
invest approximately $20.1 million in the PE Fund.  Of the $20.1 million
total commitment, MVCFS, through its wholly-owned subsidiary MVC GP II, has
committed $500,000 to the PE Fund as its general partner.  See MVC Partners for
more information on the other portion of the Company's commitment to the PE
Fund. The PE Fund has closed on approximately $104 million of capital
commitments.



During the fiscal year ended October 31, 2012 and thereafter, MVC Partners was
consolidated with the operations of the Company as MVC Partners' limited
partnership interest in the PE Fund is a substantial portion of MVC Partners'
operations.


At October 31, 2019, the limited partnership interest in the PE Fund had a cost
of approximately $9.0 million and a fair value of approximately $12.3 million.
The Company's general partnership interest in the PE Fund had a cost basis of
approximately $230,000 and a fair value of approximately $313,000.



On November 8, 2019, the Company received proceeds of approximately $2.7 million
from the PE Fund related to the sale of Focus Pointe, a portfolio company of the
PE Fund. The Company's pro-rata share of the PE Fund's cost basis in the Focus
Pointe investment totaled approximately $1.9 million, resulting in a realized
gain of approximately $773,000. The Company also received a carried interest
payment from the PE Fund of approximately $48,000 related to the sale, which was
recorded as additional realized gains.



On November 8, 2019, the Company received proceeds of approximately $291,000
from the PE Fund related to tax refunds received by the PE Fund related to
Plymouth Rock Energy, LLC. The additional proceeds were recorded as realized
gains. The Company also received a carried interest payment from the PE Fund of
approximately $11,000 related to these proceeds, which was recorded as
additional realized gains.



On February, 21, 2020, the Company received proceeds of approximately $878,000
from the PE Fund related to the release of escrow funds related to former PE
Fund portfolio companies AccuMed Corp., Focus Pointe Global and Plymouth Rock
Energy, LLC. The Company also received an approximately $32,000 carried interest
payment.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the general partnership interest and limited partnership interest in the PE Fund by a total of approximately $419,000.





At July 31, 2020, the limited partnership interest in the PE Fund had a cost of
approximately $7.2 million and a fair value of approximately $8.9 million. The
Company's general partnership interest in the PE Fund had a cost basis of
approximately $183,000 and a fair value of approximately $227,000. As of July
31, 2020, the PE Fund had investments in Gibdock Limited and Advanced Oilfield
Services, LLC.

Powers Equipment Acquisition Company, LLC

Powers, Warminster, Pennsylvania, is a family owned manufacturer of commercial refrigeration equipment.





At October 31, 2019, the Company's investment in Powers consisted of a first
lien loan with an outstanding amount of approximately $6.5 million, a cost basis
of approximately $6.4 million and a fair value of approximately $6.5 million.
The loan had an interest rate of 13.5% and a maturity date of April 30, 2024.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by $1.2 million.





At July 31, 2020, the Company's investment in Powers consisted of a first lien
loan with an outstanding amount of approximately $6.7 million, a cost basis of
approximately $6.6 million and a fair value of approximately $5.5 million.

RuMe, Inc.

RuMe, Denver, Colorado, produces functional and affordable products for the environmentally and socially-conscious consumer reducing dependence on single-use products.





At October 31, 2019, the Company's investment in RuMe consisted of 5,297,548
shares of common stock with a cost basis of approximately $924,000 and a fair
value of $0, 4,999,076 shares of series B-1 preferred stock with a cost basis of
approximately $1.0 million and a fair value of $0, 23,896,634 shares of series C
preferred stock with a cost basis of approximately $3.4 million and a fair value
of approximately $1.5 million, a revolver with an outstanding balance, cost
basis and fair value of approximately $2.1 million, another revolver with an
outstanding balance of approximately $404,000 and a cost basis and fair value of
approximately $233,000 and a subordinated note with an outstanding balance, cost
basis and a fair value of approximately $3.6 million. The warrants have a cost
basis of approximately $595,000 and a fair value of $1.4 million and the letter
of credit was fair valued at approximately -$566,000 or a liability of
approximately $566,000. The subordinated note and the $2.1 million revolver had
an interest rate of 10% PIK and maturity dates of March 31, 2020 and March 31,
2021, respectively. The $404,000 revolver had an interest rate of 10% PIK and a
maturity date of February 28, 2020.



                                       66

On November 14, 2019, the Company loaned $50,000 to RuMe on its line of credit, increasing the balance to approximately $2.1 million.





Specifically, on November 14, 2019 and February 28, 2020, the Company loaned
$50,000 and $300,000, respectively, to RuMe on its lines of credit, increasing
the balances to approximately $2.2 million and approximately $727,000,
respectively.

During the nine month period ended July 31, 2020, the maturity dates of the subordinated note and the $727,000 revolver were extended to March 31, 2021.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the series C preferred stock by approximately $1.5 million, the warrants by a total of approximately $1.4 million, the letters of credit by approximately $2.3 million, the subordinated loan by approximately $3.8 million and the revolvers by a total of approximately $3.0 million.





At July 31, 2020, the Company's investment in RuMe consisted of 5,297,548 shares
of common stock with a cost basis of approximately $924,000 and a fair value of
$0, 4,999,076 shares of series B-1 preferred stock with a cost basis of
approximately $1.0 million and a fair value of $0, 23,896,634 shares of series C
preferred stock with a cost basis of approximately $3.4 million and a fair value
of approximately $0, a revolver with an outstanding balance and cost basis of
approximately $2.2 million and a fair value of approximately $0, another
revolver with an outstanding balance and cost basis of approximately $727,000
and a fair value of approximately $0 and a subordinated note with an outstanding
balance and cost basis of approximately $3.8 million and a fair value of
approximately $0. The warrants have a cost basis of approximately $595,000 and a
fair value of $0 and the letter of credit was fair valued at approximately -$2.9
million or a liability of approximately $2.9 million. The Company reserved in
full against all of the accrued PIK interest starting April 1, 2020.



Security Holdings, B.V.

Security Holdings is an Amsterdam-based holding company that owns FIMA, a Lithuanian security and engineering solutions company.





At October 31, 2019, the Company's investment in Security Holdings consisted of
common equity interest with a cost basis of approximately $51.2 million and a
fair value of approximately $33.6 million, a bridge loan with an outstanding
balance, cost basis and fair value of approximately $4.9 million, a senior
subordinated loan with an outstanding balance, cost basis and fair value of
approximately $6.0 million and a letter of credit with a fair value of
approximately -$161,000 or a liability of $161,000. The bridge loan had an
interest rate of 5% and a maturity date of December 31, 2019 and the senior
subordinated loan had an interest rate of 3.1% and a maturity date of May 31,
2020.

During the nine month period ended July 31, 2020, the Company loaned approximately $2.5 million, to Security Holdings, increasing its senior subordinated loan outstanding amount to approximately $8.6 million.

During the nine month period ended July 31, 2020, the senior subordinated loan's maturity date was extended to May 31, 2022.

During the nine month period ended July 31, 2020, the letter of credit was reduced to 3.3 million Euro.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the common equity interest by $14.8 million and the letter of credit by approximately $36,000.





At July 31, 2020, the Company's investment in Security Holdings consisted of
common equity interest with a cost basis of approximately $51.2 million and a
fair value of approximately $18.8 million, a bridge loan with an outstanding
balance, cost basis and fair value of approximately $5.2 million, a senior
subordinated loan with an outstanding balance, cost basis and fair value of
approximately $8.7 million and a letter of credit with a fair value of
approximately -$125,000 or a liability of $125,000.



Puneet Sanan, a representative of the Company, serves as a director of Security
Holdings.



                                       67







SMA Holdings, Inc.

SMA, Irvine, California, is a strategic consulting firm, which has been serving the federal contracting and commercial markets for over 35 years.





At October 31, 2019, the Company's investment in SMA consisted of a first lien
loan with an outstanding amount of approximately $7.0 million, a cost basis of
approximately $6.4 million and a fair value of approximately $6.5 million and
warrants with a cost basis and fair value of approximately $505,000. The first
lien loan had an interest rate of 11.0% and a maturity date of June 26, 2024.

During the nine month period ended July 31, 2020, the Valuation Committee increased the fair value of the loan by $681,000.


At July 31, 2020, the Company's investment in SMA consisted of a first lien loan
with an outstanding amount of approximately $7.0 million, a cost basis of
approximately $6.5 million and a fair value of approximately $7.0 million and
warrants with a cost basis of approximately $505,000 and a fair value of
approximately $792,000.

Trientis GmbH (formerly SGDA Europe B.V.)

Trientis is an Austrian-based holding company that pursues environmental and remediation opportunities in Romania.





At October 31, 2019, the Company's investment in Trientis consisted of a first
lien loan with an outstanding balance and cost basis of approximately $1.2
million and a fair value of approximately $177,000 and a warrant with a cost
basis of approximately $68,000 and a fair value of $0. The first lien note has
an interest rate of 5%, with a PIK toggle at Trientis's option, and a maturity
date of October 26, 2024.

During the nine month period ended July 31, 2020, the Valuation Committee increased the fair value of the loan by approximately $44,000.


At July 31, 2020, the Company's investment in Trientis consisted of a first lien
loan with an outstanding balance and cost basis of approximately $1.2 million
and a fair value of approximately $221,000 and a warrant with a cost basis of
approximately $68,000 and a fair value of $0. The Company reserved in full
against all of the accrued interest starting September 1, 2018.



Tuf-Tug Inc.

Tuf-Tug, Moraine, Ohio, is a designer and manufacturer of fall protection and rigging gear.





At October 31, 2019, the Company's investment in Tuf-Tug consisted of a second
lien loan with an outstanding balance of approximately $5.0 million, a cost
basis of approximately $4.9 million and a fair value of approximately $5.0
million and 24.6 shares of common stock with a cost basis of $750,000 and a fair
value of approximately $778,000. The second lien loan had an interest rate of
13% and a maturity date of February 24, 2024.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair values of the loan by approximately $59,000 and the common stock by approximately $242,000.


At July 31, 2020, the Company's investment in Tuf-Tug consisted of a second lien
loan with an outstanding balance of approximately $5.1 million, a cost basis of
approximately $5.0 million and a fair value of approximately $5.1 million and
24.6 shares of common stock with a cost basis of $750,000 and a fair value


of
approximately $536,000.



Turf Products, LLC

Turf, Enfield, Connecticut, is a wholesale distributor of golf course and commercial turf maintenance equipment, golf course irrigation systems and consumer outdoor power equipment.


At October 31, 2019, the Company's investment in Turf consisted of a senior
subordinated loan and a third lien loan. The loans had an interest rate of 10%
and a maturity date of August 7, 2020. The senior subordinated loan had an
outstanding balance and cost basis of approximately $7.7 million and a fair
value of approximately $7.6 million and the third lien loan had an outstanding
balance and cost basis of approximately $1.1 million and a fair value of
approximately $1.0 million.



                                       68

On April 6, 2020, the Turf senior subordinated loan and third lien loan were combined into a non-amortizing senior subordinated loan in the amount of $8,697,056 with a 10% cash interest rate and a maturity of October 7, 2023.

During the nine month period ended July 31, 2020, Turf made a principal payment of $70,000 on its third lien loan.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loans by a total of approximately $401,000.





At July 31, 2020, the senior subordinated loan had an outstanding balance and
cost basis of approximately $8.7 million and a fair value of approximately

$8.1
million.

United States Technologies, Inc.

U.S. Technologies, Fairlawn, New Jersey, offers diagnostic testing, redesign, manufacturing, reverse engineering and repair services for malfunctioning electronic components of machinery and equipment.





At October 31, 2019, the Company's investment in U.S. Technologies consisted of
a senior term loan with an outstanding amount, cost basis and fair value of
approximately $5.5 million. The loan had an interest rate of 10.5% and matures
on July 17, 2020.

During the nine month period ended July 31, 2020, U.S. Tech made principal payments on its loan totaling approximately $1.8 million.

During the nine month period ended July 31, 2020, the maturity date of senior term loan was extended to July 17, 2021.

At July 31, 2020, the senior term loan had an outstanding amount, cost basis and fair value of approximately $3.7 million.

U.S. Gas & Electric, Inc.

U.S. Gas, North Miami Beach, Florida, a wholly-owned indirect subsidiary of
Crius, is a licensed Energy Service Company that markets and distributes natural
gas to small commercial and residential retail customers in the state of New
York.



On October 18, 2019, Vistra Energy notified the Company that it was asserting an
offset of Company's loan assets of approximately $1.6 million relating to an
indemnification claim obligation attributable to U.S. Gas. The Company reserved
in full against all of the accrued interest related to the $1.6 million.



At October 31, 2019, the Company's investment in U.S. Gas, an indirect
subsidiary of Crius, consisted of a second lien loan with an outstanding balance
and cost basis of approximately $37.5 million and a fair value of approximately
$37.0 million. The loan has an interest rate of 9.5% and matures on July 5,
2025.

On November 1, 2019, U.S. Gas made a principal payment of approximately $32.8 million on its second lien loan.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the loan by approximately $1.9 million related to the indemnification claim.





At July 31, 2020, the Company's investment in U.S. Gas, an indirect subsidiary
of Vistra, consisted of a second lien loan with an outstanding balance and cost
basis of approximately $4.8 million and a fair value of approximately $2.3
million. The Company reserved in full against all of the accrued interest
related to the $2.5 million portion of the second lien loan due to the
indemnification claims.

U.S. Spray Drying Holding Company

SCSD, Huguenot, New York, provides custom spray drying products to the food, pharmaceutical, nutraceutical, flavor and fragrance industries.





At October 31, 2019, the Company's investment in SCSD consisted of 784 shares of
class B common stock with a cost basis of approximately $5.5 million and a fair
value of approximately $1.8 million. The secured loan and the senior secured
loan each had an outstanding balance, cost basis and fair value of $1.5 million.
The secured loan and the senior secured loan each had an interest rate of 12%
and a maturity date of April 30, 2021.

During the nine month period ended July 31, 2020, the interest rate on the loan was decreased to 8%.

During the nine month period ended July 31, 2020, the maturity dates were extended to April 30, 2025.

During the nine month period ended July 31, 2020, the Valuation Committee decreased the fair value of the common stock by $1.8 million.


At July 31, 2020, the Company's investment in SCSD consisted of 784 shares of
class B common stock with a cost basis of approximately $5.5 million and a fair
value of approximately $10,000, a secured loan and senior secured loan each with
an outstanding balance, cost basis and fair value of $1.5 million, totaling

$3.0
million.

Puneet Sanan, representative of the Company, serves as director of SCSD.

Liquidity and Capital Resources

Our liquidity and capital resources are derived from our public offering of securities, our credit facility and cash flows from operations, including investment sales and repayments and income earned. Our primary use of funds includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, proceeds generated from our portfolio investments and/or proceeds from public and private offerings of securities to finance pursuit of our investment objective.





At July 31, 2020, the Company had investments in portfolio companies totaling
$220.9 million. Also, on that date, the Company had approximately $50.2 million
in cash equivalents and restricted cash equivalents and approximately $1.7
million in cash and restricted cash. The Company considers all money market and
other cash investments purchased with an original maturity of less than three
months to be cash equivalents. U.S. government securities and cash equivalents
are highly liquid. Pending investments in portfolio companies pursuant to our
principal investment strategy, the Company may make other short-term or
temporary investments, including in exchange-traded funds and private investment
funds offering periodic liquidity.



During the nine month period ended July 31, 2020, the Company made follow-on
investments in five portfolio companies that totaled approximately $11.5
million. Specifically, on November 14, 2019 and February 28, 2020, the Company
loaned $50,000 and $300,000, respectively, to RuMe on its lines of credit,
increasing the balances to approximately $2.2 million and approximately
$727,000, respectively. On December 13, 2019 and February 3, 2020, the Company
loaned approximately $1.6 million and $1.7 million, respectively, to Jedson,
increasing the first lien loan to approximately $9.4 million. On January 10,
2020, the Company loaned approximately $3.8 million to Apex, increasing the
first lien loan to approximately $18.8 million at that time. The maturity date
of the loan was extended to May 15, 2020. The Company also received a warrant as
part of this investment. During the nine month period ended July 31, 2020,
Custom Alloy borrowed approximately $1.7 million on its revolving credit
facility, increasing the balance outstanding to approximately $3.7 million.
During the nine month period ended July 31, 2020, the Company loaned
approximately $2.5 million, to Security Holdings B.V., increasing its senior
subordinated loan outstanding amount to approximately $8.6 million.

Current commitments include:

Commitments to Portfolio Companies:

At July 31, 2020 and October 31, 2019, the Company's existing commitments to portfolio companies consisted of the following:





Portfolio Company             Amount Committed    Amount Funded as of July 31, 2020
MVC Private Equity Fund LP    $20.1 million       $14.6 million
RuMe                          $2.2 million        $2.3 million
RuMe                          $700,000            $745,000
Custom Alloy                  $3.8 million        $3.7 million
Total                         $26.8 million       $21.3 million




                                       70





Portfolio Company                Amount Committed       Amount Funded as of October 31, 2019
MVC Private Equity Fund LP    $20.1 million             $14.6 million
RuMe                          $2.2 million              $2.1 million
RuMe                          $400,000                  $400,000
Custom Alloy                  $3.0 million              $2.1 million
Total                         $25.7 million             $19.2 million




Guarantees:

At July 31, 2020 and October 31, 2019, the Company had the following commitments to guarantee various loans and mortgages:





Guarantee        Amount Committed    Amount Funded as of July 31, 2020
MVC Automotive   $4.7 million       -
Total            $4.7 million       -

Guarantee        Amount Committed   Amount Funded as of October 31, 2019
MVC Automotive   $4.5 million       -
Total            $4.5 million       -


ASC 460, Guarantees, requires the Company to estimate the fair value of the
guarantee obligation at its inception and requires the Company to assess whether
a probable loss contingency exists in accordance with the requirements of ASC
450, Contingencies. At July 31, 2020, the Valuation Committee estimated the
combined fair values of the guarantee obligation noted above to be $0 or a
liability of approximately $0.

These guarantees are further described below, together with the Company's other commitments.





On January 16, 2008, the Company agreed to support a 4.0 million Euro mortgage
for a Ford dealership owned and operated by MVC Automotive through making
financing available to the dealership and agreeing under certain circumstances
not to reduce its equity stake in MVC Automotive.  Over time, Erste Bank, the
bank extending the mortgage to MVC Automotive, increased the amount of the
mortgage. The balance of the guarantee as of July 31, 2020 is approximately 4.1
million Euro (equivalent to approximately $4.7 million).



The Company agreed to cash collateralize a $300,000 third party letter of credit
for RuMe, which is now collateralized with Credit Facility IV (defined below)
and still a commitment of the Company as of July 31, 2020. Previously, the
Company guaranteed $1.0 million of RuMe's indebtedness to Colorado Business Bank
and also provided RuMe an additional $2.0 million letter of credit. On April 25,
2019, the $1.0 million guarantee and the $2.0 million letter of credit were
refinanced and replaced with a new $3.0 million letter of credit. The letter of
credit had a fair value of approximately -$2.9 million or a liability of $2.9
million as of July 31, 2020. The $3.0 million letter of credit is collateralized
with Credit Facility IV (defined below).



On October 29, 2010, through MVC Partners and MVCFS, the Company committed to
invest approximately $20.1 million in the PE Fund, for which an indirect
wholly-owned subsidiary of the Company serves as GP. The PE Fund closed on
approximately $104 million of capital commitments. During the fiscal year ended
October 31, 2012 and thereafter, MVC Partners was consolidated with the
operations of the Company as MVC Partners' limited partnership interest in the
PE Fund is a substantial portion of MVC Partners operations. The investment
period related to the PE Fund has ended. Additional capital may be called for
follow-on investments in existing portfolio companies of the PE Fund or to pay
operating expenses of the PE Fund until the partnership is terminated. On
December 27, 2018, the Company received proceeds of approximately $7.5 million
from the PE Fund related to the sale of Plymouth Rock Energy, LLC, a portfolio
company of the PE Fund. The Company's pro-rata share of the PE Fund's cost basis
in the Plymouth Rock Energy, LLC investment totaled approximately $2.5 million,
resulting in a realized gain of approximately $5.0 million. On October 25, 2019,
the PE Fund sold Focus Pointe, a portfolio company of the PE Fund. The Company
received proceeds of approximately $2.7 million related to the sale. The
Company's pro-rata share of the PE Fund's cost basis in the Focus Pointe
investment totaled approximately $1.9 million, resulting in a realized gain of
approximately $800,000. As of July 31, 2020, $14.6 million of the Company's


commitment was funded.



                                       71


As of October 31, 2019, RuMe had a $2.2 million line of credit provided by the
Company with a 10% interest rate and a maturity date of March 31, 2021. The
outstanding balance as of October 31, 2019 and July 31, 2020 was approximately
$2.1 million and $2.3 million, respectively, including capitalized PIK interest.
Also, during the fiscal year ended October 31, 2019, the Company provided RuMe a
$400,000 revolver with a 10% interest rate and a maturity date of February 28,
2020. The outstanding balance of the revolver as of October 31, 2019 was
approximately $404,000, including capitalized PIK interest. During the nine
month period ended July 31, 2020, the revolver was increased to $700,000 and the
maturity date was extended to March 31, 2021. The outstanding balance of the
revolver as of July 31, 2020 was approximately $745,000, including capitalized
PIK interest.

As of October 31, 2019, Security Holdings had a 4.8 million Euro letter of credit. During the nine month period ended July 31, 2020, the letter of credit was reduced to 3.3 million Euro. The letter of credit had a fair value of approximately -$125,000 or a liability of $125,000 as of July 31, 2020. The letter of credit is collateralized with Credit Facility IV (defined below).





As of October 31, 2019, Custom Alloy had a $3.0 million line of credit provided
by the Company with a 15% interest rate and a maturity date of April 30, 2020.
The balance outstanding as of October 31, 2019 was approximately $2.1 million.
During the nine month period ended July 31, 2020, the Company increased the
commitment to approximately $3.8 million and funded approximately $1.7 million,
resulting in a balance outstanding as of July 31, 2020 of approximately $3.7
million. The maturity date was also extended to April 30, 2021.



As of July 31, 2020, the total fair value associated with potential obligations
related to guarantees and letters of credit was approximately -$3.0 million


or a
liability of $3.0 million.



Commitments of the Company



On July 31, 2013, the Company entered into a one-year, $50 million revolving
credit facility ("Credit Facility II") with Branch Banking and Trust Company
("BB&T"). On January 31, 2014, Credit Facility II was increased to a $100
million revolving credit facility. On December 1, 2015, Credit Facility II was
renewed and expired on May 31, 2016, at which time all outstanding amounts under
it were due and repaid. On June 30, 2016, Credit Facility II was renewed and
reduced to a $50 million revolving credit facility, which expired on February
28, 2017, as of which time all outstanding amounts under it were due and repaid.
On February 28, 2017, Credit Facility II was renewed and increased to a $100
million revolving credit facility and expired on August 31, 2017. On August 31,
2017, Credit Facility II was renewed and decreased to a $25 million revolving
credit facility, which was to expire on August 31, 2018.  There was no change to
the interest rate or unused fee on the revolving credit facility. The Company
incurred closing costs associated with this transaction of $62,500. On August
10, 2018, Credit Facility II was renewed to August 30, 2019 and on August 30,
2019, Credit Facility II was extended to August 31, 2020. The Company incurred
closing costs associated with each of these transactions of $50,000 with no
change in terms other than the expiration date. At October 31, 2019 and July 31,
2020, there was no amount outstanding on Credit Facility II. Credit Facility II
is used to provide the Company with better overall financial flexibility in
managing its investment portfolio. Borrowings under Credit Facility II bear
interest at LIBOR plus 125 basis points. In addition, the Company is also
subject to a 25 basis point commitment fee for the average amount of Credit
Facility II that is unused during each fiscal quarter. The Company paid closing
fees, legal and other costs associated with these transactions. These costs are
amortized over the life of the facility. Borrowings under Credit Facility II
will be secured by cash, short-term and long-term U.S. Treasury securities and
other governmental agency securities. As of July 31, 2020, the Company was in
compliance with the covenants related to Credit Facility II.



                                       72





On November 15, 2017, the Company completed a public offering of $100,000,000
aggregate principal amount of its 6.25% senior notes due November 30, 2022
("Senior Notes II"). In addition, on November 20, 2017, the underwriters
exercised an over-allotment option to purchase an additional $15 million in
aggregate principal amount of Senior Notes II (together with the offering on
November 15, the "Offering"). The Senior Notes II have an interest rate of 6.25%
per year payable quarterly on January 15, April 15, July 15, and October 15 of
each year. After deducting underwriting fees and discounts and expenses, the
Offering resulted in net proceeds to the Company of approximately $111.4
million. The Offering expenses incurred are amortized over the term of the
Senior Notes II. Proceeds from the offering were used to repay the Senior Notes
in full, including all accrued interest. On February 25, 2020, the Company
notified U.S. Bank National Association, the trustee for the Senior Notes II, of
the Company's election to redeem $20.0 million aggregate principal amount of the
Senior Notes II outstanding at a price equal to 100% of the principal amount of
the Senior Notes II, plus accrued and unpaid interest on the Senior Notes II to,
but excluding, the date of redemption.  The Company funded the redemption with
cash on hand. As of July 31, 2020, the Senior Notes II had a total outstanding
amount of $95.0 million, net of deferred financing fees the balance was
approximately $93.6 million, with a market value of approximately $91.2 million.



On January 29, 2019, the Company entered into a three year, $35 million
revolving credit facility ("Credit Facility IV") with People's United Bank,
National Association as lender and lead agent. Credit Facility IV can, under
certain conditions, be increased up to $85 million. Credit Facility IV will
expire on January 29, 2022, at which time all outstanding amounts under Credit
Facility IV will be due and payable. Borrowings under the Credit Facility bear
interest at a rate of LIBOR plus 2.85%, or the prime rate plus 0.5% at the
Company's discretion. In addition, the Company was subject to (i) a closing fee
of 1% of the commitment amount paid at closing, (ii) a one-time structuring fee
in the amount of $100,000 paid at closing, (iii) an unused line fee, which is
payable monthly, of 0.75% if the Company draws less than $25 million on Credit
Facility IV or 0.60% if the Company draws more than $25 million on Credit
Facility IV, and (iv) an annual administrative agent fee in the amount of
$100,000 in 2019 and $200,000 in each year thereafter. The compensating balance
for the revolving credit facility is $5.0 million, which is reflected as
restricted cash equivalents on the Company's Consolidated Balance Sheets.  On
June 19, 2019, in order to increase the size of the Credit Facility IV, the
credit facility was amended to add Bank Leumi USA as an additional lender. The
amendment increased the size of Credit Facility IV by $15.0 million to $50.0
million. All other material terms of the Credit Facility remain unchanged. In
addition, the Company was subject to a closing fee of 1% of the additional
commitment amount of $15.0 million to be paid at closing. As of July 31, 2020,
there was no amount outstanding on Credit Facility IV and the Company was in
compliance with the maximum balance sheet leverage covenant related to Credit
Facility IV.



The Company enters into contracts with portfolio companies and other parties
that contain a variety of indemnifications. The Company's maximum exposure under
these arrangements is unknown. However, the Company has not experienced claims
or losses pursuant to these contracts and believes the risk of loss related to
indemnifications to be remote.



Subsequent Events



On August 10, 2020, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") among Barings BDC, Inc., a Maryland corporation
("BBDC"), Mustang Acquisition Sub, Inc., a Delaware corporation and wholly owned
subsidiary of BBDC ("Acquisition Sub"), and Barings LLC, a Delaware limited
liability company and investment adviser to BBDC ("Barings"). The Merger
Agreement provides that, on the terms and subject to the conditions set forth in
the Merger Agreement, Acquisition Sub will merge with and into the Company, with
the Company continuing as the surviving company and as a wholly-owned subsidiary
of BBDC (the "First Step") and, immediately thereafter, the Company will merge
with and into BBDC, with BBDC continuing as the surviving company (the "Second
Step" and, together with the First Step, the "Merger"). The boards of directors
of both BBDC and the Company, including all of the respective independent
directors, have approved the Merger Agreement and the transactions contemplated
therein. The parties to the Merger Agreement intend the Merger to be treated as
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended.



                                       73





In the First Step, each share of the Company's common stock issued and
outstanding immediately prior to the effective time of the First Step (excluding
any shares cancelled pursuant to the Merger Agreement) will be converted into
the right to receive (i) $0.39492 per share in cash, without interest, from
Barings (such amount of cash, the "Cash Consideration") and (ii) 0.94024 (such
ratio, as may be adjusted pursuant to the Merger Agreement, the "Exchange
Ratio") of a validly issued, fully paid and non-assessable share of BBDC common
stock, par value $0.001 per share (the "Share Consideration" and together with
the Cash Consideration, the "Merger Consideration"). Pursuant to the Merger
Agreement, total value of the consideration to be received by the Company's
stockholders at closing is subject to adjustment as set forth in the Merger
Agreement and may be different than the estimated total consideration described
herein, depending on a number of factors, including the number of outstanding
shares of BBDC and the Company's common stock, the payment of tax dividends by
the Company, undistributed investment company taxable income and undistributed
net capital gains of the Company and changes of the Euro-to-U.S. dollar exchange
rate relating to certain of the Company's investments between April 30, 2020 and
the closing date.



The Merger Agreement contains representations, warranties and covenants,
including, among others, covenants relating to the operation of each of BBDC's
and the Company's businesses during the period prior to the closing of the
Merger. BBDC and the Company have agreed to convene and hold stockholder
meetings for the purpose of obtaining the approvals required of BBDC's and the
Company's stockholders, respectively, and the boards of directors of BBDC and
the Company have agreed to recommend that their respective stockholders approve
the applicable proposals (as described below).



The Merger Agreement provides that the Company shall not, and shall cause its
representatives and subsidiaries not to, solicit proposals relating to
alternative transactions, or, subject to certain exceptions, initiate or
participate in discussions or negotiations regarding, or provide information
with respect to, any proposal for an alternative transaction. However, the board
of directors of the Company may, subject to certain conditions, change its
recommendation to the stockholders of the Company or, on payment of a
termination fee by the Company of approximately $2.94 million and the
reimbursement of up to $1.18 million in expenses incurred by BBDC and Barings,
terminate the Merger Agreement and enter into an Alternative Acquisition
Agreement (as defined in the Merger Agreement) for a Superior Proposal (as
defined in the Merger Agreement), if it determines in good faith, after
consultation with its outside legal counsel, that failure to do so would
reasonably be expected to be inconsistent with its fiduciary duties or
obligations under applicable law.



Consummation of the First Step, which is currently anticipated to occur during
the fourth quarter of fiscal year 2020, is subject to certain customary closing
conditions, including (1) adoption of the Merger Agreement by a majority of the
outstanding shares of the Company's common stock, (2) approval of the issuance
of BBDC common stock to be issued in the First Step by a majority of the votes
cast by the BBDC stockholders on the matter, (3) approval of the issuance of
BBDC's common stock in connection with the First Step at a price below the
then-current net asset value per share of BBDC common stock, if applicable, by
the vote specified in Section 63(2)(A) of the Investment Company Act of 1940, as
amended, (4) the absence of certain legal impediments to the consummation of the
Merger, (5) effectiveness of the registration statement for the BBDC common
stock to be issued as consideration in the First Step, (6) approval for listing
on the New York Stock Exchange of the BBDC common stock to be issued as
consideration in the First Step, (7) subject to certain materiality standards,
the accuracy of the representations and warranties and compliance with the
covenants of each party to the Merger Agreement, and (8) required regulatory
approvals (including expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended).



In addition, BBDC and the Company will take steps necessary to provide for the
repayment at closing of the Company's credit facilities and the redemption or
assumption of the Company's 6.25% senior notes due November 30, 2022.



The Merger Agreement also contains certain termination rights in favor of BBDC
and the Company, including if the First Step is not completed on or before
February 10, 2021 or if the requisite approvals of BBDC stockholders or
stockholders of the Company are not obtained. The Merger Agreement also provides
that, upon the valid termination of the Merger Agreement under certain
circumstances, BBDC may be required to pay or cause to be paid to the Company a
termination fee of approximately $4.70 million, or the Company may be required
to pay or cause to be paid to BBDC a termination fee of approximately $2.94


million.



                                       74





The representations and warranties and covenants set forth in the Merger
Agreement have been made only for purposes of such agreement and were solely for
the benefit of the parties to the Merger Agreement, may be subject to
limitations agreed upon by the contracting parties, including qualification by
confidential disclosures made for purposes of allocating contractual risk
between the parties to the Merger Agreement instead of establishing these
matters as facts, and may be subject to standards of materiality applicable to
the contracting parties that differ from those applicable to investors.
Accordingly, the Merger Agreement is included with this filing only to provide
investors with information regarding the terms of the Merger Agreement, and not
to provide investors with any factual information regarding the parties to the
Merger Agreement or their respective businesses.



Prior to the entry into the Merger Agreement and as a condition to the
willingness of BBDC to enter into the Merger Agreement, Leon G. Cooperman,
Michael T. Tokarz, Wynnefield Capital, Inc. and West Family Investments, Inc.,
stockholders of the Company which collectively own approximately 31% of the
Company's common stock issued and outstanding as of the date of the Merger
Agreement, entered into voting agreements with BBDC (collectively, the "Voting
Agreements"), pursuant to which, among other things, such stockholders of the
Company have, subject to the terms and conditions set forth in the Voting
Agreements, agreed to support the Merger and the transactions contemplated by
the Merger Agreement and to vote all their shares of the Company's common stock
in favor of the First Step. The Voting Agreements' obligations to vote in favor
of the First Step terminate upon certain events, including the effective time of
the First Step, the valid termination of the Merger Agreement in accordance with
its terms, the termination of the Voting Agreements by mutual consent of the
parties thereto or a change in the recommendation of the Company's board of
directors to the Company's stockholders pursuant to the Merger Agreement.

On August 19, 2020, the Company loaned $150,000 RuMe on its lines of credit, increasing the balance to approximately $895,000.





On August 31, 2020, the Company and BB&T entered into the Fourteenth Amendment
to Secured Revolving Credit Agreement (the "Amendment"). Pursuant to the
Amendment, the Company and BB&T renewed Credit Facility II and amended the
definition of "Termination Date" in Section 1.01 of Credit Facility II to mean
the earlier to occur of (i) December 31, 2020, (ii) the effective date of the
Merger Agreement, (iii) the date the Revolver Commitment (as defined in Credit
Facility II) is terminated pursuant to Section 6.01 of Credit Facility II
following the occurrence of an Event of Default (as defined in Credit Facility
II), or (iv) the date the Company terminates the Revolver Commitment (as defined
in Credit Facility II) entirely pursuant to Section 2.09 of Credit Facility II.
Other than as noted above, terms of Credit Facility II remain substantially
unchanged and borrowings under Credit Facility II continue to be secured by
cash, short-term and long-term U.S. Treasury securities and other governmental
agency securities.

Barings BDC, Inc. and MVC Capital, Inc. Appoint Directors	20-12-23	CI
MVC Capital, Inc. Announces Redemption of 6.25% Senior Notes Due 2022	20-12-14	CI
Mvc Capital, Inc. Reports Earnings Results for the Third Quarter Ended July 31, 2020	20-09-09	CI
MVC Capital, Inc. and Truist Bank Enters into Fourteenth Amendment to the Secured Revolving Credit Agreement	20-09-02	CI
Transcript : Barings BDC, Inc., MVC Capital, Inc. - M&A Call	20-08-11
Ron Avni Submits Resignation as Independent Director of the Board of Directors of MVC Capital	20-07-31	CI
MVC Capital, Inc. Announces Board Changes	20-07-20	CI
Transcript : MVC Capital, Inc. - Shareholder/Analyst Call	20-07-15
MVC Capital, Inc. Declares Third Quarter Dividend, Payable on July 31, 2020	20-07-14	CI
Mvc Capital, Inc. Reports Earnings Results for the Second Quarter Ended April 30, 2020	20-06-09	CI
MVC Capital, Inc. Proposes Executive Changes	20-05-27	CI
MVC Capital and Wynnefield Capital Reach Agreement on Board Nominations	20-05-27	CI
Wynnefield Capital Discloses Settlement Offer to MVC Capital	20-05-14	CI
Wynnefield Capital Nominates 3rd Candidate to MVC Capital	20-04-27	CI
Wynnefield Capital Nominates 2 Directors for Election to MVC Capital Board	20-04-21	CI
MVC Capital, Inc. Declares Second Quarter Dividend, Payable on April 30, 2020	20-04-14	CI
Mvc Capital, Inc. Reports Earnings Results for the First Quarter Ended January 31, 2020	20-03-09	CI
MVC Capital, Inc. to Partially Redeem 6.25% Senior Notes Due 2022	20-02-25	CI
Wynnefield Partners Sends Letter to MVC Capital	20-01-22	CI
Mvc Capital, Inc. Reports Earnings Results for the Full Year Ended October 31, 2019	20-01-14	CI
MVC Capital Declares First Quarter 2020 Dividend, Payable on January 10, 2020	19-12-23	CI
MVC Capital, Inc. Declares Fourth Quarter 2019 Dividend, Payable on October 31, 2019	19-10-15	CI
Mvc Capital, Inc. Reports Earnings Results for the Third Quarter Ended July 31, 2019	19-09-09	CI
MVC Capital, Inc. Renews Credit Facility Until August 30, 2020	19-09-03	CI
People's United Bank Leads Expansion of Credit Facility to $50 Million for MVC Capital, Inc	19-07-30	CI

	1st Jan change	Capi.
ARES CAPITAL CORPORATION	+3.89%	12.61B
PERSHING SQUARE HOLDINGS, LTD.	+6.57%	9.01B
FS KKR CAPITAL CORP.	-3.76%	5.41B
SPROTT PHYSICAL URANIUM TRUST FUND	+4.28%	5.25B
PIMCO DYNAMIC INCOME FUND	+5.74%	5.19B
SPROTT PHYSICAL SILVER TRUST	+13.99%	4.48B
SPROTT PHYSICAL GOLD AND SILVER TRUST	+16.44%	4.44B
MACQUARIE KOREA INFRASTRUCTURE FUND	+1.53%	4B
3I INFRASTRUCTURE PLC	+3.73%	3.75B

MVC Capital, Inc.

Equities

MVC

US5538291023

Closed End Funds

MVC CAPITAL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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