Edgar Filing: MVC CAPITAL, INC.

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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

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

For the quarterly period ended January 31, 2017 or

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

Commission File Number 814-00201

MVC CAPITAL, INC.

(Exact name of the registrant as specified in its charter)

DELAWARE		94-3346760
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

287 Bowman Avenue
2nd Floor
Purchase, New York		10577
(Address of principal		(Zip Code)
executive offices)

Registrant’s telephone number, including area code: (914) 701-0310

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 o

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

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £Accelerated filer x Non-accelerated filero Smaller reporting companyo

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

There were 22,556,412 shares of the registrant’s common stock, $.01 par value, outstanding as of March 13, 2017.

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MVC Capital, Inc.

(A Delaware Corporation)

Index

		Page
Part I. Consolidated Financial Information

Item 1. Consolidated Financial Statements
	Consolidated Balance Sheets - January 31, 2017 (Unaudited) and October 31, 2016	3
	Consolidated Statements of Operations - For the Quarter Ended January 31, 2017 (Unaudited) and - For the Quarter Ended January 31, 2016 (Unaudited)	4
	Consolidated Statements of Cash Flows - For the Quarter Ended January 31, 2017 (Unaudited) and - For the Quarter Ended January 31, 2016 (Unaudited)	5
	Consolidated Statements of Changes in Net Assets - For the Quarter Ended January 31, 2017 (Unaudited), - For the Quarter Ended January 31, 2016 (Unaudited) and - For the Year ended October 31, 2016	6
	Consolidated Selected Per Share Data and Ratios - For the Quarter Ended January 31, 2017 (Unaudited), - For the Quarter Ended January 31, 2016 (Unaudited) and - For the Year ended October 31, 2016	7
	Consolidated Schedules of Investments
	- January 31, 2017 (Unaudited)
	- October 31, 2016	8
	Notes to Consolidated Financial Statements	12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		40
Item 3. Quantitative and Qualitative Disclosures about Market Risk		67
Item 4. Controls and Procedures		82

Part II. Other Information		83

Item 1. Legal Proceedings		83
Item 1A. Risk Factors		83
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		83
Item 3. Defaults Upon Senior Securities		83
Item 4. Mine Safety Disclosures		83
Item 5. Other Information		83
Item 6. Exhibits		83

Exhibits		83

SIGNATURE		84

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CONSOLIDATED FINANCIAL STATEMENTS

MVC Capital, Inc.

Consolidated Balance Sheets

	January 31,			October 31,
	2017			2016
	(Unaudited)
ASSETS

Assets
Cash	$	31,630,953		$	19,819,548
Restricted cash (cost $800,673 and $800,527)	800,673			800,527
Cash equivalents (cost $1,349,391 and $394,612)	1,349,391			394,612
Investments at fair value
U.S. Treasury obligations (cost $24,995,613 and $34,998,593)	25,029,838			34,991,681
Non-control/Non-affiliated investments (cost $151,118,826 and $150,348,963)	124,810,998			123,189,755
Affiliate investments (cost $130,443,504 and $130,484,393)	170,704,110			169,426,770
Control investments (cost $91,941,874 and $93,878,518)	59,906,047			67,503,229
Total investments at fair value (cost $398,499,817 and $409,710,467)	380,450,993			395,111,435
Escrow receivables, net of reserves	5,004,895			9,151,805
Dividends and interest receivables, net of reserves	684,541			3,595,357
Deferred financing fees	1,027,762			1,201,473
Fee and other receivables	2,183,144			2,098,625
Prepaid expenses	253,611			192,712

Total assets	$	423,385,963		$	432,366,094

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities
Senior notes1	$	112,369,320		$	112,283,745
Revolving credit facility II	25,000,000			35,000,000
Provision for incentive compensation (Note 5)	1,610,249			1,946,555
Professional fees payable	369,873			583,049
Management fee payable	1,338,630			1,290,230
Accrued expenses and liabilities	606,620			715,538
Guarantees	237,479			—
Interest payable	346,985			348,525
Management fee payable - Asset Management	87,053			151,053
Consulting fees payable	175,236			151,943
Portfolio fees payable - Asset Management	353,820			336,297
Taxes payable	614			1,381

Total liabilities	142,495,879			152,808,316

Commitments and Contingencies (Note 10)

Shareholders’ equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 28,304,448 shares issued and 22,556,412 and 22,556,412 shares outstanding as of January 31, 2017 and October 31, 2016, respectively	283,044			283,044
Additional paid-in-capital	418,298,709			418,298,709
Accumulated earnings	125,181,214			128,135,727
Dividends paid to stockholders	(148,157,256		)	(145,112,140		)
Accumulated net realized (loss) gain	(40,517,400		)	(51,542,156		)
Net unrealized depreciation	(17,685,275		)	(13,992,454		)
Treasury stock, at cost, 5,748,036 and 5,748,036 shares held, respectively	(56,512,952		)	(56,512,952		)

Total shareholders’ equity	280,890,084			279,557,778

Total liabilities and shareholders’ equity	$	423,385,963		$	432,366,094

Net asset value per share	$	12.45		$	12.39

1 Reflects reductions of approximately $2.0 million and approximately $2.1 million as of January 31, 2017 and October 31, 2016, respectively, related to the reclassification of the unamortized debt issuance costs related the the Senior notes

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

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MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

	For the Quarter Ended			For the Quarter Ended
	January 31, 2017			January 31, 2016
Operating Income:
Dividend income
Non-control/Non-affiliated investments	$	—		$	97,385

Total dividend income	—			97,385

Interest income
Non-control/Non-affiliated investments	1,507,102			2,988,786
Affiliate investments	585,319			573,373
Control investments	133,473			79,699

Total interest income	2,225,894			3,641,858

Payment-in-kind/Deferred interest income
Non-control/Non-affiliated investments	302,961			1,259,420
Affiliate investments	179,704			90,297
Control investments	61,958			39,272

Total payment-in-kind/Deferred interest income	544,623			1,388,989

Fee income
Non-control/Non-affiliated investments	72,897			52,259
Affiliate investments	180,000			181,500
Control investments	37,500			2,343,750

Total fee income	290,397			2,577,509

Fee income - Asset Management 1
Portfolio fees	235,864			249,408
Management fees	83,222			134,362

Total fee income - Asset Management	319,086			383,770

Total operating income	3,380,000			8,089,511

Operating Expenses:
Interest and other borrowing costs	2,538,096			2,628,786
Management fee	1,813,915			1,979,291
Net Incentive compensation (Note 11)	759,774			(2,229,988		)
Audit & tax preparation fees	455,000			135,600
Other expenses	367,446			122,185
Consulting fees	275,555			222,351
Portfolio fees - Asset Management 1	176,898			187,056
Directors’ fees	106,514			110,000
Legal fees	78,525			164,000
Insurance	72,219			79,917
Management fee - Asset Management 1	62,417			100,772
Administration	50,646			61,318
Public relations fees	47,000			48,000
Printing and postage	21,007			14,694

Total operating expenses	6,825,012			3,623,982

Less: Voluntary Expense Waiver by Adviser 2	(37,500		)	(37,500		)
Less: Voluntary Management Fee Waiver by Adviser 3	(453,479		)	(494,823		)

Total waivers	(490,979		)	(532,323		)

Net operating income (loss) before taxes	(2,954,033		)	4,997,852

Tax Expenses:
Current tax expense	480			439

Total tax expense	480			439

Net operating income (loss)	(2,954,513		)	4,997,413

Net Realized and Unrealized (Loss) Gain on Investments:

Net realized gain (loss) on investments
Short term investments	97,184			(90,427		)
Non-control/Non-affiliated investments	—			(7,636,535		)
Affiliate investments	—			(71,268		)
Control investments	10,923,023			(31,760,287		)
Foreign currency	4,549			—


Total net realized gain (loss) on investments	11,024,756			(39,558,517		)

Net unrealized appreciation (depreciation) on investments	(3,692,821		)	29,569,795

Net realized and unrealized gain (loss) on investments	7,331,935			(9,988,722		)

Net increase (decrease) in net assets resulting from operations	$	4,377,422		$	(4,991,309	)

Net increase (decrease) in net assets per share resulting from operations	$	0.19		$	(0.21	)

Dividends declared per share	$	0.135		$	0.305

Weighted average number of shares outstanding 4	22,556,412			22,702,821

1 These items are related to the management of the MVC Private Equity Fund, L.P. (“PE Fund”). Please see Note 10 “Management” for more information.

2 Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of $150,000 of expenses for the 2017 and 2016 fiscal years, that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”). Please see Note 10 “Management” for more information.

3 Reflects the quarterly portion of the TTG Advisers’ voluntary waiver of .50% of the management fee for the 2017 and 2016 fiscal years. Please see Note 10 “Management” for more information.

4Please see Note 13 “Dividends and Distributions to Shareholders and Share Repurchase Program” for more information.

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

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MVC Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Quarter Ended			For the Quarter Ended
	January 31, 2017			January 31, 2016
Cash flows from Operating Activities:
Net decrease in net assets resulting from operations	$	4,377,422		$	(4,991,309	)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized gain (loss)	(11,024,756		)	39,558,517
Net change in unrealized (appreciation) depreciation	3,692,821			(29,569,795		)
Amortization of premiums (discounts) and fees	(63,474		)	5,314
Increase in accrued payment-in-kind dividends and interest	(511,649		)	(3,337,651		)
Amortization of deferred financing fees	259,286			(241,013		)
Changes in operating assets and liabilities:
Restricted cash	(146		)	500,034
Restricted cash equivalents	—			5,503,000
Dividends, interest and fees receivable	2,910,816			2,697,730
Fee and other receivables	(84,519		)	(160,738		)
Escrow receivables, net of reserves	4,146,910			(9,728,934		)
Prepaid expenses	(60,899		)	(37,349		)
Short-term investments receivable	—			(50,130,858		)
Incentive compensation (Note 11)	(336,306		)	(2,229,988		)
Other liabilities	(299,185		)	(647,939		)
Purchases of equity investments	(59,375		)	(1,599,450		)
Purchases of debt instruments	(909,743		)	(8,280,800		)
Purchases of short-term investments	(24,995,573		)	(49,931,003		)
Proceeds from equity investments (1)	13,643,783			36,621,814
Proceeds from debt instruments	30,000			8,951,299
Sales/maturities of short-term investments	35,095,887			139,662,416

Net cash provided by (used in) operating activities	25,811,300			72,613,297

Cash flows from Financing Activities:
Borrowings from revolving credit facility	25,000,000			63,200,000
Repayments from revolving credit facility	(35,000,000		)	(103,200,000		)
Borrowings from bridge loan	—			—
Repayments from bridge loan	—			(8,000,000		)
Share exchange	—			—
Financing fees paid	—			(1,304,545		)
Distributions paid to shareholders	(2,979,028		)	(6,787,796		)
Repurchases of common stock under dividend reinvestment plan	(66,088		)	(136,564		)

Net cash used in financing activities	(13,045,116		)	(56,228,905		)

Net change in cash and cash equivalents for the period	12,766,184			16,384,392

Cash and cash equivalents, beginning of period	$	20,214,160		$	10,311,567

Cash and cash equivalents, end of period	$	32,980,344		$	26,695,959

(1) For the quarter ended January 31, 2017, proceeds from equity investments includes $800,859, in escrow receivables, net of reserves.

During the quarters ended January 31, 2017 and 2016 MVC Capital, Inc. paid $2,108,571 and $2,340,892 in interest expense, respectively.

During the quarters ended January 31, 2017 and 2016 MVC Capital, Inc. paid $0 and $0 in income taxes, respectively.

Non-cash activity:

During the quarters ended January 31, 2017 and 2016, MVC Capital, Inc. recorded payment in-kind dividend and interest of $545,804 and $3,337,651, respectively. This amount was added to the principal balance of the investments and recorded as dividend/interest income.

During the quarters ended January 31, 2017 and 2016, the Plan Agent purchased 7,676 and 17,843 shares of common stock in the open market in order to satisfy the reinvestment portion of our dividends.

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

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MVC Capital, Inc.

Consolidated Statements of Changes in Net Assets

	For the Quarter Ended			For the Quarter Ended			For the Year Ended
	January 31, 2017			January 31, 2016			October 31, 2016
	(Unaudited)			(Unaudited)
Operations:
Net operating gain (loss)	$	(2,954,513	)	$	4,997,413		$	19,327,746
Net realized (loss) gain on investments	11,024,756			(39,558,517		)	(45,157,415		)
Net change in appreciation (depreciation) unrealized appreciation on investments	(3,692,821		)	29,569,795			28,627,844

Net increase (decrease) in net assets from operations	4,377,422			(4,991,309		)	2,798,175

Shareholder Distributions from:
Income	(3,045,116		)	(4,997,852		)	(16,099,238		)
Return of capital	—			(1,926,508		)	—

Net decrease in net assets from shareholder distributions	(3,045,116		)	(6,924,360		)	(16,099,238		)

Capital Share Transactions:
Issuance of common stock under dividend reinvestment plan	66,088			136,564			328,509
Repurchase of common stock under dividend reinvestment plan	(66,088		)	(136,564		)	(328,509		)
Repurchase of common stock	—			—			(1,216,746		)

Net increase in net assets from capital share transactions	—			—			(1,216,746		)

Total increase (decrease) in net assets	1,332,306			(11,915,669		)	(14,517,809		)

Net assets, beginning of period/year	279,557,778			294,075,587			294,075,587

Net assets, end of period/year	$	280,890,084		$	282,159,918		$	279,557,778

Common shares outstanding, end of period/year	22,556,412			22,702,821			22,556,412

Undistributed net operating income	$	—		$	—		$	3,228,508

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

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MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios

	For the			For the			For the
	Quarter Ended			Quarter Ended			Year Ended
	January 31, 2017			January 31, 2016			October 31, 2016
	(Unaudited)			(Unaudited)

Net asset value, beginning of period/year	$	12.39		$	12.95		$	12.95

(Loss) Gain from operations:
Net operating (loss) gain	(0.13		)	0.22			0.85
Net realized and unrealized loss on investments	0.32			(0.43		)	(0.73		)

Total loss from investment operations	0.19			(0.21		)	0.12

Less distributions from:
Income	(0.13		)	(0.22		)	(0.71		)
Return of capital	—			(0.09		)	—

Total distributions	(0.13		)	(0.31		)	(0.71		)

Capital share transactions
Anti-dilutive effect of share repurchase program	—			—			0.03

Total capital share transactions	—			—			0.03

Net asset value, end of period/year	$	12.45		$	12.43		$	12.39

Market value, end of period/year	$	8.55		$	7.40		$	8.69

Market discount	(31.33		)%	(40.47		)%	(29.86		)%

Total Return - At NAV (a)	1.57		%	(1.66		)%	1.26		%

Total Return - At Market (a)	(0.06		)%	(7.40		)%	14.32		%

Ratios and Supplemental Data:

Portfolio turnover ratio	0.43		%	2.60		%	13.74		%

Net assets, end of period/year (in thousands)	$	280,890		$	282,160		$	279,558

Ratios to average net assets:
Expenses including tax expense	8.94		%(c)	4.26		%(c)	6.35		%
Expenses excluding tax expense	8.94		%(c)	4.26		%(c)	6.35		%

Net operating income before tax expense	(4.17		)%(c)	6.88		%(c)	6.81		%
Net operating income after tax expense	(4.17		)%(c)	6.88		%(c)	6.81		%

Ratios to average net assets excluding waivers:
Expenses including tax expense	9.64		%(c)	4.99		%(c)	7.43		%
Expenses excluding tax expense	9.64		%(c)	4.99		%(c)	7.43		%

Net operating income before tax expense	(4.87		)%(c)	6.15		%(c)	5.74		%
Net operating income after tax expense	(4.87		)%(c)	6.15		%(c)	5.74		%

(a) Total annual return is historical and assumes changes in share price, reinvestments of all dividends and distributions, and no sales charge for the period/year.

(b) Supplemental Ratio information

Ratios to average net assets: (b)
Expenses excluding incentive compensation	7.87	%(c)	7.33	%(c)	7.07	%
Expenses excluding incentive compensation, interest and other borrowing costs	4.29	%(c)	3.71	%(c)	3.47	%

Net operating income (loss) before incentive compensation	(3.10	)%(c)	3.81	%(c)	6.09	%
Net operating income before incentive compensation, interest and other borrowing costs	0.49	%(c)	7.43	%(c)	9.69	%

Ratios to average net assets excluding waivers: (b)
Expenses excluding incentive compensation	8.57	%(c)	8.06	%(c)	8.15	%
Expenses excluding incentive compensation, interest and other borrowing costs	4.99	%(c)	4.44	%(c)	4.55	%

Net operating income (loss) before incentive compensation	(3.80	)%(c)	3.08	%(c)	5.02	%
Net operating income before incentive compensation, interest and other borrowing costs	(0.21	)%(c)	6.70	%(c)	8.62	%

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

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MVC Capital, Inc.

Consolidated Schedule of Investments

January 31, 2017

(Unaudited)

Company	Industry	Investment	Principal		Cost		Fair Value/Market Value

Non-control/Non-affiliated investments- 44.43% (a, c, f, g)
Actelis Networks, Inc.	Technology Investment	Preferred Stock (150,602 shares) (d, i)			$	5,000,003	—
Biogenic Reagents	Renewable Energy	Senior Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b, h, l)	$	5,574,648	5,574,648		$	5,191,932
		Senior Convertible Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b, h, l)	5,017,183		5,017,183		4,672,737
		Senior Note 12.0000% Cash, 4.0000% PIK, 06/30/2016 (b, h, l)	4,250,291		4,250,291		4,250,291
		Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 06/30/2016 (b, h, l)	1,030,188		1,030,188		1,030,188
		Warrants (d)	2		620,077		—
					16,492,387		15,145,148
Biovation Acquisition Co.	Manufacturer of Laminate Material and Composites	Common Stock (90 shares) (d)			784,622		—
Custom Alloy Corporation	Manufacturer of Pipe Fittings and Forgings	Second Lien Loan 10.1000% Cash, 04/30/2020 (h, l)	24,425,294		24,425,294		18,040,231
		Unsecured Subordinated Loan 12.0000% Cash, 03/31/2018 (l)	3,000,000		3,000,000		2,506,189
					27,425,294		20,546,420
Dukane IAS,LLC	Welding Equipment Manufacturer	Second Lien Note 10.5000% Cash, 2.5000% PIK, 11/17/2020 (b, l)	7,119,911		7,008,030		7,191,110
FDS, Inc.	Software	Senior Subordinated Debt 12.0000% Cash, 11/30/2017 (l)	2,353,156		2,353,156		2,353,156
FOLIOfn, Inc.	Technology Investment - Financial Services	Preferred Stock (5,802,259 shares) (d, i)			15,000,000		5,676,000
HTI Technologies and Industries, Inc.	Electronic Component Manufacturing	Second Lien Note 12.0000% Cash, 2.0000% PIK, 06/21/2018 (b, l)	9,729,727		9,665,627		9,729,727
Initials, Inc.	Consumer Products	Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK, 06/23/2020 (b, l)	4,818,874		4,818,874		4,659,564
Legal Solutions Holdings, Inc.	Business Services	Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 09/12/2018 (b, l)	11,141,681		11,148,723		11,123,957
MainStream Data, Inc.	Technology Investment	Common Stock (5,786 shares) (d, i)			3,750,000		—
Morey’s Seafood International, LLC	Food Services	Second Lien Loan 10.0000% Cash, 4.0000% PIK, 08/12/2018 (b, h, l)	17,167,669		17,167,669		15,631,507
Pride Engineering, LLC	Manufacturer of Equipment Components	Second Lien Note 12.0000% Cash, 06/18/2021 (l)	5,135,000		5,053,232		5,186,350
Quantum Plastics, LLC	Manufacturer of Plastic Parts	Senior Subordinated Debt 12.0000% Cash, 03/10/2021 (l)	10,000,000		9,594,815		10,000,000
		Warrants (d)	1		392,792		1,418,059
					9,987,607		11,418,059
Thunderdome Restaurants, LLC	Restaurants	Second Lien Loan, 12.0000% Cash, 06/10/2020 (l)	3,000,000		2,985,147		3,030,000
U.S. Spray Drying Holding Company	Specialty Chemicals	Class B Common Stock (784 shares) (d)			5,488,000		6,065,000
		Secured Loan 12.0000% Cash, 04/30/2019 (l)	1,500,000		1,500,000		1,500,000
					6,988,000		7,565,000
United States Technologies, Inc.	Electronics Manufacturing and Repair	Senior Lien Loan 10.5000% Cash, 07/17/2020 (l)	5,500,000		5,490,455		5,555,000
Sub Total Non-control/Non-affiliated investments					151,118,826		124,810,998

Affiliate investments - 60.77% (a, c, f, g)
Advantage Insurance Holdings LTD	Insurance	Preferred Stock (750,000 shares) (d, e)			7,500,000		8,440,595
Centile Holdings B.V.	Software	Common Equity Interest (d, e)			3,524,376		5,719,000
JSC Tekers Holdings	Real Estate Management	Common Stock (3,201 shares) (d, e)			4,500		—
		Preferred Stock (9,159,085 shares) (d, e)			11,810,188		3,687,000
					11,814,688		3,687,000
MVC Environmental, Inc.	Environmental Services	Senior Secured Loan 9.0000% PIK, 12/22/2020 (b, l)	6,572,738		6,572,738		6,572,738
		Common Stock (980 shares) (d)			3,140,375		1,169,518
					9,713,113		7,742,256
Security Holdings B.V.	Electrical Engineering	Common Equity Interest (d, e)			51,204,270		36,350,000
SGDA Europe B.V.	Environmental Services	Common Equity Interest (d, e)			28,544,800		1,005,395
U.S. Gas & Electric, Inc.	Energy Services	Second Lien Loan, 13.0000% Cash, 07/01/2019 (l)	7,500,000		7,500,000		7,500,000
		Unsecured Loan 10.0000% Cash, 4.0000% PIK , 07/01/2018 (b, l)	3,332,281		3,332,281		3,332,281
		Convertible Series I Preferred Stock (32,200 shares) (k, n)			500,000		89,367,607
		Convertible Series J Preferred Stock (8,216 shares) (n)			—		—
					11,332,281		100,199,888
Vestal Manufacturing Enterprises, Inc.	Iron Foundries	Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK , 11/28/2021 (b, l)	6,559,976		6,559,976		6,559,976
		Common Stock (5,610 shares) (d)			250,000		623,231
		Warrants (d)	5,303		—		376,769
					6,809,976		7,559,976

Sub Total Affiliate investments					130,443,504		170,704,110

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

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MVC Capital, Inc.

Consolidated Schedule of Investments - (Continued)

January 31, 2017

(Unaudited)

Company	Industry	Investment	Principal		Cost		Fair Value/Market Value
Control investments - 21.33% (c, f, g)
Equus Total Return, Inc.	Registered Investment Company	Common Stock (4,444,644 shares) (d, l)			$	10,030,272	$	9,333,752
MVC Automotive Group GmbH	Automotive Dealerships	Common Equity Interest (a, d, e)			50,057,288		12,014,000
		Bridge Loan 6.0000% Cash, 12/31/2017 (a, e, l)	$	3,797,093	3,797,093		3,797,093
					53,854,381		15,811,093
MVC Private Equity Fund LP	Private Equity	Limited Partnership Interest (a, d, j, l)			11,452,452		16,563,755
		General Partnership Interest (a, d, j, l)			292,154		416,546
					11,744,606		16,980,301
RuMe Inc.	Consumer Products	Common Stock (5,297,548 shares) (a, d)			924,475		498,448
		Series C Preferred Stock (23,896,634 shares) (a, d)			3,410,694		5,649,927
		Series B-1 Preferred Stock (4,999,076 shares) (a, d)			999,815		2,007,875
		Subordinated Debt 10.0000% PIK, 10/07/2017 (a, b, l)	921,205		882,497		882,497
		Warrants (a, d)	1		336,393		988,111
					6,553,874		10,026,858
SIA Tekers Invest	Port Facilities	Common Stock (68,800 shares) (a, d, e)			2,300,000		—
		Bridge Loan 6.0000% Cash, 06/27/2017 (a, e, h, l)	27,785		27,785		—
					2,327,785		—
Turf Products, LLC	Distributor - Landscaping and Irrigation Equipment	Senior Subordinated Debt 7.0000% Cash, 4.0000% PIK, 11/01/2018 (a, b, l)	3,895,262		3,895,262		3,762,249
		Limited Liability Company Interest (a, d)			3,535,694		3,991,794
		Warrants (a, d)	150		—		—
					7,430,956		7,754,043

Sub Total Control investments					91,941,874		59,906,047

TOTAL PORTFOLIO INVESTMENTS - 126.53% (f)					$	373,504,204	$	355,421,155

U.S. Treasury Obligations - 8.91% (f, g)
U.S. Treasury Bill	U.S. Government Securities	1.8750% Cash, 01/31/2022 (m)	25,070,000		$	24,995,613	$	25,029,838

Sub Total Short-Term Investments					$	24,995,613	$	25,029,838

Cash equivalents and restricted cash equivalents - 0.48% (f, g)
Fidelity Institutional Government Money Market Fund	Money Market Fund	Beneficial Shares (1,349,391 shares)			1,349,391		1,349,391

Total Cash equivalents and restricted cash equivalents					1,349,391		1,349,391
TOTAL INVESTMENT ASSETS - 135.92%					$	399,849,208	$	381,800,384

(a) These securities are restricted from public sale without prior registration under the Securities Act of 1933. The Company negotiates certain aspects of the method and timing of the disposition of these investments, including registration rights and related costs.

(b) These securities accrue a portion of their interest/dividends in “payment in kind” interest/dividends which is capitalized to the investment.

SGDA Europe B.V., SIA Tekers Invest, JSC Tekers Holdings, Centile Holdings B.V., Equus Total Return Inc., MVC Private Equity Fund L.P. and Advantage Insurance LTD.

The Company makes available significant managerial assistance to all of the portfolio companies in which it has invested.

(d) Non-income producing assets.

(e) The principal operations of these portfolio companies are located in Europe and the Cayman Islands which represents approximately 17% of the total assets. The remaining portfolio companies are located in North America which represents approximately 67% of the total assets.

(f) Percentages are based on net assets of $280,890,084 as of January 31, 2017.

(g) See Note 3 for further information regarding “Investment Classification.”

(h) All or a portion of the accrued interest on these securities have been reserved for.

(i) Legacy Investments.

(j) MVC Private Equity Fund, LP is a private equity fund focused on control equity investments in the lower middle market. The fund currently holds four investments, three located in the United States and one in Gibraltar, the investments are in the energy, services, contract manufacturing, and industrial sectors. The Company’s proportional share of Plymouth Rock Energy membership interest and loan, the Gibdock Limited equity interest and Focus Pointe preferred stock is $7,319,123, $4,119,043, $2,812,552, respectively.

(k) Upon a liquidity event, the Company may receive additional ownership in U.S. Gas & Electric, Inc.

(l) All or a portion of these securities may serve as collateral for the Santander Credit Facility.

(m) All or a portion of these securities may serve as collateral for the BB&T Credit Facility.

(n) All or a portion of these securities may serve as collateral for the Macquarie Energy trade supply credit facility.

PIK - Payment-in-kind

-Denotes zero cost or fair value.

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

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MVC Capital, Inc.

Consolidated Schedule of Investments

October 31, 2016

Company	Industry	Investment	Principal/Shares		Cost		Fair Value/Market Value

Non-control/Non-affiliated investments- 44.06% (a, c, f, g)
Actelis Networks, Inc.	Technology Investment	Preferred Stock (150,602 shares) (d, i)			$	5,000,003	—
Biogenic Reagents	Renewable Energy	Senior Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b, h, l)	$	5,574,648	5,574,648		$	5,191,932
		Senior Convertible Note 12.0000% Cash, 4.0000% PIK, 07/21/2018 (b, h, l)	5,017,183		5,017,183		4,672,737
		Senior Note 12.0000% Cash, 4.0000% PIK, 06/30/2016 (b, h, l)	4,250,291		4,250,291		4,250,291
		Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 06/30/2016 (b, h, l)	1,030,188		1,030,188		1,030,188
		Warrants (d)	2		620,077		—
					16,492,387		15,145,148
Biovation Acquisition Co.	Manufacturer of Laminate Material and Composites	Common Stock (90 shares) (d)			784,622		55,351
		Senior Lien Loan 5.0000% PIK, 05/05/2021 (b, l)	30,000		30,000		30,000
					814,622		85,351
Custom Alloy Corporation	Manufacturer of Pipe Fittings and Forgings	Second Lien Loan 4.5000% Cash, 5.5000% PIK, 04/30/2020 (b, h, l)	24,425,293		24,425,293		18,615,650
		Unsecured Subordinated Loan 12.0000% Cash, 03/31/2018 (l)	3,000,000		3,000,000		2,135,760
					27,425,293		20,751,410
Dukane IAS,LLC	Welding Equipment Manufacturer	Second Lien Note 10.5000% Cash, 2.5000% PIK, 11/17/2020 (b, l)	7,074,711		6,955,462		7,074,711
FDS, Inc.	Software	Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 11/30/2016 (b, l)	2,300,000		2,300,000		2,300,000
FOLIOfn, Inc.	Technology Investment - Financial Services	Preferred Stock (5,802,259 shares) (d, i)			15,000,000		5,940,000
HTI Technologies and Industries, Inc.	Electronic Component Manufacturing	Second Lien Note 12.0000% Cash, 2.0000% PIK, 06/21/2018 (b, l)	9,680,251		9,604,132		9,680,251
Initials, Inc.	Consumer Products	Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK, 06/23/2020 (b, l)	4,818,874		4,818,874		4,754,355
Legal Solutions Holdings, Inc.	Business Services	Senior Subordinated Debt 12.0000% Cash, 4.0000% PIK, 09/12/2018 (b, l)	11,028,610		11,036,929		10,898,792
MainStream Data, Inc.	Technology Investment	Common Stock (5,786 shares) (d, i)			3,750,000		—
Morey’s Seafood International, LLC	Food Services	Second Lien Loan 10.0000% Cash, 4.0000% PIK, 08/12/2018 (b, h, l)	17,167,669		17,167,669		15,169,547
Pride Engineering, LLC	Manufacturer of Equipment Components	Second Lien Note 12.0000% Cash, 06/18/2021 (l)	5,135,000		5,048,563		5,135,000
Quantum Plastics, LLC	Manufacturer of Plastic Parts	Senior Subordinated Debt 12.0000% Cash, 03/10/2021 (l)	10,000,000		9,570,176		9,657,398
		Warrants (d)	1		392,792		392,792
					9,962,968		10,050,190
Thunderdome Restaurants, LLC	Restaurants	Second Lien Loan, 12.0000% Cash, 06/10/2020 (l)	3,000,000		2,984,061		3,030,000
U.S. Spray Drying Holding Company	Specialty Chemicals	Class B Common Stock (784 shares) (d)			5,488,000		6,625,000
		Secured Loan 12.0000% Cash, 04/30/2019 (l)	1,500,000		1,500,000		1,500,000
					6,988,000		8,125,000
United States Technologies, Inc.	Electronics Manufacturing and Repair	Senior Lien Loan 10.5000% Cash, 07/17/2020 (l)	5,000,000		5,000,000		5,050,000
Sub Total Non-control/Non-affiliated investments					150,348,963		123,189,755

Affiliate investments - 60.61% (a, c, f, g)
Advantage Insurance Holdings LTD	Insurance	Preferred Stock (750,000 shares) (d, e)			7,500,000		8,304,412
Centile Holdings B.V.	Software	Common Equity Interest (d, e)			3,524,376		5,379,000
JSC Tekers Holdings	Real Estate Management	Common Stock (3,201 shares) (d, e)			4,500		—
		Preferred Stock (9,159,085 shares) (d, e)			11,810,188		3,730,000
					11,814,688		3,730,000
MVC Environmental, Inc.	Environmental Services	Senior Secured Loan 9.0000% PIK, 12/22/2020 (b, l)	6,426,943		6,426,943		6,426,943
		Common Stock (950 shares) (d)			3,081,000		1,626,910
					9,507,943		8,053,853
Security Holdings B.V.	Electrical Engineering	Common Equity Interest (d, e)			51,534,073		34,854,000
SGDA Europe B.V.	Environmental Services	Common Equity Interest (d, e)			28,544,800		1,257,000
U.S. Gas & Electric, Inc.	Energy Services	Second Lien Loan, 13.0000% Cash, 07/01/2019 (l)	7,500,000		7,500,000		7,500,000
		Unsecured Loan 10.0000% Cash, 4.0000% PIK , 07/01/2018 (b, l)	3,298,448		3,298,448		3,298,448
		Convertible Series I Preferred Stock (32,200 shares) (k, n)			500,000		89,367,607
		Convertible Series J Preferred Stock (8,216 shares) (n)			—		—
					11,298,448		100,166,055
Vestal Manufacturing Enterprises, Inc.	Iron Foundries	Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK , 11/28/2021 (b, l)	6,510,065		6,510,065		6,566,924
		Common Stock (5,610 shares) (d)			250,000		677,222
		Warrants (d)	5,303		—		438,304
					6,760,065		7,682,450

Sub Total Affiliate investments					130,484,393		169,426,770

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

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MVC Capital, Inc.

Consolidated Schedule of Investments - (Continued)

October 31, 2016

Company	Industry	Investment	Principal/Shares		Cost		Fair Value/Market Value
Control investments - 24.15% (c, f, g)
Equus Total Return, Inc.	Registered Investment Company	Common Stock (4,444,644 shares) (d, l)			$	10,030,272	$	8,311,484
MVC Automotive Group GmbH	Automotive Dealerships	Common Equity Interest (a, d, e)			50,057,288		12,321,000
		Bridge Loan 6.0000% Cash, 06/30/2017 (a, e, l)	$	3,322,500	3,322,500		3,322,500
					53,379,788		15,643,500
MVC Private Equity Fund LP	Private Equity	Limited Partnership Interest (a, d, j, l)			13,838,539		25,166,780
		General Partnership Interest (a, d, j, l)			353,024		631,262
					14,191,563		25,798,042
RuMe Inc.	Consumer Products	Common Stock (5,297,548 shares) (a, d)			924,475		540,000
		Series C Preferred Stock (23,896,634 shares) (a, d)			3,410,694		5,836,000
		Series B-1 Preferred Stock (4,999,076 shares) (a, d)			999,815		2,017,000
		Subordinated Debt 10.0000% PIK, 10/07/2017 (a, b, l)	900,000		846,777		846,777
		Guarantee (a, d)	1		—		(277,535		)
		Warrants (a, d)	1		336,393		1,054,485
					6,518,154		10,016,727
SIA Tekers Invest	Port Facilities	Common Stock (68,800 shares) (a, d, e)			2,300,000		—
		Bridge Loan 6.0000% Cash, 06/27/2017 (a, e, h, l)	27,785		27,785		—
					2,327,785		—
Turf Products, LLC	Distributor - Landscaping and Irrigation Equipment	Senior Subordinated Debt 7.0000% Cash, 4.0000% PIK, 11/01/2018 (a, b, l)	3,895,262		3,895,262		3,754,677
		Limited Liability Company Interest (a, d)			3,535,694		3,991,794
		Guarantee (a, d)	1		—		(12,995		)
		Warrants (a, d)	150		—		—
					7,430,956		7,733,476

Sub Total Control investments					93,878,518		67,503,229

TOTAL PORTFOLIO INVESTMENTS - 128.82% (f)					$	374,711,874	$	360,119,754

U.S. Treasury Obligations - 12.52% (f, g)
U.S. Treasury Bill	U.S. Government Securities	1.2500% Cash, 10/31/2021 (m)	35,100,000		$	34,998,593	$	34,991,681

Sub Total Short-Term Investments					$	34,998,593	$	34,991,681

Cash equivalents and restricted cash equivalents - 0.14% (f, g)
Fidelity Institutional Government Money Market Fund	Money Market Fund	Beneficial Shares (299,569 shares)			299,569		299,569
Morgan Stanley Institutional Liquidity Government Portfolio	Money Market Fund	Beneficial Shares (95,043 shares)			95,043		95,043
Total Cash equivalents and restricted cash equivalents					394,612		394,612

TOTAL INVESTMENTS - 141.48%					$	410,105,079	$	395,506,047

(b) These securities accrue a portion of their interest/dividends in “payment in kind” interest/dividends which is capitalized to the investment.

(c) All of the Company’s equity and debt investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940, except MVC Automotive Group GmbH, Security Holdings B.V., SGDA Europe B.V., SIA Tekers Invest, JSC Tekers Holdings, Centile Holdings B.V., Equus Total Return, Inc., MVC Private Equity Fund L.P., and Advantage Insurance LTD. The Company makes available significant managerial assistance to all of the portfolio companies in which it has invested.

(d) Non-income producing assets.

(e) The principal operations of these portfolio companies are located in Europe and Cayman Islands which represents approximately 25% of the net assets. The remaining portfolio companies are located in North America which represents approximately 104% of the net assets.

(f) Percentages are based on net assets of $279,557,778 as of October 31, 2016.

(g) See Note 3 for further information regarding “Investment Classification.”

(h) All or a portion of the accrued interest on these securities have been reserved for.

(i) Legacy Investments.

(j) MVC Private Equity Fund, LP is a private equity fund focused on control equity investments in the lower middle market. The fund currently holds five investments, four located in the United States and one in Gibraltar, the investments are in the energy, services, contract manufacturing, and industrial sectors. The Company’s proportional share of the AccuMed Corp. preferred stock, Plymouth Rock Energy membership interest and loan, the Gibdock Limited equity interest and Focus Pointe preferred stock is $8,916,632, $7,343,966, $4,627,855 and $2,854,783, respectively.

(k) Upon a liquidity event, the Company may receive additional ownership in U.S. Gas & Electric, Inc.

(l) All or a portion of these securities may serve as collateral for the Santander Credit Facility.

(m) All or a portion of these securities may serve as collateral for the BB&T Credit Facility.

(n) All or a portion of these securities may serve as collateral for the Macquarie Energy trade supply credit facility

PIK - Payment-in-kind

- Denotes zero cost or fair value.

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

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MVC Capital, Inc. (the “Company”)

Notes to Consolidated Financial Statements

January 31, 2017

(Unaudited)

1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete consolidated financial statements. Certain amounts, when applicable, have been reclassified to adjust to current period presentations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included as required by Regulation S-X, Rule 10-01. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2016, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on January 17, 2017. As the Company is an investment company, (as defined by the Investment Company Act of 1940 (the “1940 Act”)), management follows investment company accounting and reporting guidance of Financial Accounting Standards Board (“FASB”) 946-Investment Companies, which is accounting principles generally accepted in the United States of America (“GAAP”).

2. Consolidation

On July 16, 2004, the Company formed a wholly-owned subsidiary, MVC Financial Services, Inc. (“MVCFS”). MVCFS is incorporated in Delaware and its principal purpose is to provide advisory, administrative and other services to the Company, the Company’s portfolio companies and other entities. MVCFS had opening equity of $1 (100 shares at $0.01 per share). The Company does not hold MVCFS for investment purposes and does not intend to sell MVCFS.

On October 14, 2011, the Company formed a wholly-owned subsidiary, MVC Cayman, an exempted company incorporated in the Cayman Islands, to hold certain of its investments and to make certain future investments. The results of MVCFS and MVC Cayman are consolidated into the Company’s financial statements and all inter-company accounts have been eliminated in consolidation. Of the $16.1 million in cash on the Company’s Consolidated Balance Sheets as of January 31, 2017, approximately $1.1 million was held by MVC Cayman.

During fiscal year ended October 31, 2012 and thereafter, MVC Partners, LLC (“MVC Partners”) was consolidated with the operations of the Company as MVC Partners’ limited partnership interest in the MVC Private Equity Fund, L.P. (“PE Fund”) is a substantial portion of MVC Partners operations. Previously, MVC Partners was presented as a portfolio company on the Consolidated Schedule of Investments. The consolidation of MVC Partners has not had any material effect on the financial position or net results of operations of the Company. There are additional disclosures resulting from this consolidation.

MVC GP II, LLC (“MVC GP II”), an indirect wholly-owned subsidiary of the Company, serves as the general partner of the PE Fund. MVC GP II is wholly-owned by MVCFS, a subsidiary of the Company. The results of MVC GP II are consolidated into MVCFS and ultimately the Company. All inter-company accounts have been eliminated in consolidation.

During fiscal year ended October 31, 2014, MVC Turf, LLC (“MVC Turf”) was consolidated with the Company as MVC Turf is an MVC wholly-owned holding company. The consolidation of MVC Turf did not have any material effect on the financial position or net results of operations of the Company. Of the $31.6 million in cash on the Company’s Consolidated Balance Sheets as of January 31, 2017, approximately $323,000 was held by MVC Turf, an MVC wholly-owned holding company.

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3. Investment Classification

As required by the 1940 Act, we classify our investments by level of control. As defined in the 1940 Act, “Control Investments” are investments in those companies that we are deemed to “Control.” “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of us, as defined in the 1940 Act, other than Control Investments. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments. Generally, under that 1940 Act, we are deemed to control a company in which we have invested if we own 25% or more of the voting securities of such company. We are deemed to be an affiliate of a company in which we have invested if we own 5% or more and less than 25% of the voting securities of such company.

4. Cash and Cash Equivalents

For the purpose of the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, the Company considers all money market and all highly liquid temporary cash investments purchased with an original maturity of less than three months to be cash equivalents. The Company places its cash and cash equivalents with financial institutions and cash held in bank accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit. As of January 31, 2017, the Company had approximately $1.3 million in cash equivalents and approximately $31.6 million in cash totaling approximately $33.0 million. Of the $31.6 million in cash, approximately $323,000 was held by MVC Turf and approximately $1.1 million was held by MVC Cayman.

Restricted Cash and Cash Equivalents

Cash and cash equivalent accounts that are not available to the Company for day—to-day use and are legally restricted are classified as restricted cash. Restricted cash and cash equivalents are carried at cost, which approximates fair value. During the fiscal year ended October 31, 2016, the Company agreed to cash collateralize a $500,000 working capital line of credit for an entity partially owned by MVC Environmental and a $300,000 letter of credit for RuMe, which were classified as restricted cash on the Company’s Consolidated Balance Sheets as of January 31, 2017.

5. Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (Topic 606). ASU 2014-09 addresses the reporting of revenue by most entities and will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 that defers the effective date of ASU 2014-09 for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods therein. Early application is not permitted for public business entities. The Company is currently assessing the impact of this guidance.

In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). The standard requires management to evaluate, at each interim and annual reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued, and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for annual and interim periods thereafter, and early adoption is permitted. This update has had no impact on the Company’s financial condition or results of operations.

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In February 2015, the FASB issued Accounting Standards Update 2015-02, which updated consolidation standards under ASC Topic 810, “Consolidation”. Under this update, a new consolidation analysis is required for variable interest entities (“VIEs”) and will limit the circumstances in which investment managers and similar entities are required to consolidate the entities that they manage. The FASB decided to eliminate some of the criteria under which their fees are considered a variable interest and limit the circumstances in which variable interests in a VIE held by related parties of a reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. This update has had no impact on the Company’s financial condition or results of operations.

In April 2015, the FASB issued Accounting Standards Update 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. Under this guidance, debt issuance costs related to a recognized debt liability are to be presented as a direct deduction from the debt liability rather than as an asset on the balance sheet, consistent with debt discounts. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. This update has had no impact on the Company’s financial condition or results of operations.

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent). The new guidance removes the requirement that investments for which NAV is determined based on practical expedient reliance be reported utilizing the fair value hierarchy. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. This update has had no material impact on the Company’s financial condition or results of operations.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments (Topic 230). The amendments provide guidance on eight specific cash flow issues in how certain cash receipts and cash payments are presented and classified in the statement of cash flows with the objective of reducing the existing diversity in practice. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance.

In October 2016, the FASB issued ASU 2016-17, to amend the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The ASU is effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is currently assessing the impact of this guidance.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The ASU is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently assessing the impact of this guidance.

6. Investment Valuation Policy

Our investments are carried at fair value in accordance with the Accounting Standards Codification, Fair Value Measurement (“ASC 820”). In accordance with the 1940 Act, unrestricted minority-owned publicly traded securities for which market quotations are readily available are valued at the closing

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market quote on the valuation date and majority-owned publicly traded securities and other privately held securities are valued as determined in good faith by the Valuation Committee of our Board of Directors. For legally or contractually restricted securities of companies that are publicly traded, the value is based on the closing market quote on the valuation date minus a discount for the restriction. At January 31, 2017, we did not own restricted or unrestricted securities of any publicly traded company in which we have a majority-owned interest but did own one security in which we have a minority-owned interest.

ASC 820 provides a framework for measuring the fair value of assets and liabilities and provides guidance regarding a fair value hierarchy that prioritizes information used to measure value. In determining fair value, the Valuation Committee primarily uses the level 3 inputs referenced in ASC 820.

ASC 820 defines fair value in terms of the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The price used to measure the fair value is not adjusted for transaction costs while the cost basis of our investments may include initial transaction costs. Under ASC 820, the fair value measurement also assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset. The principal market is the market in which the reporting entity would sell or transfer the asset with the greatest volume and level of activity for the asset to which the reporting entity has access to as of the measurement date. If no market for the asset exists or if the reporting entity does not have access to the principal market, the reporting entity should use a hypothetical market.

Valuation Methodology

Pursuant to the requirements of the 1940 Act and in accordance with ASC 820, we value our portfolio securities at their current market values or, if market quotations are not readily available, at their estimates of fair values. Because our portfolio investments generally do not have readily ascertainable market values, we record these investments at fair value in accordance with our Valuation Procedures adopted by the Board of Directors, which are consistent with ASC 820. As permitted by the SEC, the Board of Directors has delegated the responsibility of making fair value determinations to the Valuation Committee, subject to the Board of Directors’ supervision and pursuant to our Valuation Procedures. Our Board of Directors may also hire independent consultants to review our Valuation Procedures or to conduct an independent valuation of one or more of our portfolio investments.

Pursuant to our Valuation Procedures, the Valuation Committee (which is comprised of three Independent Directors) determines fair values of portfolio company investments on a quarterly basis (or more frequently, if deemed appropriate under the circumstances). In doing so, the Committee considers the recommendations of The Tokarz Group Advisers LLC (“TTG Advisers”). The Committee also takes into account input and reviews by third party consultants retained to support the Company’s valuation process. The Company has also adopted several other enhanced processes related to valuations of controlled/affiliated portfolio companies. Any changes in valuation are recorded in the consolidated statements of operations as “Net unrealized appreciation (depreciation) on investments.”

Currently, our NAV per share is calculated and published on a quarterly basis. The Company calculates our NAV per share by subtracting all liabilities from the total value of our portfolio securities and other assets and dividing the result by the total number of outstanding shares of our common stock on the date of valuation. Fair values of foreign investments reflect exchange rates, as applicable, in effect on the last business day of the quarter end. Exchange rates fluctuate on a daily basis, sometimes significantly. Exchange rate fluctuations following the most recent quarter end are not reflected in the valuations reported in this Quarterly Report. See Item 1A Risk Factor, “Investments in foreign debt or equity may involve significant risks in addition to the risks inherent in U.S. investments.”

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At January 31, 2017 and October 31, 2016, approximately 81.74% and 81.37%, respectively, of total assets represented investments in portfolio companies recorded at fair value (“Fair Value Investments”).

Under most circumstances, at the time of acquisition, Fair Value Investments are carried at cost (absent the existence of conditions warranting, in management’s and the Valuation Committee’s view, a different initial value). During the period that an investment is held by the Company, its original cost may cease to approximate fair value as the result of market and investment specific factors. No pre-determined formula can be applied to determine fair value. Rather, the Valuation Committee analyzes fair value measurements based on the value at which the securities of the portfolio company could be sold in an orderly disposition over a reasonable period of time between willing parties, other than in a forced or liquidation sale. The liquidity event whereby the Company ultimately exits an investment is generally the sale, the merger, the recapitalization of a portfolio company or by a public offering of its securities.

There is no one methodology to determine fair value and, in fact, for any portfolio security, fair value may be expressed as a range of values, from which the Company derives a single estimate of fair value. To determine the fair value of a portfolio security, the Valuation Committee analyzes the portfolio company’s financial results and projections, publicly traded comparable companies when available, comparable private transactions when available, precedent transactions in the market when available, third-party real estate and asset appraisals if appropriate and available, discounted cash flow analysis, if appropriate, as well as other factors. The Company generally requires, where practicable, portfolio companies to provide annual audited and more regular unaudited financial statements, and/or annual projections for the upcoming fiscal year.

The fair value of our portfolio securities is inherently subjective. Because of the inherent uncertainty of fair valuation of portfolio securities and escrow receivables that do not have readily ascertainable market values, our estimate of fair value may significantly differ from the fair value that would have been used had a ready market existed for the securities. Such values also do not reflect brokers’ fees or other selling costs, which might become payable on disposition of such investments.

If a security is publicly traded, the fair value is generally equal to market value based on the closing price on the principal exchange on which the security is primarily traded unless restricted and a restricted discount is applied.

For equity securities of portfolio companies, whose securities are not publicly traded, the Valuation Committee estimates the fair value based on market and/or income approach with value then attributed to equity or equity like securities using the enterprise value waterfall (“Enterprise Value Waterfall”) valuation methodology. Under the Enterprise Value Waterfall valuation methodology, the Valuation Committee estimates the enterprise fair value of the portfolio company and then waterfalls the enterprise value over the portfolio company’s securities in order of their preference relative to one another. To assess the enterprise value of the portfolio company, the Valuation Committee 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 assets 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, and third-party asset and real estate appraisals. For non-performing assets, the Valuation Committee may estimate the liquidation or collateral value of the portfolio company’s assets. The Valuation Committee also takes into account historical and anticipated financial results.

The Company does not utilize hedge accounting and instead, when applicable, marks its derivatives to market on the Company’s consolidated statement of operations.

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In assessing enterprise value, the Valuation Committee considers the mergers and acquisitions (“M&A”) market as the principal market in which the Company would sell its investments in portfolio companies under circumstances where the Company has the ability to control or gain control of the board of directors of the portfolio company (“Control Companies”). This approach is consistent with the principal market that the Company would use for its portfolio companies if the Company has the ability to initiate a sale of the portfolio company as of the measurement date, i.e., if it has the ability to control or gain control of the board of directors of the portfolio company as of the measurement date. In evaluating if the Company can control or gain control of a portfolio company as of the measurement date, the Company takes into account its equity securities on a fully diluted basis, as well as other factors.

For Non-Control Companies, consistent with ASC 820, the Valuation Committee considers a hypothetical secondary market as the principal market in which it would sell investments in those companies. The Company also considers other valuation methodologies such as the Option Pricing Method and liquidity preferences when valuing minority equity positions of a portfolio company.

For loans and debt securities of Non-Control Companies (for which the Valuation Committee has identified the hypothetical secondary market as the principal market), the Valuation Committee determines fair value based on the assumptions that a hypothetical market participant would use to value the security in a current hypothetical sale using a market yield (“Market Yield”) valuation methodology. In applying the Market Yield valuation methodology, the Valuation Committee determines the fair value based on such factors as third party broker quotes (if available) and market participant assumptions, including synthetic credit ratings, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date.

Estimates of average life are generally based on market data of the average life of similar debt securities. However, if the Valuation Committee has information available to it that the debt security is expected to be repaid in the near term, the Valuation Committee would use an estimated life based on the expected repayment date.

The Valuation Committee determines fair value of loan and debt securities of Control Companies based on the estimate of the enterprise value of the portfolio company. To the extent the enterprise value exceeds the remaining principal amount of the loan and all other debt securities of the company, the fair value of such securities is generally estimated to be their cost. However, where the enterprise value is less than the remaining principal amount of the loan and all other debt securities, the Valuation Committee may discount the value of such securities to reflect an impairment.

For the Company’s or its subsidiary’s investment in the PE Fund, for which an indirect wholly-owned subsidiary of the Company serves as the general partner (the “GP”) of the PE Fund, the Valuation Committee relies on the GP’s determination of the fair value of the PE Fund which will be generally valued, as a practical expedient, utilizing the net asset valuations provided by the GP, which will be made: (i) no less frequently than quarterly as of the Company’s fiscal quarter end and (ii) with respect to the valuation of PE Fund investments in portfolio companies, will be based on methodologies consistent with those set forth in the Company’s Valuation Procedures. In making its determinations, the GP considers and generally relies on TTG Advisers’ recommendations. The determination of the net asset value of the Company’s or its subsidiary’s investment in the PE Fund will follow the methodologies described for valuing interests in private investment funds (“Investment Vehicles”) described below. Additionally, when both the Company and the PE Fund hold investments in the same portfolio company, the GP’s Fair Value determination shall be based on the Valuation Committee’s determination of the Fair Value of the Company’s portfolio security in that portfolio company.

As permitted under GAAP, the Company’s interests in private investment funds are generally valued, as a practical expedient, utilizing the net asset valuations provided by management of the underlying Investment Vehicles, without adjustment, unless TTG Advisers is aware of information indicating that a

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value reported does not accurately reflect the value of the Investment Vehicle, including any information showing that the valuation has not been calculated in a manner consistent with GAAP. Net unrealized appreciation (depreciation) of such investments is recorded based on the Company’s proportionate share of the aggregate amount of appreciation (depreciation) recorded by each underlying Investment Vehicle. The Company’s proportionate investment interest includes its share of interest and dividend income and expense, and realized and unrealized gains and losses on securities held by the underlying Investment Vehicles, net of operating expenses and fees. Realized gains and losses on distributions from Investment Vehicles are generally recognized on a first in, first out basis.

The Company applies the practical expedient to interests in Investment Vehicles on an investment by investment basis, and consistently with respect to the Company’s entire interest in an investment. The Company may adjust the valuation obtained from an Investment Vehicle with a premium, discount or reserve if it determines that the net asset value is not representative of fair value.

If the Company intends to sell all or a portion of its interest in an Investment Vehicle to a third-party in a privately negotiated transaction near the valuation date, the Company will consider offers from third parties to buy the interest in an Investment Vehicle in valuations, which may be discounted for both probability of close and time.

When the Company receives nominal cost warrants or free equity securities (“nominal cost equity”) with a debt security, the Company typically allocates its cost basis in the investment between debt securities and nominal cost equity at the time of origination. If the Company is not reimbursed for investment or transaction related costs at the time an investment is made, the Company typically capitalizes those costs to the cost basis of the investment.

Interest income, adjusted for amortization of premium and accretion of discount on a yield to maturity methodology, is recorded on an accrual basis to the extent that such amounts are expected to be collected. Origination and/or closing fees associated with investments in portfolio companies are accreted into income over the respective terms of the applicable loans. Upon the prepayment of a loan or debt security, any unamortized original issue discount or market discount is recorded as interest income. Prepayment premiums are recorded on loans when received as interest income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that the Company expects to collect such amounts.

For loans, debt securities, and preferred securities with contractual payment-in-kind interest or dividends, which represent contractual interest/dividends accrued and added to the loan balance or liquidation preference that generally becomes due at maturity, the Company will not ascribe value to payment-in-kind interest/dividends, if the portfolio company valuation indicates that the payment-in-kind interest is not collectible. However, the Company may ascribe value to payment-in-kind interest if the health of the portfolio company and the underlying securities are not in question. All payment-in-kind interest that has been added to the principal balance or capitalized is subject to ratification by the Valuation Committee. For interest or deferred interest receivables purchased by the Company at a discount to their outstanding amount, the Company amortizes the discount using the effective yield method and records it as interest income over the life of the loan. The Company will not ascribe value to the interest or deferred interest, if the Company has determined that the interest is not collectible.

Escrows from the sale of a portfolio company are generally valued at an amount, which may be expected to be received from the buyer under the escrow’s various conditions and discounted for both risk and time.

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look at the pricing of the security in which the guarantee provided support for the security and compare it to the price of a similar or hypothetical security without guarantee support. The difference in pricing will be discounted for time and risk over the period in which the guarantee is expected to remain outstanding.

Reclassifications — Certain amounts from prior years have been reclassified to conform to the current year presentation.

7. Concentration of Market Risk

Financial instruments that subjected the Company to concentrations of market risk consisted principally of equity investments, subordinated notes, debt instruments and escrow receivables (other than cash equivalents), which collectively represented approximately 85.13% and 85.41% of the Company’s total assets at January 31, 2017 and October 31, 2016, respectively. As discussed in Note 8, these investments consist of securities in companies with no readily determinable market values and as such are valued in accordance with the Company’s fair value policies and procedures. The Company’s investment strategy represents a high degree of business and financial risk due to the fact that the Company’s portfolio investments (other than cash equivalents) are generally illiquid, in small and middle market companies, and include foreign investments (which subject the Company to additional risks such as currency, geographic, demographic and operational risks), entities with little operating history or entities that possess operations in new or developing industries. These investments, should they become publicly traded, would generally be (i) subject to restrictions on resale, if they were acquired from the issuer in private placement transactions; and (ii) susceptible to market risk. Additionally, we are classified as a non-diversified investment company within the meaning of the 1940 Act, and therefore may invest a significant portion of our assets in a relatively small number of portfolio companies, which gives rise to a risk of significant loss should the performance or financial condition of one or more portfolio companies deteriorate. As of January 31, 2017, the fair value of our largest investment, U.S. Gas & Electric, Inc. (“U.S. Gas”), comprised 23.7% of our total assets and 35.7% of our net assets. The Company’s investments in short-term securities are generally in U.S. government securities, with a maturity of greater than three months but generally less than one year or other high quality and highly liquid investments. The Company considers all money market and other cash investments purchased with an original maturity of less than three months to be cash equivalents.

The following table shows the portfolio composition by industry grouping at fair value as a percentage of net assets as of January 31, 2017 and October 31, 2016.

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	January 31, 2017		October 31, 2016
Energy Services	35.67	%	35.83	%
Electrical Engineering	12.94	%	12.47	%
Manufacturer of Pipe Fittings	7.31	%	7.42	%
Private Equity	6.05	%	9.23	%
Automotive Dealerships	5.63	%	5.60	%
Food Services	5.56	%	5.43	%
Renewable Energy	5.39	%	5.42	%
Consumer Products	5.23	%	5.28	%
Manufacturer of Plastics Parts	4.06	%	3.60	%
Business Services	3.96	%	3.90	%
Electronics Component Manufacturing	3.46	%	3.46	%
Regulated Investment Company	3.32	%	2.97	%
Environmental Services	3.11	%	3.33	%
Insurance	3.00	%	2.97	%
Software	2.87	%	2.75	%
Distributor - Landscaping and Irrigation Equipment	2.76	%	2.77	%
Specialty Chemicals	2.69	%	2.91	%
Iron Foundries	2.69	%	2.75	%
Welding Equipment Manufacturer	2.56	%	2.53	%
Technology Investment - Financial Services	2.02	%	2.12	%
Electronics Manufacturing and Repair	1.98	%	1.81	%
Manufacturer of Equipment Components	1.86	%	1.83	%
Real Estate Management	1.32	%	1.33	%
Restaurants	1.09	%	1.08	%
Manufacturer of Laminate Material and Composites	0.00	%	0.03	%
Port Facilities	0.00	%	0.00	%
	126.53	%	128.82	%

8. Portfolio Investments

Pursuant to the requirements of the 1940 Act and ASC 820, we value our portfolio securities at their current market values or, if market quotations are not readily available, at their estimated fair values. Because our portfolio company investments generally do not have readily ascertainable market values, we record these investments at fair value in accordance with Valuation Procedures adopted by our Board of Directors. As permitted by the SEC, the Board of Directors has delegated the responsibility of making fair value determinations to the Valuation Committee, subject to the Board of Directors’ supervision and pursuant to our Valuation Procedures.

The levels of fair value inputs used to measure our investments are characterized in accordance with the fair value hierarchy established by ASC 820. Where inputs for an asset or liability fall in more than one level in the fair value hierarchy, the investment is classified in its entirety based on the lowest level input that is significant to that investment’s fair value measurement. We use judgment and consider factors specific to the investment in determining the significance of an input to a fair value measurement. The three levels of the fair value hierarchy and investments that fall into each of the levels are described below:

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·		*Level 1:* Level 1 inputs are unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We use Level 1 inputs for investments in publicly traded unrestricted securities for which we do not have a controlling interest. Such investments are valued at the closing price on the measurement date. We valued one of our investments using Level 1 inputs as of January 31, 2017.

·		*Level 2:* Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly or other inputs that are observable or can be corroborated by observable market data. Additionally, the Company’s interests in Investment Vehicles that can be withdrawn by the Company at the net asset value reported by such Investment Vehicle as of the measurement date or within six months of the measurement date are generally categorized as Level 2 investments. We did not value any of our investments using Level 2 inputs as of January 31, 2017.

·		*Level 3:* Level 3 inputs are unobservable and cannot be corroborated by observable market data. Additionally, included in Level 3 are the Company’s interests in Investment Vehicles from which the Company cannot withdraw at the net asset value reported by such Investment Vehicles as of the measurement date or within six months of the measurement date. We use Level 3 inputs for measuring the fair value of substantially all of our investments. See Note 6 “Investment Valuation Policy” for the investment valuation policies used to determine the fair value of these investments.

As noted above, the interests in Investment Vehicles are included in Level 3 of the fair value hierarchy. In determining the appropriate level, the Company considers the length of time until the investment is redeemable, including notice and lock-up periods and any other restriction on the disposition of the investment. The Company also considers the nature of the portfolios of the underlying Investment Vehicles and such vehicles’ ability to liquidate their investment.

The following fair value hierarchy tables set forth our assets and liabilities by level as of January 31, 2017 and October 31, 2016 (in thousands):

	January 31, 2017
	Level 1		Level 2		Level 3		Investment measured at NAV		Total
Senior/Subordinated Loans and credit facilities	$	—	$	—	$	144,059	$	—	$	144,059
Common Stock	9,334		—		8,356		—		17,690
Preferred Stock	—		—		114,829		—		114,829
Warrants	—		—		2,783		—		2,783
Common Equity Interest	—		—		55,088		—		55,088
LP Interest of the PE Fund	—		—		—		16,564		16,564
GP Interest of the PE Fund	—		—		—		416		416
LLC Interest	—		—		3,992		—		3,992
Escrow Receivable	—		—		5,005		—		5,005
Short-term investments	—		25,030		—		—		25,030
Total Investments, net	$	9,334	$	25,030	$	334,112	$	16,980	$	385,456

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	October 31, 2016
	Level 1		Level 2		Level 3			Investment measured at NAV		Total
Senior/Subordinated Loans and credit facilities	$	—	$	—	$	141,893		$	—	$	141,893
Common Stock	8,311		—		9,524			—		17,835
Preferred Stock	—		—		115,195			—		115,195
Warrants	—		—		1,886			—		1,886
Common Equity Interest	—		—		53,811			—		53,811
LP Interest of the PE Fund	—		—		—			25,167		25,167
GP Interest of the PE Fund	—		—		—			631		631
LLC Interest	—		—		3,992			—		3,992
Guarantee	—		—		(291		)	—		(291		)
Escrow Receivable	—		—		9,152			—		9,152
Short-term investments	—		34,992		—			—		34,992
Total Investments, net	$	8,311	$	34,992	$	335,162		$	25,798	$	404,263

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the period in which the reclassifications occur. During the quarter ended January 31, 2017 and the year ended October 31, 2016, there were no transfers in and out of Level 1 or 2.

The following tables set forth a summary of changes in the fair value of investment assets and liabilities measured using Level 3 inputs for the quarter ended January 31, 2017, and January 31, 2016 (in thousands):

	Balances, November 1, 2016		Realized Gains (Losses) (1)		Reversal of Prior Period (Appreciation) Depreciation on Realization (2)		Unrealized Appreciation (Depreciation) (3)			Purchases (4)		Sales (5)			Transfers In & Out of Level 3		Balances, January 31, 2017		Total Loss for the Year Included in Earnings Attibutable to the Change in Unrealized Appreciation (Depreciation) on Investments held as of January 31, 2017
Senior/Subordinated Loans and credit facilities	$	141,893	$	—	$	—	$	676		$	1,520	$	(30	)	$	—	$	144,059	$	(8,592	)
Common Stock	9,524		—		—		(1,227		)	59		—			—		8,356		(8,286		)
Preferred Stock	115,195		—		—		(366		)	—		—			—		114,829		70,608
Warrants	1,886		—		—		897			—		—			—		2,783		1,434
Common Equity Interest	53,811		—		—		1,607			—		(330		)	—		55,088		(78,242		)
LLC Interest	3,992		—		—		—			—		—			—		3,992		456
Escrow Receivable	9,152		801		—		—			—		(4,948		)	—		5,005		—
Total	$	335,453	$	801	$	—	$	1,587		$	1,579	$	(5,308	)	$	—	$	334,112	$	(22,622	)

	Balances, November 1, 2015			Realized Gains (Losses) (1)			Reversal of Prior Period (Appreciation) Depreciation on Realization (2)		Unrealized Appreciation (Depreciation) (3)			Purchases (4)		Sales (5)			Transfers In & Out of Level 3		Balances, January 31, 2016			Total Loss for the Year Included in Earnings Attibutable to the Change in Unrealized Appreciation (Depreciation) on Investments held as of January 31, 2016
Senior/Subordinated Loans and credit facilities	$	138,471		$	(6,526	)	$	7,593	$	(3,368	)	$	17,618	$	(18,118	)	$	—	$	135,670		$	(10,817	)
Common Stock	7,953			(15,764		)	15,764		673			3,081		—			—		11,707			(6,107		)
Preferred Stock	149,026			(14,711		)	14,088		88			—		(37,907		)	—		110,584			66,364
Warrants	1,661			(1,111		)	1,111		(29		)	—		—			—		1,632			1,012
Common Equity Interest	69,677			—			—		(7,345		)	1,599		—			—		63,931			(71,042		)
LLC Interest	3,992			—			—		—			—		—			—		3,992			456
Guarantees	(41		)	—			—		6			—		—			—		(35		)	(35		)
Escrow Receivable	293			(1,285		)	—		—			11,014		—			—		10,022			—
Total	$	371,032		$	(39,397	)	$	38,556	$	(9,975	)	$	33,312	$	(56,025	)	$	—	$	337,503		$	(20,168	)

(1) Included in net realized gain (loss) on investments in the Consolidated Statements of Operations.

(2) Included in net unrealized appreciation (depreciation) of investments in the Consolidated Statements of Operations related to securities disposed of during the quarter ended January 31, 2017 and January 31, 2016, respectively.

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(3) Included in net unrealized appreciation (depreciation) of investments in the Consolidated Statements of Operations related to securities held at January 31, 2017 and January 31, 2016, respectively.

(4) Includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of discounts, premiums and closing fees and the exchange of one or more existing securities for new securities. For the quarter ended January 31, 2017 and January 31, 2016, a total of approximately $512,000 and $3.3 million, respectively, of PIK interest and dividends and amortization of discounts and fees are included.

(5) Includes decreases in the cost basis of investments resulting from principal repayments or sales.

In accordance with ASU 2011-04, the following tables summarize information about the Company’s Level 3 fair value measurements as of January 31, 2017 and October 31, 2016 (in thousands):

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Quantitative Information about Level 3 Fair Value Measurements*

	Fair value as of				Range				Weighted
	1/31/2017		Valuation technique	Unobservable input	Low		High		average (a)

Common Stock (c) (d)	$	8,356	Adjusted Net Asset Approach	Real Estate Appraisals	N/A		N/A		N/A

			Income Approach	Discount Rate	17.1	%	17.1	%	17.1	%

			Market Approach	Revenue Multiple	1.3x		1.3x		1.3x
				EBITDA Multiple	5.5x		5.5x		5.5x
				Forward EBITDA Multiple	6.0x		7.0x		6.8x
				Minority Discount	10.0	%	10.0	%	10.0	%
				Illiquidity Discount	15.0	%	15.0	%	15.0	%

Senior/Subordinated loans and credit facilities (b) (d)	$	144,059	Market Approach	EBITDA Multiple	4.0x		8.8x		6.7x
				Forward EBITDA Multiple	6.0x		7.0x		6.2x
				Revenue Multiple	1.3x		1.3x		1.3x
				Discount to Letter of Intent	0.0	%	5.0	%	2.4	%
				Illiquidity Discount	15.0	%	15.0	%	15.0	%

			Income Approach	Required Rate of Return	10.1	%	22.0	%	16.1	%
				Discount Rate	17.1	%	17.1	%	17.1	%

			Adjusted Net Asset Approach	Real Estate Appraisals	N/A		N/A		N/A
				Discount to Net Asset Value	0.0	%	27.2	%	21.7	%

LLC Interest	$	3,992	Market Approach	EBITDA Multiple	6.0x		6.0x		6.0x

Common Equity Interest	$	55,088	Market Approach	Revenue Multiple	2.0x		2.0x		2.0x
				EBITDA Multiple	4.0x		4.0x		4.0x
				Forward EBITDA Multiple	7.0x		7.0x		7.0x

			Adjusted Net Asset Approach	Real Estate Appraisals	N/A		N/A		N/A
				Discount to Net Asset Value	0.0	%	0.0	%	0.0	%

			Income Approach	Discount Rate	15.5	%	17.5	%	15.8	%
				Perpetual Growth Rate of Free Cash Flow	3.0	%	3.0	%	3.0	%

Preferred Stock (c)	$	114,829	Adjusted Net Asset Approach	Discount to Net Asset Value	0.0	%	0.0	%	0.0	%
				Real Estate Appraisals	N/A		N/A		N/A

			Market Approach	Revenue Multiple	1.3x		1.3x		1.3x
				EBITDA Multiple	5.0x		5.0x		5.0x
				% of AUM	0.71	%	0.71	%	0.71	%
				Illiquidity Discount	30.0	%	30.0	%	30.0	%
				Multiple of Book Value	1.0x		1.0x		1.0x
				EBT Multiple	14.5x		14.5x		14.5x
				Discount to Letter of Intent	0.0	%	0.0	%	0.0	%

			Income Approach	Discount Rate	15.5	%	15.5	%	15.5	%
				Perpetual Growth Rate of Free Cash Flow	2.5	%	2.5	%	2.5	%

Warrants	$	2,783	Market Approach	Minority Discount	10.0	%	10.0	%	10.0	%
				EBITDA Multiple	5.5x		5.5x		5.5x
				Revenue Multiple	1.3x		1.3x		1.3x
				Discount to Letter of Intent	5.0	%	5.0	%	5.0	%

			Adjusted Net Asset Approach	Discount to Net Asset Value	27.2	%	27.2	%	27.2	%

Escrows	$	5,005	Income Approach	Discount Rate	20.0	%	20.0	%	20.0	%

Total	$	334,112

Notes:

(a) Calculated based on fair values.

(b) Certain investments are priced using non-binding broker or dealer quotes.

(c) Certain common and preferred stock investments are fair valued based on liquidation-out preferential rights held by the Company.

(d) Real estate appraisals are performed by independent third parties and the Company does not have reasonable access to the underlying unobservable inputs.

(e) Practical expedient is used utilizing the net asset valuations provided by the GP.

* The above table excludes certain investments whose fair value is zero due to certain specific situations at the portfolio company level.

NM - Not Meaningful

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Quantitative Information about Level 3 Fair Value Measurements*

	Fair value as of					Range				Weighted
	10/31/2016			Valuation technique	Unobservable input	Low		High		average (a)

Common Stock (c) (d)	$	9,524		Adjusted Net Asset Approach	Discount to Net Asset Value	0.0	%	0.0	%	0.0	%
					Real Estate Appraisals	N/A		N/A		N/A

				Income Approach	Discount Rate	13.3	%	30.0	%	17.0	%
					Perpetual Growth Rate of Free Cash Flow	2.0	%	2.0	%	2.0	%

				Market Approach	Revenue Multiple	1.4x		1.4x		1.4x
					EBITDA Multiple	5.5x		5.5x		5.5x
					Forward EBITDA Multiple	5.6x		7.0x		6.7x
					Minority Discount	10.0	%	10.0	%	10.0	%
					Illiquidity Discount	15.0	%	15.0	%	15.0	%

Senior/Subordinated loans and credit facilities (b) (d)	$	141,893		Market Approach	EBITDA Multiple	3.8x		8.8x		6.7x
					Forward EBITDA Multiple	5.6x		7.0x		5.8x
					Revenue Multiple	1.4x		1.4x		1.4x
					Discount to Letter of Intent	0.0	%	0.0	%	0.0	%
					Illiquidity Discount	15.0	%	15.0	%	15.0	%

				Income Approach	Required Rate of Return	11.6	%	39.9	%	15.6	%
					Discount Rate	18.1	%	30.0	%	18.2	%

				Adjusted Net Asset Approach	Real Estate Appraisals	N/A		N/A		N/A
					Discount to Net Asset Value	0.0	%	30.0	%	22.3	%

LLC Interest	$	3,992		Market Approach	EBITDA Multiple	6.0x		6.0x		6.0x

Common Equity Interest	$	53,811		Market Approach	Revenue Multiple	2.0x		2.0x		2.0x
					EBITDA Multiple	3.8x		5.5x		3.9x
					Forward EBITDA Multiple	7.0x		7.0x		7.0x

				Adjusted Net Asset Approach	Real Estate Appraisals	N/A		N/A		N/A
					Discount to Net Asset Value	0.0	%	0.0	%	0.0	%

				Income Approach	Discount Rate	15.9	%	18.1	%	16.2	%
					Perpetual Growth Rate of Free Cash Flow	3.0	%	3.0	%	3.0	%

Preferred Stock (c)	$	115,195		Adjusted Net Asset Approach	Discount to Net Asset Value	0.0	%	0.0	%	0.0	%
					Real Estate Appraisals	N/A		N/A		N/A

				Market Approach	Revenue Multiple	1.4x		1.4x		1.4x
					EBITDA Multiple	5.0x		5.0x		5.0x
					% of AUM	0.77	%	0.77	%	0.77	%
					Illiquidity Discount	30.0	%	30.0	%	30.0	%
					Multiple of Book Value	1.0x		1.0x		1.0x
					EBT Multiple	15.0x		15.0x		15.0x
					Discount to Letter of Intent	0.0	%	0.0	%	0.0	%

				Income Approach	Discount Rate	15.7	%	15.7	%	15.7	%
					Perpetual Growth Rate of Free Cash Flow	2.5	%	2.5	%	2.5	%

Warrants	$	1,886		Market Approach	Minority Discount	10.0	%	10.0	%	10.0	%
					EBITDA Multiple	5.5x		6.7x		6.1x
					Revenue Multiple	1.4x		1.4x		1.4x

				Income Approach	Discount Rate	13.3	%	13.3	%	13.3	%
					Perpetual Growth Rate of Free Cash Flow	2.0	%	2.0	%	2.0	%

				Adjusted Net Asset Approach	Discount to Net Asset Value	27.2	%	27.2	%	27.2	%

Guarantees	$	(291	)	Income Approach	Discount Rate	7.3	%	20.0	%	19.4	%

Escrows	$	9,152		Income Approach	Discount Rate	20.0	%	20.0	%	20.0	%

Total	$	335,162

Notes:

(a) Calculated based on fair values.

(b) Certain investments are priced using non-binding broker or dealer quotes.

(c) Certain common and preferred stock investments are fair valued based on liquidation-out preferential rights held by the Company.

(d) Real estate appraisals are performed by independent third parties and the Company does not have reasonable access to the underlying unobservable inputs.

(e) Practical expedient is used utilizing the net asset valuations provided by the GP.

* The above table excludes certain investments whose fair value is zero due to certain specific situations at the portfolio company level.

NM - Not Meaningful

ASU 2011-04 clarifies the application of existing fair value measurement and disclosure requirements related to the application of the highest and best use and valuation premise concepts for financial and nonfinancial instruments, measuring the fair value of an instrument classified in equity, and disclosures

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about fair value measurements. ASU 2011-04 requires additional disclosures about fair value measurements categorized within Level 3 of the fair value hierarchy, including the valuation processes used by the reporting entity, the sensitivity of the fair value to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any.

Following are descriptions of the sensitivity of the Level 3 recurring fair value measurements to changes in the significant unobservable inputs presented in the above table. For securities utilizing the income approach valuation technique, a significant increase (decrease) in the discount rate, risk premium or discount for lack of marketability would result in a significantly lower (higher) fair value measurement. The discount for lack of marketability used to determine fair value may include other factors such as liquidity or credit risk. Generally, a change in the discount rate is accompanied by a directionally similar change in the risk premium and discount for lack of marketability. For securities utilizing the market approach valuation technique, a significant increase (decrease) in the EBITDA, revenue multiple or other key unobservable inputs listed in the above table would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the discount for lack of marketability would result in a significantly lower (higher) fair value measurement. The discount for lack of marketability used to determine fair value may include other factors such as liquidity or credit risk. For securities utilizing an adjusted net asset approach valuation technique, a significant increase (decrease) in the price to book value ratio, discount rate or other key unobservable inputs listed in the above table would result in a significantly higher (lower) fair value measurement.

For the Quarter Ended January 31, 2017

During the quarter ended January 31, 2017, the Company made 3 follow-on investments in existing portfolio companies that totaled approximately $1.0 million. On November 9, 2016, the Company invested approximately $59,000 in MVC Environmental, Inc. (“MVC Environmental”) and received an additional 30 shares of common stock. On December 1, 2016, the Company loaned an additional $500,000 to United States Technologies, Inc. (“U.S. Tech”) increasing the total amount outstanding to $5.5 million. On December 13, 2016, the Company loaned an additional $475,000 to MVC Automotive Group GmbH (“MVC Automotive”) increasing the amount outstanding on the bridge loan to approximately $3.8 million. The maturity date was also extended to December 31, 2017.

On December 23, 2016, the Company received proceeds of approximately $12.2 million from the PE Fund related to the sale of AccuMed Corp., a portfolio company of the PE Fund. The Company’s pro-rata share of the PE Fund’s investment in AccuMed Corp. totaled approximately $2.4 million, resulting in a realized gain of approximately $9.8 million. The Company also received a carried interest payment from the PE Fund of approximately $373,000 related to the sale, which was recorded as a realized gain.

On January 4, 2017, BAC repaid their senior loan in full including all accrued interest totaling approximately $31,000.

During the quarter ended January 31, 2017, the Company recorded a distribution of approximately $330,000 from Security Holdings B.V. (“Security Holdings”), which was recorded as a return of capital.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the Company’s investments in: Advantage Insurance Holdings LTD (“Advantage”) preferred stock by approximately $136,000, Centile Holdings B.V. (“Centile”) equity interest by $340,000, Dukane IAS, LLC (“Dukane”) loan by approximately $71,000, Legal Solutions Holdings, Inc. (“Legal Solutions”) loan by approximately $112,000, Morey’s Seafood International, LLC (“Morey’s”) loan by approximately $462,000, Pride Engineering, LLC (“Pride”) loan by approximately $51,000, Quantum Plastics, LLC (“Quantum”) loan by approximately $323,000 and warrant by approximately $1.0 million, Security Holdings equity interest by approximately $1.5 million, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $99,000,

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Turf Products, LLC (“Turf”) loan by approximately $7,000 and guarantee by approximately $3,000, RuMe Inc. (“RuMe”) guarantee by approximately $50,000 and the U.S. Tech loan by $5,000. The Valuation Committee also increased the Ohio Medical Corporation (“Ohio Medical”) escrow by approximately $73,000 that was recorded as a realized gain. In addition, increases in the cost basis and fair value of the loans to Vestal Manufacturing Enterprises, Inc. (“Vestal”), HTI Technologies and Industries, Inc. (“HTI”), Legal Solutions, MVC Environmental, FDS, Inc. (“FDS”), RuMe, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $511,649. The Valuation Committee also decreased the fair value of the Company’s investments in: Biovation Acquisition Company (“BAC”) common stock by approximately $55,000, Custom Alloy Corporation (“Custom Alloy”) second lien and unsecured loans by a total of approximately $205,000, Foliofn, Inc. (“Foliofn”) preferred stock by $264,000, Initials, Inc. (“Initials”) loan by approximately $95,000, JSC Tekers Holdings (“JSC Tekers”) preferred stock by approximately $43,000, MVC Automotive equity interest by $307,000, MVC Environmental common stock by approximately $517,000, RuMe series C preferred stock by approximately $186,000, series B-1 preferred stock by approximately $9,000, common stock by approximately $42,000 and warrant by approximately $66,000, U.S. Spray Drying Holding Company (“SCSD”) common stock by $560,000, SGDA Europe B.V. (“SGDA Europe”) common equity interest by approximately $252,000 and Vestal Manufacturing Enterprises, Inc. (“Vestal”) loan by approximately $57,000, common stock by approximately $54,000 and warrant by approximately $62,000.

At January 31, 2017, the fair value of all portfolio investments, exclusive of U.S. Treasury obligations and escrow receivables, was $355.4 million with a cost basis of $373.5 million. At January 31, 2017, the fair value and cost basis of investments made by the Company’s former management team pursuant to the prior investment objective (“Legacy Investments”) was $5.7 million and $23.8 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $349.7 million and $349.7 million, respectively. At October 31, 2016, the fair value of all portfolio investments, exclusive of U.S. Treasury obligations and escrow receivables, was $360.1 million with a cost basis of $374.7 million. At October 31, 2016, the fair value and cost basis of Legacy Investments was $5.9 million and $23.8 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $354.2 million and $350.9 million, respectively.

For the Fiscal Year Ended October 31, 2016

During the fiscal year ended October 31, 2016, the Company made six new investments, committing capital that totaled approximately $35.7 million. The investments were made in Somotra NV (“Somotra”) ($1.7 million), Pride ($5.1 million), Dukane ($7.0 million), Quantum ($10.0 million), FDS Inc. (“FDS”) ($2.3 million) and HTI ($9.6 million).

During the fiscal year ended October 31, 2016, the Company made 9 follow-on investments in six existing portfolio companies that totaled approximately $8.5 million. On November 20, 2015 and December 3, 2015, the Company invested an additional $538,000 and $1.1 million, respectively, in MVC Automotive common equity. On January 4, 2016, the Company loaned an additional $1.5 million to Legal Solutions, which increased the senior subordinated loan to approximately $10.2 million. On February 1, 2016, the Company loaned an additional $1.1 million to Thunderdome Restaurants, LLC (“Thunderdome”), which increased the second lien loan to approximately $3.0 million. On May 5, 2016, the Company loaned $30,000 to BAC in the form of a senior loan with an interest rate of 5% and a maturity date of May 5, 2021. On June 28, 2016, the Company loaned approximately $1.7 million to MVC Automotive in the form of a bridge loan with an interest rate of 6% and a maturity date of December 31, 2016. On June 28, 2016, the Company loaned approximately $28,000 to SIA Tekers Invest (“Tekers”) in the form of a bridge loan with an interest rate of 6% and a maturity date of June 27, 2017. On October 7, 2016, the Company loaned RuMe $900,000 in the form of a subordinated note with an interest rate of 10% and a maturity date of October 7, 2017 and received a warrant at no cost and allocated a portion of the cost basis of the loan to the warrant at the time the investment was made. The Company also guaranteed $1.0 million of a third party’s working capital line of credit. On October 12, 2016, the

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Company loaned an additional $1.6 million to MVC Automotive in the form of a bridge loan and extended the maturity date to June 30, 2017. The loan had an outstanding balance at October 31, 2016 of approximately $3.3 million.

On November 3, 2015, Results Companies repaid its loan in full totaling approximately $10.0 million, including all accrued interest.

On December 22, 2015, the Company realized a loss of approximately $1.5 million due to the dissolution of Biovation Holdings, Inc. (“Biovation”).

On December 24, 2015, the Company realized losses of approximately $5.5 million on Inland Environmental & Remediation LP (“Inland”) senior secured loan and $713,000 on its warrants as part of Inland’s restructuring. As part of the restructuring, the Company obtained a $6.0 million senior secured loan from MVC Environmental, a holding company formed by the Company that owns and operates intellectual property and environmental service facilities for oil and gas waste recycling related to Inland, and received 950 of its common shares. The loan bears annual interest of 9% and matures on December 22, 2020.

On December 31, 2015, the Company completed the sale of Ohio Medical through an asset sale. The Company expects gross proceeds of approximately $40.0 million, including fees, which results in a realized loss of approximately $30.5 million. At the time of closing, the Company received cash proceeds of approximately $29.0 million, which included $2.3 million in monitoring and closing fees, and anticipates receiving an additional $11.0 million, assuming the full receipt of all escrow proceeds scheduled for various periods, with the final release of payment scheduled for 18 months from the closing. The Company has received approximately $1.3 million in escrow proceeds as of October 31, 2016. The fair value of the escrow as of October 31, 2016 was approximately $9.1 million.

On March 7, 2016 and July 28, 2016, the Company received dividends of $10.0 million and $2.5 million, respectively, from U.S. Gas.

On April 18, 2016, Somotra repaid its loan in full totaling approximately $1.7 million, including all accrued interest.

On May 6, 2016, RX Innovations, Inc. (“RX”) repaid $8.0 million on its loan. In addition, RX repaid all outstanding accrued and deferred interest for a total payment of approximately $9.9 million. As part of the transaction, which led to the repayment, RX was reorganized into FDS, Inc., a data service provider. The Company’s outstanding $2.3 million of principal was changed to a senior subordinated loan with an interest rate of 16% and a maturity date of November 30, 2016.

On May 31, 2016, the Company realized a loss of approximately $1.2 million from the dissolution of NPWT Corporation (“NPWT”).

On September 19, 2016, Agri-Carriers Group, Inc. (“Agri-Carriers”) repaid $11.8 million of principal on its loan. In addition, Agri-Carriers repaid all outstanding accrued and deferred interest for a total payment of approximately $13.7 million.

On October 31, 2016, the Company realized a loss of approximately $5.6 million on its investment in G3K Displays, Inc. (“G3K”).

During the fiscal year ended October 31, 2016, the Company recorded a distribution of approximately $1.9 million from Security Holdings of which a portion was recorded as a return of capital and a portion was recorded as dividend income.

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During the fiscal year ended October 31, 2016, the Company received distributions totaling approximately $97,000 from the PE Fund that were recorded as dividend income.

During the fiscal year ended October 31, 2016, Thunderdome made principal payments totaling approximately $51,000 on its second lien loan. The Company subsequently loaned Thunderdome an additional $1.1 million. The balance of the loan at October 31, 2016 was approximately $3.0 million.

During the fiscal year ended October 31, 2016, Dukane made principal payments totaling approximately $36,000 on its second lien loan. The balance of the loan at October 31, 2016 was approximately $7.1 million.

During the quarter ended January 31, 2016, the Valuation Committee increased the fair value of the Company’s investments in: Foliofn preferred stock by $34,000, Turf loan by approximately $19,000 and guarantee by approximately $6,000, RuMe series C preferred stock by $630,000 and series B-1 preferred stock by $160,000, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $947,000, NPWT preferred stock by $4,000, Centile equity interest by $260,000, Argi-Carriers loan by approximately $108,000, RX loan by approximately $409,000 and SCSD common stock by $750,000. In addition, increases in the cost basis and fair value of the loans to Biogenic Reagents (“Biogenic”), Custom Alloy, Morey’s, Vestal, Agri-Carriers, RX, Legal Solutions, MVC Environmental and U.S. Gas were due to the capitalization of PIK interest totaling $3,337,651. The Valuation Committee also decreased the fair value of the Company’s investments in: Custom Alloy second lien and unsecured loans by a total of approximately $2.4 million, MVC Automotive equity interest by approximately $27,000, Security Holdings equity interest by approximately $4.6 million, SGDA Europe equity interest by approximately $2.9 million, Tekers common stock by $35,000, JSC Tekers preferred stock by approximately $740,000 and common stock by $4,000, BAC common stock by approximately $38,000, Biogenic warrant and loan by a total of approximately $35,000, Morey’s second lien loan by approximately $1.1 million, Legal Solutions loan by approximately $310,000 and the Ohio Medical escrow by approximately $1.3 million that was recorded as a realized loss.

During the quarter ended April 30, 2016, the Valuation Committee increased the fair value of the Company’s investments in: Security Holdings equity interest by $911,000, RuMe series B-1 preferred stock by approximately $347,000, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $763,000, JSC Tekers preferred stock by approximately $575,000, Centile equity interest by $281,000, Morey’s loan by approximately $51,000, Custom Alloy unsecured loan by approximately $50,000, Turf guarantee by approximately $6,000 and the Initials loan by approximately $2,000. The Valuation Committee also increased the Ohio Medical escrow by approximately $177,000 that was recorded as a realized gain. In addition, increases in the cost basis and fair value of the loans to Biogenic, Custom Alloy, Morey’s, Vestal, Agri-Carriers, RX, Legal Solutions, MVC Environmental, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $1,495,179. The Valuation Committee also decreased the fair value of the Company’s investments in: Custom Alloy second lien loan by approximately $1.5 million, RuMe series C preferred stock by approximately $203,000 and common stock by approximately $144,000, Foliofn preferred stock by approximately $254,000, MVC Automotive equity interest by approximately $506,000, SGDA Europe equity interest by approximately $219,000, Tekers common stock by $266,000, Turf loan by approximately $138,000, U.S. Gas preferred stock series I by $3.9 million, BAC common stock by approximately $92,000, Biogenic warrant and loans by a total of approximately $136,000, Advantage preferred stock by approximately $67,000, MVC Environmental common stock by $38,000, Agri-Carriers loan by approximately $133,000, RX loan by approximately $179,000 and Legal Solutions loan by approximately $91,000.

During the quarter ended July 31, 2016, the Valuation Committee increased the fair value of the Company’s investments in: Agri-Carriers loan by approximately $120,000, Thunderdome loan by

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$30,000, U.S. Tech loan by $50,000, Advantage preferred stock by approximately $161,000, Morey’s loan by approximately $358,000, Turf loan by approximately $14,000 and guarantee by approximately $6,000, Vestal loan by approximately $129,000, common stock by approximately $462,000 and warrants by approximately $459,000, MVC Environmental common stock by $67,000, Foliofn preferred stock by approximately $324,000, Legal Solutions loan by approximately $271,000 and Security Holdings equity interest by $292,000. The Valuation Committee also increased the Ohio Medical escrow by approximately $210,000 that was recorded as a realized gain. In addition, increases in the cost basis and fair value of the loans to Biogenic, Custom Alloy, Morey’s, Vestal, Agri-Carriers, Initials, Legal Solutions, MVC Environmental, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $1,865,633. The Valuation Committee also decreased the fair value of the Company’s investments in: Custom Alloy second lien and unsecured loans by a total of approximately $2.9 million, Tekers common stock by $41,000 and loan by approximately $28,000, BAC common stock by approximately $72,000, Centile equity interest by $17,000, Initials loan by approximately $32,000, JSC Tekers preferred stock by approximately $1.0 million, MVC Automotive equity interest by approximately $448,000, SGDA Europe equity interest by approximately $245,000, Biogenic warrant and loans by a total of approximately $5.5 million and the MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $356,000.

During the quarter ended October 31, 2016, the Valuation Committee increased the fair value of the Company’s investments in: Advantage preferred stock by approximately $195,000, Custom Alloy second lien loan by approximately $256,000, Foliofn preferred stock by approximately $240,000, Legal Solutions loan by approximately $1,000, Morey’s loan by approximately $415,000, Turf guarantee by approximately $9,000, U.S. Gas preferred stock series I by $9.6 million, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $1.9 million, RuMe warrant by approximately $718,000 and the Biogenic loans by a total of approximately $3.2 million. The Valuation Committee also increased the Ohio Medical escrow by approximately $364,000 that was recorded as a realized gain. In addition, increases in the cost basis and fair value of the loans to Vestal, HTI, Legal Solutions, MVC Environmental, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $402,287. The Valuation Committee also decreased the fair value of the Company’s investments in: BAC common stock by approximately $298,000, Centile equity interest by $50,000, Custom Alloy unsecured loan by approximately $32,000, Initials loan by approximately $35,000, JSC Tekers preferred stock by approximately $139,000, MVC Automotive equity interest by approximately $1.7 million, RuMe common stock by $240,000, series C preferred stock by $1.1 million, series B-1 preferred stock by $158,000 and guarantee by approximately $278,000, Security Holdings equity interest by $7.0 million, SGDA Europe equity interest by approximately $1.4 million, Turf loan by approximately $2,000, Vestal loan by approximately $72,000, common stock by approximately $35,000 and warrants by approximately $21,000 and MVC Environmental common stock by $1.5 million.

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million, RuMe common stock by approximately $384,000, series C preferred stock by $632,000 and guarantee by approximately $278,000, SGDA Europe equity interest by approximately $4.8 million, Tekers common stock by $342,000 and loan by approximately $28,000, Initials loan by approximately $65,000, Turf loan by approximately $107,000, MVC Environmental common stock by $1.5 million, Security Holdings equity interest by $10.4 million, JSC Tekers preferred stock by approximately $1.3 million and common stock by $4,000, Biogenic warrant and loans by a total of approximately $2.4 million, Morey’s loan by approximately $323,000, Legal Solutions loan by approximately $129,000, BAC common stock by approximately $500,000 and the Ohio Medical escrow by approximately $534,000 that was recorded as a realized loss.

At October 31, 2016, the fair value of all portfolio investments, exclusive of U.S. Treasury obligations and escrow receivables, was $360.1 million with a cost basis of $374.7 million. At October 31, 2016, the fair value and cost basis of Legacy Investments was $5.9 million and $23.8 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $354.2 million and $350.9 million, respectively. At October 31, 2015, the fair value of all portfolio investments, exclusive of U.S. Treasury obligations and escrow receivables, was $400.9 million with a cost basis of $443.7 million. At October 31, 2015, the fair value and cost basis of the Legacy Investments was $5.6 million and $23.8 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $395.3 million and $419.9 million, respectively.

9. Commitments and Contingencies

Commitments to Portfolio Companies:

At January 31, 2017 and October 31, 2016, the Company’s existing commitments to portfolio companies consisted of the following:

Portfolio Company	Amount Committed	Amount Funded at January 31, 2017
MVC Private Equity Fund LP	$20.1 million	$14.6 million
Total	$20.1 million	$14.6 million

Portfolio Company	Amount Committed	Amount Funded at October 31, 2016
MVC Private Equity Fund LP	$20.1 million	$14.6 million
Total	$20.1 million	$14.6 million

Guarantees:

At January 31, 2017 and October 31, 2016, the Company had the following commitments to guarantee various loans and mortgages:

Guarantee	Amount Committed	Amount Funded at January 31, 2017
MVC Automotive	$4.1 million	—
RuMe	$1.0 million	—
Turf	$1.0 million	—
Total	$6.1 million	—

Guarantee	Amount Committed	Amount Funded at October 31, 2016
MVC Automotive	$6.3 million	—
RuMe	$1.0 million	—
Turf	$1.0 million	—
Total	$8.3 million	—

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ASC 460, Guarantees, requires the Company to estimate the fair value of the guarantee obligation at its inception and requires the Company to assess whether a probable loss contingency exists in accordance with the requirements of ASC 450, Contingencies. At January 31, 2017, the Valuation Committee estimated the combined fair values of the guarantee obligations noted above to be approximately -$237,000 or a liability of $237,000.

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

On January 16, 2008, the Company agreed to support a 4.0 million Euro mortgage for a Ford dealership owned and operated by MVC Automotive through making financing available to the dealership and agreeing under certain circumstances not to reduce its equity stake in MVC Automotive. Over time, Erste Bank, the bank extending the mortgage to MVC Automotive, increased the amount of the mortgage. The balance of the guarantee as of January 31, 2017 is approximately 3.8 million Euro (equivalent to approximately $4.1 million).

The Company guaranteed $1.0 million of Turf’s indebtedness to Berkshire Bank, which had a fair value of -$10,000 or a liability of $10,000 as of January 31, 2017.

The Company guaranteed $1.0 million of RuMe’s indebtedness to Colorado Business Bank, which had a fair value of approximately -$227,000 or a liability of $227,000 as of January 31, 2017.

On March 31, 2010, the Company pledged its Series I and Series J preferred stock of U.S. Gas to Macquarie Energy, LLC (“Macquarie Energy”) as collateral for Macquarie Energy’s trade supply credit facility to U.S. Gas.

On October 29, 2010, through MVC Partners and MVCFS, the Company committed to invest approximately $20.1 million in the PE Fund, for which an indirect wholly-owned subsidiary of the Company serves as GP. The PE Fund closed on approximately $104 million of capital commitments. During the fiscal year ended October 31, 2012 and thereafter, MVC Partners was consolidated with the operations of the Company as MVC Partners’ limited partnership interest in the PE Fund is a substantial portion of MVC Partners operations. The investment period related to the PE Fund has ended. Additional capital may be called for follow-on investments in existing portfolio companies of the PE Fund or to pay operating expenses of the PE Fund until the partnership is no longer extended. On December 23, 2016, the Company received proceeds of approximately $12.2 million from the PE Fund related to the sale of AccuMed Corp., a portfolio company of the PE Fund. The Company’s pro-rata share of the PE Fund’s investment in AccuMed Corp. totaled approximately $2.4 million, resulting in a realized gain of approximately $9.8 million. As of January 31, 2017, $14.6 million of the Company’s commitment has been contributed.

During the fiscal year ended October 31, 2016, the Company agreed to cash collateralize a $500,000 working capital line of credit for an entity partially owned by MVC Environmental provided by Branch Banking and Trust Company (“BB&T”), which is still a commitment of the Company as of January 31, 2017.

During the fiscal year ended October 31, 2016, the Company agreed to cash collateralize a $300,000 third party working capital line of credit for RuMe, which is still a commitment of the Company as of January 31, 2017.

Commitments of the Company

On February 19, 2013, the Company sold $70.0 million of senior unsecured notes (the “Senior Notes”) in a public offering. The Senior Notes will mature on January 15, 2023 and may be redeemed in

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whole or in part at any time or from time to time at the Company’s option on or after April 15, 2016. The Senior Notes bear interest at a rate of 7.25% per year payable quarterly on January 15, April 15, July 15, and October 15 of each year, beginning April 15, 2013. The Company had also granted the underwriters a 30-day option to purchase up to an additional $10.5 million of Senior Notes to cover overallotments. The additional $10.5 million in principal was purchased and the total principal amount of the Senior Notes totaled $80.5 million. The net proceeds to the Company from the sale of the Senior Notes, after offering expenses, were approximately $77.4 million. The offering expenses incurred are amortized over the term of the Senior Notes.

On February 26, 2013, the Company received the funds related to the Senior Notes offering, net of expenses, and subsequently repaid the credit facility (the “Credit Facility”) with Guggenheim as administrative agent for the lenders in full, including all accrued interest. The Company used the excess net proceeds after the repayment of the Credit Facility for general corporate purposes, including, for example, investing in portfolio companies according to our investment objective and strategy, repurchasing shares pursuant to the share repurchase program adopted by our Board of Directors, funding distributions, and/or funding the activities of our subsidiaries.

On May 3, 2013, the Company sold approximately $33.9 million of additional Senior Notes in a direct offering. The additional Senior Notes will also mature on January 15, 2023 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after April 15, 2016. The Notes bear interest at a rate of 7.25% per year payable quarterly on January 15, April 15, July 15, and October 15 of each year. As of January 31, 2017, the Senior Notes had a total outstanding amount of approximately $114.4 million; net of deferred financing fees the balance was approximately $112.4 million, with a market value of approximately $116.0 million. The market value of the Senior Notes is based on the closing price of the security as of January 31, 2017 on the New York Stock Exchange (NYSE:MVCB).

On July 31, 2013, the Company entered into a one-year, $50 million revolving credit facility (“Credit Facility II”) with BB&T. On January 31, 2014, Credit Facility II was increased to a $100 million revolving credit facility. On December 1, 2015, Credit Facility II was renewed and expired on May 31, 2016, at which time all outstanding amounts under it were due and repaid. On June 30, 2016, Credit Facility II was renewed and reduced to a $50 million revolving credit facility, which expired on February 28, 2017. At October 31, 2016, the balance of Credit Facility II was $35.0 million. During the quarter ended January 31, 2017, the Company’s net repayments on Credit Facility II were $10.0 million, resulting in an outstanding balance of $25.0 million at January 31, 2017. See “Subsequent Events” for more information. Credit Facility II is used to provide the Company with better overall financial flexibility in managing its investment portfolio. Borrowings under Credit Facility II bear interest at LIBOR plus 125 basis points. In addition, the Company is also subject to a 25 basis point commitment fee for the average amount of Credit Facility II that is unused during each fiscal quarter. The Company paid closing fees, legal and other costs associated with these transactions. These costs will be amortized over the life of the facility. Borrowings under Credit Facility II will be secured by cash, short-term and long-term U.S. Treasury securities and other governmental agency securities.

On December 9, 2015, the Company entered into a three-year, $50 million revolving borrowing base credit facility (“Credit Facility III”) with Santander Bank N.A. as a lender and lead agent and Wintrust Bank as a lender and syndication agent. As of October 31, 2016 and January 31, 2017, there was no outstanding balance on Credit Facility III. Credit Facility III can, under certain conditions, be increased up to $85 million. The new facility bears an interest rate of LIBOR plus 3.75% or the prime rate plus 1% (at the Company’s option), and includes a 1% closing fee of the commitment amount and a 0.75% unused fee. The compensating balance for the revolving credit facility is $10.0 million.

The Company enters into contracts with portfolio companies and other parties that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However,

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the Company has not experienced claims or losses pursuant to these contracts and believes the risk of loss related to indemnifications to be remote.

10. Management

On November 6, 2003, Michael Tokarz assumed his positions as Chairman, Portfolio Manager and Director of the Company. From November 6, 2003 to October 31, 2006, the Company was internally managed. Effective November 1, 2006, Mr. Tokarz’s employment agreement with the Company terminated and the obligations under that agreement were superseded by those under the Advisory Agreement entered into with TTG Advisers. Under the terms of the Advisory Agreement, the Company pays TTG Advisers a base management fee and an incentive fee for its provision of investment advisory and management services.

Our Board of Directors, including all of the Independent Directors, last approved a renewal of the Advisory Agreement at their in-person meeting held on October 28, 2016.

Under the terms of the Advisory Agreement, TTG Advisers determines, consistent with the Company’s investment strategy, the composition of the Company’s portfolio, the nature and timing of the changes to the Company’s portfolio and the manner of implementing such changes. TTG Advisers also identifies and negotiates the structure of the Company’s investments (including performing due diligence on prospective Portfolio Companies), closes and monitors the Company’s investments, determines the securities and other assets purchased, retains or sells and oversees the administration, recordkeeping and compliance functions of the Company and/or third parties performing such functions for the Company. TTG Advisers’ services under the Advisory Agreement are not exclusive, and it may furnish similar services to other entities. Pursuant to the Advisory Agreement, the Company is required to pay TTG Advisers a fee for investment advisory and management services consisting of two components—a base management fee and an incentive fee. The base management fee is calculated at 2.0% per annum of the Company’s total assets excluding cash, the value of any investment in a Third-Party Vehicle covered by a Separate Agreement (as defined in the Advisory Agreement) and the value of any investment by the Company not made in portfolio companies (“Non-Eligible Assets”) but including assets purchased with borrowed funds that are not Non-Eligible Assets. The incentive fee consists of two parts: (i) one part is based on our pre-incentive fee net operating income; and (ii) the other part is based on the capital gains realized on our portfolio of securities acquired after November 1, 2003.

The Advisory Agreement provides for an expense cap pursuant to which TTG Advisers will absorb or reimburse operating expenses of the Company, to the extent necessary to limit the Company’s expense ratio (the consolidated expenses of the Company, including any amounts payable to TTG Advisers under the base management fee, but excluding the amount of any interest and other direct borrowing costs, taxes, incentive compensation and extraordinary expenses taken as a percentage of the Company’s average net assets) to 3.5% in each of the 2009 and 2010 fiscal years.

On various dates, TTG Advisers and the Company entered into annual agreements to extend the expense cap of 3.5% to the 2011, 2012, 2013 and 2014 fiscal years (“Expense Limitation Agreement”). The Company and the Adviser agreed to continue the expense cap into fiscal year 2015 and fiscal year 2016, though they lowered the expense cap to 3.25% and modified the methodology so that the cap is applied to limit the Company’s ratio of expenses to total assets less cash (the “Modified Methodology”), consistent with the asset level used to calculate the base management fee. (The expenses covered by the cap remain unchanged.) On October 28, 2016, the Board of Directors, including all of the Independent Directors, approved the renewal of the Advisory Agreement for the 2017 fiscal year. Further, the Adviser agreed to continue to waive a portion of the base management fee so that it is reduced to 1.50% for fiscal year 2017. In March 2016, the Adviser agreed to modify its prior agreement to waive, effective November 1, 2015, the first $1.0 million of capital gains incentive fee due under the Advisory Agreement, such that the $1.0 million waiver of incentive fee would be applied to any incentive fee due under the

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agreement, whether it is a capital gains incentive fee or net operating income incentive fee. Furthermore, the Company and the Adviser, similar to fiscal year 2016, agreed on an expense cap for fiscal year 2017 of 3.25% under the Modified Methodology. The amount of any payments made by the GP of the PE Fund to TTG Advisers pursuant to the Portfolio Management Agreement between the GP and TTG Advisers respecting the PE Fund continues to be excluded from the calculation of the Company’s expense ratio under the Expense Limitation Agreement. In addition, for fiscal years 2010 through 2017, TTG Advisers voluntarily agreed to waive $150,000 of expenses that the Company is obligated to reimburse to TTG Advisers under the Advisory Agreement for its allocable portion of the compensation payable to certain officers of the Company, which may not exceed $200,000 per year in the aggregate (the “Voluntary Waiver”). TTG Advisers also voluntarily agreed that any assets of the Company that are invested in exchange-traded funds would not be taken into account in the calculation of the base management fee due to TTG Advisers under the Advisory Agreement. As of January 31, 2017, the Company did not have an investment in an exchange traded fund.

On October 29, 2010, through MVC Partners and MVCFS, the Company committed to invest approximately $20.1 million in the PE Fund. The PE Fund has closed on approximately $104 million of capital commitments. The Company’s Board of Directors authorized the establishment of, and investment in, the PE Fund for a variety of reasons, including the Company’s ability to make additional investments that represent more than 5% of its total assets or more than 10% of the outstanding voting securities of the issuer (“Non-Diversified Investments”) through the PE Fund. As previously disclosed, the Company is restricted in its ability to make Non-Diversified Investments. For services provided to the PE Fund, the GP and MVC Partners are together entitled to receive 25% of all management fees and other fees paid by the PE Fund and its portfolio companies and up to 30% of the carried interest generated by the PE Fund. Further, at the direction of the Board of Directors, the GP retained TTG Advisers to serve as the portfolio manager of the PE Fund. In exchange for providing those services, and pursuant to the Board of Directors’ authorization and direction, TTG Advisers is entitled to receive the balance of the fees generated by the PE Fund and its portfolio companies and a portion of any carried interest generated by the PE Fund. Given this separate arrangement with the GP and the PE Fund (the “PM Agreement”), under the terms of the Company’s Advisory Agreement with TTG Advisers, TTG Advisers is not entitled to receive from the Company a management fee or an incentive fee on assets of the Company that are invested in the PE Fund. However, the Company’s limited partnership interest and GP interest in the PE Fund are subject to the PE Fund’s annual management fee, a portion of which, as described above, is retained by the Company and not paid out to TTG Advisers as portfolio manager of the PE Fund. During the fiscal year ended October 31, 2012 and thereafter, MVC Partners was consolidated with the operations of the Company as MVC Partners’ limited partnership interest in the PE Fund is a substantial portion of MVC Partners operations. Previously, MVC Partners was presented as a Portfolio Company on the Consolidated Schedules of Investments. The consolidation of MVC Partners has not had any material effect on the financial position or net results of operations of the Company. There are additional disclosures resulting from this consolidation.

Management and portfolio fees (e.g., closing or monitoring fees) generated by the PE Fund (including its portfolio companies) that are paid to the GP are classified on the Consolidated Statements of Operations as Management fee income - Asset Management and Portfolio fee income - Asset Management, respectively. The portion of such fees that the GP pays to TTG Advisers (in accordance with its PM Agreement described above) are classified on the Consolidated Statements of Operations as Management fee - Asset Management and Portfolio fees - Asset Management. Under the PE Fund’s agreements, a significant portion of the portfolio fees that are paid by the PE Fund’s portfolio companies to the GP and TTG Advisers is subject to recoupment by the PE Fund in the form of an offset to future management fees paid by the PE Fund.

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11. Incentive Compensation

Pursuant to the Advisory Agreement, the Company pays an incentive fee to TTG Advisers which is generally: (i) 20% of pre-incentive fee net operating income and (ii) 20% of cumulative aggregate net realized capital gains less aggregate unrealized depreciation (on our portfolio securities acquired after November 1, 2003). TTG Advisers is entitled to an incentive fee with respect to our pre-incentive fee net operating income in each fiscal quarter as follows: no incentive fee in any fiscal quarter in which our pre-incentive fee net operating income does not exceed the lower hurdle rate of 1.75% of net assets, 100% of our pre-incentive fee net operating income with respect to that portion of such pre-incentive fee net operating income, if any, that exceeds the lower hurdle amount but is less than 2.1875% of net assets in any fiscal quarter and 20% of the amount of our pre-incentive fee net operating income, if any, that exceeds 2.1875% of net assets in any fiscal quarter.

At October 31, 2016, the provision for estimated incentive compensation was approximately $1.9 million. During the quarter ended January 31, 2017, this provision for incentive compensation was decreased by a net amount of approximately $336,000 to approximately $1.6 million, including both the pre-incentive fee net operating income and the capitals gains incentive fee. The net decrease in the provision for incentive compensation during the quarter ended January 31, 2017, primarily reflects the Valuation Committee’s determination to decrease the fair values of ten of the Company’s portfolio investments (BAC, Custom Alloy, Initials, JSC Tekers, MVC Automotive, MVC Environmental, RuMe, SCSD, Vestal and SGDA Europe) by a total of approximately $2.5 million. The net decrease in the provision also reflects the Valuation Committee’s determination to increase the fair values of eleven of the Company’s portfolio investments (Advantage, Centile, Dukane, Legal Solutions, Morey’s, Pride, Quantum, Security Holdings, Turf, U.S. Tech and Equus) by a total of approximately $5.1 million. For the quarter ended April 30, 2016, a $2.1 million provision was recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income exceeded the hurdle rate. In March 2016, the Adviser agreed to modify its prior agreement to waive, effective November 1, 2015, the first $1.0 million of capital gains incentive fee due under the Advisory Agreement, such that the $1.0 million waiver of incentive fee would be applied to any incentive fee due under the agreement, whether it is a capital gains incentive fee or net operating income incentive fee. As such, a $1.0 million incentive fee waiver was recorded during the quarter ended April 30, 2016 resulting in a net $1.1 million provision being recorded for the net operating income portion of the incentive fee. During the quarter ended January 31, 2017, the Company paid the Adviser the previously accrued $1.1 million incentive fee payment related to the net operating income for the quarter ended April 30, 2016. Also, for the quarter ended January 31, 2017, no provision was recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income for the quarter did not exceed the hurdle rate.

At October 31, 2015, the provision for estimated incentive compensation was approximately $5.0 million. During the fiscal year ended October 31, 2016, this provision for incentive compensation was decreased by a net amount of approximately $3.0 million to approximately $1.9 million, including both the pre-incentive fee net operating income and the capitals gains incentive fee. The net decrease in the provision for incentive compensation during the fiscal year ended October 31, 2016 primarily reflects the Valuation Committee’s determination to decrease the fair values of sixteen of the Company’s portfolio investments (Custom Alloy, MVC Automotive, Security Holdings, SGDA Europe, Tekers, Turf, JSC Tekers, RuMe, BAC, Biogenics, Morey’s, Ohio Medical, Equus, Legal Solutions, MVC Environmental and Initials by a total of approximately $32.0 million. The net decrease in the provision also reflects the Valuation Committee’s determination to increase the fair values of ten of the Company’s portfolio investments (NPWT, Centile, SCSD, Agri-Carriers, RX, U.S. Gas, Advantage, Thunderdome, U.S. Tech and Vestal) by a total of approximately $8.5 million. For the fiscal year ended October 31, 2016, no incentive compensation was paid. Also, for the quarter ended October 31, 2016, no provision was recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income for the quarter did not exceed the hurdle rate.

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12. Tax Matters

ASC 740, Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the 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 statement of operations. During the quarter ended January 31, 2017, the Company did not incur any interest or penalties. Although we file federal and state tax returns, our major tax jurisdiction is federal for the Company and MVCFS. The fiscal years 2012 through 2016 for the Company and MVCFS remain subject to examination by the IRS.

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the Act, each fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

13. Dividends and Distributions to Shareholders and Share Repurchase Program

As a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), the Company is required to distribute to its shareholders, in a timely manner, at least 90% of its investment company taxable and tax-exempt income each year. If the Company distributes, in a calendar year, at least 98% of its ordinary income for such calendar year and 98.2% of its capital gain net income for the 12-month period ending on October 31 of such calendar year (as well as any portion of the respective 2% balances not distributed in the previous year), it will not be subject to the 4% non-deductible federal excise tax on certain undistributed income of RICs.

Dividends and capital gain distributions, if any, are recorded on the ex-dividend date. Dividends and capital gain distributions are generally declared and paid quarterly according to the Company’s policy established on July 11, 2005. An additional distribution may be paid by the Company to avoid imposition of federal income tax on any remaining undistributed net investment income and capital gains. Distributions can be made payable by the Company either in the form of a cash distribution or a stock dividend. The amount and character of income and capital gain distributions are determined in accordance with income tax regulations that may differ from U.S. generally accepted accounting principles. These differences are due primarily to differing treatments of income and gain on various investment securities held by the Company, differing treatments of expenses paid by the Company, timing differences and differing characterizations of distributions made by the Company. Key examples of the primary differences in expenses paid are the accounting treatment of MVCFS (which is consolidated for GAAP purposes, but not income tax purposes) and the variation in treatment of incentive compensation expense. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications and may affect the allocation between net operating income, net realized gain (loss) and paid-in capital.

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All of our shareholders who hold shares of common stock in their own name will automatically be enrolled in our dividend reinvestment plan (the “Plan”). All such shareholders will have any cash dividends and distributions automatically reinvested by Computershare Ltd. (“the Plan Agent”) in shares of our common stock. Of course, any shareholder may elect to receive his or her dividends and distributions in cash. Currently, the Company has a policy of paying quarterly dividends to shareholders. For any of our shares that are held by banks, brokers or other entities that hold our shares as nominees for individual shareholders, the Plan Agent will administer the Plan on the basis of the number of shares certified by any nominee as being registered for shareholders that have not elected to receive dividends and distributions in cash. To receive your dividends and distributions in cash, you must notify the Plan Agent, broker or other entity that holds the shares.

For the Quarter Ended January 31, 2017

On December 20, 2016, the Company’s Board of Directors declared a dividend of $0.135 per share. The dividend was paid on January 6, 2017 to shareholders of record on December 30, 2016 and totaled approximately $3.0 million.

During the quarter ended January 31, 2017, as part of the Company’s dividend reinvestment plan for our common stockholders, the Plan Agent purchased 7,676 shares of our common stock at an average price of $8.56, including commission, in the open market in order to satisfy the reinvestment portion of our dividends under the Plan.

SHARE REPURCHASE PROGRAM

On April 3, 2013, the Company’s Board of Directors authorized an expanded share repurchase program to opportunistically buy back shares in the market in an effort to narrow the market discount of its shares. The previously authorized $5 million limit has been eliminated. Under the repurchase program, shares may be repurchased from time to time at prevailing market prices. The repurchase program does not obligate the Company to acquire any specific number of shares and may be discontinued at any time. The following table represents purchases made under our stock repurchase program for the fiscal years ended October 31, 2013 through fiscal year ended October 31, 2016. There were no repurchases made during the quarter ended January 31, 2017.

				Total Number of Shares
		Average Price Paid per		Purchased as Part of	Approximate Dollar Value
	Total Number of Shares	Share including		Publicly Announced	of Shares Purchased Under
Period *	Purchased	commission		Program	the Program
For the Year Ended October 31, 2013	1,299,294	$	12.83	1,299,294	$	16,673,207
For the Year Ended October 31, 2014	310,706	$	13.24	1,610,000	$	4,114,967
For the Year Ended October 31, 2015	—	—		1,610,000	—
For the Year Ended October 31, 2016	146,409	$	8.31	1,756,409	$	1,216,746

Total	1,756,409	$	12.53	1,756,409	$	22,004,920

*Disclosure covering repurchases will be made through quarterly and annual reports filed with the SEC going forward. MVC Capital’s website will no longer contain the monthly repurchase information.

14. Segment Data

The Company’s reportable segments are its investing operations as a business development company, MVC Capital, which includes MVC Cayman and MVC Turf. MVCFS, a wholly-owned subsidiary that

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provides advisory, administrative and other services to the Company and its portfolio companies, is also included.

The following table presents book basis segment data for the quarter ended January 31, 2017:

	MVC			MVCFS			Consolidated

Interest and dividend income	$	2,770,047		$	470		$	2,770,517
Fee income	42,300			248,097			290,397
Fee income - asset management	—			319,086			319,086

Total operating income	2,812,347			567,653			3,380,000

Total operating expenses	5,002,256			1,822,756			6,825,012
Less: Waivers by Adviser	(195,765		)	(295,214		)	(490,979		)
Total net operating expenses	4,806,491			1,527,542			6,334,033

Net operating loss before taxes	(1,994,144		)	(959,889		)	(2,954,033		)

Tax expense	—			480			480
Net operating loss	(1,994,144		)	(960,369		)	(2,954,513		)

Net realized gain on investments	10,782,250			242,506			11,024,756
Net unrealized depreciation on investments	(3,538,975		)	(153,846		)	(3,692,821		)

Net increase (decrease) in net assets resulting from operations	$	5,249,131		$	(871,709	)	$	4,377,422

15. Significant Subsidiaries

We have determined that for the quarter ended January 31, 2017, Equus, an unconsolidated portfolio company, has met the conditions of a significant subsidiary. The financial information presented below includes summarized balance sheets as of December 31, 2016 (the last fiscal quarter-end prior to January 31, 2017) and December 31, 2015, and income statements for the period October 1, 2016 to December 31, 2016 and October 1, 2015 to December 31, 2015. The financial information below is based on unaudited financial statements and derived from publicly available filings which were not prepared by the Company.

Balance Sheet	As of		As of
(All numbers in thousands)	December 31, 2016		December 31, 2015

Investments in portfolio securities at fair value	$	29,661	$	19,389
Cash, cash equivilents, tempory cash investments and restricted cash	42,255		32,186
Other assets	1,230		955
Total assets	$	73,146	$	52,530

Borrowing under margin account	$	29,994	$	15,000
Other liabilites	412		222
Total Liabilities	30,406		15,222

Net Assets	$	42,740	$	37,308

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	For the period			For the period
	October 1, 2016			October 1, 2015
Income Statement	to			to
(All numbers in thousands)	December 31, 2016			December 31, 2015

Investment income	$	192		$	222
Total expenses	888			535
Net investment loss	(696		)	(313		)
Net realized gain (loss)	(4		)	0
Net change in unrealized appreciation (depreciation) of portfolio securities	1,799			100
Net change in unrealized depreciation of portfolio securities - related party	135			(131		)
Net increase (decrease) in net assets resulting from operations	$	1,234		$	(344	)

16. Subsequent Events

On February 21, 2017, the Company repaid Credit Facility II in full, including all accrued interest.

On February 28, 2017, Credit Facility II was renewed and increased to a $100 million revolving credit facility, which expires on August 31, 2017. There was no change to the interest rate or unused fee on the revolving credit facility. The Company paid closing costs associated with this transaction of approximately $189,000.

On March 7, 2017, the Company exchanged its shares of MVC Turf, the holding company which owned the Company’s LLC interest in Turf Products, for approximately $3.8 million of additional subordinated debt in Turf Products. This additional subordinated debt increases the Company’s existing subordinated debt investment to approximately $7.7 million. The $7.7 million of subordinated debt will have an interest rate of 10% and matures on August 8, 2020. The Company’s warrant and guarantee were also retired as a part of this recapitalization. The Company also received a distribution from MVC Turf prior to the exchange of approximately $323,000.

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

This report contains certain statements of a forward-looking nature relating to future events or the future financial performance of the Company and its investment portfolio companies. Words such as may, will, expect, believe, anticipate, intend, could, estimate, might and continue, and the negative or other variations thereof or comparable terminology, are intended to identify forward-looking statements. Forward-looking statements are included in this report pursuant to the “Safe Harbor” provision of the Private Securities Litigation Reform Act of 1995. Such statements are predictions only, and the actual events or results may differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those relating to adverse conditions in the U.S. and international economies, competition in the markets in which our portfolio companies operate, investment capital demand, pricing, market acceptance, any changes in the regulatory environments in which we operate, changes in our accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, competitive forces, adverse conditions in the credit markets impacting the cost, including interest rates and/or availability of financing, the results of financing and investing efforts, the ability to complete transactions, the inability to implement our business strategies and other risks identified below or in the Company’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. The following analysis of the financial condition and results of operations of the Company should be read in conjunction with the Consolidated Financial Statements, the Notes thereto and the other financial information included elsewhere in this report and the Company’s annual report on Form 10-K for the year ended October 31, 2016.

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SELECTED CONSOLIDATED FINANCIAL DATA:

Financial information for the fiscal years ended October 31, 2016 is derived from the consolidated financial statements included in the Company’s annual report on Form 10-K, which have been audited by Grant Thornton LLP, the Company’s independent registered public accounting firm. Quarterly financial information is derived from unaudited financial data, but in the opinion of management, reflects all adjustments (consisting only of normal recurring adjustments), which are necessary to present fairly the results for such interim periods.

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Selected Consolidated Financial Data

	For the Quarter Ended January 31, 2017			For the Quarter Ended January 31, 2016			Year Ended
	(Unaudited)			(Unaudited)			October 31, 2016
	(In thousands, except per share data)
Operating Data:
Interest and related portfolio income:
Interest and dividend income	$	2,771		$	5,128		$	32,698
Fee income	290			2,578			3,255
Fee income - asset management	319			384			1,414
Other income	—			—			—

Total operating income	3,380			8,090			37,367

Expenses:
Management fee	1,814			1,979			7,590
Portfolio fees - asset management	177			187			741
Management fee - asset management	62			101			319
Administrative	1,474			958			4,253
Interest and other borrowing costs	2,538			2,629			10,212
Net Incentive compensation (Note 11)	760			(2,230		)	(2,030		)

Total operating expenses	6,825			3,624			21,085

Expense waiver by Advisor	(37		)	(37		)	(150		)
Voluntary management fee waiver by Advisor	(454		)	(495		)	(1,897		)
Voluntary incentive fee waiver by Advisor	—			—			(1,000		)
Total waiver by adviser	(491		)	(532		)	(3,047		)

Total net operating expenses	6,334			3,092			18,038

Net operating (loss) income before taxes	(2,954		)	4,998			19,329

Tax expense, net	1			—			2

Net operating (loss) income	(2,955		)	4,998			19,327

Net realized and unrealized (loss) gain:
Net realized (loss) gain on investments	11,025			(39,559		)	(45,157		)
Net unrealized appreciation (depreciation) on investments	(3,693		)	29,570			28,628

Net realized and unrealized (loss) gain on investments	7,332			(9,989		)	(16,529		)

Net increase (decrease) in net assets resulting from operations	$	4,377		$	(4,991	)	$	2,798

Per Share:
Net increase (decrease) in net assets per share resulting from operations	$	0.19		$	(0.21	)	$	0.12
Dividends per share	$	0.135		$	0.305		$	0.710
Balance Sheet Data:
Portfolio at value	$	355,421		$	358,477		$	360,120
Portfolio at cost	373,504			371,872			374,712
Total assets	423,386			451,667			432,366
Shareholders’ equity	280,890			282,160			279,558
Shareholders’ equity per share (net asset value)	$	12.45		$	12.43		$	12.39
Common shares outstanding at period end	22,556			22,703			22,556
Other Data:
Number of Investments funded in period	3			6			15
Investments funded ($) in period	$	969		$	9,880		$	43,968
Repayment/sales in period	13,674			45,573			75,105
Net investment activity in period	(12,705		)	(35,693		)	(31,137		)

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	2017		2016								2015
	Qtr 1		Qtr 4		Qtr 3		Qtr 2		Qtr 1		Qtr 4		Qtr 3		Qtr 2		Qtr 1
	(In thousands, except per share data)
Quarterly Data (Unaudited):

Total operating income	3,380		5,417		8,005		15,855		8,090		6,046		7,524		5,273		4,856

Management fee	1,814		1,721		1,932		1,958		1,979		1,900		1,899		2,066		1,980
Portfolio fees - asset management	177		183		185		186		187		187		189		187		204
Management fee - asset management	62		72		60		86		101		85		77		(18	)	16
Administrative	1,474		802		1,319		1,174		958		1,685		1,136		1,325		1,159
Interest, fees and other borrowing costs	2,538		2,598		2,488		2,497		2,629		2,532		2,627		2,616		2,455
Net Incentive compensation	760		577		(1,512	)	1,135		(2,230	)	(771	)	(3,404	)	(3,462	)	(2,120	)
Total waiver by adviser	(491	)	(467	)	(521	)	(1,527	)	(532	)	(37	)	(38	)	(37	)	(38	)
Tax expense	1		1		—		1		—		—		1		1		—
Net operating (loss) income before net realized and unrealized gains	(2,955	)	(70	)	4,054		10,345		4,998		465		5,037		2,595		1,200
Net increase (decrease) in net assets resulting from operations	4,377		5,279		(3,536	)	6,046		(4,991	)	(2,045	)	(13,959	)	(11,813	)	(9,743	)
Net increase (decrease) in net assets resulting from operations per share	0.19		0.23		(0.16	)	0.26		(0.21	)	(0.10	)	(0.61	)	(0.52	)	(0.43	)
Net asset value per share	12.45		12.39		12.27		12.56		12.43		12.95		13.18		13.93		14.58

OVERVIEW

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

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

The investments can include senior or subordinated loans, convertible debt and convertible preferred securities, common or preferred stock, equity interests, warrants or rights to acquire equity interests, and other private equity transactions. During the fiscal year ended October 31, 2016, the Company made six new investments and made 9 follow-on investments in 6 existing portfolio companies committing a total of approximately $44.2 million of capital to these investments. During the quarter ended January 31, 2017, the Company made three follow-on investments in existing portfolio companies committing capital totaling approximately $1.0 million.

The Company’s prior investment objective was to achieve long-term capital appreciation from venture capital investments in information technology companies. Accordingly, the Company’s investments had focused on investments in equity and debt securities of information technology companies. As of January 31, 2017, approximately 1.3% of the current fair value of our assets consisted of Legacy Investments. We are, however, seeking to manage these Legacy Investments to try and realize maximum returns. We generally seek to capitalize on opportunities to realize cash returns on these investments when presented with a potential “liquidity event,” i.e., a sale, public offering, merger or other reorganization.

Our new portfolio investments are made pursuant to our current objective and strategy. We are concentrating our investment efforts on small and middle-market companies that, in our view, provide opportunities to maximize total return from capital appreciation and/or income. More recently, the Company has been focusing its strategy more on yield generating investments. Under our investment approach, we have the authority to invest, without limit, in any one portfolio company, subject to any diversification limits required in order for us to continue to qualify as a RIC under Subchapter M of the Code. Presently, due to our asset growth and composition, compliance with the RIC requirements limits our ability to make Non-Diversified Investments.

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We participate in the private equity business generally by providing negotiated long-term equity and/or debt investment capital to privately-owned small and middle-market companies. Our financings are generally used to fund growth, buyouts, acquisitions, recapitalizations, note purchases and/or bridge financings. We generally invest in private companies, though, from time to time, we may invest in public companies that may lack adequate access to public capital.

We may also seek to achieve our investment objective by establishing a subsidiary or subsidiaries that would serve as general partner to a private equity or other investment fund(s). In fact, during fiscal year 2006, we established MVC Partners for this purpose. Furthermore, the Board of Directors authorized the establishment of a PE Fund, for which an indirect wholly-owned subsidiary of the Company serves as the GP and which may raise up to $250 million. On October 29, 2010, through MVC Partners and MVCFS, the Company committed to invest approximately $20.1 million in the PE Fund. The PE Fund closed on approximately $104 million of capital commitments. The Company’s Board of Directors authorized the establishment of, and investment in, the PE Fund for a variety of reasons, including the Company’s ability to make Non-Diversified Investments through the PE Fund. As previously disclosed, the Company is restricted in its ability to make Non-Diversified Investments. For services provided to the PE Fund, the GP and MVC Partners are together entitled to receive 25% of all management fees and other fees paid by the PE Fund and its portfolio companies and up to 30% of the carried interest generated by the PE Fund. Further, at the direction of the Board of Directors, the GP retained TTG Advisers to serve as the portfolio manager of the PE Fund. In exchange for providing those services, and pursuant to the Board of Directors’ authorization and direction, TTG Advisers is entitled to receive the balance of the fees and any carried interest generated by the PE Fund and its portfolio companies. Given this separate arrangement with the GP and the PE Fund, under the terms of the Company’s Advisory Agreement with TTG Advisers, TTG Advisers is not entitled to receive from the Company a management fee or an incentive fee on assets of the Company that are invested in the PE Fund. During the fiscal year ended October 31, 2012 and thereafter, MVC Partners was consolidated with the operations of the Company as MVC Partners’ limited partnership interest in the PE Fund is a substantial portion of MVC Partners operations. Previously, MVC Partners was presented as a portfolio company on the Schedule of Investments. The consolidation of MVC Partners has not had any material effect on the financial position or net results of operations of the Company. Also, during fiscal year ended October 31, 2014, MVC Turf, LLC (“MVC Turf”) was consolidated with the Company as MVC Turf is an MVC wholly-owned holding company. The consolidation of MVC Turf has not had any material effect on the financial position or net results of operations of the Company. Please see Note 2 of our consolidated financial statements “Consolidation” for more information.

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

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

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

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OPERATING INCOME

For the Quarter Ended January 31, 2017 and 2016. Total operating income was $3.4 million and $8.1 million for the quarter ended January 31, 2017 and 2016, respectively, a decrease of approximately $4.7 million.

For the Quarter Ended January 31, 2017

Total operating income was $3.4 million for the quarter ended January 31, 2017. The decrease in operating income over the same period last year was primarily due to a decrease in interest earned on loans and fee income from the Company’s portfolio companies and an increase in interest reserves. The Company earned approximately $2.8 million in interest income from investments in portfolio companies. During the quarter ended January 31, 2017, the Company reserved against all accrued cash and deferred interest associated with Custom Alloy totaling approximately $1.5 million. Of the $2.8 million recorded in interest income, approximately $545,000 was “payment in kind” interest. The “payment in kind” is computed at the contractual rate specified in each investment agreement and may be added to the principal balance of each investment. The Company’s debt investments yielded annualized rates from 6.0% to 16.0%. The Company also received fee income from asset management of the PE Fund and its portfolio companies totaling approximately $319,000 and fee income from the Company’s portfolio companies of approximately $290,000, totaling approximately $609,000 in fee income. Of the $319,000 of fee income from asset management activities, 75% of the income is obligated to be paid to TTG Advisers. However, under the PE Fund’s agreements, a significant portion of the portfolio fees that are paid by the PE Fund’s portfolio companies to the GP and TTG Advisers is subject to recoupment by the PE Fund in the form of an offset to future management fees paid by the PE Fund.

For the Quarter Ended January 31, 2016

Total operating income was $8.1 million for the quarter ended January 31, 2016. The increase in operating income over the same period last year was primarily due to an increase in interest earned on loans and fee income from the Company’s portfolio companies. The Company earned approximately $5.1 million in interest and dividend income from investments in portfolio companies. Of the $5.1 million recorded in interest/dividend income, approximately $1.4 million was “payment in kind”/deferred interest. The “payment in kind”/deferred interest are computed at the contractual rate specified in each investment agreement and may be added to the principal balance of each investment. The Company’s debt investments yielded annualized rates from 5.0% to 16.0%. The Company also received fee income from asset management of the PE Fund and its portfolio companies totaling approximately $384,000 and fee income from the Company’s portfolio companies of approximately $2.6 million, of which $2.3 million was one-time fee income related to the Ohio Medical sale, totaling approximately $3.0 million in fee income. Of the $384,000 of fee income from asset management activities, 75% of the income is obligated to be paid to TTG Advisers. However, under the PE Fund’s agreements, a significant portion of the portfolio fees that are paid by the PE Fund’s portfolio companies to the GP and TTG Advisers is subject to recoupment by the PE Fund in the form of an offset to future management fees paid by the PE Fund.

OPERATING EXPENSES

For the Quarter Ended January 31, 2017 and 2016. Operating expenses, net of Voluntary Waivers, were approximately $6.3 million and $3.1 million for the quarter ended January 31, 2017 and 2016, respectively, an increase of approximately $3.2 million.

For the Quarter Ended January 31, 2017

Operating expenses, net of the Voluntary Waivers (as described below), were approximately $6.3 million or 8.94% of the Company’s average net assets, when annualized, for the quarter ended January 31, 2017. Significant components of operating expenses for the quarter ended January 31, 2017 were interest

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and other borrowing costs of approximately $2.5 million and management fee expense paid by the Company of approximately $1.4 million, which is net of the voluntary management fee waiver of approximately $453,000.

The approximately $3.2 million increase in the Company’s net operating expenses for the quarter ended January 31, 2017 compared to the same period in 2016, was primarily due to the approximately $3.0 million increase in the estimated provision for incentive compensation expense. The portfolio fees - asset management are payable to TTG Advisers for monitoring and other customary fees received by the GP from portfolio companies of the PE Fund. To the extent the GP or TTG Advisers receives advisory, monitoring, organization or other customary fees from any portfolio company of the PE Fund or management fees related to the PE Fund, 25% of such fees shall be paid to or retained by the GP and 75% of such fees shall be paid to or retained by TTG Advisers. On October 28, 2016, the Board approved the renewal of the Advisory Agreement for the 2017 fiscal year. Further, the Adviser agreed to continue to waive a portion of the base management fee so that it is reduced to 1.50% for fiscal year 2017. For the quarter ended April 30, 2016, a $2.1 million provision was recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income exceeded the hurdle rate. In March 2016, the Adviser agreed to modify its prior agreement to waive, effective November 1, 2015, the first $1.0 million of capital gains incentive fee due under the Advisory Agreement, such that the $1.0 million waiver of incentive fee would be applied to any incentive fee due under the agreement, whether it is a capital gains incentive fee or net operating income incentive fee. As such, a $1.0 million incentive fee waiver was recorded during the quarter ended April 30, 2016 resulting in a net $1.1 million provision being recorded for the net operating income portion of the incentive fee. During the quarter ended January 31, 2017, the Company paid the Adviser the previously accrued $1.1 million incentive fee payment related to the net operating income for the quarter ended April 30, 2016. Furthermore, the Company and the Adviser, similar to fiscal year 2016, agreed on an expense cap for fiscal 2017 of 3.25% under the Modified Methodology. The amount of any payments made by the GP of the PE Fund to TTG Advisers pursuant to the Portfolio Management Agreement between the GP and TTG Advisers respecting the PE Fund continues to be excluded from the calculation of the Company’s expense ratio under the Expense Limitation Agreement. In addition, for fiscal years 2010 through 2016, TTG Advisers voluntarily agreed to waive $150,000 of expenses that the Company is obligated to reimburse to TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”). TTG Advisers also voluntarily agreed that any assets of the Company that are invested in exchange-traded funds would not be taken into account in the calculation of the base management fee due to TTG Advisers under the Advisory Agreement. As of January 31, 2017, the Company did not have an investment in an exchange traded fund. Under the Modified Methodology, for the quarter ended January 31, 2017, the Company’s expense ratio was 3.02%, (taking into account the same carve outs as those applicable to the expense cap).

Pursuant to the terms of the Advisory Agreement, during the quarter ended January 31, 2017, the provision for incentive compensation was decreased by a net amount of approximately $336,000 to approximately $1.6 million, including both the pre-incentive fee net operating income and the capitals gains incentive fee. The net decrease in the provision for incentive compensation during the quarter ended January 31, 2017, primarily reflects the Valuation Committee’s determination to decrease the fair values of ten of the Company’s portfolio investments (BAC, Custom Alloy, Initials, JSC Tekers, MVC Automotive, MVC Environmental, RuMe, SCSD, Vestal and SGDA Europe) by a total of approximately $2.5 million. The net decrease in the provision also reflects the Valuation Committee’s determination to increase the fair values of eleven of the Company’s portfolio investments (Advantage, Centile, Dukane, Legal Solutions, Morey’s, Pride, Quantum, Security Holdings, Turf, U.S. Tech and Equus) by a total of approximately $5.1 million. Also, for the quarter ended January 31, 2017, no provision was recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income for the quarter did not exceed the hurdle rate. Please see Note 11 of our consolidated financial statements “Incentive Compensation” for more information.

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For the Quarter Ended January 31, 2016

Operating expenses, net of the Voluntary Waivers (as described below), were approximately $3.1 million or 4.26% of the Company’s average net assets, when annualized, for the quarter ended January 31, 2016. Significant components of operating expenses for the quarter ended January 31, 2016 were interest and other borrowing costs of approximately $2.6 million and management fee expense paid by the Company of approximately $1.5 million, which is net of the voluntary management fee waiver.

The approximately $600,000 decrease in the Company’s net operating expenses for the quarter ended January 31, 2016 compared to the same period in 2015, was primarily due to the approximately $495,000 voluntary management fee waiver, which decreased the net management fee expense by the same amount. The portfolio fees - asset management are payable to TTG Advisers for monitoring and other customary fees received by the GP from portfolio companies of the PE Fund. To the extent the GP or TTG Advisers receives advisory, monitoring, organization or other customary fees from any portfolio company of the PE Fund or management fees related to the PE Fund, 25% of such fees shall be paid to or retained by the GP and 75% of such fees shall be paid to or retained by TTG Advisers. On October 29, 2015, the Board approved the renewal of the Advisory Agreement for the 2016 fiscal year. Further, the Adviser agreed to waive a portion of the base management fee so that it is reduced to 1.50% for fiscal year 2016. In addition, the Adviser agreed to waive $1 million of any incentive fee on capital gains if and when payable to the Adviser under the Advisory Agreement. Furthermore, the Company and the Adviser agreed to reduce the expense cap for fiscal 2016 to 3.25% under the Modified Methodology, consistent with the asset level used to calculate the base management fee. The amount of any payments made by the GP of the PE Fund to TTG Advisers pursuant to the Portfolio Management Agreement between the GP and TTG Advisers respecting the PE Fund continues to be excluded from the calculation of the Company’s expense ratio under the Expense Limitation Agreement. In addition, for fiscal years 2010 through 2016, TTG Advisers voluntarily agreed to waive $150,000 of expenses that the Company is obligated to reimburse to TTG Advisers under the Advisory Agreement (the “Voluntary Waiver”). TTG Advisers also voluntarily agreed that any assets of the Company that are invested in exchange-traded funds would not be taken into account in the calculation of the base management fee due to TTG Advisers under the Advisory Agreement. Under the Modified Methodology, for the quarter ended January 31, 2016, the Company’s expense ratio was 2.65%, (taking into account the same carve outs as those applicable to the expense cap).

Pursuant to the terms of the Advisory Agreement, during the quarter ended January 31, 2016, the provision for incentive compensation was decreased by a net amount of approximately $2.3 million to approximately $2.7 million. The net decrease in the provision for incentive compensation during the quarter ended January 31, 2016 primarily reflects the Valuation Committee’s determination to decrease the fair values of eleven of the Company’s portfolio investments (Custom Alloy, MVC Automotive, Security Holdings, SGDA Europe, Tekers, JSC Tekers, BAC, Biogenics, Morey’s, Equus and Legal Solutions) by a total of approximately $12.4 million. The net decrease in the provision also reflects the Valuation Committee’s determination to increase the fair values of seven of the Company’s portfolio investments (NPWT, Turf, Centile, RuMe, SCSD, Agri-Carriers and RX) by a total of approximately $2.3 million. For the quarter ended January 31, 2016, no incentive compensation fee was paid. Also, for the quarter ended January 31, 2016, no provision was recorded for the net operating income portion of the incentive fee as pre-incentive fee net operating income did not exceed the hurdle rate. Please see Note 11 of our consolidated financial statements “Incentive Compensation” for more information.

REALIZED GAINS AND LOSSES ON PORTFOLIO SECURITIES

For the Quarter Ended January 31, 2017 and 2016. Net realized gains for the quarter ended January 31, 2017 were approximately $11.0 million and net realized losses for the quarter ended January 31, 2016 were $39.6 million, a net increase of approximately $50.6 million.

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For the Quarter Ended January 31, 2017

Net realized gains for the quarter ended January 31, 2017 were approximately $11.0 million. The Company’s net realized gains for the quarter ended January 31, 2017 was primarily due to realized gain of approximately $9.8 million on the sale of AccuMed Corp., a portfolio company of the PE Fund.

During the quarter ended January 31, 2017, the Company recorded net realized gains of approximately $97,000 from the sale of certain short-term investments and approximately $801,000 from its escrow receivables.

For the Quarter Ended January 31, 2016

Net realized losses for the quarter ended January 31, 2016 were approximately $39.6 million. The main components of the Company’s net realized loss for the quarter ended January 31, 2016 was primarily due to the realized loss of approximately $30.5 million on the sale of Ohio Medical common and preferred stock and the realized loss of approximately $6.2 million on the Inland senior secured loan and warrant.

On December 22, 2015, the Company realized a loss of approximately $1.5 million with the dissolution of Biovation.

On December 24, 2015, the Company realized losses of approximately $5.5 million on Inland senior secured loan and $713,000 on the warrants as part of Inland’s restructuring. As part of the restructuring, the Company obtained a $6.0 million senior secured loan from MVC Environmental, Inc. and received 950 common shares in MVC Environmental, Inc. The loan bears annual interest of 9% and matures on December 22, 2020.

On December 31, 2015, the Company completed the sale of Ohio Medical through an asset sale. The Company expects gross proceeds of approximately $40.0 million, including fees. At the time of closing, the Company received cash proceeds of approximately $29.0 million and anticipates receiving an additional $11.0 million, assuming the full receipt of all escrow proceeds scheduled for various periods, with the final release of payment scheduled for 18 months from the closing.

During the quarter ended January 31, 2016, the Company also recorded net realized losses of approximately $90,000 with the sale of certain short-term investments and $1.3 million on the escrow receivables.

UNREALIZED APPRECIATION AND DEPRECIATION OF PORTFOLIO SECURITIES

For the Quarter Ended January 31, 2017 and 2016. The Company had a net change in unrealized depreciation on portfolio investments of approximately $3.7 million for the quarter ended January 31, 2017 and unrealized appreciation of approximately $29.6 million for the quarter ended January 31, 2016, respectively, a net decrease of approximately $33.3 million.

For the Quarter Ended January 31, 2017

The Company had a net change in unrealized depreciation on portfolio investments of approximately $3.7 million for the quarter ended January 31, 2017. The change in unrealized depreciation for the

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quarter ended January 31, 2017 primarily resulted from the reversal of the unrealized appreciation on the general partnership interest and limited partnership interest in the PE Fund by a total of approximately $6.5 million. The net change is also a result of the Valuation Committee determination to decrease the fair value of the Company’s investments in: BAC common stock by approximately $55,000, Custom Alloy second lien and unsecured loans by a total of approximately $205,000, Foliofn preferred stock by $264,000, Initials loan by approximately $95,000, JSC Tekers preferred stock by approximately $43,000, MVC Automotive equity interest by $307,000, MVC Environmental common stock by approximately $517,000, RuMe series C preferred stock by approximately $186,000, series B-1 preferred stock by approximately $9,000, common stock by approximately $42,000 and warrant by approximately $66,000, SCSD common stock by $560,000, SGDA Europe common equity interest by approximately $252,000 and Vestal loan by approximately $57,000, common stock by approximately $54,000 and warrant by approximately $62,000. These changes in unrealized depreciation were partially off-set by the Valuation Committee determination to increase the fair value of the Company’s investments in: Advantage preferred stock by approximately $136,000, Centile equity interest by $340,000, Dukane loan by approximately $71,000, Legal Solutions loan by approximately $112,000, Morey’s loan by approximately $462,000, Pride loan by approximately $51,000, Quantum loan by approximately $323,000 and warrant by approximately $1.0 million, Security Holdings equity interest by approximately $1.5 million, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $99,000, Turf loan by approximately $7,000 and guarantee by approximately $3,000, RuMe guarantee by approximately $50,000, Equus by approximately $1.0 million and the U.S. Tech loan by $5,000.

For the Quarter Ended January 31, 2016

The Company had a net change in unrealized appreciation on portfolio investments of approximately $29.6 million for the quarter ended January 31, 2016. The change in unrealized appreciation for the quarter ended January 31, 2016 primarily resulted from the reversal of the unrealized depreciation on the Ohio Medical common and preferred stock, Inland senior secured loan and warrant and the Biovation bridge loan and warrant by a total of $38.5 million. The net change is also a result of the Valuation Committee determination to decrease the fair value of the Company’s investments in: Custom Alloy second lien and unsecured loans by a total of approximately $2.4 million, MVC Automotive equity interest by approximately $27,000, Security Holdings equity interest by approximately $4.6 million, SGDA Europe equity interest by approximately $2.9 million, Tekers common stock by $35,000, JSC Tekers preferred stock by approximately $740,000 and common stock by $4,000, BAC common stock by approximately $38,000, Biogenic warrant and senior convertible note by a total of approximately $35,000, Morey’s second lien loan by approximately $1.1 million, Legal Solutions loan by approximately $310,000, Equus common stock by approximately $89,000 and the Ohio Medical escrow by approximately $1.3 million, which was recorded as a realized loss. These changes in unrealized depreciation were partially off-set by the Valuation Committee determination to increase the fair value of the Company’s investments in: Foliofn preferred stock by $34,000, Turf loan and guarantee by a total of approximately $25,000, RuMe series C preferred stock by $630,000 and series B preferred stock by $160,000, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $947,000, NPWT preferred stock by $4,000, Centile equity interest by $260,000, Agri-Carrier loan by approximately $108,000, RX loan by approximately $409,000 and SCSD common stock by $750,000.

PORTFOLIO INVESTMENTS

For the Quarter Ended January 31, 2017 and the Year Ended October 31, 2016. The cost of the portfolio investments held by the Company at January 31, 2017 and at October 31, 2016 was $373.5 million and $374.7 million, respectively, a decrease of $1.2 million. The aggregate fair value of portfolio investments at January 31, 2017 and at October 31, 2016 was $355.4 million and $360.1 million, respectively, a decrease of $4.7 million. The cost and fair value of cash and cash equivalents held by the

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Company at January 31, 2017 and October 31, 2016 was $33.8 million and $21.0 million, respectively, representing an increase of approximately $12.8 million. The cost and fair value of U.S. Treasury obligations held by the Company at January 31, 2017 was $25.0 million and at October 31, 2016 were $35.0 million, respectively.

For the Quarter Ended January 31, 2017

During the quarter ended January 31, 2017, the Company made 3 follow-on investments in existing portfolio companies that totaled approximately $1.0 million. On November 9, 2016, the Company invested approximately $59,000 in MVC Environmental and received an additional 30 shares of common stock. On December 1, 2016, the Company loaned an additional $500,000 to U.S. Tech increasing the total amount outstanding to $5.5 million. On December 13, 2016, the Company loaned an additional $475,000 to MVC Automotive increasing the amount outstanding on the bridge loan to approximately $3.8 million. The maturity date was also extended to December 31, 2017.

On December 23, 2016, the Company received proceeds of approximately $12.2 million from the PE Fund related to the sale of AccuMed Corp., a portfolio company of the PE Fund. The Company’s pro-rata share of the PE Fund’s investment in AccuMed Corp. totaled approximately $2.4 million, resulting in a realized gain of approximately $9.8 million. The Company also received a carried interest payment of approximately $373,000 related to the sale, which was recorded as a realized gain.

On January 4, 2017, BAC repaid their senior loan in full including all accrued interest totaling approximately $31,000.

During the quarter ended January 31, 2017, the Company recorded a distribution of approximately $330,000 from Security Holdings, which was recorded as a return of capital.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the Company’s investments in: Advantage preferred stock by approximately $136,000, Centile equity interest by $340,000, Dukane loan by approximately $71,000, Legal Solutions loan by approximately $112,000, Morey’s loan by approximately $462,000, Pride loan by approximately $51,000, Quantum loan by approximately $323,000 and warrant by approximately $1.0 million, Security Holdings equity interest by approximately $1.5 million, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $99,000, Turf loan by approximately $7,000 and guarantee by approximately $3,000, RuMe guarantee by approximately $50,000 and the U.S. Tech loan by $5,000. The Valuation Committee also increased the Ohio Medical escrow by approximately $73,000 that was recorded as a realized gain. In addition, increases in the cost basis and fair value of the loans to Vestal, HTI, Legal Solutions, MVC Environmental, FDS, RuMe, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $511,649. The Valuation Committee also decreased the fair value of the Company’s investments in: BAC common stock by approximately $55,000, Custom Alloy second lien and unsecured loans by a total of approximately $205,000, Foliofn preferred stock by $264,000, Initials loan by approximately $95,000, JSC Tekers preferred stock by approximately $43,000, MVC Automotive equity interest by $307,000, MVC Environmental common stock by approximately $517,000, RuMe series C preferred stock by approximately $186,000, series B-1 preferred stock by approximately $9,000, common stock by approximately $42,000 and warrant by approximately $66,000, SCSD common stock by $560,000, SGDA Europe common equity interest by approximately $252,000 and Vestal loan by approximately $57,000, common stock by approximately $54,000 and warrant by approximately $62,000.

At January 31, 2017, the fair value of all portfolio investments, exclusive of U.S. Treasury obligations and escrow receivables, was $355.4 million with a cost basis of $373.5 million. At January 31, 2017, the fair value and cost basis of Legacy Investments was $5.7 million and $23.8 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was

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$349.7 million and $349.7 million, respectively. At October 31, 2016, the fair value of all portfolio investments, exclusive of U.S. Treasury obligations and escrow receivables, was $360.1 million with a cost basis of $374.7 million. At October 31, 2016, the fair value and cost basis of Legacy Investments was $5.9 million and $23.8 million, respectively, and the fair value and cost basis of portfolio investments made by the Company’s current management team was $354.2 million and $350.9 million, respectively.

For the Fiscal Year Ended October 31, 2016

During the fiscal year ended October 31, 2016, the Company made 9 follow-on investments in six existing portfolio companies that totaled approximately $8.5 million. On November 20, 2015 and December 3, 2015, the Company invested an additional $538,000 and $1.1 million, respectively, in MVC Automotive common equity. On January 4, 2016, the Company loaned an additional $1.5 million to Legal Solutions, which increased the senior subordinated loan to approximately $10.2 million. On February 1, 2016, the Company loaned an additional $1.1 million to Thunderdome, which increased the second lien loan to approximately $3.0 million. On May 5, 2016, the Company loaned $30,000 to BAC in the form of a senior loan with an interest rate of 5% and a maturity date of May 5, 2021. On June 28, 2016, the Company loaned approximately $1.7 million to MVC Automotive in the form of a bridge loan with an interest rate of 6% and a maturity date of December 31, 2016. On June 28, 2016, the Company loaned approximately $28,000 to SIA Tekers Invest (“Tekers”) in the form of a bridge loan with an interest rate of 6% and a maturity date of June 27, 2017. On October 7, 2016, the Company loaned RuMe $900,000 in the form of a subordinated note with an interest rate of 10% and a maturity date of October 7, 2017 and received a warrant at no cost and allocated a portion of the cost basis of the loan to the warrant at the time the investment was made. The Company also guaranteed $1.0 million of a third party’s working capital line of credit. On October 12, 2016, the Company loaned an additional $1.6 million to MVC Automotive in the form of a bridge loan and extended the maturity date to June 30, 2017. The loan had an outstanding balance at October 31, 2016 of approximately $3.3 million.

On November 3, 2015, Results Companies repaid its loan in full totaling approximately $10.0 million, including all accrued interest.

On December 22, 2015, the Company realized a loss of approximately $1.5 million due to the dissolution of Biovation.

On December 24, 2015, the Company realized losses of approximately $5.5 million on Inland senior secured loan and $713,000 on its warrants as part of Inland’s restructuring. As part of the restructuring, the Company obtained a $6.0 million senior secured loan from MVC Environmental, a holding company formed by the Company that owns and operates intellectual property and environmental service facilities for oil and gas waste recycling related to Inland, and received 950 of its common shares. The loan bears annual interest of 9% and matures on December 22, 2020.

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On March 7, 2016 and July 28, 2016, the Company received dividends of $10.0 million and $2.5 million, respectively, from U.S. Gas.

On April 18, 2016, Somotra repaid its loan in full totaling approximately $1.7 million, including all accrued interest.

On May 6, 2016, RX repaid $8.0 million on its loan. In addition, RX repaid all outstanding accrued and deferred interest for a total payment of approximately $9.9 million. As part of the transaction, which led to the repayment, RX was reorganized into FDS, Inc., a data service provider. The Company’s outstanding $2.3 million of principal was changed to a senior subordinated loan with an interest rate of 16% and a maturity date of November 30, 2016.

On May 31, 2016, the Company realized a loss of approximately $1.2 million from the dissolution of NPWT.

On September 19, 2016, Agri-Carriers repaid $11.8 million of principal on its loan. In addition, Agri-Carriers repaid all outstanding accrued and deferred interest for a total payment of approximately $13.7 million.

On October 31, 2016, the Company realized a loss of approximately $5.6 million on its investment in G3K.

During the fiscal year ended October 31, 2016, the Company received distributions totaling approximately $97,000 from the PE Fund that were recorded as dividend income.

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$310,000 and the Ohio Medical escrow by approximately $1.3 million that was recorded as a realized loss.

During the quarter ended July 31, 2016, the Valuation Committee increased the fair value of the Company’s investments in: Agri-Carriers loan by approximately $120,000, Thunderdome loan by $30,000, U.S. Tech loan by $50,000, Advantage preferred stock by approximately $161,000, Morey’s loan by approximately $358,000, Turf loan by approximately $14,000 and guarantee by approximately $6,000, Vestal loan by approximately $129,000, common stock by approximately $462,000 and warrants by approximately $459,000, MVC Environmental common stock by $67,000, Foliofn preferred stock by approximately $324,000, Legal Solutions loan by approximately $271,000 and Security Holdings equity interest by $292,000. The Valuation Committee also increased the Ohio Medical escrow by approximately $210,000 that was recorded as a realized gain. In addition, increases in the cost basis and fair value of the loans to Biogenic, Custom Alloy, Morey’s, Vestal, Agri-Carriers, Initials, Legal Solutions, MVC Environmental, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $1,865,633. The Valuation Committee also decreased the fair value of the Company’s investments in: Custom Alloy second lien and unsecured loans by a total of approximately $2.9 million, Tekers common stock by $41,000 and loan by approximately $28,000, BAC common stock by approximately $72,000, Centile equity interest by $17,000, Initials loan by approximately $32,000, JSC Tekers preferred stock by approximately $1.0 million, MVC Automotive equity interest by approximately $448,000, SGDA Europe equity interest by approximately $245,000, Biogenic warrant and loans by a total of approximately $5.5 million and the MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $356,000.

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fair value of the loans to Vestal, HTI, Legal Solutions, MVC Environmental, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $402,287. The Valuation Committee also decreased the fair value of the Company’s investments in: BAC common stock by approximately $298,000, Centile equity interest by $50,000, Custom Alloy unsecured loan by approximately $32,000, Initials loan by approximately $35,000, JSC Tekers preferred stock by approximately $139,000, MVC Automotive equity interest by approximately $1.7 million, RuMe common stock by $240,000, series C preferred stock by $1.1 million, series B-1 preferred stock by $158,000 and guarantee by approximately $278,000, Security Holdings equity interest by $7.0 million, SGDA Europe equity interest by approximately $1.4 million, Turf loan by approximately $2,000, Vestal loan by approximately $72,000, common stock by approximately $35,000 and warrants by approximately $21,000 and MVC Environmental common stock by $1.5 million.

During the fiscal year ended October 31, 2016, the Valuation Committee increased the fair value of the Company’s investments in: Turf guarantee by approximately $27,000, RuMe series B-1 preferred stock by $349,000 and warrant by approximately $718,000, Agri-Carriers loan by approximately $95,000, Thunderdome loan by $30,000, U.S. Tech loan by $50,000, Vestal loan by approximately $57,000, common stock by approximately $427,000 and warrants by approximately $438,000, U.S. Gas preferred stock series I by $5.7 million, Advantage preferred stock by approximately $289,000, Foliofn preferred stock by approximately $344,000, MVC Private Equity Fund L.P. general partnership interest and limited partnership interest in the PE Fund by a total of approximately $3.3 million, NPWT preferred stock by $4,000, Centile equity interest by $474,000, RX loan by approximately $230,000 and SCSD common stock by $750,000. In addition, increases in the cost basis and fair value of the loans to Biogenic, Custom Alloy, Morey’s, Vestal, Agri-Carriers, RX, Legal Solutions, Initials, MVC Environmental, Dukane and U.S. Gas were due to the capitalization of PIK interest totaling $7,100,750. The Valuation Committee also decreased the fair value of the Company’s investments in: Custom Alloy second lien and unsecured loans by a total of approximately $6.5 million, MVC Automotive equity interest by approximately $2.7 million, RuMe common stock by approximately $384,000, series C preferred stock by $632,000 and guarantee by approximately $278,000, SGDA Europe equity interest by approximately $4.8 million, Tekers common stock by $342,000 and loan by approximately $28,000, Initials loan by approximately $65,000, Turf loan by approximately $107,000, MVC Environmental common stock by $1.5 million, Security Holdings equity interest by $10.4 million, JSC Tekers preferred stock by approximately $1.3 million and common stock by $4,000, Biogenic warrant and loans by a total of approximately $2.4 million, Morey’s loan by approximately $323,000, Legal Solutions loan by approximately $129,000, BAC common stock by approximately $500,000 and the Ohio Medical escrow by approximately $534,000 that was recorded as a realized loss.

Portfolio Companies

During the quarter ended January 31, 2017, the Company had investments in the following portfolio companies:

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Actelis Networks, Inc.

Actelis Networks, Inc. (“Actelis”), Fremont, California, a Legacy Investment, provides authentication and access control solutions designed to secure the integrity of e-business in Internet-scale and wireless environments.

At October 31, 2016 and January 31, 2017, the Company’s investment in Actelis consisted of 150,602 shares of Series C preferred stock at a cost of $5.0 million. The investment has been fair valued at $0.

Advantage Insurance Holdings

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

At October 31, 2016, the Company’s investment in Advantage consisted of 750,000 shares of preferred stock at a cost basis of $7.5 million and a fair value of approximately $8.3 million.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the preferred stock by approximately $136,000.

At January 31, 2017, the Company’s investment in Advantage consisted of 750,000 shares of preferred stock at a cost basis of $7.5 million and a fair value of approximately $8.4 million.

Biogenic Reagents

Biogenic, Minneapolis, Minnesota, is a producer of high-performance activated carbon products made from renewable biomass.

On September 26, 2016, Biogenics entered into an Assignment for the Benefit of Creditors to pursue an efficient sale of its assets. The Company is exploring an asset sale of the tangible and intangible assets of Biogenics to a strategic and/or financial buyer.

At October 31, 2016 and January 31, 2017, the Company’s investment in Biogenic consisted of two senior notes with maturity dates of July 21, 2018 and June 30, 2016, a senior convertible note with a maturity date of July 21, 2018, a senior subordinated note with a maturity date of June 30, 2016 and a warrant. The notes have an interest rate of 16%. The loans had a combined outstanding balance and cost basis of approximately $15.9 million and a fair value of approximately $15.1 million. The warrants had a combined cost basis of approximately $620,000 and a combined fair value of $0. The Company reserved in full against all of the accrued interest starting April 1, 2016.

Biovation Acquisition Co.

BAC, Montgomery, Minnesota, owns a manufacturing facility and markets environmentally friendly, organic and sustainable laminate materials and composites.

At October 31, 2016, the Company’s investment in BAC consisted of 90 shares of class B non-voting common stock with cost basis of approximately $785,000 and a fair value of approximately $55,000 and a senior loan with an outstanding balance, cost basis and fair value of $30,000.

On January 4, 2017, BAC repaid their senior loan in full including all accrued interest totaling approximately $31,000.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the common stock by approximately $55,000.

At January 31, 2017, the Company’s investment in BAC consisted of 90 shares of class B non-voting common stock with cost basis of approximately $785,000 and a fair value of $0.

Centile Holding B.V.

Centile, Sophia-Antipolis, France, is a leading European innovator of unified communications, network platforms, hosted solutions, applications and tools that help mobile, fixed and web-based communications service providers serve the needs of enterprise end users.

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At October 31, 2016, the Company’s investment in Centile consisted of common equity interest at a cost of $3.5 million and a fair value of approximately $5.4 million.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the common equity interest by approximately $340,000.

At January 31, 2017, the Company’s investment in Centile consisted of common equity interest at a cost of $3.5 million and a fair value of approximately $5.7 million.

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

Custom Alloy Corporation

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

At October 31, 2016, the Company’s investment in Custom Alloy consisted of an unsecured subordinated loan with a cost basis and outstanding balance of approximately $3.0 million and a fair value of approximately $2.1 million and a second lien loan with a cost basis and outstanding balance of approximately $24.4 million and a fair value of approximately $18.6 million. The second lien loan had an interest rate of 10% and a maturity date of April 30, 2020 and the unsecured subordinated loan had an interest rate of 12% and a maturity date of March 31, 2018. The Company reserved in full against all accrued PIK interest starting July 1, 2016.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the second lien loan by approximately $575,000 and increased the fair value of the unsecured subordinated loan by approximately $370,000.

At January 31, 2017, the Company’s investment in Custom Alloy consisted of an unsecured subordinated loan with a cost basis and outstanding balance of approximately $3.0 million and a fair value of approximately $2.5 million and a second lien loan with a cost basis and outstanding balance of approximately $24.4 million and a fair value of approximately $18.0 million. The Company has reserved in full against all of the accrued interest.

Dukane IAS, LLC

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

At October 31, 2016, the Company’s investment in Dukane consisted of a second lien loan with an outstanding amount of approximately $7.1 million, a cost basis of approximately $7.0 million and a fair value of approximately $7.1 million. The second lien loan had an interest rate of 13% and a maturity date of November 17, 2020.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the loan by approximately $71,000.

At January 31, 2017, the Company’s investment in Dukane consisted of a second lien loan with an outstanding amount of approximately $7.1 million, a cost basis of approximately $7.0 million and a fair value of approximately $7.2 million. The increase in cost basis of the loans is due to the amortization of loan origination fees and capitalization of “payment in kind” interest.

Equus Total Return, Inc.

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

At October 31, 2016, the Company’s investment in Equus consisted of 4,444,644 shares of common stock with a cost of approximately $10.0 million and a market value of approximately $8.3 million.

At January 31, 2017, the Company’s investment in Equus consisted of 4,444,644 shares of common stock with a cost of approximately $10.0 million and a market value of approximately $9.3 million.

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FDS, Inc.

FDS, Fort Worth, TX, is a data service provider.

At October 31, 2016, the Company’s investment in FDS consisted of a senior subordinated loan with an outstanding amount, cost basis and fair value of $2.3 million. The loan had an interest rate of 16% and a maturity date of November 30, 2016.

On November 30, 2016, the interest rate was changed to 12% cash and the maturity date was extended to November 30, 2017.

At January 31, 2017, the Company’s investment in FDS consisted of a senior subordinated loan with an outstanding amount, cost basis and fair value of $2.4 million. The increase in cost basis of the loans is due to the amortization of loan origination fees and capitalization of “payment in kind” interest.

Foliofn, Inc.

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

At October 31, 2016, the Company’s investment in Foliofn consisted of 5,802,259 shares of Series C preferred stock with a cost of $15.0 million and a fair value of approximately $5.9 million.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the preferred stock by $264,000.

At January 31, 2017, the Company’s investment in Foliofn consisted of 5,802,259 shares of Series C preferred stock with a cost of $15.0 million and a fair value of approximately $5.7 million.

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

HTI Technologies and Industries, Inc.

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

At October 31, 2016, the Company’s investment in HTI consisted of a second lien loan with an outstanding amount of approximately $9.7 million, a cost basis of approximately $9.6 million and a fair value of approximately $9.7 million. The loan as an interest rate of 14% and a maturity date of June 21, 2018.

At January 31, 2017, the Company’s investment in HTI consisted of a second lien loan with an outstanding amount, a cost basis and a fair value of approximately $9.7 million. The increase in cost basis of the loan is due to the amortization of loan origination fees and capitalization of “payment in kind” interest.

Initials, Inc.

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

At October 31, 2016, the Company’s investment in Initials consisted of a senior subordinated loan with an outstanding amount, cost basis and fair value of approximately $4.8 million. The loan has an interest rate of 15% and matures on June 23, 2020.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the loan by approximately $95,000.

At January 31, 2017, the Company’s investment in Initials consisted of a senior subordinated loan with an outstanding amount and cost basis of approximately $4.8 million and a fair value of approximately $4.7 million. The increase in cost basis of the loan is due to the capitalization of “payment in kind” interest.

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JSC Tekers Holdings

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

At October 31, 2016, the Company’s investment in JSC Tekers consisted of 9,159,085 shares of preferred stock with a cost basis of $11.8 million and a fair value of $3.7 million and 3,201 shares of common stock with a cost basis of $4,500 and a fair value of $0.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the preferred stock by $43,000.

At January 31, 2017, the Company’s investment in JSC Tekers consisted of 9,159,085 shares of preferred stock with a cost basis of $11.8 million and a fair value of $3.7 million and 3,201 shares of common stock with a cost basis of $4,500 and a fair value of $0.

Legal Solutions Holdings, Inc.

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

At October 31, 2016, the Company’s investment in Legal Solutions consisted of a senior subordinated loan with an interest rate of 16% and a maturity date of September 12, 2018 with an outstanding amount and cost basis of approximately $11.0 million and a fair value of approximately $10.9 million.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the senior subordinated loan by approximately $112,000.

At January 31, 2017, the Company’s investment in Legal Solutions consisted of a senior subordinated loan with an outstanding amount, cost basis and fair value of approximately $11.1 million. The increase in cost basis of the loan is due to the amortization of the discount on the deferred balance and the capitalization of deferred interest and PIK interest.

Mainstream Data, Inc.

Mainstream Data, Inc. (“Mainstream”), Salt Lake City, Utah, a Legacy Investment, develops and operates satellite, internet and wireless broadcast networks for information companies. Mainstream networks deliver text news, streaming stock quotations and digital images to subscribers around the world.

At October 31, 2016 and January 31, 2017, the Company’s investment in Mainstream consisted of 5,786 shares of common stock with a cost of $3.75 million. The investment has been fair valued at $0.

Morey’s Seafood International LLC

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

At October 31, 2016, the Company’s investment in Morey’s consisted of a second lien loan that had an outstanding balance and cost basis of $17.2 million and a fair value of $15.2 million. The loan had an interest rate of 14% and a maturity date of August 12, 2018.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the loan by approximately $462,000.

At January 31, 2017, the loan had an outstanding balance and cost basis of $17.2 million and a fair value of $15.6 million. The Company reserved in full against all accrued PIK interest starting July 1, 2016.

MVC Automotive Group GmbH

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

At October 31, 2016, the Company’s investment in MVC Automotive consisted of an equity interest with a cost of approximately $50.1 million and a fair value of approximately $12.3 million and a bridge

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loan with an outstanding amount, cost basis and fair value of approximately $3.3 million. The bridge loan had an interest rate of 6% and a maturity date of December 31, 2016. The mortgage guarantee for MVC Automotive was equivalent to approximately $6.3 million at October 31, 2016. This guarantee was taken into account in the valuation of MVC Automotive.

On December 13, 2016, the Company loaned an additional $475,000 to MVC Automotive increasing the amount outstanding on the bridge loan to approximately $3.8 million. The maturity date was also extended to December 31, 2017.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the equity interest by approximately $307,000.

At January 31, 2017, the Company’s investment in MVC Automotive consisted of an equity interest with a cost of approximately $50.1 million and a fair value of approximately $12.0 million and a bridge loan with an outstanding amount, cost basis and fair value of approximately $3.8 million. The mortgage guarantee for MVC Automotive was equivalent to approximately $4.1 million at January 31, 2017. This guarantee was taken into account in the valuation of MVC Automotive.

Michael Tokarz, Chairman of the Company, and Puneet Sanan, a representative of the Company, serve as directors of MVC Automotive.

MVC Environmental, Inc.

MVC Environmental, a New York-based holding company, owns and operates intellectual property and environmental service facilities for oil and gas waste recycling in the Eagle Ford Shale region of Texas.

At October 31, 2016, the Company’s investment in MVC Environmental consisted of common stock with a cost basis of approximately $3.1 million and a fair value of approximately $1.6 million and a senior secured loan with an outstanding balance, cost basis and fair value of $6.4 million. The increase in cost basis of the loan is due to the capitalization of PIK interest. The loan bears annual interest of 9% and matures on December 22, 2020.

On November 9, 2016, the Company invested approximately $59,000 in MVC Environmental and received an additional 30 shares of common stock.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the common stock by approximately $517,000.

At January 31, 2017, the Company’s investment in MVC Environmental consisted of common stock with a cost basis of approximately $3.1 million and a fair value of approximately $1.2 million and a senior secured loan with an outstanding balance, cost basis and fair value of approximately $6.6 million. The increase in cost basis of the loan is due to the capitalization of PIK interest.

David Williams, representative of the Company, serve as a director of MVC Environmental.

MVC Private Equity Fund, L.P.

MVC Private Equity Fund, L.P., Purchase, New York, is a private equity fund focused on control equity investments in the lower middle market. MVC GP II, an indirect wholly-owned subsidiary of the Company, serves as the GP to the PE Fund and is exempt from the requirement to register with the Securities and Exchange Commission as an investment adviser under Section 203 of the Investment Advisers Act of 1940. MVC GP II is wholly-owned by MVCFS, a subsidiary of the Company. The Company’s Board of Directors authorized the establishment of, and investment in, the PE Fund for a variety of reasons, including the Company’s ability to participate in Non-Diversified Investments made by the PE Fund. As previously disclosed, the Company is limited in its ability to make Non-Diversified Investments. For services provided to the PE Fund, the GP and MVC Partners are together entitled to receive 25% of all management fees and other fees paid by the PE Fund and its portfolio companies and up to 30% of the carried interest generated by the PE Fund. Further, at the direction of the Board of Directors, the GP retained TTG Advisers to serve as the portfolio manager of the PE Fund. In exchange for providing those services, and pursuant to the Board of Directors’ authorization and direction, TTG Advisers is entitled to the remaining 75% of the management and other fees generated by the PE Fund

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and its portfolio companies and any carried interest generated by the PE Fund. A significant portion of the portfolio fees that are paid by the PE Fund’s portfolio companies to the GP and TTG Advisers is subject to recoupment by the PE Fund in the form of an offset to future management fees paid by the PE Fund. Given this separate arrangement with the GP and the PE Fund, under the terms of the Company’s Advisory Agreement with TTG Advisers, TTG Advisers is not entitled to receive from the Company a management fee or an incentive fee on assets of the Company that are invested in the PE Fund. The PE Fund’s term will end on October 29, 2016; unless the GP, in its sole discretion, extends the term of the PE Fund for two additional periods of one year each.

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

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

At October 31, 2016, the limited partnership interest in the PE Fund had a cost of approximately $13.8 million and a fair value of approximately $25.2 million. The Company’s general partnership interest in the PE Fund had a cost basis of approximately $353,000 and a fair value of approximately $631,000.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair values of the limited partnership and general partnership interests by approximately $99,000.

At January 31, 2017, the limited partnership interest in the PE Fund had a cost of approximately $11.5 million and a fair value of approximately $16.6 million. The Company’s general partnership interest in the PE Fund had a cost basis of approximately $292,000 and a fair value of approximately $417,000. As of January 31, 2017, the PE Fund had invested in Plymouth Rock Energy, LLC, Gibdock Limited, Focus Pointe Holdings, Inc. and Advanced Oilfield Services, LLC.

Pride Engineering

Pride Engineering, LLC (“Pride Engineering”), Minneapolis, MN, designs and manufactures specialized components used globally in the production of two-piece metal cans.

At October 31, 2016, the Company’s investment in Pride Engineering consisted of a second lien loan with an outstanding amount of approximately $5.1 million, a cost basis of approximately $5.0 million and a fair value of approximately $5.1 million. The loan bears annual interest of 12% and matures on June 18, 2021.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the loan by approximately $51,000.

At January 31, 2017, the Company’s investment in Pride Engineering consisted of a second lien loan with an outstanding amount of approximately $5.1 million, cost basis of approximately $5.1 million and a fair value of approximately $5.2 million. The increase in cost basis of the loan is due to the amortization of loan origination fees.

Quantum Plastics, LLC

Quantum, Elgin, Illinois, is a global plastic injection manufacturer.

At October 31, 2016, the Company’s investment in Quantum consisted of a senior subordinated loan with an outstanding amount of $10.0 million, a cost basis of approximately $9.6 million and a fair value

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of approximately $9.7 million. The warrant had a cost basis and fair value of approximately $393,000. The senior subordinated loan had an interest rate of 12% and a maturity date of March 10, 2021.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the loan and warrant by a total of approximately $1.3 million.

At January 31, 2017, the Company’s investment in Quantum consisted of a senior subordinated loan with an outstanding amount of $10.0 million, a cost basis of approximately $9.6 million and a fair value of approximately $10.0 million. The warrant had a cost basis of approximately $393,000 and a fair value of approximately $1.4 million. The increase in cost basis of the loan is due to amortization of the discount and loan origination fees.

RuMe, Inc.

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

At October 31, 2016, the Company’s investment in RuMe consisted of 5,297,548 shares of common stock with a cost basis of approximately $924,000 and a fair value of $540,000, 4,999,076 shares of series B-1 preferred stock with a cost basis of approximately $1.0 million and a fair value of approximately $2.0 million, 23,896,634 shares of series C preferred stock with a cost basis of approximately $3.4 million and a fair value of approximately $5.8 million and a subordinated note with an outstanding balance of $900,000 and a cost basis and fair value of approximately $847,000. The subordinated note had an interest rate of 10% and a maturity date of October 7, 2017. The warrant had a cost basis of approximately $336,000 and a fair value of approximately $1.1 million and the guarantee was fair valued at -$278,000 or a liability of $278,000.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the series C preferred stock by approximately $186,000, the common stock by approximately $42,000, the series B-1 preferred stock by approximately $9,000 and warrant by approximately $66,000. The Valuation Committee also increased the fair value of the guarantee by approximately $50,000

At January 31, 2017, the Company’s investment in RuMe consisted of 5,297,548 shares of common stock with a cost basis of approximately $924,000 and a fair value of $498,000, 4,999,076 shares of series B-1 preferred stock with a cost basis of approximately $1.0 million and a fair value of approximately $2.0 million, 23,896,634 shares of series C preferred stock with a cost basis of approximately $3.4 million and a fair value of approximately $5.6 million and a subordinated note with an outstanding balance of $921,000 and a cost basis and fair value of approximately $882,000. The warrant had a cost basis of approximately $336,000 and a fair value of approximately $988,000 and the guarantee was fair valued at -$227,000 or a liability of $227,000. The increase in cost basis of the loan is due to the capitalization of PIK interest.

Security Holdings, B.V.

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

At October 31, 2016, the Company’s common equity interest in Security Holdings had a cost basis of approximately $51.5 million and a fair value of approximately $34.9 million.

During the quarter ended January 31, 2017, the Company recorded a distribution of approximately $330,000 from Security Holdings, which was recorded as a return of capital.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the common equity interest by approximately $1.5 million.

At January 31, 2017, the Company’s common equity interest in Security Holdings had a cost basis of approximately $51.2 million and a fair value of approximately $36.4 million.

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

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SGDA Europe B.V.

SGDA Europe is an Amsterdam-based holding company that pursues environmental and remediation opportunities in Romania.

At October 31, 2016, the Company’s equity investment had a cost basis of approximately $28.5 million and a fair value of approximately $1.3 million.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the common equity interest by approximately $252,000.

At January 31, 2017, the Company’s equity investment had a cost basis of approximately $28.5 million and a fair value of approximately $1.0 million.

Puneet Sanan, a representative of the Company, serves as a director of SGDA Europe.

SIA Tekers Invest

Tekers, Riga, Latvia, is a port facility that has been used for the storage and servicing of vehicles.

At October 31, 2016 and January 31, 2017, the Company’s investment in Tekers consisted of 68,800 shares of common stock with a cost basis of $2.3 million and a fair value of $0 and a bridge loan with an outstanding amount and cost basis of approximately $28,000 and a fair value of $0. The bridge loan has an interest rate of 6% and a maturity date of June 27, 2017. The Company reserved in full against all accrued interest related to the bridge loan.

Thunderdome Restaurants, LLC

Thunderdome Restaurants, LLC (“Thunderdome”), Cincinnati, Ohio, is a restaurant group with locations in Cincinnati, Columbus, Cleveland, Indianapolis, Nashville and Charlotte.

At October 31, 2016 and January 31, 2017, the Company’s investment in Thunderdome consisted of a second lien loan with an outstanding amount, cost basis and fair value of approximately $3.0 million. The loan has an interest rate of 12% and matures on June 10, 2020. The increase in cost basis of the loan is due to amortization of loan origination fees.

Turf Products, LLC

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

At October 31, 2016, the Company’s investment in Turf consisted of a senior subordinated loan, bearing interest at 11% per annum with a maturity date of November 1, 2018, membership interest and warrants. The senior subordinated loan had an outstanding balance and cost basis of approximately $3.9 million and a fair value of approximately $3.8 million. The membership interest had a cost of approximately $3.5 million and a fair value of approximately $4.0 million. The warrants had a cost and a fair value of $0. The Company also had a guarantee to Berkshire Bank that was fair valued at -$13,000 or a liability of $13,000.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the guarantee by approximately $3,000 and the loan by approximately $7,000.

At January 31, 2017, the senior subordinated loan had an outstanding balance and cost basis of approximately $3.9 million and a fair value of approximately $3.8 million. The membership interest had a cost of approximately $3.5 million and a fair value of approximately $4.0 million. The warrants had a cost and fair value of $0 and the guarantee was fair valued at -$10,000 or a liability of $10,000.

Michael Tokarz, Chairman of the Company, and Puneet Sanan and Shivani Khurana, representatives of the Company, serve as directors of Turf.

United States Technologies, Inc.

United States Technologies, Inc. (“U.S. Technologies”), Fairlawn, New Jersey, offers diagnostic testing, redesign, manufacturing, reverse engineering and repair services for malfunctioning electronic components of machinery and equipment.

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At October 31, 2016 the Company’s investment in U.S Technologies consisted of a senior term loan with an outstanding amount and cost basis of $5.0 million and a fair value of approximately $5.1 million. The loan has an interest rate of 10.5% and matures on July 17, 2020.

On December 1, 2016, the Company loaned an additional $500,000 to U.S. Technologies increasing the total amount outstanding to $5.5 million.

During the quarter ended January 31, 2017, the Valuation Committee increased the fair value of the loan by $5,000.

At January 31, 2017, the senior term loan had an outstanding amount of approximately $5.5 million, a cost basis of $5.5 million and a fair value of approximately $5.6 million.

U.S. Gas & Electric, Inc.

U.S. Gas, North Miami Beach, Florida, is a licensed Energy Service Company (“ESCO”) that markets and distributes natural gas to small commercial and residential retail customers in the state of New York.

At October 31, 2016, the Company’s investment in U.S. Gas consisted of a second lien loan, an unsecured loan, convertible Series I preferred stock and convertible Series J preferred stock. The second lien loan had an outstanding balance, cost basis and fair value of $7.5 million and the unsecured loan had an outstanding balance, cost and fair value of approximately $3.3 million. The second lien loan bears annual interest at 13% and has a maturity date of July 1, 2019. The unsecured loan bears annual interest at 14% and has a maturity date of July 1, 2018. The 32,200 shares of convertible Series I preferred stock had a fair value of $89.4 million and a cost of $500,000 and the 8,216 shares of convertible Series J preferred stock had a cost and fair value of $0.

At January 31, 2017, the loans had a combined outstanding balance, cost basis and a fair value of approximately $10.8 million. The increase in the cost basis of the unsecured loan is due to the capitalization of PIK interest. The convertible Series I preferred stock had a fair value of approximately $89.4 million and a cost basis of $500,000 and the convertible Series J preferred stock had a cost basis and fair value of $0.

Puneet Sanan and Peter Seidenberg, representatives of the Company, serve as Chairman and director, respectively, of U.S. Gas and Warren Holtsberg, a director of the Company, also serves as a director of U.S. Gas.

U.S. Spray Drying Holding Company

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

At October 31, 2016, the Company’s investment in SCSD consisted of 784 shares of class B common stock with a cost basis of approximately $5.5 million and a fair value of approximately $6.6 million and a secured loan with an outstanding balance, cost basis and fair value of $1.5 million. The secured loan had an interest rate of 12% and a maturity date of April 30, 2019.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the common stock by $560,000.

At January 31, 2017, the Company’s investment in SCSD consisted of 784 shares of class B common stock with a cost basis of approximately $5.5 million and a fair value of approximately $6.1 million. The secured loan had an outstanding balance, cost basis and fair value of $1.5 million.

Puneet Sanan and Shivani Khurana, representatives of the Company, serve as directors of SCSD.

Vestal Manufacturing Enterprises, Inc.

Vestal, Sweetwater, Tennessee, is a market leader for steel fabricated products to brick and masonry segments of the construction industry. Vestal manufactures and sells both cast iron and fabricated steel specialty products used in the construction of single-family homes.

At October 31, 2016, the Company’s investment in Vestal consisted of a senior subordinated loan, 5,610 shares of common stock and a warrant. The loan had an outstanding balance and cost basis of

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approximately $6.5 million and a fair value of approximately $6.6 million. The 5,610 shares of common stock had a cost basis of $250,000 and a fair value of approximately $677,000 and the warrant had no cost and was fair valued at approximately $438,000. The loan had an annual interest of 15% and a maturity date of November 28, 2021.

During the quarter ended January 31, 2017, the Valuation Committee decreased the fair value of the loan by approximately $57,000, common stock by approximately $54,000 and warrant by approximately $62,000.

At January 31, 2017, the Company’s investment in Vestal consisted of a subordinated loan, 5,610 shares of common stock and a warrant. The loan had an outstanding balance, cost basis and fair value of approximately $6.6 million. The 5,610 shares of common stock had a cost basis of $250,000 and a fair value of approximately $623,000 and the warrant had no cost basis and was fair valued at approximately $377,000. The increase in the cost basis of the loan is due to the capitalization of PIK interest.

Liquidity and Capital Resources

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

At January 31, 2017, the Company had investments in portfolio companies totaling $355.4 million. Also, on that date, the Company had approximately $1.3 million in cash equivalents and approximately $31.6 million in cash. The Company considers all money market and other cash investments purchased with an original maturity of less than three months to be cash equivalents. U.S. government securities and cash equivalents are highly liquid. Pending investments in portfolio companies pursuant to our principal investment strategy, the Company may make other short-term or temporary investments, including in exchange-traded funds and private investment funds offering periodic liquidity.

During the quarter ended January 31, 2017, the Company made 3 follow-on investments in existing portfolio companies that totaled approximately $1.0 million. On November 9, 2016, the Company invested approximately $59,000 in MVC Environmental, Inc. (“MVC Environmental”) and received an additional 30 shares of common stock. On December 1, 2016, the Company loaned an additional $500,000 to U.S. Technologies increasing the total amount outstanding to $5.5 million. On December 13, 2016, the Company loaned an additional $475,000 to MVC Automotive increasing the amount outstanding on the bridge loan to approximately $3.8 million. The maturity date was also extended to December 31, 2017.

Current commitments include:

Commitments to Portfolio Companies:

At January 31, 2017 and October 31, 2016, the Company’s existing commitments to portfolio companies consisted of the following:

Portfolio Company	Amount Committed	Amount Funded at January 31, 2017
MVC Private Equity Fund LP	$20.1 million	$14.6 million
Total	$20.1 million	$14.6 million

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Portfolio Company	Amount Committed	Amount Funded at October 31, 2016
MVC Private Equity Fund LP	$20.1 million	$14.6 million
Total	$20.1 million	$14.6 million

Guarantees:

At January 31, 2017 and October 31, 2016, the Company had the following commitments to guarantee various loans and mortgages:

Guarantee	Amount Committed	Amount Funded at January 31, 2017
MVC Automotive	$4.1 million	—
RuMe	$1.0 million	—
Turf	$1.0 million	—
Total	$6.1 million	—

Guarantee	Amount Committed	Amount Funded at October 31, 2016
MVC Automotive	$6.3 million	—
RuMe	$1.0 million	—
Turf	$1.0 million	—
Total	$8.3 million	—

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

The Company guaranteed $1.0 million of Turf’s indebtedness to Berkshire Bank, which had a fair value of -$10,000 or a liability of $10,000 as of January 31, 2017.

The Company guaranteed $1.0 million of RuMe’s indebtedness to Colorado Business Bank, which had a fair value of approximately -$227,000 or a liability of $227,000 as of January 31, 2017.

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Additional capital may be called for follow-on investments in existing portfolio companies of the PE Fund or to pay operating expenses of the PE Fund until the partnership is no longer extended. On December 23, 2016, the Company received proceeds of approximately $12.2 million from the PE Fund related to the sale of AccuMed Corp., a portfolio company of the PE Fund. The Company’s pro-rata share of the PE Fund’s investment in AccuMed Corp. totaled approximately $2.4 million, resulting in a realized gain of approximately $9.8 million. As of January 31, 2017, $14.6 million of the Company’s commitment has been contributed.

Commitments of the Company

On February 19, 2013, the Company sold $70.0 million of senior unsecured notes (the “Senior Notes”) in a public offering. The Senior Notes will mature on January 15, 2023 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after April 15, 2016. The Senior Notes bear interest at a rate of 7.25% per year payable quarterly on January 15, April 15, July 15, and October 15 of each year, beginning April 15, 2013. The Company had also granted the underwriters a 30-day option to purchase up to an additional $10.5 million of Senior Notes to cover overallotments. The additional $10.5 million in principal was purchased and the total principal amount of the Senior Notes totaled $80.5 million. The net proceeds to the Company from the sale of the Senior Notes, after offering expenses, were approximately $77.4 million. The offering expenses incurred are amortized over the term of the Senior Notes.

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28, 2017. At October 31, 2016, the balance of Credit Facility II was $35.0 million. During the quarter ended January 31, 2017, the Company’s net repayments on Credit Facility II were $10.0 million, resulting in an outstanding balance of $25.0 million at January 31, 2017. See “Subsequent Events” for more information. Credit Facility II is used to provide the Company with better overall financial flexibility in managing its investment portfolio. Borrowings under Credit Facility II bear interest at LIBOR plus 125 basis points. In addition, the Company is also subject to a 25 basis point commitment fee for the average amount of Credit Facility II that is unused during each fiscal quarter. The Company paid closing fees, legal and other costs associated with these transactions. These costs will be amortized over the life of the facility. Borrowings under Credit Facility II will be secured by cash, short-term and long-term U.S. Treasury securities and other governmental agency securities.

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

Subsequent Events

On February 21, 2017, the Company repaid Credit Facility II in full, including all accrued interest.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Historically the Company has invested in small companies, and its investments in these companies are considered speculative in nature. The Company’s investments often include securities that are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities. As a result, the Company is subject to risk of loss which may prevent our shareholders from achieving price appreciation, dividend distributions and return of capital.

Financial instruments that subjected the Company to concentrations of market risk consisted principally of equity investments, subordinated notes, debt instruments, and escrow receivables, which represent approximately 85.13% of the Company’s total assets at January 31, 2017. As discussed in Note 8 “Portfolio Investments,” these investments consist of securities in companies with no readily determinable market values and as such are valued in accordance with the Company’s fair value policies and procedures. The Company’s investment strategy represents a high degree of business and financial risk due to the fact that portfolio company investments are generally illiquid, in small and middle market companies, and include entities with little operating history or entities that possess operations in new or developing industries. These investments, should they become publicly traded, would generally be: (i) subject to restrictions on resale, if they were acquired from the issuer in private placement transactions; and (ii) susceptible to market risk. The Company may make short-term investments in 90-day Treasury Bills or longer-term treasury notes, which are federally guaranteed securities, or other investments,

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including exchange-traded funds, private investment funds and designated money market accounts, pending investments in portfolio companies made pursuant to our principal investment strategy.

In addition, the following risk factors relate to market risks impacting the Company.

We depend on key personnel of TTG Advisers, especially Mr. Tokarz, in seeking to achieve our investment objective.

We depend on the continued services of Mr. Tokarz and certain other key management personnel of TTG Advisers. If we were to lose access to any of these personnel, particularly Mr. Tokarz, it could negatively impact our operations and we could lose business opportunities. There is a risk that Mr. Tokarz’s expertise may be unavailable to the Company, which could significantly impact the Company’s ability to achieve its investment objective.

Our returns may be substantially lower than the average returns historically realized by the private equity industry as a whole.

Past performance of the private equity industry is not necessarily indicative of that sector’s future performance, nor is it necessarily a good proxy for predicting the returns of the Company. We cannot guarantee that we will meet or exceed the rates of return historically realized by the private equity industry as a whole. Additionally, our overall returns are impacted by certain factors related to our structure as a publicly-traded business development company, including:

· The substantially lower return we are likely to realize on short-term liquid investments during the period in which we are identifying potential investments, and

· The periodic disclosure required of business development companies, which could result in the Company being less attractive as an investor to certain potential portfolio companies.

Substantially all of our portfolio investments and escrow receivables are recorded at “fair value” and, as a result, there is a degree of uncertainty regarding the carrying values of our portfolio investments.

Pursuant to the requirements of the 1940 Act, because our portfolio company investments do not have readily ascertainable market values, we record these investments at fair value in accordance with our Valuation Procedures adopted by our Board of Directors. As permitted by the SEC, the Board of Directors has delegated the responsibility of making fair value determinations to the Valuation Committee, subject to the Board of Directors’ supervision and pursuant to the Valuation Procedures.

At January 31, 2017, approximately 81.74% of our total assets represented portfolio investments recorded at fair value.

There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. In determining the fair value of a portfolio investment, the Valuation Committee analyzes, among other factors, the portfolio company’s financial results and projections and publicly traded comparable companies when available, which may be dependent on general economic conditions. We specifically value each individual investment and record unrealized depreciation for an investment that we believe has become impaired, including where collection of a loan or realization of an equity security is doubtful. Conversely, we will record unrealized appreciation if we have an indication (based on a significant development) that the underlying portfolio company has appreciated in value and, therefore, our equity

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security has also appreciated in value, where appropriate. Without a readily ascertainable market value and because of the inherent uncertainty of fair valuation, fair value of our investments may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

Pursuant to our Valuation Procedures, our Valuation Committee (which is comprised of three Independent Directors) reviews, considers and determines fair valuations on a quarterly basis (or more frequently, if deemed appropriate under the circumstances). Any changes in valuation are recorded in the consolidated statements of operations as “Net change in unrealized appreciation (depreciation) on investments.”

We previously identified a material weakness in our internal control over financial reporting, which has now been remediated. Any future failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of our securities to decline.

We previously identified a material weakness in our internal control over financial reporting related to the valuation of certain portfolio companies and, as a result of such weakness, our management concluded that our disclosure controls and procedures and internal control over financial reporting were not effective as of October 31, 2014 and October 31, 2015. This contributed to a delay in the filing of certain prior financial statements.

Although we have remediated this material weakness in our internal control over financial reporting, any failure to improve our disclosure controls and procedures or internal control over financial reporting to address any identified weaknesses in the future, if they were to occur, could prevent us from maintaining accurate accounting records and discovering material accounting errors. Any of these results could adversely affect our business and the value of our common stock.

Economic recessions or downturns, including the current economic instability in Europe and the United States, could impair our portfolio companies and have a material adverse impact on our business, financial condition and results of operations.

Many of the companies in which we have made or will make investments may be susceptible to adverse economic conditions. Adverse economic conditions may affect the ability of a company to engage in a liquidity event. These conditions could lead to financial losses in our portfolio and a decrease in our revenues, net income and assets. Through the date of this report, conditions in the public debt and equity markets have been volatile and pricing levels have performed similarly. As a result, depending on market conditions, we could incur substantial realized losses and suffer unrealized losses in future periods, which could have a material adverse impact on our business, financial condition and results of operations. If current market conditions continue, or worsen, it may adversely impact our ability to deploy our investment strategy and achieve our investment objective.

Our overall business of making loans or private equity investments may be affected by current and future market conditions. The absence of an active mezzanine lending or private equity environment may slow the amount of private equity investment activity. As a result, the pace of our investment activity may slow, which could impact our ability to achieve our investment objective. In addition, significant changes in the capital markets could have an effect on the valuations of private companies and on the potential for liquidity events involving such companies. This could affect the amount and timing of any gains realized on our investments and thus have a material adverse impact on our financial condition.

Depending on market conditions, we could incur substantial realized losses and suffer unrealized losses in future periods, which could have a material adverse impact on our business, financial condition

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and results of operations. In addition, the global financial markets have not fully recovered from the global financial crisis and the economic factors that gave rise to the crisis. The continuation of current global market conditions, uncertainty or further deterioration, including the economic instability in Europe, could result in further declines in the market values of the Company’s investments. Such declines could also lead to diminished investment opportunities for the Company, prevent the Company from successfully executing its investment strategies or require the Company to dispose of investments at a loss while such adverse market conditions prevail.

We may not realize gains from our equity investments.

When we invest in mezzanine and senior debt securities, we may acquire warrants or other equity securities as well. We may also invest directly in various equity securities. Our goal is ultimately to realize gains upon our disposition of such interests. However, the equity interests we receive or invest in may not appreciate in value and, in fact, may decline in value. In addition, the equity securities we receive or invest in may be subject to restrictions on resale during periods in which it would be advantageous to sell. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

The market for private equity investments can be highly competitive. In some cases, our status as a regulated business development company may hinder our ability to participate in investment opportunities.

We face competition in our investing activities from private equity funds, other business development companies, investment banks, investment affiliates of large industrial, technology, service and financial companies, small business investment companies, wealthy individuals and foreign investors. As a regulated business development company, we are required to disclose quarterly the name and business description of portfolio companies and the value of any portfolio securities. Many of our competitors are not subject to this disclosure requirement. Our obligation to disclose this information could hinder our ability to invest in certain portfolio companies. Additionally, other regulations, current and future, may make us less attractive as a potential investor to a given company than a private equity fund not subject to the same regulations. Furthermore, some of our competitors have greater resources than we do. Increased competition would make it more difficult for us to purchase or originate investments at attractive prices. As a result of this competition, sometimes we may be precluded from making certain investments.

Our ability to use our capital loss carryforwards may be subject to limitations.

On October 31, 2016, the Company had a net capital loss carryforward of approximately $50.2 million. The Company had approximately $18.1 million in unrealized losses associated with Legacy Investments as of January 31, 2017. If we experience an aggregate 50% shift in the ownership of our common stock from shareholder transactions over a three year period (e.g., if a shareholder acquires 5% or more of our outstanding shares of common stock, or if a shareholder who owns 5% or more of our outstanding shares of common stock significantly increases or decreases its investment in the Company), our ability to utilize our capital loss carryforwards to offset future capital gains may be severely limited. Further, in the event that we are deemed to have failed to meet the requirements to qualify as a RIC, our ability to use our capital loss carryforwards could be adversely affected. Please see Note 12 of our consolidated financial statements “Tax Matters” for more information.

Loss of pass-through tax treatment would substantially reduce net assets and income available for dividends.

We have operated so as to qualify as a RIC. If we meet source of income, diversification and distribution requirements, we will qualify for effective pass-through tax treatment. We would cease to

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qualify for such pass-through tax treatment if we were unable to comply with these requirements. In addition, we may have difficulty meeting the requirement to make distributions to our shareholders because in certain cases we may recognize income before or without receiving cash representing such income, such as in the case of debt obligations that are treated as having original issue discount. If we fail to qualify as a RIC, we will have to pay corporate-level taxes on all of our income whether or not we distribute it, which would substantially reduce the amount of income available for distribution to our shareholders, and all of our distributions will be taxed to our shareholders as ordinary corporate distributions. Even if we qualify as a RIC, we generally will be subject to a corporate-level income tax on the income we do not distribute. Moreover, if we do not distribute at least; (1) 98% of our ordinary income during each calendar year, (2) 98.2% of our net capital gains realized in the period from November 1 of the prior year through October 31 of the current year, and (3) all such ordinary income and net capital gains for the previous years that were not distributed during those years, we generally will be subject to a 4% excise tax on certain undistributed amounts.

There are certain risks associated with the Company holding debt obligations that are treated under applicable tax rules as having original issue discount.

For federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount (“OID”) (such as debt instruments with payment-in-kind, or PIK, interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income 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 us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discounts and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for tax purposes.

Any original issue discount or other amounts accrued will be included in our investment company taxable income for the year of the accrual. Therefore, we may be required to make a distribution to our shareholders in order to satisfy the annual distribution requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code, even though we will not have received any corresponding cash amount. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for or maintain RIC tax treatment and thus become subject to corporate-level income tax, as described in the previous risk factor regarding loss of pass-through tax treatment.

Additionally, the higher interest rates of OID instruments reflect the payment deferral and increased credit risk associated with these instruments, and OID instruments generally represent a significantly higher credit risk than coupon loans. Even if the accounting conditions for income accrual are met, the borrower could still default when the Company’s actual collection is supposed to occur at the maturity of the obligation.

OID instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. OID income may also create uncertainty about the source of the Company’s cash distributions. For accounting purposes, any cash distributions to shareholders representing OID income are not treated as coming from paid-in capital, even though the cash to pay them comes from the offering proceeds. Thus, despite the fact that a distribution of OID income comes from the cash invested by the shareholders, the

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1940 Act does not require that shareholders be given notice of this fact by reporting it as a return of capital. PIK interest has the effect of generating investment income and potentially increasing the incentive fees payable to TTG Adviser at a compounding rate. In addition, the deferral of PIK interest also reduces the loan-to-value ratio at a compounding rate. Furthermore, OID creates the risk that fees will be paid to TTG Adviser based on non-cash accruals that ultimately may not be realized, while TTG Adviser will be under no obligation to reimburse the Company for these fees.

Our ability to grow depends on our ability to raise capital.

To fund new investments, periodically we may need to issue equity securities or borrow from financial institutions. Unfavorable economic conditions, amongst other things, 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. If we fail to obtain capital to fund our investments, it could limit both our ability to grow our business and our profitability. With certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowing. The amount of leverage that we employ depends on TTG Advisers’ and our board of directors’ assessment of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to maintain our current facilities or obtain other lines of credit at all or on terms acceptable to us.

Complying with the RIC requirements may cause us to forego otherwise attractive opportunities.

In order to qualify as a RIC for U.S. federal income tax purposes, we must satisfy tests concerning the sources of our income, the nature and diversification of our assets and the amounts we distribute to our shareholders. We may be unable to pursue investments that would otherwise be advantageous to us in order to satisfy the source of income or asset diversification requirements for qualification as a RIC. In particular, to qualify as a RIC, at least 50% of our assets must be in the form of cash and cash items, Government securities, securities of other RICs, and other securities that represent not more than 5% of our total assets and not more than 10% of the outstanding voting securities of the issuer. We have from time to time held a significant portion of our assets in the form of securities that exceed 5% of our total assets or more than 10% of the outstanding voting securities of an issuer, and compliance with the RIC requirements currently limits us from making investments that represent more than 5% of our total assets or more than 10% of the outstanding voting securities of the issuer. Thus, compliance with the RIC requirements may hinder our ability to take advantage of investment opportunities believed to be attractive, including potential follow-on investments in certain of our portfolio companies.

Regulations governing our operation as a business development company affect our ability to, and the way in which we, raise additional capital.

Generally we are not able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock or warrants at a price below the then-current net asset value per share of our common stock if our board of directors determines that such sale is in the best interests of the Company and its stockholders, and, if required by law or regulation, our stockholders approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our board of directors, closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at that time will decrease, and you might experience dilution.

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Any failure on our part to maintain our status as a business development company would reduce our operating flexibility.

We intend to continue to qualify as a business development company (“BDC”) under the 1940 Act. The 1940 Act imposes numerous constraints on the operations of BDCs. For example, BDCs are required to invest at least 70% of their total assets in specified types of securities, primarily in private companies or thinly-traded U.S. public companies, cash, cash equivalents, U.S. government securities and other high quality debt investments that mature in one year or less. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants. In addition, upon approval of a majority of our stockholders, we may elect to withdraw our status as a business development company. If we decide to withdraw our election, or if we otherwise fail to qualify as a business development company, we may be subject to the substantially greater regulation under the 1940 Act as a closed-end investment company. Compliance with such regulations would significantly decrease our operating flexibility, and could significantly increase our costs of doing business.

Changes in the law or regulations that govern business development companies and RICs, including changes in tax regulations, may significantly impact our business.

We and our portfolio companies are subject to regulation by laws at the local, state and federal levels, including federal securities law and federal taxation law. These laws and regulations, as well as their interpretation, may change from time to time. A change in these laws or regulations may significantly affect our business.

Results may fluctuate and may not be indicative of future performance.

Our operating results will fluctuate and, therefore, you should not rely on current or historical period results to be indicative of our performance in future reporting periods. In addition to many of the above-cited risk factors, other factors could cause operating results to fluctuate including, among others, variations in the investment origination volume and fee income earned, variation in timing of prepayments, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.

Our common stock price can be volatile.

The trading price of our common stock may fluctuate substantially. The price of the common stock may be higher or lower than the price you pay for your shares, depending on many factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include the following:

· Price and volume fluctuations in the overall stock market from time to time;

· Significant volatility in the market price and trading volume of securities of business development companies or other financial services companies;

· Volatility resulting from trading by third parties in derivative instruments that use our common stock as the referenced asset, including puts, calls, long-term equity participation securities, or LEAPs, or short trading positions;

· Changes in regulatory policies or tax guidelines with respect to business development companies or RICs;

· Our adherence to applicable regulatory and tax requirements, including the current restriction on our ability to make Non-Diversified Investments;

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· Actual or anticipated changes in our earnings or fluctuations in our operating results or changes in the expectations of securities analysts;

· General economic conditions and trends;

· Loss of a major funding source, which would limit our liquidity and our ability to finance transactions;

· Changes in interest rates; or

· Departures of key personnel of TTG Advisers.

We are subject to market discount risk.

As with any stock, the price of our shares will fluctuate with market conditions and other factors. If shares are sold, the price received may be more or less than the original investment. Whether investors will realize gains or losses upon the sale of our shares will not depend directly upon our NAV, but will depend upon the market price of the shares at the time of sale. Since the market price of our shares will be affected by such factors as the relative demand for and supply of the shares in the market, general market and economic conditions and other factors beyond our control, we cannot predict whether the shares will trade at, below or above our NAV. Although our shares, from time to time, had traded at a premium to our NAV, in more recent years, our shares have traded at a discount to NAV, which discount may fluctuate over time.

We have not established a mandated minimum dividend payment level and we cannot assure you of our ability to make distributions to our shareholders in the future.

We cannot assure that we will achieve investment results that will allow us to make cash distributions or year-to-year increases in cash distributions. Our ability to make distributions is impacted by, among other things, the risk factors described in this report. In addition, the asset coverage test applicable to us as a business development company can limit our ability to make distributions. Any distributions will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC status and such other factors as our board of directors may deem relevant from time to time. We cannot assure you of our ability to make distributions to our shareholders.

During certain periods, our distribution proceeds (dividends) have exceeded and may, in the future, exceed our taxable earnings and profits. Therefore, during those times, portions of the distributions that we make may represent a return of capital to you for tax purposes, which will reduce your tax basis in your shares.

During certain periods, our distribution proceeds have exceeded and may, in the future, exceed our earnings and profits. For example, in the event that we encounter delays in locating suitable investment opportunities, we may pay all or a portion of our distributions from the proceeds of any securities offering, from borrowings that were made in anticipation of future cash flow or from available funds. Therefore, portions of the distributions that we make may be a return of the money that you originally invested and represent a return of capital to you for tax purposes. A return of capital generally is a return of your investment rather than a return of earnings or gains derived from our investment activities and will be made after deducting the fees and expenses payable in connection with the offering. Such a return of capital is not taxable, but reduces your tax basis in your shares, which may result in higher taxes for you even if your shares are sold at a price below your original investment.

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We have borrowed and may continue to borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us.

We have borrowed and may continue to borrow money (subject to the 1940 Act limits) in seeking to achieve our investment objective going forward. Borrowings, also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, can increase the risks associated with investing in our securities.

Under the provisions of the 1940 Act, we are permitted, as a business development company, to borrow money or “issue senior securities” only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous.

We have borrowed from and may continue to borrow from, and issue senior debt securities to, banks, insurance companies and other private and public lenders. Lenders of these senior securities have fixed dollar claims on our assets that are superior to the claims of our common shareholders. If the value of our assets increases, then leveraging would cause the NAV attributable to our common stock to increase more sharply than it would had we not used leverage. Conversely, if the value of our consolidated assets decreases, leveraging would cause the NAV to decline more sharply than it otherwise would have had we not used leverage.

Similarly, any increase in our consolidated income in excess of consolidated interest expense on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our consolidated income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock dividend payments. Leverage is generally considered a speculative investment technique.

As of January 31, 2017, we borrowed $25 million under our short-term credit facility, Credit Facility II (as defined above), which is due on February 28, 2017. Further, we have approximately $114.4 million in aggregate principal amount of Senior Notes (as defined above), due on January 15, 2023. See Note 16 Subsequent Events for additional information.

Our ability to service our debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. The amount of leverage that we employ at any particular time will depend on our management’s and our Board of Director’s assessments of market and other factors at the time of any proposed borrowing. The Senior Notes and Credit Facility II impose certain financial and operating covenants that may restrict a portion of our business activities, including limitations that could hinder our ability to obtain additional financings and in some cases, to increase our dividends. Any additional facility we access could also impose additional covenants that could restrict our business activities. A failure to add new or replacement debt facilities or issue additional debt securities or other evidences of indebtedness could have an adverse effect on our business, financial condition or results of operations.

Changes in interest rates may affect our cost of capital and net operating income and our ability to obtain additional financing.

Because we have borrowed and may continue to borrow money to make investments, our net investment income before net realized and unrealized gains or losses, or net investment income, may be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates would

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not have a material adverse effect on our net investment income. Because of the generally fixed-rate nature of our debt investments and our borrowings, a hypothetical 1% increase or 1% decrease in interest rates is not expected to have a determinable (or easily predictable) material impact on the Company’s net investment income. In periods of declining interest rates, we may have difficulty investing our borrowed capital into investments that offer an appropriate return. In periods of sharply rising interest rates, our cost of funds would increase, which could reduce our net investment income. We may use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. We may utilize our short-term credit facilities as a means to bridge to long-term financing. Our long-term fixed-rate investments are financed primarily with equity and long-term fixed-rate debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Additionally, we cannot assure you that financing will be available on acceptable terms, if at all. Deterioration in the credit markets, which could delay our ability to sell certain of our loan investments in a timely manner, could also negatively impact our cash flows.

A portion of our existing investment portfolio was not selected by the investment team of TTG Advisers.

As of January 31, 2017, 1.3% of the Company’s assets consisted of Legacy Investments. These investments were made pursuant to the Company’s prior investment objective of seeking long-term capital appreciation from venture capital investments in information technology companies. Generally, a cash return may not be received on these investments until a “liquidity event,” i.e., a sale, public offering or merger, occurs. Until then, these Legacy Investments remain in the Company’s portfolio. The Company is managing them to seek to realize maximum returns.

Under the Advisory Agreement, TTG Advisers is entitled to compensation based on our portfolio’s performance. This arrangement may result in riskier or more speculative investments in an effort to maximize incentive compensation. Additionally, because the base management fee payable under the Advisory Agreement is based on total assets less cash, TTG Advisers may have an incentive to increase portfolio leverage in order to earn higher base management fees.

The way in which the compensation payable to TTG Advisers is determined may encourage the investment team to recommend riskier or more speculative investments and to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would adversely affect our shareholders, including investors in this offering. In addition, key criteria related to determining appropriate investments and investment strategies, including the preservation of capital, might be under-weighted if the investment team focuses exclusively or disproportionately on maximizing returns.

There are potential conflicts of interest that could impact our investment returns.

Our officers and directors, and members of the TTG Advisers investment team, may serve other entities, including the PE Fund, PPC Fund and others that operate in the same or similar lines of business as we do. Accordingly, they may have obligations to those entities, the fulfillment of which might not be in the best interests of the Company or our shareholders. It is possible that new investment opportunities that meet our investment objective may come to the attention of one of the management team members or our officers or directors in his or her role as an officer or director of another entity or as an investment professional associated with that entity, and, if so, such opportunity might not be offered, or otherwise made available, to the Company.

Additionally, as an investment adviser, TTG Advisers has a fiduciary obligation to act in the best interests of its clients, including us. To that end, if TTG Advisers manages any additional investment vehicles or client accounts (which includes its current management of the PE Fund and the PPC Fund),

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TTG Advisers will endeavor to allocate investment opportunities in a fair and equitable manner. When the investment professionals of TTG Advisers identify an investment, they will have to choose which investment fund should make the investment. As a result, there may be times when the management team of TTG Advisers has interests that differ from those of our shareholders, giving rise to a conflict. In an effort to mitigate situations that give rise to such conflicts, TTG Advisers adheres to a policy (which was approved by our Board of Directors) relating to allocation of investment opportunities, which generally requires, among other things, that TTG Advisers continue to offer the Company MVC Targeted Investments that are not Non-Diversified Investments. For more information on the allocation policy, please see “Our Investment Strategy — Allocation of Investment Opportunities” above.

Our relationship with any investment vehicle we or TTG Advisers manage could give rise to conflicts of interest with respect to the allocation of investment opportunities between us on the one hand and the other vehicles on the other hand.

Our subsidiaries are authorized to and serve as a general partner or managing member to a private equity or other investment vehicle(s) (“Other Vehicles”). In addition, TTG Advisers may serve as an investment manager, sub-adviser or portfolio manager to Other Vehicles. Further, Mr. Tokarz is a co-founder of PPC, a registered investment adviser that provides advisory services to Series A of the PPC Fund. As a result of this relationship, certain of PPC’s principals and other PPC investment professionals may make themselves available, from time to time, to consult with TTG Advisers on investment matters relating to MVC or the PE Fund. In this connection, certain employees of PPC are “associated persons” of TTG Advisers when providing certain services on behalf of TTG Advisers and, in this capacity, are subject to its oversight and supervision. Likewise, TTG Advisers makes available to PPC certain investment professionals that are employed by TTG Advisers to provide services for PPC and the PPC Fund. The foregoing raises a potential conflict of interest with respect to allocation of investment opportunities to us, on the one hand and to the Other Vehicles on the other hand. The Board and TTG Advisers have adopted an allocation policy (described above) to help mitigate potential conflicts of interest among us and Other Vehicles. For more information on the allocation policy, please see “Our Investment Strategy — Allocation of Investment Opportunities” above.

Wars, terrorist attacks, and other acts of violence may affect any market for our common stock, impact the businesses in which we invest and harm our operations and our profitability.

Wars, terrorist attacks and other acts of violence are likely to have a substantial impact on the U.S. and world economies and securities markets. The nature, scope and duration of the unrest, wars and occupation cannot be predicted with any certainty. Furthermore, terrorist attacks may harm our results of operations and your investment. We cannot assure you that there will not be further terrorist attacks against the United States or U.S. businesses. Such attacks and armed conflicts in the United States or elsewhere may impact the businesses in which we invest directly or indirectly, by undermining economic conditions in the United States. Losses resulting from terrorist events are generally uninsurable.

Our financial condition and results of operations will depend on our ability to effectively manage our future growth.

Our ability to achieve our investment objective can depend on our ability to sustain continued growth. Accomplishing this result on a cost-effective basis is largely a function of our marketing capabilities, our management of the investment process, our ability to provide competent, attentive and efficient services and our access to financing sources on acceptable terms. As we grow, TTG Advisers may need to hire, train, supervise and manage new employees. Failure to effectively manage our future growth could have a material adverse effect on our business, financial condition and results of operations.

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Investing in private companies involves a high degree of risk.

Our investment portfolio generally consists of loans to, and investments in, private companies. Investments in private businesses involve a high degree of business and financial risk, which can result in substantial losses and, accordingly, should be considered speculative. There is generally very little publicly available information about the companies in which we invest, and we rely significantly on the due diligence of the members of the investment team to obtain information in connection with our investment decisions. It is thus difficult, and often impossible, to protect the Company from the risk of fraud, misrepresentation or poor judgment by these companies.

Our investments in portfolio companies are generally illiquid.

We generally acquire our investments directly from the issuer in privately negotiated transactions. Most of the investments in our portfolio (other than cash or cash equivalents and certain other investments made pending investments in portfolio companies such as investments in exchange-traded funds) are typically subject to restrictions on resale or otherwise have no established trading market. We may exit our investments when the portfolio company has a liquidity event, such as a sale, recapitalization or initial public offering. The illiquidity of our investments may adversely affect our ability to dispose of equity and debt securities at times when it may be otherwise advantageous for us to liquidate such investments. In addition, if we were forced to immediately liquidate some or all of the investments in the portfolio, the proceeds of such liquidation could be significantly less than the current fair value of such investments.

Our investments in small and middle-market privately-held companies are extremely risky and the Company could lose its entire investment.

Investments in small and middle-market privately-held companies are subject to a number of significant risks including the following:

· Small and middle-market companies may have limited financial resources and may not be able to repay the loans we make to them. Our strategy includes providing financing to companies that typically do not have capital sources readily available to them. While we believe that this provides an attractive opportunity for us to generate profits, this may make it difficult for the borrowers to repay their loans to us upon maturity.

· Small and middle-market companies typically have narrower product lines and smaller market shares than large companies. Because our target companies are smaller businesses, they may be more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. In addition, smaller companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing and other capabilities, and a larger number of qualified managerial and technical personnel.

· There is generally little or no publicly available information about these privately-held companies. There is generally little or no publicly available operating and financial information about privately-held companies. As a result, we rely on our investment professionals to perform due diligence investigations of these privately-held companies, their operations and their prospects. We may not learn all of the material information we need to know regarding these companies through our investigations. It is difficult, if not impossible, to protect the Company from the risk of fraud, misrepresentation or poor judgment by our portfolio companies. Accordingly, the Company’s performance (including the valuation of its investments) is subject to the ongoing risk that the portfolio companies or their employees, agents, or service providers, may commit fraud adversely affecting the value of our investments.

· Small and middle-market companies generally have less predictable operating results. We expect that our portfolio companies may have significant variations in their operating results, may

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from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, may require substantial additional capital to support their operations, finance expansion or maintain their competitive position, may otherwise have a weak financial position or may be adversely affected by changes in the business cycle. Our portfolio companies may not meet net income, cash flow and other coverage tests typically imposed by their senior lenders.

· Small and middle-market businesses are more likely to be dependent on one or two persons. Typically, the success of a small or middle-market company also depends on the management talents and efforts of one or two persons or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us.

· Small and middle-market companies are likely to have greater exposure to economic downturns than larger companies. We expect that our portfolio companies will have fewer resources than larger businesses and an economic downturn may thus more likely have a material adverse effect on them.

· Small and middle-market companies may have limited operating histories. We may make debt or equity investments in new companies that meet our investment criteria. Portfolio companies with limited operating histories are exposed to the operating risks that new businesses face and may be particularly susceptible to, among other risks, market downturns, competitive pressures and the departure of key executive officers.

Our borrowers may default on their payments, which may have an effect on our financial performance.

We may make long-term unsecured, subordinated loans, which may involve a higher degree of repayment risk than conventional secured loans. We primarily invest in companies that may have limited financial resources and that may be unable to obtain financing from traditional sources. In addition, numerous factors may adversely affect a portfolio company’s ability to repay a loan we made to it, including the failure to meet a business plan, a downturn in its industry or operating results, or negative economic conditions. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in any related collateral.

Our investments in mezzanine and other debt securities may involve significant risks.

Our investment strategy contemplates investments in mezzanine and other debt securities of privately held companies. “Mezzanine” investments typically are structured as subordinated loans (with or without warrants) that carry a fixed rate of interest. We may also make senior secured and other types of loans or debt investments. Our debt investments are not, and typically will not be, rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade quality (rated lower than “Baa3” by Moody’s or lower than “BBB-” by Standard & Poor’s, commonly referred to as “junk bonds”). Loans of below investment grade quality have predominantly speculative characteristics with respect to the borrower’s capacity to pay interest and repay principal. Our debt investments in portfolio companies may thus result in a high level of risk and volatility and/or loss of principal.

Our portfolio companies may be highly leveraged.

Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair such companies’ ability to finance their future operations and capital needs. As a result, the flexibility of these companies’ to respond to changing

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business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore may invest a significant portion of our assets in a relatively small number of portfolio companies, which subjects us to a risk of significant loss should the performance or financial condition of one or more portfolio companies deteriorate.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, and therefore we may invest a significant portion of our assets in a relatively small number of portfolio companies and/or in a limited number of industries. As of January 31, 2017, the fair value of our largest investment, U.S. Gas & Electric, Inc. (“U.S. Gas”), comprised 35.7% of our net assets. Beyond the asset diversification requirements associated with our qualification as a RIC, we do not have fixed guidelines for diversification, and while we are not targeting any specific industries, relatively few industries may continue to be significantly represented among our investments. To the extent that we have large positions in the securities of a small number of portfolio companies, we are subject to an increased risk of significant loss should the performance or financial condition of these portfolio companies or their respective industries deteriorate. We may also be more susceptible to any single economic or regulatory occurrence as a result of holding large positions in a small number of portfolio companies. See the risk factor below regarding the industry in which U.S. Gas operates.

As a result of our significant portfolio investment in U.S. Gas, we are particularly subject to the risks of that company and the energy services industry.

Given the extent of our investment in U.S. Gas, the Company is particularly subject to the risks impacting U.S. Gas and the energy service industry. U.S. Gas’s operating results may fluctuate on a seasonal or quarterly basis and with general economic conditions. Weather conditions and other natural phenomena can also have an adverse impact on earnings and cash flows. Unusually mild weather in the future could diminish U.S. Gas’s results of operations and harm its financial condition. U.S. Gas enters into contracts to purchase and sell electricity and natural gas as part of its operations. With respect to such transactions, the rate of return on its capital investments is not determined through mandated rates, and its revenues and results of operations are likely to depend, in large part, upon prevailing market prices for power in its regional markets and other competitive markets. These market prices can fluctuate substantially over relatively short periods of time. Trading margins may erode as markets mature and there may be diminished opportunities for gain should volatility decline. Fuel prices may also be volatile, and the price U.S. Gas can obtain for power sales may not change at the same rate as changes in fuel costs. These factors could reduce U.S. Gas’s margins and therefore diminish its revenues and results of operations.

U.S. Gas relies on a firm supply source to meet its energy management obligations for its customers. Should U.S. Gas’s suppliers fail to deliver supplies of natural gas and electricity, there could be a material impact on its cash flows and statement of operations. U.S. Gas depends on natural gas pipelines and other storage and transportation facilities owned and operated by third parties to deliver natural gas to wholesale markets and to provide retail energy services to customers. If transportation or storage of natural gas is disrupted, including for reasons of force majeure, the ability of U.S. Gas to sell and deliver its services may be hindered. As a result, it may be responsible for damages incurred by its customers, such as the additional cost of acquiring alternative supply at then-current market rates. Additionally, U.S. Gas depends on transmission facilities owned and operated by unaffiliated power companies to deliver the power it sells at wholesale. If transmission is disrupted, or transmission capacity is inadequate, U.S. Gas may not be able to deliver its wholesale power.

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U.S. Gas is subject to substantial regulation by federal, state and local regulatory authorities. It is required to comply with numerous laws and regulations and to obtain numerous authorizations, permits, approvals and certificates from governmental agencies. U.S. Gas cannot predict the impact of any future revisions or changes in interpretations of existing regulations or the adoption of new laws and regulations applicable to it. Changes in regulations or the imposition of additional regulations could influence its operating environment and may result in substantial costs to U.S. Gas.

When we are a debt or minority equity investor in a portfolio company, we may not be in a position to control the entity, and management of the company may make decisions that could decrease the value of our portfolio holdings.

We anticipate making debt and minority equity investments; therefore, we will be subject to the risk that a portfolio company may make business decisions with which we disagree, and the shareholders and management of such company may take risks or otherwise act in ways that do not serve our interests. Due to the lack of liquidity in the markets for our investments in privately held companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

We may choose to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or part of our investment in these companies.

Some of our loans to our portfolio companies may be structured to include customary business and financial covenants placing affirmative and negative obligations on the operation of each company’s business and its financial condition. However, from time to time, we may elect to waive breaches of these covenants, including our right to payment, or waive or defer enforcement of remedies, such as acceleration of obligations or foreclosure on collateral, depending upon the financial condition and prospects of the particular portfolio company. These actions may reduce the likelihood of our receiving the full amount of future payments of interest or principal and be accompanied by a deterioration in the value of the underlying collateral as many of these companies may have limited financial resources, may be unable to meet future obligations and may go bankrupt. This could negatively impact our ability to pay dividends and cause you to lose all or part of your investment.

Our portfolio companies may incur obligations that rank equally with, or senior to, our investments in such companies. As a result, the holders of such obligations may be entitled to payments of principal or interest prior to us, preventing us from obtaining the full value of our investment in the event of an insolvency, liquidation, dissolution, reorganization, acquisition, merger or bankruptcy of the relevant portfolio company.

Our portfolio companies may have other obligations that rank equally with, or senior to, the securities in which we invest. By their terms, such other securities may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in the relevant portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying investors that are senior to us, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of other securities ranking equally with securities in which we invest, we would have to share on an equal basis any distributions with other investors holding such securities in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. As a result, we may be prevented from obtaining the full value of our investment in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

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Investments in foreign debt or equity may involve significant risks in addition to the risks inherent in U.S. investments.

Our investment strategy has resulted in some investments in debt or equity of foreign companies (subject to applicable limits prescribed by the 1940 Act). These risks may be even more pronounced for investments in less developed or emerging market countries. Investing in foreign companies can expose us to additional risks not typically associated with investing in U.S. companies. These risks include exchange rates, changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility, including developing or emerging market countries. A portion of our investments are located in countries that use the euro as their official currency. The USD/euro exchange rate, like foreign exchange rates in general, can be volatile and difficult to predict. This volatility could materially and adversely affect the value of the Company’s shares and our interests in affected portfolio companies.

Hedging transactions may expose us to additional risks.

We may enter into hedging transactions to seek to reduce currency, commodity or other rate risks. However, unanticipated changes in currency or other rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek or be able to establish a perfect or effective correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies.

Investing in our securities may involve a high degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive, and therefore, an investment in our securities may not be suitable for someone with a low risk tolerance.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management with the participation of the individual who performs the functions of the Principal Executive Officer (the “CEO”) and the individual who performs the functions of a Principal Financial Officer (the “CFO”), has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended as of the end of the period covered by this report. Based upon that evaluation, management has concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report.

There has been no change in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended January 31, 2017, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

A description of the risk factors associated with our business is set forth in the “Quantitative and Qualitative Disclosures about Market Risk” section, above.

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

We had no unregistered sales of equity securities for the quarter ended January 31, 2017.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

ITEM 6. EXHIBITS

(a) Exhibits

Exhibit No.		Exhibit

10		Ninth Amendment to the Secured Revolving Credit Agreement

31		Rule 13a-14(a) Certifications.

32		Section 1350 Certifications.

Other required Exhibits are included in this Form 10-Q or have been previously filed with the Securities and Exchange Commission (the “SEC”) in the Company’s Registration Statements on Form N-2 (Reg. Nos. 333-147039, 333-119625, 333-125953) or the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as filed with the SEC (File No. 814-00201).

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

	MVC CAPITAL, INC.

Date: March 13, 2017
	/s/ Michael Tokarz
	Michael Tokarz

	In the capacity of the officer who performs the functions of Principal Executive Officer.

	MVC CAPITAL, INC.

Date: March 13, 2017
	/s/ Scott Schuenke
	Scott Schuenke

	In the capacity of the officer who performs the functions of Principal Financial Officer.