UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2021

OR

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

Commission file number: 814-00866

MONROE CAPITAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Maryland	27-4895840
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

311 South Wacker Drive, Suite 6400 Chicago, Illinois	60606
(Address of Principal Executive Office)	(Zip Code)

(312) 258-8300

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	MRCC	The Nasdaq Global Select Market

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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	x	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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨

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

The aggregate market value of outstanding common stock held by non-affiliates of the registrant was $223.5 million based on the number of shares held by non-affiliates of the registrant as of June 30, 2021, which is the last business day of the registrant’s most recently completed second fiscal quarter.

As of March 1, 2022, the registrant had 21,666,340 shares of common stock, $0.001 par value, outstanding.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A relating to the registrant’s 2022 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.

TABLE OF CONTENTS

	Page
PART I	1
Item 1. Business	1
Item 1A. Risk Factors	28
Item 1B. Unresolved Staff Comments	58
Item 2. Properties	58
Item 3. Legal Proceedings	58
Item 4. Mine Safety Disclosures	58
PART II	59
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	59
Item 6. [Reserved]	62
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	63
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	83
Item 8. Financial Statements and Supplementary Data	83
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	84
Item 9A. Controls and Procedures	84
Item 9B. Other Information	84
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	84
PART III	85
Item 10. Directors, Executive Officers and Corporate Governance	85
Item 11. Executive Compensation	85
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	85
Item 13. Certain Relationships and Related Transactions, and Director Independence	86
Item 14. Principal Accountant Fees and Services	86
PART IV	87
Item 15. Exhibits and Financial Statement Schedules	87
Item 16. Form 10-K Summary	88
Signatures	89

CERTAIN DEFINITIONS

Except as otherwise specified in this Annual Report on Form 10-K (“Annual Report”), the terms:

• “we,” “us,” “our” and the “Company” refer to Monroe Capital Corporation, a Maryland corporation, and its consolidated subsidiaries;

• MC Advisors refers to Monroe Capital BDC Advisors, LLC, our investment adviser and a Delaware limited liability company;

• MC Management refers to Monroe Capital Management Advisors, LLC, our administrator and a Delaware limited liability company;

• Monroe Capital refers to Monroe Capital LLC, a Delaware limited liability company, and its subsidiaries and affiliates; and

• SLF refers to MRCC Senior Loan Fund I, LLC, an unconsolidated Delaware limited liability company, in which we co-invest with Life Insurance Company of the Southwest (“LSW”) primarily in senior secured loans.

FORWARD-LOOKING STATEMENTS

This Annual Report contains statements that constitute forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Some of the statements in this Annual Report constitute forward-looking statements because they relate to future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our industry, our beliefs and our assumptions. The forward-looking statements contained in this Annual Report involve risks and uncertainties, including statements as to:

• our future operating results;

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

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

• the impact of global health epidemics, such as the current novel coronavirus (“COVID-19”) pandemic, on our or our portfolio companies’ business and the global economy;

• the impact of a protracted decline in the liquidity of credit markets on our business;

• the impact of changes in London Interbank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (“SOFR”) on our operating results;

• the impact of increased competition;

• the impact of fluctuations in interest rates on our business and our portfolio companies;

• our contractual arrangements and relationships with third parties;

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

• actual and potential conflicts of interest with MC Advisors, MC Management and other affiliates of Monroe Capital;

• 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 MC Advisors to locate suitable investments for us and to monitor and administer our investments;

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

• our ability to qualify and maintain our qualification as a regulated investment company and as a business development company; and

• the impact of future legislation and regulation on our business and our portfolio companies.

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

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

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

PART I

ITEM 1. BUSINESS

FORMATION OF OUR COMPANY

We are a Maryland corporation, formed February 9, 2011, for the purpose of purchasing an initial portfolio of loans from two funds managed by Monroe Capital, raising capital in our initial public offering, which was completed in October 2012 (the “Initial Public Offering”), and thereafter operating as an externally managed business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”), as amended. We are a closed-end, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for tax purposes we have elected to be treated as a regulated investment company (“RIC”) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2012.

Public Offerings of Common Stock

The Initial Public Offering consisted of the sale of 5,750,000 shares of our common stock at a price of $15.00 per share, resulting in net proceeds to us, net of underwriting discounts and commissions, of approximately $84.6 million. On July 22, 2013, we completed a public offering of an additional 4,000,000 shares of our common stock at a price of $14.05 per share. On August 20, 2013, we also sold an additional 225,000 shares of our common stock at a price of $14.05 per share pursuant to the underwriters’ partial exercise of the over-allotment option. These issuances during the year ended December 31, 2013 provided us with proceeds, net of offering and underwriting costs, of $56.0 million.

On April 20, 2015, we closed a public offering of 2,450,000 shares of our common stock at a public offering price of $14.85 per share, raising approximately $36.4 million in gross proceeds. On May 18, 2015, we completed the sale of an additional 367,500 shares of our common stock, at a public offering price of $14.85 per share, raising approximately $5.5 million in gross proceeds pursuant to the underwriters’ exercise of the over-allotment option. Aggregate underwriters’ discounts and commissions were $1.7 million and offering costs were $0.3 million, resulting in net proceeds of approximately $39.9 million.

On July 25, 2016, we closed a public offering of 3,100,000 shares of our common stock at a public offering price of $15.50 per share, raising approximately $48.1 million in gross proceeds. On August 3, 2016, we sold an additional 465,000 shares of our common stock, at a public offering price of $15.50 per share, raising approximately $7.2 million in gross proceeds pursuant to the underwriters’ exercise of the over-allotment option. Aggregate underwriters’ discounts and commissions were $2.2 million and offering costs were $0.5 million, resulting in net proceeds of approximately $52.5 million.

On June 9, 2017, we closed a public offering of 3,000,000 shares of our common stock at a public offering price of $15.00 per share, raising approximately $45.0 million in gross proceeds. On June 14, 2017, pursuant to the underwriters’ exercise of the over-allotment option, we sold an additional 450,000 shares of our common stock, at a public offering price of $15.00 per share, raising an additional $6.8 million in gross proceeds for a total of approximately $51.8 million. Aggregate underwriters’ discounts and commissions were $2.1 million and offering costs were $0.1 million, resulting in net proceeds of approximately $49.6 million.

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At-the-market Securities Offering Program

On February 6, 2015, we entered into an at-the-market (“ATM”) securities offering program with MLV & Co. LLC (“MLV”) and JMP Securities LLC (“JMP”) (the “Initial ATM Program”) through which we could sell, by means of ATM offerings from time to time, up to $50.0 million of our common stock. During the year ended December 31, 2015, we sold 672,597 shares at an average price of $14.88 per share for gross proceeds of approximately $10.0 million under the Initial ATM Program. Aggregate underwriters’ discounts and commissions were $0.2 million and offering costs were $83 thousand, resulting in net proceeds of approximately $9.8 million.

On July 1, 2016, we amended the Initial ATM Program with MLV and JMP to replace MLV with FBR Capital Markets & Co. (“FBR”), an affiliate of MLV. On May 12, 2017, we entered into new equity distribution agreements with each of FBR and JMP (the “ATM Program”). All other material terms of the Initial ATM Program remain unchanged under the ATM Program. During the year ended December 31, 2017, we sold 173,939 shares at an average price of $15.71 per share for gross proceeds of $2.7 million under the Initial ATM Program and no shares were sold under the ATM Program. Aggregate underwriters’ discounts and commissions were $41 thousand and offering costs were $23 thousand, resulting in net proceeds of approximately $2.7 million. During the year ended December 31, 2018, we sold 182,299 shares at an average price of $13.82 per share for gross proceeds of approximately $2.5 million under the ATM Program. Aggregate underwriters’ discounts and commissions were $38 thousand and offering costs were $79 thousand, resulting in net proceeds of approximately $2.4 million. There were no stock issuances during the year ended December 31, 2019.

On May 8, 2020, we entered into an amendment to the ATM Program to extend its term. All other material terms of the ATM Program remain unchanged. During the year ended December 31, 2020, we sold 858,976 shares at an average price of $7.78 per share for gross proceeds of $6.7 million under the ATM Program. Aggregate underwriter’s discounts and commissions were $0.1 million and offering costs were $0.1 million, resulting in net proceeds of approximately $6.5 million. During the year ended December 31, 2021, we sold 362,800 shares at an average price of $11.53 per share for gross proceeds of $4.2 million under the ATM Program. Aggregate underwriter’s discounts and commissions were $63 thousand and offering costs were $27 thousand, resulting in net proceeds of approximately $4.1 million.

Small Business Investment Company Subsidiary

On February 28, 2014, our wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limited partnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958. MRCC SBIC commenced operations on September 16, 2013. On April 13, 2016, MRCC SBIC was approved by the SBA for an additional $75.0 million in SBA debentures for a total of $115.0 million in available SBA debentures. During the year ended December 31, 2021, MRCC SBIC began to repay its SBA debentures and $56.9 million in SBA debentures remained outstanding as of December 31, 2021. On March 1, 2022, MRCC SBIC fully repaid its outstanding SBA debentures and notified the SBA of its intent to surrender its license to operate as a SBIC.

OVERVIEW OF OUR BUSINESS

We are a specialty finance company focused on providing financing solutions primarily to lower middle-market companies in the United States and Canada. We provide customized financing solutions focused primarily on senior secured, junior secured and unitranche secured (a combination of senior secured and junior secured debt in the same facility in which we syndicate a “first out” portion of the loan to an investor and retain a “last out” portion of the loan) debt and, to a lesser extent, unsecured subordinated debt and equity, including equity co-investments in preferred and common stock and warrants.

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through investment in senior secured, unitranche secured and junior secured debt and, to a lesser extent, unsecured subordinated debt and equity investments. We seek to use our extensive leveraged finance origination infrastructure and broad expertise in sourcing loans to invest in primarily senior secured, unitranche secured and junior secured debt of middle-market companies. We believe that our primary focus on lending to lower middle-market companies offers several advantages as compared to lending to larger companies, including more attractive economics, lower leverage, more comprehensive and restrictive covenants, more expansive events of default, relatively small debt facilities that provide us with enhanced influence over our borrowers, direct access to borrower management and improved information flow.

Since the consummation of the Initial Public Offering, we have grown the fair value of our portfolio of investments to approximately $561.7 million at December 31, 2021. Our portfolio at December 31, 2021 consists of 96 different portfolio companies and holdings include senior secured, junior secured and unitranche secured debt and equity investments. As of December 31, 2021, we have borrowed $151.0 million under our revolving credit facility, we have $130.0 million in aggregate principal amount of senior unsecured notes (“2026 Notes”) outstanding and we have drawn $56.9 million in SBA debentures to finance the purchase of our assets.

Our investments will generally range between $2.0 million and $25.0 million each, although this investment size may vary proportionately with the size of our capital base. As of December 31, 2021, our portfolio included approximately 75.4% senior secured loans, 9.2% unitranche secured loans, 2.6% junior secured loans and 12.8% equity securities. We expect that the companies in which we invest may be leveraged, often as a result of leveraged buy-outs or other recapitalization transactions, and, in certain cases, will not be rated by national ratings agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies.

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

OUR INVESTMENT ADVISOR

Our investment activities are managed by our investment advisor, MC Advisors. MC Advisors is responsible for sourcing potential investments, conducting research and due diligence on prospective investments and their private equity sponsors, analyzing investment opportunities, structuring our investments and managing our investments and portfolio companies on an ongoing basis. MC Advisors was organized in February 2011 and is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Under our Investment Advisory and Management Agreement with MC Advisors, we pay MC Advisors a base management fee and an incentive fee for its services. While not expected to review or approve each investment, our independent directors periodically review MC Advisors’ services and fees as well as its portfolio management decisions and portfolio performance. In connection with these reviews, our independent directors consider whether our fees and expenses (including those related to leverage) remain appropriate.

MC Advisors seeks to capitalize on the significant deal origination, credit underwriting, due diligence, investment structuring, execution, portfolio management and monitoring experience of Monroe Capital’s investment professionals. The senior management team of Monroe Capital, including Theodore L. Koenig and Aaron D. Peck, provides investment services to MC Advisors pursuant to a staffing agreement, or the Staffing Agreement, between MC Management, an affiliate of Monroe Capital, and MC Advisors. Messrs. Koenig and Peck have developed a broad network of contacts within the investment community and average more than 30 years of experience investing in debt and equity securities of lower middle-market companies. In addition, Messrs. Koenig and Peck have extensive experience investing in assets that constitute our primary focus and have expertise in investing throughout all periods of the economic cycle. MC Advisors is an affiliate of Monroe Capital and is supported by experienced investment professionals of Monroe Capital under the terms of the Staffing Agreement. Monroe Capital’s core team of investment professionals has an established track record in sourcing, underwriting, executing and monitoring transactions. From Monroe Capital’s formation in 2004 through December 31, 2021, Monroe Capital’s investment professionals invested in over 1,500 loans and related investments in an aggregate amount of over $25.0 billion.

In addition to their roles with Monroe Capital and MC Advisors, Messrs. Koenig and Peck serve as interested directors. Mr. Koenig has more than 35 years of experience in structuring, negotiating and closing transactions on behalf of asset-backed lenders, commercial finance companies, financial institutions and private equity investors at organizations including Monroe Capital, which Mr. Koenig founded in 2004, and Hilco Capital LP, where he led investments in over 20 companies in the lower middle-market. Mr. Peck has more than 25 years of public company management, leveraged finance and commercial lending experience at organizations including Deerfield Capital Management LLC, Black Diamond Capital Management LLC and Salomon Smith Barney Inc. Messrs. Koenig and Peck are joined on the investment committee of MC Advisors by Michael J. Egan and Jeremy T. VanDerMeid, each of whom is a senior investment professional at Monroe Capital. Mr. Egan has more than 35 years of experience in commercial finance, credit administration and banking at organizations including Hilco Capital, The CIT Group/Business Credit, Inc., The National Community Bank of New Jersey (The Bank of New York) and KeyCorp. Mr. VanDerMeid has more than 20 years of lending and corporate finance experience at organizations including Morgan Stanley Investment Management, Dymas Capital Management Company, LLC and Heller Financial.

ABOUT MONROE CAPITAL

Monroe Capital, a Delaware limited liability company that was founded in 2004, is a leading lender to middle-market companies. As of December 31, 2021, Monroe Capital had approximately $12.7 billion in assets under management. Over its eighteen-year history, Monroe Capital has developed an established lending platform that we believe generates consistent deal flow from a network of proprietary relationships. Monroe Capital’s assets under management are comprised of a diverse portfolio of over 475 current investments that were either originated directly by Monroe Capital or sourced from Monroe Capital’s third-party relationships. From Monroe Capital’s formation in 2004 through December 31, 2021, Monroe Capital’s investment professionals invested in over 1,500 loans and related investments in an aggregate amount of over $25.0 billion. The senior investment team of Monroe Capital averages more than 30 years of experience and has developed a proven investment and portfolio management process that has performed through multiple market cycles. In addition, Monroe Capital’s investment professionals are supported by a robust infrastructure of administrative and back-office personnel focused on compliance, operations, finance, treasury, legal, accounting and reporting, marketing, information technology and office management.

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INVESTMENT STRATEGY

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation primarily through investments in senior, unitranche and junior secured debt and, to a lesser extent, unsecured subordinated debt and equity. We also seek to invest opportunistically in attractively priced, broadly syndicated loans, which should enhance our geographic and industry portfolio diversification and increase our portfolio’s liquidity. We do not target any specific industry, however, as of December 31, 2021, our investments in the Banking, Finance, Insurance & Real Estate and Services: Business industries represented approximately 17.6% and 12.7%, respectively, of the fair value of our portfolio. To achieve our investment objective, we utilize the following investment strategy:

Attractive Current Yield on Investment Portfolio. We believe our sourcing network allows us to enter into transactions with attractive yields and investment structures. Based on current market conditions and our pipeline of new investments, we expect our target directly originated senior and unitranche secured debt will have an average maturity of three to seven years and interest rates of 6% to 13%, and we expect our target directly originated junior secured debt and unsecured subordinated debt will have an average maturity of four to seven years and interest rates of 8% to 15%. In addition, based on current market conditions and our pipeline of new investments, we expect that our target debt investments will typically have a variable coupon (with a LIBOR or SOFR floor), may include payment-in-kind (“PIK”) interest (interest that is not received in cash, but added to the principal balance of the loan), and that we will typically receive upfront closing fees of 1% to 4%. We may also receive warrants or other forms of upside equity participation. Our transactions are generally secured and supported by a lien on all assets and/or a pledge of company stock in order to provide priority of return and to influence any corporate actions. Although we will target investments with the characteristics described in this paragraph, we cannot provide assurance that our new investments will have these characteristics and we may enter into investments with different characteristics as the market dictates. For a description of the characteristics of our current investment portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Portfolio and Investment Activity.” Until investment opportunities can be found, we may invest our undeployed capital in cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less from the date of investment. These temporary investments may have lower yields than our other investments and, accordingly, may result in lower distributions, if any, during such period.

Sound Portfolio Construction. We strive to exercise discipline in portfolio creation and management and to implement effective governance throughout our business. Monroe Capital and MC Advisors, which is comprised of substantially the same investment professionals who operate Monroe Capital, have been, and we believe will continue to be, conservative in the underwriting and structuring of covenant packages in order to enable early intervention in the event of weak financial performance by a portfolio company. We seek to pursue lending opportunities selectively and to maintain a diversified portfolio. We believe that exercising disciplined portfolio management through continued intensive account monitoring and timely and relevant management reporting allows us to mitigate risks in our debt investments. In addition, we have implemented rigorous governance processes through segregation of duties, documented policies and procedures and independent oversight and review of transactions, which we believe helps us to maintain a low level of non-performing loans. We believe that Monroe Capital’s proven process of thorough origination, conservative underwriting, due diligence and structuring, combined with careful account management and diversification, enabled it to protect investor capital, and we believe MC Advisors follows the same philosophy and processes in originating, structuring and managing our portfolio investments.

Predictability of Returns. Beyond conservative structuring and protection of capital, we seek a predictable exit from our investments. We seek to invest in situations where there are a number of potential exit options that can result in full repayment or a modest refinance of our investment. We seek to structure the majority of our transactions as secured loans with a covenant package that provides for full or partial repayment upon the completion of asset sales and restructurings. Because we seek to structure these transactions to provide for contractually determined, periodic payments of principal and interest, we are less likely to depend on merger and acquisition activity or public equity markets to exit our debt investments. As a result, we believe that we can achieve our target returns even in a period when public markets are depressed.

BUSINESS STRATEGY

We believe that we represent an attractive investment opportunity for the following reasons:

Deep, Experienced Management Team. We are managed by MC Advisors, which has access through the Staffing Agreement to Monroe Capital’s experienced team comprised of over 150 professionals, including seven senior partners that average more than 30 years of direct lending experience. We are led by our Chairman and Chief Executive Officer, Theodore L. Koenig, and Aaron D. Peck, our Chief Financial Officer and Chief Investment Officer. This extensive experience includes the management of investments with borrowers of varying credit profiles and transactions completed in all phases of the credit cycle. Monroe Capital’s senior investment professionals provide us with a difficult-to-replicate sourcing network and a broad range of transactional, financial, managerial and investment skills. This expertise and experience is supported by administrative and back office personnel focused on operations, finance, legal and compliance, accounting and reporting, marketing, information technology and office management. From Monroe Capital’s formation in 2004 through December 31, 2021, Monroe Capital’s investment professionals invested in over 1,500 loans and related investments in an aggregate amount of over $25.0 billion.

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Differentiated Relationship-Based Sourcing Network. We believe Monroe Capital’s senior investment professionals benefit from extensive relationships with commercial banks, private equity firms, financial intermediaries, management teams and turn-around advisors. We believe that this broad sourcing network differentiates us from our competitors and offers us a diversified origination approach that does not rely on a single channel and offers us consistent deal flow throughout the economic cycle. We also believe that this broad network allows us to originate a substantial number of non-private equity-sponsored investments.

Extensive Institutional Platform for Originating Middle-Market Deal Flow. Monroe Capital’s broad network of relationships and significant origination resources enable us to review numerous lending opportunities, permitting us to exercise a high degree of selectivity in terms of loans to which we ultimately commit. Monroe Capital estimates that it reviewed approximately 2,000 investment opportunities during 2021. Monroe Capital’s over 1,500 previously executed transactions, over 475 of which are with current borrowers, offer us another source of deal flow, as these debt investments reach maturity or seek refinancing. We are also positioned to benefit from Monroe Capital’s established brand name, strong track record in partnering with industry participants and reputation for closing deals on time and as committed. Monroe Capital’s senior investment professionals are complemented by extensive experience in capital markets transactions, risk management and portfolio monitoring.

Disciplined, “Credit-First” Underwriting Process. Monroe Capital has developed a systematic underwriting process that applies a consistent approach to credit review and approval, with a focus on evaluating credit first and then appropriately assessing the risk-reward profile of each loan. MC Advisors’ assessment of credit outweighs pricing and other considerations, as we seek to minimize potential credit losses through effective due diligence, structuring and covenant design. MC Advisors seeks to customize each transaction structure and financial covenant to reflect risks identified through the underwriting and due diligence process. We also seek to actively manage our origination and credit underwriting activities through personal visits and calls on all parties involved with an investment, including the management team, private equity sponsors, if any, or other lenders.

Established Credit Risk Management Framework. We seek to manage our credit risk through a well-defined portfolio strategy and credit policy. In terms of credit monitoring, MC Advisors assigns each loan to a particular portfolio management professional and maintains an internal credit rating analysis for all loans. MC Advisors then employs ongoing review and analysis, together with regular investment committee meetings to review the status of certain complex and challenging loans and a comprehensive quarterly review of all loan transactions. MC Advisors’ investment professionals also have significant turnaround and debt work-out experience, which gives them perspective on the risks and possibilities throughout the entire credit cycle. We believe this careful approach to investment and monitoring enables us to identify problems early and gives us an opportunity to assist borrowers before they face difficult liquidity constraints. By anticipating possible negative contingencies and preparing for them, we believe that we diminish the probability of underperforming assets and loan losses.

INVESTMENTS

Investment Structure

We structure our investments, which typically have maturities of three to seven years, as follows:

Senior Secured Loans. We structure senior secured loans to obtain security interests in the assets of the portfolio company borrowers that serve as collateral in support of the repayment of such loans. This collateral may take the form of first-priority liens on the assets of the portfolio company borrower. Our senior secured loans may provide for moderate loan amortization in the early years of the loan, with the majority of the amortization deferred until loan maturity.

Unitranche Secured Loans. We structure our unitranche secured loans as senior secured loans. We obtain security interests in the assets of these portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first-priority liens on the assets of a portfolio company. Generally, we syndicate a “first out” portion of the loan to an investor and retain a “last out” portion of the loan, in which case the “first out” portion of the loan will generally receive priority with respect to payments of principal, interest and any other amounts due thereunder. Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and our unitranche secured loans will expose us to the risks associated with second lien and subordinated loans and may limit our recourse or ability to recover collateral upon a portfolio company’s bankruptcy. Unitranche secured loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred until loan maturity. Unitranche secured loans generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. In many cases we, together with our affiliates, are the sole or majority lender of our unitranche secured loans, which can afford us additional influence with a borrower in terms of monitoring and, if necessary, remediation in the event of underperformance.

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Junior Secured Loans. We structure junior secured loans to obtain a security interest in the assets of these portfolio companies that serves as collateral in support of the repayment of such loans. This collateral may take the form of second priority liens on the assets of a portfolio company. These loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred until loan maturity.

Preferred Equity. We generally structure preferred equity investments to combine features of equity and debt. We may obtain a security interest in the assets of these portfolio companies that serves as collateral in support of the repayment of such preferred equity, which takes a priority to common stockholders. Preferred equity interests generally have a stated dividend rate and may not have a fixed maturity date.

Warrants and Equity Co-Investment Securities. In some cases, we may also receive nominally priced warrants or options to buy a minority equity interest in the portfolio company in connection with a loan. As a result, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We may structure such warrants to include provisions protecting our rights as a minority-interest holder, as well as a “put,” or right to sell such securities back to the issuer, upon the occurrence of specified events. In other cases, we may make a minority equity co-investment in the portfolio company in connection with a loan. Additionally, we may receive equity in our distressed portfolio companies in conjunction with amendments or additional debt fundings.

We tailor the terms of each investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its business plan and improve its operating results. We seek to limit the downside potential of our investments by:

• selecting investments that we believe have a very low probability of loss;

• requiring a total return on our investments (including both interest and potential equity appreciation) that we believe will compensate us appropriately for credit risk; and

• negotiating covenants in connection with our investments that afford our portfolio companies as much flexibility in managing their businesses as possible, consistent with the preservation of our capital. Such restrictions may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights, including either observation or rights to a seat on the board of directors under some circumstances.

We expect to hold most of our investments to maturity or repayment, but we may sell some of our investments earlier if a liquidity event occurs, such as a sale, recapitalization or worsening of the credit quality of the portfolio company, or if an investment has reached its return target.

Senior Loan Fund. We have invested in SLF, which as of December 31, 2021, consisted of loans to different borrowers in industries similar to the companies in our portfolio. SLF invests primarily in senior secured loans of middle market companies. These senior secured loans are generally similar to our senior secured loans, which are secured by a first lien on some or all of the issuer’s assets and include traditional senior debt and any related revolving or similar credit facility. SLF may also invest in more liquid senior secured loans.

Investments

We seek to create a diverse portfolio that includes senior secured, unitranche secured, junior secured loans and warrants and equity co-investment securities by investing approximately $2.0 million to $25.0 million of capital, on average, in the securities of middle-market companies. This investment size may vary proportionately with the size of our capital base. Set forth below is a list of our ten largest portfolio company investments as of December 31, 2021, as well as the top ten industries in which we were invested as of December 31, 2021, in each case excluding SLF, calculated as a percentage of our total investments at fair value as of such date (in thousands):

Portfolio Company	Fair Value of Investments		Percentage of Total Investments
HFZ Capital Group, LLC (1)	$	29,152		5.2	%
American Community Homes, Inc.		23,748		4.2
Security Services Acquisition Sub Corp.		17,536		3.1
Nearly Natural, Inc.		15,576		2.8
Express Wash Acquisition Company, LLC		15,511		2.8
Mammoth Holdings, LLC		13,370		2.4
Priority Ambulance, LLC		12,907		2.3
MCP Shaw Acquisitionco, LLC		12,839		2.3
Second Avenue SFR Holdings II LLC		11,854		2.1
Planful, Inc.		11,439		2.0
	$	163,932		29.2	%

(1) Includes the associated investment in MC Asset Management (Corporate), LLC.

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Industry	Fair Value of Investments		Percentage of Total Investments
Banking, Finance, Insurance & Real Estate	$	99,091		17.6	%
Services: Business		71,540		12.7
High Tech Industries		54,085		9.6
Healthcare & Pharmaceuticals		53,179		9.5
Services: Consumer		39,248		7.0
Media: Diversified & Production		24,220		4.3
Automotive		21,556		3.8
Beverage, Food & Tobacco		19,133		3.4
Environmental Industries		17,693		3.2
Media: Advertising, Printing & Publishing		16,794		3.0
	$	416,539		74.1	%

INVESTMENT PROCESS OVERVIEW

We view our investment process as consisting of the phases described below:

Origination. MC Advisors seeks to develop investment opportunities through extensive relationships with regional banks, private equity firms, financial intermediaries, management teams and other turn-around advisors. Monroe Capital has developed this network since its formation in 2004. MC Advisors manages these leads through personal visits and calls by its senior deal professionals. It is these professionals’ responsibility to identify specific opportunities, refine opportunities through due diligence regarding the underlying facts and circumstances and utilize innovative thinking and flexible terms to solve the financing issues of prospective clients. Monroe Capital’s origination professionals are broadly dispersed with seven offices in the United States and one in South Korea. Certain of Monroe Capital’s originators are responsible for covering a specified target market based on geography and others focus on specialized industry verticals. We believe Monroe Capital’s origination professionals’ experience is vital to enable us to provide our borrowers with innovative financing solutions. We further believe that their strength and breadth of relationships across a wide range of markets will generate numerous financing opportunities and enable us to be highly selective in our lending activities. In sourcing new transactions, MC Advisors seeks opportunities to work with borrowers primarily domiciled in the United States and Canada and typically focuses on industries in which Monroe Capital has previous lending experience.

Due Diligence. For each of our investments, MC Advisors prepares a comprehensive new business presentation, which summarizes the investment opportunity and its due diligence and risk analysis, all from the perspective of strengths, weaknesses, opportunities and threats presented by the opportunity. This presentation assesses the borrower and its management, including products and services offered, market position, sales and marketing capabilities and distribution channels; key contracts, customers and suppliers, meetings with management and facility tours; background checks on key executives; customer calls; and an evaluation of exit strategies. MC Advisors’ presentation typically evaluates historical financial performance of the borrower and includes projections, including operating trends, an assessment of the quality of financial information, capitalization and liquidity measures and debt service capacity. The financial analysis also includes sensitivity analysis against management projections and an analysis of potential downside scenarios, particularly for cyclical businesses. MC Advisors seeks to also review the dynamics of the borrowers’ industry and assess the maturity, market size, competition, technology and regulatory issues confronted by the industry. Finally, MC Advisors’ new business presentation includes all relevant third-party reports and assessments, including, as applicable, analyses of the quality of earnings of the prospective borrower, a review of the business by industry experts and third-party valuations. MC Advisors also includes in this due diligence, if relevant, field exams, collateral appraisals and environmental reviews, as well as a review of comparable private and public transactions.

Underwriting. MC Advisors uses the systematic, consistent approach to credit evaluation developed in house by Monroe Capital with a particular focus on determining the value of a business in a downside scenario. In this process, the senior investment professionals at MC Advisors bring to bear extensive lending experience with emphasis on lessons learned from past credit cycles. We believe that the extensive credit and debt work-out experience of Monroe Capital’s senior management enables us to anticipate problems and minimize risks. Monroe Capital’s underwriting professionals work closely with its origination professionals to identify individual deal strengths, risks and any risk mitigants. MC Advisors preliminarily screens transactions based on cash flow, enterprise value and asset-based characteristics, and each of these measures is developed on a proprietary basis using thorough credit analysis focused on sustainability and predictability of cash flow to support enterprise value, barriers to entry, market position, competition, customer and supplier relationships, management strength, private equity sponsor track record and industry dynamics. For asset-based transactions, MC Advisors seeks to understand current and future collateral value, opening availability and ongoing liquidity. MC Advisors documents this preliminary analysis which is thoroughly reviewed by at least one member of its investment committee prior to proposing a formal term sheet. We believe this early involvement of the investment committee ensures that our resources and those of third parties are deployed appropriately and efficiently during the investment process and lowers execution risk for our clients. With respect to transactions reviewed by MC Advisors, we expect that only approximately 10% of our sourced deals will reach the formal term sheet stage.

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Credit Approval/Investment Committee Review. MC Advisors employs a standardized, structured process developed by Monroe Capital when evaluating and underwriting new investments for our portfolio. MC Advisors’ investment committee considers its comprehensive new business presentation to approve or decline each investment. This committee includes Messrs. Koenig, Peck, Egan and VanDerMeid. The committee is committed to providing a prompt turnaround on investment decisions. Each meeting to approve an investment requires a quorum of at least three members of the investment committee, and each investment must receive unanimous approval by such members of the investment committee.

The following chart illustrates the stages of MC Advisors’ evaluation process:

Evaluation Process

 

Execution. We believe Monroe Capital has developed a strong reputation for closing deals as proposed, and we intend to continue this tradition. Through MC Advisors’ consistent approach to credit evaluation and underwriting, we seek to close deals as fast or faster than competitive financing providers while maintaining the discipline with respect to credit, pricing and structure necessary to ensure the ultimate success of the financing.

Monitoring. We benefit from the portfolio management system in place at Monroe Capital. This monitoring includes regular meetings between the responsible analyst and our portfolio company to discuss market activity and current events. MC Advisors’ portfolio management staff closely monitors all credits, with senior portfolio managers covering agented and more complex investments with the support of junior portfolio management staff. MC Advisors segregates our capital markets investments by industry. MC Advisors’ monitoring process, developed by Monroe Capital, has daily, weekly, monthly and quarterly components and related reports, each to evaluate performance against historical, budget and underwriting expectations. MC Advisors’ analysts monitor performance using standard industry software tools to provide consistent disclosure of performance. When necessary, MC Advisors updates our internal risk ratings, borrowing base criteria and covenant compliance reports.

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

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

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

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

The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December 31, 2021 (in thousands):

Investment Performance Risk Rating	Investments at Fair Value		Percentage of Total Investments
1	$	1,759		0.3	%
2		465,224		82.9
3		75,942		13.5
4		18,136		3.2
5		632		0.1
Total	$	561,693		100.0	%

The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December 31, 2020 (in thousands):

Investment Performance Risk Rating	Investments at Fair Value		Percentage of Total Investments
1	$	1,592		0.3	%
2		428,554		78.4
3		92,001		16.8
4		19,844		3.6
5		5,048		0.9
Total	$	547,039		100.0	%

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SUMMARY RISK FACTORS

The risk factors described below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 1A. of this Annual Report on Form 10-K and the other reports and documents filed by us with the SEC.

We are subject to risks relating to our business and structure

• We depend upon MC Advisors’ senior management for our success, and upon its access to the investment professionals of Monroe Capital and its affiliates.

• There may be conflicts related to obligations that MC Advisors’ senior investment professionals and members of its investment committee have to other clients.

• Our management and incentive fee structure may create incentives for MC Advisors that are not fully aligned with the interests of our stockholders.

• Our ability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us.

• We finance our investments with borrowed money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing with us.

• We operate in a highly competitive market for investment opportunities.

• The majority of our assets are subject to security interests under our revolving credit facility and if we default on our obligations under such facility, we may suffer adverse consequences, including foreclosure on our assets.

• The interest rates of our revolving credit facility and loans to our portfolio companies that extend beyond 2023 might be subject to change based on recent regulatory changes.

• Many of our portfolio investments are recorded at fair value as determined in good faith by our Board and, as a result, there may be uncertainty as to the value of our portfolio investments.

• We will be subject to corporate-level U.S. federal income tax if we are unable to qualify or maintain qualification as a RIC under Subchapter M of the Code.

• Each of MC Advisors and the Administrator can resign on 60 days’ notice, and we can provide no assurance that we could find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

• We are highly dependent on information systems and systems failures could significantly disrupt our business, which could, in turn, negatively affect the market price of our common stock and our ability to pay distributions.

We are subject to risks relating to our investments

• The COVID-19 pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impact on our portfolio companies and our business and operations.

• Economic, political and market conditions could have a significant adverse effect on our business, financial condition and results of operations.

• The lack of liquidity in our investments may adversely affect our business.

• Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized losses.

• Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields.

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• Our portfolio may be exposed in part to one or more specific industries, which may subject us to a risk of significant loss in a particular investment or investments if there is a downturn in that particular industry.

• We may hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings.

• Because we do not hold controlling equity interests in the majority of our portfolio companies, we may not be able to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies, which could decrease the value of our investments.

• Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

• We may be subject to risks associated with syndicated loans.

• We may not realize gains from our equity investments.

 We are subject to risks relating to our securities

• We may not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital.

• If we sell common stock at a discount to our net asset value per share, stockholders who do not participate in such sale will experience immediate dilution in an amount that may be material.

• Investing in our common stock may involve an above-average degree of risk.

• Shares of closed-end investment companies, including BDCs, often trade at a discount to their net asset value.

• The market price of our securities may fluctuate significantly.

• The 2026 Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future.

• If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2026 Notes.

MANAGEMENT AND OTHER AGREEMENTS

MC Advisors is located at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606. MC Advisors is a registered investment adviser under the Advisers Act. Subject to the overall supervision of our Board and in accordance with the 1940 Act, MC Advisors manages our day-to-day operations and provides investment advisory services to us. Under the terms of the Investment Advisory and Management Agreement, MC Advisors:

• determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

• assists us in determining what securities we purchase, retain or sell;

• identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and

• executes, closes, services and monitors the investments we make.

MC Advisors’ services under the Investment Advisory and Management Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.

Management and Incentive Fee

Under the Investment Advisory and Management Agreement with MC Advisors and subject to the overall supervision of our Board, MC Advisors provides investment advisory services to us. For providing these services, MC Advisors receives a fee from us, consisting of two components — a base management fee and an incentive fee.

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On November 4, 2019, our Board approved a change to the Investment Advisory Agreement to amend the base management fee structure. Effective July 1, 2019, the base management fee is calculated initially at an annual rate equal to 1.75% of average invested assets (calculated as total assets excluding cash, which includes assets financed using leverage); provided, however, the base management fee is calculated at an annual rate equal to 1.00% of our average invested assets (calculated as total assets excluding cash, which includes assets financed using leverage) that exceeds the product of (i) 200% and (ii) our average net assets. For the avoidance of doubt, the 200% is calculated in accordance with the asset coverage limitation as defined in the 1940 Act to give effect to our exemptive relief with respect to MRCC SBIC’s SBA debentures. This change has the effect of reducing our base management fee rate on assets in excess of regulatory leverage of 1:1 debt to equity to 1.00% per annum. The base management fee is payable quarterly in arrears.

Prior to July 1, 2019, the base management fee was calculated at an annual rate equal to 1.75% of average invested assets (calculated as total assets excluding cash, which included assets financed using leverage) and was payable quarterly in arrears.

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the preceding quarter subject to a total return requirement. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under our administration agreement between us and MC Management (the “Administration Agreement”) and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that we have not yet received in cash. MC Advisors is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued interest that we never actually receive.

The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of our pre-incentive fee net investment income will be payable except to the extent 20.0% of the cumulative net increase in net assets resulting from operations over the then-current and 11 preceding quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding quarters (the “Incentive Fee Limitation”). Therefore, any ordinary income incentive fee that is payable in a calendar quarter will be limited to the lesser of (i) 20% of the amount by which our pre-incentive fee net investment income for such calendar quarter exceeds the 2% hurdle described below, subject to the “catch-up” provision, and (ii) (x) 20% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding calendar quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the amount, if positive, of the sum of our pre-incentive fee net investment income, base management fees, realized gains and losses and unrealized gains and losses for the then-current and 11 preceding calendar quarters.

Pre-incentive fee net investment income does not include any realized capital gains or losses or unrealized capital gains or losses. If any distributions from portfolio companies are characterized as a return of capital, such returns of capital would affect the capital gains incentive fee to the extent a gain or loss is realized. Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter where we incur a loss. For example, if we receive pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, we will pay the applicable incentive fee even if we have incurred a loss in that quarter due to realized and unrealized capital losses.

Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed “hurdle rate” of 2% per quarter (8% annually). If market interest rates rise, we may be able to invest our funds in debt instruments that provide for a higher return, which would increase our pre-incentive fee net investment income and make it easier for MC Advisors to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income.

We pay MC Advisors an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

• no incentive fee in any calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle rate of 2% (8% annually);

• 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5% in any calendar quarter. We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.5%) as the “catch-up” provision. The catch-up is meant to provide MC Advisors with 20% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 2.5% in any calendar quarter; and

• 20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.5% in any calendar quarter.

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These calculations are adjusted for any share issuances or repurchases during the quarter.

The following is a graphical representation of the calculation of the income-related portion of the incentive fee:

Quarterly Incentive Fee Based on Pre-Incentive Fee Net Investment Income

Pre-incentive fee net investment income (expressed as a percentage of the value of net assets)

 

Percentage of pre-incentive fee net investment income allocated to income-related portion
of incentive fee

These calculations will be appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

The second part of the incentive fee is a capital gains incentive fee that is determined and payable in arrears as of the end of each fiscal year (or upon termination of the investment advisory and management agreement, as of the termination date), and equals 20% of our realized capital gains as of the end of the fiscal year. In determining the capital gains incentive fee payable to MC Advisors, we calculate the cumulative aggregate realized capital gains and cumulative aggregate realized capital losses since our inception, and the aggregate unrealized capital depreciation as of the date of the calculation, as applicable, with respect to each of the investments in our portfolio. For this purpose, cumulative aggregate realized capital gains, if any, equals the sum of the differences between the net sales price of each investment, when sold, and the amortized cost of such investment. Cumulative aggregate realized capital losses equals the sum of the amounts by which the net sales price of each investment, when sold, is less than the amortized cost of such investment since our inception. Aggregate unrealized capital depreciation equals the sum of the difference, if negative, between the valuation of each investment as of the applicable calculation date and the amortized cost of such investment. At the end of the applicable year, the amount of capital gains that serves as the basis for our calculation of the capital gains incentive fee equals the cumulative aggregate realized capital gains less cumulative aggregate realized capital losses, less aggregate unrealized capital depreciation, with respect to our portfolio of investments. If this number is positive at the end of such year, then the capital gains incentive fee for such year equals 20% of such amount, less the aggregate amount of any capital gains incentive fees paid in respect of our portfolio in all prior years.

Examples of Quarterly Incentive Fee Calculation

Example 1: Income Related Portion of Incentive Fee before Total Return Requirement Calculation

Alternative 1

Assumptions

Investment income (including interest, dividends, fees, etc.) = 1.25%
Hurdle rate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%
Pre-incentive fee net investment income (investment income – (management fee + other expenses)) = 0.6125%

Pre-incentive fee net investment income does not exceed hurdle rate, therefore there is no income-related incentive fee.

Alternative 2

Assumptions

Investment income (including interest, dividends, fees, etc.) = 3.0%
Hurdle rate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%
Pre-incentive fee net investment income (investment income – (management fee + other expenses)) = 2.3625%

Incentive fee = 100% × Pre-incentive fee net investment income (subject to “catch-up”) ⁽³⁾

= 100% × (2.3625% – 2%)

= 0.3625%

Pre-incentive fee net investment income exceeds the hurdle rate, but does not fully satisfy the “catch-up” provision, therefore the income-related portion of the incentive fee is 0.3625%.

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Alternative 3

Assumptions

Investment income (including interest, dividends, fees, etc.) = 3.5%
Hurdle rate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.2%
Pre-incentive fee net investment income (investment income – (management fee + other expenses)) = 2.8625%
Incentive fee = 100% × Pre-incentive fee net investment income (subject to “catch-up”) ⁽³⁾
Incentive fee = 100% × “catch-up” + (20% × (Pre-incentive fee net investment income – 2.5%))
“Catch-up”   = 2.5% – 2%

       = 0.5%

Incentive fee = (100% × 0.5%) + (20% × (2.8625% – 2.5%))
                        = 0.5% + (20% × 0.3625%)
                        = 0.5% + 0.0725%
                        = 0.5725%

Pre-incentive fee net investment income exceeds the hurdle rate, and fully satisfies the “catch-up” provision, therefore the income related portion of the incentive fee is 0.5725%.

⁽¹⁾ Represents 8.0% annualized hurdle rate.

⁽²⁾ Represents 1.75% annualized base management fee.

⁽³⁾ The “catch-up” provision is intended to provide our investment advisor with an incentive fee of 20% on all pre-incentive fee net investment income as if a hurdle rate did not apply when our net investment income exceeds 2.5% in any fiscal quarter.

Example 2: Income Portion of Incentive Fee with Total Return Requirement Calculation

Assumptions

Hurdle rate ⁽¹⁾ = 2%
Management fee ⁽²⁾ = 0.4375%

Other expenses (legal, accounting, transfer agent, etc.) = 0.2%

Cumulative incentive compensation accrued and/or paid for preceding 11 calendar quarters = $9 million

Alternative 1

Additional Assumptions

Investment income (including interest, dividends, fees, etc.) = 3.50%
Pre-incentive fee net investment income (investment income – (management fee + other expenses)) = 2.8625%
20.0% of cumulative net increase in net assets resulting from operations over current and preceding 11 calendar quarters = $8 million

Although our pre-incentive fee net investment income exceeds the hurdle rate of 2.0% (as shown in Alternative 3 of Example 1 above), no incentive fee is payable because 20.0% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters did not exceed the cumulative income and capital gains incentive fees accrued and/or paid for the preceding 11 calendar quarters.

Alternative 2

Additional Assumptions

Investment Income (including interest, dividends, fees, etc.) = 3.50%
Pre-incentive fee net investment income (investment income – (management fee + other expenses)) = 2.8625%
20% of cumulative net increase in net assets resulting from operations over current and preceding 11 calendar quarters = $10 million

Because our pre-incentive fee net investment income exceeds the hurdle rate of 2.0% and because 20.0% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative income and capital gains incentive fees accrued and/or paid for the preceding 11 calendar quarters, an incentive fee would be payable, as shown in Alternative 3 of Example 1 above.

⁽¹⁾ Represents 8.0% annualized hurdle rate.

⁽²⁾ Represents 1.75% annualized base management fee.

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Example 3: Capital Gains Portion of Incentive Fee (*)

Alternative 1:

Assumptions

Year 1:  $20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”)

Year 2:  Investment A sold for $50 million and fair market value (“FMV”) of Investment B determined to be $32 million

Year 3:  FMV of Investment B determined to be $25 million

Year 4:  Investment B sold for $31 million

The capital gains portion of the incentive fee would be:

Year 1:  None

Year 2:  Capital gains incentive fee of $6 million — ($30 million realized capital gains on sale of Investment A multiplied by 20%)

Year 3:  None — $5 million (20% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6 million (previous capital gains fee paid in Year 2)

Year 4:  Capital gains incentive fee of $200,000 — $6.2 million ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (capital gains incentive fee taken in Year 2)

Alternative 2

Assumptions

Year 1:  $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”)

Year 2:  Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million

Year 3:  FMV of Investment B determined to be $27 million and Investment C sold for $30 million

Year 4:  FMV of Investment B determined to be $35 million

Year 5:  Investment B sold for $20 million

The capital gains incentive fee, if any, would be:

Year 1:  None

Year 2:  $5 million capital gains incentive fee — 20% multiplied by $25 million ($30 million realized capital gains on Investment A less unrealized capital depreciation on Investment B)

Year 3:  $1.4 million capital gains incentive fee ⁽¹⁾ — $6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less $5 million capital gains incentive fee received in Year 2

Year 4:  None

Year 5:  None — $5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less $6.4 million cumulative capital gains incentive fee paid in Year 2 and Year 3 ⁽²⁾

* The hypothetical amounts of returns shown are based on a percentage of our total net assets and assume no leverage. There is no guarantee that positive returns will be realized, and actual returns may vary from those shown in this example.

⁽¹⁾ As illustrated in Year 3 of Alternative 1 above, if we were to be wound up on a date other than our fiscal year end of any year, we may have paid aggregate capital gains incentive fees that are more than the amount of such fees that would be payable if we had been wound up on the fiscal year end of such year.

⁽²⁾ As noted above, it is possible that the cumulative aggregate capital gains fee received by our investment advisor ($6.4 million) is effectively greater than $5 million (20% of cumulative aggregate realized capital gains less net realized capital losses or net unrealized depreciation ($25 million)).

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Payment of Our Expenses

All investment professionals of MC Advisors and/or its affiliates, when and to the extent engaged in providing investment advisory and management services to us, and the compensation and routine overhead expenses of personnel allocable to these services to us, are provided and paid for by MC Advisors and not by us. We bear all other out-of-pocket costs and expenses of our operations and transactions, including, without limitation:

• organization and offering;

• calculating our net asset value (including the cost and expenses of any independent valuation firm);

• fees and expenses incurred by MC Advisors payable to third parties, including agents, consultants or other advisors, in monitoring financial and legal affairs for us and in conducting research and due diligence on prospective investments and equity sponsors, analyzing investment opportunities, structuring our investment and monitoring our investments and portfolio companies on an ongoing basis (although none of MC Advisors’ duties will be subcontracted to sub-advisors);

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

• offerings of our common stock and other securities;

• investment advisory fees;

• administration fees and expenses, if any, payable under the Administration Agreement (including payments under the Administration Agreement between us and MC Management based upon our allocable portion of MC Management’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our chief financial officer and chief compliance officer, and their respective staffs);

• transfer agent, dividend agent and custodial fees and expenses;

• federal and state registration fees;

• all costs of registration and listing our shares on any securities exchange;

• federal, state and local taxes;

• independent directors’ fees and expenses;

• costs of preparing and filing reports or other documents required by the SEC or other regulators;

• costs of any reports, proxy statements or other notices to stockholders, including printing costs;

• fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;

• direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs;

• proxy voting expenses; and

• all other expenses incurred by us or MC Management in connection with administering our business.

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Duration and Termination

Unless terminated earlier as described below, the Investment Advisory and Management Agreement will continue in effect from year to year if approved annually by our Board or by the affirmative vote of the holders of a majority of our outstanding voting securities, and, in either case, if also approved by a majority of our directors who are not “interested persons.” The Investment Advisory and Management Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, by MC Advisors and may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. The holders of a majority of our outstanding voting securities may also terminate the Investment Advisory and Management Agreement without penalty. See “Risk Factors — Risks Relating to Our Business and Structure — We depend upon MC Advisors’ senior management for our success, and upon its access to the investment professionals of Monroe Capital and its affiliates” and “Risk Factors — Risks Relating to Our Business and Structure — MC Advisors can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.”

Indemnification

The Investment Advisory and Management Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, MC Advisors and its affiliates’ respective officers, directors, members, managers, stockholders and employees are entitled to indemnification from us from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory and Management Agreement, except where attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person’s duties under the Investment Advisory and Management Agreement.

Administration Agreement

Pursuant to an Administration Agreement, MC Management furnishes us with office facilities and equipment and provides us clerical, bookkeeping and record keeping and other administrative services at such facilities. Under the Administration Agreement, MC Management performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. MC Management also assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns, prints and disseminates reports to our stockholders and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Under the Administration Agreement, MC Management also provides managerial assistance on our behalf to those portfolio companies that have accepted our offer to provide such assistance.

Payments under the Administration Agreement are equal to an amount based upon our allocable portion (subject to the review and approval of our Board) of MC Management’s overhead in performing its obligations under the Administration Agreement, including rent and our allocable portion of the cost of our officers, including our chief financial officer and chief compliance officer and their respective staffs. Unless terminated earlier as described below, the Administration Agreement will continue in effect from year to year with the approval of our Board. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.

MC Management may retain third parties to assist in providing administrative services to us. To the extent that MC Management outsources any of its functions, we pay the fees associated with such functions on a direct basis without profit to MC Management. We reimburse MC Management for the allocable portion (subject to the review and approval of our Board) of MC Management’s overhead and other expenses incurred by it in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the cost of our chief financial officer and chief compliance officer and their respective staffs. For the years ended December 31, 2021, 2020 and 2019, we incurred $3.4 million, $3.3 million and $3.5 million in administrative expenses (included within Professional fees, Administrative service fees and General and administrative expenses on the consolidated statements of operations) under the Administration Agreement, respectively, of which $1.4 million, $1.3 million and $1.3 million, respectively, was related to MC Management overhead and salary allocation and paid directly to MC Management.

Indemnification

The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, MC Management and its affiliates’ respective officers, directors, members, managers, stockholders and employees are entitled to indemnification from us from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Administration Agreement, except where attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person’s duties under the Administration Agreement.

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License Agreement

We have entered into a license agreement with Monroe Capital under which Monroe Capital has agreed to grant us a non-exclusive, royalty-free license to use the name “Monroe Capital.” Under this agreement, we have a right to use the “Monroe Capital” name for so long as MC Advisors or one of its affiliates remains our investment advisor. Other than with respect to this limited license, we have no legal right to the “Monroe Capital” name. This license agreement will remain in effect for so long as the Investment Advisory and Management Agreement with MC Advisors is in effect.

Staffing Agreement

We do not have any internal employees. We depend on the diligence, skill and network of business contacts of the senior investment professionals of MC Advisors to achieve our investment objective. MC Advisors is an affiliate of Monroe Capital and depends upon access to the investment professionals and other resources of Monroe Capital and Monroe Capital’s affiliates to fulfill its obligations to us under the Investment Advisory and Management Agreement. MC Advisors also depends upon Monroe Capital to obtain access to deal flow generated by the professionals of Monroe Capital and its affiliates. Under the Staffing Agreement, MC Management provides MC Advisors with the resources necessary to fulfill these obligations. The Staffing Agreement provides that MC Management will make available to MC Advisors experienced investment professionals and access to the senior investment personnel of Monroe Capital for purposes of evaluating, negotiating, structuring, closing and monitoring our investments. The Staffing Agreement also includes a commitment that the members of MC Advisors’ investment committee serve in such capacity. The Staffing Agreement remains in effect until terminated and may be terminated by either party without penalty upon 60 days’ written notice to the other party. Services under the Staffing Agreement are provided to MC Advisors on a direct cost reimbursement basis, and such fees are not our obligation.

Board Approval of the Investment Advisory and Management Agreement and Staffing Agreement

At a meeting of our Board held on July 29, 2021, our Board, including directors who are not “interested persons” as defined in the 1940 Act, voted unanimously to approve and continue the Investment Advisory and Management Agreement for another annual period in accordance with the requirements of the 1940 Act. The approval included consideration and approval of the specific individuals provided through the Staffing Agreement between MC Advisors and MC Management that comprise our investment committee. In reaching a decision to approve and continue the investment advisory agreement and investment committee, the Board reviewed a significant amount of information and considered, among other things:

• Nature, Quality and Extent of Services. Our Board reviewed information about the services to be performed and the personnel performing such services under the Investment Advisory Agreement and Staffing Agreement, including the specific approval of the members of the investment committee to be provided pursuant to the Staffing Agreement. Our Board considered the nature, extent and quality of the investment selection process employed by MC Advisors and the experience of the members of the investment committee. Our Board concluded that the services to be provided under the Investment Advisory Agreement are consistent with those of comparable BDCs described in the available market data.

• The reasonableness of the fees paid to MC Advisors. Our Board considered comparative data based on publicly available information on other BDCs with respect to services rendered and the advisory fees (including the management fees and incentive fees) of other BDCs as well as our projected operating expenses and expense ratio compared to other BDCs. Our Board also considered the profitability of MC Advisors. Based upon its review, our Board concluded that the fees to be paid under the Investment Advisory Agreement are reasonable compared to other BDCs.

• Investment Performance. Our Board reviewed our investment performance as well as comparative data with respect to the investment performance of other externally managed BDCs. Our Board concluded that MC Advisors was delivering results consistent with our investment objective over the most recently completed period.

• Economies of Scale. Our Board addressed the potential for MC Advisors to realize economies of scale in managing our assets, and determined that at this time they did not expect economies of scale to be realized by MC Advisors.

Based on the information reviewed and the discussions detailed above, our Board, including all of the directors who are not “interested persons” as defined in the 1940 Act, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and approved the investment advisory agreement and its continuation as being in the best interests of our stockholders. MC Advisors bears all expenses related to the services and personnel provided pursuant to the Staffing Agreement.

VALUATION PROCESS AND DETERMINATION OF NET ASSET VALUE

The net asset value per share of our outstanding shares of common stock is determined quarterly by dividing the value of total assets minus liabilities by the total number of shares outstanding. We calculate the value of our total assets in accordance with the following procedures.

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Investments for which market quotations are readily available and within a recent date are valued at such market quotations. We may also obtain indicative prices with respect to certain of our investments from pricing services or brokers or dealers in order to value such investments. We expect that there will not be a readily available market value within a recent date for many of our investments; those debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by our Board using a documented valuation policy and a consistently applied valuation process.

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

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

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

• our Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of investments for which market quotations are not readily available. We will consult with independent valuation firm(s) relative to each portfolio company at least once in every calendar year, but the independent appraisals are generally received quarterly for each investment;

• to the extent an independent valuation firm is not engaged to conduct an investment appraisal on an investment for which market quotations are not readily available, the investment will be valued by the MC Advisors investment professional responsible for the credit monitoring;

• preliminary valuation conclusions are then documented and discussed with the investment committee of MC Advisors;

• the audit committee of our Board reviews the preliminary valuations of MC Advisors and of the independent valuation firm(s) and MC Advisors adjusts or further supplements the valuation recommendations to reflect any comments provided by the audit committee; and

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

The valuation technique utilized in the determination of fair value is affected by a wide variety of factors including the type of investment, whether the investment is new and not yet established in the marketplace, and other characteristics particular to the transaction. Our Board generally uses the income approach to determine fair value for loans where market quotations are not readily available, as long as it is appropriate. If there is deterioration in credit quality or a debt investment is in workout status, we may consider other factors in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. This liquidation analysis may also include probability weighting of alternative outcomes. We generally consider our debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance and the loan is otherwise not deemed to be impaired. In determining the fair value of the performing debt, we consider fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions and other relevant factors, both qualitative and quantitative. In the event that a debt instrument is not performing, as defined above, we will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the debt instrument. See Note 4 to the accompanying consolidated financial statements for additional information on the determination of fair value.

We report our investments at fair value with changes in value reported through our consolidated statements of operations under the caption “unrealized gain (loss).” In determining fair value, we are required to assume that portfolio investments are to be sold in the principal market to market participants, or in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. The market in which we can exit portfolio investments with the greatest volume and level activity is considered our principal market.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

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COMPETITION

We compete with a number of specialty and commercial finance companies to make the types of investments that we make in middle-market companies, including BDCs, traditional commercial banks, private investment funds, regional banking institutions, small business investment companies, investment banks and insurance companies. Additionally, with increased competition for investment opportunities, alternative investment vehicles such as hedge funds may invest in areas they have not traditionally invested in or from which they had withdrawn during the recent economic downturn, including investing in middle-market companies. As a result, competition for investments in lower middle-market companies has intensified, and we expect that trend to continue. Many of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us.

We use the expertise of the investment professionals of MC Advisors to assess investment risks and determine appropriate pricing and terms for investments in our loan portfolio. In addition, we expect that the relationships of the senior professionals of MC Advisors will enable us to learn about, and compete effectively for, investment opportunities with attractive middle-market companies, independently or in conjunction with the private equity clients of MC Advisors. For additional information concerning the competitive risks we face, see “Risk Factors — Risks Relating to Our Business and Structure — We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.”

INFORMATION TECHNOLOGY

We utilize a number of industry standard practices and software packages to secure, protect, manage and back up all corporate data. We outsource portions of our information technology function to efficiently monitor and maintain our systems. Also, we conduct a daily backup of our systems to ensure the security and stability of the network.

ELECTION TO BE TAXED AS A RIC

As a BDC, we have elected to be treated as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we timely distribute to our stockholders as dividends. To continue to qualify as a RIC, we must, among other things, meet certain source-of income and asset diversification requirements (as described below). In addition, we must distribute to our stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses (the “Annual Distribution Requirement”). Generally, we would expect these distributions to be taxable to our stockholders as ordinary income and not to be eligible for the reduced maximum tax rates associated with qualified dividends.

TAXATION AS A RIC

If we continue to:

• qualify as a RIC; and

• satisfy the Annual Distribution Requirement;

then we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gains, defined as net long-term capital gains in excess of net short-term capital losses we distribute to our stockholders.

We will be subject to U.S. federal income tax at the regular corporate rates on any net income or net capital gain not distributed (or deemed distributed) to our stockholders.

We will be subject to a 4% nondeductible federal excise tax on our undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (a) 98% of our ordinary income for each calendar year, (b) 98.2% of our capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (c) any income realized, but not distributed, in the preceding years (the “Excise Tax Avoidance Requirement”). For this purpose, however, any ordinary income or capital gain net income retained by us that is subject to corporate income tax for the tax year ending in that calendar year will be considered to have been distributed by year end. For the years ended December 31, 2021, 2020 and 2019, we recorded $0.3 million, $0.4 million and $10 thousand on our consolidated statements of operations for U.S. federal excise taxes.

In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:

• meet the Annual Distribution Requirement;

• qualify to be treated as a BDC under the 1940 Act at all times during each taxable year;

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• derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, or other income derived with respect to our business of investing in such stock or securities, and net income derived from interests in “qualified publicly traded partnerships” (partnerships that are traded on an established securities market or tradable on a secondary market, other than partnerships that derive 90% of their income from interest, dividends and other permitted RIC income) (the “90% Income Test”); and

• diversify our holdings so that at the end of each quarter of the taxable year:

• at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities of a “qualified publicly traded partnership”); and

• no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the securities of one or more qualified publicly traded partnerships (the “Diversification Tests”).

To the extent that we invest in entities treated as partnerships for U.S. federal income tax purposes (other than a “qualified publicly traded partnership”), we generally must include the items of gross income derived by the partnerships for purposes of the 90% Income Test, and the income that is derived from a partnership (other than a “qualified publicly traded partnership”) will be treated as qualifying income for purposes of the 90% Income Test only to the extent that such income is attributable to items of income of the partnership which would be qualifying income if realized by us directly. In addition, we generally must take into account our proportionate share of the assets held by partnerships (other than a “qualified publicly traded partnership”) in which we are a partner for purposes of the Diversification Tests.

In order to prevent our receipt of income that would not satisfy the 90% Income Test, we have established and may establish additional special purpose corporations to hold assets from which we do not anticipate earning dividend, interest or other qualifying income under the 90% Income Test. Any investments held through a special purpose corporation would generally be subject to U.S. federal income taxes and other taxes, and therefore would be expected to achieve a reduced after-tax yield.

We may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, for debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or issued with warrants), we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in our income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income will continue to constitute original issue discount or other income required to be included in taxable income prior to receipt of cash.

Because any original issue discount or other amounts accrued are included in our investment company taxable income in the year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received the corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement. We may have to sell some of our investments at times and/or at prices we do not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.

Gain or loss realized from warrants as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.

Our investments in non-U.S. securities may be subject to non-U.S. income, withholding and other taxes. In that case, our yield on those securities would be decreased. Stockholders will generally not be entitled to claim a credit or deduction with respect to non-U.S. taxes paid by us.

If we purchase shares in a “passive foreign investment company” (a “PFIC”), we may be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend by us to our stockholders. Additional charges in the nature of interest may be imposed on us in respect of deferred taxes arising from such distributions or gains. If we invest in a PFIC and elect to treat the PFIC as a “qualified electing fund” (a “QEF”), under the Code, in lieu of the foregoing requirements, we will be required to include in income each year a portion of the ordinary earnings and net capital gain of the QEF, even if such income is not distributed to us. Alternatively, we can elect to mark-to-market at the end of each taxable year our shares in a PFIC; in that case, we will recognize as ordinary income any increase in the value of such shares and as ordinary loss any decrease in such value to the extent it does not exceed prior increases included in income. Under either election, we may be required to recognize in a year income in excess of our distributions from PFICs and our proceeds from dispositions of PFIC stock during that year, and such income will be taken into account for purposes of the Annual Distribution Requirement and the 4% federal excise tax.

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Under Section 988 of the Code, gain or loss attributable to fluctuations in exchange rates between the time we accrue income, expenses, or other liabilities denominated in a foreign currency and the time we actually collect such income or pay such expenses or liabilities is generally treated as ordinary income or loss. Similarly, gain or loss on foreign currency forward contracts and the disposition of debt denominated in a foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.

Through our use of leverage, we are subject to certain financial covenants that could limit our ability to make distributions to our stockholders. In addition, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met. If we are unable to make sufficient distributions to satisfy the Annual Distribution Requirement, we may fail to qualify as a RIC.

Although we do not expect to do so, we are authorized (subject to our financial covenants and 1940 Act asset coverage tests) to borrow funds and to sell assets in order to satisfy the Annual Distribution Requirement and to eliminate or minimize our liability for U.S. federal income tax and the 4% federal excise tax. However, our ability to dispose of assets to make distributions may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or to avoid the 4% federal excise tax, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

If we fail to satisfy the Annual Distribution Requirement or otherwise fail to qualify as a RIC in any taxable year, and certain relief provisions are not available, we will be subject to tax in that year on all of our taxable income, regardless of whether we make any distributions to our stockholders. In that case, all of such income will be subject to corporate-level U.S. federal income tax, reducing the amount available to be distributed to our stockholders. See “Failure to Qualify as a RIC” below for more information.

As a RIC, we are not allowed to carry forward or carry back a net operating loss for purposes of computing our investment company taxable income in other taxable years. We generally are permitted to carry forward for an indefinite period any capital losses not used to offset capital gains. However, future transactions that we engage in may cause our ability to use any capital loss carry forwards, and unrealized losses once realized, to be limited under Section 382 of the Code.

Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things: (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capital gain and qualified dividend income into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (iv) cause us to recognize income or gain without a corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will not be qualifying income for purposes of the 90% Income Test described above. We will monitor our transactions and may make certain tax decisions in order to mitigate the potential adverse effects of these provisions.

As described above, to the extent that we invest in equity securities of entities that are treated as partnerships for U.S. federal income tax purposes, the effect of such investments for purposes of the 90% Income Test and the Diversification Tests will depend on whether or not the partnership is a “qualified publicly traded partnership” (as defined in the Code). If the partnership is a “qualified publicly traded partnership,” the net income derived from such investments will be qualifying income for purposes of the 90% Income Test and will be “securities” for purposes of the Diversification Tests. If the partnership, however, is not treated as a “qualified publicly traded partnership,” then the consequences of an investment in the partnership will depend upon the amount and type of income and assets of the partnership allocable to us. The income derived from such investments may not be qualifying income for purposes of the 90% Income Test and, therefore, could adversely affect our qualification as a RIC. We intend to monitor our investments in equity securities of entities that are treated as partnerships for U.S. federal income tax purposes to prevent our disqualification as a RIC.

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FAILURE TO QUALIFY AS A RIC

If we fail the 90% Income Test or the Diversification Tests for any taxable year or quarter of such taxable year, we may nevertheless continue to qualify as a RIC for such year if certain relief provisions of the Code apply (which, among other things may require us to pay certain corporate-level federal taxes or to dispose of certain assets). If we are unable to qualify for treatment as a RIC and are unable to cure the failure, we would be subject to U.S. federal income tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to our stockholders, nor would they be required to be made. In the event of such a failure to qualify, distributions, including distributions of net long-term capital gain, would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, our corporate stockholders would be eligible to claim a dividend received deduction with respect to such dividend; our non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. In order to qualify as a RIC, in addition to the other requirements discussed above, we would be required to distribute all of our previously undistributed earnings and profits attributable to any period prior to us becoming a RIC by the end of the first year that we intend to qualify as a RIC. To the extent that we have any net built-in gains in our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) as of the beginning of the first year that we qualify as a RIC, we would be subject to a corporate-level U.S. federal income tax on such built-in gains if and when recognized over the next ten years (or shorter applicable period). Alternatively, we may choose to recognize such built-in gains immediately prior to our qualification as a RIC.

If we have previously qualified as a RIC, but are subsequently unable to qualify for treatment as a RIC, and certain amelioration provisions are not applicable, we would be subject to tax on all of our taxable income (including our net capital gains) at regular corporate rates. We would not be able to deduct distributions to our stockholders, nor would they be required to be made. Distributions, including distributions of net long-term capital gain, would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, our corporate stockholders would be eligible to claim a dividend received deduction with respect to such dividend; our non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S. federal income tax. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. In order to requalify as a RIC, in addition to the other requirements discussed above, we would be required to distribute all of our previously undistributed earnings attributable to the period we failed to qualify as a RIC by the end of the first year that we intend to requalify as a RIC. If we fail to requalify as a RIC for a period greater than two taxable years, we may be subject to regular corporate tax on any net built-in gains with respect to certain of our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized over the next five years.

REGULATION

We are a BDC under the 1940 Act and have elected to be treated as a RIC under the Code. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates (including any investment advisors), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors of a BDC be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities.

We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of our portfolio companies, except that we may enter into hedging transactions to manage the risks associated with interest rate fluctuations. However, we may purchase or otherwise receive warrants to purchase the common stock of our portfolio companies in connection with acquisition financing or other investments. Similarly, in connection with an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances. We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, we generally cannot acquire more than 3% of the total outstanding voting stock of any registered investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest, in the aggregate, more than 10% of the value of our total assets in the securities of more than one investment company. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses. None of these policies are fundamental and may be changed to the extent permitted by law without stockholder approval.

The SBIC license allowed our subsidiary, MRCC SBIC, to obtain leverage by issuing SBA debentures, subject to the issuance of a leverage commitment by the SBA and other customary procedures. On March 1, 2022, MRCC SBIC fully repaid its outstanding SBA debentures and notified the SBA of its intent to surrender its license to operate as a SBIC. SBA debentures are non-recourse, interest only debentures with interest payable semi-annually and a 10-year maturity. The principal amount of SBA debentures is not required to be paid prior to maturity but may be prepaid semi-annually without penalty. The interest rate of SBA debentures is fixed on a semi-annual basis (pooling date) at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, had a superior claim to MRCC SBIC’s assets over our stockholders.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding $19.5 million and have average after tax net income not exceeding $6.5 million for the two most recent fiscal years. In addition, an SBIC must devote 25% of its investment activity to “smaller” concerns as defined by the SBA. A smaller concern is one that has a tangible net worth not exceeding $6.0 million and has average after tax net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility, which depends on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

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On October 2, 2014, we received exemptive relief from the SEC to permit us to exclude the debt of MRCC SBIC guaranteed by the SBA from the asset coverage test under the 1940 Act. The exemptive relief provides us with increased flexibility under the asset coverage test by permitting us to borrow, through MRCC SBIC, more than we would otherwise be able to absent the receipt of this exemptive relief. This provides us with increased investment flexibility but also increases our risks related to leverage. For a discussion of the risks associated with leverage, see “Risk Factors — Risks Relating to Our Business and Structure — Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital” and “Risk Factors — Risks Relating to Our Business and Structure — We maintain a revolving credit facility and use other borrowed funds to make investments or fund our business operations, which exposes us to risks typically associated with leverage and increases the risk of investing in us.”

Prior to surrendering its license, MRCC SBIC was subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and other covenants and limitations on its ability to make distributions to us.

QUALIFYING ASSETS

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “qualifying assets,” unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our business are the following:

(a) Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer that:

• is organized under the laws of, and has its principal place of business in, the United States;

• is not an investment company (other than a small business investment company wholly-owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and

• satisfies either of the following:

• does not have any class of securities listed on a national securities exchange or has any class of securities listed on a national securities exchange subject to a $250 million market capitalization maximum; or

• is controlled by a BDC or a group of companies including a BDC, and such BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result, the BDC has an affiliated person who is a director of the eligible portfolio company.

(b) Securities of any eligible portfolio company which we control.

(c) Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident to such a private transaction, if the issuer is in bankruptcy and subject to reorganization, or, if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

(d) Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity securities of the eligible portfolio company.

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(e) Securities received in exchange for or distributed on or with respect to securities described above, or pursuant to the exercise of warrants or rights relating to such securities.

(f) Cash, cash equivalents, U.S. government securities or high-quality debt securities that mature in one year or less from the date of investment.

The regulations defining qualifying assets may change over time. We may adjust our investment focus as needed to comply with and/or take advantage of any regulatory, legislative, administrative or judicial actions in this area. Investments in the securities of companies domiciled in or with their principal places of business outside of the United States, are not qualifying assets. In accordance with Section 55(a) of the 1940 Act, we cannot invest more than 30% of our assets in non-qualifying assets.

MANAGERIAL ASSISTANCE TO PORTFOLIO COMPANIES

A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, a BDC must either control the issuer of securities or must offer to make available to the issuer of the securities significant managerial assistance. However, when a BDC purchases securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance. Making available managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers, employees or agents offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participation in board and management meetings, consulting with and advising a portfolio company’s officers or other organizational or financial guidance. MC Advisors or its affiliates provide such managerial assistance on our behalf to portfolio companies that request this assistance.

TEMPORARY INVESTMENTS

Pending investments in other types of qualifying assets, as described above, our investments may consist of cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less from the date of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets or temporary investments. We may invest in U.S. Treasury bills or in repurchase agreements, so long as the agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we would not meet the Diversification Tests in order to qualify as a RIC for U.S. federal income tax purposes. Accordingly, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. MC Advisors monitors the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

SENIOR SECURITIES

We are generally permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. We consolidate our financial results with all of our wholly-owned subsidiaries, including MRCC SBIC, for financial reporting purposes and measure our compliance with the leverage test applicable to BDCs under the 1940 Act on a consolidated basis. On October 2, 2014, we received exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiaries from our asset coverage test under the 1940 Act. As such, our ratio of total consolidated assets to outstanding indebtedness may be less than 150%. This provides us with increased investment flexibility but also increases our risks related to leverage. For a discussion of the risks associated with leverage, see “Risk Factors — Risks Relating to Our Business and Structure — Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital” and “Risk Factors — Risks Relating to Our Business and Structure — We maintain a revolving credit facility and use other borrowed funds to make investments or fund our business operations, which exposes us to risks typically associated with leverage and increases the risk of investing in us.”

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CODES OF ETHICS

We and MC Advisors have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements. You may access our code of ethics on our website at www.monroebdc.com. The date and substance of amendments to the code, if any, are noted on the cover page of the code of ethics. In addition, each code of ethics is attached as an exhibit to our registration statement and is available on the EDGAR Database on the SEC’s website at www.sec.gov. You may also obtain copies of each code of ethics, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.

PROXY VOTING POLICIES AND PROCEDURES

We have delegated our proxy voting responsibility to MC Advisors. The proxy voting policies and procedures of MC Advisors are set out below. The guidelines are reviewed periodically by MC Advisors and our directors who are not “interested persons,” and, accordingly, are subject to change. For purposes of these proxy voting policies and procedures described below, “we,” “our” and “us” refer to MC Advisors.

Introduction

As an investment advisor registered under the Advisers Act, we have a fiduciary duty to act solely in the best interests of our clients. As part of this duty, we recognize that we must vote client securities in a timely manner free of conflicts of interest and in the best interests of our clients.

These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

Proxy Policies

We vote proxies relating to our portfolio securities in what we perceive to be the best interest of our clients’ stockholders. We review on a case-by-case basis each proposal submitted to a stockholder vote to determine its effect on the portfolio securities held by our clients. In most cases we will vote in favor of proposals that we believe are likely to increase the value of the portfolio securities held by our clients. Although we will generally vote against proposals that may have a negative effect on our clients’ portfolio securities, we may vote for such a proposal if there exist compelling long-term reasons to do so.

Our proxy voting decisions are made by those senior officers who are responsible for monitoring each of our clients’ investments. To ensure that our vote is not the product of a conflict of interest, we require that (a) anyone involved in the decision-making process disclose to our chief compliance officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote and (b) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties. Where conflicts of interest may be present, we will disclose such conflicts to our client, including those directors who are not interested persons and we may request guidance from such persons on how to vote such proxies for their account.

Proxy Voting Records

You may obtain information about how we voted proxies for Monroe Capital Corporation by making a written request for proxy voting information to: Monroe Capital Corporation, 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606, Attention: Chief Compliance Officer, or by calling Monroe Capital Corporation at (312) 258-8300. The SEC also maintains a website at www.sec.gov that contains such information.

COMPLIANCE POLICIES AND PROCEDURES

We and MC Advisors have adopted and implemented written policies and procedures reasonably designed to prevent violation of federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation. Our chief compliance officer is responsible for administering these policies and procedures.

PRIVACY PRINCIPLES

We are committed to maintaining the privacy of our stockholders and to safeguarding their nonpublic personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.

Generally, we do not receive any nonpublic personal information relating to our stockholders, although certain nonpublic personal information of our stockholders may become available to us. We do not disclose any nonpublic personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third-party administrator).

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We restrict access to nonpublic personal information about our stockholders to employees of MC Management and its affiliates with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the nonpublic personal information of our stockholders.

OTHER

We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to Monroe Capital Corporation or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We and MC Advisors are each required to adopt and implement written policies and procedures reasonably designed to prevent violation of relevant federal securities laws, obtain approval of the Board of these policies and procedures, review these policies and procedures annually for their adequacy and the effectiveness of their implementation and designate a chief compliance officer to be responsible for administering the policies and procedures.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our Board who are not interested persons and, in some cases, prior approval by the SEC. The SEC has interpreted the BDC prohibition on transactions with affiliates to prohibit “joint transactions” among entities that share a common investment advisor. The staff of the SEC has granted no-action relief permitting purchases of a single class of privately placed securities provided that the advisor negotiates no term other than price and certain other conditions are met. Any co-investment would be made subject to compliance with existing regulatory guidance, applicable regulations and our allocation procedures. If opportunities arise that would otherwise be appropriate for us and for another fund advised by MC Advisors to invest in different securities of the same issuer, MC Advisors will need to decide which fund will proceed with the investment. Moreover, except in certain circumstances, we are unable to invest in any issuer in which another fund advised by MC Advisors has previously invested.

On October 15, 2014, we, along with MC Advisors and certain other funds and accounts sponsored or managed by MC Advisors and its affiliates, received exemptive relief from the SEC that permits us greater flexibility to negotiate the terms of co-investments if our Board determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by MC Advisors or its affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. We believe that co-investment by us and accounts sponsored or managed by MC Advisors and its affiliates may afford us additional investment opportunities and the ability to achieve greater diversification.

POLICIES AND PROCEDURES FOR MANAGING CONFLICTS

As of December 31, 2021, affiliates of MC Advisors manage other assets in 11 closed-end funds, two small business investment companies and 25 private funds that also have an investment strategy focused primarily on senior, unitranche and junior secured debt and to a lesser extent, unsecured subordinated debt to lower middle-market companies. In addition, MC Advisors manages our wholly-owned SBIC subsidiary, MRCC SBIC, as the manager of MRCC SBIC’s general partner, a private BDC, Monroe Capital Income Plus Corporation, and it may manage other entities in the future with an investment focus similar to ours. To the extent that we compete with entities managed by MC Advisors or any of its affiliates for a particular investment opportunity, MC Advisors will allocate investment opportunities across the entities for which such opportunities are appropriate, consistent with (a) its internal conflict of interest and allocation policies, (b) the requirements of the Advisers Act and (c) certain restrictions under the 1940 Act and rules thereunder regarding co-investments with affiliates. MC Advisors’ allocation policies are intended to ensure that we may generally share equitably with other investment funds or other investment vehicles managed by MC Advisors or its affiliates in investment opportunities, particularly those involving a security with limited supply or involving differing classes of securities of the same issuer which may be suitable for us and such other investment funds or other investment vehicles.

MC Advisors and/or its affiliates may in the future sponsor or manage investment funds, accounts, or other investment vehicles with similar or overlapping investment strategies and have put in place a conflict-resolution policy that addresses the co-investment restrictions set forth under the 1940 Act. MC Advisors will seek to ensure an equitable allocation of investment opportunities when we are able to invest alongside other accounts managed by MC Advisors and its affiliates. We received exemptive relief from the SEC on October 15, 2014 that permits greater flexibility relating to co-investments, subject to certain conditions. When we invest alongside such other accounts as permitted under the 1940 Act, pursuant to SEC staff interpretation, and pursuant to our exemptive relief from the SEC that would permit greater flexibility relating to co-investments, such investments will be made consistent with such relief and MC Advisors’ allocation policy. Under this allocation policy, a fixed percentage of each opportunity, which may vary based on asset class and from time to time, will be offered to us and similar eligible accounts, as periodically determined by MC Advisors and approved by our Board, including a majority of our independent directors. The allocation policy provides that allocations among us and other accounts will generally be made pro rata based on each account’s capital available for investment, as determined, in our case, by our Board, including a majority of our independent directors. It is our policy to base our determinations as to the amount of capital available for investment on such factors as the amount of cash on hand, existing commitments and reserves, if any, the targeted leverage level, the targeted asset mix and diversification requirements and other investment policies and restrictions set by our Board, or imposed by applicable laws, rules, regulations or interpretations. We expect that these determinations will be made similarly for other accounts. In situations where co-investment with other entities sponsored or managed by MC Advisors or its affiliates is not permitted or appropriate, such as when there is an opportunity to invest in different securities of the same issuer, MC Advisors will need to decide whether we or such other entity or entities will proceed with the investment. MC Advisors will make these determinations based on its policies and procedures which will generally require that such opportunities be offered to eligible accounts on a basis that is fair and equitable over time.

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AVAILABLE INFORMATION

We intend to make this Annual Report on Form 10-K, as well as our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, publicly available free of charge as soon as reasonably practicable following our filing of such reports with the SEC. We maintain a website at www.monroebdc.com and make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available, free of charge, on or through our website. Information contained on our website is not incorporated into this report, and you should not consider information on our website to be part of this report. You may also obtain such information by contacting us in writing at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606, Attention: Investor Relations. The SEC maintains a website that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov.

ITEM 1A. RISK FACTORS

Investing in our securities involves a number of significant risks. The risks set out below are not the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occurs, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Relating to Our Business and Structure

The COVID-19 pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impact on our portfolio companies and our business and operations.

In late 2019 and early 2020, COVID-19 emerged in China and spread rapidly to across the world, including to the United States. This outbreak has led and for an unknown period of time will continue to lead to disruptions in local, regional, national and global markets and economies affected thereby. With respect to the U.S. credit markets (in particular for middle market loans), this outbreak has resulted in, and until fully resolved is likely to continue to result in, the following among other things: (i) government imposition of various forms of “stay at home” orders and the closing of “non-essential” businesses, resulting in significant disruption to the businesses of many middle-market loan borrowers including supply chains, demand and practical aspects of their operations, as well as in lay-offs of employees, and, while these effects are hoped to be temporary, some effects could be persistent or even permanent; (ii) increased draws by borrowers on revolving lines of credit; (iii) increased requests by borrowers for amendments and waivers of their credit agreements to avoid default, increased defaults by such borrowers and/or increased difficulty in obtaining refinancing at the maturity dates of their loans; (iv) volatility and disruption of these markets including greater volatility in pricing and spreads and difficulty in valuing loans during periods of increased volatility, and liquidity issues; and (v) rapidly evolving proposals and/or actions by state and federal governments to address problems being experienced by the markets and by businesses and the economy in general that will not necessarily adequately address the problems facing the loan market and middle market businesses. This outbreak is having, and any future outbreaks could have, an adverse impact on our portfolio companies and us and on the markets and the economy in general, and that impact could be material. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. It is impossible to determine the scope of the COVID-19 pandemic, or any future outbreaks, how long any such outbreak, market disruption or uncertainties may last, the effect any governmental actions will have or the full potential impact on us, MC Advisors and our portfolio companies.

The COVID-19 pandemic (including the preventative measures taken in response thereto) has to date (i) created significant business disruption issues for certain of our portfolio companies, and (ii) adversely impacted the value and performance of certain of our portfolio companies. The COVID-19 pandemic is continuing as of the filing date of this Annual Report, and its extended duration may have further adverse impacts on our portfolio companies after December 31, 2021, including for the reasons described below. As a result of this disruption and the pressures on their liquidity, certain of our portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by us, subject to availability under the terms of such loans.

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The effects described above on our portfolio companies have, for certain of our portfolio companies to date, impacted their ability to make payments on their loans on a timely basis and in some cases have required us to amend certain terms, including payment terms. In addition, an extended duration of the COVID-19 pandemic may impact the ability of our portfolio companies to continue making their loan payments on a timely basis or meeting their loan covenants. The inability of portfolio companies to make timely payments or meet loan covenants may in the future require us to undertake similar amendment actions with respect to other of our investments or to restructure our investments. The amendment or restructuring of our investments may include the need for us to make additional investments in our portfolio companies (including debt or equity investments) beyond any existing commitments, exchange debt for equity, or change the payment terms of our investments to permit a portfolio company to pay a portion of its interest through payment-in-kind, which would defer the cash collection of such interest and add it to the principal balance, which would generally be due upon repayment of the outstanding principal.

As a result of the COVID-19 pandemic, collateral for our loans may decline in value, which could cause loan losses to increase and the net worth and liquidity of loan guarantors could decline, impairing their ability to honor commitments to us. An increase in loan delinquencies and non-accruals or a decrease in loan collateral and guarantor net worth could result in increased costs and reduced income, which would have a material adverse effect on our business, financial condition or results of operations.

The COVID-19 pandemic has adversely impacted the fair value of certain of our investments as of December 31, 2021 and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments. Our Board approved the fair value of our investment portfolio as of December 31, 2021 and these valuations were determined in good faith in accordance with our valuation policy based on information known or knowable as of the valuation date. As a result, the long term impacts of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments and the fair value of our portfolio investments may be further negatively impacted after December 31, 2021 by circumstances and events that are not yet known, including the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition, write downs in the value of our investments have reduced, and any additional write downs may further reduce, our net asset value (and, as a result, our asset coverage calculation). Accordingly, we may continue to incur additional net unrealized losses or may incur realized losses after December 31, 2021, which could have a material adverse effect on our business, financial condition and results of operations.

The volatility and disruption to the global economy from the COVID-19 pandemic has affected, and may continue to affect, the pace of our investment activity, which may have a material adverse impact on our results of operations. Such volatility and disruption have also led to the increased credit spreads in the private debt capital markets.

Further, from an operational perspective, MC Advisors’ investment professionals are currently partially working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. In addition, we are highly dependent on third party service providers for certain communication and information systems. As a result, we rely upon the successful implementation and execution of the business continuity planning of such providers in the current environment. If one or more of these third parties to whom we outsource certain critical business activities experience operational failures as a result of the impacts from the spread of COVID-19, or claim that they cannot perform due to a force majeure, it may have a material adverse effect on our business, financial condition, results of operations, liquidity and cash flows.

We are currently operating in a period of capital markets disruption and economic uncertainty.

The U.S. capital markets have experienced extreme volatility and disruption following the spread of COVID-19 in the United States that began in December 2019. The global impact of the outbreak is rapidly evolving, and many countries have reacted by instituting quarantines, prohibitions on travel and the closure of offices, businesses, schools, retail stores and other public venues. Businesses have also implemented similar precautionary measures. Such measures, as well as the general uncertainty surrounding the dangers and impact of COVID-19, have created significant disruption in supply chains and economic activity. The impact of the COVID-19 pandemic has led to significant volatility in the global public equity markets and it is uncertain how long this volatility will continue. As the COVID-19 pandemic continues, the potential impacts, including a global, regional or other economic recession, remain uncertain and difficult to assess. Some economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a long-term world-wide economic downturn.

Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments.

Additionally, the disruption in economic activity caused by the COVID-19 pandemic has had, and may continue to have, a negative effect on the potential for liquidity events involving our investments. The illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes. An inability to raise or access capital, and any required sale of all or a portion of our investments as a result, could have a material adverse effect on our business, financial condition or results of operations.

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We depend upon MC Advisors’ senior management for our success, and upon its access to the investment professionals of Monroe Capital and its affiliates.

We do not have any internal management capacity or employees. We depend on the investment expertise, skill and network of business contacts of the senior investment professionals of MC Advisors, who evaluate, negotiate, structure, execute, monitor and service our investments in accordance with the terms of the Investment Advisory and Management Agreement. Our success depends to a significant extent on the continued service and coordination of the senior investment professionals of MC Advisors, particularly Messrs. Koenig, Peck, Egan and VanDerMeid, who comprise the MC Advisors investment committee. These individuals may have other demands on their time now and in the future, and we cannot assure you that they will continue to be actively involved in our management. Each of these individuals is an employee of MC Management and is not subject to an employment contract. The departure of any of these individuals or competing demands on their time in the future could have a material adverse effect on our ability to achieve our investment objective.

MC Advisors evaluates, negotiates, structures, closes and monitors our investments in accordance with the terms of the Investment Advisory and Management Agreement. We can offer no assurance, however, that MC Advisors’ senior investment professionals will continue to provide investment advice to us. If these individuals do not maintain their existing relationships with Monroe Capital and its affiliates and do not develop new relationships with other sources of investment opportunities, we may not be able to grow our investment portfolio or achieve our investment objective. In addition, individuals with whom Monroe Capital’s senior investment professionals have relationships are not obligated to provide us with investment opportunities. Therefore, we can offer no assurance that such relationships will generate investment opportunities for us.

MC Advisors, an affiliate of Monroe Capital, provides us with access to Monroe Capital’s investment professionals. MC Advisors also depends upon Monroe Capital to obtain access to deal flow generated by the investment professionals of Monroe Capital and its affiliates. The Staffing Agreement provides that MC Management will make available to MC Advisors experienced investment professionals and access to the senior investment personnel of Monroe Capital for purposes of evaluating, negotiating, structuring, closing and monitoring our investments. We are not a party to this Staffing Agreement and cannot assure you that MC Management will continue to fulfill its obligations under the agreement. Furthermore, the Staffing Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. If MC Management fails to perform or terminates the agreement, we cannot assure you that MC Advisors will enforce the Staffing Agreement or that such agreement will not be terminated by either party or that we will continue to have access to the investment professionals of Monroe Capital and its affiliates or their information and deal flow.

The investment committee that oversees our investment activities is provided by MC Advisors under the Investment Advisory and Management Agreement. The loss of any member of MC Advisors’ investment committee or of other Monroe Capital senior investment professionals would limit our ability to achieve our investment objective and operate as we anticipate. This could have a material adverse effect on our financial condition and results of operations.

Our business model depends to a significant extent upon strong referral relationships with financial institutions, sponsors and investment professionals. Any inability of MC Advisors to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.

We depend upon the senior investment professionals of MC Advisors to maintain their relationships with financial institutions, sponsors and investment professionals, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities. If the senior investment professionals of MC Advisors fail to maintain such relationships, or to develop new relationships with other sources of investment opportunities, we will not be able to grow our investment portfolio. In addition, individuals with whom the senior investment professionals of MC Advisors have relationships are not obligated to provide us with investment opportunities, and, therefore, we can offer no assurance that these relationships will generate investment opportunities for us in the future.

Our financial condition and results of operations depend on our ability to manage our business effectively.

Our ability to achieve our investment objective and grow depends on our ability to manage our business. This depends, in turn, on MC Advisors’ ability to identify, invest in and monitor companies that meet our investment criteria. The achievement of our investment objectives depends upon MC Advisors’ execution of our investment process, its ability to provide competent, attentive and efficient services to us and, to a lesser extent, our access to financing on acceptable terms. MC Advisors has substantial responsibilities under the Investment Advisory and Management Agreement. The senior origination professionals and other personnel of MC Advisors and its affiliates may be called upon to provide managerial assistance to our portfolio companies. These activities may distract them or slow our rate of investment. Any failure to manage our business and our future growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects. Our results of operations depend on many factors, including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial markets and economic conditions. Furthermore, if we cannot successfully operate our business or implement our investment policies and strategies, it could negatively impact our ability to pay dividends or other distributions and you may lose all or part of your investment.

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There may be conflicts related to obligations that MC Advisors’ senior investment professionals and members of its investment committee have to other clients.

The senior investment professionals and members of the investment committee of MC Advisors serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds, accounts or other investment vehicles sponsored or managed by MC Advisors or its affiliates. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interests or in the best interest of our stockholders. For example, Messrs. Koenig, Peck, Egan and VanDerMeid have and will continue to have management responsibilities for other investment funds, accounts or other investment vehicles sponsored or managed by affiliates of MC Advisors. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best interests of us or our stockholders. MC Advisors seeks to allocate investment opportunities among eligible accounts in a manner that is fair and equitable over time and consistent with its allocation policy.

MC Advisors manages other assets in a private BDC, and affiliates of MC Advisors manage other assets in 11 closed-end funds, two small business investment companies and 25 private funds that also have an investment strategy focused primarily on senior, unitranche and junior secured debt and, to a lesser extent, unsecured subordinated debt to lower middle-market companies. Except for the private BDC, none of these funds are registered with the SEC. In addition, MC Advisors and/or its affiliates may manage other entities in the future with an investment strategy that has the same or similar focus as ours.

Monroe Capital and its affiliates seek to allocate investment opportunities among the participating funds, including us, in proportion to the relative amounts of capital available for new investments, taking into account such factors as Monroe Capital may determine appropriate, including investment objectives, legal or regulatory restrictions, current holdings, availability of capital for investment, immediately available cash, the size of investments generally, risk-return considerations, relative exposure to market trends, maintenance of targeted leverage level, targeted asset mix, target investment return, diversification requirements, strategic objectives, specific liquidity requirements, tax consequences, limitations and restrictions on a fund’s portfolio that are imposed by such fund’s governing board or documents, and other considerations or factors that Monroe Capital deems necessary or appropriate in light of the circumstances at such time (collectively, the “Allocation Criteria”). We expect that Monroe Capital will follow the Allocation Criteria with respect to all of its funds under management, including us.

In situations where co-investment with other entities sponsored or managed by MC Advisors or its affiliates is not permitted or appropriate, such as when there is an opportunity to invest in securities of the same issuer that have different priorities or liens, MC Advisors will need to decide whether we or such other entity or entities will proceed with the investment. MC Advisors will make these determinations based on its policies and procedures which require that such opportunities be offered to eligible accounts on a basis that is fair and equitable over time. However, there can be no assurance that we will be able to participate in all investment opportunities that are suitable to us.

MC Advisors or its investment committee may, from time to time, possess material nonpublic information, limiting our investment discretion.

The managing members and the senior origination professionals of MC Advisors and the senior professionals and members of MC Advisors’ investment committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities of which are purchased or sold on our behalf. In the event that material nonpublic information is obtained with respect to such companies, or we become subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have a material adverse effect on us.

Our management and incentive fee structure may create incentives for MC Advisors that are not fully aligned with the interests of our stockholders.

In the course of our investing activities, we pay management and incentive fees to MC Advisors. Management fees are based on our total assets (which include assets purchased with borrowed amounts but exclude cash and cash equivalents). As a result, investors in our common stock invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through direct investments. Because these fees are based on our total assets, including assets purchased with borrowed amounts but excluding cash and cash equivalents, MC Advisors benefits when we incur debt or otherwise use leverage. This fee structure may encourage MC Advisors to cause us to borrow money to finance additional investments or to maintain leverage when it would otherwise be appropriate to pay off our indebtedness. Under certain circumstances, the use of borrowed money may increase the likelihood of default, which would disfavor our stockholders. Our Board is charged with protecting our interests by monitoring how MC Advisors addresses these and other conflicts of interest associated with its management services and compensation. While our Board is not expected to review or approve each investment, our independent directors periodically review MC Advisors’ services and fees as well as its portfolio management decisions and portfolio performance. In connection with these reviews, our independent directors consider whether our fees and expenses (including those related to leverage) remain appropriate. As a result of this arrangement, MC Advisors or its affiliates may from time to time have interests that differ from those of our stockholders, giving rise to a conflict.

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The part of the incentive fee payable to MC Advisors that relates to our net investment income is computed and paid on income that may include interest income that has been accrued but not yet received in cash. This fee structure may be considered to involve a conflict of interest for MC Advisors to the extent that it may encourage MC Advisors to favor debt financings that provide for deferred interest, rather than current cash payments of interest. MC Advisors may have an incentive to invest in PIK interest securities in circumstances where it would not have done so but for the opportunity to continue to earn the incentive fee even when the issuers of the deferred interest securities would not be able to make actual cash payments to us on such securities. This risk could be increased because MC Advisors is not obligated to reimburse us for any incentive fees received even if we subsequently incur losses or never receive in cash the deferred income that was previously accrued. In addition, the part of the incentive fee payable to MC Advisors that relates to our net investment income generally does not include any realized capital gains or losses or unrealized capital gains or losses. However, part one incentive fees are subject to Incentive Fee Limitation as described in Note 6 to the accompanying consolidated financial statements. Any net investment income incentive fee would not be subject to repayment.

Our incentive fee may induce MC Advisors to make certain investments, including speculative investments.

MC Advisors receives an incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive fee based on income, there is no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result, MC Advisors may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

The Investment Advisory and Management Agreement with MC Advisors and the Administration Agreement with MC Management were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third-party.

We negotiated the Investment Advisory and Management Agreement and the Administration Agreement with related parties. Consequently, their terms, including fees payable to MC Advisors, may not be as favorable to us as if they had been negotiated with an unaffiliated third-party. In addition, we may choose not to enforce, or to enforce less vigorously, our rights and remedies under these agreements because of our desire to maintain our ongoing relationship with MC Advisors and MC Management. Any such decision, however, would breach our fiduciary obligations to our stockholders.

Our ability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us.

We are prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our independent directors and, in some cases, of the SEC. Any person that owns, directly or indirectly, five percent or more of our outstanding voting securities is our affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any security from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company, without prior approval of our independent directors and, in some cases, of the SEC. We are prohibited from buying or selling any security from or to any person who owns more than 25% of our voting securities or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. As a result of these restrictions, we may be prohibited from buying or selling any security (other than any security of which we are the issuer) from or to any portfolio company of a private equity fund managed by MC Advisors or its affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.

We may, however, co-invest with MC Advisors and its affiliates’ other clients in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations. For example, we may co-invest with such accounts consistent with guidance promulgated by the SEC staff permitting us and such other accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that MC Advisors, acting on our behalf and on behalf of other clients, negotiates no term other than price. We may also co-invest with MC Advisors’ affiliates’ other clients as otherwise permissible under regulatory guidance, applicable regulations, exemptive relief granted to us by the SEC on October 15, 2014 and MC Advisors’ allocation policy, which the investment committee of MC Advisors maintains in writing. The allocation policy further provides that allocations among us and these other funds are generally made in proportion to the relative amounts of capital available for new investments taking into account the Allocation Criteria. We expect that Monroe Capital will follow the Allocation Criteria with respect to all of its funds under management, including us. However, we can offer no assurance that investment opportunities will be allocated to us fairly or equitably in the short-term or over time.

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In situations where co-investment with other entities sponsored or managed by MC Advisors or its affiliates is not permitted or appropriate, such as when there is an opportunity to invest in securities of the same issuer that have different priorities or liens, MC Advisors will need to decide whether we or such other entity or entities will proceed with the investment. MC Advisors will make these determinations based on its policies and procedures which require that such opportunities be offered to eligible accounts on a basis that is fair and equitable over time. Moreover, except in certain circumstances, we are unable to invest in any issuer in which a fund managed by MC Advisors or its affiliates has previously invested. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of the majority of the members of our Board who are not interested persons and, in some cases, prior approval by the SEC. The SEC has interpreted the BDC regulations governing transactions with affiliates to prohibit certain “joint transactions” between entities that share a common investment adviser.

We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.

We compete with a number of specialty and commercial finance companies to make the types of investments that we make in middle-market companies, including BDCs, traditional commercial banks, private investment funds, regional banking institutions, small business investment companies, investment banks and insurance companies. Additionally, with increased competition for investment opportunities, alternative investment vehicles such as hedge funds may seek to invest in areas they have not traditionally invested in or from which they had withdrawn during the economic downturn, including investing in middle-market companies. As a result, competition for investments in lower middle-market companies has intensified, and we expect that trend to continue. Many of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and structure, however, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant part of our competitive advantage stems from the fact that the lower middle-market is underserved by traditional commercial and investment banks, and generally has less access to capital. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms.

Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the source of income, asset diversification and distribution requirements we must satisfy to maintain our RIC status. The competitive pressures we face may have a material adverse effect on our business, financial condition and results of operations. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we may not be able to identify and make investments that are consistent with our investment objective.

We will be subject to corporate-level U.S. federal income tax if we are unable to qualify or maintain qualification as a RIC under Subchapter M of the Code.

We elected to be treated as a RIC under Subchapter M of the Code commencing with our taxable year ended December 31, 2012, have qualified in each taxable year since, and intend to qualify annually hereafter; however, no assurance can be given that we will be able to qualify for and maintain RIC status. To receive RIC tax treatment under the Code and to be relieved of federal taxes on income and gains distributed to our stockholders, we must meet certain requirements, including source-of-income, asset diversification and distribution requirements. The annual distribution requirement applicable to RICs is satisfied if we 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 on an annual basis. In addition, we will be subject to a 4% nondeductible federal excise tax to the extent that we do not satisfy certain additional minimum distribution requirements on a calendar year basis. To the extent we use debt financing, we will be subject to certain asset coverage ratio requirements under the 1940 Act and may be subject to financial covenants under loan and credit agreements, each of which could, under certain circumstances, restrict us from making annual distributions necessary to receive RIC tax treatment. If we are unable to obtain cash from other sources, we may fail to be taxed as a RIC and, thus, may be subject to corporate-level U.S. federal income tax on our entire taxable income without regard to any distributions made by us. In order to be taxed as a RIC, we must also meet certain asset diversification requirements at the end of each calendar quarter. Failure to meet these tests may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments are in private or thinly traded public companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If we fail to be taxed as a RIC for any reason and become subject to corporate U.S. federal income tax, the resulting corporate U.S. federal income taxes could substantially reduce our net assets, the amount of income available for distributions to stockholders and the amount of our distributions and the amount of funds available for new investments. Such a failure would have a material adverse effect on us and our stockholders.

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An extended disruption in the capital markets and the credit markets could negatively affect our business.

As a BDC, it will be necessary for us to maintain our ability to raise additional capital for investment purposes. Without sufficient access to the capital markets or credit markets, we may be forced to curtail our business operations or we may not be able to pursue new business opportunities. The capital markets and the credit markets have experienced periods of extreme volatility and disruption and, accordingly, there has been and may in the future be uncertainty in the financial markets in general. Ongoing disruptive conditions in the financial industry and the impact of new legislation in response to those conditions could restrict our business operations and could adversely impact our results of operations and financial condition.

We access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. A reduction in the availability of new capital could limit our ability to pursue new business opportunities and grow our business. In addition, we are required to 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 to qualify for the tax benefits available to RICs. As a result, these earnings will not be available to fund new investments. An inability to access the capital markets successfully could limit our ability to grow our business and execute our business strategy fully and could decrease our earnings, if any, which may have an adverse effect on the value of our securities.

We may need to raise additional capital to grow because we must distribute most of our income.

We may need additional capital to fund new investments and grow our portfolio of investments. We intend to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital. Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. A reduction in the availability of new capital could limit our ability to grow. In addition, in order to qualify as a RIC, we are required to distribute each taxable year an amount at least equal to 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. As a result, these earnings are not available to fund new investments. An inability to access the capital markets successfully could limit our ability to grow our business and execute our business strategy fully and could decrease our earnings, if any, which may have an adverse effect on the value of our securities.

We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.

For U.S. federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as original issue discount, or through contracted PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Original issue discount, which could be significant relative to our overall investment activities, or increases in loan balances as a result of contracted PIK arrangements, are included in income before we receive the corresponding cash payments. We also may be required to include in income certain other amounts that we will not receive in cash.

That part of the incentive fee payable by us that relates to our net investment income is computed and paid on income that may include interest that has been accrued but not yet received in cash, such as original issue discount and PIK interest. If we pay a net investment income incentive fee on interest that has been accrued, but not yet received in cash, it will increase the basis of our investment in that loan, which will reduce the capital gain incentive fee that we would otherwise pay in the future. Nevertheless, if we pay a net investment income incentive fee on interest that has been accrued but not yet received, and if that portfolio company defaults on such a loan, it is possible that accrued interest previously included in the calculation of the incentive fee will become uncollectible.

Because we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirements applicable to RICs. In such a case, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations and sourcings to meet these distribution requirements. If we are not able to obtain such cash from other sources, we may fail to qualify for the tax benefits available to RICs and thus be subject to corporate-level U.S. federal income tax.

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The 1940 Act allows us to incur additional leverage, which could increase the risk of investing in us.

The 1940 Act generally prohibits us from incurring indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed half of the value of our total assets). However, under the Small Business Credit Availability Act (the “SBCAA”), which became law in March 2018, BDCs have the ability to elect to become subject to a lower asset coverage requirement of 150% (i.e., the amount of debt may not exceed two-thirds of the value of our total assets), subject to the receipt of the requisite board or stockholder approvals under the SBCAA and satisfaction of certain other conditions.

On June 20, 2018, our stockholders approved the application of the modified asset coverage requirements, as approved by our board of directors on March 27, 2018, and we became subject to the 150% minimum asset coverage ratio, effective June 21, 2018.

Leverage is generally considered a speculative investment technique and may increase the risk of investing in our securities. Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to pay distributions, scheduled debt payments or other payments related to our securities. The effects of leverage would cause any decrease in net asset value for any losses to be greater than any increase in net asset value for any corresponding gains. If we incur additional leverage, you will experience increased risks of investing in our common stock.

Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital.

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we are permitted as a BDC to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% (as of June 21, 2018) of total assets less all liabilities and indebtedness not represented by senior securities, immediately after each issuance of senior securities (other than the SBA debentures of an SBIC subsidiary, as permitted by exemptive relief we have been granted by the SEC). If the value of our assets declines, we may be unable to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous. This could have a material adverse effect on our operations and we may not be able to make distributions in an amount sufficient to be subject to taxation as a RIC, or at all. In addition, issuance of securities could dilute the percentage ownership of our current stockholders in us.

No person or entity from which we borrow money will have a veto power or a vote in approving or changing any of our fundamental policies. If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest. Holders of our common stock will directly or indirectly bear all of the costs associated with offering and servicing any preferred stock that we issue. In addition, any interests of preferred stockholders may not necessarily align with the interests of holders of our common stock and the rights of holders of shares of preferred stock to receive dividends would be senior to those of holders of shares of our common stock.

As a BDC, we generally are not able to issue our common stock at a price below net asset value per share without first obtaining the approval of our stockholders and our independent directors. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then percentage ownership of our stockholders at that time would decrease, and you might experience dilution. We have stockholder approval to sell our common stock below net asset value through June 16, 2022. We may seek further stockholder approval to sell shares below net asset value in the future.

We maintain a revolving credit facility and use other borrowed funds to make investments or fund our business operations, which exposes us to risks typically associated with leverage and increases the risk of investing in us.

We maintain a revolving credit facility, have issued debt securities and may borrow money, including through the issuance of additional debt securities or preferred stock, to leverage our capital structure, which is generally considered a speculative investment technique. As a result:

• our common stock is exposed to an increased risk of loss because a decrease in the value of our investments would have a greater negative impact on the value of our common stock than if we did not use leverage;

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• if we do not appropriately match the assets and liabilities of our business, adverse changes in interest rates could reduce or eliminate the incremental income we make with the proceeds of any leverage;

• our ability to pay distributions on our common stock may be restricted if our asset coverage ratio, as provided in the 1940 Act, is not at least 150% and any amounts used to service indebtedness or preferred stock would not be available for such distributions;

• any credit facility is subject to periodic renewal by its lenders, whose continued participation cannot be guaranteed;

• our revolving credit facility with ING Capital LLC, as agent, is, and any other credit facility we may enter into would be, subject to various financial and operating covenants, including that our portfolio of investments satisfies certain eligibility and concentration limits as well as valuation methodologies;

• such securities would be governed by an indenture or other instrument containing covenants restricting our operating flexibility;

• we bear the cost of issuing and paying interest or distributions on such securities, which costs are entirely borne by our common stockholders; and

• any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our common stock.

The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing in the table below.

	Assumed Return on Our Portfolio (Net of Expenses) (1)
	-10%			-5%			0%			5%			10%
Corresponding return to common stockholder (2)(3)		-28.81	%		-16.98	%		-5.15	%		6.69	%		18.52	%

⁽¹⁾ The assumed return on our portfolio is required by regulation of the SEC to assist investors in understanding the effects of leverage and is not a prediction of, and does not represent, our projected or actual performance.

⁽²⁾ Assumes $590.5 million in total assets, $341.0 million in debt outstanding, of which $281.0 million is senior securities outstanding, $249.5 million in net assets and an average cost of funds of 3.77%, which was the weighted average interest rate of borrowing on our revolving credit facility, SBA debentures and 2026 Notes as of December 31, 2021. The interest rate on our revolving credit facility is a variable rate. Actual interest payments may be different. 

⁽³⁾ In order for us to cover our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2021 total portfolio assets of at least 2.17%.

The majority of our assets are subject to security interests under our revolving credit facility and if we default on our obligations under such facility, we may suffer adverse consequences, including foreclosure on our assets.

As of December 31, 2021, the majority of our assets (excluding, among other things, investments held in and by certain of our subsidiaries) were pledged as collateral under our revolving credit facility. If we default on our obligations under this facility, the lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests or their superior claim. In such event, we may be forced to sell our investments to raise funds to repay our outstanding borrowings in order to avoid foreclosure and these forced sales may be at times and at prices we would not consider advantageous. Moreover, such deleveraging of our company could significantly impair our ability to effectively operate our business in the manner in which we have historically operated. As a result, we could be forced to curtail or cease new investment activities and lower or eliminate the distributions that we have historically paid to our stockholders.

In addition, if the lenders exercise their right to sell the assets pledged under our revolving credit facility, such sales may be completed at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repayment of the amounts outstanding under the credit facilities.

We are subject to risks associated with our revolving credit facility and the terms of our revolving credit facility may contractually limit our ability to incur additional indebtedness.

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

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The revolving credit facility requires us to comply with certain financial and operational covenants, including asset coverage ratios and a minimum net worth. For example, the revolving credit facility requires that we maintain an asset coverage ratio of at least 1.5 to 1 and a senior debt coverage ratio of at least 2 to 1 at all times. We may divert cash to pay the lenders in amounts sufficient to cause these tests to be satisfied. Our compliance with these covenants depends on many factors, some of which, such as market conditions, are beyond our control.

Our ability to sell our investments is also limited under the revolving credit facility. Under the revolving credit facility, the sale of any portfolio investment may not cause our covered debt amount to exceed our borrowing base. As a result, there may be times or circumstances during which we are unable to sell investments, pay distributions or take other actions that might be in our best interests.

Availability of borrowings under the revolving credit facility is linked to the valuation of the collateral pursuant to a borrowing base mechanism. As such, declines in the fair market value of our investments which are collateral to the revolving credit facility may reduce availability under our revolving credit facility.

To the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.

To the extent we borrow money to make investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income in the event we use debt to finance our investments. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income. We expect that our long-term fixed-rate investments will be financed primarily with issuances of equity and long-term debt securities. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.

You should also be aware that a rise in the general level of interest rates typically leads to higher interest rates applicable to our debt investments. Accordingly, an increase in interest rates may result in an increase of the amount of incentive fees payable to MC Advisors.

The interest rates of our revolving credit facility and loans to our portfolio companies that extend beyond 2023 might be subject to change based on recent regulatory changes.

LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending transactions between banks on the London interbank market and has been widely used as a reference for setting the interest rate on loans globally. We typically use LIBOR as a reference rate in term loans we extend to portfolio companies such that the interest due to us pursuant to a term loan extended to a portfolio company is calculated using LIBOR. The terms of our debt investments generally include minimum interest rate floors which are calculated based on LIBOR. Amounts drawn under our revolving credit facility also currently bear interest at LIBOR plus a margin.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. As of January 1, 2022, consistent with FCA’s prior announcement, British pound, euro, Swiss franc, and Japanese yen settings and the one-week and two-month U.S. dollar LIBOR settings are no longer available. Until the end of 2022, one-month, three-month, and six-month British pound and Japanese yen LIBOR settings will continue publication on a changed methodology (i.e. “synthetic”) basis, but these synthetic rates may only be used in legacy LIBOR contracts, other than cleared derivatives, that have not been changed at or ahead of the end of 2021. The remaining U.S. dollar LIBOR settings will permanently cease immediately after June 30, 2023, providing additional time to address the legacy contracts that reference such U.S. dollar LIBOR settings. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate.

A committee established by the Federal Reserve, the Alternative Reference Rates Committee, announced the replacement of LIBOR with a new index, based on overnight repurchase agreements collateralized by U.S. Treasury securities, called the Secured Overnight Financing Rate (“SOFR”). The Federal Reserve Bank of New York began publishing SOFR in April 2018. Other jurisdictions have also proposed their own alternative to LIBOR, including the Sterling Overnight Index Average for Sterling markets, the Euro Short Term Rate for Euros and Tokyo Overnight Average Rate for Japanese Yens. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict whether SOFR will attain market traction as a LIBOR replacement tool, and the future of LIBOR is still uncertain. The effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR or other reference rates that may be enacted in the United Kingdom or elsewhere cannot be predicted at this time, and it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may have on the financial markets for financial instruments based on LIBOR.

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To date, certain of the loan agreements with our portfolio companies have already been amended to include fallback language providing a mechanism for the parties to negotiate a new reference interest rate in the event that LIBOR ceases to exist. Factors such as the pace of the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rate, prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates could also have a material adverse effect on our business, financial condition and results of operations. In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have a material adverse effect on our business, financial condition, tax position and results of operations.

We are exposed to risks associated with changes in interest rates.

Interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could have an adverse impact on our net investment income while an increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates and increase our interest expense, thereby decreasing our net income. An increase in interest rates available to investors could also make investment in our common stock less attractive unless we are able to increase our dividend rate. In addition, a significant increase in market interest rates could also result in an increase in our non-performing assets and a decrease in the value of our portfolio because our floating-rate loan portfolio companies may be unable to meet higher payment obligations.

MRCC SBIC is subject to SBA regulations.

Under current SBA regulations, a licensed SBIC can invest in entities that have a tangible net worth not exceeding $19.5 million and an average annual net income after U.S. federal income taxes (excluding any carryover losses) not exceeding $6.5 million for the two most recent fiscal years. In addition, a licensed SBIC must invest 25.0% of its capital in those entities that have a tangible net worth not exceeding $6.0 million and an average annual net income after U.S. federal income taxes (excluding any carryover losses) not exceeding $2.0 million for the two most recent fiscal years. The SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on either the number of employees or the gross sales. The SBA regulations permit licensed SBICs to make long term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in certain prohibited industries. Further, the SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA staff to determine its compliance with the relevant SBA regulations. Compliance with these SBA requirements may cause MRCC SBIC to forego attractive investment opportunities that are not permitted under the SBA regulations, and may cause MRCC SBIC to make investments it otherwise would not make in order to remain in compliance with these regulations.

Failure to comply with the SBA regulations could result in the loss of the SBIC license and the resulting inability to participate in the SBA debenture program. The SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning 10.0% or more of a class of capital stock of a licensed SBIC. Current SBA regulations provide the SBA with certain rights and remedies if an SBIC violates their terms. Remedies for regulatory violations are graduated in severity depending on the seriousness of capital impairment or other regulatory violations. For minor regulatory infractions, the SBA issues a warning. For more serious infractions, the use of SBA debentures may be limited or prohibited, outstanding debentures can be declared to be immediately due and payable, restrictions on distributions and making new investments may be imposed and management fees may be required to be reduced. In severe cases, the SBA may require the removal of a general partner of an SBIC or its officers, directors, managers or partners, or the SBA may obtain appointment of a receiver for the SBIC.

On March 1, 2022, MRCC SBIC fully repaid its outstanding SBA debentures and notified the SBA of its intent to surrender its license to operate as a SBIC. Effective with the surrender of its license MRCC SBIC is no longer subject to SBA regulations.

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If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material adverse effect on our business, financial condition and results of operations.

As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets, as defined in section 55(a) of the 1940 Act. See “Business — Qualifying Assets.” We believe that most of the investments that we may acquire in the future will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rules under the 1940 Act could prevent us, for example, from making follow-on investments in existing portfolio companies which could result in the dilution of our position or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. If we need to dispose of investments quickly, it could be difficult to dispose of such investments on favorable terms. We may not be able to find a buyer for such investments and, even if we do find a buyer, we may have to sell the investments at a substantial loss. Any such outcomes would have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Many of our portfolio investments are recorded at fair value as determined in good faith by our Board and, as a result, there may be uncertainty as to the value of our portfolio investments.

Under the 1940 Act, we are required to carry our portfolio investments at market value, or if there is no readily available market value, at fair value as determined by our Board. Many of our portfolio investments may take the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable, and we value these securities at fair value as determined in good faith by our Board, including to reflect significant events affecting the value of our securities. As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our investments:

• a comparison of the portfolio company’s securities to publicly traded securities;

• the enterprise value of a portfolio company;

• the nature and realizable value of any collateral;

• the portfolio company’s ability to make payments and its earnings and discounted cash flow;

• the markets in which the portfolio company does business; and

• changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors.

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We expect that most of our investments (other than cash and cash equivalents) will be classified as Level 3 in the fair value hierarchy and require disclosures about the level of disaggregation along with the inputs and valuation techniques we use to measure fair value. This means that our portfolio valuations are based on unobservable inputs and our own assumptions about how market participants would price the asset or liability in question. Inputs into the determination of fair value of our portfolio investments require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information. We employ the services of one or more independent service providers to conduct fair value appraisals of material investments for which market quotations are not readily available. These fair value appraisals for material investments are received at least once every calendar year for each portfolio company investment, but are generally received quarterly. The types of factors that our Board may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Due to this uncertainty in the value of our portfolio investments, a fair value determination may cause net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon one or more of our investments. As a result, investors purchasing shares of our common stock based on an overstated net asset value would pay a higher price than the value of the investments might warrant. Conversely, investors selling shares during a period in which the net asset value understates the value of investments will receive a lower price for their shares than the value the investment portfolio might warrant.

We adjust quarterly the valuation of our portfolio to reflect the determination of our Board of the fair value of each investment in our portfolio. Any changes in fair value are recorded in our consolidated statements of operations as net change in unrealized gain (loss).

Legislative or regulatory tax changes could adversely affect investors.

At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. The Biden Administration has announced a number of tax law proposals, including American Families Plan and Made in America Tax Plan, which include increases in the corporate and individual tax rates, and impose a minimum tax on book income and profits of certain multinational corporations. Any new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or our shareholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments.

Our Board may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.

Our Board has the authority, except as otherwise prohibited by the 1940 Act, to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. Under Maryland law, we also cannot be dissolved without prior stockholder approval except by judicial action. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and the price value of our common stock. Nevertheless, any such changes could adversely affect our business and impair our ability to make distributions.

MC Advisors can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

MC Advisors has the right to resign under the Investment Advisory and Management Agreement without penalty at any time upon 60 days’ written notice to us, whether we have found a replacement or not. If MC Advisors resigns, we may not be able to find a new investment advisor or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our securities may decline. In addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by MC Advisors and its affiliates. Even if we were able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.

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MC Management can resign on 60 days’ notice from its role as our administrator under the Administration Agreement, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.

MC Management has the right to resign under the Administration Agreement without penalty upon 60 days’ written notice to us, whether we have found a replacement or not. If MC Management resigns, we may not be able to find a new administrator or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and administrative activities is likely to suffer if we are unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by MC Management. Even if we were able to retain a comparable service provider or individuals to perform such services, whether internal or external, their integration into our business and lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition, business and results of operations.

We may incur lender liability as a result of our lending activities.

In recent years, a number of judicial decisions have upheld the right of borrowers and others to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or stockholders. We may be subject to allegations of lender liability, which could be time-consuming and expensive to defend and result in significant liability.

We may incur liability as a result of providing managerial assistance to our portfolio companies.

In the course of providing significant managerial assistance to certain portfolio companies, certain of our management and directors may serve as directors on the boards of such companies. To the extent that litigation arises out of investments in these companies, our management and directors may be named as defendants in such litigation, which could result in an expenditure of our funds, through our indemnification of such officers and directors, and the diversion of management time and resources.

MC Advisors may not be able to achieve the same or similar returns as those achieved by our senior management and investment teams while they were employed at prior positions.

The track record and achievements of the senior investment professionals of Monroe Capital are not necessarily indicative of future results that will be achieved by MC Advisors. As a result, MC Advisors may not be able to achieve the same or similar returns as those achieved by the senior investment professionals of Monroe Capital.

Risks Relating to Our Investments

Events outside of our control, including public health crises, could negatively affect our portfolio companies, our investment adviser and the results of our operations.

Periods of market volatility could continue to occur in response to pandemics or other events outside of our control. We, MC Advisors, and the portfolio companies in which we invest in could be affected by force majeure events (i.e., events beyond the control of the party claiming that the event has occurred, such as acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism, labor strikes, major plant breakdowns, pipeline or electricity line ruptures, failure of technology, defective design and construction, accidents, demographic changes, government macroeconomic policies, social instability, etc.). Some force majeure events could adversely affect the ability of a party (including us, MC Advisors, a portfolio company or a counterparty to us, MC Advisors, or a portfolio company) to perform its obligations until it is able to remedy the force majeure event. In addition, force majeure events, such as the cessation of the operation of equipment for repair or upgrade, could similarly lead to the unavailability of essential equipment and technologies.

These risks could, among other effects, adversely impact the cash flows available from a portfolio company, cause personal injury or loss of life, including to a senior manager of MC Advisors or its affiliates, damage property, or instigate disruptions of service. In addition, the cost to a portfolio company or us of repairing or replacing damaged assets resulting from such force majeure event could be considerable. It will not be possible to insure against all such events, and insurance proceeds received, if any, could be inadequate to completely or even partially cover any loss of revenues or investments, any increases in operating and maintenance expenses, or any replacements or rehabilitation of property. Certain events causing catastrophic loss could be either uninsurable, or insurable at such high rates as to adversely impact us, MC Advisors, or portfolio companies, as applicable. Force majeure events that are incapable of or are too costly to cure could have permanent adverse effects. Certain force majeure events (such as war or an outbreak of an infectious disease) could have a broader negative impact on the world economy and international business activity generally, or in any of the countries in which we invest or our portfolio companies operate specifically.

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Such force majeure events could result in or coincide with: increased volatility in the global securities, derivatives and currency markets; a decrease in the reliability of market prices and difficulty in valuing assets; greater fluctuations in currency exchange rates; increased risk of default (by both government and private issuers); further social, economic, and political instability; nationalization of private enterprise; greater governmental involvement in the economy or in social factors that impact the economy; less governmental regulation and supervision of the securities markets and market participants and decreased monitoring of the markets by governments or self-regulatory organizations and reduced enforcement of regulations; limited, or limitations on, the activities of investors in such markets; controls or restrictions on foreign investment, capital controls and limitations on repatriation of invested capital; inability to purchase and sell investments or otherwise settle security or derivative transactions (i.e., a market freeze); unavailability of currency hedging techniques; substantial, and in some periods extremely high, rates of inflation, which can last many years and have substantial negative effects on credit and securities markets as well as the economy as a whole; recessions; and difficulties in obtaining and/or enforcing legal judgments.

Additionally, a major governmental intervention into industry, including the nationalization of an industry or the assertion of control over one or more portfolio companies or its assets, could result in a loss to us, including if the investment in such portfolio companies is canceled, unwound or acquired (which could result in inadequate compensation). Any of the foregoing could therefore adversely affect the performance of us and our investments.

Economic recessions or downturns could impair our portfolio companies and harm our operating results.

Many of our portfolio companies are susceptible to economic slowdowns or recessions and may be unable to repay our loans during these periods. These portfolio companies may face intense competition, including competition from companies with greater financial resources, more extensive research and development, manufacturing, marketing and service capabilities and greater number of qualified and experienced managerial and technical personnel. They may need additional financing that they are unable to secure and that we are unable or unwilling to provide, or they may be subject to adverse developments unrelated to the technologies they acquire.

Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may decrease the value of collateral securing some of our loans and the value of our equity investments and could lead to financial losses in our portfolio and a corresponding decrease in revenues, net income and assets.

Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing our investments and harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of its loans and foreclosure on its assets, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. It is possible that we could become subject to a lender liability claim, including as a result of actions taken if we or MC Advisors render significant managerial assistance to the borrower. Furthermore, if one of our portfolio companies were to file for bankruptcy protection, even though we may have structured our investment as senior secured debt, depending on the facts and circumstances, including the extent to which we or MC Advisors provided managerial assistance to that portfolio company or otherwise exercise control over it, a bankruptcy court might re-characterize our debt as a form of equity and subordinate all or a portion of our claim to claims of other creditors.

Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.

Certain of our portfolio companies may be impacted by inflation. If such portfolio companies are unable pass any increases in their costs along to their customers, it could adversely affect their results and their ability to impacting their ability to pay interest and principal on our loans. In addition, any projected future decreases in our portfolio companies' operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce our net assets resulting from operations.

Market conditions have materially and adversely affected debt and equity capital markets in the United States and around the world.

In the past, the global capital markets experienced periods of disruption resulting in increasing spreads between the yields realized on riskier debt securities and those realized on securities perceived as being risk-free and a lack of liquidity in parts of the debt capital markets, significant write-offs in the financial services sector relating to subprime mortgages and the re-pricing of credit risk in the broadly syndicated market. These events, along with the deterioration of the housing market, illiquid market conditions, declining business and consumer confidence and the failure of major financial institutions in the United States, led to a general decline in economic conditions. This economic decline materially and adversely affected the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and to financial firms in particular. If such a period of disruption were to occur in the future, to the extent that we wish to use debt to fund our investments, the debt capital that will be available to us, if at all, may be at a higher cost, and on terms and conditions that may be less favorable, than what we expect, which could negatively affect our financial performance and results. A prolonged period of market illiquidity may cause us to reduce the volume of loans we originate and/or fund below historical levels and adversely affect the value of our portfolio investments, which could have a material and adverse effect on our business, financial condition, and results of operations. The spread between the yields realized on riskier debt securities and those realized on securities perceived as being risk-free has remained narrow on a relative basis recently. If these spreads were to widen or if there were deterioration of market conditions, these events could materially and adversely affect our business.

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Our investments in leveraged portfolio companies may be risky, and we could lose all or part of our investment.

Investment in leveraged companies involves a number of significant risks. Leveraged companies, including lower middle-market companies, in which we invest may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold. Such developments may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing any guarantees that we may have obtained in connection with our investment. In addition, our junior secured loans are generally subordinated to senior loans. As such, other creditors may rank senior to us in the event of an insolvency.

Our portfolio companies will likely consist primarily of lower middle-market, privately owned companies, which may present a greater risk of loss than loans to larger companies.

Our portfolio consists, and will most likely continue to consist, primarily of loans to lower middle-market, privately owned companies. Compared to larger, publicly traded firms, these companies generally have more limited access to capital and higher funding costs, may be in a weaker financial position and may need more capital to expand, compete and operate their business. In addition, many of these companies may be unable to obtain financing from public capital markets or from traditional sources, such as commercial banks. Accordingly, loans made to these types of borrowers may entail higher risks than loans made to companies that have larger businesses, greater financial resources or are otherwise able to access traditional credit sources on more attractive terms.

Investing in lower middle-market companies involves a number of significant risks, including that lower middle-market companies:

• may have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;

• are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;

• typically have more limited access to the capital markets, which may hinder their ability to refinance borrowings;

• will be unable to refinance or repay at maturity the unamortized loan balance as we structure our loans such that a significant balance remains due at maturity;

• generally have less predictable operating results, may be particularly vulnerable to changes in customer preferences or market conditions, depend on one or a limited number of major customers;

• may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and

• generally have less publicly available information about their businesses, operations and financial condition. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and may lose all or part of our investment.

Any of these factors or changes thereto could impair a portfolio company’s financial condition, results of operation, cash flow or result in other adverse events, such as bankruptcy, any of which could limit a portfolio company’s ability to make scheduled payments on loans from us. This, in turn, may lead to their inability to make payments on outstanding borrowings, which could result in losses in our loan portfolio and a decrease in our net interest income and book value.

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We may be subject to risks associated with our investments in senior loans.

We invest in senior secured loans. Senior secured loans are usually rated below investment grade or may also be unrated. As a result, the risks associated with senior secured loans may be considered by credit rating agencies to be similar to the risks of below investment grade fixed income instruments, although senior secured loans are senior and secured in contrast to other below investment grade fixed income instruments, which are often subordinated or unsecured. Investment in senior secured loans rated below investment grade is considered speculative because of the credit risk of their issuers. Such companies are more likely than investment grade issuers to default on their payments of interest and principal owed to us, and such defaults could have a material adverse effect on our performance. An economic downturn would generally lead to a higher non-payment rate, and a senior secured loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a senior secured loan may decline in value or become illiquid, which would adversely affect the senior secured loan’s value.

There may be less readily available and reliable information about most senior secured loans than is the case for many other types of securities, including securities issued in transactions registered under the Securities Act or registered under the Exchange Act. As a result, MC Advisors will rely primarily on its own evaluation of a borrower’s credit quality rather than on any available independent sources. Therefore, we will be particularly dependent on the analytical abilities of MC Advisors.

In general, the secondary trading market for senior secured loans is not well developed. No active trading market may exist for certain senior secured loans, which may make it difficult to value them. Illiquidity and adverse market conditions may mean that we may not be able to sell senior secured loans quickly or at a fair price. To the extent that a secondary market does exist for certain senior secured loans, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.

We may be subject to risks associated with our investments in junior debt securities.

We invest in junior debt securities. Although certain junior debt securities are typically senior to common stock or other equity securities, the equity and debt securities in which we will invest may be subordinated to substantial amounts of senior debt, all or a significant portion of which may be secured. Such subordinated investments may be characterized by greater credit risks than those associated with the senior obligations of the same issuer. These subordinated securities may not be protected by all of the financial covenants, such as limitations upon additional indebtedness, typically protecting such senior debt. Holders of junior debt generally are not entitled to receive full payments in bankruptcy or liquidation until senior creditors are paid in full. Holders of equity are not entitled to payments until all creditors are paid in full. In addition, the remedies available to holders of junior debt are normally limited by restrictions benefiting senior creditors. In the event any portfolio company cannot generate adequate cash flow to meet senior debt service, we may suffer a partial or total loss of capital invested.

We may be subject to risks associated with our investments in unitranche secured loans and securities.

We invest in unitranche secured loans, which are a combination of senior secured and junior secured debt in the same facility in which we syndicate a “first out” portion of the loan to an investor and retain a “last out” portion of the loan. Unitranche secured loans provide all of the debt needed to finance a leveraged buyout or other corporate transaction, both senior and junior, but generally in a first lien position, while the borrower generally pays a blended, uniform interest rate rather than different rates for different tranches. Unitranche secured debt generally requires payments of both principal and interest throughout the life of the loan. Generally, we expect these securities to carry a blended yield that is between senior secured and junior debt interest rates. Unitranche secured loans provide a number of advantages for borrowers, including the following: simplified documentation, greater certainty of execution and reduced decision-making complexity throughout the life of the loan. In some cases, a portion of the total interest may accrue or be paid in kind. Because unitranche secured loans combine characteristics of senior and junior financing, unitranche secured loans have risks similar to the risks associated with senior secured and second lien loans and junior debt in varying degrees according to the combination of loan characteristics of the unitranche secured loan.

Loans may become nonperforming for a variety of reasons.

A nonperforming loan may require substantial debt work-out negotiations or restructuring that may entail a substantial reduction in the interest rate and/or a substantial write-down of the principal of such loan. Because of the unique and customized nature of a loan agreement and the private syndication of a loan, certain loans may not be purchased or sold as easily as publicly traded securities, and, historically, the trading volume in the loan market has been small relative to other markets. Loans may encounter trading delays due to their unique and customized nature, and transfers of interests in loans may require the consent of an agent or borrower.

The lack of liquidity in our investments may adversely affect our business.

All of our assets may be invested in illiquid securities, and a substantial portion of our investments in leveraged companies will be subject to legal and other restrictions on resale or will otherwise be less liquid than more broadly traded public securities. The illiquidity of these investments may make it difficult for us to sell such investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded these investments. As a result, we do not expect to achieve liquidity in our investments in the near-term. However, to maintain the election to be regulated as a BDC and qualify as a RIC, we may have to dispose of investments if we do not satisfy one or more of the applicable criteria under the respective regulatory frameworks. We may also face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we or MC Advisors have material nonpublic information regarding such portfolio company.

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Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our net asset value through increased net unrealized losses.

As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by our Board. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation. We record decreases in the market values or fair values of our investments as unrealized losses. Declines in prices and liquidity in the corporate debt markets may result in significant net unrealized losses on our portfolio. The effect of all of these factors on our portfolio may reduce our net asset value by increasing net unrealized losses on our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could have a material adverse effect on our business, financial condition and results of operations.

Our portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions with equal or greater expected yields.

The loans underlying our portfolio may be callable at any time, and many of them can be repaid with no premium to par. It is generally not clear and highly unpredictable when or if any loan might be called. Whether a loan is called will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital. As market conditions change frequently, it is unknown when, and if, this may be possible for each portfolio company. Risks associated with owning loans include the fact that prepayments may occur at any time, sometimes without premium or penalty, and that the exercise of prepayment rights during periods of declining spreads could cause us to reinvest prepayment proceeds in lower-yielding instruments. In the case of some of these loans, having the loan called early may reduce our achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields.

Our portfolio may be exposed in part to one or more specific industries, which may subject us to a risk of significant loss in a particular investment or investments if there is a downturn in that particular industry.

Our portfolio may be exposed in part to one or more specific industries. A downturn in any particular industry in which we are invested could significantly impact the aggregate returns we realize. If an industry in which we have significant investments suffers from adverse business or economic conditions, including the effects of the COVID-19 pandemic, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financial position and results of operations.

As of December 31, 2021, our investments in the Banking, Finance, Insurance & Real Estate and Services: Business industries represented approximately 17.6% and 12.7%, respectively, of the fair value of our portfolio and are subject to certain risks particular to these industries. The laws and rules governing the business of companies in these industries and interpretations of those laws and rules are subject to frequent change and broad latitude is given to the agencies administering those regulations. Existing or future laws and rules could force our portfolio companies operating in these industries to change how they do business, restrict revenue, increase costs, change reserve levels and change business practices. Any of these factors could materially adversely affect the operations of a portfolio company in these industries and, in turn, impair our ability to timely collect principal and interest payments owed to us.

We may be subject to risks associated with our investments in the technology industry.

We may invest portions of our portfolio in the technology industry. There are risks in investing in companies that target technology-related markets, including rapid and sometimes dramatic price erosion of products, the reliance on capital and debt markets to finance large capital outlays, including fabrication facilities, the reliance on partners outside of the United States, particularly in Asia, and inherent cyclicality of the technology market in general. As a result of multiple factors, access to capital may be difficult or impossible for companies in our portfolio that are pursuing these markets. The revenue, income (or losses) and valuations of technology-related companies can and often do fluctuate suddenly and dramatically. In addition, because of rapid technological change, the average selling prices of products and some services provided by technology-related sectors have historically decreased over their productive lives. As a result, the average selling prices of products and services offered by our portfolio companies that operate in technology-related sectors may decrease over time, which could adversely affect their operating results and, correspondingly, the value of any securities that we may hold. This could, in turn, materially adversely affect our business, financial condition and results of operations.

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We may be subject to risks associated with our investments in the business services industry.

Portfolio companies in the business services sector are subject to many risks, including the negative impact of regulation, changing technology, a competitive marketplace and difficulty in obtaining financing. Portfolio companies in the business services industry must respond quickly to technological changes and understand the impact of these changes on customers’ preferences. Adverse economic, business, or regulatory developments affecting the business services sector could have a negative impact on the value of our investments in portfolio companies operating in this industry, and therefore could negatively impact our business and results of operations.

We may be subject to risks associated with our investments in the insurance industry.

We may invest portions of our portfolio in the insurance industry. The insurance business has historically been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity, as well as periods when shortages of capacity permitted an increase in pricing and, thus, more favorable underwriting profits. An increase in premium levels is often offset over time by an increasing supply of insurance capacity in the form of capital provided by new entrants and existing insurers, which may cause prices to decrease. Any of these factors could lead to a significant reduction in premium rates, less favorable policy terms and fewer opportunities for our portfolio companies to underwrite insurance risks. Any of these factors could in turn, materially adversely affect our business, financial condition and results of operations.

We may be subject to risks associated with our investments in the finance industry.

We may invest portions of our portfolio in the finance industry. The regulatory environment in which the finance industry operates could have a material adverse effect on business and operating results for our portfolio companies. Our portfolio companies are subject to a wide variety of laws and regulations in the jurisdictions where they operate, including supervision and licensing by numerous governmental entities. These laws and regulations can create significant constraints on operations and result in significant costs related to compliance. Failure to comply with these laws and regulations could impair the ability of a portfolio company to continue operating and result in substantial civil and criminal penalties, monetary damages, attorneys’ fees and costs, possible revocation of licenses, and damage to reputation, brand and valued customer relationships. Any of these factors could in turn, materially adversely affect our business, financial condition and results of operations.

Our investments in the healthcare and pharmaceutical services industry sector are subject to extensive government regulation and certain other risks particular to that industry.

We invest in healthcare and pharmaceutical services companies. Our investments in portfolio companies that operate in this sector are subject to certain significant risks particular to that industry. The laws and rules governing the business of healthcare companies and interpretations of those laws and rules are subject to frequent change. Broad latitude is given to the agencies administering those regulations. Existing or future laws and rules could force our portfolio companies engaged in healthcare to change how they do business, restrict revenue, increase costs, change reserve levels and change business practices. Healthcare companies often must obtain and maintain regulatory approvals to market many of their products, change prices for certain regulated products and consummate some of their acquisitions and divestitures. Delays in obtaining or failing to obtain or maintain these approvals could reduce revenue or increase costs. Policy changes on the local, state and federal level, such as the expansion of the government’s role in the healthcare arena and alternative assessments and tax increases specific to the healthcare industry or healthcare products as part of federal health care reform initiatives, could fundamentally change the dynamics of the healthcare industry. In particular, health insurance reform, including The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, or Health Insurance Reform Legislation, could have a significant effect on our portfolio companies in this industry sector. As Health Insurance Reform Legislation is implemented, our portfolio companies in this industry sector may be forced to change how they do business. We can give no assurance that these portfolio companies will be able to adapt successfully in response to these changes. Any of these factors could materially adversely affect the operations of a portfolio company in this industry sector and, in turn, impair our ability to timely collect principal and interest payments owed to us.

To the extent original issue discount and payment-in-kind interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income.

Our investments include original issue discount, or OID, components and may include PIK interest or PIK dividend components. For the year ended December 31, 2021, PIK interest and PIK dividends comprised approximately 15.5% and 2.2% of our investment income, respectively. To the extent original issue discount constitutes a portion of our income, we are exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash, including the following:

• We must include in income 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 us in the same taxable year. Because any OID or other amounts accrued will be included in investment company taxable income for the year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy our annual distribution requirements, even though we will not have received any corresponding cash amount. As a result, we may have to sell some of our investments at times or at prices that would not be advantageous to us, raise additional debt or equity capital or forgo new investment opportunities.

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• The higher yield of OID instruments reflect the payment deferral and credit risk associated with these instruments.

• Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation.

• OID instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of the collateral.

• OID instruments generally represent a significantly higher credit risk than coupon loans.

• OID income received by us may create uncertainty about the source of our cash distributions to stockholders. For accounting purposes, any cash distributions to stockholders representing OID or market discount income are not treated as coming from paid-in capital, even though the cash to pay them comes from the offering proceeds. Thus, although a distribution of OID or market discount interest comes from the cash invested by the stockholders, Section 19(a) of the 1940 Act does not require that stockholders be given notice of this fact by reporting it as a return of capital.

• The deferral of PIK interest has a negative impact on liquidity, as it represents non-cash income that may require distribution of cash dividends to stockholders in order to maintain our RIC status. In addition, the deferral of PIK interest also increases the loan-to-value (“LTV”) ratio at a compounding rate, thus, increasing the risk that we will absorb a loss in the event of foreclosure.

• OID and market discount instruments create the risk of non-refundable incentive fee payments to MC Advisors based on non-cash accruals that we may not ultimately realize.

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited by the 1940 Act with respect to the proportion of our assets that may be invested in securities of a single issuer.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Our portfolio is and may in the future be concentrated in a limited number of portfolio companies and industries. Beyond the asset diversification requirements associated with our qualification as a RIC under the Code, we do not have fixed guidelines for diversification. Although we are classified as a non-diversified investment company within the meaning of the 1940 Act, we maintain the flexibility to operate as a diversified investment company and have done so for an extended period of time. To the extent that we operate as a non-diversified investment company in the future, we may be subject to greater risk. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. As a result, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Additionally, while we are not targeting any specific industries, our investments may be concentrated in relatively few industries. As a result, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize.

We may hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, enter into bankruptcy proceedings.

Leveraged companies may experience bankruptcy or similar financial distress, and the risk of these events has been significantly increased by the COVID-19 pandemic. The bankruptcy process has a number of significant inherent risks. Many events in a bankruptcy proceeding are the product of contested matters and adversary proceedings and are beyond the control of the creditors. A bankruptcy filing by a portfolio company may adversely and permanently affect the portfolio company. If the proceeding is converted to a liquidation, the value of the issuer may not equal the liquidation value that was believed to exist at the time of the investment. A bankruptcy or other workout often raise conflicts of interest (including, for example, conflicts over proposed waivers and amendments to debt covenants), including between investors who hold different interests in the applicable company. The duration of a bankruptcy proceeding is also difficult to predict, and a creditor’s return on investment can be adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective. The administrative costs in connection with a bankruptcy proceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors. Because the standards for classification of claims under bankruptcy law are vague, our influence with respect to the class of securities or other obligations we own may be lost by increases in the number and amount of claims in the same class or by different classification and treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even to identify, any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for taxes) may be substantial.

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Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in seeking to:

• increase or maintain in whole or in part our position as a creditor or equity ownership percentage in a portfolio company;

• exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or

• preserve or enhance the value of our investment.

We have discretion to make follow-on investments, subject to the availability of capital resources and the provisions of the 1940 Act. Failure on our part to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our level of risk, because we prefer other opportunities or because we are inhibited by compliance with BDC requirements or the desire to maintain our RIC status. Our ability to make follow-on investments may also be limited by MC Advisors’ allocation policy.

Because we do not hold controlling equity interests in the majority of our portfolio companies, we may not be able to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies, which could decrease the value of our investments.

Although we may do so in the future, we do not currently hold controlling equity positions in the majority of our portfolio companies. Our debt investments may provide limited control features such as restrictions, for example, on the ability of a portfolio company to assume additional debt, or to use the proceeds of our investment for other than certain specified purposes. “Control” under the 1940 Act is presumed at more than 25% equity ownership, and may also be present at lower ownership levels where we provide managerial assistance. When we do not acquire a controlling equity position in a portfolio company, we may be subject to the risk that a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments.

Defaults by our portfolio companies will harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its assets. This could trigger cross-defaults under other agreements and jeopardize such portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.

In addition, many of our investments will likely have a principal amount outstanding at maturity, which could result in a substantial loss to us if the borrower is unable to refinance or repay.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

We generally seek to invest capital in senior, unitranche and junior secured loans and, to a lesser extent, unsecured subordinated debt and equity. The portfolio companies in which we invest usually have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt securities in which we invest. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments in respect of the debt securities in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying senior creditors, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share any distributions on an equal and ratable basis with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

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Additionally, certain loans that we make to portfolio companies may be secured on a second-priority basis by the same collateral securing senior secured debt of such companies. The first-priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by first-priority liens on the collateral will generally control the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second-priority liens after payment in full of all obligations secured by the first-priority liens on the collateral. If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the second-priority liens, then, to the extent not repaid from the proceeds of the sale of the collateral, we will only have an unsecured claim against the portfolio company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of such senior debt, including in unitranche secured transactions. Under a typical intercreditor agreement, at any time that obligations that have the benefit of the first-priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first-priority liens:

• the ability to cause the commencement of enforcement proceedings against the collateral;

• the ability to control the conduct of such proceedings;

• the approval of amendments to collateral documents;

• releases of liens on the collateral; and

• waivers of past defaults under collateral documents.

We may not have the ability to control or direct such actions, even if our rights are adversely affected. In addition, a bankruptcy court may choose not to enforce an intercreditor agreement or other agreement with creditors.

We may also make unsecured loans to portfolio companies, meaning that such loans will not benefit from any interest in collateral of such companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured loan obligations after payment in full of all secured loan obligations. If such proceeds were not sufficient to repay the outstanding secured loan obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.

We may also make subordinated investments that rank below other obligations of the obligor in right of payment. Subordinated investments are generally more volatile than secured loans and are subject to greater risk of default than senior obligations as a result of adverse changes in the financial condition of the obligor or in general economic conditions. If we make a subordinated investment in a portfolio company, the portfolio company may be highly leveraged, and its relatively high LTV ratio may create increased risks that its operations might not generate sufficient cash flow to service all of its debt obligations.

We may be subject to risks associated with syndicated loans.

From time to time, our investments may consist of syndicated loans. Under the documentation for such loans, a financial institution or other entity typically is designated as the administrative agent and/or collateral agent. This agent is granted a lien on any collateral on behalf of the other lenders and distributes payments on the indebtedness as they are received. The agent is the party responsible for administering and enforcing the loan and generally may take actions only in accordance with the instructions of a majority or two-thirds in commitments and/or principal amount of the associated indebtedness. In most cases, we do not expect to hold a sufficient amount of the indebtedness to be able to compel any actions by the agent. Accordingly, we may be precluded from directing such actions unless we act together with other holders of the indebtedness. If we are unable to direct such actions, we cannot assure you that the actions taken will be in our best interests.

There is a risk that a loan agent may become bankrupt or insolvent. Such an event would delay, and possibly impair, any enforcement actions undertaken by holders of the associated indebtedness, including attempts to realize upon the collateral securing the associated indebtedness and/or direct the agent to take actions against the related obligor or the collateral securing the associated indebtedness and actions to realize on proceeds of payments made by obligors that are in the possession or control of any other financial institution. In addition, we may be unable to remove the agent in circumstances in which removal would be in our best interests. Moreover, agented loans typically allow for the agent to resign with certain advance notice.

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The disposition of our investments may result in contingent liabilities.

A significant portion of our investments involve private securities. In connection with the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to potential liabilities. These arrangements may result in contingent liabilities that ultimately result in funding obligations that we must satisfy through our return of distributions previously made to us.

Investments in securities of foreign companies, if any, may involve significant risks in addition to the risks inherent in U.S. investments.

We may make investments in securities of foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies, including changes in exchange control regulations, political and social instability, expropriation and imposition of foreign taxes. In addition, any investments that we make that are denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Factors such as trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political developments may affect currency values. We may employ hedging techniques to minimize these risks, but we cannot assure you that we will, in fact, hedge currency risk, or, that if we do, such strategies will be effective.

We may be subject to additional risks if we engage in hedging transactions and/or invest in foreign securities.

The 1940 Act generally requires that 70% of our investments be in issuers each of whom, in addition to other requirements, is organized under the laws of, and has its principal place of business in, any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands or any other possession of the United States. Our investment strategy does not contemplate a significant number of investments in securities of non-U.S. companies. We expect that these investments would focus on the same investments that we make in U.S. middle-market companies and, accordingly, would be complementary to our overall strategy and enhance the diversity of our holdings.

To the extent that these investments are denominated in a foreign currency, we may engage in hedging transactions. Engaging in either hedging transactions or investing in foreign securities would entail additional risks to our stockholders. We may, for example, use instruments such as interest rate swaps, caps, collars and floors, forward contracts or currency options or borrow under a revolving credit facility in foreign currencies to minimize our foreign currency exposure. In each such case, we generally would seek to hedge against fluctuations of the relative values of our portfolio positions from changes in market interest rates or currency exchange rates. Hedging against a decline in the values of our portfolio positions would not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of the positions declined. However, such hedging could establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions could also limit the opportunity for gain if the values of the underlying portfolio positions increased. Moreover, it might not be possible to hedge against an exchange rate or interest rate fluctuation that was so generally anticipated that we would not be able to enter into a hedging transaction at an acceptable price. Our ability to engage in hedging transactions may also be adversely affected by recent rules adopted by the U.S. Commodity Futures Trading Commission.

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

We may not realize gains from our equity investments.

We currently hold, and we may in the future make, investments that include warrants or other equity or equity-related securities. In addition, we may from time to time make non-control, equity co-investments in companies in conjunction with private equity sponsors. Our goal is ultimately to realize gains upon our disposition of such equity interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We often seek puts or similar rights to give us the right to sell our equity securities back to the portfolio company issuer. We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.

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Risks Relating to Our Common Stock

We may not be able to pay distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital.

We have paid and intend to continue to pay distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to sustain a specified level of cash distributions or make periodic increases in cash distributions. Our ability to pay distributions might be adversely affected by, among other things, the impact of one or more of the risk factors described herein. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC could limit our ability to pay distributions. All distributions will be paid at the discretion of our Board and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as our Board may deem relevant from time to time. We cannot assure you that we will continue to pay distributions to our stockholders.

When we make distributions, we will be required to determine the extent to which such distributions are paid out of current or accumulated earnings and profits. Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of an investor’s basis in our stock and, assuming that an investor holds our stock as a capital asset, thereafter as a capital gain.

If the current period of capital market disruption and instability continues for an extended period of time, there is a risk that our stockholders may not receive distributions or that our distributions may decline over time and a portion of our distributions to you may be a return of capital for U.S. federal income tax purposes.

We intend to make distributions to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make or maintain a specified level of cash distributions and we may choose to pay a portion of dividends in our own stock. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this report, including the COVID-19 pandemic described above. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. Our revolving credit facility may also limit our ability to declare dividends if we default under certain provisions. Further, if we invest a greater amount of assets in equity securities that do not pay current dividends, it could reduce the amount available for distribution. The above referenced restrictions on distributions may also inhibit our ability to make required interest payments to holders of our debt, which may cause a default under the terms of our debt agreements. Such a default could materially increase our cost of raising capital, as well as cause us to incur penalties under the terms of our debt agreements.

The distributions we pay to our stockholders in a year may exceed our taxable income for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes that would reduce a stockholder’s adjusted tax basis in its shares of our common stock or preferred stock and correspondingly increase such stockholder’s gain, or reduce such stockholder’s loss, on disposition of such shares. Distributions in excess of a stockholder’s adjusted tax basis in its shares of our common stock or preferred stock will constitute capital gains to such stockholder.

We may choose to pay a portion of our dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive.

We have adopted a dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash pursuant to such plan. We may distribute taxable dividends that are payable in part in our stock. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income (or as long-term capital gain or qualified dividend income to the extent such distribution is properly reported as such) to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. The tax rate for ordinary income will vary depending on a stockholder’s particular characteristics. For individuals, the top marginal federal ordinary income tax rate is 37%. To the extent distributions paid by us to non-corporate stockholders (including individuals) are attributable to dividends from U.S. corporations and certain qualified foreign corporations, such distributions generally will be eligible for a maximum qualified dividend federal tax rate of 20%. However, in this regard, it is anticipated that distributions paid by us will generally not be attributable to such dividends and, therefore, generally will not qualify for the preferential federal tax rate. Distributions of our net capital gains (which is generally our realized net long-term capital gains in excess of realized net short-term capital losses) properly reported by us as “capital gain dividends” will be taxable to a U.S. stockholder as long-term capital gains currently at a maximum federal tax rate of 20%.

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As a result of receiving dividends in the form of our common stock, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold federal tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in shares of our common stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of shares of our common stock.

In addition, as discussed above, our loans may contain a PIK interest provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income. To avoid the imposition of corporate-level tax, we will need to make sufficient distributions, a portion of which may be paid in shares of our common stock, regardless of whether our recognition of income is accompanied by a corresponding receipt of cash.

If we sell common stock at a discount to our net asset value per share, stockholders who do not participate in such sale will experience immediate dilution in an amount that may be material.

The issuance or sale by us of shares of our common stock at a price per share, after offering expenses and commission, that is a discount to net asset value poses a risk of dilution to our stockholders. In particular, stockholders who do not purchase additional shares at or below the discounted price in proportion to their current ownership will experience an immediate decrease in net asset value per share (as well as in the aggregate net asset value of their shares if they do not participate at all). These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we experience in our assets, potential earning power and voting interests from such issuance or sale. In addition, such sales may adversely affect the price at which our common stock trades.

Investing in our common stock may involve an above-average degree of risk.

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

Shares of closed-end investment companies, including BDCs, often trade at a discount to their net asset value.

Shares of closed-end investment companies, including BDCs, may trade at a discount from net asset value. This characteristic of closed-end investment companies and BDCs is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our common stock will trade at, above or below net asset value.

Provisions of the Maryland General Corporation Law and our charter and bylaws could deter takeover attempts and have an adverse effect on the price of our common stock.

The Maryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficult a change in control of us or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicable requirements of the 1940 Act. Our Board has adopted a resolution exempting from the Maryland Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our Board, including approval by a majority of our independent directors. If the resolution exempting business combinations is repealed or our Board does not approve a business combination, the Maryland Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. The SEC staff has taken the position that, under the 1940 Act, an investment company may not avail itself of the Maryland Control Share Acquisition Act. As a result, we will amend our bylaws to be subject to the Maryland Control Share Acquisition Act, only if the Board determines that it would be in our best interests and, after notification, the SEC staff does not object to our determination that our being subject to the Maryland Control Share Acquisition Act does not conflict with the 1940 Act. If such conditions are met, and we amend our bylaws to repeal the exemption from the Maryland Control Share Acquisition Act, the Maryland Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction.

We have adopted certain measures that may make it difficult for a third-party to obtain control of us, including provisions of our charter classifying our Board in three staggered terms and authorizing our Board to classify or reclassify shares of our capital stock in one or more classes or series and to cause the issuance of additional shares of our stock. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

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The market price of our securities may fluctuate significantly.

The market price and liquidity of the market for our securities may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors may include:

• significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which is not necessarily related to the operating performance of these companies;

• changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;

• loss of RIC or BDC status;

• the ability of MRCC SBIC, or any other SBIC subsidiary we may form to obtain and maintain an SBIC license;

• changes or perceived changes in earnings or variations in operating results;

• changes or perceived changes in the value of our portfolio of investments;

• changes in accounting guidelines governing valuation of our investments;

• any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

• departure of MC Advisors’ key personnel;

• the occurrence of one or more natural disasters, pandemic outbreaks or other health crises (including but not limited to the COVID-19 outbreak);

• operating performance of companies comparable to us;

• general economic trends and other external factors, including the current COVID-19 pandemic; and

• loss of a major funding source.

Risks Relating to the 2026 Notes

The 4.75% Notes due 2026 (the “2026 Notes”) are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future.

The 2026 Notes are not secured by any of our assets or any of the assets of any of our subsidiaries. As a result, the 2026 Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have incurred or that we or our subsidiaries may incur in the future (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest) to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the 2026 Notes. As of December 31, 2021, we had $151.0 million in outstanding indebtedness under the revolving credit facility. The indebtedness under the revolving credit facility is effectively senior to the 2026 Notes to the extent of the value of the assets securing such indebtedness.

The 2026 Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The 2026 Notes are obligations exclusively of the Company, and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the 2026 Notes, and the 2026 Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future. Any assets of our subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the 2026 Notes. Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests in such entities (and therefore the claims of our creditors, including holders of the 2026 Notes) with respect to the assets of such entities. Even if we are recognized as a creditor of one or more of these entities, our claims would still be effectively subordinated to any security interests in the assets of any such entity and to any indebtedness or other liabilities of any such entity senior to our claims. Consequently, the 2026 Notes are structurally subordinated to all indebtedness and other liabilities, including trade payables, of any of our existing or future subsidiaries, including MRCC SBIC. As of December 31, 2021, our subsidiaries had total indebtedness outstanding of $56.9 million. Certain of these entities (excluding MRCC SBIC) currently serve as guarantors under our revolving credit facility, and in the future our subsidiaries may incur substantial additional indebtedness, all of which is and would be structurally senior to the 2026 Notes.

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The indenture under which the 2026 Notes are issued contains limited protection for holders of the 2026 Notes.

The indenture under which the 2026 Notes are issued offers limited protection to holders of the 2026 Notes. The terms of the indenture and the 2026 Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on investments in the 2026 Notes. In particular, the terms of the indenture and the 2026 Notes do not place any restrictions on our or our subsidiaries’ ability to:

• issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the 2026 Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the 2026 Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the 2026 Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the 2026 Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(2) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to us by the SEC, which generally prohibit us from incurring additional indebtedness, including through the issuance of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such incurrence or issuance;

• pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the 2026 Notes, including subordinated indebtedness, except that we have agreed that, for the period of time during which the 2026 Notes are outstanding, we will not violate Section 18(a)(1)(B) as modified by (i) Section 61(a)(2) of the 1940 Act or any successor provisions thereto, whether or not we are subject to such provisions of the 1940 Act and after giving effect to any exemptive relief granted to us by the SEC and (ii) the following two exceptions: (A) we will be permitted to declare a cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act or any successor provisions, but only up to such amount as is necessary for us to maintain our status as a RIC under Subchapter M of the Code; and (B) this restriction will not be triggered unless and until such time as our asset coverage has not been in compliance with the minimum asset coverage required by Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act or any successor provisions (after giving effect to any exemptive relief granted to us by the SEC) for more than six consecutive months. If Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act were currently applicable to us, these provisions would generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, were below 150% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase;

• sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

• enter into transactions with affiliates;

• create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

• make investments; or

• create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

Furthermore, the terms of the indenture and the 2026 Notes do not protect holders of the 2026 Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, if any, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity.

Our ability to recapitalize, incur additional debt (including additional debt that matures prior to the maturity of the 2026 Notes) and take a number of other actions that are not limited by the terms of the 2026 Notes may have important consequences for you as a holder of the 2026 Notes, including making it more difficult for us to satisfy our obligations with respect to the 2026 Notes or negatively affecting the market value of the 2026 Notes.

Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the 2026 Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for, trading levels, and prices of the 2026 Notes.

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The 2026 Notes may or may not have an established trading market. If a trading market in the 2026 Notes is developed, it may not be maintained.

The 2026 Notes may or may not have an established trading market. If a trading market in the 2026 Notes is developed, it may not be maintained. If the 2026 Notes are traded, they may trade at a discount to their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, our financial condition or other relevant factors. Accordingly, we cannot assure you that a liquid trading market has been or will develop for the 2026 Notes, that you will be able to sell your 2026 Notes at a particular time or that the price you receive when you sell will be favorable. To the extent an active trading market does not develop or is not maintained, the liquidity and trading price for the 2026 Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the 2026 Notes for an indefinite period of time.

If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2026 Notes.

As of December 31, 2021, we had approximately $151.0 million of indebtedness outstanding under the revolving credit facility. Any default under the agreements governing our indebtedness, including a default under the revolving credit facility or other indebtedness to which we may be a party that is not waived by the required lenders, and the remedies sought by lenders or the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the 2026 Notes and substantially decrease the market value of the 2026 Notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including the revolving credit facility), we could be in default under the terms of the agreements governing such indebtedness, including the 2026 Notes. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the revolving credit facility or other debt we may incur in the future could elect to terminate their commitment, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.

If our operating performance declines and we are not able to generate sufficient cash flow to service our debt obligations, we may in the future need to refinance or restructure our debt, including the 2026 Notes, sell assets, reduce or delay capital investments, seek to raise additional capital or seek to obtain waivers from the lenders under the revolving credit facility or other debt that we may incur in the future to avoid being in default. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the 2026 Notes and our other debt. If we breach our covenants under the revolving credit facility or any of our other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders thereof. If this occurs, we would be in default under the revolving credit facility or other debt, the lenders or holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the revolving credit facility, could proceed against the collateral securing the debt. Because the revolving credit facility has, and any future credit facilities will likely have, customary cross-default provisions, if we have a default under the terms of the 2026 Notes, the obligations under the revolving credit facility or any future credit facility may be accelerated and we may be unable to repay or finance the amounts due.

We may choose to redeem the 2026 Notes when prevailing interest rates are relatively low.

The 2026 Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option. We may choose to redeem the 2026 Notes from time to time, especially if prevailing interest rates are lower than the rate borne by the 2026 Notes. If prevailing rates are lower at the time of redemption, and we redeem the 2026 Notes, you likely would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the 2026 Notes being redeemed. Our redemption right also may adversely impact your ability to sell the 2026 Notes as the optional redemption date or period approaches.

We may not be able to repurchase the 2026 Notes upon a Change of Control Repurchase Event.

We may not be able to repurchase the 2026 Notes upon certain change in control events described in the indentures under which the 2026 Notes were issued (each, a “Change of Control Repurchase Event”) because we may not have sufficient funds. We would not be able to borrow under our revolving credit facility to finance such a repurchase of the 2026 Notes, and we expect that any future credit facility would have similar limitations. Upon a Change of Control Repurchase Event, holders of the 2026 Notes may require us to repurchase for cash some or all of the 2026 Notes at a repurchase price equal to 100% of the aggregate principal amount of the 2026 Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date. The terms of our revolving credit facility provide that certain change of control events will constitute an event of default thereunder entitling the lenders to accelerate any indebtedness outstanding under our revolving credit facility at that time and to terminate our revolving credit facility. In this regard, the occurrence of a Change of Control Repurchase Event enabling the holders of the 2026 Notes to require the mandatory purchase of the 2026 Notes will constitute an event of default under our revolving credit facility, entitling the lenders to accelerate any indebtedness outstanding under our revolving credit facility at that time and to terminate our revolving credit facility. As a result, we may not be able to comply with our obligations under the Change of Control Repurchase Event provisions of the indenture governing the 2026 Notes unless we were to obtain the consent of the lenders under the revolving credit facility or find another means to do so. Our and our subsidiaries’ future financing facilities may contain similar restrictions and provisions. Our failure to purchase such tendered 2026 Notes upon the occurrence of such Change of Control Repurchase Event would cause an event of default under the indenture governing the 2026 Notes and a cross-default under the agreements governing the revolving credit facility, which may result in the acceleration of such indebtedness requiring us to repay that indebtedness immediately. If the holders of the 2026 Notes exercise their right to require us to repurchase 2026 Notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our current and future debt instruments, and we may not have sufficient funds to repay any such accelerated indebtedness.

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A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the 2026 Notes or change in the debt markets could cause the liquidity or market value of the 2026 Notes to decline significantly.

Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the 2026 Notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the 2026 Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of 2026 Notes of any changes in our credit ratings. There can be no assurance that our credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by the rating agencies if in their judgment future circumstances relating to the basis of the credit ratings, such as adverse changes in our company, so warrant. The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the Notes.

General Risk Factors

We may experience fluctuations in our quarterly operating results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable to us on the debt securities we acquire, the default rate on such securities, the level of our expenses, including the cost of our indebtedness, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We and our portfolio companies are subject to regulation at the local, state and federal level. These laws and regulations, as well as their interpretation, may change from time to time, including as the result of interpretive guidance or other directives from the U.S. President and others in the executive branch, and new laws, regulations and interpretations may also come into effect, including those governing the types of investments we or our portfolio companies are permitted to make, any of which could have a material adverse effect on our business, and political uncertainty could increase regulatory uncertainty in the near term. The effects of legislative and regulatory proposals directed at the financial services industry or affecting taxation, may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. In addition, if we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.

Additionally, changes to the laws and regulations governing our operations, including those associated with RICs, may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities or result in the imposition of corporate-level taxes on us. Such changes could result in material differences to the strategies and plans set forth herein and may shift our investment focus from the areas of expertise of MC Advisors to other types of investments in which MC Advisors may have little or no expertise or experience. Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.

Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.

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Efforts to comply with the Sarbanes-Oxley Act involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely affect us and the market price of our securities.

As a publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and other rules implemented by the SEC.

We are subject to the Sarbanes-Oxley Act, and the related rules and regulations promulgated by the SEC. Under current SEC rules, our management is required to report on its internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and rules and regulations of the SEC thereunder. We are required to review on an annual basis our internal controls over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal controls over financial reporting. As a result, we expect to continue to incur associated expenses, which may negatively impact our financial performance and our ability to make distributions. This process also will result in a diversion of our management’s time and attention. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations and may not be able to ensure that the process is effective or that the internal controls are or will be effective in a timely manner. There can be no assurance that our quarterly reviews and annual audits will not identify additional material weaknesses. In the event that we are unable to maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, our value and results of operations may be adversely affected. As a result, we expect to incur significant associated expenses, which may negatively impact our financial performance and our ability to make distributions.

The failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning, could impair our ability to conduct business effectively.

The occurrence of a disaster such as a cyber-attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in our disaster recovery systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of Monroe Capital employees were unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised.

We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer systems could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we may experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss.

A disaster or a disruption in the infrastructure that supports our business, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, could have a material adverse impact on our ability to continue to operate our business without interruption. Our disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.

Third parties with which we do business may also be sources of cybersecurity or other technological risk. We outsource certain functions and these relationships allow for the storage and processing of our information, as well as client, counterparty, employee, and borrower information. While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure, destruction, or other cybersecurity incident that affects our data, resulting in increased costs and other consequences as described above.

In addition, cybersecurity has become a top priority for regulators around the world, and some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention or reputational damage.

A data breach could negatively impact our business and result in significant penalties.

MC Advisors is subject to numerous laws in various jurisdictions relating to privacy and the storage, sharing, use, processing, disclosure and protection of information that we and our affiliates hold. The European Union’s (the “EU”) General Data Protection Regulation, the Cayman Islands Data Protection Law, 2017, and the California Consumer Privacy Act of 2018 are recent examples of such laws, and MC Advisors anticipates new privacy and data protection laws will be passed in other jurisdictions in the future. In general, these laws introduce many new obligations on MC Advisors and its affiliates and service providers and create new rights for parties who have given us their personal information, such as investors and others.

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Breach of these laws could result in significant financial penalties for MC Advisors and/or us. As interpretation of these laws evolves and new laws are passed, MC Advisors could be required to make changes to its business practices, which could result in additional risks, costs and liabilities to us and adversely affect investment returns. While MC Advisors intends to comply with its privacy and data protection obligations under the privacy and data protection laws that are applicable to it, it is possible that MC Advisors will not be able to accurately anticipate the ways in which regulators and courts will apply or interpret these laws. A violation of applicable privacy and data protection law could result in negative publicity and/or subject MC Advisors or us, to significant costs associated with litigation, settlements, regulatory action, judgments, liabilities and/or penalties.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We do not own any real estate or other physical properties materially important to our operation. The principal executive offices of Monroe Capital are located at 311 South Wacker Drive, Suite 6400, Chicago, Illinois 60606. Monroe Capital and its affiliates currently have additional offices, and/or company representatives in New York, New York; Los Angeles, California; San Francisco, California; Atlanta, Georgia; Boston, Massachusetts; Naples, Florida; and Seoul, South Korea. MC Management furnishes us office space, and we reimburse it for such costs on an allocated basis.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK

Our common stock is traded on The Nasdaq Global Select Market under the ticker symbol “MRCC.” Our common stock has historically traded at prices both above and below our net asset value per share. It is not possible to predict whether our common stock will trade at, above or below net asset value.

HOLDERS

As of March 2, 2022, there were seven holders of record of our common stock. This does not include the number of stockholders that hold shares in “street name” through banks or broker-dealers.

DISTRIBUTIONS

We currently intend to make distributions to our stockholders on a quarterly basis out of assets legally available for distribution. We may also make additional distributions to our stockholders from time to time. Our quarterly and additional distributions, if any, will be determined by our board of directors.

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

In October 2012, we adopted an “opt out” dividend reinvestment plan for our common stockholders. When we declare a distribution, our stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts out” of our dividend reinvestment plan. If a stockholder opts out, that stockholder will receive cash distributions.

PERFORMANCE GRAPH

The following graph compares the return on our common stock from December 31, 2016 to December 31, 2021 with that of the Standard & Poor’s 500 Stock Index and the NASDAQ Financial 100 index. The graph assumes that on December 31, 2016, a person invested $100 in each of our common stock, the Standard & Poor’s 500 Stock Index and the NASDAQ Financial 100 index. The graph measures total stockholder return, which takes into account both changes in stock price and dividends. The graph also assumes the reinvestment of all dividends prior to any tax effect. The graph and other information furnished under this Part II Item 5 of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under, or to the liabilities of Section 18 of, the Exchange Act. The stock price performance included in the below graph is not necessarily indicative of future stock performance.

 

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Price Range of Common Stock and Distributions

Our common stock began trading on The Nasdaq Global Market under the ticker symbol “MRCC” on October 25, 2012. Prior to that date, there was no established trading market for our common stock. Our common stock is now traded on the Nasdaq Global Select Market. Our common stock has historically traded both above and below net asset value (“NAV”).

The following table sets forth the high and low closing sales prices of our common stock, the closing sales price as a premium (discount) to NAV per share and the distributions declared by us since January 1, 2020:

			Closing Sales Price				Premium (Discount) of High Sales Price to			Premium (Discount) of Low Sales Price to			Declared
	NAV(1)		High		Low		NAV(2)			NAV(2)			Distributions(3)(4)
Year ending December 31, 2021
Fourth Quarter	$	11.51	$	11.82	$	10.15		2.7	%		(11.8	)%	$	0.25
Third Quarter	$	11.45	$	11.13	$	10.14		(2.8	)%		(11.4	)%	$	0.25
Second Quarter	$	11.36	$	11.50	$	10.17		1.2	%		(10.5	)%	$	0.25
First Quarter	$	11.08	$	10.15	$	8.08		(8.4	)%		(27.1	)%	$	0.25
Year ending December 31, 2020
Fourth Quarter	$	11.00	$	9.40	$	6.45		(14.5	)%		(41.4	)%	$	0.25
Third Quarter	$	10.83	$	7.61	$	6.17		(29.7	)%		(43.0	)%	$	0.25
Second Quarter	$	10.37	$	8.81	$	6.01		(15.0	)%		(42.0	)%	$	0.25
First Quarter	$	10.04	$	12.07	$	4.90		20.2	%		(51.2	)%	$	0.35

(1)	NAV per share is determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period.
(2)	Calculated by taking the respective high or low closing sales price divided by the quarter end NAV and subtracting 1.
(3)	Represents the distribution declared in the specified quarter. We have adopted an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution, stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions. See “Dividend Reinvestment Plan.”
(4)	Our management monitors available taxable earnings, including net investment income and realized capital gains, to determine if a tax return of capital may occur for the year. To the extent that our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a tax return of capital to our stockholders. The tax character of distributions will be determined at the end of the fiscal year. There was no return of capital for tax purposes for the years ended December 31, 2021 or 2020.

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FEES AND EXPENSES

The following table is intended to assist you in understanding the costs and expenses that an investor in our common stock will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and actual amounts and percentages may vary. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you,” “us,” “the Company” or “Monroe Capital Corporation,” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in Monroe Capital Corporation.

	December 31, 2021
Stockholder transaction expenses:
Sales load (as a percentage of offering price)		—	%(1)
Offering expenses (as a percentage of offering price)		—	%(2)
Dividend reinvestment plan expenses		—	%(3)
Total stockholder transaction expenses (as a percentage of offering price)		—	%(2)
Estimated annual expenses (as a percentage of net assets attributable to common stock):
Base management fees		3.96	%(4)
Incentive fees payable under the Investment Advisory Agreement		1.39	%(5)
Interest payments on borrowed funds		6.22	%(6)
Other expenses (estimated)		1.49	%(7)
Acquired fund fees and expenses		0.88	%(8)
Total annual expense (estimated)		13.94	%(9)

⁽¹⁾ In the event that the securities to which this prospectus relates are sold to or through underwriters or agents, a corresponding prospectus supplement will disclose the applicable sales load.

(2)	The related prospectus supplement will disclose the estimated amount of total offering expenses (which may include offering expenses borne by third parties on our behalf), the offering price and the offering expenses borne by us as a percentage of the offering price.
(3)	The expenses of the dividend reinvestment plan are included in “other expenses.” See “Dividend Reinvestment Plan.”
(4)	Our base management fee is calculated initially at an annual rate of 1.75% of our average invested assets (calculated as total assets excluding cash, which includes assets financed using leverage); provided however, the base management fee is calculated at an annual rate equal to 1.00% of our average invested assets (calculated as total assets excluding cash, which includes assets financed using leverage) that exceeds the product of (i) 200% and (ii) our average net assets. For the avoidance of doubt, the 200% is calculated in accordance with the asset coverage limitation as defined in the 1940 Act to give effect to our exemptive relief with respect to MRCC SBIC’s SBA debentures. The “base management fee” percentage is calculated as a percentage of net assets attributable to common stockholders, rather than total assets, including assets that have been funded with borrowed monies, because common stockholders bear all of this cost. The base management fee in the table above assumes the base management fee remains consistent with fees incurred, gross of the base management fee waiver, if applicable, for the quarter ended December 31, 2021 of $2.5 million, based on average total assets (excluding cash) for the period of $568.4 million, as a percentage of our average net assets for the period of $248.1 million. See “Management and Other Agreements — Investment Advisory Agreement.”
(5)	Estimated assuming that annual incentive fees earned by MC Advisors remains consistent with the incentive fees earned, gross of the Incentive Fee Limitation due to the total return requirement and the incentive fee waivers, if applicable, for the quarter ended December 31, 2021 of $0.9 million, as a percentage of our average net assets of $248.1 million for the period. For information about our Incentive Fee Limitation and incentive fee waivers, see “Management and Other Agreements — Investment Advisory Agreement” and “Consolidated Statements of Operations” in our financial statements incorporated by reference into this prospectus. The incentive fee consists of two parts: The first part of the incentive fee, payable quarterly in arrears, equals 20% of our pre-incentive fee net investment income (including interest that is accrued but not yet received in cash), subject to a 2% quarterly (8% annualized) rate of return on the value of our net assets, or hurdle rate, and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, MC Advisors receives no incentive fee until our net investment income equals the hurdle rate of 2% but then receives, as a “catch-up,” 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, MC Advisors will receive 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply. The first component of the incentive fee will be computed and paid on income that includes, in the case of investments with a deferred interest feature such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends and zero coupon securities, accrued income that we have not yet received in cash. Since the hurdle rate is fixed, as interest rates rise, it will be easier for the MC Advisors to surpass the hurdle rate and receive an incentive fee based on net investment income. The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of our pre-incentive fee net investment income will be payable except to the extent that 20% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. In other words, any ordinary income incentive fee that is payable in a calendar quarter will be limited to the lesser of (i) 20% of the amount by which our pre-incentive fee net investment income for such calendar quarter exceeds the 2% hurdle, subject to the “catch-up” provision, and (ii) (x) 20% of the cumulative net increase in net assets resulting from operations for the then current and 11 preceding calendar quarters minus (y) the cumulative incentive fees accrued and/or paid for the 11 preceding calendar quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the sum of our pre-incentive fee net investment income, base management fees, realized gains and losses and unrealized appreciation and depreciation for the then current and 11 preceding calendar quarters. The second part of the incentive fee, payable annually in arrears, equals 20% of our realized capital gains on a cumulative basis from inception through the end of the fiscal year, if any (or upon the termination of the Investment Advisory Agreement, as of the termination date), computed net of all realized capital losses on a cumulative basis and unrealized capital depreciation, less the aggregate amount of any previously paid capital gain incentive fees. We will accrue (but not pay) an expense for potential payment of capital gain incentive fees with respect to any unrealized appreciation on our portfolio. See “Management and Other Agreements — Investment Advisory Agreement.”

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⁽⁶⁾ We may borrow funds from time to time to make investments to the extent we determine that it is appropriate to do so. The costs associated with any outstanding borrowings are indirectly borne by our investors. The table assumes borrowings are consistent with the average borrowings for the quarter ended December 31, 2021 of $334.6 million, no preferred stock issued or outstanding and average net assets of $248.1 million. For the quarter ended December 31, 2021, we had interest expense of $3.9 million (including fees for unused portions of commitments and amortization of deferred financing costs). As of December 31, 2021, the weighted average interest rate of our revolving credit facility (excluding debt issuance costs) was 3.14%, the weighted average interest rate on our SBA-guaranteed debentures (excluding debt issuance costs) was 3.18% and the interest rate on our senior unsecured notes was 4.75%. Although we do not have any current plans to issue debt securities or preferred stock in the next twelve months, we may issue debt securities or preferred stock, subject to our compliance with applicable requirements under the 1940 Act.

(7)	Includes our estimated overhead expenses, including payments under the Administration Agreement based on our allocable portion of overhead and other expenses incurred by MC Management. The table above assumes “other expenses” remain consistent with the $0.9 million incurred during the quarter ended December 31, 2021 and average net assets for the period of $248.1 million.
(8)	Our stockholders indirectly bear the expenses of our investment in SLF. SLF does not pay any fees to MC Advisors or its affiliates; however, SLF has entered into an administration agreement with MC Management, pursuant to which certain loan servicing and administrative functions are delegated to MC Management. SLF may reimburse MC Management for its allocable share of overhead and other expenses incurred by MC Management. For the quarter ended December 31, 2021, SLF incurred $52 thousand of allocable expenses. The table above assumes “acquired fund fees and expenses” remain consistent with the $0.5 million of expenses incurred for the quarter ended December 31, 2021 and average net assets for the period of $248.1 million. Future expenses for SLF may be substantially higher or lower because certain expenses may fluctuate over time.
(9)	“Total annual expenses” as a percentage of consolidated net assets attributable to common stock are higher than the total annual expenses percentage would be for a company that is not leveraged. We borrow money to leverage our net assets and increase our total assets. We calculate the “total annual expenses” percentage as a percentage of net assets (defined as total assets less indebtedness and after taking into account any incentive fees payable during the period), rather than the total assets, including assets that have been purchased with borrowed amounts. The terms of our indebtedness may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Borrowings” incorporated by reference into this prospectus and in other documents incorporated by reference into this prospectus. If the “total annual expenses” percentage were calculated instead as a percentage of average consolidated total assets for the quarter ended December 31, 2021, our “total annual expenses” would be 5.91% of average consolidated total assets for the period of $585.0 million. With certain limited exceptions, we are only allowed to borrow amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150%. We have received exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiary guaranteed by the SBA from the definition of senior securities for the purposes of the asset coverage ratio. We have included our estimated leverage expenses (consistent with the assumptions in footnote (7)) in “total annual expenses.”

ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, the following discussion and other parts of this Annual Report on Form 10-K contain forward-looking information that involves risks and uncertainties.

Please see “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

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

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

Our investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through investment in senior secured, unitranche secured and junior secured debt and, to a lesser extent, unsecured subordinated debt and equity investments. We seek to use our extensive leveraged finance origination infrastructure and broad expertise in sourcing loans to invest in primarily senior secured, unitranche secured and junior secured debt of middle-market companies. Our investments will generally range between $2.0 million and $25.0 million each, although this investment size may vary proportionately with the size of our capital base. As of December 31, 2021, our portfolio included approximately 75.4% senior secured loans, 9.2% unitranche secured loans, 2.6% junior secured loans and 12.8% equity securities, compared to December 31, 2020, when our portfolio included approximately 74.1% senior secured loans, 11.7% unitranche secured loans, 2.6% junior secured loans and 11.6% equity securities. We expect that the companies in which we invest may be leveraged, often as a result of leveraged buy-outs or other recapitalization transactions, and, in certain cases, will not be rated by national ratings agencies. If such companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies.

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

On February 28, 2014, our wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limited partnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958. MRCC SBIC commenced operations on September 16, 2013. See “SBA Debentures” below for more information.

Investment income

We generate interest income on the debt investments in portfolio company investments that we originate or acquire. Our debt investments, whether in the form of senior secured, unitranche secured or junior secured debt, typically have an initial term of three to seven years and bear interest at a fixed or floating rate. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. In some cases, our investments provide for deferred interest of payment-in-kind (“PIK”) interest. In addition, we may generate revenue in the form of commitment, origination, amendment, structuring or due diligence fees, fees for providing managerial assistance and consulting fees. Loan origination fees, original issue discount and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income. We record prepayment premiums and prepayment gains (losses) on loans as interest income. As the frequency or volume of the repayments which trigger these prepayment premiums and prepayment gains (losses) may fluctuate significantly from period to period, the associated interest income recorded may also fluctuate significantly from period to period. Interest and fee income are recorded on the accrual basis to the extent we expect to collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. We record fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recognized as fee income in the period the service has been completed.

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

Expenses

Our primary operating expenses include the payment of base management and incentive fees to MC Advisors, under the investment advisory and management agreement (the “Investment Advisory Agreement”), the payment of fees to MC Management for our allocable portion of overhead and other expenses under the administration agreement (the “Administration Agreement”) and other operating costs. See Note 6 to our consolidated financial statements and “Related Party Transactions” below for additional information on our Investment Advisory Agreement and Administration Agreement. Our expenses also include interest expense on our various forms of indebtedness. We bear all other out-of-pocket costs and expenses of our operations and transactions.

Net gain (loss)

We recognize realized gains or losses on investments, foreign currency forward contracts and foreign currency and other transactions based on the difference between the net proceeds from the disposition and the cost basis without regard to unrealized gains or losses previously recognized within net realized gain (loss) on the consolidated statements of operations. We record current period changes in fair value of investments, foreign currency forward contracts, foreign currency and other transactions within net change in unrealized gain (loss) on the consolidated statements of operations.

Portfolio and Investment Activity

During the year ended December 31, 2021, we invested $146.9 million in 32 new portfolio companies and $80.0 million in 33 existing portfolio companies and had $234.5 million in aggregate amount of sales and principal repayments, resulting in net sales and repayments of $7.6 million for the year.

During the year ended December 31, 2020, we invested $73.1 million in 18 new portfolio companies and $70.3 million in 39 existing portfolio companies and had $194.6 million in aggregate amount of sales and principal repayments, resulting in net sales and repayments of $51.2 million for the year.

During the year ended December 31, 2019, we invested $98.6 million in 18 new portfolio companies and $132.0 million in 33 existing portfolio companies and had $166.1 million in aggregate amount of sales and principal repayments, resulting in net investments of $64.5 million for the year.

The following table shows portfolio yield by security type:

	December 31, 2021						December 31, 2020
	Weighted Average Annualized Contractual Coupon Yield (1)			Weighted Average Annualized Effective Yield (2)			Weighted Average Annualized Contractual Coupon Yield (1)			Weighted Average Annualized Effective Yield (2)
Senior secured loans		8.5	%		8.5	%		8.1	%		8.1	%
Unitranche secured loans		5.1			5.4			6.3			6.5
Junior secured loans		10.1			10.1			7.6			7.6
Preferred equity securities		3.0			3.0			1.4			1.4
Total		7.9	%		8.0	%		7.7	%		7.7	%

⁽¹⁾ The weighted average annualized contractual coupon yield at period end is computed by dividing (a) the interest income on our debt investments and preferred equity investments (with a stated coupon rate) at the period end contractual coupon rate for each investment by (b) the par value of our debt investments (excluding debt investments acquired for no cost in a restructuring on non-accrual status) and the cost basis of our preferred equity investments. We exclude loans acquired for no cost in a restructuring on non-accrual status within this metric as management believes this disclosure provides a better indication of return on invested capital. This exclusion impacts only the junior secured loans and total disclosed above. The weighted average contractual coupon yield including debt investments acquired for no cost in a restructuring on non-accrual status was 9.0% for junior secured loans and 7.9% in total as of December 31, 2021. The weighted average contractual coupon yield including debt investments acquired for no cost in a restructuring on non-accrual status was 4.1% for junior secured loans and 7.5% in total as of December 31, 2020.

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⁽²⁾ The weighted average annualized effective yield on portfolio investments at period end is computed by dividing (a) interest income on our debt investments and preferred equity investments (with a stated coupon rate) at the period end effective rate for each investment by (b) the par value of our debt investments (excluding debt investments acquired for no cost in a restructuring on non-accrual status) and the cost basis of our preferred equity investments. We exclude loans acquired for no cost in a restructuring on non-accrual status within this metric as management believes this disclosure provides a better indication of return on invested capital. This exclusion impacts only the junior secured loans and total disclosed above. The weighted average effective yield including debt investments acquired for no cost in a restructuring on non-accrual status was 9.0% for junior secured loans and 7.9% in total as of December 31, 2021. The weighted average effective yield including debt investments acquired for no cost in a restructuring on non-accrual status was 4.1% for junior secured loans and 7.5% in total as of December 31, 2020. The weighted average annualized effective yield on portfolio investments is a metric on the investment portfolio alone and does not represent a return to stockholders. This metric is not inclusive of our fees and expenses, the impact of leverage on the portfolio or sales load that may be paid by stockholders.

The following table shows the composition of our investment portfolio (in thousands):

	December 31, 2021				December 31, 2020
Fair Value:
Senior secured loans	$	423,700	75.4	%	$	405,224	74.1	%
Unitranche secured loans		51,494	9.2			64,040	11.7
Junior secured loans		14,364	2.6			14,592	2.6
LLC equity interest in SLF		41,125	7.3			39,284	7.2
Equity securities		31,010	5.5			23,899	4.4
Total	$	561,693	100.0	%	$	547,039	100.0	%

Our portfolio composition remained relatively consistent with December 31, 2020. The increase in the effective yield on our portfolio included the benefit of reducing the number of investments on non-accrual status during the year ended December 31, 2021.

The following table shows our portfolio composition by industry (in thousands):

	December 31, 2021				December 31, 2020
Fair Value:
Aerospace & Defense	$	7,972	1.4	%	$	—	—	%
Automotive		21,556	3.8			9,637	1.8
Banking, Finance, Insurance & Real Estate		99,091	17.6			72,627	13.3
Beverage, Food & Tobacco		19,133	3.4			20,676	3.8
Capital Equipment		12,839	2.3			13,750	2.5
Chemicals, Plastics & Rubber		10,163	1.8			27,754	5.1
Construction & Building		16,636	3.0			16,809	3.0
Consumer Goods: Durable		9,734	1.7			18,893	3.4
Consumer Goods: Non-Durable		8,460	1.5			13,027	2.4
Containers, Packaging & Glass		—	—			4,997	0.9
Environmental Industries		17,693	3.2			13,168	2.4
Healthcare & Pharmaceuticals		53,179	9.5			37,815	6.9
High Tech Industries		54,085	9.6			81,417	14.9
Hotels, Gaming & Leisure		2,706	0.5			1,771	0.3
Investment Funds & Vehicles		41,125	7.3			39,284	7.2
Media: Advertising, Printing & Publishing		16,794	3.0			31,553	5.8
Media: Broadcasting & Subscription		2,477	0.5			2,227	0.4
Media: Diversified & Production		24,220	4.3			6,811	1.2
Retail		11,478	2.0			18,443	3.4
Services: Business		71,540	12.7			78,584	14.4
Services: Consumer		39,248	7.0			25,306	4.6
Telecommunications		5,988	1.1			1,100	0.2
Wholesale		15,576	2.8			11,390	2.1
Total	$	561,693	100.0	%	$	547,039	100.0	%

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Portfolio Asset Quality

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

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

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

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

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

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The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December 31, 2021 (in thousands):

Investment Performance Risk Rating	Investments at Fair Value		Percentage of Total Investments
1	$	1,759		0.3	%
2		465,224		82.9
3		75,942		13.5
4		18,136		3.2
5		632		0.1
Total	$	561,693		100.0	%

The following table shows the distribution of our investments on the 1 to 5 investment performance risk rating scale as of December 31, 2020 (in thousands):

Investment Performance Risk Rating	Investments at Fair Value		Percentage of Total Investments
1	$	1,592		0.3	%
2		428,554		78.4
3		92,001		16.8
4		19,844		3.6
5		5,048		0.9
Total	$	547,039		100.0	%

As of December 31, 2021, we had six borrowers with loans or preferred equity securities on non-accrual status (BLST Operating Company, LLC (“BLST”), Curion Holdings, LLC (“Curion”), Education Corporation of America (“ECA”), NECB Collections, LLC (“NECB”), Toojay’s Management, LLC (“Toojay’s OldCo”) and Vinci Brands LLC formerly Incipio, LLC (“Incipio”)), and these investments totaled $14.7 million in fair value, or 2.6% of our total investments at fair value. As of December 31, 2020, we had 12 borrowers with loans or preferred equity securities on non-accrual status (BLST, California Pizza Kitchen, Inc., Curion, ECA, Incipio last out term loan and third lien tranches, Luxury Optical Holdings Co. (“Luxury Optical”), NECB, Parterre Flooring & Surface Systems, LLC (“Parterre”), SHI Holdings, Inc. (“SHI”), The Worth Collection, Ltd. (“Worth”), Toojay’s OldCo and Valudor Products, LLC preferred equity), and these investments totaled $22.3 million in fair value, or 4.1% of our total investments at fair value.

Results of Operations

Operating results were as follows (in thousands):

	For the years ended December 31,
	2021			2020 (1)			2019
Total investment income	$	53,830		$	61,581		$	68,193
Total expenses, net of fee waivers		31,380			30,823			39,142
Net investment income before income taxes		22,450			30,758			29,051
Income taxes, including excise taxes		282			370			17
Net investment income		22,168			30,388			29,034
Net realized gain (loss) on investments		(21,764	)		2,551			(933	)
Net realized gain (loss) on extinguishment of debt		(3,110	)		—			—
Net realized gain (loss) on foreign currency forward contracts		(48	)		(16	)		12
Net realized gain (loss) on foreign currency and other transactions		(895	)		(14	)		(4	)
Net realized gain (loss)		(25,817	)		2,521			(925	)
Net change in unrealized gain (loss) on investments		34,579			(30,559	)		(8,002	)
Net change in unrealized gain (loss) on foreign currency forward contracts		894			(54	)		(75	)
Net change in unrealized gain (loss) on foreign currency and other transactions		635			(650	)		(818	)
Net change in unrealized gain (loss)		36,108			(31,263	)		(8,895	)
Net increase (decrease) in net assets resulting from operations	$	32,459		$	1,646		$	19,214

⁽¹⁾ In May 2020, an arbitrator issued a final award in favor of the estate of Rockdale Blackhawk, LLC (the “Estate”) in the legal proceeding between the Estate and a national insurance carrier. Our share of the net proceeds from the award exceeded the contractual obligations due to us as a result of our right to receive excess proceeds pursuant to the terms of a sharing agreement between the lenders and the Estate. In June 2020, we received $33.1 million as an initial payment of proceeds from the legal proceedings from the Estate, of which $19.5 million was recorded as a reduction in the cost basis of our investment in Rockdale Blackhawk, LLC (“Rockdale”), $3.9 million was recorded as the collection of previously accrued interest, $7.4 million was recorded as investment income for previously unaccrued interest and fees and $2.3 million was recorded as realized gains. Additionally, as an offset, we recorded net change in unrealized (loss) of ($8.2) million primarily as a result of the reversal associated with the collection of proceeds from the Estate. Total net income associated with our investment in Rockdale was $1.9 million during the year ended December 31, 2020. As of December 31, 2021, we have a remaining investment in Rockdale associated with residual proceeds currently expected from the Estate of $1.7 million.

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Investment Income

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

	For the years ended December 31,
	2021		2020		2019
Interest income	$	35,738	$	42,640	$	54,254
PIK interest income		8,320		8,776		5,538
Dividend income (1)		5,712		4,557		4,110
Fee income		1,267		3,222		1,926
Prepayment gain (loss)		1,691		1,133		883
Accretion of discounts and amortization of premium		1,102		1,253		1,482
Total investment income	$	53,830	$	61,581	$	68,193

⁽¹⁾ During the years ended December 31, 2021, 2020 and 2019, includes PIK dividends of $1,164, $157 and $54, respectively.

The decrease in investment income of $7.8 million during the year ended December 31, 2021 is primarily the result of the inclusion of $7.4 million of previously unrecorded interest and fee income associated with our investment in Rockdale during the year ended December 31, 2020. The decrease in investment income of $6.6 million during the year ended December 31, 2020 is primarily the result of declines in the effective rate on the portfolio driven by decreases in LIBOR, the placement of additional investments on non-accrual status and a decrease in average outstanding loan balances, partially offset by $7.4 million of interest and fee income associated with our investment in Rockdale that had not been recorded prior to the initial payment from the Estate.

Operating Expenses

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

	For the years ended December 31,
	2021		2020		2019
Interest and other debt financing expenses	$	16,074	$	17,989	$	20,268
Base management fees, net of base management fee waivers (1)		9,514		9,377		10,780
Incentive fees, net of incentive fee waivers (2)		2,206		—		4,429
Professional fees		1,013		1,023		1,209
Administrative service fees		1,357		1,300		1,309
General and administrative expenses		1,072		989		991
Directors’ fees		144		145		156
Total expenses, net of base management fee and incentive fee waivers	$	31,380	$	30,823	$	39,142

(1)

Base management fees for the year ended December 31, 2021, 2020 and 2019 were $9,514, $9,807 and $10,780, respectively, and MC Advisors elected to voluntarily waive zero, $430 and zero, respectively, of these base management fees.

(2)

During the years ended December 31, 2021, 2020 and 2019, MC Advisors waived part one incentive fees (based on net investment income) of $1,484, $712 and $1,182, respectively. Incentive fees during the years ended December 31, 2021, 2020 and 2019 were limited by zero, $5,012 and $1,081 due to the Incentive Fee Limitation, respectively. See Note 6 in our attached consolidated financial statements for additional information on the Incentive Fee Limitation.

The composition of our interest and other debt financing expenses, average debt outstanding and average stated interest rates (i.e. the rate in effect plus spread) were as follows (in thousands):

	For the years ended December 31,
	2021			2020			2019
Interest expense – revolving credit facility	$	4,593		$	5,594		$	8,710
Interest expense – 2023 Notes		837			6,270			5,756
Interest expense – 2026 Notes		5,763			—			—
Interest expense – SBA debentures		2,676			3,944			3,933
Amortization of deferred financing costs		2,205			2,181			1,869
Total interest and other debt financing expenses	$	16,074		$	17,989		$	20,268
Average debt outstanding		332,034			370,904			397,503
Average stated interest rate		4.1	%		4.2	%		4.5	%

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The increase in expenses of $0.6 million during the year ended December 31, 2021 is primarily the result of an increase in incentive fees, partially offset by a decrease in interest expense due to lower average debt outstanding (including our repayment of $58.1 million in SBA debentures during the year ended December 31, 2021). Additionally, the refinance of our 5.75% 2023 Notes with the 4.75% 2026 Notes during the year ended December 31, 2021 contributed to the decline in interest expense. The decrease in expenses of $8.3 million during the year ended December 31, 2020 is primarily the result of a decrease in incentive fees due to a larger Incentive Fee Limitation during the year ended December 31, 2020, a decrease in interest expense on our revolving credit facility as a result of lower average debt outstanding and a reduction in LIBOR and a decline in management fees due to a decrease in average portfolio size. Additionally, MC Advisors voluntarily waived base management fees of $0.4 million during the year ended December 31, 2020.

Income Taxes, Including Excise Taxes

We have elected to be treated as a RIC under Subchapter M of the Code and operate in a manner so as to qualify for the tax treatment available to RICs. To maintain qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements and distribute to stockholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward such taxable income in excess of current year dividend distributions from such current year taxable income into the next year and pay a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year dividend distributions, we accrue excise tax, if any, on estimated excess taxable income as such taxable income is earned. For the years ended December 31, 2021, 2020 and 2019, we recorded a net expense on the consolidated statements of operations of $0.3 million, $0.4 million, and $10 thousand, respectively, for U.S. federal excise tax.

Certain of our consolidated subsidiaries are subject to U.S. federal and state corporate-level income taxes. For the years ended December 31, 2021, 2020 and 2019, we recorded a net tax expense on the consolidated statements of operations of $4 thousand, $2 thousand and $7 thousand, respectively, for these subsidiaries.

Net Realized Gain (Loss)

During the years ended December 31, 2021, 2020 and 2019, we had sales or dispositions of investments of $19.3 million, $32.4 million and $1.7 million, respectively, resulting in ($21.8) million, $2.6 million and ($0.9) million of net realized gain (loss), respectively. During 2021, the realized losses were primarily attributable to the realization of the previously recorded unrealized loss on our investments in Worth, SHI, Parterre and Answers Finance, LLC, partially offset by the gain on the disposition of Luxury Optical. During 2020, $2.3 million of the net realized gain was attributable to our investment in Rockdale.

We may enter into foreign currency forward contracts to reduce our exposure to foreign currency exchange rate fluctuations. During the years ended December 31, 2021, 2020 and 2019, we had ($48) thousand, ($16) thousand and $12 thousand of net realized gain (loss) on foreign currency forward contracts, respectively. During the years ended December 31, 2021, 2020 and 2019, we had ($0.9) million, ($14) thousand and ($4) thousand of net realized gain (loss) on foreign currency and other transactions, respectively.

Net Change in Unrealized Gain (Loss)

For the years ended December 31, 2021, 2020 and 2019, our investments had $34.6 million, ($30.6) million and ($8.0) million of net change in unrealized gain (loss), respectively. The net change in unrealized gain (loss) includes both unrealized gain on investments in our portfolio with mark-to-market gains during the year and unrealized loss on investments in our portfolio with mark-to-market losses during the year. The net change in unrealized gains during the year ended December 31, 2021 was primarily attributable to the realization of previously recorded unrealized losses upon the disposition of certain assets during the year. Excluding the $26.5 million reversal of previously recognized unrealized losses on our investments due to realizations during the year, we estimate approximately $9.7 million of the net unrealized gain on investments during the year ended December 31, 2021 was attributable to broad market movements and tightening of credit spreads in the loan markets. Approximately $7.9 million of these net unrealized gains were attributable to investments held in the portfolio directly, while approximately $1.8 million of these gains were attributable to our investment in SLF. This was partially offset by ($1.6) million in net unrealized losses on investments attributable to portfolio companies that have underlying credit or fundamental performance concerns resulting in a risk rating of Grade 3, 4 or 5 on our investment performance risk rating scale.

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During the year ended December 31, 2020, our operating results were negatively impacted by the uncertainty surrounding the COVID-19 pandemic which has caused severe disruptions in the global economy and negatively impacted the fair value and performance of our investment portfolio.  We estimate approximately ($20.9) million of the net unrealized losses were attributable to specific credit or fundamental performance of the underlying portfolio companies, a significant portion of which is as a result of the impact of the COVID-19 pandemic on individual credit performance. We also recorded ($8.4) million of net change in unrealized (loss) as a result of the reversal of previously recorded unrealized gains associated with the collection of proceeds from Rockdale. Additionally, we estimate that the remainder of the net unrealized losses during the year ended December 31, 2020, were attributable to broad market movements and widening of credit spreads. This includes net unrealized losses of ($3.1) million attributable to our investment in the SLF. The SLF’s underlying investments are loans to middle-market borrowers that are generally larger than the rest of our portfolio which is focused on lower middle-market companies. These upper middle-market loans held within the SLF experienced higher volatility in valuation than the rest of our portfolio.

For the years ended December 31, 2021, 2020 and 2019, our foreign currency forward contracts had $0.9 million, ($54) thousand, and ($75) thousand of net change in unrealized gain (loss), respectively. For the years ended December 31, 2021, 2020 and 2019, our foreign currency borrowings had $0.6 million, ($0.7) million and ($0.8) million of net change in unrealized gain (loss), respectively.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the years ended December 31, 2021, 2020 and 2019, the net increase (decrease) in net assets from operations was $32.5 million, $1.6 million and $19.2 million, respectively. Based on the weighted average shares of common stock outstanding for the years ended December 31, 2021, 2020 and 2019, our per share net increase (decrease) in net assets resulting from operations was $1.51, $0.08 and $0.94, respectively. The $30.8 million increase during the year ended December 31, 2021, is primarily the result of net unrealized mark-to-market gains on investments in the portfolio during the year ended December 31, 2021, as compared to the year ended December 31, 2020, where investments in the portfolio experienced significant net unrealized mark to mark-to-market losses, primarily as a result of market volatility and deterioration of fundamental performance on certain portfolio companies related to the COVID-19 pandemic.

The $17.6 million decrease during the year ended December 31, 2020, is primarily the result of a comparative increase in net mark-to-market losses on investments in the portfolio, partially offset by an increase in net investment income.

Liquidity and Capital Resources

As of December 31, 2021, we had $2.6 million in cash, $15.5 million in cash at MRCC SBIC, $151.0 million of total debt outstanding on our revolving credit facility, $130.0 million in 2026 Notes and $56.9 million in outstanding SBA debentures. We had $104.0 million available for additional borrowings on our revolving credit facility, subject to borrowing base availability. See “Borrowings” below for additional information.

In accordance with the 1940 Act, we are permitted to borrow amounts such that our asset coverage ratio, as defined in the 1940 Act, is at least 150% after such borrowing. We were granted exemptive relief from the SEC for permission to exclude the debt of MRCC SBIC guaranteed by the SBA from the asset coverage test under the 1940 Act. As of December 31, 2021 and December 31, 2020, our asset coverage ratio based on aggregate borrowings outstanding was 189% and 200%, respectively.

Cash Flows

For the year ended December 31, 2021, we experienced a net increase (decrease) in cash and restricted cash of ($14.3) million. During the same period operating activities provided $20.0 million, primarily as a result of sales of and principal repayments on portfolio investments, partially offset by purchases of portfolio investments. During the same period, we used $34.3 million in financing activities, primarily as a result of repayments on our 2023 Notes and SBA debentures and distributions to stockholders, partially offset by net proceeds from our 2026 Notes (net of deferred financing cost payments), net borrowings on our revolving credit facility and proceeds from shares issued under the at-the market (“ATM”) securities offering program.

For the year ended December 31, 2020, we experienced a net increase (decrease) in cash and restricted cash of $2.8 million. During the same period operating activities provided $74.9 million, primarily as a result of sales of and principal repayments on portfolio investments, partially offset by purchases of portfolio investments. During the same period, we used $72.1 million in financing activities, primarily as a result of net repayments on our revolving credit facility and distributions to stockholders, partially offset by proceeds from shares issued under the ATM securities offering program.

For the year ended December 31, 2019, we experienced a net increase (decrease) in cash and restricted cash of $11.9 million. During the same period we used $39.2 million in operating activities, primarily as a result of purchases of portfolio investments, partially offset by sales of and principal repayments on portfolio investments. During the same period, we generated $51.2 million from financing activities, primarily as a result of net proceeds from our 2023 Notes (net of deferred financing cost payments) and net borrowings on our revolving credit facility, partially offset by distributions to stockholders.

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Capital Resources

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

As a BDC, we are generally not permitted to issue and sell our common stock at a price below net asset value (“NAV”) per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current NAV per share of our common stock if our board of directors (“Board”), including our independent directors, determines that such sale is in the best interests of us and our stockholders, and if our stockholders have approved such sales. On June 16, 2021, our stockholders once again voted to allow us to sell or otherwise issue common stock at a price below net asset value per share for a period of one year, subject to certain limitations. As of December 31, 2021 and 2020, we had 21,666,340 and 21,303,540 shares outstanding, respectively.

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

Stock Issuances: On May 12, 2017, we entered into ATM equity distribution agreements with each of JMP Securities LLC (“JMP”) and FBR Capital Markets & Co. (“FBR”) and (the “ATM Program”) through which we can sell, by means of ATM offerings from time to time, up to $50.0 million of our common stock. On May 8, 2020, we entered into an amendment to the ATM Program to extend its term. All other material terms of the ATM Program remain unchanged. There were no stock issuances during the year ended December 31, 2019. During the year ended December 31, 2020, we sold 858,976 shares at an average price of $7.78 per share for gross proceeds of $6.7 million under the ATM Program. Aggregate underwriter’s discounts and commissions were $0.1 million and offering costs were $0.1 million, resulting in net proceeds of approximately $6.5 million. During the year ended December 31, 2021, we sold 362,800 shares at an average price of $11.53 per share for gross proceeds of $4.2 million under the ATM Program. Aggregate underwriter’s discounts and commissions were $63 thousand and offering costs were $27 thousand, resulting in net proceeds of approximately $4.1 million.

Borrowings

Revolving Credit Facility: We have a $255.0 million revolving credit facility with ING Capital LLC, as agent. The revolving credit facility has an accordion feature which permits us, under certain circumstances to increase the size of the facility up to $400.0 million (subject to maintaining 150% asset coverage, as defined by the 1940 Act). The revolving credit facility is secured by a lien on all of our assets, including cash on hand, but excluding the assets of our wholly-owned subsidiary, MRCC SBIC. We may make draws under the revolving credit facility to make or purchase additional investments through March 1, 2023 and for general working capital purposes until March 1, 2024, the maturity date of the revolving credit facility.

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Our ability to borrow under the revolving credit facility is subject to availability under the borrowing base, which permits us to borrow up to 72.5% of the fair market value of our portfolio company investments depending on the type of investment we hold and whether the investment is quoted. Our ability to borrow is also subject to certain concentration limits, and continued compliance with the representations, warranties and covenants given by us under the facility. The revolving credit facility contains certain financial and restrictive covenants, including, but not limited to, our maintenance of: (1) minimum consolidated total net assets at least equal to $150.0 million plus 65% of the net proceeds to us from sales of our equity securities after March 1, 2019; (2) a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of not less than 1.5 to 1; and (3) a senior debt coverage ratio of at least 2 to 1. The revolving credit facility also requires us to undertake customary indemnification obligations with respect to ING Capital LLC and other members of the lending group and to reimburse the lenders for expenses associated with entering into the credit facility. The revolving credit facility also has customary provisions regarding events of default, including events of default for nonpayment, change in control transactions at both Monroe Capital Corporation and MC Advisors, failure to comply with financial and negative covenants, and failure to maintain our relationship with MC Advisors. If we incur an event of default under the revolving credit facility and fail to remedy such default under any applicable grace period, if any, then the entire revolving credit facility could become immediately due and payable, which would materially and adversely affect our liquidity, financial condition, results of operations and cash flows.

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

As of December 31, 2021, we had U.S. dollar borrowings of $146.4 million and non-U.S. dollar borrowings denominated in Great Britain pounds of £3.4 million ($4.6 million in U.S. dollars) under the revolving credit facility. As of December 31, 2020, we had U.S. dollar borrowings of $104.6 million and non-U.S. dollar borrowings denominated in Great Britain pounds of £16.1 million ($22.0 million in U.S. dollars) under the revolving credit facility. The borrowings denominated in Great Britain pounds may be positively or negatively affected by movements in the rate of exchange between the U.S. dollar and the Great Britain pound. These movements are beyond our control and cannot be predicted. The borrowings denominated in Great Britain pounds are translated into U.S. dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign currency borrowings is included in net change in unrealized gain (loss) on foreign currency and other transactions on our consolidated statements of operations and totaled $0.7 million, ($0.7) million and ($0.8) million for the years ended December 31, 2021, 2020 and 2019, respectively.

Borrowings under the revolving credit facility bear interest, at our election, at an annual rate of LIBOR (one-month, three-month or six-month at our discretion based on the term of the borrowing) plus 2.625% or at a daily rate equal to 1.625% per annum plus the greater of the prime interest rate, the federal funds rate plus 0.5% or LIBOR plus 1.0%, with a LIBOR floor of 0.5%. In addition to the stated interest rate on borrowings under the revolving credit facility, we are required to pay a commitment fee and certain conditional fees based on usage of the expanded borrowing base and usage of the asset coverage ratio flexibility. A commitment fee of 0.5% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is less than 35% of the then available maximum borrowing or a commitment fee of 1.0% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is greater than or equal to 35% of the then available maximum borrowing. As of December 31, 2021 and December 31, 2020, the outstanding borrowings were accruing at a weighted average interest rate of 3.1% and 3.2%, respectively.

2023 Notes: On February 18, 2021, we redeemed $109.0 million in aggregate principal amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC Subtopic 470-50, Debt – Modifications and Extinguishment (“ASC 470-50”), which resulted in a realized loss of $2.3 million (primarily comprised of the unamortized deferred financing costs at the time of the redemption) and was recorded in net gain (loss) on extinguishment of debt on our consolidated statements of operations. The 2023 Notes were delisted from the Nasdaq Global Select Market, in conjunction with the redemption.

2026 Notes: On January 25, 2021, we closed a private offering of $130.0 million in aggregate principal amount of senior unsecured notes (the “2026 Notes”). Aggregate underwriting commissions were $3.3 million and other issuance costs were $0.7 million, resulting in proceeds of approximately $126.0 million. The 2026 Notes mature on February 15, 2026 and may be redeemed in whole or in part at any time or from time to time at our option at par plus a “make-whole” premium, if applicable. The 2026 Notes bear interest at an annual rate of 4.75% payable semi-annually on February 15 and August 15 of each year, commencing on August 15, 2021. The 2026 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future unsecured indebtedness.

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

The SBIC license allowed MRCC SBIC to obtain leverage by issuing SBA debentures. On March 1, 2022, MRCC SBIC fully repaid its outstanding SBA debentures and notified the SBA of its intent to surrender its license to operate as a SBIC. See Recent Developments for additional information. SBA debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten-year maturity. The principal amount of SBA debentures is not required to be paid prior to maturity but may be prepaid on a semi-annual basis without penalty. The interest rate of SBA debentures is fixed on a semi-annual basis (pooling date) at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, had a superior claim to MRCC SBIC’s assets over our stockholders.

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During the year ended December 31, 2021, we repaid $58.1 million in aggregate amount of SBA debentures. The repayment was accounted for as a debt extinguishment in accordance with ASC 470-50 which resulted in a realized loss of $0.8 million (primarily comprised of the unamortized deferred financing costs at the time of the repayment) recorded in net gain (loss) on extinguishment of debt on our consolidated statements of operations. As of December 31, 2021, MRCC SBIC had $15.5 million in cash and $87.2 million in investments at fair value. As of December 31, 2020, MRCC SBIC had $25.7 million in cash and $131.2 million in investments at fair value.

As of both December 31, 2021 and 2020, MRCC SBIC had $57.6 million in leverageable capital and the following SBA debentures outstanding (in thousands):

Maturity Date	Interest Rate			December 31, 2021		December 31, 2020
September 2024		3.4	%	$	2,920	$	12,920
March 2025		3.3	%		14,800		14,800
March 2025		2.9	%		7,080		7,080
September 2025		3.6	%		—		5,200
March 2027		3.5	%		—		20,000
September 2027		3.2	%		32,100		32,100
March 2028		3.9	%		—		18,520
September 2028		4.2	%		—		4,380
Total				$	56,900	$	115,000

Distributions

Our Board will determine the timing and amount, if any, of our distributions. We intend to pay distributions on a quarterly basis. In order to avoid corporate-level tax on the income we distribute as a RIC, we must distribute to our stockholders at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, on an annual basis out of the assets legally available for such distributions. In addition, we also intend to distribute any realized net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) at least annually out of the assets legally available for such distributions. Distributions to stockholders for the years ended December 31, 2021, 2020 and 2019 totaled $21.5 million ($1.00 per share), $23.1 million ($1.10 per share) and $28.6 million ($1.40 per share), respectively, none of which represented a return of capital. The tax character of such distributions is determined at the end of the fiscal year.

In October 2012, we adopted an “opt out” dividend reinvestment plan (“DRIP”) for our common stockholders. When we declare a distribution, our stockholders’ cash distributions will automatically be reinvested in additional shares of our common stock unless a stockholder specifically “opts out” of our DRIP. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions, stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes.

MRCC Senior Loan Fund I, LLC

We co-invest with Life Insurance Company of the Southwest (“LSW”) in senior secured loans through SLF, an unconsolidated Delaware LLC. SLF is capitalized as underlying investment transactions are completed, taking into account available debt and equity commitments available for funding these investments. All portfolio and investment decisions in respect to SLF must be approved by the SLF investment committee, consisting of one representative of each of us and LSW. SLF may cease making new investments upon notification of either member but operations will continue until all investments have been sold or paid-off in the normal course of business. Investments held by SLF are measured at fair value using the same valuation methodologies as described below. Our investment is illiquid in nature as SLF does not allow for withdrawal from the LLC or the sale of a member’s interest unless approved by the board members of SLF. The full withdrawal of a member would result in an orderly wind-down of SLF.

73

SLF’s profits and losses are allocated to us and LSW in accordance with the respective ownership interests. As of both December 31, 2021 and 2020, we and LSW each owned 50.0% of the LLC equity interests of SLF. As of both December 31, 2021 and 2020, SLF had $100.0 million in equity commitments from its members (in the aggregate), of which $84.3 million was funded.

As of both December 31, 2021 and 2020, we have committed to fund $50.0 million of LLC equity interest subscriptions to SLF. As of both December 31, 2021 and 2020, $42.2 million of our LLC equity interest subscriptions to SLF had been called and contributed, net of return of capital distributions subject to recall.

For the years ended December 31, 2021, 2020 and 2019, we received $4.3 million, $4.4 million and $4.0 million of dividend income from our LLC equity interest in SLF, respectively.

SLF has a senior secured revolving credit facility (as amended, the “SLF Credit Facility”) with Capital One, N.A., through its wholly-owned subsidiary MRCC Senior Loan Fund I Financing SPV, LLC (“SLF SPV”), The SLF Credit Facility originally allowed SLF SPV to borrow up to $170.0 million, subject to leverage and borrowing base restrictions and borrowings on the SLF Credit Facility bore interest at an annual rate of LIBOR (three-month) plus 2.25%. On November 23, 2021, the SLF Credit Facility was amended to, among other things, extend the maturity date to November 23, 2031, allow SLF SPV to borrow up to $175.0 million at any one time, subject to leverage and borrowing base restrictions, and decrease the interest rate on the borrowings under the SLF Credit Facility to an annual rate of LIBOR (three-month) plus 2.10%.

SLF does not pay any fees to MC Advisors or its affiliates; however, SLF has entered into an administration agreement with Monroe Capital Management Advisors, LLC (“MC Management”), pursuant to which certain loan servicing and administrative functions are delegated to MC Management. SLF may reimburse MC Management for its allocable share of overhead and other expenses incurred by MC Management. For the years ended December 31, 2021, 2020 and 2019, SLF incurred $0.2 million, $0.2 million, and $0.2 million of allocable expenses, respectively. There are no agreements or understandings by which we guarantee any SLF obligations.

As of December 31, 2021 and 2020, SLF had total assets at fair value of $194.6 million and $209.7 million, respectively. As of December 31, 2021 and December 31, 2020, SLF had one portfolio company investment on non-accrual status with a fair value of $1.1 million and $1.0 million, respectively. The portfolio companies in SLF are in industries and geographies similar to those in which we may invest directly. Additionally, as of December 31, 2021 and 2020, SLF had $2.1 million and $0.8 million, respectively, in outstanding commitments to fund investments under undrawn revolvers and delayed draw commitments.

Below is a summary of SLF’s portfolio, followed by a listing of the individual investments in SLF’s portfolio as of December 31, 2021 and 2020:

	As of
	December 31, 2021			December 31, 2020
Senior secured loans (1)		193,062			214,389
Weighted average current interest rate on senior secured loans (2)		5.9	%		5.8	%
Number of portfolio company investments in SLF		57			57
Largest portfolio company investment (1)		6,720			6,790
Total of five largest portfolio company investments (1)		27,074			27,064

(1)	Represents outstanding principal amount, excluding unfunded commitments. Principal amounts in thousands.
(2)	Computed as the (a) annual stated interest rate on accruing senior secured loans divided by (b) total senior secured loans at outstanding principal amount.

74

MRCC SENIOR LOAN FUND I, LLC

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2021

(in thousands)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate (b)			Maturity	Principal		Fair Value
Non-Controlled/Non-Affiliate Company Investments
Senior Secured Loans
Aerospace & Defense
Bromford Industries Limited (c)	P+4.25%		7.50	%	11/5/2025		2,744	$	2,692
Bromford Industries Limited (c)	P+4.25%		7.50	%	11/5/2025		1,829		1,794
Trident Maritime Systems, Inc.	L+5.50%		6.50	%	2/26/2027		2,467		2,478
Trident Maritime Systems, Inc. (Revolver) (d)	L+5.50%		6.50	%	2/26/2027		265		—
							7,305		6,964
Automotive
Accelerate Auto Works Intermediate, LLC	L+4.75%		5.75	%	12/1/2027		1,454		1,436
Accelerate Auto Works Intermediate, LLC (Delayed Draw) (d)	L+4.75%		5.75	%	12/1/2027		388		—
Accelerate Auto Works Intermediate, LLC (Revolver) (d)	L+4.75%		5.75	%	12/1/2027		132		—
Truck-Lite Co., LLC	L+6.25%		7.25	%	12/14/2026		1,709		1,718
Truck-Lite Co., LLC	L+6.25%		7.25	%	12/14/2026		253		255
Wheel Pros, Inc.	L+4.50%		5.25	%	5/11/2028		1,952		1,951
							5,888		5,360
Banking, Finance, Insurance & Real Estate
Avison Young (USA) Inc. (c)	L+5.75%		5.97	%	1/30/2026		4,850		4,824
Harbour Benefit Holdings, Inc.	L+5.25%		6.25	%	12/13/2024		2,948		2,932
Harbour Benefit Holdings, Inc.	L+5.25%		6.25	%	12/13/2024		66		65
Keystone Purchaser, LLC (e)	L+6.25%		7.25	%	5/7/2027		3,000		2,947
Lightbox Intermediate, L.P.	L+5.00%		5.13	%	5/11/2026		4,875		4,814
Minotaur Acquisition, Inc. (e)	L+4.75%		4.85	%	3/27/2026		4,912		4,894
							20,651		20,476
Beverage, Food & Tobacco
CBC Restaurant Corp.	n/a		5.00% PIK	(f)	12/30/2022		1,116		1,072
SW Ingredients Holdings, LLC	L+4.75%		5.75	%	7/3/2025		3,619		3,619
							4,735		4,691
Capital Equipment
Analogic Corporation	L+5.25%		6.25	%	6/24/2024		4,752		4,702
DS Parent, Inc. (e)	L+5.75%		6.50	%	12/8/2028		3,000		2,970
							7,752		7,672
Chemicals, Plastics & Rubber
Polymer Solutions Group	L+7.00%		8.00	%	1/3/2023		1,178		1,169
							1,178		1,169
Construction & Building
The Cook & Boardman Group LLC	L+5.75%		6.75	%	10/20/2025		2,910		2,838
							2,910		2,838
Consumer Goods: Durable
International Textile Group, Inc.	L+5.00%		5.13	%	5/1/2024		1,711		1,590
Runner Buyer Inc. (e)	L+5.50%		6.25	%	10/23/2028		3,000		2,970
							4,711		4,560
Consumer Goods: Non-Durable
PH Beauty Holdings III, INC	L+5.00%		5.18	%	9/26/2025		2,418		2,284
							2,418		2,284
Containers, Packaging & Glass
Liqui-Box Holdings, Inc.	L+4.50%		5.50	%	2/26/2027		4,268		3,991
Polychem Acquisition, LLC	L+5.00%		5.50	%	3/17/2025		2,918		2,917
Port Townsend Holdings Company, Inc. and Crown Corrugated Company	L+6.75%		5.75% Cash/ 2.00% PIK		4/3/2024		4,751		4,238
PVHC Holding Corp	L+4.75%		5.75	%	8/5/2024		3,217		2,976
							15,154		14,122
Energy: Oil & Gas
Drilling Info Holdings, Inc.	L+4.25%		4.35	%	7/30/2025		4,516		4,471
Offen, Inc.	L+5.00%		5.10	%	6/22/2026		2,388		2,387
Offen, Inc.	L+5.00%		5.10	%	6/22/2026		876		876
							7,780		7,734
Healthcare & Pharmaceuticals
Cano Health, LLC (e)	SF+4.00%		4.51	%	11/23/2027		1,995		1,997
LSCS Holdings, Inc. (e)	L+4.50%		5.00	%	12/15/2028		1,846		1,849
Radiology Partners, Inc.	L+4.25%		4.35	%	7/9/2025		4,760		4,700
TEAM Public Choices, LLC (e)	L+5.00%		6.00	%	12/17/2027		2,992		2,985
							11,593		11,531
High Tech Industries
Corel Inc. (c)	L+5.00%		5.18	%	7/2/2026		3,800		3,797
LW Buyer, LLC	L+5.00%		5.14	%	12/30/2024		4,875		4,863
TGG TS Acquisition Company	L+6.50%		6.60	%	12/12/2025		3,435		3,446
							12,110		12,106
Hotels, Gaming & Leisure
Excel Fitness Holdings, Inc.	L+5.25%		6.25	%	10/7/2025		4,165		4,155
North Haven Spartan US Holdco, LLC	L+5.00%		6.00	%	6/6/2025		2,297		2,037
Tait LLC	L+5.00%		5.14	%	3/28/2025		4,125		3,785
Tait LLC (Revolver)	P+4.00%		7.25	%	3/28/2025		769		728
							11,356		10,705
Media: Advertising, Printing & Publishing
Cadent, LLC	L+5.00%		6.00	%	9/11/2023		4,339		4,296
Cadent, LLC (Revolver) (d)	L+5.00%		6.00	%	9/11/2023		167		—
							4,506		4,296
Media: Diversified & Production
Research Now Group, Inc. and Survey Sampling International, LLC	L+5.50%		6.50	%	12/20/2024		6,720		6,645
STATS Intermediate Holdings, LLC	L+5.25%		5.41	%	7/10/2026		4,900		4,897
The Octave Music Group, Inc.	L+6.00%		7.00	%	5/29/2025		3,866		3,871
							15,486		15,413
Services: Business
AQ Carver Buyer, Inc.	L+5.00%		6.00	%	9/23/2025		4,888		4,900
CHA Holdings, Inc	L+4.50%		5.50	%	4/10/2025		1,980		1,901
CHA Holdings, Inc	L+4.50%		5.50	%	4/10/2025		418		401
Eliassen Group LLC	L+4.25%		4.35	%	11/5/2024		3,956		3,956
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK		3/7/2023		4,326		4,329
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK		3/7/2023		781		781
Engage2Excel, Inc. (Revolver) (d)	L+8.00%		7.00% Cash/ 2.00% PIK		3/7/2023		555		541
Orbit Purchaser LLC	L+4.50%		5.50	%	10/21/2024		2,431		2,425
Orbit Purchaser LLC	L+4.50%		5.50	%	10/21/2024		1,877		1,873
Orbit Purchaser LLC	L+4.50%		5.50	%	10/21/2024		549		548
Output Services Group, Inc.	L+4.50%		5.50	%	3/27/2024		4,815		4,145
Secretariat Advisors LLC (e)	L+4.75%		5.50	%	12/29/2028		1,710		1,693
Secretariat Advisors LLC (d) (e)	L+4.75%		5.50	%	12/29/2028		270		—
SIRVA Worldwide Inc.	L+5.50%		5.60	%	8/4/2025		1,850		1,683
Teneo Holdings LLC	L+5.25%		6.25	%	7/11/2025		4,888		4,908
The Kleinfelder Group, Inc.	L+5.25%		6.25	%	11/29/2024		2,387		2,387
							37,681		36,471
Services: Consumer
360Holdco, Inc.	L+4.75%		5.75	%	8/2/2025		2,168		2,161
360Holdco, Inc. (Delayed Draw) (d)	L+4.75%		5.75	%	8/2/2025		827		—
Laseraway Intermediate Holdings II, LLC	L+5.75%		6.50	%	10/14/2027		2,222		2,214
							5,217		4,375
Telecommunications
Intermedia Holdings, Inc.	L+6.00%		7.00	%	7/21/2025		1,778		1,770
Mavenir Systems, Inc.	L+4.75%		5.25	%	8/18/2028		1,667		1,669
Sandvine Corporation	L+4.50%		4.60	%	10/31/2025		2,000		1,999
							5,445		5,438
Utilities: Oil & Gas
NGS US Finco, LLC	L+4.25%		5.25	%	10/1/2025		1,695		1,644
NGS US Finco, LLC	L+5.25%		6.25	%	10/1/2025		248		244
							1,943		1,888
Wholesale
BMC Acquisition, Inc.	L+5.25%		6.25	%	12/30/2024		4,486		4,469
HALO Buyer, Inc.	L+4.50%		5.50	%	6/30/2025		4,824		4,547
							9,310		9,016
TOTAL INVESTMENTS								$	189,109

(a)	All investments are U.S. companies unless otherwise noted.
(b)	The majority of investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate ("LIBOR" or "L"), Secured Overnight Financing Rate ("SOFR" or "SF") or Prime ("P") which reset daily, monthly, quarterly or semiannually. We have provided the spread over LIBOR or Prime and the current contractual rate of interest in effect at December 31, 2021. Certain investments are subject to a LIBOR or Prime interest rate floor.
(c)	This is an international company.
(d)	All or a portion of this commitment was unfunded as of December 31, 2021. As such, interest is earned only on the funded portion of this commitment. Principal reflects the commitment outstanding.
(e)	Investment position or portion thereof unsettled at December 31, 2021.
(f)	This position was on non-accrual status as of December 31, 2021, meaning that we have ceased accruing interest income on the position.

75

MRCC SENIOR LOAN FUND I, LLC

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2020

(in thousands)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate (b)			Maturity		Principal		Fair Value
Non-Controlled/Non-Affiliate Company Investments
Senior Secured Loans
Aerospace & Defense
Bromford Industries Limited (c)	L+5.25%		6.25	%		11/5/2025		2,772	$	2,685
Bromford Industries Limited (c)	L+5.25%		6.25	%		11/5/2025		1,848		1,790
Trident Maritime SH, Inc.	L+4.75%		5.75	%		6/4/2024		4,401		4,363
Trident Maritime SH, Inc. (Revolver) (d)	L+4.75%		5.75	%		6/4/2024		340		—
								9,361		8,838
Automotive
Truck-Lite Co., LLC	L+6.25%		7.25	%		12/14/2026		1,726		1,716
Truck-Lite Co., LLC	L+6.25%		7.25	%		12/14/2026		256		254
Wheel Pros, LLC	L+5.25%		6.25	%		11/10/2027		3,000		2,961
								4,982		4,931
Banking, Finance, Insurance & Real Estate
Avison Young (USA), Inc. (c)	L+5.00%		5.25	%		1/30/2026		4,900		4,659
Harbour Benefit Holdings, Inc. (fka Zenith Merger Sub, Inc.)	L+5.25%		6.25	%		12/13/2024		4,653		4,585
Harbour Benefit Holdings, Inc. (fka Zenith Merger Sub, Inc.) (Delayed Draw) (d)	L+5.25%		6.25	%		12/13/2024		264		102
Lightbox Intermediate, L.P.	L+5.00%		5.15	%		5/11/2026		4,925		4,777
Minotaur Acquisition, Inc.	L+5.00%		5.15	%		3/27/2026		2,947		2,900
								17,689		17,023
Beverage, Food & Tobacco
CBC Restaurant Corp.	n/a		5.00% PIK	(e)		4/28/2022		1,117		1,031
SW Ingredients Holdings, LLC	L+4.00%		5.00	%		7/3/2025		3,656		3,647
								4,773		4,678
Capital Equipment
Analogic Corporation	L+5.25%		6.25	%		6/24/2024		4,800		4,800
								4,800		4,800
Chemicals, Plastics & Rubber
Polymer Solutions Group	L+7.00%		8.00	%		6/30/2021		1,216		1,189
								1,216		1,189
Construction & Building
ISC Purchaser, LLC	L+4.00%		5.00	%		7/11/2025		4,937		4,896
The Cook & Boardman Group, LLC	L+5.75%		6.75	%		10/20/2025		2,940		2,811
								7,877		7,707
Consumer Goods: Durable
International Textile Group, Inc.	L+5.00%		5.37	%		5/1/2024		1,758		1,597
								1,758		1,597
Consumer Goods: Non-Durable
PH Beauty Holdings III, Inc.	L+5.00%		5.23	%		9/26/2025		2,442		2,149
								2,442		2,149
Containers, Packaging & Glass
Liqui-Box Holdings, Inc.	L+4.50%		5.50	%		2/26/2027		4,312		3,848
Polychem Acquisition, LLC	L+5.00%		5.15	%		3/17/2025		2,948		2,948
Port Townsend Holdings Company, Inc.	L+6.75%		5.75% Cash/ 2.00% PIK			4/3/2024		4,683		4,263
PVHC Holding Corp.	L+4.75%		5.75	%		8/5/2024		3,250		2,844
								15,193		13,903
Energy: Oil & Gas
Drilling Info Holdings, Inc.	L+4.25%		4.40	%		7/30/2025		4,563		4,429
Offen, Inc.	L+5.00%		5.15	%		6/22/2026		2,412		2,343
Offen, Inc.	L+5.00%		5.15	%		6/22/2026		885		860
								7,860		7,632
Healthcare & Pharmaceuticals
LSCS Holdings, Inc.	L+4.25%		4.51	%		3/17/2025		2,299		2,253
LSCS Holdings, Inc.	L+4.25%		4.51	%		3/17/2025		593		582
Radiology Partners, Inc.	L+4.25%		4.40	%		7/9/2025		4,760		4,692
								7,652		7,527
High Tech Industries
AQA Acquisition Holding, Inc.	L+4.25%		5.25	%		5/24/2023		3,257		3,257
Corel, Inc. (c)	L+5.00%		5.23	%		7/2/2026		3,900		3,844
LW Buyer, LLC	L+5.00%		5.15	%		12/30/2024		4,925		4,900
TGG TS Acquisition Company	L+6.50%		6.65	%		12/12/2025		3,753		3,720
								15,835		15,721
Hotels, Gaming & Leisure
Excel Fitness Holdings, Inc.	L+5.25%		6.25	%		10/7/2025		4,207		3,878
North Haven Spartan US Holdco, LLC	L+5.00%		6.00	%		6/6/2025		2,321		1,979
Tait, LLC	L+5.00%		5.23	%		3/28/2025		4,167		3,669
Tait, LLC (Revolver)	P+4.00%		7.25	%		3/28/2025		769		711
								11,464		10,237
Media: Advertising, Printing & Publishing
Cadent, LLC	L+5.50%		6.50	%		9/11/2023		4,728		4,622
Cadent, LLC (Revolver) (d)	L+5.50%		6.50	%		9/11/2023		167		—
Digital Room Holdings, Inc.	L+5.00%		5.27	%		5/21/2026		4,362		4,133
Monotype Imaging Holdings, Inc.	L+5.50%		6.50	%		10/9/2026		4,906		4,653
								14,163		13,408
Media: Diversified & Production
Research Now Group, Inc. and Survey Sampling International, LLC	L+5.50%		6.50	%		12/20/2024		6,790		6,708
Stats Intermediate Holding, LLC	L+5.25%		5.47	%		7/10/2026		4,950		4,909
The Octave Music Group, Inc.	L+6.00%		6.25% Cash/ 0.75% PIK			5/29/2025		4,871		4,335
								16,611		15,952
Services: Business
AQ Carver Buyer, Inc.	L+5.00%		6.00	%		9/23/2025		4,937		4,888
CHA Holdings, Inc.	L+4.50%		5.50	%		4/10/2025		2,002		1,872
CHA Holdings, Inc.	L+4.50%		5.50	%		4/10/2025		422		395
Eliassen Group, LLC	L+4.25%		4.40	%		11/5/2024		3,017		2,922
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		4,299		4,178
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		776		754
Engage2Excel, Inc. (Revolver) (d)	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		548		364
GI Revelation Acquisition, LLC	L+5.00%		5.15	%		4/16/2025		1,365		1,344
Legility, LLC	L+6.00%		7.00	%		12/17/2025		4,906		4,735
Orbit Purchaser, LLC	L+4.50%		5.50	%		10/21/2024		2,456		2,407
Orbit Purchaser, LLC	L+4.50%		5.50	%		10/21/2024		1,897		1,859
Orbit Purchaser, LLC	L+4.50%		5.50	%		10/21/2024		555		544
Output Services Group, Inc.	L+4.50%		5.50	%		3/27/2024		4,865		3,648
SIRVA Worldwide, Inc.	L+5.50%		5.65	%		8/4/2025		1,900		1,741
Teneo Holdings, LLC	L+5.25%		6.25	%		7/11/2025		4,938		4,903
The Kleinfelder Group, Inc.	L+5.25%		6.25	%		11/29/2024		2,450		2,450
								41,333		39,004
Services: Consumer
Cambium Learning Group, Inc.	L+4.50%		4.75	%		12/18/2025		4,900		4,883
LegalZoom.com, Inc.	L+4.50%		4.65	%		11/21/2024		2,694		2,706
								7,594		7,589
Telecommunications
Intermedia Holdings, Inc.	L+6.00%		7.00	%		7/21/2025		1,797		1,795
Mavenir Systems, Inc.	L+6.00%		7.00	%		5/8/2025		3,900		3,893
								5,697		5,688
Transportation: Cargo
GlobalTranz Enterprises, LLC	L+5.00%		5.15	%		5/15/2026		3,262		3,050
								3,262		3,050
Utilities: Oil & Gas
NGS US Finco, LLC	L+4.25%		5.25	%		10/1/2025		1,712		1,640
NGS US Finco, LLC	L+5.25%		6.25	%		10/1/2025		250		246
								1,962		1,886
Wholesale
BMC Acquisition, Inc.	L+5.25%		6.25	%		12/30/2024		4,850		4,802
HALO Buyer, Inc.	L+4.50%		5.50	%		6/30/2025		4,875		4,533
PT Intermediate Holdings III, LLC	L+5.50%		6.50	%		10/15/2025		1,980		1,851
								11,705		11,186
TOTAL INVESTMENTS									$	205,695

^(a) All investments are U.S. companies unless otherwise noted.

^(b) The majority of the investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime” or “P”) which reset daily, monthly, quarterly, or semiannually. For each such investment, we have provided the spread over LIBOR or Prime and the current contractual interest rate in effect at December 31, 2020. Certain investments are subject to a LIBOR or Prime interest rate floor, or rate cap.

^(c) This is an international company.

^(d) All or a portion of this commitment was unfunded as of December 31, 2020. As such, interest is earned only on the funded portion of this commitment. Principal reflects the commitment outstanding.

^(e) This position was on non-accrual status as of December 31, 2020, meaning that we have ceased accruing interest income on the position.

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Below is certain summarized financial information for SLF as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 (in thousands):

	December 31, 2021			December 31, 2020
Assets
Investments, at fair value	$	189,109		$	205,695
Cash		40			351
Restricted cash		4,862			2,948
Interest receivable		600			629
Other assets		12			43
Total assets		194,623			209,666
Liabilities
Revolving credit facility		94,765			131,497
Less: Unamortized deferred financing costs		(2,319	)		(969	)
Total debt, less unamortized deferred financing costs		92,446			130,528
Payable for open trades		19,367			—
Interest payable		242			294
Accounts payable and accrued expenses		318			277
Total liabilities		112,373			131,099
Members’ capital		82,250			78,567
Total liabilities and members’ capital	$	194,623		$	209,666

	For the years ended December 31,
	2021		2020			2019
Investment income:
Interest income	$	13,164	$	15,578		$	16,294
Total investment income		13,164		15,578			16,294
Expenses:
Interest and other debt financing expenses		3,918		5,227			7,056
Professional fees		647		666			718
Total expenses		4,565		5,893			7,774
Net investment income		8,599		9,685			8,520
Net gain (loss):
Net realized gain (loss)		—		(1,713	)		7
Net change in unrealized gain (loss)		3,734		(5,429	)		(781	)
Net gain (loss)		3,734		(7,142	)		(774	)
Net increase (decrease) in members’ capital	$	12,333	$	2,543		$	7,746

Related Party Transactions

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

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

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

• SLF has an administration agreement with MC Management to provide SLF with certain loan servicing and administrative functions. SLF may reimburse MC Management for its allocable share of overhead and other expenses incurred by MC Management. See Note 3 to our consolidated financial statements and “Liquidity and Capital Resources - MRCC Senior Loan Fund I, LLC” for additional information.

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

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

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

Contractual Obligations and Off-Balance Sheet Arrangements

The following table shows our significant contractual payment obligations for repayment as of December 31, 2021 (in thousands):

	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Revolving credit facility	$	151,045	$	—	$	151,045	$	—	$	—
2026 Notes		130,000		—		—		130,000		—
SBA debentures payable		56,900		—		2,920		21,880		32,100
Unfunded commitments (1)		55,483		55,483		—		—		—
Total contractual obligations	$	393,428	$	55,483	$	153,965	$	151,880	$	32,100

⁽¹⁾ Unfunded commitments represent all amounts unfunded, excluding our investments in SLF, as of December 31, 2021. These amounts may or may not be funded to the borrowing party now or in the future. The unfunded commitments relate to loans or equity investments with various maturity dates, but we are showing this amount in the less than one year category as this entire amount was eligible for funding to the borrowers as of December 31, 2021.

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized on the consolidated statements of assets and liabilities. As of December 31, 2021 and 2020, we had outstanding commitments to fund investments under undrawn revolvers, capital expenditure loans, delayed draw commitments and subscription agreements, excluding unfunded commitments in SLF, totaling $55.5 million and $52.3 million, respectively. As of both December 31, 2021 and 2020, we had unfunded commitments to SLF of $7.8 million that may be contributed primarily for the purpose of funding new investments approved by the SLF investment committee. Drawdowns of the commitments to SLF require authorization from one of our representatives on SLF’s board of managers. Additionally, we have entered into certain contracts with other parties that contain a variety of indemnifications. Our maximum exposure under these arrangements is unknown. However, we have not experienced claims or losses pursuant to these contracts and believe the risk of loss related to such indemnifications to be remote.

Off-Balance Sheet Arrangements

Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheet financings or liabilities.

Senior Securities

Information about our senior securities is shown in the following table as of December 31, 2021 and for the years indicated in the table (dollars in thousands). This annual information has been derived from our audited consolidated financial statements for each respective period, which have been audited by RSM US LLP, our independent registered public accounting firm. RSM US LLP’s report on the senior securities table as of December 31, 2021 is attached as an exhibit 99.1 of this report.

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Class and Year	Total Amount Outstanding Exclusive of Treasury Securities(1)		Asset Coverage per Unit(2)		Involuntary Liquidating Preference per Unit(3)		Asset Market Value per Unit(4)
Revolving Credit Facility
December 31, 2021	$	151,045	$	1,888		—		N/A
December 31, 2020		126,559		1,995		—		N/A
December 31, 2019		180,294		1,862		—		N/A
December 31, 2018		136,026		2,262		—		N/A
December 31, 2017		117,092		3,380		—		N/A
December 31, 2016		129,000		2,848		—		N/A
December 31, 2015		123,700		2,462		—		N/A
December 31, 2014		82,300		2,547		—		N/A
December 31, 2013		76,000		2,644		—		N/A
December 31, 2012		55,000		2,521		—		N/A
5.75% Notes due 2023
December 31, 2020	$	109,000	$	1,995		—	$	940	(5)
December 31, 2019		109,000		1,862		—		1,005	(5)
December 31, 2018		69,000		2,262		—		986	(5)
4.75% Notes due 2026
December 31, 2021	$	130,000	$	1,888		—		N/A
Secured Borrowings(6)
December 31, 2016(7)	$	1,320	$	2,848		—		N/A
December 31, 2015(8)		2,535		2,462		—		N/A
December 31, 2014(9)		4,134		2,547		—		N/A
December 31, 2013(10)		7,997		2,644		—		N/A

(1)	Total amount of each class of senior securities outstanding at the end of the period presented.
(2)	The asset coverage ratio of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage per Unit (including for the 5.75% Notes due 2023 and 4.75% Notes due 2026, which were issued in $25 and $2,000 increments, respectively). On October 2, 2014, we received exemptive relief from the SEC to permit us to exclude the debt of MRCC SBIC guaranteed by the SBA from our asset coverage test under the 1940 Act.
(3)	The amount to which such class of senior security would be entitled upon the involuntary liquidation of the issuer in preference to any security junior to it. The “—” in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of senior securities.
(4)	Not applicable, except for with respect to the 5.75% Notes due 2023, as the other senior securities are not registered for public trading.
(5)	The average market value for the 5.75% Notes due 2023 is calculated as the average daily closing prices of such notes on the Nasdaq Global Select Market for the years ended December 31, 2020, 2019 and 2018, as applicable, divided by the par value per unit of such notes. This average market value is multiplied by $1,000 to determine the Average Market Value per Unit.
(6)	Certain partial loan sales do not qualify for sale accounting under ASC Topic 860 — Transfers and Servicing because these sales do not meet the definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment on the accompanying consolidated statements of assets and liabilities and the portion sold is recorded as a secured borrowing in the liabilities section of the consolidated statements of assets and liabilities. Amounts presented in this table represent the par amount outstanding.
(7)	The secured borrowings have a weighted average stated interest rate of 6.26%, a weighted average years to maturity of 1.0 year and a fair value as of December 31, 2016 of $1,314.
(8)	The secured borrowings have a weighted average stated interest rate of 5.75%, a weighted average years to maturity of 2.0 years and a fair value as of December 31, 2015 of $2,476.
(9)	The secured borrowings have a weighted average stated interest rate of 5.45%, a weighted average years to maturity of 3.0 years and a fair value as of December 31, 2014 of $4,008.
(10)	The secured borrowings have a weighted average stated interest rate of 4.33%, a weighted average years to maturity of 4.0 years and a fair value as of December 31, 2013 of $7,943.

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Market Trends

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

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

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

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

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

Pricing and Deal Structures: We believe that the volatility in global markets over the last several years and current macroeconomic issues including changes in bank regulations for middle-market banks has reduced access to, and availability of, debt capital to middle-market companies, causing a reduction in competition and generally more favorable capital structures and deal terms. Sizable recent capital raises in the private debt marketplace have created significantly increased competition over the last few years, reducing available pricing and creating less favorable capital structures; however, we believe that current market conditions for our target market may continue to create favorable opportunities to invest at attractive risk-adjusted returns.

Market Environment: We believe middle market investments are attractive in uncertain market environments such as the current market environment following the COVID-19 outbreak that began in late 2019 and early 2020, and that these investments have historically generated considerable yield premia with more favorable capital structures for lenders when compared to the market for large corporate loans.⁽¹⁾ On the other hand, we believe that the increased competition for direct lending to middle market businesses could result in less favorable pricing terms for our potential investments. If pricing, terms and structures weaken, we would expect to experience decreased net interest income, lower yields and increased risk of credit loss. However, we believe that Monroe Capital’s scale, product suite, entrenched relationships and strong market position will continue to allow us to find investment opportunities with attractive risk-adjusted returns.

⁽¹⁾ Standard & Poor’s “LCD Middle Market Review Q4 2021 – New-issue first-lien yield-to-maturity. Middle Market loans have, on average, generated higher yields in comparison to large corporate loans based on data starting in the fourth quarter of 2005.

Recent Developments

On March 1, 2022, we repaid all $56.9 million of our remaining SBA debentures utilizing a borrowing on the revolving credit facility and the restricted cash at MRCC SBIC. Additionally, MRCC SBIC notified the SBA of its intent to surrender its license to operate as a SBIC.

On March 2, 2022, our Board declared a quarterly distribution of $0.25 per share payable on March 31, 2022 to holders of record on March 16, 2022.

Significant Accounting Estimates and Critical Accounting Policies

Revenue Recognition

We record interest and fee income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, we do not accrue PIK interest if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount and market discount or premium are capitalized, and then we amortize such amounts using the effective interest method as interest income over the life of the investment. Upon the prepayment of a loan or debt security, any unamortized premium or discount or loan origination fees are recorded as interest income. We record prepayment premiums on loans and debt securities as interest income when we receive such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. We record fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recognized as fee income in the period the service has been completed.

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

Valuation of Portfolio Investments

As a BDC, we generally invest in illiquid securities including debt and, to a lesser extent, equity securities of middle-market companies. Under procedures established by our Board, we value investments for which market quotations are readily available and within a recent date at such market quotations. When doing so, we determine whether the quote obtained is sufficient in accordance with generally accepted accounting principles in the United States of America to determine the fair value of the security. Debt and equity securities that are not publicly traded or whose market prices are not readily available or whose market prices are not regularly updated are valued at fair value as determined in good faith by our Board. Such determination of fair values may involve subjective judgments and estimates. Investments purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.

Our Board is ultimately and solely responsible for determining the fair value of the portfolio investments that are not publicly traded, whose market prices are not readily available on a quarterly basis in good faith or in any other situation where portfolio investments require a fair value determination. Because we expect that there will not be a readily available market for many of the investments in our portfolio, we expect to value many of our portfolio investments at fair value as determined in good faith by our Board using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

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

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

• our Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of investments for which market quotations are not readily available. We will consult with independent valuation firm(s) relative to each portfolio company at least once in every calendar year, but the independent appraisals are generally received quarterly for each investment;

• to the extent an independent valuation firm is not engaged to conduct an investment appraisal on an investment for which market quotations are not readily available, the investment will be valued by the MC Advisors investment professional responsible for the credit monitoring;

• preliminary valuation conclusions are then documented and discussed with the investment committee of MC Advisors;

• the audit committee of our Board reviews the preliminary valuations of MC Advisors and of the independent valuation firm(s) and MC Advisors adjusts or further supplements the valuation recommendations to reflect any comments provided by the audit committee; and

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

We generally use the income approach to determine fair value for loans where market quotations are not readily available, as long as it is appropriate. If there is deterioration in credit quality or a debt investment is in workout status, we may consider other factors in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. This liquidation analysis may also include probability weighting of alternative outcomes. We generally consider our debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance and the loan is otherwise not deemed to be impaired. In determining the fair value of the performing debt, we consider fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions and other relevant factors, both qualitative and quantitative. In the event that a debt instrument is not performing, as defined above, we will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the debt instrument.

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Under the income approach, discounted cash flow models are utilized to determine the present value of the future cash flow streams of our debt investments, based on future interest and principal payments as set forth in the associated loan agreements. In determining fair value under the income approach, we also consider the following factors: applicable market yields and leverage levels, credit quality, prepayment penalties, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made.

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

In addition, for certain debt investments, we may base our valuation on indicative bid and ask prices provided by an independent third-party pricing service. Bid prices reflect the highest price that we and others may be willing to pay. Ask prices represent the lowest price that we and others may be willing to accept. We generally use the midpoint of the bid/ask range as our best estimate of fair value of such investment.

As of December 31, 2021, our Board determined, in good faith, the fair value of our investment portfolio in accordance with GAAP and our valuation procedures based on the facts and circumstances known by us at that time, or reasonably expected to be known at that time. Due to the overall volatility that the COVID-19 pandemic has caused, any valuations conducted in the future in conformity with GAAP could result in a lower fair value of our portfolio. The potential impact of COVID-19 on our results going forward will depend to a large extent on future developments or new information that may emerge regarding the full duration and severity of COVID-19 including the actions taken by governments and other entities to contain COVID-19 or treat its impact, all of which are beyond our control. Accordingly, we cannot predict the extent to which our financial condition and results of operations will be affected at this time.

Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss

We measure realized gain or loss by the difference between the net proceeds from the sale and the amortized cost basis of the investment, without regard to unrealized gain or loss previously recognized. Net change in unrealized gain or loss reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gain or loss, when gain or loss is realized. Additionally, we do not isolate the portion of the change in fair value resulting from foreign currency exchange rate fluctuations from the changes in fair values of the underlying investment. All fluctuations in fair value are included in net change in unrealized gain (loss) on our consolidated statements of operations. The impact resulting from changes in foreign exchange rates on the revolving credit facility borrowings is included in net change in unrealized gain (loss) on foreign currency and other transactions.

Capital Gains Incentive Fee

Pursuant to the terms of the Investment Advisory Agreement with MC Advisors, the incentive fee on capital gains earned on liquidated investments of our portfolio is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). This fee equals 20% of our incentive fee capital gains (i.e., our realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a quarterly basis, we accrue for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

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

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During the years ended December 31, 2021, 2020 and 2019, we did not have any further reductions in accrued capital gains incentive fees as they were already at zero, primarily as a result of accumulated realized and unrealized losses on the portfolio.

New Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective as of March 12, 2020 through December 31, 2022. We did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the year ended December 31, 2021.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to financial market risks, including changes in interest rates and the valuations of our investment portfolio. Uncertainty with respect to the economic effects of the COVID-19 outbreak has introduced significant volatility in the financial markets, and the effects of this volatility could materially impact our market risks. For additional information concerning the COVID-19 pandemic and its potential impact on our business and our operating results, see Part I, Item 1A. Risk Factors, “Risk Factors – Risks Relating to Our Business and Structure – The COVID-19 pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impact on our portfolio companies and our business and operations.”

The majority of the loans in our portfolio have floating interest rates, and we expect that our loans in the future may also have floating interest rates. These loans are usually based on a floating LIBOR or SOFR and typically have interest rate re-set provisions that adjust applicable interest rates under such loans to current market rates on a monthly or quarterly basis. The majority of the loans in our current portfolio have interest rate floors which will effectively convert the loans to fixed rate loans in the event interest rates decrease. In addition, our revolving credit facility has a floating interest rate provision, whereas our SBA debentures and the 2026 Notes have fixed interest rates until maturity. We expect that other credit facilities into which we may enter in the future may also have floating interest rate provisions. See “Risk Factors – Risks Relating to Our Business and Structure – The interest rates of our revolving credit facility and loans to our portfolio companies that extend beyond 2023 might be subject to change based on recent regulatory changes” for more information regarding risks associated with our portfolio loans and borrowings that utilize LIBOR as a reference rate.

Assuming that the consolidated statement of assets and liabilities as of December 31, 2021 was to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (in thousands):

Change in Interest Rates	Increase (decrease) in interest income		Increase (decrease) in interest expense			Net increase (decrease) in investment income
Down 25 basis points	$	—	$	(3	)	$	3
Up 100 basis points		440		917			(477)
Up 200 basis points		4,610		2,427			2,183
Up 300 basis points		8,993		3,938			5,055

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

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

We may also have exposure to foreign currencies (currently the Great Britain pound and Australian dollar) related to certain investments. Such investments are translated into U.S. dollars based on the spot rate at each balance sheet date, exposing us to movements in the exchange rate. In order to reduce our exposure to fluctuations in exchange rates, we may borrow in foreign currency under our revolving credit facility to finance such investments or we may enter into foreign currency forward contracts. As of December 31, 2021, we have non-U.S. dollar borrowings denominated in Great Britain pounds of £3.4 million ($4.6 million U.S. dollars) outstanding under the revolving credit facility. As of December 31, 2021, we had foreign currency forward contracts in place for £0.2 million and AUD 19.1 million associated with future principal and interest payments on certain investments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements are annexed to this Annual Report beginning on page F-1.

83

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

Management’s Annual Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act). Under the supervision and with participation of our Chief Executive Officer and Chief Financial Officer, the company conducted an evaluation of the effectiveness of internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the Company’s evaluation under the framework in Internal Control – Integrated Framework (2013), management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021.

Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

84

PART III

We will file a definitive Proxy Statement for our 2022 Annual Meeting of Stockholders with the Securities and Exchange Commission (the “SEC”), pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of our definitive Proxy Statement that specifically address the items set forth herein are incorporated by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.

85

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2022 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.

86

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the year ended December 31, 2021 (and are numbered in accordance with Item 601 of Regulation S-K).

(a)(1) and (2) Consolidated Financial Statements and Schedules

See the Index to Consolidated Financial Statements at page F-1 of this report.

87

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Consolidated Statements of Assets and Liabilities as of December 31, 2021 and 2020	F-3
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019	F-4
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2021, 2020 and 2019	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019	F-6
Consolidated Schedules of Investments as of December 31, 2021 and 2020	F-7
Notes to Consolidated Financial Statements	F-26

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Monroe Capital Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of assets and liabilities of Monroe Capital Corporation and its Subsidiaries (collectively, the Company), including the consolidated schedules of investments, as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of December 31, 2021 and 2020, by correspondence with the custodians and issuers of equity securities and other appropriate procedures where replies from issuers of equity securities were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of investments using significant unobservable inputs

The fair value of the Company’s investments categorized as Level 3 investments within the fair value hierarchy was $519,527 thousand as of December 31, 2021. As discussed in Notes 2 and 4 to the consolidated financial statements, the Company measures its Level 3 investments at fair value using significant unobservable inputs.

We identified the valuation of Level 3 investments as a critical audit matter because of management estimation and judgment necessary to select valuation techniques and the use of significant unobservable inputs in the valuation techniques. When performing our audit procedures over management’s estimate of fair value of Level 3 investments, a high degree of auditor judgement and specialized skills are required.

The procedures we performed to address this critical audit matter include the following, among others:

· We evaluated the appropriateness of valuation techniques used for a sample of Level 3 investments and tested certain related significant unobservable inputs by comparing these inputs to external sources. We evaluated the reasonableness of significant changes in valuation techniques or significant unobservable inputs for those investments from the prior year-end. We involved valuation specialists with specialized skills and knowledge who assisted in evaluating the Company’s valuation techniques compared to those of a market participant, using market information to develop a range of market yield, financial performance measures, and discount rate assumptions and comparing them to the assumptions used by the Company.

· For certain investments, we developed an independent estimate of the fair value and compared our estimate to management’s estimate.

· We evaluated management’s ability to reasonably estimate fair value by comparing management’s historical estimates to subsequent transactions, taking into account changes in market or investment specific conditions, where applicable.

/s/ RSM US LLP

We have served as the Company's auditor since 2011.

Chicago, Illinois

March 2, 2022

F-2

MONROE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except per share data)

	December 31, 2021			December 31, 2020
ASSETS
Investments, at fair value:
Non-controlled/non-affiliate company investments	$	430,287		$	398,040
Non-controlled affiliate company investments		90,281			109,715
Controlled affiliate company investments		41,125			39,284
Total investments, at fair value (amortized cost of: $576,178 and $596,103, respectively)		561,693			547,039
Cash		2,622			6,769
Restricted cash		15,459			25,657
Unrealized gain on foreign currency forward contracts		781			—
Interest receivable		9,476			4,606
Other assets		427			1,052
Total assets		590,458			585,123
LIABILITIES
Debt:
Revolving credit facility		151,045			126,559
2023 Notes		—			109,000
2026 Notes		130,000			—
SBA debentures payable		56,900			115,000
Total debt		337,945			350,559
Less: Unamortized deferred financing costs		(5,794	)		(7,052	)
Total debt, less unamortized deferred financing costs		332,151			343,507
Interest payable		3,304			2,764
Unrealized loss on foreign currency forward contracts		—			113
Management fees payable		2,454			1,978
Incentive fees payable		435			—
Accounts payable and accrued expenses		2,643			2,327
Total liabilities		340,987			350,689
Net assets	$	249,471		$	234,434
Commitments and contingencies (See Note 12)
ANALYSIS OF NET ASSETS
Common stock, $0.001 par value, 100,000 shares authorized, 21,666 and 21,304 shares issued and outstanding, respectively	$	22		$	21
Capital in excess of par value		298,687			294,897
Accumulated undistributed (overdistributed) earnings		(49,238	)		(60,484	)
Total net assets	$	249,471		$	234,434
Net asset value per share	$	11.51		$	11.00

See Notes to Consolidated Financial Statements.

F-3

MONROE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Year ended December 31,
	2021			2020			2019
Investment income:
Non-controlled/non-affiliate company investments:
Interest income	$	33,381		$	42,928		$	54,388
Payment-in-kind interest income		1,836			3,928			544
Dividend income		400			10			65
Fee income		1,231			3,222			1,926
Total investment income from non-controlled/non-affiliate company investments		36,848			50,088			56,923
Non-controlled affiliate company investments:
Interest income		5,150			2,098			2,231
Payment-in-kind interest income		6,484			4,848			4,994
Dividend income		987			147			—
Fee income		36			—			—
Total investment income from non-controlled affiliate company investments		12,657			7,093			7,225
Controlled affiliate company investments:
Dividend income		4,325			4,400			4,045
Total investment income from controlled affiliate company investments		4,325			4,400			4,045
Total investment income		53,830			61,581			68,193
Operating expenses:
Interest and other debt financing expenses		16,074			17,989			20,268
Base management fees		9,514			9,807			10,780
Incentive fees		3,690			712			5,611
Professional fees		1,013			1,023			1,209
Administrative service fees		1,357			1,300			1,309
General and administrative expenses		1,072			989			991
Directors' fees		144			145			156
Expenses before base management fee and incentive fee waivers		32,864			31,965			40,324
Base management fee waivers		—			(430	)		—
Incentive fee waivers		(1,484	)		(712	)		(1,182	)
Total expenses, net of base management fee and incentive fee waivers		31,380			30,823			39,142
Net investment income before income taxes		22,450			30,758			29,051
Income taxes, including excise taxes		282			370			17
Net investment income		22,168			30,388			29,034
Net gain (loss):
Net realized gain (loss):
Non-controlled/non-affiliate company investments		(16,127	)		2,551			34
Non-controlled affiliate company investments		(5,637	)		—			(967	)
Extinguishment of debt		(3,110	)		—			—
Foreign currency forward contracts		(48	)		(16	)		12
Foreign currency and other transactions		(895	)		(14	)		(4	)
Net realized gain (loss)		(25,817	)		2,521			(925	)
Net change in unrealized gain (loss):
Non-controlled/non-affiliate company investments		27,788			(20,397	)		859
Non-controlled affiliate company investments		4,950			(7,034	)		(8,689	)
Controlled affiliate company investments		1,841			(3,128	)		(172	)
Foreign currency forward contracts		894			(54	)		(75	)
Foreign currency and other transactions		635			(650	)		(818	)
Net change in unrealized gain (loss)		36,108			(31,263	)		(8,895	)
Net gain (loss)		10,291			(28,742	)		(9,820	)
Net increase (decrease) in net assets resulting from operations	$	32,459		$	1,646		$	19,214
Per common share data:
Net investment income per share - basic and diluted	$	1.03		$	1.45		$	1.42
Net increase (decrease) in net assets resulting from operations per share - basic and diluted	$	1.51		$	0.08		$	0.94
Weighted average common shares outstanding - basic and diluted		21,453			20,924			20,445

See Notes to Consolidated Financial Statements.

F-4

MONROE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(in thousands)

	Common Stock
	Number of shares		Par value		Capital in excess of par value			Accumulated undistributed (overdistributed) earnings			Total net assets
Balances at December 31, 2018		20,445	$	20	$	288,911		$	(30,164	)	$	258,767
Net investment income		—		—		—			29,034			29,034
Net realized gain (loss)		—		—		—			(925	)		(925	)
Net change in unrealized gain (loss)		—		—		—			(8,895	)		(8,895	)
Issuance of common stock, net of offering and underwriting costs		—		—		—			—			—
Distributions to stockholders		—		—		—			(28,624	)		(28,624	)
Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles		—		—		(61	)		61			—
Balances at December 31, 2019		20,445	$	20	$	288,850		$	(39,513	)	$	249,357
Net investment income		—	$	—	$	—		$	30,388		$	30,388
Net realized gain (loss)		—		—		—			2,521			2,521
Net change in unrealized gain (loss)		—		—		—			(31,263	)		(31,263	)
Issuance of common stock, net of offering and underwriting costs		859		1		6,494			—			6,495
Distributions to stockholders		—		—		—			(23,064	)		(23,064	)
Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles		—		—		(447	)		447			—
Balances at December 31, 2020		21,304	$	21	$	294,897		$	(60,484	)	$	234,434
Net investment income		—	$	—	$	—		$	22,168		$	22,168
Net realized gain (loss)		—		—		—			(25,817	)		(25,817	)
Net change in unrealized gain (loss)		—		—		—			36,108			36,108
Issuance of common stock, net of offering and underwriting costs		362		1		4,091			—			4,092
Distributions to stockholders		—		—		—			(21,514	)		(21,514	)
Tax reclassification of stockholders’ equity in accordance with generally accepted accounting principles		—		—		(301)			301			—
Balances at December 31, 2021		21,666	$	22	$	298,687		$	(49,238	)	$	249,471

See Notes to Consolidated Financial Statements.

F-5

MONROE CAPITAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year ended December 31,
	2021			2020			2019
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	32,459		$	1,646		$	19,214
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized (gain) loss on investments		21,764			(2,551	)		933
Net realized (gain) loss on extinguishment of debt		3,110			—			—
Net realized (gain) loss on foreign currency forward contracts		48			16			(12	)
Net realized (gain) loss on foreign currency and other transactions		895			14			4
Net change in unrealized (gain) loss on investments		(34,579	)		30,559			8,002
Net change in unrealized (gain) loss on foreign currency forward contracts		(894	)		54			75
Net change in unrealized (gain) loss on foreign currency and other transactions		(635	)		650			818
Payment-in-kind interest income		(8,320	)		(8,776	)		(5,538	)
Net accretion of discounts and amortization of premiums		(1,102	)		(1,253	)		(1,482	)
Purchases of investments		(226,863	)		(143,358	)		(230,605	)
Proceeds from principal payments, sales of investments and settlement of forward contracts		234,398			194,555			166,092
Amortization of deferred financing costs		2,205			2,181			1,869
Changes in operating assets and liabilities:
Interest receivable		(4,870	)		4,083			(915	)
Other assets		625			(557	)		197
Interest payable		540			1			213
Management fees payable		476			(773	)		433
Incentive fees payable		435			(1,374	)		1,374
Accounts payable and accrued expenses		316			(186	)		83
Net cash provided by (used in) operating activities		20,008			74,931			(39,245	)
Cash flows from financing activities:
Borrowings on revolving credit facility		309,300			96,200			334,997
Repayments of revolving credit facility		(285,020	)		(150,600	)		(291,550	)
Proceeds from 2023 Notes		—			—			40,000
Repayment of 2023 Notes		(109,000	)		—			—
Proceeds from 2026 Notes		130,000			—			—
Repayment of SBA debentures		(58,100	)		—			—
Payments of deferred financing costs		(4,057	)		(1,180	)		(3,660	)
Proceeds from shares sold, net of offering and underwriting costs		4,092			6,495			—
Stockholder distributions paid, net of stock issued under the dividend reinvestment plan of $0, $0 and $0, respectively		(21,514	)		(23,064	)		(28,624	)
Net cash provided by (used in) financing activities		(34,299	)		(72,149	)		51,163
Net increase (decrease) in Cash and Restricted cash		(14,291	)		2,782			11,918
Effect of foreign currency exchange rates		(54	)		1			(1	)
Cash and Restricted cash, beginning of year		32,426			29,643			17,726
Cash and Restricted cash, end of year	$	18,081		$	32,426		$	29,643
Supplemental disclosure of cash flow information:
Cash interest paid during the year	$	13,221		$	15,721		$	18,130
Cash paid (refund received) for income taxes, including excise taxes during the year	$	400		$	85		$	(13	)

The following tables provide a reconciliation of cash and restricted cash reported on the Consolidated Statements of Assets and Liabilities that sum to the total of the same such amounts on the Consolidated Statements of Cash Flows:

	December 31, 2021		December 31, 2020		December 31, 2019
Cash	$	2,622	$	6,769	$	2,234
Restricted cash		15,459		25,657		27,409
Total cash and restricted cash shown on the Consolidated Statements of Cash Flows	$	18,081	$	32,426	$	29,643

See Notes to Consolidated Financial Statements.

F-6

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)		Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Non-Controlled/Non-Affiliate Company Investments
Senior Secured Loans
Automotive
Born To Run, LLC	L+6.00	%	7.00	%	4/1/2021		4/1/2027		3,483	$	3,419	$	3,544		1.4	%
Born To Run, LLC (Delayed Draw) (f) (g)	L+6.00	%	7.00	%	4/1/2021		4/1/2027		569		33		34		0.0	%
Hastings Manufacturing Company	L+7.25	%	8.25	%	4/24/2018		4/24/2023		2,524		2,508		2,524		1.0	%
Lifted Trucks Holdings, LLC	L+5.75	%	6.75	%	8/2/2021		8/2/2027		7,000		6,866		6,979		2.8	%
Lifted Trucks Holdings, LLC (Delayed Draw) (f) (g)	L+5.75	%	6.75	%	8/2/2021		8/2/2027		1,400		—		—		0.0	%
Lifted Trucks Holdings, LLC (Revolver) (f)	L+5.75	%	6.75	%	8/2/2021		8/2/2027		1,667		444		443		0.2	%
Magneto & Diesel Acquisition, Inc.	L+5.50	%	6.50	%	12/18/2018		12/18/2023		4,850		4,812		4,850		1.9	%
Magneto & Diesel Acquisition, Inc.	L+5.50	%	6.50	%	7/6/2020		12/18/2023		1,908		1,885		1,938		0.8	%
Magneto & Diesel Acquisition, Inc.	L+5.50	%	6.50	%	8/4/2021		12/18/2023		829		815		842		0.4	%
Magneto & Diesel Acquisition, Inc. (Revolver) (f)	L+5.50	%	6.50	%	12/18/2018		12/18/2023		500		—		—		0.0	%
									24,730		20,782		21,154		8.5	%
Banking, Finance, Insurance & Real Estate
Florida East Coast Industries, LLC (h)	n/a		10.50	%	8/9/2021		6/28/2024		3,572		3,477		3,571		1.4	%
J2 BWA Funding LLC (Delayed Draw) (f) (g) (h)	n/a		9.00	%	12/24/2020		12/24/2026		2,710		677		677		0.3	%
Liftforward SPV II, LLC (h)	L+10.75	%	11.25	%	11/10/2016		9/30/2022		744		744		713		0.3	%
MV Realty Holdings, LLC (Delayed Draw) (f) (g) (h)	L+9.75	%	11.25	%	7/29/2021		7/29/2026		8,000		971		1,289		0.5	%
NCBP Property, LLC (h)	L+9.50	%	10.50	%	12/18/2020		12/16/2022		1,950		1,940		1,955		0.8	%
Oceana Australian Fixed Income Trust (h) (i) (j)	n/a		10.75	%	6/29/2021		6/29/2026		3,288		3,400		3,288		1.3	%
Oceana Australian Fixed Income Trust (h) (i) (j)	n/a		11.50	%	2/25/2021		2/25/2026		7,805		8,460		7,805		3.1	%
StarCompliance MidCo, LLC	L+6.75	%	7.75	%	1/12/2021		1/11/2027		2,000		1,965		2,000		0.8	%
StarCompliance MidCo, LLC	L+6.75	%	7.75	%	10/12/2021		1/11/2027		336		329		336		0.1	%
StarCompliance MidCo, LLC (Revolver) (f)	L+6.75	%	7.75	%	1/12/2021		1/11/2027		322		—		—		0.0	%
W3 Monroe RE Debt LLC (h)	n/a		10.00% PIK		2/5/2021		2/4/2028		2,906		2,906		2,906		1.2	%
									33,633		24,869		24,540		9.8	%
Beverage, Food & Tobacco
LVF Holdings, Inc.	L+6.25	%	7.25	%	6/10/2021		6/10/2027		1,496		1,468		1,496		0.6	%
LVF Holdings, Inc.	L+6.25	%	7.25	%	6/10/2021		6/10/2027		1,432		1,432		1,432		0.6	%
LVF Holdings, Inc. (Delayed Draw) (f) (g)	L+6.25	%	7.25	%	6/10/2021		6/10/2027		344		—		—		0.0	%
LVF Holdings, Inc. (Revolver) (f)	L+6.25	%	7.25	%	6/10/2021		6/10/2027		238		119		119		0.0	%
LX/JT Intermediate Holdings, Inc. (k)	L+6.00	%	7.50	%	3/11/2020		3/11/2025		9,375		9,246		9,239		3.7	%
LX/JT Intermediate Holdings, Inc. (Revolver) (f)	L+6.00	%	7.50	%	3/11/2020		3/11/2025		833		—		—		0.0	%
Toojay's Management LLC (l)	n/a		n/a	(m)	10/26/2018		10/26/2022		1,448		1,407		—		0.0	%
Toojay's Management LLC (l)	n/a		n/a	(m)	10/26/2018		10/26/2022		199		199		—		0.0	%
Toojay's Management LLC (Revolver) (l)	n/a		n/a	(m)	10/26/2018		10/26/2022		66		66		—		0.0	%
									15,431		13,937		12,286		4.9	%

F-7

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Capital Equipment
MCP Shaw Acquisitionco, LLC (k)	SF+6.50%	7.50	%	2/28/2020		11/28/2025		9,733	$	9,595	$	9,699		3.9	%
MCP Shaw Acquisitionco, LLC	SF+6.50%	7.50	%	12/29/2021		11/28/2025		3,002		2,942		2,992		1.2	%
MCP Shaw Acquisitionco, LLC (Delayed Draw) (f) (g)	SF+6.50%	7.50	%	12/29/2021		11/28/2025		983		—		—		0.0	%
MCP Shaw Acquisitionco, LLC (Revolver) (f)	SF+6.50%	7.50	%	2/28/2020		11/28/2025		1,784		—		—		0.0	%
								15,502		12,537		12,691		5.1	%
Chemicals, Plastics & Rubber
Valudor Products LLC	L+7.50%	7.00% Cash/ 1.50% PIK		6/18/2018		6/19/2023		1,585		1,574		1,871		0.7	%
Valudor Products LLC	L+7.50%	8.50%		12/22/2021		6/19/2023		548		548		1,469		0.6	%
Valudor Products LLC (n)	L+7.50%	8.50% PIK		6/18/2018		6/19/2023		237		234		230		0.1	%
Valudor Products LLC (Revolver) (f)	L+9.50%	10.50	%	6/18/2018		6/19/2023		1,095		480		479		0.2	%
								3,465		2,836		4,049		1.6	%
Construction & Building
Dude Solutions Holdings, Inc.	L+6.25%	7.25	%	6/14/2019		6/13/2025		9,900		9,755		9,870		4.0	%
Dude Solutions Holdings, Inc. (Revolver) (f)	L+6.25%	7.25	%	6/14/2019		6/13/2025		1,304		—		—		0.0	%
TCFIII OWL Buyer LLC	L+6.00%	7.00	%	4/19/2021		4/17/2026		2,040		2,008		2,040		0.8	%
TCFIII OWL Buyer LLC	L+6.00%	7.00	%	4/19/2021		4/17/2026		2,491		2,491		2,491		1.0	%
TCFIII OWL Buyer LLC	L+6.00%	7.00	%	12/17/2021		4/17/2026		2,235		2,196		2,235		0.9	%
								17,970		16,450		16,636		6.7	%
Consumer Goods: Durable
Independence Buyer, Inc.	L+5.75%	6.75	%	8/3/2021		8/3/2026		6,000		5,887		6,000		2.4	%
Independence Buyer, Inc. (Revolver) (f)	L+5.75%	6.75	%	8/3/2021		8/3/2026		1,423		—		—		0.0	%
Recycled Plastics Industries, LLC	L+6.75%	7.75	%	8/4/2021		8/4/2026		3,491		3,426		3,491		1.4	%
Recycled Plastics Industries, LLC (Revolver) (f)	L+6.75%	7.75	%	8/4/2021		8/4/2026		473		142		142		0.1	%
								11,387		9,455		9,633		3.9	%
Consumer Goods: Non-Durable
The Kyjen Company, LLC	L+6.50%	7.50	%	5/14/2021		4/3/2026		993		983		997		0.4	%
The Kyjen Company, LLC (Revolver) (f)	L+6.50%	7.50	%	5/14/2021		4/3/2026		105		43		43		0.0	%
Thrasio, LLC	L+7.00%	8.00	%	12/18/2020		12/18/2026		2,470		2,438		2,470		1.0	%
								3,568		3,464		3,510		1.4	%
Environmental Industries
Quest Resource Management Group, LLC	L+6.50%	7.50	%	10/19/2020		10/20/2025		990		924		989		0.4	%
Quest Resource Management Group, LLC	L+6.50%	7.50	%	10/19/2020		10/20/2025		1,087		1,087		1,086		0.4	%
Quest Resource Management Group, LLC	L+6.50%	7.50	%	12/7/2021		10/20/2025		3,856		3,779		3,853		1.6	%
Quest Resource Management Group, LLC (Delayed Draw) (f) (g)	L+6.50%	7.50	%	12/7/2021		10/20/2025		1,778		—		—		0.0	%
StormTrap, LLC	L+5.50%	6.50	%	12/10/2018		12/8/2023		7,170		7,114		7,170		2.9	%
StormTrap, LLC (Revolver) (f)	L+5.50%	6.50	%	12/10/2018		12/8/2023		432		—		—		0.0	%
Synergy Environmental Corporation (k)	L+6.00%	7.00	%	4/29/2016		9/29/2023		2,853		2,846		2,853		1.1	%
Synergy Environmental Corporation (k)	L+6.00%	7.00	%	4/29/2016		9/29/2023		477		476		477		0.2	%
Synergy Environmental Corporation	L+6.00%	7.00	%	4/29/2016		9/29/2023		810		810		810		0.3	%
Synergy Environmental Corporation (Revolver) (f)	L+6.00%	7.00	%	4/29/2016		9/29/2023		671		—		—		0.0	%
								20,124		17,036		17,238		6.9	%

F-8

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity			Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Healthcare & Pharmaceuticals
Apotheco, LLC	L+8.50%	6.50% Cash/ 3.00% PIK		4/8/2019		4/8/2024			3,632	$	3,597	$	3,462		1.4	%
Apotheco, LLC (Revolver)	L+8.50%	6.50% Cash/ 3.00% PIK		4/8/2019		4/8/2024			955		955		910		0.4	%
Brickell Bay Acquisition Corp.	L+6.50%	7.50	%	2/12/2021		2/12/2026			1,899		1,865		1,889		0.7	%
Brickell Bay Acquisition Corp. (Delayed Draw) (f) (g)	L+6.50%	7.50	%	2/12/2021		2/12/2026			382		—		—		0.0	%
Caravel Autism Health, LLC	L+5.75%	6.75	%	6/30/2021		6/30/2027			5,000		4,906		4,699		1.9	%
Caravel Autism Health, LLC (Delayed Draw) (f) (g)	L+5.75%	6.75	%	6/30/2021		6/30/2027			3,750		187		176		0.1	%
Caravel Autism Health, LLC (Revolver) (f)	L+5.75%	6.75	%	6/30/2021		6/30/2027			1,250		625		587		0.2	%
Dorado Acquisition, Inc.	L+6.75%	7.75	%	6/30/2021		6/30/2026			4,988		4,895		4,983		2.0	%
Dorado Acquisition, Inc. (Delayed Draw) (f) (g)	L+6.75%	7.75	%	6/30/2021		6/30/2026			216		—		—		0.0	%
Dorado Acquisition, Inc. (Revolver) (f)	L+6.75%	7.75	%	6/30/2021		6/30/2026			596		—		—		0.0	%
INH Buyer, Inc.	L+6.00%	7.00	%	6/30/2021		6/28/2028			2,939		2,911		2,857		1.1	%
NationsBenefits, LLC	L+7.00%	8.00	%	8/20/2021		8/20/2026			4,000		3,924		3,993		1.6	%
NationsBenefits, LLC (Revolver) (f)	L+7.00%	8.00	%	8/20/2021		8/20/2026			445		—		—		0.0	%
Rockdale Blackhawk, LLC	n/a	n/a	(o)	3/31/2015		n/a	(p)		—		—		1,681		0.7	%
Seran BioScience, LLC	L+6.25%	7.25	%	12/31/2020		12/31/2025			2,481		2,440		2,487		1.0	%
Seran BioScience, LLC (Revolver) (f)	L+6.25%	7.25	%	12/31/2020		12/31/2025			444		—		—		0.0	%
									32,977		26,305		27,724		11.1	%
High Tech Industries
Arcstor Midco, LLC	L+7.00%	8.00	%	3/16/2021		3/16/2027			4,466		4,386		4,433		1.8	%
MarkLogic Corporation	L+6.00%	7.00	%	10/20/2020		10/20/2025			3,465		3,396		3,517		1.4	%
MarkLogic Corporation	L+6.00%	7.00	%	11/23/2021		10/20/2025			323		317		330		0.1	%
MarkLogic Corporation (Delayed Draw) (f) (g)	L+6.00%	7.00	%	11/23/2021		10/20/2025			215		—		—		0.0	%
MarkLogic Corporation (Revolver) (f)	L+6.00%	7.00	%	10/20/2020		10/20/2025			269		—		—		0.0	%
Mindbody, Inc.	L+8.50%	8.00% Cash/ 1.50% PIK		2/15/2019		2/14/2025			6,487		6,415		6,438		2.6	%
Mindbody, Inc.	L+8.50%	8.00% Cash/ 1.50% PIK		9/22/2021		2/14/2025			669		669		664		0.3	%
Mindbody, Inc. (Revolver) (f)	L+8.00%	9.00	%	2/15/2019		2/14/2025			667		—		—		0.0	%
Newforma, Inc. (k)	L+5.50%	6.50	%	6/30/2017		6/30/2022			3,890		3,882		3,890		1.6	%
Newforma, Inc. (Revolver) (f)	L+5.50%	6.50	%	6/30/2017		6/30/2022			1,250		—		—		0.0	%
Planful, Inc.	L+6.50%	7.50	%	12/28/2018		12/30/2024			9,500		9,414		9,472		3.8	%
Planful, Inc.	L+6.50%	7.50	%	1/11/2021		12/30/2024			1,325		1,325		1,322		0.5	%
Planful, Inc. (Revolver) (f)	L+6.50%	7.50	%	12/28/2018		12/30/2024			442		88		88		0.0	%
									32,968		29,892		30,154		12.1	%
Hotels, Gaming & Leisure
Equine Network, LLC	L+8.00%	9.00	%	12/31/2020		12/31/2025			1,737		1,704		1,733		0.7	%
Equine Network, LLC	L+8.00%	9.00	%	1/29/2021		12/31/2025			788		774		786		0.3	%
Equine Network, LLC (Delayed Draw) (f) (g)	L+8.00%	9.00	%	12/31/2020		12/31/2025			427		—		—		0.0	%
Equine Network, LLC (Revolver) (f)	L+8.00%	9.00	%	12/31/2020		12/31/2025			171		85		85		0.1	%
									3,123		2,563		2,604		1.1	%

F-9

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Media: Advertising, Printing & Publishing
Destination Media, Inc. (k)	L+5.50%	6.50	%	4/7/2017		4/7/2022		1,738	$	1,736	$	1,738		0.7	%
Destination Media, Inc. (Revolver) (f)	L+5.50%	6.50	%	4/7/2017		4/7/2022		542		—		—		0.0	%
North Haven USHC Acquisition, Inc.	L+6.00%	7.00	%	10/30/2020		10/30/2025		2,475		2,435		2,475		1.0	%
North Haven USHC Acquisition, Inc.	L+6.00%	7.00	%	3/12/2021		10/30/2025		717		717		717		0.3	%
North Haven USHC Acquisition, Inc. (Delayed Draw) (f) (g)	L+6.00%	7.00	%	9/3/2021		10/30/2025		1,441		482		487		0.2	%
North Haven USHC Acquisition, Inc. (Revolver) (f)	L+6.00%	7.00	%	10/30/2020		10/30/2025		240		—		—		0.0	%
Relevate Health Group, LLC	L+6.00%	7.00	%	11/20/2020		11/20/2025		1,489		1,465		1,504		0.6	%
Relevate Health Group, LLC (Delayed Draw) (f) (g)	L+6.00%	7.00	%	11/20/2020		11/20/2025		784		666		673		0.3	%
Relevate Health Group, LLC (Revolver) (f)	L+6.00%	7.00	%	11/20/2020		11/20/2025		316		—		—		0.0	%
Spherix Global Inc.	SF+6.00%	7.00	%	12/22/2021		12/22/2026		1,100		1,081		1,081		0.4	%
Spherix Global Inc. (Revolver) (f)	SF+6.00%	7.00	%	12/22/2021		12/22/2026		122		—		—		0.0	%
XanEdu Publishing, Inc.	L+6.50%	7.50	%	1/28/2020		1/28/2025		4,631		4,555		4,647		1.8	%
XanEdu Publishing, Inc. (Revolver) (f)	L+6.50%	7.50	%	1/28/2020		1/28/2025		742		—		—		0.0	%
								16,337		13,137		13,322		5.3	%
Media: Broadcasting & Subscription
Vice Group Holding Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		5/2/2019		11/2/2022		1,526		1,523		1,526		0.6	%
Vice Group Holding Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		11/4/2019		11/2/2022		293		291		293		0.1	%
Vice Group Holding Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		5/2/2019		11/2/2022		478		478		478		0.2	%
Vice Group Holding Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		5/2/2019		11/2/2022		180		180		180		0.1	%
								2,477		2,472		2,477		1.0	%
Media: Diversified & Production
Attom Intermediate Holdco, LLC	L+6.15%	7.15	%	1/4/2019		1/4/2024		1,940		1,923		1,937		0.8	%
Attom Intermediate Holdco, LLC	L+6.15%	7.15	%	6/25/2020		1/4/2024		473		467		472		0.2	%
Attom Intermediate Holdco, LLC	L+6.15%	7.15	%	7/1/2021		1/4/2024		279		273		278		0.1	%
Attom Intermediate Holdco, LLC (Revolver) (f)	L+5.75%	6.75	%	1/4/2019		1/4/2024		320		160		160		0.1	%
Chess.com, LLC	L+6.50%	7.50	%	12/31/2021		12/31/2027		6,000		5,880		5,880		2.3	%
Chess.com, LLC (Revolver) (f)	L+6.50%	7.50	%	12/31/2021		12/31/2027		652		—		—		0.0	%
Crownpeak Technology, Inc.	L+5.75%	6.75	%	2/28/2019		2/28/2024		4,000		3,962		4,000		1.6	%
Crownpeak Technology, Inc.	L+5.75%	6.75	%	2/28/2019		2/28/2024		60		60		60		0.0	%
Crownpeak Technology, Inc. (Revolver) (f)	L+5.75%	6.75	%	2/28/2019		2/28/2024		167		—		—		0.0	%
CyberGrants Holdings, LLC	L+6.50%	7.25	%	9/8/2021		9/8/2027		10,900		10,744		10,900		4.4	%
CyberGrants Holdings, LLC (Delayed Draw) (f) (g)	L+6.50%	7.25	%	9/8/2021		9/8/2027		1,069		—		—		0.0	%
CyberGrants Holdings, LLC (Revolver) (f)	L+6.50%	7.25	%	9/8/2021		9/8/2027		1,069		—		—		0.0	%
								26,929		23,469		23,687		9.5	%
Retail
BLST Operating Company, LLC	L+8.50%	1.00% Cash/ 9.00% PIK	(m)	8/28/2020		8/28/2025		1,147		1,025		1,143		0.5	%
Forman Mills, Inc. (k)	L+9.50%	8.50% Cash/ 2.00% PIK		1/14/2020		12/30/2022		1,336		1,336		1,330		0.5	%
Forman Mills, Inc. (k)	L+9.50%	8.50% Cash/ 2.00% PIK		10/4/2016		12/30/2022		282		281		281		0.1	%
Forman Mills, Inc. (k)	L+9.50%	8.50% Cash/ 2.00% PIK		10/4/2016		12/30/2022		7,623		7,600		7,524		3.0	%
								10,388		10,242		10,278		4.1	%

F-10

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Services: Business
Aras Corporation	L+7.00%	4.25% Cash/ 3.75% PIK		4/13/2021		4/13/2027		2,079	$	2,044	$	2,103		0.8	%
Aras Corporation (Revolver) (f)	L+7.00%	4.25% Cash/ 3.75% PIK		4/13/2021		4/13/2027		150		—		—		0.0	%
Burroughs, Inc. (k)	L+6.50%	7.50	%	12/22/2017		12/22/2022		5,501		5,477		5,480		2.2	%
Burroughs, Inc. (Revolver) (f)	L+6.50%	7.50	%	12/22/2017		12/22/2022		1,220		—		—		0.0	%
Certify, Inc.	L+5.50%	6.50	%	2/28/2019		2/28/2024		9,000		8,935		9,000		3.6	%
Certify, Inc.	L+5.50%	6.50	%	2/28/2019		2/28/2024		1,227		1,227		1,227		0.5	%
Certify, Inc. (Revolver) (f)	L+5.50%	6.50	%	2/28/2019		2/28/2024		409		102		102		0.0	%
HS4 Acquisitionco, Inc.	L+6.75%	7.75	%	7/9/2019		7/9/2025		10,000		9,869		9,910		4.0	%
HS4 Acquisitionco, Inc. (Revolver) (f)	L+6.75%	7.75	%	7/9/2019		7/9/2025		817		—		—		0.0	%
IT Global Holding LLC (h)	L+9.00%	10.00	%	11/15/2018		11/10/2023		3,405		3,374		4,411		1.8	%
IT Global Holding LLC (h)	L+9.00%	10.00	%	7/19/2019		11/10/2023		1,270		1,255		1,645		0.7	%
IT Global Holding LLC (Revolver) (h)	L+9.00%	10.00	%	11/15/2018		11/10/2023		875		875		1,060		0.4	%
RedZone Robotics, Inc.	L+6.75%	7.75	%	6/1/2018		6/5/2023		213		211		213		0.1	%
RedZone Robotics, Inc. (Revolver) (f)	L+6.75%	7.75	%	6/1/2018		6/5/2023		158		—		—		0.0	%
Relativity ODA LLC	L+7.50%	8.50% PIK		5/12/2021		5/12/2027		1,896		1,854		1,894		0.8	%
Relativity ODA LLC (Revolver) (f)	L+7.50%	8.50% PIK		5/12/2021		5/12/2027		180		—		—		0.0	%
Security Services Acquisition Sub Corp.	L+6.00%	7.00	%	9/30/2021		9/30/2026		7,980		7,872		7,972		3.2	%
Security Services Acquisition Sub Corp. (k)	L+6.00%	7.00	%	2/15/2019		9/30/2026		3,413		3,382		3,409		1.4	%
Security Services Acquisition Sub Corp. (k)	L+6.00%	7.00	%	2/15/2019		9/30/2026		2,455		2,455		2,452		1.0	%
Security Services Acquisition Sub Corp. (k)	L+6.00%	7.00	%	2/15/2019		9/30/2026		2,157		2,157		2,154		0.9	%
Security Services Acquisition Sub Corp.	L+6.00%	7.00	%	2/15/2019		9/30/2026		1,551		1,551		1,549		0.6	%
ServiceMax, Inc. (h)	L+7.00%	8.00	%	11/1/2021		11/1/2027		3,500		3,431		3,500		1.4	%
ServiceMax, Inc. (Revolver) (f) (h)	L+7.00%	8.00	%	11/1/2021		11/1/2027		350		—		—		0.0	%
VPS Holdings, LLC	L+9.00%	8.00% Cash/ 2.00% PIK		10/5/2018		10/4/2024		3,447		3,410		3,325		1.3	%
VPS Holdings, LLC	L+9.00%	8.00% Cash/ 2.00% PIK		10/5/2018		10/4/2024		2,817		2,817		2,717		1.1	%
VPS Holdings, LLC (Revolver) (f)	L+9.00%	8.00% Cash/ 2.00% PIK		10/5/2018		10/4/2024		1,001		101		97		0.0	%
								67,071		62,399		64,220		25.8	%
Services: Consumer
Express Wash Acquisition Company, LLC	L+6.50%	7.50	%	12/28/2020		12/26/2025		3,203		3,156		3,203		1.3	%
Express Wash Acquisition Company, LLC	L+6.50%	7.50	%	9/3/2021		12/26/2025		7,275		7,156		7,275		2.9	%
Express Wash Acquisition Company, LLC	L+6.50%	7.50	%	9/3/2021		12/26/2025		3,500		3,500		3,500		1.4	%
Express Wash Acquisition Company, LLC (Delayed Draw) (f) (g)	L+6.50%	7.50	%	9/3/2021		12/26/2025		2,500		925		925		0.4	%
Express Wash Acquisition Company, LLC (Revolver) (f)	L+6.50%	7.50	%	12/28/2020		12/26/2025		750		400		400		0.2	%
IDIG Parent, LLC	L+6.00%	7.00	%	12/15/2020		12/15/2026		5,517		5,423		5,530		2.2	%
IDIG Parent, LLC	L+6.00%	7.00	%	12/15/2020		12/15/2026		918		918		920		0.4	%
IDIG Parent, LLC (Revolver) (f)	L+6.00%	7.00	%	12/15/2020		12/15/2026		429		—		—		0.0	%
Mammoth Holdings, LLC	L+6.00%	7.00	%	10/16/2018		10/16/2023		1,940		1,924		1,940		0.8	%
Mammoth Holdings, LLC	L+6.00%	7.00	%	10/16/2018		10/16/2023		4,073		4,073		4,073		1.5	%
Mammoth Holdings, LLC	L+6.00%	7.00	%	3/12/2021		10/16/2023		6,355		6,355		6,368		2.6	%
Mammoth Holdings, LLC (Delayed Draw) (f) (g)	L+6.00%	7.00	%	6/15/2021		10/16/2023		1,646		988		989		0.4	%
Mammoth Holdings, LLC (Revolver) (f)	L+6.00%	7.00	%	10/16/2018		10/16/2023		657		—		—		0.0	%
								38,763		34,818		35,123		14.1	%

F-11

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Telecommunications
Calabrio, Inc.	L+7.00%	8.00	%	4/16/2021		4/16/2027		3,400	$	3,322	$	3,400		1.4	%
Calabrio, Inc. (Revolver) (f)	L+7.00%	8.00	%	4/16/2021		4/16/2027		409		—		—		0.0	%
VHT Solutions	L+7.00%	8.00% PIK		12/21/2021		12/21/2026		1,500		1,470		1,470		0.6	%
VHT Solutions (Delayed Draw) (f) (g)	L+7.00%	8.00% PIK		12/21/2021		12/21/2026		120		—		—		0.0	%
VHT Solutions (Revolver) (f)	L+7.00%	8.00% PIK		12/21/2021		12/21/2026		43		—		—		0.0	%
								5,472		4,792		4,870		2.0	%
Wholesale
Nearly Natural, Inc. (k)	L+11.50%	8.50% Cash/ 4.00% PIK		12/15/2017		12/15/2022		6,601		6,572		6,520		2.6	%
Nearly Natural, Inc.	L+11.50%	8.50% Cash/ 4.00% PIK		2/16/2021		12/15/2022		3,099		3,066		3,061		1.2	%
Nearly Natural, Inc. (k)	L+11.50%	8.50% Cash/ 4.00% PIK		9/22/2020		12/15/2022		1,706		1,691		1,685		0.7	%
Nearly Natural, Inc. (k)	L+11.50%	8.50% Cash/ 4.00% PIK		8/28/2019		12/15/2022		1,859		1,859		1,836		0.7	%
Nearly Natural, Inc. (Revolver)	L+11.50%	8.50% Cash/ 4.00% PIK		12/15/2017		12/15/2022		2,430		2,430		2,400		1.0	%
								15,695		15,618		15,502		6.2	%
Total Non-Controlled/Non-Affiliate Senior Secured Loans								398,010		347,073		351,698		141.1	%
Unitranche Secured Loans (q)
Aerospace & Defense
Cassavant Holdings, LLC	L+6.50%	7.50	%	9/8/2021		9/8/2026		7,980		7,828		7,972		3.2	%
								7,980		7,828		7,972		3.2	%
Chemicals, Plastics & Rubber
MFG Chemical, LLC (k)	L+8.00%	9.00	%	6/23/2017		6/23/2022		5,555		5,546		5,555		2.2	%
MFG Chemical, LLC	L+8.00%	9.00	%	3/15/2018		6/23/2022		543		543		543		0.2	%
								6,098		6,089		6,098		2.4	%
Consumer Goods: Non-Durable
Vinci Brands LLC (fka Incipio, LLC)	n/a	2.00% PIK	(m)	7/6/2018		2/6/2024		7,026		7,026		4,950		2.0	%
Vinci Brands LLC (fka Incipio, LLC) (r)	n/a	2.00% PIK	(m)	3/9/2018		2/6/2024		3,065		3,065		—		0.0	%
Vinci Brands LLC (fka Incipio, LLC) (s)	n/a	2.00% PIK	(m)	12/26/2014		2/6/2024		13,552		13,528		—		0.0	%
Vinci Brands LLC (fka Incipio, LLC) (t)	n/a	2.00% PIK	(m)	12/26/2014		2/6/2024		1,149		1,149		—		0.0	%
								24,792		24,768		4,950		2.0	%
Healthcare & Pharmaceuticals
Priority Ambulance, LLC (u)	L+6.50%	7.50	%	7/18/2018		4/12/2022		10,015		10,015		10,010		4.0	%
Priority Ambulance, LLC (v)	L+6.50%	7.50	%	4/12/2017		4/12/2022		1,253		1,251		1,253		0.5	%
Priority Ambulance, LLC	L+6.50%	7.50	%	12/13/2018		4/12/2022		655		655		655		0.3	%
Priority Ambulance, LLC	L+6.50%	7.50	%	10/22/2020		4/12/2022		990		990		989		0.4	%
								12,913		12,911		12,907		5.2	%
High Tech Industries
Energy Services Group, LLC	L+8.42%	9.42	%	5/4/2017		5/4/2022		3,725		3,720		3,725		1.5	%
Energy Services Group, LLC (h) (w)	SN+8.42%	9.42	%	5/4/2017		5/4/2022		4,541		4,458		4,541		1.8	%
Energy Services Group, LLC	L+8.42%	9.42	%	5/4/2017		5/4/2022		1,060		1,047		1,060		0.4	%
WillowTree, LLC	L+5.00%	6.00	%	10/9/2018		10/9/2023		7,639		7,584		7,651		3.1	%
								16,965		16,809		16,977		6.8	%

F-12

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity			Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Services: Business
Onit, Inc.	L+7.25%	8.25	%	12/20/2021		5/2/2025			1,500	$	1,472	$	1,472		0.6	%
									1,500		1,472		1,472		0.6	%
Telecommunications
VB E1, LLC (Delayed Draw) (f) (g)	L+7.65%	8.15	%	11/18/2020		11/18/2026			2,250		1,100		1,118		0.4	%
									2,250		1,100		1,118		0.4	%
Total Non-Controlled/Non-Affiliate Unitranche Secured Loans									72,498		70,977		51,494		20.6	%
Junior Secured Loans
Banking, Finance, Insurance & Real Estate
Florida East Coast Industries, LLC (h)	n/a	16.00% PIK		8/9/2021		6/28/2024			1,520		1,482		1,530		0.6	%
MoneyLion, Inc. (h)	n/a	12.00	%	8/27/2021		5/1/2023			1,500		1,488		1,522		0.6	%
Witkoff/Monroe 700 JV LLC (Delayed Draw) (f) (g) (h)	n/a	8.00% Cash/ 4.00% PIK		7/2/2021		7/2/2026			5,576		4,665		4,886		2.0	%
									8,596		7,635		7,938		3.2	%
Services: Consumer
Education Corporation of America	L+11.00%	5.72% Cash/ 5.50% PIK	(m)	9/3/2015		n/a	(p)		833		831		576		0.2	%
									833		831		576		0.2	%
Total Non-Controlled/Non-Affiliate Junior Secured Loans									9,429		8,466		8,514		3.4	%
Equity Securities (x) (y)
Automotive
Born To Run, LLC (269,438 Class A units)	—	—	(z)	4/1/2021		—			—		269		293		0.1	%
Lifted Trucks Holdings, LLC (111,111 Class A units) (aa)	—	—	(z)	8/2/2021		—			—		111		109		0.1	%
											380		402		0.2	%
Banking, Finance, Insurance & Real Estate
J2 BWA Funding LLC (0.7% profit sharing) (h) (aa)	—	—	(z)	12/24/2020		—			—		—		—		0.0	%
MV Realty Holdings, LLC (729 common units) (h) (aa)	—	—	(z)	7/29/2021		—			—		300		558		0.2	%
MV Realty Holdings, LLC (warrant to purchase up to 0.8% of the equity) (h) (aa)	—	—	(z)	7/28/2021		7/28/2031			—		363		1,007		0.4	%
PKS Holdings, LLC (5,680 preferred units) (h)	n/a	12.00% PIK		11/30/2017		—			—		58		219		0.1	%
PKS Holdings, LLC (5,714 preferred units) (h)	n/a	12.00% PIK		11/30/2017		—			—		9		34		0.0	%
PKS Holdings, LLC (132 preferred units) (h)	n/a	12.00% PIK		11/30/2017		—			—		1		5		0.0	%
PKS Holdings, LLC (916 preferred units) (h)	n/a	12.00% PIK		11/30/2017		—			—		9		34		0.0	%
Witkoff/Monroe 700 JV LLC (2,141 preferred units) (h) (aa)	n/a	8.00% Cash/ 4.00% PIK		7/2/2021		—			—		2		2		0.0	%
											742		1,859		0.7	%

F-13

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Beverage, Food & Tobacco
California Pizza Kitchen, Inc. (78,699 common units)	—	—	(z)	8/19/2016		—		—	$	5,468	$	3,699		1.5	%
										5,468		3,699		1.5	%
Capital Equipment
MCP Shaw Acquisitionco, LLC (118,906 Class A-2 units) (aa)	—	—	(z)	2/28/2020		—		—		119		148		0.1	%
										119		148		0.1	%
Chemicals, Plastics & Rubber
Valudor Products LLC (501,014 Class A-1 units) (aa)	n/a	10.00% PIK		6/18/2018		—		—		501		16		0.0	%
										501		16		0.0	%
Consumer Goods: Durable
Independence Buyer, Inc. (81 Class A units)	—	—	(z)	8/3/2021		—		—		81		101		0.0	%
										81		101		0.0	%
Environmental Industries
Quest Resource Management Group, LLC (warrant to purchase up to 0.2% of the equity)	—	—	(z)	10/19/2020		3/19/2028		—		67		286		0.1	%
Quest Resource Management Group, LLC (warrant to purchase up to 0.2% of the equity)	—	—	(z)	10/19/2021		3/19/2028		—		—		169		0.1	%
										67		455		0.2	%
Healthcare & Pharmaceuticals
Dorado Acquisition, Inc. (178,891 Class A-1 units)	—	—	(z)	6/30/2021		—		—		179		179		0.1	%
Dorado Acquisition, Inc. (178,891 Class A-2 units)	—	—	(z)	6/30/2021		—		—		—		9		0.0	%
NationsBenefits, LLC (888,889 Series A units) (aa)	n/a	9.00% PIK		8/20/2021		—		—		736		714		0.3	%
NationsBenefits, LLC (106,667 shares of common units) (aa)	—	—	(z)	8/20/2021		—		—		153		67		0.0	%
Seran BioScience, LLC (33,333 common units) (aa)	—	—	(z)	12/31/2020		—		—		334		714		0.3	%
										1,402		1,683		0.7	%
High Tech Industries
MarkLogic Corporation (290,239 Class A units)	—	—	(z)	10/20/2020		—		—		290		423		0.2	%
Planful, Inc. (473,082 Class A units)	n/a	8.00% PIK		12/28/2018		—		—		473		557		0.2	%
Recorded Future, Inc. (80,486 Class A units) (ab)	—	—	(z)	7/3/2019		—		—		81		203		0.1	%
										844		1,183		0.5	%
Hotels, Gaming & Leisure
Equine Network, LLC (99 Class A units) (aa)	—	—	(z)	12/31/2020		—		—		99		102		0.0	%
										99		102		0.0	%

F-14

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity			Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Media: Advertising, Printing & Publishing
AdTheorent Holding Company, Inc. (177,362 shares of common stock) (h) (aj)	—	—	(z)	12/22/2016		—			—	$	114	$	1,041		0.4	%
InMobi Pte, Ltd. (warrant to purchase up to 2.8% of the equity) (h) (j)	—	—	(z)	9/18/2015		9/18/2025			—		—		2,204		0.9	%
Relevate Health Group, LLC (40 preferred units)	n/a	12.00% PIK		11/20/2020		—			—		40		40		0.0	%
Relevate Health Group, LLC (40 Class B common units)	—	—	(z)	11/20/2020		—			—		—		—		0.0	%
Spherix Global Inc. (81 Class A units)	—	—	(z)	12/22/2021		—			—		81		81		0.0	%
XanEdu Publishing, Inc. (49,479 Class A units)	n/a	8.00% PIK		1/28/2020		—			—		49		106		0.0	%
											284		3,472		1.3	%
Media: Diversified & Production
Attom Intermediate Holdco, LLC (297,197 Class A units) (aa)	—	—	(z)	1/4/2019		—			—		297		446		0.2	%
Chess.com, LLC (2 Class A units) (aa)	—	—	(z)	12/31/2021		—			—		87		87		0.0	%
											384		533		0.2	%
Retail
BLST Operating Company, LLC (139,883 Class A units) (aa)	—	—	(z)	8/28/2020		—			—		712		420		0.2	%
Forman Mills, Inc. (warrant to purchase up to 2.6% of the equity) (k)	—	—	(z)	1/14/2020		1/14/2029			—		—		702		0.3	%
Luxury Optical Holdings Co. (af)	n/a	n/a	(z)	9/12/2014		—			—		—		78		0.0	%
											712		1,200		0.5	%
Services: Business
APCO Worldwide, Inc. (100 Class A voting common stock)	—	—	(z)	11/1/2017		—			—		395		737		0.3	%
											395		737		0.3	%
Services: Consumer
Education Corporation of America - Series G Preferred Stock (8,333 shares)	n/a	12.00% PIK	(m)	9/3/2015		—			—		7,492		2,281		0.9	%
Express Wash Acquisition Company, LLC (121,311 Class A units) (aa)	n/a	8.00% PIK		12/28/2020		—			—		125		208		0.1	%
IDIG Parent, LLC (245,958 shares of common stock) (aa) (ac)	—	—	(z)	1/4/2021		—			—		248		428		0.2	%
											7,865		2,917		1.2	%
Wholesale
Nearly Natural, Inc. (152,174 Class A units)	—	—	(z)	12/15/2017		—			—		153		69		0.0	%
Nearly Natural, Inc. (39,394 Class AA units)	—	—	(z)	8/27/2021		—			—		39		5		0.0	%
											192		74		0.0	%
Total Non-Controlled/Non-Affiliate Equity Securities											19,535		18,581		7.4	%
Total Non-Controlled/Non-Affiliate Company Investments										$	446,051	$	430,287		172.5	%
Non-Controlled Affiliate Company Investments (ad)
Senior Secured Loans
Banking, Finance, Insurance & Real Estate
American Community Homes, Inc.	L+10.00%	11.50% PIK		7/22/2014		3/31/2022			10,457	$	10,457	$	10,457		4.2	%
American Community Homes, Inc.	L+14.50%	16.00% PIK		7/22/2014		3/31/2022			4,753		4,753		4,753		1.9	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		5/24/2017		3/31/2022			634		634		634		0.3	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		8/10/2018		3/31/2022			2,331		2,331		3,164		1.3	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		3/29/2019		3/31/2022			4,315		4,315		4,357		1.8	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		9/30/2019		3/31/2022			20		20		20		0.0	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		12/30/2019		3/31/2022			99		99		99		0.0	%
HFZ Capital Group LLC (h) (ae)	L+12.50%	14.00% PIK		10/20/2017		n/a	(p)		13,242		13,242		15,084		6.0	%
HFZ Capital Group LLC (h) (ae)	L+12.50%	14.00% PIK		10/20/2017		n/a	(p)		4,758		4,758		5,420		2.2	%
MC Asset Management (Corporate), LLC (h)	L+15.00%	16.00% PIK		1/26/2021		1/26/2024			7,154		7,154		7,154		2.9	%
MC Asset Management (Corporate), LLC (Delayed Draw) (f) (g) (h)	L+15.00%	16.00% PIK		4/26/2021		1/26/2024			1,643		850		850		0.3	%
Second Avenue SFR Holdings II LLC (Revolver) (f) (h)	L+7.00%	7.50	%	8/11/2021		8/9/2024			4,875		2,104		2,104		0.8	%
									54,281		50,717		54,096		21.7	%

F-15

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity			Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Beverage, Food & Tobacco
TJ Management HoldCo LLC (Revolver) (f)	L+5.50%	6.50	%	9/9/2020		6/28/2024			477	$	—	$	—		0.0	%
									477		—		—		0.0	%
Healthcare & Pharmaceuticals
Ascent Midco, LLC (k)	L+5.50%	6.50	%	2/5/2020		2/5/2025			6,392		6,308		6,392		2.6	%
Ascent Midco, LLC (Revolver) (f)	L+5.50%	6.50	%	2/5/2020		2/5/2025			1,129		—		—		0.0	%
									7,521		6,308		6,392		2.6	%
High Tech Industries
Mnine Holdings, Inc.	L+8.00%	4.00% Cash/ 5.00% PIK		11/2/2018		12/30/2022			5,193		5,165		5,771		2.3	%
									5,193		5,165		5,771		2.3	%
Services: Business
Curion Holdings, LLC (ag)	n/a	14.00% PIK	(m)	5/2/2017		8/31/2022			4,533		4,497		4,561		1.8	%
Curion Holdings, LLC (Revolver) (f)	n/a	14.00% PIK	(m)	5/2/2017		8/31/2022			871		528		550		0.2	%
									5,404		5,025		5,111		2.0	%
Services: Consumer
NECB Collections, LLC (Revolver) (f)	L+11.00%	12.00% PIK	(m)	6/25/2019		n/a	(p)		1,356		1,312		632		0.3	%
									1,356		1,312		632		0.3	%
Total Non-Controlled Affiliate Senior Secured Loans									74,232		68,527		72,002		28.9	%
Junior Secured Loans
Banking, Finance, Insurance & Real Estate
Second Avenue SFR Holdings II LLC (h)	n/a	8.00	%	8/6/2021		7/28/2028			5,850		5,850		5,850		2.3	%
									5,850		5,850		5,850		2.3	%
Services: Business
Curion Holdings, LLC (k)	n/a	15.00% PIK	(m)	8/17/2018		1/2/2023			1,720		1		—		0.0	%
Curion Holdings, LLC (k)	n/a	15.00% PIK	(m)	8/17/2018		1/2/2023			44		—		—		0.0	%
									1,764		1		—		0.0	%
Total Non-Controlled Affiliate Company Junior Secured Loans									7,614		5,851		5,850		2.3	%
Equity Securities (y) (ad)
Banking, Finance, Insurance & Real Estate
American Community Homes, Inc. (warrant to purchase up to 22.3% of the equity)	—	—	(z)	10/9/2014		12/18/2024			—		—		264		0.1	%
MC Asset Management (Corporate), LLC (15.9% of interests) (h) (aa) (ae)	—	—	(z)	6/11/2019		—			—		793		644		0.2	%
Second Avenue SFR Holdings II LLC (24.4% of interests) (h)	—	—	(z)	8/6/2021		—			—		3,900		3,900		1.6	%
											4,693		4,808		1.9	%
Beverage, Food & Tobacco
TJ Management HoldCo LLC (16 shares of common stock) (l) (aa)	—	—	(z)	9/9/2020		—			—		1,631		3,148		1.3	%
											1,631		3,148		1.3	%

F-16

MONROE CAPITAL CORPORATION

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued)

December 31, 2021

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Healthcare & Pharmaceuticals
Ascent Midco, LLC (2,032,258 Class A units) (aa)	n/a	8.00% PIK		2/5/2020		—		—	$	2,032	$	2,554		1.0	%
Familia Dental Group Holdings, LLC (1,105 Class A units) (aa) (ah)	—	—	(z)	4/8/2016		—		—		3,785		1,919		0.8	%
										5,817		4,473		1.8	%
High Tech Industries
Mnine Holdings, Inc. (6,400 Class B units)	—	—	(z)	6/30/2020		—		—		—		—		0.0	%
										—		—		0.0	%
Services: Business
Curion Holdings, LLC (58,779 shares of common stock) (k)	—	—	(z)	8/17/2018		—		—		—		—		0.0	%
										—		—		0.0	%
Services: Consumer
NECB Collections, LLC (20.8% of units) (aa)	—	—	(z)	6/21/2019		—		—		1,458		—		0.0	%
										1,458		—		0.0	%
Total Non-Controlled Affiliate Equity Securities										13,599		12,429		5.0	%
Total Non-Controlled Affiliate Company Investments									$	87,977	$	90,281		36.2	%
Controlled Affiliate Company Investments (ai)
Equity Securities
Investment Funds & Vehicles
MRCC Senior Loan Fund I, LLC (50.0% of the equity interests) (h)	—	—		10/31/2017		—		—	$	42,150	$	41,125		16.5	%
Total Controlled Affiliate Equity Securities										42,150		41,125		16.5	%
Total Controlled Affiliate Company Investments									$	42,150	$	41,125		16.5	%
TOTAL INVESTMENTS									$	576,178	$	561,693		225.2	%

F-17

Derivative Instruments

Foreign currency forward contracts

Description	Notional Amount to be Purchased		Notional Amount to be Sold		Counterparty	Settlement Date	Unrealized Gain (Loss)
Foreign currency forward contract	$	101	£	82	Bannockburn Global Forex, LLC	1/3/2022	$	(10	)
Foreign currency forward contract	$	97	£	79	Bannockburn Global Forex, LLC	4/4/2022		(10	)
Foreign currency forward contract	$	36	£	29	Bannockburn Global Forex, LLC	5/6/2022		(3	)
Foreign currency forward contract	$	121	AUD	156	Bannockburn Global Forex, LLC	1/19/2022		8
Foreign currency forward contract	$	105	AUD	136	Bannockburn Global Forex, LLC	2/16/2022		7
Foreign currency forward contract	$	102	AUD	132	Bannockburn Global Forex, LLC	3/16/2022		6
Foreign currency forward contract	$	113	AUD	146	Bannockburn Global Forex, LLC	4/19/2022		7
Foreign currency forward contract	$	107	AUD	138	Bannockburn Global Forex, LLC	5/17/2022		7
Foreign currency forward contract	$	119	AUD	153	Bannockburn Global Forex, LLC	6/17/2022		7
Foreign currency forward contract	$	107	AUD	138	Bannockburn Global Forex, LLC	7/18/2022		7
Foreign currency forward contract	$	108	AUD	140	Bannockburn Global Forex, LLC	8/16/2022		7
Foreign currency forward contract	$	118	AUD	153	Bannockburn Global Forex, LLC	9/16/2022		7
Foreign currency forward contract	$	117	AUD	152	Bannockburn Global Forex, LLC	10/19/2022		7
Foreign currency forward contract	$	105	AUD	136	Bannockburn Global Forex, LLC	11/16/2022		6
Foreign currency forward contract	$	109	AUD	142	Bannockburn Global Forex, LLC	12/16/2022		7
Foreign currency forward contract	$	118	AUD	153	Bannockburn Global Forex, LLC	1/18/2023		7
Foreign currency forward contract	$	108	AUD	140	Bannockburn Global Forex, LLC	2/16/2023		6
Foreign currency forward contract	$	102	AUD	132	Bannockburn Global Forex, LLC	3/16/2023		6
Foreign currency forward contract	$	123	AUD	160	Bannockburn Global Forex, LLC	4/20/2023		7
Foreign currency forward contract	$	93	AUD	121	Bannockburn Global Forex, LLC	5/16/2023		5
Foreign currency forward contract	$	121	AUD	156	Bannockburn Global Forex, LLC	6/19/2023		7
Foreign currency forward contract	$	107	AUD	138	Bannockburn Global Forex, LLC	7/18/2023		6
Foreign currency forward contract	$	113	AUD	146	Bannockburn Global Forex, LLC	8/16/2023		6
Foreign currency forward contract	$	113	AUD	146	Bannockburn Global Forex, LLC	9/18/2023		6
Foreign currency forward contract	$	114	AUD	148	Bannockburn Global Forex, LLC	10/18/2023		6
Foreign currency forward contract	$	107	AUD	140	Bannockburn Global Forex, LLC	11/16/2023		6
Foreign currency forward contract	$	109	AUD	142	Bannockburn Global Forex, LLC	12/18/2023		6
Foreign currency forward contract	$	115	AUD	150	Bannockburn Global Forex, LLC	1/17/2024		6
Foreign currency forward contract	$	110	AUD	143	Bannockburn Global Forex, LLC	2/16/2024		6
Foreign currency forward contract	$	11,827	AUD	15,410	Bannockburn Global Forex, LLC	3/18/2024		635
							$	781

(a) All of the Company's investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940 (the “1940 Act”), unless otherwise noted. All of the Company's investments are issued by U.S. portfolio companies unless otherwise noted.

(b) The majority of the investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”), Prime Rate (“Prime” or “P”), Sterling Overnight Index Average ("SONIA" or "SN") or Secured Overnight Financing Rate ("SOFR" or "SF") which reset daily, monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over LIBOR, Prime, or SOFR and the current contractual interest rate in effect at December 31, 2021. Certain investments are subject to a LIBOR, Prime, or SOFR interest rate floor, or rate cap. Certain investments contain a Payment-in-Kind (“PIK”) provision.

(c) Except as otherwise noted, all of the Company’s portfolio company investments, which as of December 31, 2021 represented 225.2% of the Company’s net assets or 95.1% of the Company’s total assets, are subject to legal restrictions on sales.

(d) Except as otherwise noted, because there is no readily available market value for these investments, the fair value of these investments is determined in good faith using significant unobservable inputs by the Company's board of directors as required by the 1940 Act. See Note 4 in the accompanying notes to the consolidated financial statements.

(e) Percentages are based on net assets of $249,471 as of December 31, 2021.

(f) All or a portion of this commitment was unfunded at December 31, 2021. As such, interest is earned only on the funded portion of this commitment.

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

(h) This investment is treated as a non-qualifying investment under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2021, non-qualifying assets totaled 22.5% of the Company’s total assets.

(i) This loan is denominated in Australian dollars and is translated into U.S. dollars as of the valuation date.

(j) This is an international company.

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

(l) During the three months ended September 30, 2020, the senior secured lender group of Toojay’s Management, LLC (“Toojay’s OldCo”) established TJ Management HoldCo, LLC (“Toojay’s NewCo”) in order to acquire certain of the assets of Toojay’s OldCo as part of a bankruptcy restructuring. The Company owns 15.9% of the equity in Toojay’s NewCo. Toojay’s NewCo credit bid a portion of the senior secured debt in Toojay’s OldCo to acquire certain assets of Toojay’s OldCo which constitute the ongoing operations of the portfolio company. The Company’s portion of this credit bid was $2,386, and as such the Company's outstanding senior secured debt investment in Toojay’s OldCo was reduced by the amount of the credit bid and the Company’s cost basis of its new equity investment in Toojay’s NewCo was increased by the amount of the credit bid. While the Company still has loans outstanding at Toojay’s OldCo, the Company has valued these positions at zero as of December 31, 2021.

(m) This position was on non-accrual status as of December 31, 2021, meaning that the Company has ceased accruing interest income on the position. See Note 2 in the accompanying notes to the consolidated financial statements for additional information on the Company’s accounting policies.

(n) This investment represents a note convertible to preferred shares of the borrower.

(o) In May 2020, an arbitrator issued a final award in favor of the estate of Rockdale Blackhawk, LLC (the “Estate”) in the legal proceeding between the Estate and a national insurance carrier. The Company's share of the net proceeds from the award exceeded the contractual obligations due to the Company as a result of the Company’s right to receive excess proceeds pursuant to the terms of a sharing agreement between the lenders and the Estate investment is a non-income producing security.

(p) This is a demand note with no stated maturity.

(q) The Company structures its unitranche secured loans as senior secured loans. The Company obtains security interests in the assets of these portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first-priority liens on the assets of a portfolio company. Generally, the Company syndicates a “first out” portion of the loan to an investor and retains a "last out” portion of the loan, in which case the “first out” portion of the loan will generally receive priority with respect to payments of principal, interest and any other amounts due thereunder. Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and the Company’s unitranche secured loans will expose the Company to the risks associated with second lien and subordinated loans and may limit the Company’s recourse or ability to recover collateral upon a portfolio company’s bankruptcy. Unitranche secured loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred until loan maturity. Unitranche secured loans generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. In many cases the Company, together with its affiliates, are the sole or majority lender of these unitranche secured loans, which can afford the Company additional influence with a borrower in terms of monitoring and, if necessary, remediation in the event of underperformance.

(r) A portion of this loan (principal of $54) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(s) A portion of this loan (principal of $4,969) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(t) A portion of this loan (principal of $421) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(u) A portion of this loan (principal of $9,258) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(v) A portion of this loan (principal of $525) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(w) This loan is denominated in Great Britain pounds and is translated into U.S. dollars as of the valuation date.

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

(y) Ownership of certain equity investments may occur through a holding company or partnership.

(z) Represents a non-income producing security.

(aa) Investment is held by a taxable subsidiary of the Company. See Note 2 in the accompanying notes to the consolidated financial statements for additional information on the Company’s wholly-owned taxable subsidiaries.

(ab) As of December 31, 2021, the Company was party to a subscription agreement with a commitment to fund an additional equity investment of $16.

(ac) As of December 31, 2021, the Company was party to a subscription agreement with a commitment to fund an equity investment of $43.

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

(ae) The Company restructured its investment in HFZ Capital Group LLC (“HFZ”) during the three months ended December 31, 2020. As part of the restructuring of HFZ, the Company obtained a 15.9% equity interest in MC Asset Management (Corporate), LLC (“Corporate”). Corporate owns 100% of the equity of MC Asset Management Industrial, LLC (“Industrial”). In conjunction with these restructurings, the Company participated $4,758 of principal of its loan to HFZ as an equity contribution to Industrial. This participation did not qualify for sale accounting under ASC Topic 860–Transfers and Servicing because the sale did not meet the definition of a “participating interest”, as defined in the guidance, in order for sale treatment to be allowed. As a result, the Company continues to reflect its full investment in HFZ but has split the loan into two investments.

(af) During the three months ended December 31, 2021, the Company sold its investment in Luxury Optical Holdings Co. The remaining fair value at December 31, 2021 represents the remaining expected escrow proceeds associated with the sale.

(ag) A portion of this loan (principal of $4,226) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(ah) As of December 31, 2021, the Company was party to a subscription agreement with a commitment to fund an additional equity investment of $428.

(ai)

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

(aj)

The fair value of this investment was valued using Level 1 inputs. See Note 4 in the accompanying notes to the consolidated financial statements.

n/a - not applicable

F-18

MONROE CAPITAL CORPORATION 

CONSOLIDATED SCHEDULE OF INVESTMENTS 

December 31, 2020 

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above  Index (b)	Interest Rate		Acquisition Date (c)	Maturity	Principal	Amortized Cost		Fair Value (d)		% of Net Assets (e)
Non-Controlled/Non-Affiliate Company Investments
Senior Secured Loans
Automotive
Hastings Manufacturing Company	L+8.25%	9.25	%	4/24/2018	4/24/2023	2,820	$	2,790	$	2,829	1.2	%
Magneto & Diesel Acquisition, Inc.	L+6.05%	7.10	%	12/18/2018	12/18/2023	4,876		4,820		4,876	2.1	%
Magneto & Diesel Acquisition, Inc.	L+6.05%	7.10	%	7/6/2020	12/18/2023	1,918		1,885		1,932	0.8	%
Magneto & Diesel Acquisition, Inc. (Revolver) (f)	L+6.05%	7.10	%	12/18/2018	12/18/2023	500		—		—	0.0	%
						10,114		9,495		9,637	4.1	%
Banking, Finance, Insurance & Real Estate
777 SPV I, LLC (g)	L+8.50%	10.25	%	4/15/2019	4/14/2023	4,665		4,628		4,760	2.0	%
J2 BWA Funding, LLC (Delayed Draw) (f) (g) (h)	n/a	10.00	%	12/24/2020	12/24/2026	2,750		—		—	0.0	%
Liftforward SPV II, LLC (g)	L+10.75%	11.25	%	11/10/2016	6/30/2021	2,057		2,057		1,929	0.8	%
NCBP Property, LLC (g)	L+9.50%	10.50	%	12/18/2020	12/16/2022	1,950		1,931		1,931	0.8	%
US Claims Litigation Funding, LLC (Revolver) (f) (g)	L+8.75%	9.75	%	11/30/2020	11/29/2024	1,500		850		850	0.4	%
						12,922		9,466		9,470	4.0	%
Beverage, Food & Tobacco
LX/JT Intermediate Holdings, Inc. (j)	L+6.00%	7.50	%	3/11/2020	3/11/2025	9,732		9,564		9,567	4.1	%
LX/JT Intermediate Holdings, Inc. (Revolver) (f)	L+6.00%	7.50	%	3/11/2020	3/11/2025	833		—		—	0.0	%
Toojay’s Management, LLC (k)	n/a	n/a	(l)	10/26/2018	10/26/2022	1,448		1,407		—	0.0	%
Toojay’s Management, LLC (k)	n/a	n/a	(l)	10/26/2018	10/26/2022	199		199		—	0.0	%
Toojay’s Management, LLC (Revolver) (k)	n/a	n/a	(l)	10/26/2018	10/26/2022	66		66		—	0.0	%
						12,278		11,236		9,567	4.1	%
Capital Equipment
MCP Shaw Acquisitionco, LLC (j)	L+6.50%	7.50	%	2/28/2020	11/28/2025	9,924		9,752		9,721	4.2	%
MCP Shaw Acquisitionco, LLC (Revolver) (f)	L+6.50%	7.50	%	2/28/2020	11/28/2025	1,784		—		—	0.0	%
						11,708		9,752		9,721	4.2	%
Chemicals, Plastics & Rubber
Midwest Composite Technologies, LLC (j)	L+6.75%	7.75	%	12/2/2019	8/31/2023	14,925		14,701		14,926	6.4	%
Midwest Composite Technologies, LLC	L+6.75%	7.75	%	8/31/2018	8/31/2023	887		876		887	0.4	%
Midwest Composite Technologies, LLC (Delayed Draw) (f) (h)	L+6.75%	7.75	%	8/31/2018	8/31/2023	509		179		179	0.1	%
Midwest Composite Technologies, LLC (Revolver) (f)	L+6.75%	7.75	%	8/31/2018	8/31/2023	90		—		—	0.0	%
Valudor Products, LLC	L+7.50%	7.00% Cash/ 1.50% PIK		6/18/2018	6/19/2023	1,561		1,543		1,702	0.7	%
Valudor Products, LLC (m)	L+7.50%	8.50% PIK		6/18/2018	6/19/2023	217		214		—	0.0	%
Valudor Products, LLC (Revolver) (f)	L+9.50%	10.50	%	6/18/2018	6/19/2023	818		549		521	0.2	%
						19,007		18,062		18,215	7.8	%
Construction & Building
Cali Bamboo, LLC	L+9.50%	8.00% Cash/ 2.50% PIK		7/10/2015	3/31/2022	6,859		6,857		6,859	2.9	%
Cali Bamboo, LLC (Revolver) (f)	L+9.50%	8.00% Cash/ 2.50% PIK		7/10/2015	3/31/2022	2,165		—		—	0.0	%
Dude Solutions Holdings, Inc.	L+7.50%	8.50	%	6/14/2019	6/13/2025	9,975		9,794		9,950	4.3	%
Dude Solutions Holdings, Inc. (Revolver) (f)	L+7.50%	8.50	%	6/14/2019	6/13/2025	1,304		—		—	0.0	%
						20,303		16,651		16,809	7.2	%
Consumer Goods: Durable
Franchise Group Intermediate Holdco, LLC	L+8.00%	9.50	%	2/24/2020	2/14/2025	3,425		3,366		3,382	1.4	%
Nova Wildcat Amerock, LLC	L+5.25%	6.25	%	10/12/2018	10/12/2023	9,009		8,897		9,009	3.9	%
Nova Wildcat Amerock, LLC (Revolver) (f)	L+5.25%	6.25	%	10/12/2018	10/12/2023	931		—		—	0.0	%
Parterre Flooring & Surface Systems, LLC (j)	L+9.00%	10.00	%(l)	8/22/2017	8/22/2022	7,613		7,533		2,351	1.0	%
Parterre Flooring & Surface Systems, LLC (Revolver)	L+9.00%	10.00	%(l)	8/22/2017	8/22/2022	696		696		215	0.1	%
						21,674		20,492		14,957	6.4	%
Consumer Goods: Non-Durable
Thrasio, LLC	L+7.00%	8.00	%	12/18/2020	12/18/2026	1,500		1,463		1,463	0.6	%
Thrasio, LLC (Delayed Draw) (f) (h)	L+7.00%	8.00	%	12/18/2020	12/18/2026	990		—		—	0.0	%
						2,490		1,463		1,463	0.6	%
Environmental Industries
Quest Resource Management Group, LLC	L+8.50%	9.75	%	10/19/2020	10/20/2025	1,000		933		979	0.4	%
Quest Resource Management Group, LLC (Delayed Draw) (f) (h)	L+8.50%	9.75	%	10/19/2020	10/20/2025	1,087		—		—	0.0	%
StormTrap, LLC	L+5.50%	6.50	%	12/10/2018	12/8/2023	7,840		7,751		7,840	3.4	%
StormTrap, LLC (Revolver) (f)	L+5.50%	6.50	%	12/10/2018	12/8/2023	432		—		—	0.0	%
Synergy Environmental Corporation (j)	L+6.00%	7.00	%	4/29/2016	9/29/2023	2,885		2,874		2,888	1.2	%
Synergy Environmental Corporation (j)	L+6.00%	7.00	%	4/29/2016	9/29/2023	482		481		483	0.2	%
Synergy Environmental Corporation	L+6.00%	7.00	%	4/29/2016	9/29/2023	823		823		824	0.4	%
Synergy Environmental Corporation (Revolver) (f)	L+6.00%	7.00	%	4/29/2016	9/29/2023	671		67		67	0.0	%
						15,220		12,929		13,081	5.6	%

F-19

MONROE CAPITAL CORPORATION 

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued) 

December 31, 2020 

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above  Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal	Amortized Cost		Fair Value (d)		% of Net Assets (e)
Healthcare & Pharmaceuticals
American Optics Holdco, Inc. (g) (n)	L+6.50%	7.50	%	9/13/2017	9/13/2022		2,165	$	2,148	$	2,165	0.9	%
American Optics Holdco, Inc. (g) (n)	L+6.50%	7.50	%	9/13/2017	9/13/2022		1,637		1,622		1,637	0.7	%
American Optics Holdco, Inc. (Revolver) (f) (g) (n)	L+6.50%	7.50	%	9/13/2017	9/13/2022		220		—		—	0.0	%
American Optics Holdco, Inc. (Revolver) (f) (g) (n)	L+6.50%	7.50	%	9/13/2017	9/13/2022		440		—		—	0.0	%
Apotheco, LLC	L+8.50%	6.50% Cash / 3.00% PIK		4/8/2019	4/8/2024		3,541		3,491		3,315	1.4	%
Apotheco, LLC (Revolver)	L+8.50%	6.50% Cash / 3.00% PIK		4/8/2019	4/8/2024		927		927		868	0.4	%
Rockdale Blackhawk, LLC	n/a	n/a	(o)	3/31/2015	n/a	(i)	—		—		1,592	0.7	%
Seran BioScience, LLC	L+7.25%	8.25	%	12/31/2020	12/31/2025		2,500		2,450		2,450	1.0	%
Seran BioScience, LLC (Revolver) (f)	L+7.25%	8.25	%	12/31/2020	12/31/2025		444		—		—	0.0	%
							11,874		10,638		12,027	5.1	%
High Tech Industries
MarkLogic Corporation	L+8.00%	9.00	%	10/20/2020	10/20/2025		3,500		3,415		3,544	1.5	%
MarkLogic Corporation (Revolver) (f)	L+8.00%	9.00	%	10/20/2020	10/20/2025		269		—		—	0.0	%
Mindbody, Inc.	L+8.50%	8.00% Cash / 1.50% PIK		2/15/2019	2/14/2025		6,389		6,297		6,143	2.6	%
Mindbody, Inc. (Revolver) (f)	L+8.00%	9.00	%	2/15/2019	2/14/2025		667		—		—	0.0	%
Newforma, Inc. (j)	L+5.00%	6.00	%	6/30/2017	6/30/2022		11,899		11,836		11,899	5.1	%
Newforma, Inc. (Revolver) (f)	L+5.00%	6.00	%	6/30/2017	6/30/2022		1,250		—		—	0.0	%
Planful, Inc. (fka Host Analytics, Inc.)	L+6.00%	7.00	%	12/28/2018	12/28/2023		9,500		9,375		9,443	4.0	%
Planful, Inc. (fka Host Analytics, Inc.) (Revolver) (f)	L+6.00%	7.00	%	12/28/2018	12/28/2023		442		88		88	0.0	%
RPL Bidco Limited (g) (n) (p)	L+7.50%	8.00	%	11/9/2017	11/9/2023		14,429		13,867		14,429	6.2	%
RPL Bidco Limited (g) (n) (p)	L+7.50%	8.00	%	5/22/2018	11/9/2023		1,777		1,639		1,777	0.8	%
RPL Bidco Limited (Revolver) (f) (g) (n) (p)	L+7.50%	8.00	%	11/9/2017	11/9/2023		547		—		—	0.0	%
							50,669		46,517		47,323	20.2	%
Hotels, Gaming & Leisure
Equine Network, LLC	L+8.00%	9.00	%	12/31/2020	12/31/2025		1,750		1,711		1,711	0.7	%
Equine Network, LLC (Delayed Draw) (f) (h)	L+8.00%	9.00	%	12/31/2020	12/31/2025		427		—		—	0.0	%
Equine Network, LLC (Revolver) (f)	L+8.00%	9.00	%	12/31/2020	12/31/2025		171		—		—	0.0	%
							2,348		1,711		1,711	0.7	%
Media: Advertising, Printing & Publishing
AdTheorent Holding Company, LLC	L+8.50%	9.00	%	12/22/2016	12/22/2021		2,700		2,687		2,683	1.2	%
Destination Media, Inc. (j)	L+5.50%	6.50	%	4/7/2017	4/7/2022		4,324		4,304		4,315	1.8	%
Destination Media, Inc. (Revolver)	L+5.50%	6.50	%	4/7/2017	4/7/2022		542		542		542	0.2	%
North Haven USHC Acquisition, Inc.	L+6.50%	7.50	%	10/30/2020	10/30/2025		2,500		2,451		2,525	1.1	%
North Haven USHC Acquisition, Inc. (Revolver) (f)	L+6.50%	7.50	%	10/30/2020	10/30/2025		240		—		—	0.0	%
Relevate Health Group, LLC	L+6.25%	7.25	%	11/20/2020	11/20/2025		1,500		1,470		1,506	0.6	%
Relevate Health Group, LLC (Delayed Draw) (f) (h)	L+6.25%	7.25	%	11/20/2020	11/20/2025		789		671		674	0.3	%
Relevate Health Group, LLC (Revolver) (f)	L+6.25%	7.25	%	11/20/2020	11/20/2025		316		—		—	0.0	%
Stratus Unlimited, LLC (fka MC Sign Lessor Corp.)	L+7.00%	8.00	%	12/22/2017	8/30/2024		15,563		15,498		15,465	6.6	%
Stratus Unlimited, LLC (fka MC Sign Lessor Corp.) (Revolver) (f)	L+7.00%	8.00	%	12/22/2017	8/30/2024		3,490		—		—	0.0	%
XanEdu Publishing, Inc.	L+6.50%	7.50	%	1/28/2020	1/28/2025		1,886		1,854		1,890	0.8	%
XanEdu Publishing, Inc. (Revolver) (f)	L+6.50%	7.50	%	1/28/2020	1/28/2025		495		197		197	0.1	%
							34,345		29,674		29,797	12.7	%
Media: Broadcasting & Subscription
Vice Group Holding, Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		5/2/2019	11/2/2022		1,355		1,348		1,372	0.6	%
Vice Group Holding, Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		11/4/2019	11/2/2022		260		257		263	0.1	%
Vice Group Holding, Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		5/2/2019	11/2/2022		425		425		430	0.2	%
Vice Group Holding, Inc.	L+12.00%	5.50% Cash/ 8.00% PIK		5/2/2019	11/2/2022		160		160		162	0.1	%
							2,200		2,190		2,227	1.0	%
Media: Diversified & Production
Attom Intermediate Holdco, LLC	L+5.75%	6.75	%	1/4/2019	1/4/2024		1,960		1,935		1,927	0.8	%
Attom Intermediate Holdco, LLC	L+7.50%	8.75	%	6/25/2020	1/4/2024		478		469		492	0.2	%
Attom Intermediate Holdco, LLC (Revolver) (f)	L+5.75%	6.75	%	1/4/2019	1/4/2024		320		—		—	0.0	%
Crownpeak Technology, Inc.	L+6.25%	7.25	%	2/28/2019	2/28/2024		4,000		3,946		3,962	1.7	%
Crownpeak Technology, Inc.	L+6.25%	7.25	%	2/28/2019	2/28/2024		60		60		59	0.0	%
Crownpeak Technology, Inc. (Revolver) (f)	L+6.25%	7.25	%	2/28/2019	2/28/2024		167		—		—	0.0	%
							6,985		6,410		6,440	2.7	%
Retail
BLST Operating Company, LLC (fka Bluestem Brands, Inc.)	L+8.50%	1.00% Cash/ 9.00% PIK	(l)	8/28/2020	8/28/2025		1,259		1,254		1,039	0.4	%
Forman Mills, Inc. (j)	L+9.50%	8.50% Cash/ 2.00% PIK		1/14/2020	12/30/2022		1,308		1,308		1,292	0.5	%
Forman Mills, Inc. (j)	L+9.50%	8.50% Cash/ 2.00% PIK		10/4/2016	12/30/2022		744		741		735	0.3	%
Forman Mills, Inc. (j)	L+9.50%	8.50% Cash/ 2.00% PIK		10/4/2016	12/30/2022		7,459		7,429		6,944	3.0	%
LuLu’s Fashion Lounge, LLC	L+9.50%	8.00% Cash/ 2.50% PIK		8/21/2017	8/29/2022		4,123		4,074		3,525	1.5	%
The Worth Collection, Ltd. (j)	L+8.50%	9.00	%(l)	9/29/2016	9/29/2021		10,587		10,248		120	0.1	%
							25,480		25,054		13,655	5.8	%

F-20

MONROE CAPITAL CORPORATION 

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued) 

December 31, 2020 

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above  Index (b)	Interest Rate		Acquisition Date (c)	Maturity	Principal	Amortized Cost		Fair Value (d)		% of Net Assets (e)
Services: Business
Arcserve (USA), LLC	L+6.00%	7.00	%	5/1/2019	5/1/2024	4,634	$	4,567	$	4,644	2.0	%
Atlas Sign Industries of FLA, LLC (j)	L+11.50%	11.50% Cash/ 1.00% PIK		5/14/2018	5/15/2023	3,563		3,368		3,324	1.4	%
Burroughs, Inc. (j)	L+7.50%	8.50	%	12/22/2017	12/22/2022	5,726		5,681		5,726	2.4	%
Burroughs, Inc. (Revolver) (f)	L+7.50%	8.50	%	12/22/2017	12/22/2022	1,220		170		170	0.1	%
Certify, Inc.	L+5.75%	6.75	%	2/28/2019	2/28/2024	9,000		8,907		9,000	3.8	%
Certify, Inc.	L+5.75%	6.75	%	2/28/2019	2/28/2024	1,227		1,227		1,227	0.5	%
Certify, Inc. (Revolver) (f)	L+5.75%	6.75	%	2/28/2019	2/28/2024	409		102		102	0.0	%
HS4 Acquisitionco, Inc.	L+6.75%	7.75	%	7/9/2019	7/9/2025	10,050		9,887		9,929	4.2	%
HS4 Acquisitionco, Inc. (Revolver) (f)	L+6.75%	7.75	%	7/9/2019	7/9/2025	817		—		—	0.0	%
IT Global Holding, LLC	L+9.00%	10.00	%	11/15/2018	11/10/2023	9,975		9,845		9,794	4.2	%
IT Global Holding, LLC	L+9.00%	10.00	%	7/19/2019	11/10/2023	3,719		3,661		3,651	1.6	%
IT Global Holding, LLC (Revolver)	L+9.00%	10.00	%	11/15/2018	11/10/2023	875		875		875	0.4	%
Madison Logic, Inc. (j)	L+7.50%	8.00	%	11/30/2016	11/30/2021	9,080		9,037		9,080	3.9	%
Madison Logic, Inc. (Revolver) (f)	L+7.50%	8.00	%	11/30/2016	11/30/2021	988		—		—	0.0	%
RedZone Robotics, Inc.	L+7.25%	7.75% Cash/ 0.50% PIK		6/1/2018	6/5/2023	591		585		556	0.2	%
RedZone Robotics, Inc. (Revolver) (f)	L+6.75%	7.75	%	6/1/2018	6/5/2023	158		—		—	0.0	%
Security Services Acquisition Sub Corp. (j)	L+6.00%	7.00	%	2/15/2019	2/15/2024	3,439		3,394		3,442	1.5	%
Security Services Acquisition Sub Corp. (j)	L+6.00%	7.00	%	2/15/2019	2/15/2024	2,473		2,473		2,476	1.1	%
Security Services Acquisition Sub Corp. (j)	L+6.00%	7.00	%	2/15/2019	2/15/2024	2,180		2,180		2,182	0.9	%
Security Services Acquisition Sub Corp.	L+6.00%	7.00	%	2/15/2019	2/15/2024	1,563		1,563		1,564	0.7	%
VPS Holdings, LLC	L+7.00%	8.00	%	10/5/2018	10/4/2024	3,663		3,611		3,469	1.5	%
VPS Holdings, LLC	L+7.00%	8.00	%	10/5/2018	10/4/2024	2,989		2,989		2,831	1.2	%
VPS Holdings, LLC (Revolver) (f)	L+7.00%	8.00	%	10/5/2018	10/4/2024	1,000		100		95	0.0	%
						79,339		74,222		74,137	31.6	%
Services: Consumer
Express Wash Acquisition Company, LLC	L+6.50%	7.50	%	12/28/2020	12/26/2025	2,500		2,456		2,456	1.0	%
Express Wash Acquisition Company, LLC (Revolver) (f)	L+6.50%	7.50	%	12/28/2020	12/26/2025	1,000		—		—	0.0	%
IDIG Parent, LLC (q)	L+6.50%	7.50	%	12/15/2020	12/15/2026	10,200		9,997		9,996	4.3	%
IDIG Parent, LLC (Delayed Draw) (f) (h)	L+6.50%	7.50	%	12/15/2020	12/15/2026	1,684		—		—	0.0	%
IDIG Parent, LLC (Revolver) (f)	L+6.50%	7.50	%	12/15/2020	12/15/2026	723		—		—	0.0	%
Mammoth Holdings, LLC	L+6.00%	7.00	%	10/16/2018	10/16/2023	1,960		1,936		1,949	0.8	%
Mammoth Holdings, LLC	L+6.00%	7.00	%	10/16/2018	10/16/2023	4,115		4,115		4,092	1.8	%
Mammoth Holdings, LLC (Revolver) (f)	L+6.00%	7.00	%	10/16/2018	10/16/2023	500		—		—	0.0	%
						22,682		18,504		18,493	7.9	%
Wholesale
Nearly Natural, Inc. (j)	L+6.75%	7.75	%	12/15/2017	12/15/2022	6,685		6,625		6,650	2.9	%
Nearly Natural, Inc. (j)	L+6.75%	7.75	%	9/22/2020	12/15/2022	1,728		1,698		1,719	0.7	%
Nearly Natural, Inc. (j)	L+6.75%	7.75	%	8/28/2019	12/15/2022	1,882		1,882		1,872	0.8	%
Nearly Natural, Inc. (Revolver) (f)	L+6.75%	7.75	%	12/15/2017	12/15/2022	2,397		959		959	0.4	%
						12,692		11,164		11,200	4.8	%
Total Non-Controlled/Non-Affiliate Senior Secured Loans						374,330		335,630		319,930	136.5	%
Unitranche Secured Loans (r)
Banking, Finance, Insurance & Real Estate
Kudu Investment Holdings, LLC (g)	L+5.75%	6.75	%	12/23/2019	12/23/2025	7,932		7,849		7,971	3.4	%
Kudu Investment Holdings, LLC (Delayed Draw) (f) (g) (h)	L+5.75%	6.75	%	12/23/2019	12/23/2025	2,357		448		451	0.2	%
						10,289		8,297		8,422	3.6	%
Chemicals, Plastics & Rubber
MFG Chemical, LLC (j)	L+6.00%	6.50	%	6/23/2017	6/23/2022	9,232		9,184		8,627	3.7	%
MFG Chemical, LLC	L+6.00%	6.50	%	3/15/2018	6/23/2022	976		976		912	0.4	%
						10,208		10,160		9,539	4.1	%
Consumer Goods: Durable
RugsUSA, LLC	L+6.00%	7.00	%	5/2/2018	4/28/2023	3,937		3,918		3,936	1.7	%
						3,937		3,918		3,936	1.7	%
Healthcare & Pharmaceuticals
Priority Ambulance, LLC (s)	L+6.50%	7.50	%	7/18/2018	4/12/2022	10,015		10,015		9,930	4.2	%
Priority Ambulance, LLC (t)	L+6.50%	7.50	%	4/12/2017	4/12/2022	1,253		1,242		1,243	0.5	%
Priority Ambulance, LLC	L+6.50%	7.50	%	12/13/2018	4/12/2022	672		672		666	0.3	%
Priority Ambulance, LLC (Delayed Draw) (f) (h)	L+6.50%	7.50	%	10/22/2020	4/12/2022	1,009		—		—	0.0	%
						12,949		11,929		11,839	5.0	%
High Tech Industries
Energy Services Group, LLC	L+8.42%	9.42	%	5/4/2017	5/4/2022	3,948		3,930		3,948	1.7	%
Energy Services Group, LLC (g) (p)	L+8.42%	9.42	%	5/4/2017	5/4/2022	4,861		4,699		4,861	2.0	%
Energy Services Group, LLC	L+8.42%	9.42	%	5/4/2017	5/4/2022	1,124		1,110		1,124	0.5	%
WillowTree, LLC	L+5.50%	6.50	%	10/9/2018	10/9/2023	7,840		7,755		7,707	3.3	%
						17,773		17,494		17,640	7.5	%
Telecommunications
VB E1, LLC (Delayed Draw) (f) (h)	L+8.50%	9.00	%	11/18/2020	11/18/2026	2,250		1,100		1,100	0.5	%
						2,250		1,100		1,100	0.5	%
Total Non-Controlled/Non-Affiliate Unitranche Secured Loans						57,406		52,898		52,476	22.4	%

F-21

MONROE CAPITAL CORPORATION 

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued) 

December 31, 2020 

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal	Amortized Cost		Fair Value (d)		% of Net Assets (e)
Junior Secured Loans
Beverage, Food & Tobacco
California Pizza Kitchen, Inc.	L+12.50%	1.00% Cash/ 14.00% PIK	(l)	8/19/2016	5/23/2025		1,264	$	1,264	$	1,011	0.4	%
CSM Bakery Solutions, LLC	L+7.75%	8.75	%	5/23/2013	2/4/2022		5,954		5,954		5,909	2.5	%
							7,218		7,218		6,920	2.9	%
Capital Equipment
ALTA Enterprises, LLC (g)	L+8.00%	9.80	%	2/14/2020	8/13/2025		3,850		3,732		3,886	1.7	%
							3,850		3,732		3,886	1.7	%
High Tech Industries
Micro Holdings Corp.	L+7.50%	7.65	%	8/16/2017	8/18/2025		3,000		2,981		3,024	1.3	%
							3,000		2,981		3,024	1.3	%
Services: Consumer
Education Corporation of America	L+11.00%	5.75% Cash/ 5.50% PIK	(l)	9/3/2015	n/a	(i)	833		831		762	0.3	%
							833		831		762	0.3	%
Total Non-Controlled/Non-Affiliate Junior Secured Loans							14,901		14,762		14,592	6.2	%
Equity Securities (u) (v)
Banking, Finance, Insurance & Real Estate
J2 BWA Funding, LLC (0.7% profit sharing) (g)	—	—	(w)	12/24/2020	—		—		—		—	0.0	%
PKS Holdings, LLC (5,680 preferred units) (g)	n/a	5.00% PIK		11/30/2017	—		—		58		214	0.1	%
PKS Holdings, LLC (5,714 preferred units) (g)	n/a	5.00% PIK		11/30/2017	—		—		9		33	0.0	%
PKS Holdings, LLC (132 preferred units) (g)	n/a	5.00% PIK		11/30/2017	—		—		1		5	0.0	%
PKS Holdings, LLC (916 preferred units) (g)	n/a	5.00% PIK		11/30/2017	—		—		9		33	0.0	%
									77		285	0.1	%
Beverage, Food & Tobacco
California Pizza Kitchen, Inc. (78,699 preferred units)	—	—	(w)	8/19/2016	—		—		5,468		866	0.4	%
									5,468		866	0.4	%
Capital Equipment
MCP Shaw Acquisitionco, LLC (118,906 Class A-2 units)	—	—	(w)	2/28/2020	—		—		119		143	0.1	%
									119		143	0.1	%
Chemicals, Plastics & Rubber
Valudor Products, LLC (501,014 Class A-1 units)	n/a	10.00% PIK	(l)	6/18/2018	—		—		501		—	0.0	%
									501		—	0.0	%
Environmental Industries
Quest Resource Holding Corporation (warrant to purchase up to 0.2% of the equity)	—	—	(w)	10/19/2020	3/19/2028		—		67		87	0.0	%
									67		87	0.0	%
Healthcare & Pharmaceuticals
Seran BioScience, LLC (33,333 common units)	—	—	(w)	12/31/2020	—		—		333		333	0.1	%
									333		333	0.1	%
High Tech Industries
Answers Finance, LLC (76,539 shares of common stock)	—	—	(w)	4/14/2017	—		—		2,344		54	0.0	%
MarkLogic Corporation (289,941 Class A units)	—	—	(w)	10/20/2020	—		—		290		286	0.1	%
Planful, Inc. (fka Host Analytics, Inc.) (473,082 Class A units)	n/a	8.00% PIK		12/28/2018	—		—		473		603	0.3	%
Recorded Future, Inc. (80,486 Class A units) (x)	—	—	(w)	7/3/2019	—		—		81		131	0.1	%
									3,188		1,074	0.5	%
Hotels, Gaming & Leisure
Equine Network, LLC (60 Class A units)	n/a	10.00% PIK		12/31/2020	—		—		60		60	0.0	%
									60		60	0.0	%
Media: Advertising, Printing & Publishing
AdTheorent Holding Company, LLC (128,866 Class A voting units)	—	—	(w)	12/22/2016	—		—		129		445	0.2	%
InMobi Pte, Ltd. (warrant to purchase up to 2.8% of the equity) (g) (n)	—	—	(w)	9/18/2015	9/18/2025		—		—		203	0.1	%
Relevate Health Group, LLC (40 preferred units)	n/a	12.00% PIK		11/20/2020	—		—		40		40	0.0	%
Relevate Health Group, LLC (40 Class B common units)	—	—	(w)	11/20/2020	—		—		—		1	0.0	%
Stratus Unlimited, LLC (fka MC Sign Lessor Corp.) (686 shares of common units)	—	—	(w)	8/30/2019	—		—		872		996	0.4	%
XanEdu Publishing, Inc. (49,479 Class A units)	n/a	8.00% PIK		1/28/2020	—		—		49		71	0.0	%
									1,090		1,756	0.7	%
Media: Diversified & Production
Attom Intermediate Holdco, LLC (297,197 Class A units)	—	—	(w)	1/4/2019	—		—		297		371	0.2	%
									297		371	0.2	%
Retail
BLST Operating Company, LLC (fka Bluestem Brands, Inc.) (139,883 Class A units)	—	—	(w)	8/28/2020	—		—		1,072		140	0.1	%
Forman Mills, Inc. (warrant to purchase up to 2.6% of the equity)	—	—	(w)	1/14/2020	1/14/2029		—		—		48	0.0	%
The Tie Bar Operating Company, LLC - Class A preferred units (1,275 units)	—	—	(w)	6/25/2013	—		—		87		4	0.0	%
The Tie Bar Operating Company, LLC - Class B preferred units (1,275 units)	—	—	(w)	6/25/2013	—		—		—		—	0.0	%
									1,159		192	0.1	%
Services: Business
APCO Worldwide, Inc. (100 Class A voting common stock)	—	—	(w)	11/1/2017	—		—		395		433	0.2	%
Atlas Sign Industries of FLA, LLC (warrant to purchase up to 0.8% of the equity)	—	—	(w)	5/14/2018	5/14/2026		—		125		35	0.0	%
									520		468	0.2	%
Services: Consumer
Education Corporation of America - Series G preferred stock (8,333 shares)	n/a	12.00% PIK	(l)	9/3/2015	—		—		7,492		5,117	2.2	%
Express Wash Acquisition Company, LLC (100,000 Class A units)	n/a	8.00% PIK		12/28/2020	—		—		100		100	0.0	%
									7,592		5,217	2.2	%

F-22

MONROE CAPITAL CORPORATION 

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued) 

December 31, 2020 

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above  Index (b)	Interest Rate		Acquisition Date (c)	Maturity		Principal		Amortized Cost		Fair Value (d)		% of Net Assets (e)
Wholesale
Nearly Natural, Inc. (152,174 Class A units)	—	—	(w)	12/15/2017	—			—	$	152	$	190	0.1	%
										152		190	0.1	%
Total Non-Controlled/Non-Affiliate Equity Securities										20,623		11,042	4.7	%
Total Non-Controlled/Non-Affiliate Company Investments									$	423,913	$	398,040	169.8	%
Non-Controlled Affiliate Company Investments (y)
Senior Secured Loans
Banking, Finance, Insurance & Real Estate
American Community Homes, Inc.	L+10.00%	11.50% PIK		7/22/2014	2/26/2021			9,401	$	9,401	$	9,401	4.0	%
American Community Homes, Inc.	L+14.50%	16.00% PIK		7/22/2014	2/26/2021			6,239		6,239		6,239	2.7	%
American Community Homes, Inc.	L+14.50%	16.00% PIK		3/17/2016	2/26/2021			825		825		825	0.4	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		5/24/2017	2/26/2021			570		570		570	0.2	%
American Community Homes, Inc.	L+14.50%	16.00% PIK		5/24/2017	2/26/2021			335		335		335	0.2	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		8/10/2018	2/26/2021			2,095		2,095		2,915	1.2	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		3/29/2019	2/26/2021			3,879		3,879		3,879	1.7	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		9/30/2019	2/26/2021			18		18		18	0.0	%
American Community Homes, Inc.	L+10.00%	11.50% PIK		12/30/2019	2/26/2021			89		89		89	0.0	%
HFZ Capital Group, LLC (g) (af)	L+12.50%	14.00% PIK		10/20/2017	n/a	(i)		13,242		13,242		13,106	5.6	%
HFZ Capital Group, LLC (g) (af)	L+12.50%	14.00% PIK		10/20/2017	n/a	(i)		4,758		4,758		4,709	2.0	%
MC Asset Management (Industrial), LLC (g) (af)	L+17.00%	18.00% PIK		6/11/2019	10/30/2024			10,702		10,695		11,579	4.9	%
								52,153		52,146		53,665	22.9	%
Beverage, Food & Tobacco
TJ Management HoldCo, LLC (Revolver) (f) (k)	L+5.50%	6.50	%	9/9/2020	9/8/2023			795		—		—	0.0	%
								795		—		—	0.0	%
Containers, Packaging & Glass
Summit Container Corporation	L+8.00%	9.00	%	12/5/2013	3/31/2021			3,259		3,269		3,204	1.4	%
Summit Container Corporation (Revolver) (f)	L+8.00%	9.00	%	6/15/2018	3/31/2021			6,015		1,657		1,654	0.7	%
								9,274		4,926		4,858	2.1	%
Healthcare & Pharmaceuticals
Ascent Midco, LLC (j)	L+5.50%	6.50	%	2/5/2020	2/5/2025			6,930		6,814		6,997	3.0	%
Ascent Midco, LLC (Delayed Draw) (f) (h) (j)	L+5.50%	6.50	%	2/5/2020	2/5/2025			2,838		—		—	0.0	%
Ascent Midco, LLC (Revolver) (f)	L+5.50%	6.50	%	2/5/2020	2/5/2025			1,129		—		—	0.0	%
SHI Holdings, Inc. (j)	L+10.75%	10.90% PIK	(l)	7/10/2014	n/a	(i)		2,899		2,897		188	0.1	%
SHI Holdings, Inc. (Revolver) (f)	L+10.75%	10.90% PIK	(l)	7/10/2014	n/a	(i)		4,667		4,585		297	0.1	%
								18,463		14,296		7,482	3.2	%
High Tech Industries
Mnine Holdings, Inc.	L+8.00%	4.00% Cash/ 5.00% PIK		11/2/2018	12/30/2022			11,768		11,665		12,356	5.3	%
								11,768		11,665		12,356	5.3	%
Retail
Luxury Optical Holdings Co.	L+8.00%	9.00% PIK	(l)	9/12/2014	12/15/2021			1,481		1,481		1,430	0.6	%
Luxury Optical Holdings Co. (Delayed Draw) (f) (h)	L+11.50%	12.50	%(l)	9/29/2017	12/15/2021			3,565		624		624	0.3	%
Luxury Optical Holdings Co. (Revolver)	L+8.00%	9.00% PIK	(l)	9/12/2014	12/15/2021			68		68		66	0.0	%
								5,114		2,173		2,120	0.9	%
Services: Business
Curion Holdings, LLC (j)	n/a	14.00% PIK	(l)	5/2/2017	5/2/2022			4,226		4,189		3,159	1.4	%
Curion Holdings, LLC (Revolver) (f)	n/a	14.00% PIK	(l)	5/2/2017	5/2/2022			871		836		820	0.3	%
								5,097		5,025		3,979	1.7	%
Services: Consumer
NECB Collections, LLC (Revolver) (f)	L+11.00%	12.00% PIK	(l)	6/25/2019	6/30/2021			1,356		1,312		834	0.3	%
								1,356		1,312		834	0.3	%
Total Non-Controlled Affiliate Senior Secured Loans								104,020		91,543		85,294	36.4	%
Unitranche Secured Loans (r)
Consumer Goods: Non-Durable
Incipio, LLC (z)	L+8.50%	9.50% PIK	(l)	12/26/2014	8/22/2022			14,701		14,677		1,764	0.8	%
Incipio, LLC (aa)	L+8.50%	9.50% PIK		3/9/2018	8/22/2022			4,278		4,278		4,227	1.8	%
Incipio, LLC	L+8.50%	9.50% PIK		7/6/2018	8/22/2022			1,818		1,818		1,805	0.8	%
Incipio, LLC	L+8.50%	9.50% PIK		1/15/2020	8/22/2022			1,530		1,530		1,519	0.6	%
Incipio, LLC	L+8.50%	9.50% PIK		4/17/2019	8/22/2022			766		766		761	0.3	%
Incipio, LLC (Delayed Draw) (f) (h)	L+8.50%	9.50% PIK		7/8/2020	8/22/2022			2,525		1,498		1,488	0.6	%
								25,618		24,567		11,564	4.9	%
Total Non-Controlled Affiliate Unitranche Secured Loans								25,618		24,567		11,564	4.9	%
Junior Secured Loans
Consumer Goods: Non-Durable
Incipio, LLC (ab)	n/a	10.70% PIK	(l)	6/18/2018	8/22/2022			3,766		—		—	0.0	%
Incipio, LLC (ac)	n/a	10.70% PIK	(l)	6/18/2018	8/22/2022			7,194		—		—	0.0	%
								10,960		—		—	0.0	%

F-23

MONROE CAPITAL CORPORATION 

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued) 

December 31, 2020 

(in thousands, except for shares and units)

Portfolio Company (a)	Spread Above  Index (b)	Interest Rate		Acquisition Date (c)	Maturity	Principal	Amortized Cost		Fair Value (d)		% of Net Assets (e)
Services: Business
Curion Holdings, LLC (j)	n/a	15.00% PIK	(l)	8/17/2018	1/2/2023	1,720	$	1	$	—	0.0	%
Curion Holdings, LLC (j)	n/a	15.00% PIK	(l)	8/17/2018	1/2/2023	44		—		—	0.0	%
						1,764		1		—	0.0	%
Total Non-Controlled Affiliate Company Junior Secured Loans						12,724		1		—	0.0	%
Equity Securities (v) (y)
Banking, Finance, Insurance & Real Estate
American Community Homes, Inc. (warrant to purchase up to 22.3% of the equity)	—	—	(w)	10/9/2014	12/18/2024	—		—		—	0.0	%
MC Asset Management (Corporate), LLC (15.9% of interests) (g) (af)	—	—	(w)	6/11/2019	—	—		793		785	0.3	%
								793		785	0.3	%
Beverage, Food & Tobacco
TJ Management HoldCo, LLC (16 shares of common stock) (k)	—	—	(w)	9/9/2020	—	—		2,386		3,323	1.4	%
								2,386		3,323	1.4	%
Consumer Goods: Non-Durable
Incipio, LLC (1,774 shares of Series C common units)	—	—	(w)	7/6/2018	—	—		—		—	0.0	%
								—		—	0.0	%
Containers, Packaging & Glass
Summit Container Corporation (warrant to purchase up to 19.5% of the equity)	—	—	(w)	1/6/2014	1/6/2024	—		—		139	0.1	%
								—		139	0.1	%
Healthcare & Pharmaceuticals
Ascent Midco, LLC (2,032,258 Class A units)	n/a	8.00% PIK		2/5/2020	—	—		2,032		3,016	1.3	%
Familia Dental Group Holdings, LLC (1,052 Class A units) (ad)	—	—	(w)	4/8/2016	—	—		3,602		3,118	1.3	%
SHI Holdings, Inc. (24 shares of common stock)	—	—	(w)	12/14/2016	—	—		27		—	0.0	%
								5,661		6,134	2.6	%
High Tech Industries
Mnine Holdings, Inc. (6,400 Class B units)	—	—	(w)	6/30/2020	—	—		—		—	0.0	%
								—		—	0.0	%
Retail
Luxury Optical Holdings Co. (91 preferred units)	n/a	15.00% PIK	(l)	9/12/2014	—	—		3,631		2,476	1.1	%
Luxury Optical Holdings Co. (86 shares of common stock)	—	—	(w)	9/29/2017	—	—		—		—	0.0	%
								3,631		2,476	1.1	%
Services: Business
Curion Holdings, LLC (58,779 shares of common stock)	—	—	(w)	8/17/2018	—	—		—		—	0.0	%
								—		—	0.0	%
Services: Consumer
NECB Collections, LLC (20.8% of units)	—	—	(w)	6/21/2019	—	—		1,458		—	0.0	%
								1,458		—	0.0	%
Total Non-Controlled Affiliate Equity Securities								13,929		12,857	5.5	%
Total Non-Controlled Affiliate Company Investments							$	130,040	$	109,715	46.8	%
Controlled Affiliate Company Investments (ae)
Equity Securities
Investment Funds & Vehicles
MRCC Senior Loan Fund I, LLC (50.0% of the equity interests) (g)	—	—		10/31/2017	—	—	$	42,150	$	39,284	16.7	%
Total Controlled Affiliate Equity Securities								42,150		39,284	16.7	%
Total Controlled Affiliate Company Investments							$	42,150	$	39,284	16.7	%
TOTAL INVESTMENTS							$	596,103	$	547,039	233.3	%

F-24

MONROE CAPITAL CORPORATION 

CONSOLIDATED SCHEDULE OF INVESTMENTS – (continued) 

December 31, 2020 

(in thousands, except for shares and units)

Derivative Instruments

Foreign currency forward contracts

	Notional Amount		Notional Amount				Unrealized Gain
Description	to be Purchased		to be Sold		Counterparty	Settlement Date	(Loss)
Foreign currency forward contract	$	107	£	87	Bannockburn Global Forex, LLC	1/4/2021	$	(12	)
Foreign currency forward contract	$	264	£	206	Bannockburn Global Forex, LLC	3/3/2021		(18	)
Foreign currency forward contract	$	33	£	26	Bannockburn Global Forex, LLC	3/3/2021		(2	)
Foreign currency forward contract	$	103	£	84	Bannockburn Global Forex, LLC	4/2/2021		(12	)
Foreign currency forward contract	$	271	£	212	Bannockburn Global Forex, LLC	6/1/2021		(19	)
Foreign currency forward contract	$	33	£	26	Bannockburn Global Forex, LLC	6/1/2021		(2	)
Foreign currency forward contract	$	103	£	83	Bannockburn Global Forex, LLC	7/2/2021		(11	)
Foreign currency forward contract	$	102	£	83	Bannockburn Global Forex, LLC	10/4/2021		(11	)
Foreign currency forward contract	$	101	£	82	Bannockburn Global Forex, LLC	1/3/2022		(11	)
Foreign currency forward contract	$	97	£	79	Bannockburn Global Forex, LLC	4/4/2022		(11	)
Foreign currency forward contract	$	36	£	29	Bannockburn Global Forex, LLC	5/6/2022		(4	)
							$	(113	)

(a) All of the Company’s investments are issued by eligible portfolio companies, as defined in the Investment Company Act of 1940 (the “1940 Act”), unless otherwise noted. All of the Company’s investments are issued by U.S. portfolio companies unless otherwise noted.

(b) The majority of the investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime” or “P”) which reset daily, monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at December 31, 2020. Certain investments are subject to a LIBOR or Prime interest rate floor, or rate cap. Certain investments contain a payment-in-kind (“PIK”) provision.

(c) Except as otherwise noted, all of the Company’s portfolio company investments, which as of December 31, 2020 represented 233.3% of the Company’s net assets or 93.5% of the Company’s total assets, are subject to legal restrictions on sales.

(d) Because there is no readily available market value for these investments, the fair value of these investments is determined in good faith using significant unobservable inputs by the Company’s board of directors as required by the 1940 Act. (See Note 4 in the accompanying notes to the consolidated financial statements.)

(e) Percentages are based on net assets of $234,434 as of December 31, 2020.

(f) All or a portion of this commitment was unfunded at December 31, 2020. As such, interest is earned only on the funded portion of this commitment.

(g) This investment is treated as a non-qualifying investment under Section 55(a) of the 1940 Act. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2020, non-qualifying assets totaled 19.9% of the Company’s total assets.

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

(i) This is a demand note with no stated maturity.

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

(k) During the three months ended September 30, 2020, the senior secured lender group of Toojay’s Management, LLC (“Toojay’s OldCo”) established TJ Management HoldCo, LLC (“Toojay’s NewCo”) in order to acquire certain of the assets of Toojay’s OldCo as part of a bankruptcy restructuring. The Company owns 15.9% of the equity in Toojay’s NewCo. Toojay’s NewCo credit bid a portion of the senior secured debt in Toojay’s OldCo to acquire certain assets of Toojay’s OldCo which constitute the ongoing operations of the portfolio company. The Company’s portion of this credit bid was $2,386, and as such the Company’s outstanding senior secured debt investment in Toojay’s OldCo was reduced by the amount of the credit bid and the Company’s cost basis of its new equity investment in Toojay’s NewCo was increased by the amount of the credit bid. While the Company still has loans outstanding at Toojay’s OldCo, the Company has valued these positions at zero as of December 31, 2020.

(l) This position was on non-accrual status as of December 31, 2020, meaning that the Company has ceased accruing interest income on the position. See Note 2 in the accompanying notes to the consolidated financial statements for additional information on the Company’s accounting policies.

(m) This investment represents a note convertible to preferred shares of the borrower.

(n) This is an international company.

(o) In May 2020, an arbitrator issued a final award in favor of the estate of Rockdale Blackhawk, LLC (the “Estate”) in the legal proceeding between the Estate and a national insurance carrier. The Company’s share of the net proceeds from the award exceeded the contractual obligations due to the Company as a result of the Company’s right to receive excess proceeds pursuant to the terms of a sharing agreement between the lenders and the Estate. In June 2020, the Company received $33,135 as an initial payment of proceeds from the legal proceedings from the Estate, of which $19,540 was recorded as a reduction in the cost basis of the Company’s investment in Rockdale, $3,878 was recorded as the collection of previously accrued interest, $7,378 was recorded as investment income for previously unaccrued interest and fees and $2,339 was recorded as realized gains. Additionally, as an offset, the Company recorded net change in unrealized (loss) of ($8,243) primarily as a result of the reversal associated with the collection of proceeds from the Estate. Total net income associated with the Company’s investment in Rockdale was $1,887 during the year ended December 31, 2020. As of December 31, 2020, the Company has this remaining investment in Rockdale associated with residual proceeds currently expected from the Estate. This investment is a non-income producing security.

(p) This loan is denominated in Great Britain pounds and is translated into U.S. dollars as of the valuation date.

(q) As of December 31, 2020, the Company was party to a subscription agreement with a commitment to fund an equity investment of $289.

(r) The Company structures its unitranche secured loans as senior secured loans. The Company obtains security interests in the assets of these portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first-priority liens on the assets of a portfolio company. Generally, the Company syndicates a “first out” portion of the loan to an investor and retains a “last out” portion of the loan, in which case the “first out” portion of the loan will generally receive priority with respect to payments of principal, interest and any other amounts due thereunder. Unitranche structures combine characteristics of traditional first lien senior secured as well as second lien and subordinated loans and the Company’s unitranche secured loans will expose the Company to the risks associated with second lien and subordinated loans and may limit the Company’s recourse or ability to recover collateral upon a portfolio company’s bankruptcy. Unitranche secured loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the amortization deferred until loan maturity. Unitranche secured loans generally allow the borrower to make a large lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. In many cases the Company, together with its affiliates, are the sole or majority lender of these unitranche secured loans, which can afford the Company additional influence with a borrower in terms of monitoring and, if necessary, remediation in the event of underperformance.

(s) A portion of this loan (principal of $9,258) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(t) A portion of this loan (principal of $525) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

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

(v) Ownership of certain equity investments may occur through a holding company or partnership.

(w) Represents a non-income producing security.

(x) As of December 31, 2020, the Company was party to a subscription agreement with a commitment to fund an additional equity investment of $16.

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

(z) A portion of this loan (principal of $5,390) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(aa) A portion of this loan (principal of $54) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(ab) A portion of this loan (principal of $1,015) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(ac) A portion of this loan (principal of $1,938) is held in the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP, and is therefore not collateral to the Company’s revolving credit facility.

(ad) As of December 31, 2020, the Company was party to a subscription agreement with a commitment to fund an additional equity investment of $611.

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

(af) The Company restructured its investments in HFZ Capital Group LLC (“HFZ”) and HFZ Member RB portfolio, LLC (“Member RB”) during the three months ended December 31, 2020. As part of the restructuring of HFZ, the Company obtained a 15.9% equity interest in MC Asset Management (Corporate), LLC (“Corporate”). As part of the Member RB restructuring, the Company exchanged its loan in Member RB for a promissory note in MC Asset Management (Industrial), LLC (“Industrial”). Corporate owns 100% of the equity of Industrial. In conjunction with these restructurings, the Company participated $4,758 of principal of its loan to HFZ as an equity contribution to Industrial. This participation did not qualify for sale accounting under ASC Topic 860 – Transfers and Servicing because the sale did not meet the definition of a “participating interest”, as defined in the guidance, in order for sale treatment to be allowed. As a result, the Company continues to reflect its full investment in HFZ but has split the loan into two investments.

n/a - not applicable

See Notes to Consolidated Financial Statements.

F-25

MONROE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share data)

Note 1. Organization and Principal Business

Monroe Capital Corporation (together with its subsidiaries, the “Company”) is an externally managed, non-diversified, closed-end management investment company and has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation through investment in senior secured, junior secured and unitranche secured (a combination of senior secured and junior secured debt in the same facility in which the Company syndicates a “first out” portion of the loan to an investor and retains a “last out” portion of the loan) debt and, to a lesser extent, unsecured subordinated debt and equity co-investments in preferred and common stock and warrants. The Company is managed by Monroe Capital BDC Advisors, LLC (“MC Advisors”), a registered investment adviser under the Investment Advisers Act of 1940, as amended. In addition, for U.S. federal income tax purposes, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On February 28, 2014, the Company’s wholly-owned subsidiary, Monroe Capital Corporation SBIC, LP (“MRCC SBIC”), a Delaware limited partnership, received a license from the Small Business Administration (“SBA”) to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958, as amended. MRCC SBIC commenced operations on September 16, 2013. See Note 7 for additional information.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

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

Use of Estimates

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

Consolidation

As permitted under ASC Topic 946, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries, including MRCC SBIC and its wholly-owned general partner MCC SBIC GP, LLC, and the Company’s wholly-owned taxable subsidiaries (the “Taxable Subsidies”) in its consolidated financial statements. The purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies that are taxed as partnerships for U.S. federal income tax purposes while complying with the “source of income” requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate income tax purposes, and each Taxable Subsidiary is subject to U.S. federal corporate income tax on its taxable income. All intercompany balances and transactions have been eliminated. The Company does not consolidate its non-controlling interest in MRCC Senior Loan Fund I, LLC (“SLF”). See further description of the Company’s investment in SLF in Note 3.

Fair Value of Financial Instruments

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

F-26

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

Revenue Recognition

The Company’s revenue recognition policies are as follows:

Investments and related investment income: Interest and dividend income is recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest income is accrued based upon the outstanding principal amount and contractual terms of debt and preferred equity investments. Interest is accrued on a daily basis. The Company records fees on loans based on the determination of whether the fee is considered a yield enhancement or payment for a service. If the fee is considered a yield enhancement associated with a funding of cash on a loan, the fee is generally deferred and recognized into interest income using the effective interest method if captured in the cost basis or using the straight-line method if the loan is unfunded and therefore there is no cost basis. If the fee is not considered a yield enhancement because a service was provided, and the fee is payment for that service, the fee is deemed earned and recognized as fee income in the period the service has been completed.

Dividend income on preferred equity securities is recorded as dividend income on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies. Each distribution received from limited liability company (“LLC”) and limited partnership (“LP”) investments is evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments in LLCs and LPs as dividend income unless there are sufficient accumulated tax-basis earnings and profits in the LLC or LP prior to the applicable distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment. For the years ended December 31, 2021, 2020 and 2019, the Company received return of capital distributions from its equity investments and its investment in LLC equity interest in SLF of $1,177, zero and $69, respectively.

The Company has certain investments in its portfolio that contain a payment-in-kind (“PIK”) provision, which represents contractual interest or dividends that are added to the principal balance and recorded as income. The Company stops accruing PIK interest or PIK dividends when it is determined that PIK interest or PIK dividends are no longer collectible. To maintain RIC tax treatment, and to avoid incurring corporate U.S. federal income tax, substantially all of this income must be paid out to stockholders in the form of distributions, even though the Company has not yet collected the cash.

Loan origination fees, original issue discount and market discount or premiums are capitalized, and the Company then amortizes such amounts using the effective interest method as interest income over the life of the investment. Unamortized discounts and loan origination fees totaled $4,370 and $4,844 as of December 31, 2021 and 2020, respectively. Upfront loan origination and closing fees received for the years ended December 31, 2021, 2020 and 2019 totaled $3,752, $1,909 and $3,250, respectively. Upon the prepayment of a loan or debt security, any unamortized premium or discount or loan origination fees are recorded as interest income.

The components of the Company’s investment income were as follows:

	For the years ended December 31,
	2021		2020		2019
Interest income	$	35,738	$	42,640	$	54,254
PIK interest income		8,320		8,776		5,538
Dividend income (1)		5,712		4,557		4,110
Fee income		1,267		3,222		1,926
Prepayment gain (loss)		1,691		1,133		883
Accretion of discounts and amortization of premium		1,102		1,253		1,482
Total investment income	$	53,830	$	61,581	$	68,193

(1) During the years ended December 31, 2021, 2020 and 2019, includes PIK dividends of $1,164, $157 and $54, respectively.

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

F-27

Non-accrual: Loans or preferred equity securities are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the 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. Non-accrual loans are restored to accrual status when past due principal, interest, or dividends are paid, or are expected to be paid, and, in management’s judgment are likely to remain current. The fair value of the Company’s investments on non-accrual status totaled $14,693 and $22,273 at December 31, 2021 and 2020, respectively.

Distributions

Distributions to common stockholders are recorded on the applicable record date. The amount, if any, to be distributed to common stockholders is determined by the Board each quarter and is generally based upon the Company’s earnings estimated by management. Net realized capital gains, if any, are generally distributed at least annually.

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

In October 2012, the Company adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. When the Company declares a cash dividend, the Company’s stockholders who have not “opted out” of the DRIP at least three days prior to the dividend payment date will have their cash dividend automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the Company’s common stock on a date determined by the Board. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased by the DRIP plan administrator, before any associated brokerage or other costs. See Note 10 for additional information on the Company’s distributions.

Segments

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

Cash

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

Restricted Cash

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

Unamortized Deferred Financing Costs

Deferred financing costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. As of December 31, 2021 and 2020, the Company had unamortized deferred financing costs of $5,794 and $7,052, respectively, presented as a direct reduction of the carrying amount of debt on the consolidated statements of assets and liabilities. These amounts are amortized and included in interest and other debt financing expenses on the consolidated statements of operations over the estimated average life of the borrowings. Amortization of deferred financing costs for the years ended December 31, 2021, 2020 and 2019 was $2,205, $2,181 and $1,869, respectively.

Offering Costs

Offering costs include, among other things, fees paid in relation to legal, accounting, regulatory and printing work completed in preparation of debt and equity offerings. Offering costs from equity offerings are charged against the proceeds from the offering within the consolidated statements of changes in net assets. Offering costs from debt offerings are reclassified to unamortized deferred financing costs on the consolidated statements of assets and liabilities as noted above. As of December 31, 2021 and 2020, other assets on the consolidated statements of assets and liabilities included $123 and $562, respectively, of deferred offering costs which will be charged against the proceeds from future debt or equity offerings when completed.

F-28

Investments Denominated in Foreign Currency

As of December 31, 2021, the Company held investments in one portfolio company that was denominated in Great Britain pounds and one portfolio company that was denominated in Australian dollars. As of December 31, 2020, the Company held investments in two portfolio companies that were denominated in Great Britain pounds.

At each balance sheet date, portfolio company investments denominated in foreign currencies are translated into U.S. dollars using the spot exchange rate on the last business day of the period. Purchases and sales of foreign portfolio company investments, and any income from such investments, are translated into U.S. dollars using the rates of exchange prevailing on the respective dates of such transactions.

Although the fair values of foreign portfolio company investments and the fluctuation in such fair values are translated into U.S. dollars using the applicable foreign exchange rates described above, the Company does not isolate the portion of the change in fair value resulting from foreign currency exchange rates fluctuations from the change in fair value of the underlying investment. All fluctuations in fair value are included in net change in unrealized gain (loss) on investments on the Company’s consolidated statements of operations.

Investments denominated in foreign currencies and foreign currency transactions may involve certain consideration and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. dollar.

Derivative Instruments

The Company may enter into foreign currency forward contracts to reduce the Company’s exposure to foreign currency exchange rate fluctuations. In a foreign currency forward contract, the Company agrees to receive or deliver a fixed quantity of one currency for another, at a pre-determined price at a future date. Foreign currency forward contracts are marked-to-market based on the difference between the forward rate and the exchange rate at the current period end. Unrealized gain (loss) on foreign currency forward contracts are recorded on the Company’s consolidated statements of assets and liabilities by counterparty on a net basis.

The Company does not utilize hedge accounting and as such values its foreign currency forward contracts at fair value with the change in unrealized gain or loss recorded in net change in unrealized gain (loss) on foreign currency forward contracts and the realized gain or loss recorded in net realized gain (loss) on foreign currency forward contracts on the Company’s consolidated statements of operations.

Income Taxes

The Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment available to RICs. To maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements and distribute to stockholders, for each taxable year, at least 90% of the Company’s “investment company taxable income,” which is generally the Company’s net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. If the Company qualifies as a RIC and satisfies the annual distribution requirement, the Company will not have to pay corporate-level federal income taxes on any income that the Company distributes to its stockholders. The Company intends to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. The Company is also subject to nondeductible federal excise taxes if the Company does not distribute at least 98% of net ordinary income, 98.2% of any capital gain net income, if any, and any recognized and undistributed income from prior years for which it paid no federal income taxes. To the extent that the Company determines that its estimated current year annual taxable income may exceed estimated current year dividend distributions, the Company accrues excise tax, calculated as 4% of the estimated excess taxable income, if any, as taxable income is earned. For the years ended December 31, 2021, 2020 and 2019, the Company recorded a net expense on the consolidated statements of operations of $278, $368, and $10, respectively, for U.S. federal excise tax. As of December 31, 2021 and 2020, payables for excise taxes of $183 and $306, respectively, were included in accounts payable and accrued expenses on the consolidated statements of assets and liabilities.

The Company’s consolidated Taxable Subsidiaries may be subject to U.S. federal and state corporate-level income taxes. For the years ended December 31, 2021, 2020 and 2019, the Company recorded a net tax expense of $4, $2 and $7, respectively, on the consolidated statements of operations for these subsidiaries. As of both December 31, 2021 and 2020, no payables for corporate-level income taxes were accrued.

F-29

The Company accounts for income taxes in conformity with ASC Topic 740 — Income Taxes (“ASC Topic 740”). ASC Topic 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. The Company did not take any material uncertain income tax positions through December 31, 2021. The 2018 through 2021 tax years remain subject to examination by U.S. federal and state tax authorities.

Subsequent Events

The Company has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the consolidated financial statements were issued. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-K or would be required to be recognized in the consolidated financial statements as of and for the year ended December 31, 2021, except as disclosed in Note 14.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”). The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective as of March 12, 2020 through December 31, 2022. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the year ended December 31, 2021.

Note 3. Investments

The following tables show the composition of the Company’s investment portfolio, at amortized cost and fair value (with corresponding percentage of total portfolio investments):

	December 31, 2021				December 31, 2020
Amortized Cost:
Senior secured loans	$	415,600	72.1	%	$	427,173	71.7	%
Unitranche secured loans		70,977	12.3			77,465	13.0
Junior secured loans		14,317	2.5			14,763	2.4
LLC equity interest in SLF		42,150	7.3			42,150	7.1
Equity securities		33,134	5.8			34,552	5.8
Total	$	576,178	100.0	%	$	596,103	100.0	%

	December 31, 2021				December 31, 2020
Fair Value:
Senior secured loans	$	423,700	75.4	%	$	405,224	74.1	%
Unitranche secured loans		51,494	9.2			64,040	11.7
Junior secured loans		14,364	2.6			14,592	2.6
LLC equity interest in SLF		41,125	7.3			39,284	7.2
Equity securities		31,010	5.5			23,899	4.4
Total	$	561,693	100.0	%	$	547,039	100.0	%

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

	December 31, 2021				December 31, 2020
Amortized Cost:
International	$	11,860	2.0	%	$	19,276	3.2	%
Midwest		145,023	25.2			149,468	25.1
Northeast		107,828	18.7			139,553	23.4
Southeast		164,100	28.5			142,721	24.0
Southwest		40,121	7.0			23,857	4.0
West		107,246	18.6			121,228	20.3
Total	$	576,178	100.0	%	$	596,103	100.0	%

F-30

	December 31, 2021				December 31, 2020
Fair Value:
International	$	11,093	2.0	%	$	20,008	3.7	%
Midwest		143,435	25.5			144,261	26.4
Northeast		112,175	20.0			123,349	22.5
Southeast		159,807	28.4			138,406	25.3
Southwest		44,380	7.9			25,557	4.7
West		90,803	16.2			95,458	17.4
Total	$	561,693	100.0	%	$	547,039	100.0	%

The following tables show the composition of the Company’s investment portfolio by industry, at amortized cost and fair value (with corresponding percentage of total portfolio investments):

	December 31, 2021				December 31, 2020
Amortized Cost:
Aerospace & Defense	$	7,828	1.4	%	$	—	—	%
Automotive		21,162	3.7			9,495	1.6
Banking, Finance, Insurance & Real Estate		94,506	16.4			70,779	11.9
Beverage, Food & Tobacco		21,036	3.7			26,308	4.4
Capital Equipment		12,656	2.2			13,603	2.3
Chemicals, Plastics & Rubber		9,426	1.6			28,723	4.8
Construction & Building		16,450	2.9			16,651	2.8
Consumer Goods: Durable		9,536	1.7			24,410	4.1
Consumer Goods: Non-Durable		28,232	4.9			26,030	4.3
Containers, Packaging & Glass		—	—			4,926	0.8
Environmental Industries		17,103	3.0			12,996	2.2
Healthcare & Pharmaceuticals		52,743	9.2			42,857	7.2
High Tech Industries		52,710	9.1			81,845	13.7
Hotels, Gaming & Leisure		2,662	0.5			1,771	0.3
Investment Funds & Vehicles		42,150	7.3			42,150	7.1
Media: Advertising, Printing & Publishing		13,421	2.3			30,764	5.1
Media: Broadcasting & Subscription		2,472	0.4			2,190	0.4
Media: Diversified & Production		23,853	4.1			6,707	1.1
Retail		10,954	1.9			32,017	5.4
Services: Business		69,292	12.0			79,768	13.4
Services: Consumer		46,284	8.0			29,697	5.0
Telecommunications		5,892	1.0			1,100	0.2
Wholesale		15,810	2.7			11,316	1.9
Total	$	576,178	100.0	%	$	596,103	100.0	%

	December 31, 2021				December 31, 2020
Fair Value:
Aerospace & Defense	$	7,972	1.4	%	$	—	—	%
Automotive		21,556	3.8			9,637	1.8
Banking, Finance, Insurance & Real Estate		99,091	17.6			72,627	13.3
Beverage, Food & Tobacco		19,133	3.4			20,676	3.8
Capital Equipment		12,839	2.3			13,750	2.5
Chemicals, Plastics & Rubber		10,163	1.8			27,754	5.1
Construction & Building		16,636	3.0			16,809	3.0
Consumer Goods: Durable		9,734	1.7			18,893	3.4
Consumer Goods: Non-Durable		8,460	1.5			13,027	2.4
Containers, Packaging & Glass		—	—			4,997	0.9
Environmental Industries		17,693	3.2			13,168	2.4
Healthcare & Pharmaceuticals		53,179	9.5			37,815	6.9
High Tech Industries		54,085	9.6			81,417	14.9
Hotels, Gaming & Leisure		2,706	0.5			1,771	0.3
Investment Funds & Vehicles		41,125	7.3			39,284	7.2
Media: Advertising, Printing & Publishing		16,794	3.0			31,553	5.8
Media: Broadcasting & Subscription		2,477	0.5			2,227	0.4
Media: Diversified & Production		24,220	4.3			6,811	1.2
Retail		11,478	2.0			18,443	3.4
Services: Business		71,540	12.7			78,584	14.4
Services: Consumer		39,248	7.0			25,306	4.6
Telecommunications		5,988	1.1			1,100	0.2
Wholesale		15,576	2.8			11,390	2.1
Total	$	561,693	100.0	%	$	547,039	100.0	%

F-31

MRCC Senior Loan Fund I, LLC

The Company co-invests with Life Insurance Company of the Southwest (“LSW”) in senior secured loans through SLF, an unconsolidated Delaware LLC. SLF is capitalized as underlying investment transactions are completed, taking into account available debt and equity commitments available for funding these investments. All portfolio and investment decisions in respect to SLF must be approved by the SLF investment committee, consisting of one representative from the Company and one representative from LSW. SLF may cease making new investments upon notification of either member but operations will continue until all investments have been sold or paid-off in the normal course of business. Investments held by SLF are measured at fair value using the same valuation methodologies as described in Note 4. The Company’s investment is illiquid in nature as SLF does not allow for withdrawal from the LLC or the sale of a member’s interest unless approved by the board members of SLF. The full withdrawal of a member would result in an orderly wind-down of SLF.

SLF’s profits and losses are allocated to the Company and LSW in accordance with their respective ownership interests. As of both December 31, 2021 and 2020, the Company and LSW each owned 50.0% of the LLC equity interests of SLF. As of both December 31, 2021 and 2020, SLF had $100,000 in equity commitments from its members (in the aggregate), of which $84,300 was funded.

As of both December 31, 2021 and 2020, the Company had committed to fund $50,000 of LLC equity interest subscriptions to SLF. As of both December 31, 2021 and 2020, $42,150 of the Company’s LLC equity interest subscriptions to SLF had been called and contributed, net of return of capital distributions subject to recall.

For the years ended December 31, 2021, 2020 and 2019, the Company received $4,325, $4,400 and $4,045 of dividend income from its LLC equity interest in SLF, respectively.

SLF has a senior secured revolving credit facility (as amended, the “SLF Credit Facility”) with Capital One, N.A., through its wholly-owned subsidiary MRCC Senior Loan Fund I Financing SPV, LLC (“SLF SPV”), The SLF Credit Facility originally allowed SLF SPV to borrow up to $170,000, subject to leverage and borrowing base restrictions and borrowings on the SLF Credit Facility bore interest at an annual rate of LIBOR (three-month) plus 2.25%. On November 23, 2021, the SLF Credit Facility was amended to, among other things, extend the maturity date to November 23, 2031, allow SLF SPV to borrow up to $175,000 at any one time, subject to leverage and borrowing base restrictions, and decrease the interest rate on the borrowings under the SLF Credit Facility to an annual rate of LIBOR (three-month) plus 2.10%.

SLF does not pay any fees to MC Advisors or its affiliates; however, SLF has entered into an administration agreement with Monroe Capital Management Advisors, LLC (“MC Management”), pursuant to which certain loan servicing and administrative functions are delegated to MC Management. SLF may reimburse MC Management for its allocable share of overhead and other expenses incurred by MC Management. For the years ended December 31, 2021, 2020, and 2019, SLF incurred $211, $209, and $201, of allocable expenses, respectively. There are no agreements or understandings by which the Company guarantees any SLF obligations.

As of December 31, 2021 and 2020, SLF had total assets at fair value of $194,623 and $209,666, respectively. As of December 31, 2021 and December 31, 2020, SLF had one portfolio company investment on non-accrual status with a fair value of $1,072 and $1,031, respectively. The portfolio companies in SLF are in industries and geographies similar to those in which the Company may invest directly. Additionally, as of December 31, 2021 and 2020, SLF had $2,061 and $839, respectively, in outstanding commitments to fund investments under undrawn revolvers and delayed draw commitments.

Below is a summary of SLF’s portfolio, followed by a listing of the individual investments in SLF’s portfolio as of December 31, 2021 and 2020:

	As of
	December 31, 2021			December 31, 2020
Senior secured loans (1)		193,062			214,389
Weighted average current interest rate on senior secured loans (2)		5.9	%		5.8	%
Number of portfolio company investments in SLF		57			57
Largest portfolio company investment (1)		6,720			6,790
Total of five largest portfolio company investments (1)		27,074			27,064

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

F-32

MRCC SENIOR LOAN FUND I, LLC

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2021

Portfolio Company (a)	Spread Above Index (b)	Interest Rate (b)			Maturity		Principal		Fair Value
Non-Controlled/Non-Affiliate Company Investments
Senior Secured Loans
Aerospace & Defense
Bromford Industries Limited (c)	P+4.25%		7.50	%		11/5/2025		2,744	$	2,692
Bromford Industries Limited (c)	P+4.25%		7.50	%		11/5/2025		1,829		1,794
Trident Maritime Systems, Inc.	L+5.50%		6.50	%		2/26/2027		2,467		2,478
Trident Maritime Systems, Inc. (Revolver) (d)	L+5.50%		6.50	%		2/26/2027		265		—
								7,305		6,964
Automotive
Accelerate Auto Works Intermediate, LLC	L+4.75%		5.75	%		12/1/2027		1,454		1,436
Accelerate Auto Works Intermediate, LLC (Delayed Draw) (d)	L+4.75%		5.75	%		12/1/2027		388		—
Accelerate Auto Works Intermediate, LLC (Revolver) (d)	L+4.75%		5.75	%		12/1/2027		132		—
Truck-Lite Co., LLC	L+6.25%		7.25	%		12/14/2026		1,709		1,718
Truck-Lite Co., LLC	L+6.25%		7.25	%		12/14/2026		253		255
Wheel Pros, Inc.	L+4.50%		5.25	%		5/11/2028		1,952		1,951
								5,888		5,360
Banking, Finance, Insurance & Real Estate
Avison Young (USA) Inc. (c)	L+5.75%		5.97	%		1/30/2026		4,850		4,824
Harbour Benefit Holdings, Inc.	L+5.25%		6.25	%		12/13/2024		2,948		2,932
Harbour Benefit Holdings, Inc.	L+5.25%		6.25	%		12/13/2024		66		65
Keystone Purchaser, LLC (e)	L+6.25%		7.25	%		5/7/2027		3,000		2,947
Lightbox Intermediate, L.P.	L+5.00%		5.13	%		5/11/2026		4,875		4,814
Minotaur Acquisition, Inc. (e)	L+4.75%		4.85	%		3/27/2026		4,912		4,894
								20,651		20,476
Beverage, Food & Tobacco
CBC Restaurant Corp.	n/a		5.00% PIK	(f)		12/30/2022		1,116		1,072
SW Ingredients Holdings, LLC	L+4.75%		5.75	%		7/3/2025		3,619		3,619
								4,735		4,691
Capital Equipment
Analogic Corporation	L+5.25%		6.25	%		6/24/2024		4,752		4,702
DS Parent, Inc. (e)	L+5.75%		6.50	%		12/8/2028		3,000		2,970
								7,752		7,672
Chemicals, Plastics & Rubber
Polymer Solutions Group	L+7.00%		8.00	%		1/3/2023		1,178		1,169
								1,178		1,169
Construction & Building
The Cook & Boardman Group LLC	L+5.75%		6.75	%		10/20/2025		2,910		2,838
								2,910		2,838
Consumer Goods: Durable
International Textile Group, Inc.	L+5.00%		5.13	%		5/1/2024		1,711		1,590
Runner Buyer Inc. (e)	L+5.50%		6.25	%		10/23/2028		3,000		2,970
								4,711		4,560
Consumer Goods: Non-Durable
PH Beauty Holdings III, INC	L+5.00%		5.18	%		9/26/2025		2,418		2,284
								2,418		2,284
Containers, Packaging & Glass
Liqui-Box Holdings, Inc.	L+4.50%		5.50	%		2/26/2027		4,268		3,991
Polychem Acquisition, LLC	L+5.00%		5.50	%		3/17/2025		2,918		2,917
Port Townsend Holdings Company, Inc. and Crown Corrugated Company	L+6.75%		5.75% Cash/ 2.00% PIK			4/3/2024		4,751		4,238
PVHC Holding Corp	L+4.75%		5.75	%		8/5/2024		3,217		2,976
								15,154		14,122
Energy: Oil & Gas
Drilling Info Holdings, Inc.	L+4.25%		4.35	%		7/30/2025		4,516		4,471
Offen, Inc.	L+5.00%		5.10	%		6/22/2026		2,388		2,387
Offen, Inc.	L+5.00%		5.10	%		6/22/2026		876		876
								7,780		7,734
Healthcare & Pharmaceuticals
Cano Health, LLC (e)	SF+4.00%		4.51	%		11/23/2027		1,995		1,997
LSCS Holdings, Inc. (e)	L+4.50%		5.00	%		12/15/2028		1,846		1,849
Radiology Partners, Inc.	L+4.25%		4.35	%		7/9/2025		4,760		4,700
TEAM Public Choices, LLC (e)	L+5.00%		6.00	%		12/17/2027		2,992		2,985
								11,593		11,531
High Tech Industries
Corel Inc. (c)	L+5.00%		5.18	%		7/2/2026		3,800		3,797
LW Buyer, LLC	L+5.00%		5.14	%		12/30/2024		4,875		4,863
TGG TS Acquisition Company	L+6.50%		6.60	%		12/12/2025		3,435		3,446
								12,110		12,106
Hotels, Gaming & Leisure
Excel Fitness Holdings, Inc.	L+5.25%		6.25	%		10/7/2025		4,165		4,155
North Haven Spartan US Holdco, LLC	L+5.00%		6.00	%		6/6/2025		2,297		2,037
Tait LLC	L+5.00%		5.14	%		3/28/2025		4,125		3,785
Tait LLC (Revolver)	P+4.00%		7.25	%		3/28/2025		769		728
								11,356		10,705
Media: Advertising, Printing & Publishing
Cadent, LLC	L+5.00%		6.00	%		9/11/2023		4,339		4,296
Cadent, LLC (Revolver) (d)	L+5.00%		6.00	%		9/11/2023		167		—
								4,506		4,296
Media: Diversified & Production
Research Now Group, Inc. and Survey Sampling International, LLC	L+5.50%		6.50	%		12/20/2024		6,720		6,645
STATS Intermediate Holdings, LLC	L+5.25%		5.41	%		7/10/2026		4,900		4,897
The Octave Music Group, Inc.	L+6.00%		7.00	%		5/29/2025		3,866		3,871
								15,486		15,413
Services: Business
AQ Carver Buyer, Inc.	L+5.00%		6.00	%		9/23/2025		4,888		4,900
CHA Holdings, Inc	L+4.50%		5.50	%		4/10/2025		1,980		1,901
CHA Holdings, Inc	L+4.50%		5.50	%		4/10/2025		418		401
Eliassen Group LLC	L+4.25%		4.35	%		11/5/2024		3,956		3,956
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		4,326		4,329
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		781		781
Engage2Excel, Inc. (Revolver) (d)	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		555		541
Orbit Purchaser LLC	L+4.50%		5.50	%		10/21/2024		2,431		2,425
Orbit Purchaser LLC	L+4.50%		5.50	%		10/21/2024		1,877		1,873
Orbit Purchaser LLC	L+4.50%		5.50	%		10/21/2024		549		548
Output Services Group, Inc.	L+4.50%		5.50	%		3/27/2024		4,815		4,145
Secretariat Advisors LLC (e)	L+4.75%		5.50	%		12/29/2028		1,710		1,693
Secretariat Advisors LLC (d) (e)	L+4.75%		5.50	%		12/29/2028		270		—
SIRVA Worldwide Inc.	L+5.50%		5.60	%		8/4/2025		1,850		1,683
Teneo Holdings LLC	L+5.25%		6.25	%		7/11/2025		4,888		4,908
The Kleinfelder Group, Inc.	L+5.25%		6.25	%		11/29/2024		2,387		2,387
								37,681		36,471
Services: Consumer
360Holdco, Inc.	L+4.75%		5.75	%		8/2/2025		2,168		2,161
360Holdco, Inc. (Delayed Draw) (d)	L+4.75%		5.75	%		8/2/2025		827		—
Laseraway Intermediate Holdings II, LLC	L+5.75%		6.50	%		10/14/2027		2,222		2,214
								5,217		4,375
Telecommunications
Intermedia Holdings, Inc.	L+6.00%		7.00	%		7/21/2025		1,778		1,770
Mavenir Systems, Inc.	L+4.75%		5.25	%		8/18/2028		1,667		1,669
Sandvine Corporation	L+4.50%		4.60	%		10/31/2025		2,000		1,999
								5,445		5,438
Utilities: Oil & Gas
NGS US Finco, LLC	L+4.25%		5.25	%		10/1/2025		1,695		1,644
NGS US Finco, LLC	L+5.25%		6.25	%		10/1/2025		248		244
								1,943		1,888
Wholesale
BMC Acquisition, Inc.	L+5.25%		6.25	%		12/30/2024		4,486		4,469
HALO Buyer, Inc.	L+4.50%		5.50	%		6/30/2025		4,824		4,547
								9,310		9,016
TOTAL INVESTMENTS									$	189,109

(a)	All investments are U.S. companies unless otherwise noted.
(b)	The majority of investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate ("LIBOR" or "L"), Secured Overnight Financing Rate ("SOFR" or "SF") or Prime ("P") which reset daily, monthly, quarterly or semiannually. The Company has provided the spread over LIBOR or Prime and the current contractual rate of interest in effect at December 31, 2021. Certain investments are subject to a LIBOR or Prime interest rate floor.
(c)	This is an international company.
(d)	All or a portion of this commitment was unfunded as of December 31, 2021. As such, interest is earned only on the funded portion of this commitment. Principal reflects the commitment outstanding.
(e)	Investment position or portion thereof unsettled at December 31, 2021.
(f)	This position was on non-accrual status as of December 31, 2021, meaning that the Company has ceased accruing interest income on the position.

F-33

MRCC SENIOR LOAN FUND I, LLC

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2020

Portfolio Company (a)	Spread Above Index (b)	Interest Rate (b)			Maturity		Principal		Fair Value
Non-Controlled/Non-Affiliate Company Investments
Senior Secured Loans
Aerospace & Defense
Bromford Industries Limited (c)	L+5.25%		6.25	%		11/5/2025		2,772	$	2,685
Bromford Industries Limited (c)	L+5.25%		6.25	%		11/5/2025		1,848		1,790
Trident Maritime SH, Inc.	L+4.75%		5.75	%		6/4/2024		4,401		4,363
Trident Maritime SH, Inc. (Revolver) (d)	L+4.75%		5.75	%		6/4/2024		340		—
								9,361		8,838
Automotive
Truck-Lite Co., LLC	L+6.25%		7.25	%		12/14/2026		1,726		1,716
Truck-Lite Co., LLC	L+6.25%		7.25	%		12/14/2026		256		254
Wheel Pros, LLC	L+5.25%		6.25	%		11/10/2027		3,000		2,961
								4,982		4,931
Banking, Finance, Insurance & Real Estate
Avison Young (USA), Inc. (c)	L+5.00%		5.25	%		1/30/2026		4,900		4,659
Harbour Benefit Holdings, Inc. (fka Zenith Merger Sub, Inc.)	L+5.25%		6.25	%		12/13/2024		4,653		4,585
Harbour Benefit Holdings, Inc. (fka Zenith Merger Sub, Inc.) (Delayed Draw) (d)	L+5.25%		6.25	%		12/13/2024		264		102
Lightbox Intermediate, L.P.	L+5.00%		5.15	%		5/11/2026		4,925		4,777
Minotaur Acquisition, Inc.	L+5.00%		5.15	%		3/27/2026		2,947		2,900
								17,689		17,023
Beverage, Food & Tobacco
CBC Restaurant Corp.	n/a		5.00% PIK	(e)		4/28/2022		1,117		1,031
SW Ingredients Holdings, LLC	L+4.00%		5.00	%		7/3/2025		3,656		3,647
								4,773		4,678
Capital Equipment
Analogic Corporation	L+5.25%		6.25	%		6/24/2024		4,800		4,800
								4,800		4,800
Chemicals, Plastics & Rubber
Polymer Solutions Group	L+7.00%		8.00	%		6/30/2021		1,216		1,189
								1,216		1,189
Construction & Building
ISC Purchaser, LLC	L+4.00%		5.00	%		7/11/2025		4,937		4,896
The Cook & Boardman Group, LLC	L+5.75%		6.75	%		10/20/2025		2,940		2,811
								7,877		7,707
Consumer Goods: Durable
International Textile Group, Inc.	L+5.00%		5.37	%		5/1/2024		1,758		1,597
								1,758		1,597
Consumer Goods: Non-Durable
PH Beauty Holdings III, Inc.	L+5.00%		5.23	%		9/26/2025		2,442		2,149
								2,442		2,149
Containers, Packaging & Glass
Liqui-Box Holdings, Inc.	L+4.50%		5.50	%		2/26/2027		4,312		3,848
Polychem Acquisition, LLC	L+5.00%		5.15	%		3/17/2025		2,948		2,948
Port Townsend Holdings Company, Inc.	L+6.75%		5.75% Cash/ 2.00% PIK			4/3/2024		4,683		4,263
PVHC Holding Corp.	L+4.75%		5.75	%		8/5/2024		3,250		2,844
								15,193		13,903
Energy: Oil & Gas
Drilling Info Holdings, Inc.	L+4.25%		4.40	%		7/30/2025		4,563		4,429
Offen, Inc.	L+5.00%		5.15	%		6/22/2026		2,412		2,343
Offen, Inc.	L+5.00%		5.15	%		6/22/2026		885		860
								7,860		7,632
Healthcare & Pharmaceuticals
LSCS Holdings, Inc.	L+4.25%		4.51	%		3/17/2025		2,299		2,253
LSCS Holdings, Inc.	L+4.25%		4.51	%		3/17/2025		593		582
Radiology Partners, Inc.	L+4.25%		4.40	%		7/9/2025		4,760		4,692
								7,652		7,527
High Tech Industries
AQA Acquisition Holding, Inc.	L+4.25%		5.25	%		5/24/2023		3,257		3,257
Corel, Inc. (c)	L+5.00%		5.23	%		7/2/2026		3,900		3,844
LW Buyer, LLC	L+5.00%		5.15	%		12/30/2024		4,925		4,900
TGG TS Acquisition Company	L+6.50%		6.65	%		12/12/2025		3,753		3,720
								15,835		15,721
Hotels, Gaming & Leisure
Excel Fitness Holdings, Inc.	L+5.25%		6.25	%		10/7/2025		4,207		3,878
North Haven Spartan US Holdco, LLC	L+5.00%		6.00	%		6/6/2025		2,321		1,979
Tait, LLC	L+5.00%		5.23	%		3/28/2025		4,167		3,669
Tait, LLC (Revolver)	P+4.00%		7.25	%		3/28/2025		769		711
								11,464		10,237
Media: Advertising, Printing & Publishing
Cadent, LLC	L+5.50%		6.50	%		9/11/2023		4,728		4,622
Cadent, LLC (Revolver) (d)	L+5.50%		6.50	%		9/11/2023		167		—
Digital Room Holdings, Inc.	L+5.00%		5.27	%		5/21/2026		4,362		4,133
Monotype Imaging Holdings, Inc.	L+5.50%		6.50	%		10/9/2026		4,906		4,653
								14,163		13,408
Media: Diversified & Production
Research Now Group, Inc. and Survey Sampling International, LLC	L+5.50%		6.50	%		12/20/2024		6,790		6,708
Stats Intermediate Holding, LLC	L+5.25%		5.47	%		7/10/2026		4,950		4,909
The Octave Music Group, Inc.	L+6.00%		6.25% Cash/ 0.75% PIK			5/29/2025		4,871		4,335
								16,611		15,952
Services: Business
AQ Carver Buyer, Inc.	L+5.00%		6.00	%		9/23/2025		4,937		4,888
CHA Holdings, Inc.	L+4.50%		5.50	%		4/10/2025		2,002		1,872
CHA Holdings, Inc.	L+4.50%		5.50	%		4/10/2025		422		395
Eliassen Group, LLC	L+4.25%		4.40	%		11/5/2024		3,017		2,922
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		4,299		4,178
Engage2Excel, Inc.	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		776		754
Engage2Excel, Inc. (Revolver) (d)	L+8.00%		7.00% Cash/ 2.00% PIK			3/7/2023		548		364
GI Revelation Acquisition, LLC	L+5.00%		5.15	%		4/16/2025		1,365		1,344
Legility, LLC	L+6.00%		7.00	%		12/17/2025		4,906		4,735
Orbit Purchaser, LLC	L+4.50%		5.50	%		10/21/2024		2,456		2,407
Orbit Purchaser, LLC	L+4.50%		5.50	%		10/21/2024		1,897		1,859
Orbit Purchaser, LLC	L+4.50%		5.50	%		10/21/2024		555		544
Output Services Group, Inc.	L+4.50%		5.50	%		3/27/2024		4,865		3,648
SIRVA Worldwide, Inc.	L+5.50%		5.65	%		8/4/2025		1,900		1,741
Teneo Holdings, LLC	L+5.25%		6.25	%		7/11/2025		4,938		4,903
The Kleinfelder Group, Inc.	L+5.25%		6.25	%		11/29/2024		2,450		2,450
								41,333		39,004
Services: Consumer
Cambium Learning Group, Inc.	L+4.50%		4.75	%		12/18/2025		4,900		4,883
LegalZoom.com, Inc.	L+4.50%		4.65	%		11/21/2024		2,694		2,706
								7,594		7,589
Telecommunications
Intermedia Holdings, Inc.	L+6.00%		7.00	%		7/21/2025		1,797		1,795
Mavenir Systems, Inc.	L+6.00%		7.00	%		5/8/2025		3,900		3,893
								5,697		5,688
Transportation: Cargo
GlobalTranz Enterprises, LLC	L+5.00%		5.15	%		5/15/2026		3,262		3,050
								3,262		3,050
Utilities: Oil & Gas
NGS US Finco, LLC	L+4.25%		5.25	%		10/1/2025		1,712		1,640
NGS US Finco, LLC	L+5.25%		6.25	%		10/1/2025		250		246
								1,962		1,886
Wholesale
BMC Acquisition, Inc.	L+5.25%		6.25	%		12/30/2024		4,850		4,802
HALO Buyer, Inc.	L+4.50%		5.50	%		6/30/2025		4,875		4,533
PT Intermediate Holdings III, LLC	L+5.50%		6.50	%		10/15/2025		1,980		1,851
								11,705		11,186
TOTAL INVESTMENTS									$	205,695

(a)	All investments are U.S. companies unless otherwise noted.
(b)	The majority of the investments bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) or Prime Rate (“Prime” or “P”) which reset daily, monthly, quarterly, or semiannually. For each such investment, the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at December 31, 2020. Certain investments are subject to a LIBOR or Prime interest rate floor, or rate cap.
(c)	This is an international company.
(d)	All or a portion of this commitment was unfunded as of December 31, 2020. As such, interest is earned only on the funded portion of this commitment. Principal reflects the commitment outstanding.
(e)	This position was on non-accrual status as of December 31, 2020, meaning that the Company has ceased accruing interest income on the position.

F-34

Below is certain summarized financial information for SLF as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019:

	December 31, 2021			December 31, 2020
Assets
Investments, at fair value	$	189,109		$	205,695
Cash		40			351
Restricted cash		4,862			2,948
Interest receivable		600			629
Other assets		12			43
Total assets		194,623			209,666
Liabilities
Revolving credit facility		94,765			131,497
Less: Unamortized deferred financing costs		(2,319	)		(969	)
Total debt, less unamortized deferred financing costs		92,446			130,528
Payable for open trades		19,367			—
Interest payable		242			294
Accounts payable and accrued expenses		318			277
Total liabilities		112,373			131,099
Members’ capital		82,250			78,567
Total liabilities and members’ capital	$	194,623		$	209,666

	For the years ended December 31,
	2021		2020			2019
Investment income:
Interest income	$	13,164	$	15,578		$	16,294
Total investment income		13,164		15,578			16,294
Expenses:
Interest and other debt financing expenses		3,918		5,227			7,056
Professional fees		647		666			718
Total expenses		4,565		5,893			7,774
Net investment income		8,599		9,685			8,520
Net gain (loss):
Net realized gain (loss)		—		(1,713	)		7
Net change in unrealized gain (loss)		3,734		(5,429	)		(781	)
Net gain (loss)		3,734		(7,142	)		(774	)
Net increase (decrease) in members’ capital	$	12,333	$	2,543		$	7,746

Note 4. Fair Value Measurements

Investments

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

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

F-35

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

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

• Level 2 — Valuations based on inputs other than quoted prices in active markets, including quoted prices for similar assets or liabilities, which are either directly or indirectly observable.

• Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. This includes situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value are based upon the best information available and may require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

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

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

• the Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of investments for which market quotations are not readily available. The Company will consult with independent valuation firm(s) relative to each portfolio company at least once in every calendar year, but the independent appraisals are generally received quarterly for each investment;

• to the extent an independent valuation firm is not engaged to conduct an investment appraisal on an investment for which market quotations are not readily available, the investment will be valued by the MC Advisors investment professional responsible for the credit monitoring;

• preliminary valuation conclusions are then documented and discussed with the investment committee of MC Advisors;

• the audit committee of the Board reviews the preliminary valuations of MC Advisors and of the independent valuation firm(s) and MC Advisors adjusts or further supplements the valuation recommendations to reflect any comments provided by the audit committee; and

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

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

Under the income approach, discounted cash flow models are utilized to determine the present value of the future cash flow streams of its debt investments, based on future interest and principal payments as set forth in the associated loan agreements. In determining fair value under the income approach, the Company also considers the following factors: applicable market yields and leverage levels, credit quality, prepayment penalties, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, and changes in the interest rate environment and the credit markets that generally may affect the price at which similar investments may be made.

F-36

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

In addition, for certain debt investments, the Company may base its valuation on indicative bid and ask prices provided by an independent third-party pricing service. Bid prices reflect the highest price that the Company and others may be willing to pay. Ask prices represent the lowest price that the Company and others may be willing to accept. The Company generally uses the midpoint of the bid/ask range as its best estimate of fair value of such investment.

As of December 31, 2021, the Board determined, in good faith, the fair value of the Company’s portfolio investments in accordance with GAAP and the Company’s valuation procedures 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, any valuations conducted in the future in conformity with GAAP could result in a lower fair value of the Company’s portfolio. The potential impact of COVID-19 on the Company’s results going forward will depend to a large extent on future developments or new information that may emerge regarding the full duration and severity of COVID-19, including the actions taken by governments and other entities to contain COVID-19 or treat its impact, all of which are beyond the Company’s control. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected at this time.

Foreign Currency Forward Contracts

The valuation for the Company’s foreign currency forward contracts is based on the difference between the exchange rate associated with the forward contract and the exchange rate at the current period end. Foreign currency forward contracts are categorized as Level 2 in the fair value hierarchy.

Fair Value Disclosures

The following tables present fair value measurements of investments and foreign currency forward contracts, by major class according to the fair value hierarchy:

	Fair Value Measurements
December 31, 2021	Level 1		Level 2		Level 3		Total
Investments:
Senior secured loans	$	—	$	—	$	423,700	$	423,700
Unitranche secured loans		—		—		51,494		51,494
Junior secured loans		—		—		14,364		14,364
Equity securities		1,041		—		29,969		31,010
Investments measured at NAV (1) (2)		—		—		—		41,125
Total investments	$	1,041	$	—	$	519,527	$	561,693
Foreign currency forward contracts asset (liability)	$	—	$	781	$	—	$	781

	Fair Value Measurements
December 31, 2020	Level 1		Level 2			Level 3		Total
Investments:
Senior secured loans	$	—	$	—		$	405,224	$	405,224
Unitranche secured loans		—		—			64,040		64,040
Junior secured loans		—		—			14,592		14,592
Equity securities		—		—			23,899		23,899
Investments measured at NAV (1) (2)		—		—			—		39,284
Total investments	$	—	$	—		$	507,755	$	547,039
Foreign currency forward contracts asset (liability)	$	—	$	(113	)	$	—	$	(113	)

(1)	Certain investments that are measured at fair value using the NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the consolidated statements of assets and liabilities.
(2)	Represents the Company’s investment in LLC equity interests in SLF. The fair value of this investment has been determined using the NAV of the Company’s ownership interest in SLF’s members’ capital.

F-37

Senior secured loans, unitranche secured loans and junior secured loans are collateralized by tangible and intangible assets of the borrowers. These investments include loans to entities that have some level of challenge in obtaining financing from other, more conventional institutions, such as a bank. Interest rates on these loans are either fixed or floating, and are based on current market conditions and credit ratings of the borrower. Excluding loans on non-accrual, the contractual interest rates on the loans ranged from 6.00% to 16.00% at December 31, 2021 and 6.00% to 18.00% at December 31, 2020. The maturity dates on the loans outstanding at December 31, 2021 range between March 2022 and July 2028.

The following tables provide a reconciliation of the beginning and ending balances for investments at fair value that use Level 3 inputs for the years ended December 31, 2021 and 2020:

	Investments
		Senior secured loans			Unitranche secured loans			Junior secured loans			Equity securities			Total Level 3 investments
Balance as of December 31, 2020	$	405,224		$	64,040		$	14,592		$	23,899		$	507,755
Net realized gain (loss) on investments		(22,512	)		—			—			748			(21,764	)
Net change in unrealized gain (loss) on investments		30,041			(6,054	)		218			8,533			32,738
Purchases of investments and other adjustments to cost (1)		204,213			10,815			13,652			7,605			236,285
Proceeds from principal payments and sales of investments (2)		(193,266	)		(17,307	)		(14,098	)		(9,775	)		(234,446	)
Reclassifications (3)		—			—			—			—			—
Transfers in (out) of Level 3 (4)		—			—			—			(1,041	)		(1,041	)
Balance as of December 31, 2021	$	423,700		$	51,494		$	14,364		$	29,969		$	519,527

	Investments
		Senior secured loans			Unitranche secured loans			Junior secured loans			Equity securities			Total Level 3 investments
Balance as of December 31, 2019	$	475,157		$	76,247		$	13,676		$	8,739		$	573,819
Net realized gain (loss) on investments		2,341			89			—			121			2,551
Net change in unrealized gain (loss) on investments		(17,782	)		(11,535	)		953			933			(27,431	)
Purchases of investments and other adjustments to cost (1)		139,835			6,342			4,050			3,160			153,387
Proceeds from principal payments and sales of investments (2)		(175,627	)		(14,312	)		(4,472	)		(160	)		(194,571	)
Reclassifications (3)		(18,700	)		7,209			385			11,106			—
Balance as of December 31, 2020	$	405,224		$	64,040		$	14,592		$	23,899		$	507,755

(1)	Includes purchases of new investments, effects of refinancing and restructurings, premium and discount accretion and amortization and PIK interest.
(2)	Represents net proceeds from investments sold and principal paydowns received.
(3)	Represents non-cash reclassification of investment type due to the restructuring.
(4)	Represents non-cash transfers between fair value categories.

The total net change in unrealized gain (loss) on investments included on the consolidated statements of operations for the year ended December 31, 2021, attributable to Level 3 investments still held at December 31, 2021 was $7,402. The total net change in unrealized gain (loss) on investments included on the consolidated statements of operations for the year ended December 31, 2020, attributable to Level 3 investments still held at December 31, 2020 was ($16,603). Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of Level 3 as of the beginning of the period in which the reclassifications occur. During the year ended December 31, 2021 one investment transferred from Level 3 to Level 1 as a result of an acquisition. There were no transfers among Levels 1, 2 and 3 during the years ended December 31, 2020.

Significant Unobservable Inputs

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

F-38

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets and liabilities as of December 31, 2021 were as follows:

					Unobservable	Weighted Average			Range
	Fair Value			Valuation Technique	Input	Mean			Minimum			Maximum
Assets:
Senior secured loans	$	305,252		Discounted cash flow	EBITDA multiples		7.7	x		5.0	x		20.0	x
					Market yields		9.6	%		5.3	%		20.0	%
Senior secured loans		79,913		Discounted cash flow	Revenue multiples		6.5	x		0.5	x		13.0	x
					Market yields		8.4	%		5.2	%		13.1	%
Senior secured loans		23,484		Enterprise value	Book value multiples		1.5	x		1.5	x		1.5	x
Senior secured loans		5,771		Enterprise value	Revenue multiples		2.8	x		2.8	x		2.8	x
Senior secured loans		5,111		Enterprise value	EBITDA multiples		6.5	x		6.5	x		6.5	x
Senior secured loans		3,026		Liquidation	Probability weighting of alternative outcomes		88.2	%		48.2	%		100.0	%
Unitranche secured loans		45,072		Discounted cash flow	EBITDA multiples		8.4	x		5.5	x		11.0	x
					Market yields		8.5	%		7.3	%		13.3	%
Unitranche secured loans		4,950		Enterprise value	Revenue multiples		0.6	x		0.6	x		0.6	x
Unitranche secured loans		1,472		Discounted cash flow	Revenue multiples		14.0	x		14.0	x		14.0	x
					Market yields		8.3	%		8.3	%		8.3	%
Junior secured loans		12,266		Discounted cash flow	Market yields		15.8	%		8.0	%		25.1	%
Junior secured loans		1,522		Discounted cash flow	Revenue multiples		15.0	x		15.0	x		15.0	x
					Market yields		2.0	%		2.0	%		2.0	%
Junior secured loans		576		Liquidation	Probability weighting of alternative outcomes		69.1	%		69.1	%		69.1	%
Equity securities		15,688		Enterprise value	EBITDA multiples		5.6	x		4.5	x		15.1	x
Equity securities		6,448		Enterprise value	Revenue multiples		4.8	x		0.6	x		12.3	x
Equity securities		2,281		Liquidation	Probability weighting of alternative outcomes		24.4	%		24.4	%		24.4	%
Equity securities		714		Discounted cash flow	EBITDA multiples		13.3	x		13.3	x		13.3	x
					Market yields		12.3	%		12.3	%		12.3	%
Equity securities		455		Option pricing model	Volatility		42.5	%		42.5	%		42.5	%
Equity securities		264		Enterprise value	Tangible book value multiples		1.5	x		1.5	x		1.5	x
Total Level 3 Assets	$	514,265	(1)

⁽¹⁾ Excludes loans of $5,262 at fair value where valuation (unadjusted) is obtained from a third-party pricing service for which such disclosure is not required.

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements of assets and liabilities as of December 31, 2020 were as follows:

					Unobservable	Weighted Average			Range
	Fair Value			Valuation Technique	Input	Mean			Minimum			Maximum
Assets:
Senior secured loans	$	271,926		Discounted cash flow	EBITDA multiples		7.5	x		2.8	x		16.6	x
					Market yields		9.5	%		6.2	%		18.8	%
Senior secured loans		74,479		Discounted cash flow	Revenue multiples		4.8	x		0.5	x		10.5	x
					Market yields		9.2	%		6.1	%		18.5	%
Senior secured loans		24,271		Enterprise value	Book value multiples		2.0	x		2.0	x		2.0	x
Senior secured loans		15,515		Enterprise value	Revenue multiples		2.0	x		0.7	x		2.4	x
Senior secured loans		7,525		Liquidation	Probability weighting of alternative outcomes		63.2	%		1.1	%		100.0	%
Senior secured loans		6,944		Enterprise value	EBITDA multiples		8.0	x		8.0	x		8.0	x
Unitranche secured loans		52,476		Discounted cash flow	EBITDA multiples		9.7	x		8.0	x		12.5	x
					Market yields		9.3	%		7.5	%		12.8	%
Unitranche secured loans		9,800		Discounted cash flow	Revenue multiples		0.7	x		0.7	x		0.7	x
					Market yields		10.7	%		10.5	%		11.0	%
Unitranche secured loans		1,764		Enterprise value	Revenue multiples		0.7	x		0.7	x		0.7	x
Junior secured loans		3,886		Discounted cash flow	Market yields		10.0	%		10.0	%		10.0	%
Junior secured loans		762		Liquidation	Probability weighting of alternative outcomes		91.5	%		91.5	%		91.5	%
Equity securities		10,865		Enterprise value	EBITDA multiples		7.6	x		2.8	x		15.3	x
Equity securities		6,771		Enterprise value	Revenue multiples		1.3	x		0.5	x		11.0	x
Equity securities		5,117		Liquidation	Probability weighting of alternative outcomes		54.6	%		54.6	%		54.6	%
Equity securities		87		Option pricing model	Volatility		70.0	%		70.0	%		70.0	%
Total Level 3 Assets	$	492,188	(1)

⁽¹⁾ Excludes loans of $15,567 at fair value where valuation (unadjusted) is obtained from a third-party pricing service for which such disclosure is not required.

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

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

F-39

Other Financial Assets and Liabilities

ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments such as cash, receivables and payables approximate the fair value of such items due to the short maturity of such instruments. Fair value of the Company’s revolving credit facility is estimated by discounting remaining payments using applicable market rates or market quotes for similar instruments at the measurement date, if applicable. As of both December 31, 2021 and 2020, the Company believes that the carrying value of its revolving credit facility approximates fair value. The 2026 Notes are carried at cost and with their longer maturity dates, fair value is estimated by discounting remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the notes. As of December 31, 2021, the Company believes that the carrying value of the 2026 Notes approximates fair value. SBA debentures are carried at cost and with their longer maturity dates, fair value is estimated by discounting remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the SBA debentures. As of both December 31, 2021 and 2020, the Company believes that the carrying value of the SBA debentures approximates fair value.

Note 5. Transactions with Affiliated Companies

An affiliated company is a company in which the Company has an ownership interest of 5% or more of its voting securities. A controlled affiliate company is a company in which the Company has an ownership interest of more than 25% of its voting securities. Please see the Company’s consolidated schedule of investments for the type of investment, principal amount, interest rate including the spread, and the maturity date. Transactions related to the Company’s investments with affiliates for the years ended December 31, 2021 and 2020 were as follows:

F-40

Portfolio Company	Fair value at December 31, 2020		Transfers in (out)			Purchases (cost)		Sales and paydowns (cost)			PIK interest (cost)		Discount accretion		Net realized gain (loss)			Net unrealized gain (loss)			Fair value at December 31, 2021
Non-Controlled affiliate company investments:
American Community Homes, Inc.	$	9,401	$	—		$	—	$	(90	)	$	1,146	$	—	$	—		$	—		$	10,457
American Community Homes, Inc.		6,239		—			—		(2,229	)		743		—		—			—			4,753
American Community Homes, Inc.		825		—			—		(838	)		13		—		—			—			—
American Community Homes, Inc.		570		—			—		(5	)		69		—		—			—			634
American Community Homes, Inc.		335		—			—		(341	)		6		—		—			—			—
American Community Homes, Inc.		2,915		—			—		(20	)		256		—		—			13			3,164
American Community Homes, Inc.		3,879		—			—		(37	)		473		—		—			42			4,357
American Community Homes, Inc.		18		—			—		—			2		—		—			—			20
American Community Homes, Inc.		89		—			—		(1	)		11		—		—			—			99
American Community Homes, Inc. (warrant to purchase up to 22.3% of the equity)		—		—			—		—			—		—		—			264			264
		24,271		—			—		(3,561	)		2,719		—		—			319			23,748
Ascent Midco, LLC		6,997		—			—		(531	)		—		25		—			(99	)		6,392
Ascent Midco, LLC (Delayed Draw)		—		—			—		—			—		—		—			—			—
Ascent Midco, LLC (Revolver)		—		—			—		—			—		—		—			—			—
Ascent Midco, LLC (2,032,258 Class A units)		3,016		—			—		—			—		—		—			(462	)		2,554
		10,013		—			—		(531	)		—		25		—			(561	)		8,946
Curion Holdings, LLC		3,159		—			308		—			—		—		—			1,094			4,561
Curion Holdings, LLC (Revolver)		820		—			—		(308	)		—		—		—			38			550
Curion Holdings, LLC (Junior secured loan)		—		—			—		—			—		—		—			—			—
Curion Holdings, LLC (Junior secured loan)		—		—			—		—			—		—		—			—			—
Curion Holdings, LLC (58,779 shares of common stock)		—		—			—		—			—		—		—			—			—
		3,979		—			308		(308	)		—		—		—			1,132			5,111
Familia Dental Group Holdings, LLC (1,105 Class A units)		3,118		—			183		—			—		—		—			(1,382	)		1,919
		3,118		—			183		—			—		—		—			(1,382	)		1,919
HFZ Capital Group, LLC		13,106		—			—		—			—		—		—			1,978			15,084
HFZ Capital Group, LLC		4,709		—			—		—			—		—		—			711			5,420
MC Asset Management (Corporate), LLC		—		—			6,423		—			731		—		—			—			7,154
MC Asset Management (Corporate), LLC (Delayed Draw)		—		—			793		—			57		—		—			—			850
MC Asset Management (Corporate), LLC (15.9% interest)		785		—			—		—			—		—		—			(141	)		644
MC Asset Management (Industrial), LLC		11,579		—			—		(12,119	)		1,423		1		—			(884	)		—
		30,179		—			7,216		(12,119	)		2,211		1		—			1,664			29,152
Incipio, LLC (1)		1,764		—			—		—			—		—		—			(1,764	)		—
Incipio, LLC (1)		4,227		(1,562	)		—		—			48		—		—			(2,713	)		—
Incipio, LLC (1)		1,805		(1,732	)		—		—			15		—		—			(88	)		—
Incipio, LLC (1)		761		(730	)		—		—			6		—		—			(37	)		—
Incipio, LLC (1)		1,519		(1,458	)		—		—			13		—		—			(74	)		—
Incipio, LLC (1)		1,488		(1,527	)		108		—			9		—		—			(78	)		—
Incipio, LLC (Junior secured loan) (1)		—		—			—		—			—		—		—			—			—
Incipio, LLC (Junior secured loan) (1)		—		—			—		—			—		—		—			—			—
Incipio, LLC (1,774 shares of Series C common units) (1)		—		—			—		—			—		—		—			—			—
		11,564		(7,009	)		108		—			91		—		—			(4,754	)		—
Luxury Optical Holdings Co. (2)		1,430		—			—		(1,640	)		159		—		—			51			—
Luxury Optical Holdings Co. (Delayed Draw) (2)		624		—			1,729		(2,353	)		—		—		—			—			—
Luxury Optical Holdings Co. (Revolver) (2)		66		—			—		(75	)		7		—		—			2			—
Luxury Optical Holdings Co. (91 preferred units) (2)		2,476		(78	)		—		(6,132	)		694		—		1,807			1,233			—
Luxury Optical Holdings Co. (86 shares of common stock) (2)		—		—			—		—			—		—		—			—			—
		4,596		(78	)		1,729		(10,200	)		860		—		1,807			1,286			—
Mnine Holdings, Inc.		12,356		—			—		(7,137	)		603		34		—			(85	)		5,771
Mnine Holdings, Inc. (6,400 Class B units)		—		—			—		—			—		—		—			—			—
		12,356		—			—		(7,137	)		603		34		—			(85	)		5,771
NECB Collections, LLC (Revolver)		834		—			—		—			—		—		—			(202	)		632
NECB Collections, LLC, LLC (20.8% of units)		—		—			—		—			—		—		—			—			—
		834		—			—		—			—		—		—			(202	)		632
SHI Holdings, Inc.		188		—			—		—			—		—		(2,897	)		2,709			—
SHI Holdings, Inc. (Revolver)		297		—			—		(315	)		—		—		(4,270	)		4,288			—
SHI Holdings, Inc. (24 shares of common stock)		—		—			—		—			—		—		(27	)		27			—
		485		—			—		(315	)		—		—		(7,194	)		7,024			—
Second Avenue SFR Holdings II LLC (Revolver)		—		—			2,104		—			—		—		—			—			2,104
Second Avenue SFR Holdings II LLC (Delayed Draw)		—		—			5,850		—			—		—		—			—			5,850
Second Avenue SFR Holdings II LLC (24.4% of interests)		—		—			3,900		—			—		—		—			—			3,900
		—		—			11,854		—			—		—		—			—			11,854
Summit Container Corporation		3,204		—			—		(3,019	)		—		—		(250	)		65			—
Summit Container Corporation (Revolver)		1,654		—			5,402		(7,059	)		—		—		—			3			—
Summit Container Corporation (warrant to purchase up to 19.5% of the equity)		139		—			—		—			—		—		—			(139	)		—
		4,997		—			5,402		(10,078	)		—		—		(250	)		(71	)		—
TJ Management HoldCo, LLC (Revolver)		—		—			—		—			—		—		—			—			—
TJ Management HoldCo, LLC (16 shares of common stock)		3,323		—			—		(755	)		—		—		—			580			3,148
		3,323		—			—		(755	)		—		—		—			580			3,148
Total non-controlled affiliate company investments	$	109,715	$	(7,087	)	$	26,800	$	(45,004	)	$	6,484	$	60	$	(5,637	)	$	4,950		$	90,281
Controlled affiliate company investments:
MRCC Senior Loan Fund I, LLC	$	39,284	$	—		$	—	$	—		$	—	$	—	$	—		$	1,841		$	41,125
		39,284		—			—		—			—		—		—			1,841			41,125
Total Controlled affiliate company investments	$	39,284	$	—		$	—	$	—		$	—	$	—	$	—		$	1,841		$	41,125

F-41

Portfolio Company	Fair value at December 31, 2019		Transfers in (out)			Purchases (cost)		Sales and paydowns (cost)			PIK interest (cost)		Discount accretion		Net realized gain (loss)		Net unrealized gain (loss)			Fair value at December 31, 2020
Non-controlled affiliate company investments:
American Community Homes, Inc.	$	6,764	$	—		$	—	$	(523	)	$	1,095	$	8	$	—	$	2,057		$	9,401
American Community Homes, Inc.		4,289		—			—		(345	)		985		5		—		1,305			6,239
American Community Homes, Inc.		512		—			—		(46	)		203		1		—		155			825
American Community Homes, Inc.		410		—			—		(31	)		65		2		—		124			570
American Community Homes, Inc.		230		—			—		(19	)		54		—		—		70			335
American Community Homes, Inc.		1,472		—			—		(126	)		299		—		—		1,270			2,915
American Community Homes, Inc.		2,760		—			—		(232	)		508		—		—		843			3,879
American Community Homes, Inc.		11		—			—		(1	)		5		—		—		3			18
American Community Homes, Inc.		1,168		—			—		(1,117	)		20		—		—		18			89
American Community Homes, Inc. (Revolver)		—		—			2,500		(2,538	)		38		—		—		—			—
American Community Homes, Inc. (warrant to purchase up to 22.3% of the equity)		—		—			—		—			—		—		—		—			—
		17,616		—			2,500		(4,978	)		3,272		16		—		5,845			24,271
Ascent Midco, LLC		—		—			6,860		(70	)		—		24		—		183			6,997
Ascent Midco, LLC (Delayed Draw)		—		—			—		—			—		—		—		—			—
Ascent Midco, LLC (Revolver)		—		—			734		(734	)		—		—		—		—			—
Ascent Midco, LLC (2,032,258 Class A units)		—		—			2,032		—			—		—		—		984			3,016
		—		—			9,626		(804	)		—		24		—		1,167			10,013
Curion Holdings, LLC		3,279		—			—		—			—		—		—		(120	)		3,159
Curion Holdings, LLC (Revolver)		441		—			385		—			—		—		—		(6	)		820
Curion Holdings, LLC (Junior secured loan)		—		—			—		—			—		—		—		—			—
Curion Holdings, LLC (Junior secured loan)		—		—			—		—			—		—		—		—			—
Curion Holdings, LLC (58,779 shares of common stock)		—		—			—		—			—		—		—		—			—
		3,720		—			385		—			—		—		—		(126	)		3,979
Familia Dental Group Holdings, LLC (1,052 Class A units) (3)		—		3,407			—		—			—		—		—		(289	)		3,118
		—		3,407			—		—			—		—		—		(289	)		3,118
HFZ Capital Group, LLC (4)		—		13,025			—		—			—		—		—		81			13,106
HFZ Capital Group, LLC (4)		—		4,680			—		—			—		—		—		29			4,709
MC Asset Management (Corporate), LLC (15.9% of interests) (4)		—		793			—		—			—		—		—		(8	)		785
MC Asset Management (Industrial), LLC (4)		—		10,632			—		—			—		2		—		945			11,579
		—		29,130			—		—			—		2		—		1,047			30,179
Incipio, LLC		12,343		—			—		—			128		—		—		(10,707	)		1,764
Incipio, LLC		3,750		—			—		—			463		—		—		14			4,227
Incipio, LLC		1,606		—			—		—			197		—		—		2			1,805
Incipio, LLC		686		—			—		—			74		—		—		1			761
Incipio, LLC		—		—			1,404		—			126		—		—		(11	)		1,519
Incipio, LLC (Delayed Draw)		—		—			1,458		—			40		—		—		(10	)		1,488
Incipio, LLC (Junior secured loan)		—		—			—		—			—		—		—		—			—
Incipio, LLC (Junior secured loan)		—		—			—		—			—		—		—		—			—
Incipio, LLC (1,774 shares of Series C common units)		—		—			—		—			—		—		—		—			—
		18,385		—			2,862		—			1,028		—		—		(10,711	)		11,564
Luxury Optical Holdings Co. (5)		3,457		(2,371	)		—		—			—		3		—		341			1,430
Luxury Optical Holdings Co. (Delayed Draw) (5)		620		—			—		—			—		—		—		4			624
Luxury Optical Holdings Co. (Revolver) (5)		159		(109	)		—		—			—		—		—		16			66
Luxury Optical Holdings Co. (90 preferred units) (5)		—		2,480			—		—			—		—		—		(4	)		2,476
Luxury Optical Holdings Co. (86 shares of common stock) (5)		—		—			—		—			—		—		—		—			—
		4,236		—			—		—			—		3		—		357			4,596
Mnine Holdings, Inc. (6)		—		10,321			—		—			1,161		21		—		853			12,356
Mnine Holdings, Inc. (6,400 Class B units) (6)		—		—			—		—			—		—		—		—			—
		—		10,321			—		—			1,161		21		—		853			12,356
NECB Collections, LLC (Revolver)		1,148		—			112		—			52		—		—		(478	)		834
NECB Collections, LLC (20.8% of units)		318		—			—		—			—		—		—		(318	)		—
		1,466		—			112		—			52		—		—		(796	)		834
SHI Holdings, Inc.		2,459		—			—		—			—		—		—		(2,271	)		188
SHI Holdings, Inc. (Revolver)		3,601		—			345		—			—		—		—		(3,649	)		297
SHI Holdings, Inc. (24 shares of common stock)		—		—			—		—			—		—		—		—			—
		6,060		—			345		—			—		—		—		(5,920	)		485
Summit Container Corporation		2,971		—			—		—			—		—		—		233			3,204
Summit Container Corporation (Revolver)		5,406		—			33,558		(37,376	)		—		—		—		66			1,654
Summit Container Corporation (warrant to purchase up to 19.5% of the equity)		—		—			—		—			—		—		—		139			139
		8,377		—			33,558		(37,376	)		—		—		—		438			4,997
TJ Management HoldCo, LLC (Revolver) (7)		—		—			127		(127	)		—		—		—		—			—
TJ Management HoldCo, LLC (16 shares of common stock) (7)		—		2,222			—		—			—		—		—		1,101			3,323
		—		2,222			127		(127	)		—		—		—		1,101			3,323
Total non-controlled affiliate company investments	$	59,860	$	45,080		$	49,515	$	(43,285	)	$	5,513	$	66	$	—	$	(7,034	)	$	109,715
Controlled affiliate company investments:
MRCC Senior Loan Fund I, LLC	$	42,412	$	—		$	—	$	—		$	—	$	—	$	—	$	(3,128	)	$	39,284
		42,412		—			—		—			—		—		—		(3,128	)		39,284
Total controlled affiliate company investments	$	42,412	$	—		$	—	$	—		$	—	$	—	$	—	$	(3,128	)	$	39,284

(1)	During the three months ended September 30, 2021, Incipio, LLC (“Incipio”) underwent a restructuring whereby substantially all of the assets of Incipio were acquired by a new entity, Vinci Brands LLC (“Vinci”). The senior lenders at Incipio, including the Company, were part of the new financing at Vinci. The Company’s investments in Vinci are not categorized as affiliate company investments as the Company does not have an equity interest in Vinci. For the purpose of this schedule, transfers out represents the fair value at June 30, 2021.
(2)	During the three months ended December 31, 2021, the Company sold its investment in LOH. For the purpose of this schedule, transfers (out) represents the fair value of the remaining escrow proceeds.
(3)	The Company restructured its investment in Familia Dental Group Holdings, LLC (“Familia”) during the three months ended December 31, 2020. As a part of the restructuring, the Company obtained a 9.9% equity stake in Familia in exchange for a $3,606 reduction of a secured loan position. For the purpose of this schedule, transfers in represent the fair value at September 30, 2020.
(4)	The Company restructured its investments in HFZ Capital Group LLC (“HFZ”) and HFZ Member RB portfolio, LLC (“Member RB”) during the three months ended December 31, 2020. As part of the restructuring of HFZ, the Company obtained a 15.9% equity interest in MC Asset Management (Corporate), LLC (“Corporate”). As part of the Member RB restructuring, the Company exchanged its loan in Member RB for a promissory note in MC Asset Management (Industrial), LLC (“Industrial”). Corporate owns 100% of the equity of Industrial.  In conjunction with these restructurings, the Company participated $4,758 of principal of its loan to HFZ as an equity contribution to Industrial.  This participation did not qualify for sale accounting under ASC Topic 860 – Transfers and Servicing because the sale did not meet the definition of a “participating interest”, as defined in the guidance, in order for sale treatment to be allowed. As a result, the Company continues to reflect its full investment in HFZ but has split the loan into two investments. For the purpose of this schedule, transfers in represent the fair value at September 30, 2020.
(5)	The Company restructured its investment in Luxury Optical Holdings Co. (“LOH”) during the three months ended December 31, 2020. As a part of the restructuring, the Company obtained 9.1% of the preferred units of LOH in exchange for a $3,632 reduction of the secured loan positions. For the purpose of this schedule, transfers in (out) represent the fair value at September 30, 2020. The Company also increased its delayed draw commitment to LOH.
(6)	The Company restructured its investment in Mnine Holdings, Inc. (“Mnine”) during the three months ended June 30, 2020. As a part of the restructuring, the Company also received 5.3% of the equity of Mnine. For the purpose of this schedule, transfers in represent the fair value at March 31, 2020.
(7)	During the three months ended September 30, 2020, the senior secured lender group of Toojay’s Management, LLC (“Toojay’s OldCo”) established TJ Management HoldCo, LLC (“Toojay’s NewCo”) in order to acquire certain of the assets of Toojay’s OldCo as part of a bankruptcy restructuring. The Company owns 15.9% of the equity in Toojay’s NewCo. Toojay’s NewCo credit bid a portion of the senior secured debt in Toojay’s OldCo to acquire certain assets of Toojay’s OldCo which constitute the ongoing operations of the portfolio company. The Company’s portion of this credit bid was $2,386, and as such the Company’s outstanding senior secured debt investment in Toojay’s OldCo was reduced by the amount of the credit bid and the Company’s cost basis of its new equity investment in Toojay’s NewCo was increased by the amount of the credit bid. For the purpose of this schedule, transfers in represent the fair value at June 30, 2020 of the senior secured debt investment that was exchanged in the credit bid. The Company also provided a follow-on revolver commitment to Toojay’s NewCo.

F-42

	For the years ended December 31,
	2021						2020
Portfolio Company	Interest Income		Dividend Income		Fee Income		Interest Income			Dividend Income		Fee Income
Non-controlled affiliate company investments:
American Community Homes, Inc.	$	1,148	$	—	$	—	$	1,103		$	—	$	—
American Community Homes, Inc.		742		—		—		990			—		—
American Community Homes, Inc.		13		—		—		203			—		—
American Community Homes, Inc.		69		—		—		67			—		—
American Community Homes, Inc.		5		—		—		54			—		—
American Community Homes, Inc.		255		—		—		299			—		—
American Community Homes, Inc.		473		—		—		497			—		—
American Community Homes, Inc.		31		—		—		6			—		—
American Community Homes, Inc.		12		—		—		19			—		—
American Community Homes, Inc. (Revolver)		—		—		—		219			—		—
American Community Homes, Inc. (Warrant)		—		—		—		—			—		—
		2,748		—		—		3,457			—		—
Ascent Midco, LLC		471		—		—		456			—		—
Ascent Midco, LLC (Delayed Draw)		9		—		—		14			—		—
Ascent Midco, LLC (Revolver)		4		—		—		20			—		—
Ascent Midco, LLC (Class A units)		—		174		—		—			147		—
		484		174		—		490			147		—
Curion Holdings, LLC		—		—		—		—			—		—
Curion Holdings, LLC (Revolver)		—		—		—		—			—		—
Curion Holdings, LLC (Junior secured loan)		—		—		—		—			—		—
Curion Holdings, LLC (Junior secured loan)		—		—		—		—			—		—
Curion Holdings, LLC (Common units)		—		—		—		—			—		—
		—		—		—		—			—		—
Familia Dental Group Holdings, LLC (Class A units)		—		—		—		—			—		—
		—		—		—		—			—		—
HFZ Capital Group, LLC		1,880		—		—		613			—		—
HFZ Capital Group, LLC		675		—		—		31			—		—
MC Asset Management (Corporate), LLC		1,024		—		—		n/a			n/a		n/a
MC Asset Management (Corporate), LLC (Delayed Draw)		91		—		—		n/a			n/a		n/a
MC Asset Management (Corporate), LLC (LLC interest)		—		—		—		n/a			n/a		n/a
MC Asset Management (Industrial), LLC		2,136		—		—		98			—		—
		5,806		—		—		742			—		—
Incipio, LLC		—		—		—		(309	)		—		—
Incipio, LLC		—		—		—		403			—		—
Incipio, LLC		—		—		—		170			—		—
Incipio, LLC		—		—		—		71			—		—
Incipio, LLC		—		—		—		138			—		—
Incipio, LLC		—		—		—		49			—		—
Incipio, LLC (Junior secured loan)		—		—		—		—			—		—
Incipio, LLC (Junior secured loan)		—		—		—		—			—		—
Incipio, LLC (Common units)		—		—		—		—			—		—
		—		—		—		522			—		—
Luxury Optical Holdings Co.		166		—		—		4			—		—
Luxury Optical Holdings Co. (Delayed Draw)		219		—		36		80			—		—
Luxury Optical Holdings Co. (Revolver)		7		—		—		—			—		—
Luxury Optical Holdings Co. (Preferred units)		694		813		—		—			—		—
Luxury Optical Holdings Co. (Common stock)		—		—		—		—			—		—
		1,086		813		36		84			—		—
Mnine Holdings, Inc.		1,301		—		—		966			—		—
Mnine Holdings, Inc. (Common units)		—		—		—		—			—		—
		1,301		—		—		966			—		—
NECB Collections, LLC (Revolver)		—		—		—		77			—		—
NECB Collections, LLC (LLC units)		—		—		—		—			—		—
		—		—		—		77			—		—
Second Avenue SFR Holdings II LLC (Revolver)		22		—		—		n/a			n/a		n/a
Second Avenue SFR Holdings II LLC (Delayed Draw)		83		—		—		n/a			n/a		n/a
Second Avenue SFR Holdings II LLC (LLC interest)		—		—		—		n/a			n/a		n/a
		105		—		—		n/a			n/a		n/a
SHI Holdings, Inc.		—		—		—		(2	)		—		—
SHI Holdings, Inc. (Revolver)		—		—		—		(3	)		—		—
SHI Holdings, Inc. (Common stock)		—		—		—		—			—		—
		—		—		—		(5	)		—		—
Summit Container Corporation		57		—		—		304			—		—
Summit Container Corporation (Revolver)		35		—		—		304			—		—
Summit Container Corporation (Warrant)		—		—		—		—			—		—
		92		—		—		608			—		—
TJ Management HoldCo, LLC (Revolver)		12		—		—		5			—		—
TJ Management HoldCo, LLC (Common stock)		—		—		—		—			—		—
		12		—		—		5			—		—
Total non-controlled affiliate company investments	$	11,634	$	987	$	36	$	6,946		$	147	$	—
Controlled affiliate company investments:
MRCC Senior Loan Fund I, LLC	$	—	$	4,325	$	—	$	—		$	4,400	$	—
		—		4,325		—		—			4,400		—
Total controlled affiliate company investments	$	—	$	4,325	$	—	$	—		$	4,400	$	—

F-43

Note 6. Transactions with Related Parties

The Company has entered into an investment advisory agreement with MC Advisors (the “Investment Advisory Agreement”), under which MC Advisors, subject to the overall supervision of the Board, provides investment advisory services to the Company. The Company pays MC Advisors a fee for its services under the Investment Advisory Agreement consisting of two components - a base management fee and an incentive fee. The cost of both the base management fee and the incentive fee are borne by the Company’s stockholders, unless such fees are waived by MC Advisors.

On November 4, 2019, the Board approved a change to the Investment Advisory Agreement to amend the base management fee structure. Effective July 1, 2019, the base management fee is calculated initially at an annual rate equal to 1.75% of average invested assets (calculated as total assets excluding cash, which includes assets financed using leverage); provided, however, the base management fee is calculated at an annual rate equal to 1.00% of the Company’s average invested assets (calculated as total assets excluding cash, which includes assets financed using leverage) that exceeds the product of (i) 200% and (ii) the Company’s average net assets. For the avoidance of doubt, the 200% is calculated in accordance with the asset coverage limitation as defined in the 1940 Act to give effect to the Company’s exemptive relief with respect to MRCC SBIC’s SBA debentures. This has the effect of reducing the Company’s base management fee rate on assets in excess of regulatory leverage of 1:1 debt to equity to 1.00% per annum. The base management fee is payable quarterly in arrears.

Prior to July 1, 2019 the base management fee was calculated at an annual rate equal to 1.75% of average invested assets (calculated as total assets excluding cash, which included assets financed using leverage) and was payable quarterly in arrears.

Base management fees for the years ended December 31, 2021, 2020 and 2019 were $9,514, $9,807 and $10,780, respectively. MC Advisors elected to voluntarily waive zero, $430, and zero of such base management fees for the years ended December 31, 2021, 2020, and 2019, respectively.

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

The composition of the Company’s incentive fees was as follows:

	For the years ended December 31,
	2021			2020			2019
Part one incentive fees (1)	$	3,690		$	5,724		$	6,692
Part two incentive fees (2)		—			—			—
Incentive Fee Limitation		—			(5,012	)		(1,081	)
Incentive fees, excluding the impact of incentive fee waivers		3,690			712			5,611
Incentive fee waivers (3)		(1,484	)		(712	)		(1,182	)
Total incentive fees, net of incentive fee waivers	$	2,206		$	—		$	4,429

(1)	Based on pre-incentive fee net investment income.
(2)	Based upon net realized and unrealized gains and losses, or capital gains. The Company accrues, but does not pay, a capital gains incentive fee in connection with any unrealized capital appreciation, as appropriate. If, on a cumulative basis, the sum of net realized gain (loss) plus net unrealized gain (loss) decreases during a period, the Company will reverse any excess capital gains incentive fee previously accrued such that the amount of capital gains incentive fee accrued is no more than 20% of the sum of net realized gain (loss) plus net unrealized gain (loss).
(3)	Represents part one incentive fees waived by MC Advisors.

F-44

The Company has entered into an administration agreement with MC Management (the “Administration Agreement”), under which the Company reimburses MC Management, subject to the review and approval of the Board, for its allocable portion of overhead and other expenses, including the costs of furnishing the Company with office facilities and equipment and providing clerical, bookkeeping, record-keeping and other administrative services at such facilities, and the Company’s allocable portion of the cost of the chief financial officer and chief compliance officer and their respective staffs. To the extent that MC Management outsources any of its functions, the Company will pay the fees associated with such functions on a direct basis, without incremental profit to MC Management. For the years ended December 31, 2021, 2020 and 2019, the Company incurred $3,442, $3,312 and $3,509, respectively, in administrative expenses (included within Professional fees, Administrative service fees and General and administrative expenses on the consolidated statements of operations) under the Administration Agreement, of which $1,357, $1,300 and $1,309, respectively, was related to MC Management overhead and salary allocation and paid directly to MC Management. As of December 31, 2021 and 2020, $337 and $327, respectively, of expenses were due to MC Management under this agreement and are included in accounts payable and accrued expenses on the consolidated statements of assets and liabilities.

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

As of both December 31, 2021 and 2020, the Company had accounts payable to members of the Board of zero, representing accrued and unpaid fees for their services.

Note 7. Borrowings

In accordance with the 1940 Act, the Company is permitted to borrow amounts such that its asset coverage ratio, as defined in the 1940 Act, is at least 150% after such borrowing. The Company has been granted exemptive relief from the SEC for permission to exclude the debt of MRCC SBIC guaranteed by the SBA from the asset coverage test under the 1940 Act. As of December 31, 2021 and December 31, 2020, the Company’s asset coverage ratio based on aggregate borrowings outstanding was 189% and 200%, respectively.

Revolving Credit Facility: The Company has a $255,000 revolving credit facility with ING Capital LLC, as agent. The revolving credit facility has an accordion feature which permits the Company, under certain circumstances to increase the size of the facility up to $400,000 (subject to maintaining 150% asset coverage, as defined by the 1940 Act). The revolving credit facility is secured by a lien on all of the Company’s assets, including cash on hand, but excluding the assets of the Company’s wholly-owned subsidiary, MRCC SBIC. The Company may make draws under the revolving credit facility to make or purchase additional investments through March 1, 2023 and for general working capital purposes until March 1, 2024, the maturity date of the revolving credit facility.

The Company’s ability to borrow under the revolving credit facility is subject to availability under the borrowing base, which permits the Company to borrow up to 72.5% of the fair market value of its portfolio company investments depending on the type of investment the Company holds and whether the investment is quoted. The Company’s ability to borrow is also subject to certain concentration limits, and continued compliance with the representations, warranties and covenants given by the Company under the facility. The revolving credit facility contains certain financial and restrictive covenants, including, but not limited to, the Company’s maintenance of: (1) minimum consolidated total net assets at least equal to $150,000 plus 65% of the net proceeds to the Company from sales of its equity securities after March 1, 2019; (2) a ratio of total assets (less total liabilities other than indebtedness) to total indebtedness of not less than 1.5 to 1; and (3) a senior debt coverage ratio of at least 2 to 1. The revolving credit facility also requires the Company to undertake customary indemnification obligations with respect to ING Capital LLC and other members of the lending group and to reimburse the lenders for expenses associated with entering into the credit facility. The revolving credit facility also has customary provisions regarding events of default, including events of default for nonpayment, change in control transactions at both Monroe Capital Corporation and MC Advisors, failure to comply with financial and negative covenants, and failure to maintain the Company’s relationship with MC Advisors. If the Company incurs an event of default under the revolving credit facility and fails to remedy such default under any applicable grace period, if any, then the entire revolving credit facility could become immediately due and payable, which would materially and adversely affect the Company’s liquidity, financial condition, results of operations and cash flows.

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

As of December 31, 2021, the Company had U.S. dollar borrowings of $146,400 and non-U.S. dollar borrowings denominated in Great Britain pounds of £3,433 ($4,645 in U.S. dollars) under the revolving credit facility. As of December 31, 2020, the Company had U.S. dollar borrowings of $104,550 and non-U.S. dollar borrowings denominated in Great Britain pounds of £16,100 ($22,009 in U.S. dollars) under the revolving credit facility. The borrowings denominated in Great Britain pounds may be positively or negatively affected by movements in the rate of exchange between the U.S. dollar and the Great Britain pound. These movements are beyond the control of the Company and cannot be predicted. The borrowings denominated in Great Britain pounds are translated into U.S. dollars based on the spot rate at each balance sheet date. The impact resulting from changes in foreign currency borrowings is included in net change in unrealized gain (loss) on foreign currency and other transactions on the Company’s consolidated statements of operations and totaled $660, ($665) and ($821) for the years ended December 31, 2021, 2020 and 2019, respectively. For the year-ended December 31, 2021, the Company repaid borrowings denominated in Great Britain pounds of £12,667. As a result of this repayment, the Company recognized a realized gain (loss) on foreign currency and other transactions on the Company’s consolidated statements of operations of ($866) for year ended December 31, 2021. There were no repayments of foreign currency borrowings for the year ended December 31, 2020 and 2019.

F-45

Borrowings under the revolving credit facility bear interest, at the Company’s election, at an annual rate of LIBOR (one-month, three-month or six-month at the Company’s discretion based on the term of the borrowing) plus 2.625% or at a daily rate equal to 1.625% per annum plus the greater of the prime interest rate, the federal funds rate plus 0.5% or LIBOR plus 1.0%, with a LIBOR floor of 0.5%. In addition to the stated interest rate on borrowings under the revolving credit facility, the Company is required to pay a commitment fee and certain conditional fees based on usage of the expanded borrowing base and usage of the asset coverage ratio flexibility. A commitment fee of 0.5% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is less than 35% of the then available maximum borrowing or a commitment fee of 1.0% per annum on any unused portion of the revolving credit facility if the unused portion of the facility is greater than or equal to 35% of the then available maximum borrowing. As of December 31, 2021 and December 31, 2020, the outstanding borrowings were accruing at a weighted average interest rate of 3.1% and 3.2%, respectively.

2023 Notes: On February 18, 2021, the Company redeemed $109,000 in aggregate principal amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC Subtopic 470-50, Debt – Modifications and Extinguishments (“ASC 470-50”), which resulted in a realized loss of $2,335 (primarily comprised of the unamortized deferred financing costs at the time of the redemption) recorded in net gain (loss) on extinguishment of debt on the Company’s consolidated statements of operations. The 2023 Notes were delisted from the Nasdaq Global Select Market in conjunction with the redemption.

2026 Notes: On January 25, 2021, the Company closed a private offering of $130,000 in aggregate principal amount of senior unsecured notes (the “2026 Notes”). Aggregate underwriting commissions were $3,325 and other issuance costs were $683, resulting in net proceeds of approximately $125,992. The 2026 Notes mature on February 15, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option at par plus a “make-whole” premium, if applicable. The 2026 Notes bear interest at an annual rate of 4.75% payable semi-annually on February 15 and August 15 of each year, commencing on August 15, 2021. The 2026 Notes are general, unsecured obligations and rank equal in right of payment with all of the Company’s existing and future unsecured indebtedness. As of December 31, 2021, the Company had $130,000 in aggregate principal amount of senior unsecured notes outstanding.

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

The SBIC license allowed MRCC SBIC to obtain leverage by issuing SBA debentures. On March 1, 2022, MRCC SBIC fully repaid its outstanding debentures and notified the SBA of its intent to surrender its license to operate as a SBIC. See Note 14 for additional information. SBA debentures are non-recourse, interest only debentures with interest payable semi-annually and have a 10-year maturity. The principal amount of SBA debentures is not required to be paid prior to maturity but may be prepaid on a semi-annual basis. The interest rate of SBA debentures is fixed on a semi-annual basis (pooling date) at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, has a superior claim to MRCC SBIC’s assets over the Company’s stockholders.

During the year ended December 31, 2021, the Company repaid $58,100 in aggregate principal amount of the SBA debentures. The repayment was accounted for as a debt extinguishment in accordance with ASC 470-50 which resulted in a realized loss of $775 (primarily comprised of the unamortized deferred financing costs at the time of the repayment) recorded in net gain (loss) on extinguishment of debt on the Company’s consolidated statements of operations. As of December 31, 2021, MRCC SBIC had $15,459 in cash and $87,248 in investments at fair value. As of December 31, 2020, MRCC SBIC had $25,657 in cash and $131,167 in investments at fair value.

F-46

As of both December 31, 2021 and December 31, 2020, MRCC SBIC had $57,624 in leverageable capital and the following SBA debentures outstanding:

Maturity Date	Interest Rate			December 31, 2021		December 31, 2020
September 2024		3.4	%	$	2,920	$	12,920
March 2025		3.3	%		14,800		14,800
March 2025		2.9	%		7,080		7,080
September 2025		3.6	%		—		5,200
March 2027		3.5	%		—		20,000
September 2027		3.2	%		32,100		32,100
March 2028		3.9	%		—		18,520
September 2028		4.2	%		—		4,380
Total				$	56,900	$	115,000

Components of interest expense: The components of the Company’s interest expense and other debt financing expenses, average debt outstanding and average stated interest rates (i.e. the rate in effect plus spread) were as follows:

	For the years ended December 31,
	2021			2020			2019
Interest expense – revolving credit facility	$	4,593		$	5,594		$	8,710
Interest expense – 2023 Notes		837			6,270			5,756
Interest expense – 2026 Notes		5,763			—			—
Interest expense – SBA debentures		2,676			3,944			3,933
Amortization of deferred financing costs		2,205			2,181			1,869
Total interest and other debt financing expenses	$	16,074		$	17,989		$	20,268
Average debt outstanding		332,034			370,904			397,503
Average stated interest rate		4.1	%		4.2	%		4.5	%

Note 8. Derivative Instruments

The Company enters into foreign currency forward contracts from time to time to help mitigate the impact that an adverse change in foreign exchange rates would have on future interest cash flows from the Company’s investments denominated in foreign currencies. As of December 31, 2021 and 2020, the counterparty to these foreign currency forward contracts was Bannockburn Global Forex, LLC. Net unrealized gain or loss on foreign currency forward contracts are included in net change in unrealized gain (loss) on foreign currency forward contracts and net realized gain or loss on forward currency forward contracts are included in net realized gain (loss) on foreign currency forward contracts on the accompanying consolidated statements of operations.

Certain information related to the Company’s foreign currency forward contracts is presented below as of December 31, 2021 and December 31, 2020.

	As of December 31, 2021
Description	Notional Amount to be Sold		Settlement Date	Gross Amount of Unrealized Gain		Gross Amount of Unrealized Loss			Balance Sheet location of Net Amounts
Foreign currency forward contract	£	82	1/3/2022	$	—	$	(10	)	Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	£	79	4/4/2022		—		(10	)	Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	£	29	5/6/2022		—		(3	)	Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	156	1/19/2022		8		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	136	2/16/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	132	3/16/2022		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	146	4/19/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	138	5/17/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	153	6/17/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	138	7/18/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	140	8/16/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	153	9/16/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	152	10/19/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	136	11/16/2022		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	142	12/16/2022		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	153	1/18/2023		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	140	2/16/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	132	3/16/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	160	4/20/2023		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	121	5/16/2023		5		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	156	6/19/2023		7		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	138	7/18/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	146	8/16/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	146	9/18/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	148	10/18/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	140	11/16/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	142	12/18/2023		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	150	1/17/2024		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	143	2/16/2024		6		—		Unrealized gain on foreign currency forward contracts
Foreign currency forward contract	AUD	15,410	3/18/2024		635		—		Unrealized gain on foreign currency forward contracts
				$	804	$	(23	)

	As of December 31, 2020
	Notional Amount to be Sold		Settlement Date	Gross Amount of Unrealized Gain		Gross Amount of Unrealized Loss			Balance Sheet location of Net Amounts
Foreign currency forward contract	£	87	1/4/2021	$	—	$	(12	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	206	3/3/2021		—		(18	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	26	3/3/2021		—		(2	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	84	4/2/2021		—		(12	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	212	6/1/2021		—		(19	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	26	6/1/2021		—		(2	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	83	7/2/2021		—		(11	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	83	10/4/2021		—		(11	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	82	1/3/2022		—		(11	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	79	4/4/2022		—		(11	)	Unrealized loss on foreign currency forward contracts
Foreign currency forward contract	£	29	5/6/2022		—		(4	)	Unrealized loss on foreign currency forward contracts
Total				$	—	$	(113	)

F-47

For the years ended December 31, 2021, 2020 and 2019, the Company recognized net change in unrealized gain (loss) on foreign currency forward contracts of $894, ($54) and ($75), respectively. For the years ended December 31, 2021, 2020 and 2019, the Company recognized net realized gain (loss) on foreign currency forward contracts of ($48), ($16) and $12, respectively.

Note 9. Income Taxes

The Company has elected to be treated as a RIC under Subchapter M of the Code. As a RIC, the Company is not taxed on any investment company taxable income or capital gains which it distributes to stockholders. The Company intends to distribute all of its investment company taxable income and capital gains annually. Accordingly, no provision for federal income tax has been made in the consolidated financial statements.

Dividends from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal tax regulations, which may differ from amounts in accordance with U.S. GAAP and those differences could be material. These book-to-tax differences are either temporary or permanent in nature. Reclassifications due to permanent book-to-tax differences have no impact on net assets.

The following permanent differences were reclassified for tax purposes:

	For the years ended December 31,
	2021			2020			2019
Increase (decrease) in capital in excess of par value	$	(301	)	$	(447	)	$	(61	)
Increase (decrease) in accumulated undistributed (overdistributed) earnings		301			447			61

Taxable income generally differs from net increase (decrease) in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses and generally excludes unrealized gain (loss) on investments as investment gains and losses are not included in taxable income until they are realized.

Capital losses in excess of capital gains earned in a tax year may generally be carried forward and used to offset capital gains, subject to certain limitations. Under the Regulated Investment Company Modernization Act of 2010, capital losses incurred after September 30, 2011 are not subject to expiration and retain their character as either short-term or long-term capital losses. As of December 31, 2021 and 2020, the Company had short-term capital loss carryforwards of $1,489 and $1,303, respectively. As of December 31, 2021 and 2020, the Company had long-term capital loss carryforwards of $40,931 and $19,353, respectively.

The following table reconciles net increase in net assets resulting from operations to taxable income:

	For the years ended December 31,
	2021			2020			2019
Net increase (decrease) in net assets resulting from operations	$	32,459		$	1,646		$	19,214
Net change in unrealized (gain) loss		(36,108	)		31,263			8,895
Other realized gain (loss) for tax but not book		—			(857	)		105
Other income (loss) for tax but not book		—			217			171
Other deductions for book in excess of deductions for tax		—			—			—
Expenses not currently deductible		282			370			10
Net capital loss carryforward		21,764			(1,694	)		817
Total taxable income	$	18,397		$	30,945		$	29,212

For income tax purposes, distributions paid to stockholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof. The following table provides the tax character of distributions paid:

	For the years ended December 31,
	2021		2020		2019
Ordinary income	$	21,514	$	23,064	$	28,624
Long-term capital gains		—		—		—
Total	$	21,514	$	23,064	$	28,624

The Company’s consolidated Taxable Subsidiaries are subject to U.S. federal and state income taxes. For the years ended December 31, 2021, 2020 and 2019, the Company recorded a net tax expense of approximately $4, $2 and $7, respectively, for these Taxable Subsidiaries.

F-48

As of December 31, 2021, the estimated cost basis of investment for U.S. federal income tax purposes was $576,327, resulting in estimated net unrealized loss of $14,634, comprised of estimated gross unrealized gains and losses of $22,135 and $36,769, respectively. As of December 31, 2020, the estimated cost basis of investment for U.S. federal income tax purposes was $601,462, resulting in estimated net unrealized loss of $54,423, comprised of estimated gross unrealized gains and losses of $10,812 and $65,235, respectively.

Note 10. Distributions

The Company’s distributions are recorded on the record date. The following table summarizes distributions declared during the years ended December 31, 2021, 2020 and 2019:

Date Declared	Record Date	Payment Date	Amount Per Share		Cash Distribution		DRIP Shares Issued		DRIP Shares Value		DRIP Shares Repurchased in the Open Market		Cost of DRIP Shares Repurchased
Year ended December 31, 2021:
March 2, 2021	March 16, 2021	March 31, 2021	$	0.25	$	5,326		—	$	—		35,611	$	364
June 2, 2021	June 16, 2021	June 30, 2021		0.25		5,386		—		—		31,277		343
September 2, 2021	September 16, 2021	September 30, 2021		0.25		5,386		—		—		35,623		369
December 2, 2021	December 16, 2021	December 31, 2021		0.25		5,416		—		—		27,905		315
Total distributions declared			$	1.00	$	21,514		—	$	—		130,416	$	1,391
Year ended December 31, 2020:
March 3, 2020	March 16, 2020	March 31, 2020	$	0.35	$	7,155		—	$	—		55,938	$	374
May 8, 2020	June 15, 2020	June 30, 2020		0.25		5,257		—		—		40,612		283
September 4, 2020	September 16, 2020	September 30, 2020		0.25		5,326		—		—		44,246		305
December 4, 2020	December 16, 2020	December 31, 2020		0.25		5,326		—		—		45,667		365
Total distributions declared			$	1.10	$	23,064		—	$	—		186,463	$	1,327
Year ended December 31, 2019:
March 5, 2019	March 15, 2019	March 29, 2019	$	0.35	$	7,156		—	$	—		27,498	$	342
May 31, 2019	June 14, 2019	June 28, 2019		0.35		7,156		—		—		30,802		363
September 3, 2019	September 16, 2019	September 30, 2019		0.35		7,156		—		—		33,674		355
December 2, 2019	December 16, 2019	December 31, 2019		0.35		7,156		—		—		31,662		349
Total distributions declared			$	1.40	$	28,624		—	$	—		123,636	$	1,409

None of the distributions declared during the years ended December 31, 2021, 2020 and 2019 represented a return of capital for tax purposes.

Note 11. Stock Issuances and Repurchases

Stock Issuances: On May 12, 2017, the Company entered into at-the-market (“ATM”) equity distribution agreements with each of JMP Securities LLC (“JMP”) and FBR Capital Markets & Co. (“FBR”) (the “ATM Program”) through which we could sell, by means of ATM offerings, from time to time, up to $50,000 of our common stock. On May 8, 2020, the Company entered into an amendment to the ATM Program to extend its term. All other material terms of the ATM Program remain unchanged. There were no stock issuances during the year ended December 31, 2019. During the year ended December 31, 2020, the Company sold 858,976 shares at an average price of $7.78 per share for gross proceeds of $6,684 under the ATM Program. Aggregate underwriter’s discounts and commissions were $100 and offering costs were $89, resulting in net proceeds of approximately $6,495. During the year ended December 31, 2021, we sold 362,800 shares at an average price of $11.53 per share for gross proceeds of $4,182 under the ATM Program. Aggregate underwriter’s discounts and commissions were $63 and offering costs were $27, resulting in net proceeds of approximately $4,092.

Note 12. Commitments and Contingencies

Commitments: As of December 31, 2021 and 2020, the Company had $55,483 and $52,252, respectively, in outstanding commitments to fund investments under undrawn revolvers, capital expenditure loans, delayed draw commitments and subscription agreements (excluding SLF). As described in Note 3, the Company had unfunded commitments of $7,850 to SLF as of both December 31, 2021 and 2020, that may be contributed primarily for the purpose of funding new investments approved by the SLF investment committee. Drawdowns of the commitments to SLF require authorization from one of the Company’s representatives on SLF’s board of managers. Management believes that the Company’s available cash balances and/or ability to draw on the revolving credit facility provide sufficient funds to cover its unfunded commitments as of December 31, 2021.

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

F-49

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

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

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

Note 13. Financial Highlights

The financial highlights for the Company are as follows:

	For the years ended December 31,
	2021			2020			2019			2018			2017
Per share data:
Net asset value at beginning of year (1)	$	11.00		$	12.20		$	12.66		$	13.77		$	14.52
Net investment income (2)		1.03			1.45			1.42			1.57			1.40
Net gain (loss) (2)		0.48			(1.37	)		(0.48	)		(1.28	)		(0.75	)
Net increase (decrease) in net assets from operations (2)		1.51			0.08			0.94			0.29			0.65
Stockholder distributions – income		(1.00	)		(1.10	)		(1.40	)		(1.40	)		(1.37	)
Stockholder distributions – capital gains		—			—			—			—			(0.03	)
Stockholder distributions – return of capital		—			—			—			—			—
Effect of share issuance above (below) NAV (3)		—			(0.18	)		—			—			—
Effect of share repurchases (3)		—			—			—			—			—
Other (3)		—			—			—			—			—
Net asset value at end of year	$	11.51		$	11.00		$	12.20		$	12.66		$	13.77
Net assets at end of year	$	249,471		$	234,434		$	249,357		$	258,767		$	278,699
Shares outstanding at end of year		21,666,340			21,303,540			20,444,564			20,444,564			20,239,957
Per share market value at end of year	$	11.22		$	8.03		$	10.86		$	9.60		$	13.75
Total return based on market value (4)		53.26	%		(13.86	)%		27.68	%		(21.74	)%		(1.82	)%
Total return based on average net asset value (5)		13.40	%		0.72	%		7.53	%		2.17	%		4.58	%
Ratio/Supplemental data:
Ratio of net investment income to average net assets (6)		9.15	%		13.32	%		11.38	%		11.85	%		9.80	%
Ratio of total expenses, net of incentive fee waivers, to average net assets (6)(7)		13.07	%		13.68	%		15.35	%		9.84	%		9.46	%
Portfolio turnover (8)		41.80	%		25.24	%		27.18	%		31.53	%		39.39	%

	For the years ended December 31,
	2016			2015			2014			2013			2012
Per share data:
Net asset value at beginning of year (1)	$	14.19		$	14.05		$	13.92		$	14.54		$	15.00
Net investment income (2)		1.55			1.60			1.57			1.13			0.15
Net gain (loss) (2)		0.13			(0.07	)		(0.12	)		0.15			0.03
Net increase (decrease) in net assets from operations (2)		1.68			1.53			1.45			1.28			0.18
Stockholder distributions – income		(1.40	)		(1.37	)		(1.36	)		(1.15	)		(0.14	)
Stockholder distributions – capital gains		—			(0.03	)		—			—			—
Stockholder distributions – return of capital		—			—			—			(0.21	)		(0.20	)
Effect of share issuance above (below) NAV (3)		0.05			—			—			(0.57	)		(0.30	)
Effect of share repurchases (3)		—			—			0.04			0.03			—
Other (3)		—			0.01			—			—			—
Net asset value at end of year	$	14.52		$	14.19		$	14.05		$	13.92		$	14.54
Net assets at end of year	$	240,850		$	184,535		$	133,738		$	138,092		$	83,634
Shares outstanding at end of year		16,581,869			13,008,007			9,517,910			9,918,269			5,750,103
Per share market value at end of year	$	15.38		$	13.09		$	14.46		$	12.20		$	14.83
Total return based on market value (4)		28.95	%		(0.21	)%		30.67	%		(9.29	)%		1.15	%
Total return based on average net asset value (5)		11.70	%		11.04	%		10.34	%		9.17	%		1.14	%
Ratio/Supplemental data:
Ratio of net investment income to average net assets (6)		10.81	%		11.56	%		11.20	%		7.71	%		5.00	%
Ratio of total expenses, net of incentive fee waivers, to average net assets (6)(7)		10.81	%		11.20	%		11.03	%		8.53	%		5.77	%
Portfolio turnover (8)		22.41	%		30.70	%		47.03	%		39.77	%		11.88	%

(1)	The beginning net asset value for 2012 represents the initial public offering price on October 24, 2012.
(2)	Calculated using the weighted average shares outstanding during the years ended December 31, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and for the period from October 24, 2012 to December 31, 2012, respectively.

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⁽³⁾ Includes the effect of share issuances above (below) net asset value and the impact of different share amounts used in calculating per share data as a result of calculating certain per share data based on weighted average shares outstanding during the period and certain per share data based on shares outstanding as of a period end or transaction date.

⁽⁴⁾ Total return based on market value is calculated assuming a purchase of common shares at the market value on the first day and a sale at the market value on the last day of the periods reported. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s DRIP. Total return based on market value does not reflect brokerage commissions.

(5)	Total return based on average net asset value is calculated by dividing the net increase (decrease) in net assets resulting from operations by the average net asset value.
(6)	Ratios for the period from October 24, 2012 to December 31, 2012 are annualized. Incentive fees included within the ratio are not annualized.
(7)	The following is a schedule of supplemental ratios for the years presented.

	2021			2020			2019			2018			2017
Ratio of total investment income to average net assets (6)		22.22	%		27.00	%		26.73	%		21.69	%		19.26	%
Ratio of interest and other debt financing expenses to average net assets (6)		6.63	%		7.89	%		7.95	%		4.56	%		3.13	%
Ratio of total expenses (without incentive fees) to average net assets (6)		12.16	%		13.86	%		13.61	%		9.19	%		7.43	%
Ratio of incentive fees, net of incentive fee waivers, to average net assets (8) (9)		0.91	%		0.00	%		1.74	%		0.65	%		2.03	%

	2016			2015			2014			2013			2012
Ratio of total investment income to average net assets (6)		21.62	%		22.76	%		22.23	%		17.10	%		10.82	%
Ratio of interest and other debt financing expenses to average net assets (6)		3.26	%		3.33	%		3.23	%		2.59	%		1.93	%
Ratio of total expenses (without incentive fees) to average net assets (6)		8.17	%		8.31	%		8.42	%		7.15	%		5.76	%
Ratio of incentive fees, net of incentive fee waivers, to average net assets (8) (9)		2.64	%		2.89	%		2.61	%		1.38	%		0.01	%

(8)	Ratios for the period from October 24, 2012 to December 31, 2012 are not annualized.
(9)	The ratio of waived incentive fees to average net assets was 0.61%, 0.31%, 0.46%, zero and 0.12%, 0.13%, zero, zero, zero and zero for the years ended December 31, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and for the period from October 24, 2012 to December 31, 2012, respectively.

Note 14. Subsequent Events

The Company has evaluated subsequent events through March 2, 2022, the date on which the consolidated financial statements were issued.

On March 1, 2022, the Company repaid all $56,900 of its remaining SBA debentures utilizing a borrowing on the revolving credit facility and the restricted cash at MRCC SBIC. Additionally, MRCC SBIC notified the SBA of its intent to surrender its license to operate as a SBIC.

On March 2, 2022, the Board declared a quarterly distribution of $0.25 per share payable on March 31, 2022 to holders of record on March 16, 2022.

Note 15. Selected Quarterly Financial Data (unaudited)

	For the quarter ended
	December 31, 2021		September 30, 2021		June 30, 2021		March 31, 2021
Total investment income	$	13,039	$	15,214	$	12,364	$	13,213
Net investment income	$	5,373	$	6,312	$	5,157	$	5,326
Net gain (loss)	$	1,462	$	927	$	6,173	$	1,729
Net increase (decrease) in net assets resulting from operations	$	6,835	$	7,239	$	11,330	$	7,055
Net investment income per share – basic and diluted	$	0.25	$	0.29	$	0.24	$	0.25
Net increase (decrease) in net assets resulting from operations per share – basic and diluted	$	0.32	$	0.34	$	0.53	$	0.33
Net asset value per share at period end	$	11.51	$	11.45	$	11.36	$	11.08

	For the quarter ended
	December 31, 2020		September 30, 2020		June 30, 2020		March 31, 2020
Total investment income	$	12,552	$	13,385	$	20,642	$	15,002
Net investment income	$	5,326	$	5,644	$	12,636	$	6,782
Net gain (loss)	$	3,751	$	9,541	$	1,598	$	(43,632	)
Net increase (decrease) in net assets resulting from operations	$	9,077	$	15,185	$	14,234	$	(36,850	)
Net investment income per share – basic and diluted	$	0.25	$	0.26	$	0.61	$	0.33
Net increase (decrease) in net assets resulting from operations per share – basic and diluted	$	0.42	$	0.71	$	0.69	$	(1.81	)
Net asset value per share at period end	$	11.00	$	10.83	$	10.37	$	10.04

	For the quarter ended
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
Total investment income	$	17,985		$	17,330		$	16,719		$	16,159
Net investment income	$	7,649		$	7,238		$	7,073		$	7,074
Net gain (loss)	$	(3,521	)	$	(3,585	)	$	(3,081	)	$	367
Net increase (decrease) in net assets resulting from operations	$	4,128		$	3,653		$	3,992		$	7,441
Net investment income per share – basic and diluted	$	0.37		$	0.35		$	0.35		$	0.35
Net increase (decrease) in net assets resulting from operations per share – basic and diluted	$	0.21		$	0.17		$	0.20		$	0.36
Net asset value per share at period end	$	12.20		$	12.34		$	12.52		$	12.67

F-51

(a)(3) Exhibits

Exhibit Number	Description of Document
3.1	Amended and Restated Articles of Incorporation of Monroe Capital Corporation (Incorporated by reference to Exhibit (a)(1) of the Registrant’s Pre-Effective Amendment No. 8 to the Registration Statement on Form N-2 (File No. 333-172601) filed on October 18, 2012)
3.2	Bylaws of Monroe Capital Corporation (Incorporated by reference to Exhibit (b)(1) of the Registrant’s Pre-Effective Amendment No. 8 to the Registration Statement on Form N-2 (File No. 333-172601) filed on October 18, 2012)
4.1	Form of Stock Certificate of Monroe Capital Corporation (Incorporated by reference to Exhibit (d) of the Registrant’s Pre-Effective Amendment No. 8 to the Registration Statement on Form N-2 (File No. 333-172601) filed on October 18, 2012)
4.2	Indenture by and between the Registrant and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit (d)(7) of the Registrant’s Post-Effective Amendment No. 6 to the Registration Statement on Form N-2 (File No. 333-216665) filed on September 12, 2018)
4.3	First Supplemental Indenture by and between the Registrant and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit (d)(8) of the Registrant’s Post-Effective Amendment No. 6 to the Registration Statement on Form N-2 (File No. 333-216665) filed on September 12, 2018)
4.4	Form of Global Note with respect to the 5.75% Notes due 2023 (Incorporated by reference to Exhibit (d)(8) of the Registrant’s Post-Effective Amendment No. 6 to the Registration Statement on Form N-2 (File No. 333-216665) filed on September 12, 2018, and Exhibit A therein)
4.5	Second Supplemental Indenture by and between the Registrant and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K (File No. 814-00866) filed on January 25, 2021)
4.6	Form of Global Note with respect to the 4.75% Notes due 2026 (Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (File No. 814-00866) filed on January 25, 2021, and Exhibit A therein)
4.7	Description of Securities (filed herewith)
10.1	Dividend Reinvestment Plan (Incorporated by reference to Exhibit (e) of the Registrant’s Pre-Effective Amendment No. 8 to the Registration Statement on Form N-2 (File No. 333-172601) filed on October 18, 2012)
10.2	Amended and Restated Investment Advisory and Management Agreement between Registrant and MC Advisors (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 814-00866) filed on November 6, 2019)
10.3	Form of Custodian Agreement (Incorporated by reference to Exhibit (j) of the Registrant’s Pre-Effective Amendment No. 8 to the Registration Statement on Form N-2 (File No. 333-172601) filed on October 18, 2012)
10.4	Administration Agreement between Registrant and MC Management (Incorporated by reference to Exhibit (k)(1) of the Registrant’s Pre-Effective Amendment No. 8 to the Registration Statement on Form N-2 (File No. 333-172601) filed on October 18, 2012)
10.5	License Agreement between the Registrant and Monroe Capital, LLC (Incorporated by reference to Exhibit (k)(2) of the Registrant’s Pre-Effective Amendment No. 8 to the Registration Statement on Form N-2 (File No. 333-172601) filed on October 18, 2012)
10.6	MRCC Senior Loan Fund I, LLC Limited Liability Company Agreement dated October 31, 2017, by and between the Registrant and NLV Financial Corporation (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 814-00866) filed on November 1, 2017)
10.7	Second Amended and Restated Senior Secured Revolving Credit Agreement among the Registrant as borrower, the Lenders party thereto and ING Capital LLC, as Administrative Agent, dated March 1, 2019 (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 814-00866) filed on March 5, 2019)
10.8	Amendment No. 1 to Second Amended and Restated Senior Secured Revolving Credit Agreement among the Registrant, as borrower, the Lenders party thereto, and ING Capital LLC, as Administrative Agent, dated March 20, 2019 (Incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K (File No. 814-00866) filed on March 20, 2019)
10.9	Amendment No. 2 to Second Amended and Restated Senior Secured Revolving Credit Agreement among the Registrant, as borrower, the Lenders party thereto, and ING Capital LLC, as Administrative Agent, dated September 27, 2019 (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 814-00866) filed on October 2, 2019)
10.10	Amendment No. 3 and Limited Waiver to Second Amended and Restated Senior Secured Revolving Credit Agreement among the Registrant, as borrower, the Lenders party thereto, and ING Capital LLC, as Administrative Agent, dated May 21, 2020 (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 814-00866) filed on May 22, 2020)
10.11	Amendment No. 4 to Second Amended and Restated Senior Secured Revolving Credit Agreement among the Registrant, as borrower, the Lenders party thereto, and ING Capital LLC, as Administrative Agent, dated December 30, 2021 (filed herewith)
21.1	List of Subsidiaries (filed herewith)
23.1	Consent of RSM US LLP (filed herewith)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
99.1	Report of RSM US LLP on Senior Securities Table (filed herewith)

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 2, 2022

Monroe Capital Corporation (Registrant)

By	/s/ Theodore L. Koenig
	Theodore L. Koenig
	Chairman, Chief Executive Officer and Director
	(Principal Executive Officer)

By	/s/ Aaron D. Peck
	Aaron D. Peck
	Chief Financial Officer, Chief Investment Officer and Director
	(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Theodore L. Koenig	Chairman, Chief Executive Officer and Director	March 2, 2022
Theodore L. Koenig	(Principal Executive Officer)
/s/ Aaron D. Peck	Chief Financial Officer, Chief Investment Officer and Director	March 2, 2022
Aaron D. Peck	(Principal Financial and Accounting Officer)
/s/ Thomas J. Allison	Director	March 2, 2022
Thomas J. Allison
/s/ Jeffrey A. Golman	Director	March 2, 2022
Jeffrey A. Golman
/s/ Jorde M. Nathan	Director	March 2, 2022
Jorde M. Nathan
/s/ Robert S. Rubin	Director	March 2, 2022
Robert S. Rubin
/s/ Jeffrey D. Steele	Director	March 2, 2022
Jeffrey D. Steele

89