UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)

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



For the quarterly period ended June 30, 2016



OR



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



Commission file number: 814-00866



MONROE CAPITAL CORPORATION

(Exact Name of Registrant as Specified in
its Charter)



|Maryland                                                               | 27-4895840                                  
|---------------------------------------------------------------------- | --------------------------------------------
|(State or Other Jurisdiction of
        Incorporation or Organization) | (I.R.S. Employer
        Identification No.)
|                                                                       |                                             
|311 South Wacker Drive, Suite 6400
        Chicago, Illinois           | 60606                                       
|(Address of Principal Executive Office)                                | (Zip Code)                                  



(312) 258-8300

(Registrant’s Telephone Number, Including
Area Code)



Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YesxNo ̈



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YesxNo ̈



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



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



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ̈Nox



As of August 5, 2016, the registrant had 16,573,007
shares of common stock, $0.001 par value, outstanding.











TABLE OF CONTENTS



|                              |                                                                                                                          | Page
|----------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ----
|PART I. FINANCIAL INFORMATION | 3                                                                                                                       
|                              |                                                                                                                          |     
|Item 1.                       | Consolidated Financial Statements                                                                                        | 3   
|                              |                                                                                                                          |     
|                              | Consolidated Statements of Assets and Liabilities as of June 30, 2016 (unaudited) and December 31, 2015                  | 3   
|                              |                                                                                                                          |     
|                              | Consolidated Statements of Operations for the three and six months ended June 30, 2016 (unaudited) and 2015 (unaudited)  | 4   
|                              |                                                                                                                          |     
|                              | Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2016 (unaudited) and 2015 (unaudited) | 5   
|                              |                                                                                                                          |     
|                              | Consolidated Statements of Cash Flows for the six months ended June 30, 2016 (unaudited) and 2015 (unaudited)            | 6   
|                              |                                                                                                                          |     
|                              | Consolidated Schedules of Investments as of June 30, 2016 (unaudited) and December 31, 2015                              | 7   
|                              |                                                                                                                          |     
|                              | Notes to Consolidated Financial Statements (unaudited)                                                                   | 11  
|                              |                                                                                                                          |     
|Item 2.                       | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                    | 29  
|                              |                                                                                                                          |     
|Item 3.                       | Quantitative and Qualitative Disclosures About Market Risk                                                               | 41  
|                              |                                                                                                                          |     
|Item 4.                       | Controls and Procedures                                                                                                  | 42  
|                              |                                                                                                                          |     
|PART II. OTHER INFORMATION    | 43                                                                                                                      
|                              |                                                                                                                          |     
|Item 1.                       | Legal Proceedings                                                                                                        | 43  
|                              |                                                                                                                          |     
|Item 1A.                      | Risk Factors                                                                                                             | 43  
|                              |                                                                                                                          |     
|Item 2.                       | Unregistered Sales of Equity Securities and Use of Proceeds                                                              | 43  
|                              |                                                                                                                          |     
|Item 3.                       | Defaults Upon Senior Securities                                                                                          | 43  
|                              |                                                                                                                          |     
|Item 4.                       | Mine Safety Disclosures                                                                                                  | 43  
|                              |                                                                                                                          |     
|Item 5.                       | Other Information                                                                                                        | 43  
|                              |                                                                                                                          |     
|Item 6.                       | Exhibits                                                                                                                 | 44  
|                              |                                                                                                                          |     
|Signatures                    |                                                                                                                          | 45  



2







Part I. Financial Information

Item 1. Consolidated Financial Statements



MONROE CAPITAL CORPORATION



CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES



(in thousands, except per share data)



|                                                                                                                             |  | June 30, 2016 |         |   | December 31, 2015 |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | -
|                                                                                                                             |  | (unaudited)   |         |   |                   |  
|                                                                                                                             |  |               |         |   |                   |  
|ASSETS                                                                                                                       |  |               |         |   |                   |  
|Investments, at fair value:                                                                                                  |  |               |         |   |                   |  
|Non-controlled/non-affiliate company investments                                                                             |  | $             | 293,578 |   |                   | $
|Non-controlled affiliate company investments                                                                                 |  |               | 41,880  |   |                   |  
|Controlled affiliate company investments                                                                                     |  |               | 7,350   |   |                   |  
|Total investments, at fair value (cost of: $343,454 and $342,738, respectively)                                              |  |               | 342,808 |   |                   |  
|Cash                                                                                                                         |  |               | 5,483   |   |                   |  
|Restricted cash                                                                                                              |  |               | 8,139   |   |                   |  
|Interest receivable                                                                                                          |  |               | 2,041   |   |                   |  
|Other assets                                                                                                                 |  |               | 579     |   |                   |  
|Total assets                                                                                                                 |  |               | 359,050 |   |                   |  
|                                                                                                                             |  |               |         |   |                   |  
|LIABILITIES                                                                                                                  |  |               |         |   |                   |  
|Debt:                                                                                                                        |  |               |         |   |                   |  
|Revolving credit facility                                                                                                    |  |               | 127,200 |   |                   |  
|SBA debentures payable                                                                                                       |  |               | 40,000  |   |                   |  
|Total debt                                                                                                                   |  |               | 167,200 |   |                   |  
|Less: Unamortized deferred financing costs                                                                                   |  |               | (4,037  | ) |                   |  
|Total debt less unamortized deferred financing costs                                                                         |  |               | 163,163 |   |                   |  
|Secured borrowings, at fair value (proceeds of: $2,258 and $2,535, respectively)                                             |  |               | 2,112   |   |                   |  
|Payable for open trades                                                                                                      |  |               | -       |   |                   |  
|Interest payable                                                                                                             |  |               | 534     |   |                   |  
|Management fees payable                                                                                                      |  |               | 1,504   |   |                   |  
|Incentive fees payable                                                                                                       |  |               | 1,554   |   |                   |  
|Accounts payable and accrued expenses                                                                                        |  |               | 1,533   |   |                   |  
|Directors fees payable                                                                                                       |  |               | -       |   |                   |  
|Total liabilities                                                                                                            |  |               | 170,400 |   |                   |  
|Net assets                                                                                                                   |  | $             | 188,650 |   |                   | $
|                                                                                                                             |  |               |         |   |                   |  
|Commitments and contingencies (See Note 10)                                                                                  |  |               |         |   |                   |  
|                                                                                                                             |  |               |         |   |                   |  
|ANALYSIS OF NET ASSETS                                                                                                       |  |               |         |   |                   |  
|Common stock, $0.001 par value, 100,000 shares
    authorized, 13,008 and 13,008 shares issued and outstanding, respectively |  | $             | 13      |   |                   | $
|Capital in excess of par value                                                                                               |  |               | 184,419 |   |                   |  
|Undistributed net investment income (accumulated distributions in excess of net investment income)                           |  |               | 4,719   |   |                   |  
|Accumulated net unrealized appreciation (depreciation) on investments and secured borrowings                                 |  |               | (501    | ) |                   |  
|Total net assets                                                                                                             |  | $             | 188,650 |   |                   | $
|                                                                                                                             |  |               |         |   |                   |  
|Net asset value per share                                                                                                    |  | $             | 14.50   |   |                   | $



See Notes to Consolidated Financial Statements.



3





MONROE CAPITAL CORPORATION



CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



(in thousands, except per share data)



|                                                                                   |  | Three months ended June 30, |        |   | Six months ended June 30, |  
|---------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | -
|                                                                                   |  | 2016                        |        |   | 2015                      |  
|Investment income:                                                                 |  |                             |        |   |                           |  
|Interest income:                                                                   |  |                             |        |   |                           |  
|Non-controlled/non-affiliate company investments                                   |  | $                           | 8,965  |   |                           | $
|Non-controlled affiliate company investments                                       |  |                             | 1,092  |   |                           |  
|Controlled affiliate company investments                                           |  |                             | 10     |   |                           |  
|Total interest income                                                              |  |                             | 10,067 |   |                           |  
|Dividend income:                                                                   |  |                             |        |   |                           |  
|Non-controlled/non-affiliate company investments                                   |  |                             | 250    |   |                           |  
|Non-controlled affiliate company investments                                       |  |                             | 801    |   |                           |  
|Total dividend income                                                              |  |                             | 1,051  |   |                           |  
|Total investment income                                                            |  |                             | 11,118 |   |                           |  
|                                                                                   |  |                             |        |   |                           |  
|Operating expenses:                                                                |  |                             |        |   |                           |  
|Interest and other debt financing expenses                                         |  |                             | 1,773  |   |                           |  
|Base management fees                                                               |  |                             | 1,504  |   |                           |  
|Incentive fees                                                                     |  |                             | 1,319  |   |                           |  
|Professional fees                                                                  |  |                             | 238    |   |                           |  
|Administrative service fees                                                        |  |                             | 304    |   |                           |  
|General and administrative expenses                                                |  |                             | 182    |   |                           |  
|Directors fees                                                                     |  |                             | 39     |   |                           |  
|Total expenses                                                                     |  |                             | 5,359  |   |                           |  
|Net investment income                                                              |  |                             | 5,759  |   |                           |  
|                                                                                   |  |                             |        |   |                           |  
|Net gain (loss) on investments and secured borrowings:                             |  |                             |        |   |                           |  
|Net realized gain (loss) on investments:                                           |  |                             |        |   |                           |  
|Non-controlled/non-affiliate company investments                                   |  |                             | -      |   |                           |  
|Net realized gain (loss) on investments                                            |  |                             | -      |   |                           |  
|                                                                                   |  |                             |        |   |                           |  
|Net change in unrealized appreciation (depreciation) on investments:               |  |                             |        |   |                           |  
|Non-controlled/non-affiliate company investments                                   |  |                             | (261   | ) |                           |  
|Non-controlled affiliate company investments                                       |  |                             | 1,368  |   |                           |  
|Controlled affiliate company investments                                           |  |                             | (1,648 | ) |                           |  
|Net change in unrealized appreciation (depreciation) on investments                |  |                             | (541   | ) |                           |  
|                                                                                   |  |                             |        |   |                           |  
|Net change in unrealized (appreciation) depreciation on secured borrowings         |  |                             | 59     |   |                           |  
|                                                                                   |  |                             |        |   |                           |  
|Net gain (loss) on investments and secured borrowings                              |  |                             | (482   | ) |                           |  
|                                                                                   |  |                             |        |   |                           |  
|Net increase (decrease) in net assets resulting from operations                    |  | $                           | 5,277  |   |                           | $
|                                                                                   |  |                             |        |   |                           |  
|Per common share data:                                                             |  |                             |        |   |                           |  
|Net investment income per share - basic and diluted                                |  | $                           | 0.44   |   |                           | $
|Net increase in net assets resulting from operations per share - basic and diluted |  | $                           | 0.41   |   |                           | $
|Weighted average common shares outstanding - basic and diluted                     |  |                             | 13,008 |   |                           |  



See Notes to Consolidated Financial Statements.



4







MONROE CAPITAL CORPORATION



CONSOLIDATED STATEMENTS OF CHANGES IN NET
ASSETS

(unaudited)



(in thousands)



|                                                                 |  | Common
    Stock     |        |  | Capital
    in |   |    | Undistributed
                                         
net investment
                                                                                              income
                                         (accumulated
                                                                                              distributions
                                         in
                                                                                              excess
                                         of net |  |   | Accumulatednet
                                                                                              realized |  |  | Accumulated
    
net unrealized
    appreciation 
    (depreciation) on 
    investments and |        |   |                        |  
|---------------------------------------------------------------- |  | -------------------- | ------ |  | -------------- | - | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------------------------------------------------------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------------------------- | ------ | - | ---------------------- | -
|                                                                 |  | Number
    of shares |        |  | Par
    value  |   |    | excess
    of par value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | investment
    income)                                                                                                |  |  | gain
    (loss) on 
    investments                                                          |        |   | secured
    borrowings |  
|Balances at December 31, 2014                                    |  |                      | 9,518  |  |                | $ | 10 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $ | 134,803                                                                                                               |  |  | $                                                                                            | (639   | ) |                        | $
|Net increase (decrease) in net assets resulting from operations  |  |                      | -      |  |                |   | -  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | -                                                                                                                     |  |  |                                                                                              | 9,238  |   |                        |  
|Issuance of common stock, net of offering and underwriting costs |  |                      | 2,932  |  |                |   | 2  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | 41,535                                                                                                                |  |  |                                                                                              | -      |   |                        |  
|Stockholder distributions paid                                   |  |                      | -      |  |                |   | -  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | -                                                                                                                     |  |  |                                                                                              | (7,728 | ) |                        |  
|Balances at June 30, 2015                                        |  |                      | 12,450 |  |                | $ | 12 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $ | 176,338                                                                                                               |  |  | $                                                                                            | 871    |   |                        | $
|                                                                 |  |                      |        |  |                |   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   |                                                                                                                       |  |  |                                                                                              |        |   |                        |  
|Balances at December 31, 2015                                    |  |                      | 13,008 |  |                | $ | 13 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $ | 184,419                                                                                                               |  |  | $                                                                                            | 1,692  |   |                        | $
|Net increase (decrease) in net assets resulting from operations  |  |                      | -      |  |                |   | -  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | -                                                                                                                     |  |  |                                                                                              | 11,546 |   |                        |  
|Stockholder distributions paid                                   |  |                      | -      |  |                |   | -  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |   | -                                                                                                                     |  |  |                                                                                              | (8,519 | ) |                        |  
|Balances at June 30, 2016                                        |  |                      | 13,008 |  |                | $ | 13 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $ | 184,419                                                                                                               |  |  | $                                                                                            | 4,719  |   |                        | $



See Notes to Consolidated Financial Statements.

5









MONROE CAPITAL CORPORATION



CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



(in thousands)



|                                                                                                                                                  |  | Six months ended June 30, |        
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------
|                                                                                                                                                  |  | 2016                      |        
|                                                                                                                                                  |  |                           |        
|Cash flows from operating activities:                                                                                                             |  |                           |        
|Net increase (decrease) in net assets resulting from operations                                                                                   |  | $                         | 13,221 
|Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash 
provided by (used in) operating activities: |  |                           |        
|Net change in unrealized (appreciation) depreciation on investments                                                                               |  |                           | (1,001 
|Net change in unrealized appreciation (depreciation) on secured borrowings                                                                        |  |                           | (87    
|Net realized (gain) loss on investments                                                                                                           |  |                           | (587   
|Payment-in-kind interest income                                                                                                                   |  |                           | (830   
|Net accretion of discounts and amortization of premiums                                                                                           |  |                           | (754   
|Proceeds from principal payments and sales of investments                                                                                         |  |                           | 47,383 
|Purchases of investments                                                                                                                          |  |                           | (45,928
|Amortization of deferred financing costs                                                                                                          |  |                           | 381    
|Changes in operating assets and liabilities:                                                                                                      |  |                           |        
|Interest receivable                                                                                                                               |  |                           | (435   
|Other assets                                                                                                                                      |  |                           | 168    
|Payable for open trades                                                                                                                           |  |                           | (5,297 
|Interest payable                                                                                                                                  |  |                           | (43    
|Management fees payable                                                                                                                           |  |                           | 1      
|Incentive fees payable                                                                                                                            |  |                           | 303    
|Accounts payable and accrued expenses                                                                                                             |  |                           | 67     
|Directors fees payable                                                                                                                            |  |                           | (74    
|Net cash provided by (used in) operating activities                                                                                               |  |                           | 6,488  
|                                                                                                                                                  |  |                           |        
|Cash flows from investing activities:                                                                                                             |  |                           |        
|Net change in restricted cash                                                                                                                     |  |                           | 449    
|Net cash provided by (used in) investing activities                                                                                               |  |                           | 449    
|                                                                                                                                                  |  |                           |        
|Cash flows from financing activities:                                                                                                             |  |                           |        
|Borrowings on credit facility                                                                                                                     |  |                           | 24,000 
|Repayments of credit facility                                                                                                                     |  |                           | (20,500
|SBA debentures borrowings                                                                                                                         |  |                           | -      
|Payments of deferred financing costs                                                                                                              |  |                           | (849   
|Repayments on secured borrowings                                                                                                                  |  |                           | (277   
|Proceeds from shares sold, net of offering and underwriting costs                                                                                 |  |                           | -      
|Stockholder distributions paid                                                                                                                    |  |                           | (9,106 
|Net cash provided by (used in) financing activities                                                                                               |  |                           | (6,732 
|                                                                                                                                                  |  |                           |        
|Net increase (decrease) in cash                                                                                                                   |  |                           | 205    
|Cash, beginning of period                                                                                                                         |  |                           | 5,278  
|Cash, end of period                                                                                                                               |  | $                         | 5,483  
|                                                                                                                                                  |  |                           |        
|Supplemental disclosure of cash flow information:                                                                                                 |  |                           |        
|Cash interest paid during the period                                                                                                              |  | $                         | 2,974  
|Cash paid for excise taxes during the period                                                                                                      |  | $                         | 167    



See Notes to Consolidated Financial Statements.



6







MONROE CAPITAL CORPORATION



CONSOLIDATED SCHEDULE OF INVESTMENTS

(unaudited)



June 30, 2016



(in thousands, except for units)





|Portfolio
    Company (a)                                                    |  | Industry                                      |  | Spread
    Above Index (b) |          |  | Interest
    Rate |  |                                                                | Maturity |  | Principal  |     |  | Amortized
    Cost |  |  | Fair
    
Value (c) |         |  | %
    ofNet 
Assets (d) |  
|---------------------------------------------------------------------------- |  | --------------------------------------------- |  | -------------------------- | -------- |  | ----------------- |  | -------------------------------------------------------------- | -------- |  | ---------- | --- |  | ------------------ |  |  | ------------------- | ------- |  | ----------------------- | -
|Senior Secured Loans                                                         |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  |                    |  |  |                     |         |  |                         |  
|360 Holdings
    III Corp.                                                   |  | Consumer Goods:
    Non-Durable               |  |                            | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 10/1/2021  |     |  | 5,955              |  |  | $                   | 5,731   |  |                         | $
|American
    Community Homes, Inc.(e)                                        |  | Banking, Finance, Insurance
    & Real Estate |  |                            | L+8.00%  |  |                   |  | 9.50                                                           | %        |  | 7/22/2019  |     |  | 7,667              |  |  |                     | 7,529   |  |                         |  
|American
    Community Homes, Inc.(e)                                        |  | Banking, Finance, Insurance
    & Real Estate |  |                            | L+12.50% |  |                   |  | 9.50%
                                         Cash/4.50% PIK  |          |  | 7/22/2019  |     |  | 4,122              |  |  |                     | 4,053   |  |                         |  
|American
    Community Homes, Inc.(e)                                        |  | Banking, Finance, Insurance
    & Real Estate |  |                            | L+12.50% |  |                   |  | 9.50%
                                         Cash/4.50% PIK  |          |  | n/a        | (w) |  | 507                |  |  |                     | 495     |  |                         |  
|Answers Corporation                                                          |  | High Tech Industries                          |  |                            | L+5.25%  |  |                   |  | 6.25                                                           | %        |  | 10/1/2021  |     |  | 2,903              |  |  |                     | 2,811   |  |                         |  
|BCC
    Software, LLC (f)                                                    |  | High Tech Industries                          |  |                            | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 6/20/2019  |     |  | 2,735              |  |  |                     | 2,708   |  |                         |  
|BCC
    Software, LLC (Revolver) (g)                                         |  | High Tech Industries                          |  |                            | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 6/20/2019  |     |  | 469                |  |  |                     | -       |  |                         |  
|Bluestem Brands, Inc.                                                        |  | Consumer Goods: Non-Durable                   |  |                            | L+7.50%  |  |                   |  | 8.50                                                           | %        |  | 11/6/2020  |     |  | 2,839              |  |  |                     | 2,814   |  |                         |  
|Cali Bamboo, LLC                                                             |  | Construction & Building                       |  |                            | L+8.50%  |  |                   |  | 9.00                                                           | %        |  | 7/10/2020  |     |  | 5,450              |  |  |                     | 5,368   |  |                         |  
|Cali
    Bamboo, LLC (Revolver) (g)                                          |  | Construction & Building                       |  |                            | L+8.50%  |  |                   |  | 9.00                                                           | %        |  | 7/10/2020  |     |  | 1,624              |  |  |                     | 325     |  |                         |  
|Cornerstone
    Detention Products, Inc. (h)                                 |  | Construction & Building                       |  |                            | L+10.50% |  |                   |  | 10.50%
                                         Cash/1.00% PIK |          |  | 4/8/2019   |     |  | 4,002              |  |  |                     | 3,953   |  |                         |  
|Cornerstone
    Detention Products, Inc. (Revolver) (g)                      |  | Construction & Building                       |  |                            | L+9.50%  |  |                   |  | 10.50                                                          | %        |  | 4/8/2019   |     |  | 400                |  |  |                     | -       |  |                         |  
|Cyalume
    Technologies Holdings, Inc.(f)                                   |  | Aerospace & Defense                           |  |                            | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 5/18/2020  |     |  | 4,902              |  |  |                     | 4,791   |  |                         |  
|Cyalume Technologies Holdings,
    Inc. (Delayed Draw)                       |  | Aerospace & Defense                           |  |                            | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 5/18/2020  |     |  | 441                |  |  |                     | 441     |  |                         |  
|Cyalume
    Technologies Holdings, Inc. (Revolver) (g)                       |  | Aerospace & Defense                           |  |                            | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 5/18/2020  |     |  | 1,528              |  |  |                     | 153     |  |                         |  
|Diesel
    Direct Holdings, Inc. (f)                                         |  | Energy: Oil & Gas                             |  |                            | L+7.00%  |  |                   |  | 7.50                                                           | %        |  | 2/17/2020  |     |  | 5,294              |  |  |                     | 5,258   |  |                         |  
|EB
    Employee Solutions, LLC (f)                                           |  | Services: Business                            |  |                            | L+8.50%  |  |                   |  | 10.00                                                          | %        |  | 2/28/2019  |     |  | 3,420              |  |  |                     | 3,365   |  |                         |  
|Familia
    Dental Group Holdings, LLC (f)                                   |  | Healthcare & Pharmaceuticals                  |  |                            | L+8.00%  |  |                   |  | 8.50                                                           | %        |  | 4/8/2021   |     |  | 5,466              |  |  |                     | 5,395   |  |                         |  
|Familia
    Dental Group Holdings, LLC (Delayed Draw) (g) (i)                |  | Healthcare & Pharmaceuticals                  |  |                            | L+8.00%  |  |                   |  | 8.50                                                           | %        |  | 4/8/2021   |     |  | 519                |  |  |                     | 218     |  |                         |  
|Familia
    Dental Group Holdings, LLC (Revolver) (g)                        |  | Healthcare & Pharmaceuticals                  |  |                            | L+8.00%  |  |                   |  | 8.50                                                           | %        |  | 4/8/2021   |     |  | 573                |  |  |                     | -       |  |                         |  
|G&M
    Opco LLC (f)                                                         |  | Construction & Building                       |  |                            | L+7.50%  |  |                   |  | 8.00                                                           | %        |  | 6/23/2020  |     |  | 3,088              |  |  |                     | 3,023   |  |                         |  
|InMobi
    Pte, Ltd. (Delayed Draw) (g) (i) (j)                              |  | Media: Advertising, Printing
    & Publishing |  |                            | L+10.17% |  |                   |  | 10.86                                                          | %        |  | 9/1/2018   |     |  | 10,000             |  |  |                     | 6,667   |  |                         |  
|Jerry Lee Radio, LLC                                                         |  | Media: Broadcasting &
    Subscription        |  |                            | L+9.50%  |  |                   |  | 10.00                                                          | %        |  | 12/17/2020 |     |  | 14,196             |  |  |                     | 13,872  |  |                         |  
|Landpoint, LLC                                                               |  | Energy: Oil & Gas                             |  |                            | L+12.75% |  |                   |  | 12.00%
                                         Cash/2.25% PIK | (q)      |  | 12/20/2018 |     |  | 3,500              |  |  |                     | 3,450   |  |                         |  
|Landpoint,
    LLC (Revolver) (g)                                            |  | Energy: Oil & Gas                             |  |                            | L+10.50% |  |                   |  | 12.00                                                          | %        |  | 12/20/2018 |     |  | 313                |  |  |                     | -       |  |                         |  
|L.A.R.K. Industries, Inc.                                                    |  | Construction & Building                       |  |                            | L+7.00%  |  |                   |  | 8.00                                                           | %        |  | 9/3/2019   |     |  | 6,603              |  |  |                     | 6,495   |  |                         |  
|Luxury Optical Holdings
    Co.                                              |  | Retail                                        |  |                            | L+9.00%  |  |                   |  | 9.00%
                                         Cash/1.00% PIK  |          |  | 9/12/2019  |     |  | 3,953              |  |  |                     | 3,899   |  |                         |  
|Luxury
    Optical Holdings Co. (Revolver) (g)                               |  | Retail                                        |  |                            | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 9/12/2019  |     |  | 273                |  |  |                     | -       |  |                         |  
|Miles Media Group LLC                                                        |  | Hotels, Gaming & Leisure                      |  |                            | L+12.50% |  |                   |  | 10.50%
                                         Cash/3.00% PIK |          |  | 3/24/2021  |     |  | 6,093              |  |  |                     | 6,024   |  |                         |  
|Miles
    Media Group LLC (Delayed Draw) (g) (i)                             |  | Hotels, Gaming & Leisure                      |  |                            | L+12.50% |  |                   |  | 10.50%
                                         Cash/3.00% PIK |          |  | 3/24/2021  |     |  | 1,455              |  |  |                     | -       |  |                         |  
|Miles
    Media Group LLC (Revolver) (g)                                     |  | Hotels, Gaming & Leisure                      |  |                            | L+12.50% |  |                   |  | 10.50%
                                         Cash/3.00% PIK |          |  | 3/24/2021  |     |  | 320                |  |  |                     | -       |  |                         |  
|O'Brien Industrial Holdings,
    LLC                                         |  | Metals & Mining                               |  |                            | L+7.75%  |  |                   |  | 8.75                                                           | %        |  | 5/13/2019  |     |  | 5,286              |  |  |                     | 5,205   |  |                         |  
|PD Products, LLC                                                             |  | Consumer Goods: Non-Durable                   |  |                            | L+10.50% |  |                   |  | 12.00                                                          | %        |  | 10/4/2018  |     |  | 12,349             |  |  |                     | 12,259  |  |                         |  
|PD
    Products, LLC (Revolver) (g)                                          |  | Consumer Goods: Non-Durable                   |  |                            | L+10.50% |  |                   |  | 12.00                                                          | %        |  | 10/4/2018  |     |  | 2,500              |  |  |                     | 275     |  |                         |  
|PeopleConnect Intermediate,
    LLC (formerly Intelius, Inc.)                |  | Services: Consumer                            |  |                            | L+5.50%  |  |                   |  | 6.50                                                           | %        |  | 7/1/2020   |     |  | 4,739              |  |  |                     | 4,650   |  |                         |  
|PeopleConnect Intermediate,
    LLC (formerly Intelius, Inc.)                |  | Services: Consumer                            |  |                            | L+11.50% |  |                   |  | 12.50                                                          | %        |  | 7/1/2020   |     |  | 4,869              |  |  |                     | 4,775   |  |                         |  
|PeopleConnect
    Intermediate, LLC (formerly Intelius, Inc.) (Revolver) (g) |  | Services: Consumer                            |  |                            | L+8.50%  |  |                   |  | 9.50                                                           | %        |  | 7/1/2020   |     |  | 354                |  |  |                     | -       |  |                         |  
|Precision
    Toxicology, LLC (f)                                            |  | Healthcare & Pharmaceuticals                  |  |                            | L+11.50% |  |                   |  | 10.00%
                                         Cash/2.00% PIK |          |  | 3/24/2020  |     |  | 4,336              |  |  |                     | 4,269   |  |                         |  
|Rockdale
    Blackhawk, LLC (e)                                              |  | Healthcare & Pharmaceuticals                  |  |                            | L+11.00% |  |                   |  | 12.00                                                          | %        |  | 3/31/2020  |     |  | 11,565             |  |  |                     | 10,656  |  |                         |  
|Rockdale
    Blackhawk, LLC (Revolver) (e) (g)                               |  | Healthcare & Pharmaceuticals                  |  |                            | L+11.00% |  |                   |  | 12.00                                                          | %        |  | 3/31/2020  |     |  | 1,849              |  |  |                     | -       |  |                         |  
|Rockdale
    Blackhawk, LLC (Capex) (e)                                      |  | Healthcare & Pharmaceuticals                  |  |                            | L+11.00% |  |                   |  | 12.00                                                          | %        |  | 3/31/2020  |     |  | 597                |  |  |                     | 597     |  |                         |  
|Rocket
    Dog Brands, LLC (e)                                               |  | Consumer Goods: Non-Durable                   |  |                            | n/a      |  |                   |  | 10.00                                                          | %        |  | 8/29/2019  |     |  | 1,033              |  |  |                     | 1,033   |  |                         |  
|Rocket
    Dog Brands, LLC (e)                                               |  | Consumer Goods: Non-Durable                   |  |                            | n/a      |  |                   |  | 15.00                                                          | %        |  | 8/29/2019  |     |  | 390                |  |  |                     | 385     |  |                         |  
|Rocket
    Dog Brands, LLC (e)                                               |  | Consumer Goods: Non-Durable                   |  |                            | n/a      |  |                   |  | 17.00                                                          | %        |  | 9/30/2016  |     |  | 200                |  |  |                     | 195     |  |                         |  
|SHI
    Holdings, Inc. (f)                                                   |  | Healthcare & Pharmaceuticals                  |  |                            | L+9.25%  |  |                   |  | 9.71                                                           | %        |  | 7/10/2019  |     |  | 2,625              |  |  |                     | 2,585   |  |                         |  
|SHI
    Holdings, Inc. (Revolver) (g)                                        |  | Healthcare & Pharmaceuticals                  |  |                            | L+9.25%  |  |                   |  | 9.71                                                           | %        |  | 7/10/2019  |     |  | 955                |  |  |                     | 930     |  |                         |  
|Shields Land Company of
    Georgia, LLC                                     |  | Banking, Finance, Insurance
    & Real Estate |  |                            | L+9.50%  |  |                   |  | 9.96                                                           | %        |  | 12/28/2017 |     |  | 2,450              |  |  |                     | 2,413   |  |                         |  
|SNI
    Companies (k)                                                        |  | Services: Business                            |  |                            | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 12/31/2018 |     |  | 5,832              |  |  |                     | 5,754   |  |                         |  
|SNI
    Companies (Revolver) (g)                                             |  | Services: Business                            |  |                            | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 12/31/2018 |     |  | 1,250              |  |  |                     | -       |  |                         |  
|Summit
    Container Corporation (e) (f)                                     |  | Containers, Packaging
    & Glass             |  |                            | L+11.00% |  |                   |  | 11.00%
                                         Cash/2.00% PIK |          |  | 1/6/2019   |     |  | 3,691              |  |  |                     | 3,621   |  |                         |  
|Synergy
    Environmental Corporation (Solterra) (f)                         |  | Environmental Industries                      |  |                            | L+8.00%  |  |                   |  | 8.50                                                           | %        |  | 4/29/2021  |     |  | 3,170              |  |  |                     | 3,107   |  |                         |  
|Synergy
    Environmental Corporation (Solterra) (f)                         |  | Environmental Industries                      |  |                            | L+8.00%  |  |                   |  | 8.50                                                           | %        |  | 4/29/2021  |     |  | 530                |  |  |                     | 525     |  |                         |  
|Synergy
    Environmental Corporation (Solterra) (Delayed Draw) (g) (i)      |  | Environmental Industries                      |  |                            | L+8.00%  |  |                   |  | 8.50                                                           | %        |  | 4/29/2018  |     |  | 1,342              |  |  |                     | -       |  |                         |  
|Synergy
    Environmental Corporation (Solterra) (Revolver) (g)              |  | Environmental Industries                      |  |                            | L+8.00%  |  |                   |  | 8.50                                                           | %        |  | 4/29/2021  |     |  | 671                |  |  |                     | 54      |  |                         |  
|TPP
    Acquisition, Inc. (l)                                                |  | Retail                                        |  |                            | L+11.00% |  |                   |  | 10.50%
                                         Cash/2.00% PIK | (r)      |  | 12/17/2017 |     |  | 6,835              |  |  |                     | 6,769   |  |                         |  
|TPP
    Acquisition, Inc. (Revolver) (l)                                     |  | Retail                                        |  |                            | L+11.00% |  |                   |  | 4.50%
                                         Cash/8.00% PIK  | (r)      |  | 12/17/2017 |     |  | 2,035              |  |  |                     | 2,035   |  |                         |  
|TPP
    Acquisition, Inc. (g) (i) (l)                                        |  | Retail                                        |  |                            | L+11.00% |  |                   |  | 4.00%
                                         Cash/8.50% PIK  | (r)      |  | 12/17/2017 |     |  | 3,400              |  |  |                     | 1,900   |  |                         |  
|TPP
    Acquisition, Inc. (Delayed Draw)(l)                                  |  | Retail                                        |  |                            | L+11.00% |  |                   |  | 10.50%
                                         Cash/2.00% PIK | (r)      |  | 12/17/2017 |     |  | 3,429              |  |  |                     | 3,429   |  |                         |  
|TRG, LLC                                                                     |  | Hotels, Gaming & Leisure                      |  |                            | L+11.51% |  |                   |  | 8.00%
                                         Cash/4.01% PIK  | (s)      |  | 3/31/2021  |     |  | 11,756             |  |  |                     | 11,711  |  |                         |  
|TRG, LLC (Revolver)                                                          |  | Hotels, Gaming & Leisure                      |  |                            | L+9.50%  |  |                   |  | 10.00                                                          | %        |  | 3/31/2021  |     |  | 131                |  |  |                     | 131     |  |                         |  
|TRG,
    LLC (CapEx) (g)                                                     |  | Hotels, Gaming & Leisure                      |  |                            | L+9.50%  |  |                   |  | 8.00%
                                         Cash/2.00% PIK  |          |  | 3/31/2021  |     |  | 1,601              |  |  |                     | 798     |  |                         |  
|TTM Technologies, Inc.                                                       |  | High Tech Industries                          |  |                            | L+5.00%  |  |                   |  | 6.00                                                           | %        |  | 5/31/2021  |     |  | 1,181              |  |  |                     | 1,145   |  |                         |  
|Vacation
    Innovations, LLC (m)                                            |  | Hotels, Gaming & Leisure                      |  |                            | L+8.50%  |  |                   |  | 7.50%
                                         Cash/1.50% PIK  |          |  | 8/20/2020  |     |  | 11,004             |  |  |                     | 10,804  |  |                         |  
|Vacation
    Innovations, LLC (Revolver)(g)                                  |  | Hotels, Gaming & Leisure                      |  |                            | L+8.50%  |  |                   |  | 7.50%
                                         Cash/1.50% PIK  |          |  | 8/20/2020  |     |  | 342                |  |  |                     | -       |  |                         |  
|Vacation
    Innovations, LLC (Delayed Draw) (g) (i)                         |  | Hotels, Gaming & Leisure                      |  |                            | L+8.50%  |  |                   |  | 7.50%
                                         Cash/1.50% PIK  |          |  | 8/20/2020  |     |  | 2,037              |  |  |                     | -       |  |                         |  
|Yandy Holding, LLC                                                           |  | Retail                                        |  |                            | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 9/30/2019  |     |  | 5,840              |  |  |                     | 5,778   |  |                         |  
|Yandy
    Holding, LLC (Revolver) (g)                                        |  | Retail                                        |  |                            | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 9/30/2019  |     |  | 907                |  |  |                     | -       |  |                         |  
|Total
    Senior Secured Loans                                               |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  | 233,691            |  |  |                     | 206,626 |  |                         |  
|                                                                             |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  |                    |  |  |                     |         |  |                         |  
|Unitranche Loans                                                             |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  |                    |  |  |                     |         |  |                         |  
|Collaborative
    Neuroscience Network, LLC (n)                              |  | Healthcare & Pharmaceuticals                  |  |                            | L+11.50% |  |                   |  | 13.00                                                          | %        |  | 12/27/2017 |     |  | 7,058              |  |  |                     | 6,977   |  |                         |  
|Collaborative Neuroscience
    Network, LLC                                  |  | Healthcare & Pharmaceuticals                  |  |                            | n/a      |  |                   |  | 12.00%
                                         Cash/3.00% PIK |          |  | 10/31/2016 |     |  | 282                |  |  |                     | 282     |  |                         |  
|Fabco Automotive Corporation                                                 |  | Automotive                                    |  |                            | L+9.25%  |  |                   |  | 10.25                                                          | %        |  | 4/3/2017   |     |  | 8,438              |  |  |                     | 8,400   |  |                         |  
|Gracelock Industries,
    LLC                                                |  | Wholesale                                     |  |                            | L+13.74% |  |                   |  | 11.00%
                                         Cash/4.24% PIK | (t)      |  | 5/7/2019   |     |  | 5,048              |  |  |                     | 4,958   |  |                         |  
|Incipio
    Technologies, Inc. (o)                                           |  | Consumer Goods: Non-Durable                   |  |                            | L+6.00%  |  |                   |  | 7.00                                                           | %        |  | 12/26/2019 |     |  | 15,000             |  |  |                     | 14,704  |  |                         |  
|MooreCo, Inc.                                                                |  | Consumer Goods: Durable                       |  |                            | L+14.50% |  |                   |  | 13.50%
                                         Cash/2.50% PIK |          |  | 12/27/2017 |     |  | 3,700              |  |  |                     | 3,670   |  |                         |  
|Output Services Group,
    Inc.                                              |  | Services: Business                            |  |                            | L+9.00%  |  |                   |  | 9.50%
                                         Cash/1.00% PIK  |          |  | 12/17/2018 |     |  | 6,678              |  |  |                     | 6,592   |  |                         |  
|Output Services Group,
    Inc.                                              |  | Services: Business                            |  |                            | L+9.00%  |  |                   |  | 9.50%
                                         Cash/1.00% PIK  |          |  | 12/17/2018 |     |  | 8,489              |  |  |                     | 8,355   |  |                         |  
|Playtime,
    LLC                                                            |  | Hotels,
    Gaming & Leisure                  |  |                            | L+8.50%  |  |                   |  | 9.00%
                                         Cash/1.00% PIK  |          |  | 12/31/2021 |     |  | 5,400              |  |  |                     | 5,364   |  |                         |  
|Total
    Unitranche Loans                                                   |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  | 60,093             |  |  |                     | 59,302  |  |                         |  
|                                                                             |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  |                    |  |  |                     |         |  |                         |  
|Junior Secured Loans                                                         |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  |                    |  |  |                     |         |  |                         |  
|AIM Aerospace, Inc.                                                          |  | Aerospace & Defense                           |  |                            | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 8/2/2022   |     |  | 5,000              |  |  |                     | 4,930   |  |                         |  
|Confie Seguros Holdings
    II Co.                                           |  | Banking, Finance, Insurance
    & Real Estate |  |                            | L+9.00%  |  |                   |  | 10.25                                                          | %        |  | 5/8/2019   |     |  | 8,594              |  |  |                     | 8,149   |  |                         |  
|CSM Bakery Supplies LLC                                                      |  | Beverage, Food & Tobacco                      |  |                            | L+7.75%  |  |                   |  | 8.75                                                           | %        |  | 7/3/2021   |     |  | 5,792              |  |  |                     | 5,757   |  |                         |  
|Education Corporation
    of America                                         |  | Services: Consumer                            |  |                            | L+11.00% |  |                   |  | 11.63                                                          | %        |  | 12/31/2018 |     |  | 5,000              |  |  |                     | 4,901   |  |                         |  
|Hyland Software Inc.                                                         |  | High Tech Industries                          |  |                            | L+7.25%  |  |                   |  | 8.25                                                           | %        |  | 7/1/2023   |     |  | 5,000              |  |  |                     | 4,821   |  |                         |  
|Mergermarket USA, Inc.                                                       |  | Media: Broadcasting &
    Subscription        |  |                            | L+6.50%  |  |                   |  | 7.50                                                           | %        |  | 12/19/2021 |     |  | 4,500              |  |  |                     | 4,392   |  |                         |  
|Micro Holdings Corp.                                                         |  | High Tech Industries                          |  |                            | L+7.50%  |  |                   |  | 8.50                                                           | %        |  | 7/8/2022   |     |  | 5,590              |  |  |                     | 5,465   |  |                         |  
|Mud Pie, LLC                                                                 |  | Consumer Goods: Non-Durable                   |  |                            | n/a      |  |                   |  | 10.00%
                                         Cash/1.50% PIK |          |  | 11/4/2020  |     |  | 10,178             |  |  |                     | 10,010  |  |                         |  
|New NSI Holdings, Inc.                                                       |  | Chemicals, Plastics &
    Rubber              |  |                            | L+8.25%  |  |                   |  | 9.25                                                           | %        |  | 7/28/2022  |     |  | 4,000              |  |  |                     | 3,945   |  |                         |  
|Pre-Paid Legal Services,
    Inc. (Legal Shield)                             |  | Services: Consumer                            |  |                            | L+9.00%  |  |                   |  | 10.25                                                          | %        |  | 7/1/2020   |     |  | 3,000              |  |  |                     | 2,996   |  |                         |  
|Rocket
    Dog Brands, LLC (e)                                               |  | Consumer Goods: Non-Durable                   |  |                            | n/a      |  |                   |  | 15.00%
                                         PIK            |          |  | 5/1/2020   |     |  | 1,800              |  |  |                     | 1,800   |  |                         |  
|Sterling Merger Sub Corp.                                                    |  | Services: Business                            |  |                            | L+7.75%  |  |                   |  | 8.75                                                           | %        |  | 6/19/2023  |     |  | 5,000              |  |  |                     | 4,954   |  |                         |  
|SCP
    TPZ Acquisition, Inc.                                                |  | Media:
    Diversified & Production           |  |                            | L+8.25%  |  |                   |  | 9.25                                                           | %        |  | 5/29/2022  |     |  | 5,000              |  |  |                     | 4,933   |  |                         |  
|Total
    Junior Secured Loans                                               |  |                                               |  |                            |          |  |                   |  |                                                                |          |  |            |     |  | 68,454             |  |  |                     | 67,053  |  |                         |  





7









|Equity Securities                                                                                                        |  |                                               |  |  |     |  |  |  |                                                     |     |  |            |  |  |   |  |  |   |         |  |  |   |         |  |  |  |       |  
|------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------- |  |  | --- |  |  |  | --------------------------------------------------- | --- |  | ---------- |  |  | - |  |  | - | ------- |  |  | - | ------- |  |  |  | ----- | -
|American
    Community Homes, Inc. (warrant to purchase up to 9.0% of the equity)(e)                                     |  | Banking, Finance, Insurance
    & Real Estate |  |  | -   |  |  |  | -                                                   | (u) |  | 10/9/2024  |  |  | - |  |  |   | -       |  |  |   | 921     |  |  |  | 0.5   | %
|BookIt
    Operating LLC (warrant to purchase up to 3.0% of the equity) (p)                                              |  | Hotels, Gaming & Leisure                      |  |  | -   |  |  |  | -                                                   | (u) |  | 12/21/2023 |  |  | - |  |  |   | -       |  |  |   | 587     |  |  |  | 0.3   | %
|Collaborative
    Neuroscience Network, LLC (warrant to purchase up to 1.67 LLC units) (p)                               |  | Healthcare & Pharmaceuticals                  |  |  | -   |  |  |  | -                                                   | (u) |  | 12/27/2022 |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|Cyalume
    Technologies Holdings, Inc. - Series D Preferred Stock (3.06 shares)(p)                                      |  | Aerospace & Defense                           |  |  | -   |  |  |  | -                                                   | (u) |  | -          |  |  | - |  |  |   | -       |  |  |   | 485     |  |  |  | 0.3   | %
|Education
    Corporation of America - Series G Preferred Stock (8,333 shares) (p)                                       |  | Services: Consumer                            |  |  | n/a |  |  |  | 12.00                                               | %   |  | -          |  |  | - |  |  |   | 8,125   |  |  |   | 8,433   |  |  |  | 4.5   | %
|InMobi
    Pte, Ltd. (represents the right to purchase 0.42% of the equity)(j) (p)                                       |  | Media: Advertising, Printing
    & Publishing |  |  | -   |  |  |  | -                                                   | (u) |  | 9/18/2025  |  |  | - |  |  |   | -       |  |  |   | 107     |  |  |  | 0.1   | %
|O'Brien
    Industrial Holdings, LLC (warrants to purchase up to 2.44% of certain affiliated entities of the company)(p) |  | Metals & Mining                               |  |  | -   |  |  |  | -                                                   | (u) |  | 5/13/2024  |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|Output
    Services Group, Inc. (warrant to purchase up to 3.89% of the common stock) (p)                                |  | Services: Business                            |  |  | -   |  |  |  | -                                                   | (u) |  | 12/17/2022 |  |  | - |  |  |   | -       |  |  |   | 794     |  |  |  | 0.4   | %
|Playtime,
    LLC - Preferred Units (8,665 units) (p)                                                                    |  | Hotels, Gaming & Leisure                      |  |  | -   |  |  |  | -                                                   | (u) |  | -          |  |  | - |  |  |   | 200     |  |  |   | 8       |  |  |  | 0.0   | %
|Rocket
    Dog Brands, LLC - Common Units (75,502 units) (e)                                                             |  | Consumer Goods: Non-Durable                   |  |  | -   |  |  |  | -                                                   | (u) |  | -          |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|Rocket
    Dog Brands, LLC - Preferred Units (10 units) (e)                                                              |  | Consumer Goods: Non-Durable                   |  |  | -   |  |  |  | 15.00%
                                         PIK | (v) |  | -          |  |  | - |  |  |   | 967     |  |  |   | -       |  |  |  | 0.0   | %
|Rockdale
    Blackhawk, LLC - LLC Units (11.56% of the LLC interest)(e)                                                  |  | Healthcare & Pharmaceuticals                  |  |  | -   |  |  |  | -                                                   | (u) |  | -          |  |  | - |  |  |   | 1,093   |  |  |   | 11,507  |  |  |  | 6.1   | %
|Summit
    Container Corporation (warrant to purchase up to 19.50% of the equity) (e)                                    |  | Containers, Packaging
    & Glass             |  |  | -   |  |  |  | -                                                   | (u) |  | 1/6/2024   |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|The
    Tie Bar Operating Company, LLC - Class A Preferred Units (1,275 units)(p)                                        |  | Retail                                        |  |  | -   |  |  |  | -                                                   | (u) |  | -          |  |  | - |  |  |   | 87      |  |  |   | 89      |  |  |  | 0.0   | %
|The
    Tie Bar Operating Company, LLC - Class B Preferred Units (1,275 units) (p)                                       |  | Retail                                        |  |  | -   |  |  |  | -                                                   | (u) |  | -          |  |  | - |  |  |   | 1       |  |  |   | -       |  |  |  | 0.0   | %
|TPP
    Acquisition, Inc. (829 shares of common stock) (l)                                                               |  | Retail                                        |  |  | -   |  |  |  | -                                                   | (u) |  | -          |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|Total
    Equity Securities                                                                                              |  |                                               |  |  |     |  |  |  |                                                     |     |  |            |  |  |   |  |  |   | 10,473  |  |  |   | 22,931  |  |  |  | 12.2  | %
|TOTAL
    INVESTMENTS                                                                                                    |  |                                               |  |  |     |  |  |  |                                                     |     |  |            |  |  |   |  |  | $ | 343,454 |  |  | $ | 342,808 |  |  |  | 181.7 | %










| | (a) | All of our investments are issued by eligible U.S. portfolio
companies, as defined in the Investment Company Act of 1940 (the “1940 Act”) except for InMobi Pte, Ltd. which is
an international company headquartered in California. All investments are non-controlled/non-affiliate company investments, unless
otherwise noted.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The majority of the investments bear interest at a rate
that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime”
or “P”) which reset daily, monthly, quarterly, or semiannually. For each such investment, the Company has provided
the spread over LIBOR or Prime and the current contractual interest rate in effect at June 30, 2016. Certain investments are subject
to a LIBOR or Prime interest rate floor.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Because there is no readily available market value for
these investments, the fair value of these investments is determined in good faith by our board of directors as required by the
Investment Company Act of 1940. (See Note 4 in the accompanying notes to the consolidated financial statements.)
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Percentages are based on net assets of $188,650 as of
June 30, 2016.
| | --- | --------------------------------------------------------------------

| | (e) | As defined in the 1940 Act, the Company is deemed to
be an "Affiliated Person" of the portfolio company as it owns five percent or more of the portfolio company's voting
securities. See Note 5 in the accompanying notes to the consolidated financial statements for additional information on transactions
in which the issuer was an Affiliated Person (but not a portfolio company that the Company is deemed to control).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) | All of this loan is held in the Company’s wholly-owned
subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (g) | All or a portion of this commitment was unfunded at June
30, 2016. As such, interest is earned only on the funded portion of this commitment.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------

| | (h) | A portion of this loan (principal of $2,401) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i) | This delayed draw loan requires that certain financial
covenants be met by the portfolio company prior to any fundings.
| | --- | -----------------------------------------------------------------------------------------------------------------------

| | (j) | This investment is treated as a non-qualifying investment
under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time
the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of June 30, 2016, non-qualifying
assets totaled 1.88% of the Company's total assets.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (k) | A portion of this loan (principal of $3,740) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (l) | As defined in the 1940 Act, the Company is deemed to
be both an “Affiliated Person” of and to “Control” this portfolio company as it owns more than 25% in
company's voting securities. See Note 5 in the accompanying notes to the consolidated financial statements for additional information
on transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (m) | A portion of this loan (principal of $4,859) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (n) | The sale of a portion of this loan does not qualify for
sale accounting under ASC Topic 860 — Transfers and Servicing, and therefore, the entire unitranche loan asset remains on
the Consolidated Schedule of Investments.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (o) | A portion of this loan (principal of $5,500) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (p) | Represents less than 5% ownership of the portfolio company's
voting securities.
| | --- | -------------------------------------------------------------------------------

| | (q) | The PIK portion of the interest rate for Landpoint, LLC
is structured as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 2.25% per annum and is subject
to a minimum payment upon termination of $338.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (r) | This position is currently on non-accrual status.
| | --- | -------------------------------------------------

| | (s) | A portion of the PIK interest rate for TRG, LLC is structured
as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 2.01% per annum and is subject to an estimated
minimum payment upon termination of $1,407.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (t) | The PIK portion of the interest rate for Gracelock Industries,
LLC is structured as a fee paid upon the termination of the commitment. The fee currently accrues at 4.24% per annum.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (u) | Represents a non-income producing security.
| | --- | -------------------------------------------

| | (v) | This position includes a PIK dividend and is currently
on non-accrual status.
| | --- | -----------------------------------------------------------------------------

| | (w) | This is a demand note with no stated maturity.
| | --- | ----------------------------------------------

n/a - not applicable



See Notes to Consolidated Financial Statements.



8









MONROE CAPITAL CORPORATION



CONSOLIDATED SCHEDULE OF INVESTMENTS



December 31, 2015



(in thousands, except for units)



|Portfolio
    Company (a)                                                    |  | Industry                                      |  | Spread
    AboveIndex (b) |          |  | Interest
    Rate |  |                                                                | Maturity |  | Principal  |  |  | Amortized
    Cost |  |  | FairValue (c) |         |  | %
    ofNetAssets (d) |  
|---------------------------------------------------------------------------- |  | --------------------------------------------- |  | ------------------------- | -------- |  | ----------------- |  | -------------------------------------------------------------- | -------- |  | ---------- |  |  | ------------------ |  |  | ------------- | ------- |  | --------------------- | -
|Senior
    Secured Loans                                                     |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  |                    |  |  |               |         |  |                       |  
|360
    Holdings III Corp.                                                   |  | Consumer Goods:
    Non-Durable               |  |                           | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 10/1/2021  |  |  | 5,985              |  |  | $             | 5,746   |  |                       | $
|Alora
    Pharmaceuticals, LLC (e)                                           |  | Healthcare & Pharmaceuticals                  |  |                           | L+7.50%  |  |                   |  | 8.50                                                           | %        |  | 9/13/2018  |  |  | 11,338             |  |  |               | 11,229  |  |                       |  
|Alora
    Pharmaceuticals, LLC (Revolver) (f)                                |  | Healthcare & Pharmaceuticals                  |  |                           | L+7.50%  |  |                   |  | 8.50                                                           | %        |  | 9/13/2018  |  |  | 1,336              |  |  |               | -       |  |                       |  
|American
    Community Homes, Inc.(g)                                        |  | Banking, Finance, Insurance
    & Real Estate |  |                           | L+8.00%  |  |                   |  | 9.50                                                           | %        |  | 7/22/2019  |  |  | 7,667              |  |  |               | 7,511   |  |                       |  
|American
    Community Homes, Inc.(g)                                        |  | Banking, Finance, Insurance
    & Real Estate |  |                           | L+12.50% |  |                   |  | 9.50%
                                         Cash/4.50% PIK  |          |  | 7/22/2019  |  |  | 4,029              |  |  |               | 3,951   |  |                       |  
|Answers
    Corporation                                                      |  | High Tech Industries                          |  |                           | L+5.25%  |  |                   |  | 6.25                                                           | %        |  | 10/1/2021  |  |  | 2,918              |  |  |               | 2,818   |  |                       |  
|BCC
    Software, LLC (h)                                                    |  | High Tech Industries                          |  |                           | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 6/20/2019  |  |  | 2,817              |  |  |               | 2,785   |  |                       |  
|BCC
    Software, LLC (Revolver) (f)                                         |  | High Tech Industries                          |  |                           | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 6/20/2019  |  |  | 469                |  |  |               | -       |  |                       |  
|Bluestem
    Brands, Inc.                                                    |  | Consumer Goods: Non-Durable                   |  |                           | L+7.50%  |  |                   |  | 8.50                                                           | %        |  | 11/6/2020  |  |  | 2,919              |  |  |               | 2,892   |  |                       |  
|Cali
    Bamboo, LLC                                                         |  | Construction & Building                       |  |                           | L+8.50%  |  |                   |  | 9.00                                                           | %        |  | 7/10/2020  |  |  | 4,179              |  |  |               | 4,101   |  |                       |  
|Cali
    Bamboo, LLC (Revolver) (f)                                          |  | Construction & Building                       |  |                           | L+8.50%  |  |                   |  | 9.00                                                           | %        |  | 7/10/2020  |  |  | 1,624              |  |  |               | 1,039   |  |                       |  
|Cornerstone
    Detention Products, Inc. (i)                                 |  | Construction & Building                       |  |                           | L+10.50% |  |                   |  | 10.50%
                                         Cash/1.00% PIK |          |  | 4/8/2019   |  |  | 4,221              |  |  |               | 4,161   |  |                       |  
|Cornerstone
    Detention Products, Inc. (Revolver) (f)                      |  | Construction & Building                       |  |                           | L+9.50%  |  |                   |  | 10.50                                                          | %        |  | 4/8/2019   |  |  | 400                |  |  |               | -       |  |                       |  
|Cyalume
    Technologies Holdings, Inc.(h)                                   |  | Aerospace & Defense                           |  |                           | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 5/18/2020  |  |  | 5,236              |  |  |               | 5,106   |  |                       |  
|Cyalume
    Technologies Holdings, Inc. (Delayed Draw)                       |  | Aerospace & Defense                           |  |                           | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 5/18/2020  |  |  | 453                |  |  |               | 453     |  |                       |  
|Cyalume
    Technologies Holdings, Inc. (Revolver) (f)                       |  | Aerospace & Defense                           |  |                           | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 5/18/2020  |  |  | 1,528              |  |  |               | 306     |  |                       |  
|Diesel
    Direct Holdings, Inc. (h)                                         |  | Energy: Oil & Gas                             |  |                           | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 2/17/2020  |  |  | 5,363              |  |  |               | 5,299   |  |                       |  
|EB
    Employee Solutions, LLC (h)                                           |  | Services: Business                            |  |                           | L+8.50%  |  |                   |  | 10.00                                                          | %        |  | 2/28/2019  |  |  | 3,470              |  |  |               | 3,406   |  |                       |  
|G&M
    Opco LLC (h)                                                         |  | Construction & Building                       |  |                           | L+7.50%  |  |                   |  | 8.00                                                           | %        |  | 6/23/2020  |  |  | 3,169              |  |  |               | 3,096   |  |                       |  
|InMobi
    Pte, Ltd. (Delayed Draw) (f) (j) (k)                              |  | Media: Advertising, Printing
    & Publishing |  |                           | L+10.17% |  |                   |  | 10.50                                                          | %        |  | 9/1/2018   |  |  | 10,000             |  |  |               | 5,842   |  |                       |  
|Jerry
    Lee Radio, LLC                                                     |  | Media: Broadcasting &
    Subscription        |  |                           | L+9.50%  |  |                   |  | 10.00                                                          | %        |  | 12/17/2020 |  |  | 15,000             |  |  |               | 14,627  |  |                       |  
|Landpoint,
    LLC                                                           |  | Energy: Oil & Gas                             |  |                           | L+12.75% |  |                   |  | 12.00%
                                         Cash/2.25% PIK | (q)      |  | 12/20/2018 |  |  | 3,750              |  |  |               | 3,688   |  |                       |  
|Landpoint,
    LLC (Revolver) (f)                                            |  | Energy: Oil & Gas                             |  |                           | L+10.50% |  |                   |  | 12.00                                                          | %        |  | 12/20/2018 |  |  | 313                |  |  |               | -       |  |                       |  
|L.A.R.K.
    Industries, Inc.                                                |  | Construction & Building                       |  |                           | L+7.00%  |  |                   |  | 8.00                                                           | %        |  | 9/3/2019   |  |  | 6,690              |  |  |               | 6,562   |  |                       |  
|Luxury
    Optical Holdings Co.                                              |  | Retail                                        |  |                           | L+9.00%  |  |                   |  | 9.00%
                                         Cash/1.00% PIK  |          |  | 9/12/2019  |  |  | 4,035              |  |  |               | 3,972   |  |                       |  
|Luxury
    Optical Holdings Co. (Revolver) (f)                               |  | Retail                                        |  |                           | L+8.00%  |  |                   |  | 9.00                                                           | %        |  | 9/12/2019  |  |  | 273                |  |  |               | -       |  |                       |  
|Miles
    Media Group LLC                                                    |  | Hotels, Gaming & Leisure                      |  |                           | L+8.50%  |  |                   |  | 9.50                                                           | %        |  | 9/12/2019  |  |  | 3,875              |  |  |               | 3,814   |  |                       |  
|Miles
    Media Group LLC (Delayed Draw) (f) (j)                             |  | Hotels, Gaming & Leisure                      |  |                           | L+8.50%  |  |                   |  | 9.50                                                           | %        |  | 9/12/2019  |  |  | 1,600              |  |  |               | -       |  |                       |  
|Miles
    Media Group LLC (Revolver) (f)                                     |  | Hotels, Gaming & Leisure                      |  |                           | L+8.50%  |  |                   |  | 9.50                                                           | %        |  | 9/12/2019  |  |  | 320                |  |  |               | -       |  |                       |  
|O'Brien
    Industrial Holdings, LLC                                         |  | Metals & Mining                               |  |                           | L+11.50% |  |                   |  | 11.00%
                                         Cash/2.00% PIK |          |  | 5/13/2019  |  |  | 6,326              |  |  |               | 6,213   |  |                       |  
|O'Brien
    Industrial Holdings, LLC (Revolver) (f)                          |  | Metals & Mining                               |  |                           | L+9.50%  |  |                   |  | 11.00                                                          | %        |  | 5/13/2019  |  |  | 2,844              |  |  |               | 1,219   |  |                       |  
|PD
    Products, LLC                                                         |  | Consumer Goods: Non-Durable                   |  |                           | L+10.50% |  |                   |  | 12.00                                                          | %        |  | 10/4/2018  |  |  | 12,698             |  |  |               | 12,589  |  |                       |  
|PD
    Products, LLC (Revolver) (f)                                          |  | Consumer Goods: Non-Durable                   |  |                           | L+10.50% |  |                   |  | 12.00                                                          | %        |  | 10/4/2018  |  |  | 2,500              |  |  |               | 1,025   |  |                       |  
|PeopleConnect
    Intermediate, LLC (formerly Intelius, Inc.)                |  | Services: Consumer                            |  |                           | L+5.50%  |  |                   |  | 6.50                                                           | %        |  | 7/1/2020   |  |  | 4,958              |  |  |               | 4,855   |  |                       |  
|PeopleConnect
    Intermediate, LLC (formerly Intelius, Inc.)                |  | Services: Consumer                            |  |                           | L+11.50% |  |                   |  | 12.50                                                          | %        |  | 7/1/2020   |  |  | 4,979              |  |  |               | 4,874   |  |                       |  
|PeopleConnect
    Intermediate, LLC (formerly Intelius, Inc.) (Revolver) (f) |  | Services: Consumer                            |  |                           | L+8.50%  |  |                   |  | 9.50                                                           | %        |  | 7/1/2020   |  |  | 354                |  |  |               | -       |  |                       |  
|Precision
    Toxicology, LLC (h)                                            |  | Healthcare & Pharmaceuticals                  |  |                           | L+8.00%  |  |                   |  | 8.00%
                                         Cash/1.00% PIK  |          |  | 3/24/2020  |  |  | 5,440              |  |  |               | 5,345   |  |                       |  
|Precision
    Toxicology, LLC (Revolver) (f)                                 |  | Healthcare & Pharmaceuticals                  |  |                           | L+8.00%  |  |                   |  | 8.00%
                                         Cash/1.00% PIK  |          |  | 3/24/2020  |  |  | 635                |  |  |               | -       |  |                       |  
|Rockdale
    Blackhawk, LLC (g)                                              |  | Healthcare & Pharmaceuticals                  |  |                           | L+11.00% |  |                   |  | 12.00                                                          | %        |  | 3/31/2020  |  |  | 12,207             |  |  |               | 11,155  |  |                       |  
|Rockdale
    Blackhawk, LLC (Revolver) (f) (g)                               |  | Healthcare & Pharmaceuticals                  |  |                           | L+11.00% |  |                   |  | 12.00                                                          | %        |  | 3/31/2020  |  |  | 1,849              |  |  |               | 789     |  |                       |  
|Rockdale
    Blackhawk, LLC (Capex) (f) (g)                                  |  | Healthcare & Pharmaceuticals                  |  |                           | L+11.00% |  |                   |  | 12.00                                                          | %        |  | 3/31/2020  |  |  | 2,288              |  |  |               | 629     |  |                       |  
|Rocket
    Dog Brands, LLC (g)                                               |  | Consumer Goods: Non-Durable                   |  |                           | n/a      |  |                   |  | 10.00                                                          | %        |  | 8/29/2019  |  |  | 1,032              |  |  |               | 1,032   |  |                       |  
|Rocket
    Dog Brands, LLC (Delayed Draw) (f) (g) (j)                        |  | Consumer Goods: Non-Durable                   |  |                           | n/a      |  |                   |  | 15.00                                                          | %        |  | 8/29/2019  |  |  | 350                |  |  |               | 150     |  |                       |  
|SHI
    Holdings, Inc. (h)                                                   |  | Healthcare & Pharmaceuticals                  |  |                           | L+9.25%  |  |                   |  | 9.67                                                           | %        |  | 7/10/2019  |  |  | 2,737              |  |  |               | 2,688   |  |                       |  
|SHI
    Holdings, Inc. (Revolver) (f)                                        |  | Healthcare & Pharmaceuticals                  |  |                           | L+9.25%  |  |                   |  | 9.67                                                           | %        |  | 7/10/2019  |  |  | 818                |  |  |               | 573     |  |                       |  
|SNI
    Companies (l)                                                        |  | Services: Business                            |  |                           | L+10.00% |  |                   |  | 11.00                                                          | %        |  | 12/31/2018 |  |  | 6,852              |  |  |               | 6,743   |  |                       |  
|SNI
    Companies (Revolver) (f)                                             |  | Services: Business                            |  |                           | L+10.00% |  |                   |  | 11.00                                                          | %        |  | 12/31/2018 |  |  | 1,250              |  |  |               | 125     |  |                       |  
|Summit
    Container Corporation (g) (h)                                     |  | Containers, Packaging &
    Glass             |  |                           | L+9.00%  |  |                   |  | 11.00                                                          | %        |  | 1/6/2019   |  |  | 3,600              |  |  |               | 3,537   |  |                       |  
|The
    Sandbox Group LLC (h)                                                |  | Media: Advertising, Printing
    & Publishing |  |                           | L+10.00% |  |                   |  | 9.00%
                                         Cash/2.00% PIK  |          |  | 2/23/2020  |  |  | 5,388              |  |  |               | 5,274   |  |                       |  
|The
    Sandbox Group LLC (Revolver) (f)                                     |  | Media: Advertising, Printing
    & Publishing |  |                           | L+10.00% |  |                   |  | 9.00%
                                         Cash/2.00% PIK  |          |  | 2/23/2020  |  |  | 1,250              |  |  |               | 1,243   |  |                       |  
|TRG,
    LLC                                                                 |  | Hotels, Gaming & Leisure                      |  |                           | L+17.92% |  |                   |  | 11.00%
                                         Cash/7.92% PIK | (r)      |  | 12/23/2019 |  |  | 3,068              |  |  |               | 3,017   |  |                       |  
|TRG,
    LLC (Revolver) (f)                                                  |  | Hotels, Gaming & Leisure                      |  |                           | L+12.00% |  |                   |  | 13.00                                                          | %        |  | 12/23/2019 |  |  | 131                |  |  |               | -       |  |                       |  
|TRG,
    LLC (CapEx) (f)                                                     |  | Hotels, Gaming & Leisure                      |  |                           | L+12.00% |  |                   |  | 11.00%
                                         Cash/2.00% PIK |          |  | 12/23/2019 |  |  | 919                |  |  |               | 653     |  |                       |  
|TTM
    Technologies, Inc.                                                   |  | High Tech Industries                          |  |                           | L+5.00%  |  |                   |  | 6.00                                                           | %        |  | 5/31/2021  |  |  | 1,330              |  |  |               | 1,287   |  |                       |  
|Vacation
    Innovations, LLC                                                |  | Hotels, Gaming & Leisure                      |  |                           | L+9.00%  |  |                   |  | 9.50                                                           | %        |  | 8/20/2020  |  |  | 6,211              |  |  |               | 6,093   |  |                       |  
|Vacation
    Innovations, LLC (Revolver) (f)                                 |  | Hotels, Gaming & Leisure                      |  |                           | L+9.00%  |  |                   |  | 9.50                                                           | %        |  | 8/20/2020  |  |  | 342                |  |  |               | -       |  |                       |  
|Yandy
    Holding, LLC                                                       |  | Retail                                        |  |                           | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 9/30/2019  |  |  | 6,419              |  |  |               | 6,342   |  |                       |  
|Yandy
    Holding, LLC (Revolver) (f)                                        |  | Retail                                        |  |                           | L+9.00%  |  |                   |  | 10.00                                                          | %        |  | 9/30/2019  |  |  | 907                |  |  |               | -       |  |                       |  
|Total
    Senior Secured Loans                                               |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  | 214,659            |  |  |               | 189,854 |  |                       |  
|                                                                             |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  |                    |  |  |               |         |  |                       |  
|Unitranche
    Loans                                                         |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  |                    |  |  |               |         |  |                       |  
|Accutest
    Corporation                                                     |  | Services: Business                            |  |                           | L+9.50%  |  |                   |  | 11.00                                                          | %        |  | 6/5/2018   |  |  | 6,586              |  |  |               | 6,440   |  |                       |  
|Collaborative
    Neuroscience Network, LLC (m)                              |  | Healthcare & Pharmaceuticals                  |  |                           | L+11.50% |  |                   |  | 13.00                                                          | %        |  | 12/27/2017 |  |  | 7,058              |  |  |               | 6,968   |  |                       |  
|Fabco
    Automotive Corporation                                             |  | Automotive                                    |  |                           | L+9.25%  |  |                   |  | 10.25                                                          | %        |  | 4/3/2017   |  |  | 8,437              |  |  |               | 8,393   |  |                       |  
|Gracelock
    Industries, LLC                                                |  | Wholesale                                     |  |                           | L+12.05% |  |                   |  | 11.00%
                                         Cash/2.55% PIK | (s)      |  | 5/7/2019   |  |  | 5,207              |  |  |               | 5,101   |  |                       |  
|Incipio
    Technologies, Inc. (n)                                           |  | Consumer Goods: Non-Durable                   |  |                           | L+6.00%  |  |                   |  | 7.00                                                           | %        |  | 12/26/2019 |  |  | 15,000             |  |  |               | 14,669  |  |                       |  
|MooreCo,
    Inc.                                                            |  | Consumer Goods: Durable                       |  |                           | L+13.50% |  |                   |  | 12.50%
                                         Cash/2.50% PIK |          |  | 12/27/2017 |  |  | 4,223              |  |  |               | 4,177   |  |                       |  
|Output
    Services Group, Inc.                                              |  | Services: Business                            |  |                           | L+9.00%  |  |                   |  | 9.50%
                                         Cash/1.00% PIK  |          |  | 12/17/2018 |  |  | 6,655              |  |  |               | 6,555   |  |                       |  
|Output
    Services Group, Inc.                                              |  | Services: Business                            |  |                           | L+9.00%  |  |                   |  | 9.50%
                                         Cash/1.00% PIK  |          |  | 12/17/2018 |  |  | 7,429              |  |  |               | 7,301   |  |                       |  
|Playtime,
    LLC (m)                                                        |  | Hotels, Gaming & Leisure                      |  |                           | L+7.50%  |  |                   |  | 9.00                                                           | %        |  | 12/4/2017  |  |  | 5,677              |  |  |               | 5,627   |  |                       |  
|TPP
    Acquisition, Inc. (o)                                                |  | Retail                                        |  |                           | L+11.00% |  |                   |  | 10.50%
                                         Cash/2.00% PIK |          |  | 12/17/2017 |  |  | 6,835              |  |  |               | 6,769   |  |                       |  
|TPP
    Acquisition, Inc. (Revolver) (o)                                     |  | Retail                                        |  |                           | L+11.00% |  |                   |  | 4.50%
                                         Cash/8.00% PIK  |          |  | 12/17/2017 |  |  | 2,035              |  |  |               | 2,035   |  |                       |  
|TPP
    Acquisition, Inc. (Delayed Draw) (o)                                 |  | Retail                                        |  |                           | L+11.00% |  |                   |  | 10.50%
                                         Cash/2.00% PIK |          |  | 12/17/2017 |  |  | 3,429              |  |  |               | 3,429   |  |                       |  
|Total
    Unitranche Loans                                                   |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  | 78,571             |  |  |               | 77,464  |  |                       |  
|                                                                             |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  |                    |  |  |               |         |  |                       |  
|Junior
    Secured Loans                                                     |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  |                    |  |  |               |         |  |                       |  
|Confie
    Seguros Holdings II Co.                                           |  | Banking, Finance, Insurance
    & Real Estate |  |                           | L+9.00%  |  |                   |  | 10.25                                                          | %        |  | 5/8/2019   |  |  | 5,594              |  |  |               | 5,555   |  |                       |  
|CSM
    Bakery Supplies LLC                                                  |  | Beverage, Food & Tobacco                      |  |                           | L+7.75%  |  |                   |  | 8.75                                                           | %        |  | 7/3/2021   |  |  | 5,792              |  |  |               | 5,691   |  |                       |  
|Education
    Corporation of America                                         |  | Services: Consumer                            |  |                           | L+11.00% |  |                   |  | 11.60                                                          | %        |  | 12/31/2018 |  |  | 5,833              |  |  |               | 5,698   |  |                       |  
|Hyland
    Software Inc.                                                     |  | High Tech Industries                          |  |                           | L+7.25%  |  |                   |  | 8.25                                                           | %        |  | 7/1/2023   |  |  | 5,000              |  |  |               | 4,810   |  |                       |  
|Mergermarket
    USA, Inc.                                                   |  | Media: Broadcasting &
    Subscription        |  |                           | L+6.50%  |  |                   |  | 7.50                                                           | %        |  | 12/19/2021 |  |  | 4,500              |  |  |               | 4,384   |  |                       |  
|Micro
    Holdings Corp.                                                     |  | High Tech Industries                          |  |                           | L+7.50%  |  |                   |  | 8.50                                                           | %        |  | 7/8/2022   |  |  | 5,590              |  |  |               | 5,455   |  |                       |  
|Mud
    Pie, LLC                                                             |  | Consumer Goods: Non-Durable                   |  |                           | n/a      |  |                   |  | 10.00%
                                         Cash/1.50% PIK |          |  | 11/4/2020  |  |  | 10,101             |  |  |               | 9,919   |  |                       |  
|New
    NSI Holdings, Inc.                                                   |  | Chemicals, Plastics &
    Rubber              |  |                           | L+8.25%  |  |                   |  | 9.25                                                           | %        |  | 7/28/2022  |  |  | 4,000              |  |  |               | 3,942   |  |                       |  
|Pre-Paid
    Legal Services, Inc. (Legal Shield)                             |  | Services: Consumer                            |  |                           | L+9.00%  |  |                   |  | 10.25                                                          | %        |  | 7/1/2020   |  |  | 3,000              |  |  |               | 2,988   |  |                       |  
|Physiotherapy
    Corporation                                                |  | Healthcare & Pharmaceuticals                  |  |                           | L+8.50%  |  |                   |  | 9.50                                                           | %        |  | 6/3/2022   |  |  | 5,000              |  |  |               | 4,953   |  |                       |  
|Rocket
    Dog Brands, LLC (g)                                               |  | Consumer Goods: Non-Durable                   |  |                           | n/a      |  |                   |  | 15.00%
                                         PIK            |          |  | 5/1/2020   |  |  | 1,673              |  |  |               | 1,673   |  |                       |  
|Sterling
    Infosystems, Inc.                                               |  | Services: Business                            |  |                           | L+7.75%  |  |                   |  | 8.75                                                           | %        |  | 6/19/2023  |  |  | 5,000              |  |  |               | 4,952   |  |                       |  
|SCP
    TPZ Acquisition, Inc.                                                |  | Media:
    Diversified & Production           |  |                           | L+8.25%  |  |                   |  | 9.25                                                           | %        |  | 5/29/2022  |  |  | 5,000              |  |  |               | 4,928   |  |                       |  
|Total
    Junior Secured Loans                                               |  |                                               |  |                           |          |  |                   |  |                                                                |          |  |            |  |  | 66,083             |  |  |               | 64,948  |  |                       |  





9







|Equity
    Securities                                                                                                    |  |                                               |  |  |     |  |  |  |                                                     |     |  |            |  |  |   |  |  |   |         |  |  |   |         |  |  |  |       |  
|------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------- |  |  | --- |  |  |  | --------------------------------------------------- | --- |  | ---------- |  |  | - |  |  | - | ------- |  |  | - | ------- |  |  |  | ----- | -
|American
    Community Homes, Inc. (warrant to purchase up to 9.0% of the equity)(p)                                     |  | Banking, Finance, Insurance
    & Real Estate |  |  | -   |  |  |  | -                                                   | (t) |  | 10/9/2024  |  |  | - |  |  |   | -       |  |  |   | 353     |  |  |  | 0.2   | %
|BookIt
    Operating LLC (warrant to purchase up to 3.0% of the equity) (p)                                              |  | Hotels, Gaming & Leisure                      |  |  | -   |  |  |  | -                                                   | (t) |  | 12/21/2023 |  |  | - |  |  |   | -       |  |  |   | 587     |  |  |  | 0.3   | %
|Collaborative
    Neuroscience Network, LLC (warrant to purchase up to 1.67 LLC units) (p)                               |  | Healthcare & Pharmaceuticals                  |  |  | -   |  |  |  | -                                                   | (t) |  | 12/27/2022 |  |  | - |  |  |   | -       |  |  |   | 147     |  |  |  | 0.1   | %
|Cyalume
    Technologies Holdings, Inc. - Series D Preferred Stock (3.06 shares)(p)                                      |  | Aerospace & Defense                           |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | -       |  |  |   | 449     |  |  |  | 0.2   | %
|Education
    Corporation of America - Series G Preferred Stock (8,333 shares) (p)                                       |  | Services: Consumer                            |  |  | n/a |  |  |  | 12.00                                               | %   |  | -          |  |  | - |  |  |   | 8,125   |  |  |   | 8,345   |  |  |  | 4.5   | %
|InMobi
    Pte, Ltd. (represents the right to purchase 0.42% of the equity) (k) (p)                                      |  | Media: Advertising, Printing
    & Publishing |  |  | -   |  |  |  | -                                                   | (t) |  | 9/18/2025  |  |  | - |  |  |   | -       |  |  |   | 108     |  |  |  | 0.1   | %
|O'Brien
    Industrial Holdings, LLC (warrants to purchase up to 2.44% of certain affiliated entities of the company)(p) |  | Metals & Mining                               |  |  | -   |  |  |  | -                                                   | (t) |  | 5/13/2024  |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|Output
    Services Group, Inc. (warrant to purchase up to 3.89% of the common stock) (p)                                |  | Services: Business                            |  |  | -   |  |  |  | -                                                   | (t) |  | 12/17/2022 |  |  | - |  |  |   | -       |  |  |   | 450     |  |  |  | 0.2   | %
|Playtime,
    LLC - Preferred Units (8,665 units) (p)                                                                    |  | Hotels, Gaming & Leisure                      |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | 200     |  |  |   | 64      |  |  |  | 0.0   | %
|Rocket
    Dog Brands, LLC - Common Units (75,502 units) (g)                                                             |  | Consumer Goods: Non-Durable                   |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|Rocket
    Dog Brands, LLC - Preferred Units (10 units) (g)                                                              |  | Consumer Goods: Non-Durable                   |  |  | -   |  |  |  | 15.00%
                                         PIK | (u) |  | -          |  |  | - |  |  |   | 967     |  |  |   | -       |  |  |  | 0.0   | %
|Rockdale
    Blackhawk, LLC - LLC Units (11.56% of the LLC interest)(g)                                                  |  | Healthcare & Pharmaceuticals                  |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | 1,093   |  |  |   | 8,184   |  |  |  | 4.4   | %
|Summit
    Container Corporation (warrant to purchase up to 19.50% of the equity) (g)                                    |  | Containers, Packaging &
    Glass             |  |  | -   |  |  |  | -                                                   | (t) |  | 1/6/2024   |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|The
    Sandbox Group LLC (warrant to purchase up to 1.0% of the equity) (p)                                             |  | Media: Advertising, Printing
    & Publishing |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | -       |  |  |   | 277     |  |  |  | 0.2   | %
|The
    Tie Bar Operating Company, LLC - Class A Preferred Units (1,275 units)(p)                                        |  | Retail                                        |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | 86      |  |  |   | 90      |  |  |  | 0.1   | %
|The
    Tie Bar Operating Company, LLC - Class B Preferred Units (1,275 units) (p)                                       |  | Retail                                        |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | 1       |  |  |   | -       |  |  |  | 0.0   | %
|TPP
    Acquisition, Inc. (829 shares of common stock) (o)                                                               |  | Retail                                        |  |  | -   |  |  |  | -                                                   | (t) |  | -          |  |  | - |  |  |   | -       |  |  |   | -       |  |  |  | 0.0   | %
|Total
    Equity Securities                                                                                              |  |                                               |  |  |     |  |  |  |                                                     |     |  |            |  |  |   |  |  |   | 10,472  |  |  |   | 19,054  |  |  |  | 10.3  | %
|TOTAL
    INVESTMENTS                                                                                                    |  |                                               |  |  |     |  |  |  |                                                     |     |  |            |  |  |   |  |  | $ | 342,738 |  |  | $ | 341,091 |  |  |  | 184.8 | %






| | (a) | All of our investments are issued by eligible U.S. portfolio
companies, as defined in the Investment Company Act of 1940 (the “1940 Act”) except for InMobi Pte, Ltd. which is
an international company headquartered in California.  All investments are non-controlled/non-affiliate company investments,
unless otherwise noted.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The majority of the investments bear interest at a rate
that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime”
or “P”) which reset daily, monthly, quarterly, or semiannually. For each such investment the Company has provided
the spread over LIBOR or Prime and the current contractual interest rate in effect at December 31, 2015. Certain investments are
subject to a LIBOR or Prime interest rate floor.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Because there is no readily available market value for
these investments, the fair value of these investments is determined in good faith by our board of directors as required by the
Investment Company Act of 1940. (See Note 4 in the accompanying notes to the consolidated financial statements.)
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Percentages are based on net assets of $184,535 as of
December 31, 2015.
| | --- | ------------------------------------------------------------------------

| | (e) | A portion of this loan (principal of $4,679) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (f) | All or a portion of this commitment was unfunded at December
31, 2015. As such, interest is earned only on the funded portion of this commitment.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | (g) | As defined in the 1940 Act, the Company is deemed to
be an “Affiliated Person” of the portfolio company as it owns five percent or more of the portfolio company's voting
securities. See Note 5 in the accompanying notes to the consolidated financial statements for additional information on transactions
in which the issuer was an Affiliated Person (but not a portfolio company that the Company is deemed to control).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (h) | All of this loan is held in the Company’s wholly-owned
subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s revolving credit facility.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (i) | A portion of this loan (principal of $2,532) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (j) | This delayed draw loan requires that certain financial
covenants be met by the portfolio company prior to any fundings.
| | --- | -----------------------------------------------------------------------------------------------------------------------

| | (k) | This investment is treated as a non-qualifying investment
under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time
the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2015,
non-qualifying assets totaled 1.60% of the Company’s total assets.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (l) | A portion of this loan (principal of $4,394) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (m) | The sale of a portion of this loan does not qualify for
sale accounting under ASC Topic 860 — Transfers and Servicing, and therefore, the entire unitranche loan asset remains on
the Consolidated Schedule of Investments.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (n) | A portion of this loan (principal of $5,500) is held
in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP and is therefore not collateral to the Company’s
revolving credit facility.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (o) | As defined in the 1940 Act, the Company is deemed to
be both an “Affiliated Person” of and to “Control” this portfolio company as it owns more than 25% percent
of the portfolio company’s voting securities. See Note 5 in the accompanying notes to the consolidated financial statements
for additional information on transactions in which the issuer was both an Affiliated Person and a portfolio company that the
Company is deemed to Control.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (p) | Represents less than 5% ownership of the portfolio company’s
voting securities.
| | --- | -------------------------------------------------------------------------------

| | (q) | The PIK portion of the interest rate for Landpoint, LLC
is structured as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 2.25% per annum and is subject
to a minimum payment upon termination of $338.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (r) | A portion of the PIK interest rate for TRG, LLC is structured
as a guaranteed fee paid upon the termination of the commitment. The fee accrues at 5.92% per annum and is subject to an estimated
minimum payment upon termination of $891.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (s) | The PIK portion of the interest rate for Gracelock Industries,
LLC is structured as a fee paid upon the termination of the commitment. The fee accrues at 2.55% per annum.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (t) | Represents a non-income producing security.
| | --- | -------------------------------------------

| | (u) | This position includes a PIK dividend and is currently
on non-accrual status.
| | --- | -----------------------------------------------------------------------------

n/a - not applicable



See Notes to Consolidated Financial Statements.



10







MONROE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(in thousands, except share and per share
data)



Note 1. Organization and Principal Business



Monroe Capital Corporation (“Monroe Capital”
and together with its subsidiaries, the “Company”) was formed in February 2011 to act as an externally managed non-diversified,
closed-end management investment company and has elected to be treated as a business development company under the Investment Company
Act of 1940, as amended (the “1940 Act”). The Company had no substantive operating activities prior to October 24,
2012, the date of its initial public offering. Monroe Capital’s investment objective is to maximize the total return to its
stockholders in the form of current income and capital appreciation through investment in senior secured, junior secured and unitranche
(a combination of senior secured and junior secured debt in the same facility) debt and, to a lesser extent, unsecured subordinated
debt and equity investments. Monroe Capital is managed by Monroe Capital BDC Advisors, LLC (“MC Advisors”), a registered
investment adviser under the Investment Advisers Act of 1940, as amended. In addition, for U.S. federal income tax purposes, Monroe
Capital has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue
Code of 1986, as amended (the “Code”).



On February 28, 2014, the Company’s wholly-owned
subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limited partnership, received a license from
the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under
Section 301(c) of the Small Business Investment Act of 1958, as amended. MRCC SBIC commenced operations on September 16, 2013.
As of June 30, 2016, MRCC SBIC had $20,000 in regulatory and leveragable capital and $40,000 in SBA-guaranteed debentures outstanding.
On April 13, 2016, MRCC SBIC was approved by the SBA for an additional $75,000 in SBA-guaranteed debentures. See Note 7 for additional
information.



On July 25, 2016, the Company closed a
public offering of 3,100,000 shares of its common stock at a public offering price of $15.50 per share, raising approximately
$48,050 in gross proceeds. On August 3, 2016, the Company sold an additional 465,000 shares of its common stock, at a public
offering price of $15.50 per share, raising approximately $7,208 in gross proceeds pursuant to the underwriters’
exercise of the over-allotment option. Aggregate underwriters’ discounts and commissions were $2,210 and offering costs
are expected to total approximately $350.



Note 2. Summary of Significant Accounting Policies



Basis of Presentation



The accompanying consolidated financial statements
of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant
to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. The Company has determined it meets the
definition of an investment company and follows the accounting and reporting guidance in the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 946 — Financial Services — Investment
Companies (“ASC Topic 946”). Certain prior period amounts have been reclassified to conform to the current period
presentation.



Use of Estimates



The preparation of the consolidated financial
statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



Consolidation



As permitted under Regulation S-X and ASC Topic
946, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary
or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated
the results of the Company’s wholly-owned subsidiaries, in its consolidated financial statements. All intercompany balances
and transactions have been eliminated.



Fair Value of Financial Instruments



The Company applies fair value to substantially
all of its financial instruments in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC
Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures
for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency
of valuation inputs. See Note 4 to the consolidated financial statements for further discussion regarding the fair value measurements
and hierarchy.



11









ASC Topic 820 requires disclosure of the fair
value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts
of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short
maturity of such instruments.



Revenue Recognition



The Company’s revenue recognition policies
are as follows:



Investments and related investment income:
Interest and dividend income is recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest
income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest
is accrued on a daily basis. All other income is recorded into income when earned. The Company records prepayment fees and amendment
fees on loans as interest income in the period earned. For the three and six months ended June 30, 2016, interest income included
$516 and $847 of prepayment and amendment fees, respectively. For the three and six months ended June 30, 2015, interest income
included $559 and $1,125 of prepayment and amendment fees, respectively.



Dividend income on preferred equity securities
is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are
expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies.
Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments
is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company
will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated
tax-basis earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital
are recorded as a reduction in the cost basis of the investment. For the three and six months ended June 30, 2016, the Company
recorded dividend income of $1,051 and $2,913, respectively. For both the three and six months ended June 30, 2015, the Company
recorded no dividend income.



Loan origination fees, original issue discount
and market discount or premiums are capitalized, and the Company then amortizes such amounts using the effective interest method
as interest income over the life of the investment. Unamortized discounts and loan origination fees totaled $5,890 and $6,340 as
of June 30, 2016 and December 31, 2015, respectively. Upfront loan origination and closing fees received for the three and six
months ended June 30, 2016 totaled $350 and $1,496, respectively. For the three and six months ended June 30, 2015, upfront loan
origination and closing fees received totaled $630 and $1,548, respectively. For the three and six months ended June 30, 2016,
interest income included $389 and $754 of accretion of loan origination fees, original issue discounts and market discounts or
premiums, respectively. For the three and six months ended June 30, 2015, interest income included $279 and $479 of accretion of
loan origination fees, original issue discounts and market discounts or premiums, respectively. Upon the prepayment of a loan or
debt security, any unamortized premium or discount or loan origination fees are recorded as interest income. For the three and
six months ended June 30, 2016, interest income included $232 and $609 of unamortized discount or loan origination fees recorded
as interest income upon prepayment of a loan or debt security, respectively. For the three and six months ended June 30, 2015,
interest income included $503 and $770 of unamortized discount or loan origination fees recorded as interest income upon prepayment
of a loan or debt security, respectively.



The Company has certain investments in its portfolio
that contain a payment-in-kind (“PIK”) interest provision, which represents contractual interest or dividends that
are added to the principal balance and recorded as income. For the three and six months ended June 30, 2016, interest income included
$460 and $830 of PIK interest, respectively. For the three and six months ended June 30, 2015, interest income included $510 and
$1,040 of PIK interest, respectively. The Company stops accruing PIK interest when it is determined that PIK interest is no longer
collectible. To maintain RIC tax treatment, and to avoid corporate tax, substantially all of this income must be paid out to stockholders
in the form of distributions, even though the Company has not yet collected the cash.



Investment transactions are recorded on a trade-date
basis. Realized gains or losses on portfolio investments are calculated based upon the difference between the net proceeds from
the disposition and the amortized cost basis of the investment, without regard to unrealized gains and losses previously recognized.
Realized gains and losses are recorded within net realized gain (loss) on investments in the consolidated statements of operations.
Changes in the fair value of investments from the prior period, as determined by the Company’s board of directors (the “Board”)
through the application of the Company’s valuation policy, are included within net change in unrealized appreciation (depreciation)
on investments in the consolidated statements of operations.



Non-accrual: Loans or preferred equity
securities are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there
is reasonable doubt that principal, interest or dividends will be collected. Interest payments received on non-accrual loans may
be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual
status when past due principal, interest or dividends are paid and, in management’s judgment, are likely to remain current.
On January 1, 2016, the Company placed its loan investments in TPP Acquisition, Inc. on non-accrual status. During the three and
six months ended June 30, 2016, the Company received interest payments from TPP Acquisition, Inc. totaling $10, which were recognized
as interest income. Prior to placing TPP Acquisition Inc. on non-accrual status there were no other loan investments on non-accrual
status. The Company’s preferred unit investment in Rocket Dog Brands LLC, which has a stated PIK interest rate, continues
to remain on non-accrual status, and no dividend income was recorded related to this investment for the three and six months ended
June 30, 2016 and 2015. The fair value of the Company’s investments on non-accrual status totaled $7,350 and zero at June
30, 2016 and December 31, 2015, respectively.





12







Partial loan sales: The Company follows
the guidance in ASC Topic 860 — Transfers and Servicing (“ASC Topic 860”), when accounting for
loan participations and other partial loan sales. Such guidance requires a participation or other partial loan sale to meet the
definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations
or other partial loan sales which do not meet the definition of a participating interest remain on the Company’s consolidated
statements of assets and liabilities and the proceeds are recorded as a secured borrowing until the definition is met. For these
partial loan sales, the interest earned on the entire loan balance is recorded within “interest income” and the interest
earned by the buyer in the partial loan sale is recorded within “interest and other debt financing expenses” in the
accompanying consolidated statements of operations. Changes in the fair value of secured borrowings from the prior period, as determined
by the Board through the application of the Company’s valuation policy, are included as changes in unrealized appreciation
(depreciation) on secured borrowings in the consolidated statements of operations. See Note 7 “Secured Borrowings”
for additional information.







Distributions



Distributions to common stockholders are recorded
on the record date. The amount, if any, to be distributed is determined by the Board each quarter and is generally based upon the
earnings estimated by management. Net realized capital gains, if any, are generally distributed at least annually, although the
Company may decide to retain such capital gains for investment.



The determination of the tax attributes for
the Company’s distributions is made annually, based upon its taxable income for the full year and distributions paid for
the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income
from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form
of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will
generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.



The Company has adopted a dividend reinvestment
plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has
elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the Company’s stockholders who
have not “opted out” of the DRIP at least three days prior to the dividend payment date will have their cash dividend
automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the
share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock
by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the Company’s common
stock on a date determined by the Board. Shares purchased in the open market to satisfy the DRIP requirements will be valued based
upon the average price of the applicable shares purchased by the DRIP plan administrator, before any associated brokerage or other
costs. See Note 8 regarding distributions for additional information.



Earnings per Share



In accordance with the provisions of
ASC Topic 260 — Earnings per Share (“ASC Topic 260”), basic earnings per share is computed by
dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period.
The weighted average shares outstanding utilized in the calculation of earnings per share take into account share issues
under the at-the-market (“ATM”) program on the issuance date and the Company’s repurchases of its common
stock on the repurchase date. See Note 9 for additional information on the Company’s share issuances and repurchases.
For the periods presented in these consolidated financial statements, there were no potentially dilutive common shares
issued.



Segments



In accordance with ASC Topic 280 — Segment
Reporting, the Company has determined that it has a single reporting segment and operating unit structure.



Cash



The Company deposits its cash in a financial
institution and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits.



Restricted Cash



Restricted cash includes amounts held within
MRCC SBIC. Cash held within an SBIC is generally restricted to the originations of new loans from the SBIC and the payment of SBA
debentures and related interest expense.



Unamortized Deferred Financing Costs



Deferred financing costs represent fees
and other direct incremental costs incurred in connection with the Company’s borrowings. As of June 30, 2016 and
December 31, 2015, the Company had unamortized deferred financing costs of $4,037 and $3,569, respectively, presented as a
direct reduction of the carrying amount of debt on the consolidated statements of assets and liabilities. These amounts are amortized and included in interest expense in
the consolidated statements of operations over the estimated average life of the borrowings. Amortization of deferred
financing costs for the three and six months ended June 30, 2016 was $199 and $381, respectively. Amortization of deferred
financing costs for the three and six months ended June 30, 2015 was $200 and $367, respectively.



Offering Costs



Offering costs include, among other things,
fees paid in relation to legal, accounting, regulatory and printing work completed in preparation of equity offerings. Offering
costs are charged against the proceeds from equity offerings within the consolidated statements of changes in net assets. As of
June 30, 2016 and December 31, 2015, other assets on the consolidated statements of assets and liabilities included $399 and $358,
respectively, of deferred offering costs which will be charged against the proceeds from further equity offerings when received.



13







Income Taxes



The Company has elected to be treated as a RIC
under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment available to RICs. To maintain qualification
as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and distribute
to stockholders, for each taxable year, at least 90% of the Company’s “investment company taxable income,” which
is generally the Company’s net ordinary income plus the excess, if any, of realized net short-term capital gains over realized
net long-term capital losses. If the Company qualifies as a RIC and satisfies the annual distribution requirement, the Company
will not have to pay corporate-level federal income taxes on any income that the Company distributes to its stockholders. The Company
intends to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on
income. The Company will also be subject to nondeductible federal excise taxes if the Company does not distribute at least 98%
of net ordinary income, 98.2% of any capital gain net income, if any, and any recognized and undistributed income from prior years
for which it paid no federal income taxes. To the extent that the Company determines that its estimated current year annual taxable
income may exceed estimated current year dividend distributions, the Company accrues excise tax, if any, calculated as 4% of the
estimated excess taxable income as taxable income is earned. For the three and six months ended June 30, 2016, zero and $87 were
recorded within general and administrative expenses on the consolidated statements of operations for U.S. federal excise tax, respectively.
For the three and six months ended June 30, 2015, zero and $3 was recorded within general and administrative expenses for U.S.
federal excise tax, respectively. As of June 30, 2016 and December 31, 2015, payables for excise taxes of zero and $80, respectively,
were included in accounts payable and accrued expenses on the consolidated statements of assets and liabilities.



The Company accounts for income taxes in conformity
with ASC Topic 740 — Income Taxes (“ASC Topic 740”). ASC Topic 740 provides guidelines for how uncertain
tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires
the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions
are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to
meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy
to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. There were no material uncertain
income tax positions through June 30, 2016. The 2012 through 2015 tax years remain subject to examination by U.S. federal and state
tax authorities.



Recent Accounting Pronouncements



In May 2014, the FASB issued Accounting Standards
Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606) (“ASU 2014-09”). The
core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. To achieve that core principle, an entity should apply the following steps: Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction
price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance
obligation.



ASU 2014-09 also specified the accounting for
some costs to obtain or fulfill a contract with a customer. In addition, ASU 2014-09 requires that an entity disclose sufficient
information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers. The initial effective date of ASU 2014-09 was for fiscal periods beginning after
December 15, 2016. However, in August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (ASC
Topic 606): Deferral of the Effective Date, which deferred the effective date to fiscal periods beginning after December
15, 2017. Management is currently evaluating the impact these changes will have on the Company’s consolidated financial
statements and disclosures.



In February 2015, the FASB issued ASU 2015-02,
Consolidation (ASC Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 significantly
changes the consolidation analysis required under GAAP and ends the deferral granted to investment companies from applying the
variable interest entity guidance. ASU 2015-02 is effective for interim and annual reporting periods in fiscal years that begin
after December 15, 2015 and early adoption is permitted. The Company has adopted ASU 2015-02 and the adoption did not have a material
impact on the Company’s consolidated financial statements and disclosures.



In April 2015, the FASB issued ASU No. 2015-03,
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”).
ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the statements of assets and
liabilities as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition
and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. ASU 2015-03 is effective for fiscal
years that begin after December 15, 2015 and early adoption is permitted. The Company has adopted ASU 2015-03 and the revised presentation
is reflected in the Company’s consolidated financial statements for the periods presented.



In January 2016, the FASB issued ASU 2016-01,
Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities (“ASU 2016-01”). ASU 2016-01 retains many current requirements for the classification and measurement
of financial instruments; however, it significantly revises an entity’s accounting related to (1) the classification and
measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities
measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments.
This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted
for public business entities. Management is currently evaluating the impact these changes will have on the Company’s consolidated
financial statements and disclosures.



14







Note 3. Investments



The following table shows the composition of
the investment portfolio, at amortized cost and fair value (with corresponding percentage of total portfolio investments):



|                     |  | June 30, 2016 |         |  | December 31, 2015 | 
|-------------------- |  | ------------- | ------- |  | ----------------- | 
|Amortized Cost:      |  |               |         |  |                   | 
|Senior secured loans |  | $             | 206,626 |  |                   | 
|Unitranche loans     |  |               | 59,302  |  |                   | 
|Junior secured loans |  |               | 67,053  |  |                   | 
|Equity securities    |  |               | 10,473  |  |                   | 
|Total                |  | $             | 343,454 |  |                   | 



|                     |  | June 30, 2016 |         |  | December 31, 2015 | 
|-------------------- |  | ------------- | ------- |  | ----------------- | 
|Fair Value:          |  |               |         |  |                   | 
|Senior secured loans |  | $             | 201,002 |  |                   | 
|Unitranche loans     |  |               | 53,920  |  |                   | 
|Junior secured loans |  |               | 64,955  |  |                   | 
|Equity securities    |  |               | 22,931  |  |                   | 
|Total                |  | $             | 342,808 |  |                   | 



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



|                |  | June 30, 2016 |         |  | December 31, 2015 | 
|--------------- |  | ------------- | ------- |  | ----------------- | 
|Amortized Cost: |  |               |         |  |                   | 
|West            |  | $             | 123,806 |  |                   | 
|Northeast       |  |               | 62,060  |  |                   | 
|Southeast       |  |               | 58,409  |  |                   | 
|Midwest         |  |               | 51,823  |  |                   | 
|Southwest       |  |               | 38,276  |  |                   | 
|International   |  |               | 6,667   |  |                   | 
|South           |  |               | 2,413   |  |                   | 
|Mid-Atlantic    |  |               | —       |  |                   | 
|Total           |  | $             | 343,454 |  |                   | 



|              |  | June 30, 2016 |         |  | December 31, 2015 | 
|------------- |  | ------------- | ------- |  | ----------------- | 
|Fair Value:   |  |               |         |  |                   | 
|West          |  | $             | 115,491 |  |                   | 
|Northeast     |  |               | 63,111  |  |                   | 
|Southeast     |  |               | 60,362  |  |                   | 
|Midwest       |  |               | 51,956  |  |                   | 
|Southwest     |  |               | 42,738  |  |                   | 
|International |  |               | 6,737   |  |                   | 
|South         |  |               | 2,413   |  |                   | 
|Mid-Atlantic  |  |               | -       |  |                   | 
|Total         |  | $             | 342,808 |  |                   | 



15







The following table shows the composition of
the investment portfolio by industry, at amortized cost and fair value (with corresponding percentage of total portfolio investments):



|                                          |  | June 30, 2016 |         |  | December 31, 2015 | 
|----------------------------------------- |  | ------------- | ------- |  | ----------------- | 
|Amortized Cost:                           |  |               |         |  |                   | 
|Aerospace & Defense                       |  | $             | 10,315  |  |                   | 
|Automotive                                |  |               | 8,400   |  |                   | 
|Banking, Finance, Insurance & Real Estate |  |               | 22,639  |  |                   | 
|Beverage, Food & Tobacco                  |  |               | 5,757   |  |                   | 
|Chemicals, Plastics & Rubber              |  |               | 3,945   |  |                   | 
|Construction & Building                   |  |               | 19,164  |  |                   | 
|Consumer Goods: Durable                   |  |               | 3,670   |  |                   | 
|Consumer Goods: Non-Durable               |  |               | 50,173  |  |                   | 
|Containers, Packaging & Glass             |  |               | 3,621   |  |                   | 
|Energy: Oil & Gas                         |  |               | 8,708   |  |                   | 
|Environmental Industries                  |  |               | 3,686   |  |                   | 
|Healthcare & Pharmaceuticals              |  |               | 33,002  |  |                   | 
|High Tech Industries                      |  |               | 16,950  |  |                   | 
|Hotels, Gaming & Leisure                  |  |               | 35,032  |  |                   | 
|Media: Advertising, Printing & Publishing |  |               | 6,667   |  |                   | 
|Media: Broadcasting & Subscription        |  |               | 18,264  |  |                   | 
|Media: Diversified & Production           |  |               | 4,933   |  |                   | 
|Metals & Mining                           |  |               | 5,205   |  |                   | 
|Retail                                    |  |               | 23,898  |  |                   | 
|Services: Business                        |  |               | 29,020  |  |                   | 
|Services: Consumer                        |  |               | 25,447  |  |                   | 
|Wholesale                                 |  |               | 4,958   |  |                   | 
|Total                                     |  | $             | 343,454 |  |                   | 



|                                          |  | June 30, 2016 |         |  | December 31, 2015 | 
|----------------------------------------- |  | ------------- | ------- |  | ----------------- | 
|Fair Value:                               |  |               |         |  |                   | 
|Aerospace & Defense                       |  | $             | 11,087  |  |                   | 
|Automotive                                |  |               | 4,350   |  |                   | 
|Banking, Finance, Insurance & Real Estate |  |               | 23,904  |  |                   | 
|Beverage, Food & Tobacco                  |  |               | 5,503   |  |                   | 
|Chemicals, Plastics & Rubber              |  |               | 3,936   |  |                   | 
|Construction & Building                   |  |               | 19,216  |  |                   | 
|Consumer Goods: Durable                   |  |               | 3,700   |  |                   | 
|Consumer Goods: Non-Durable               |  |               | 47,598  |  |                   | 
|Containers, Packaging & Glass             |  |               | 3,606   |  |                   | 
|Energy: Oil & Gas                         |  |               | 8,624   |  |                   | 
|Environmental Industries                  |  |               | 3,763   |  |                   | 
|Healthcare & Pharmaceuticals              |  |               | 43,449  |  |                   | 
|High Tech Industries                      |  |               | 15,877  |  |                   | 
|Hotels, Gaming & Leisure                  |  |               | 35,207  |  |                   | 
|Media: Advertising, Printing & Publishing |  |               | 6,737   |  |                   | 
|Media: Broadcasting & Subscription        |  |               | 18,419  |  |                   | 
|Media: Diversified & Production           |  |               | 4,938   |  |                   | 
|Metals & Mining                           |  |               | 5,260   |  |                   | 
|Retail                                    |  |               | 17,098  |  |                   | 
|Services: Business                        |  |               | 29,920  |  |                   | 
|Services: Consumer                        |  |               | 25,980  |  |                   | 
|Wholesale                                 |  |               | 4,636   |  |                   | 
|Total                                     |  | $             | 342,808 |  |                   | 



Note 4. Fair Value Measurements



Investments



The Company values all investments in accordance
with ASC Topic 820. ASC Topic 820 requires enhanced disclosures about assets and liabilities that are measured and reported at
fair value. As defined in ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.



16







ASC Topic 820 establishes a hierarchal disclosure
framework which prioritizes and ranks the level of market price observability of inputs used in measuring investments at fair value.
Market price observability is affected by a number of factors, including the type of investment and the characteristics specific
to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively
quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring
fair value.



Based on the observability of the inputs used
in the valuation techniques, the Company is required to provide disclosures on fair value measurements according to the fair value
hierarchy. The fair value hierarchy ranks the observability of the inputs used to determine fair values. Investments carried at
fair value are classified and disclosed in one of the following three categories:



| | · | Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level 2 — Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable.
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The inputs into the determination of fair value may require significant management judgment or estimation. Such information may be the result of consensus pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | · | the quarterly valuation process begins with each portfolio company or investment being initially evaluated and rated by the investment professionals of MC Advisors responsible for the portfolio investment;                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | · | preliminary valuation conclusions are then documented and discussed with the investment committee of the Company;                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | · | the Board also engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of investments for which market quotations are not readily available. The Company will consult with independent valuation firm(s) relative to each portfolio company at least once in every calendar year, but are generally received quarterly;
| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | · | the audit committee of the Board reviews the preliminary valuations of MC Advisors and of the independent valuation firm(s) and responds and supplements the valuation recommendations to reflect any comments; and                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                   
| | · | the Board discusses these valuations and determines the fair value of each investment in the portfolio in good faith, based on the input of MC Advisors, the independent valuation firm(s) and the audit committee.                                                                                                                                               



The availability of valuation techniques and
observable inputs can vary from investment to investment and is affected by a wide variety of factors including the type of investment,
whether the investment is new and not yet established in the marketplace, and other characteristics particular to the transaction.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized
due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation,
those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities
existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized
in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.
In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety
falls is determined based on the lowest level input that is significant to the fair value measurement.



Fair value is a market-based measure considered
from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are
not readily available, assumptions utilized in the valuation are set to reflect those that market participants would use in pricing
the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date,
including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced
for many securities. This condition could cause an investment to be reclassified to a lower level within the fair value hierarchy.



The accompanying consolidated schedules of investments
held by the Company consist primarily of private debt instruments (“Level 3 debt”). Management generally uses the yield
approach to determine fair value, as long as it is appropriate. If there is deterioration in credit quality or a debt investment
is in workout status, the Company may consider other factors in determining the fair value, including the value attributable to
the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation
analysis. The Company considers its Level 3 debt to be performing loans if the borrower is not in default, the borrower is remitting
payments in a timely manner; the loan is in covenant compliance or is otherwise not deemed to be impaired. In determining the fair
value of the performing Level 3 debt, the Company considers fluctuations in current interest rates, the trends in yields of debt
instruments with similar credit ratings, financial condition of the borrower, economic conditions and other relevant factors, both
qualitative and quantitative. In the event that a Level 3 debt instrument is not performing, as defined above, the Company will
evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value
of the Level 3 debt instrument.



17







Senior, unitranche and junior secured loans
are collateralized by tangible and intangible assets of the borrowers. These investments include loans to entities that have some
level of challenge in obtaining financing from other, more conventional institutions, such as a bank. Interest rates on these loans
are either fixed or floating, and are based on current market conditions and credit ratings of the borrower. The contractual interest
rates on the loans ranged between 6.00% and 17.00% at June 30, 2016 and 6.00% and 18.92% at December 31, 2015. The maturity dates
on the loans outstanding at June 30, 2016 range between September 2016 and July 2023. Management evaluates the collectability of
the loans on an ongoing basis based upon various factors including, but not limited to, the credit history of the borrower, its
financial status and its available collateral.



Under the yield approach, the Company uses discounted
cash flow models to determine the present value of the future cash flow streams of its debt investments, based on future interest
and principal payments as set forth in the associated loan agreements. In determining fair value under the yield approach, the
Company also considers the following factors: applicable market yields and leverage levels, credit quality, prepayment penalties,
the nature and realizable value of any collateral, the portfolio company’s ability to make payments, and changes in the interest
rate environment and the credit markets that generally may affect the price at which similar investments may be made. This evaluation
will be updated quarterly for Level 3 debt instruments that are performing and are not performing, respectively, and more frequently
for time periods where there are significant changes in the investor base or significant changes in the perceived value of the
underlying collateral. The collateral value will be analyzed on an ongoing basis using internal metrics, appraisals, third-party
valuation agents and other data as may be acquired and analyzed by the Company.



Under the market approach, the Company typically
uses the enterprise value methodology to determine the fair value of an investment. There is no one methodology to estimate enterprise
value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which
the Company derives a single estimate of enterprise value. In estimating the enterprise value of a portfolio company, the Company
analyzes various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio
company’s historical and projected financial results, applicable market trading and transaction comparables, applicable market
yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does
business, and comparisons of financial ratios of peer companies that are public. Typically, the enterprise values of private companies
are based on multiples of earnings before interest, income taxes, depreciation and amortization (“EBITDA”), cash flows,
net income, revenues, or in limited cases, book value.



Under the income approach, the Company prepares
and analyzes discounted cash flow models based on projections of the future free cash flows (or earnings) of the portfolio company.
In determining the fair value under the income approach, the Company considers various factors including, but not limited to, the
portfolio company’s projected financial results, applicable market trading and transaction comparables, applicable market
yields and leverage levels, the markets in which the portfolio company does business, and comparisons of financial ratios of peer
companies that are public.



Secured Borrowings



The Company has elected the fair value option
under ASC Topic 825 — Financial Instruments (“ASC Topic 825”) relating to accounting for debt obligations
at their fair value for its secured borrowings which arose due to partial loan sales which did not meet the criteria for sale treatment
under ASC Topic 860. The Company reports changes in the fair value of its secured borrowings within net change in unrealized (appreciation)
depreciation on secured borrowings in the consolidated statements of operations. The net gain or loss reflects the difference between
the fair value and the principal amount due on maturity.



Due to the absence of a liquid trading market
for these secured borrowings, they are valued by calculating the net present value of the future expected cash flow streams using
an appropriate risk-adjusted discount rate model. The discount rate considers projected performance of the related loan investment,
applicable market yields and leverage levels, credit quality, prepayment penalties and comparable company analysis. The Company
consults with an independent valuation firm relative to the fair value of its secured borrowings at least once in every calendar
year.



Fair Value Disclosures



The following table presents fair value measurements
of investments and secured borrowings, by major class, as of June 30, 2016, according to the fair value hierarchy:



|                     |  | Fair Value Measurements |  
|-------------------- |  | ----------------------- | -
|                     |  | Level 1                 |  
|Investments:         |  |                         |  
|Senior secured loans |  | $                       | —
|Unitranche loans     |  |                         | —
|Junior secured loans |  |                         | —
|Equity securities    |  |                         | —
|Total Investments    |  | $                       | —
|                     |  |                         |  
|Secured borrowings   |  | $                       | —



18









The following table presents fair value measurements
of investments and secured borrowings, by major class, as of December 31, 2015, according to the fair value hierarchy:



|                     |  | Fair Value Measurements |  
|-------------------- |  | ----------------------- | -
|                     |  | Level 1                 |  
|Investments:         |  |                         |  
|Senior secured loans |  | $                       | —
|Unitranche loans     |  |                         | —
|Junior secured loans |  |                         | —
|Equity securities    |  |                         | —
|Total Investments    |  | $                       | —
|                     |  |                         |  
|Secured borrowings   |  | $                       | —



The following tables provide a reconciliation
of the beginning and ending balances for investments and secured borrowings that use Level 3 inputs for the three and six months
ended June 30, 2016:





|                                                                           |  | Investments          |         |   |                  |  
|-------------------------------------------------------------------------- |  | -------------------- | ------- | - | ---------------- | -
|                                                                           |  | Senior secured loans |         |   | Unitranche loans |  
|Balance as of March 31, 2016                                               |  | $                    | 202,268 |   |                  | $
|Reclassifications                                                          |  |                      | —       |   |                  |  
|Net change in unrealized appreciation (depreciation) on investments        |  |                      | (1,610  | ) |                  |  
|Net realized gain (loss) on investments                                    |  |                      | —       |   |                  |  
|Purchases of investments and other adjustments to cost (1)                 |  |                      | 19,842  |   |                  |  
|Proceeds from principal payments and sales on investments (2)              |  |                      | (19,498 | ) |                  |  
|Net change in unrealized appreciation (depreciation) on secured borrowings |  |                      | —       |   |                  |  
|Proceeds from secured borrowings                                           |  |                      | —       |   |                  |  
|Repayments on secured borrowings                                           |  |                      | —       |   |                  |  
|Balance as of June 30, 2016                                                |  | $                    | 201,002 |   |                  | $







|                                                                           |  | Investments          |         |   |                  |  
|-------------------------------------------------------------------------- |  | -------------------- | ------- | - | ---------------- | -
|                                                                           |  | Senior secured loans |         |   | Unitranche loans |  
|Balance as of December 31, 2015                                            |  | $                    | 190,559 |   |                  | $
|Reclassifications                                                          |  |                      | 6,525   |   |                  |  
|Net change in unrealized appreciation (depreciation) on investments        |  |                      | (621    | ) |                  |  
|Net realized gain (loss) on investments                                    |  |                      | —       |   |                  |  
|Purchases of investments and other adjustments to cost (1)                 |  |                      | 38,113  |   |                  |  
|Proceeds from principal payments and sales on investments (2)              |  |                      | (33,574 | ) |                  |  
|Net change in unrealized appreciation (depreciation) on secured borrowings |  |                      | —       |   |                  |  
|Proceeds from secured borrowings                                           |  |                      | —       |   |                  |  
|Repayments on secured borrowings                                           |  |                      | —       |   |                  |  
|Balance as of June 30, 2016                                                |  | $                    | 201,002 |   |                  | $










|(1) | Includes purchases of new investments, effects of refinancing and restructurings, premium and discount accretion and amortization and PIK interest.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents net proceeds from investments sold and principal paydowns received.                                                                     





19









The following tables provide a reconciliation
of the beginning and ending balances for investments and secured borrowings that use Level 3 inputs for the three and six months
ended June 30, 2015:



|                                                                           |  | Investments           |         |   |                  |  
|-------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------- | -
|                                                                           |  | Senior  secured loans |         |   | Unitranche loans |  
|Balance as of March 31, 2015                                               |  | $                     | 148,660 |   |                  | $
|Net change in unrealized appreciation (depreciation) on investments        |  |                       | 598     |   |                  |  
|Net realized gain (loss) on investments                                    |  |                       | —       |   |                  |  
|Purchases of investments and other adjustments to cost (1)                 |  |                       | 25,858  |   |                  |  
|Proceeds from principal payments and sales on investments  (2)             |  |                       | (11,682 | ) |                  |  
|Net change in unrealized appreciation (depreciation) on secured borrowings |  |                       | —       |   |                  |  
|Proceeds from secured borrowings                                           |  |                       | —       |   |                  |  
|Repayments on secured borrowings                                           |  |                       | —       |   |                  |  
|Balance as of June 30, 2015                                                |  | $                     | 163,434 |   |                  | $



|                                                                           |  | Investments           |         |   |                  |  
|-------------------------------------------------------------------------- |  | --------------------- | ------- | - | ---------------- | -
|                                                                           |  | Senior  secured loans |         |   | Unitranche loans |  
|Balance as of December 31, 2014                                            |  | $                     | 124,161 |   |                  | $
|Net change in unrealized appreciation (depreciation) on investments        |  |                       | 438     |   |                  |  
|Net realized gain (loss) on investments                                    |  |                       | —       |   |                  |  
|Purchases of investments and other adjustments to cost (1)                 |  |                       | 59,698  |   |                  |  
|Proceeds from principal payments and sales on investments (2)              |  |                       | (20,863 | ) |                  |  
|Net change in unrealized appreciation (depreciation) on secured borrowings |  |                       | —       |   |                  |  
|Proceeds from secured borrowings                                           |  |                       | —       |   |                  |  
|Repayments on secured borrowings                                           |  |                       | —       |   |                  |  
|Balance as of June 30, 2015                                                |  | $                     | 163,434 |   |                  | $










|(1) | Includes purchases of new investments, effects of refinancing and restructurings, premium and discount accretion and amortization and PIK interest.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents net proceeds from investments sold and principal paydowns received.                                                                     



20







The total change in unrealized appreciation
(depreciation) included in the consolidated statements of operations within net change in unrealized appreciation (depreciation)
on investments for the three and six months ended June 30, 2016, attributable to Level 3 investments still held at June 30, 2016,
was ($744) and $1,550, respectively. The total change in unrealized appreciation (depreciation) included in the consolidated statements
of operations within net change in unrealized appreciation (depreciation) on investments for the three and six months ended June
30, 2015, attributable to Level 3 investments still held at June 30, 2015, was $222 and $441, respectively. The total change in
unrealized (appreciation) depreciation included in the consolidated statements of operations within net change in unrealized (appreciation)
depreciation on secured borrowings for the three and six months ended June 30, 2016, attributable to Level 3 investments still
held at June 30, 2016, was $59 and $87, respectively. The total change in unrealized (appreciation) depreciation included in the
consolidated statements of operations within net change in unrealized (appreciation) depreciation on secured borrowings for the
three and six months ended June 30, 2015, attributable to Level 3 investments still held at June 30, 2015, was ($31) and $8, respectively.
Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of Level 3 as of the beginning
of the period which the reclassifications occur. There were no transfers among Levels 1, 2 and 3 during the three and six months
ended June 30, 2016 and 2015.



Significant Unobservable Inputs



ASC Topic 820 requires disclosure of quantitative
information about the significant unobservable inputs used in the valuation of assets and liabilities classified as Level 3 within
the fair value hierarchy. Disclosure of this information is not required in circumstances where a valuation (unadjusted) is obtained
from a third-party pricing service and the information regarding the unobservable inputs is not reasonably available to the Company
and as such, the disclosures provided below exclude those investments valued in that manner. The tables below are not intended
to be all-inclusive, but rather to provide information on significant unobservable inputs and valuation techniques used by the
Company.



The valuation techniques and significant unobservable
inputs used in recurring Level 3 fair value measurements of assets and liabilities as of June 30, 2016 were as follows:





|                     |  |            |         |     |                     |                                                          |                    |                   |               |  |      | Range   | 
|-------------------- |  | ---------- | ------- | --- | ------------------- | -------------------------------------------------------- | ------------------ | ----------------- | ------------- |  | ---- | ------- | 
|                     |  | Fair Value |         |     | Valuation Technique |                                                          | Unobservable Input |                   | Weighted Mean |  |      | Minimum | 
|Assets:              |  |            |         |     |                     |                                                          |                    |                   |               |  |      |         | 
|Senior secured loans |  | $          | 178,686 |     |                     | Discounted cash flow                                     |                    | EBITDA multiples  |               |  | 6.2  | x       | 
|                     |  |            |         |     |                     |                                                          |                    | Market yields     |               |  | 11.9 | %       | 
|Senior secured loans |  |            | 1,334   |     |                     | Enterprise value                                         |                    | Revenue multiples |               |  | 0.5  | x       | 
|Senior secured loans |  |            | 7,350   |     |                     | Enterprise value                                         |                    | EBITDA multiples  |               |  | 3.8  | x       | 
|Unitranche loans     |  |            | 49,570  |     |                     | Discounted cash flow                                     |                    | EBITDA multiples  |               |  | 5.7  | x       | 
|                     |  |            |         |     |                     |                                                          |                    | Market yields     |               |  | 13.7 | %       | 
|Unitranche loans     |  |            | 4,350   |     |                     | Combination of discounted cash flow and enterprise value |                    | EBITDA multiples  |               |  | 5.5  | x       | 
|                     |  |            |         |     |                     |                                                          |                    | Market yields     |               |  | 33.6 | %       | 
|Junior secured loans |  |            | 24,295  |     |                     | Discounted cash flow                                     |                    | EBITDA multiples  |               |  | 7.4  | x       | 
|                     |  |            |         |     |                     |                                                          |                    | Market yields     |               |  | 11.3 | %       | 
|Junior secured loans |  |            | 14      |     |                     | Enterprise value                                         |                    | Revenue multiples |               |  | 0.5  | x       | 
|Equity securities    |  |            | 8,433   |     |                     | Discounted cash flow                                     |                    | EBITDA multiples  |               |  | 3.8  | x       | 
|                     |  |            |         |     |                     |                                                          |                    | Market yields     |               |  | 15.0 | %       | 
|Equity securities    |  |            | 14,498  |     |                     | Enterprise value                                         |                    | EBITDA multiples  |               |  | 3.1  | x       | 
|Total Level 3 Assets |  | $          | 288,530 | (1) |                     |                                                          |                    |                   |               |  |      |         | 
|                     |  |            |         |     |                     |                                                          |                    |                   |               |  |      |         | 
|Liabilities:         |  |            |         |     |                     |                                                          |                    |                   |               |  |      |         | 
|Secured Borrowings   |  | $          | 2,112   |     |                     | Discounted cash flow                                     |                    | Market yields     |               |  | 13.2 | %       | 














| | (1) | Excludes loans of $54,278 at fair value where valuation
(unadjusted) is obtained from a third-party pricing service for which such disclosure is not required.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------







21









The valuation techniques and significant unobservable
inputs used in recurring Level 3 fair value measurements of assets as of December 31, 2015 were as follows:



|                     |  |            |         |     |                    |                                                          |                    |                   |                   |  |      | Range   | 
|-------------------- |  | ---------- | ------- | --- | ------------------ | -------------------------------------------------------- | ------------------ | ----------------- | ----------------- |  | ---- | ------- | 
|                     |  | Fair Value |         |     | ValuationTechnique |                                                          | Unobservable Input |                   | Weighted 
Average |  |      | Minimum | 
|Assets:              |  |            |         |     |                    |                                                          |                    |                   |                   |  |      |         | 
|Senior secured loans |  | $          | 163,078 |     |                    | Discounted cash flow                                     |                    | EBITDA multiples  |                   |  | 6.2  | x       | 
|                     |  |            |         |     |                    |                                                          |                    | Market yields     |                   |  | 12.3 | %       | 
|Senior secured loans |  |            | 1,182   |     |                    | Enterprise value                                         |                    | Revenue multiples |                   |  | 0.5  | x       | 
|Unitranche loans     |  |            | 49,620  |     |                    | Discounted cash flow                                     |                    | EBITDA multiples  |                   |  | 6.1  | x       | 
|                     |  |            |         |     |                    |                                                          |                    | Market yields     |                   |  | 13.6 | %       | 
|Unitranche loans     |  |            | 5,358   |     |                    | Combination of discounted cash flow and enterprise value |                    | EBITDA multiples  |                   |  | 4.3  | x       | 
|                     |  |            |         |     |                    |                                                          |                    | Market yields     |                   |  | 29.7 | %       | 
|Unitranche loans     |  |            | 6,526   |     |                    | Enterprise value                                         |                    | EBITDA multiples  |                   |  | 3.5  | x       | 
|Junior secured loans |  |            | 19,862  |     |                    | Discounted cash flow                                     |                    | EBITDA multiples  |                   |  | 6.8  | x       | 
|                     |  |            |         |     |                    |                                                          |                    | Market yields     |                   |  | 12.2 | %       | 
|Junior secured loans |  |            | 570     |     |                    | Enterprise value                                         |                    | Revenue multiples |                   |  | 0.5  | x       | 
|Equity securities    |  |            | 8,345   |     |                    | Discounted cash flow                                     |                    | EBITDA multiples  |                   |  | 3.8  | x       | 
|                     |  |            |         |     |                    |                                                          |                    | Market yields     |                   |  | 15.0 | %       | 
|Equity securities    |  |            | 10,709  |     |                    | Enterprise value                                         |                    | EBITDA multiples  |                   |  | 3.3  | x       | 
|Total Level 3 Assets |  | $          | 265,250 | (1) |                    |                                                          |                    |                   |                   |  |      |         | 
|                     |  |            |         |     |                    |                                                          |                    |                   |                   |  |      |         | 
|Liabilities:         |  |            |         |     |                    |                                                          |                    |                   |                   |  |      |         | 
|Secured borrowings   |  | $          | 2,476   |     |                    | Discounted cash flow                                     |                    | Market yields     |                   |  | 9.0  | %       | 










| | (1) | Excludes
loans of $75,841 at fair value where valuation (unadjusted) is obtained from a third-party pricing service for which such disclosure
is not required.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



The significant unobservable inputs
used in the market approach of fair value measurement of  the Company’s investments are the market multiples of EBITDA
or revenue of the comparable guideline public companies. The Company selects a population of public companies for each
investment with similar operations and attributes of the portfolio company. Using these guideline public companies’
data, a range of multiples of enterprise value to EBITDA is calculated. The Company selects percentages from the range of
multiples for purposes of determining the portfolio company’s estimated enterprise value based on said multiple and
generally the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Significant increases
(decreases) in the multiple will result in an increase (decrease) in enterprise value, resulting in an increase (decrease) in
the fair value estimate of the investment.



The significant unobservable input used in the
income approach of fair value measurement of the Company’s investments is the discount rate used to discount the estimated future cash flows
expected to be received from the underlying investment, which include both future principal and interest payments. Significant
increases (decreases) in the discount rate would result in a decrease (increase) in the fair value estimate of the investment.
Included in the consideration and selection of discount rates are the following factors: risk of default, rating of the investment
and comparable investments, and call provisions.



Other Financial Assets and Liabilities



ASC Topic 820 requires disclosure of the fair
value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts
of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short
maturity of such instruments. Fair value of the Company’s revolving credit facility is estimated by discounting remaining
payments using applicable market rates or market quotes for similar instruments at the measurement date, if applicable. The Company
believes that the carrying value of its revolving credit facility approximates fair value. SBA-guaranteed debentures are carried
at cost and with their longer maturity dates, fair value is estimated by discounting remaining payments using current market rates
for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay
the debentures. As of June 30, 2016 and December 31, 2015, the fair value of the Company’s SBA debentures using Level 3 inputs
is estimated at $40,000 and $40,000, respectively, which is the same as the Company’s carrying value of the SBA debentures.



22







Note 5. Transactions with Affiliated Companies



An affiliated company is a company in which
the Company has ownership of 5% or more of its voting securities. A controlled affiliate company is a company in which the Company
has ownership of more than 25% of its voting securities. Transactions related to the Company’s investments with affiliates for the six months
ended June 30, 2016 and 2015 were as follows:



|Portfolio
    Company                                  |  | Fair valueatDecember31, 2015 |        |  | Purchases
    (cost) |   |       | Sales andpaydowns(cost) |  |   | PIK
    interest (cost) |   |  | Discount
    accretion |     |  | Net
    realized gains/ (losses) |   |     | Net
    unrealized gains/ (losses) |  |   | Fair
    
    value at June 30, 
    2016 |  |  | Interest
    income |        |   | Dividend
    income |  
|------------------------------------------------------ |  | ---------------------------- | ------ |  | -------------------- | - | ----- | ----------------------- |  | - | ----------------------- | - |  | ---------------------- | --- |  | -------------------------------- | - | --- | ---------------------------------- |  | - | ----------------------------------------- |  |  | ------------------- | ------ | - | ------------------- | -
|Non-controlled
    affiliate company investments (1) : |  |                              |        |  |                      |   |       |                         |  |   |                         |   |  |                        |     |  |                                  |   |     |                                    |  |   |                                           |  |  |                     |        |   |                     |  
|American
    Community Homes, Inc.                     |  | $                            | 11,692 |  |                      | $ | 488   |                         |  | $ | —                       |   |  | $                      | 99  |  |                                  | $ | 29  |                                    |  | $ | —                                         |  |  | $                   | 997    |   |                     | $
|Rockdale
    Blackhawk LLC                             |  |                              | 21,903 |  |                      |   | —     |                         |  |   | (1,412                  | ) |  |                        | —   |  |                                  |   | 92  |                                    |  |   | —                                         |  |  |                     | 3,038  |   |                     |  
|Rocket
    Dog Brands LLC                              |  |                              | 1,752  |  |                      |   | 384   |                         |  |   | —                       |   |  |                        | 168 |  |                                  |   | 5   |                                    |  |   | —                                         |  |  |                     | (961   | ) |                     |  
|Summit
    Container Corporation                       |  |                              | 3,400  |  |                      |   | 137   |                         |  |   | (95                     | ) |  |                        | 29  |  |                                  |   | 13  |                                    |  |   | —                                         |  |  |                     | 122    |   |                     |  
|Total
    non-controlled affiliate company investments |  | $                            | 38,747 |  |                      | $ | 1,009 |                         |  | $ | (1,507                  | ) |  | $                      | 296 |  |                                  | $ | 139 |                                    |  | $ | —                                         |  |  | $                   | 3,196  |   |                     | $
|Controlled
    affiliate company investments (1) :     |  |                              |        |  |                      |   |       |                         |  |   |                         |   |  |                        |     |  |                                  |   |     |                                    |  |   |                                           |  |  |                     |        |   |                     |  
|TPP Acquisition,
    Inc.                              |  | $                            | 6,525  |  |                      | $ | 1,900 |                         |  | $ | —                       |   |  | $                      | —   |  |                                  | $ | —   |                                    |  | $ | —                                         |  |  | $                   | (1,075 | ) |                     | $
|Total
    controlled affiliate company investments     |  | $                            | 6,525  |  |                      | $ | 1,900 |                         |  | $ | —                       |   |  | $                      | —   |  |                                  | $ | —   |                                    |  | $ | —                                         |  |  | $                   | (1,075 | ) |                     | $



|Portfolio
    Company                                  |  | Fair valueatDecember31, 2014 |        |  | Purchases
    (cost) |   |        | Sales andpaydowns(cost) |  |   | PIK
    interest (cost) |   |  | Discount
    accretion |     |  | Net
    realized gains/ (losses) |   |    | Net
    unrealized gains/ (losses) |  |   | Fair
    value at June 30, 
    2015 |  |  | Interest
    income |        |   | Dividend
    income |  
|------------------------------------------------------ |  | ---------------------------- | ------ |  | -------------------- | - | ------ | ----------------------- |  | - | ----------------------- | - |  | ---------------------- | --- |  | -------------------------------- | - | -- | ---------------------------------- |  | - | ------------------------------------ |  |  | ------------------- | ------ | - | ------------------- | -
|Non-controlled
    affiliate company investments (1) : |  |                              |        |  |                      |   |        |                         |  |   |                         |   |  |                        |     |  |                                  |   |    |                                    |  |   |                                      |  |  |                     |        |   |                     |  
|American
    Community Homes, Inc.                     |  | $                            | 10,163 |  |                      | $ | —      |                         |  | $ | —                       |   |  | $                      | 77  |  |                                  | $ | 21 |                                    |  | $ | —                                    |  |  | $                   | 133    |   |                     | $
|Rockdale
    Blackhawk LLC                             |  |                              | —      |  |                      |   | 14,200 |                         |  |   | —                       |   |  |                        | —   |  |                                  |   | 43 |                                    |  |   | —                                    |  |  |                     | 1,152  |   |                     |  
|Rocket
    Dog Brands LLC                              |  |                              | 2,454  |  |                      |   | —      |                         |  |   | —                       |   |  |                        | 109 |  |                                  |   | —  |                                    |  |   | —                                    |  |  |                     | (146   | ) |                     |  
|Summit
    Container Corporation                       |  |                              | 3,979  |  |                      |   | —      |                         |  |   | (98                     | ) |  |                        | —   |  |                                  |   | 10 |                                    |  |   | —                                    |  |  |                     | (158   | ) |                     |  
|Total
    non-controlled affiliate company investments |  | $                            | 16,596 |  |                      | $ | 14,200 |                         |  | $ | (98                     | ) |  | $                      | 186 |  |                                  | $ | 74 |                                    |  | $ | —                                    |  |  | $                   | 981    |   |                     | $
|Controlled
    affiliate company investments (1) :     |  |                              |        |  |                      |   |        |                         |  |   |                         |   |  |                        |     |  |                                  |   |    |                                    |  |   |                                      |  |  |                     |        |   |                     |  
|TPP
    Acquisition, Inc.                              |  | $                            | 6,621  |  |                      | $ | 960    |                         |  | $ | —                       |   |  | $                      | 70  |  |                                  | $ | 14 |                                    |  | $ | —                                    |  |  | $                   | (1,324 | ) |                     | $
|Total
    controlled affiliate company investments     |  | $                            | 6,621  |  |                      | $ | 960    |                         |  | $ | —                       |   |  | $                      | 70  |  |                                  | $ | 14 |                                    |  | $ | —                                    |  |  | $                   | (1,324 | ) |                     | $










|(1) | Includes both loan and equity security investment transactions for these portfolio companies.
|--- | ---------------------------------------------------------------------------------------------



Note 6. Transactions with Related Parties



The Company has entered into an Investment Advisory
and Management Agreement with MC Advisors, under which MC Advisors, subject to the overall supervision of the Board, provides investment
advisory services to the Company. The Company pays MC Advisors a fee for its services under the Investment Advisory and Management
Agreement consisting of two components—a base management fee and an incentive fee. The base management fee is calculated
at an annual rate equal to 1.75% of invested assets (calculated as total assets excluding cash) and is payable in arrears. Base
management fees for the three and six months ended June 30, 2016 was $1,504 and $3,004, respectively. Base management fees for
the three and six months ended June 30, 2015 were $1,188 and $2,256, respectively.



23









The incentive fee consists of two parts. The
first part is calculated and payable quarterly in arrears and equals 20% of “pre-incentive fee net investment income”
for the immediately preceding quarter, subject to a 2% (8% annualized) preferred return, or “hurdle,” and a “catch
up” feature. The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in
respect of preincentive fee net investment income will be payable except to the extent that 20.0% of the cumulative net increase
in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative incentive
fees accrued and/or paid for the 11 preceding calendar quarters. Therefore, any ordinary income incentive fee that is payable in
a calendar quarter will be limited to the lesser of (1) 20% of the amount by which preincentive fee net investment income for such
calendar quarter exceeds the 2.0% hurdle, subject to the “catch-up” provision, and (2) (x) 20% of the cumulative net
increase in net assets resulting from operations for the then current and 11 preceding calendar quarters minus (y) the cumulative
incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net
increase in net assets resulting from operations” is the sum of preincentive fee net investment income, realized gains and
losses and unrealized appreciation and depreciation for the then current and 11 preceding calendar quarters. The second part of
the incentive fee is determined and payable in arrears as of the end of each fiscal year in an amount equal to 20% of realized
capital gains, if any, on a cumulative basis from inception through the end of the year, computed net of all realized capital losses
on a cumulative basis and unrealized depreciation, less the aggregate amount of any previously paid capital gain incentive fees.



Incentive fees for the three and six months
ended June 30, 2016 were $1,319 and $3,059, respectively. Incentive fees for the three months ended June 30, 2016, consisted of
part one incentive fees (based on net investment income) of $1,416, reduced by the second part of the incentive fee (based upon
net realized and unrealized gains and losses) of ($97). Incentive fees for the six months ended June 30, 2016, consisted of part
one incentive fees (based on net investment income) of $2,921 and part two incentive fees (based upon net realized and unrealized
gains and losses, or capital gains) of $138.  Incentive fees for the three and six months ended June 30, 2015 consisted solely of part one incentive fees (based
on net investment income) of $1,268 and $2,310, respectively. The Company accrues, but does not pay, a capital gains incentive
fee in connection with any unrealized capital appreciation, as appropriate. If, on a cumulative basis, the sum of net realized
gains (losses) plus net unrealized appreciation (depreciation) decreases during a period, the Company will reverse any excess capital
gains incentive fee previously accrued such that the amount of capital gains incentive fee accrued is no more than 20% of the sum
of net realized gains (losses) plus net unrealized appreciation (depreciation).



The Company has entered into an Administration
Agreement with Monroe Capital Management Advisors, LLC (“MC Management”), under which the Company reimburses MC Management
(subject to the review and approval of the Board) for its allocable portion of overhead and other expenses, including the costs
of furnishing the Company with office facilities and equipment and providing clerical, bookkeeping, record-keeping and other administrative
services at such facilities, and the Company’s allocable portion of the cost of the chief financial officer and chief compliance
officer and their respective staffs. To the extent that MC Management outsources any of its functions, the Company will pay the
fees associated with such functions on a direct basis, without incremental profit to MC Management. For the three and six months
ended June 30, 2016, the Company incurred $724 and $1,510, respectively, in administrative expenses (included within Professional
fees, Administrative service fees and General and administrative on the consolidated statements of operations) under the Administration
Agreement, of which $304 and $632, respectively, was related to MC Management overhead and salary allocation and paid directly
to MC Management. For the three and six months ended June 30, 2015, the Company incurred $702 and $1,368, respectively, in administrative
expenses (included within Professional fees, Administrative service fees and General and administrative on the consolidated statements
of operations) under the Administration Agreement, of which $278 and $549, respectively, was related to MC Management overhead
and salary allocation and paid directly to MC Management. As of June 30, 2016 and December 31, 2015, $304 and $249, respectively,
of expenses were due to MC Management under this agreement and are included in accounts payable and accrued expenses on the consolidated
statements of assets and liabilities.



The Company has entered into a license agreement
with Monroe Capital LLC under which Monroe Capital LLC has agreed to grant the Company a non-exclusive, royalty-free license to
use the name “Monroe Capital” for specified purposes in its business. Under this agreement, the Company will have a
right to use the “Monroe Capital” name at no cost, subject to certain conditions, for so long as the Advisor or one
of its affiliates remains its investment advisor. Other than with respect to this limited license, the Company has no legal right
to the “Monroe Capital” name.



As of June 30, 2016 and December 31, 2015, the
Company had accounts payable to members of the Board of zero and $74, respectively, representing accrued and unpaid fees for their
services.



Note 7. Borrowings



Revolving Credit Facility: As of
June 30, 2016 and December 31, 2015, the Company had $127,200 and $123,700 outstanding, respectively, under its revolving
credit facility with ING Capital LLC, as agent, to finance the purchase of the Company’s assets. As of June 30, 2016,
the maximum amount the Company was able to borrow under the revolving credit facility was $160,000 and this maximum borrowing
can be increased to $300,000 pursuant to an accordion feature (subject to maintaining 200% asset coverage, as defined by the
1940 Act). The maturity date on the facility is December 14, 2020.



24









The revolving credit facility is secured
by a lien on all of our assets, including cash on hand, but excluding the assets of the Company’s wholly-owned
subsidiary, MRCC SBIC. The Company’s ability to borrow under the revolving credit facility is subject to availability
under a defined borrowing base, which varies based on  portfolio characteristics and certain eligibility criteria and
concentration limits, as well as required valuation methodologies. The Company may make draws under the revolving credit
facility to make or purchase additional investments through December 2019 and for general working capital purposes until the
maturity date of the revolving credit facility. Borrowings under the revolving credit facility bear interest, at the Company’s
election, at an annual rate of LIBOR (one-month, two-month, three-month or six-month at our discretion based on the term of
the borrowing) plus 3.00%, with a further step-down to LIBOR plus 2.75% when net worth exceeds $225,000 or at a daily rate
equal to 2.00% per annum plus the greater of the prime interest rate, the federal funds rate plus 0.5% or LIBOR plus 1.0%. In
addition to the stated interest rate on borrowings under the revolving credit facility, the Company  is required to pay a fee
of 0.5% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is less than
65% of the then available maximum borrowing or a fee of 1.0% per annum on any unused portion of the revolving credit facility
if the unused portion of the facility is greater than or equal to 65% of the then available maximum borrowing. As of June 30,
2016 and December 31, 2015, all of the outstanding borrowings were accruing at an interest rate of 3.5% and 3.4% (based on
one-month LIBOR), respectively. The weighted average interest rate of the revolving credit facility borrowings (excluding
debt issuance costs) for the three and six months ended June 30, 2016 was 3.6% and 3.5%, respectively. The weighted average
fee rate on the unused portion of the revolving credit facility for the three and six months ended June 30, 2016 was 0.5% and
0.5%, respectively. The weighted average interest rate of the Company’s revolving credit facility borrowings (excluding
debt issuance costs) for the three and six months ended June 30, 2015 was 3.7% and 3.6%, respectively. The weighted average
fee rate on the Company’s unused portion of the revolving credit facility for the three and six months ended June 30,
2015 was 0.5% and 0.5%, respectively.



The Company’s ability to borrow
under the revolving credit facility is subject to availability under the borrowing base, which permits the Company to borrow
up to 70% of the fair market value of its portfolio company investments depending on the type of the investment the Company
holds and whether the investment is quoted. The Company’s ability to borrow is also subject to certain concentration
limits, and continued compliance with the representations, warranties and covenants given by the Company under the facility.
The revolving credit facility contains certain financial and restrictive covenants, including, but not limited to, the
Company’s maintenance of: (1) a minimum consolidated total net assets at least equal to the greater of (a) 40% of the
consolidated total assets on the last day of each quarter or (b) $120.0 million plus 65% of the net proceeds to the Company
from sales of its securities after December 14, 2015; (2) a ratio of total assets (less total liabilities other than
indebtedness) to total indebtedness of not less than 2.1 times; and (3) a ratio of earnings before interest and taxes to
interest expense of at least 2.5 times. The credit facility also requires the Company to undertake customary indemnification
obligations with respect to ING Capital LLC and other members of the lending group and to reimburse the lenders for expenses
associated with entering into the credit facility. The revolving credit facility also has customary provisions regarding
events of default, including events of default for nonpayment, change in control transactions at both Monroe Capital
Corporation and MC Advisors, failure to comply with financial and negative covenants, and failure to maintain our
relationship with MC Advisors. If the Company incurs an event of default under the revolving credit facility and fail to
remedy such default under any applicable grace period, if any, then the entire revolving credit facility could
become immediately due and payable, which would materially and adversely affect the Company’s liquidity, financial
condition, results of operations and cash flows.



The Company’s revolving credit facility
also imposes certain conditions that may limit the amount of the Company’s distributions to stockholders. Distributions payable in the Company’s common
stock under the DRIP are not limited by the revolving credit facility. Distributions in cash or property other than common stock
are generally limited to 115% of the amount of distributions required to maintain the Company’s status as a RIC.



SBA Debentures: On February 28, 2014,
the Company’s wholly-owned subsidiary, MRCC SBIC received a license from the SBA to operate as a SBIC under Section 301(c)
of the Small Business Investment Act of 1958, as amended. MRCC SBIC commenced operations on September 16, 2013.



The SBIC license allows MRCC SBIC to obtain
leverage by issuing SBA-guaranteed debentures, subject to the issuance of a leverage commitment by the SBA and other customary
procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a
ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid
at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis (pooling date) at a
market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, has a superior claim to MRCC SBIC’s
assets over the Company’s stockholders in the event the Company liquidates MRCC SBIC or the SBA exercises its remedies upon
an event of default. As of June 30, 2016 and December 31, 2015, MRCC SBIC had $20,000 in regulatory capital and leveragable capital
and $40,000 in SBA-guaranteed debentures outstanding.



As of June 30, 2016 and December 31, 2015, MRCC
SBIC had the following SBA-guaranteed debentures outstanding:



|Maturity Date  |  | Interest Rate |     |   | Amount |  
|-------------- |  | ------------- | --- | - | ------ | -
|September 2024 |  |               | 3.4 | % |        | $
|March 2025     |  |               | 3.3 | % |        |  
|March 2025     |  |               | 2.9 | % |        |  
|September 2025 |  |               | 3.6 | % |        |  
|Total          |  |               |     |   |        | $



SBA regulations currently limit the amount that
an individual SBIC may borrow to a maximum of $150,000 when it has at least $75,000 in regulatory capital, receives a leverage
commitment from the SBA and has been through an audit examination by the SBA subsequent to licensing. The SBA also historically
limited a related group of SBICs (commonly referred to as a “family of funds”) to a maximum of $225,000 in total borrowings.
On December 18, 2015, this family of funds limitation was raised to $350,000 in total borrowings. As the Company has other affiliated
SBICs already in operation, MRCC SBIC was historically limited to a maximum of $40,000 in borrowings. Pursuant to the increase
in the family of funds limitation, the Company submitted a commitment application to the SBA and on April 13, 2016 was approved
for $75,000 in additional SBA-guaranteed debentures for MRCC SBIC. In order for MRCC SBIC to gain access to the entirety of the
$75,000 in SBA-guaranteed debentures, the Company would be required to contribute to MRCC SBIC an additional $37,500 in leveragable
and regulatory capital.



25









Secured Borrowings: Certain partial loan
sales do not qualify for sale accounting under ASC Topic 860 because these sales do not meet the definition of a “participating
interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales
which do not meet the definition of a participating interest remain as an investment on the accompanying consolidated statements
of assets and liabilities and the portion sold is recorded as a secured borrowing in the liabilities section of the consolidated
statements of assets and liabilities. For these partial loan sales, the interest earned on the entire loan balance is recorded
within “interest income” and the interest earned by the buyer in the partial loan sale is recorded within “interest
and other debt financing expenses” in the accompanying consolidated statements of operations.



As of June 30, 2016, secured borrowings at fair
value totaled $2,112 and the fair value of the loans that are associated with these secured borrowings was $6,129. As of December
31, 2015, secured borrowings at fair value totaled $2,476 and the fair value of the loans that are associated with these secured
borrowings was $11,803. These secured borrowings were created as a result of the Company’s completion of partial loan sales
of certain unitranche loan assets during the year ended December 31, 2013 that did not meet the definition of a “participating
interest.” As a result, sale treatment was not allowed and these partial loan sales were treated as secured borrowings. No
such partial loan sales occurred during the year ended December 31, 2015 and the six months ended June 30, 2016. During the three
and six months ended June 30, 2016 repayments on secured borrowings totaled $77 and $277, respectively. During the three and six
months ended June 30, 2015, repayments on secured borrowings totaled $400 and $550, respectively. The weighted average interest
rate on the Company’s secured borrowings was approximately 6.0% as of June 30, 2016.



Components of interest expense: The components
of the Company’s interest expense and other debt financing expenses are as follows:



|                                                 |  | Three months ended June 30, |      
|------------------------------------------------ |  | --------------------------- | -----
|                                                 |  | 2016                        |      
|Interest expense – revolving credit facility     |  | $                           | 1,188
|Interest expense – SBA debentures                |  |                             | 326  
|Amortization of deferred financing costs         |  |                             | 199  
|Interest expense – secured borrowings            |  |                             | 35   
|Other                                            |  |                             | 25   
|Total interest and other debt financing expenses |  | $                           | 1,773



|                                                 |  | Six months ended June 30, |      
|------------------------------------------------ |  | ------------------------- | -----
|                                                 |  | 2016                      |      
|Interest expense – revolving credit facility     |  | $                         | 2,316
|Interest expense – SBA debentures                |  |                           | 652  
|Amortization of deferred financing costs         |  |                           | 381  
|Interest expense – secured borrowings            |  |                           | 72   
|Other                                            |  |                           | 43   
|Total interest and other debt financing expenses |  | $                         | 3,464



Note 8. Distributions



The Company’s distributions are recorded
on the record date. The following table summarizes distributions declared during the six months ended June 30, 2016:



|Date Declared                   |  | Record Date    |      | Payment Date   |  | Amount Per 
Share |       |  | Cash Distribution |   |       | DRIP Shares Issued |  |   | DRIP Shares Value |  |  | DRIP Shares Repurchased in the Open Market |        |  | Cost of DRIP Shares Repurchased |  
|------------------------------- |  | -------------- | ---- | -------------- |  | ----------------- | ----- |  | ----------------- | - | ----- | ------------------ |  | - | ----------------- |  |  | ------------------------------------------ | ------ |  | ------------------------------- | -
|Six months ended June 30, 2016:
|March 4, 2016                   |  | March 15, 2016 |      | March 31, 2016 |  | $                 | 0.35  |  |                   | $ | 4,553 |                    |  |   | —                 |  |  | $                                          | —      |  |                                 |  
|June 1, 2016                    |  | June 15, 2016  |      | June 30, 2016  |  |                   | 0.35  |  |                   |   | 4,553 |                    |  |   | —                 |  |  |                                            | —      |  |                                 |  
|Total distributions declared    |  | $              | 0.70 |                |  | $                 | 9,106 |  |                   |   | —     |                    |  | $ | —                 |  |  |                                            | 38,662 |  |                                 | $



26







The Company’s distributions are recorded
on the record date. The following table summarizes distributions declared during the six months ended June 30, 2015:



|Date Declared                   |  | Record Date    |      | Payment Date   |  | Amount Per Share |       |  | Cash Distribution |   |       | DRIP Shares Issued |  |   | DRIP Shares Value |  |  | DRIP Shares Repurchased in the Open Market |        |  | Cost of DRIP Shares Repurchased |  
|------------------------------- |  | -------------- | ---- | -------------- |  | ---------------- | ----- |  | ----------------- | - | ----- | ------------------ |  | - | ----------------- |  |  | ------------------------------------------ | ------ |  | ------------------------------- | -
|Six months ended June 30, 2015:
|March 6, 2015                   |  | March 20, 2015 |      | March 31, 2015 |  | $                | 0.35  |  |                   | $ | 3,371 |                    |  |   | —                 |  |  | $                                          | —      |  |                                 |  
|June 2, 2015                    |  | June 15, 2015  |      | June 30, 2015  |  |                  | 0.35  |  |                   |   | 4,357 |                    |  |   | —                 |  |  |                                            | —      |  |                                 |  
|Total distributions declared    |  | $              | 0.70 |                |  | $                | 7,728 |  |                   |   | —     |                    |  | $ | —                 |  |  |                                            | 35,080 |  |                                 | $



Note 9. Stock Issuances and Repurchases



Stock Issuances: On February
6, 2015, the Company entered into an ATM securities offering program with MLV & Co. LLC and JMP Securities LLC through
which the Company may sell, by means of ATM offerings from time to time, up to $50,000 of the Company’s common stock.
During the three and six months ended June 30, 2016, the Company did not sell any shares of its common stock. The Company did
not issue any shares under the ATM program during the three months ended June 30, 2015. During the six months ended June 30,
2015, the Company sold 114,451 shares at an average price of $14.99 per share, raising approximately $1,716 in gross
proceeds. Aggregate underwriters’ discounts and commissions were $27 and offering costs were $5, resulting in net
proceeds of approximately $1,684.



Note 10. Commitments and Contingencies



Commitments: As of June 30, 2016 and
December 31, 2015, the Company had $23,357 and $20,703, respectively, in outstanding commitments to fund investments under undrawn
revolvers, capital expenditure loans and delayed draw commitments.



Indemnifications: In the normal course
of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide
general indemnifications. The Company’s maximum exposure under these agreements is unknown, as these involve future claims
that may be made against the Company but that have not occurred. The Company expects the risk of any future obligations under these
indemnifications to be remote.



Concentration of credit and counterparty
risk: Credit risk arises primarily from the potential inability of counterparties to perform in accordance with the terms of
the contract. In the event that the counterparties do not fulfill their obligations, the Company may be exposed to risk. The risk
of default depends on the creditworthiness of the counterparties or issuers of the instruments. It is the Company’s policy
to review, as necessary, the credit standing of each counterparty.



Market risk: The Company’s investments
and borrowings are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market
risk is directly impacted by the volatility and liquidity in the markets in which the investments and borrowings are traded.



Legal proceedings: In the normal course
of business, the Company may be subject to legal and regulatory proceedings that are generally incidental to its ongoing operations.
While there can be no assurance of the ultimate disposition of any such proceedings, the Company is not currently aware of any
such proceedings or disposition that would have a material adverse effect on the Company’s consolidated financial statements.



27







Note 11. Financial Highlights



The following is a schedule of financial highlights
for the six months ended June 30, 2016 and 2015:



|                                                                              |  | June 30, 2016 |            |   | June 30, 2015 |  
|----------------------------------------------------------------------------- |  | ------------- | ---------- | - | ------------- | -
|Per share data:                                                               |  |               |            |   |               |  
|Net asset value at beginning of period                                        |  | $             | 14.19      |   |               | $
|Net investment income (1)                                                     |  |               | 0.89       |   |               |  
|Net gain (loss) on investments and secured borrowings (1)                     |  |               | 0.13       |   |               |  
|Net increase in net assets from operations (1)                                |  |               | 1.02       |   |               |  
|Stockholder distributions (2)                                                 |  |               | (0.70      | ) |               |  
|Other (3)                                                                     |  |               | (0.01      | ) |               |  
|Net asset value at end of period                                              |  | $             | 14.50      |   |               | $
|                                                                              |  |               |            |   |               |  
|Net assets at end of period                                                   |  | $             | 188,650    |   |               | $
|Shares outstanding at end of period                                           |  |               | 13,008,007 |   |               |  
|Per share market value at end of period                                       |  | $             | 14.83      |   |               | $
|Total return based on market value (4)                                        |  |               | 18.92      | % |               |  
|Total return based on net asset value (5)                                     |  |               | 7.12       | % |               |  
|Ratio/Supplemental data:                                                      |  |               |            |   |               |  
|Ratio of net investment income to average net assets (6)                      |  |               | 14.07      | % |               |  
|Ratio of interest and other debt financing expenses to average net assets (7) |  |               | 3.72       | % |               |  
|                                                                              |  |               |            |   |               |  
|Ratio of expenses (without incentive fees) to average net assets (7)          |  |               | 8.66       | % |               |  
|Ratio of incentive fees to average net assets (8)                             |  |               | 1.64       | % |               |  
|Ratio of total expenses to average net assets (6)                             |  |               | 10.30      | % |               |  
|Average debt outstanding                                                      |  | $             | 164,917    |   |               | $
|Average debt outstanding per share                                            |  | $             | 12.68      |   |               | $
|Portfolio turnover (8)                                                        |  |               | 13.41      | % |               |  












|(1) | Calculated using the weighted average shares outstanding during the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent the Company’s taxable earnings fall below the total amount of the Company’s distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to the Company’s stockholders. The tax character of distributions will be determined at the end of the fiscal year. However, if the character of such distributions were determined as of June 30, 2016 and 2015, none of the distributions would have been characterized as a tax return of capital to the Company’s stockholders; this tax return of capital may differ from the return of capital calculated with reference to net investment income for financial reporting purposes.
|(3) | Represents the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of a period end or transaction date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(4) | Total return based on market value is calculated assuming a purchase of common shares at the market value on the first day and a sale at the market value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total return based on market value does not reflect brokerage commissions. Return calculations are not annualized.                                                                                                                                                                                                                                                                                                                                                                                                                   
|(5) | Total return based on net asset value is calculated by dividing the net increase in net assets from operations by the net asset value per share at the beginning of the period (excluding the impact of dividends paid). Total returns based on net asset value covering less than a full period are not annualized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(6) | Ratios are annualized. Incentive fees included within the ratio are not annualized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(7) | Ratios are annualized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(8) | Ratios are not annualized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                





Note 12. Subsequent Events



On July 25, 2016, the Company closed a
public offering of 3,100,000 shares of its common stock at a public offering price of $15.50 per share, raising approximately
$48,050 in gross proceeds. On August 3, 2016, the Company sold an additional 465,000 shares of its common stock, at a public
offering price of $15.50 per share, raising approximately $7,208 in gross proceeds pursuant to the underwriters’
exercise of the over-allotment option. Aggregate underwriters’ discounts and commissions were $2,210 and offering costs
are expected to total approximately $350.



28









ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS



Except as otherwise specified, references to
“we,” “us” and “our” refer to Monroe Capital Corporation and its consolidated subsidiaries.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and related notes appearing in our annual report on Form 10-K (the “Annual Report”)
for the year ended December 31, 2015, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 4,
2016. The information contained in this section should also be read in conjunction with our unaudited consolidated financial statements
and related notes and other financial information appearing elsewhere in this quarterly report on Form 10-Q (the “Quarterly
Report”).



FORWARD-LOOKING STATEMENTS



This Quarterly Report, including Management’s
Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements,
which relate to future events or our future performance or future financial condition. These forward-looking statements are not
historical facts, but rather are based on current expectations, estimates and projections about our company, our industry, our
beliefs and our assumptions. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties,
including statements as to:



| | · | our future operating results;
| | - | -----------------------------



| | · | our business prospects and the prospects of our prospective portfolio companies;
| | - | --------------------------------------------------------------------------------



| | · | the dependence of our future success on the general economy and its impact on the industries in which we invest;
| | - | ----------------------------------------------------------------------------------------------------------------



| | · | the impact of a protracted decline in the liquidity of credit markets on our business;
| | - | --------------------------------------------------------------------------------------



| | · | the impact of increased competition;
| | - | ------------------------------------



| | · | the impact of fluctuations in interest rates on our business and our portfolio companies;
| | - | -----------------------------------------------------------------------------------------



| | · | our contractual arrangements and relationships with third parties;
| | - | ------------------------------------------------------------------



| | · | the valuation of our investments in portfolio companies, particularly those having no liquid trading market;
| | - | ------------------------------------------------------------------------------------------------------------



| | · | the ability of our prospective portfolio companies to achieve their objectives;
| | - | -------------------------------------------------------------------------------



| | · | our expected financings and investments;
| | - | ----------------------------------------



| | · | the adequacy of our cash resources and working capital;
| | - | -------------------------------------------------------



| | · | the ability of our Monroe Capital BDC Advisors, LLC (“MC Advisors”) to locate suitable investments for us and to monitor our investments; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



| | · | the impact of future legislation and regulation on our business and our portfolio companies.
| | - | --------------------------------------------------------------------------------------------



We use words such as “anticipates,”
“believes,” “expects,” “intends,” “seeks,” “plans,” “estimates,”
“targets,” “expects” and similar expressions to identify forward-looking statements. The forward looking
statements contained in this Quarterly Report involve risks and uncertainties. Our actual results could differ materially from
those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I—Item
1A. Risk Factors” in our Annual Report and “Part II—Item 1A. Risk Factors” in this Quarterly
Report.



Although we believe that the assumptions on
which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as
a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our
ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional
capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly
Report should not be regarded as a representation by us that our plans and objectives will be achieved.



We have based the forward-looking statements
included in this Quarterly Report on information available to us on the date of this Quarterly Report, and we assume no obligation
to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements
in this Quarterly Report, whether as a result of new information, future events or otherwise, you are advised to consult any additional
disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.



29







Overview



Monroe Capital Corporation is an
externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business
development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In
addition, for tax purposes, we have elected to be treated as a regulated investment company (“RIC”) under the
subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). We were incorporated under the
Maryland General Corporation Law on February 9, 2011. We are a specialty finance company focused on providing financing
solutions primarily to lower middle-market companies in the United States and Canada. We provide customized financing
solutions focused primarily on senior secured, junior secured and unitranche (a combination of senior secured and junior
secured debt in the same facility in which we syndicate a “first out” portion of the loan to an investor and
retain a “last out” portion of the loan) debt and, to a lesser extent, unsecured subordinated debt and equity,
including equity co-investments in preferred and common stock, and warrants.



Our shares are currently listed on the NASDAQ
Global Select Market under the symbol “MRCC”.



Our investment objective is to maximize the
total return to our stockholders in the form of current income and capital appreciation through investment in senior, unitranche
and junior secured debt and, to a lesser extent, subordinated debt and equity investments. We seek to use our extensive leveraged
finance origination infrastructure and broad expertise in sourcing loans to invest in primarily senior, unitranche and junior secured
debt of middle-market companies. Our investments in senior, unitranche, junior secured debt and other investments generally will
range between $2.0 million and $18.0 million each, although this investment size may vary proportionately with the size of our
capital base. As of June 30, 2016, our portfolio included approximately 58.6% senior secured debt, 15.7% unitranche secured debt,
19.0% junior secured debt and 6.7% equity securities, compared to December 31, 2015, when our portfolio consisted of 55.9% senior
secured debt, 20.0% unitranche secured debt, 18.6% junior secured debt and 5.5% equity securities. We expect that the companies
in which we invest may be leveraged, often as a result of leveraged buy-outs or other recapitalization transactions, and, in certain
cases, will not be rated by national ratings agencies. If such companies were rated, we believe that they would typically receive
a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies.



While our primary focus is to maximize current
income and capital appreciation through debt investments in thinly traded or private U.S. companies, we may invest a portion of
the portfolio in opportunistic investments in order to seek to enhance returns to stockholders. Such investments may include investments
in high-yield bonds, distressed debt, private equity or securities of public companies that are not thinly traded and securities
of middle-market companies located outside of the United States. We expect that these public companies generally will have debt
securities that are non-investment grade.



On February 28, 2014, our wholly-owned subsidiary,
Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limited partnership, received a license from the Small
Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section
301(c) of the Small Business Investment Act of 1958. MRCC SBIC commenced operations on September 16, 2013. As of June 30, 2016,
MRCC SBIC had $20.0 million in regulatory and leveragable capital and $40.0 million in SBA-guaranteed debentures outstanding. On
April 13, 2016, MRCC SBIC was approved by the SBA for an additional $75.0 million in SBA-guaranteed debentures. See “SBA
Debentures” below for more information.



On July 25, 2016, we closed a public offering
of 3,100,000 shares of our common stock at a public offering price of $15.50 per share, raising approximately $48.1 million in
gross proceeds. On August 3, 2016, we sold an additional 465,000 shares of our common stock, at a public offering price
of $15.50 per share, raising approximately $7.2 million in gross proceeds pursuant to the underwriters’ exercise of the over-allotment
option. Aggregate underwriters’ discounts and commissions were $2.2 million and offering costs are expected to total approximately
$0.4 million.



Investment income



We generate interest income on the debt investments
in portfolio company investments that we originate or acquire. Our debt investments, whether in the form of senior, junior or unitranche
secured debt, typically have an initial term of three to seven years and bear interest at a fixed or floating rate. In some instances
we receive payments on our debt investment based on scheduled amortization of the outstanding balances. In addition, we receive
repayments of some of our debt investments prior to their scheduled maturity date. In some cases, our investments provide for deferred
interest of payment-in-kind (“PIK”) interest. In addition, we may generate revenue in the form of commitment, origination,
amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees,
original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income.
We record prepayment premiums and prepayment gains (losses) on loans as interest income. As the frequency or volume of the repayments
which trigger these prepayment premiums and prepayment gains (losses) may fluctuate significantly from period to period, the associated
interest income recorded may also fluctuate significantly from period to period. Interest and dividend income is recorded on the
accrual basis to the extent we expect to collect such amounts. In addition, we also generate dividend income on preferred equity
securities, common equity securities and LLC interests in accordance with our revenue recognition policies.



Expenses



Our primary operating expenses include the payment
of fees to MC Advisors under the Investment Advisory and Management Agreement (management and incentive fees), and the payment
of fees to Monroe Capital Management Advisors, LLC (“MC Management”) for our allocable portion of overhead and other
expenses under the Administration Agreement and other operating costs. See Note 6 to our consolidated financial statements and
“Related Party Transactions” below for additional information on our Investment Advisory and Management Agreement
and Administration agreement. Our expenses also include interest expense on our revolving credit facility, our SBA-guaranteed debentures
and our secured borrowings. We bear all other out-of-pocket costs and expenses of our operations and transactions.



30







Net gain (loss) on investments and
secured borrowings



We recognize realized gains or losses on investments
based on the difference between the net proceeds from the disposition and the cost basis of the investment or derivative instrument
without regard to unrealized gains or losses previously recognized. We record current period changes in fair value of investments
and secured borrowings within net change in unrealized appreciation (depreciation) on investments and net change in unrealized
(appreciation) depreciation on secured borrowings, respectively, in the consolidated statements of operations.



Portfolio and Investment Activity



During the three months ended June 30, 2016,
we invested $11.8 million in three new portfolio companies and $7.8 million in eight existing portfolio companies and had $20.6
million in aggregate amount of sales and principal repayments, resulting in net repayments of $1.0 million for the period.



During the six months ended June 30, 2016, we
invested $16.7 million in four new portfolio companies and $29.2 million in 15 existing portfolio companies and had $47.4 million
in aggregate amount of sales and principal repayments, resulting in net repayments of $1.5 million for the period.



During the three months ended June 30, 2015,
we invested $50.5 million in 12 new portfolio companies and $20.0 million in 12 existing portfolio companies and had $41.9
million in aggregate amount of sales and principal repayments, resulting in net investments of $28.6 million for the period.



During the six months ended June 30, 2015,
we invested $81.8 million in 16 new portfolio companies and $25.1 million in 14 existing portfolio companies and had $59.9
million in aggregate amount of sales and principal repayments, resulting in net investments of $47.0 million for the period.



The following table shows the composition of
the investment portfolio (in thousands) and associated yield data:



|                     |  | June 30, 2016 |        
|-------------------- |  | ------------- | -------
|                     |  | Fair Value    |        
|Senior secured loans |  | $             | 201,002
|Unitranche loans     |  |               | 53,920 
|Junior secured loans |  |               | 64,955 
|Equity securities    |  |               | 22,931 
|Total                |  | $             | 342,808



|                     |  | December 31, 2015 |        
|-------------------- |  | ----------------- | -------
|                     |  | Fair Value        |        
|Senior secured loans |  | $                 | 190,559
|Unitranche loans     |  |                   | 68,090 
|Junior secured loans |  |                   | 63,388 
|Equity securities    |  |                   | 19,054 
|Total                |  | $                 | 341,091








| | (1) | Based upon the par value of our debt investments and the cost basis of our preferred equity investments.
| | --- | --------------------------------------------------------------------------------------------------------



31







The following table shows the portfolio composition
by industry grouping at fair value (dollars in thousands):



|                                          |  | June 30, 2016             |         |  | December 31, 2015             | 
|----------------------------------------- |  | ------------------------- | ------- |  | ----------------------------- | 
|                                          |  | Investments at Fair Value |         |  | Percentage of Total Portfolio | 
|Aerospace & Defense                       |  | $                         | 11,087  |  |                               | 
|Automotive                                |  |                           | 4,350   |  |                               | 
|Banking, Finance, Insurance & Real Estate |  |                           | 23,904  |  |                               | 
|Beverage, Food & Tobacco                  |  |                           | 5,503   |  |                               | 
|Chemicals, Plastics & Rubber              |  |                           | 3,936   |  |                               | 
|Construction & Building                   |  |                           | 19,216  |  |                               | 
|Consumer Goods: Durable                   |  |                           | 3,700   |  |                               | 
|Consumer Goods: Non-Durable               |  |                           | 47,598  |  |                               | 
|Containers, Packaging & Glass             |  |                           | 3,606   |  |                               | 
|Energy: Oil & Gas                         |  |                           | 8,624   |  |                               | 
|Environmental Industries                  |  |                           | 3,763   |  |                               | 
|Healthcare & Pharmaceuticals              |  |                           | 43,449  |  |                               | 
|High Tech Industries                      |  |                           | 15,877  |  |                               | 
|Hotels, Gaming & Leisure                  |  |                           | 35,207  |  |                               | 
|Media: Advertising, Printing & Publishing |  |                           | 6,737   |  |                               | 
|Media: Broadcasting & Subscription        |  |                           | 18,419  |  |                               | 
|Media: Diversified & Production           |  |                           | 4,938   |  |                               | 
|Metals & Mining                           |  |                           | 5,260   |  |                               | 
|Retail                                    |  |                           | 17,098  |  |                               | 
|Services: Business                        |  |                           | 29,920  |  |                               | 
|Services: Consumer                        |  |                           | 25,980  |  |                               | 
|Wholesale                                 |  |                           | 4,636   |  |                               | 
|Total                                     |  | $                         | 342,808 |  |                               | 



Portfolio Asset Quality



MC Advisors’ portfolio management staff
closely monitors all credits, with senior portfolio managers covering agented and more complex investments. MC Advisors segregates
our capital markets investments by industry. The MC Advisors’ monitoring process and projections developed by Monroe Capital
both have daily, weekly, monthly and quarterly components and related reports, each to evaluate performance against historical,
budget and underwriting expectations. MC Advisors’ analysts will monitor performance using standard industry software tools
to provide consistent disclosure of performance. MC Advisors also monitors our investment exposure using a proprietary trend analysis
tool. When necessary, MC Advisors will update our internal risk ratings, borrowing base criteria and covenant compliance reports.



As part of the monitoring process, MC Advisors
regularly assesses the risk profile of each of our investments and rates each of them based on an internal proprietary system that
uses the categories listed below, which we refer to as MC Advisors’ investment performance rating. For any investment rated
in grades 3, 4 or 5, MC Advisors will increase its monitoring intensity and prepare regular updates for the investment committee,
summarizing current operating results and material impending events and suggesting recommended actions. MC Advisors monitors and,
when appropriate, changes the investment ratings assigned to each investment in our portfolio. In connection with our valuation
process, MC Advisors reviews these investment ratings on a quarterly basis, and our board of directors (the “Board”)
reviews and affirms such ratings. A definition of the rating system follows:



|Investment
        Performance
        Risk Rating |  | Summary Description                                                                                                                                                                                                                                                                                                                                                                                     
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Grade 1                                            |  | Includes investments exhibiting the least amount of risk in our portfolio. The issuer is performing above expectations or the issuer’s operating trends and risk factors are generally positive.                                                                                                                                                                                                        
|                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|Grade 2                                            |  | Includes investments exhibiting an acceptable level of risk that is similar to the risk at the time of origination. The issuer is generally performing as expected or the risk factors are neutral to positive.                                                                                                                                                                                         
|                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|Grade 3                                            |  | Includes investments performing below expectations and indicates that the investment’s risk has increased somewhat since origination. The issuer may be out of compliance with debt covenants; however, scheduled loan payments are generally not past due.                                                                                                                                             
|                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|Grade 4                                            |  | Includes an issuer performing materially below expectations and indicates that the issuer’s risk has increased materially since origination. In addition to the issuer being generally out of compliance with debt covenants, scheduled loan payments may be past due (but generally not more than six months past due). For grade 4 investments, we intend to increase monitoring of the issuer.       
|                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                         
|Grade 5                                            |  | Indicates that the issuer is performing substantially below expectations and the investment risk has substantially increased since origination. Most or all of the debt covenants are out of compliance or payments are substantially delinquent. Investments graded 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we expect to recover.



Our investment performance risk ratings do not
constitute any rating of investments by a nationally recognized statistical rating organization or reflect or represent any third-party
assessment of any of our investments.



In the event of a delinquency or a decision
to rate an investment grade 4 or grade 5, the applicable analyst, in consultation with a member of the investment committee, will
develop an action plan. Such a plan may require a meeting with the borrower’s management or the lender group to discuss reasons
for the default and the steps management is undertaking to address the under-performance, as well as required amendments and waivers
that may be required. In the event of a dramatic deterioration of a credit, MC Advisors intends to form a team or engage outside
advisors to analyze, evaluate and take further steps to preserve its value in the credit. In this regard, we would expect to explore
all options, including in a private equity sponsored investment, assuming certain responsibilities for the private equity sponsor
or a formal sale of the business with oversight of the sale process by us. Several of Monroe Capital’s professionals are
experienced in running work-out transactions and bankruptcies.



32







The following table shows the distribution of
our investments on the 1 to 5 investment performance rating scale as of June 30, 2016 (dollars in thousands):



|Investment Performance Rating |  | Investments at Fair Value |         |  | Percentage of Total Investments | 
|----------------------------- |  | ------------------------- | ------- |  | ------------------------------- | 
|1                             |  | $                         | —       |  |                                 | 
|2                             |  |                           | 311,365 |  |                                 | 
|3                             |  |                           | 24,093  |  |                                 | 
|4                             |  |                           | 7,350   |  |                                 | 
|5                             |  |                           | —       |  |                                 | 
|Total                         |  | $                         | 342,808 |  |                                 | 



The following table shows the distribution of
our investments on the 1 to 5 investment performance rating scale as of December 31, 2015 (dollars in thousands):



|Investment Performance Rating |  | Investments at Fair Value |         |  | Percentage of Total Investments | 
|----------------------------- |  | ------------------------- | ------- |  | ------------------------------- | 
|1                             |  | $                         | —       |  |                                 | 
|2                             |  |                           | 315,358 |  |                                 | 
|3                             |  |                           | 19,208  |  |                                 | 
|4                             |  |                           | 6,525   |  |                                 | 
|5                             |  |                           | —       |  |                                 | 
|Total                         |  | $                         | 341,091 |  |                                 | 



Results of Operations



Operating results were as follows (dollars in
thousands):



|                                                                           |  | Three months ended June 30, |       
|-------------------------------------------------------------------------- |  | --------------------------- | ------
|                                                                           |  | 2016                        |       
|Total investment income                                                    |  | $                           | 11,118
|Total expenses                                                             |  |                             | 5,359 
|Net investment income                                                      |  |                             | 5,759 
|Net realized gain (loss) on investments                                    |  |                             | —     
|Net change in unrealized appreciation (depreciation) on investments        |  |                             | (541  
|Net change in unrealized (appreciation) depreciation on secured borrowings |  |                             | 59    
|Net increase (decrease) in net assets resulting from operations            |  | $                           | 5,277 



|                                                                           |  | Six months ended June 30, |       
|-------------------------------------------------------------------------- |  | ------------------------- | ------
|                                                                           |  | 2016                      |       
|Total investment income                                                    |  | $                         | 22,657
|Total expenses                                                             |  |                           | 11,111
|Net investment income                                                      |  |                           | 11,546
|Net realized gain (loss) on investments                                    |  |                           | 587   
|Net change in unrealized appreciation (depreciation) on investments        |  |                           | 1,001 
|Net change in unrealized (appreciation) depreciation on secured borrowings |  |                           | 87    
|Net increase (decrease) in net assets resulting from operations            |  | $                         | 13,221



33







Investment Income



The composition of our investment income was
as follows (dollars in thousands):



|                                                   |  | Three months ended June 30, |       
|-------------------------------------------------- |  | --------------------------- | ------
|                                                   |  | 2016                        |       
|Interest income                                    |  | $                           | 8,930 
|Dividend income                                    |  |                             | 1,051 
|Fee income                                         |  |                             | 516   
|Prepayment gain (loss)                             |  |                             | 232   
|Accretion of discounts and amortization of premium |  |                             | 389   
|Total investment income                            |  | $                           | 11,118



|                                                   |  | Six months ended June 30, |       
|-------------------------------------------------- |  | ------------------------- | ------
|                                                   |  | 2016                      |       
|Interest income                                    |  | $                         | 17,534
|Dividend income                                    |  |                           | 2,913 
|Fee income                                         |  |                           | 847   
|Prepayment gain (loss)                             |  |                           | 609   
|Accretion of discounts and amortization of premium |  |                           | 754   
|Total investment income                            |  | $                         | 22,657



The increase in investment income of
$1.6 million and $5.1 million during the three and six months ended June 30, 2016, respectively, as compared to the three and
six months ended June 30, 2015, is primarily due to increases in average outstanding loan balances and increases in dividend
income.



Operating Expenses



The composition of our operating expenses was
as follows (dollars in thousands):



|                                           |  | Three months ended June 30, |      
|------------------------------------------ |  | --------------------------- | -----
|                                           |  | 2016                        |      
|Interest and other debt financing expenses |  | $                           | 1,773
|Base management fees                       |  |                             | 1,504
|Incentive fees                             |  |                             | 1,319
|Professional fees                          |  |                             | 238  
|Administrative service fees                |  |                             | 304  
|General and administrative expenses        |  |                             | 182  
|Directors fees                             |  |                             | 39   
|Total operating expenses                   |  | $                           | 5,359



|                                           |  | Six months ended June 30, |       
|------------------------------------------ |  | ------------------------- | ------
|                                           |  | 2016                      |       
|Interest and other debt financing expenses |  | $                         | 3,464 
|Base management fees                       |  |                           | 3,004 
|Incentive fees                             |  |                           | 3,059 
|Professional fees                          |  |                           | 445   
|Administrative service fees                |  |                           | 632   
|General and administrative expenses        |  |                           | 433   
|Directors fees                             |  |                           | 74    
|Total operating expenses                   |  | $                         | 11,111



The composition of our interest and other debt
financing expenses was as follows (dollars in thousands):



|                                                 |  | Three months ended June 30, |      
|------------------------------------------------ |  | --------------------------- | -----
|                                                 |  | 2016                        |      
|Interest expense – revolving credit facility     |  | $                           | 1,188
|Interest expense – SBA debentures                |  |                             | 326  
|Amortization of deferred financing costs         |  |                             | 199  
|Interest expense – secured borrowings            |  |                             | 35   
|Other                                            |  |                             | 25   
|Total interest and other debt financing expenses |  | $                           | 1,773



|                                                 |  | Six months ended June 30, |      
|------------------------------------------------ |  | ------------------------- | -----
|                                                 |  | 2016                      |      
|Interest expense – revolving credit facility     |  | $                         | 2,316
|Interest expense – SBA debentures                |  |                           | 652  
|Amortization of deferred financing costs         |  |                           | 381  
|Interest expense – secured borrowings            |  |                           | 72   
|Other                                            |  |                           | 43   
|Total interest and other debt financing expenses |  | $                         | 3,464



34







The increase in expenses of $0.9 million during
the three months ended June 30, 2016, as compared to the three months ended June 30, 2015 is primarily due to an increase in base
management fees due to the growth in invested assets and an increase in interest expense as a result of additional borrowings (including
SBA-guaranteed debentures) required to support the growth of the portfolio.



The increase in expenses of $2.7 million
during the six months ended June 30, 2016, as compared to the six months ended June 30, 2015, is primarily due to an increase
in base management fees due to the growth in invested assets and increased incentive fees resulting from improvement in
performance. An increase in interest expense also contributed to the increase in expenses during the six months ended June 30,
2016 as a result of additional borrowings (including SBA-guaranteed debentures) required to support the growth of the
portfolio.



Net Realized Gain (Loss) on Investments



During both the three months ended
June 30, 2016 and 2015, we had zero sales of investments resulting in zero net realized gain (loss) on investments. During
the six months ended June 30, 2016 and 2015, we had sales of investments of $0.6 million and zero, resulting in $0.6 million
and zero of realized gains (losses), respectively.



Net Change in Unrealized Appreciation (Depreciation) on Investments
and Secured Borrowings



For the three months ended June 30, 2016 and
2015, our investments had ($0.5) million and $24 thousand of net change in unrealized appreciation (depreciation), respectively.
For the three months ended June 30, 2016 and 2015, our secured borrowings had $59 thousand and ($31) thousand of net change in
unrealized (appreciation) depreciation, respectively.



For the six months ended June 30, 2016 and 2015,
our investments had $1.0 million and ($0.3) million of net unrealized appreciation (depreciation), respectively. For the six months
ended June 30, 2016 and 2015, our secured borrowings had $87 thousand and $8 thousand of net unrealized (appreciation) depreciation,
respectively.



Net Increase (Decrease) in Net Assets Resulting from Operations



For the three months ended June 30, 2016 and
2015, the net increase in net assets from operations was $5.3 million and $5.1 million, respectively. Based on the weighted average
shares of common stock outstanding for the three months ended June 30, 2016 and 2015, our per share net increase in net assets
resulting from operations was $0.41 and $0.43, respectively. The $0.2 million increase during the three months ended June 30, 2016,
as compared to three months ended June 30, 2015, is the result of a $0.7 million increase in net investment income primarily due
to portfolio growth and increases in dividend income and a ($0.5) million decrease in net gain (loss) on investments and secured
borrowings, primarily due to net unrealized losses during the three months ended June 30, 2016 on the mark-to-market of our portfolio
of investments.



For the six months ended June 30, 2016 and 2015,
the net increase in net assets from operations was $13.2 million and $8.9 million, respectively. Based on the weighted average
shares of common stock outstanding for the six months ended June 30, 2016 and 2015, our per share net increase in net assets resulting
from operations was $1.02 and $0.84, respectively. The $4.3 million increase during the six months ended June 30, 2016, as compared
to six months ended June 30, 2015, is the result of a $2.3 million increase in net investment income primarily due to portfolio
growth and increases in dividend income and a $2.0 million increase in net gain (loss) on investments and secured borrowings, primarily
due to net unrealized gains during the six months ended June 30, 2016 on the mark-to-market of our portfolio of investments.



Liquidity and Capital Resources



As of June 30, 2016, we had $5.5 million in
cash, $8.1 million in cash at MRCC SBIC, $127.2 million of total debt outstanding on our revolving credit facility and $40.0 million
in outstanding SBA-guaranteed debentures. We had $32.8 million available for additional borrowings on our revolving credit facility
and $75.0 million in available SBA-guaranteed debentures. See “Borrowings” below for additional information.



Cash Flows



For the six months ended June 30, 2016 and 2015,
we experienced a net increase (decrease) in cash of $0.2 million and ($0.7) million, respectively. For the six months ended June
30, 2016, operating activities provided $6.5 million, primarily as a result of net income from operations, partially offset by
net cash outflows for the settlement of open trades. For the six months ended June 30, 2015, we used $20.9 million in operating
activities, primarily as a result of purchases of portfolio investments, partially offset by sales of and principal repayments
on portfolio investments. During the six months ended June 30, 2016 and 2015, investing activities provided $0.4 million and $0.2
million, respectively, due to changes in the restricted cash balance at MRCC SBIC. During the six months ended June 30, 2016, we
used $6.7 million for financing activities primarily as a result of distributions to stockholders, partially offset by net borrowings
on our revolving credit facility. During the six months ended June 30, 2015, we generated $20.1 million from financing activities,
primarily from proceeds from our capital raise during the period and SBA debenture borrowings, partially offset by net repayments
on our revolving credit facility and distributions to stockholders.



Capital Resources



As a BDC, we distribute substantially all of
our net income to our stockholders and have an ongoing need to raise additional capital for investment purposes. We intend to generate
additional cash primarily from future offerings of securities, future borrowings and cash flows from operations, including income
earned from investments in our portfolio companies. On both a short-term and long-term basis, our primary use of funds will be
to invest in portfolio companies and make cash distributions to our stockholders.



35







As a BDC, we are generally not permitted to
issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock, or warrants,
options or rights to acquire our common stock, at a price below the then-current net asset value per share of our common stock
if our Board, including independent directors, determines that such sale is in the best interests of us and our stockholders, and
if our stockholders have approved such sales. On June 24, 2015, our stockholders voted to allow us to sell or otherwise issue common
stock at a price below net asset value per share for a period of one year, subject to certain limitations. On July 14, 2016, our
stockholders once again voted to allow us to sell or otherwise issue common stock at a price below net asset value per share for
a period of one year, subject to certain limitations. As of June 30, 2016 and December 31, 2015, we had 13,008,007 and 13,008,007
shares outstanding, respectively.



On June 24, 2015, our stockholders approved
a proposal to authorize us to issue warrants, options or rights to subscribe to, convert to, or purchase our common stock in one
or more offerings. This is a standing authorization and does not require annual re-approval by our stockholders.



Stock Issuances: On February 6,
2015, we entered into an at-the-market (“ATM”) securities offering program with MLV & Co. LLC and JMP Securities
LLC through which we may sell, by means of ATM offerings from time to time, up to $50.0 million of our common stock. During the
six months ended June 30, 2016, we did not make any sales of our common stock under the ATM program.



Borrowings



Revolving Credit Facility: As of June
30, 2016 and December 31, 2015, we had $127.2 million and $123.7 million outstanding, respectively, under our revolving credit
facility with ING Capital LLC, as agent, to finance the purchase of our assets. As of June 30, 2016, the maximum amount we were
able to borrow under the revolving credit facility is $160.0 million and this maximum borrowing can be increased to $300.0 million
pursuant to an accordion feature (subject to maintaining 200% asset coverage, as defined by the 1940 Act). The maturity date on
the facility is December 14, 2020.



The revolving
credit facility is secured by a lien on all of our assets, including cash on hand, but excluding the assets of our wholly-owned
subsidiary, MRCC SBIC. Our ability to borrow under the revolving credit facility is subject to availability under a defined borrowing
base, which varies based on our portfolio characteristics and certain eligibility criteria and concentration limits, as well as
required valuation methodologies. We may make draws under the revolving credit facility to make or purchase additional investments
through December 2019 and for general working capital purposes until the maturity date of the revolving credit facility. Borrowings
under the revolving credit facility bear interest, at our election, at an annual rate of LIBOR (one-month, two-month, three-month
or six-month at our discretion based on the term of the borrowing) plus 3.00%, with a further step-down to LIBOR plus 2.75% when
net worth exceeds $225.0 million or at a daily rate equal to 2.00% per annum plus the greater of the prime interest rate, the federal
funds rate plus 0.5% or LIBOR plus 1.0%. In addition to the stated interest rate on borrowings under the revolving credit facility,
we are required to pay a fee of 0.5% per annum on any unused portion of the revolving credit facility if the unused portion of
the facility is less than 65% of the then available maximum borrowing or a fee of 1.0% per annum on any unused portion of the revolving
credit facility if the unused portion of the facility is greater than or equal to 65% of the then available maximum borrowing.
As of June 30, 2016 and December 31, 2015, all of the outstanding borrowings were accruing at an interest rate of 3.5% and 3.4%
(based on one-month LIBOR), respectively. The weighted average fee rate on our unused portion of the revolving credit facility
for the three and six months ended June 30, 2016 was 3.6% and 3.5%, respectively. The weighted average interest rate of our revolving
credit facility borrowings (excluding debt issuance costs) for the three and six months ended June 30, 2016 was 0.5% and 0.5%,
respectively. As of June 30, 2015, all of the outstanding borrowings were accruing at an interest rate of 3.4% (based on one-month
LIBOR). The weighted average fee rate on the unused portion of
the revolving credit facility for the three and six months ended June 30, 2015 was 0.5% and 0.5%, respectively. The weighted average
interest rate of the revolving credit facility borrowings (excluding debt issuance costs) for the three and six months ended June
30, 2015 was 3.7% and 3.6%, respectively.



Our ability to borrow under the revolving credit
facility is subject to availability under the borrowing base, which permits us to borrow up to 70% of the fair market value of
our portfolio company investments depending on the type of the investment we hold and whether the investment is quoted. Our ability
to borrow is also subject to certain concentration limits, and our continued compliance with the representations, warranties and
covenants given by us under the facility. The revolving credit facility contains certain financial and restrictive covenants, including,
but not limited to, our maintenance of: (1) a minimum consolidated total net assets at least equal to the greater of (a) 40% of
the consolidated total assets on the last day of each quarter or (b) $120.0 million plus 65% of the net proceeds to us from sales
of our securities after December 14, 2015; (2) a ratio of total assets (less total liabilities other than indebtedness) to total
indebtedness of not less than 2.1 times; and (3) a ratio of earnings before interest and taxes to interest expense of at least
2.5 times. The credit facility also requires us to undertake customary indemnification obligations with respect to ING Capital
LLC and other members of the lending group and to reimburse the lenders for expenses associated with entering into the credit facility.
The revolving credit facility also has customary provisions regarding events of default, including events of default for nonpayment,
change in control transactions at both Monroe Capital Corporation and MC Advisors, failure to comply with financial and negative
covenants, and failure to maintain our relationship with MC Advisors. If we incur an event of default under the revolving credit
facility and fail to remedy such default under any applicable grace period, if any, then the entire revolving credit facility could
become immediately due and payable, which would materially and adversely affect our liquidity, financial condition, results of
operations and cash flows.



Our revolving credit facility also
imposes certain conditions that may limit the amount of our distributions to stockholders. Distributions payable in our
common stock under the dividend reinvestment plan are not limited by the revolving credit facility. Distributions in cash or
property other than common stock are generally limited to 115% of the amount of distributions required to maintain our status
as a RIC.



36







SBA Debentures: On February 28,
2014, our wholly-owned subsidiary, MRCC SBIC, received a license from the SBA to operate as a SBIC under Section 301(c) of the
Small Business Investment Act of 1958, as amended. MRCC SBIC commenced operations on September 16, 2013.



The SBIC license allows MRCC SBIC to obtain
leverage by issuing SBA-guaranteed debentures, subject to the issuance of a leverage commitment by the SBA and other customary
procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a
ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid
at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis (pooling date) at a
market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, has a superior claim to MRCC SBIC’s
assets over our stockholders in the event we liquidate MRCC SBIC or the SBA exercises its remedies upon an event of default. As
of June 30, 2016, MRCC SBIC had $20.0 million in regulatory capital and leveragable capital and $40.0 million in SBA-guaranteed
debentures outstanding. As of December 31, 2015, MRCC SBIC had $20.0 million in regulatory and leveragable capital and $40.0 million
in SBA-guaranteed debentures outstanding.



As of June 30, 2016 and December 31, 2015, MRCC SBIC
had the following SBA-guaranteed debentures outstanding (dollars in thousands):



|Maturity Date  |  | Interest Rate |     |   | Amount |  
|-------------- |  | ------------- | --- | - | ------ | -
|September 2024 |  |               | 3.4 | % |        | $
|March 2025     |  |               | 3.3 | % |        |  
|March 2025     |  |               | 2.9 | % |        |  
|September 2025 |  |               | 3.6 | % |        |  
|Total          |  |               |     |   |        | $



SBA regulations currently limit the amount that
an individual SBIC may borrow to a maximum of $150.0 million when it has at least $75.0 million in regulatory capital, receives
a leverage commitment from the SBA and has been through an audit examination by the SBA subsequent to licensing. The SBA also historically
limited a related group of SBICs (commonly referred to as a “family of funds”) to a maximum of $225.0 million in total
borrowings. On December 18, 2015, this family of funds limitation was raised to $350.0 million in total borrowings. As we have
other affiliated SBICs already in operation, MRCC SBIC was historically limited to a maximum of $40.0 million in borrowings. Pursuant
to the increase in the family of funds limitation, we submitted a commitment application to the SBA and on April 13, 2016 were
approved for $75.0 million in additional SBA-guaranteed debentures for MRCC SBIC. In order for MRCC SBIC to gain access to the
entirety of the $75.0 million in SBA-guaranteed debentures, we would be required to contribute to MRCC SBIC an additional $37.5
million in leveragable and regulatory capital.



Secured Borrowings: Certain partial loan
sales do not qualify for sale accounting under ASC Topic 860 — Transfers and Servicing (“ASC Topic 860”)
because these sales do not meet the definition of a “participating interest,” as defined in the guidance, in order
for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating
interest remain as an investment on the accompanying consolidated statements of assets and liabilities and the portion sold is
recorded as a secured borrowing in the liabilities section of the consolidated statements of assets and liabilities. For these
partial loan sales, the interest earned on the entire loan balance is recorded within “interest income” and the interest
earned by the buyer in the partial loan sale is recorded within “interest and other debt financing expenses” in the
accompanying consolidated statements of operations.



As of June 30, 2016, secured borrowings at fair
value totaled $2.1 million and the fair value of the loans that are associated with these secured borrowings was $6.1 million.
As of December 31, 2015, secured borrowings at fair value totaled $2.5 million and the fair value of the loans that are associated
with these secured borrowings was $11.8 million. These secured borrowings were created as a result of our completion of partial
loan sales of certain unitranche loan assets during the year ended December 31, 2013, that did not meet the definition of a “participating
interest.” As a result, sale treatment was not allowed and these partial loan sales were treated as secured borrowings. No
such partial loan sales occurred during the year ended December 31, 2015 and the six months ended June 30, 2016. During the three
and six months ended June 30, 2016, repayments on secured borrowings totaled $0.1 million and $0.3 million, respectively. During
the three and six months ended June 30, 2015, repayments on secured borrowings totaled $0.4 million and $0.6 million, respectively.
The weighted average interest rate on our secured borrowings was approximately 6.0% and 5.8% as of June 30, 2016 and December 31,
2015, respectively.



Distribution Policy



Our Board will determine the timing and amount,
if any, of our distributions. We intend to pay distributions on a quarterly basis. In order to avoid corporate-level tax on the
income we distribute as a RIC, we must distribute to our stockholders at least 90% of our ordinary income and realized net short-term
capital gains in excess of realized net long-term capital losses, if any, on an annual basis out of the assets legally available
for such distributions. In addition, we also intend to distribute any realized net capital gains (i.e., realized net long-term
capital gains in excess of realized net short-term capital losses) at least annually out of the assets legally available for such
distributions. Distributions to stockholders for the three and six months ended June 30, 2016 totaled $4.5 million ($0.35 per share)
and $9.1 million ($0.70 per share), respectively. Distributions to stockholders for the three and six months ended June 30, 2015
totaled $4.4 million ($0.35 per share) and $7.7 million ($0.70 per share), respectively. The tax character of such distributions
is determined at the end of the fiscal year. However, if the character of such distributions were determined as of June 30, 2016
and 2015, no portion of these distributions would have been characterized as a tax return of capital to stockholders.



37







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



Related Party Transactions



We have a number of business relationships with
affiliated or related parties, including the following:



| | · | We have an Investment Advisory and Management Agreement with MC Advisors, an investment advisor registered with the SEC, to manage our day-to-day operating and investing activities. We pay MC Advisors a fee for its services under the Investment Advisory and Management Agreement consisting of two components — a base management fee and an incentive fee. See Note 6 to our consolidated financial statements and “Significant Accounting Estimates and Critical Accounting Policies — Capital Gains Incentive Fee” for additional information.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We have an Administration Agreement with MC Management to provide us with the office facilities and administrative services necessary to conduct our day-to-day operations. See Note 6 to our consolidated financial statements for additional information.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Theodore L. Koenig, our Chief Executive Officer and Chairman of our Board is also a manager of MC Advisors and the President and Chief Executive Officer of MC Management. Aaron D. Peck, our Chief Financial Officer and Chief Investment Officer, serves as a director on our Board and is also a managing director of MC Management.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | We
have a license agreement with Monroe Capital LLC, under which Monroe Capital LLC has agreed to grant us a non-exclusive, royalty-free
license to use the name “Monroe Capital” for specified purposes in our business.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Commitments and Contingencies and Off-Balance Sheet Arrangements



Commitments and Contingencies



As of June 30, 2016 and December 31, 2015,
we had $23.4 million and $20.7 million in outstanding commitments to fund investments under undrawn revolvers, capital
expenditure loans and delayed draw commitments. Additionally, we have entered into certain contracts with other parties that
contain a variety of indemnifications. Our maximum exposure under these arrangements is unknown. However, we have not
experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnifications to be
remote.



Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources.



Market Trends



We have identified the following trends that
may affect our business:



Target Market:   We believe
that small and middle-market companies in the United States with annual revenues between $10.0 million and $2.5 billion represent
a significant growth segment of the U.S. economy and often require substantial capital investments to grow. Middle-market companies
have generated a significant number of investment opportunities for investment funds managed or advised by Monroe Capital, and
we believe that this market segment will continue to produce significant investment opportunities for us.



Specialized Lending Requirements:   We
believe that several factors render many U.S. financial institutions ill-suited to lend to U.S. middle-market companies. For example,
based on the experience of our management team, lending to U.S. middle-market companies (1) is generally more labor intensive than
lending to larger companies due to the smaller size of each investment and the fragmented nature of information for such companies,
(2) requires due diligence and underwriting practices consistent with the demands and economic limitations of the middle-market
and (3) may also require more extensive ongoing monitoring by the lender.



Demand for Debt Capital:   We
believe there is a large pool of uninvested private equity capital for middle-market companies. We expect private equity firms
will seek to leverage their investments by combining equity capital with senior secured loans and mezzanine debt from other sources,
such as us.



38







Competition from Other Lenders:   We
believe that many traditional bank lenders, in recent years, de-emphasized their service and product offerings to middle-market
businesses in favor of lending to large corporate clients and managing capital market transactions. In addition, many commercial
banks face significant balance sheet constraints as they seek to build capital and meet future regulatory capital requirements.
These factors may result in opportunities for alternative funding sources to middle-market companies and therefore drive increased
new investment opportunities for us. Conversely, there is increased competitive pressure in the BDC and investment company marketplace
for senior and subordinated debt which could result in lower yields for increasingly riskier assets.



Pricing and Deal Structures:   We
believe that the volatility in global markets over the last several years and current macroeconomic issues such as a weakened U.S.
economy has reduced access to, and availability of, debt capital to middle-market companies, causing a reduction in competition
and generally more favorable capital structures and deal terms. Recent capital raises in the BDC and investment company marketplace
have created increased competition; however, we believe that current market conditions may continue to create favorable opportunities
to invest at attractive risk-adjusted returns.



Recent Developments



On July 25, 2016, we closed a public offering
of 3,100,000 shares of our common stock at a public offering price of $15.50 per share, raising approximately $48.1 million in
gross proceeds. On August 3, 2016, we sold an additional 465,000 shares of our common stock, at a public offering price
of $15.50 per share, raising approximately $7.2 million in gross proceeds pursuant to the underwriters’ exercise of the over-allotment
option. Aggregate underwriters’ discounts and commissions were $2.2 million and offering costs are expected to total approximately
$0.4 million.



Significant Accounting Estimates and Critical Accounting Policies



Revenue Recognition



We record interest income on an accrual basis
to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, we do not accrue
PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable
interest on loans and debt securities if we have reason to doubt our ability to collect such interest. Loan origination fees, original
issue discount and market discount or premium is capitalized, and we then amortize such amounts using the effective interest method
as interest income over the life of the investment. Upon the prepayment of a loan or debt security, any unamortized premium or
discount or loan origination fees are recorded as interest income. We record prepayment premiums on loans and debt securities as
interest income when we receive such amounts.



Dividend income on preferred equity securities
is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are
expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies.
Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments
is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will
not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis
earnings and profits in the LLC or LP prior to the distribution. Distributions that are classified as a return of capital are recorded
as a reduction in the cost basis of the investment.



Valuation of Portfolio Investments



As a BDC, we generally invest in illiquid securities
including debt and, to a lesser extent, equity securities of middle-market companies. Under procedures established by our Board,
we value investments for which market quotations are readily available and within a recent date at such market quotations. We obtain
these market values from an independent pricing service or at the mean between the bid and ask prices obtained from at least two
brokers or dealers (if available, otherwise by a principal market maker or a primary market dealer). When doing so, we determine
whether the quote obtained is sufficient in accordance with generally accepted accounting principles in the United States (“GAAP”)
to determine the fair value of the security. Debt and equity securities that are not publicly traded or whose market prices are
not readily available or whose market prices are not regularly updated are valued at fair value as determined in good faith by
our Board. Such determination of fair values may involve subjective judgments and estimates. Investments purchased within 60 days
of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value. With respect
to unquoted or thinly-traded securities, our Board, together with our independent valuation firms, values each investment considering,
among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other
factors.



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



When an external event such as a purchase transaction,
public offering or subsequent equity sale occurs, our Board uses the pricing indicated by the external event to corroborate and/or
assist us in our valuation. Because we expect that there will not be a readily available market for many of the investments in
our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by our Board using
a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the
fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly
from the values that would have been used had a readily available market value existed for such investments, and the differences
could be material.



39







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



| | · | the quarterly valuation process begins with each portfolio company or investment being initially evaluated and rated by the investment professionals responsible for the credit monitoring of the portfolio investment;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | preliminary valuation conclusions are then documented and discussed with senior management;
| | - | -------------------------------------------------------------------------------------------



| | · | our Board engages one or more independent valuation firm(s) to conduct fair value appraisals of material investments for which market quotations are not readily available. These fair value appraisals for material investments are received at least once in every calendar year for each portfolio company investment, but are generally received quarterly;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our audit committee of the Board reviews the preliminary valuations of MC Advisors and of the independent valuation firm(s) and responds and supplements the valuation recommendations to reflect any comments; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our
Board discusses these valuations and determines the fair value of each investment in the portfolio in good faith, based on the
input of MC Advisors, the independent valuation firm(s) and the audit committee.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Valuation of Secured Borrowings



We have elected the fair value option
under Accounting Standards Codification (“ASC”) Topic 825 — Financial Instruments (“ASC
Topic 825”) relating to accounting for debt obligations at their fair value for our secured borrowings, which arose due
to partial loan sales which did not meet the criteria for sale treatment under ASC Topic 860. Due to the absence of a
liquid trading market for these secured borrowings, they are valued by calculating the net present value of the future
expected cash flow streams using an appropriate risk-adjusted discount rate model. The discount rate considers projected
performance of the related loan investment, applicable market yields and leverage levels, credit quality, prepayment
penalties and comparable company analysis. We will consult with an independent valuation firm relative to the fair value of
its secured borrowings at least once in every calendar year.



Net Realized Gains or Losses and Net Change in Unrealized
Appreciation or Depreciation



We measure realized gains or losses by the difference
between the net proceeds from the sale and the amortized cost basis of the investment, without regard to unrealized appreciation
or depreciation previously recognized. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment
values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when
gains or losses are realized. We report changes in the fair value of secured borrowings that are measured at fair value as a component
of the net change in unrealized (appreciation) depreciation on secured borrowings in the consolidated statements of operations.



Capital Gains Incentive Fee



Pursuant to the terms of the Investment Advisory
and Management Agreement with MC Advisors, the incentive fee on capital gains earned on liquidated investments of our portfolio
is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory and administrative
services agreement). This fee equals 20.0% of our incentive fee capital gains (i.e., our realized capital gains on a cumulative
basis from inception, calculated as of the end of the applicable period, net of all realized capital losses and unrealized capital
depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a quarterly
basis, we accrue for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such
period.



While the Investment Advisory
and Management Agreement with MC Advisors neither includes nor contemplates the inclusion of unrealized gains in the calculation
of the capital gains incentive fee, pursuant to an interpretation of an American Institute for Certified Public Accountants Technical
Practice Aid for investment companies, we include unrealized gains in the calculation of the capital gains incentive fee expense
and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to MC Advisors
if our entire portfolio was liquidated at its fair value as of the consolidated statement of asset and liabilities date even though
MC Advisors is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.



During the three months ended June 30,
2016, we had a reduction in accrued capital gains incentive fees of $97 thousand, all as a result of net declines in
portfolio valuations during the period. During the six months ended June 30, 2016, we had a net increase in accrued capital
gains incentive fees of $138 thousand, of which $117 thousand was related to realized capital gains and was therefore payable
to MC advisors and $21 thousand was a result of net increases in portfolio valuations during the period. During the three
and six months ended June 30, 2015, we did not accrue any capital gains incentive fees based on the performance of our
portfolio.



New Accounting Pronouncements



In May 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue
from Contracts with Customers (ASC Topic 606) (“ASU 2014-09”). The core principle of ASU 2014-09 is that an
entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve
that core principle, an entity should apply the following steps: Step 1: Identify the contract(s) with a customer. Step
2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate
the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity
satisfies a performance obligation.



40







ASU 2014-09 also specified the accounting for
some costs to obtain or fulfill a contract with a customer. In addition, ASU 2014-09 requires that an entity disclose sufficient
information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers. The initial effective date of ASU 2014-09 was for fiscal periods beginning after
December 15, 2016. However, in August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (ASC Topic 606):
Deferral of the Effective Date, which deferred the effective date to fiscal periods beginning after December 15, 2017. Management
is currently evaluating the impact these changes will have on our consolidated financial statements and disclosures.



In February 2015, the FASB issued ASU 2015-02,
Consolidation (ASC Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 significantly
changes the consolidation analysis required under GAAP and ends the deferral granted to investment companies from applying the
variable interest entity guidance. ASU 2015-02 is effective for interim and annual reporting periods in fiscal years that begin
after December 15, 2015 and early adoption is permitted. We have adopted ASU 2015-02 and the adoption did not have a material impact
on our consolidated financial statements and disclosures.



In April 2015, the FASB issued ASU No. 2015-03,
Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs
(“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented
in the statements of assets and liabilities as a direct deduction from the carrying amount of that debt liability, consistent with
debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU.
ASU 2015-03 is effective for fiscal years that begin after December 15, 2015 and early adoption is permitted. We have adopted ASU
2015-03 and the revised presentation is reflected in our consolidated financial statements for the periods presented.



In January 2016, the FASB issued ASU 2016-01,
Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities (“ASU 2016-01”). ASU 2016-01 retains many current requirements for the classification and
measurement of financial instruments; however, it significantly revises an entity’s accounting related to (1) the classification
and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities
measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments.
This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted
for public business entities. Management is currently evaluating the impact these changes will have on our consolidated financial
statements and disclosures.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK



We are subject to financial market risks,
including changes in interest rates. The majority of the loans in our portfolio have floating interest rates, and we expect that
our loans in the future may also have floating interest rates. These loans are usually based on a floating LIBOR and typically
have interest rate re-set provisions that adjust applicable interest rates under such loans to current market rates on a monthly
or quarterly basis. The majority of the loans in our current portfolio have interest rate floors which have effectively converted
the loans to fixed rate loans in the current interest rate environment. In addition, our credit facility has a floating interest
rate provision and we expect that other credit facilities into which we enter in the future may have floating interest rate provisions.



Assuming that the consolidated statement of
financial condition as of June 30, 2016 was to remain constant and that we took no actions to alter our existing interest rate
sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates.





|                         |  | Increase 
    (decrease) in |       |   | Increase 
    (decrease) in |   |       | Net increase 
    (decrease) in | 
|------------------------ |  | --------------------------- | ----- | - | --------------------------- | - | ----- | ------------------------------- | 
|Change in Interest Rates |  | interest income             |       |   | interest expense            |   |       | net investment income           | 
|                         |  | (in thousands)              |      
|Down 25 basis points     |  | $                           | (44   | ) |                             | $ | (318  | )                               | 
|Up 100 basis points      |  |                             | 1,483 |   |                             |   | 1,249 |                                 | 
|Up 200 basis points      |  |                             | 4,547 |   |                             |   | 2,544 |                                 | 
|Up 300 basis points      |  |                             | 7,655 |   |                             |   | 3,838 |                                 | 





Although we believe that this analysis is indicative
of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit market, credit quality, the
size and composition of the assets in our portfolio and other business developments, including borrowing under the credit facility
or other borrowings that could affect net increase in net assets resulting from operations, or net income. Accordingly, we can
offer no assurances that actual results would not differ materially from the analysis above.



We may in the future hedge against interest
rate fluctuations by using standard hedging instruments such as futures, options and forward contracts to the extent permitted
under the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest
rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in
our portfolio with fixed interest rates or interest rate floors.



41







ITEM 4. CONTROLS AND PROCEDURES



In accordance with Rules 13a-15(b) and 15d-15(b)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation
of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based on that evaluation, our management,
including the Chief Executive Officer and Chief Financial Officer, concluded that, at the end of the period covered by our Quarterly
Report on Form 10-Q, our disclosure controls and procedures were effective and provided reasonable assurance that information required
to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Notwithstanding
the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth
in the Company’s periodic reports.



No change occurred in our internal control over
financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the six months ended June 30,
2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



42







PART II



OTHER INFORMATION



Item 1. Legal Proceedings



Neither we nor our investment adviser are currently
subject to any material legal proceedings.



Item 1A. Risk Factors



None.



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



None.



Item 3. Defaults Upon Senior Securities



None.



Item 4. Mine Safety Disclosures



None.



Item 5. Other Information



None.



43







Item 6. Exhibits



|Exhibit |  |                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Document                                                                                                                                                      
|        |  |                                                                                                                                                                              
|31.1    |  | Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|        |  |                                                                                                                                                                              
|31.2    |  | Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|        |  |                                                                                                                                                                              
|32.1    |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                       



44







SIGNATURES



Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



|Date: August 8, 2016  | By | /s/ Theodore L. Koenig                                                                                                                                                      
|--------------------- | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      |    | Theodore L. Koenig
        Chairman, Chief Executive Officer and Director
        (Principal Executive Officer)                                                             
|                      |    | Monroe Capital Corporation                                                                                                                                                  
|                      |    |                                                                                                                                                                             
|Date:  August 8, 2016 | By | /s/ Aaron D. Peck                                                                                                                                                           
|                      |    | Aaron D. Peck
        Chief Financial Officer, Chief Investment Officer and Director
        (Principal Financial and Accounting Officer)
        Monroe Capital Corporation



45