UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________________________________________

Form 10-Q

____________________________________________________

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

For the Quarterly Period Ended September 30, 2021
 

or

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

For the transition period from              to             

Commission file number: 814-00924

_____________________________________________________

Sierra Income Corporation

(Exact Name of Registrant as Specified in its Charter)

_____________________________________________________

Maryland	45-2544432
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
100 Park Avenue New York, NY 10017
(Address of Principal Executive Offices)

(212) 759-0777

(Registrant’s Telephone Number, Including Area Code)

___________________________________________________

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

___________________________________________________

Securities registered pursuant to Section 12(b) of the Exchange Act: None 

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☐    No  ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

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

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

As of November 15, 2021, the Registrant had 102,276,889 shares of common stock, $0.001 par value, outstanding.

TABLE OF CONTENTS

Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Assets and Liabilities as of September 30, 2021 (unaudited) and December 31, 2020	F-1
Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)	F-2
Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2021 and 2020 (unaudited)	F-3
Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	F-4
Consolidated Schedule of Investments as of September 30, 2021 (unaudited)	F-5
Consolidated Schedule of Investments as of December 31, 2020	F-13
Notes to Consolidated Financial Statements (unaudited)	F-21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3. Quantitative and Qualitative Disclosures About Market Risk	15
Item 4. Controls and Procedures	16
Part II. Other Information
Item 1. Legal Proceedings	16
Item 1A. Risk Factors	16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3. Defaults Upon Senior Securities	17
Item 4. Mine Safety Disclosures	17
Item 5. Other Information	17
Item 6. Exhibits	17
SIGNATURES	18

Sierra Income Corporation

Consolidated Statements of Assets and Liabilities

	September 30, 2021			December 31, 2020
ASSETS	(unaudited)
Investments at fair value
Non-controlled/non-affiliated investments (amortized cost of $451,491,435 and $521,483,006, respectively)	$	423,154,580		$	472,813,820
Non-controlled/affiliated investments (amortized cost of $35,965,142 and $36,560,467, respectively)		18,842,911			19,844,927
Controlled investments (amortized cost of $136,154,910 and $142,960,466, respectively)		102,270,662			111,327,733
Investments at fair value		544,268,153			603,986,480
Cash and cash equivalents		74,930,671			65,301,216
Unsettled trades receivable		9,240,520			2,541,500
Interest receivable from investments		4,321,047			3,943,980
Prepaid expenses and other assets		2,753,981			1,934,866
Total assets	$	635,514,372		$	677,708,042
LIABILITIES
Revolving credit facilities payable (net of deferred financing costs of $0 and $659,266, respectively) (Note 5)	$	79,000,000		$	144,340,734
Accounts payable and accrued expenses		5,083,752			1,406,175
Deferred tax liability		3,016,448			2,390,596
Base management fees payable (Note 6)		2,780,151			2,967,857
Taxes Payable		933,274			—
Administrator fees payable (Note 6)		442,320			401,260
Interest payable		216,644			449,420
Unsettled trades payable		—			11,061
Total liabilities		91,472,589			151,967,103
Commitments (Note 10)
NET ASSETS
Common shares, par value $0.001 per share, 250,000,000 common shares authorized, 102,276,889 and 102,630,605 common shares issued and outstanding, respectively		102,277			102,631
Capital in excess of par value		848,735,664			850,737,609
Total distributable earnings/(loss)		(304,796,158	)		(325,099,301	)
Total net assets		544,041,783			525,740,939
Total liabilities and net assets	$	635,514,372		$	677,708,042
NET ASSET VALUE PER COMMON SHARE	$	5.32		$	5.12

See accompanying notes to consolidated financial statements.

F-1

Sierra Income Corporation

Consolidated Statements of Operations

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
INVESTMENT INCOME
Interest and dividend income from investments
Non-controlled/non-affiliated investments:
Cash	$	9,477,520		$	9,056,470		$	30,737,763		$	27,065,042
Payment-in-kind		293,377			76,164			1,275,730			1,086,053
Non-controlled/affiliated investments
Cash		690,841			225,480			1,111,512			363,381
Payment-in-kind		98,817			118,805			287,374			349,196
Controlled investments:
Cash		1,847,614			3,260,100			5,119,592			4,939,580
Total interest and dividend income		12,408,169			12,737,019			38,531,971			33,803,252
Fee income (Note 11)		189,707			187,629			956,189			622,262
Interest from cash and cash equivalents		(1,020	)		10,671			14,913			1,386,070
Total investment income		12,596,856			12,935,319			39,503,073			35,811,584
EXPENSES
Base management fees (Note 6)		2,780,151			3,021,491			8,871,911			9,217,687
Interest and financing expenses		816,620			2,106,105			3,901,402			9,848,708
General and administrative expenses		3,997,792			1,680,990			7,848,361			11,959,187
Professional fees		3,060,717			(416,913	)		5,719,220			10,790,405
Administrator expenses (Note 6)		442,320			431,598			1,668,219			1,822,255
Offering costs		21,381			30,816			26,537			35,973
Total expenses		11,118,981			6,854,087			28,035,650			43,674,215
Income tax expense		—			—			1,938,320			—
NET INVESTMENT INCOME/(LOSS)		1,477,875			6,081,232			9,529,103			(7,862,631	)
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) from non-controlled/non-affiliated investments		2,280,557			(53,622,479	)		(2,021,338	)		(61,903,159	)
Net realized gain/(loss) from affiliated investments		(207,240	)		1,147,844			(7,869	)		1,380,236
Net realized gain/(loss) from controlled investments		4,976,007			—			4,976,007			—
Net change in unrealized appreciation/(depreciation) on non-controlled/non-affiliated investments		(12,418,334	)		82,610,010			20,330,743			16,159,235
Net change in unrealized appreciation/(depreciation) on non-controlled/affiliated investments		607,712			(928,234	)		(406,691	)		(7,594,056	)
Net change in unrealized appreciation/(depreciation) on controlled investments		(5,643,356	)		(2,200,713	)		(2,251,515	)		(17,603,221	)
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments		1,198,269			(749,289	)		(625,852	)		(802,137	)
Loss on extinguishment of debt (see Note 5)		—			(217,950	)		—			(217,950	)
Net realized and unrealized gain/(loss) on investments		(9,206,385	)		26,039,189			19,993,485			(70,581,052	)
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	(7,728,510	)	$	32,120,421		$	29,522,588		$	(78,443,683	)
WEIGHTED AVERAGE - BASIC AND DILUTED EARNINGS/(LOSS) PER COMMON SHARE	$	(0.08	)	$	0.31		$	0.29		$	(0.76	)
WEIGHTED AVERAGE - BASIC AND DILUTED NET INVESTMENT INCOME/(LOSS) PER COMMON SHARE	$	0.01		$	0.06		$	0.09		$	(0.08	)
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - BASIC AND DILUTED (NOTE 9)		102,210,752			102,742,489			102,452,267			102,771,213
DISTRIBUTIONS DECLARED PER COMMON SHARE	$	0.03		$	—		$	0.09		$	0.11

See accompanying notes to the consolidated financial statements.

F-2

Sierra Income Corporation

Consolidated Statements of Changes in Net Assets

(unaudited)

	Common Stock
				Par			Paid in Capital			Distributable			Total
	Shares			Amount			in Excess of Par			Earnings			Net Assets
Balance at June 30, 2021		102,080,498		$	102,081		$	847,731,674		$	(294,003,268	)	$	553,830,487
Net increase (decrease) in net assets resulting from operations:
Net investment income/(loss)		—			—			—			1,477,875			1,477,875
Net realized gain (loss) on investments		—			—			—			7,049,324			7,049,324
Net change in unrealized appreciation/(depreciation) on investments		—			—			—			(17,453,978	)		(17,453,978	)
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments		—			—			—			1,198,269			1,198,269
Shareholder distributions:
Issuance of common shares pursuant to distribution reinvestment plan		196,403			196			1,003,990			—			1,004,186
Repurchase of common shares		(12	)		—			—			—			—
Distributions from earnings		—			—			—			(3,064,380	)		(3,064,380	)
Total increase/(decrease) for the three months ended September 30, 2021		196,391			196			1,003,990			(10,792,890	)		(9,788,704	)
Balance at September 30, 2021		102,276,889		$	102,277		$	848,735,664		$	(304,796,158	)	$	544,041,783
Balance at December 31, 2020		102,630,605		$	102,631		$	850,737,609		$	(325,099,301	)	$	525,740,939
Net increase/(decrease) in net assets resulting from operations:
Net investment income/(loss)		—			—			—			9,529,103			9,529,103
Net realized gain/(loss) on investments		—			—			—			2,946,800			2,946,800
Net change in unrealized appreciation/(depreciation) on investments		—			—			—			17,672,537			17,672,537
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments		—			—			—			(625,852	)		(625,852	)
Shareholder distributions:
Issuance of common shares pursuant to distribution reinvestment plan		610,778			610			3,046,153			—			3,046,763
Repurchase of common shares		(964,494	)		(964	)		(5,048,098	)		—			(5,049,062	)
Distributions from earnings		—			—			—			(9,219,445	)		(9,219,445	)
Total increase/(decrease) for the nine months ended September 30, 2021		(353,716	)		(354	)		(2,001,945	)		20,303,143			18,300,844
Balance at September 30, 2021		102,276,889		$	102,277		$	848,735,664		$	(304,796,158	)	$	544,041,783
Balance at June 30, 2020		102,833,465		$	102,833		$	872,534,843		$	(399,878,756	)	$	472,758,920
Net increase (decrease) in net assets resulting from operations:
Net investment income/(loss)		—			—			—			6,081,232			6,081,232
Net realized gain (loss) on investments		—			—			—			(52,474,635	)		(52,474,635	)
Net change in unrealized appreciation/(depreciation) on investments		—			—			—			79,481,063			79,481,063
Net loss on extinguishment of debt		—			—			—			(217,950	)		(217,950	)
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments		—			—			—			(749,289	)		(749,289	)
Shareholder distributions:
Issuance of common shares pursuant to distribution reinvestment plan		62,042			61			(61	)		—			—
Repurchase of common shares		(324,136	)		(323	)		(1,570,998	)		—			(1,571,321	)
Distributions from earnings		—			—			—			(52,881	)		(52,881	)
Total increase/(decrease) for the three months ended September 30, 2020		(262,094	)		(262	)		(1,571,059	)		32,067,540			30,496,219
Balance at September 30, 2020		102,571,371		$	102,571		$	870,963,784		$	(367,811,216	)	$	503,255,139
Balance at December 31, 2019		102,282,366		$	102,282		$	869,567,685		$	(278,607,246	)	$	591,062,721
Net increase/(decrease) in net assets resulting from operations:
Net investment income/(loss)		—			—			—			(7,862,631	)		(7,862,631	)
Net realized gain/(loss) on investments		—			—			—			(60,522,923	)		(60,522,923	)
Net change in unrealized appreciation/(depreciation) on investments		—			—			—			(9,038,042	)		(9,038,042	)
Net loss on extinguishment of debt		—			—			—			(217,950	)		(217,950	)
Change in provision for deferred taxes on unrealized appreciation/(depreciation) on investments		—			—			—			(802,137	)		(802,137	)
Shareholder distributions:
Issuance of common shares pursuant to distribution reinvestment plan		772,088			772			3,842,359			—			3,843,131
Repurchase of common shares		(483,083	)		(483	)		(2,446,260	)		—			(2,446,743	)
Distributions from earnings		—			—			—			(10,760,287	)		(10,760,287	)
Total increase/(decrease) for the nine months ended September 30, 2020		289,005			289			1,396,099			(89,203,970	)		(87,807,582	)
Balance at September 30, 2020		102,571,371		$	102,571		$	870,963,784		$	(367,811,216	)	$	503,255,139

See accompanying notes to consolidated financial statements.

F-3

Sierra Income Corporation

Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:	$	29,522,588		$	(78,443,683	)
ADJUSTMENT TO RECONCILE NET INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS TO NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES:
Payment-in-kind interest income		(1,563,104	)		(1,435,249	)
Net amortization of premium on investments		(421,139	)		208,642
Amortization of deferred financing costs		659,266			1,756,424
Net realized (gain)/loss on investments		(2,946,800	)		60,522,923
Net change in unrealized (appreciation)/depreciation on investments		(17,672,537	)		9,038,042
Purchases and originations		(112,027,303	)		(89,377,350	)
Proceeds from sale of investments and principal repayments		194,349,210			102,035,112
Loss on extinguishment of debt		—			217,950
(Increase)/decrease in operating assets:
Unsettled trades receivable		(6,699,020	)		(582,371	)
Interest receivable from investments		(377,067	)		4,145,690
Deferred transaction costs		—			14,993,778
Prepaid expenses and other assets		(819,115	)		(3,627,915	)
Increase/(decrease) in operating liabilities:
Unsettled trades payable		(11,061	)		—
Base management fee payable		(187,706	)		(1,039,027	)
Transaction costs payable		—			(495,930	)
Accounts payable and accrued expenses		3,677,577			87,556
Administrator fees payable		41,060			49,675
Interest payable		(232,776	)		(988,611	)
Taxes payable		933,274			—
Deferred tax liability		625,852			802,137
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES		86,851,199			17,867,793
Cash flows from financing activities:
Repayments of revolving credit facility		(66,000,000	)		(148,100,000	)
Payment of cash distributions		(6,172,682	)		(6,917,156	)
Financing costs paid		—			(86,683	)
Repurchase of common shares		(5,049,062	)		(2,446,743	)
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES		(77,221,744	)		(157,550,582	)
TOTAL INCREASE/(DECREASE) IN CASH		9,629,455			(139,682,789	)
CASH, CASH EQUIVALENTS AT BEGINNING OF PERIOD		65,301,216			225,316,656
CASH, CASH EQUIVALENTS AT END OF PERIOD	$	74,930,671		$	85,633,867
Supplemental Information:
Cash paid during the period for interest	$	3,474,912		$	8,862,945
Supplemental non-cash information:
Issuance of common shares in connection with distribution reinvestment plan	$	3,046,763		$	3,843,131

See accompanying notes to consolidated financial statements.

F-4

Sierra Income Corporation

Consolidated Schedule of Investments

As of September 30, 2021

(unaudited)

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Non-controlled/non-affiliated investments –	77.8%
AAAHI Acquisition Corporation	Transportation: Consumer	Senior Secured First Lien Term Loan LIBOR + 8.250%, 1.000% Floor (4) (6)	12/10/2023	$	7,251,893	$	7,251,893	$	6,309,147		1.2	%
					7,251,893		7,251,893		6,309,147
Alpine SG, LLC	High Tech Industries	Senior Secured First Lien Term Loan LIBOR + 8.500%, 1.000% Floor (4) (6) (14)	11/16/2022		1,262,051		1,242,468		1,263,691		0.2	%
		Senior Secured First Lien Delayed Draw Term Loan LIBOR + 5.750%, 1.000% Floor (4) (6)	6/1/2028		2,410,036		2,361,836		2,361,836		0.4	%
		Senior Secured First Lien Delayed Draw Term Loan LIBOR + 5.750%, 1.000% Floor (4) (6)	11/16/2022		6,165,725		6,165,664		5,993,084		1.1	%
		Senior Secured First Lien Term Loan LIBOR + 5.750%, 1.000% Floor (4) (6)	11/16/2022		15,801,509		15,728,506		15,385,245		2.8	%
					25,639,321		25,498,474		25,003,856
AMMC CLO 22, Limited Series 2018-22A	Multi-Sector Holdings	Subordinated Notes 13.917% effective yield (7) (8) (9)	4/25/2031		7,222,000		5,090,521		4,857,517		0.9	%
					7,222,000		5,090,521		4,857,517
AMMC CLO 23, Ltd. Series 2020-23A	Multi-Sector Holdings	Subordinated Notes 15.361% effective yield (7) (8) (9)	10/17/2031		2,000,000		1,622,187		1,646,600		0.3	%
					2,000,000		1,622,187		1,646,600
Apidos CLO XXIV, Series 2016-24A	Multi-Sector Holdings	Subordinated Notes 14.550% effective yield (4) (7) (8) (9)	7/20/2027		18,357,647		9,330,856		9,252,254		1.7	%
					18,357,647		9,330,856		9,252,254
Arrow International Inc.	Hotel, Gaming & Leisure	Senior Secured First Lien Term Loan LIBOR + 7.250%, 1.250% Floor (6)	12/21/2025		10,000,000		10,000,000		10,000,000		1.8	%
		Senior Secured First Lien Term Loan LIBOR + 7.250%, 1.250% Floor (10)	12/21/2025		5,000,000		5,000,000		5,000,000		0.9	%
					15,000,000		15,000,000		15,000,000
Aviation Technical Services, Inc.	Aerospace & Defense	Senior Secured Second Lien Term Loan LIBOR + 8.500%, 1.000% Floor (4) (6)	3/31/2025		26,259,760		26,259,760		24,902,131		4.6	%
					26,259,760		26,259,760		24,902,131

F-5

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Brook & Whittle Holding Corp.	Containers, Packaging & Glass	Senior Secured First Lien Delayed Draw Term Loan LIBOR + 5.250%, 1.000% Floor (4) (6)	10/17/2024		—		—		—		—	%
		Senior Secured First Lien Delayed Draw Term Loan LIBOR + 5.250%, 1.000% Floor (4) (6)	10/17/2024		3,664,919		3,653,930		3,664,919		0.7	%
		Senior Secured First Lien Term Loan LIBOR + 5.750%, 1.000% Floor (4) (6)	10/17/2024		2,081,164		2,081,164		2,081,164		0.4	%
					5,746,083		5,735,094		5,746,083
Cardenas Markets, LLC	Retail	Senior Secured First Lien Term Loan LIBOR + 6.250%, 1.000% Floor (6)	6/3/2027		2,000,000		1,980,000		1,971,000		0.4	%
					2,000,000		1,980,000		1,971,000
CM Finance SPV LLC	Banking, Finance, Insurance & Real Estate	Subordinated Notes 3.000% (4) (5) (11)	6/24/2021		35,600		35,600		—		—	%
					35,600		35,600		—
CPI International, Inc.	Aerospace & Defense	Senior Secured Second Lien Term Loan LIBOR + 7.250%, 1.000% Floor (4) (12)	7/28/2025		8,575,302		8,561,483		8,022,195		1.5	%
					8,575,302		8,561,483		8,022,195
CT Technologies Intermediate Holdings, Inc.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (4) (12)	12/16/2025		4,999,937		4,983,144		5,007,937		0.9	%
					4,999,937		4,983,144		5,007,937
DataOnline Corp.	High Tech Industries	Revolving Credit Facility LIBOR + 6.250%, 1.000% Floor (4) (6)	11/13/2025		2,142,857		2,142,857		2,105,571		0.4	%
		Senior Secured First Lien Term Loan LIBOR + 6.250%, 1.000% Floor (4) (6)	11/13/2025		14,737,500		14,737,500		14,529,701		2.7	%
					16,880,357		16,880,357		16,635,272
Dryden 43 Senior Loan Fund, Series 2016-43A	Multi-Sector Holdings	Subordinated Notes 14.561% effective yield (4) (7) (8) (9)	7/20/2029		3,620,000		2,415,714		2,300,872		0.4	%
					3,620,000		2,415,714		2,300,872
Dryden 49 Senior Loan Fund, Series 2017-49A	Multi-Sector Holdings	Subordinated Notes 15.468% effective yield (4) (7) (8) (9)	7/18/2030		17,233,288		11,434,494		11,103,407		2.0	%
					17,233,288		11,434,494		11,103,407
Envision Healthcare Corporation	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 3.750% (4) (12)	10/10/2025		48,625		34,949		43,184		—	%
					48,625		34,949		43,184

F-6

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
GC EOS Buyer Inc.	Automotive	Senior Secured First Lien Term Loan LIBOR + 4.500% (4) (12)	8/1/2025		2,493,573		2,481,723		2,465,895		0.5	%
					2,493,573		2,481,723		2,465,895
Glass Mountain Pipeline Holdings, LLC	Energy: Oil & Gas	Senior Secured First Lien Term Loan LIBOR + 4.500%, 1.000% Floor (4) (5) (12)	12/23/2024		48,375		25,468		16,448		—	%
					48,375		25,468		16,448
Golden West Packaging Group LLC	Forest Products & Paper	Senior Secured First Lien Term Loan LIBOR + 5.250%, 1.000% Floor (4) (12)	6/20/2023		1,323,073		1,323,073		1,302,698		0.2	%
					1,323,073		1,323,073		1,302,698
Holland Acquisition Corp.	Energy: Oil & Gas	Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor (5) (6) (11)	5/29/2020		3,754,497		3,634,434		—		—	%
					3,754,497		3,634,434		—
Hylan Datacom & Electrical LLC	Construction & Building	Senior Secured First Lien Term Loan LIBOR + 10.000%, 1.000% Floor (4) (5) (6)	7/25/2022		15,603,165		15,427,675		8,581,741		1.6	%
		Senior Secured First Lien Term Loan LIBOR + 10.000%, 1.000% Floor (4) (6)	7/25/2021		354,887		342,466		354,887		0.1	%
					15,958,052		15,770,141		8,936,628
Innovative XCessories & Services, LLC	Automotive	Senior Secured First Lien Term Loan LIBOR + 5.200%, 1.000% Floor (4) (10)	3/5/2027		2,953,865		2,930,793		2,942,050		0.5	%
					2,953,865		2,930,793		2,942,050
Iqor US Inc.	Services: Business	Senior Secured First Lien Term Loan LIBOR + 7.500%, 1.000% Floor (4) (12)	11/19/2024		2,716,876		2,673,564		2,778,006		0.5	%
					2,716,876		2,673,564		2,778,006
Isagenix International, LLC	Wholesale	Senior Secured First Lien Term Loan LIBOR + 5.750%, 1.000% Floor (4) (6)	6/16/2025		1,677,804		1,650,966		1,392,578		0.3	%
					1,677,804		1,650,966		1,392,578
Isola USA Corp.	High Tech Industries	Senior Secured Second Lien Term Loan LIBOR + 9.500%, 1.000% Floor, PIK (5) (6) (14)	1/2/2023		12,167,739		6,958,657		8,517,417		1.6	%
		Common Units - 10,283,782 units (13)			—		—		—		—	%
					12,167,739		6,958,657		8,517,417
Ivanti Software, Inc.	High Tech Industries	Senior Secured Second Lien Term Loan LIBOR + 8.500%, 1.000% Floor (4) (6)	12/1/2028		6,000,000		6,000,000		6,051,000		1.1	%
					6,000,000		6,000,000		6,051,000
JFL-WCS Partners, LLC	Environmental Industries	Common Units - 70,412 units (4) (13)			—		88,159		4,661,274		0.9	%
					—		88,159		4,661,274
JFL-NGS Partners, LLC	Environmental Industries	Preferred units - 6,375,000 units 12.500%			—		6,556,485		9,243,750		1.7	%
		Common Units - 3,252.95 units (13)			—		1,125,000		2,503,178		0.5	%
					—		7,681,485		11,746,928

F-7

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
K&N Parent, Inc.	Automotive	Senior Secured First Lien Term Loan LIBOR + 4.750%, 1.000% Floor (12)	10/20/2023		7,964,693		7,646,105		7,543,360		1.4	%
		Senior Secured Second Lien Term Loan LIBOR + 8.750%, 1.000% Floor (12)	10/21/2024		2,000,000		1,751,355		1,675,000		0.3	%
					9,964,693		9,397,460		9,218,360
Keystone Acquisition Corp.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 5.250%, 1.000% Floor (4) (6)	5/1/2024		1,770,300		1,733,312		1,744,808		0.3	%
		Senior Secured Second Lien Term Loan LIBOR + 9.250%, 1.000% Floor (4) (6)	5/1/2025		7,000,000		6,934,869		6,932,100		1.3	%
					8,770,300		8,668,181		8,676,908
KNB Holdings Corporation	Consumer Goods: Durable	Senior Secured First Lien Term Loan LIBOR + 5.500%, 1.000% Floor (12)	4/26/2024		1,945,946		1,500,712		1,655,611		0.3	%
					1,945,946		1,500,712		1,655,611
Lifestyle Intermediate II, LLC	Consumer Goods: Durable	Senior Secured First Lien Term Loan LIBOR + 7.000%, 1.000% Floor (4)	1/26/2026		3,214,295		3,214,295		3,214,295		0.6	%
		Senior Secured First Lien Term Loan LIBOR + 7.000%, 1.000% Floor (4) (14)	1/26/2026		1,166,667		1,166,667		1,166,667		0.2	%
					4,380,962		4,380,962		4,380,962
LogMeIn, Inc.	High Tech Industries	Senior Secured First Lien Term Loan LIBOR + 4.750%, 1.000% Floor (4) (12)	8/31/2027		1,985,000		1,961,373		1,984,206		0.4	%
					1,985,000		1,961,373		1,984,206
Magnetite XIX, Limited	Multi-Sector Holdings	Subordinated Notes LIBOR + 8.770% (6) (7) (8) (9)	4/17/2034		5,250,000		5,092,500		5,250,000		1.0	%
		Subordinated Notes 16.339% effective yield (4) (7) (8) (9)	7/17/2030		13,730,209		8,359,988		8,569,023		1.6	%
					18,980,209		13,452,488		13,819,023
Offen Inc.	Transportation: Cargo	Senior Secured First Lien Term Loan LIBOR + 5.000% (4) (12)	6/21/2026		3,926,361		3,899,642		3,902,018		0.7	%
					3,926,361		3,899,642		3,902,018
Path Medical, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 13.000%, 1.000% Floor, PIK (4) (5) (12)	10/11/2021		11,763,979		8,703,195		—		—	%
		Senior Secured First Lien Term Loan LIBOR + 9.500%, 1.000% Floor, PIK (4) (5) (12)	10/11/2021		8,464,916		8,021,285		4,655,704		0.9	%
		Warrants - 36,716 warrants (4) (13)	1/9/2027		—		669,709		—		—	%
					20,228,895		17,394,189		4,655,704
PetroChoice Holdings, Inc.	Chemicals, Plastics & Rubber	Senior Secured Second Lien Term Loan LIBOR + 8.750%, 1.000% Floor (4) (6)	8/21/2023		9,000,000		9,000,000		8,364,600		1.5	%
					9,000,000		9,000,000		8,364,600
Polymer Solutions Group Holdings, LLC	Chemicals, Plastics & Rubber	Senior Secured First Lien Term Loan LIBOR + 7.000%, 1.000% Floor (4) (12)	1/1/2023		1,039,254		1,039,254		1,023,873		0.2	%
					1,039,254		1,039,254		1,023,873
Proppants Holdings, LLC	Energy: Oil & Gas	Common Units - 1,506,254 units (13)			—		890,481		18,828		—	%
		Common Units - 161,852 units (13)			—		8,832		—		—	%
					—		899,313		18,828
PT Network, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 5.500%, 1.000% Floor, 2.00% PIK (4) (10)	11/30/2023		8,136,436		7,879,566		8,049,376		1.5	%
		Membership Units - 1.441 units (4) (13)			—		—		—		—	%
					8,136,436		7,879,566		8,049,376
RA Outdoors, LLC	High Tech Industries	Senior Secured First Lien Term Loan LIBOR + 6.750%, 1.000% Floor (4) (12) (14)	4/8/2026		18,765,432		18,765,432		18,577,778		3.4	%
					18,765,432		18,765,432		18,577,778

F-8

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
RateGain Technologies, Inc.	Hotel, Gaming & Leisure	Subordinated Notes (4) (11) (13)	7/31/2020		386,854		363,936		386,854		0.1	%
		Subordinated Notes (4) (11) (13)	7/31/2021		476,190		476,190		476,190		0.1	%
					863,044		840,126		863,044
Redwood Services Group, LLC	Services: Business	Senior Secured First Lien Term Loan LIBOR + 8.500%, 1.000% Floor (4) (6)	6/6/2023		3,970,000		3,970,000		3,981,910		0.7	%
		Senior Secured First Lien Term Loan LIBOR + 6.000%, 1.000% Floor (4) (12)	6/6/2023		22,436,105		22,436,105		22,021,037		4.0	%
		Senior Secured First Lien Term Loan LIBOR + 8.500%, 1.000% Floor (4) (12)	6/6/2023		728,511		716,354		728,511		0.1	%
					27,134,616		27,122,459		26,731,458
Resolute Investment Managers, Inc.	Banking, Finance, Insurance & Real Estate	Senior Secured Second Lien Term Loan LIBOR + 8.000%, 1.000% Floor (4) (6)	4/30/2025		5,081,120		5,060,559		5,093,823		0.9	%
					5,081,120		5,060,559		5,093,823
Rhombus Cinema Holdings, LP	Media: Diversified & Production	Preferred Equity - 7,449 shares 10.000% PIK (4) (5) (13)			—		4,584,207		—		—	%
		Common Units - 3,163 units (4) (13)			—		2,864,831		—		—	%
		Common Units - 3,163 units (4) (13)			—		297,962		—		—	%
					—		7,747,000		—
RTIC Subsidiary Holdings, LLC	Consumer Goods: Durable	Senior Secured First Lien Term Loan LIBOR + 7.750%, 1.250% Floor (4) (6)	9/1/2025		9,812,891		9,812,891		9,887,469		1.8	%
		Revolving Credit Facility LIBOR + 7.750%, 1.250% Floor (4) (6) (14)	9/1/2025		793,651		793,651		793,651		0.1	%
		Senior Secured First Lien Term Loan LIBOR + 7.750%, 1.250% Floor (4) (12)	9/1/2025		788,690		788,691		780,804		0.1	%
		Preferred Class A units - 145.347 units (13)			—		145,347		145,347		—	%
		Preferred Class B units - 145.347 units (13)			—		145,347		145,347		—	%
		Common units - 153 units (13)			—		15,300		28,610		—	%
					11,395,232		11,701,227		11,781,228
SavATree, LLC	Environmental Industries	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (4) (6)	6/2/2022		4,250,921		4,250,921		4,250,921		0.8	%
					4,250,921		4,250,921		4,250,921
Simplified Logistics, LLC	Services: Business	Senior Secured First Lien Term Loan LIBOR + 6.500%, 1.000% Floor (4) (6) (14)	2/27/2024		18,155,679		18,155,679		18,030,404		3.3	%
					18,155,679		18,155,679		18,030,404
SMART Financial Operations, LLC	Retail	Preferred Equity - 1,000,000 units (4) (13)			—		1,000,000		490,000		0.1	%
					—		1,000,000		490,000

F-9

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Smile Doctors, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 6.000%, 1.000% Floor (4) (6)	10/6/2022		13,701,350		13,689,162		13,546,525		2.5	%
					13,701,350		13,689,162		13,546,525
Sound Point CLO XX, Ltd.	Multi-Sector Holdings	Subordinated Notes 9.402% effective yield (4) (7) (8) (9)	7/26/2031		4,489,000		3,174,273		2,718,987		0.5	%
					4,489,000		3,174,273		2,718,987
Team Car Care, LLC	Automotive	Senior Secured First Lien Term Loan LIBOR + 8.000%, 1.000% Floor (4) (6)	2/23/2023		13,075,430		13,075,430		12,996,978		2.4	%
					13,075,430		13,075,430		12,996,978
Team Services Group	Services: Consumer	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (4) (12)	12/20/2027		9,962,469		9,765,817		9,925,608		1.8	%
		Senior Secured Second Lien Term Loan LIBOR + 9.000%, 1.000% Floor (4) (12)	12/18/2028		5,000,000		4,862,313		5,041,000		0.9	%
					14,962,469		14,628,130		14,966,608
The Octave Music Group, Inc.	Media: Diversified & Production	Senior Secured First Lien Term Loan LIBOR + 5.250%, 1.000% Floor, 0.75% PIK (4) (12)	5/29/2025		7,655,172		7,601,135		7,578,621		1.4	%
					7,655,172		7,601,135		7,578,621
Thermacell Repellents, Inc.	Consumer Goods: Durable	Revolving Credit Facility LIBOR + 6.250%, 1.000% Floor (4) (12)	12/4/2026		—		—		—		—	%
		Senior Secured First Lien Term Loan LIBOR + 6.250%, 1.000% Floor (4) (12) (14)	12/4/2026		2,787,150		2,742,830		2,737,279		0.5	%
					2,787,150		2,742,830		2,737,279
Time Manufacturing Acquisition, LLC	Capital Equipment	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (4)	2/3/2023		2,452,942		2,452,771		2,438,224		0.4	%
					2,452,942		2,452,771		2,438,224
True Religion Apparel, Inc.	Retail	Common units - 2.713 units (13)			—		—		—		—	%
		Preferred Equity - 2.818 units (13)			—		12,094		—		—	%
					—		12,094		—
Velocity Pooling Vehicle, LLC	Automotive	Common Units - 4,676 units (4) (13)			—		259,938		34,649		—	%
		Warrants - 5,591 warrants (4) (13)	3/30/2028		—		310,802		41,429		—	%
					—		570,740		76,078
Vision Solutions, Inc.	High Tech Industries	Senior Secured Second Lien Term Loan LIBOR + 7.250%, 1.000% Floor, 0.75% (6)	4/23/2029		6,500,000		6,438,973		6,502,600		1.2	%
					6,500,000		6,438,973		6,502,600
VOYA CLO 2015-2, LTD.	Multi-Sector Holdings	Subordinated Notes 0.026% effective yield (4) (7) (8) (9)	7/19/2028		10,735,659		4,846,889		3,674,816		0.7	%
					10,735,659		4,846,889		3,674,816
VOYA CLO 2016-2, LTD.	Multi-Sector Holdings	Subordinated Notes 7.618% effective yield (4) (7) (8) (9)	7/19/2028		11,088,290		6,341,789		4,996,383		0.9	%
					11,088,290		6,341,789		4,996,383
Walker Edison Furniture Company LLC	Consumer Goods: Durable	Common Units - 2,000 units (4) (13)			—		—		3,148,399		0.6	%
					—		—		3,148,399
Watermill-QMC Midco, Inc.	Automotive	Equity - 1.62% partnership interest (4) (13)			—		902,277		—		—	%
					—		902,277		—
Wawona Delaware Holdings, LLC	Beverage & Food	Senior Secured First Lien Term Loan LIBOR + 4.750% (4) (6)	9/11/2026		45,050		43,055		42,122		—	%
					45,050		43,055		42,122
West Dermatology, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 7.500%, 1.000% Floor (4) (6)	2/11/2025		1,667,425		1,667,425		1,667,425		0.3	%
		Senior Secured First Lien Delayed Draw Term Loan LIBOR + 7.500%, 1.000% Floor (4) (6) (14)	2/11/2025		866,447		874,331		886,663		0.2	%
		Revolving Credit Facility LIBOR + 6.000%, 1.000% Floor, 0.75% PIK (4) (6) (14)	2/11/2025		220,994		220,994		220,994		—	%
		Senior Secured First Lien Term Loan LIBOR + 6.000%, 1.000% Floor, 0.750% PIK (4) (6) (14)	2/11/2025		4,727,338		4,724,870		4,727,338		0.9	%
					7,482,204		7,487,620		7,502,420
Wok Holdings Inc.	Retail	Senior Secured First Lien Term Loan LIBOR + 6.250% (4) (12)	3/1/2026		48,750		34,735		48,038		—	%
					48,750		34,735		48,038
Total non-controlled/non-affiliated investments						$	451,491,435	$	423,154,580		77.8	%

F-10

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Non-controlled/affiliated investments –	3.5%
1888 Industrial Services, LLC	Energy: Oil & Gas	Revolving Credit Facility LIBOR + 5.000%, 1.000% Floor (4) (6) (14)	9/30/2021		1,243,924		1,243,924		1,081,846		0.2	%
		Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (4) (5) (12)	9/30/2021		431,176		431,176		—		—	%
		Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor, PIK (4) (5) (6)	9/30/2021		3,698,023		3,315,574		—		—	%
		Senior Secured First Lien Term Loan LIBOR + 8.000%, 1.000% Floor, PIK (4) (5) (6)	9/30/2021		9,935,291		6,816,029		—		—	%
		Units - 6,122.765 units (4) (7) (13)			—		—		—		—	%
					15,308,414		11,806,703		1,081,846
Caddo Investors Holdings 1 LLC	Forest Products & Paper	Equity - 12.250% LLC Interest (4) (16)			—		5,072,149		6,986,351		1.3	%
					—		5,072,149		6,986,351
Charming Charlie LLC	Retail	Senior Secured First Lien Delayed Draw Term Loan 20.000% (5)	5/28/2022		769,967		769,967		396,225		0.1	%
		Senior Secured First Lien Term Loan LIBOR + 10.000%, 1.000% Floor (5) (6)	4/24/2023		7,590,773		5,859,128		—		—	%
		Senior Secured First Lien Term Loan 20.000% (5)	5/15/2022		138,517		138,517		71,281		—	%
		Common Stock - 34,923,249 shares (7) (13)			—		—		—		—	%
					8,499,257		6,767,612		467,506
Dynamic Energy Services International LLC	Energy: Oil & Gas	Senior Secured First Lien Term Loan 13.500% PIK (4) (5) (6)	12/31/2021		7,378,116		3,810,060		—		—	%
		Common Units - 6,500,000 shares (5) (13)			—		—		—		—	%
					7,378,116		3,810,060		—
Kemmerer Operations, LLC	Metals & Mining	Senior Secured First Lien Term Loan 15.000% PIK (4)	6/21/2023		2,381,985		2,381,985		2,381,985		0.4	%
		Senior Secured First Lien Delayed Draw Term Loan 15.000% PIK (4) (14)	6/21/2023		163,915		163,915		163,915		—	%
		Common Units - 6.7797 units (4) (13)			—		962,718		1,411,308		0.3	%
					2,545,900		3,508,618		3,957,208
MCM 500 East Pratt Holdings, LLC	Banking, Finance, Insurance & Real Estate	Equity - 5,000,000 units (7)			—		5,000,000		6,350,000		1.2	%
					—		5,000,000		6,350,000
Total non-controlled/affiliated investments(15)							35,965,142		18,842,911		3.5	%
Controlled investments	18.8%
Black Angus Steakhouses, LLC	Hotel, Gaming & Leisure	Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor, PIK (4) (5) (6)	6/30/2022		23,265,757		20,457,589		10,751,106		2.0	%
		Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor (4) (6)	6/30/2022		1,897,321		1,897,321		1,897,321		0.3	%
		Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor (4) (12) (14)	6/30/2022		3,750,000		3,750,000		3,750,000		0.7	%
		Equity - 44.60% of outstanding equity (4) (7) (13)			—		—		—		—	%
					28,913,078		26,104,910		16,398,427
Sierra Senior Loan Strategy JV I LLC	Multi-Sector Holdings	Equity - 89.01% ownership of SIC Senior Loan Strategy JV I LLC (7) (16)			—		110,050,000		85,872,235		15.8	%
					—		110,050,000		85,872,235
Total controlled investments(15)							136,154,910		102,270,662		18.8	%
Total investments						$	623,611,487	$	544,268,153		100.0	%
Money Market Fund	8.6%
Federated Institutional Prime Obligations Fund		Money Market 0.010% (17)		$	18,473,764	$	18,473,764	$	18,473,764		3.4	%
State Street Institutional Liquid Reserves Fund		Money Market 0.050% (17)			28,572,714		28,578,428		28,575,571		5.3	%
Total money market fund				$	47,046,478	$	47,052,192	$	47,049,335		8.6	%

F-11

(1) All of the Company's investments are domiciled in the United States except for AMMC CLO 22, Limited Series 2018-22A, AMMC CLO 23, Ltd. Series 2020-23A, Apidos CLO XXIV, Series 2016-24A, Dryden 43 Senior Loan Fund, Series 2016-43A, Dryden 49 Senior Loan Fund, 2017-49A, Magnetite XIX, Limited, Sound Point CLO XX, Ltd., VOYA CLO 2016-2, LTD., and VOYA CLO 2015-2, LTD., which are all domiciled in the Cayman Islands. All foreign investments were denominated in US Dollars.

(2) Unless otherwise indicated, all securities are valued using significant unobservable inputs, which are categorized as Level 3 assets under the definition of ASC 820 fair value hierarchy.

(3) Percentage is based on net assets of $544,041,783 as of September 30, 2021.

(4)	An affiliated fund that is managed by an affiliate of SIC Advisors LLC also holds an investment in this security.
(5)	The investment was on non-accrual status as of September 30, 2021.
(6)	The interest rate on these loans is subject to a base rate plus 3 Month "3M" LIBOR, which at September 30, 2021 was 0.13%. The interest rate is subject to a minimum LIBOR floor.

(7)   The investment is not a qualifying asset under Section 55 of the Investment Company Act of 1940 (the "1940 Act"). Non-qualifying assets represent 26.9% of the Company's portfolio at fair value.

(8) Securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities represent a fair value of  $54,369,859 or 10.0% of net assets, and a combined cost of $57,709,211 as of September 30, 2021 and are considered restricted securities. The acquisition date and fair value of each restricted security are as follows;

Company	Type of Investment	Acquisition Date	Fair Value
AMMC CLO 22, Limited Series 2018-22A	Subordinated Notes	03/08/18	4,857,517
AMMC CLO 23, Ltd. Series 2020-23A	Subordinated Notes	11/12/20	1,646,600
Apidos CLO XXIV, Series 2016-24A	Subordinated Notes	07/22/16	9,252,254
Dryden 43 Senior Loan Fund, Series 2016-43A	Subordinated Notes	07/15/16	2,300,872
Dryden 49 Senior Loan Fund, Series 2017-49A	Subordinated Notes	06/19/17	11,103,407
Magnetite XIX, Limited	Subordinated Notes	03/24/21	5,250,000
Magnetite XIX, Limited	Subordinated Notes	06/29/17	8,569,023
Sound Point CLO XX, Ltd.	Subordinated Notes	06/27/18	2,718,987
VOYA CLO 2015-2, LTD.	Subordinated Notes	03/22/19	3,674,816
VOYA CLO 2016-2, LTD.	Subordinated Notes	06/07/16	4,996,383

(9) This investment is in the equity class of a collateralized loan obligation ("CLO"). The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield is based on the current projections of this excess cash flow taking into account assumptions that have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.

(10) The interest rate on these loans is subject to a base rate plus 6 month "6M" LIBOR, which at September 30, 2021, 2021 was 0.16%. The interest rate is subject to a minimum LIBOR floor.

(11)	The investment is past due as of September 30, 2021
(12)	The interest rate on these loans is subject to a base rate plus 1 Month "1M" LIBOR, which at September 30, 2021 was 0.08%. The interest rate is subject to a minimum LIBOR floor.

(13)	Security is non-income producing.
(14)	The investment has an unfunded commitment as of September 30, 2021. For further details see Note 10. Fair value includes an analysis of the unfunded commitment.

(15) Non-controlled/affiliated investments are defined by the 1940 Act as investments in companies in which the Company owns at least 5% but no more than 25% of the voting securities or we are under common control with such portfolio company. Controlled investments are defined by the 1940 Act as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

(16)	As a practical expedient, the Company uses NAV to determine the fair value of this investment.
(17)	Represents securities in Level 1 of the valuation hierarchical levels. Money Market investments are deemed to be cash equivalents and are not included in the ASC 820 table (see Note 4).

See accompanying notes to consolidated financial statements.

F-12

Sierra Income Corporation

Consolidated Schedule of Investments

As of December 31, 2020

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Non-controlled/non-affiliated investments –	89.9%
AAAHI Acquisition Corporation	Transportation: Consumer	Senior Secured First Lien Term Loan LIBOR + 8.250%, 1.000% Floor (4) (5) (13)	12/10/2023	$	7,110,546	$	6,975,416	$	4,977,382		0.9	%
					7,110,546		6,975,416		4,977,382
Alpine SG, LLC	High Tech Industries	Senior Secured First Lien Term Loan LIBOR + 8.500%, 1.000% Floor (5) (6)	11/16/2022		1,262,051		1,230,864		1,298,524		0.2	%
		Senior Secured First Lien Delayed Draw Term Loan LIBOR + 5.750%, 1.000% Floor (5) (6)	11/16/2022		6,165,725		6,165,633		6,102,218		1.2	%
		Senior Secured First Lien Term Loan LIBOR + 5.750%, 1.000% Floor (5) (6)	11/16/2022		12,529,258		12,517,772		12,400,207		2.4	%
		Senior Secured First Lien Revolving Credit Facility LIBOR + 5.750%, 1.000% Floor (5) (6)	11/16/2022		1,000,000		1,000,000		989,700		0.2	%
					20,957,034		20,914,269		20,790,649
American Dental Partners, Inc.	Healthcare & Pharmaceuticals	Senior Secured Second Lien Term Loan LIBOR + 8.500%, 1.000% Floor (4) (5)	9/25/2023		4,893,750		4,893,750		4,704,362		0.9	%
					4,893,750		4,893,750		4,704,362
Amerijet Holdings, Inc.	Transportation: Cargo	Senior Secured First Lien Term Loan LIBOR + 8.000%, 1.000% Floor (5) (6)	7/15/2021		2,952,518		2,952,518		2,952,518		0.6	%
					2,952,518		2,952,518		2,952,518
AMMC CLO 22, Limited Series 2018-22A	Multi-Sector Holdings	Subordinated Notes 13.429% effective yield (7) (8) (9)	4/25/2031		7,222,000		5,402,828		4,786,019		0.9	%
					7,222,000		5,402,828		4,786,019
AMMC CLO 23, Ltd. Series 2020-23A	Multi-Sector Holdings	Subordinated Notes 19.100% effective yield (7) (8) (9)	10/17/2031		2,000,000		1,688,071		1,688,000		0.3	%
					2,000,000		1,688,071		1,688,000
Answers Finance, LLC	High Tech Industries	Common Stock - 388,533 shares (10)			—		5,076,376		493,437		0.1	%
					—		5,076,376		493,437
Apidos CLO XXIV, Series 2016-24A	Multi-Sector Holdings	Subordinated Notes 8.894% effective yield (5) (7) (8) (9)	7/20/2027		18,357,647		10,342,024		8,402,295		1.6	%
					18,357,647		10,342,024		8,402,295
Arrow International Inc.	Hotel, Gaming & Leisure	Senior Secured First Lien Term Loan LIBOR + 7.250%, 1.250% Floor (6)	12/21/2025		10,000,000		10,000,000		10,000,000		1.9	%
					10,000,000		10,000,000		10,000,000
Avantor, Inc.	Wholesale	Common Stock - 27,252 shares (5) (8) (10) (11)			—		467,171		767,144		0.1	%
					—		467,171		767,144
Aviation Technical Services, Inc.	Aerospace & Defense	Senior Secured Second Lien Term Loan LIBOR + 8.500%, 1.000% Floor (4) (5)	3/31/2022		25,000,000		25,000,000		21,795,000		4.1	%
					25,000,000		25,000,000		21,795,000

F-13

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
BRG Sports, Inc.	Consumer Goods: Durable	Senior Secured First Lien Term Loan LIBOR + 6.250%, 1.000% Floor (5) (6)	6/15/2023		3,480,384		3,474,606		3,445,232		0.7	%
					3,480,384		3,474,606		3,445,232
Brook & Whittle Holding Corp.	Containers, Packaging & Glass	Senior Secured First Lien Delayed Draw Term Loan LIBOR + 5.250%, 1.000% Floor (4) (5)	10/17/2024		699,967		697,464		682,888		0.1	%
		Senior Secured First Lien Term Loan LIBOR + 5.250%, 1.000% Floor (4) (5)	10/17/2024		2,976,219		2,965,575		2,903,599		0.6	%
					3,676,186		3,663,039		3,586,487
Callaway Golf Co.	Consumer Goods: Durable	Senior Secured First Lien Term Loan LIBOR + 4.500%, 1.000% Floor (5) (6)	1/4/2026		46,000		45,422		46,060		—	%
					46,000		45,422		46,060
CM Finance SPV LLC	Banking, Finance, Insurance & Real Estate	Subordinated Notes 3.000% (5)	6/24/2021		35,600		35,600		35,600		—	%
					35,600		35,600		35,600
CPI International, Inc.	Aerospace & Defense	Senior Secured Second Lien Term Loan LIBOR + 7.250%, 1.000% Floor (5) (6)	7/28/2025		8,575,302		8,558,896		7,928,725		1.5	%
					8,575,302		8,558,896		7,928,725
CT Technologies Intermediate Holdings, Inc.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (5) (6)	12/16/2025		7,000,000		6,965,245		6,965,000		1.3	%
					7,000,000		6,965,245		6,965,000
DataOnline Corp.	High Tech Industries	Revolving Credit Facility LIBOR + 6.250%, 1.000% Floor (4) (5) (12)	11/13/2025		1,821,429		1,821,429		1,765,929		0.3	%
		Senior Secured First Lien Term Loan LIBOR + 6.250%, 1.000% Floor (4) (5)	11/13/2025		14,850,000		14,850,000		14,465,385		2.8	%
					16,671,429		16,671,429		16,231,314
Delta Air Lines, Inc.	Transportation: Consumer	Senior Secured First Lien Notes 4.750% (5) (7) (8)	10/20/2028		1,000,000		1,000,000		1,090,700		0.2	%
					1,000,000		1,000,000		1,090,700
Dryden 38 Senior Loan Fund, Series 2015-38A	Multi-Sector Holdings	Subordinated Notes 11.373% effective yield (7) (8) (9)	7/15/2027		7,000,000		4,308,139		3,598,000		0.7	%
					7,000,000		4,308,139		3,598,000
Dryden 43 Senior Loan Fund, Series 2016-43A	Multi-Sector Holdings	Subordinated Notes 8.262% effective yield (5) (7) (8) (9)	7/20/2029		3,620,000		2,513,635		1,901,586		0.4	%
					3,620,000		2,513,635		1,901,586
Dryden 49 Senior Loan Fund, Series 2017-49A	Multi-Sector Holdings	Subordinated Notes 9.989% effective yield (5) (7) (8) (9)	7/18/2030		17,233,288		12,375,842		9,498,988		1.8	%
					17,233,288		12,375,842		9,498,988
Envision Healthcare Corporation	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 3.750% (5) (6)	10/10/2025		49,000		33,226		40,734		—	%
					49,000		33,226		40,734
First Boston Construction Holdings, LLC	Banking, Finance, Insurance & Real Estate	Senior Secured First Lien Notes 12.000% (5)	2/23/2023		7,473,750		7,473,750		7,458,055		1.4	%
		Preferred Equity - 2,304,406 units (5) (10)			—		1,868,437		1,307,906		0.2	%
					7,473,750		9,342,187		8,765,961
Friedrich Holdings, Inc.	Construction & Building	Senior Secured First Lien Term Loan LIBOR + 6.000%, 1.000% Floor (5) (6)	2/7/2023		10,421,300		10,421,300		10,263,938		2.0	%
					10,421,300		10,421,300		10,263,938
GK Holdings, Inc.	Services: Business	Senior Secured Second Lien Term Loan LIBOR + 10.250%, 1.000% Floor (4) (13)	1/20/2022		10,000,000		10,000,000		5,500,000		1.0	%
					10,000,000		10,000,000		5,500,000

F-14

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Glass Mountain Pipeline Holdings, LLC	Energy: Oil & Gas	Senior Secured First Lien Term Loan LIBOR + 4.500%, 1.000% Floor (5) (6) (13)	12/23/2024		48,625		23,389		24,434		—	%
					48,625		23,389		24,434
Golden West Packaging Group LLC	Forest Products & Paper	Senior Secured First Lien Term Loan LIBOR + 5.250%, 1.000% Floor (5) (6)	6/20/2023		1,405,738		1,405,738		1,404,332		0.3	%
					1,405,738		1,405,738		1,404,332
Holland Acquisition Corp.	Energy: Oil & Gas	Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor (4) (13) (14)	5/29/2020		3,857,305		3,733,979		108,310		—	%
					3,857,305		3,733,979		108,310
Hylan Datacom & Electrical LLC	Construction & Building	Senior Secured First Lien Term Loan LIBOR + 10.000%, 1.000% Floor (4) (5)	7/25/2022		15,255,390		15,255,390		10,983,881		2.1	%
					15,255,390		15,255,390		10,983,881
Impact Group, LLC	Services: Business	Senior Secured First Lien Term Loan LIBOR + 7.370%, 1.000% Floor (4) (5)	6/27/2023		5,734,462		5,734,462		5,548,092		1.1	%
					5,734,462		5,734,462		5,548,092
Innovative XCessories & Services, LLC	Automotive	Senior Secured First Lien Term Loan LIBOR + 5.200%, 1.000% Floor (4) (5)	3/5/2027		2,976,933		2,950,524		2,979,016		0.6	%
					2,976,933		2,950,524		2,979,016
Interflex Acquisition Company, LLC	Containers, Packaging & Glass	Senior Secured First Lien Term Loan LIBOR + 8.000%, 1.000% Floor (5) (6)	8/18/2022		11,553,578		11,543,801		11,533,937		2.2	%
					11,553,578		11,543,801		11,533,937
Iqor US Inc.	Services: Business	Senior Secured First Lien Term Loan LIBOR + 7.500%, 1.000% Floor (5) (6)	11/19/2024		3,471,136		3,388,625		3,401,713		0.6	%
		Senior Secured First Lien Term Loan LIBOR + 7.500%, 1.000% Floor (5) (6)	11/19/2025		7,734,435		7,734,435		7,734,435		1.5	%
		Equity - 246,857 Shares			—		2,962,285		3,085,713		0.6	%
					11,205,571		14,085,345		14,221,861
Isagenix International, LLC	Wholesale	Senior Secured First Lien Term Loan LIBOR + 5.750%, 1.000% Floor (4) (5)	6/16/2025		1,776,911		1,745,748		978,900		0.2	%
					1,776,911		1,745,748		978,900
Isola USA Corp.	High Tech Industries	Senior Secured Second Lien Term Loan LIBOR + 9.500%, 1.000% Floor, PIK (4) (12) (13)	1/2/2023		11,331,641		7,016,631		8,498,730		1.6	%
		Common Units - 10,283,782 units (10)			—		—		—		—	%
					11,331,641		7,016,631		8,498,730
Ivanti Software, Inc.	High Tech Industries	Senior Secured Second Lien Term Loan LIBOR + 8.500%, 1.000% Floor (5) (6)	12/1/2028		6,000,000		6,000,000		5,947,800		1.1	%
					6,000,000		6,000,000		5,947,800
JFL-WCS Partners, LLC	Environmental Industries	Preferred units - 618,876 6.000%, PIK (5)			—		659,447		709,806		0.1	%
		Common Units - 70,412 units (5) (10)			—		98,052		5,069,664		1.0	%
					—		757,499		5,779,470

F-15

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Keystone Acquisition Corp.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 5.250%, 1.000% Floor (4) (5)	5/1/2024		1,784,130		1,736,823		1,614,638		0.3	%
		Senior Secured Second Lien Term Loan LIBOR + 9.250%, 1.000% Floor (4) (5)	5/1/2025		7,000,000		6,921,915		6,127,800		1.2	%
					8,784,130		8,658,738		7,742,438
LogMeIn, Inc.	High Tech Industries	Senior Secured First Lien Term Loan LIBOR + 7.750%, 1.000% Floor (5) (6) (8)	8/31/2027		1,000,000		980,865		995,300		0.2	%
					1,000,000		980,865		995,300
Magnetite XIX, Limited	Multi-Sector Holdings	Subordinated Notes LIBOR + 7.610% (4) (7) (8) (9)	7/17/2030		2,000,000		1,893,387		1,745,800		0.3	%
		Subordinated Notes 9.779% effective yield (5) (7) (8) (9)	7/17/2030		13,730,209		9,451,985		7,493,948		1.4	%
					15,730,209		11,345,372		9,239,748
Midwest Physician Administrative Services, LLC	Healthcare & Pharmaceuticals	Senior Secured Second Lien Term Loan LIBOR + 7.000%, 0.750% Floor (6)	8/15/2025		2,000,000		1,935,192		1,945,000		0.4	%
					2,000,000		1,935,192		1,945,000
Novetta Solutions, LLC	High Tech Industries	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (5) (6)	10/17/2022		1,560,779		1,522,514		1,521,291		0.3	%
		Senior Secured Second Lien Term Loan LIBOR + 8.500%, 1.000% Floor (5) (6)	10/16/2023		11,000,000		10,951,758		10,574,300		2.0	%
					12,560,779		12,474,272		12,095,591
Offen Inc.	Transportation: Cargo	Senior Secured First Lien Term Loan LIBOR + 5.000% (5) (6)	6/21/2026		2,893,982		2,871,192		2,793,272		0.5	%
		Senior Secured First Lien Term Loan LIBOR + 5.000% (5) (6)	6/21/2026		1,061,947		1,053,584		1,024,991		0.2	%
					3,955,929		3,924,776		3,818,263
Path Medical, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 13.000%, 1.000% Floor, PIK (4) (5) (6) (13)	10/11/2021		10,752,249		8,860,931		1,075,225		0.2	%
		Senior Secured First Lien Term Loan LIBOR + 9.500%, 1.000% Floor, PIK (4) (5) (6)	10/11/2021		7,943,176		7,943,176		7,943,176		1.5	%
		Warrants - 36,716 warrants (5) (10)	1/9/2027		—		669,709		—		—	%
					18,695,425		17,473,816		9,018,401
PetroChoice Holdings, Inc.	Chemicals, Plastics & Rubber	Senior Secured Second Lien Term Loan LIBOR + 8.750%, 1.000% Floor (4) (5)	8/21/2023		9,000,000		9,000,000		8,010,000		1.5	%
					9,000,000		9,000,000		8,010,000
Polymer Solutions Group Holdings, LLC	Chemicals, Plastics & Rubber	Senior Secured First Lien Term Loan LIBOR + 7.000%, 1.000% Floor (5) (6)	6/30/2021		1,064,355		1,060,861		1,053,498		0.2	%
					1,064,355		1,060,861		1,053,498
Project Silverback Holdings Corp.	High Tech Industries	Senior Secured First Lien Term Loan LIBOR + 3.500%, 1.000% Floor (4)	8/21/2024		4,837,500		4,403,234		4,819,601		0.9	%
					4,837,500		4,403,234		4,819,601
Proppants Holdings, LLC	Energy: Oil & Gas	Common Units - 161,852 units (10)			—		874,363		323,704		0.1	%
		Common Units - 161,852 units (10)			—		8,832		—		—	%
					—		883,195		323,704
PT Network, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 5.500%, 1.000% Floor, 2.00% PIK (5) (17)	11/30/2023		8,072,834		7,729,742		7,427,007		1.4	%
		Membership Units - 1.441 units (5) (10)			—		—		—		—	%
					8,072,834		7,729,742		7,427,007

F-16

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
RateGain Technologies, Inc.	Hotel, Gaming & Leisure	Subordinated Notes (5) (10) (14)	7/31/2020		440,050		440,049		—		—	%
		Subordinated Notes (5) (10)	7/31/2021		476,190		476,190		—		—	%
					916,240		916,239		—
Redwood Services Group, LLC	Services: Business	Senior Secured First Lien Term Loan LIBOR + 8.500%, 1.000% Floor (5) (6)	6/6/2023		4,000,000		4,000,000		4,000,000		0.8	%
		Senior Secured First Lien Term Loan LIBOR + 6.000%, 1.000% Floor (5) (6)	6/6/2023		12,611,712		12,611,712		12,267,412		2.3	%
		Senior Secured First Lien Term Loan LIBOR + 8.500%, 1.000% Floor (5) (6)	6/6/2023		10,730,528		10,713,091		10,472,305		2.0	%
		Revolving Credit Facility LIBOR + 6.000%, 1.000% Floor (5) (6) (12)	6/6/2023		287,500		287,500		208,725		—	%
					27,629,740		27,612,303		26,948,442
Resolute Investment Managers, Inc.	Banking, Finance, Insurance & Real Estate	Senior Secured Second Lien Term Loan LIBOR + 8.000%, 1.000% Floor (5) (6)	4/30/2025		6,000,000		5,970,877		5,943,600		1.1	%
					6,000,000		5,970,877		5,943,600
Rhombus Cinema Holdings, LP	Media: Diversified & Production	Preferred Equity - 7,449 shares 10.000% PIK (5) (10) (13)			—		4,584,207		—		—	%
		Common Units - 3,163 units (5) (7) (10)			—		2,864,831		—		—	%
		Common Units - 3,163 units (5) (7) (10)			—		297,962		—		—	%
					—		7,747,000		—
RTIC Subsidiary Holdings, LLC	Consumer Goods: Durable	Senior Secured First Lien Term Loan LIBOR + 7.750%, 1.250% Floor (4) (5) (12)	9/1/2025		10,000,000		10,000,000		10,000,000		1.9	%
		Preferred Class A units - 142.50 units (10)			—		142,500		142,500		—	%
		Preferred Class B units - 142.50 units (10)			—		142,500		142,500		—	%
		Common units - 150 units (10)			—		15,000		15,000		—	%
					10,000,000		10,300,000		10,300,000
SavATree, LLC	Environmental Industries	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (4) (5)	6/2/2022		4,283,931		4,283,931		4,273,221		0.8	%
					4,283,931		4,283,931		4,273,221
SFP Holding, Inc.	Construction & Building	Senior Secured First Lien Term Loan LIBOR + 6.250%, 1.000% Floor (4) (5) (12)	9/1/2022		16,560,532		16,540,362		16,560,532		3.1	%
		Equity - 0.803% of outstanding equity (5) (10)			—		711,698		548,007		0.1	%
					16,560,532		17,252,060		17,108,539
Simplified Logistics, LLC	Services: Business	Senior Secured First Lien Term Loan LIBOR + 6.500%, 1.000% Floor (4) (5)	2/28/2022		17,323,831		17,323,831		17,058,776		3.2	%
		Senior Secured First Lien Term Loan LIBOR + 6.500%, 1.000% Floor (4) (5)	2/28/2022		971,277		971,277		956,417		0.2	%
		Revolving Credit Facility LIBOR + 6.500%, 1.000% Floor (4) (5)	2/28/2022		3,533,333		3,533,333		3,482,807		0.7	%
					21,828,441		21,828,441		21,498,000
SMART Financial Operations, LLC	Retail	Preferred Equity - 1,000,000 units (5) (10)			—		1,000,000		490,000		0.1	%
					—		1,000,000		490,000

F-17

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
Smile Doctors, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 6.000%, 1.000% Floor (4) (5)	10/6/2022		13,805,148		13,786,625		13,587,027		2.6	%
					13,805,148		13,786,625		13,587,027
Sound Point CLO XX, Ltd.	Multi-Sector Holdings	Subordinated Notes 8.553% effective yield (5) (7) (8) (9)	7/26/2031		4,489,000		3,508,513		2,824,030		0.5	%
					4,489,000		3,508,513		2,824,030
Starfish Holdco, LLC	High Tech Industries	Senior Secured Second Lien Term Loan LIBOR + 9.000%, 1.000% Floor (4) (5)	8/18/2025		2,000,000		1,982,268		1,919,600		0.4	%
					2,000,000		1,982,268		1,919,600
Team Car Care, LLC	Automotive	Senior Secured First Lien Term Loan LIBOR + 8.000%, 1.000% Floor (4) (5)	2/23/2023		13,624,819		13,624,819		13,529,446		2.6	%
					13,624,819		13,624,819		13,529,446
Team Services Group	Services: Consumer	Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (5) (6)	12/20/2027		5,000,000		4,850,000		4,825,000		0.9	%
		Senior Secured Second Lien Term Loan LIBOR + 9.000%, 1.000% Floor (5) (6)	12/18/2028		5,000,000		4,850,000		4,900,000		0.9	%
					10,000,000		9,700,000		9,725,000
The Octave Music Group, Inc.	Media: Diversified & Production	Senior Secured First Lien Term Loan LIBOR + 5.250%, 1.000% Floor, 0.75% PIK (5) (6)	5/29/2025		7,793,103		7,727,145		6,780,000		1.3	%
					7,793,103		7,727,145		6,780,000
True Religion Apparel, Inc.	Retail	Senior Secured First Lien Term Loan 10.000% (13)	10/27/2022		179,437		133,654		12,094		—	%
		Common Stock - 2,448 shares (10)			—		—		—		—	%
		Warrants - 1,122 warrants (10)			—		—		—		—	%
					179,437		133,654		12,094
Velocity Pooling Vehicle, LLC	Automotive	Senior Secured First Lien Term Loan LIBOR + 11.000%, 1.000% Floor (4) (5)	4/28/2023		871,784		838,397		871,784		0.2	%
		Common Units - 4,676 units (5) (10)			—		259,937		11,035		—	%
		Warrants - 5,591 warrants (5) (10)	3/30/2028		—		310,802		13,195		—	%
					871,784		1,409,136		896,014
VOYA CLO 2015-2, LTD.	Multi-Sector Holdings	Subordinated Notes 0.516% effective yield (5) (7) (8) (9)	7/19/2028		10,735,659		5,792,260		3,657,639		0.7	%
					10,735,659		5,792,260		3,657,639
VOYA CLO 2016-2, LTD.	Multi-Sector Holdings	Subordinated Notes 2.808% effective yield (5) (7) (8) (9)	7/19/2028		11,088,290		7,333,317		4,407,595		0.8	%
					11,088,290		7,333,317		4,407,595
Walker Edison Furniture Company LLC	Consumer Goods: Durable	Senior Secured First Lien Term Loan LIBOR + 8.750%, 1.000% Floor (4) (5)	9/26/2024		1,975,000		1,975,000		1,975,000		0.4	%
		Senior Secured First Lien Term Loan LIBOR + 6.250%, 1.000% Floor (4) (5)	9/26/2024		14,250,000		14,250,000		14,250,000		2.7	%
		Common Units - 2,000 units (5) (10)			—		2,000,000		11,000,000		2.1	%
					16,225,000		18,225,000		27,225,000
Watermill-QMC Midco, Inc.	Automotive	Equity - 1.62% partnership interest (5) (10)			—		902,277		—		—	%
					—		902,277		—
Wawona Delaware Holdings, LLC	Beverage & Food	Senior Secured First Lien Term Loan LIBOR + 4.750% (4) (5)	9/11/2026		49,375		46,869		48,141		—	%
					49,375		46,869		48,141
West Dermatology, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan LIBOR + 7.500%, 1.000% Floor (5) (6) (12)	2/11/2025		726,672		726,672		613,498		0.1	%
		Revolving Credit Facility LIBOR + 6.000%, 1.000% Floor, 0.75% PIK (5) (6)	2/11/2025		1,657,459		1,657,459		1,614,033		0.3	%
		Senior Secured First Lien Term Loan LIBOR + 6.000%, 1.000% Floor, 0.750% PIK (5) (6)	2/11/2025		4,739,503		4,739,503		4,617,698		0.9	%
					7,123,634		7,123,634		6,845,229
Wok Holdings Inc.	Retail	Senior Secured First Lien Term Loan LIBOR + 6.250%, (5) (6)	3/1/2026		49,125		33,080		42,758		—	%
					49,125		33,080		42,758
Total non-controlled/non-affiliated investments						$	521,483,006	$	472,813,820		89.9	%

F-18

Company(1)(2)	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value		% of Net Assets(3)
1888 Industrial Services, LLC	Energy: Oil & Gas	Revolving Credit Facility LIBOR + 5.000%, 1.000% Floor (4) (5) (12)	9/30/2021		1,243,924		1,243,924		1,243,924		0.2	%
		Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor (4) (5) (13)	9/30/2021		431,176		403,717		431,176		0.1	%
		Senior Secured First Lien Term Loan LIBOR + 5.000%, 1.000% Floor, PIK (4) (5) (13)	9/30/2021		3,534,740		3,315,574		—		—	%
		Senior Secured First Lien Term Loan LIBOR + 8.000%, 1.000% Floor, PIK (4) (5) (13)	9/30/2021		9,286,929		6,816,029		—		—	%
		Units - 6,122.765 units (5) (10)			—		—		—		—	%
					14,496,769		11,779,244		1,675,100
Black Angus Steakhouses, LLC	Hotel, Gaming & Leisure	Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor, PIK (5) (6) (13)	6/30/2022		21,573,552		20,457,589		9,060,892		1.7	%
		Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor (5) (6)	6/30/2022		1,897,321		1,897,321		1,897,321		0.4	%
		Senior Secured First Lien Term Loan LIBOR + 9.000%, 1.000% Floor (6) (12)	6/30/2022		3,055,556		3,055,556		3,055,556		0.6	%
		Equity - 44.60% of outstanding equity (5) (10)			—		—		—		—	%
					26,526,429		25,410,466		14,013,769
Caddo Investors Holdings 1 LLC	Forest Products & Paper	Equity - 12.250% LLC Interest (5) (16)			—		5,072,149		6,366,372		1.2	%
					—		5,072,149		6,366,372
Charming Charlie LLC	Retail	Senior Secured First Lien Delayed Draw Term Loan 20.000% (13) (14)	5/15/2020		769,967		769,968		396,225		0.1	%
		Senior Secured First Lien Term Loan LIBOR + 10.000%, 1.000% Floor (4) (13)	4/24/2023		7,590,773		5,859,128		—		—	%
		Senior Secured First Lien Term Loan 20.000% (13) (14)	5/15/2020		138,517		138,517		71,281		—	%
		Common Stock - 34,923,249 shares (10)			—		—		—		—	%
					8,499,257		6,767,613		467,506
Dynamic Energy Services International LLC	Energy: Oil & Gas	Senior Secured First Lien Term Loan 13.500% PIK (4) (5) (13)	12/31/2021		7,049,577		4,449,025		493,470		0.1	%
		Common Units - 6,500,000 shares (5) (10)			—		—		—		—	%
					7,049,577		4,449,025		493,470
Kemmerer Operations, LLC	Metals & Mining	Senior Secured First Lien Term Loan 15.000% PIK (5)	6/21/2023		2,130,353		2,130,353		2,130,353		0.4	%
		Senior Secured First Lien Delayed Draw Term Loan 15.000% PIK (5) (12)	6/21/2023		399,366		399,366		399,366		0.1	%
		Common Units - 6.7797 units (5) (10)			—		962,717		962,760		0.2	%
					2,529,719		3,492,436		3,492,479
MCM 500 East Pratt Holdings, LLC	Banking, Finance, Insurance & Real Estate	Equity - 5,000,000 units (8) (10)			—		5,000,000		7,350,000		1.4	%
					—		5,000,000		7,350,000
MCM Capital Office Park Holdings LLC	Banking, Finance, Insurance & Real Estate	Equity - 7,500,000 units (8) (10)			—		7,500,000		15,525,000		3.0	%
					—		7,500,000		15,525,000
Sierra Senior Loan Strategy JV I LLC	Multi-Sector Holdings	Equity - 89.01% ownership of SIC Senior Loan Strategy JV I LLC (8) (16)			—		110,050,000		81,788,964		15.6	%
					—		110,050,000		81,788,964
Total controlled/affiliated investments(15)						$	179,520,933	$	131,172,660		25.0	%
Total investments						$	701,003,939	$	603,986,480		114.9	%
Money Market Fund - 32.5%
Federated Institutional Prime Obligations Fund		Money Market 0.150% (11)			25,401,625		25,401,625		25,401,625		4.8	%
State Street Institutional Liquid Reserves Fund		Money Market 0.010% (11)			12,683,935		12,686,471		12,685,203		2.4	%
Total money market fund				$	38,085,560	$	38,088,096	$	38,086,828		7.2	%

F-19

(1) All of the Company's investments are domiciled in the United States except for AMMC CLO 22, Limited Series 2018-22A, AMMC CLO 23, Limited Series 2020-23A, Apidos CLO XXIV, Series 2016-24A, Dryden 38 Senior Loan Fund, Series 2015-38A, Dryden 43 Senior Loan Fund, Series 2016-43A, Dryden 49 Senior Loan Fund, 2017-49A, Magnetite XIX, Limited, Sound Point CLO XX, Ltd., VOYA CLO 2016-2, LTD., and VOYA CLO 2015-2, LTD., which are all domiciled in the Cayman Islands. All foreign investments were denominated in US Dollars.

(2) Unless otherwise indicated, all securities are valued using significant unobservable inputs, which are categorized as Level 3 assets under the definition of ASC 820 fair value hierarchy.

(3) Percentage is based on net assets of $525,740,939 as of December 31, 2020.

(4) The interest rate on these loans is subject to a base rate plus 3 Month "3M" LIBOR, which at December 31, 2020 was 0.24%. The interest rate is subject to a minimum LIBOR floor.

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

(6) The interest rate on these loans is subject to a base rate plus 1 Month "1M" LIBOR, which at December 31, 2020 was 0.14%. The interest rate is subject to a minimum LIBOR floor.

(7) Securities are exempt from registration under Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"). These securities represent a fair value of $51,094,601 or 9.7% of net assets as of December 31, 2020 and are considered restricted securities.

(8) The investment is not a qualifying asset under Section 55 of the Investment Company Act of 1940, as amended (the "1940 Act"). Non-qualifying assets represent 30.0% of the Company's portfolio at fair value.

(9) This investment is in the equity class of a collateralized loan obligation ("CLO"). The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield is based on the current projections of this excess cash flow taking into account assumptions that have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.

(10) Security is non-income producing.

(11) Represents securities in Level 1 in the ASC 820 table (see Note 4).

(12) The investment has an unfunded commitment as of December 31, 2020. For further details see Note 10. Fair value includes an analysis of the unfunded commitment.

(13) The investment was on non-accrual status as of December 31, 2020.

(14) The investment is past due as of December 31, 2020.

(15)	Affiliate Investments are defined by the 1940 Act as investments in companies in which the Company owns at least 5% but no more than 25% of the voting securities or we are under common control with such portfolio company. Control Investments are defined by the 1940 Act as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
(16)	As a practical expedient, the Company uses NAV to determine the fair value of this investment.
(17)	The interest rate on these loans is subject to a base rate plus 6 Month "6M" LIBOR, which at December 31, 2020 was 0.34%. The interest rate is subject to a minimum LIBOR floor.

See accompanying notes to consolidated financial statements.

F-20

SIERRA INCOME CORPORATION

Notes to Consolidated Financial Statements

September 30, 2021

(unaudited)

Note 1. Organization

Sierra Income Corporation (the “Company”) was incorporated under the general corporation laws of the State of Maryland on June 13, 2011 and formally commenced operations on April 17, 2012. The Company is an externally managed, non-diversified closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the "1940 Act"). The Company is externally managed by SIC Advisors LLC (“SIC Advisors”), an investment adviser registered with the Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). SIC Advisors is a wholly owned subsidiary of Medley LLC. On March 7, 2021, Medley LLC commenced a voluntary case (the “Medley Bankruptcy Case”) under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). See Note 14 for more information about the chapter 11 plan confirmed by the Bankruptcy Court on October 14, 2021 and that became effective on October 18, 2021.

The Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The Company’s fiscal year-end is December 31.

On April 17, 2012, the Company successfully reached its minimum escrow requirement and officially commenced operations by issuing 1,108,033 shares of common stock to SIC Advisors for gross proceeds of $10,000,000. On July 2, 2018, the Company’s board of directors determined to terminate the Company’s offering effective as of July 31, 2018. Through July 31, 2018, the Company sold a total of 108,727,717 shares of common stock, which includes shares issued as part of the distribution reinvestment plan (see Note 12) and the shares sold to SIC Advisors, for total gross proceeds of $1.0 billion. The proceeds from the issuance of common stock are presented in the Company’s Consolidated Statements of Changes in Net Assets and Consolidated Statements of Cash Flows and are presented net of selling commissions and dealer manager fees.

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

On July 2, 2020, the Company purchased STRF Holdings LLC ("STRF"), a wholly-owned subsidiary.

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

Agreement and Plan of Merger
On September 21, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Barings BDC, Inc., a Maryland corporation (“BBDC”), Mercury Acquisition Sub, Inc., a Maryland corporation and a direct wholly owned subsidiary of BBDC (“Acquisition Sub”), the Company and Barings LLC, a Delaware limited liability company and investment adviser to BBDC (“Barings”). The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement, Acquisition Sub will merge with and into the Company, with the Company continuing as the surviving company and as a wholly owned subsidiary of BBDC (the “First Merger”) and, immediately thereafter, the Company will merge with and into BBDC, with BBDC continuing as the surviving company (together with the First Merger, the “Merger”). The boards of directors of both BBDC and the Company, including all of the respective independent directors, have approved the Merger Agreement and the transactions contemplated therein. The parties to the Merger Agreement intend the Merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Code.

In the First Merger, each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the First Merger (excluding any shares cancelled pursuant to the Merger Agreement) will be converted into the right to receive (i) $0.9783641 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”) and (ii) 0.44973 (such ratio, as may be adjusted pursuant to the Merger Agreement, the “Exchange Ratio”) of a validly issued, fully paid and non-assessable share of BBDC common stock, par value $0.001 per share (the “Share Consideration” and, together with the Cash Consideration, the “Merger Consideration”).

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

The Merger Agreement provides that the Company shall not, and shall cause its subsidiaries and instruct its representatives not to, directly or indirectly, solicit proposals relating to alternative transactions, or, subject to certain exceptions, initiate or participate in discussions or negotiations regarding, or provide information with respect to, any proposal for an alternative transaction. However, the Company’s board of directors may, subject to certain conditions, change its recommendation to the Company’s stockholders or, on payment of a termination fee of $11.0 million to BBDC and the reimbursement of up to $2.0 million in expenses incurred by BBDC and Barings, terminate the Merger Agreement and enter into an Alternative Acquisition Agreement (as defined in the Merger Agreement) for a Superior Proposal (as defined in the Merger Agreement) if it determines in good faith, after consultation with its outside legal counsel, that failure to do so would be inconsistent with the directors’ duties under applicable law.

Consummation of the First Merger, which is currently anticipated to occur during the first quarter of fiscal year 2022, is subject to certain customary closing conditions, including (1) approval of the First Merger by the holders of at least a majority of the outstanding shares of the Company’s common stock entitled to vote thereon, (2) approval of the issuance of BBDC common stock to be issued in the First Merger by a majority of the votes cast by the BBDC stockholders on the matter at the BBDC stockholders meeting, (3) approval of the issuance of BBDC’s common stock in connection with the First Merger at a price below the then-current net asset value per share of BBDC common stock, if applicable, by the vote specified in Section 63(2)(A) of the 1940 Act, (4) the absence of certain legal impediments to the consummation of the First Merger, (5) effectiveness of the registration statement for the BBDC common stock to be issued as consideration in the First Merger, (6) approval for listing on the New York Stock Exchange of the BBDC common stock to be issued as consideration in the First Merger, (7) subject to certain materiality standards, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement, and (8) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or early termination thereof).

Barings, as party to the Merger Agreement, agreed to vote all shares of BBDC common stock over which it has voting power (other than in its fiduciary capacity) in favor of the proposals to be submitted by BBDC to its stockholders for approval relating to the Merger.

In addition, the Company and BBDC will take steps necessary to provide for the repayment at closing of the Alpine Credit Facility (as defined below). The Merger Agreement also contains certain termination rights in favor of BBDC and the Company, including if the First Merger is not completed on or before March 31, 2022 or if the requisite approvals of the Company stockholders or BBDC stockholders are not obtained.

Further, BBDC will enter into an amendment and restatement of its investment advisory agreement with Barings, effective as of the closing of the Merger, to raise the annualized hurdle rate thereunder from 8.0% to 8.25%. Following the closing of the Merger, BBDC will also enter into a credit support agreement with Barings, for the benefit of the combined company, to protect against net cumulative unrealized and realized losses of up to $100.0 million on the acquired Company investment portfolio over the next ten years.

Note 2. Significant Accounting Policies

Basis of Presentation

The Company follows the accounting and reporting guidance in the Financial Accounting Standards Board Accounting Standards Codification ("ASC") Topic 946 - Financial Services, Investment Companies ("ASC 946"). The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles ("GAAP") and includes the accounts of the Company and its wholly-owned subsidiaries, Alpine and the Taxable Subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. All references made to the "Company," "we," and "us" herein include Sierra Income Corporation and its consolidated subsidiaries, except as stated otherwise. Additionally, the accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933. All intercompany balances and transactions have been eliminated. Therefore, this Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 19, 2021. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending December 31, 2021.

Cash and Cash Equivalents

The Company considers cash equivalents to be highly liquid investments or investments with original maturities of three months or less. Cash and cash equivalents include deposits in money market mutual funds. The Company deposits its cash in major U.S. financial institutions which, at times, may be in excess of the Federal Deposit Insurance Corporation insurance limits.

Use of Estimates in the Preparation of Financial Statements

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

Deferred Financing Costs

Financing costs, incurred in connection with the Company’s credit facilities (see Note 5), are deferred and amortized over the life of each corresponding facility.

Indemnification

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

F-21

Revenue Recognition

Interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. The Company records amortized or accreted discounts or premiums as interest income using the effective interest method. Dividend income, which represents dividends from equity investments and distributions from subsidiaries, if any, is recognized on an accrual basis to the extent that the Company expects to collect such amount.

Fee income associated with investments in portfolio companies is recognized as income in the period that the Company becomes entitled to such fees. Other fees related to loan administration requirements are capitalized as deferred revenue and recorded into income over the respective period.

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

The Company holds debt investments that contain a payment-in-kind ("PIK") interest provision. PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is recorded on an accrual basis to the extent such amounts are expected to be collected. PIK interest is not accrued if the Company does not expect the issuer to be able to pay all principal and interest when due. For the three and nine months ended September 30, 2021, the Company earned PIK interest of $392,194 and $1,563,104, respectively. For the three and nine months ended September 30, 2020, the Company earned PIK interest of $194,969 and $1,435,249, respectively.

Investment transactions are accounted for on a trade-date basis. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously recognized. For the three and nine months ended September 30, 2021, the Company did not recognize any realized gains or losses related to certain non-cash restructuring transactions. For the three and nine months ended September 30, 2020, the Company recognized realized losses on investments of $1,244,758 related to certain non-cash restructuring transactions. The Company reports changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation/(depreciation) on investments in the Consolidated Statements of Operations.

Management reviews all loans that become 90 days or more past due on principal and interest or when there is reasonable doubt that principal or interest will be collected for possible placement on management's designation of non-accrual status. Accrued interest is generally reserved when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Loans on non-accrual status are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although the Company may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. As of September 30, 2021, certain investments in eleven portfolio companies were on non-accrual status with a combined cost of $88,988,561, or 14.3% of the cost of the Company's portfolio, and a combined fair value of $32,989,921, or 6.1% of the fair value of the Company's portfolio. As of December 31, 2020, certain investments in twelve portfolio companies were on non-accrual status with a combined cost of $83,537,754, or 11.9% of the cost of the Company's portfolio, and a combined fair value of $30,649,219, or 5.1% of the fair value of the Company's portfolio.

Interest income from investments in the “equity” class of a collateralized loan obligation ("CLO") security (typically subordinated notes) is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets. The Company monitors the expected cash flows from these investments, including the expected residual payments, and the effective yield is determined and updated periodically. Any difference between the cash distribution received and the amount calculated pursuant to the effective interest method is recorded as an adjustment to the cost basis of such investments.

Investment Classification

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, the Company would be deemed to “control” a portfolio company if it owns more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio company. The Company refers to such investments in portfolio companies that it “controls” as “Controlled Investments.” Under the 1940 Act, the Company would be deemed to be an “Affiliated Person” of a portfolio company if it owns at least 5%, but no more than 25%, of the portfolio company’s outstanding voting securities or if it is under common control with such portfolio company. The Company refers to such investments in Affiliated Persons as “Affiliated Investments.”

Valuation of Investments

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

F-22

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

Investments in investment companies are valued at fair value. Fair values are generally determined utilizing the net asset value ("NAV") supplied by, or on behalf of, management of each investment company, which is net of management and incentive fees or allocations charged by the investment company and is in accordance with the "practical expedient", as defined by ASC 820. NAVs received by, or on behalf of, management of each investment company are based on the fair value of the investment company's underlying investments in accordance with policies established by management of each investment company, as described in each of their financial statements and offering memorandum.

The methodologies utilized by the Company in estimating the fair value of its investments categorized as Level 3 generally fall into the following two categories:

• The “Market Approach” uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities, or a group of assets and liabilities, such as a business.

• The “Income Approach” converts future amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount. When the Income Approach is used, the fair value measurement reflects current market expectations about those future amounts.

The Company uses third-party valuation firms to assist the board of directors in the valuation of its portfolio investments. The valuation reports generated by the third-party valuation firms consider the evaluation of financing and sale transactions with third parties, expected cash flows and market based information, including comparable transactions, performance multiples, and movement in yields of debt instruments, among other factors. Based on market data obtained from the third-party valuation firms, the Company uses a combined market yield analysis and an enterprise model of valuation. In applying the market yield analysis, the value of the Company’s loans is determined based upon inputs such as the coupon rate, current market yield, interest rate spreads of similar securities, the stated value of the loan, and the length to maturity. In applying the enterprise model, the Company uses a waterfall analysis which takes into account the specific capital structure of the borrower and the related seniority of the instruments within the borrower’s capital structure into consideration. To estimate the enterprise value of the portfolio company, the Company weighs some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value.

The methodologies and information that the Company utilizes when applying the Market Approach for performing investments includes, among other things:

• valuations of comparable public companies (“Guideline Comparable Approach”);

• recent sales of private and public comparable companies (“Guideline Comparable Approach”);

• recent acquisition prices of the company, debt securities or equity securities (“Recent Arms-length Transaction”);

• external valuations of the portfolio company, offers from third parties to buy the company (“Estimated Sales Proceeds Approach”);

• subsequent sales made by the company of its investments (“Expected Sales Proceeds Approach”); and

• estimating the value to potential buyers.

The methodologies and information that the Company utilizes when applying the Income Approach for performing investments includes:

• discounting the forecasted cash flows of the portfolio company or securities (“Discounted Cash Flow” or “DCF” Approach); and

• Black-Scholes model or simulation models or a combination thereof (Income Approach – Option Model) with respect to the valuation of warrants.

For non-performing investments, the Company may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities using an expected recovery model. The Company may estimate the fair value of warrants based on a model such as the Black-Scholes model or simulation models or a combination thereof.

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

• the quarterly valuation process begins with each portfolio investment being initially valued by the Company's valuation professionals;

• preliminary valuation conclusions are then documented and discussed with senior management; and

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

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

• management reviews preliminary valuations and its own independent assessment;

• the independent audit committee of the Company’s board of directors reviews the preliminary valuations of senior management and independent valuation firms; and

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

The Company’s investments in subordinated notes are carried at fair value, which is based on a discounted cash flow model. The discounted cash flow model models both the underlying collateral (assets) and the liabilities of the CLO capital structure. The discounted cash flow model uses a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated cash flows of the assets. The discounted cash flow model distributes the asset cash flows to the liability structure based on the payment priorities and discounts them back using appropriate market discount rates based on discount rates for comparable CLOs. The assumptions are based on available market data as well as management estimates. Additional data is used to validate the results from the discounted cash flow method, such as analysis of relevant data observed in the CLO market, review of quotes, where available, recent acquisitions and observable transactions in the subordinated notes, among other factors.

F-23

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s financial instruments, including cash and accounts payable and accrued expenses, approximate fair value due to their short-term nature. The carrying amounts and fair values of the Company’s long-term obligations are discussed in Note 5.

U.S. Federal Income Taxes

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

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

For the year ended December 31, 2020, the Company distributed at least 98% of its ordinary income and 98.2% of its capital gains, and as such, there was no excise tax accrual or expense recorded.

The Taxable Subsidiaries accrue income taxes payable based on the applicable corporate rates on the unrealized gains generated by the investments held by the Taxable Subsidiaries. As of September 30, 2021 and December 31, 2020, the Company recorded a deferred tax liability of $3,016,448 and $2,390,596, respectively, on the Consolidated Statements of Assets and Liabilities. The change in deferred tax liabilities is included as a component of net realized and unrealized gain/(loss) on investments on the Consolidated Statements of Operations.

ICTI generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount ("OID"), the Company must include in ICTI each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in ICTI other amounts that it has not yet received in cash, such as PIK interest income. Because any OID or other amounts accrued will be included in the Company’s ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount. ICTI also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they are realized.

Although the Company files federal and state tax returns, the Company's major tax jurisdiction is the United States federal jurisdiction. The Company’s federal and state tax returns for the prior three fiscal years remain open, subject to examination by the Internal Revenue Service.

The Company accounts for income taxes in conformity with ASC Topic 740 - Income Taxes (“ASC 740”). ASC 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Consolidated Statements of Operations. There were no interest or penalties due to material uncertain income tax positions at September 30, 2021 and December 31, 2020.

F-24

As of September 30, 2021, for U.S. federal income tax purposes, the aggregate gross unrealized appreciation and the aggregate gross unrealized depreciation are $18,465,124 and $85,362,419, respectively. As of September 30, 2021, net unrealized depreciation is $66,897,295 based on a tax basis cost of $610,942,881.

As of December 31, 2020, for federal income tax purposes, the aggregate gross unrealized appreciation and the aggregate gross unrealized depreciation are $28,388,444 and $119,104,895, respectively. As of December 31, 2020, net unrealized depreciation is $90,716,451 based on a tax basis cost of $694,702,931.

Segments

The Company invests in various industries. The Company separately evaluates the performance of each of its investment relationships. However, because each of these investment relationships has similar business and economic characteristics, they have been aggregated into a single investment segment. 

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

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

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

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

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, "Reference rate reform (Topic 848)—Facilitation of the effects of reference rate reform on financial reporting." The amendments in this update provide optional expedients and exceptions for applying U.S. GAAP to certain contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform and became effective upon issuance for all entities. The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and also with our lender, including financial instruments that mature before and after December 31, 2021, when certain LIBOR reference rates will be discontinued. Many of these agreements, including the credit agreement relating to the Alpine Credit Facility, include language for choosing an alternative successor rate if LIBOR reference is no longer considered to be appropriate. With respect to other agreements, the Company intends to work with its portfolio companies and lenders to modify agreements to choose an alternative successor rate. Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The standard is effective as of March 12, 2020 through December 31, 2022 and the Company plans to apply the amendments in this update to account for contract modifications due to changes in reference rates. The Company does not believe that it will have a material impact on its consolidated financial statements and disclosures.

Note 3. Investments

The following table shows the amortized cost and the fair value of the Company’s portfolio investments as of September 30, 2021:

	Amortized Cost		Percentage			Fair Value		Percentage
Senior secured first lien term loans	$	342,236,943		54.9	%	$	286,852,679		52.7	%
Senior secured second lien term loans		81,827,969		13.1			81,101,866		14.9
Subordinated notes		58,584,937		9.4			55,232,903		10.1
Sierra Senior Loan Strategy JV I LLC		110,050,000		17.6			85,872,235		15.8
Equity/warrants		30,911,638		5.0			35,208,470		6.5
Total	$	623,611,487		100.0	%	$	544,268,153		100.0	%

The following table shows the amortized cost and the fair value of the Company’s portfolio investments as of December 31, 2020: 

	Amortized Cost		Percentage			Fair Value		Percentage
Senior secured first lien term loans	$	369,385,810		52.7	%	$	315,490,601		52.3	%
Senior secured first lien notes		8,473,750		1.2			8,548,755		1.4
Senior secured second lien term loans		103,081,287		14.7			93,794,917		15.5
Subordinated notes		65,561,840		9.4			50,039,500		8.3
Sierra Senior Loan Strategy JV I LLC		110,050,000		15.7			81,788,964		13.5
Equity/warrants		44,451,252		6.3			54,323,743		9.0
Total	$	701,003,939		100.0	%	$	603,986,480		100.0	%

F-25

The following table shows the amortized cost and fair value of the Company’s portfolio investments by industry classification as of September 30, 2021:

Industry Classification	Amortized Cost		Percentage			Fair Value		Percentage
Multi-Sector Holdings		167,759,211		26.9	%		140,242,094		25.8	%
High Tech Industries		82,503,266		13.2			83,272,129		15.3
Services: Business		47,951,702		7.7			47,539,868		8.7
Healthcare & Pharmaceuticals		60,136,811		9.6			47,482,054		8.7
Aerospace & Defense		34,821,243		5.6			32,924,326		6.0
Hotel, Gaming & Leisure		41,945,036		6.7			32,261,471		5.9
Automotive		29,358,423		4.7			27,699,361		5.1
Consumer Goods: Durable		20,325,731		3.3			23,703,479		4.4
Environmental Industries		12,020,565		1.9			20,659,123		3.8
Services: Consumer		14,628,130		2.3			14,966,608		2.7
Banking, Finance, Insurance & Real Estate		10,096,159		1.6			11,443,823		2.1
Chemicals, Plastics & Rubber		10,039,254		1.6			9,388,473		1.7
Construction & Building		15,770,141		2.5			8,936,628		1.6
Forest Products & Paper		6,395,222		1.0			8,289,049		1.5
Media: Diversified & Production		15,348,135		2.5			7,578,621		1.4
Transportation: Consumer		7,251,893		1.2			6,309,147		1.2
Containers, Packaging & Glass		5,735,094		0.9			5,746,083		1.1
Metals & Mining		3,508,618		0.6			3,957,208		0.7
Transportation: Cargo		3,899,642		0.6			3,902,018		0.7
Retail		9,794,441		1.6			2,976,544		0.5
Capital Equipment		2,452,771		0.4			2,438,224		0.4
Energy: Oil & Gas		20,175,978		3.2			1,117,122		0.2
Wholesale		1,650,966		0.3			1,392,578		0.3
Beverage & Food		43,055		0.0			42,122		0.0
Total	$	623,611,487		100.0	%	$	544,268,153		100.0	%

The following table shows the amortized cost and fair value of the Company’s portfolio investments by industry classification as of December 31, 2020:

Industry Classification	Amortized Cost		Percentage			Fair Value		Percentage
Multi-Sector Holdings	$	174,660,001		24.9	%	$	131,792,864		21.8	%
Services: Business		79,260,551		11.3			73,716,395		12.2
High Tech Industries		75,519,344		10.8			71,792,022		11.9
Healthcare & Pharmaceuticals		68,599,968		9.8			58,275,198		9.6
Consumer Goods: Durable		32,045,028		4.6			41,016,292		6.8
Construction & Building		42,928,750		6.1			38,356,358		6.4
Banking, Finance, Insurance & Real Estate		27,848,664		4.0			37,620,161		6.2
Aerospace & Defense		33,558,896		4.8			29,723,725		4.9
Hotel, Gaming & Leisure		36,326,705		5.2			24,013,769		4.0
Automotive		18,886,756		2.7			17,404,476		2.9
Containers, Packaging & Glass		15,206,840		2.2			15,120,424		2.5
Environmental Industries		5,041,430		0.7			10,052,691		1.7
Services: Consumer		9,700,000		1.4			9,725,000		1.6
Chemicals, Plastics & Rubber		10,060,861		1.4			9,063,498		1.5
Forest Products & Paper		6,477,887		0.9			7,770,704		1.3
Media: Diversified & Production		15,474,145		2.2			6,780,000		1.1
Transportation: Cargo		6,877,294		1.0			6,770,781		1.1
Transportation: Consumer		7,975,416		1.1			6,068,082		1.0
Metals & Mining		3,492,436		0.5			3,492,479		0.6
Energy: Oil & Gas		20,868,832		3.0			2,625,018		0.4
Wholesale		2,212,919		0.3			1,746,044		0.3
Retail		7,934,347		1.1			1,012,358		0.2
Beverage & Food		46,869		0.0			48,141		0.0
Total	$	701,003,939		100.0	%	$	603,986,480		100.0	%

The following table shows the composition of the Company’s portfolio investments by geography classification at fair value as of September 30, 2021 and December 31, 2020: 

	September 30, 2021					December 31, 2020
Geography	Fair Value		Percentage			Fair Value		Percentage
United States	$	489,898,294		90.0	%	$	553,982,580		91.7	%
Cayman Islands		54,369,859		10.0			50,003,900		8.3
Total	$	544,268,153		100.0	%	$	603,986,480		100.0	%

F-26

Transactions with Controlled/Affiliated Companies

During the nine months ended September 30, 2021 and 2020, the Company had investments in portfolio companies designated as controlled/affiliated investments under the 1940 Act. Transactions with controlled/affiliated investments were as follows: 

				Purchases/			Transfers		Net change in
		Fair Value at		(Sales)			In/(Out)		unrealized
		December 31,		of			of		appreciation/			Realized			Fair Value at		Income
Name of Investment(2)	Type of Investment	2020		Investments			Investments		(depreciation)			Gain/(Loss)			September 30, 2021		Earned
Non-controlled/affiliated investments:
1888 Industrial Services, LLC	Revolving Credit Facility	$	1,243,924	$	—		$	—	$	(162,078	)	$	—		$	1,081,846	$	58,029
	Senior Secured First Lien Term Loan		431,176		(6,467	)		—		(458,636	)		33,927			—		—
	Senior Secured First Lien Term Loan		—		—			—		—			—			—		—
	Senior Secured First Lien Term Loan		—		—			—		—			—			—		—
	Membership Units		—		—			—		—			—			—		—
Access Media Holdings, LLC	Senior Secured First Lien Term Loan		—		(127,680	)		—		—			127,680			—		—
Caddo Investors Holdings 1 LLC	Equity		6,366,372		—			—		619,979			—			6,986,351		—
Charming Charlie LLC	Senior Secured First Lien Term Loan		—		—			—		—			—			—		—
	Senior Secured First Lien Term Loan		—		—			—		—			—			—		—
	Senior Secured First Lien Term Loan		71,281		—			—		—			—			71,281		—
	Senior Secured First Lien Term Loan		396,225		—			—		—			—			396,225		—
	Common Stock		—		—			—		—			—			—		—
Dynamic Energy Services International LLC	Revolving Credit Facility		—		—			—		—			—			—		—
	Senior Secured First Lien Term Loan		493,470		(431,726	)		—		145,496			(207,240	)		—		—
	Equity		—		—			—		—			—			—		—
Kemmerer Operations, LLC	Senior Secured First Lien Term Loan		2,130,353		251,632			—		—			—			2,381,985		251,737
	Senior Secured First Lien Delayed Draw Term Loan		399,366		(235,451	)		—		—			—			163,915		35,638
	Equity		962,760		—			—		448,548			—			1,411,308		—
MCM 500 East Pratt Holdings, LLC	Equity		7,350,000		—			—		(1,000,000	)		—			6,350,000		1,053,482
TwentyEighty, Inc.	Common Units		—		(37,764	)		—		—			37,764			—		—
Total non-controlled/affiliated investments			19,844,927		(587,456	)		—		(406,691	)		(7,869	)		18,842,911		1,398,886
Controlled investments:
Black Angus Steakhouses, LLC	Senior Secured First Lien Term Loan		1,897,321		—			—		—			—			1,897,321		178,880
	Senior Secured First Lien Term Loan		9,060,892		—			—		1,690,214			—			10,751,106		—
	Senior Secured First Lien Term Loan		3,055,556		694,444			—		—			—			3,750,000		277,608
	Equity		—		—			—		—			—			—		—
MCM Capital Office Park Holdings LLC	Equity		15,525,000		(12,476,007	)		—		(8,025,000	)		4,976,007			—		642,965
Sierra Senior Loan Strategy JV I LLC(1)	Equity		81,788,964		—			—		4,083,271			—			85,872,235		4,020,139
Total controlled investments			111,327,733		(11,781,563	)		—		(2,251,515	)		4,976,007			102,270,662		5,119,592
Total		$	131,172,660	$	(12,369,019	)	$	—	$	(2,658,206	)	$	4,968,138		$	121,113,573	$	6,518,478

F-27

		Fair Value			Purchases/			Transfers		Net change in
		at			(Sales)			In/(Out)		unrealized					Fair Value
		December 31,			of			of		appreciation/			Realized		at			Income
Name of Investment(2)	Type of Investment	2019			Investments			Investments		(depreciation)			Gain/(Loss)		September 30, 2020			Earned
Non-controlled/affiliated investments:
1888 Industrial Services, LLC	Revolving Credit Facility	$	1,183,094			60,349		$	—	$	—		$	—	$	1,243,443		$	60,605
	Senior Secured First Lien Term Loan		3,315,574			—			—		(3,315,574	)		—		—			—
	Senior Secured First Lien Term Loan		2,113,617			—			—		(2,113,617	)		—		—			—
	Senior Secured First Lien Term Loan		416,940			—			—		(2,312	)		—		414,628			20,913
	Senior Secured First Lien Term Loan		79,986			(79,986	)		—		—			—		—			3,860
	Senior Secured First Lien Term Loan		288,300			(288,300	)		—		—			—		—			13,913
	Membership Units		—			(35,600	)		—		—			35,600		—			—
Access Media Holdings, LLC	Senior Secured First Lien Term Loan		2,251,418			—			—		(1,290,625	)		—		960,793			—
	Common Stock		—			—			—		—			—		—			—
	Preferred Equity		—			—			—		—			—		—			—
	Preferred Equity		—			—			—		—			—		—			—
	Preferred Equity		(88,200	)		—			—		—			—		(88,200	)		—
Caddo Investors Holdings 1 LLC	Equity		5,765,253			33,606			—		182,698			—		5,981,557			—
Charming Charlie LLC	Senior Secured First Lien Term Loan		—			—			—		—			—		—			—
	Senior Secured First Lien Term Loan		—			—			—		—			—		—			—
	Senior Secured First Lien Term Loan		112,981			(12,125	)		—		(29,575	)		—		71,281			6,437
	Senior Secured First Lien Term Loan		628,025			(67,400	)		—		(164,400	)		—		396,225			35,782
	Common Stock		—			—			—		—			—		—			0
Dynamic Energy Services International LLC	Revolving Credit Facility		—			—			—		—			—		—			0
	Senior Secured First Lien Term Loan		692,431			—			—		(216,054	)		—		476,377			0
	Equity		—			—			—		—			—		—			0
Kemmerer Operations, LLC	Senior Secured First Lien Term Loan		461,035			54,663			—		—			—		515,698			54,686
	Senior Secured First Lien Delayed Draw Term Loan		1,834,227			217,478			—		—			—		2,051,705			217,568
	Equity		962,760			—			—		—			—		962,760			0
MCM 500 East Pratt Holdings, LLC	Equity		7,350,000			—			—		—			—		7,350,000			298,813
TwentyEighty, Inc.	Equity		644,597			(621,650	)		—		(644,597	)		621,650		—			—
Total non-controlled/affiliated investments			28,012,038			(738,965	)		—		(7,594,056	)		657,250		20,336,267			712,577
Controlled investments:
Black Angus Steakhouses, LLC	Senior Secured First Lien Term Loan		—			(334,822	)		2,232,143		—			—		1,897,321			44,948
	Senior Secured First Lien Term Loan		—			2,232,143			18,225,446		(7,838,695	)		—		12,618,894			1,270,505
	Equity		—			—			—		—			—		—			—
MCM Capital Office Park Holdings LLC	Equity		11,775,000			—			—		2,850,000			—		14,625,000			666,419
Sierra Senior Loan Strategy JV I LLC(1)	Equity		68,434,389			18,000,000			—		(12,614,526	)		—		73,819,863			2,957,672
Total controlled investments			80,209,389			19,897,321			20,457,589		(17,603,221	)		—		102,961,078			4,939,544
Total		$	108,221,427		$	19,158,356		$	20,457,589	$	(25,197,277	)	$	657,250	$	123,297,345		$	5,652,121

(1) The Company and Great American Life Insurance Company ("GALIC") are the members of Sierra Senior Loan Strategy JV I LLC ("Sierra JV"), a joint venture formed as a Delaware limited liability company that is not consolidated by either member for financial reporting purposes. The members of Sierra JV make capital contributions as investments by Sierra JV are completed, and all portfolio and other material decisions regarding Sierra JV must be submitted to Sierra JV’s board of managers, which is comprised of an equal number of members appointed by each of the Company and GALIC. Approval of Sierra JV’s board of managers requires the unanimous approval of a quorum of the board of managers, with a quorum consisting of equal representation of members appointed by each of the Company and GALIC. Because management of Sierra JV is shared equally between the Company and GALIC, the Company does not have operational control over the Sierra JV for purposes of the 1940 Act or otherwise.

(2) The par amount and additional detail are shown in the consolidated schedule of investments.

F-28

Purchases/(sales) of investments in controlled/affiliated investments are included in the purchases and sales presented on the Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020. Transfers in/(out) of controlled/affiliated represents the fair value for the month an investment became or was removed as a controlled/affiliates investment. Income received from controlled/affiliated investments is included in total investment income on the Consolidated Statements of Operations for the nine months ended September 30, 2021 and 2020.

In connection with certain of the Company’s investments, the Company receives warrants that are obtained for the objective of increasing the total investment returns and are not held for hedging purposes. As of September 30, 2021 and December 31, 2020, the total fair value of warrants were $41,429 and $13,195, respectively, and were included in investments at fair value on the Consolidated Statements of Assets and Liabilities. Total realized and change in unrealized gains (losses) related to warrants for the three and nine months ended September 30, 2021 were $13,474 and $28,234. Total realized and change in unrealized gains (losses) related to warrants for the three and nine months ended September 30, 2020 were $13,195 and $(8,274). The Company receives warrants in connection with individual investments and are not subject to master netting arrangements.

As of September 30, 2021, the Company held loans it has made directly to 62 investee companies with aggregate principal amounts of $496.0 million. As of December 31, 2020, the Company held loans it has made directly to 67 investee companies with aggregate principal amounts of $541.1 million. During the three and nine months ended September 30, 2021, the Company made 13 and 49 loans to investee companies with aggregate principal amounts of $20.3 million and $63.6 million, respectively. During the three and nine months ended September 30, 2020, the Company made 7 and 38 loans to investee companies with aggregate principal amounts of $21.3 million and $90.5 million, respectively.

In addition to the loans that the Company has provided, the Company has unfunded commitments to provide additional financings through undrawn term loans or revolving lines of credit. The details of such arrangements are disclosed in Note 10.

Sierra Senior Loan Strategy JV I LLC

On March 27, 2015, the Company and GALIC entered into a limited liability company operating agreement to co-manage Sierra JV. All portfolio and other material decisions regarding Sierra JV must be submitted to Sierra JV's board of managers, which is comprised of four members, two of whom are selected by the Company and the other two are selected by GALIC. The Company has concluded that it does not operationally control Sierra JV. As the Company does not operationally control Sierra JV, it does not consolidate the operations of Sierra JV within the consolidated financial statements. As a practical expedient, the Company uses NAV to determine the fair value of its investment in Sierra JV; therefore, this investment has been presented as a reconciling item within the fair value hierarchy (see Note 4).

As of September 30, 2021 and December 31, 2020, Sierra JV had total capital commitments of $124.6 million, with the Company providing $110.1 million and GALIC providing $14.5 million. As of September 30, 2021 and December 31, 2020, approximately $124.5 million was funded relating to these commitments of which $110.1 million was from the Company. The Company does not have the right to withdraw any of their respective capital commitment, unless in connection with a transfer of its membership interests. The Company may transfer full membership interests as long as it is approved by all members and transferred in a transaction exempt from the registration requirements of the Securities Act or applicable state securities laws.

Sierra JV entered into a Senior Secured Revolving Credit Facility Agreement, as amended (the "JV Facility") with Deutsche Bank, AG, New York Branch ("DB").

On March 29, 2019, the JV Facility reinvestment period was extended from March 30, 2019 to June 28, 2019.

On June 28, 2019, the JV Facility reinvestment period was further extended from June 28, 2019 to October 28, 2019.

On October 28, 2019, the JV Facility reinvestment period was further extended from October 28, 2019 to March 31, 2020 and the interest rate was modified from bearing an interest rate of LIBOR (with a 0.00% floor) + 2.50% per annum to LIBOR (with a 0.00% floor) + 2.75% per annum.

On March 31, 2020, the total commitment under the JV Facility was reduced to $240.0 million from $250.0 million and the reinvestment period was extended from March 31, 2020 to April 30, 2020.

On April 30, 2020, the total commitment under the JV Facility was reduced to $200.0 million from $240.0 million, the reinvestment period was extended from April 30, 2020 to July 31, 2020, the maturity date was extended to July 31, 2023 and the interest rate was modified from bearing an interest rate of LIBOR (with a 0.00% floor) + 2.75% per annum to LIBOR (with a 0.50% floor) + 3.15% per annum.

On July 29, 2020, the total commitment under the JV Facility was reduced to $175.0 million from $200.0 million, the reinvestment period was extended from July 31, 2020 to April 30, 2021 and the maturity date was extended to April 30, 2024. Additionally, the interest rate was modified from bearing an interest rate of LIBOR (with a 0.50% floor) + 3.15% per annum to LIBOR (with a 0.50% floor) + 3.25% per annum.

The JV Facility ended its reinvestment period on April 18, 2021 and has entered its amortization period. The first scheduled amortization payment occurs on April 18, 2022 with subsequent payments required every six months until the final amortization payment that is set to occur at maturity on April 18, 2024.

The JV Facility is secured substantially by all of Sierra JV's assets, subject to certain exclusions set forth in the JV Facility. As of September 30, 2021 and December 31, 2020, there was $96.1 million and $124.7 million outstanding under the JV Facility, respectively.

The following table shows a summary of Sierra JV's portfolio as of September 30, 2021 and December 31, 2020:

	September 30, 2021			December 31, 2020
	(unaudited)
Senior secured loans(1)	$	196,012,191		$	210,175,007
Weighted average current interest rate on senior secured loans(2)		5.77	%		6.05	%
Number of borrowers in the Sierra JV		48			52
Investments at fair value	$	187,528,449		$	196,605,878
Largest loan to a single borrower(1)	$	10,422,359		$	10,595,716
Total of five largest loans to borrowers(1)	$	36,611,314		$	38,163,663

(1) At par value.

(2) Computed as the (a) annual stated interest rate on accruing senior secured loans, divided by (b) total senior secured loans at principal amount.

F-29

The following is a list of the individual investments in Sierra JV's portfolio as of September 30, 2021 (unaudited):

Company	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value(1)
4Over International, LLC	Media: Advertising, Printing & Publishing	Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor) (2)	6/7/2022	$	10,422,359	$	10,422,359	$	10,021,097
ADB Acquisition, LLC	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 6.25%) (4)	12/18/2025		2,899,375		2,838,535		2,857,044
Brook & Whittle Holding Corp.	Containers, Packaging and Glass	Senior Secured First Lien Term Loan (LIBOR + 7.00%, 1.00% LIBOR Floor) (4)	10/17/2024		4,962,500		4,962,500		4,962,500
Callaway Golf Company	Consumer Goods: Durable	Senior Secured First Lien Term Loan (LIBOR + 4.35%) (2)	1/2/2026		1,494,065		1,476,745		1,500,639
Cambrex Corporation	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (2)	12/4/2026		3,970,000		3,952,835		3,974,367
Cardenas Markets LLC	Retail	Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor) (2)	11/29/2023		5,985,000		5,928,244		5,898,217
CHA Consulting, Inc.	Construction & Building	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor) (4)	4/10/2025		1,325,706		1,322,395		1,309,268
CHA Consulting, Inc.	Construction & Building	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor) (4)	4/10/2025		586,070		586,070		578,803
Covenant Surgical Partners, Inc.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 4.00%) (2)(6)	7/1/2026		5,900,870		5,867,551		5,790,524
CT Technologies Intermediate Holdings, Inc.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (2)	12/16/2025		4,975,000		4,970,510		4,982,960
Envision Healthcare Corporation	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 3.75%) (2)	10/10/2025		1,920,688		1,883,221		1,705,763
GC EOS Buyer, Inc.	Automotive	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor) (3)	8/1/2025		3,375,489		3,346,116		3,338,021
Glass Mountain Pipeline Holdings, LLC	Energy: Oil & Gas	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor) (5)(8)	12/23/2024		4,813,313		4,737,643		1,636,526
Golden West Packaging Group LLC	Forest Products & Paper	Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor) (2)	6/20/2023		3,819,896		3,819,896		3,761,070
High Ridge Brands Co.	Consumer Goods: Non-Durable	Senior Secured First Lien Term Loan (9.25% Base Rate) (8)	6/30/2022		2,266,515		1,898,217		367,629
Infogroup, Inc.	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (4)	4/3/2023		4,775,000		4,762,920		4,510,943
Intermediate LLC	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor) (4)	7/1/2026		2,695,000		2,683,216		2,644,065
Isagenix International, LLC	Wholesale	Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor) (4)	6/16/2025		2,434,863		2,427,558		2,020,936
Ivanti Software, Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor) (4)	12/1/2027		4,975,000		4,909,067		4,970,025

F-30

Company	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value(1)
IXS Holdings, Inc.	Automotive	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 0.75% LIBOR Floor) (4)	3/5/2027		2,953,865		2,930,897		2,942,050
Keystone Acquisition Corp.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor) (4)	5/1/2024		6,036,930		5,994,779		5,949,998
KNB Holdings Corporation	Consumer Goods: Durable	Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor) (4)	4/26/2024		4,614,976		4,581,015		3,926,422
Liaison Acquisition, LLC	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor) (4)	12/20/2026		4,401,738		4,391,812		4,404,378
Logmein, Inc.	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 3.75%, 1.00% LIBOR Floor) (2)	5/4/2026		2,985,000		2,930,713		2,983,806
Mileage Plus Holdings, LLC	Transportation: Consumer	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor) (2)	6/21/2027		5,098,181		5,093,926		5,275,087
NGS US Finco, LLC	Capital Equipment	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor) (2)	10/1/2025		2,913,223		2,905,831		2,843,597
NGS US Finco, LLC	Capital Equipment	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor) (2)	10/1/2025		2,481,250		2,439,069		2,458,919
Northern Star Industries, Inc.	Capital Equipment	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor) (5)	3/28/2025		4,101,250		4,090,973		4,077,463
NorthStar Group Services, Inc.	Environmental Industries	Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor) (4)	11/12/2026		4,906,250		4,842,478		4,918,516
Offen, Inc.	Transportation: Cargo	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (4)	6/22/2026		4,907,951		4,883,702		4,877,522
Patriot Rail Company LLC	Transportation: Cargo	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor) (4)	10/19/2026		1,723,750		1,698,836		1,728,059
PetroChoice Holdings, Inc.	Chemicals, Plastics and Rubber	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (2)	8/19/2022		6,698,288		6,688,802		6,463,848
Plaskolite PPC Intermediate II LLC	Chemicals, Plastics and Rubber	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor) (4)	12/15/2025		3,160,991		3,127,620		3,164,468
Port Townsend Holdings Company, Inc.	Forest Products & Paper	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor) (2)(6)	4/3/2024		3,310,797		3,298,504		3,005,873
PT Network, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor, 2.00% PIK) (5)(9)	11/30/2023		4,532,501		4,407,215		4,484,004
PT Network, LLC	Healthcare & Pharmaceuticals	Class C Common Stock (7)			1		—		—
PVHC Holding Corp	Containers, Packaging and Glass	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor) (4)	8/2/2024		1,932,505		1,927,874		1,871,051
Quartz Holding Company	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor) (2)	4/2/2026		941,835		940,295		934,771
RB Media, Inc.	Media: Diversified & Production	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor) (2)	8/29/2025		5,632,559		5,603,086		5,634,249
Resolute Investment Managers, Inc.	Banking, Finance, Insurance & Real Estate	Senior Secured First Lien Term Loan (LIBOR + 8.00%, 1.00% LIBOR Floor) (4)	4/30/2025		1,693,707		1,686,915		1,697,941

F-31

Company	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value(1)
Sierra Enterprises, LLC	Beverage & Food	Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor) (2)	11/11/2024		3,839,419		3,833,940		3,844,411
Simplified Logistics, LLC	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor) (4)	2/27/2022		3,421,280		3,374,730		3,397,673
Syniverse Holdings, Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (2)	3/9/2023		2,875,455		2,867,137		2,874,017
TEAM Services Group	Services: Consumer	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (5)	12/20/2027		6,969,987		6,820,972		6,944,198
The Octave Music Group, Inc.	Media: Diversified & Production	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor, 0.75% PIK) (4)(9)	5/29/2025		5,327,586		5,290,332		5,274,310
Thermacell Repellents	Consumer Goods: Durable	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor) (3)	12/4/2026		4,977,050		4,932,926		4,927,280
Veregy Consolidated	Environmental Industries	Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor) (4)	11/3/2027		3,970,000		3,866,126		3,958,884
Vision Solutions, Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 0.75% LIBOR Floor) (2)	4/24/2028		5,750,000		5,722,857		5,731,600
Wawona Delaware Holdings, LLC	Beverage & Food	Senior Secured First Lien Term Loan (LIBOR + 4.75%) (4)	9/11/2026		860,362		854,262		804,438
Wok Holdings Inc.	Hotels, Gaming & Leisure	Senior Secured First Lien Term Loan (LIBOR + 6.25%) (2)	3/1/2026		6,483,750		6,449,498		6,389,087
Wrench Group LLC	Services: Consumer	Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor) (4)	4/30/2026		2,913,045		2,894,933		2,910,132
Total				$	196,012,191	$	194,167,653	$	187,528,449

(1) All securities are valued using significant unobservable inputs, which are categorized as Level 3 assets under the definition of ASC 820 fair value hierarchy.

(2) The interest rate on these loans is subject to a base rate plus 1 Month ("1M") LIBOR, which at September 30, 2021 was 0.08%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at September 30, 2021 was the Base rate plus the LIBOR floor or 1M LIBOR.

(3) The interest rate on these loans is subject to a base rate plus 2 Month ("2M") LIBOR, which at September 30, 2021 was 0.11%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at September 30, 2021 was the Base rate plus the LIBOR floor or 2M LIBOR.

(4) The interest rate on these loans is subject to a base rate plus 1 Month ("3M") LIBOR, which at September 30, 2021 was 0.13%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at September 30, 2021 was the Base rate plus the LIBOR floor or 3M LIBOR.

(5) The interest rate on these loans is subject to a base rate plus 6 Month ("6M") LIBOR, which at September 30, 2021 was 0.16%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at September 30, 2021 was the Base rate plus the LIBOR floor or 6M LIBOR.

(6) Includes an analysis of the value of any unfunded loan commitments.

(7) Security is non-income producing.

(8) The investment was on non-accrual status as of September 30, 2021.

(9) Par amount includes accumulated paid-in-kind ("PIK") interest and is net of repayments.

F-32

The following is a list of the individual investments in Sierra JV's portfolio as of December 31, 2020:

Company	Industry	Type of Investment	Maturity	Par Amount		Cost		Fair Value(1)
4Over International, LLC	Media: Advertising, Printing & Publishing	Senior Secured First Lien Term Loan (LIBOR + 6.00%)(2)	6/7/2022	$	10,595,716	$	10,595,716	$	10,595,716
ADB Companies	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)(4)(6)	12/18/2025		2,500,000		2,425,370		2,425,000
Brook & Whittle Holding	Containers, Packaging & Glass	Senior Secured First Lien Term Loan (LIBOR + 7.00%, 1.00% LIBOR Floor)(4)	10/17/2024		5,000,000		5,000,000		5,000,000
Callaway Golf Company	Consumer Goods: Durable	Senior Secured First Lien Term Loan (LIBOR + 4.35%)(2)	1/2/2026		1,506,345		1,485,640		1,508,303
Cambrex Corporation	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(2)	12/4/2026		4,000,000		3,980,210		3,980,000
Cardenas Markets LLC	Retail	Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(2)	11/29/2023		7,847,596		7,723,410		7,847,596
CHA Consulting, Inc.	Construction & Building	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(4)	4/10/2025		1,336,961		1,332,898		1,297,788
CHA Consulting, Inc.	Construction & Building	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(4)	4/10/2025		591,000		591,000		573,684
Covenant Surgical Partners, Inc.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 4.00%)(2)(6)	7/1/2026		4,937,812		4,898,946		4,741,270
CT Technologies Intermediate Holdings, Inc.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(2)	12/16/2025		5,000,000		4,975,931		4,975,000
Envision Healthcare Corporation	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 3.75%)(2)	10/10/2025		1,935,500		1,889,054		1,608,981
GC EOS Buyer, Inc.	Automotive	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(3)	8/1/2025		3,401,588		3,366,203		3,282,532
GK Holdings, Inc.	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(4)(8)	1/20/2021		3,864,837		3,864,580		3,401,056

F-33

				Par
Company	Industry	Type of Investment	Maturity	Amount		Cost		Fair Value(1)
Glass Mountain Pipeline Holdings, LLC	Energy: Oil & Gas	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(5)(8)	12/23/2024		4,838,188		4,827,833		2,431,189
Golden West Packaging Group LLC	Forest Products & Paper	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(2)	6/20/2023		4,058,560		4,058,560		4,054,502
High Ridge Brands Co.	Consumer Goods: Non-Durable	Senior Secured First Lien Term Loan (9.25% Base Rate)(8)	6/30/2022		2,266,515		1,893,812		367,669
Infogroup, Inc.	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(4)	4/3/2023		4,812,500		4,794,282		4,484,769
Intermediate LLC	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 3.75%)(4)	7/1/2026		2,715,625		2,701,881		2,557,304
Isagenix International, LLC	Wholesale	Senior Secured First Lien Term Loan (LIBOR + 5.75%, 1.00% LIBOR Floor)(4)	6/16/2025		2,578,687		2,569,382		1,420,599
Ivanti Software, Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(4)	12/1/2027		5,000,000		4,925,706		4,982,500
IXS Holdings, Inc.	Automotive	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(4)	3/5/2027		2,976,933		2,950,597		2,979,016
Keystone Acquisition Corp.	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(4)	5/1/2024		6,084,094		6,029,328		5,506,105
KNB Holdings Corporation	Consumer Goods: Durable	Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(4)	4/26/2024		4,711,121		4,666,373		3,574,799
Liasion Acquisition, LLC	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(4)	12/20/2026		6,435,000		6,421,268		6,435,000
LifeMiles Ltd.	Services: Consumer	Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(2)	8/18/2022		4,078,218		4,070,961		3,843,721
Logmein	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 3.75%)(2)	5/4/2026		3,000,000		2,941,452		2,985,900
Mileage Plus	Transportation: Consumer	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(2)	6/21/2027		5,098,181		5,093,806		5,307,207
NGS US Finco, LLC	Capital Equipment	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(2)	10/1/2025		2,935,723		2,926,468		2,847,651
NGS US Finco, LLC	Capital Equipment	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(2)	10/1/2025		2,500,000		2,451,295		2,450,000
Northern Star Industries, Inc.	Capital Equipment	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(5)	3/28/2025		4,133,125		4,120,550		3,797,102
NorthStar Group Services, Inc.	Environmental Industries	Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor)(4)	11/12/2026		5,000,000		4,925,521		4,925,500
Nuvei Technologies Corp.	Banking, Finance, Insurance & Real Estate	Senior Secured First Lien Term Loan (LIBOR + 4.00%, 0.75% LIBOR Floor)(2)	9/29/2025		3,000,000		3,000,000		3,003,900
Offen, Inc.	Transportation: Cargo	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(4)	6/22/2026		4,944,911		4,916,534		4,772,829
Patriot Rail Company LLC	Transportation: Cargo	Senior Secured First Lien Term Loan (LIBOR + 5.25%)(4)	10/19/2026		1,736,875		1,708,056		1,739,133
Peraton Corp.	Aerospace and Defense	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor)(2)	4/29/2024		3,362,879		3,354,861		3,358,843
PetroChoice Holdings, Inc.	Chemicals, Plastics and Rubber	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(2)	8/19/2022		6,751,727		6,739,538		6,426,969

F-34

				Par
Company	Industry	Type of Investment	Maturity	Amount		Cost		Fair Value(1)
Plaskolite PPC Intermediate II LLC	Chemicals, Plastics and Rubber	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(4)	12/15/2025		3,185,000		3,143,257		3,171,305
Port Townsend Holdings Company, Inc.	Forest Products & Paper	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(2)(6)	4/3/2024		2,937,918		2,921,835		2,630,140
PT Network, LLC	Healthcare & Pharmaceuticals	Senior Secured First Lien Term Loan (LIBOR + 5.50%, 1.00% LIBOR Floor, 2.00% PIK)(5)(9)	11/30/2023		4,497,071		4,322,519		4,137,305
PT Network, LLC	Healthcare & Pharmaceuticals	Class C Common Stock(7)			1		-		-
PVHC Holding Corp	Containers, Packaging and Glass	Senior Secured First Lien Term Loan (LIBOR + 4.75%, 1.00% LIBOR Floor)(4)	8/2/2024		1,947,447		1,941,553		1,858,254
Quartz Holding Company	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.00%)(2)	4/2/2026		949,061		948,258		926,569
RB Media, Inc.	Media: Diversified & Production	Senior Secured First Lien Term Loan (LIBOR + 4.25%, 1.00% LIBOR Floor)(2)	45898		5,632,559		5,597,474		5,592,568
Resolute	Banking, Finance, Insurance & Real Estate	Senior Secured First Lien Term Loan (LIBOR + 8.00%, 1.00% LIBOR Floor)(4)	4/30/2025		2,000,000		1,990,307		1,981,200
Salient CRGT Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(2)	2/28/2022		4,159,226		4,139,751		3,987,866
Sierra Enterprises, LLC	Beverage & Food	Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(2)	11/11/2024		3,869,259		3,862,349		3,637,104
Simplified Logistics, LLC	Services: Business	Senior Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)(4)	2/27/2022		3,438,750		3,381,255		3,386,137
Syniverse Holdings, Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(2)	3/9/2023		2,897,803		2,885,063		2,621,933
TEAM Services	Services: Consumer	Senior Secured First Lien Term Loan (LIBOR + 5.00%, 1.00% LIBOR Floor)(5)	12/20/2027		5,000,000		4,850,587		4,825,000
The Octave Music Group, Inc.	Media: Diversified & Production	Senior Secured First Lien Term Loan (LIBOR + 5.25%, 1.00% LIBOR Floor, 0.75% PIK)(4)(9)	5/29/2025		5,844,828		5,795,611		5,085,000
Veregy	Transportation: Cargo	Senior Secured First Lien Term Loan (LIBOR + 6.00%, 1.00% LIBOR Floor)(4)	11/3/2027		4,000,000		3,882,494		3,952,400
Vero Parent, Inc.	High Tech Industries	Senior Secured First Lien Term Loan (LIBOR + 4.50%, 1.00% LIBOR Floor)(2)	8/16/2024		3,866,037		3,848,371		3,850,960
Wawona Delaware Holdings, LLC	Beverage & Food	Senior Secured First Lien Term Loan (LIBOR + 4.75%)(4)	9/11/2026		942,963		935,269		919,389
Wok Holdings Inc.	Retail	Senior Secured First Lien Term Loan (LIBOR + 6.25%)(2)	3/1/2026		6,533,625		6,492,517		5,686,867
Wrench Group LLC	Services: Consumer	Senior Secured First Lien Term Loan (LIBOR + 4.00%, 1.00% LIBOR Floor)(4)	4/30/2026		2,937,242		2,915,853		2,866,748
Total				$	210,175,007	$	208,071,345	$	196,605,878

F-35

(1) All securities are valued using significant unobservable inputs, which are categorized as Level 3 assets under the definition of ASC 820 fair value hierarchy.

(2) The interest rate on these loans is subject to a base rate plus 1 Month ("1M") LIBOR, which at December 31, 2020 was 0.14%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at December 31, 2020 was the Base rate plus the LIBOR floor or 1M LIBOR.

(3) The interest rate on these loans is subject to a base rate plus 2 Month ("2M") LIBOR, which at December 31, 2020 was 0.19%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at December 31, 2020 was the Base rate plus the LIBOR floor or 2M LIBOR.

(4) The interest rate on these loans is subject to a base rate plus 1 Month ("3M") LIBOR, which at December 31, 2020 was 0.24%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at December 31, 2020 was the Base rate plus the LIBOR floor or 3M LIBOR.

(5) The interest rate on these loans is subject to a base rate plus 6 Month ("6M") LIBOR, which at December 31, 2020 was 0.34%. As the interest rate is subject to a minimum LIBOR floor, the prevailing rate in effect at December 31, 2020 was the Base rate plus the LIBOR floor or 6M LIBOR.

(6) Includes an analysis of the value of any unfunded loan commitments.

(7) Security is non-income producing.

(8) The investment was on non-accrual status as of December 31, 2020.

(9) Par amount includes accumulated paid-in-kind ("PIK") interest and is net of repayments.

Below is certain summarized financial information for the Sierra JV as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020.

	September 30, 2021		December 31, 2020
	(unaudited)
Selected Consolidated Statement of Assets and Liabilities Information:
Investments in loans at fair value (cost: of $194,167,653 and $208,071,345, respectively)	$	187,528,449	$	196,605,878
Cash and cash equivalents		3,392,482		17,130,001
Other assets		671,054		1,173,707
Total assets	$	191,591,985	$	214,909,586
Senior credit facility payable (net of deferred financing costs of $1,874,764 and $2,639,540, respectively)		94,236,111		122,063,405
Other liabilities		523,902		526,233
Interest payable		356,968		432,351
Total liabilities		95,116,981		123,021,989
Members’ capital		96,475,004		91,887,597
Total liabilities and members' capital	$	191,591,985	$	214,909,586

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Selected Consolidated Statement of Operations Information:
Total investment income	$	3,059,435		$	3,245,938		$	9,710,442		$	11,402,684
Total expenses		(1,729,064	)		(1,945,450	)		(5,541,458	)		(7,504,395	)
Net change in unrealized appreciation/(depreciation) of investments		426,616			7,669,339			4,826,264			(4,627,209	)
Net realized gain/(loss) on investments		18,509			(868,215	)		108,672			(11,619,079	)
Net income/(loss)	$	1,775,496		$	8,101,612		$	9,103,920		$	(12,347,999	)

In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, the Company must determine if any of its portfolio companies is considered a “significant subsidiary.” Pursuant to the definition of “significant subsidiary” applicable to investment companies set forth in Rule 1-02(w) of Regulation S-X, a portfolio company will meet the definition of “significant subsidiary” if either the investment test or the income test is triggered. Rule 3-09 of Regulation S-X requires the Company to include separate audited financial statements of any unconsolidated majority-owned subsidiary (portfolio company in which the Company owns greater than 50% of the unconsolidated subsidiary) in the Company's annual report on Form 10-K if one of the following conditions are met: (i) if the portfolio investment’s fair value exceeds 20% of the Company’s total investments fair value (the investment test); or (ii) either (A) if the income from the portfolio investment exceeds 80% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries (the income test) or (B) if the income from the portfolio investment exceeds 20% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries and have a fair value exceeding 5% of the Company’s total investment fair value (the alternate income test). If the Company has an unconsolidated majority-owned subsidiary and does not satisfy any Rule 3-09 significant subsidiary conditions during a quarter end, the Company must include summarized income statement within the notes to the quarterly financial statements. 

Rule 4-08(g) of Regulation S-X requires the Company to include summarized financial statements of any unconsolidated controlled subsidiary (portfolio company in which the Company owns greater than 25% of the voting securities of the unconsolidated subsidiary or otherwise controls the subsidiary) in the Company's annual report on Form 10-K if one of the following conditions are met: (i) if the portfolio investment’s fair value exceeds 10% of the Company’s total investments fair value (the investment test); or (ii) either (A) if the income from the portfolio investment exceeds 80% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries (the income test) or (B) if the income from the portfolio investment income exceeds 10% of the Company’s absolute value of the change in net assets from operations of the Company and its subsidiaries and have a fair value exceeding 5% of the Company’s total investment fair value (the alternate income test).

F-36

After performing the investment and income analysis for the nine months ended September 30, 2021, excluding Sierra JV, the Company determined that no portfolio company would be deemed to be a significant subsidiary pursuant to Rules 3-09 and 4-08(g) of Regulation S-X.

Note 4. Fair Value Measurements

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

• Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

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

• Level 3 — Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. The inputs for the determination of fair value may require significant management judgment or estimation and is based upon management’s assessment of the assumptions that market participants would use in pricing the assets or liabilities. These investments include debt and equity investments in private companies or assets valued using the Market or Income Approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") multiples. The information may also include pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.

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

The following table presents the fair value measurements of the Company’s total investments, by major class according to the fair value hierarchy, as of September 30, 2021:

Type of Investment	Level 1		Level 2		Level 3		Total
Asset
Senior secured first lien term loans	$	—	$	—	$	286,852,679	$	286,852,679
Senior secured second lien term loans		—		—		81,101,866		81,101,866
Subordinated notes		—		—		55,232,903		55,232,903
Equity/warrants		—		—		28,222,119		28,222,119
Total	$	—	$	—	$	451,409,567		451,409,567
Investments measured at net asset value(1)								92,858,586
Total Investments, at fair value							$	544,268,153

(1) Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

The following table presents the fair value measurements of the Company’s total investments, by major class according to the fair value hierarchy, as of December 31, 2020: 

Type of Investment	Level 1		Level 2		Level 3		Total
Asset
Senior secured first lien term loans	$	—	$	—	$	315,490,601	$	315,490,601
Senior secured first lien notes		—		—		8,548,755		8,548,755
Senior secured second lien term loans		—		—		93,794,917		93,794,917
Subordinated notes		—		—		50,039,500		50,039,500
Equity/warrants		767,144		—		47,190,227		47,957,371
Total	$	767,144	$	—	$	515,064,000		515,831,144
Investments measured at net asset value(1)								88,155,336
Total Investments, at fair value							$	603,986,480

(1) Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

F-37

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the nine months ended September 30, 2021: 

	Senior			Senior			Senior
	Secured			Secured			Secured
		First Lien			First Lien			Second Lien			Subordinated
	Term Loans			Notes			Term Loans			Notes			Equity/Warrants			Total
Balance, December 31, 2020	$	315,490,601		$	8,548,755		$	93,794,917		$	50,039,500		$	47,190,227		$	515,064,000
Purchases		89,262,444			—			9,763,261			5,092,498			7,837,056			111,955,259
Sales		(118,262,159	)		(8,561,250	)		(28,143,373	)		(11,562,922	)		(23,685,341	)		(190,215,045	)
Transfers in		—			—			—			—			—			—
Transfers out		—			—			—			—			—			—
Amortization of discount/(premium)		339,902			—			81,220			—			—			421,122
Paid-in-kind interest income		1,076,757			—			486,347			—			—			1,563,104
Net realized gains/(losses)		434,178			87,500			(3,440,773	)		(506,482	)		2,775,837			(649,740	)
Net change in unrealized appreciation/(depreciation)		(1,489,044	)		(75,005	)		8,560,267			12,170,309			(5,895,660	)		13,270,867
Balance, September 30, 2021	$	286,852,679		$	—		$	81,101,866		$	55,232,903		$	28,222,119		$	451,409,567
Change in net unrealized appreciation/ (depreciation) in investments held as of September 30, 2021	$	(2,315,631	)	$	—		$	3,434,184		$	11,276,754		$	(2,991,941	)	$	9,403,366

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. During the nine months ended September 30, 2021, the Company recorded no transfers from Level 3 to Level 2 and no transfers from Level 2 to Level 3. The Company recorded no other transfers between levels.

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the nine months ended September 30, 2020:

	Senior			Senior			Senior
	Secured			Secured			Secured
	First Lien			First Lien			Second Lien
	Term Loans			Notes			Term Loans			Subordinated Notes			Equity/Warrants			Total
Balance, December 31, 2019	$	328,816,197		$	14,354,825		$	122,817,885		$	63,021,420		$	38,521,450		$	567,531,777
Purchases		52,326,722			1,000,000			989,526			35,599			446,272			54,798,119
Sales		(30,275,038	)		(2,613,875	)		(30,741,097	)		(3,994,765	)		(2,096,407	)		(69,721,182	)
Transfers in		—			—			—			—			—			—
Transfers out		—			—			—			—			—			—
Amortization of discount/(premium)		870,213			—			(393,435	)		—			—			476,778
Paid-in-kind interest income		—			—			—			—			28,530			28,530
Net realized gains/(losses)		(23,906,698	)		(5,130,000	)		(33,405,025	)		—			547,948			(61,893,775	)
Net change in unrealized appreciation/(depreciation)		(8,894,854	)		695,104			21,852,892			(14,526,447	)		51,009			(822,296	)
Balance, September 30, 2020	$	318,936,542		$	8,306,054		$	81,120,746		$	44,535,807		$	37,498,802		$	490,397,951
Change in net unrealized appreciation/(depreciation) in investments held as of September 30, 2020	$	(21,639,540	)	$	(157,696	)	$	(5,733,639	)	$	(14,526,447	)	$	656,243		$	(41,401,079	)

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. During the nine months ended September 30, 2020, the Company recorded no transfers from Level 3 to Level 2 and no transfers from Level 2 to Level 3 due to availability of market data and observable valuation inputs to support the valuation. The Company recorded no other transfers between levels.

F-38

The following table presents the quantitative information about Level 3 fair value measurements of the Company’s total investments, as of September 30, 2021:

Type of Investment	Fair Value		Valuation techniques	Unobservable input(1)	Range (weighted average)
Senior Secured First Lien Term Loans	$211,582,861		Income Approach (DCF)	Market Yield	5.53% - 13.70% (7.96%)
Senior Secured First Lien Term Loans	40,395,158		Market Approach (Guideline Comparable)/ Enterprise Value Analysis	EBITDA Multiple	2.00x - 10.50x (6.19x)
				Discount Rate	0.00% - 75.00% (37.50%)
Senior Secured First Lien Term Loans	34,874,660		Recent Arms-Length Transaction	Recent Arms-Length Transaction	N/A
Senior Secured Second Lien Term Loans	72,584,449		Income Approach (DCF)	Market Yield	8.59% - 16.78% (10.91%)
Senior Secured Second Lien Term Loans	8,517,417		Market Approach (Guideline Comparable)	EBITDA Multiple	5.50x - 6.50x (6.00x)
Subordinated Notes	863,044		Market Approach (Guideline Comparable)	EBITDA Multiple	4.50x - 5.50x (5.00x)
Subordinated Notes	54,369,859		Income Approach (DCF)	Discount Rate	7.60% - 20.00% (15.64%)
				Projected Default rates	2.00% - 2.00% (2.00%)
				Recovery Rates	60.00% - 65.00% (62.50%)
				Reinvestment Rates	99.50% - 99.50% (99.50%)
				Prepayment Rates	20.00% - 20.00% (20.00%)
Subordinated Notes	—		Recent Arms-Length Transaction	Recent Arms-Length Transaction	N/A
Equity	18,828		Recent Arms-Length Transaction	Recent Arms-Length Transaction	N/A
Equity	28,203,291		Market Approach (Guideline Comparable)/Income Approach (DCF)/ Enterprise Value Analysis	EBITDA Multiple	2.00x - 12.00x (8.57x)
				Discount Rate	0.00% - 75.00% (37.50%)
Total	$	451,409,567

(1) Represents the method used when the Company has determined that market participants would use such inputs when measuring the fair value of these investments.

F-39

The following table presents the quantitative information about Level 3 fair value measurements of the Company’s total investments, as of December 31, 2020:

Type of Investment	Fair Value		Valuation techniques	Unobservable input(1)	Range (weighted average)
Senior Secured First Lien Term Loans	$	209,276,266	Income Approach (DCF)	Market Yield	4.61% - 26.41% (7.93%)
Senior Secured First Lien Term Loans		84,351,515	Market Approach (Guideline Comparable)/Income Approach (DCF)/ Enterprise Value Analysis	EBITDA Multiple Expected Proceeds Revenue Multiple Discount Rate	2.00x - 9.50x (6.21x) $48.00 - $115.00 ($69.29) 0.80x - 1.00x (0.90x) 16.9% - 18.9% (17.9%)
Senior Secured First Lien Term Loans		21,862,820	Recent Arms-Length Transaction	Recent Arms-Length Transaction	N/A
Senior Secured First Lien Notes		8,548,755	Income Approach (DCF)	Market Yield	3.42% - 11.86% (10.78%)
Senior Secured Second Lien Term Loans		74,896,187	Income Approach (DCF)	Market Yield	7.53% - 21.50% (13.85%)
Senior Secured Second Lien Term Loans		13,998,730	Market Approach (Guideline Comparable)	EBITDA Multiple Expected Proceeds	6.50x - 7.50x (7.00x) $209.70 - $233.00 ($221.35)
Senior Secured Second Lien Term Loans		4,900,000	Recent Arms-Length Transaction	Recent Arms-Length Transaction	N/A
Subordinated Notes		48,315,900	Income Approach (DCF)	Discount Rate Projected Default rates Recovery Rates Reinvestment Rates Prepayment Rates	11.02% - 21.00% (18.72%) 2.00% - 2.00% (2.00%) 65.00% - 65.00% (65.00%) 98.00% - 98.00% (98.00%) 20.00% - 25.00% (22.50%)
Subordinated Notes		1,723,600	Recent Arms-Length Transaction	Recent Arms-Length Transaction	N/A
Equity		38,001,340	Market Approach (Guideline Comparable)/Income Approach (DCF)/Enterprise Value Analysis	Book Value Multiple EBITDA Multiple Capitalization Rate Revenue Multiple Expected Proceeds	0.75x - 1.00x (0.88x) 2.00x - 9.50 (8.39x) 7.50x - 9.30x (8.54%) 0.50x - 1.00x (0.83x) $0.10 - $66.20 ($2.60)
Equity		9,188,887	Recent Arms-Length Transaction	Recent Arms-Length Transaction	N/A
Total	$	515,064,000

(1) Represents the method used when the Company has determined that market participants would use such inputs when measuring the fair value of these investments.

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

The significant unobservable inputs used in the fair value measurement of the Company’s equity/warrants investments are comparable company multiples of revenue or EBITDA for the latest twelve months (“LTM”), next twelve months (“NTM”) or a reasonable period a market participant would consider. Increases in revenue or EBITDA multiples in isolation would result in higher fair value measurement.

F-40

Note 5. Borrowings

The following table shows the Company's outstanding debt as of September 30, 2021 and December 31, 2020:

	September 30, 2021						December 31, 2020
	Total		Balance		Unused		Total		Balance			Unused
	Commitment		Outstanding		Commitment		Commitment		Outstanding			Commitment
Alpine Credit Facility		79,000,000		79,000,000		—		180,000,000		145,000,000			35,000,000
Total before deferred financing costs		79,000,000		79,000,000		—		180,000,000		145,000,000			35,000,000
Unamortized deferred financing costs		—		—		—		—		(659,266	)		—
Total borrowings outstanding, net of deferred financing costs	$	79,000,000	$	79,000,000	$	—	$	180,000,000	$	144,340,734		$	35,000,000

As a BDC, the Company is generally allowed to employ leverage to the extent that its asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements under the 1940 Act are met) after giving effect to such leverage. The amount of leverage that the Company employs at any time depends on its assessment of the market and other factors at the time of any proposed borrowing.

The fair value of the Company’s debt obligation is determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company’s margin borrowings are estimated based upon market interest rates for its own borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. The Company’s debt obligation is recorded at its carrying value, which approximates fair value.

ING Credit Facility

On August 12, 2016, the Company amended its existing senior secured syndicated revolving credit facility (the “ING Credit Facility” as amended from time to time as described below) pursuant to a Senior Secured Revolving Credit Agreement (the “Revolving Credit Agreement” as amended from time to time as described below) with certain lenders party thereto from time to time and ING Capital LLC, as administrative agent. The ING Credit Facility was secured by substantially all of the Company’s assets, subject to certain exclusions as further set forth in an Amended and Restated Guarantee, Pledge and Security Agreement (the “Security Agreement”) entered into in connection with the Revolving Credit Agreement, among the Company, the subsidiary guarantors party thereto, ING Capital LLC, as Administrative Agent, each Financial Agent and Designated Indebtedness Holder party thereto and ING Capital LLC, as Collateral Agent. The ING Credit Facility also included usual and customary representations, covenants and events of default for senior secured revolving credit facilities of this nature.

On May 15, 2020, the Company entered into Amendment No. 4 to the Revolving Credit Agreement to among other things, (i) shorten the maturity date from March 31, 2021 to September 30, 2020, (ii) accelerate the amortization of the Revolving Credit Agreement, and (iii) provide for the prepayment of the outstanding loans under the Revolving Credit Agreement in an aggregate principal amount of not less than $20 million. On July 22, 2020, the Company paid all remaining outstanding obligations under the Revolving Credit Agreement. On July 31, 2020 (the “Termination Date”), the Company terminated the commitments on the Credit Agreement. 

The Company was also required to pay a commitment fee to the lenders based on the daily unused portion of the aggregate commitments under the ING Credit Facility. The commitment fee was (i) 1.50% if the used portion of the aggregate commitments is less than or equal to 40%, (ii) 0.75% if the used portion of the aggregate commitments is greater than 40% and less than or equal to 65% or (iii) 0.50% if the used portion of the aggregate commitments is greater than 65%. The ING Credit Facility provided that the Company may use the proceeds of the ING Credit Facility for general corporate purposes, including making investments in accordance with the Company’s investment objective and strategy.

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

In connection with the security interest established under the Security Agreement, the Company, ING Capital LLC, in its capacity as collateral agent, and State Street Bank and Trust Company, in its capacity as the Company’s custodian, entered into a control agreement dated as of December 4, 2013, in order to, among other things, perfect the security interest granted pursuant to the Security Agreement in, and provide for control over, the related collateral. As a result of the termination of the Revolving Credit Agreement, the Security Agreement was terminated effective as of the Termination Date.

F-41

The following table shows additional information about the interest and financing costs related to the ING Credit Facility for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended					For the Nine Months Ended
	September 30, (unaudited)					September 30, (unaudited)
	2021		2020			2021		2020
Interest expense related to the ING Credit Facility	$	—	$	18,023		$	—	$	1,729,272
Financing expenses related to the ING Credit Facility		—		144,911			—		1,238,677
Total interest and financing expenses related to the ING Credit Facility	$	—	$	162,934		$	—	$	2,967,949
Weighted average outstanding debt balance of the ING Credit Facility	$	—	$	2,624,148		$	—	$	49,254,498
Weighted average interest rate of the ING Credit Facility (annualized)		N/A		2.9	%		N/A		4.6	%

Alpine Credit Facility

On September 29, 2017, the Company’s wholly-owned, special purpose financing subsidiary, Alpine, amended its existing revolving credit facility (the “Alpine Credit Facility”) pursuant to an Amended and Restated Loan Agreement (the “Loan Agreement”) with JPMorgan Chase Bank, National Association (“JPMorgan”), as administrative agent and lender, the Financing Providers from time to time party thereto, SIC Advisors, as the portfolio manager, and the Collateral Administrator, Collateral Agent and Securities Intermediary party thereto. The Loan Agreement was amended to, among other things, (i) extend the reinvestment period until December 29, 2020, (ii) extend the scheduled termination date until March 29, 2022, (iii) decrease the applicable margin for advances to 2.85% per annum and (iv) increase the compliance condition for net advances to 55% of net asset value. Alpine’s obligations to JPMorgan under the Alpine Credit Facility are secured by a first priority security interest in a significant portion of the assets of Alpine, including its portfolio of loans. The obligations of Alpine under the Alpine Credit Facility are non-recourse to the Company.

On November 18, 2020, Alpine entered into Amendment No.1 to the Loan Agreement to, among other things, (i) extend the reinvestment period from December 29, 2020 to May 18, 2021, (ii) increase the applicable margin for advances from 2.85% to 3.10% per annum, (iii) reduce the amount of maximum borrowings in an aggregate principal amount from $300,000,000 to $180,000,000 on a committed basis, (iv) require the Company to maintain a minimum a cash balance of $20,000,000 in Alpine, and (v) decrease the compliance condition for net advances from 55% to 52.5% of net asset value. The maturity date under the Loan Agreement did not change and therefore any amounts borrowed, as well as all accrued and unpaid interest thereunder, will be due and payable on March 29, 2022. In connection with the Amendment, the Company repaid $35,000,000 of the outstanding balance under the Loan Agreement on November 18, 2020, reducing the outstanding balance from $180,000,000 to $145,000,000. The Alpine Credit Facility ended its reinvestment period on May 18, 2021 and has entered its amortization period. As of September 30, 2021 and December 31, 2020, Alpine’s borrowings under the Alpine Credit Facility totaled $79,000,000 and $145,000,000, respectively, and were recorded as part of revolving credit facilities payable on our Consolidated Statements of Assets and Liabilities.

The Alpine Credit Facility provided for borrowings in an aggregate principal amount up to $180,000,000 on a committed basis. Borrowings outstanding under the Alpine Credit Facility are subject to compliance with a NAV coverage ratio with respect to the current value of Alpine’s portfolio and various portfolio criteria must be satisfied.

Pricing under the Alpine Credit Facility for each one month calculation period is based on LIBOR for an interest period of one month, plus a spread of 3.10% per annum. If LIBOR is unavailable, pricing will be determined at the greater of the prime rate offered by JPMorgan or the federal funds effective rate plus 50 basis points, plus a spread of 3.10% per annum. Interest is payable monthly in arrears. 

Borrowings of Alpine are considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act, applicable to BDCs.

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

As of September 30, 2021 and December 31, 2020, the carrying amount of the Company’s borrowings under the Alpine Credit Facility approximated the fair value of the Company’s debt obligation. The fair value of the Company’s debt obligation is determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company’s borrowings under the Alpine Credit Facility is estimated based upon market interest rates of the Company’s borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. As of September 30, 2021 and December 31, 2020, certain unobservable inputs used to value the Alpine Credit Facility would be deemed to be Level 3, as defined in Note 4.

F-42

As of December 31, 2020, the financing costs of $659,266 related to the Alpine Credit Facility were capitalized and amortized over the respective term. The following table shows additional information about the interest and financing costs related to the Alpine Credit Facility for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended						For the Nine Months Ended
	September 30, (unaudited)						September 30, (unaudited)
	2021			2020			2021			2020
Interest expense related to the Alpine Credit Facility	$	816,620		$	1,693,497		$	3,242,136		$	6,145,062
Financing expenses related to the Alpine Credit Facility		—			249,674			659,266			735,697
Total Interest and financing expenses related to the Alpine Credit Facility	$	816,620		$	1,943,171		$	3,901,402		$	6,880,759
Weighted average outstanding debt balance of the Alpine Credit Facility	$	100,029,348		$	180,000,000		$	127,711,722		$	189,416,058
Weighted average interest rate of the Alpine Credit Facility (annualized)		3.2	%		3.7	%		3.3	%		4.3	%

Note 6. Agreements

Investment Advisory Agreement

On April 5, 2012, the Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with SIC Advisors to manage the Company’s investment activities. The Investment Advisory Agreement became effective as of April 17, 2012, the date that the Company met its minimum offering requirement. Pursuant to the 1940 Act, the initial term of the Investment Advisory Agreement was for two years from its effective date. Unless earlier terminated pursuant to its terms, the Investment Advisory Agreement will remain in effect from year-to-year thereafter if approved annually at an in-person meeting of the Company’s board of directors by a majority of the directors who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Company or the Adviser, and either the Company’s board of directors or the holders of a majority of the Company’s outstanding voting securities. Most recently, on April 15, 2021, the Company’s board of directors approved the renewal of the Investment Advisory Agreement for an additional one-year term, which will expire on April 17, 2022. 

Pursuant to the Investment Advisory Agreement, SIC Advisors implements the Company’s business strategy on a day-to-day basis and performs certain services for the Company, subject to oversight by the Company’s board of directors. SIC Advisors is responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investment transactions, asset sales, financings and performing asset management duties. Under the Investment Advisory Agreement, the Company has agreed to pay SIC Advisors a management fee for investment advisory and management services consisting of a base management fee and an incentive fee.

The base management fee is calculated at an annual rate of 1.75% of the Company’s gross assets payable quarterly in arrears. For purposes of calculating the base management fee, the term “gross assets” includes any assets acquired with the proceeds of leverage. For the first quarter of the Company’s operations, the base management fee was calculated based on the initial value of the Company’s gross assets. Subsequently, the base management fee is calculated based on the gross assets at the end of each completed calendar quarter. Base management fees for any partial quarter are appropriately pro-rated. For the three and nine months ended September 30, 2021, the Company recorded an expense for base management fees of $2,780,151 and $8,871,911, respectively. For the three and nine months ended September 30, 2020, the Company recorded an expense for base management fees of $3,021,491 and $9,217,687, respectively. As of September 30, 2021 and December 31, 2020, the Company recorded a base management fee payable of $2,780,151 and $2,967,857, respectively.

The incentive fee consists of the following two parts:

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

F-43

For the three and nine months ended September 30, 2021 and 2020 the Company recorded no incentive fees. As of September 30, 2021 and December 31, 2020, the Company recorded no incentive fees payable.

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

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

On April 23, 2021, the Company entered into the Incentive Fee Waiver Agreement with SIC Advisors, pursuant to which SIC Advisors agreed to waive (i) 50% of any incentive fee on income payable to SIC Advisors for any fiscal quarter during the period beginning with the fiscal quarter ending September 30, 2021 and the fiscal quarter ending June 30, 2022, and (ii) 50% of any incentive fee on capital gains payable to SIC Advisors for the fiscal year ending December 31, 2021. For the avoidance of doubt, the Incentive Fee Waiver Agreement does not amend the calculation of the incentive fees as set forth in the Investment Advisory Agreement. Other than the waiver contemplated by the Incentive Fee Waiver Agreement, the terms of the Investment Advisory Agreement will remain in full force and effect. Following (i) the fiscal quarter ending June 30, 2022 with respect to the waiver granted by SIC Advisors on any incentive fee payable on income, and (ii) the fiscal year ending December 31, 2021 with respect to the waiver granted by SIC Advisors on any incentive fee payable on capital gains, unless otherwise extended by the Company and SIC Advisors, the Incentive Fee Waiver Agreement will terminate and the original terms of the Investment Advisory Agreement will be in full force and effect.

For the three and nine months ended September 30, 2021 and 2020, the Company recorded no capital gains incentive fees. As of September 30, 2021 and December 31, 2020, the Company recorded no capital gains incentive fees payable.

Administration Agreement

On April 5, 2012, the Company entered into an administration agreement (the “Administration Agreement”) with Medley Capital LLC, pursuant to which Medley Capital LLC furnishes the Company with administrative services necessary to conduct its day-to-day operations. Medley Capital LLC is reimbursed for administrative expenses it incurs on the Company’s behalf in performing its obligations. Such costs are reasonably allocated to the Company on the basis of assets, revenues, time records or other reasonable methods. The Company does not reimburse Medley Capital LLC for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of Medley Capital LLC. Pursuant to the 1940 Act, the Administration Agreement remained in effect for an initial period of two years from its effective date. The Administration Agreement became effective on April 17, 2012, the date that we met our minimum offering requirement. Pursuant to its terms, and unless earlier terminated as described below, the Administration Agreement will remain in effect from year-to-year if approved annually by a majority of our directors who are not "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of the Company or Medley Capital LLC, and either the holders of a majority of our outstanding voting securities or our board of directors. Most recently, on April 15, 2021, the Company’s board of directors approved the renewal of the Administration Agreement for an additional one-year term, which will expire on April 17, 2022. 

On April 23, 2021, the Company entered into the Expense Limitation Agreement with Medley Capital LLC, the Company’s administrator, pursuant to which, Medley Capital LLC agreed that the amount of expenses payable and reimbursable by the Company under the Administration Agreement will be capped at $2.2 million for the fiscal year ending December 31, 2021. For the avoidance of doubt, other than the cap contemplated by the Expense Limitation Agreement, the Expense Limitation Agreement does not amend the allocation of costs and expenses that are payable or reimbursable by the Company under the Administration Agreement. Following the quarter ending December 31, 2021, unless otherwise extended by the Company and Medley Capital LLC, the Expense Limitation Agreement will terminate and the original terms of the Administration Agreement will be in full force and effect.

On February 28, 2013, Medley Capital LLC entered into a Sub-Administration Agreement with State Street Bank Global Fund Accounting and Custody to perform certain financial, accounting, administrative and other services on behalf of the Company. For the three and nine months ended September 30, 2021, the Company recorded administrator expenses of $442,320 and $1,668,219, respectively. For the three and nine months ended September 30, 2020, the Company recorded administrator expenses of $431,598 and $1,822,255, respectively. As of September 30, 2021 and December 31, 2020, the Company had administrator fees payable of $442,320 and $401,260, respectively.

Note 7. Related Party Transactions

Investment Advisory Agreement

We have entered into an Investment Advisory Agreement and Incentive Fee Waiver Agreement with SIC Advisors (as described and for the periods set forth in Note 6). Members of our senior management also serve as executive officers of other investment managers affiliated with SIC Advisors that do, and may in the future, manage investment funds, accounts or other investment vehicles with investment objectives similar to ours.

Administration Agreement

We have entered into an Administration Agreement with Medley Capital LLC, pursuant to which Medley Capital LLC furnishes us with administrative services necessary to conduct our day-to-day operations. Medley Capital LLC is reimbursed for administrative expenses it incurs on our behalf. We do not reimburse Medley Capital LLC for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of Medley Capital LLC. Medley Capital LLC is an affiliate of SIC Advisors. In addition, we entered in the Expense Limitation Agreement with Medley Capital LLC (as described and for the period set forth in Note 6).

F-44

Commitment Letter 

As previously reported, on March 7, 2021, Medley LLC, the parent of the Company’s investment adviser and administrator, commenced a voluntary case (the “Chapter 11 Case”) under chapter 11 of title 11 of the United States Code in the Bankruptcy Court. The Chapter 11 Case is captioned In re Medley LLC, No, 21-10526 (KBO) (Bankr. D. Del. Mar. 7, 2021).
 
In connection with the Chapter 11 Case, on August 11, 2021 the Company entered into a commitment letter (the “Commitment Letter”) among the Company, Medley LLC, Medley Capital LLC, and SIC Advisors, pursuant to which the Company has agreed to contribute $2.1 million, subject to certain conditions, to an employee compensation and retention plan (the “Compensation Plan”) to be established by Medley Capital LLC.  The Compensation Plan is an element of a Term Sheet dated July 21, 2021 (the “Term Sheet”) filed by Medley LLC with the Bankruptcy Court as Docket No. 276 in the Chapter 11 Case.
 
Pursuant to the Commitment Letter, the Company’s contribution is to be made in three equal installments of $700,000 in September 2021, December 2021, and January 2022, and the contributions are to be used solely to fund payments to employees of Medley Capital LLC under the Compensation Plan. To the extent any such employee forfeits a compensation payment to which he or she would otherwise be entitled or is obligated to return a payment received, the Company is entitled to recoup the amount in its sole discretion.
 
The Company’s obligations under the Commitment Letter are subject to review and approval of definitive documents relating to the Compensation Plan, conditionally approved by the Bankruptcy Court for purposes of solicitation of votes, in form and substance consistent with the Compensation Plan included as an exhibit to the Term Sheet. 
 
The Company may terminate the Commitment Letter by written notice to Medley LLC, Medley Capital LLC, and SIC Advisors upon the occurrence of certain events, including, but not limited to, the entry by the Bankruptcy Court of an order materially inconsistent with the Term Sheet; the failure by the Bankruptcy Court to have entered an appropriate order by November 30, 2021; or the failure by SIC Advisors to comply with any covenant or agreement in the Investment Advisory Agreement dated April 5, 2012 between SIC Advisors and the Company.

License Agreement

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

Co-Investment Transactions

Opportunities for co-investments may arise when SIC Advisors or an affiliated adviser becomes aware of investment opportunities that may be appropriate for the Company and other clients or affiliated funds. The Company obtained an exemptive order from the SEC on November 25, 2013 (the “Prior Exemptive Order”). On March 29, 2017, the Company, SIC Advisors and certain other affiliated funds and investment advisers received an exemptive order (the "Exemptive Order") that supersedes the Prior Exemptive Order and allows affiliated registered investment companies to participate in co-investment transactions with us that would otherwise have been prohibited under Section 17(d) and 57(a)(4) and Rule 17d-1. On October 4, 2017, the Company, SIC Advisors and certain of our affiliates received an exemptive order that supersedes the Exemptive Order (the “Current Exemptive Order”) and allows, in addition to the entities already covered by the Exemptive Order, Medley LLC and its subsidiary, Medley Capital LLC, to the extent they hold financial assets in a principal capacity, and any direct or indirect, wholly- or majority-owned subsidiary of Medley LLC that is formed in the future, to participate in co-investment transactions with us that would otherwise be prohibited by either or both of Sections 17(d) and 57(a)(4) of the 1940 Act. Co-investment under the Current Exemptive Order is subject to certain conditions therein, including the condition that, in the case of each co-investment transaction, the board of directors determines that it would be in the Company’s best interest to participate in the transaction. However, neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us or them. See the footnotes to the consolidated schedule of investments as of  September 30, 2021 and December 31, 2020 for disclosures regarding securities also held by affiliated funds.

Note 8. Directors Fees

For the three and nine months ended September 30, 2021, the Company recorded directors' fees expenses in General and Administrative expenses on the Consolidated Statement of Operations of $317,500 and $1,004,326, respectively. For the three and nine months ended September 30, 2020, the Company recorded directors' fees expenses in General and Administrative expenses on the Consolidated Statement of Operations of $216,000 and $755,375, respectively. The increase in directors’ fees was primarily attributable to the efforts of the members of the Company’s special committee to lead the process to evaluate strategic alternatives for the Company, which ultimately resulted in the entering into of the Merger Agreement (as described in Note 1).

Note 9. Earnings Per Share

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

The following table sets forth the computation of the weighted average basic and diluted net increase in net assets per share from operations for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2021			2020		2021		2020
Net increase/(decrease) in net assets from operations	$	(7,728,510	)	$	32,120,421	$	29,522,588	$	(78,443,683	)
Weighted average common shares outstanding		102,210,752			102,742,489		102,452,267		102,771,213
Weighted average basic and diluted earnings/(loss) per common share	$	(0.08	)	$	0.31	$	0.29	$	(0.76	)

Note 10. Commitments

As of September 30, 2021 and December 31, 2020, the Company had $20,506,917 and $17,393,369, respectively, of unfunded commitments under loan and financing agreements. These amounts are primarily composed of commitments for senior secured term loans, revolvers, and additional capital contributions for the Sierra JV. The unrealized gain or loss associated with unfunded commitments is recorded in the financial statements and reflected as an adjustment to the valuation of the related security in the Consolidated Schedule of Investments. The par amount of the unfunded commitments are not recognized by the Company until the commitment is funded.

	As of
	September 30, 2021		December 31, 2020
1888 Industrial Services, LLC	$	376,856	$	376,856
Alpine SG, LLC		1,000,000		—
Black Angus Steakhouses, LLC		416,667		1,111,111
DataOnline Corp.		—		321,429
Isola USA Corp.		1,138,277		1,138,277
Kemmerer Operations LLC		908,475		908,475
Lifestyle Intermediate II, LLC		1,333,333		—
RA Outdoors, LLC		1,234,568		—
Redwood Services Group, LLC		—		2,587,500
RTIC Subsidiary Holdings, LLC		2,380,952		3,174,603
SFP Holdings, Inc.		—		3,081,900
Simplified Logistics, LLC		3,533,333		—
Thermacell Repellents, Inc.		2,200,000		—
West Dermatology, LLC		5,984,456		4,693,218
Total Commitments	$	20,506,917	$	17,393,369

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Note 11. Fee Income

Fee income consists of origination fees, amendment fees, prepayment fees, administrative agent fees and other miscellaneous fees. Origination fees, prepayment fees, amendment fees, and other similar fees are non-recurring fee sources. Such fees are received on a transaction by transaction basis and do not constitute a regular stream of income. The following table shows the Company’s fee income for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Origination fees	$	61,189	$	167,218	$	486,737	$	329,554
Amendment fees		123,618		14,599		432,652		250,030
Administrative agent fees		4,901		4,888		22,720		27,401
Other fees		—		924		14,080		15,277
Fee income	$	189,707	$	187,629	$	956,189	$	622,262

Note 12. Distributions and Share Repurchase Program

Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a distribution is determined by the Company’s board of directors.

The Company has adopted an “opt in” distribution reinvestment plan (“DRIP”), pursuant to which, prior to the suspension of the DRIP (as described below), the Company’s stockholders could elect to have the full amount of any cash distributions reinvested in additional shares of the Company’s common stock. The reinvestment purchase price under the DRIP is 94.5% of the NAV per share of the Company’s common stock on the distribution date. If the Company declares a cash dividend or other distribution, each stockholder that had “opted in” to the DRIP would have their distributions automatically reinvested in additional shares of the Company’s common stock rather than receiving cash distributions. Stockholders who received distributions in the form of shares of common stock will be subject to the same federal, state and local tax consequences as if they received cash distributions.

On September 21, 2021, the Company’s board of directors approved the suspension of the DRIP pursuant to the Merger Agreement (as described in Note 1). As a result, beginning with the Company’s first distribution following the September 2021 distribution, any distributions declared by the Company will be paid in cash to all stockholders unless and until the DRIP is reinstated.

For the nine months ended September 30, 2021, the Company distributed a total of $9,219,445 of which $6,172,682 was in cash and $3,046,763 was in the form of common stock issued under the DRIP. For the nine months ended September 30, 2020, the Company distributed a total of $10,760,287 of which $6,917,156 was in cash and $3,843,131 was in the form of common stock issued under the DRIP.

The following table reflects the cash distributions per share that the Company has declared or paid to its stockholders during 2021 and 2020. Stockholders of record as of each respective record date were entitled to receive the distribution.

Record Date	Payment Date	Amount per share
January 30, 2020	January 31, 2020	$	0.03500
February 27, 2020	February 28, 2020		0.03500
March 30, 2020	March 31, 2020		0.03500
October 29, 2020	October 30, 2020		0.01000
November 27, 2020	November 30, 2020		0.01000
December 30, 2020	December 31, 2020		0.01000
January 28, 2021	January 29, 2021		0.01000
February 25, 2021	February 26, 2021		0.01000
March 30, 2021	March 31, 2021		0.01000
April 29, 2021	April 30, 2021		0.01000
May 28, 2021	May 31, 2021		0.01000
June 29, 2021	June 30, 2021		0.01000
July 29, 2021	July 30, 2021		0.01000
August 30, 2021	August 31, 2021		0.01000
September 29, 2021	September 30, 2021		0.01000

The Company’s distributions may be funded from borrowings, which may constitute a return of capital and reduce the amount of capital available to the Company for investment, and historically may have been funded from offering proceeds or borrowings. Any capital returned to stockholders through distributions will be distributed after payment of fees and expenses. On July 31, 2020, our board of directors temporarily suspended the monthly distributions on the shares of the Company’s common stock. On October 22, 2020, our board of directors determined to reinstate the monthly distributions on the shares of the Company’s common stock. 

During the term of the Expense Support and Reimbursement Agreement with SIC Advisors (which expired on December 31, 2016), SIC Advisors reimbursed the Company for operating expenses in an amount equal to the difference between the Company’s distributions paid to its stockholders in each month, less the sum of the Company’s net investment income, net realized capital gains and dividends paid to the Company from its portfolio companies, not included in net income and net realized capital gains, during such period (“Expense Support Reimbursement”). The Company’s previous distributions to stockholders may have been funded from temporary Expense Support Reimbursements that may have been subject to repayment to SIC Advisors. The portion of these distributions derived from temporary Expense Support Reimbursements were not based on the Company's investment performance and may not continue in the future. If SIC Advisors had not agreed to make Expense Support Reimbursements, these distributions would have come from paid-in-capital. The Company's contingent obligation to repay eligible reimbursements to SIC Advisors expired on September 30, 2019.

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

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Share Repurchase Program

In June 2013, the Company commenced a share repurchase program pursuant to which it conducted quarterly share repurchases of up to 2.5% of the weighted average number of outstanding shares of its common stock in the prior four calendar quarters or 10% of the weighted average number of outstanding shares in the prior 12-month period. In connection with the previously proposed mergers of the Company, MDLY, and Medley Capital Corporation, the Company suspended the Share Repurchase Program. The purpose of the share repurchase program was to allow stockholders to sell their shares back to the Company at a price equal to the most recently disclosed NAV per share of the Company's common stock immediately prior to the date of repurchase. Shares were purchased from stockholders participating in the program on a pro-rata basis. Unless the Company's board of directors determined otherwise, the number of shares repurchased during any calendar year were limited to the proceeds received in association with the sale of shares of common stock under the DRIP.

Notwithstanding the suspension of the share repurchase program our board of directors previously approved the repurchase of shares of our common stock from our stockholders who have requested repurchases in connection with such stockholder’s death or disability. In the event of the death or disability of a stockholder, the Company would repurchase the shares held by such stockholder at a price equal to the NAV per share of our shares as disclosed in the periodic report the Company files with the SEC immediately following the date of the death or disability of such stockholder. The Company's board of directors has the right to suspend or terminate repurchases due to death or disability to the extent that it determines that it is in the Company's best interest to do so.

In addition, on April 28, 2021, our board of directors authorized a share repurchase program, pursuant to which the Company conducted quarterly share repurchases, beginning in the second quarter of 2021, of the lesser of: (i) the number of shares of common stock, par value $0.0001 per share, that the Company can purchase with the proceeds received under the DRIP from the prior quarter; or (ii) 2.5% of the weighted average number of shares outstanding in the prior four calendar quarters (the “Share Repurchase Program”). Notwithstanding the foregoing, in connection with the first share repurchase offer for the quarter ended June 30, 2021, the Company intended to repurchase the number of shares that the Company can purchase with the proceeds received under the DRIP from the prior two quarters. The purpose of the Share Repurchase Program was to allow stockholders to sell their shares back to the Company at a price equal to the most recently disclosed net asset value per share of the Company’s common stock immediately prior to the date of such share repurchase. Shares were purchased from stockholders participating in the Share Repurchase Program on a pro rata basis. The Share Repurchase Program may be suspended, extended, modified or discontinued by our board of directors at any time.

As previously disclosed on September 22, 2021, pursuant to the Merger Agreement (as described in Note 1), the Company’s board of directors determined to suspend the share repurchase program and repurchase in the event of death or disability.

During the three and nine months ended September 30, 2021, the Company repurchased 12 and 964,494 shares of certain shareholders pursuant to the Share Repurchase Program and due to death or disability, respectively. During the three and nine months ended September 30, 2020, the Company repurchased 324,136 and 483,083 shares of certain shareholders due to death or disability, respectively.

Note 13. Financial Highlights

The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2021 and 2020:

	2021			2020
Per Share Data:(1)
Net asset value at beginning of period	$	5.12		$	5.78
Net investment income/(loss)		0.09			(0.08	)
Net realized gains/(losses) on investments		0.03			(0.59	)
Net unrealized appreciation/(depreciation) on investments		0.17			(0.09	)
Net increase/(decrease) in net assets	$	0.29		$	(0.76	)
Distributions declared from net investment income(2)		(0.09	)		(0.11	)
Total distributions to shareholders	$	(0.09	)	$	(0.11	)
Net asset value at end of period	$	5.32		$	4.91
Total return based on net asset value(4)(5)		5.78	%		(13.44	)%
Portfolio turnover rate(5)		18.63	%		14.77	%
Shares outstanding at end of period		102,276,889			102,571,371
Net assets at end of period	$	544,041,783		$	503,255,139
Ratio/Supplemental Data (annualized):
Ratio of net investment income/(loss) to average net assets		2.35	%		(2.11	)%
Ratio of net expenses (including incentive fees) to average net assets		7.36	%		11.78	%
Ratio of incentive fees to average net assets (5)		—	%		—	%
Supplemental Data (annualized):
Asset coverage ratio per unit(6)	$	7,887		$	3,796
Percentage of non-recurring fee income		3.16	%		2.22	%
Ratio of net expenses (excluding incentive fees) to average net assets		7.36	%		11.78	%
Ratio of interest and financing related expenses to average net assets (7)		0.96	%		2.66	%
Total Debt Outstanding:(8)(9)
Revolving Credit Facility	$	79,000,000		$	180,000,000

(1) The per share data was derived by using the weighted average shares outstanding during the nine months ended September 30, 2021 and 2020, which were 102,452,267 and 102,771,213 respectively. Table may not foot due to rounding.

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

(3) Shares issued under the DRIP (see Note 12) may cause an incremental increase/decrease in NAV per share due to the effect of issuing shares at amounts that differ from the prevailing NAV at each issuance.

(4) Total annual returns are historical and assume reinvestments of all dividends and distributions at prices obtained under the Company’s DRIP, and no sales charge.

(5) Not annualized.

(6) Asset coverage per unit is the ratio of the carrying value of the Company's total consolidated assets for regulatory purposes, less all liabilities and indebtedness not represented by senior securities to the aggregate amount of Senior Securities representing indebtedness. Asset coverage per unit is expressed in terms of dollars per $1,000 of indebtedness. As of September 30, 2021 and 2020, the Company's Asset Coverage Per Unit including unfunded commitments was $6,261 and $3,380, respectively.

(7) Represents the impact of non-recurring fees over total investment income.

(8) Total amount of each class of senior securities outstanding at the end of the period excluding debt issuance costs.

(9) Average market value per unit is not applicable as these classes of securities are not registered for public trading.

F-47

Note 14. Subsequent Events

Management has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the nine months ended September 30, 2021, except as disclosed below.

On October 19, 2021, our board of directors declared a series of monthly distributions for October, November and December 2021 in the amount of $0.01 per share. Stockholders of record as of each respective monthly record date will be entitled to receive the distribution. Below are the details for each respective distribution:

Record Date	Payment Date	Amount per share
November 15, 2021	November 16, 2021	$	0.01
November 29, 2021	November 30, 2021		0.01
December 30, 2021	December 31, 2021		0.01

On March 7, 2021 (the “Petition Date”), Medley LLC (the “Debtor”) commenced a voluntary case (the “Medley Bankruptcy Case”) under chapter 11 of title 11 of the United States Code in the Bankruptcy Court.  The Debtor is the sole member of the investment adviser, SIC Advisors, and the administrator, Medley Capital LLC, of the Company.  Following the commencement of the Medley Bankruptcy Case, the Debtor continued to manage its business as a debtor in possession under the Bankruptcy Code.  The Debtor, Medley Capital LLC and the Official Committee of Unsecured Creditors appointed in the Medley Bankruptcy Case reached agreement on the terms of a chapter 11 plan, which was filed with the Bankruptcy Court on August 13, 2021, and ultimately confirmed by the Bankruptcy Court on October 14, 2021 (as supplemented and modified, the Modified Third Amended Combined Disclosure Statement Chapter 11 Plan of Medley LLC, the “Plan”). The Plan became effective on October 18, 2021 (the “Effective Date”).
 
The Plan provides for a limited restructuring in chapter 11 to enable the Debtor to maximize the value of its remaining contracts (the “Remaining Contracts”) over a short run-off period, until the Remaining Contracts are terminated, subject to an end date of March 31, 2022 (the “Run-Off End Date”). The Remaining Contracts consist of investment management agreements between the Debtor’s subsidiary advisers and third-party clients, including the Company’s investment advisory agreement and related agreements with SIC Advisors and its administration agreement and related agreements with Medley Capital LLC.  The Debtor does not have its own employees, and in order to provide for the continued performance of the Debtor’s subsidiaries under the Remaining Contracts, the Plan establishes a compensation plan for Medley Capital LLC’s employees (the “Non-Debtor Compensation Plan”). The Non-Debtor Compensation Plan is designed to retain certain key Medley Capital LLC employees to service the Remaining Contracts, including the Company’s investment advisory agreement with SIC Advisors and pursuant to the Non-Debtor Compensation Plan, the Company has agreed to contribute $2.1 million of a total cost of $5.7 million to fund the Non-Debtor Compensation Plan. The Company’s obligations under the Non-Debtor Compensation Plan expire on January 31, 2022, while Medley Capital’s obligations under the Non-Debtor Compensation Plan expire on the Run-Off End Date. The Plan also contemplates that SIC Advisors LLC will continue to honor its obligations under the Company’s investment advisory agreement until the termination thereof. Accordingly, the Company’s arrangements with SIC Advisors and Medley Capital LLC are expected to remain in place until the closing of the Merger. 
 
The Plan further provides for a liquidating trust established for the benefit of creditors holding allowed claims against the Debtor. On the Effective Date, the Debtor’s assets, including all cash on hand and all causes of action retained by the estate under the Plan were transferred to the liquidating trust, and the Plan provides for the subsequent transfer of the proceeds received by the Debtor under the Remaining Contracts once the wind-down is complete. 

In the event the proposed mergers contemplated by the Merger Agreement is not consummated for any reason on or before the Run-Off End Date, the Company’s board of directors would expect to consider alternatives, including another merger transaction, the Company’s liquidation or the replacement of SIC Advisors as its investment adviser, based on, among other things, then-current market circumstances, the performance of the Company’s portfolio and the financial position of the Company. The Company also might seek a modification to the Plan, that would extend the Run-Off End Date so that SIC Advisors may continue to serve as the Company’s investment adviser beyond March 31, 2022. 

F-48

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

The following discussion and analysis should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this annual report on Form 10-K.

Except as otherwise specified, references to “we,” “us,” “our,” or the “Company,” refers to Sierra Income Corporation. “SIC Advisors” or “Adviser” refers to SIC Advisors LLC, our investment adviser. SIC Advisors is a wholly owned subsidiary of Medley LLC. On March 7, 2021, Medley LLC commenced a voluntary case (the “Medley Bankruptcy Case”) under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). See “Recent Developments” for more information about the chapter 11 plan confirmed by the Bankruptcy Court on October 14, 2021 and that became effective on October 18, 2021.

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

• our future operating results;

• our business prospects and the prospects of our portfolio companies;

• changes in laws and regulations, changes in political, economic or industry conditions, and changes in the interest rate environment or other conditions affecting the financial and capital markets, including with respect to changes resulting from or in response to, or potentially even the absence of changes as a result of, the impact of the COVID-19 pandemic;

• risks associated with possible disruptions in our operations or the economy generally including the current economic downturn as a result of the impact of the COVID-19 pandemic;

• the risk that, if the current period of capital markets disruption and instability continues for an extended period of time, that our stockholders may not receive distributions, if any, or at historical levels and that a portion of our distribution in the future may be a return of capital;

• the effect of investments that we expect to make;

• our contractual arrangements and relationships with third parties;

• actual and potential conflicts of interest with SIC Advisors and its affiliates;

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

• the ability of our portfolio companies to achieve their objectives;

• the use of borrowed money to finance a portion of our investments;

• the adequacy of our financing sources and working capital;

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

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

• the ability of SIC Advisors and its affiliates to attract and retain highly talented professionals;

• our ability to maintain our qualification as a RIC and as a BDC;

• the effect of changes in laws or regulations affecting our operations;

• risks relating to our pending transaction with Barings BDC, Inc. pursuant to the Merger Agreement (as described below);

• uncertainties associated with the continued impact from the COVID-19 pandemic, including: its impact on the global and U.S. capital markets, and the global and U.S. economy; the length and full duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak; the effect of the COVID-19 pandemic on our business prospects and the operational and financial performance of our portfolio companies, including our and their ability to achieve their respective objectives; the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business and our use of borrowed money to finance a portion of our investments 

Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “potential,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may,” or similar expressions. The forward-looking statements contained in this quarterly report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including due to the factors set forth in “Risk Factors” in this quarterly report on Form 10-Q and in Item 1A “Risk Factors” in Part 1 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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

1

Recent COVID-19 Developments

On March 11, 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) as a pandemic, and, on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. While consumer demand for goods and services has begun to rebound, we continue to see reductions in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both in the United States and globally. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

We have been closely monitoring, and will continue to monitor, the COVID-19 pandemic and its impact on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence and underwriting processes, and financial markets. In addition, as a result of the adverse effects of the COVID-19 pandemic and the related disruption and financial distress, certain portfolio companies may seek to modify their loans from us, which could reduce the amount or extend the time for payment of principal, reduce the rate or extend the time of payment of interest, and/or increase the amount of PIK interest we receive with respect to such investment, among other things. The effects of the COVID-19 pandemic have also impeded, and may continue to impede, the ability of certain of our portfolio companies to raise additional capital and/or pursue asset sales or otherwise execute strategic transactions, which could have a material adverse effect on the valuation of our investments in such companies. Portfolio companies operating in certain industries may be more susceptible to these risks than other portfolio companies in other industries in light of the effects of the COVID-19 pandemic. Given the rapid development and fluidity of this situation, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position or cash flows at this time. Further, the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in turn impact the valuation of our investments. We believe our portfolio companies have taken, and continue to take, immediate actions to effectively and efficiently respond to the challenges posed by COVID-19 and related orders imposed by state and local governments, including developing liquidity plans supported by internal cash reserves, and shareholder support. The extent to which our operations may be impacted by the COVID-19 pandemic will depend largely on future developments, which remain highly uncertain and cannot be accurately predicted, including guidance from U.S. and international authorities. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. COVID-19 presents material uncertainty and risks with respect to the underlying value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

We have evaluated subsequent events from September 30, 2021 through the filing date of this quarterly report on Form 10-Q. However, as the discussion in this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Company’s financial statements for the quarterly period ended September 30, 2021, the analysis contained herein may not fully account for impacts relating to the COVID-19 pandemic. In that regard, for example, as of September 30, 2021, the Company valued its portfolio investments in conformity with U.S. GAAP based on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time. Due to the overall volatility that the COVID-19 pandemic has caused during the time that followed our September 30, 2021 valuation, any valuations conducted now or in the future in conformity with U.S. GAAP could result in a lower fair value of our portfolio. The impact to our results going forward will depend to a large extent on future developments and new information that may emerge regarding the duration of COVID-19 and the actions taken by authorities and other entities to contain the coronavirus or treat its impact, all of which are beyond our control. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected at this time.

Overview

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

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

We intend to meet our investment objective by primarily lending to, and investing in, the debt of privately owned U.S. middle market companies, which we define as companies with annual revenue between $50 million and $1 billion. We intend to focus primarily on making investments in first lien senior secured debt, second lien secured debt, and to a lesser extent, subordinated debt, of middle market companies in a broad range of industries. We expect that the majority of our debt investments will bear interest at floating interest rates, but our portfolio may also include fixed-rate investments. We will originate transactions sourced through SIC Advisors’ existing network, and, to a lesser extent, expect to acquire debt securities through the secondary market. We may make equity investments in companies that we believe will generate appropriate risk adjusted returns, although we do not expect such investments to be a substantial portion of our portfolio.

2

The level of our investment activity depends on many factors, including the amount of debt and equity capital available to prospective portfolio companies, the level of merger, acquisition and refinancing activity for such portfolio companies, the availability of credit to finance transactions, the general economic environment and the competitive environment for the types of investments we make. The precise timing of our investment activity will depend on the availability of investment opportunities that are consistent with our investment objectives and strategies.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, we are only allowed to borrow money such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if certain requirements under the 1940 Act are met) after such borrowing, with certain limited exceptions. To maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements. To be eligible for RIC tax treatment under Subchapter M for U.S. federal income tax purposes, we must distribute at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, for the taxable year.

Agreement and Plan of Merger

On September 21, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Barings BDC, Inc., a Maryland corporation (“BBDC”), Mercury Acquisition Sub, Inc., a Maryland corporation and a direct wholly owned subsidiary of BBDC (“Acquisition Sub”), the Company and Barings LLC, a Delaware limited liability company and investment adviser to BBDC (“Barings”). The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement, Acquisition Sub will merge with and into the Company, with the Company continuing as the surviving company and as a wholly owned subsidiary of BBDC (the “First Merger”) and, immediately thereafter, the Company will merge with and into BBDC, with BBDC continuing as the surviving company (together with the First Merger, the “Merger”). The boards of directors of both BBDC and the Company, including all of the respective independent directors, have approved the Merger Agreement and the transactions contemplated therein. The parties to the Merger Agreement intend the Merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Code.

In the First Merger, each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the First Merger (excluding any shares cancelled pursuant to the Merger Agreement) will be converted into the right to receive (i) $0.9783641 per share in cash, without interest, from Barings (such amount of cash, the “Cash Consideration”) and (ii) 0.44973 (such ratio, as may be adjusted pursuant to the Merger Agreement, the “Exchange Ratio”) of a validly issued, fully paid and non-assessable share of BBDC common stock, par value $0.001 per share (the “Share Consideration” and, together with the Cash Consideration, the “Merger Consideration”).

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

The Merger Agreement provides that the Company shall not, and shall cause its subsidiaries and instruct its representatives not to, directly or indirectly, solicit proposals relating to alternative transactions, or, subject to certain exceptions, initiate or participate in discussions or negotiations regarding, or provide information with respect to, any proposal for an alternative transaction. However, the Company’s board of directors may, subject to certain conditions, change its recommendation to the Company’s stockholders or, on payment of a termination fee of $11.0 million to BBDC and the reimbursement of up to $2.0 million in expenses incurred by BBDC and Barings, terminate the Merger Agreement and enter into an Alternative Acquisition Agreement (as defined in the Merger Agreement) for a Superior Proposal (as defined in the Merger Agreement) if it determines in good faith, after consultation with its outside legal counsel, that failure to do so would be inconsistent with the directors’ duties under applicable law.

Consummation of the First Merger, which is currently anticipated to occur during the first quarter of fiscal year 2022, is subject to certain customary closing conditions, including (1) approval of the First Merger by the holders of at least a majority of the outstanding shares of the Company’s common stock entitled to vote thereon, (2) approval of the issuance of BBDC common stock to be issued in the First Merger by a majority of the votes cast by the BBDC stockholders on the matter at the BBDC stockholders meeting, (3) approval of the issuance of BBDC’s common stock in connection with the First Merger at a price below the then-current net asset value per share of BBDC common stock, if applicable, by the vote specified in Section 63(2)(A) of the 1940 Act, (4) the absence of certain legal impediments to the consummation of the First Merger, (5) effectiveness of the registration statement for the BBDC common stock to be issued as consideration in the First Merger, (6) approval for listing on the New York Stock Exchange of the BBDC common stock to be issued as consideration in the First Merger, (7) subject to certain materiality standards, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement, and (8) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or early termination thereof).

Barings, as party to the Merger Agreement, agreed to vote all shares of BBDC common stock over which it has voting power (other than in its fiduciary capacity) in favor of the proposals to be submitted by BBDC to its stockholders for approval relating to the Merger.

In addition, the Company and BBDC will take steps necessary to provide for the repayment at closing of the Alpine Credit Facility (as defined below). The Merger Agreement also contains certain termination rights in favor of BBDC and the Company, including if the First Merger is not completed on or before March 31, 2022 or if the requisite approvals of the Company stockholders or BBDC stockholders are not obtained.

Further, BBDC will enter into an amendment and restatement of its investment advisory agreement with Barings, effective as of the closing of the Merger, to raise the annualized hurdle rate thereunder from 8.0% to 8.25%. Following the closing of the Merger, BBDC will also enter into a credit support agreement with Barings, for the benefit of the combined company, to protect against net cumulative unrealized and realized losses of up to $100.0 million on the acquired Company investment portfolio over the next ten years.

Revenues

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

Expenses

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

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

• the cost of calculating our NAV, including the related fees and cost of any third-party valuation services;

• the cost of effecting sales and repurchases of shares of our common stock and other securities;

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

• interest payable on debt, if any, incurred to finance our investments;

• transfer agent and custodial fees;

• fees and expenses associated with marketing efforts subject to limitations included in the Investment Advisory Agreement;

• federal and state registration fees and any stock exchange listing fees;

• federal, state and local taxes;

• independent directors’ fees and expenses, including travel expenses;

• costs of director and stockholder meetings, proxy statements, stockholders’ reports and notices;

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

• direct costs, including those relating to printing of stockholder reports and advertising or sales materials, mailing, long distance telephone and staff subject to limitations included in the Investment Advisory Agreement;

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

• brokerage commissions for our investments;

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

• the reimbursement of the compensation of our Chief Financial Officer and Chief Compliance Officer and their respective staffs, whose compensation is paid by Medley Capital LLC, to the extent that each such reimbursement amount is annually approved by our independent director committee and subject to the limitations included in our Administration Agreement.

Administrative Services

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

On April 23, 2021, the Company entered into the Expense Limitation Agreement with Medley Capital LLC, the Company’s administrator, pursuant to which, Medley Capital LLC agreed that the amount of expenses payable and reimbursable by the Company under the Administration Agreement will be capped at $2.2 million for the fiscal year ending December 31, 2021. For the avoidance of doubt, other than the cap contemplated by the Expense Limitation Agreement, the Expense Limitation Agreement does not amend the allocation of costs and expenses that are payable or reimbursable by the Company under the Administration Agreement. Following the quarter ending December 31, 2021, unless otherwise extended by the Company and Medley Capital LLC, the Expense Limitation Agreement will terminate and the original terms of the Administration Agreement will be in full force and effect.

3

Portfolio and Investment Activity

The following table shows the amortized cost and the fair value of our investment portfolio as of September 30, 2021:

	Amortized Cost		Percentage			Fair Value		Percentage
Senior secured first lien term loans	$	342,236,943		54.9	%	$	286,852,679		52.7	%
Senior secured second lien term loans		81,827,969		13.1			81,101,866		14.9
Subordinated notes		58,584,937		9.4			55,232,903		10.1
Sierra Senior Loan Strategy JV I LLC		110,050,000		17.6			85,872,235		15.8
Equity/warrants		30,911,638		5.0			35,208,470		6.5
Total	$	623,611,487		100.0	%	$	544,268,153		100.0	%

As of September 30, 2021, our income-bearing investment portfolio, which represented 95.1% of our total portfolio, had a weighted average yield based upon the cost of our investment portfolio of 8.0%, and 2.4% of our income-bearing portfolio bore interest based on fixed rates, while 97.6% of our income-bearing portfolio bore interest at floating rates, such as LIBOR.

As of September 30, 2021, the Company held loans it has made directly to 62 investee companies with aggregate principal amounts of $496.0 million. As of December 31, 2020, the Company held loans it has made directly to 67 investee companies with aggregate principal amounts of $541.1 million. During the three and nine months ended September 30, 2021, the Company made 13 and 49 loans to investee companies with aggregate principal amounts of $20.3 million and $63.6 million, respectively. During the three and nine months ended September 30, 2020, the Company made 7 and 38 loans to investee companies, respectively, with aggregate principal amounts of $21.3 million and $90.5 million, respectively

The following table shows the amortized cost and the fair value of our investment portfolio as of December 31, 2020:

	Amortized Cost		Percentage			Fair Value		Percentage
Senior secured first lien term loans	$	369,385,810		52.7	%	$	315,490,601		52.3	%
Senior secured first lien notes		8,473,750		1.2			8,548,755		1.4
Senior secured second lien term loans		103,081,287		14.7			93,794,917		15.5
Subordinated notes		65,561,840		9.4			50,039,500		8.3
Sierra Senior Loan Strategy JV I LLC		110,050,000		15.7			81,788,964		13.5
Equity/warrants		44,451,252		6.3			54,323,743		9.0
Total	$	701,003,939		100.0	%	$	603,986,480		100.0	%

As of December 31, 2020, our income-bearing investment portfolio, which represented 87.2% of our total portfolio, had a weighted average yield based upon the cost of our investment portfolio of approximately 8.0%, and 3.5% of our income-bearing portfolio bore interest based on fixed rates, while 96.5% of our income-bearing portfolio bore interest at floating rates, such as LIBOR.

The following table shows weighted average current yield to maturity based on fair value as of September 30, 2021 and December 31, 2020:

	September 30, 2021						December 31, 2020
				Weighted						Weighted
				Average						Average
	Percentage			Current			Percentage			Current
	of Total			Yield for Total			of Total			Yield for Total
	Investments			Investments(1)			Investments			Investments(1)
Senior secured first lien term loans		52.7	%		7.3	%		52.7	%		9.3	%
Senior secured first lien notes		—			—			1.2			11.0	%
Senior secured second lien term loans		14.9			10.6	%		14.7			10.9	%
Subordinated notes		10.1			12.6	%		9.4			8.8	%
Sierra Senior Loan Strategy JV I LLC		15.8			8.4	%		15.7			9.0	%
Equity/warrants		6.5			12.5	%		6.3			6.0	%
Total		100.0	%		8.6	%		100.0	%		9.5	%

(1) The weighted average current yield for total investments does not represent the total return to our stockholders.

4

The following table shows the portfolio composition by industry classification based on fair value as of September 30, 2021:

Industry Classification	Amortized Cost		Percentage			Fair Value		Percentage
Multi-Sector Holdings		167,759,211		26.9	%		140,242,094		25.8	%
High Tech Industries		82,503,266		13.2			83,272,129		15.3
Services: Business		47,951,702		7.7			47,539,868		8.7
Healthcare & Pharmaceuticals		60,136,811		9.6			47,482,054		8.7
Aerospace & Defense		34,821,243		5.6			32,924,326		6.0
Hotel, Gaming & Leisure		41,945,036		6.7			32,261,471		5.9
Automotive		29,358,423		4.7			27,699,361		5.1
Consumer Goods: Durable		20,325,731		3.3			23,703,479		4.4
Environmental Industries		12,020,565		1.9			20,659,123		3.8
Services: Consumer		14,628,130		2.3			14,966,608		2.7
Banking, Finance, Insurance & Real Estate		10,096,159		1.6			11,443,823		2.1
Chemicals, Plastics & Rubber		10,039,254		1.6			9,388,473		1.7
Construction & Building		15,770,141		2.5			8,936,628		1.6
Forest Products & Paper		6,395,222		1.0			8,289,049		1.5
Media: Diversified & Production		15,348,135		2.5			7,578,621		1.4
Transportation: Consumer		7,251,893		1.2			6,309,147		1.2
Containers, Packaging & Glass		5,735,094		0.9			5,746,083		1.1
Metals & Mining		3,508,618		0.6			3,957,208		0.7
Transportation: Cargo		3,899,642		0.6			3,902,018		0.7
Retail		9,794,441		1.6			2,976,544		0.5
Capital Equipment		2,452,771		0.4			2,438,224		0.4
Energy: Oil & Gas		20,175,978		3.2			1,117,122		0.2
Wholesale		1,650,966		0.3			1,392,578		0.3
Beverage & Food		43,055		0.0			42,122		0.0
Total	$	623,611,487		100.0	%	$	544,268,153		100.0	%

The following table shows the portfolio composition by industry classification based on fair value as of December 31, 2020:

Industry Classification	Amortized Cost		Percentage			Fair Value		Percentage
Multi-Sector Holdings	$	174,660,001		24.9	%	$	131,792,864		21.8	%
Services: Business		79,260,551		11.3			73,716,395		12.2
High Tech Industries		75,519,344		10.8			71,792,022		11.9
Healthcare & Pharmaceuticals		68,599,968		9.8			58,275,198		9.6
Consumer Goods: Durable		32,045,028		4.6			41,016,292		6.8
Construction & Building		42,928,750		6.1			38,356,358		6.4
Banking, Finance, Insurance & Real Estate		27,848,664		4.0			37,620,161		6.2
Aerospace & Defense		33,558,896		4.8			29,723,725		4.9
Hotel, Gaming & Leisure		36,326,705		5.2			24,013,769		4.0
Automotive		18,886,756		2.7			17,404,476		2.9
Containers, Packaging & Glass		15,206,840		2.2			15,120,424		2.5
Environmental Industries		5,041,430		0.7			10,052,691		1.7
Services: Consumer		9,700,000		1.4			9,725,000		1.6
Chemicals, Plastics & Rubber		10,060,861		1.4			9,063,498		1.5
Forest Products & Paper		6,477,887		0.9			7,770,704		1.3
Media: Diversified & Production		15,474,145		2.2			6,780,000		1.1
Transportation: Cargo		6,877,294		1.0			6,770,781		1.1
Transportation: Consumer		7,975,416		1.1			6,068,082		1.0
Metals & Mining		3,492,436		0.5			3,492,479		0.6
Energy: Oil & Gas		20,868,832		3.0			2,625,018		0.4
Wholesale		2,212,919		0.3			1,746,044		0.3
Retail		7,934,347		1.1			1,012,358		0.2
Beverage & Food		46,869		0.0			48,141		0.0
Total	$	701,003,939		100.0	%	$	603,986,480		100.0	%

5

SIC Advisors regularly assesses the risk profile of our portfolio investments and rates each of them based on the categories set forth below, which we refer to as SIC Advisors’ investment credit rating. Investment credit ratings are assigned to each of the investments in our portfolio that are directly held by the Company, but exclude any off-balance sheet interests of the Company:

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

The following table shows the distribution of our investment portfolio, not including cash and cash equivalents, on the 1 to 5 investment credit rating scale at fair value as of September 30, 2021 and December 31, 2020:

	September 30, 2021					December 31, 2020
Investment	Investments at					Investments at
Credit Rating	Fair Value		Percentage			Fair Value		Percentage
1	$	29,167,480		5.5	%	$	51,481,987		8.5	%
2		384,459,844		70.6			410,310,087		67.9
3		96,338,069		17.7			110,668,216		18.3
4		8,517,417		1.6			13,500,546		2.3
5		25,785,342		4.7			18,025,644		3.0
Total	$	544,268,153		100.0	%	$	603,986,480		100.0	%

The COVID-19 pandemic has impacted our investment ratings as of September 30, 2021, causing downgrades of certain portfolio companies. As the COVID-19 pandemic continues to evolve, we are continuing to maintain close communications with our portfolio companies to proactively assess and manage potential risks across our investment portfolio. We have also increased oversight and analysis of credits in vulnerable industries in an attempt to improve loan performance and reduce credit risk.

Results of Operations

The following table shows operating results for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Total investment income	$	12,596,856		$	12,935,319		$	39,503,073		$	35,811,584
Total expenses		11,118,981			6,854,087			28,035,650			43,674,215
Income Tax Expense		—			—			1,938,320			—
Net investment income/(loss)		1,477,875			6,081,232			9,529,103			(7,862,631	)
Net realized gain/(loss) from investments		7,049,324			(52,474,635	)		2,946,800			(60,522,923	)
Net change in unrealized appreciation/(depreciation) on investments		(17,453,978	)		79,481,063			17,672,537			(9,038,042	)
Change in provision for deferred taxes on unrealized gain on investments		1,198,269			(749,289	)		(625,852	)		(802,137	)
Loss on extinguishment of debt		—			(217,950	)		—			(217,950	)
Net increase/(decrease) in net assets resulting from operations	$	(7,728,510	)	$	32,120,421		$	29,522,588		$	(78,443,683	)

Investment Income

Total investment income decreased $338,463, or 2.6%, to $12,596,856 for the three months ended September 30, 2021, compared to $12,935,319 for the three months ended September 30, 2020. Total investment income consisted primarily of portfolio interest and dividends, which decreased $328,850, or 2.6%, to $12,408,169 for the three months ended September 30, 2021, compared to $12,737,019 for the three months ended September 30, 2020. This decrease was primarily attributable to a decrease in the size of the underlying portfolio, primarily as a result of principal repayments and the sale of portfolio investments.

Total investment income increased $3,691,489, or 10.3%, to $39,503,073 for the nine months ended September 30, 2021, compared to $35,811,584 for the nine months ended September 30, 2020. Total investment income consisted primarily of portfolio interest and dividends, which increased $4,728,719, or 14.0%, to $38,531,971 for the nine months ended September 30, 2021, compared to $33,803,252 for the nine months ended September 30, 2020. This increase was primarily attributable to an increase in dividend income from certain portfolio investments.

As of September 30, 2021, certain investments in eleven portfolio companies were on non-accrual status with a combined cost of $88,988,561, or 14.3% of the cost of the Company's portfolio, and a combined fair value of $32,989,921 or 6.1% of the fair value of the Company's portfolio. As of September 30, 2020, certain investments in fourteen portfolio companies were on non-accrual status with a combined cost of $107,750,374, or 14.8% of the cost of the Company's portfolio, and a combined fair value of $50,838,081 or 8.5% of the fair value of the Company's portfolio.

Fee income increased $2,078, or 1.1%, to $189,707 for the three months ended September 30, 2021, compared to $187,629 for the three months ended September 30, 2020, primarily due to an increase in fees associated with loan amendments. Fee income increased $333,927, or 53.7%, to $956,189 for the nine months ended September 30, 2021, compared to $622,262 for the nine months ended September 30, 2020, primarily due to an increase in fees associated with loan originations and loan amendments.

6

Operating Expenses

The following table shows operating expenses for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2021		2020			2021		2020
Base management fees	$	2,780,151	$	3,021,491		$	8,871,911	$	9,217,687
Interest and financing expenses		816,620		2,106,105			3,901,402		9,848,708
General and administrative expenses		3,997,792		1,680,990			7,848,361		11,959,187
Administrator expenses		442,320		431,598			1,668,219		1,822,255
Offering costs		21,381		30,816			26,537		35,973
Professional fees		3,060,717		(416,913	)		5,719,220		10,790,405
Total expenses	$	11,118,981	$	6,854,087		$	28,035,650	$	43,674,215

Total expenses increased $4,264,894, or 62.2%, to $11,118,981 for the three months ended September 30, 2021, as compared to $6,854,087 for the three months ended September 30, 2020, primarily due to an increase in general and administrative expenses relating to legal fees and professional fees related to investment banking and advisory fees in connection with the proposed mergers contemplated by the Merger Agreement. Total expenses decreased $15,638,565, or 35.8%, to $28,035,650 for the nine months ended September 30, 2021, as compared to $43,674,215 for the nine months ended September 30, 2020, primarily due to a decrease in interest and financing expenses and a decrease in general and administrative expenses and professional fees related to the one-time expense of deferred transaction costs.

Base management fees decreased $241,340, or 8.0%, to $2,780,151 for the three months ended September 30, 2021, as compared to $3,021,491 for the three months ended September 30, 2020, primarily due to a decrease in our gross assets. Base management fees decreased $345,776, or 3.8%, to $8,871,911 for the nine months ended September 30, 2021, as compared to $9,217,687 for the nine months ended September 30, 2020, primarily due to a decrease in our gross assets. 

Interest and financing expenses decreased $1,289,485, or 61.2%, to $816,620 for the three months ended September 30, 2021, as compared to $2,106,105 for the three months ended September 30, 2020, primarily due to the wind-down and termination of the ING Credit Facility (as defined below) from May 2020 through July 2020, as well as the repayment of $101,000,000 of the outstanding balance of its Alpine Credit Facility. Interest and financing expenses decreased $5,947,306, or 60.4% to $3,901,402 for the nine months ended September 30, 2021, as compared to $9,848,708 for the nine months ended September 30, 2020, primarily due to the wind-down and termination of the ING Credit Facility (as defined below) from May 2020 through July 2020, as well as the repayment of $101,000,000 of the outstanding balance of its Alpine Credit Facility.

General and administrative expenses increased $2,316,802, or 137.8%, to $3,997,792 for the three months ended September 30, 2021, as compared to $1,680,990 for the three months ended September 30, 2020, primarily due to an increase in legal fees in connection with the proposed mergers contemplated by the Merger Agreement. General and administrative expenses decreased $4,110,826, or 34.4%, to $7,848,361  for the nine months ended September 30, 2021, as compared to $11,959,187 for the nine months ended September 30, 2020, primarily due to a decrease in expenses related to the expensing of previously deferred transaction costs related to the termination of the previously contemplated mergers of the Company, MDLY, and Medley Capital Corporation. 

Professional fees increased $3,477,630 or 834.1% to $3,060,717 for the three months ended September 30, 2021, as compared to $(416,913) for the three months ended September 30, 2020, primarily due to an increase in investment banking and advisory fees in connection with the proposed mergers contemplated by the Merger Agreement. Professional fees decreased $5,071,185 or 47.0% to $5,719,220 for the nine months ended September 30, 2021, as compared to $10,790,405 for the nine months ended September 30, 2020, primarily due to a decrease in expenses related to the expensing of previously deferred transaction costs related to the termination of the previously contemplated mergers of the Company, MDLY, and Medley Capital Corporation.

Net Realized Gains/Losses on Investments

We measure realized gains or losses by the difference between the net proceeds from the disposition and the amortized cost basis of an investment, without regard to unrealized gains or losses previously recognized. For the three and nine months ended September 30, 2021, we recognized net realized gain on investments of $7,049,324 and $2,946,800 primarily due to the sale of investments. For the three and nine months ended September 30, 2020, we recognized net realized loss on investments of $52,474,635 and $60,522,923 primarily due to the sale of investments.

Net Unrealized Appreciation/Depreciation on Investments

Net change in unrealized appreciation/depreciation on investments reflects the net change in the fair value of our investments including the provision for deferred taxes. For the three and nine months ended September 30, 2021, we recorded a net change in unrealized depreciation, net of tax, of $16,255,709 and a net change in unrealized appreciation of $17,046,685, respectively.

For the three and nine months ended September 30, 2020, we recorded a net change in unrealized appreciation, net of tax, of $78,731,774 and a net change in unrealized depreciation, net of tax, of $9,840,179, respectively. The unrealized appreciation for the three months ended September 30, 2020 resulted from positive market and credit-related adjustments. 

Changes in Net Assets from Operations

For the three and nine months ended September 30, 2021, we recorded a net decrease in net assets resulting from operations of $7,728,510 and net increase in net assets resulting from operations of $29,522,588, respectively. Based on 102,210,752 and 102,452,267 weighted average common shares outstanding for the three and nine months ended September 30, 2021, our per share net decrease in net assets resulting from operations was $0.08 and our per share net increase in net assets resulting from operations was $0.29, respectively.

For the three and nine months ended September 30, 2020, we recorded a net increase in net assets resulting from operations of $32,120,421 and a net decrease in in net assets resulting from operations of $78,443,683 Based on 102,742,489  and 102,771,213 weighted average common shares outstanding for the three and nine months ended September 30, 2020, our per share net increase in net assets resulting from operations was $0.31 and our per share net decrease in net assets resulting from operations was $0.76.

Financial Condition, Liquidity and Capital Resources

As a BDC, we distribute substantially all of our net income to our stockholders and have an ongoing need to raise additional capital for investment purposes. To fund growth, we have a number of alternatives available to increase capital, including increasing debt, and funding from operational cash flow.

Our liquidity and capital resources historically have been generated primarily from the net proceeds of our public offering of common stock and use of our credit facilities. We also generate liquidity from the scheduled and early repayment of our investments. 

7

As of September 30, 2021 and December 31, 2020, we had $74.9 million and $65.3 million, respectively, in cash and cash equivalents. In the future, we may generate cash from cash flows from operations, including interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less. Our primary use of funds is to make investments in our targeted asset classes, cash distributions to our stockholders, and other general corporate purposes.

In order to satisfy the Code requirements applicable to us as a RIC, we intend to distribute to our stockholders substantially all of our taxable income, but we may also elect to periodically spillover certain excess undistributed taxable income from one tax year into the next tax year. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if certain requirements under the 1940 Act are met) at the time of the borrowing or issuance of preferred stock. This requirement limits the amount that we may borrow.

The following table shows our net borrowings as of September 30, 2021 and December 31, 2020:

	September 30, 2021						December 31, 2020
	Total		Balance		Unused		Total		Balance			Unused
	Commitment		Outstanding		Commitment		Commitment		Outstanding			Commitment
Alpine Credit Facility		79,000,000		79,000,000		—		180,000,000		145,000,000			35,000,000
Total before deferred financing costs		79,000,000		79,000,000		—		180,000,000		145,000,000			35,000,000
Unamortized deferred financing costs		—		—		—		—		(659,266	)		—
Total borrowings outstanding, net of deferred financing costs	$	79,000,000	$	79,000,000	$	—	$	180,000,000	$	144,340,734		$	35,000,000

ING Credit Facility

On August 12, 2016, the Company amended its existing senior secured syndicated revolving credit facility (the “ING Credit Facility” as amended from time to time as described below) pursuant to a Senior Secured Revolving Credit Agreement (the “Revolving Credit Agreement” as amended from time to time as described below) with certain lenders party thereto from time to time and ING Capital LLC, as administrative agent. The ING Credit Facility was secured by substantially all of the Company’s assets, subject to certain exclusions as further set forth in an Amended and Restated Guarantee, Pledge and Security Agreement (the “Security Agreement”) entered into in connection with the Revolving Credit Agreement, among the Company, the subsidiary guarantors party thereto, ING Capital LLC, as Administrative Agent, each Financial Agent and Designated Indebtedness Holder party thereto and ING Capital LLC, as Collateral Agent. The ING Credit Facility also included usual and customary representations, covenants and events of default for senior secured revolving credit facilities of this nature.

On May 15, 2020, the Company entered into Amendment No. 4 to the Revolving Credit Agreement to among other things, (i) shorten the maturity date from March 31, 2021 to September 30, 2020, (ii) accelerate the amortization of the Revolving Credit Agreement, and (iii) provide for the prepayment of the outstanding loans under the Revolving Credit Agreement in an aggregate principal amount of not less than $20 million. On July 22, 2020, the Company paid all remaining outstanding obligations under the Revolving Credit Agreement. On July 31, 2020 (the “Termination Date”), the Company terminated the commitments on the Credit Agreement. 

The Company was also required to pay a commitment fee to the lenders based on the daily unused portion of the aggregate commitments under the ING Credit Facility. The commitment fee was (i) 1.50% if the used portion of the aggregate commitments is less than or equal to 40%, (ii) 0.75% if the used portion of the aggregate commitments is greater than 40% and less than or equal to 65% or (iii) 0.50% if the used portion of the aggregate commitments is greater than 65%. The ING Credit Facility provided that the Company may use the proceeds of the ING Credit Facility for general corporate purposes, including making investments in accordance with the Company’s investment objective and strategy.

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

In connection with the security interest established under the Security Agreement, the Company, ING Capital LLC, in its capacity as collateral agent, and State Street Bank and Trust Company, in its capacity as the Company’s custodian, entered into a control agreement dated as of December 4, 2013, in order to, among other things, perfect the security interest granted pursuant to the Security Agreement in, and provide for control over, the related collateral. As a result of the termination of the Revolving Credit Agreement, the Security Agreement was terminated effective as of the Termination Date.

Alpine Credit Facility

On September 29, 2017, the Company’s wholly-owned, special purpose financing subsidiary, Alpine, amended its existing revolving credit facility (the “Alpine Credit Facility”) pursuant to an Amended and Restated Loan Agreement (the “Loan Agreement”) with JPMorgan Chase Bank, National Association (“JPMorgan”), as administrative agent and lender, the Financing Providers from time to time party thereto, SIC Advisors, as the portfolio manager, and the Collateral Administrator, Collateral Agent and Securities Intermediary party thereto. The Loan Agreement was amended to, among other things, (i) extend the reinvestment period until December 29, 2020, (ii) extend the scheduled termination date until March 29, 2022, (iii) decrease the applicable margin for advances to 2.85% per annum and (iv) increase the compliance condition for net advances to 55% of net asset value. Alpine’s obligations to JPMorgan under the Alpine Credit Facility are secured by a first priority security interest in a significant portion of the assets of Alpine, including its portfolio of loans. The obligations of Alpine under the Alpine Credit Facility are non-recourse to the Company.

On November 18, 2020, Alpine entered into Amendment No.1 to the Loan Agreement to, among other things, (i) extend the reinvestment period from December 29, 2020 to May 18, 2021, (ii) increase the applicable margin for advances from 2.85% to 3.10% per annum, (iii) reduce the amount of maximum borrowings in an aggregate principal amount from $300,000,000 to $180,000,000 on a committed basis, (iv) require the Company to maintain a minimum a cash balance of $20,000,000 in Alpine, and (v) decrease the compliance condition for net advances from 55% to 52.5% of net asset value. The maturity date under the Loan Agreement did not change and therefore any amounts borrowed, as well as all accrued and unpaid interest thereunder, will be due and payable on March 29, 2022. In connection with the Amendment, the Company repaid $35,000,000 of the outstanding balance under the Loan Agreement on November 18, 2020, reducing the outstanding balance from $180,000,000 to $145,000,000. The Alpine Credit Facility ended its reinvestment period on May 18, 2021 and has entered its amortization period. As of September 30, 2021 and December 31, 2020, Alpine’s borrowings under the Alpine Credit Facility totaled $79,000,000 and $145,000,000, respectively, and were recorded as part of revolving credit facilities payable on our Consolidated Statements of Assets and Liabilities.

8

The Alpine Credit Facility provided for borrowings in an aggregate principal amount up to $180,000,000 on a committed basis. Borrowings outstanding under the Alpine Credit Facility are subject to compliance with a NAV coverage ratio with respect to the current value of Alpine’s portfolio and various portfolio criteria must be satisfied. 

Pricing under the Alpine Credit Facility for each one month calculation period is based on LIBOR for an interest period of one month, plus a spread of 3.10% per annum. If LIBOR is unavailable, pricing will be determined at the greater of the prime rate offered by JPMorgan or the federal funds effective rate plus 50 basis points, plus a spread of 3.10% per annum. Interest is payable monthly in arrears. Borrowings of Alpine are considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act, applicable to BDCs.

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

As of September 30, 2021 the carrying amount of the Company’s borrowings under the Alpine Credit Facility approximated the fair value of the Company’s debt obligation. The fair value of the Company’s debt obligation is determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company’s borrowings under the Alpine Credit Facility is estimated based upon market interest rates of the Company’s borrowings or entities with similar credit risk, adjusted for nonperformance risk, if any. As of September 30, 2021 and 2020, the Alpine Credit Facility would be deemed to be Level 3, as defined in Note 4.

Contractual Obligations

The following table shows our payment obligations for repayment of debt, which total our contractual obligations at September 30, 2021:

	Payment Due By Period
			Less than						More than
	Total		1 Year		1 - 3 Years		3 - 5 Years		5 Years
Alpine Credit Facility	$	79,000,000	$	79,000,000	$	—	$	—	$	—
Total Contractual Obligations	$	79,000,000	$	79,000,000	$	—	$	—	$	—

We have entered into certain contracts under which we have material future commitments.

Investment Advisory Agreement

On April 5, 2012, we entered into the Investment Advisory Agreement with SIC Advisors in accordance with the 1940 Act. The Investment Advisory Agreement became effective as of April 17, 2012, the date that we met the minimum offering requirement. Pursuant to the 1940 Act, the initial term of the Investment Advisory Agreement was for two years from its effective date, with one-year renewals subject to approval by our board of directors, a majority of whom must be independent directors. Most recently, on April 15, 2021, the board of directors approved the renewal of the Investment Advisory Agreement for an additional one-year term, which will expire on April 17, 2022. SIC Advisors serves as our investment adviser in accordance with the terms of the Investment Advisory Agreement. Payments under our Investment Advisory Agreement in each reporting period consist of (i) a management fee equal to a percentage of the value of our gross assets and (ii) an incentive fee based on our performance.

Administration Agreement

On April 5, 2012, we entered into the Administration Agreement with Medley Capital LLC with an initial term of two years, pursuant to which Medley Capital LLC furnishes us with administrative services necessary to conduct our day-to-day operations. The Administration Agreement became effective as of April 17, 2012, the date that we met the minimum offering requirement. Pursuant to its terms, and unless earlier terminated as described below, the Administration Agreement will remain in effect from year-to-year if approved annually by a majority of our directors who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of the Company or Medley Capital LLC, and either the holders of a majority of our outstanding voting securities or our board of directors. Most recently, on April 15, 2021, the board of directors approved the renewal of the Administration Agreement for an additional one-year term, which will expire on April 17, 2022. Medley Capital LLC is reimbursed for administrative expenses it incurs on our behalf in performing its obligations. Such costs are reasonably allocated to us on the basis of assets, revenues, time records or other reasonable methods. We do not reimburse Medley Capital LLC for any services for which it receives a separate fee or for rent, depreciation, utilities, capital equipment or other administrative items allocated to a controlling person of Medley Capital LLC.

Commitment Letter

As previously reported, on March 7, 2021, Medley LLC, the parent of the Company’s investment adviser and administrator, commenced a voluntary case (the “Chapter 11 Case”) under chapter 11 of title 11 of the United States Code in the Bankruptcy Court. The Chapter 11 Case is captioned In re Medley LLC, No, 21-10526 (KBO) (Bankr. D. Del. Mar. 7, 2021).

In connection with the Chapter 11 Case, on August 11, 2021 the Company entered into a commitment letter (the “Commitment Letter”) among the Company, Medley LLC, Medley Capital LLC, and SIC Advisors, pursuant to which the Company has agreed to contribute $2.1 million, subject to certain conditions, to an employee compensation and retention plan (the “Compensation Plan”) to be established by Medley Capital LLC.  The Compensation Plan is an element of a Term Sheet dated July 21, 2021 (the “Term Sheet”) filed by Medley LLC with the Bankruptcy Court as Docket No. 276 in the Chapter 11 Case.

Pursuant to the Commitment Letter, the Company’s contribution is to be made in three equal installments of $700,000 in September 2021, December 2021, and January 2022, and the contributions are to be used solely to fund payments to employees of Medley Capital LLC under the Compensation Plan. To the extent any such employee forfeits a compensation payment to which he or she would otherwise be entitled or is obligated to return a payment received, the Company is entitled to recoup the amount in its sole discretion.

The Company’s obligations under the Commitment Letter are subject to review and approval of definitive documents relating to the Compensation Plan, conditionally approved by the Bankruptcy Court for purposes of solicitation of votes, in form and substance consistent with the Compensation Plan included as an exhibit to the Term Sheet. 

The Company may terminate the Commitment Letter by written notice to Medley LLC, Medley Capital LLC, and SIC Advisors upon the occurrence of certain events, including, but not limited to, the entry by the Bankruptcy Court of an order materially inconsistent with the Term Sheet; the failure by the Bankruptcy Court to have entered an appropriate order by November 30, 2021; or the failure by SIC Advisors to comply with any covenant or agreement in the Investment Advisory Agreement dated April 5, 2012 between SIC Advisors and the Company.

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

Off-Balance Sheet Arrangements

On March 27, 2015, the Company and GALIC entered into a limited liability company operating agreement to co-manage Sierra JV. All portfolio and other material decisions regarding Sierra JV must be submitted to Sierra JV's board of managers, which is comprised of four members, two of whom are selected by the Company and the other two are selected by GALIC. The Company has concluded that it does not operationally control Sierra JV. As the Company does not operationally control Sierra JV, it does not consolidate the operations of Sierra JV within the consolidated financial statements. As a practical expedient, the Company uses NAV to determine the fair value of its investment in Sierra JV; therefore, this investment has been presented as a reconciling item within the fair value hierarchy (see Note 4).

9

As of September 30, 2021 and December 31, 2020, Sierra JV had total capital commitments of $124.6 million, with the Company providing $110.1 million and GALIC providing $14.5 million. As of September 30, 2021 and December 31, 2020, approximately $124.5 million was funded relating to these commitments of which $110.1 million was from the Company. The Company does not have the right to withdraw any of their respective capital commitment, unless in connection with a transfer of its membership interests. The Company may transfer full membership interests as long as it is approved by all members and transferred in a transaction exempt from the registration requirements of the Securities Act or applicable state securities laws.

Sierra JV entered into a Senior Secured Revolving Credit Facility Agreement, as amended (the "JV Facility") with Deutsche Bank, AG, New York Branch ("DB").

On March 29, 2019, the JV Facility reinvestment period was extended from March 30, 2019 to June 28, 2019.

On June 28, 2019, the JV Facility reinvestment period was further extended from June 28, 2019 to October 28, 2019.

On October 28, 2019, the JV Facility reinvestment period was further extended from October 28, 2019 to March 31, 2020 and the interest rate was modified from bearing an interest rate of LIBOR (with a 0.00% floor) + 2.50% per annum to LIBOR (with a 0.00% floor) + 2.75% per annum.

On March 31, 2020, the total commitment under the JV Facility was reduced to $240.0 million from $250.0 million and the reinvestment period was extended from March 31, 2020 to April 30, 2020.

On April 30, 2020, the total commitment under the JV Facility was reduced to $200.0 million from $240.0 million, the reinvestment period was extended from April 30, 2020 to July 31, 2020 and the maturity date was extended to July 31, 2023.

On July 29, 2020, the total commitment under the JV Facility was reduced to $175.0 million from $200.0 million, the reinvestment period was extended from July 31, 2020 to April 30, 2021 and the maturity date was extended to April 30, 2024. Additionally, the interest rate was modified from bearing an interest rate of LIBOR (with a 0.00% floor) + 2.75% per annum to LIBOR (with a 0.50% floor) + 3.25% per annum.

The JV Facility ended its reinvestment period on April 18, 2021 and has entered its amortization period. The first scheduled amortization payment occurs on April 18, 2022 with subsequent payments required every six months until the final amortization payment that is set to occur at maturity on April 18, 2024.

The JV Facility is secured substantially by all of Sierra JV's assets, subject to certain exclusions set forth in the JV Facility. As of September 30, 2021 and December 31, 2020, there was $96.1 million and $124.7 million outstanding under the JV Facility, respectively.

The Company has determined that Sierra JV is an investment company under ASC 946, however in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company does not consolidate its interest in Sierra JV.

Distributions

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

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

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

On July 31, 2020, our board of directors temporarily suspended the monthly distributions on the shares of the Company’s common stock. On October 22, 2020, our board of directors determined to reinstate the monthly distributions on the shares of the Company’s common stock. Any distributions to our stockholders paid by the Company is subject to our board of directors’ discretion and applicable legal restrictions and take into account our results of operations, our general financial condition, general economic conditions, or other factors prohibit us from declaring a distribution. Any distributions to our stockholders will be declared out of assets legally available for distribution. From time to time, but not less than quarterly, we will review our accounts to determine whether distributions to our stockholders are appropriate. We have not established limits on the amount of funds we may use from available sources to make distributions. From the commencement of our offering through September 30, 2016, a portion of our distributions were comprised in part of expense support payments made by SIC Advisors that were subject to repayment by us within three years of the date of such support payment.

Our distributions may exceed our earnings, which we refer to as a return of capital. As a result, a portion of the distributions we make may represent a return of capital. Our use of the term “return of capital” merely means distributions in excess of our earnings and as such may constitute a return on your individual investments and does not mean a return on capital. Therefore stockholders are advised that they should be aware of the differences with our use of the term “return of capital” and “return on capital.”

10

The following table reflects the cash distributions per share that the Company has declared or paid to its stockholders during 2021 and 2020. Stockholders of record as of each respective record date were entitled to receive the distribution.

Record Date	Payment Date	Amount per share
January 30, 2020	January 31, 2020	$	0.03500
February 27, 2020	February 28, 2020		0.03500
March 30, 2020	March 31, 2020		0.03500
October 29, 2020	October 30, 2020		0.01000
November 27, 2020	November 30, 2020		0.01000
December 30, 2020	December 31, 2020		0.01000
January 28, 2021	January 29, 2021		0.01000
February 25, 2021	February 26, 2021		0.01000
March 30, 2021	March 31, 2021		0.01000
April 29, 2021	April 30, 2021		0.01000
May 28, 2021	May 31, 2021		0.01000
June 29, 2021	June 30, 2021		0.01000
July 29, 2021	July 30, 2021		0.01000
August 30, 2021	August 31, 2021		0.01000
September 29, 2021	September 30, 2021		0.01000

We have adopted an “opt in” DRIP, pursuant to which, prior to the suspension of the DRIP (as described below), common stockholders could have elected to have the full amount of any cash distributions reinvested in additional shares of our common stock. As a result, if we declared a cash distribution, stockholders that had “opted in” to our DRIP would have their distribution automatically reinvested in additional shares of our common stock rather than receiving cash dividends. Stockholders who received distributions in the form of shares of common stock would be subject to the same federal, state and local tax consequences as if they received cash distributions.

On September 21, 2021, the Company’s board of directors approved the suspension of the DRIP pursuant to the Merger Agreement. As a result, beginning with the Company’s first distribution following the September 2021 distribution, any distributions declared by the Company will be paid in cash to all stockholders unless and until the DRIP is reinstated.

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

Related Party Transactions

We have entered into an Investment Advisory Agreement and Incentive Fee Waiver Agreement with SIC Advisors (as described and for periods set forth in "Management Fee"). Members of our senior management also serve as executive officers of other investment managers affiliated with SIC Advisors that do, and may in the future, manage investment funds, accounts or other investment vehicles with investment objectives similar to ours.

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

We have entered into the Commitment Letter with Medley LLC, Medley Capital LLC, and SIC Advisors, pursuant to which the Company has agreed to contribute $2.1 million, subject to certain conditions, to the Compensation Plan to be established by Medley Capital LLC.

We have entered into a license agreement with SIC Advisors under which SIC Advisors has agreed to grant us a non-exclusive, royalty-free license to use the name “Sierra” for specified purposes in our business. Under the license agreement, we will have a right to use the “Sierra” name, subject to certain conditions, for so long as SIC Advisors or one of its affiliates remains our investment adviser. Other than with respect to this limited license, we will have no legal right to the “Sierra” name. In addition, we entered into the Expense Limitation Agreement with Medley Capital LLC (as described and for the period set forth in "Administrative Services").

Management Fee

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

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

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

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

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On April 23, 2021, the Company entered into the Incentive Fee Waiver Agreement with SIC Advisors, pursuant to which SIC Advisors agreed to waive (i) 50% of any incentive fee on income payable to SIC Advisors for any fiscal quarter during the period beginning with the fiscal quarter ending September 30, 2021 and the fiscal quarter ending June 30, 2022, and (ii) 50% of any incentive fee on capital gains payable to SIC Advisors for the fiscal year ending December 31, 2021. For the avoidance of doubt, the Incentive Fee Waiver Agreement does not amend the calculation of the incentive fees as set forth in the Investment Advisory Agreement. Other than the waiver contemplated by the Incentive Fee Waiver Agreement, the terms of the Investment Advisory Agreement will remain in full force and effect. Following (i) the fiscal quarter ending June 30, 2022 with respect to the waiver granted by SIC Advisors on any incentive fee payable on income, and (ii) the fiscal year ending December 31, 2021 with respect to the waiver granted by SIC Advisors on any incentive fee payable on capital gains, unless otherwise extended by the Company and SIC Advisors, the Incentive Fee Waiver Agreement will terminate and the original terms of the Investment Advisory Agreement will be in full force and effect.

Under the terms of the Investment Advisory Agreement, SIC Advisors bears all organizational and offering expenses on our behalf. Since June 2, 2014, the date that we raised $300 million in gross proceeds in connection with the sale of shares of our common stock, SIC Advisors was no longer obligated to bear, pay or otherwise be responsible for any ongoing organizational and offering expenses on our behalf, and we were responsible for paying or otherwise incurring all such organizational and offering expenses. Pursuant to the terms of the Investment Advisory Agreement, we had agreed to reimburse SIC Advisors for any such organizational and offering expenses incurred by SIC Advisors not to exceed 1.25% of the gross subscriptions raised by us over the course of the offering period, which was initially scheduled to terminate two years from the initial offering date, unless extended. On July 2, 2018, the Company’s board of directors determined to terminate the Company’s offering effective as of July 31, 2018.

Pursuant to the Investment Advisory Agreement, SIC Advisors implements the Company’s business strategy on a day-to-day basis and performs certain services for the Company, subject to oversight by the Company’s board of directors. SIC Advisors is responsible for, among other duties, determining investment criteria, sourcing, analyzing and executing investment transactions, asset sales, financings and performing asset management duties. Under the Investment Advisory Agreement, the Company has agreed to pay SIC Advisors a management fee for investment advisory and management services consisting of a base management fee and an incentive fee.

Critical Accounting Policies

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

Valuation of Investments

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

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

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

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

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

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

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

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

• our quarterly valuation process begins with each portfolio investment being initially valued by the valuation professionals;

• conclusions are then documented and discussed with senior management; and

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

In addition, all of our investments are subject to the following valuation process:

• management reviews preliminary valuations and their own independent assessment;

• the audit committee of our board of directors reviews the preliminary valuations of senior management and independent valuation firms; and

• our board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of SIC Advisors, the respective independent valuation firms and the audit committee.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. In addition, changes in the market environment (including the impact of COVID-19 on the financial market), portfolio company performance, and other events may occur over the lives of the investments that may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned.

Our investments in subordinated notes are carried at fair value, which is based on a discounted cash flow model. The discounted cash flow model models both the underlying collateral (“assets”) and the liabilities of the CLO capital structure. The discounted cash flow model uses a set of assumptions including projected default rates, recovery rates, reinvestment rates and prepayment rates in order to arrive at estimated cash flows of the assets. The discounted cash flow model distributes the asset cash flows to the liability structure based on the payment priorities and discounts them back using appropriate market discount rates based on discount rates for comparable CLOs. The assumptions are based on available market data as well as management estimates. Additional data is used to validate the results from the discounted cash flow method, such as analysis of relevant data observed in the CLO market, review of quotes, where available, recent acquisitions and observable transactions in the subordinated notes, among other factors.

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Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities or accounting purposes if we have reason to doubt our ability to collect such interest. Original issue discounts, market discounts, or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as fee income. Dividend income, if any, is recognized on an accrual basis to the extent that we expect to collect such amount.

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

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Payment-in-Kind Interest

We have investments in our portfolio that contain a PIK interest provision. Any PIK interest is added to the principal balance of such investments and is recorded as income, if the portfolio company valuation indicates that such PIK interest is collectible. In order to maintain RIC tax treatment, substantially all of this income must be paid out to stockholders in the form of dividends, even if we have not collected any cash.

U.S. Federal Income Taxes

We have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders from our tax earnings and profits. To obtain and maintain our RIC tax treatment, we must, among other things, meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any.

Recent Developments

On October 19, 2021, our board of directors declared a series of monthly distributions for October, November and December 2021 in the amount of $0.01 per share. Stockholders of record as of each respective monthly record date will be entitled to receive the distribution. Below are the details for each respective distribution:

Record Date	Payment Date	Amount per share
November 15, 2021	November 16, 2021	$	0.01
November 29, 2021	November 30, 2021		0.01
December 30, 2021	December 31, 2021		0.01

On March 7, 2021 (the “Petition Date”), Medley LLC (the “Debtor”) commenced a voluntary case (the “Medley Bankruptcy Case”) under chapter 11 of title 11 of the United States Code in the Bankruptcy Court.  The Debtor is the sole member of the investment adviser, SIC Advisors, and the administrator, Medley Capital LLC, of the Company.  Following the commencement of the Medley Bankruptcy Case, the Debtor continued to manage its business as a debtor in possession under the Bankruptcy Code.  The Debtor, Medley Capital LLC and the Official Committee of Unsecured Creditors appointed in the Medley Bankruptcy Case reached agreement on the terms of a chapter 11 plan, which was filed with the Bankruptcy Court on August 13, 2021, and ultimately confirmed by the Bankruptcy Court on October 14, 2021 (as supplemented and modified, the Modified Third Amended Combined Disclosure Statement Chapter 11 Plan of Medley LLC, the “Plan”). The Plan became effective on October 18, 2021 (the “Effective Date”).
 
The Plan provides for a limited restructuring in chapter 11 to enable the Debtor to maximize the value of its remaining contracts (the “Remaining Contracts”) over a short run-off period, until the Remaining Contracts are terminated, subject to an end date of March 31, 2022 (the “Run-Off End Date”). The Remaining Contracts consist of investment management agreements between the Debtor’s subsidiary advisers and third-party clients, including the Company’s investment advisory agreement and related agreements with SIC Advisors and its administration agreement and related agreements with Medley Capital LLC.  The Debtor does not have its own employees, and in order to provide for the continued performance of the Debtor’s subsidiaries under the Remaining Contracts, the
Plan establishes a compensation plan for Medley Capital LLC’s employees (the “Non-Debtor Compensation Plan”). The Non-Debtor Compensation Plan is designed to retain certain key Medley Capital LLC employees to service the Remaining Contracts, including the Company’s investment advisory agreement with SIC Advisors and pursuant to the Non-Debtor Compensation Plan, the Company has agreed to contribute $2.1 million of a total cost of $5.7 million to fund the Non-Debtor Compensation Plan. The Company’s obligations under the Non-Debtor Compensation Plan expire on January 31, 2022, while Medley Capital’s obligations under the Non-Debtor Compensation Plan expire on the Run-Off End Date. The Plan also contemplates that SIC Advisors LLC will continue to honor its obligations under the Company’s investment advisory agreement until the termination thereof. Accordingly, the Company’s arrangements with SIC Advisors and Medley Capital LLC are expected to remain in place until the closing of the Merger. 
 
The Plan further provides for a liquidating trust established for the benefit of creditors holding allowed claims against the Debtor. On the Effective Date, the Debtor’s assets, including all cash on hand and all causes of action retained by the estate under the Plan were transferred to the liquidating trust, and the Plan provides for the subsequent transfer of the proceeds received by the Debtor under the Remaining Contracts once the wind-down is complete. 

In the event the proposed merger contemplated by the Merger Agreement is not consummated for any reason on or before the Run-Off End Date, the Company’s board of directors would expect to consider alternatives, including another merger transaction, the Company’s liquidation or the replacement of SIC Advisors as its investment adviser, based on, among other things, then-current market circumstances, the performance of the Company’s portfolio and the financial position of the Company. The Company also  might seek a modification to the Plan that would extend the Run-Off End Date so that SIC Advisors may continue to serve as the Company’s investment adviser beyond March 31, 2022. 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. The continued uncertainty with respect to the economic effects of the COVID-19 pandemic has introduced significant volatility in the financial markets, and the effects of this volatility could materially impact our market risks, including those listed below. For additional information concerning the potential impact of the COVID-19 pandemic on our business and our operating results, see Item 1A “Risk Factors -- We are subject to financial market risks, including changes in interest rates. See “Risk Factors - Risks Relating to Debt Financing - We are currently operating in a period of capital markets disruptions and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have a negative impact on our business, financial condition and operations.” in Part 1 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

As of September 30, 2021, 97.6% of our portfolio investments (based on fair value) paid floating interest rates, while 2.4% paid fixed interest rates and 4.9% were non-income producing investments while 95.1% were income producing investments. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses, including with respect to our income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. In contrast, a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. In addition, a rise in interest rates may increase the likelihood that a portfolio company defaults on a loan. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income under the Investment Advisory Agreement we have entered into with SIC Advisors(subject to the Incentive Fee Waiver Agreement), and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to SIC Advisors with respect to our increased pre-incentive fee net investment income.

Our interest expense will also be affected by changes in the published LIBOR rate in connection with the Alpine Credit Facility. See "Risks Relating to Debt Financing - Changes relating to the LIBOR calculation process may adversely affect the value of our portfolio of LIBOR-indexed, floating-rate debt securities” in "Item 1 A. Risk Factors" of our annual report on Form 10-K for the fiscal year ended December 31, 2020. As a result, we are subject to risks relating to changes in market interest rates. In periods of rising interest rates, when we or our subsidiaries have debt outstanding or financing arrangements in effect, our cost of funds would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

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

Based on our Consolidated Statement of Assets and Liabilities as of September 30, 2021, the following table shows the approximate annual impact on the change in net interest income of hypothetical base rate changes in interest rates, assuming no changes in our investment portfolio and capital structure:

	Change in
	Interest		Interest			Net Interest
Basis point increase/(decrease)	Income (1)		Expense			Income
300	$	11,803,406	$	2,370,000		$	9,433,406
200	$	4,613,558	$	1,580,000			3,033,558
100	$	679,089	$	790,000			(110,911	)
(100)	$	—	$	(63,398	)		63,398
(200)	$	—	$	(63,398	)		63,398
(300)	$	—	$	(63,398	)		63,398

(1) Assumes no defaults or prepayments by portfolio companies over the next twelve months.

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the three months ended September 30, 2021, we did not engage in interest rate hedging activities.

In addition, we may have risk regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies-Valuation of Investments” and “Item 1A. Risk Factors.”

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, as of the end of the period covered by this quarterly report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings

From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us. We are not currently party to any material legal proceedings.

Item 1A. Risk Factors

In addition to other information set forth in this report, you should carefully consider the “Risk Factors” discussed in our annual report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 19, 2021, which could materially affect our business, financial condition and/or operating results. Other than the items disclosed below, there have been no material changes during the nine months ended September 30, 2021 to the risk factors discussed in “Item 1A. Risk Factors” of our annual report on Form 10-K. Additional risks or uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

Risks Relating to the Proposed Merger with Barings BDC, Inc.
 
Because the market price of Barings BDC’s common stock will fluctuate, the Company’s stockholders cannot be sure of the market value of the Merger Consideration they will receive until the closing date.
The Exchange Ratio is fixed in the Merger Agreement and the Merger Consideration will not be adjusted for changes in the market price of Barings BDC’s common stock. Pursuant to the terms of the Merger Agreement, at the Effective Time (as defined in the Merger Agreement), each Company stockholder will have the right to receive 0.44973 newly issued shares of Barings BDC’s common stock for each share of the Company’s common stock that they own immediately prior to the Effective Time, subject only to customary anti-dilution adjustments and with cash paid in lieu of fractional shares. The market value of the Merger Consideration may vary from the closing price of Barings BDC’s common stock on the date the Merger was announced, on the date of the Company’s special meeting of stockholders approving the Merger Agreement and on the date the Merger is completed. Any change in the market price of Barings BDC’s common stock prior to completion of the Merger will affect the market value of the aggregate Merger Consideration that the Company’s stockholders will receive upon completion of the First Merger.

Accordingly, at the time of the Company’s special meeting of stockholders, the Company’s stockholders will not know or be able to calculate the market value of the Merger Consideration they would receive upon completion of the First Merger. Neither Barings BDC nor the Company is permitted to terminate the Merger Agreement or resolicit the vote of their respective stockholders solely because of changes in the market price of shares of Barings BDC’s common stock.

Changes in the market price of Barings BDC Common Stock may result from a variety of factors, including, among other things:

• changes in the business, operations or prospects of Barings BDC;
• the financial condition of current or prospective portfolio companies of Barings BDC;
• interest rates or general market or economic conditions;
• market assessments of the likelihood that the Merger will be completed and the timing of completion of the Merger;
• market perception of the future profitability of the combined company;
• the duration and effects of the COVID-19 pandemic on Barings BDC’s portfolio companies; and
• the duration and effects of the COVID-19 pandemic on equity trading prices generally, and specifically on the trading price of Barings BDC’s common stock and the common stock of the surviving corporation following the Merger.

The Company’s stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Merger.

The Company’s stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective percentage ownership interests in the Company prior to the Merger. Consequently, The Company’s stockholders should expect to exercise less influence over the management and policies of the combined company following the Merger than they currently exercise over the management and policies of the Company. If the Merger is consummated, based on the number of shares of Barings BDC’s common stock and the Company’s common stock issued and outstanding on September 20, 2021, it is expected that current Barings BDC’s stockholders will own approximately 58.7% of the outstanding Barings BDC’s common stock and former Company stockholders will own approximately 41.3% of the outstanding Barings BDC’s common stock. In addition, both prior to and after completion of the Merger, subject to certain restrictions in the Merger Agreement and Barings BDC’s stockholder approval, Barings BDC may issue additional shares of Barings BDC’s common stock (including, subject to certain restrictions under the 1940 Act, at prices below Barings BDC’s common stock’s then-current net asset value per share), all of which would further reduce the percentage ownership of the combined company held by former the Company stockholders. In addition, the issuance or sale by Barings BDC of shares of Barings BDC’s common stock at a discount to net asset value poses a risk of economic dilution to stockholders.

The announcement and pendency of the proposed Merger could adversely affect both Barings BDC’s and the Company’s business, financial results and operations.
The announcement and pendency of the proposed Merger could cause disruptions in and create uncertainty surrounding both Barings BDC’s and the Company’s business, including affecting relationships with their respective existing and future borrowers, which could have a significant negative impact on Barings BDC’s future revenues and results of operations, regardless of whether the Merger is completed, and on the Company’s future revenues and results of operations if the Merger is not consummated. In addition, Barings BDC and the Company have diverted, and will continue to divert, significant management resources towards the completion of the Merger, which could have a significant negative impact on each of their future revenues and results of operations.

The Company and Barings BDC are also subject to restrictions on the conduct of each of their businesses prior to the completion of the Merger as provided in the Merger Agreement, generally requiring the Company and Barings BDC to conduct their business only in the ordinary course and subject to specific limitations, including, among other things, certain restrictions on their respective ability to make certain investments and acquisitions, sell, transfer or dispose of their respective assets, amend their respective organizational documents and, in the case of the Company, enter into or modify certain material contracts. These restrictions could prevent the Company or Barings BDC from pursuing otherwise attractive business opportunities, industry developments and future opportunities and may otherwise have a significant negative impact on Barings BDC’s future investment income and results of operations.

If the Merger does not close the Company will not benefit from the expenses incurred in its pursuit of the Merger and, under certain circumstances, the Company may be required to pay an $11.0 million termination fee and to reimburse expenses incurred in connection with the Merger by Barings BDC and Barings, subject to a maximum expense reimbursement payment of $2.0 million.

For various reasons, the Merger may not be completed. If the Merger is not completed, the Company will have incurred substantial expenses for which no ultimate benefit will have been received. Both companies have incurred out-of-pocket expenses in connection with the Merger for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Merger is not completed. The Merger Agreement provides that, upon the valid termination of the Merger Agreement under certain circumstances, the Company may be required to pay or cause to be paid to Barings BDC a termination fee of $11.0 million and to pay Barings BDC’s and Barings’ expenses incurred in connection with the Merger, subject to a maximum reimbursement payment of $2.0 million.

The termination of the Merger Agreement could negatively impact the Company.

The Merger may not be completed. For example, either the Company or Barings BDC may terminate the Merger Agreement if the Merger is not completed by March 31, 2022 (so long as the party seeking termination has not been the primary cause of the delay). If the Merger Agreement is terminated, there may be various consequences, including:
• the Company’s business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger;
• the Company’s board of directors would expect to consider alternatives, including the replacement of SIC Advisors as its investment adviser, another merger transaction (though the Company may not be able to find a party willing to pay an equivalent or more attractive price than the price Barings BDC agreed to pay in the Merger) or the Company’s liquidation, based on, among other things, then-current market circumstances, the performance of the Company’s portfolio and the financial position of the Company;
• the Company also might seek a modification to the Plan to extend the Run-Off End Date so that SIC Advisors may continue to serve as the Company’s investment adviser beyond March 31, 2022; and
• the payment of any termination fee and reimbursement of expenses, if required under the circumstances, could adversely affect the financial condition and liquidity of the Company. 

Except in specified circumstances, if the Merger is not completed by March 31, 2022, either the Company or Barings BDC may choose not to proceed with the Merger.

Either the Company or Barings BDC may terminate the Merger Agreement if the Effective Time has not occurred by March 31, 2022. However, this right to terminate the Merger Agreement will not be available to the Company or Barings BDC if the failure of such party to perform any of its obligations under the Merger Agreement has been the primary cause of or resulted in the failure of the Merger to be complete on or before such date.

The Merger is subject to closing conditions, including stockholder approvals, that, if not satisfied or waived, will result in the Merger not being completed, which may result in material adverse consequences to the Company’s business and operations.

While there can be no assurances as to the exact timing, or that the Merger will be completed at all, Barings BDC and the Company are working to complete the Merger in the first quarter of 2022. The Merger is subject to closing conditions, including required regulatory approvals (including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder) and certain approvals of Barings BDC’s and the Company’s respective stockholders that, if not satisfied, will prevent the Merger from being completed. The closing condition that Barings BDC stockholders approve the issuance of shares of Barings BDC’s common stock in connection with the First Merger and the issuance of shares of Barings BDC’s common stock in connection with the First Merger at a price below its then-current NAV may not be waived and must be satisfied for the Merger to be completed. Barings BDC currently expects that all directors and executive officers of Barings BDC will vote their shares of Barings BDC’s common stock in favor of the proposals presented at the Barings BDC’s special meeting of stockholders to be held in connection with the Merger. Additionally, Barings, as a party to the Merger Agreement, agreed to vote all shares of Barings BDC’s common stock over which it has voting power (other than in its fiduciary capacity) in favor of the proposals to be presented at the Barings BDC’s special meeting of stockholders. The closing condition that the Company’s stockholders adopt the Merger Agreement may not be waived and must be satisfied for the Merger to be completed. If the closing conditions to the Merger are not satisfied, including receipt of the required approvals by the stockholders of Barings BDC and of the Company, and the Merger is not completed, the resulting failure to complete the Merger could have a material adverse impact on the Company’s business and operations.

The Company and Barings BDC will be subject to contractual restrictions while the Merger is pending, including restrictions on pursuing alternatives to the Merger.

Uncertainty about the effect of the Merger may have an adverse effect on Barings BDC and the Company and, consequently, on the combined company following completion of the Merger. These uncertainties may impair Barings BDC's and SIC Advisors’ abilities to motivate key personnel until the Merger is consummated and could cause those who deal with Barings BDC and the Company to seek to change their existing business relationships with Barings BDC and the Company, respectively. In addition, the Merger Agreement restricts Barings BDC and the Company from taking actions that they might otherwise consider to be in their best interests without the consent of the other party. These restrictions may prevent Barings BDC and the Company from pursuing certain business opportunities that may arise prior to the completion of the Merger, including restrictions on them pursuing alternatives to the Merger.

The Merger Agreement contains provisions that could discourage or make it difficult for a third party to acquire the Company prior to the completion of the proposed Merger.

The Merger Agreement prohibits the Company from soliciting alternatives to the Merger and imposes limitations on the Company’s ability to respond to and negotiate unsolicited proposals received from third parties. The Merger Agreement contains customary non-solicitation and other provisions that, subject to limited exceptions, limit the Company’s ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of the Company. The Company can consider and participate in discussions and negotiations with respect to an alternative proposal only in very limited circumstances so long as certain notice and other procedural requirements are satisfied. In addition, subject to certain procedural requirements (including the ability of Barings BDC to revise its offer) and the payment of an $11.0 million termination fee and the reimbursement of up to $2.0 million in expenses incurred by Barings BDC and Barings, the Company may terminate the Merger Agreement and enter into an agreement with a third party that makes a superior proposal. These provisions may discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in connection with the Merger. 

If the Merger is not completed, the Company would expect to consider other strategic alternatives, which are subject to risks and uncertainties.

If the Merger is not completed, the Company’s special committee, comprised solely of independent directors of the Company’s board of directors, and the Company’s board of director expect to consider alternatives, including the replacement of SIC Advisors as its investment adviser, another merger transaction or the Company’s liquidation, based on, among other things, then-current market circumstances, the performance of the Company’s portfolio and the financial position of the Company. In addition, the terms of any such alternative transaction may be less attractive than the Merger. These strategic or other alternatives available to the Company may involve various additional risks to its business, including, among others, distraction of its management team and associated expenses with exploring such alternatives, and risks and uncertainties related to its ability to complete any such alternatives and other variables which may adversely affect its operations. 

Subject to applicable law, each party may waive one or more conditions to the Merger without resoliciting approval from its respective stockholders.

Certain conditions to Barings BDC’s and the Company’s obligations to complete the Merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of Barings BDC and the Company. In the event that any such waiver does not require resolicitation of stockholders, the parties to the Merger Agreement will have the discretion to complete the Merger without seeking further stockholder approval. Accordingly, the terms and conditions as set forth in the Merger Agreement and described herein, including certain protections to Barings BDC and the Company, may be waived. The conditions requiring the approval of Barings BDC’s stockholders and approval of the Company’s stockholders, however, cannot be waived.

The shares of Barings BDC’s common stock to be received by the Company’s stockholders as a result of the First Merger will have different rights associated with them than shares of the Company’s common stock currently held by them.

The rights associated with the Company’s common stock are different from the rights associated with Barings BDC’s common stock.

The market price of Barings BDC’s common stock after the Merger may be affected by factors different from those affecting Barings BDC’s common stock or the Company's common stock currently.

The businesses of Barings BDC and the Company differ in some respects and, accordingly, the results of operations of the combined company and the market price of Barings BDC’s common stock after the Merger may be affected by factors different from those
currently affecting the independent results of operations of each of Barings BDC and the Company. These factors include:
• a larger stockholder base;
• a different portfolio composition; and
• a different capital structure.

Accordingly, the historical trading prices and financial results of Barings BDC may not be indicative of these matters for the combined company following the Merger.

The Merger may trigger certain “change of control” provisions and other restrictions in certain of Barings BDC’s and the Company’s contracts and the failure to obtain any required consents or waivers could adversely impact the combined company.

Certain agreements of Barings BDC and the Company or their controlled affiliates will or may require the consent of one or more counterparties in connection with the Merger. The failure to obtain any such consent may permit such counter-parties to terminate, or otherwise increase their rights or Barings BDC’s or the Company’s obligations under, any such agreement because the Merger may violate an anti-assignment, change of control or similar provision. If this happens, Barings BDC or the Company may have to seek to replace that agreement with a new agreement or seek a waiver or amendment to such agreement. Barings BDC and the Company cannot assure you that Barings BDC or the Company will be able to replace, amend or obtain a waiver under any such agreement on comparable terms or at all.

If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Merger, including preventing Barings BDC from operating a material part of the Company’s business.

In addition, the consummation of the Merger may violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under Barings BDC’s or the Company’s agreements. Any such violation, conflict, breach, loss, default or other effect could, either
individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Merger.

The combined company may not be able to obtain financing for additional capital requirements.

Following completion of the Merger, the combined company may seek significant ongoing capital funding and, although the Company and Barings BDC anticipate that the combined company will be able to obtain such funding through cash generated from operations and subsequent debt, equity or hybrid offerings, there can be no assurances that the combined company will be able to obtain financing on acceptable terms or at all.

The Company has incurred and expects to incur substantial transaction fees and costs in connection with the Merger, whether or not the Merger is completed.

The Company has incurred and expects to incur additional material non-recurring expenses in connection with the Merger and completion of the transactions contemplated by the Merger Agreement. The Company has incurred significant legal, advisory and financial services fees in connection with the process of negotiating and evaluating the terms of the Merger and the strategic review process that led to the Merger Agreement. Additional significant unanticipated costs may be incurred in the course of coordinating the businesses of the Company and Barings BDC after completion of the Merger. Even if the Merger is not completed, the Company will need to pay certain costs relating to the Merger incurred prior to the date the Merger was abandoned, such as legal, accounting, financial advisory, filing and printing fees. Such costs may be significant and could have an adverse effect on the Company’s future results of operations, cash flows and financial condition.

Litigation filed against the Company or Barings BDC in connection with the Merger could result in substantial costs and could delay or prevent the Merger from being completed.

From time to time, the Company and Barings BDC may be subject to legal actions, including securities class action lawsuits and derivative lawsuits, as well as various regulatory, governmental and law enforcement inquiries, investigations and subpoenas in connection with the Merger. These or any similar securities class action lawsuits and derivative lawsuits, regardless of their merits, may result in substantial costs and divert management time and resources. An adverse judgment in such cases could have a negative impact on the Company’s or Barings BDC’s liquidity and financial condition or could prevent the Merger from being completed.
 

Sales of shares of Barings BDC’s common stock after the completion of the Merger may cause the market price of Barings BDC common Stock to decline.

Based on the number of outstanding shares of the Company’s common stock as of the close of business on September 20, 2021, Barings BDC would issue approximately 46.0 million shares of Barings BDC common stock pursuant to the Merger Agreement. Former Company stockholders may decide not to hold the shares of Barings BDC’s common stock that they receive pursuant to the Merger Agreement. In addition, Barings BDC stockholders may decide not to hold their shares of Barings BDC’s common stock after completion of the Merger. In each case, such sales of Barings BDC’s common stock could have the effect of depressing the market price for Barings BDC’s common stock and may take place promptly following the completion of the Merger.

Barings BDC may be unable to realize the benefits anticipated by the Merger, including estimated cost savings, or it may take longer than anticipated to realize such benefits.

The realization of certain benefits anticipated as a result of the Merger will depend in part on the integration of the Company’s investment portfolio with Barings BDC’s and the integration of the Company’s business with Barings BDC’s. There can be no assurance that the Company’s investment portfolio or business can be operated profitably or integrated successfully into Barings BDC’s operations in a timely fashion or at all. The dedication of management resources to such integration may divert attention from the day-to-day business of the combined company and there can be no assurance that there will not be substantial costs associated with the transition process or there will not be other material adverse effects as a result of these integration efforts. Such effects, including incurring unexpected costs or delays in connection with such integration and failure of the Company’s investment portfolio to perform as expected, could have a material adverse effect on the financial results of the combined company.

Barings BDC also expects to achieve certain cost savings from the Merger when the two companies have fully integrated their portfolios. It is possible that the estimates of the potential cost savings could ultimately be incorrect. The cost savings estimates also assume Barings BDC will be able to combine the operations of Barings BDC and the Company in a manner that permits those cost savings to be fully realized. If the estimates turn out to be incorrect or if Barings BDC is not able to successfully combine the Company’s investment portfolio or business with the operations of Barings BDC, the anticipated cost savings may not be fully realized, or realized at all, or may take longer to realize than expected.

The investment objectives and investment strategy of Barings BDC differ from the investment objectives and investment strategy of the Company and, therefore, an equity investment in Barings BDC has different risks than an equity investment in the Company.

Barings BDC’s primary investment objective is to generate income by investing directly in privately-held middle-market companies to help these companies fund acquisitions, growth or refinancing. Barings BDC seeks to achieve its investment objective by investing in senior secured private debt investments in well-established middle-market businesses that operate across a wide range of industries. the Company’s investment objective, by contrast, is to generate current income, and to a lesser extent, long-term capital appreciation. The Company seeks to achieve its investment objective by primarily lending to and investing in the debt of privately owned U.S. companies middle-market companies. Stockholders of the Company will become stockholders of Barings BDC in connection with the closing of the Merger and, therefore, should understand the risks of an investment in Barings BDC. Given the relative size of the constituent companies of the Merger (with Barings BDC having total assets of approximately $1.8 billion as of September 30, 2021 and the Company having total assets of approximately $635.5 million as of September 30, 2021), the risks related to an investment in the combined company will be weighted more towards the risks related to an investment in Barings BDC. This will increasingly be the case as the Company’s assets mature over time and Barings BDC redeploys proceeds from such assets in accordance with Barings BDC’s investment strategy.

Other Risks

We cannot predict how new tax legislation will affect us, our investments, or our shareholders, and any such legislation could adversely affect our business. 

Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. The Biden Administration has proposed significant changes to the existing U.S. tax rules, and there are a number of proposals in Congress that would similarly modify the existing U.S. tax rules. The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our investors of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our common stock.

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

In June 2013, we commenced a share repurchase program pursuant to which we conducted quarterly share repurchases, of up to 2.5% of the weighted average number of outstanding shares in of our common stock in the prior four calendar quarters or 10% of the weighted average number of outstanding shares in the prior12-month period. In connection with the previously proposed mergers of the Company, MDLY, and Medley Capital Corporation, we suspended the share repurchase program. The purpose of the share repurchase program was to allow stockholders to sell their shares back to us at a price equal to the most recently disclosed NAV per share of our common stock immediately prior to the date of repurchase. Shares were purchased from stockholders participating in the program on a pro rata basis. Unless our board of directors determined otherwise, the number of shares to be repurchased during any calendar year were limited to the proceeds received in association with the sale of shares of common stock under the distribution reinvestment plan.

Notwithstanding the suspension of the share repurchase program, our board of directors previously approved the repurchase of shares of our common stock from our stockholders who have requested repurchases in connection with such stockholder’s death or disability. In the event of the death or disability of a stockholder, we would repurchase the shares held by such stockholder at a price equal to the NAV per share of our shares as disclosed in the periodic report we filed with the SEC immediately following the date of the death or disability of such stockholder. Our board of directors has the right to suspend or terminate repurchases due to the death or disability to the extent that it determines that it is in the company's best interest to do so. 

In addition, on April 28, 2021, our board of directors authorized a share repurchase program, pursuant to which the Company conducted quarterly share repurchases, beginning in the second quarter of 2021, of the lesser of: (i) the number of shares of common stock, par value $0.0001 per share, that the Company can purchase with the proceeds received under the DRIP from the prior quarter; or (ii) 2.5% of the weighted average number of shares of common stock outstanding in the prior four calendar quarters (the “Share Repurchase Program”). Notwithstanding the foregoing, in connection with the first share repurchase offer for the quarter ended June 30, 2021, the Company intended to repurchase the number of shares that the Company can purchase with the proceeds received under the DRIP from the prior two quarters. The purpose of the Share Repurchase Program was to allow stockholders to sell their shares of common stock back to the Company at a price equal to the most recently disclosed net asset value per share of the Company’s common stock immediately prior to the date of such share repurchase. Shares were purchased from stockholders participating in the Share Repurchase Program on a pro rata basis. The Share Repurchase Program may be suspended, extended, modified or discontinued by our board of directors at any time.

As previously disclosed on September 22, 2021, pursuant to the Merger Agreement (as described in Note 1), the Company’s board of directors determined to suspend the share repurchase program and repurchase in the event of death or disability.

During the three and nine months ended September 30, 2021, the Company repurchased 12 and 964,494 of shares of certain shareholders pursuant to the Share Repurchase Program and due to death or disability, respectively. The following table provides information concerning our repurchases of shares of our common stock from our stockholders who have requested repurchases in connection with such stockholder’s death or disability during the three and nine months ended September 30, 2021:

					Total Number of Shares		Maximum Number of
					Purchased as Part of		Shares that May Yet be
	Total Number of		Average Price Per		Publicly Announced		Purchased Under the
Period	Shares Purchased		Share Paid		Plans or Programs		Plans or Programs
January 1, 2021 - January 31, 2021		2,451		4.91		—		—
April 1, 2021 - April 30, 2021		384,363		5.12		—		—
June 1, 2021 - June 30, 2021		577,668		5.28
July 1, 2021 - July 31, 2021		12		5.28
Total		964,494		5.22		—		—

Item 3. Defaults Upon Senior Securities

None. 

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

2.1	Agreement and Plan of Merger, by and among Barings BDC, Inc., Mercury Acquisition Sub, Inc., Sierra Income Corporation and Barings LLC, dated as of September 21, 2021.
3.1	Articles of Incorporation of the Registrant
3.2	Articles of Amendment of the Registrant
3.3	Articles of Amendment and Restatement of the Registrant
3.4	Second Articles of Amendment and Restatement of the Registrant
3.5	Form of Articles Supplementary Electing to be Subject to Subtitle 8 of the Maryland General Corporation Law
3.6	Form of Bylaws of the Registrant
10.1	Second Amended and Restated Distribution Reinvestment Plan
10.2	Investment Advisory Agreement
10.3	Incentive Fee Waiver Agreement, dated April 23, 2021, between and between Sierra Income Corporation and SIC Advisors LLC
10.4	Custody Agreement
10.5	Form of Administration Agreement
10.6	Expense Limitation Agreement, dated April 23, 2021, by and between Sierra Income Corporation and Medley Capital LLC
10.7	Form of License Agreement
10.8	Amended and Restated Loan Agreement, dated as of September 29, 2017, by and among Alpine Funding LLC as borrower, JPMorgan Chase Bank, National Association, as administrative agent, the Financing Providers from time to time party thereto, SIC Advisors LLC, as the portfolio manager, and the Collateral Administrator, Collateral Agent and Securities Intermediary party thereto
10.9	Loan Agreement, dated as of July 23, 2014, by and among Alpine Funding LLC, as company, JPMorgan Chase Bank, National Association, as administrative agent, the Financing Providers from time to time party thereto, SIC Advisors LLC, as the portfolio manager, and the Collateral Administrator, Collateral Agent and Securities Intermediary party thereto
10.10	Sale and Contribution Agreement, dated as of July 23, 2014, by and between Sierra Income Corporation, as seller, and Alpine Funding LLC, as purchaser
10.11	Portfolio Management Agreement, dated as of July 23, 2014, by and between Alpine Funding LLC, as borrower and SIC Advisors LLC, as portfolio manager
10.12	Amendment No. 1 to the Loan Agreement, dated as of July 23, 2014, by and among Alpine Funding LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, the Financing Providers from time to time party thereto, SIC Advisors LLC, as the portfolio manager, and the Collateral Administrator, Collateral Agent and Securities Intermediary party thereto
10.13	Limited Liability Company Operating Agreement of Sierra Senior Loan Strategy JV I LLC, dated March 27, 2015
31.1	Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
99.1	Commitment Letter, dated August 11, 2021, among Sierra Income Corporation, Medley LLC, Medley Capital LLC and SIC Advisors LLC

* Filed herewith.

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SIGNATURES

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

Dated: November 15, 2021	Sierra Income Corporation
	By	/s/ Dean Crowe
		Dean Crowe Chief Executive Officer (Principal Executive Officer)
	By	/s/ Richard T. Allorto, Jr.
		Richard T. Allorto, Jr. Chief Financial Officer (Principal Accounting and Financial Officer)

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