##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the Quarterly Period Ended June 30, 2014

OR



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

For the transition period from
 to

Commission File Number 814-00924





Sierra Income
Corporation

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 45-2544432                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

375 Park Avenue, 33rd Floor

New York, NY 10152

(Address of principal executive offices)

(212) 759-0777

(Registrants telephone number, including area code)





(Former name, former address and former fiscal year, if changed since last report)





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

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

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



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (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   ̈    No  x

As of August 6, 2014, the Registrant had 38,704,353 shares of common stock, $0.001 par value, outstanding.









---

##### Table of Contents

TABLE OF CONTENTS



|                                                                                                    |  |                                                                                                                                   |     |      |      | 
|--------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------- | --- | ---- | ---- | 
|                                                                                                    |  |                                                                                                                                   |     | Page |     
|Part I.      Financial
Information                                                                  |  |                                                                                                                                   |     |     
|                                                                                                    | 
|Item 1.      Financial Statements                                                                   |  |                                                                                                                                   | F-1 |     
|                                                                                                    |  |                                                                                                                                  
|                                                                                                    |  | Consolidated Statements of Assets and Liabilities as of June 30, 2014 (unaudited) and December 
31, 2013                          |     |      | F-1  | 
|                                                                                                    |  |                                                                                                                                  
|                                                                                                    |  | Consolidated Statements of Operations for the three and six months ended June 30, 2014 (unaudited) and June
 30, 2013 (unaudited) |     |      | F-2  | 
|                                                                                                    |  |                                                                                                                                  
|                                                                                                    |  | Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2014 (unaudited) and June
30, 2013 (unaudited) |     |      | F-3  | 
|                                                                                                    |  |                                                                                                                                  
|                                                                                                    |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2014 (unaudited) and June 
30, 2013 (unaudited)           |     |      | F-4  | 
|                                                                                                    |  |                                                                                                                                  
|                                                                                                    |  | Consolidated Schedules of Investments as of June 30, 2014 (unaudited) andDecember 31, 2013                                        |     |      | F-5  | 
|                                                                                                    |  |                                                                                                                                  
|                                                                                                    |  | Notes to Financial Statements (unaudited)                                                                                         |     |      | F-17 | 
|                                                                                                    | 
|Item 2.      
Managements Discussion and Analysis of Financial Condition and Results of Operations |  |                                                                                                                                   | 1   |     
|                                                                                                    | 
|Item 3.      
Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                                                   | 18  |     
|                                                                                                    | 
|Item 4.      Controls and Procedures                                                                |  |                                                                                                                                   | 18  |     
|                                                                                                    | 
|Part II.    Other Information                                                                       |  |                                                                                                                                   |     |     
|                                                                                                    | 
|Item 1.      Legal Proceedings                                                                      |  |                                                                                                                                   | 19  |     
|                                                                                                    | 
|Item 1A.  Risk Factors                                                                              |  |                                                                                                                                   | 19  |     
|                                                                                                    | 
|Item 2.      
Unregistered Sales of Equity Securities and Use of Proceeds                           |  |                                                                                                                                   | 20  |     
|                                                                                                    | 
|Item 3.      Defaults Upon Senior
Securities                                                        |  |                                                                                                                                   | 20  |     
|                                                                                                    | 
|Item 4.      Mine Safety Disclosures                                                                |  |                                                                                                                                   | 20  |     
|                                                                                                    | 
|Item 5.      Other Information                                                                      |  |                                                                                                                                   | 20  |     
|                                                                                                    | 
|Item 6.      Exhibits                                                                               |  |                                                                                                                                   | 20  |     
|                                                                                                    | 
|SIGNATURES                                                                                          |  |                                                                                                                                   | 21  |     



---

##### Table of Contents

Sierra Income Corporation

Consolidated Statements of Assets and Liabilities



|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                             |  | As of         |            
|                                                                                                                                                             |  | June 30, 2014 |             |   | December 31, 2013 |  
|                                                                                                                                                             |  | (unaudited)   |             |   |                   |  
|ASSETS                                                                                                                                                       |  |               |             |   |                   |   |             |  
|Non-controlled/non-affiliated investments, at fair value (amortized cost of $328,287,381 and $137,332,276,
respectively)                                     |  | $             | 329,329,420 |   |                   | $ | 137,801,537 |  
|Cash collateral on total return swap (Note 5)                                                                                                                |  |               | 42,260,341  |   |                   |   | 6,706,159   |  
|Cash                                                                                                                                                         |  |               | 15,543,088  |   |                   |   | 34,939,948  |  
|Unsettled trades receivable                                                                                                                                  |  |               | 5,655,000   |   |                   |   | 496,250     |  
|Due from affiliate (Note 7)                                                                                                                                  |  |               | 5,128,780   |   |                   |   | 2,592,989   |  
|Interest receivable                                                                                                                                          |  |               | 2,319,338   |   |                   |   | 1,989,128   |  
|Deferred financing costs                                                                                                                                     |  |               | 1,306,767   |   |                   |   | 1,150,139   |  
|Unrealized appreciation on total return swap (Note 5)                                                                                                        |  |               | 1,269,417   |   |                   |   | 351,396     |  
|Receivable due on total return swap (Note 5)                                                                                                                 |  |               | 1,102,819   |   |                   |   | 155,317     |  
|Prepaid expenses and other assets                                                                                                                            |  |               | 209,916     |   |                   |   | 23,975      |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|Total assets                                                                                                                                                 |  | $             | 404,124,886 |   |                   | $ | 186,206,838 |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|LIABILITIES                                                                                                                                                  |  |               |             |   |                   |   |             |  
|Revolving credit facility payable                                                                                                                            |  | $             | 60,000,000  |   |                   | $ | 16,000,000  |  
|Unsettled trades payable                                                                                                                                     |  |               | 21,373,750  |   |                   |   | 15,492,500  |  
|Management fee                                                                                                                                               |  |               | 1,768,046   |   |                   |   | 814,655     |  
|Accounts payable and accrued expenses                                                                                                                        |  |               | 819,265     |   |                   |   | 495,893     |  
|Provisional incentive fee                                                                                                                                    |  |               | 622,566     |   |                   |   | 182,989     |  
|Interest payable                                                                                                                                             |  |               | 444,653     |   |                   |   | 33,055      |  
|Administrator fees                                                                                                                                           |  |               | 272,579     |   |                   |   | 152,162     |  
|Directors fees                                                                                                                                               |  |               | 73,235      |   |                   |   |            |  
|Due to affiliate                                                                                                                                             |  |               | 54,753      |   |                   |   | 33,311      |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|Total liabilities                                                                                                                                            |  | $             | 85,428,847  |   |                   | $ | 33,204,565  |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|Commitments (Note 11)                                                                                                                                        |  |               |             |   |                   |   |             |  
|                                                                                                                                                             |  |              
|NET ASSETS                                                                                                                                                   |  |               |             |   |                   |   |             |  
|Common shares, par value $.001 per share, 250,000,000 common shares authorized, 34,455,001 and 16,663,500 common shares issued
and outstanding, respectively |  | $             | 34,455      |   |                   | $ | 16,664      |  
|Capital in excess of par value                                                                                                                               |  |               | 316,738,088 |   |                   |   | 152,552,912 |  
|Accumulated net realized gain/(loss) (distribution in excess of net realized gain/(loss)) from investments and total return
swap                             |  |               | (138,783    | ) |                   |   | (138,783    | )
|Distributions in excess of net investment income                                                                                                             |  |               | (249,177    | ) |                   |   | (249,177    | )
|Net unrealized appreciation on investments and total return swap                                                                                             |  |               | 2,311,456   |   |                   |   | 820,657     |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|Total net assets                                                                                                                                             |  |               | 318,696,039 |   |                   |   | 153,002,273 |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|Total liabilities and net assets                                                                                                                             |  | $             | 404,124,886 |   |                   | $ | 186,206,838 |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  
|NET ASSET VALUE PER SHARE                                                                                                                                    |  | $             | 9.25        |   |                   | $ | 9.18        |  
|                                                                                                                                                             |  |               |             |   |                   |   |             |  

See accompanying notes to the consolidated financial statements.



F-1



---

##### Table of Contents

Sierra Income Corporation

Consolidated Statements of Operations



|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|---------------------------------------------------------------------------------- |  | ---------------------------------- | ---------- | - | -------------------------------- | - | --------- | ----------- |  | - | ----------- | - |  | - | ---------- | -
|                                                                                   |  | For the three months endedJune
30, |            |   | For the six months endedJune
30, |  
|                                                                                   |  | 2014                               |            |   | 2013                             |   |           | 2014        |  |   | 2013        |  
|                                                                                   |  | (unaudited)                        |            |   | (unaudited)                      |   |           | (unaudited) |  |   | (unaudited) |  
|INVESTMENT INCOME                                                                  |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|Interest from non-controlled/non-affiliated investments                            |  | $                                  | 6,055,653  |   |                                  | $ | 1,461,355 |             |  | $ | 9,813,514   |   |  | $ | 2,454,460  |  
|Other fee income                                                                   |  |                                    | 653,728    |   |                                  |   | 64,750    |             |  |   | 1,488,377   |   |  |   | 129,460    |  
|Paid-in-kind interest income                                                       |  |                                    | 104,443    |   |                                  |   |          |             |  |   | 108,147     |   |  |   |           |  
|Interest from cash                                                                 |  |                                    |           |   |                                  |   | 179       |             |  |   |            |   |  |   | 441        |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|Total investment income                                                            |  |                                    | 6,813,824  |   |                                  |   | 1,526,284 |             |  |   | 11,410,038  |   |  |   | 2,584,361  |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|EXPENSES                                                                           |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|Base management fee                                                                |  |                                    | 1,768,047  |   |                                  |   | 358,389   |             |  |   | 2,910,818   |   |  |   | 603,888    |  
|Organizational and offering costs reimbursed to SIC Advisors (Note 7)              |  |                                    | 1,224,673  |   |                                  |   | 280,353   |             |  |   | 2,208,458   |   |  |   | 458,520    |  
|General and administrative expenses                                                |  |                                    | 588,338    |   |                                  |   | 118,445   |             |  |   | 1,053,865   |   |  |   | 222,716    |  
|Interest and financing expenses                                                    |  |                                    | 506,299    |   |                                  |   | 36,850    |             |  |   | 669,700     |   |  |   | 65,495     |  
|Professional fees                                                                  |  |                                    | 250,370    |   |                                  |   | 192,949   |             |  |   | 505,698     |   |  |   | 488,225    |  
|Administrator expenses                                                             |  |                                    | 272,579    |   |                                  |   | 158,824   |             |  |   | 500,795     |   |  |   | 296,914    |  
|Provisional incentive fee                                                          |  |                                    | 326,458    |   |                                  |   | (114,528  | )           |  |   | 438,949     |   |  |   | 34,108     |  
|Offering costs                                                                     |  |                                    | 190,100    |   |                                  |   |          |             |  |   | 190,100     |   |  |   |           |  
|Directors fees                                                                     |  |                                    | 41,646     |   |                                  |   | 41,875    |             |  |   | 82,835      |   |  |   | 85,640     |  
|Insurance expenses                                                                 |  |                                    | 32,261     |   |                                  |   | 31,432    |             |  |   | 56,588      |   |  |   | 58,331     |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|Total gross expenses                                                               |  |                                    | 5,200,771  |   |                                  |   | 1,104,589 |             |  |   | 8,617,806   |   |  |   | 2,313,837  |  
|Expense support reimbursement (Note 7)                                             |  |                                    | (2,143,066 | ) |                                  |   | (732,424  | )           |  |   | (3,456,536  | ) |  |   | (1,417,828 | )
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|Net expenses                                                                       |  |                                    | 3,057,705  |   |                                  |   | 372,165   |             |  |   | 5,161,270   |   |  |   | 896,009    |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|NET INVESTMENT INCOME                                                              |  |                                    | 3,756,119  |   |                                  |   | 1,154,119 |             |  |   | 6,248,768   |   |  |   | 1,688,352  |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|Net realized gain/(loss) from investments                                          |  |                                    | 861,569    |   |                                  |   | (1,427    | )           |  |   | 2,131,822   |   |  |   | 109,208    |  
|Net realized gain on total return swap (Note 5)                                    |  |                                    | 1,372,779  |   |                                  |   |          |             |  |   | 1,811,488   |   |  |   |           |  
|Net change in unrealized appreciation/(depreciation) on investments                |  |                                    | 773,862    |   |                                  |   | (662,689  | )           |  |   | 572,778     |   |  |   | 83,630     |  
|Net change in unrealized appreciation/(depreciation) on total return swap (Note 5) |  |                                    | 471,000    |   |                                  |   |          |             |  |   | 918,021     |   |  |   |           |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|Net gain/(loss) on investments and total return swap                               |  |                                    | 3,479,210  |   |                                  |   | (664,116  | )           |  |   | 5,434,109   |   |  |   | 192,838    |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                               |  | $                                  | 7,235,329  |   |                                  | $ | 490,003   |             |  | $ | 11,682,877  |   |  | $ | 1,881,190  |  
|                                                                                   |  |                                    |            |   |                                  |   |           |             |  |   |             |   |  |   |            |  
|WEIGHTED AVERAGE  BASIC AND DILUTED EARNINGS PER COMMON SHARE                     |  | $                                  | 0.25       |   |                                  | $ | 0.09      |             |  | $ | 0.47        |   |  | $ | 0.45       |  
|WEIGHTED AVERAGE  BASIC AND DILUTED NET INVESTMENT INCOME PER COMMON SHARE        |  | $                                  | 0.13       |   |                                  | $ | 0.22      |             |  | $ | 0.25        |   |  | $ | 0.40       |  
|WEIGHTED AVERAGE COMMON STOCK OUTSTANDING  BASIC AND DILUTED (Note 10)            |  |                                    | 29,185,996 |   |                                  |   | 5,150,372 |             |  |   | 24,802,153  |   |  |   | 4,193,642  |  
|DIVIDENDS DECLARED PER COMMON SHARE                                                |  | $                                  | 0.20       |   |                                  | $ | 0.20      |             |  | $ | 0.40        |   |  | $ | 0.40       |  

See accompanying notes to the consolidated financial statements.



F-2



---

##### Table of Contents

Sierra Income Corporation

Consolidated Statements of Changes in Net Assets



|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----------- | - | ----------- | - | ---------- | -
|                                                                                                                                        |  | For the six months ended June 30, |            
|                                                                                                                                        |  | 2014                              |             |   | 2013        |  
|                                                                                                                                        |  | (unaudited)                       |             |   | (unaudited) |  
|INCREASE FROM OPERATIONS                                                                                                                |  |                                   |             |   |             |   |            |  
|Net investment income                                                                                                                   |  | $                                 | 6,248,768   |   |             | $ | 1,688,352  |  
|Net realized gain on investments                                                                                                        |  |                                   | 2,131,822   |   |             |   | 109,208    |  
|Net realized gain on total return swap (Note 5)                                                                                         |  |                                   | 1,811,488   |   |             |   |           |  
|Net change in unrealized appreciation/(depreciation) on investments                                                                     |  |                                   | 572,778     |   |             |   | 83,630     |  
|Net change in unrealized appreciation/(depreciation) on total return swap (Note 5)                                                      |  |                                   | 918,021     |   |             |   |           |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|Net increase in net assets resulting from operations                                                                                    |  |                                   | 11,682,877  |   |             |   | 1,881,190  |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|SHAREHOLDER DISTRIBUTIONS                                                                                                               |  |                                   |             |   |             |   |            |  
|Distributions from net realized gains                                                                                                   |  |                                   | (3,943,310  | ) |             |   | (110,635   | )
|Distributions from net investment income (Note 2)                                                                                       |  |                                   | (6,248,768  | ) |             |   | (1,563,353 | )
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|Net decrease in net assets from shareholder distributions                                                                               |  |                                   | (10,192,078 | ) |             |   | (1,673,988 | )
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|COMMON SHARE TRANSACTIONS                                                                                                               |  |                                   |             |   |             |   |            |  
|Issuance of common shares, net of underwriting costs                                                                                    |  |                                   | 159,934,090 |   |             |   | 32,930,878 |  
|Issuance of common shares pursuant to distribution reinvestment plan                                                                    |  |                                   | 4,550,252   |   |             |   | 450,747    |  
|Repurchase of common shares                                                                                                             |  |                                   | (281,375    | ) |             |   |           |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|Net increase in net assets resulting from common share transactions                                                                     |  |                                   | 164,202,967 |   |             |   | 33,381,625 |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|Total increase in net assets                                                                                                            |  |                                   | 165,693,766 |   |             |   | 33,588,827 |  
|Net assets at beginning of period                                                                                                       |  |                                   | 153,002,273 |   |             |   | 20,622,982 |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|Net assets at end of period (including accumulated undistributed net investment income/(loss) of $(249,177) and $328,131,
respectively) |  | $                                 | 318,696,039 |   |             | $ | 54,211,809 |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|Net asset value per common share                                                                                                        |  | $                                 | 9.25        |   |             | $ | 9.13       |  
|Common shares outstanding, beginning of period                                                                                          |  |                                   | 16,663,500  |   |             |   | 2,300,573  |  
|Issuance of common shares                                                                                                               |  |                                   | 17,327,945  |   |             |   | 3,589,695  |  
|Issuance of common shares pursuant to distribution reinvestment plan                                                                    |  |                                   | 494,168     |   |             |   | 49,095     |  
|Repurchase of common shares                                                                                                             |  |                                   | (30,612     | ) |             |   |           |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  
|Common shares outstanding, end of period                                                                                                |  |                                   | 34,455,001  |   |             |   | 5,939,363  |  
|                                                                                                                                        |  |                                   |             |   |             |   |            |  

See accompanying notes to the consolidated financial statements.



F-3



---

##### Table of Contents

Sierra Income Corporation

Consolidated Statements of Cash Flows



|                                                                                                                       |  |                                   |              |   |             |   |             |  
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ------------ | - | ----------- | - | ----------- | -
|                                                                                                                       |  | For the six months ended June 30, |             
|                                                                                                                       |  | 2014                              |              |   | 2013        |  
|                                                                                                                       |  | (unaudited)                       |              |   | (unaudited) |  
|Cash flows from operating activities                                                                                   |  |                                   |              |   |             |   |             |  
|NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                                                   |  | $                                 | 11,682,877   |   |             | $ | 1,881,190   |  
|ADJUSTMENT TO RECONCILE NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS TO NET CASH USED IN OPERATING
ACTIVITIES |  |                                   |              |   |             |   |             |  
|Paid-in-kind interest income                                                                                           |  |                                   | (108,147     | ) |             |   | (580        | )
|Net amortization of premium on investments                                                                             |  |                                   | 4,497        |   |             |   | 3,774       |  
|Amortization of deferred financing costs                                                                               |  |                                   | (156,628     | ) |             |   |            |  
|Net realized gain on investments                                                                                       |  |                                   | (2,131,822   | ) |             |   | (109,208    | )
|Net change in unrealized appreciation/(depreciation) on investments                                                    |  |                                   | (572,778     | ) |             |   | (83,630     | )
|Net change in unrealized appreciation/(depreciation) on total return swap (Note 5)                                     |  |                                   | (918,021     | ) |             |   |            |  
|Purchases of investments                                                                                               |  |                                   | (261,077,040 | ) |             |   | (60,520,596 | )
|Proceeds from sale of investments and principal repayments                                                             |  |                                   | 72,357,407   |   |             |   | 15,864,943  |  
|(Increase)/decrease in operating assets:                                                                               |  |                                   |              |   |             |   |             |  
|Cash collateral on total return swap (Note 5)                                                                          |  |                                   | (35,554,182  | ) |             |   |            |  
|Unsettled trades receivable                                                                                            |  |                                   | (5,158,750   | ) |             |   | (1,015,000  | )
|Due from affiliate                                                                                                     |  |                                   | (2,535,791   | ) |             |   | (406,117    | )
|Interest receivable                                                                                                    |  |                                   | (330,210     | ) |             |   | (547,958    | )
|Receivable due on total return swap (Note 5)                                                                           |  |                                   | (947,502     | ) |             |   |            |  
|Prepaid expenses and other assets                                                                                      |  |                                   | (185,941     | ) |             |   | (19,929     | )
|Increase/(decrease) in operating liabilities:                                                                          |  |                                   |              |   |             |   |             |  
|Unsettled trades payable                                                                                               |  |                                   | 5,881,250    |   |             |   | 3,440,000   |  
|Management fee                                                                                                         |  |                                   | 953,391      |   |             |   | 187,072     |  
|Accounts payable and accrued expenses                                                                                  |  |                                   | 323,372      |   |             |   | 18,365      |  
|Provisional incentive fee                                                                                              |  |                                   | 439,577      |   |             |   | 34,107      |  
|Administrator fees                                                                                                     |  |                                   | 120,417      |   |             |   | 30,365      |  
|Interest payable                                                                                                       |  |                                   | 411,598      |   |             |   | 5,047       |  
|Directors fee                                                                                                          |  |                                   | 73,235       |   |             |   | 16,709      |  
|Due to affiliate                                                                                                       |  |                                   | 21,442       |   |             |   | 6,714       |  
|                                                                                                                       |  |                                   |              |   |             |   |             |  
|NET CASH USED IN OPERATING ACTIVITIES                                                                                  |  |                                   | (217,407,749 | ) |             |   | (41,214,732 | )
|                                                                                                                       |  |                                   |              |   |             |   |             |  
|Cash flows from financing activities                                                                                   |  |                                   |              |   |             |   |             |  
|Borrowings under revolving credit facility                                                                             |  |                                   | 80,000,000   |   |             |   |            |  
|Repayments of revolving credit facility                                                                                |  |                                   | (36,000,000  | ) |             |   |            |  
|Borrowings under prime broker margin account                                                                           |  |                                   |             |   |             |   | 5,749,895   |  
|Proceeds from issuance of common stock, net of underwriting costs                                                      |  |                                   | 159,934,090  |   |             |   | 32,930,878  |  
|Payment of cash dividends                                                                                              |  |                                   | (5,641,826   | ) |             |   | (1,223,241  | )
|Repurchase of common shares                                                                                            |  |                                   | (281,375     | ) |             |   |            |  
|                                                                                                                       |  |                                   |              |   |             |   |             |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                                                              |  |                                   | 198,010,889  |   |             |   | 37,457,532  |  
|                                                                                                                       |  |                                   |              |   |             |   |             |  
|TOTAL INCREASE/(DECREASE) IN CASH                                                                                      |  |                                   | (19,396,860  | ) |             |   | (3,757,200  | )
|CASH AT BEGINNING OF PERIOD                                                                                            |  |                                   | 34,939,948   |   |             |   | 6,651,767   |  
|                                                                                                                       |  |                                   |              |   |             |   |             |  
|CASH AT END OF PERIOD                                                                                                  |  | $                                 | 15,543,088   |   |             | $ | 2,894,567   |  
|                                                                                                                       |  |                                   |              |   |             |   |             |  
|Supplemental Information                                                                                               |  |                                   |              |   |             |   |             |  
|Cash paid during the period for interest                                                                               |  | $                                 | 258,102      |   |             | $ | 60,448      |  
|Supplemental non-cash information                                                                                      |  |                                   |              |   |             |   |             |  
|Paid-in-kind interest income                                                                                           |  | $                                 | 108,147      |   |             | $ | 580         |  
|Amortization of deferred financing costs                                                                               |  | $                                 | 156,628      |   |             | $ |            |  
|Net amortization of premium on investments                                                                             |  | $                                 | (4,497       | ) |             | $ | (3,774      | )
|Issuance of common shares in connection with distribution reinvestment plan                                            |  | $                                 | 4,550,252    |   |             | $ | 450,747     |  

See accompanying notes to the consolidated financial statements



F-4



---

##### Table of Contents

Sierra Income Corporation

Consolidated Schedule of Investments

As of June 30, 2014

(unaudited)



|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|------------------------------------------------- |  | --------------------------------------------------- |  | ------------------------------------------------------------------------ |  | -------- | ---------- |  | --------------- | - | ---------- | ---- |  | - | ---------- |  |  | ----------------- | ---------- |  |  |  | --- | -
|Company(1)                                        |  | Industry                                            |  | Type of Investment                                                       |  | Maturity |            |  | Par/ShareAmount |   |            | Cost |  |   | Fair Value |  |  | %
ofNet Assets(2) |           
|Non-controlled/non-affiliatedinvestments  103.3% |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  | 
|Access Media 3, Inc.                              |  | Telecommunications                                  |  | Senior Secured First Lien Term Loans 10.000%(3)(4)                       |  |          | 10/22/2018 |  |                 | $ | 6,975,092  |      |  | $ | 6,975,092  |  |  | $                 | 6,975,092  |  |  |  | 2.2 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 6,975,092  |      |  |   | 6,975,092  |  |  |                   | 6,975,092  |  |  |  |     |  
|Aderant North America, Inc.                       |  | Electronics                                         |  | Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.250% Floor(3)(5) |  |          | 6/20/2019  |  |                 |   | 450,000    |      |  |   | 450,000    |  |  |                   | 457,600    |  |  |  | 0.1 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 450,000    |      |  |   | 450,000    |  |  |                   | 457,600    |  |  |  |     |  
|Alcatel  Lucent USA, Inc.(6)
(7)                 |  | Telecommunications                                  |  | Senior Secured First Lien Term Loans LIBOR + 3.500%, 1.000% Floor(5)     |  |          | 1/30/2019  |  |                 |   | 985,000    |      |  |   | 981,027    |  |  |                   | 982,442    |  |  |  | 0.3 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 985,000    |      |  |   | 981,027    |  |  |                   | 982,442    |  |  |  |     |  
|ALG USA Holdings, Inc.                            |  | Leisure,Amusement, MotionPictures, andEntertainment |  | Senior Secured Second Lien Term Loans LIBOR + 9.000%, 1.250% Floor(8)    |  |          | 2/28/2020  |  |                 |   | 2,000,000  |      |  |   | 1,965,233  |  |  |                   | 2,035,496  |  |  |  | 0.6 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 2,000,000  |      |  |   | 1,965,233  |  |  |                   | 2,035,496  |  |  |  |     |  
|Allen Edmonds Corp.                               |  | Retail Stores                                       |  | Senior Secured Second Lien Term Loans LIBOR + 9.000%, 1.000% Floor(3)(5) |  |          | 5/27/2019  |  |                 |   | 7,000,000  |      |  |   | 7,000,000  |  |  |                   | 7,053,504  |  |  |  | 2.2 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 7,000,000  |      |  |   | 7,000,000  |  |  |                   | 7,053,504  |  |  |  |     |  
|American Pacific Corp.                            |  | Chemicals, Plastics,and Rubber                      |  | Senior Secured First Lien Term Loans LIBOR + 6.000%, 1.000% Floor(8)     |  |          | 2/27/2019  |  |                 |   | 7,980,000  |      |  |   | 7,923,288  |  |  |                   | 7,955,023  |  |  |  | 2.5 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 7,980,000  |      |  |   | 7,923,288  |  |  |                   | 7,955,023  |  |  |  |     |  
|Anaren, Inc.                                      |  | Aerospace andDefense                                |  | Senior Secured First Lien Term Loans LIBOR + 4.500%, 1.000% Floor(8)     |  |          | 02/18/2021 |  |                 |   | 3,980,000  |      |  |   | 3,941,748  |  |  |                   | 3,930,055  |  |  |  | 1.2 | %
|                                                  |  |                                                     |  |                                                                          |  |          |           
|                                                  |  |                                                     |  | Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.000% Floor(8)    |  |          | 08/18/2021 |  |                 |   | 10,000,000 |      |  |   | 9,903,452  |  |  |                   | 9,877,534  |  |  |  | 3.1 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 13,980,000 |      |  |   | 13,845,200 |  |  |                   | 13,807,589 |  |  |  |     |  
|Ascensus, Inc.                                    |  | Finance                                             |  | Senior Secured Second Lien Term Loans LIBOR + 8.000%, 1.000% Floor(8)    |  |          | 12/2/2020  |  |                 |   | 4,000,000  |      |  |   | 3,943,618  |  |  |                   | 3,993,402  |  |  |  | 1.3 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 4,000,000  |      |  |   | 3,943,618  |  |  |                   | 3,993,402  |  |  |  |     |  
|Associated Asphalt Partners, LLC                  |  | Chemicals, Plastics,and Rubber                      |  | Senior Secured First Lien Notes 8.500%(9)                                |  |          | 2/15/2018  |  |                 |   | 2,000,000  |      |  |   | 2,015,341  |  |  |                   | 2,093,647  |  |  |  | 0.7 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 2,000,000  |      |  |   | 2,015,341  |  |  |                   | 2,093,647  |  |  |  |     |  
|Atrium Innovations, Inc.(6)                       |  | Healthcare,Education, andChildcare                  |  | Senior Secured Second Lien Term Loans LIBOR + 6.750%, 1.000% Floor(8)    |  |          | 8/13/2021  |  |                 |   | 5,000,000  |      |  |   | 4,976,042  |  |  |                   | 5,087,051  |  |  |  | 1.6 | %
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                                  |  |                                                     |  |                                                                          |  |          |            |  |                 |   | 5,000,000  |      |  |   | 4,976,042  |  |  |                   | 5,087,051  |  |  |  |     |  

See accompanying notes to consolidated financial statements.



F-5



---

##### Table of Contents

|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|-------------------------------------------- |  | ------------------------------- |  | ------------------------------------------------------------------------ |  | -------- | ---------- |  | --------------- | - | ---------- | ---- |  | - | ---------- |  |  | ----------------- | ---------- |  |  |  | --- | -
|Company(1)                                   |  | Industry                        |  | Type of Investment                                                       |  | Maturity |            |  | Par/ShareAmount |   |            | Cost |  |   | Fair Value |  |  | %
ofNet Assets(2) |           
|Bennu Oil & Gas, LLC                         |  | Oil and Gas                     |  | Senior Secured Second Lien Term Loans LIBOR + 7.500%, 1.250% Floor(8)    |  |          | 11/1/2018  |  |                 | $ | 5,553,224  |      |  | $ | 5,548,075  |  |  | $                 | 5,563,157  |  |  |  | 1.7 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 5,553,224  |      |  |   | 5,548,075  |  |  |                   | 5,563,157  |  |  |  |     |  
|Bon-Ton Stores, Inc.                         |  | Retail Stores                   |  | Senior Secured Second Lien Notes 10.625%                                 |  |          | 7/15/2017  |  |                 |   | 1,698,000  |      |  |   | 1,630,532  |  |  |                   | 1,712,314  |  |  |  | 0.5 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 1,698,000  |      |  |   | 1,630,532  |  |  |                   | 1,712,314  |  |  |  |     |  
|Caesars Entertainment Operating Co.,
Inc.(6) |  | Hotels, Motels, Inns,and Gaming |  | Senior Secured First Lien Notes 11.250%(10)                              |  |          | 6/1/2017   |  |                 |   | 6,000,000  |      |  |   | 6,199,320  |  |  |                   | 5,490,000  |  |  |  | 1.7 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 6,000,000  |      |  |   | 6,199,320  |  |  |                   | 5,490,000  |  |  |  |     |  
|Charming Charlie, Inc.                       |  | Retail Stores                   |  | Senior Secured First Lien Term Loans LIBOR + 8.000%, 1.000% Floor(8)     |  |          | 1/9/2019   |  |                 |   | 8,990,306  |      |  |   | 9,010,299  |  |  |                   | 9,038,185  |  |  |  | 2.8 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 8,990,306  |      |  |   | 9,010,299  |  |  |                   | 9,038,185  |  |  |  |     |  
|Collective Brands Finance, Inc.(6)(7)        |  | Retail Stores                   |  | Senior Secured Second Lien Term Loans LIBOR + 7.500%, 1.000% Floor(11)   |  |          | 3/11/2022  |  |                 |   | 6,000,000  |      |  |   | 6,019,591  |  |  |                   | 5,990,743  |  |  |  | 1.9 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 6,000,000  |      |  |   | 6,019,591  |  |  |                   | 5,990,743  |  |  |  |     |  
|ConvergeOne Holdings Corp.                   |  | Telecommunications              |  | Senior Secured Second Lien Term Loans LIBOR + 8.000%, 1.000% Floor(3)(5) |  |          | 6/17/2021  |  |                 |   | 12,500,000 |      |  |   | 12,375,000 |  |  |                   | 12,375,000 |  |  |  | 3.9 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 12,500,000 |      |  |   | 12,375,000 |  |  |                   | 12,375,000 |  |  |  |     |  
|Cornerstone Chemical Company                 |  | Chemicals, Plastics,and Rubber  |  | Senior Secured First Lien Notes 9.375%(9)                                |  |          | 3/15/2018  |  |                 |   | 2,500,000  |      |  |   | 2,599,775  |  |  |                   | 2,648,863  |  |  |  | 0.8 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 2,500,000  |      |  |   | 2,599,775  |  |  |                   | 2,648,863  |  |  |  |     |  
|Deltek, Inc.                                 |  | Electronics                     |  | Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.250% Floor(8)    |  |          | 10/10/2019 |  |                 |   | 3,000,000  |      |  |   | 2,979,736  |  |  |                   | 3,090,000  |  |  |  | 1.0 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 3,000,000  |      |  |   | 2,979,736  |  |  |                   | 3,090,000  |  |  |  |     |  
|Drew Marine Partners LP                      |  | Cargo Transport                 |  | Senior Secured Second Lien Term Loans LIBOR + 7.000%, 1.000% Floor(8)    |  |          | 5/19/2021  |  |                 |   | 10,000,000 |      |  |   | 10,085,158 |  |  |                   | 10,065,442 |  |  |  | 3.2 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 10,000,000 |      |  |   | 10,085,158 |  |  |                   | 10,065,442 |  |  |  |     |  
|Dynamic Energy Services International, LLC   |  | Oil and Gas                     |  | Senior Secured First Lien Term Loans LIBOR + 8.500%, 1.000% Floor(3)(5)  |  |          | 3/6/2018   |  |                 |   | 9,875,000  |      |  |   | 9,875,000  |  |  |                   | 9,838,958  |  |  |  | 3.1 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 9,875,000  |      |  |   | 9,875,000  |  |  |                   | 9,838,958  |  |  |  |     |  
|EarthLink, Inc.(6)                           |  | Telecommunications              |  | Senior Secured First Lien Notes 7.375%(9)(10)                            |  |          | 6/1/2020   |  |                 |   | 2,450,000  |      |  |   | 2,438,391  |  |  |                   | 2,578,625  |  |  |  | 0.8 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 2,450,000  |      |  |   | 2,438,391  |  |  |                   | 2,578,625  |  |  |  |     |  
|Encompass Digital Media, Inc.(7)             |  | Broadcasting andEntertainment   |  | Senior Secured Second Lien Term Loans Base Rate + 6.750%(12)             |  |          | 6/6/2022   |  |                 |   | 1,500,000  |      |  |   | 1,485,132  |  |  |                   | 1,500,069  |  |  |  | 0.5 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 1,500,000  |      |  |   | 1,485,132  |  |  |                   | 1,500,069  |  |  |  |     |  
|F.H.G. Corp.                                 |  | Beverage, Food, andTobacco      |  | Senior Secured First Lien Term Loans LIBOR + 9.500%, 1.000% Floor(3)(5)  |  |          | 4/28/2019  |  |                 |   | 15,000,000 |      |  |   | 15,000,000 |  |  |                   | 14,958,380 |  |  |  | 4.7 | %
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                                             |  |                                 |  |                                                                          |  |          |            |  |                 |   | 15,000,000 |      |  |   | 15,000,000 |  |  |                   | 14,958,380 |  |  |  |     |  

See accompanying notes to consolidated financial
statements.



F-6



---

##### Table of Contents

|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|------------------------------------------------------------- |  | ---------------------------------------------------------- |  | ----------------------------------------------------------------------- |  | -------- | ---------- |  | --------------- | - | --------- | ---- |  | - | ---------- |  |  | ----------------- | --------- |  |  |  | --- | -
|Company(1)                                                    |  | Industry                                                   |  | Type of Investment                                                      |  | Maturity |            |  | Par/ShareAmount |   |           | Cost |  |   | Fair Value |  |  | %
ofNet Assets(2) |          
|F.H.G. Corp. Cornerstone Research                             |  | Beverage, Food, andTobacco                                 |  | Common Stock(3)(13)                                                     |  |          |            |  |                 | $ | 288       |      |  | $ | 300,000    |  |  | $                 | 300,000   |  |  |  | 0.1 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 288       |      |  |   | 300,000    |  |  |                   | 300,000   |  |  |  |     |  
|Flexera Software, Inc.(7)                                     |  | Electronics                                                |  | Senior Secured Second Lien Term Loans LIBOR + 7.000%, 1.000% Floor(8)   |  |          | 4/2/2021   |  |                 |   | 5,000,000 |      |  |   | 5,019,584  |  |  |                   | 5,009,115 |  |  |  | 1.6 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 5,000,000 |      |  |   | 5,019,584  |  |  |                   | 5,009,115 |  |  |  |     |  
|Gastar Exploration USA, Inc.(6)                               |  | Oil and Gas                                                |  | Senior Secured First Lien Notes 8.625%(9)(10)                           |  |          | 5/15/2018  |  |                 |   | 5,400,000 |      |  |   | 5,415,461  |  |  |                   | 5,656,760 |  |  |  | 1.8 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 5,400,000 |      |  |   | 5,415,461  |  |  |                   | 5,656,760 |  |  |  |     |  
|Genex Services, Inc.(7)                                       |  | Insurance                                                  |  | Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(8)   |  |          | 5/27/2022  |  |                 |   | 7,500,000 |      |  |   | 7,512,747  |  |  |                   | 7,425,474 |  |  |  | 2.3 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 7,500,000 |      |  |   | 7,512,747  |  |  |                   | 7,425,474 |  |  |  |     |  
|Gibson Escrow Corp.                                           |  | Personal andNondurableConsumer Products(ManufacturingOnly) |  | Senior Secured First Lien Notes 8.875%(9)                               |  |          | 8/1/2018   |  |                 |   | 2,500,000 |      |  |   | 2,603,642  |  |  |                   | 2,565,625 |  |  |  | 0.8 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 2,500,000 |      |  |   | 2,603,642  |  |  |                   | 2,565,625 |  |  |  |     |  
|Great Atlantic & Pacific Tea Company                          |  | Grocery                                                    |  | Senior Secured First Lien Term Loans LIBOR + 9.000%, 2.000% Floor(3)(5) |  |          | 3/13/2017  |  |                 |   | 927,106   |      |  |   | 940,817    |  |  |                   | 943,614   |  |  |  | 0.3 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 927,106   |      |  |   | 940,817    |  |  |                   | 943,614   |  |  |  |     |  
|Green Field Energy Services, Inc.                             |  | Oil and Gas                                                |  | Senior Secured First Lien Notes 13.000%(3)(9)(14)                       |  |          | 11/15/2016 |  |                 |   | 766,616   |      |  |   | 755,499    |  |  |                   | 318,145   |  |  |  | 0.1 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 766,616   |      |  |   | 755,499    |  |  |                   | 318,145   |  |  |  |     |  
|Green Field Energy Services, Inc., Warrants, expires 11/15/21 |  | Oil and Gas                                                |  | Warrants/Equity(3)(13)                                                  |  |          |            |  |                 |   | 709       |      |  |   | 29,000     |  |  |                   |          |  |  |  | 0.0 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 709       |      |  |   | 29,000     |  |  |                   |          |  |  |  |     |  
|Greenway Medical Technologies, Inc.(7)                        |  | Healthcare,Education, andChildcare                         |  | Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.000% Floor(8)   |  |          | 11/4/2021  |  |                 |   | 1,000,000 |      |  |   | 985,852    |  |  |                   | 1,000,000 |  |  |  | 0.3 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 1,000,000 |      |  |   | 985,852    |  |  |                   | 1,000,000 |  |  |  |     |  
|GTCR Valor Companies, Inc.                                    |  | Electronics                                                |  | Senior Secured First Lien Term Loans LIBOR + 5.000%, 1.000% Floor(4)(5) |  |          | 5/30/2021  |  |                 |   | 4,553,846 |      |  |   | 4,508,367  |  |  |                   | 4,508,308 |  |  |  | 1.4 | %
|                                                              |  |                                                            |  |                                                                         |  |          |           
|                                                              |  |                                                            |  | Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.000% Floor(5)   |  |          | 11/30/2021 |  |                 |   | 4,000,000 |      |  |   | 3,960,000  |  |  |                   | 3,960,000 |  |  |  | 1.2 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 8,553,846 |      |  |   | 8,468,367  |  |  |                   | 8,468,308 |  |  |  |     |  
|Healogics, Inc.                                               |  | Healthcare,Education, andChildcare                         |  | Senior Secured Second Lien Term Loans LIBOR + 8.000%, 1.250% Floor(15)  |  |          | 2/5/2020   |  |                 |   | 2,000,000 |      |  |   | 1,996,566  |  |  |                   | 2,040,000 |  |  |  | 0.6 | %
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   |           |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                                            |  |                                                                         |  |          |            |  |                 |   | 2,000,000 |      |  |   | 1,996,566  |  |  |                   | 2,040,000 |  |  |  |     |  

See accompanying notes to consolidated financial
statements.



F-7



---

##### Table of Contents

|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|------------------------------------- |  | ---------------------------------- |  | ------------------------------------------------------------------------ |  | -------- | ---------- |  | --------------- | - | ---------- | ---- |  | - | ---------- |  |  | ----------------- | --------- |  |  |  | --- | -
|Company(1)                            |  | Industry                           |  | Type of Investment                                                       |  | Maturity |            |  | Par/ShareAmount |   |            | Cost |  |   | Fair Value |  |  | %
ofNet Assets(2) |          
|Holland Acquisition Corp.             |  | Oil and Gas                        |  | Senior Secured First Lien Term Loans LIBOR + 9.000%, 1.000% Floor(8)     |  |          | 5/29/2018  |  |                 | $ | 5,000,000  |      |  | $ | 4,912,897  |  |  | $                 | 5,055,641 |  |  |  | 1.6 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 5,000,000  |      |  |   | 4,912,897  |  |  |                   | 5,055,641 |  |  |  |     |  
|Integra Telecom, Inc.                 |  | Telecommunications                 |  | Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.250% Floor(3)(5) |  |          | 2/22/2020  |  |                 |   | 1,618,000  |      |  |   | 1,608,495  |  |  |                   | 1,650,360 |  |  |  | 0.5 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 1,618,000  |      |  |   | 1,608,495  |  |  |                   | 1,650,360 |  |  |  |     |  
|Interface Security Systems, Inc.      |  | Electronics                        |  | Senior Secured First Lien Notes 9.250%(3)(9)                             |  |          | 1/15/2018  |  |                 |   | 3,417,000  |      |  |   | 3,470,194  |  |  |                   | 3,514,116 |  |  |  | 1.1 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 3,417,000  |      |  |   | 3,470,194  |  |  |                   | 3,514,116 |  |  |  |     |  
|IronGate Energy Services, LLC         |  | Oil and Gas                        |  | Senior Secured First Lien Notes 11.000%(9)                               |  |          | 7/1/2018   |  |                 |   | 3,000,000  |      |  |   | 2,952,922  |  |  |                   | 3,025,824 |  |  |  | 1.0 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 3,000,000  |      |  |   | 2,952,922  |  |  |                   | 3,025,824 |  |  |  |     |  
|Isola USA(7)                          |  | Electronics                        |  | Senior Secured First Lien Term Loans LIBOR + 8.250%, 1.000% Floor(8)     |  |          | 11/29/2018 |  |                 |   | 5,949,843  |      |  |   | 6,092,562  |  |  |                   | 6,119,068 |  |  |  | 1.9 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 5,949,843  |      |  |   | 6,092,562  |  |  |                   | 6,119,068 |  |  |  |     |  
|Kik Custom Products, Inc.             |  | Healthcare,Education, andChildcare |  | Senior Secured Second Lien Term Loans LIBOR + 8.250%, 1.250% Floor(15)   |  |          | 10/29/2019 |  |                 |   | 5,000,000  |      |  |   | 4,990,800  |  |  |                   | 5,004,022 |  |  |  | 1.6 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 5,000,000  |      |  |   | 4,990,800  |  |  |                   | 5,004,022 |  |  |  |     |  
|Linc Energy Finance (USA), Inc.       |  | Oil and Gas                        |  | Senior Secured First Lien Notes 12.500%(3) (9)                           |  |          | 10/31/2017 |  |                 |   | 500,000    |      |  |   | 498,518    |  |  |                   | 549,164   |  |  |  | 0.2 | %
|                                      |  |                                    |  |                                                                          |  |          |           
|                                      |  |                                    |  | Senior Secured First Lien Notes 12.500%(3)                               |  |          | 10/31/2017 |  |                 |   | 500,000    |      |  |   | 486,733    |  |  |                   | 549,164   |  |  |  | 0.2 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 1,000,000  |      |  |   | 985,251    |  |  |                   | 1,098,328 |  |  |  |     |  
|Liquidnet Holdings, Inc.              |  | Finance                            |  | Senior Secured First Lien Term Loans LIBOR + 6.750%, 1.000% Floor(5)     |  |          | 5/22/2019  |  |                 |   | 7,000,000  |      |  |   | 6,896,769  |  |  |                   | 6,979,981 |  |  |  | 2.2 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 7,000,000  |      |  |   | 6,896,769  |  |  |                   | 6,979,981 |  |  |  |     |  
|Livingston International,
Inc.(6) (7) |  | Cargo Transport                    |  | Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.250% Floor(8)    |  |          | 4/18/2020  |  |                 |   | 2,658,504  |      |  |   | 2,653,994  |  |  |                   | 2,685,089 |  |  |  | 0.8 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 2,658,504  |      |  |   | 2,653,994  |  |  |                   | 2,685,089 |  |  |  |     |  
|LTCG Holdings Corp.                   |  | Healthcare,Education, andChildcare |  | Senior Secured Second Lien Term Loans LIBOR + 5.000%, 1.000% Floor(8)    |  |          | 6/9/2020   |  |                 |   | 4,000,000  |      |  |   | 3,980,195  |  |  |                   | 3,980,000 |  |  |  | 1.3 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 4,000,000  |      |  |   | 3,980,195  |  |  |                   | 3,980,000 |  |  |  |     |  
|Newpage Corp.                         |  | Containers,Packaging, andGlass     |  | Senior Secured First Lien Term Loans LIBOR + 8.250%, 1.250% Floor(8)     |  |          | 2/11/2021  |  |                 |   | 10,000,000 |      |  |   | 9,872,769  |  |  |                   | 9,878,168 |  |  |  | 3.1 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 10,000,000 |      |  |   | 9,872,769  |  |  |                   | 9,878,168 |  |  |  |     |  
|Omnitracs, Inc.                       |  | Electronics                        |  | Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(8)    |  |          | 4/29/2020  |  |                 |   | 7,000,000  |      |  |   | 7,014,850  |  |  |                   | 7,070,000 |  |  |  | 2.2 | %
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   |            |      |  |   |            |  |  |                   |           |  |  |  |     |  
|                                      |  |                                    |  |                                                                          |  |          |            |  |                 |   | 7,000,000  |      |  |   | 7,014,850  |  |  |                   | 7,070,000 |  |  |  |     |  

See accompanying notes to consolidated financial
statements.



F-8



---

##### Table of Contents

|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|--------------------------- |  | ----------------------------------------- |  | ------------------------------------------------------------------------------- |  | -------- | --------- |  | --------------- | - | ---------- | ---- |  | - | ---------- |  |  | ----------------- | ---------- |  |  |  | --- | -
|Company(1)                  |  | Industry                                  |  | Type of Investment                                                              |  | Maturity |           |  | Par/ShareAmount |   |            | Cost |  |   | Fair Value |  |  | %
ofNet Assets(2) |           
|Pangea Finance, LLC         |  | Electronics                               |  | Senior Secured Second Lien Term Loans LIBOR + 10.750%, 1.000% Floor(8)          |  |          | 4/3/2020  |  |                 | $ | 7,500,000  |      |  | $ | 7,353,987  |  |  | $                 | 7,353,668  |  |  |  | 2.3 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 7,500,000  |      |  |   | 7,353,987  |  |  |                   | 7,353,668  |  |  |  |     |  
|RCS Capital Corp.(6)        |  | Finance                                   |  | Senior Secured Second Lien Term Loans LIBOR + 9.250%, 1.000% Floor(3)(5)        |  |          | 4/29/2021 |  |                 |   | 1,800,000  |      |  |   | 1,800,000  |  |  |                   | 1,800,000  |  |  |  | 0.6 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 1,800,000  |      |  |   | 1,800,000  |  |  |                   | 1,800,000  |  |  |  |     |  
|Reddy Ice Group, Inc.       |  | Beverage, Food, andTobacco                |  | Senior Secured Second Lien Term Loans LIBOR + 9.500%, 1.250% Floor(3)(5)        |  |          | 10/1/2019 |  |                 |   | 2,000,000  |      |  |   | 2,000,000  |  |  |                   | 1,930,557  |  |  |  | 0.6 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 2,000,000  |      |  |   | 2,000,000  |  |  |                   | 1,930,557  |  |  |  |     |  
|Response Team Holdings, LLC |  | Buildings and RealEstate                  |  | Preferred Equity 12% PIK(3)                                                     |  |          |           |  |                 |   | 2,865,852  |      |  |   | 2,608,445  |  |  |                   | 2,685,964  |  |  |  | 0.8 | %
|                            |  |                                           |  |                                                                                 |  |          |          
|                            |  |                                           |  | Senior Secured First Lien Term Loans LIBOR + 8.500%, 2.000% Floor, 1% PIK(3)(5) |  |          | 3/28/2019 |  |                 |   | 11,131,183 |      |  |   | 11,131,183 |  |  |                   | 11,294,309 |  |  |  | 3.5 | %
|                            |  |                                           |  |                                                                                 |  |          |          
|                            |  |                                           |  | Warrants to purchase 3.70% of the outstanding common units(3)(13)               |  |          |           |  |                 |   |           |      |  |   | 257,407    |  |  |                   | 257,407    |  |  |  | 0.1 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 13,997,035 |      |  |   | 13,997,035 |  |  |                   | 14,237,680 |  |  |  |     |  
|School Specialty, Inc.      |  | Healthcare,Education, andChildcare        |  | Senior Secured First Lien Term Loans LIBOR + 8.500%, 1.000% Floor(8)            |  |          | 6/11/2019 |  |                 |   | 5,954,925  |      |  |   | 5,844,836  |  |  |                   | 5,956,771  |  |  |  | 1.9 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 5,954,925  |      |  |   | 5,844,836  |  |  |                   | 5,956,771  |  |  |  |     |  
|Securus Technologies, Inc.  |  | Telecommunications                        |  | Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.250% Floor(8)           |  |          | 4/30/2021 |  |                 |   | 2,000,000  |      |  |   | 1,982,120  |  |  |                   | 2,038,528  |  |  |  | 0.6 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 2,000,000  |      |  |   | 1,982,120  |  |  |                   | 2,038,528  |  |  |  |     |  
|Sizzling Platter, LLC       |  | Beverage, Food, andTobacco                |  | Senior Secured Second Lien Term Loans LIBOR + 7.500%, 1.000% Floor(5)           |  |          | 4/28/2019 |  |                 |   | 15,000,000 |      |  |   | 15,000,000 |  |  |                   | 15,000,000 |  |  |  | 4.7 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 15,000,000 |      |  |   | 15,000,000 |  |  |                   | 15,000,000 |  |  |  |     |  
|Tectum Holdings, Inc.       |  | Automobile                                |  | Senior Secured Second Lien Term Loans LIBOR + 8.000%, 1.000% Floor(8)           |  |          | 3/12/2019 |  |                 |   | 12,500,000 |      |  |   | 12,500,000 |  |  |                   | 12,500,000 |  |  |  | 3.9 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 12,500,000 |      |  |   | 12,500,000 |  |  |                   | 12,500,000 |  |  |  |     |  
|Tempel Steel Company        |  | Mining, Steel, Iron,and NonpreciousMetals |  | Senior Secured First Lien Notes
12.000%(3)(9)                                   |  |          | 8/15/2016 |  |                 |   | 1,115,000  |      |  |   | 1,107,255  |  |  |                   | 1,080,155  |  |  |  | 0.3 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 1,115,000  |      |  |   | 1,107,255  |  |  |                   | 1,080,155  |  |  |  |     |  
|Travelclick, Inc.(7)        |  | Hotels, Motels, Inns,and Gaming           |  | Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.000% Floor(15)          |  |          | 2/19/2019 |  |                 |   | 6,000,000  |      |  |   | 5,910,854  |  |  |                   | 5,910,703  |  |  |  | 1.9 | %
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   |            |      |  |   |            |  |  |                   |            |  |  |  |     |  
|                            |  |                                           |  |                                                                                 |  |          |           |  |                 |   | 6,000,000  |      |  |   | 5,910,854  |  |  |                   | 5,910,703  |  |  |  |     |  

See accompanying notes to consolidated financial
statements.



F-9



---

##### Table of Contents

|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|----------------------------------------------------- |  | ---------------------------------------------------------- | - | ------------------------------------------------------------------------ |  | -------- | --------- | --------- | --------------- | - | ---------- | -------------- | ----------- | - | --------------------- | - | ----------- | ----------------- | ---------- |  | ----- | - | --- | -
|Company(1)                                            |  | Industry                                                   |   | Type of Investment                                                       |  | Maturity |           |           | Par/ShareAmount |   |            | Cost           |             |   | Fair Value            |   |             | %
ofNet Assets(2) |           
|True Religion Apparel, Inc.                           |  | Personal andNondurableConsumer Products(ManufacturingOnly) |   | Senior Secured Second Lien Term Loans LIBOR + 10.000%, 1.000% Floor(5)   |  |          | 1/30/2020 |           |                 | $ | 4,000,000  |                |             | $ | 3,844,348             |   |             | $                 | 3,811,911  |  |       |   | 1.2 | %
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   | 4,000,000  |                |             |   | 3,844,348             |   |             |                   | 3,811,911  |  |       |   |     |  
|U.S. Well Services, LLC, Warrants, expires
2/15/19(6) |  | Oil and Gas                                                |   | Warrants/Equity (3) (13)                                                 |  |          |           |           |                 |   | 1,731      |                |             |   | 173                   |   |             |                   | 450,060    |  |       |   | 0.1 | %
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   | 1,731      |                |             |   | 173                   |   |             |                   | 450,060    |  |       |   |     |  
|Valence Surface Technologies, Inc.                    |  | Chemicals, Plastics,and Rubber                             |   | Senior Secured Second Lien Term Loans LIBOR + 5.500%, 1.000% Floor(4)(5) |  |          | 6/12/2019 |           |                 |   | 8,928,607  |                |             |   | 8,854,377             |   |             |                   | 8,861,631  |  |       |   | 2.8 | %
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   | 8,928,607  |                |             |   | 8,854,377             |   |             |                   | 8,861,631  |  |       |   |     |  
|Velocity Pooling Vehicle, LLC                         |  | Automobile                                                 |   | Senior Secured Second Lien Term Loans LIBOR + 7.250%, 1.000% Floor(3)(8) |  |          | 5/14/2022 |           |                 |   | 20,625,000 |                |             |   | 17,744,711            |   |             |                   | 17,739,173 |  |       |   | 5.6 | %
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   | 20,625,000 |                |             |   | 17,744,711            |   |             |                   | 17,739,173 |  |       |   |     |  
|YP LLC(7)                                             |  | Business Services                                          |   | Senior Secured First Lien Term Loans LIBOR + 6.750%, 1.000% Floor(8)     |  |          | 6/4/2018  |           |                 |   | 5,521,739  |                |             |   | 5,567,602             |   |             |                   | 5,580,363  |  |       |   | 1.8 | %
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   | 5,521,739  |                |             |   | 5,567,602             |   |             |                   | 5,580,363  |  |       |   |     |  
|Total non-controlled/non-affiliated investments       |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            | $              | 328,287,381 |   |                       | $ | 329,329,420 |                   |            |  | 103.3 | %
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|                                                      |  |                                                            |   |                                                                          |  |          |          
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            | NotionalAmount |             |   | UnrealizedGain (Loss) |   |             |                   |           
|Derivative Instrument  Long Exposure                 |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            | 
|Total return swap with Citibank, N.A.(Note 5)         |  | Total Return Swap                                          |   |                                                                          |  |          |           |           |                 |   |            | $              | 159,382,453 |   |                       | $ | 1,269,417   |                   |            |  |       |  
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  
|                                                      |  |                                                            | $ | 159,382,453                                                              |  |          | $         | 1,269,417 |                 |   |            |                |            
|                                                      |  |                                                            |   |                                                                          |  |          |           |           |                 |   |            |                |             |   |                       |   |             |                   |            |  |       |   |     |  



|(1) | All of our investments are domiciled in the United States except for Atrium Innovations, Inc. and Livingston International, Inc. which are domiciled in Canada.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Percentage is based on net assets of $318,696,039 as of June 30, 2014.
|--- | ----------------------------------------------------------------------

|(3) | An affiliated fund that is managed by an affiliate of SIC Advisors LLC also holds an investment in this security.
|--- | -----------------------------------------------------------------------------------------------------------------

|(4) | The investment has an unfunded commitment as of June 30, 2014 which is excluded from the presentation (see Note 11).
|--- | --------------------------------------------------------------------------------------------------------------------

|(5) | The interest rate on these loans is subject to a base rate plus 1M LIBOR, which at June 30, 2014 was 0.16%. As the interest rate is subject to a minimum LIBOR floor
which was greater than the 1M LIBOR rate at June 30, 2014, the prevailing rate in effect at June 30, 2014 was the base rate plus the LIBOR floor.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The investment is not a qualifying asset under Section 55 of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 9.3% of the Companys
portfolio at fair value.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Security is also a part of the underlying portfolio of the total return swap with Citibank, N.A. (see Note 5). The Companys total exposure to Alcatel-Lucent USA,
Inc., Collective Brands Finance, Inc., Encompass Digital Media, Inc., Flexera Software, LLC, Genex Holdings, Inc., Greenway Medical Technologies, Inc., Isola USA Corp., Livingston International, Inc., TravelCLICK, Inc., and YP, LLC is $5,982,442 or
1.88%, $11,968,243 or 3.76%, $6,475,069 or 2.03%, $7,275,990 or 2.28%, $9,415,474 or 2.95%, $2,481,288 or 0.78%, $10,034,443 or 3.15%, $4,654,532 or 1.46%, $20,760,703 or 6.51%, and $11,143,515 or 3.50%, respectively, of Net Assets as of
June 30, 2014.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | The interest rate on these loans is subject to a base rate plus 3M LIBOR, which at June 30, 2014 was 0.23%. As the interest rate is subject to a minimum LIBOR floor
which was greater than the 3M LIBOR rate at June 30, 2014, the prevailing rate in effect at June 30, 2014 was the base rate plus the LIBOR floor.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities represent a fair value of $24,030,924 and 7.5% of net assets as
of June 30, 2014 and are considered restricted.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



F-10



---

##### Table of Contents

|(10) | Represents securities in Level 2 in the ASC 820 table (see Note 4).
|---- | -------------------------------------------------------------------

|(11) | The interest rate on these loans is subject to a base rate plus 1Y LIBOR, which at June 30, 2014 was 0.55%. As the interest rate is subject to a minimum LIBOR floor
which was greater than the 1Y LIBOR rate at June 30, 2014, the prevailing rate in effect at June 30, 2014 was the base rate plus the LIBOR floor.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | The base rate in effect as of June 30, 2014 was 3.25%.
|---- | ------------------------------------------------------

|(13) | Security is non-income producing.
|---- | ---------------------------------

|(14) | The investment was on non-accrual status as of June 30, 2014.
|---- | -------------------------------------------------------------

|(15) | The interest rate on these loans is subject to a base rate plus 6M LIBOR, which at June 30, 2014 was 0.33%. As the interest rate is subject to a minimum LIBOR floor
which was greater than the 6M LIBOR rate at June 30, 2014, the prevailing rate in effect at June 30, 2014 was the base rate plus the LIBOR floor.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|1M | 1 Month
|-- | -------

|1Y | 1 Year
|-- | ------

|3M | 3 Month
|-- | -------

|6M | 6 Month
|-- | -------

|LIBOR | London Interbank Offered Rate
|----- | -----------------------------







See accompanying notes to consolidated financial statements.



F-11



---

##### Table of Contents

Sierra Income Corporation

Consolidated Schedule of Investments

As of December 31, 2013



|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|------------------------------------------------- |  | ------------------------------------------------------ |  | --------------------------------------------------------------------- |  | -------- | ---------- |  | --------- | - | --------- | ---- |  | - | --------- |  |  | ----------------- | --------- |  |  |  | --- | -
|Company(1)                                        |  | Industry                                               |  | Type of Investment                                                    |  | Maturity |            |  | ParAmount |   |           | Cost |  |   | FairValue |  |  | % ofNet Assets(2) |          
|Non-controlled/non-affiliated investments  90.1% |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  | 
|Access Media 3, Inc.                              |  | Telecommunications                                     |  | Senior Secured First Lien Term Loans 10.00%(3)                        |  |          | 10/22/2018 |  |           | $ | 7,000,000 |      |  | $ | 7,000,000 |  |  | $                 | 7,000,000 |  |  |  | 4.6 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 7,000,000 |      |  |   | 7,000,000 |  |  |                   | 7,000,000 |  |  |  |     |  
|Aderant North America, Inc.                       |  | Electronics                                            |  | Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.250% Floor(3) |  |          | 6/20/2019  |  |           |   | 450,000   |      |  |   | 450,000   |  |  |                   | 453,861   |  |  |  | 0.3 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 450,000   |      |  |   | 450,000   |  |  |                   | 453,861   |  |  |  |     |  
|Alcatel  Lucent USA, Inc.                        |  | Telecommunications                                     |  | Senior Secured First Lien Term Loans LIBOR + 4.750%, 1.000% Floor     |  |          | 1/30/2019  |  |           |   | 990,000   |      |  |   | 985,662   |  |  |                   | 993,712   |  |  |  | 0.6 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 990,000   |      |  |   | 985,662   |  |  |                   | 993,712   |  |  |  |     |  
|ALG USA Holdings, Inc.                            |  | Leisure, Amusement, Motion Pictures, and Entertainment |  | Senior Secured Second Lien Term Loans LIBOR + 9.000%, 1.250% Floor    |  |          | 2/28/2020  |  |           |   | 2,000,000 |      |  |   | 1,963,092 |  |  |                   | 2,007,080 |  |  |  | 1.3 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 2,000,000 |      |  |   | 1,963,092 |  |  |                   | 2,007,080 |  |  |  |     |  
|Allen Edmonds Corp.                               |  | Retail Stores                                          |  | Senior Secured Second Lien Term Loans LIBOR + 9.00%, 1.00% Floor(3)   |  |          | 5/27/2019  |  |           |   | 7,000,000 |      |  |   | 7,000,000 |  |  |                   | 7,000,000 |  |  |  | 4.6 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 7,000,000 |      |  |   | 7,000,000 |  |  |                   | 7,000,000 |  |  |  |     |  
|American Apparel, Inc.                            |  | Retail Stores                                          |  | Senior Secured First Lien Notes 13.000%(3)(4)                         |  |          | 4/15/2020  |  |           |   | 2,500,000 |      |  |   | 2,459,496 |  |  |                   | 2,300,000 |  |  |  | 1.5 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 2,500,000 |      |  |   | 2,459,496 |  |  |                   | 2,300,000 |  |  |  |     |  
|Ascensus, Inc.                                    |  | Finance                                                |  | Senior Secured Second Lien Term Loans LIBOR + 8.00%, 1.00% Floor      |  |          | 12/2/2020  |  |           |   | 4,000,000 |      |  |   | 3,940,522 |  |  |                   | 3,940,522 |  |  |  | 2.6 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 4,000,000 |      |  |   | 3,940,522 |  |  |                   | 3,940,522 |  |  |  |     |  
|Associated Asphalt Partners LLC                   |  | Chemicals, Plastics, and Rubber                        |  | Senior Secured First Lien Notes 8.500%(4)                             |  |          | 2/15/2018  |  |           |   | 5,000,000 |      |  |   | 5,036,563 |  |  |                   | 5,130,000 |  |  |  | 3.3 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 5,000,000 |      |  |   | 5,036,563 |  |  |                   | 5,130,000 |  |  |  |     |  
|Bennu Oil & Gas, LLC                              |  | Oil and Gas                                            |  | Senior Secured Second Lien Term Loans LIBOR + 9.00%, 1.25% Floor      |  |          | 11/1/2018  |  |           |   | 1,122,857 |      |  |   | 1,113,148 |  |  |                   | 1,113,148 |  |  |  | 0.7 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 1,122,857 |      |  |   | 1,113,148 |  |  |                   | 1,113,148 |  |  |  |     |  
|Bon-Ton Stores, Inc.(5)                           |  | Retail Stores                                          |  | Senior Secured Second Lien Notes 10.625%                              |  |          | 7/15/2017  |  |           |   | 1,698,000 |      |  |   | 1,622,374 |  |  |                   | 1,695,844 |  |  |  | 1.1 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 1,698,000 |      |  |   | 1,622,374 |  |  |                   | 1,695,844 |  |  |  |     |  
|Caesars Entertainment Operating Co., Inc.         |  | Hotels, Motels, Inns, and Gaming                       |  | Senior Secured First Lien Notes 11.250%(5)                            |  |          | 6/1/2017   |  |           |   | 3,000,000 |      |  |   | 3,153,543 |  |  |                   | 3,056,250 |  |  |  | 2.0 | %
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   |           |      |  |   |           |  |  |                   |           |  |  |  |     |  
|                                                  |  |                                                        |  |                                                                       |  |          |            |  |           |   | 3,000,000 |      |  |   | 3,153,543 |  |  |                   | 3,056,250 |  |  |  |     |  



F-12



---

##### Table of Contents

|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|--------------------------------------- |  | -------------------------------------------------------------- |  | -------------------------------------------------------------------- |  | -------- | ---------- |  | --------- |  | --------- | ---- |  |  | --------- |  |  | ----------------- | --------- |  |  |  | --- | -
|Company(1)                              |  | Industry                                                       |  | Type of Investment                                                   |  | Maturity |            |  | ParAmount |  |           | Cost |  |  | FairValue |  |  | % ofNet Assets(2) |          
|Charming Charlie, Inc.                  |  | Retail Stores                                                  |  | Senior Secured First Lien Term Loans LIBOR + 8.00%, 1.00% Floor      |  |          | 1/9/2019   |  |           |  | 6,000,000 |      |  |  | 6,000,000 |  |  |                   | 6,000,000 |  |  |  | 3.9 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 6,000,000 |      |  |  | 6,000,000 |  |  |                   | 6,000,000 |  |  |  |     |  
|Checkers Drive-In Restaurants, Inc.     |  | Beverage, Food, and Tobacco                                    |  | Senior Secured First Lien Notes 11.000%(4)                           |  |          | 12/1/2017  |  |           |  | 1,500,000 |      |  |  | 1,504,143 |  |  |                   | 1,614,675 |  |  |  | 1.1 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 1,500,000 |      |  |  | 1,504,143 |  |  |                   | 1,614,675 |  |  |  |     |  
|Cornerstone Chemical Company            |  | Chemicals, Plastics, and Rubber                                |  | Senior Secured First Lien Notes 9.375%                               |  |          | 3/15/2018  |  |           |  | 2,000,000 |      |  |  | 2,000,000 |  |  |                   | 2,080,000 |  |  |  | 1.4 | %
|                                        |  |                                                                |  | Senior Secured First Lien Notes 9.375%(4)                            |  |          | 3/15/2018  |  |           |  | 2,500,000 |      |  |  | 2,611,122 |  |  |                   | 2,600,000 |  |  |  | 1.7 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 4,500,000 |      |  |  | 4,611,122 |  |  |                   | 4,680,000 |  |  |  |     |  
|Deltek, Inc.                            |  | Electronics                                                    |  | Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.250% Floor   |  |          | 10/10/2019 |  |           |  | 3,000,000 |      |  |  | 2,978,006 |  |  |                   | 3,034,560 |  |  |  | 2.0 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 3,000,000 |      |  |  | 2,978,006 |  |  |                   | 3,034,560 |  |  |  |     |  
|Dispensing Dynamics International, Inc. |  | Personal and Nondurable Consumer Products (Manufacturing Only) |  | Senior Secured First Lien Notes 12.500%(4)                           |  |          | 1/1/2018   |  |           |  | 2,200,000 |      |  |  | 2,179,668 |  |  |                   | 2,223,342 |  |  |  | 1.4 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 2,200,000 |      |  |  | 2,179,668 |  |  |                   | 2,223,342 |  |  |  |     |  
|Drew Marine Partners LP                 |  | Cargo Transport                                                |  | Senior Secured Second Lien Term Loans LIBOR + 7.00%, 1.00% Floor     |  |          | 5/19/2021  |  |           |  | 3,000,000 |      |  |  | 2,992,638 |  |  |                   | 2,992,638 |  |  |  | 2.0 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 3,000,000 |      |  |  | 2,992,638 |  |  |                   | 2,992,638 |  |  |  |     |  
|EarthLink, Inc.                         |  | Telecommunications                                             |  | Senior Secured First Lien Notes 7.375%(4)(5)                         |  |          | 6/1/2020   |  |           |  | 2,450,000 |      |  |  | 2,437,636 |  |  |                   | 2,453,062 |  |  |  | 1.6 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 2,450,000 |      |  |  | 2,437,636 |  |  |                   | 2,453,062 |  |  |  |     |  
|Erickson Air-Crane, Inc.(5)             |  | Aerospace and Defense                                          |  | Senior Secured Second Lien Notes 8.250%(4)                           |  |          | 5/1/2020   |  |           |  | 1,953,000 |      |  |  | 1,966,979 |  |  |                   | 2,016,472 |  |  |  | 1.3 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 1,953,000 |      |  |  | 1,966,979 |  |  |                   | 2,016,472 |  |  |  |     |  
|Gastar Exploration USA, Inc.(5)         |  | Oil and Gas                                                    |  | Senior Secured First Lien Notes 8.625%(4)                            |  |          | 5/15/2018  |  |           |  | 3,000,000 |      |  |  | 3,000,000 |  |  |                   | 2,958,750 |  |  |  | 1.9 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 3,000,000 |      |  |  | 3,000,000 |  |  |                   | 2,958,750 |  |  |  |     |  
|Gibson Brands, Inc.                     |  | Personal and Nondurable Consumer Products (Manufacturing Only) |  | Senior Secured First Lien Notes 8.875%(4)                            |  |          | 8/1/2018   |  |           |  | 3,000,000 |      |  |  | 3,056,289 |  |  |                   | 3,069,270 |  |  |  | 2.0 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 3,000,000 |      |  |  | 3,056,289 |  |  |                   | 3,069,270 |  |  |  |     |  
|Great Atlantic & Pacific Tea Company    |  | Grocery                                                        |  | Senior Secured First Lien Term Loans LIBOR + 9.000%, 2.000% Floor(3) |  |          | 3/13/2017  |  |           |  | 932,467   |      |  |  | 948,787   |  |  |                   | 952,002   |  |  |  | 0.6 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 932,467   |      |  |  | 948,787   |  |  |                   | 952,002   |  |  |  |     |  
|Green Field Energy Services, Inc.       |  | Oil and Gas                                                    |  | Senior Secured First Lien Notes 13.000%(3)(4)                        |  |          | 11/15/2016 |  |           |  | 766,616   |      |  |  | 755,914   |  |  |                   | 322,744   |  |  |  | 0.2 | %
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                        |  |                                                                |  |                                                                      |  |          |            |  |           |  | 766,616   |      |  |  | 755,914   |  |  |                   | 322,744   |  |  |  |     |  



F-13



---

##### Table of Contents

|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|------------------------------------------------------------- |  | ------------------------------------ |  | --------------------------------------------------------------------- |  | -------- | ---------- |  | --------- |  | --------- | ---- |  |  | --------- |  |  | ----------------- | --------- |  |  |  | --- | -
|Company(1)                                                    |  | Industry                             |  | Type of Investment                                                    |  | Maturity |            |  | ParAmount |  |           | Cost |  |  | FairValue |  |  | % ofNet Assets(2) |          
|Green Field Energy Services, Inc., Warrants, expires 11/15/21 |  | Oil and Gas                          |  | Warrants/Equity(3)(6)                                                 |  |          |            |  |           |  | 709       |      |  |  | 29,000    |  |  |                   |          |  |  |  | 0.0 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 709       |      |  |  | 29,000    |  |  |                   |          |  |  |  |     |  
|Greenway Medical Technologies, Inc.(7)                        |  | Healthcare, Education, and Childcare |  | Senior Secured Second Lien Term Loans LIBOR + 8.25%, 1.00% Floor      |  |          | 11/4/2021  |  |           |  | 1,000,000 |      |  |  | 985,218   |  |  |                   | 985,218   |  |  |  | 0.6 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 1,000,000 |      |  |  | 985,218   |  |  |                   | 985,218   |  |  |  |     |  
|Healogics, Inc.                                               |  | Healthcare, Education, and Childcare |  | Senior Secured Second Lien Term Loans LIBOR + 8.000%, 1.250% Floor    |  |          | 2/5/2020   |  |           |  | 2,000,000 |      |  |  | 1,996,440 |  |  |                   | 2,040,000 |  |  |  | 1.3 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 2,000,000 |      |  |  | 1,996,440 |  |  |                   | 2,040,000 |  |  |  |     |  
|Holland Acquisition Corp.                                     |  | Oil and Gas                          |  | Senior Secured First Lien Term Loans LIBOR + 9.000%, 1.000% Floor     |  |          | 5/29/2018  |  |           |  | 5,000,000 |      |  |  | 4,904,352 |  |  |                   | 4,917,000 |  |  |  | 3.2 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 5,000,000 |      |  |  | 4,904,352 |  |  |                   | 4,917,000 |  |  |  |     |  
|IDQ Holdings, Inc.                                            |  | Automobile                           |  | Senior Secured First Lien Notes 11.500%(4)                            |  |          | 4/1/2017   |  |           |  | 1,000,000 |      |  |  | 1,035,523 |  |  |                   | 1,066,250 |  |  |  | 0.7 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 1,000,000 |      |  |  | 1,035,523 |  |  |                   | 1,066,250 |  |  |  |     |  
|Integra Telecom, Inc.                                         |  | Telecommunications                   |  | Senior Secured Second Lien Term Loans LIBOR + 8.500%, 1.250% Floor(3) |  |          | 2/22/2020  |  |           |  | 1,618,000 |      |  |  | 1,607,900 |  |  |                   | 1,650,360 |  |  |  | 1.1 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 1,618,000 |      |  |  | 1,607,900 |  |  |                   | 1,650,360 |  |  |  |     |  
|Interface Security Systems, Inc.                              |  | Electronics                          |  | Senior Secured First Lien Notes 9.250%(3)(4)                          |  |          | 1/15/2018  |  |           |  | 3,417,000 |      |  |  | 3,476,530 |  |  |                   | 3,492,550 |  |  |  | 2.3 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 3,417,000 |      |  |  | 3,476,530 |  |  |                   | 3,492,550 |  |  |  |     |  
|IronGate Energy Services LLC                                  |  | Oil and Gas                          |  | Senior Secured First Lien Notes 11.000%(4)                            |  |          | 7/1/2018   |  |           |  | 3,000,000 |      |  |  | 2,948,441 |  |  |                   | 3,029,850 |  |  |  | 2.0 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 3,000,000 |      |  |  | 2,948,441 |  |  |                   | 3,029,850 |  |  |  |     |  
|Keystone Automotive Operations, Inc.                          |  | Automobile                           |  | Senior Secured Second Lien Term Loans LIBOR + 9.500%, 1.250% Floor    |  |          | 8/15/2020  |  |           |  | 5,000,000 |      |  |  | 5,000,000 |  |  |                   | 5,053,000 |  |  |  | 3.3 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 5,000,000 |      |  |  | 5,000,000 |  |  |                   | 5,053,000 |  |  |  |     |  
|Kik Custom Products, Inc.                                     |  | Healthcare, Education, and Childcare |  | Senior Secured Second Lien Term Loans LIBOR + 8.25%, 1.25% Floor      |  |          | 10/29/2019 |  |           |  | 3,000,000 |      |  |  | 2,970,000 |  |  |                   | 2,970,000 |  |  |  | 1.9 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 3,000,000 |      |  |  | 2,970,000 |  |  |                   | 2,970,000 |  |  |  |     |  
|Linc Energy Finance (USA), Inc.                               |  | Oil and Gas                          |  | Senior Secured First Lien Notes 12.500%(3)(4)                         |  |          | 10/31/2017 |  |           |  | 500,000   |      |  |  | 498,368   |  |  |                   | 545,925   |  |  |  | 0.4 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  | Senior Secured First Lien Notes 12.500%(3)                            |  |          | 10/31/2017 |  |           |  | 500,000   |      |  |  | 485,222   |  |  |                   | 545,925   |  |  |  | 0.4 | %
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                                              |  |                                      |  |                                                                       |  |          |            |  |           |  | 1,000,000 |      |  |  | 983,590   |  |  |                   | 1,091,850 |  |  |  |     |  



F-14



---

##### Table of Contents

|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|----------------------------------- |  | ------------------------------------------- |  | --------------------------------------------------------------------- |  | -------- | ---------- |  | --------- |  | --------- | ---- |  |  | --------- |  |  | ----------------- | --------- |  |  |  | --- | -
|Company(1)                          |  | Industry                                    |  | Type of Investment                                                    |  | Maturity |            |  | ParAmount |  |           | Cost |  |  | FairValue |  |  | % ofNet Assets(2) |          
|Liquidnet Holdings, Inc.            |  | Finance                                     |  | Senior Secured First Lien Term Loans LIBOR + 8.000%, 1.250% Floor     |  |          | 5/7/2017   |  |           |  | 2,887,500 |      |  |  | 2,862,362 |  |  |                   | 2,867,576 |  |  |  | 1.9 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,887,500 |      |  |  | 2,862,362 |  |  |                   | 2,867,576 |  |  |  |     |  
|Livingston International, Inc.(7)   |  | Cargo Transport                             |  | Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.250% Floor(5) |  |          | 4/18/2020  |  |           |  | 2,658,504 |      |  |  | 2,653,733 |  |  |                   | 2,685,089 |  |  |  | 1.8 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,658,504 |      |  |  | 2,653,733 |  |  |                   | 2,685,089 |  |  |  |     |  
|Maxim Crane Works Holdings, Inc.(7) |  | Oil and Gas                                 |  | Senior Secured Second Lien Notes 12.250%(4)                           |  |          | 4/15/2015  |  |           |  | 1,500,000 |      |  |  | 1,519,124 |  |  |                   | 1,542,360 |  |  |  | 1.0 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 1,500,000 |      |  |  | 1,519,124 |  |  |                   | 1,542,360 |  |  |  |     |  
|Michael Baker International, Inc.   |  | Diversified/Conglomerate Service            |  | Senior Secured First Lien Notes 8.25%(4)                              |  |          | 10/15/2018 |  |           |  | 2,500,000 |      |  |  | 2,500,000 |  |  |                   | 2,511,528 |  |  |  | 1.6 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,500,000 |      |  |  | 2,500,000 |  |  |                   | 2,511,528 |  |  |  |     |  
|Omnitracs, Inc.                     |  | Electronics                                 |  | Senior Secured Second Lien Term Loans LIBOR + 7.75%, 1.00% Floor      |  |          | 4/29/2020  |  |           |  | 7,000,000 |      |  |  | 7,015,128 |  |  |                   | 7,015,128 |  |  |  | 4.6 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 7,000,000 |      |  |  | 7,015,128 |  |  |                   | 7,015,128 |  |  |  |     |  
|Prince Minerals Holding Corp.       |  | Mining, Steel, Iron, and Nonprecious Metals |  | Senior Secured First Lien Notes 11.500%(3)(4)                         |  |          | 12/15/2019 |  |           |  | 1,200,000 |      |  |  | 1,187,246 |  |  |                   | 1,310,568 |  |  |  | 0.9 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 1,200,000 |      |  |  | 1,187,246 |  |  |                   | 1,310,568 |  |  |  |     |  
|Reddy Ice Group, Inc.               |  | Beverage, Food, and Tobacco                 |  | Senior Secured Second Lien Term Loans LIBOR + 9.500%, 1.250% Floor(3) |  |          | 10/1/2019  |  |           |  | 2,000,000 |      |  |  | 2,000,000 |  |  |                   | 1,942,460 |  |  |  | 1.3 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,000,000 |      |  |  | 2,000,000 |  |  |                   | 1,942,460 |  |  |  |     |  
|Renaissance Learning, Inc.          |  | Healthcare, Education, and Childcare        |  | Senior Secured Second Lien Term Loans LIBOR + 7.75%, 1.00% Floor      |  |          | 5/14/2021  |  |           |  | 3,500,000 |      |  |  | 3,447,888 |  |  |                   | 3,447,888 |  |  |  | 2.3 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 3,500,000 |      |  |  | 3,447,888 |  |  |                   | 3,447,888 |  |  |  |     |  
|School Specialty, Inc.              |  | Healthcare, Education, and Childcare        |  | Senior Secured First Lien Term Loans LIBOR + 8.500%, 1.000% Floor     |  |          | 6/11/2019  |  |           |  | 2,985,000 |      |  |  | 2,936,006 |  |  |                   | 2,864,585 |  |  |  | 1.9 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,985,000 |      |  |  | 2,936,006 |  |  |                   | 2,864,585 |  |  |  |     |  
|Securus Technologies, Inc.          |  | Telecommunications                          |  | Senior Secured Second Lien Term Loans LIBOR + 7.750%, 1.250% Floor    |  |          | 4/30/2021  |  |           |  | 2,000,000 |      |  |  | 1,981,227 |  |  |                   | 1,988,280 |  |  |  | 1.3 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,000,000 |      |  |  | 1,981,227 |  |  |                   | 1,988,280 |  |  |  |     |  
|Sesac Holdco II, Inc.               |  | Broadcasting and Entertainment              |  | Senior Secured Second Lien Term Loans LIBOR + 8.750%, 1.250% Floor(3) |  |          | 7/12/2019  |  |           |  | 2,250,000 |      |  |  | 2,294,369 |  |  |                   | 2,300,535 |  |  |  | 1.5 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,250,000 |      |  |  | 2,294,369 |  |  |                   | 2,300,535 |  |  |  |     |  
|Sizzling Platter, LLC               |  | Beverage, Food, and Tobacco                 |  | Senior Secured First Lien Notes 12.250%(3)(4)                         |  |          | 4/15/2016  |  |           |  | 2,063,000 |      |  |  | 2,124,725 |  |  |                   | 2,198,601 |  |  |  | 1.4 | %
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  |           |      |  |  |           |  |  |                   |           |  |  |  |     |  
|                                    |  |                                             |  |                                                                       |  |          |            |  |           |  | 2,063,000 |      |  |  | 2,124,725 |  |  |                   | 2,198,601 |  |  |  |     |  



F-15



---

##### Table of Contents

|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|-------------------------------------------------- |  | -------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | -------- | ---------- |  | ------------------ | -------------- | --------- | ---- | --------------------- | - | ---------- | - | ----------- | ----------------- | --------- |  | ---- | - | --- | -
|Company(1)                                         |  | Industry                                                       |  | Type of Investment                                                  |  | Maturity |            |  | ParAmount/Quantity |                |           | Cost |                       |   | FairValue  |   |             | % ofNet Assets(2) |          
|Sorenson Communications                            |  | Telecommunications                                             |  | Senior Secured First Lien Term Loans LIBOR + 8.250%, 1.250% Floor   |  |          | 10/31/2014 |  |                    |                | 2,979,987 |      |                       |   | 2,979,987  |   |             |                   | 2,988,451 |  |      |   | 2.0 | %
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                | 2,979,987 |      |                       |   | 2,979,987  |   |             |                   | 2,988,451 |  |      |   |     |  
|Tempel Steel Company                               |  | Mining, Steel, Iron, and Nonprecious Metals                    |  | Senior Secured First Lien Notes 12.000%(3)(4)                       |  |          | 8/15/2016  |  |                    |                | 1,115,000 |      |                       |   | 1,105,791  |   |             |                   | 1,085,921 |  |      |   | 0.7 | %
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                | 1,115,000 |      |                       |   | 1,105,791  |   |             |                   | 1,085,921 |  |      |   |     |  
|True Religion Apparel, Inc.                        |  | Personal and Nondurable Consumer Products (Manufacturing Only) |  | Senior Secured Second Lien Term Loans LIBOR + 10.000%, 1.000% Floor |  |          | 1/30/2020  |  |                    |                | 4,000,000 |      |                       |   | 3,835,240  |   |             |                   | 3,861,480 |  |      |   | 2.5 | %
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                | 4,000,000 |      |                       |   | 3,835,240  |   |             |                   | 3,861,480 |  |      |   |     |  
|U.S. Well Services, LLC(5)                         |  | Oil and Gas                                                    |  | Senior Secured First Lien Notes 14.500%(3)(4)                       |  |          | 2/15/2017  |  |                    |                | 3,816,605 |      |                       |   | 3,796,701  |   |             |                   | 3,832,100 |  |      |   | 2.5 | %
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                | 3,816,605 |      |                       |   | 3,796,701  |   |             |                   | 3,832,100 |  |      |   |     |  
|U.S. Well Services, LLC, Warrants, expires 2/15/19 |  | Oil and Gas                                                    |  | Warrants/Equity(3)(6)                                               |  |          |            |  |                    |                | 1,731     |      |                       |   | 173        |   |             |                   | 54,977    |  |      |   | 0.0 | %
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                | 1,731     |      |                       |   | 173        |   |             |                   | 54,977    |  |      |   |     |  
|Total non-controlled/non-affiliated investments    |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           | $    | 137,332,276           |   |            | $ | 137,801,537 |                   |           |  | 90.1 | %
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |         
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    | NotionalAmount |           |      | UnrealizedGain (Loss) |   |            |   |            
|Derivative Instrument  Long Exposure              |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |  
|Total return swap with Citibank, N.A. (Note 5)     |  |                                                                |  | Total Return Swap                                                   |  |          |            |  |                    |                |           |      |                       | $ | 24,855,700 |   |             | $                 | 351,396   |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       | $ | 24,855,700 |   |             | $                 | 351,396   |  |      |   |     |  
|                                                   |  |                                                                |  |                                                                     |  |          |            |  |                    |                |           |      |                       |   |            |   |             |                   |           |  |      |   |     |  



|(1) | All of our investments are domiciled in the United States except for Livingston International, Inc. which is domiciled in Canada.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(2) | Percentage is based on net assets of $153,002,273 as of December 31, 2013.
|--- | --------------------------------------------------------------------------

|(3) | An affiliated fund that is managed by an affiliate of SIC Advisors LLC also holds an investment in this security.
|--- | -----------------------------------------------------------------------------------------------------------------

|(4) | Securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities represent a fair value of $45,303,968 and 29.6%
of net assets as of December 31, 2013 and are considered restricted.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The investment is not a qualifying asset under Section 55 of the Investment Company Act of 1940, as amended. Non-qualifying assets represent 11.5%
of the Companys portfolio at fair value.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Security is non-income producing.
|--- | ---------------------------------

|(7) | Security is also held in the underlying portfolio of the total return swap with Citibank, N.A. (see Note 5). The Companys total commitment to
Greenway Medical Technologies, Inc., Livingston International, Inc. and Maxim Crane Works Holdings, Inc. is $2,470,218 or 1.6%, $4,654,532 or 3.0% and $2,034,860 or 1.3%, respectively, of Net Assets as of December 31, 2013.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-16



---

##### Table of Contents

SIERRA INCOME CORPORATION

Notes to Consolidated Financial Statements

June 30, 2014

(unaudited)

Note 1. Organization

Sierra Income Corporation (the Company) was incorporated under the general corporation laws of the State of Maryland on
June 13, 2011 and formally commenced operations on April 17, 2012. The Company is an externally managed, non-diversified closed-end 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). The Company is externally managed by SIC Advisors LLC (SIC Advisors), a registered investment adviser under the Investment Advisers Act of
1940, as amended (the Advisers Act). The Company has elected and intends to continue to qualify to be treated for U.S. federal income tax purposes as a regulated investment company (RIC) under subchapter M of the
Internal Revenue Code of 1986, as amended (the Code). The Companys fiscal year-end is December 31st.

On April 17, 2012, the Company successfully reached its minimum escrow requirement and officially commenced operations by issuing
1,108,033 shares of common stock to SIC Advisors for gross proceeds of $10,000,000. The Companys offering period is currently scheduled to terminate on April 17, 2015, unless further extended. Since commencing its operations, the Company
has sold a total of 34,455,001 shares of common stock, which includes shares issued as part of the distribution reinvestment plan (see Note 12), for total proceeds of $347.6 million, which includes the shares sold to SIC Advisors. The proceeds from
the issuance of common stock are presented in the Companys consolidated statements of changes in net assets and consolidated statements of cash flows and are presented net of selling commissions and dealer manager fees.

On August 15, 2013, the Company formed Arbor Funding LLC, a wholly-owned financing subsidiary.

On June 18, 2014, the Company formed Alpine Funding LLC, a wholly-owned financing subsidiary.

The Company has formed and expects to continue to form certain taxable subsidiaries (the Taxable Subsidiaries), which are
taxed as corporations for federal income tax purposes. These Taxable Subsidiaries allow us to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code.

The Companys investment objective is to generate current income, and to a lesser extent, long-term capital
appreciation. The Company intends to meet its investment objective by investing primarily in the debt of privately owned U.S. companies with a focus on senior secured debt, second lien debt and, to a lesser extent, subordinated debt. The Company
will originate transactions sourced through SIC Advisors direct origination network, and also expects to acquire debt securities through the secondary market. The Company may make equity investments in companies that it believes will generate
appropriate risk adjusted returns, although it does not expect this to be a substantial portion of the portfolio.

Note 2. Significant
Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles (GAAP) and includes
the accounts of the Company and its wholly-owned subsidiaries, Alpine Funding LLC, Arbor Funding LLC and SIC RT1 LLC. Additionally, 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 Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in



F-17



---

##### Table of Contents

accordance with GAAP are omitted. In the opinion of management, the unaudited interim financial results included herein contain all adjustments and reclassifications that are necessary for the
fair presentation of financial statements for the periods included herein. Therefore, this Form 10-Q should be read in conjunction with the Companys annual report on Form 10-K for the year ended December 31, 2013, which was filed with the
U.S. Securities and Exchange Commission on March 13, 2014. The current periods results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2014. The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Cash

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

Offering Costs

Offering costs incurred directly by the Company will be recorded in the period incurred. See Note 7 regarding offering costs paid for by
SIC Advisors.

Use of Estimates in the Preparation of Financial Statements

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

Deferred Financing Costs

Financing costs, incurred in connection with our credit facility (discussed in Note 6), are deferred and amortized over the life of the facility.

Indemnification

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

Revenue Recognition

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. We record amortized or
accreted discounts or premiums as interest income using the effective interest method. Dividend income, if any, is recognized on an accrual basis to the extent that the Company expects to collect such amount.

Origination/closing, amendment and transaction break-up fees associated with investments in portfolio companies are recognized as income
in the period that we become entitled to such fees. Other fees are capitalized as deferred revenue and recorded into income over the respective period. Other fee income for the three and six months ended June 30, 2014 was $653,728 and
$1,488,377, respectively. Other fee income for the three and six months ended June 30, 2013 was $64,750 and $129,460, respectively.



F-18



---

##### Table of Contents

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

The Company holds debt investments in its portfolio that
contain a payment-in-kind (PIK) interest provision. PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is recorded on the accrual basis to the extent such
amounts are expected to be collected. PIK interest is not accrued if the Company does not expect the issuer to be able to pay all principal and interest when due. For the three and six months ended June 30, 2014, the Company earned $104,443 and
$108,147 in PIK interest, respectively. For the three and six months ended June 30, 2013, the Company earned $0 and $580 in PIK interest, respectively.

Investment transactions are accounted for on a trade-date basis. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost
basis of investment, without regard to unrealized gains or losses previously recognized. The Company reports changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation
(depreciation) on investments in the consolidated statements of operations. For total return swap transactions (discussed in Note 5), periodic payments are received or made at the end of each settlement period, but prior to settlement are recorded
as realized gains or losses on total return swap in the consolidated statements of operations.

Management reviews all loans
that become 90 days or more past due on principal and interest or when there is reasonable doubt that principal or interest will be collected for possible placement on non-accrual status. Accrued interest is generally reserved when a loan is placed
on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon managements judgment regarding collectability. Non-accrual loans are restored to accrual status when past
due principal and interest is paid and, in managements judgment, are likely to remain current, although the Company may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. At
June 30, 2014, one portfolio company was on non-accrual status with a fair value of $318,145 or 0.1% of the fair value of our portfolio. At December 31, 2013, one portfolio company was on non-accrual status with a fair value of
$322,744, or 0.2% of the fair value of our portfolio.

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, the Company would be
deemed to control a portfolio company if it owns more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. The Company refers to such
investments in portfolio companies that it controls as Controlled Investments. Under the 1940 Act, the Company would be deemed to be an Affiliated Person of a portfolio company if it owns between 5% and 25% of the
portfolio companys outstanding voting securities or if it is under common control with such portfolio company. The Company refers to such investments in Affiliated Persons as Affiliated Investments. As of June 30, 2014 and
December 31, 2013, the Company has no Controlled Investments or Affiliated Investments.

Valuation of Investments

The Company applies fair value accounting to all of its financial instruments in accordance with the 1940 Act and ASC Topic 820 
Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC 820, the Company has
categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy as discussed in Note 4. Fair value is a market-based measure considered from the perspective of
the market participant who holds the financial instrument rather than an entity specific measure. Therefore, when market assumptions are not readily available, the Companys own assumptions are set to reflect those that management believes
market participants would use in pricing the financial instrument at the measurement date.



F-19



---

##### Table of Contents

Investments for which market quotations are readily available are valued at such market
quotations, which are generally obtained from an independent pricing service or multiple broker-dealers or market makers. The Company weighs the use of third-party broker quotes, if any, in determining fair value based on our understanding of the
level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer. However, debt investments with remaining maturities within 60 days that are not credit impaired are valued at cost
plus accreted discount, or minus amortized premium, which approximates fair value. Investments for which market quotations are not readily available are valued at fair value as determined by the Companys board of directors based upon input
from management and third party valuation firms. Because these investments are illiquid and because there may not be any directly comparable companies whose financial instruments have observable market values, these loans are valued using a
fundamental valuation methodology, consistent with traditional asset pricing standards, that is objective and consistently applied across all loans and through time.

The Company uses third-party valuation firms to assist the board of directors in the valuation of its portfolio investments. The valuation reports generated by the third-party valuation firms consider the
evaluation of financing and sale transactions with third parties, expected cash flows and market based information, including comparable transactions, performance multiples, and movement in yields of debt instruments, among other factors. Based on
market data obtained from the third-party valuation firms, the Company uses a combined market yield analysis and an enterprise model of valuation. In applying the market yield analysis, the value of the Companys loans is determined based upon
inputs such as the coupon rate, current market yield, interest rate spreads of similar securities, the stated value of the loan, and the length to maturity. In applying the enterprise model, the Company uses a waterfall analysis which takes into
account the specific capital structure of the borrower and the related seniority of the instruments within the borrowers capital structure into consideration. To estimate the enterprise value of the portfolio company, the Company weighs some
or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing investments may be based on, among other
things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from
third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For non-performing investments, we may estimate the liquidation
or collateral value of the portfolio companys assets and liabilities using an expected recovery model. We may estimate the fair value of warrants based on a model such as the Black-Scholes model or simulation models or a combination thereof.

Over-the-counter (OTC) derivative contracts, such as total return swaps (discussed in Note 5) are fair valued using models
that measure the change in fair value of reference assets underlying the swaps offset against any fees payable to the swap counterparty. The fair values of the reference assets underlying the swaps are determined using similar methods as described
above for debt and equity investments where the Company also invests directly in such assets.

The Company undertakes a
multi-step valuation process each quarter when valuing investments for which market quotations are not readily available, as described below:



| |  |  | the Companys quarterly valuation process begins with each portfolio investment being initially valued by the investment professionals responsible
for monitoring the portfolio investment;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | conclusions are then documented and discussed with senior management; and
| | - |  | -------------------------------------------------------------------------



| |  |  | an independent valuation firm engaged by the Companys board of directors prepares an independent valuation report for approximately one third of
the portfolio investments each quarter on a rotating quarterly basis on non fiscal year-end quarters, such that each of these investments will be valued by an independent valuation firm at least twice per annum when combined with the fiscal year-end
review of all the investments by independent valuation firms.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-20



---

##### Table of Contents

In addition, all of the Companys investments are subject to the following valuation
process:



| |  |  | management reviews preliminary valuations and their own independent assessment;
| | - |  | -------------------------------------------------------------------------------



| |  |  | the audit committee of the Companys board of directors reviews the preliminary valuations of senior management and independent valuation firms;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys board of directors discusses valuations and determines the fair value of each investment in the Companys portfolio in good
faith based on the input of SIC Advisors, the respective independent valuation firms and the audit committee.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Fair Value of Financial Instruments

The carrying amounts of certain of the Companys financial instruments, including cash and accounts payable and accrued expenses, approximate fair value due to their short-term nature. The carrying
amounts and fair values of our long-term obligations are discussed in Note 4.

Federal Income Taxes

The Company has elected to be treated as a RIC under subchapter M of the Code and operate in a manner so as to qualify for the tax
treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90% of the sum of its
investment company taxable income (ICTI) including PIK, as defined by the Code, and net tax-exempt interest income (which is the excess of the Companys gross tax-exempt interest income over certain disallowed deductions) for each
taxable year in order to be eligible for tax treatment under subchapter M of the Code. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next
tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

The Company will be subject to a nondeductible U.S. federal excise tax of 4% on undistributed income if it does not distribute at least
98% of its ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31 of such calendar year. To the extent that the Company determines that its estimated current year annual
taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.

The Companys Taxable Subsidiaries accrue income taxes payable based on the applicable corporate rates on the unrealized gains
generated by the investments held by the Taxable Subsidiaries. There were no such deferred tax liabilities for the six months ended June 30, 2014 or June 30, 2013. There was no tax expense recorded during the six month period ended June
30, 2014.

ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent
differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax
rules as having original issue discount, the Company must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company
in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as 1) PIK interest income and 2) interest income from investments that have been classified as non-accrual for financial
reporting purposes. Interest income



F-21



---

##### Table of Contents

on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized in ICTI. Because any original issue discount or other amounts accrued will be included
in the Companys ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company will not have received and may not ever
receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

Although we file federal and state tax returns, our major tax jurisdiction is federal. The Companys federal tax returns from
inception-to-date remain subject to examination by the Internal Revenue Service.

The Company accounts for income taxes in
conformity with ASC Topic 740 Income Taxes (ASC 740). ASC 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. ASC 740 requires the
evaluation of tax positions taken or expected to be taken in the course of preparing the Companys tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority. Tax
positions deemed to meet a more-likely-than-not threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax
expense in the consolidated statements of operations. There were no material uncertain income tax positions at June 30, 2014.

The following table reflects, for tax purposes, the sources of the cash distributions that the Company has paid on its common stock during the six months ended June 30, 2014 and the six months ended
June 30, 2013:



|                                         |  |                                |            |  |                                |  |       |                     |  |   |            |  |  |  |       |  
|---------------------------------------- |  | ------------------------------ | ---------- |  | ------------------------------ |  | ----- | ------------------- |  | - | ---------- |  |  |  | ----- | -
|                                         |  | Six months ended June 30, 2014 |            |  | Six months ended June 30, 2013 | 
|Source of Distribution                   |  | Distribution 
Amount(1)        |            |  | Percentage                     |  |       | Distribution Amount |  |   | Percentage | 
|Return of capital from offering proceeds |  | $                              |           |  |                                |  |      | %                   |  | $ |           |  |  |  |      | %
|Return of capital from borrowings        |  |                                |           |  |                                |  |      |                     |  |   |           |  |  |  |      |  
|Ordinary income                          |  |                                | 10,192,078 |  |                                |  | 100.0 |                     |  |   | 1,673,988  |  |  |  | 100.0 |  
|Return of capital (other)                |  |                                |           |  |                                |  |      |                     |  |   |           |  |  |  |      |  
|                                         |  |                                |            |  |                                |  |       |                     |  |   |            |  |  |  |       |  
|Distributions on a tax basis:            |  | $                              | 10,192,078 |  |                                |  | 100.0 | %                   |  | $ | 1,673,988  |  |  |  | 100.0 | %
|                                         |  |                                |            |  |                                |  |       |                     |  |   |            |  |  |  |       |  



|(1) | The Distribution
Amount and Percentage reflected for June 30, 2014 are estimated figures. The actual source of distributions for the fiscal year ending 2014 will be calculated in connection with the Companys year-end procedures.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Segments

The Company invests in various industries. The Company separately evaluates the performance of each of its investment relationships. However, because each of these investment relationships has similar
business and economic characteristics, they have been aggregated into a single investment segment. All applicable segment disclosures are included in or can be derived from the Companys consolidated financial statements. See Note 3 for further
information.

Company Investment Risk, Concentration of Credit Risk, and Liquidity Risk

SIC Advisors has broad discretion in making investments for the Company. Investments generally consist of debt instruments that may be
affected by business, financial market or legal uncertainties. Prices of investments may be volatile, and a variety of factors that are inherently difficult to predict, such as domestic or international economic and political developments, may
significantly affect the results of the Companys activities and the value of its investments. In addition, the value of the Companys portfolio may fluctuate as the general level of interest rates fluctuates.



F-22



---

##### Table of Contents

The value of the Companys investments in loans and bonds may be detrimentally affected
to the extent, among other things, that a borrower defaults on its obligations, there is insufficient collateral and/or there are extensive legal and other costs incurred in collecting on a defaulted loan, observable secondary or primary market
yields for similar instruments issued by comparable companies increase materially or risk premiums required in the market between smaller companies, such as the Companys borrowers, and those for which market yields are observable, increase
materially. SIC Advisors may attempt to minimize these risks by maintaining low loan-to-liquidation values with each loan and the collateral underlying the loan.

The Companys assets may, at any time, include securities and other financial instruments or obligations that are illiquid or thinly traded, making purchase or sale of such securities and financial
instruments at desired prices or in desired quantities difficult. Furthermore, the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments accurately.

Note 3. Investments

The following table shows the composition of the Companys portfolio investments by industry classification at fair value at
June 30, 2014:



|                                                               |  |            |             |  |            |  |       |  
|-------------------------------------------------------------- |  | ---------- | ----------- |  | ---------- |  | ----- | -
|                                                               |  | Fair Value |             |  | Percentage | 
|Electronics                                                    |  | $          | 41,081,875  |  |            |  | 12.5  | %
|Beverage, Food, and Tobacco                                    |  |            | 32,188,937  |  |            |  | 9.8   | %
|Oil and Gas                                                    |  |            | 31,006,873  |  |            |  | 9.4   | %
|Automobile                                                     |  |            | 30,239,173  |  |            |  | 9.2   | %
|Telecommunications                                             |  |            | 26,600,047  |  |            |  | 8.1   | %
|Retail Stores                                                  |  |            | 23,794,746  |  |            |  | 7.2   | %
|Healthcare, Education, and Childcare                           |  |            | 23,067,844  |  |            |  | 7.0   | %
|Chemicals, Plastics, and Rubber                                |  |            | 21,559,164  |  |            |  | 6.5   | %
|Buildings and Real Estate                                      |  |            | 14,237,680  |  |            |  | 4.3   | %
|Aerospace and Defense                                          |  |            | 13,807,589  |  |            |  | 4.2   | %
|Finance                                                        |  |            | 12,773,383  |  |            |  | 3.9   | %
|Cargo Transport                                                |  |            | 12,750,531  |  |            |  | 3.9   | %
|Hotels, Motels, Inns, and Gaming                               |  |            | 11,400,703  |  |            |  | 3.5   | %
|Containers, Packaging, and Glass                               |  |            | 9,878,168   |  |            |  | 3.0   | %
|Insurance                                                      |  |            | 7,425,474   |  |            |  | 2.2   | %
|Personal and Nondurable Consumer Products (Manufacturing Only) |  |            | 6,377,536   |  |            |  | 1.9   | %
|Business Services                                              |  |            | 5,580,363   |  |            |  | 1.7   | %
|Leisure, Amusement, Motion Pictures, and Entertainment         |  |            | 2,035,496   |  |            |  | 0.6   | %
|Broadcasting and Entertainment                                 |  |            | 1,500,069   |  |            |  | 0.5   | %
|Mining, Steel, Iron, and Nonprecious Metals                    |  |            | 1,080,155   |  |            |  | 0.3   | %
|Grocery                                                        |  |            | 943,614     |  |            |  | 0.3   | %
|                                                               |  |            |             |  |            |  |       |  
|Total                                                          |  | $          | 329,329,420 |  |            |  | 100.0 | %
|                                                               |  |            |             |  |            |  |       |  

See Note 5 for industry classifications of the underlying TRS reference assets as of June 30, 2014.



F-23



---

##### Table of Contents

The following table shows the composition of the Companys portfolio investments by
industry classification at fair value at December 31, 2013:



|                                                               |  |            |             |  |            |  |       |  
|-------------------------------------------------------------- |  | ---------- | ----------- |  | ---------- |  | ----- | -
|                                                               |  | Fair Value |             |  | Percentage | 
|Oil and Gas                                                    |  | $          | 18,862,779  |  |            |  | 13.7  | %
|Telecommunications                                             |  |            | 17,073,865  |  |            |  | 12.4  | %
|Retail Stores                                                  |  |            | 16,995,844  |  |            |  | 12.3  | %
|Electronics                                                    |  |            | 13,996,099  |  |            |  | 10.2  | %
|Healthcare, Education, and Childcare                           |  |            | 12,307,691  |  |            |  | 8.9   | %
|Chemicals, Plastics, and Rubber                                |  |            | 9,810,000   |  |            |  | 7.1   | %
|Personal and Nondurable Consumer Products (Manufacturing Only) |  |            | 9,154,092   |  |            |  | 6.7   | %
|Finance                                                        |  |            | 6,808,098   |  |            |  | 4.9   | %
|Automobile                                                     |  |            | 6,119,250   |  |            |  | 4.4   | %
|Beverage, Food, and Tobacco                                    |  |            | 5,755,736   |  |            |  | 4.2   | %
|Cargo Transport                                                |  |            | 5,677,727   |  |            |  | 4.1   | %
|Hotels, Motels, Inns, and Gaming                               |  |            | 3,056,250   |  |            |  | 2.2   | %
|Diversified/Conglomerate Service                               |  |            | 2,511,528   |  |            |  | 1.8   | %
|Mining, Steel, Iron, and Nonprecious Metals                    |  |            | 2,396,489   |  |            |  | 1.7   | %
|Broadcasting and Entertainment                                 |  |            | 2,300,535   |  |            |  | 1.7   | %
|Aerospace and Defense                                          |  |            | 2,016,472   |  |            |  | 1.5   | %
|Leisure, Amusement, Motion Pictures, and Entertainment         |  |            | 2,007,080   |  |            |  | 1.5   | %
|Grocery                                                        |  |            | 952,002     |  |            |  | 0.7   | %
|                                                               |  |            |             |  |            |  |       |  
|Total                                                          |  | $          | 137,801,537 |  |            |  | 100.0 | %
|                                                               |  |            |             |  |            |  |       |  

See Note 5 for industry classifications of the underlying TRS reference assets as of December 31,
2013.

The following table summarizes the amortized cost and the fair value of the Companys portfolio investments as of
June 30, 2014:



|                                      |  |               |             |  |            |  |       |       |  |   |             |  |  |  |       |  
|------------------------------------- |  | ------------- | ----------- |  | ---------- |  | ----- | ----- |  | - | ----------- |  |  |  | ----- | -
|                                      |  | AmortizedCost |             |  | Percentage |  |       | Value |  |   | Percentage  | 
|Senior secured first lien term loans  |  | $             | 109,474,256 |  |            |  | 33.3  | %     |  | $ | 109,994,358 |  |  |  | 33.4  | %
|Senior secured first lien notes       |  |               | 30,543,051  |  |            |  | 9.3   |       |  |   | 30,070,088  |  |  |  | 9.1   |  
|Senior secured second lien term loans |  |               | 183,444,517 |  |            |  | 55.9  |       |  |   | 183,859,229 |  |  |  | 55.8  |  
|Senior secured second lien notes      |  |               | 1,630,532   |  |            |  | 0.5   |       |  |   | 1,712,314   |  |  |  | 0.5   |  
|Warrants/Equity                       |  |               | 3,195,025   |  |            |  | 1.0   |       |  |   | 3,693,431   |  |  |  | 1.2   |  
|                                      |  |               |             |  |            |  |       |       |  |   |             |  |  |  |       |  
|Total                                 |  | $             | 328,287,381 |  |            |  | 100.0 | %     |  | $ | 329,329,420 |  |  |  | 100.0 | %
|                                      |  |               |             |  |            |  |       |       |  |   |             |  |  |  |       |  

The following table summarizes the amortized cost and the fair value of the Companys portfolio
investments as of December 31, 2013:



|                                      |  |               |             |  |            |  |       |       |  |   |             |  |  |  |       |  
|------------------------------------- |  | ------------- | ----------- |  | ---------- |  | ----- | ----- |  | - | ----------- |  |  |  | ----- | -
|                                      |  | AmortizedCost |             |  | Percentage |  |       | Value |  |   | Percentage  | 
|Senior secured first lien term loans  |  | $             | 28,617,156  |  |            |  | 20.9  | %     |  | $ | 28,583,326  |  |  |  | 20.8  | %
|Senior secured first lien notes       |  |               | 47,352,921  |  |            |  | 34.5  |       |  |   | 47,427,311  |  |  |  | 34.4  |  
|Senior secured second lien term loans |  |               | 56,224,549  |  |            |  | 40.9  |       |  |   | 56,481,247  |  |  |  | 41.0  |  
|Senior secured second lien notes      |  |               | 5,108,477   |  |            |  | 3.7   |       |  |   | 5,254,676   |  |  |  | 3.8   |  
|Warrants/Equity                       |  |               | 29,173      |  |            |  |      |       |  |   | 54,977      |  |  |  |      |  
|                                      |  |               |             |  |            |  |       |       |  |   |             |  |  |  |       |  
|Total                                 |  | $             | 137,332,276 |  |            |  | 100.0 | %     |  | $ | 137,801,537 |  |  |  | 100.0 | %
|                                      |  |               |             |  |            |  |       |       |  |   |             |  |  |  |       |  



F-24



---

##### Table of Contents

The following table shows the composition of the Companys portfolio investments by
geography classification at fair value at June 30, 2014:



|              |  |            |             |  |            |  |       |  
|------------- |  | ---------- | ----------- |  | ---------- |  | ----- | -
|Geography     |  | Fair Value |             |  | Percentage | 
|United States |  | $          | 321,557,280 |  |            |  | 97.6  | %
|Canada        |  |            | 7,772,140   |  |            |  | 2.4   |  
|              |  |            |             |  |            |  |       |  
|Total         |  | $          | 329,329,420 |  |            |  | 100.0 | %
|              |  |            |             |  |            |  |       |  

The following table shows the composition of the Companys portfolio investments by geography
classification at fair value at December 31, 2013:



|              |  |            |             |  |            |  |       |  
|------------- |  | ---------- | ----------- |  | ---------- |  | ----- | -
|Geography     |  | Fair Value |             |  | Percentage | 
|United States |  | $          | 135,116,448 |  |            |  | 98.1  | %
|Canada        |  |            | 2,685,089   |  |            |  | 1.9   |  
|              |  |            |             |  |            |  |       |  
|Total         |  | $          | 137,801,537 |  |            |  | 100.0 | %
|              |  |            |             |  |            |  |       |  

Opportunities for co-investments may arise when SIC Advisors or an affiliated adviser becomes aware of
investment opportunities that may be appropriate for the Company and other clients, or affiliated funds. As a BDC, the Company was substantially limited in its ability to co-invest in privately negotiated transactions with affiliated funds until it
obtained an exemptive order from the SEC on November 25, 2013 (the Exemptive Order). The Exemptive Order permits the Company to participate in negotiated co-investment transactions with certain affiliates, each of whose investment
adviser is Medley, LLC, the parent company of Medley Capital LLC and SIC Advisors, or an investment adviser controlled by Medley, LLC, in a manner consistent with its investment objective, strategies and restrictions, as well as regulatory
requirements and other pertinent factors. Co-investment under the Exemptive Order is subject to certain conditions therein, including the condition that, in the case of each co-investment transaction, the Companys board of directors determines
that it would be advantageous for the Company to co-invest in a manner described in the Exemptive Order. Before receiving the Exemptive Order, the Company only participated in co-investments that were allowed under existing regulatory guidance, such
as syndicated loan transactions where price was the only negotiated term, which limited the types of investments that the Company could make. Please refer to footnote 3 to the Schedule of Investments as of June 30, 2014 for disclosures
regarding securities also held by affiliated funds.

In June 2013, the FASB issued Accounting Standards Update 2013-08
Financial Services-Investment Companies (Topic 946) Amendments to the Scope, Measurement, and Disclosure Requirements (ASU 2013-08). ASU 2013-08 clarifies the characteristics of an investment company and requires
reporting entities to disclose information about the following items: (i) the type and amount of financial support provided to investee companies, including situations in which the Company assisted an investee in obtaining financial support,
(ii) the primary reasons for providing the financial support, (iii) the type and amount of financial support the Company is contractually required to provide to an investee, but has not yet provided, and (iv) the primary reasons for
the contractual requirement to provide the financial support. The Company adopted ASU 2013-08 for the fiscal year ending December 31, 2014 as the amendments in ASU 2013-08 are effective for an entitys interim and annual reporting periods
in fiscal years that begin after December 15, 2013.

As part of the Companys investment objective, in addition to
purchasing loans on the secondary market, it makes loans directly to privately-held middle market companies to help provide these companies with capital as the trend of bank consolidation that has occurred over the last 20 years has reduced the
amount of capital available for such companies. As of June 30, 2014, the Company holds loans it has made directly to 29 investee companies with aggregate principal amounts of $203,275,010. As of December 31, 2013, the Company holds loans
it has made directly to 28 investee companies with aggregate principal amounts of $80,807,327. During the three and six month period ended June 30, 2014, the Company made 7 and 17 loans to investee companies, respectively, with aggregate
principal amounts of $82,125,000 and $151,327,105, respectively. The details of the



F-25



---

##### Table of Contents

Companys loans have been disclosed on the consolidated schedule of investments as well as in Note 4. In addition to providing loans to investee companies, from time to time the Company
assists investee companies in securing financing from other sources by introducing such investee companies to sponsors or by leading a syndicate of lenders to provide the investee companies with financing. During the three and six months periods
ended June 30, 2014 and June 30, 2013, the Company did not make any such introductions or lead any syndicates. Affiliates of the Companys Advisor do not serve as officers or directors of any investee companies or provide managerial
direction as part of their roles.

In addition to the loans that the Company has provided, the Company has unfunded
commitments to provide additional financings through undrawn term loans or revolving lines of credit. The details of such arrangements are disclosed in Note 8 (Commitments and Contingencies).

Note 4. Fair Value Measurements

The Company follows ASC 820 for
measuring the fair value of portfolio investments. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available,
fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management
estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments complexity. The Companys fair value analysis includes an analysis of the value of any unfunded loan
commitments. Financial investments recorded at fair value in the consolidated financial statements are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value. The valuation
hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement date. The three levels are defined as follows:



| |  |  | Level 1  Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly
observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third
parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or
liabilities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. The inputs
for the determination of fair value may require significant management judgment or estimation and is based upon managements assessment of the assumptions that market participants would use in pricing the assets or liabilities. These
investments include debt and equity investments in private companies or assets valued using the market or income approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful
current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and EBITDA multiples. The information may also include 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to using the above inputs in
investment valuations, the Company employs the valuation policy approved by the board of directors that is consistent with ASC 820 (see Note 2). Consistent with the Companys valuation policy, the Company evaluates the source of inputs,
including any markets in which the Companys investments are trading, in determining fair value.



F-26



---

##### Table of Contents

The following table presents the fair value measurements of the Companys total
investments, by major class according to the fair value hierarchy, as of June 30, 2014:



|                                      |  |         |   |  |         |   |            |         |  |   |             |  |  |   |             | 
|------------------------------------- |  | ------- | - |  | ------- | - | ---------- | ------- |  | - | ----------- |  |  | - | ----------- | 
|Type of Investment                    |  | Level 1 |   |  | Level 2 |   |            | Level 3 |  |   | Total       | 
|Senior secured first lien term loans  |  | $       |  |  |         | $ |           |         |  | $ | 109,994,358 |  |  | $ | 109,994,358 | 
|Senior secured first lien notes       |  |         |  |  |         |   | 13,725,385 |         |  |   | 16,344,703  |  |  |   | 30,070,088  | 
|Senior secured second lien term loans |  |         |  |  |         |   |           |         |  |   | 183,859,229 |  |  |   | 183,859,229 | 
|Senior secured second lien notes      |  |         |  |  |         |   |           |         |  |   | 1,712,314   |  |  |   | 1,712,314   | 
|Warrants/Equity                       |  |         |  |  |         |   |           |         |  |   | 3,693,431   |  |  |   | 3,693,431   | 
|                                      |  |         |   |  |         |   |            |         |  |   |             |  |  |   |             | 
|Total                                 |  | $       |  |  |         | $ | 13,725,385 |         |  | $ | 315,604,035 |  |  | $ | 329,329,420 | 
|                                      |  |         |   |  |         |   |            |         |  |   |             |  |  |   |             | 
|                                      |  |         |   | 
|Derivative Instrument- Long Exposure  |  | Level 1 |   |  | Level 2 |   |            | Level 3 |  |   | Total       | 
|Asset                                 |  |         |   |  |         |   |            |         |  |   |             |  |  |   |             | 
|Total return swap with Citibank, N.A. |  | $       |  |  |         | $ |           |         |  | $ | 1,269,417   |  |  | $ | 1,269,417   | 
|                                      |  |         |   |  |         |   |            |         |  |   |             |  |  |   |             | 

The following table presents the fair value measurements of the Companys total investments, by
major class according to the fair value hierarchy, as of December 31, 2013:



|                                      |  |         |   |  |         |   |           |         |  |   |             |  |  |   |             | 
|------------------------------------- |  | ------- | - |  | ------- | - | --------- | ------- |  | - | ----------- |  |  | - | ----------- | 
|Type of Investment                    |  | Level 1 |   |  | Level 2 |   |           | Level 3 |  |   | Total       | 
|Senior secured first lien term loans  |  | $       |  |  |         | $ |          |         |  | $ | 28,583,326  |  |  | $ | 28,583,326  | 
|Senior secured first lien notes       |  |         |  |  |         |   | 5,509,312 |         |  |   | 41,917,999  |  |  |   | 47,427,311  | 
|Senior secured second lien term loans |  |         |  |  |         |   |          |         |  |   | 56,481,247  |  |  |   | 56,481,247  | 
|Senior secured second lien notes      |  |         |  |  |         |   |          |         |  |   | 5,254,676   |  |  |   | 5,254,676   | 
|Warrants/Equity                       |  |         |  |  |         |   |          |         |  |   | 54,977      |  |  |   | 54,977      | 
|                                      |  |         |   |  |         |   |           |         |  |   |             |  |  |   |             | 
|Total                                 |  | $       |  |  |         | $ | 5,509,312 |         |  | $ | 132,292,225 |  |  | $ | 137,801,537 | 
|                                      |  |         |   |  |         |   |           |         |  |   |             |  |  |   |             | 
|                                      |  |         |   | 
|Derivative Instrument-Long Exposure   |  | Level 1 |   |  | Level 2 |   |           | Level 3 |  |   | Total       | 
|Asset                                 |  |         |   |  |         |   |           |         |  |   |             |  |  |   |             | 
|Total return swap with Citibank, N.A. |  | $       |  |  |         | $ |          |         |  | $ | 351,396     |  |  | $ | 351,396     | 
|                                      |  |         |   |  |         |   |           |         |  |   |             |  |  |   |             | 



F-27



---

##### Table of Contents

The following table provides a reconciliation of the beginning and ending balances for total
investments that use Level 3 inputs for the six months ended June 30, 2014 based off of fair value hierarchy at June 30, 2014:



|                                                                                                |  |                               |             |   |                                |   |            |                                    |  |   |                                     |   |  |                 |             |   |                 |   |           |       |  |   |           |  |  |   |             |  
|----------------------------------------------------------------------------------------------- |  | ----------------------------- | ----------- | - | ------------------------------ | - | ---------- | ---------------------------------- |  | - | ----------------------------------- | - |  | --------------- | ----------- | - | --------------- | - | --------- | ----- |  | - | --------- |  |  | - | ----------- | -
|                                                                                                |  | Senior
SecuredFirst LienNotes |             |   | Senior SecuredSecond LienNotes |   |            | Senior SecuredFirst LienTerm
Loans |  |   | Senior SecuredSecond LienTerm Loans |   |  | Warrants/Equity |             |   | TotalReturnSwap |   |           | Total | 
|Balance, December 31, 2013                                                                      |  | $                             | 41,917,999  |   |                                | $ | 5,254,676  |                                    |  | $ | 28,583,326                          |   |  | $               | 56,481,247  |   |                 | $ | 54,977    |       |  | $ | 351,396   |  |  | $ | 132,643,621 |  
|Purchases                                                                                       |  |                               | 2,606,250   |   |                                |   |           |                                    |  |   | 94,405,816                          |   |  |                 | 152,543,038 |   |                 |   | 3,077,778 |       |  |   |          |  |  |   | 252,632,882 |  
|Sales                                                                                           |  |                               | (26,403,480 | ) |                                |   | (3,559,511 | )                                  |  |   | (13,621,372                         | ) |  |                 | (25,340,532 | ) |                 |   |          |       |  |   |          |  |  |   | (68,924,895 | )
|Transfers in                                                                                    |  |                               |            |   |                                |   |           |                                    |  |   |                                    |   |  |                 |            |   |                 |   |          |       |  |   |          |  |  |   |            |  
|Transfers out                                                                                   |  |                               | (3,000,000  | ) |                                |   |           |                                    |  |   |                                    |   |  |                 |            |   |                 |   |          |       |  |   |          |  |  |   | (3,000,000  | )
|Amortization of discount/(premium)                                                              |  |                               | (26,916     | ) |                                |   | 4,970      |                                    |  |   | 15,281                              |   |  |                 | 32,169      |   |                 |   |          |       |  |   |          |  |  |   | 25,504      |  
|Paid-in-kind interest income                                                                    |  |                               |            |   |                                |   |           |                                    |  |   | 20,072                              |   |  |                 |            |   |                 |   | 88,075    |       |  |   |          |  |  |   | 108,147     |  
|Net realized gains                                                                              |  |                               | 1,552,281   |   |                                |   | 76,597     |                                    |  |   | 37,305                              |   |  |                 | (14,708     | ) |                 |   |          |       |  |   |          |  |  |   | 1,651,475   |  
|Net change in unrealized appreciation/ (depreciation)                                           |  |                               | (301,431    | ) |                                |   | (64,418    | )                                  |  |   | 553,930                             |   |  |                 | 158,015     |   |                 |   | 472,601   |       |  |   | 918,021   |  |  |   | 1,736,718   |  
|                                                                                                |  |                               |             |   |                                |   |            |                                    |  |   |                                     |   |  |                 |             |   |                 |   |           |       |  |   |           |  |  |   |             |  
|Balance, June 30, 2014                                                                          |  | $                             | 16,344,703  |   |                                | $ | 1,712,314  |                                    |  | $ | 109,994,358                         |   |  | $               | 183,859,229 |   |                 | $ | 3,693,431 |       |  | $ | 1,269,417 |  |  | $ | 316,873,452 |  
|                                                                                                |  |                               |             |   |                                |   |            |                                    |  |   |                                     |   |  |                 |             |   |                 |   |           |       |  |   |           |  |  |   |             |  
|Change in net unrealized appreciation (depreciation) in investments held as of June 30, 2014(1) |  | $                             | 75,924      |   |                                | $ | 8,312      |                                    |  | $ | 567,127                             |   |  | $               | 217,181     |   |                 | $ | 472,601   |       |  | $ | 918,021   |  |  | $ | 2,259,166   |  
|                                                                                                |  |                               |             |   |                                |   |            |                                    |  |   |                                     |   |  |                 |             |   |                 |   |           |       |  |   |           |  |  |   |             |  



|(1) | Amount is included in the related amount on investments and derivative instruments in the condensed consolidated statements of operations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period
in which they occur. During the six months ended June 30, 2014, the Company recorded $3,000,000 in transfers from level 3 to level 2 due to an increase in observable inputs in market data and no other transfers between levels. Transfers are
reflected at the value of the securities at the end of the period.



F-28



---

##### Table of Contents

The following table provides a reconciliation of the beginning and ending balances for total
investments that use Level 3 inputs for the six months ended June 30, 2013 based off of fair value hierarchy at June 30, 2013:



|                                                      |  |                     |            |   |                                    |   |            |                                     |  |   |                 |   |  |       |        |  |  |   |            |  
|----------------------------------------------------- |  | ------------------- | ---------- | - | ---------------------------------- | - | ---------- | ----------------------------------- |  | - | --------------- | - |  | ----- | ------ |  |  | - | ---------- | -
|                                                      |  | SeniorSecured Notes |            |   | Senior SecuredFirst LienTerm Loans |   |            | Senior SecuredSecond LienTerm Loans |  |   | Warrants/Equity |   |  | Total |       
|Balance, December 31, 2012                            |  | $                   | 22,551,198 |   |                                    | $ | 1,962,630  |                                     |  | $ | 2,928,247       |   |  | $     | 15,115 |  |  | $ | 27,457,190 |  
|Purchases                                             |  |                     | 27,104,738 |   |                                    |   | 8,910,409  |                                     |  |   | 14,585,449      |   |  |       | 9,021  |  |  |   | 50,609,617 |  
|Sales                                                 |  |                     | (5,261,845 | ) |                                    |   | (1,554,974 | )                                   |  |   | (1,850,000      | ) |  |       |       |  |  |   | (8,666,819 | )
|Transfers in                                          |  |                     | 1,659,221  |   |                                    |   |           |                                     |  |   |                |   |  |       |       |  |  |   | 1,659,221  |  
|Transfers out                                         |  |                     | (1,508,330 | ) |                                    |   |           |                                     |  |   |                |   |  |       |       |  |  |   | (1,508,330 | )
|Amortization of discount/ (premium)                   |  |                     | (33,270    | ) |                                    |   | (1,920     | )                                   |  |   | (8,530          | ) |  |       |       |  |  |   | (43,720    | )
|Paid-in-kind interest income                          |  |                     |           |   |                                    |   | 580        |                                     |  |   |                |   |  |       |       |  |  |   | 580        |  
|Net realized gains                                    |  |                     | 4,575      |   |                                    |   | 9,085      |                                     |  |   | 12,132          |   |  |       |       |  |  |   | 25,792     |  
|Net change in unrealized appreciation/ (depreciation) |  |                     | 384,354    |   |                                    |   | 85,099     |                                     |  |   | 149,040         |   |  |       | 32,907 |  |  |   | 651,400    |  
|                                                      |  |                     |            |   |                                    |   |            |                                     |  |   |                 |   |  |       |        |  |  |   |            |  
|Balance, June 30, 2013                                |  | $                   | 44,900,641 |   |                                    | $ | 9,410,909  |                                     |  | $ | 15,816,338      |   |  | $     | 57,043 |  |  | $ | 70,184,931 |  
|                                                      |  |                     |            |   |                                    |   |            |                                     |  |   |                 |   |  |       |        |  |  |   |            |  

During the six months ended June 30, 2013, the Company recorded $1,508,330 of transfers from Level 3
to Level 2 due to an increase of observable inputs in market data. Transfers are reflected at the value of the securities at the end of the period.

The following table presents the quantitative information about Level 3 fair value measurements of our total investments, as of June 30, 2014:



|                                     |  |            |             |  |                      |                                                    |                    |                                        |                          |  |                                                   | 
|------------------------------------ |  | ---------- | ----------- |  | -------------------- | -------------------------------------------------- | ------------------ | -------------------------------------- | ------------------------ |  | ------------------------------------------------- | 
|                                     |  | Fair Value |             |  | Valuation techniques |                                                    | Unobservable input |                                        | Range (weighted average) | 
|Senior secured firstlien term loans  |  | $          | 109,994,358 |  |                      | Income approach (DLF)                              |                    | Market yield                           |                          |  | 4.64%  11.30% (9.26%)                            | 
|Senior secured firstlien notes       |  | $          | 16,334,703  |  |                      | Income approach (DLF)                              |                    | Market yield                           |                          |  | 7.02%  13.76% (8.85%)                            | 
|Senior secured secondlien term loans |  | $          | 183,859,229 |  |                      | Enterprise valuation analysisIncome approach
(DLF) |                    | Liquidation proceedsMarket yield       |                          |  | $189.1M  $222.4M ($205.8M)6.10%  13.03% (9.28%) | 
|Senior secured secondlien notes      |  | $          | 1,712,314   |  |                      | Income approach (DLF)                              |                    | Market yield                           |                          |  | 10.30% (10.30%)                                   | 
|Warrants/Equity                      |  | $          | 3,693,431   |  |                      | Enterprise valuation analysis                      |                    | EBITDA multiple(1)Liquidation proceeds |                          |  | 5.00x (5.00x)$189.1M  $222.4M ($205.8M)          | 
|Total return swap                    |  | $          | 1,269,417   |  |                      | Income approach (DLF)                              |                    | Market yield ofunderlying assets       |                          |  | 4.31%  14.81%(6.73%)                             | 



|(1) | Represents amounts used when the Company has determined that market participants would use such multiples when measuring the fair value of these
investments.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



F-29



---

##### Table of Contents

The following table presents the quantitative information about Level 3 fair value
measurements of our total investments, as of December 31, 2013:



|                                     |  |            |            |  |                      |                                                    |                    |                                        |                          |  |                                                   | 
|------------------------------------ |  | ---------- | ---------- |  | -------------------- | -------------------------------------------------- | ------------------ | -------------------------------------- | ------------------------ |  | ------------------------------------------------- | 
|                                     |  | Fair Value |            |  | Valuation techniques |                                                    | Unobservable input |                                        | Range (weighted average) | 
|Senior secured firstlien term loans  |  | $          | 28,583,326 |  |                      | Income approach (DLF)                              |                    | Market yield                           |                          |  | 5.66%  10.51%(9.52%)                             | 
|Senior secured firstlien notes       |  | $          | 41,917,999 |  |                      | Income approach (DLF)Enterprise valuation analysis |                    | Market yieldLiquidation proceeds       |                          |  | 7.35%  15.05%(10.22%)$189.0M  $222.4M ($205.8M) | 
|Senior secured secondlien term loans |  | $          | 56,481,247 |  |                      | Income approach (DLF)                              |                    | Market yield                           |                          |  | 8.05%  11.83%(9.65%)                             | 
|Senior secured secondlien notes      |  | $          | 5,254,676  |  |                      | Income approach (DLF)                              |                    | Market yield                           |                          |  | 7.59%  10.67%(9.23%)                             | 
|Warrants/Equity                      |  | $          | 54,977     |  |                      | Enterprise valuation analysis                      |                    | EBITDA multiple(1)Liquidation proceeds |                          |  | 5.00x (5.00x)$189.0M 
$222.4M ($205.8M)          | 
|Total return swap                    |  | $          | 351,396    |  |                      | Income approach (DLF)                              |                    | Market yield ofunderlying assets       |                          |  | 5.16%  10.18%(8.49%)                             | 



|(1) | Represents amounts used when the Company has determined that market participants would use such multiples when measuring the fair value of these
investments.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

The significant unobservable inputs used in the fair value measurement of the Companys
debt and derivative investments are market yields. Significant increases in market yields would result in significantly lower fair value measurements.

The significant unobservable inputs used in the fair value measurement of the Companys warrants/equity investments are comparable company EBITDA multiples. Significant decreases in EBITDA multiples
in isolation would result in significantly lower fair value measurements.

Note 5. Total Return Swap

On August 27, 2013, the Company, through its wholly-owned financing subsidiary, Arbor Funding LLC (Arbor), entered into a
total return swap (TRS) with Citibank, N.A. (Citibank) that is indexed to a basket of loans.

The TRS
with Citibank enables Arbor, to obtain the economic benefit of the loans underlying the TRS, despite the fact that such loans will not be directly held or otherwise owned by Arbor, in return for an interest-type payment to Citibank.

SIC Advisors acts as the investment manager of Arbor and has discretion over the composition of the basket of loans underlying the TRS.
The terms of the TRS are governed by an ISDA 2002 Master Agreement, the Schedule thereto and Credit Support Annex to such Schedule, and the Confirmation exchanged thereunder, between Arbor and Citibank, which collectively establish the TRS, and are
collectively referred to herein as the TRS Agreement. On March 21, 2014, the Company amended and restated its Confirmation Letter Agreement (the Amended Confirmation Agreement) with Citibank. The Amended Confirmation
Agreement increases the maximum market value (determined at the time each such loan becomes subject to the TRS) of the portfolio of loans that Arbor may select from $100,000,000 to $200,000,000, and increased the interest rate payable to Citibank
from LIBOR plus 1.30% per annum to LIBOR plus 1.35% per annum. Other than the foregoing, the Amended Confirmation Agreement did not change any of the other terms of the TRS.

Pursuant to the terms of the TRS Agreement, as amended by the Amended Confirmation Agreement (the Amended TRS Agreement), and
subject to conditions customary for transactions of this nature, Arbor may select a portfolio of loans with a maximum market value (determined at the time each such loan becomes subject to the TRS) of $200,000,000, which is also referred to as the
maximum notional amount of the TRS. Each



F-30



---

##### Table of Contents

individual loan, and the portfolio of loans taken as a whole, must meet criteria described in the Amended TRS Agreement. Arbor receives from Citibank a periodic payment on set dates that is based
upon any coupons, both earned and accrued, generated by the loans underlying the TRS, subject to limitations described in the Amended TRS Agreement as well as any fees associated with the loans included in the portfolio. Arbor pays to Citibank
interest at a rate equal to one-month LIBOR + 1.35% per annum. In addition, upon the termination or repayment of any loan subject to the TRS, Arbor either receives from Citibank the appreciation in the value of such loan, or pays to Citibank
any depreciation in the value of such loan.

Citibank may terminate the TRS on or after the second anniversary of the
effectiveness of the TRS. SIC Advisors may terminate the TRS on behalf of Arbor at any time upon providing 10 days prior notice to Citibank. Any termination by SIC Advisors on behalf of Arbor prior to the second anniversary of the effectiveness of
the TRS will result in payment of an early termination fee to Citibank. The early termination fee shall equal the present value of the following two cash flows: (a) interest payments at a rate equal 1.35% based on 70% of the maximum notional
amount of $200,000,000, payable from the later of the first anniversary of the effectiveness of the TRS or the termination date until the second anniversary of the effectiveness of the TRS and (b) interest payments at a rate equal to 0.15%
based on the maximum notional amount of $200,000,000, payable from the later of the first anniversary of the effectiveness of the TRS or the termination date until the second anniversary of the effectiveness of the TRS.

Arbor is required to pay a minimum usage fee in connection with the TRS of 1.35% on the amount equal to 85% of the average daily unused
portion of the maximum amount permitted under the TRS. Such minimum usage fee will not apply during the first 365 days and last 60 days of the term of the TRS. Arbor will also pay Citibank customary fees in connection with the establishment and
maintenance of the TRS.

Arbor is required to initially cash collateralize a specified percentage of each loan (generally 25%
to 35% of the market value of such loan) included under the TRS in accordance with margin requirements described in the Amended TRS Agreement. As of June 30, 2014 and December 31, 2013, Arbor has posted $42,260,341 and $6,706,159,
respectively, in collateral to Citibank in relation to the TRS which is recorded on the consolidated statements of assets and liabilities as cash collateral on total return swap. Arbor may be required to post additional collateral from time to time
as a result of a decline in the mark-to-market value of the portfolio of loans subject to the TRS. The obligations of Arbor under the Amended TRS Agreement are non-recourse to the Company and the Companys exposure under the Amended TRS
Agreement is limited to the value of the Companys investment in Arbor, which generally equals the value of cash collateral provided by Arbor under the Amended TRS Agreement.

In connection with the TRS, Arbor has made customary representations and warranties and is required to comply with various covenants,
reporting requirements and other customary requirements for similar transactions. In addition to customary events of default and termination events included in the form ISDA 2002 Master Agreement, the Amended TRS Agreement contains the following
termination events: (a) a failure to satisfy the portfolio criteria for at least 30 days; (b) a failure to post initial cash collateral or additional collateral as required by the Amended TRS Agreement; (c) a default by Arbor or the
Company with respect to indebtedness in an amount equal to or greater than the lesser of $10,000,000 and 2% of the Companys net asset value at such time; (d) a merger of Arbor or the Company meeting certain criteria; (e) the Company
or Arbor amending their respective constituent documents to alter their investment strategy in a manner that has or could reasonably be expected to have a material adverse effect; and (f) SIC Advisors ceasing to be the investment manager of
Arbor or to have authority to enter into transactions under the Amended TRS Agreement on behalf of Arbor, and not being replaced by an entity reasonably acceptable to Citibank. As of June 30, 2014 and December 31, 2013 the Company did not
have any derivatives with contingent features in net liability positions. Therefore, if a trigger event had occurred, no amount would have been required to be posted by the Company.

The Companys maximum derivative risk exposure as of June 30, 2014 and December 31, 2013 is $42,260,341 and $6,706,159,
respectively, which is recorded on the consolidated statements of assets and liabilities as cash collateral on total return swap.



F-31



---

##### Table of Contents

The Companys derivative asset due from Citibank, net of amounts available for offset
under a master netting agreement as of June 30, 2014 and December 31, 2013 was $1,102,819 and $155,317, respectively, which is recorded on the consolidated statements of assets and liabilities as receivable due on total return swap. The
Company does not offset collateral posted in relation to the TRS with any unrealized appreciation or depreciation outstanding in the consolidated statements of assets and liabilities as of June 30, 2014 or December 31, 2013.

Transactions in total return swap contracts during the three and six months ended June 30, 2014 resulted in $1,372,779 and
$1,811,488 in realized gains and $471,000 and $918,021 in unrealized gains, respectively, which is recorded on the consolidated statements of operations. The Company had no transactions in total return swap contracts for the three and six months
ended June 30, 2013.

The Company only held one derivative position as of the six months ended June 30, 2014 and the year
ended December 31, 2013 and the derivative held is subject to a netting arrangement. The following table represents the Companys gross and net amounts after offset under Master Agreements (MA) of the derivative assets and
liabilities presented by derivative type net of the related collateral pledged by the Company as of June 30, 2014 and December 31, 2013:



|                     |  |                                     |           |  |                                     |   |   |                                                                            |  |   |                        |  |  |                              |   |  |  |   |           | 
|-------------------- |  | ----------------------------------- | --------- |  | ----------------------------------- | - | - | -------------------------------------------------------------------------- |  | - | ---------------------- |  |  | ---------------------------- | - |  |  | - | --------- | 
|                     |  | Gross DerivativeAssets Subject toMA |           |  | DerivativeAmountAvailable forOffset |   |   | Net Amount Presentedin the ConsolidatedStatements of Assetsand
Liabilities |  |   | CashCollateralReceived |  |  | NetAmount
ofDerivativeAssets |  
|June 30, 2014        |  |                                     |           |  |                                     |   |   |                                                                            |  |   |                        |  |  |                              |   |  |  |   |           | 
|Total Return Swap(1) |  | $                                   | 1,269,417 |  |                                     | $ |  |                                                                            |  | $ | 1,269,417              |  |  | $                            |  |  |  | $ | 1,269,417 | 
|                     |  |                                     |           |  |                                    
|December 31, 2013    |  |                                     |           |  |                                     |   |   |                                                                            |  |   |                        |  |  |                              |   |  |  |   |           | 
|Total Return Swap(1) |  | $                                   | 351,396   |  |                                     | $ |  |                                                                            |  | $ | 351,396                |  |  | $                            |  |  |  | $ | 351,396   | 



|(1) | Cash was posted
for initial margin requirements for the total return swap as of June 30, 2014 and December 31, 2013 and is reported on the consolidated statements of assets and liabilities as cash collateral on total return swap.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following represents the volume of the Companys derivative transactions during the three and six
months ended June 30, 2014 and 2013:



|                                         |  |                           |             |  |                         |   |   |      |  |   |            |  |  |   |   | 
|---------------------------------------- |  | ------------------------- | ----------- |  | ----------------------- | - | - | ---- |  | - | ---------- |  |  | - | - | 
|                                         |  | Three months endedJune 30 |             |  | Six months endedJune 30 |  
|                                         |  | 2014                      |             |  | 2013                    |   |   | 2014 |  |   | 2013       | 
|Average notional par amount of contracts |  | $                         | 126,714,344 |  |                         | $ |  |      |  | $ | 87,538,831 |  |  | $ |  | 

The following is a summary of the TRS reference assets as of June 30, 2014 (unaudited):



|                            |  |                               |  |                                    |  |                             |  |          |            |  |           |  |           |                        |  |  |           |  |  |                                      |           |  |  |  |         |  
|--------------------------- |  | ----------------------------- |  | ---------------------------------- |  | --------------------------- |  | -------- | ---------- |  | --------- |  | --------- | ---------------------- |  |  | --------- |  |  | ------------------------------------ | --------- |  |  |  | ------- | -
|Company(1)                  |  | Industry                      |  | Type ofInvestment                  |  | CouponRate                  |  | Maturity |            |  | ParAmount |  |           | InitialNotionalCost(2) |  |  | FairValue |  |  | UnrealizedAppreciation(Depreciation) |          
|Alcatel-Lucent USA, Inc.    |  | Telecommunications            |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 3.500%,1.00% Floor  |  |          | 1/30/2019  |  |           |  | 5,000,000 |                        |  |  | 5,000,000 |  |  |                                      | 4,987,013 |  |  |  | (12,987 | )
|AMF Bowling Worldwide, Inc. |  | Broadcasting andEntertainment |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 6.000%,1.250% Floor |  |          | 6/29/2018  |  |           |  | 2,943,750 |                        |  |  | 2,929,031 |  |  |                                      | 2,998,945 |  |  |  | 69,914  |  
|ANVC Merger Corp.           |  | Aerospace andDefense          |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.500%,1.00% Floor  |  |          | 2/18/2021  |  |           |  | 4,987,500 |                        |  |  | 4,937,625 |  |  |                                      | 4,924,911 |  |  |  | (12,714 | )
|AP Gaming I, LLC            |  | Electronics                   |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 8.250%,1.000% Floor |  |          | 12/18/2020 |  |           |  | 6,733,125 |                        |  |  | 6,531,131 |  |  |                                      | 6,800,456 |  |  |  | 269,325 |  



F-32



---

##### Table of Contents

|                                          |  |                                                               |  |                                    |  |                                   |  |          |            |  |           |  |            |                        |  |  |            |  |  |                                      |            |  |  |  |          |  
|----------------------------------------- |  | ------------------------------------------------------------- |  | ---------------------------------- |  | --------------------------------- |  | -------- | ---------- |  | --------- |  | ---------- | ---------------------- |  |  | ---------- |  |  | ------------------------------------ | ---------- |  |  |  | -------- | -
|Company(1)                                |  | Industry                                                      |  | Type ofInvestment                  |  | CouponRate                        |  | Maturity |            |  | ParAmount |  |            | InitialNotionalCost(2) |  |  | FairValue  |  |  | UnrealizedAppreciation(Depreciation) |           
|Asurion Corporation                       |  | Insurance                                                     |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 3.750%,1.25% Floor(3)     |  |          | 5/24/2019  |  |           |  | 9,997,432  |                        |  |  | 9,996,188  |  |  |                                      | 10,059,916 |  |  |  | 63,728   |  
|Atkore International, Inc.                |  | Mining, Steel, Ironand NonpreciousMetals                      |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 6.750%,1.25% Floor        |  |          | 10/9/2021  |  |           |  | 10,000,000 |                        |  |  | 10,032,500 |  |  |                                      | 10,025,000 |  |  |  | (7,500   | )
|Collective Brands Finance, Inc.           |  | Retail Stores                                                 |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.000%,1.00% Floor        |  |          | 3/11/2021  |  |           |  | 6,000,000  |                        |  |  | 5,977,500  |  |  |                                      | 6,015,000  |  |  |  | 37,500   |  
|Deluxe Entertainment Services Group, Inc. |  | Broadcasting andEntertainment                                 |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 5.500%,1.00% Floor        |  |          | 2/28/2020  |  |           |  | 1,000,000  |                        |  |  | 995,000    |  |  |                                      | 996,250    |  |  |  | 1,250    |  
|El Pollo Loco, Inc.                       |  | Personal, Food andmiscellaneous                               |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 8.500%,1.00% Floor        |  |          | 4/9/2019   |  |           |  | 1,500,000  |                        |  |  | 1,485,000  |  |  |                                      | 1,515,000  |  |  |  | 30,000   |  
|Encompass Digital Media, Inc.             |  | Broadcasting andEntertainment                                 |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.500%,1.000% Floor       |  |          | 6/6/2021   |  |           |  | 5,000,000  |                        |  |  | 4,975,000  |  |  |                                      | 5,018,750  |  |  |  | 43,750   |  
|Fieldwood Energy LLC                      |  | Oil and Gas                                                   |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 7.125%,1.250% Floor       |  |          | 9/30/2020  |  |           |  | 4,246,305  |                        |  |  | 4,317,500  |  |  |                                      | 4,375,818  |  |  |  | 58,318   |  
|Flexera Software, Inc.                    |  | Electronics                                                   |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 7.000%,1.000% Floor       |  |          | 4/2/2021   |  |           |  | 2,250,000  |                        |  |  | 2,266,875  |  |  |                                      | 2,254,102  |  |  |  | (12,773  | )
|Genex Services, Inc.                      |  | Insurance                                                     |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.250%,1.000% Floor       |  |          | 5/22/2024  |  |           |  | 2,000,000  |                        |  |  | 1,990,000  |  |  |                                      | 2,010,000  |  |  |  | 20,000   |  
|Greenway Medical Technologies, Inc.       |  | Healthcare,Education andChildcare                             |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 5.000%,1.000% Floor       |  |          | 11/2/2020  |  |           |  | 1,496,250  |                        |  |  | 1,481,288  |  |  |                                      | 1,494,380  |  |  |  | 13,092   |  
|Caesars Entertainment Operating Co., Inc. |  | Hotels, Motels, Innsand Gaming                                |  | Senior SecuredFirst LienNotes      |  | 11.25%                            |  |          | 6/1/2017   |  |           |  | 3,000,000  |                        |  |  | 3,067,500  |  |  |                                      | 2,745,000  |  |  |  | (322,500 | )
|Hudson Products Holdings. Inc.            |  | Machinery (Non-Agriculture, Non-Construction, Non-Electronic) |  | Senior SecuredFirst LienNotes      |  | LIBOR + 4.000%,1.000% Floor       |  |          | 3/17/2019  |  |           |  | 5,000,000  |                        |  |  | 4,975,000  |  |  |                                      | 5,008,350  |  |  |  | 33,350   |  
|Iqor US, Inc.                             |  | Diversified/ConglomerateService                               |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 8.250%,1.250% Floor(3)    |  |          | 2/19/2021  |  |           |  | 7,746,032  |                        |  |  | 7,591,111  |  |  |                                      | 7,416,825  |  |  |  | (174,286 | )
|Isola USA                                 |  | Electronics                                                   |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 8.250%,1.000% Floor       |  |          | 11/23/2018 |  |           |  | 3,975,000  |                        |  |  | 3,915,375  |  |  |                                      | 4,088,057  |  |  |  | 172,682  |  
|Livingston International, Inc.            |  | Cargo Transport                                               |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 7.750%,1.250% Floor(1)(4) |  |          | 4/18/2020  |  |           |  | 1,954,783  |                        |  |  | 1,969,443  |  |  |                                      | 1,974,330  |  |  |  | 4,887    |  
|Maxim Crane Works LP                      |  | Diversified/ConglomerateService                               |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 9.250%,1.000% Floor       |  |          | 11/26/2018 |  |           |  | 3,500,000  |                        |  |  | 3,567,500  |  |  |                                      | 3,572,905  |  |  |  | 5,405    |  
|Mitel Networks Corporation                |  | Telecommunications                                            |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.250%,1.000% Floor       |  |          | 1/31/2020  |  |           |  | 1,854,155  |                        |  |  | 1,844,884  |  |  |                                      | 1,869,229  |  |  |  | 24,345   |  
|Mohegan Tribal Gaming                     |  | Hotels, Motels, Innsand Gaming                                |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.500%,1.000% Floor       |  |          | 11/19/2019 |  |           |  | 1,995,000  |                        |  |  | 1,975,050  |  |  |                                      | 2,025,763  |  |  |  | 50,713   |  
|Nine West Holdings, Inc.                  |  | Retail Stores                                                 |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 3.750%,1.000% Floor       |  |          | 9/5/2019   |  |           |  | 6,000,000  |                        |  |  | 5,985,000  |  |  |                                      | 6,024,780  |  |  |  | 39,780   |  



F-33



---

##### Table of Contents

|                                                   |  |                                   |  |                                    |  |                                |  |          |            |  |           |  |            |                        |  |   |             |  |  |                                      |             |   |           |   |         |  
|-------------------------------------------------- |  | --------------------------------- |  | ---------------------------------- |  | ------------------------------ |  | -------- | ---------- |  | --------- |  | ---------- | ---------------------- |  | - | ----------- |  |  | ------------------------------------ | ----------- | - | --------- | - | ------- | -
|Company(1)                                         |  | Industry                          |  | Type ofInvestment                  |  | CouponRate                     |  | Maturity |            |  | ParAmount |  |            | InitialNotionalCost(2) |  |   | FairValue   |  |  | UnrealizedAppreciation(Depreciation) |            
|Pharmed Group Corporation                          |  | Healthcare,Education andChildcare |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 3.25%,1.000% Floor     |  |          | 1/28/2021  |  |           |  | 487,500    |                        |  |   | 485,063     |  |  |                                      | 485,877     |   |           |   | 814     |  
|Pharmed Group Corporation                          |  | Healthcare,Education andChildcare |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 6.750%,1.000% Floor    |  |          | 1/28/2022  |  |           |  | 5,000,000  |                        |  |   | 4,975,000   |  |  |                                      | 5,056,250   |   |           |   | 81,250  |  
|Polymer Group, Inc.                                |  | Containers,Packaging and Glass    |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.250%,1.000% Floor    |  |          | 12/13/2019 |  |           |  | 3,997,500  |                        |  |   | 3,992,513   |  |  |                                      | 4,037,475   |   |           |   | 44,963  |  
|Sungard Availability Services Capital, Inc.        |  | Diversified/ConglomerateService   |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 5.000%,1.000% Floor    |  |          | 3/31/2019  |  |           |  | 12,000,000 |                        |  |   | 11,947,500  |  |  |                                      | 11,895,000  |   |           |   | (52,500 | )
|Thomson Multimedia                                 |  | Printing andPublishing            |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 6.000%,1.000% Floor    |  |          | 3/31/2020  |  |           |  | 6,000,000  |                        |  |   | 6,103,800   |  |  |                                      | 6,075,000   |   |           |   | (28,800 | )
|Travelclick, Inc.                                  |  | Cargo Transport                   |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.500%,1.250% Floor    |  |          | 2/19/2019  |  |           |  | 15,000,000 |                        |  |   | 14,850,000  |  |  |                                      | 15,000,000  |   |           |   | 150,000 |  
|Viking Acquisition, Inc.                           |  | Automobile                        |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.250%,1.250% Floor    |  |          | 11/5/2016  |  |           |  | 3,680,198  |                        |  |   | 3,684,799   |  |  |                                      | 3,690,319   |   |           |   | 5,520   |  
|YP LLC                                             |  | Printing andPublishing            |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 6.750%,1.250% Floor(3) |  |          | 6/4/2018   |  |           |  | 5,521,739  |                        |  |   | 5,563,152   |  |  |                                      | 5,580,363   |   |           |   | 17,210  |  
|YRC Worldwide, Inc.                                |  | Cargo Transport                   |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 7.000%,1.000% Floor    |  |          | 2/13/2019  |  |           |  | 9,987,500  |                        |  |   | 9,975,125   |  |  |                                      | 10,137,313  |   |           |   | 162,188 |  
|                                                   |  |                                   |  |                                    |  |                                |  |          |            |  |           |  |            |                        |  |   |             |  |  |                                      |             |   |           |   |         |  
|                                                   |  |                                   |  |                                    |  |                                |  |          |            |  |           |  |            |                        |  | $ | 159,382,453 |  |  | $                                    | 160,158,377 |   |           | $ | 775,924 |  
|Total accrued interest income, net of expenses     |  |                                   |  |                                    |  |                                |  |          |            |  |           |  |            |                        |  |   |             |  |  |                                      |             | $ | 493,493   |  
|                                                   |  |                                   |  |                                    |  |                                |  |          |            |  |           |  |            |                        |  |   |             |  |  |                                      |             |   |           |   |         |  
|Total unrealized appreciation on total return swap |  |                                   |  |                                    |  |                                |  |          |            |  |           |  |            |                        |  |   |             |  |  |                                      |             | $ | 1,269,417 |  
|                                                   |  |                                   |  |                                    |  |                                |  |          |            |  |           |  |            |                        |  |   |             |  |  |                                      |             |   |           |   |         |  



|(1) | All investments are domiciled in the United States except for Livingston International, Inc., which is domiciled in Canada.
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the initial amount of par of an investment in which the TRS is referenced.
|--- | -------------------------------------------------------------------------------------

|(3) | The referenced asset or portion thereof is unsettled as of June 30, 2014.
|--- | -------------------------------------------------------------------------

|(4) | The investment is not a qualifying asset under the Investment Company Act of 1940, as amended.
|--- | ----------------------------------------------------------------------------------------------



F-34



---

##### Table of Contents

The following is a summary of the TRS reference assets as of December 31, 2013:



|                                                   |  |                                          |  |                                    |  |                                   |  |          |            |  |           |  |           |                        |  |   |            |  |  |                                      |            |   |         |   |         | 
|-------------------------------------------------- |  | ---------------------------------------- |  | ---------------------------------- |  | --------------------------------- |  | -------- | ---------- |  | --------- |  | --------- | ---------------------- |  | - | ---------- |  |  | ------------------------------------ | ---------- | - | ------- | - | ------- | 
|Company(1)                                         |  | Industry                                 |  | Type ofInvestment                  |  | Coupon Rate                       |  | Maturity |            |  | ParAmount |  |           | InitialNotionalCost(2) |  |   | Fair Value |  |  | UnrealizedAppreciation(Depreciation) |           
|AMF Bowling Worldwide, Inc.                        |  | Broadcasting andEntertainment            |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 7.500%,1.250% Floor       |  |          | 6/29/2018  |  |           |  | 2,981,250 |                        |  | $ | 2,966,345  |  |  | $                                    | 2,988,703  |   |         | $ | 22,358  | 
|AP Gaming I, LLC                                   |  | Electronics                              |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 8.250%,1.000% Floor(3)    |  |          | 12/18/2020 |  |           |  | 6,750,000 |                        |  |   | 6,547,500  |  |  |                                      | 6,581,250  |   |         |   | 33,750  | 
|El Pollo Loco Inc.                                 |  | Personal, Food,and MiscellaneousServices |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 8.500%,1.000% Floor       |  |          | 4/9/2019   |  |           |  | 1,500,000 |                        |  |   | 1,485,000  |  |  |                                      | 1,507,500  |   |         |   | 22,500  | 
|Fieldwood Energy LLC                               |  | Oil and Gas                              |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 7.125%,1.250% Floor       |  |          | 9/30/2020  |  |           |  | 1,000,000 |                        |  |   | 970,000    |  |  |                                      | 1,020,000  |   |         |   | 50,000  | 
|Greenway Medical Technologies, Inc.                |  | Healthcare,Education, andChildcare       |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 5.000%,1.000% Floor       |  |          | 11/2/2020  |  |           |  | 1,500,000 |                        |  |   | 1,485,000  |  |  |                                      | 1,492,500  |   |         |   | 7,500   | 
|Isola USA                                          |  | Diversified/ConglomerateService          |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 8.250%,1.000% Floor       |  |          | 11/23/2018 |  |           |  | 4,000,000 |                        |  |   | 3,940,000  |  |  |                                      | 4,020,000  |   |         |   | 80,000  | 
|Livingston International, Inc.                     |  | Diversified/ConglomerateManufacturing    |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 7.750%,1.250% Floor(1)(4) |  |          | 4/18/2020  |  |           |  | 1,954,783 |                        |  |   | 1,969,443  |  |  |                                      | 1,976,813  |   |         |   | 7,370   | 
|Maxim Crane Works Holdings, Inc.                   |  | Diversified/ConglomerateService          |  | Senior SecuredSecond LienTerm Loan |  | LIBOR + 9.250%,1.000% Floor(3)    |  |          | 11/26/2018 |  |           |  | 500,000   |                        |  |   | 492,500    |  |  |                                      | 501,250    |   |         |   | 8,750   | 
|McGraw-Hill Companies, Inc.                        |  | Healthcare,Education, andChildcare       |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 7.750%,1.250% Floor       |  |          | 3/22/2019  |  |           |  | 1,994,987 |                        |  |   | 2,024,912  |  |  |                                      | 2,029,062  |   |         |   | 4,150   | 
|Mohegan Tribal Gaming Authority                    |  | Hotels, Motels,Inns, and Gaming          |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.500%,1.000% Floor       |  |          | 11/19/2019 |  |           |  | 2,000,000 |                        |  |   | 1,980,000  |  |  |                                      | 2,028,760  |   |         |   | 48,760  | 
|Polymer Group, Inc.                                |  | Containers,Packaging, andGlass           |  | Senior SecuredFirst LienTerm Loan  |  | LIBOR + 4.250%,1.000% Floor(3)    |  |          | 12/13/2019 |  |           |  | 1,000,000 |                        |  |   | 995,000    |  |  |                                      | 1,004,380  |   |         |   | 9,380   | 
|                                                   |  |                                          |  |                                    |  |                                   |  |          |            |  |           |  |           |                        |  |   |            |  |  |                                      |            |   |         |   |         | 
|                                                   |  |                                          |  |                                    |  |                                   |  |          |            |  |           |  |           |                        |  | $ | 24,855,700 |  |  | $                                    | 25,150,218 |   |         | $ | 294,518 | 
|Total accrued interest income, net of expenses     |  |                                          |  |                                    |  |                                   |  |          |            |  |           |  |           |                        |  |   |            |  |  |                                      |            |   | 56,878  |  
|                                                   |  |                                          |  |                                    |  |                                   |  |          |            |  |           |  |           |                        |  |   |            |  |  |                                      |            |   |         |   |         | 
|Total unrealized appreciation on total return swap |  |                                          |  |                                    |  |                                   |  |          |            |  |           |  |           |                        |  |   |            |  |  |                                      |            | $ | 351,396 |  
|                                                   |  |                                          |  |                                    |  |                                   |  |          |            |  |           |  |           |                        |  |   |            |  |  |                                      |            |   |         |   |         | 



|(1) | All investments are domiciled in the United States except for Livingston International, Inc., which is domiciled in Canada.
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(2) | Represents the initial amount of par of an investment in which the TRS is referenced.
|--- | -------------------------------------------------------------------------------------

|(3) | The referenced asset or portion thereof is unsettled as of December 31, 2013.
|--- | -----------------------------------------------------------------------------

|(4) | The investment is not a qualifying asset under the Investment Company Act of 1940, as amended.
|--- | ----------------------------------------------------------------------------------------------

Note 6. Borrowings

As a BDC, the Company is only allowed to employ
leverage to the extent that its asset coverage, as defined in the 1940 Act, equals at least 200% after giving effect to such leverage. The amount of leverage that the Company employs at any time depends on its assessment of the market and other
factors at the time of any proposed borrowing.

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



F-35



---

##### Table of Contents

borrowings are estimated based upon market interest rates for its own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. The Companys debt obligation
is recorded at its carrying value, which approximates fair value.

Prime Brokerage Agreement

Prior to December 4, 2013 the Company maintained a prime brokerage account and margin borrowing facility (the Margin
Facility) with Barclays Capital Inc. (Barclays) for investment purposes that was based on the fair value of investments held at Barclays as determined by Barclays. The prime brokerage account and margin borrowing facility was
closed on December 4, 2013.

Revolving Credit Facility

On December 4, 2013, the Company entered into a three-year senior secured syndicated revolving credit facility with a one-year term
out period (the ING Facility) pursuant to a Senior Secured Revolving Credit Agreement (the Revolving Credit Agreement) with certain lenders party thereto from time to time and ING Capital LLC, as administrative agent. The ING
Facility matures on December 4, 2017 and is secured by substantially all of the Companys assets, subject to certain exclusions as further set forth in a Guarantee, Pledge and Security Agreement (the Security Agreement) entered
into in connection with the Revolving Credit Agreement, among the Company, the Subsidiary Guarantors party thereto, ING Capital LLC, as Administrative Agent, each Financial Agent and Designated Indebtedness Holder party thereto and ING Capital LLC,
as Collateral Agent. The ING Facility also includes usual and customary representations, covenants and events of default for senior secured revolving credit facilities of this nature.

The ING Facility allows for the Company, at its option, to borrow money at a rate of either (i) an alternate base rate plus
2.50% per annum or (ii) LIBOR plus 2.75% per annum. The interest rate margins are subject to certain step-downs upon the satisfaction of certain conditions described in the Revolving Credit Agreement. The alternate base rate will be
the greatest of (i) the U.S. Prime Rate set forth in the Wall Street Journal, (ii) the federal funds effective rate plus 1/2 of 1%, and (iii) three month LIBOR plus 1%. The current commitment under the ING Facility is $95,000,000, and
the ING Facility includes an accordion feature that allows for potential future expansion of the ING Facility up to a total of $100,000,000. Availability of loans under the ING Facility is linked to the valuation of the collateral pursuant to a
borrowing base mechanism.

The Company is also required to pay a commitment fee to the lenders based on the daily unused
portion of the aggregate commitments under the ING Facility. The commitment fee is (x) 0.50% for the initial six month period commencing on the closing date and (y) thereafter, 1% of the aggregate unused commitments if the used portion of
the aggregate commitments is less than or equal to 35% of the aggregate commitments, or 0.50% if the used portion of the aggregate commitments is greater than 35% of the aggregate commitments. The ING Facility provides that the Company may use the
proceeds of the facility for general corporate purposes, including making investments in accordance with the Companys investment objective and strategy.

Borrowings under the Revolving Credit Agreement are subject to, among other things, a minimum borrowing base. Substantially all of the Companys assets are pledged as collateral under the Revolving
Credit Agreement. The ING Facility requires the Company to, among other things (i) make representations and warranties regarding the collateral as well the Companys business and operations, (ii) agree to certain indemnification
obligations, and (iii) agree to comply with various affirmative and negative covenants. The documents for the Revolving Credit Agreement also include default provisions, such as the failure to make timely payments under the Revolving Credit
Agreement, the occurrence of a change in control, and the failure by the Company to materially perform under the operative agreements governing the Revolving Credit Agreement, which, if not complied with, could accelerate repayment under the
Revolving Credit Agreement, thereby materially and adversely affecting the Companys liquidity, financial condition and results of operations.



F-36



---

##### Table of Contents

In connection with the security interest established under the Security Agreement, the
Company, ING Capital LLC, in its capacity as collateral agent, and State Street Bank and Trust Company, in its capacity as the Companys custodian, entered into a Control Agreement dated as of December 4, 2013 (the Control
Agreement), in order to, among other things, perfect the security interest granted pursuant to the Security Agreement in, and provide for control over, the related collateral.

As of June 30, 2014 and December 31, 2013 the carrying amount of the Companys borrowings under the ING Facility
approximated the fair value of our debt obligation. The fair value of the Companys debt obligation is determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an
orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Companys borrowing under the ING Facility is estimated based upon market interest rates of the Companys
borrowing or entities with similar credit risk, adjusted for nonperformance risk, if any. At June 30, 2014 and December 31, 2013, the ING Facility would be deemed to be Level 3, as defined in Note 4.

As of June 30, 2014 and December 31, 2013, $1,306,767 and $1,150,139 of financing costs related to the ING Facility have been
capitalized and are being amortized over the respective terms, respectively. For the three and six months ended June 30, 2014, the Company recorded $506,299 and $669,700, respectively, of interest and financing expenses related to the ING
Facility, of which $355,311 and $401,654 was attributable to interest and $150,988 and $268,046 was attributable to amortization of deferred financing costs, respectively. For the three and six months ended June 30, 2013, the Company did not record
any financing expenses related to the ING Facility and did not record any deferred financing costs. As of June 30, 2014 and December 31, 2013, the Companys outstanding borrowings under the ING Facility was $60,000,000 and
$16,000,000, respectively. For the three and six months ended June 30, 2014, our weighted average outstanding debt balance and interest rate on the ING Facility was $51,250,000 and 2.8%, and $33,857,143 and 2.4%, respectively. For the three and
six months ended June 30, 2013, the Company had no borrowings under the ING Facility.

Note 7. Agreements

Investment Advisory Agreement

On April 15, 2012, the Company entered into an investment advisory agreement (IAA) with SIC Advisors to manage the Companys investment activities. The IAA became effective as of
April 17, 2012, the date that the Company met its minimum offering requirement. Pursuant to the 1940 Act, the initial term of the IAA was for two years from its effective date, with one-year renewals subject to approval by the Companys
board of directors, a majority of whom must be independent directors. On March 12, 2014, the Companys board of directors approved the renewal of the IAA for an additional one-year term at an in-person meeting. Pursuant to the IAA, SIC
Advisors implements the Companys business strategy on a day-to-day basis and performs certain services for the Company, subject to oversight by the Companys board of directors. SIC Advisors is responsible for, among other duties,
determining investment criteria, sourcing, analyzing and executing investment transactions, asset sales, financings and performing asset management duties. Under the IAA, the Company has agreed to pay SIC Advisors a management fee for investment
advisory and management services consisting of a base management fee and an incentive fee.

The base management fee is
calculated at an annual rate of 1.75% of the Companys gross assets payable quarterly in arrears. For purposes of calculating the base management fee, the term gross assets includes any assets acquired with the proceeds of leverage.
Gross assets also includes any cash collateral posted with respect to the TRS, adjusted for realized and unrealized appreciation. For the first quarter of the Companys operations, the base management fee was calculated based on the
initial value of the Companys gross assets. Subsequently, the base management fee is calculated based on the gross assets at the end of each completed calendar quarter. Base management fees for any partial quarter are appropriately prorated.
For the three and six months ended June 30, 2014 the Company recorded an expense for base management fees of $1,768,047 and $2,910,818,



F-37



---

##### Table of Contents

respectively, of which $1,768,046 was payable at June 30, 2014. For the three and six months ended June 30, 2013, the Company recorded an expense for base management fees of $358,389
and $603,888, respectively. As of December 31, 2013, the Company had $814,655 of base management fees payable.

The incentive
fee consists of the following two parts:

An incentive fee on net investment income (subordinated incentive fee on
income) is calculated and payable quarterly in arrears and is based upon pre-incentive fee net investment income for the immediately preceding quarter. No subordinated incentive fee on income is payable in any calendar quarter in which
pre-incentive fee net investment income does not exceed a quarterly return to stockholders of 1.75% per quarter on the Companys net assets at the end of the immediately preceding fiscal quarter, (the preferred quarterly
return.) All pre-incentive fee net investment income, if any, that exceeds the quarterly preferred return, but is less than or equal to 2.1875% of net assets at the end of the immediately preceding fiscal quarter in any quarter, will be
payable to SIC Advisors. The Company refers to this portion of its subordinated incentive fee on income as the catch up. It is intended to provide an incentive fee of 20% on pre-incentive fee net investment income when pre-incentive fee net
investment income exceeds 2.1875% of net assets at the end of the immediately preceding quarter in any quarter. For any quarter in which the Companys pre-incentive fee net investment income exceeds 2.1875% of net assets at the end of the
immediately preceding quarter, the subordinated incentive fee on income shall equal 20% of the amount of pre-incentive fee net investment income, because the preferred return and catch up will have been achieved.

A capital gains incentive fee will be earned on realized investments and shall be payable in arrears as of the end of each calendar year
during which the IAA is in effect. If the IAA is terminated, the fee will also become payable as of the effective date of such termination. The fee equals 20% of the realized capital gains, less the aggregate amount of any previously paid capital
gains incentive fees. Incentive fee on capital gains is equal to realized capital gains on a cumulative basis from inception, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis.

Under GAAP, the Company calculates capital gains incentive fees as if the Company had realized all assets at their fair values and
liabilities at their settlement amounts as of the reporting date. GAAP requires that the capital gains incentive fee accrual assume the cumulative aggregate unrealized capital appreciation is realized, even though such unrealized capital
appreciation is not payable under the IAA. Accordingly, the Company accrues a provisional capital gains incentive fee taking into account any unrealized gains or losses. There can be no assurance that such unrealized capital appreciation will be
realized in the future and that the provisional capital gains incentive fee will become payable.

For the three and six months
ended June 30, 2014 the Company recorded a provisional capital gains incentive fee of $326,458 and $438,949, respectively. For the three and six months ended June 30, 2013 the Company recorded a provisional capital gains incentive fee of
$(114,528) and $34,108, respectively. As of June 30, 2014 and December 31, 2013, the Company recorded a provisional capital gains incentive fee payable of $622,566 and $182,989, respectively.

Prior to June 2, 2014, SIC Advisors bore all organizational and offering expenses on behalf of the Company until the Companys gross
proceeds in connection with the sale of its common stock exceeded $300,000,000. As of June 2, 2014, the Company is responsible for all ongoing organization and offering expenses.

Pursuant to the terms of the IAA, the Company has agreed to reimburse SIC Advisors for any such organizational and offering expenses
incurred by SIC Advisors not to exceed 1.25% of the gross subscriptions raised by the Company over the course of the offering period, which is currently scheduled to terminate April 17, 2015, unless further extended.

In the event that other organizational and offering expenses exceed 5.25% of the gross proceeds from the sale of shares of the
Companys common stock pursuant to its public offering or one or more private offerings at



F-38



---

##### Table of Contents

the time of the completion of the offering or other organizational and offering expenses, together with selling commissions, dealer manager fees and any discounts paid to members of the Financial
Industry Regulatory Authority, exceed 15% of the gross proceeds from the sale of shares of the Companys common stock pursuant to its public offering or one or more private offerings at the time of the completion of the offering, then SIC
Advisors shall be required to pay without reimbursement from the Company, or, if already paid by the Company, reimburse the Company, for amounts exceeding such 5.25% and 15% limit, as appropriate.

For the three and six months ended June 30, 2014, SIC Advisors incurred organizational and offering costs of $473,662 and
$1,551,110, respectively. For the three and six months ended June 30, 2013, SIC Advisors incurred organizational and offering costs of $298,700 and $500,155, respectively. Of the total $5,602,303 organizational and offering costs incurred from
inception through June 30, 2014, $1,123,416 and $2,113,905 were reimbursed to SIC Advisors during the three and six months ended June 30, 2014, respectively. For the three and six months ended June 30, 2013, the Company reimbursed SIC
Advisors $137,477 and $451,806, respectively. As of June 30, 2014 and December 31, 2013, $54,753 and $33,311 have been accrued and are reflected in the consolidated statements of assets and liabilities as due to affiliate, respectively. The
remaining unreimbursed amount will be eligible for reimbursement to the extent the Company receives subscriptions until April 17, 2015, which is the currently scheduled date that the offering period ends, unless it is extended. Organizational
and offering expenses paid for by SIC Advisors and reimbursed by the Company will be expensed on the Companys consolidated statements of operations.

Administration Agreement

On April 5, 2012, the Company entered into
an administration agreement (the Administration Agreement) with Medley Capital LLC, with an initial term of two years pursuant to which Medley Capital LLC furnishes the Company with administrative services necessary to conduct its
day-to-day operations. On March 12, 2014, the Companys board of directors approved the renewal of the Administration Agreement for an additional one-year term at an in-person meeting. Medley Capital LLC is reimbursed for administrative
expenses it incurs on the Companys behalf in performing its obligations. Such costs are reasonably allocated to the Company on the basis of assets, revenues, time records or other reasonable methods. The Company does not reimburse Medley
Capital LLC for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of Medley Capital LLC. Medley Capital LLC is an affiliate of
SIC Advisors. For the three and six months ended June 30, 2014, the Company recorded an expense of $272,579 and $500,795, respectively, of which $272,579 was payable at June 30, 2014, relating to administrator expenses. For the three and
six months ended June 30, 2013, the Company recorded an expense of $158,824 and $296,914, respectively. As of December 31, 2013, the Company had $152,162 in administrator expenses payable.

Expense Support and Reimbursement Agreement

On June 29, 2012, the Company entered into an Expense Support and Reimbursement Agreement (the Expense Support Agreement) with SIC Advisors. Pursuant to the Expense Support Agreement, SIC
Advisors has agreed to reimburse the Company for operating expenses in an amount equal to the difference between distributions paid to the Companys stockholders in each month, less the sum of the Companys net investment income, the
Companys net realized capital gains and dividends paid to the Company from its portfolio companies during such period (Expense Support Reimbursement). To the extent that no dividends or other distributions are paid to the
Companys stockholders in any given month, then the Expense Support Reimbursement for such month shall be equal to such amount necessary in order for Available Operating Funds for the month to equal zero. The terms of the Expense Support
Agreement commenced as of the date that the Companys registration statement was declared effective by the SEC and continued monthly thereafter until December 31, 2012. Most recently, on June 4, 2014, the Companys board of
directors approved an extension of the Expense Support Agreement through December 31, 2014.

Pursuant to the Expense
Support Agreement, the Company has a conditional obligation to reimburse SIC Advisors for any amounts funded by SIC Advisors under the Expense Support Agreement if (and only to the



F-39



---

##### Table of Contents

extent that), during any fiscal quarter occurring within three years of the date on which SIC Advisors incurred a liability for such amount, the sum of the Companys net investment income,
the Companys net capital gains and the amount of any dividends and other distributions paid to the Company from its portfolio companies (to the extent not included in net investment income or net capital gains for tax purposes) exceeds the
distributions paid by the Company to stockholders. The purpose of the Expense Support Agreement is to avoid such distributions being characterized as returns of capital for GAAP purposes and to reduce operating expenses until the Company has raised
sufficient capital to be able to absorb such expenses.

Pursuant to the Expense Support Agreement, the Company will reimburse
SIC Advisors for expense support payments it previously made following any calendar quarter in which the Company received net investment income, net capital gains and dividends from its portfolio companies in excess of the distributions paid to the
Companys stockholders during such calendar quarter (the Excess Operating Funds). Any such reimbursement will be made within three years of the date that the expense support payment obligation was incurred by SIC Advisors, subject
to the conditions described below. The amount of the reimbursement during any calendar quarter will equal the lesser of (i) the Excess Operating Funds received during the quarter and (ii) the aggregate amount of all expense payments made
by SIC Advisors that have not yet been reimbursed. In addition, the Company will only make reimbursement payments if its operating expense ratio (as described in footnote 1 to the table below) is equal to or less than its operating
expense ratio at the time the corresponding expense payment was incurred and if the annualized rate of its regular cash distributions to the Companys stockholders is equal to or greater than the annualized rate of the Companys regular
cash distributions to stockholders at the time the corresponding expense payment was incurred.

For the three and six months
ended June 30, 2014, the Company recorded Expense Support Reimbursements of $2,143,066 and $3,456,536, respectively, on the consolidated statements of operations. For the three and six months ended June 30, 2013, the Company recorded
Expense Support Reimbursements of $732,424 and $1,417,828, respectively, on the consolidated statements of operations, which includes $125,000 that SIC Advisors elected to reimburse on June 27, 2013 related to expenses from prior periods.
Repayments of amounts paid by SIC Advisors to the Company under the Expense Support Agreement will be accrued as they become probable and estimable. As of June 30, 2014 and December 31, 2013, the Company recorded $5,128,780 and $2,592,989,
respectively, in its consolidated statements of assets and liabilities as due from affiliate relating to the Expense Support and Reimbursement Agreement. From inception through June 30, 2014, the company did not record any reimbursement to SIC
Advisors for Expense Support Reimbursements.

The following table provides information regarding liabilities incurred by SIC
Advisors pursuant to the Expense Support Agreement as well as other information relating to the Companys ability to reimburse SIC Advisors for such payments:



|                   |  |                                   |           |  |                          |  |      |                                |  |  |                             |   |  |                   
|------------------ |  | --------------------------------- | --------- |  | ------------------------ |  | ---- | ------------------------------ |  |  | --------------------------- | - |  | ------------------
|Quarter Ended      |  | Amount ofExpensePaymentObligation |           |  | OperatingExpenseRatio(1) |  |      | AnnualizedDistribution
Rate(2) |  |  | Eligibleto be RepaidThrough
|June 30, 2012      |  | $                                 | 454,874   |  |                          |  | 6.13 | %                              |  |  | 8.00                        | % |  | June 30, 2015     
|September 30, 2012 |  |                                   | 437,303   |  |                          |  | 4.05 | %                              |  |  | 8.00                        | % |  | September 30, 2015
|December 31, 2012  |  |                                   | 573,733   |  |                          |  | 3.91 | %                              |  |  | 8.00                        | % |  | December 31, 2015 
|March 31, 2013     |  |                                   | 685,404   |  |                          |  | 1.71 | %                              |  |  | 8.00                        | % |  | March 31, 2016    
|June 30, 2013      |  |                                   | 732,425   |  |                          |  | 1.00 | %                              |  |  | 7.84                        | % |  | June 30, 2016     
|September 30, 2013 |  |                                   | 1,277,853 |  |                          |  | 0.83 | %                              |  |  | 7.84                        | % |  | September 30, 2016
|December 31, 2013  |  |                                   | 1,243,569 |  |                          |  | 0.45 | %                              |  |  | 7.84                        | % |  | December 31, 2016 
|March 31, 2014     |  |                                   | 1,313,470 |  |                          |  | 0.45 | %                              |  |  | 7.80                        | % |  | March 31, 2017    
|June 30, 2014      |  |                                   | 2,143,066 |  |                          |  | 0.38 | %                              |  |  | 7.80                        | % |  | June 30, 2017     



|(1) | Operating Expense Ratio is as of the date the expense support payment obligation was incurred by our Advisor and includes all expenses
borne by the Company, except for organizational and offering expenses, base management and incentive fees owed to SIC Advisors, and interest expense, as a percentage of net assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-40



---

##### Table of Contents

|(2) | Annualized Distribution Rate equals the annualized rate of distributions paid to stockholders based on the amount of the regular cash
distribution paid immediately prior to the date the expense support payment obligation was incurred by SIC Advisors. Annualized Distribution Rate does not include special cash or stock distributions paid to stockholders.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 8. Related Party Transactions

On October 19, 2011, SIC Advisors entered into a subscription agreement to purchase 110.80 shares of common stock for cash consideration of $1,000. The consideration represents $9.025 per share.

On March 31, 2012, SIC Advisors entered into a subscription agreement to purchase 1,108,033.24 shares of common stock
for cash consideration of $10,000,000. The purchase was made on April 17, 2012. The consideration represents $9.025 per share.

Due from affiliate relates to amounts due from SIC Advisors pursuant to the Expense Support Agreement as discussed in Note 7.

Due to affiliate relates to reimbursements of organizational and offering expenses pursuant to the IAA paid to SIC Advisors as discussed in Note 7.

An affiliate of the Companys dealer manager has an ownership interest in SIC Advisors.

Note 9. Directors Fees

The Companys independent directors receive an annual retainer fee of $30,000 and further receive a fee of $2,500 ($1,000 for
telephonic attendance) for each regularly scheduled board meeting and a fee of $1,000 for each special board meeting and all committee meetings as well as reimbursement of reasonable and documented out-of-pocket expenses incurred in connection with
attending each board or committee meeting. In addition, the chairman of the audit committee receives an annual retainer of $10,000, while the chairman of any other committee receives an annual retainer of $2,500. For the three and six months ended
June 30, 2014, the Company recorded directors fees expenses of $41,646 and $82,835, respectively, of which $73,235 was payable at June 30, 2014. For the three and six months ended June 30, 2013, the Company recorded
directors fees expenses of $41,875 and $85,640, respectively. As of December 31, 2013, the Company did not have any directors fees payable.

Note 10. Earnings Per Share

In accordance with the provisions of ASC Topic
260  Earnings per Share (ASC 260), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common
shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The
following table sets forth the computation of the weighted average basic and diluted net increase in net assets per share from operations for the three and six months ended June 30:



|                                                      |  |                            |            |  |                          |   |           |      |  |   |            |  |  |   |           | 
|----------------------------------------------------- |  | -------------------------- | ---------- |  | ------------------------ | - | --------- | ---- |  | - | ---------- |  |  | - | --------- | 
|                                                      |  | For the three months ended |            |  | For the six months ended |  
|                                                      |  | June 30,                   |            |  | June 30,                 |  
|Basic and diluted                                     |  | 2014                       |            |  | 2013                     |   |           | 2014 |  |   | 2013       | 
|Net increase/(decrease) in net assets from operations |  | $                          | 7,235,329  |  |                          | $ | 490,003   |      |  | $ | 11,682,877 |  |  | $ | 1,881,190 | 
|Weighted average common shares outstanding            |  |                            | 29,185,996 |  |                          |   | 5,150,372 |      |  |   | 24,802,153 |  |  |   | 4,193,642 | 
|Earnings per common share-basic and diluted           |  | $                          | 0.25       |  |                          | $ | 0.09      |      |  | $ | 0.47       |  |  | $ | 0.45      | 



F-41



---

##### Table of Contents

Note 11. Commitments and Contingencies

The Companys investment portfolio may contain debt investments that are in the form of lines of credit and unfunded delayed draw
commitments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of June 30, 2014 the Company had three unfunded commitments under loan and
financing agreements. As of December 31, 2013 the Company had no unfunded commitments under loan and financing agreements.



|                                   |  |               |           |  |                   |   |   | 
|---------------------------------- |  | ------------- | --------- |  | ----------------- | - | - | 
|                                   |  | As of         |          
|                                   |  | June 30, 2014 |           |  | December 31, 2013 |  
|Access Media 3, Inc.               |  | $             | 24,908    |  |                   | $ |  | 
|GTCR Valor Companies, Inc.         |  |               | 3,446,154 |  |                   |   |   | 
|Valence Surface Technologies, Inc. |  |               | 1,071,393 |  |                   |   |  | 
|                                   |  |               |           |  |                   |   |   | 
|Total                              |  | $             | 4,542,455 |  |                   | $ |  | 
|                                   |  |               |           |  |                   |   |   | 

Note 12. Distributions and Share Repurchase Plan Distributions

Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend is
determined by the Companys board of directors.

The Company has adopted an opt in distribution reinvestment
plan (DRIP) pursuant to which the Companys common stockholders may elect to have the full amount of any cash distributions reinvested in additional shares of the Companys common stock. As a result, if the Company declares a
cash dividend or other distribution, each stockholder that has opted in to the Companys reinvestment plan will have their distributions automatically reinvested in additional shares of the Companys common stock rather than
receiving cash distributions. Stockholders who receive distributions in the form of shares of common stock will be subject to the same federal, state and local tax consequences as if they received cash distributions. For the six months ended
June 30, 2014, the Company distributed a total of $10,192,078, of which, $5,641,826 was in cash and $4,550,252 was in the form of common shares associated with the DRIP. For the six months ended June 30, 2013, the Company distributed a
total of $1,673,988, of which, $1,223,241, was in cash and $450,747 was in the form of common shares associated with the DRIP.



F-42



---

##### Table of Contents

The following table reflects the cash distributions per share that the Company declared or
paid to its stockholders since it commenced operations in April 2012. Stockholders of record as of each respective record date were entitled to receive the distribution.



|                                    |  |              |                    |  |                 |   |         | 
|----------------------------------- |  | ------------ | ------------------ |  | --------------- | - | ------- | 
|Record Date                         |  | Payment Date |                    |  | Amountper share |  
|July 13 and 31, 2012                |  |              | August 1, 2012     |  |                 | $ | 0.03333 | 
|August 15 and 31, 2012              |  |              | September 4, 2012  |  |                 |   | 0.03333 | 
|September 14 and 28, 2012           |  |              | October 1, 2012    |  |                 |   | 0.03333 | 
|October 15 and 30, 2012             |  |              | October 31, 2012   |  |                 |   | 0.03333 | 
|November 15 and 29, 2012            |  |              | November 30, 2012  |  |                 |   | 0.03333 | 
|December 14 and 28, 2012            |  |              | December 31, 2012  |  |                 |   | 0.03333 | 
|January 15 and 31, 2013             |  |              | January 31, 2013   |  |                 |   | 0.03333 | 
|February 15 and 28, 2013            |  |              | February 28, 2013  |  |                 |   | 0.03333 | 
|March 15 and 29, 2013               |  |              | March 29, 2013     |  |                 |   | 0.03333 | 
|April 15 and 30, 2013               |  |              | April 30, 2013     |  |                 |   | 0.03333 | 
|May 15 and 31, 2013                 |  |              | May 31, 2013       |  |                 |   | 0.03333 | 
|June 14 and 28, 2013                |  |              | June 28, 2013      |  |                 |   | 0.03333 | 
|July 15 and 31, 2013                |  |              | July 31, 2013      |  |                 |   | 0.03333 | 
|August 15 and 30, 2013              |  |              | August 30, 2013    |  |                 |   | 0.03333 | 
|September 13 and 30, 2013           |  |              | September 30, 2013 |  |                 |   | 0.03333 | 
|October 15 and 31, 2013             |  |              | October 31, 2013   |  |                 |   | 0.03333 | 
|November 15 and 29, 2013            |  |              | November 29, 2013  |  |                 |   | 0.03333 | 
|December 13 and 31, 2013            |  |              | December 31, 2013  |  |                 |   | 0.03333 | 
|January 15 and 31, 2014             |  |              | January 31, 2014   |  |                 |   | 0.03333 | 
|February 14 and 28, 2014            |  |              | February 28, 2014  |  |                 |   | 0.03333 | 
|March 14 and 31, 2014               |  |              | March 31, 2014     |  |                 |   | 0.03333 | 
|April 15 and 30, 2014               |  |              | April 30, 2014     |  |                 |   | 0.03333 | 
|May 15 and 30, 2014                 |  |              | May 30, 2014       |  |                 |   | 0.03333 | 
|June 13 and 30, 2014                |  |              | June 30, 2014      |  |                 |   | 0.03333 | 
|July 15 and July 31, 2014           |  |              | July 31, 2014      |  |                 |   | 0.03333 | 
|August 15 and August 29, 2014       |  |              | August 29, 2014    |  |                 |   | 0.03333 | 
|September 15 and September 30, 2014 |  |              | September 30, 2014 |  |                 |   | 0.03333 | 

The Companys distributions may be funded from offering proceeds or borrowings, which may constitute
a return of capital and reduce the amount of capital available to the Company for investment. Any capital returned to stockholders through distributions will be distributed after payment of fees and expenses.

The Companys previous distributions to stockholders were funded from temporary Expense Support Reimbursements that are subject to
repayment to SIC Advisors. These distributions were not based on our investment performance and may not continue in the future. If SIC Advisors had not agreed to make Expense Support Reimbursements, these distributions would have come from
paid-in-capital. The reimbursement of these payments owed to SIC Advisors will reduce the future distributions to which stockholders would otherwise be entitled.

The determination of the tax attributes (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of paid-in-capital surplus which is a nontaxable
distribution) of distributions is made annually as of the end of the Companys fiscal year based upon its taxable income for the full year and distributions paid for the full year.



F-43



---

##### Table of Contents

Share Repurchase Program

In June 2013, the Company commenced a share repurchase program pursuant to which it intends to conduct quarterly share repurchases, of up to 2.5% of the weighted average number of outstanding shares in
any 3-month period or 10% of the weighted average number of outstanding shares in any 12-month period. The purpose of the share repurchase program is to allow stockholders to sell their shares back to the Company at a price equal to the most
recently disclosed net asset value per share of the Companys common stock immediately prior to the date of repurchase. Shares will be purchased from stockholders participating in the program on a pro rata basis. Unless the Companys board
of directors determines otherwise, the number of shares to be repurchased during any calendar year will be limited to the proceeds received in association with the sale of shares of common stock under the distribution reinvestment plan.

On June 4, 2013, the Company offered to repurchase up to 16,652 shares at a price per share of $9.18, which represented the
Companys net asset value per share as of March 31, 2013. No stockholders elected to participate in this quarterly repurchase, and the Company did not purchase any shares.

On August 8, 2013, the Company offered to repurchase up to 32,627 shares at a price per share of $9.13, which represented the
Companys net asset value per share as of June 30, 2013. On September 27, 2013, the Company repurchased 3,642 shares.

On November 7, 2013, the Company offered a repurchase up to 60,966 shares at a price per share of $9.14, which represented the Companys net asset value per share as of September 30, 2013.
On December 19, 2013, the Company repurchased 5,826 shares.

On March 12, 2014, the Company offered to repurchase up
to 120,816 shares at a price per share of $9.18, which represented the Companys net asset value per share as of December 31, 2013. On April 25, 2014, the Company repurchased 9,835 shares.

On May 6, 2014, the Company offered to repurchase up to 199,476 shares at a price per share of $9.20, which represented the
Companys net asset value per share as of March 31, 2014. On June 13, 2014, the Company repurchased 17,777 shares.

On August 5, 2014, the Company offered to repurchase up to 294,068 shares at a price of $9.25, which represents the Companys net asset value per share as of June 30, 2014.



F-44



---

##### Table of Contents

Note 13. Financial Highlights

The following is a schedule of financial highlights of the Company for the six months ended June 30:



|                                                                                |  |      |             |   |      |   |            |  
|------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | -
|                                                                                |  | 2014 |             |   | 2013 |  
|Per Share Data:(1)                                                              |  |      |             |   |      |   |            |  
|Net asset value at beginning of period                                          |  | $    | 9.18        |   |      | $ | 8.96       |  
|Net investment income/(loss)                                                    |  |      | 0.25        |   |      |   | 0.40       |  
|Net realized gains/(losses) on investments and total return swap                |  |      | 0.16        |   |      |   | 0.03       |  
|Net unrealized appreciation/(depreciation) on investments and total return swap |  |      | 0.06        |   |      |   | 0.14       |  
|                                                                                |  |      |             |   |      |   |            |  
|Net increase/(decrease) in net assets                                           |  |      | 0.47        |   |      |   | 0.57       |  
|Distributions declared from net investment income(2)                            |  |      | (0.24       | ) |      |   | (0.37      | )
|Distributions from net realized capital gains                                   |  |      | (0.16       | ) |      |   | (0.03      | )
|                                                                                |  |      |             |   |      |   |            |  
|Total distributions to stockholders                                             |  |      | (0.40       | ) |      |   | (0.40      | )
|Issuance of common stock above net asset value(3)                               |  |      |            |   |      |   |           |  
|Net asset value at end of period                                                |  |      | 9.25        |   |      |   | 9.13       |  
|Total return based on net asset value(4)(5)                                     |  |      | 5.20        | % |      |   | 6.36       | %
|Portfolio turnover rate                                                         |  |      | 34.10       | % |      |   | 32.06      | %
|Shares outstanding at end of period                                             |  |      | 34,455,001  |   |      |   | 5,939,363  |  
|Net assets at end of period                                                     |  |      | 318,696,039 |   |      |   | 54,211,809 |  
|Ratio/Supplemental Data (annualized):                                           |  |      |             |   |      |   |            |  
|Ratio of net investment income/(loss) to average net assets(5)                  |  |      | 5.57        | % |      |   | 10.22      | %
|Ratio of net expenses (including incentive fees) to average net assets(5)       |  |      | 4.60        | % |      |   | 4.87       | %
|Ratio of incentive fees to average net assets                                   |  |      | 0.39        | % |      |   | 0.19       | %
|Supplemental data (annualized):                                                 |  |      |             |   |      |   |            |  
|Ratio of operating expenses to average net assets                               |  |      | 4.21        | % |      |   | 6.26       | %
|Ratio of interest and financing related expenses to average net assets          |  |      | 0.60        | % |      |   | 0.36       | %



|(1) | The per share data was derived by using the weighted average shares outstanding during the six months ended June 30, 2014 and June 30, 2013, which were
24,802,153 and 4,193,642, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The per share data for distributions is the actual amount of paid distributions per share during the period.
|--- | ------------------------------------------------------------------------------------------------------------

|(3) | Shares issued under the DRIP (see Note 12) as well as the continuous issuance of shares of common stock may cause on incremental increase/decrease in
net asset value per share due to the effect of issuing shares at amounts that differ from the prevailing net asset value at each issuance.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Total annual returns are historical and assume reinvestments of all dividends and distributions at prices obtained under the Companys dividend
reinvestment plan, and no sales charge.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Total returns, ratios of net investment income/(loss), and ratios of net expenses to average net assets for the six months ended June 30, 2014 and June
30, 2013 prior to the effect of the Expense Support and Reimbursement Agreement were as follows: total return 4.48% and (5.92%), ratio of net investment income/(loss): 2.51% and (38.99%) and ratio of net expenses to average net assets: 7.74% and
49.75%, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 14. Subsequent Events

Management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There
have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the six months ended June 30, 2014,
except as disclosed below.

The Company issued common shares and received gross proceeds of approximately $43.3 million
subsequent to June 30, 2014.



F-45



---

##### Table of Contents

On July 10, 2014, the pricing committee of the board of directors approved an increase
to Companys public offering price from $10.25 per share to $10.30 per share. This increase became effective with the weekly closing on July 11, 2014. The purpose of this action was to ensure that the Companys net asset value per
share, after deducting selling commissions and dealer manager fees, did not exceed its offering price per share, as required by the 1940 Act.

Alpine Credit Facility

On July 23, 2014, the Companys newly-formed, wholly-owned, special purpose financing subsidiary, Alpine Funding LLC
(Alpine), entered into a revolving credit facility (the Alpine Credit Facility) pursuant to a Loan Agreement with JPMorgan Chase Bank, National Association (JPMorgan), as administrative agent and lender, the
Financing Providers from time to time party thereto, SIC Advisors LLC, as the portfolio manager, and the Collateral Administrator, Collateral Agent and Securities Intermediary party thereto (the Loan Agreement). Alpines obligations
to JPMorgan under the Alpine Credit Facility are secured by a first priority security interest in substantially all of the assets of Alpine, including its portfolio of loans. The obligations of Alpine under the Alpine Credit Facility are
non-recourse to the Company.

The Alpine Credit Facility provides for borrowings in an aggregate principal amount up to
$150,000,000 on a committed basis. Borrowings under the Alpine Credit Facility are subject to compliance with a net asset value coverage ratio with respect to the current value of Alpines portfolio and various eligibility criteria must be
satisfied with respect to the initial acquisition of each loan in Alpines portfolio. Any amounts borrowed under the Alpine Credit Facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on January 23,
2019.

Pricing under the Alpine Credit Facility for each one month calculation period is based on the London Interbank Offered
Rate (LIBOR) for an interest period of one month, plus a spread of 3.25% per annum. If LIBOR is unavailable, pricing will be determined at the prime rate offered by JPMorgan or the federal funds effective rate, plus a spread of
3.25% per annum. Interest is payable monthly in arrears. Beginning February 22, 2015, Alpine will be required to pay a non-usage fee equal to .50% on the average daily unused amount of the financing commitments to the extent the aggregate
principal amount available under the Alpine Credit Facility has not been borrowed. Alpine also paid a set-up fee and incurred certain other customary costs and expenses in connection with obtaining the Alpine Credit Facility.

Borrowings of Alpine will be considered borrowings of the Company for purposes of complying with the asset coverage requirements under
the Investment Company Act of 1940 Act, as amended, applicable to business development companies. As of August 6, 2014, the Company had $25,000,000 outstanding under the Alpine Credit Facility.

Pursuant to a Sale and Contribution Agreement entered into between the Company and Alpine (the Sale Agreement) in connection
with the Alpine Credit Facility, the Company may sell loans or contribute cash or loans to Alpine from time to time and will retain a residual interest in any assets contributed through its ownership of Alpine or will receive fair market value for
any assets sold to Alpine. In certain circumstances the Company may be required to repurchase certain loans sold to Alpine. In addition to the acquisition of loans pursuant to the Sale Agreement, Alpine may purchase additional assets from various
sources. Alpine has appointed SIC Advisors LLC to manage its portfolio of assets pursuant to the terms of a Portfolio Management Agreement between SIC Advisors LLC and Alpine.

Amendment to Total Return Swap

On July 23, 2014, the Company, through
Arbor Funding LLC (Arbor), its wholly-owned financing subsidiary, entered into the Second Amended and Restated Confirmation Letter Agreement (the Second Amended Confirmation Agreement) with Citibank, N.A. (Citi),
initially entered into on August 27, 2013, and



F-46



---

##### Table of Contents

first amended and restated on March 21, 2014, relating to a total return swap, or TRS, for senior secured floating rate loans. The TRS with Citi enables the Company, through Arbor, to obtain
the economic benefit of the loans subject to the TRS, despite the fact that such loans will not be directly held or otherwise owned by the Company or Arbor, in return for an interest-type payment to Citi. The Second Amended Confirmation Agreement
increases the maximum market value (determined at the time each such loan becomes subject to the TRS) of the portfolio of loans that Arbor may select from $200,000,000 to $350,000,000. Other than the foregoing, the Second Amended Confirmation
Agreement did not change any of the other terms of the TRS. As of August 5, 2014, Arbor has posted $45,168,170 in collateral to Citi in relation to the TRS.



F-47



---

##### Table of Contents

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

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking
statements, which relate to future events or our performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including, but not limited to, statements as to:



| |  |  | our future operating results;
| | - |  | -----------------------------



| |  |  | our business prospects and the prospects of our portfolio companies;
| | - |  | --------------------------------------------------------------------



| |  |  | changes in the economy;
| | - |  | -----------------------



| |  |  | risk associated with possible disruptions in our operations or the economy generally;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | the effect of investments that we expect to make;
| | - |  | -------------------------------------------------



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



| |  |  | actual and potential conflicts of interest with SIC Advisors and its affiliates;
| | - |  | --------------------------------------------------------------------------------



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



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



| |  |  | the use of borrowed money to finance a portion of our investments;
| | - |  | ------------------------------------------------------------------



| |  |  | the adequacy of our financing sources and working capital;
| | - |  | ----------------------------------------------------------



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



| |  |  | the ability of SIC Advisors to locate suitable investments for us and to monitor and administer our investments;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | the ability of SIC Advisors and its affiliates to attract and retain highly talented professionals;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | our ability to maintain our qualification as a RIC and as a BDC; and
| | - |  | --------------------------------------------------------------------



| |  |  | the effect of changes in laws or regulations affecting our operations or to tax legislation and our tax position.
| | - |  | -----------------------------------------------------------------------------------------------------------------

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words trend,
opportunity, pipeline, believe, comfortable, expect, anticipate, current, intention, estimate, position, assume,
potential, outlook, continue, remain, maintain, sustain, seek, achieve, and similar expressions, or future or conditional verbs such as will,
would, should, could, may, or similar expressions. The forward looking statements contained in this annual 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 as Risk Factors in this annual report on Form 10-K.

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements.
Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. Although we undertake no obligation to revise or update any forward-looking
statements, 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 have filed or in the future may file with the SEC,
including quarterly reports on Form 10-Q, annual reports on Form 10-K, and current reports on Form 8-K.

Overview

We are an externally managed non-diversified closed-end management investment company that has elected to be treated as a BDC under the
1940 Act. We are externally managed by SIC Advisors LLC, or SIC Advisors, which is a registered investment adviser under the Advisers Act. SIC Advisors is responsible for sourcing potential investments, conducting due diligence on prospective
investments, analyzing investment opportunities, structuring investments and monitoring our portfolio on an ongoing basis. In addition, we have elected and intend to qualify to be treated, for U.S. federal income tax purposes, as a
RIC under subchapter M of the Code.



1



---

##### Table of Contents

On April 17, 2012 we successfully reached the minimum escrow requirement and officially
commenced operations by receiving gross proceeds of $10 million in exchange for 1,108,033.24 shares of our common stock sold to SIC Advisors. As of June 30, 2014, we have combined proceeds, as well as a modest amount of leverage through a
revolving credit facility with ING Capital LLC, which we have used to invest $328.2 million across 59 transactions.

Under our Investment Advisory Agreement, we pay SIC Advisors an annual management fee as well as an incentive fee based on our investment
performance. Also, under the Administration Agreement, we reimburse Medley for the allocable portion of overhead and other expenses incurred by Medley Capital LLC in performing its obligations under the Administration Agreement, including our
allocable portion of the costs of compensation and related expenses of our chief compliance officer, chief financial officer and their respective staffs.

Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in the debt of privately
owned U.S. companies with a focus on senior secured debt, second lien debt and, to a lesser extent, subordinated debt. We will originate transactions sourced through SIC Advisors network, and expect to acquire debt securities through the
secondary market. Our debt investments may take the form of corporate loans or bonds, may be secured or unsecured and may, in some cases, be accompanied by warrants, options or other forms of equity participation. We may separately purchase common
or preferred equity interests in transactions.

The level of our investment activity depends on many factors, including the
amount of debt and equity capital available to prospective portfolio companies, the level of merger, acquisition and refinancing activity for such companies, the availability of credit to finance transactions, the general economic environment and
the competitive environment for the types of investments we make. Based on prevailing market conditions, we anticipate that we will invest the proceeds from each subscription closing generally within 30-90 days. The precise timing will depend on the
availability of investment opportunities that are consistent with our investment objective and strategies. Any distributions we make during such period may be substantially lower than the distributions that we expect to pay when our portfolio is
fully invested.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to
invest at least 70% of our total assets in qualifying assets, including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one
year or less. In addition, we are only allowed to borrow money such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowing, with certain limited exceptions. To obtain and maintain our RIC status, we must meet
specified source-of-income and asset diversification requirements. To be eligible for tax treatment under Subchapter M for U.S. federal income tax purposes, we must distribute at least 90% of our net ordinary income and realized net short-term
capital gains in excess of realized net long-term capital losses, if any, for the taxable year.

Revenues

We generate revenue in the form of interest on the debt securities that we hold and distributions and capital gains on other interests
that we acquire in our portfolio companies. We expect that the senior debt we invest in will generally have stated terms of three to ten years and that the subordinated debt we invest in will generally have stated terms of five to ten years. Our
senior and subordinated debt investments bear interest at a fixed or floating rate. Interest on debt securities is generally payable monthly, quarterly or semiannually. In addition, some of our investments provide for deferred interest payments or
PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with
transactions. Original issue discounts and market discounts or premiums will be capitalized, and we will accrete or amortize such amounts as interest income. We will record prepayment premiums on loans and debt securities as interest income.
Dividend income, if any, will be recognized on an accrual basis to the extent that we expect to collect such amounts.



2



---

##### Table of Contents

Expenses

Our primary annual operating expenses consist of the payment of advisory fees and the reimbursement of expenses under our Investment Advisory Agreement with SIC Advisors (the Investment Advisory
Agreement) and our Administration Agreement with Medley Capital LLC (the Administration Agreement). We bear other expenses, which include, among other things:



| |  |  | corporate, organizational and offering expenses relating to offerings of our common stock, subject to limitations included in our Investment Advisory
Agreement;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost of calculating our net asset value, including the related fees and cost of any third-party valuation services;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | the cost of effecting sales and repurchases of shares of our common stock and other securities;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | fees payable to third parties relating to, or associated with, monitoring our financial and legal affairs, making investments, and valuing investments,
including fees and expenses associated with performing due diligence reviews of prospective investments;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest payable on debt, if any, incurred to finance our investments;
| | - |  | ----------------------------------------------------------------------



| |  |  | transfer agent and custodial fees;
| | - |  | ----------------------------------



| |  |  | fees and expenses associated with marketing efforts;
| | - |  | ----------------------------------------------------



| |  |  | federal and state registration fees and any stock exchange listing fees;
| | - |  | ------------------------------------------------------------------------



| |  |  | federal, state and local taxes;
| | - |  | -------------------------------



| |  |  | independent directors fees and expenses, including travel expenses;
| | - |  | --------------------------------------------------------------------



| |  |  | costs of director and stockholder meetings, proxy statements, stockholders reports and notices;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | costs of fidelity bonds, directors and officers/errors and omissions liability insurance and other types of insurance;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | direct costs, including those relating to printing of stockholder reports and advertising or sales materials, mailing, long distance telephone and
staff;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | fees and expenses associated with independent audits and outside legal costs, including compliance with the Sarbanes-Oxley Act of 2002, the 1940 Act
and applicable federal and state securities laws;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | brokerage commissions for our investments;
| | - |  | ------------------------------------------



| |  |  | all other expenses incurred by us or the Advisor in connection with administering our investment portfolio, including expenses incurred by our Advisor
in performing certain of its obligations under the Investment Advisory Agreement; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the reimbursement of the compensation of our chief financial officer and chief compliance officer, whose salary is paid by Medley, to the extent that
each such reimbursement amount is annually approved by our independent director committee and subject to the limitations included in our Administration Agreement.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Reimbursement of Medley for Administrative Services

We reimburse Medley
Capital LLC for the administrative expenses necessary for its performance of services to us. However, such reimbursement is made at an amount equal to the lower of Medley Capital LLCs actual costs or the amount that we would be required to pay
for comparable administrative services in the same geographic location. Also, such costs will be reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. We will not reimburse Medley Capital LLC for any
services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of Medley Capital LLC.



3



---

##### Table of Contents

Portfolio and Investment Activity

As of June 30, 2014, our portfolio consisted of investments in 59 portfolio companies with a fair value of $329.3 million, and was
comprised of 33.4% Senior secured first lien term loans, 55.9% Senior secured second lien term loans, 9.1% Senior Secured first lien notes, 0.5% Senior Secured second lien notes and 1.1% warrants and equity.

As of December 31, 2013, our portfolio consisted of investments in 49 portfolio companies with a fair value of $137.8 million, and
was comprised of 20.8% Senior Secured first lien term loans, 41.0% Senior Secured second lien term loans, 34.4% senior secured notes, 3.8% Senior Secured second lien notes and 0.0% warrants.

As of June 30, 2014, our income-bearing investment portfolio, which represented 98.9% of our total portfolio, had a weighted average
yield based upon the cost of our portfolio investments of approximately 9.1%, and 11.9% of our income-bearing portfolio bore interest based on fixed rates, and 88.1% of our income-bearing portfolio bore interest on floating rates, such as LIBOR.

As of December 31, 2013, our income-bearing investment portfolio, which represented 99.9% of our total portfolio, had a
weighted average yield based upon the cost of our portfolio investments of approximately 9.9%, and 43.3% of our income-bearing portfolio bore interest based on fixed rates, and 56.7% of our income-bearing portfolio bore interest on floating rates,
such as LIBOR.

For the three months ended June 30, 2014, we had $82,125,000 of principal in direct originations across 7
portfolio companies and $62,175,973 of principal in purchased transactions across 22 portfolio companies. As of June 30, 2014, the fair value of our investment portfolio was comprised of $200,286,526 in originated transactions across 29
companies and $129,042,894 in purchased transactions across 30 companies.

The following table summarizes the amortized cost
and the fair value of investments not including cash as of June 30, 2014:



|                                      |  |               |             |  |            |  |       |            |  |   |             |  |  |  |       |  
|------------------------------------- |  | ------------- | ----------- |  | ---------- |  | ----- | ---------- |  | - | ----------- |  |  |  | ----- | -
|                                      |  | AmortizedCost |             |  | Percentage |  |       | Fair Value |  |   | Percentage  | 
|Senior secured first lien term loans  |  | $             | 109,474,255 |  |            |  | 33.3  | %          |  | $ | 109,994,358 |  |  |  | 33.4  | %
|Senior secured first lien notes       |  |               | 30,543,051  |  |            |  | 9.3   |            |  |   | 30,070,088  |  |  |  | 9.1   |  
|Senior secured second lien term loans |  |               | 183,444,517 |  |            |  | 55.9  |            |  |   | 183,859,229 |  |  |  | 55.9  |  
|Senior secured second lien notes      |  |               | 1,630,532   |  |            |  | 0.5   |            |  |   | 1,712,314   |  |  |  | 0.5   |  
|Warrants/Equity                       |  |               | 3,195,026   |  |            |  | 1.0   |            |  |   | 3,693,431   |  |  |  | 1.1   |  
|                                      |  |               |             |  |            |  |       |            |  |   |             |  |  |  |       |  
|Total                                 |  | $             | 328,287,381 |  |            |  | 100.0 | %          |  | $ | 329,329,420 |  |  |  | 100.0 | %
|                                      |  |               |             |  |            |  |       |            |  |   |             |  |  |  |       |  

The following table summarizes the amortized cost and the fair value of investments, not including cash
as of December 31, 2013:



|                                      |  |               |             |  |            |  |       |            |  |   |             |  |  |  |       |  
|------------------------------------- |  | ------------- | ----------- |  | ---------- |  | ----- | ---------- |  | - | ----------- |  |  |  | ----- | -
|                                      |  | AmortizedCost |             |  | Percentage |  |       | Fair Value |  |   | Percentage  | 
|Senior secured first lien term loans  |  | $             | 28,617,156  |  |            |  | 20.9  | %          |  | $ | 28,583,326  |  |  |  | 20.8  | %
|Senior secured first lien notes       |  |               | 47,352,921  |  |            |  | 34.5  |            |  |   | 47,427,311  |  |  |  | 34.4  |  
|Senior secured second lien term loans |  |               | 56,224,549  |  |            |  | 40.9  |            |  |   | 56,481,247  |  |  |  | 41.0  |  
|Senior secured second lien notes      |  |               | 5,108,477   |  |            |  | 3.7   |            |  |   | 5,254,676   |  |  |  | 3.8   |  
|Warrants/Equity                       |  |               | 29,173      |  |            |  |      |            |  |   | 54,977      |  |  |  |      |  
|                                      |  |               |             |  |            |  |       |            |  |   |             |  |  |  |       |  
|Total                                 |  | $             | 137,332,276 |  |            |  | 100.0 | %          |  | $ | 137,801,537 |  |  |  | 100.0 | %
|                                      |  |               |             |  |            |  |       |            |  |   |             |  |  |  |       |  



4



---

##### Table of Contents

Our portfolio composition, based on fair value, including the value of the TRS underlying
loans, at June 30, 2014 was as follows:



|                                      |  |                               |       |   |                                                 |  |      |  
|------------------------------------- |  | ----------------------------- | ----- | - | ----------------------------------------------- |  | ---- | -
|                                      |  | Percentageof TotalInvestments |       |   | WeightedAverageCurrentYield forTotalInvestments | 
|Senior Secured First Lien Term Loans  |  |                               | 29.6  | % |                                                 |  | 9.3  | %
|Senior Secured First Lien Notes       |  |                               | 8.1   |   |                                                 |  | 10.1 |  
|Senior Secured Second Lien Term Loans |  |                               | 49.5  |   |                                                 |  | 9.3  |  
|Senior Secured Second Lien Notes      |  |                               | 0.5   |   |                                                 |  | 10.3 |  
|Equity/Warrants                       |  |                               | 12.3  |   |                                                 |  | 19.0 |  
|                                      |  |                               |       |   |                                                 |  |      |  
|Total                                 |  |                               | 100.0 | % |                                                 |  | 10.5 | %
|                                      |  |                               |       |   |                                                 |  |      |  

The following table shows the portfolio composition by industry grouping, including the TRS underlying
loans, based on fair value at June 30, 2014:



|                                                               |  |                            |            |  |                                |  |      |                            |  |  |                                 |  |  |                                                                       |      |   |                                                                    |  |            |  |  |  |      |  
|-------------------------------------------------------------- |  | -------------------------- | ---------- |  | ------------------------------ |  | ---- | -------------------------- |  |  | ------------------------------- |  |  | --------------------------------------------------------------------- | ---- | - | ------------------------------------------------------------------ |  | ---------- |  |  |  | ---- | -
|                                                               |  | Investmentsat
FairValue(1) |            |  | Percentageof
TotalPortfolio(1) |  |      | Value ofTRSUnderlyingLoans |  |  | Percentageof TRSUnderlyingLoans |  |  | TotalInvestmentsat Fair Valueincluding thevalue of
TRSUnderlyingLoans |      |   | Percentageof TotalPortfolioIncludingthe valueof
TRSUnderlyingLoans | 
|Electronics                                                    |  |                            | 41,081,874 |  |                                |  | 12.4 | %                          |  |  | 13,142,615                      |  |  |                                                                       | 8.2  | % |                                                                    |  | 54,224,489 |  |  |  | 11.2 | %
|Cargo Transport                                                |  |                            | 12,750,531 |  |                                |  | 3.9  |                            |  |  | 27,111,643                      |  |  |                                                                       | 17.0 |   |                                                                    |  | 39,862,174 |  |  |  | 8.2  | %
|Retail Stores                                                  |  |                            | 23,794,745 |  |                                |  | 7.2  |                            |  |  | 12,039,780                      |  |  |                                                                       | 7.5  |   |                                                                    |  | 35,834,525 |  |  |  | 7.3  |  
|Oil and Gas                                                    |  |                            | 31,006,875 |  |                                |  | 9.4  |                            |  |  | 4,375,818                       |  |  |                                                                       | 2.7  |   |                                                                    |  | 35,382,692 |  |  |  | 7.2  |  
|Automobile                                                     |  |                            | 30,239,173 |  |                                |  | 9.2  |                            |  |  | 3,690,319                       |  |  |                                                                       | 2.3  |   |                                                                    |  | 33,929,492 |  |  |  | 6.9  |  
|Telecommunications                                             |  |                            | 26,600,046 |  |                                |  | 8.1  |                            |  |  | 6,856,243                       |  |  |                                                                       | 4.3  |   |                                                                    |  | 33,456,289 |  |  |  | 6.8  |  
|Beverage, Food and Tobacco                                     |  |                            | 32,188,937 |  |                                |  | 9.8  |                            |  |  |                                |  |  |                                                                       |     |   |                                                                    |  | 32,188,937 |  |  |  | 6.6  |  
|Healthcare, Education, and Childcare                           |  |                            | 23,067,844 |  |                                |  | 7.0  |                            |  |  | 7,036,506                       |  |  |                                                                       | 4.4  |   |                                                                    |  | 30,104,350 |  |  |  | 6.2  |  
|Diversified/Conglomerate Service                               |  |                            |           |  |                                |  |     |                            |  |  | 22,884,730                      |  |  |                                                                       | 14.3 |   |                                                                    |  | 22,884,730 |  |  |  | 4.7  |  
|Chemicals, Plastics, and Rubber                                |  |                            | 21,559,164 |  |                                |  | 6.5  |                            |  |  |                                |  |  |                                                                       |     |   |                                                                    |  | 21,559,164 |  |  |  | 4.4  |  
|Insurance                                                      |  |                            | 7,425,474  |  |                                |  | 2.3  |                            |  |  | 12,069,916                      |  |  |                                                                       | 7.5  |   |                                                                    |  | 19,495,390 |  |  |  | 4.0  |  
|Aerospace and Defense                                          |  |                            | 13,807,589 |  |                                |  | 4.2  |                            |  |  | 4,924,911                       |  |  |                                                                       | 3.1  |   |                                                                    |  | 18,732,500 |  |  |  | 3.8  |  
|Hotels, Motels, Inns and Gaming                                |  |                            | 11,400,703 |  |                                |  | 3.5  |                            |  |  | 4,770,763                       |  |  |                                                                       | 3.0  |   |                                                                    |  | 16,171,466 |  |  |  | 3.3  |  
|Buildings and Real Estate                                      |  |                            | 14,237,680 |  |                                |  | 4.3  |                            |  |  |                                |  |  |                                                                       |     |   |                                                                    |  | 14,237,680 |  |  |  | 2.9  |  
|Containers, Packaging, and Glass                               |  |                            | 9,878,168  |  |                                |  | 3.0  |                            |  |  | 4,037,475                       |  |  |                                                                       | 2.5  |   |                                                                    |  | 13,915,643 |  |  |  | 2.8  |  
|Finance                                                        |  |                            | 12,773,383 |  |                                |  | 3.9  |                            |  |  |                                |  |  |                                                                       |     |   |                                                                    |  | 12,773,383 |  |  |  | 2.6  |  
|Printing and Publishing                                        |  |                            |           |  |                                |  |     |                            |  |  | 11,655,363                      |  |  |                                                                       | 7.3  |   |                                                                    |  | 11,655,363 |  |  |  | 2.4  |  
|Mining, Steel, Iron and Nonprecious Metals                     |  |                            | 1,080,155  |  |                                |  | 0.3  |                            |  |  | 10,025,000                      |  |  |                                                                       | 6.3  |   |                                                                    |  | 11,105,155 |  |  |  | 2.3  |  
|Broadcasting and Entertainment                                 |  |                            | 1,500,069  |  |                                |  | 0.5  |                            |  |  | 8,017,695                       |  |  |                                                                       | 5.0  |   |                                                                    |  | 9,517,764  |  |  |  | 1.9  |  
|Personal and Nondurable Consumer Products (Manufacturing Only) |  |                            | 6,377,537  |  |                                |  | 1.9  |                            |  |  |                                |  |  |                                                                       |     |   |                                                                    |  | 6,377,537  |  |  |  | 1.3  |  



5



---

##### Table of Contents

|                                                              |  |                            |             |  |                                |  |       |                            |  |   |                                 |  |  |                                                                       |     |   |                                                                    |   |             |  |  |  |       |  
|------------------------------------------------------------- |  | -------------------------- | ----------- |  | ------------------------------ |  | ----- | -------------------------- |  | - | ------------------------------- |  |  | --------------------------------------------------------------------- | --- | - | ------------------------------------------------------------------ | - | ----------- |  |  |  | ----- | -
|                                                              |  | Investmentsat
FairValue(1) |             |  | Percentageof
TotalPortfolio(1) |  |       | Value ofTRSUnderlyingLoans |  |   | Percentageof TRSUnderlyingLoans |  |  | TotalInvestmentsat Fair Valueincluding thevalue of
TRSUnderlyingLoans |     |   | Percentageof TotalPortfolioIncludingthe valueof
TRSUnderlyingLoans |  
|Business Services                                             |  |                            | 5,580,363   |  |                                |  | 1.7   |                            |  |   |                                |  |  |                                                                       |    |   |                                                                    |   | 5,580,363   |  |  |  | 1.1   |  
|Machinery (Non-Agriculture, Non-Construction, Non-Electronic) |  |                            |            |  |                                |  |      |                            |  |   | 5,008,350                       |  |  |                                                                       | 3.1 |   |                                                                    |   | 5,008,350   |  |  |  | 1.0   |  
|Leisure, Amusement, Motion Pictures, Entertainment            |  |                            | 2,035,496   |  |                                |  | 0.6   |                            |  |   | 996,250                         |  |  |                                                                       | 0.6 |   |                                                                    |   | 3,031,746   |  |  |  | 0.6   |  
|Personal, Food and Miscellaneous                              |  |                            |            |  |                                |  |      |                            |  |   | 1,515,000                       |  |  |                                                                       | 0.9 |   |                                                                    |   | 1,515,000   |  |  |  | 0.3   |  
|Grocery                                                       |  |                            | 943,614     |  |                                |  | 0.3   |                            |  |   |                                |  |  |                                                                       |    |   |                                                                    |   | 943,614     |  |  |  | 0.2   |  
|                                                              |  |                            |             |  |                                |  |       |                            |  |   |                                 |  |  |                                                                       |     |   |                                                                    |   |             |  |  |  |       |  
|Total                                                         |  | $                          | 329,329,420 |  |                                |  | 100.0 | %                          |  | $ | 160,158,377                     |  |  |                                                                       | 100 | % |                                                                    | $ | 489,487,796 |  |  |  | 100.0 | %
|                                                              |  |                            |             |  |                                |  |       |                            |  |   |                                 |  |  |                                                                       |     |   |                                                                    |   |             |  |  |  |       |  



|(1) | Does not include TRS underlying loans
|--- | -------------------------------------

SIC Advisors regularly assesses the risk profile of each of our investments and rates each of them based on the following categories, which we refer to as SIC Advisors investment credit rating:



|              |  |                                                                                                                                                                  
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Credit
Rating |  | Definition                                                                                                                                                       
|1             |  | Investments that are performing above expectations.                                                                                                              
|              | 
|2             |  | Investments that are performing within expectations, with risks that are neutral or favorable compared to risks at the time of origination or purchase.          
|              | 
|              |  | All new loans are rated 2.                                                                                                                                     
|              | 
|3             |  | Investments that are performing below expectations and that require closer monitoring, but where no loss of interest, dividend or principal is expected.         
|              | 
|              |  | Companies rated 3 may be out of compliance with financial covenants, however, loan payments are generally not past due.                                        
|              | 
|4             |  | Investments that are performing below expectations and for which risk has increased materially since origination or purchase.                                    
|              | 
|              |  | Some loss of interest or dividend is expected, but no loss of principal.                                                                                         
|              | 
|              |  | In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 180 days past due).
|              | 
|5             |  | Investments that are performing substantially below expectations and whose risks have increased substantially since origination or purchase.                     
|              | 
|              |  | Most or all of the debt covenants are out of compliance and payments are substantially delinquent.                                                               
|              | 
|              |  | Some loss of principal is expected.                                                                                                                              



6



---

##### Table of Contents

The following table shows the distribution of our investments, not including cash, on the 1
to 5 investment performance rating scale at fair value as of June 30, 2014:



|                              |  |                          |             |  |                   |  |       |                          |  |   |             |  |  |  |       |  
|----------------------------- |  | ------------------------ | ----------- |  | ----------------- |  | ----- | ------------------------ |  | - | ----------- |  |  |  | ----- | -
|                              |  | June 30, 2014            |             |  | December 31, 2013 | 
|Investment Performance Rating |  | Investments atFair Value |             |  | Percentage        |  |       | Investments atFair Value |  |   | Percentage  | 
|1                             |  | $                        |            |  |                   |  |      | %                        |  | $ | 2,198,601   |  |  |  | 1.6   | %
|2                             |  |                          | 329,011,275 |  |                   |  | 99.9  |                          |  |   | 99,713,280  |  |  |  | 98.2  |  
|3                             |  |                          |            |  |                   |  |      |                          |  |   |            |  |  |  | 0.2   |  
|4                             |  |                          |            |  |                   |  |      |                          |  |   |            |  |  |  |      |  
|5                             |  |                          | 318,145     |  |                   |  | 0.1   |                          |  |   | 322,745     |  |  |  |      |  
|                              |  |                          |             |  |                   |  |       |                          |  |   |             |  |  |  |       |  
|Total                         |  | $                        | 329,329,420 |  |                   |  | 100.0 | %                        |  | $ | 137,801,537 |  |  |  | 100.0 | %
|                              |  |                          |             |  |                   |  |       |                          |  |   |             |  |  |  |       |  

Results of Operations

Operating results for the three and six months ended June 30, 2014 and 2013 are as follows:



|                                                                |  |                                    |           |  |                                  |   |           |      |  |   |            |  |  |   |           | 
|--------------------------------------------------------------- |  | ---------------------------------- | --------- |  | -------------------------------- | - | --------- | ---- |  | - | ---------- |  |  | - | --------- | 
|                                                                |  | For the three months ended June 30 |           |  | For the six months ended June 30 |  
|                                                                |  | 2014                               |           |  | 2013                             |   |           | 2014 |  |   | 2013       | 
|Total investment income                                         |  | $                                  | 6,813,824 |  |                                  | $ | 1,526,284 |      |  | $ | 11,410,038 |  |  | $ | 2,584,361 | 
|Total expenses, net                                             |  |                                    | 3,057,705 |  |                                  |   | 372,165   |      |  |   | 5,161,270  |  |  |   | 896,009   | 
|Net investment income/(loss)                                    |  |                                    | 3,756,119 |  |                                  |   | 1,154,119 |      |  |   | 6,248,768  |  |  |   | 1,688,352 | 
|Net realized gain/(loss) from investments                       |  |                                    | 2,234,348 |  |                                  |   | (1,427    | )    |  |   | 3,943,310  |  |  |   | 109,208   | 
|Net unrealized gain/(loss) on investments and total return swap |  |                                    | 1,244,862 |  |                                  |   | (662,689  | )    |  |   | 1,490,799  |  |  |   | 83,630    | 
|                                                                |  |                                    |           |  |                                  |   |           |      |  |   |            |  |  |   |           | 
|Net increase/(decrease) in net assets resulting from operations |  |                                    | 7,235,329 |  |                                  | $ | 490,003   |      |  |   | 11,682,877 |  |  | $ | 1,881,190 | 
|                                                                |  |                                    |           |  |                                  |   |           |      |  |   |            |  |  |   |           | 

Investment Income

For the three months ended June 30, 2014, investment income totaled $6,813,824, of which $6,055,653 was attributable to portfolio interest, $653,728 was attributable to other fee income, and $104,443
was attributable to PIK interest. For the three months ended June 30, 2013, investment income totaled $1,526,284, of which $1,461,355 was attributable to portfolio interest, $64,750 was attributable to other fee income, and $179 to interest
earned on cash.

For the six months ended June 30, 2014, investment income totaled $11,410,038, of which $9,813,514 was
attributable to portfolio interest, $1,488,377 was attributable to other fee income, and $108,147 to PIK interest. For the six months ended June 30, 2013, investment income totaled $2,584,361, of which $129,460 was attributable to portfolio
interest and $441 to interest earned on cash and cash equivalents.



7



---

##### Table of Contents

Operating Expenses

Operating expenses for the three and six months ended June, 2014 and 2013 were as follows:



|                                                             |  |                                    |           |  |                                  |   |           |      |  |  |           |  |  |   |           | 
|------------------------------------------------------------ |  | ---------------------------------- | --------- |  | -------------------------------- | - | --------- | ---- |  |  | --------- |  |  | - | --------- | 
|                                                             |  | For the three months ended June 30 |           |  | For the six months ended June 30 |  
|                                                             |  | 2014                               |           |  | 2013                             |   |           | 2014 |  |  | 2013      | 
|Base management fees                                         |  |                                    | 1,768,047 |  |                                  | $ | 358,389   |      |  |  | 2,910,818 |  |  | $ | 603,888   | 
|Provisional incentive fees                                   |  |                                    | 326,458   |  |                                  |   | (114,528  | )    |  |  | 438,949   |  |  |   | 34,108    | 
|Administrator expenses                                       |  |                                    | 272,579   |  |                                  |   | 158,824   |      |  |  | 500,795   |  |  |   | 296,914   | 
|Professional fees                                            |  |                                    | 250,370   |  |                                  |   | 192,949   |      |  |  | 505,698   |  |  |   | 488,225   | 
|Interest and financing expenses                              |  |                                    | 506,299   |  |                                  |   | 36,850    |      |  |  | 669,700   |  |  |   | 65,495    | 
|Insurance expense                                            |  |                                    | 32,261    |  |                                  |   | 31,432    |      |  |  | 56,588    |  |  |   | 58,331    | 
|Directors fees                                               |  |                                    | 41,646    |  |                                  |   | 41,875    |      |  |  | 82,835    |  |  |   | 85,640    | 
|Organizational and offering costs reimbursed to an affiliate |  |                                    | 1,224,673 |  |                                  |   | 280,353   |      |  |  | 2,208,458 |  |  |   | 458,520   | 
|Offering costs                                               |  |                                    | 190,100   |  |                                  |   |          |      |  |  | 190,100   |  |  |   |          | 
|General and administrative expenses                          |  |                                    | 588,338   |  |                                  |   | 118,445   |      |  |  | 1,053,865 |  |  |   | 222,716   | 
|                                                             |  |                                    |           |  |                                  |   |           |      |  |  |           |  |  |   |           | 
|Expenses before expense reimbursement                        |  |                                    | 5,200,771 |  |                                  | $ | 1,104,589 |      |  |  | 8,617,806 |  |  | $ | 2,313,837 | 
|                                                             |  |                                    |           |  |                                  |   |           |      |  |  |           |  |  |   |           | 

Expense Support and Reimbursement Agreement

On June 29, 2012, the Company entered into an Expense Support and Reimbursement Agreement (the Expense Support Agreement)
with SIC Advisors. Pursuant to the Expense Support Agreement, SIC Advisors has agreed to reimburse the Company for operating expenses in an amount equal to the difference between distributions paid to the Companys stockholders in each month,
less the sum of the Companys net investment income, the Companys net realized capital gains and dividends paid to the Company from its portfolio companies during such period (Expense Support Reimbursement). To the extent that
no dividends or other distributions are paid to the Companys stockholders in any given month, then the Expense Support Reimbursement for such month shall be equal to such amount necessary in order for Available Operating Funds for the month to
equal zero. The terms of the Expense Support Agreement commenced as of the date that the Companys registration statement was declared effective by the SEC and continued monthly thereafter until December 31, 2012. Subsequently, the
Companys board of directors approved amendments to the Expense Support Agreement that extended the term from December 31, 2012 to December 31, 2014.

Pursuant to the Expense Support Agreement, the Company has a conditional obligation to reimburse SIC Advisors for any amounts funded by SIC Advisors under the Expense Support Agreement if (and only to the
extent that), during any fiscal quarter occurring within three years of the date on which SIC Advisors incurred a liability for such amount, the sum of the Companys net investment income, the Companys net capital gains and the amount of
any dividends and other distributions paid to the Company from its portfolio companies (to the extent not included in net investment income or net capital gains for tax purposes) exceeds the distributions paid by the Company to stockholders. The
purpose of the Expense Support Agreement is to avoid such distributions being characterized as returns of capital for GAAP purposes and to reduce operating expenses until the Company has raised sufficient capital to be able to absorb such expenses.

Pursuant to the Expense Support Agreement, the Company will reimburse SIC Advisors for expense support payments it previously
made following any calendar quarter in which the Company received net investment income, net capital gains and dividends from its portfolio companies in excess of the distributions paid to the Companys stockholders during such calendar quarter
(the Excess Operating Funds). Any such reimbursement will be made within three years of the date that the expense support payment obligation was incurred by SIC Advisors, subject to the conditions described below. The amount of the
reimbursement during any calendar



8



---

##### Table of Contents

quarter will equal the lesser of (i) the Excess Operating Funds received during the quarter and (ii) the aggregate amount of all expense payments made by SIC Advisors that have not yet
been reimbursed. In addition, the Company will only make reimbursement payments if its operating expense ratio (as described in footnote 1 to the table below) is equal to or less than its operating expense ratio at the time the
corresponding expense payment was incurred and if the annualized rate of its regular cash distributions to the Companys stockholders is equal to or greater than the annualized rate of the Companys regular cash distributions to
stockholders at the time the corresponding expense payment was incurred.

As of June 30, 2014, we recorded $5,128,780 in
our statements of assets and liabilities as due from affiliate relating to the Expense Support Agreement. For the three and six months ended June 30, 2014, we recorded expense reimbursements of $2,143,066 and 3,456,536 on the statement of
operations. Expense reimbursements to SIC Advisors will be accrued as they become probable and estimable. For the three months ended June 30, 2014, we did not record any expense reimbursements to SIC Advisors. As of December 31, 2013, we
recorded $2,592,989 in our statement of assets and liabilities as due from affiliate relating to the Expense Support Agreement. For the three and six months ended June 30, 2013 and 2014, we did not record any expense reimbursements to SIC
Advisors.

For the three months ended June 30, 2013, total expense reimbursement from SIC Advisors pursuant to the
Expense Support and Reimbursement Agreement was $732,425 and net expenses after taking into account the expense reimbursement from SIC Advisors, was $372,165.

For the three months ended June 30, 2014 total expense reimbursement from SIC Advisors pursuant to the Expense Support and Reimbursement Agreement was $2,143,066 and net expenses after taking into
account the expense reimbursement from SIC Advisors, was $3,057,705.

Net Realized Gains/Losses from Investments

We measure realized gains or losses by the difference between the net proceeds from the disposition and the amortized cost basis of an
investment, without regard to unrealized gains or losses previously recognized.

During the three and six months ended
June 30, 2014, we recognized $2,234,648 and 3,943,310 in net realized gains on total investments.

During the three and
six months ended June 30, 2013, we recognized $1,427 of realized losses and $109,208 of realized gains, respectively, on our portfolio investments.

Net Unrealized Appreciation/Depreciation on Investments

Net change
in unrealized appreciation on investments reflects the net change in the fair value of our total investments. For the three and six months ended June 30, 2014, we had unrealized appreciation of $1,244,862 and $1,490,799 on total investments.
For the three and six months ended June 30, 2013, we had unrealized depreciation of $662,689 and unrealized appreciation of $83,630, respectively, on our portfolio investments.

Changes in Net Assets from Operations

For the three and six months
ended June 30, 2014, we recorded a net increase in net assets resulting from operations of $7,235,329 and $11,682,877, respectively. Based on 29,185,996 weighted average common shares outstanding for the three months ended June 30, 2014,
our per share basic and diluted earnings was $0.25. Based on 24,802,153 weighted average common shares outstanding for the six months ended June 30, 2014, our per share basic and diluted earnings was $0.47.



9



---

##### Table of Contents

For the three and six months ended June 30, 2013, we recorded a net increase in net
assets resulting from operations of $490,003 and $1,881,190, respectively. Based on 5,150,372 weighted average common shares 7 outstanding for the three months ended June 30, 2013, our per share basic and diluted earnings was $0.09. Based on
4,193,642 weighted average common shares outstanding for the six months ended June 30, 2013, our per share basic and diluted earnings was $0.45.

Financial Condition, Liquidity and 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. To fund growth, we have a number of alternatives available to increase capital; including raising
equity, increasing debt, and funding from operational cash flow.

Our liquidity and capital resources have been generated
primarily from the net proceeds of our public offering of common stock.

As of June 30, 2014, we had $15,543,088 in cash.
In the future, we may generate cash from future offerings of securities, future borrowings and cash flows from operations, including interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt
investments that mature in one year or less. Our primary use of funds is investments in our targeted asset classes, cash distributions to our stockholders, and other general corporate purposes.

In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders substantially all of our
taxable income, but we may also elect to periodically spillover certain excess undistributed taxable income from one tax year into the next tax year. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to total
senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200%. This requirement limits the amount that we may borrow.

On December 4, 2013, we entered into a three-year senior secured syndicated revolving credit facility with a one-year term out period (the ING Facility) pursuant to a Senior Secured
Revolving Credit Agreement (the Revolving Credit Agreement) with certain lenders party thereto from time to time and ING Capital LLC, as administrative agent. The ING Facility matures on December 4, 2017 and is secured by
substantially all of our assets, subject to certain exclusions as further set forth in a Guarantee, Pledge and Security Agreement (the Security Agreement) entered into in connection with the Revolving Credit Agreement, among us, the
Subsidiary Guarantors party thereto, ING Capital LLC, as Administrative Agent, each Financial Agent and Designated Indebtedness Holder party thereto and ING Capital LLC, as Collateral Agent. The ING Facility also includes usual and customary
representations, covenants and events of default for senior secured revolving credit facilities of this nature. As of June 30, 2014, our borrowings under the ING Facility totaled $60,000,000 and were recorded as revolving credit facility
payable on our consolidated statements of assets and liabilities.

Contractual Obligations and Off-Balance Sheet Arrangements

We have entered into certain contracts under which we have material future commitments. On April 5, 2012, we entered
into the Investment Advisory Agreement with SIC Advisors in accordance with the 1940 Act. The Investment Advisory Agreement became effective as of April 17, 2012, the date that we met the minimum offering requirement. Pursuant to the 1940 Act,
the initial term of the Investment Advisory Agreement was for two years from its effective date, with one-year renewals subject to approval by our board of directors, a majority of whom must be independent directors. On March 12, 2014, the
board of directors approved the renewal of the Investment Advisory Agreement for an additional one-year term at an in-person meeting. SIC Advisors serves as our investment advisor in accordance with the terms of the Investment Advisory Agreement.
Payments under our Investment Advisory Agreement in each reporting period consist of (i) a management fee equal to a percentage of the value of our gross assets and (ii) an incentive fee based on our performance.



10



---

##### Table of Contents

On April 5, 2012, we entered into the Administration Agreement with Medley Capital LLC
with an initial term of two years, pursuant to which Medley Capital LLC furnishes us with administrative services necessary to conduct our day-to-day operations. On March 12, 2014, the board of directors approved the renewal of the
Administration Agreement for an additional one-year term at an in-person meeting. Medley Capital LLC is reimbursed for administrative expenses it incurs on our behalf in performing its obligations. Such costs are reasonably allocated to us on the
basis of assets, revenues, time records or other reasonable methods. We do not reimburse Medley Capital LLC for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items
allocated to a controlling person of Medley Capital LLC.

If any of our contractual obligations discussed above are
terminated, our costs may increase under any new agreements that we enter into as replacements. We would also likely incur expenses in locating alternative parties to provide the services we expect to receive under the investment advisory agreement
and administration agreement. Any new investment advisory agreement would also be subject to approval by our stockholders.

Off-Balance
Sheet Arrangements

On August 27, 2013, Arbor Funding LLC (Arbor), a newly-formed, wholly-owned financing
subsidiary of the Company, entered into a total return swap (TRS) with Citibank, N.A. (Citibank).

The
TRS with Citibank enables Arbor to obtain the economic benefit of the loans underlying the TRS, despite the fact that such loans will not be directly held or otherwise owned by Arbor, in return for an interest-type payment to Citibank. Accordingly,
the TRS is analogous to Arbor utilizing leverage to acquire loans and incurring an interest expense to a lender.

SIC Advisors
acts as the investment manager of Arbor and has discretion over the composition of the basket of loans underlying the TRS. The terms of the TRS are governed by an ISDA 2002 Master Agreement, the Schedule thereto and Credit Support Annex to such
Schedule, and the Confirmation exchanged thereunder, between Arbor and Citibank, which collectively establish the TRS, and are collectively referred to herein as the TRS Agreement.

Our derivative asset due from Citibank, net of amounts available for offset under a master netting agreement as of June 30, 2014 was
$ 1,102,819, which is recorded on the consolidated statements of assets and liabilities as receivable due on total return swap.

Transactions in total return swap contracts during the three months ended June 30, 2014 were $1,372,779 in realized gains and
$471,000 in unrealized gains, which is recorded on the consolidated statements of operations.

For the three months ended
June 30, 2014, the average notional par amount of total return swap contracts was $126,714,344.

Distributions

We have elected and intend to continue to qualify to be treated, for U.S. federal income tax purposes, as a RIC under subchapter M of the
Code. To obtain and maintain RIC tax treatment, we must, among others things, distribute at least 90% of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our stockholders. In order to
avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to the sum of: (i) 98% of our ordinary income for the calendar year, (ii) 98.2% of our capital gains in excess of capital
losses for the one-year period generally ending on October 31 of the calendar year (unless an election is made by us to use our taxable year) and (iii) any ordinary income and net capital gains for preceding years that were not distributed
during such years and on which we paid no federal income tax.



11



---

##### Table of Contents

While we intend to distribute any income and capital gains in the manner necessary to
minimize imposition of the 4% U.S. federal excise tax, sufficient amounts of our taxable income and capital gains may not be distributed to avoid entirely the imposition of the tax. In that event, we will be liable for the tax only on the amount by
which we do not meet the foregoing distribution requirement.

We currently intend to distribute net capital gains
(i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually out of the assets legally available for such distributions. However, we may decide in the future to retain such capital gains for
investment and elect to treat such gains as deemed distributions to you. If this happens, you will be treated for U.S. federal income tax purposes as if you had received an actual distribution of the capital gains that we retain and reinvested the
net after tax proceeds in us. In this situation, you would be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to your allocable share of the tax we paid on the capital gains deemed distributed to you. We can offer
no assurance that we will continue to achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we may be prohibited from making distributions if doing so causes us to fail to maintain the asset
coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.

Subject to
our board of directors discretion and applicable legal restrictions, we expect to authorize and pay monthly distributions to our stockholders. Any distributions to our stockholders will be declared out of assets legally available for
distribution. We expect to continue making monthly distributions unless our results of operations, our general financial condition, general economic conditions, or other factors prohibit us from doing so. From time to time, but not less than
quarterly, we will review our accounts to determine whether distributions to our stockholders are appropriate. We have not established limits on the amount of funds we may use from available sources to make distributions. We expect that for a
significant time after the commencement of this offering, substantially all of our distributions will result from expense support payments made by SIC Advisors that may be subject to repayment by us within three years. The purpose of this
arrangement is to avoid such distributions being characterized as returns of capital for GAAP purposes. We may still have distributions which could be characterized as a return of capital for tax purposes. Such distributions are not based on our
investment performance and can only be sustained if we achieve positive investment performance in future periods and/or SIC Advisors continues to make Expense Support Payments under the Expense Support Agreement. Any future reimbursements to SIC
Advisors will reduce the distributions that may otherwise be available for distribution to stockholders. There can be no assurance that we will achieve the performance necessary to sustain our distributions or that we will be able to pay
distributions at all. SIC Advisors has no obligation to make Expense Support Payments pursuant to the Expense Support Agreement after December 31, 2014, unless the Expense Support Agreement is extended. For the three and six months ended
June 30, 2014, if Expense Support Payments of $2,143,066 and $3,456,536 were not made by SIC Advisors, approximately 36% and 34% of the distributions would have been a return of capital, respectively.

Our distributions may exceed our earnings, which we refer to as a return of capital, especially during the period before we have invested
substantially all of the proceeds of this offering. As a result, a portion of the distributions we make may represent a return of capital for tax purposes. Our use of the term return of capital merely means distributions in excess of our
earnings and as such may constitute a return on your individual investments and does not mean a return on capital. Therefore stockholders are advised that they should be aware of the differences with our use of the term return of capital
and return on capital.



12



---

##### Table of Contents

The following table reflects the cash distributions per share that we have declared or paid
to our stockholders since we commenced operations in April 2012. Stockholders of record as of each respective record date were entitled to receive the distribution.



|                                    |  |                    |  |                  |         | 
|----------------------------------- |  | ------------------ |  | ---------------- | ------- | 
|Record Date                         |  | Payment Date       |  | Amount per share |        
|July 13 and 31, 2012                |  | August 1, 2012     |  | $                | 0.03333 | 
|August 15 and 31, 2012              |  | September 4, 2012  |  |                  | 0.03333 | 
|September 14 and 28, 2012           |  | October 1, 2012    |  |                  | 0.03333 | 
|October 15 and 30, 2012             |  | October 31, 2012   |  |                  | 0.03333 | 
|November 15 and 29, 2012            |  | November 30, 2012  |  |                  | 0.03333 | 
|December 14 and 28, 2012            |  | December 31, 2012  |  |                  | 0.03333 | 
|January 15 and 31, 2013             |  | January 31, 2013   |  |                  | 0.03333 | 
|February 15 and 28, 2013            |  | February 28, 2013  |  |                  | 0.03333 | 
|March 15 and 29, 2013               |  | March 29, 2013     |  |                  | 0.03333 | 
|April 15 and 30, 2013               |  | April 30, 2013     |  |                  | 0.03333 | 
|May 15 and 31, 2013                 |  | May 31, 2013       |  |                  | 0.03333 | 
|June 14 and 28, 2013                |  | June 28, 2013      |  |                  | 0.03333 | 
|July 15 and 31, 2013                |  | July 31, 2013      |  |                  | 0.03333 | 
|August 15 and 30, 2013              |  | August 30, 2013    |  |                  | 0.03333 | 
|September 13 and 30, 2013           |  | September 30, 2013 |  |                  | 0.03333 | 
|October 15 and 31, 2013             |  | October 31, 2013   |  |                  | 0.03333 | 
|November 15 and 29, 2013            |  | November 29, 2013  |  |                  | 0.03333 | 
|December 13 and 31, 2013            |  | December 31, 2013  |  |                  | 0.03333 | 
|January 15 and 31, 2014             |  | January 31, 2014   |  |                  | 0.03333 | 
|February 14 and 28, 2014            |  | February 28, 2014  |  |                  | 0.03333 | 
|March 14 and 31, 2014               |  | March 31, 2014     |  |                  | 0.03333 | 
|April 15 and 30, 2014               |  | April 30, 2014     |  |                  | 0.03333 | 
|May 15 and 30, 2014                 |  | May 30, 2014       |  |                  | 0.03333 | 
|June 13 and 30, 2014                |  | June 30, 2014      |  |                  | 0.03333 | 
|July 15 and July 31, 2014           |  | July 31, 2014      |  |                  | 0.03333 | 
|August 15 and August 29, 2014       |  | August 29, 2014    |  |                  | 0.03333 | 
|September 15 and September 30, 2014 |  | September 30, 2014 |  |                  | 0.03333 | 

We have adopted an opt in distribution reinvestment plan pursuant to which our common
stockholders may elect to have the full amount of any cash distributions reinvested in additional shares of our common stock. As a result, if we declare a cash distribution, stockholders that have opted in to our distribution
reinvestment plan will have their distribution automatically reinvested in additional shares of our common stock rather than receiving cash dividends. Stockholders who receive distributions in the form of shares of common stock will be subject to
the same federal, state and local tax consequences as if they received cash distributions.

Each year a statement on Internal
Revenue Service Form 1099-DIV (or such successor form) identifying the source of the distribution (i.e., paid from ordinary income, paid from net capital gain on the sale of securities, or a return of capital) will be mailed to our
stockholders. The tax basis of shares must be reduced by the amount of any return of capital distributions, which will result in an increase in the amount of any taxable gain (or a reduction in any deductible loss) on the sale of shares.

Related Party Transactions

On October 19, 2011, SIC Advisors entered into a subscription agreement to purchase 110.80 shares of common stock for cash consideration of $1,000. The consideration represents $9.025 per share.

On April 17, 2012, SIC Advisors purchased 1,108,033.24 shares of our common stock for aggregate gross proceeds of
$10,000,000. The consideration represents $9.025 per share.



13



---

##### Table of Contents

We have entered into an Investment Advisory Agreement and Expense Support and Reimbursement
Agreement with SIC Advisors in which our senior management holds an equity interest. Members of our senior management also serve as principals of other investment managers affiliated with SIC Advisors that do, and may in the future, manage
investment funds, accounts or other investment vehicles with investment objectives similar to ours.

We have entered into an
Administration Agreement with Medley Capital LLC, pursuant to which Medley Capital LLC furnishes us with administrative services necessary to conduct our day-to-day operations. Medley Capital LLC is reimbursed for administrative expenses it incurs
on our behalf. We do not reimburse Medley Capital LLC for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of Medley Capital
LLC. Medley Capital LLC is an affiliate of SIC Advisors.

We have entered into a dealer manager agreement with SC
Distributors, LLC and pay them a dealer manager fee of up to 2.75% of gross proceeds raised in the offering. An affiliated entity of SC Distributors, LLC owns an equity interest in SIC Advisors, which provides the right to receive a fixed percentage
of the management fees received by SIC Advisors.

We have entered into a license agreement with SIC Advisors under which SIC
Advisors has agreed to grant us a non-exclusive, royalty-free license to use the name Sierra for specified purposes in our business. Under this agreement, we will have a right to use the Sierra name, subject to certain
conditions, for so long as SIC Advisors or one of its affiliates remains our investment advisor. Other than with respect to this limited license, we will have no legal right to the Sierra name.

Management Fee

We pay
SIC Advisors a fee for its services under the Investment Advisory Agreement. The fee consists of two components: a base management fee and an incentive fee.

The base management fee is calculated at an annual rate of 1.75% of our gross assets and is payable quarterly in arrears. The incentive fee consists of:



| |  |  | An incentive fee on net investment income (subordinated incentive fee on income) is calculated and payable quarterly in arrears and is
based upon pre-incentive fee net investment income for the immediately preceding quarter. No subordinated incentive fee on income is payable in any calendar quarter in which pre-incentive fee net investment income does not exceed a quarterly return
to stockholders of 1.75% per quarter on the Companys net assets at the end of the immediately preceding fiscal quarter, or the preferred quarterly return. All pre-incentive fee net investment income, if any, that exceeds the quarterly
preferred return, but is less than or equal to 2.1875% of net assets at the end of the immediately preceding fiscal quarter in any quarter, will be payable to SIC Advisors. The Company refers to this portion of its subordinated incentive fee on
income as the catch up. It is intended to provide an incentive fee of 20% on pre-incentive fee net investment income when pre-incentive fee net investment income exceeds 2.1875% of net assets at the end of the immediately preceding quarter in any
quarter. For any quarter in which the Companys pre-incentive fee net investment income exceeds 2.1875% of net assets at the end of the immediately preceding quarter, the subordinated incentive fee on income shall equal 20% of the amount of
pre-incentive fee net investment income, because the preferred return and catch up will have been achieved.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A capital gains incentive fee will be earned on realized investments and shall be payable in arrears as of the end of each calendar year during which
the IAA is in effect. If the IAA is terminated, the fee will become payable as of the effective date of such termination. The capital gains incentive fee is based on our realized capital gains on a cumulative basis from inception, computed net of
all realized capital losses and unrealized capital depreciation on a cumulative basis, which we refer to as net realized capital gains. The capital gains incentive fee equals 20% of net realized capital gains, less the aggregate
amount of any previously paid capital gains incentive fee.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



---

##### Table of Contents

Under the terms of the investment advisory agreement, SIC Advisors bears all organization
and offering expenses on our behalf. Upon such time that we have raised $300 million in gross proceeds in connection with the sale of shares of our common stock, SIC Advisors shall no longer be obligated to bear, pay or otherwise be responsible for
any ongoing organization and offering expenses on our behalf, and we will be responsible for paying or otherwise incurring all such organization and offering expenses. As of June 2, 2014 we are responsible for all ongoing organizational and
offering expenses. Pursuant to the terms of the Investment Advisory Agreement, we have agreed to reimburse SIC Advisors for any such organizational and offering expenses incurred by SIC Advisors not to exceed 1.25% of the gross subscriptions raised
by us over the course of the offering period, which was initially scheduled to terminate two years from the initial offering date, unless extended. At a meeting held on June 12, 2014, our board of directors approved an extension of our offering
for an additional year. Notwithstanding the foregoing, in the event that organizational and offering expenses, together with sales commissions, the dealer manager fee and any discounts paid to members of the Financial Industry Regulatory Authority,
exceed 15% of the gross proceeds from the sale of shares of our common stock pursuant to our registration statement or otherwise at the time of the completion of our offering, then SIC Advisors shall be required to pay or, if already paid by us,
reimburse us for amounts exceeding such 15% limit.

Critical Accounting Policies

This discussion of our expected operating plans is based upon our expected consolidated financial statements, which will be prepared in
accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these consolidated financial statements will require our management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we will
describe our critical accounting policies in the notes to our future consolidated financial statements.

Valuation of Investments

The Company applies fair value accounting to all of its financial instruments in accordance with the 1940 Act and ASC
Topic 820  Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC 820, the
Company has categorized its financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy as identified below and discussed in Note 4.



| |  |  | Level 1  Quoted prices are available in active markets for identical investments as of the reporting date. Publicly listed equities and publicly
listed derivatives will be included in Level 1. In addition, securities sold, but not yet purchased and call options will be included in Level 1. We will not adjust the quoted price for these investments, even in situations where we hold a large
position and a sale could reasonably affect the quoted price.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2  Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting
date, and fair value is determined through the use of models or other valuation methodologies. In certain cases, debt and equity securities are valued on the basis of prices from an orderly transaction between market participants provided by
reputable dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrices, market transactions
in comparable investments, and various relationships between investments. Investments which are generally expected to be included in this category include corporate bonds and loans, convertible debt indexed to publicly listed securities, and certain
over-the-counter derivatives.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the
investment. The inputs into the determination of fair value require significant judgment or estimation. Investments that are expected to be included in this category are our private portfolio companies.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



15



---

##### Table of Contents

Fair value is a market-based measure considered from the perspective of the market
participant who holds the financial instrument rather than an entity specific measure. Therefore, when market assumptions are not readily available, the Companys own assumptions are set to reflect those that management believes market
participants would use in pricing the financial instrument at the measurement date.

Investments for which market quotations
are readily available are valued at such market quotations, which are generally obtained from an independent pricing service or multiple broker-dealers or market makers. We weight the use of third-party broker quotes, if any, in determining fair
value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer. However, debt investments with remaining maturities within 60 days that are
not credit impaired are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value. Investments for which market quotations are not readily available are valued at fair value as determined by the Companys
board of directors based upon input from management and third party valuation firms. Because these investments are illiquid and because there may not be any directly comparable companies whose financial instruments have observable market values,
these loans are valued using a fundamental valuation methodology, consistent with traditional asset pricing standards, that is objective and consistently applied across all loans and through time.

The Company uses third-party valuation firms to assist the board of directors in the valuation of its portfolio investments. The
valuation reports generated by the third-party valuation firms consider the evaluation of financing and sale transactions with third parties, expected cash flows and market based information, including comparable transactions, performance multiples,
and movement in yields of debt instruments, among other factors. Based on market data obtained from the third-party valuation firms, the Company uses a combined market yield analysis and an enterprise model of valuation. In applying the market yield
analysis, the value of the Companys loans is determined based upon inputs such as the coupon rate, current market yield, interest rate spreads of similar securities, the stated value of the loan, and the length to maturity. In applying the
enterprise model, the Company uses a waterfall analysis which takes into account the specific capital structure of the borrower and the related seniority of the instruments within the borrowers capital structure into consideration. To estimate
the enterprise value of the portfolio company, we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies
for performing investments may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party
valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. For
non-performing investments, we may estimate the liquidation or collateral value of the portfolio companys assets and liabilities using an expected recovery model. We may estimate the fair value of warrants based on a model such as the
Black-Scholes model or simulation models or a combination thereof.

The Company undertakes a multi-step valuation process each
quarter when valuing investments for which market quotations are not readily available, as described below:



| |  |  | the Companys quarterly valuation process begins with each portfolio investment being initially valued by the investment professionals responsible
for monitoring the portfolio investment;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | conclusions are then documented and discussed with senior management; and
| | - |  | -------------------------------------------------------------------------



| |  |  | an independent valuation firm engaged by the Companys board of directors prepares an independent valuation report for approximately one third of
the portfolio investments each quarter on a rotating quarterly basis on non fiscal year-end quarters, such that each of these investments will be valued by an independent valuation firm at least twice per annum when combined with the fiscal year-end
review of all the investments by independent valuation firms, exclusive of TRS underlying portfolio.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

In addition, all of the Companys investments are subject to the following valuation
process:



| |  |  | management reviews preliminary valuations and their own independent assessment;
| | - |  | -------------------------------------------------------------------------------



| |  |  | the audit committee of the Companys board of directors reviews the preliminary valuations of senior management and independent valuation firms;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys board of directors discusses valuations and determines the fair value of each investment in the Companys portfolio in good
faith based on the input of SIC Advisors, the respective independent valuation firms and the audit committee.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

We will value the TRS in accordance with the TRS Agreement. Pursuant to the TRS Agreement, the value of the TRS will be based on the
increase or decrease in the value of the assets underlying the TRS, together with accrued interest income, interest expense and certain other expenses incurred under the TRS. The assets underlying the TRS will be valued by Citibank. Citibank will
base its valuation on the indicative bid prices provided by an independent third-party pricing service. Bid prices reflect the highest price that market participants may be willing to pay. These valuations will be sent to us for review and testing.
Our board of directors will review and approve the value of the TRS, as well as the value of the assets underlying the TRS, on a quarterly basis as part of their quarterly determination of net asset value. To the extent our board of directors has
any questions or concerns regarding the valuation of the assets underlying the TRS, such valuation will be discussed or challenged pursuant to the terms of the TRS. For additional disclosures on the TRS, see  Financial Condition,
Liquidity and Capital Resources  Total Return Swap.

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with
contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes 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 or accounting purposes if we have reason to doubt our ability to collect such interest. Original issue discounts, market discounts or premiums are accreted or
amortized using the effective interest method as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination, closing, prepayment penalties, commitment and other upfront fees are recorded as income. Dividend
income, if any, is recognized on an accrual basis to the extent that we expect to collect such amount.

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

We measure net realized gains or losses by the difference
between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties.
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.

Payment-in-Kind Interest

We have investments in our portfolio that contain a PIK interest provision. Any PIK interest is added to the principal balance of such investments and is recorded as income, if the portfolio company
valuation indicates that



17



---

##### Table of Contents

such PIK interest is collectible. In order to maintain our status as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends, even if we have not
collected any cash.

Organization and Offering Expenses

As of June 2, 2014, the Company is responsible for all ongoing organization and offering expenses.

Federal Income Taxes

We have elected to be treated for federal
income tax purposes, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level federal income taxes on any ordinary income or capital gains that we distribute to
our stockholders from our tax earnings and profits. To obtain and maintain our RIC tax treatment, we must, among other things, meet specified source-of-income and asset diversification requirements and distribute annually 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.

Recent
Developments

We do not believe that any recently issued but not yet effective accounting pronouncements, if adopted,
would have a material effect on our condensed financial statements.

Item 3: Quantitative and Qualitative
Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. Under the
terms of the TRS between Arbor and Citibank, Arbor will pay fees to Citibank at a floating rate based on LIBOR in exchange for the right to receive the economic benefit of a portfolio of assets having a maximum notional amount of $350,000,000. We
expect any future credit facilities, total return swap agreements or other financing arrangements that we or any of our subsidiaries may enter into will also be based on a floating interest rate. As a result, we are subject to risks relating to
changes in market interest rates. In periods of rising interest rates, when we or our subsidiaries have debt outstanding or swap agreements in effect, our cost of funds would increase, which could reduce our net investment income, especially to the
extent we hold fixed rate investments.

In addition, any investments we make that are denominated in a foreign currency will
be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential
illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

Item 4: Controls and Procedures.

Disclosure Controls

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) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that the disclosure controls and
procedures are effective.

Change In Internal Control Over Financial Reporting

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 three months ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



18



---

##### Table of Contents

Part II  Other Information



|Item 1: | Legal Proceedings.
|------- | ------------------

We
are not currently subject to any legal proceedings, nor, to our knowledge, are any legal proceedings threatened against us or our subsidiaries.



|Item 1A: | Risk Factors.
|-------- | -------------

In
addition to other information set forth in this report, you should carefully consider the Risk Factors discussed in our annual report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on March 14, 2014,
which could materially affect our business, financial condition and/or operating results. Except as set forth below, there have been no material changes during the six months ended June 30, 2014 to the risk factors discussed in
Item 1A. Risk Factors of our annual report on Form 10-K. Additional risks or uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or
operating results.

Economic recessions or downturns may have a material adverse effect on our business, financial condition and results
of operations, and could impair the ability of our portfolio companies to repay loans.

Economic recessions or
downturns may result in a prolonged period of market illiquidity which could have a material adverse effect on our business, financial condition and results of operations. Unfavorable economic conditions also could increase our funding costs, limit
our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results.

In addition, to the extent that recessionary conditions return, the financial results of small and mid-sized companies, like those in
which we invest, will likely experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. Additionally, the end markets for certain of our portfolio companies products
and services would likely experience negative economic trends. The performances of certain of our portfolio companies have been, and may continue to be, negatively impacted by these economic or other conditions, which may ultimately result in our
receipt of a reduced level of interest income from our portfolio companies and/or losses or charge offs related to our investments, and, in turn, may adversely affect distributable income. Further, adverse economic conditions may decrease the value
of collateral securing some of our loans and the value of our equity investments. As a result, we may need to modify the payment terms of our investments, including changes in payment-in-kind interest provisions and/or cash interest rates. These
factors may result in our receipt of a reduced level of interest income from our portfolio companies and/or losses or charge offs related to our investments, and, in turn, may adversely affect distributable income and have a material adverse effect
on our results of operations.

Further downgrades of the U.S. credit rating, impending automatic spending cuts or another government
shutdown could negatively impact our liquidity, financial condition and earnings.

Recent U.S. debt ceiling and budget
deficit concerns, together with signs of deteriorating sovereign debt conditions in Europe, have increased the possibility of additional credit-rating downgrades and economic slowdowns. Standard & Poors Ratings Services lowered its
long-term sovereign credit rating on the United States, or the US, from AAA to AA+ in August 2011. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have
lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any further downgrades to the U.S. governments sovereign credit rating or its perceived creditworthiness could adversely affect
the U.S. and global financial markets and economic conditions. Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access
the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S.



19



---

##### Table of Contents

federal government to shut down for periods of time. Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of
operations.

Global economic, political and market conditions may adversely affect our business, results of operations and financial
condition, including our revenue growth and profitability.

The current worldwide financial market situation, as well
as various social and political tensions in the United States and around the world, may continue to contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets, and may cause further
economic uncertainties or deterioration in the United States and worldwide. Since 2010, several European Union (EU) countries, including Greece, Ireland, Italy, Spain, and Portugal, have faced budget issues, some of which may have
negative long-term effects for the economies of those countries and other EU countries. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and
Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as China, may have a severe impact on the worldwide and United states financial markets. Moreover, there are concerns that the recent economic slowdown in China
could have a negative impact on markets throughout the world. We do not know how long the financial markets will continue to be affected by these events and cannot predict the effects of these or similar events in the future on the United States
economy and securities markets or on our investments. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.



|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.



|Item 6: | Exhibits.
|------- | ---------

EXHIBIT INDEX



|       |  |                                                                                                                                                       
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                                           
|       | 
|31.1   |  | Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|       | 
|31.2   |  | Certification by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), 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.                               



20



---

##### Table of Contents

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.



|                      |  |                            |  |                                                                                             
|--------------------- |  | -------------------------- |  | --------------------------------------------------------------------------------------------
|Dated: August 6, 2014 |  | Sierra Income Corporation.
|                      |  |                           
|                      |  | By                         |  | /s/ Seth Taube                                                                              
|                      |  |                            |  | Seth Taube Chief Executive
Officer (Principal Executive Officer)                            
|                      |  |                           
|Dated: August 6, 2014 |  | By                         |  | /s/ Richard T. Allorto, Jr.                                                                 
|                      |  |                            |  | Richard T. Allorto, Jr.
Chief Financial Officer (Principal Accounting
and Financial Officer)



21