MVC Capital Earnings 2020-01-31

MVC 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
MMD
CBH
HQH
GBDC
CET
SAF
FLAG
NTG
RCG
SSSS

10-Q 1 tm2011695d1_10q.htm FORM 10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

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

For the quarterly period ended January 31, 2020

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

Commission File Number 814-00201

MVC Capital, Inc.

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

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

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

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

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	MVC	New York Stock Exchange
Senior Notes	MVCD	New York Stock Exchange

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. (Check one):

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨ Emerging Growth Company ¨

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

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

There were 17,725,118 shares of the registrant’s common stock, $.01 par value, outstanding as of March 9, 2020.

MVC Capital, Inc.

(A Delaware Corporation)

Index

				Page
Part I.	Consolidated Financial Information

	Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets
		-	January 31, 2020 (Unaudited) and October 31, 2019	3
		Consolidated Statements of Operations
		-	For the Quarter Ended January 31, 2020 (Unaudited) and
		-	For the Quarter Ended January 31, 2019 (Unaudited)	4
		Consolidated Statements of Cash Flows
		-	For the Quarter Ended January 31, 2020 (Unaudited) and
		-	For the Quarter Ended January 31, 2019 (Unaudited)	5
		Consolidated Statements of Changes in Net Assets
		-	For the Quarter Ended January 31, 2020 (Unaudited)
		-	For the Quarter Ended January 31, 2019 (Unaudited) and
		-	For the Year ended October 31, 2019	6
		Consolidated Selected Per Share Data and Ratios
		-	For the Quarter Ended January 31, 2020 (Unaudited)
		-	For the Quarter Ended January 31, 2019 (Unaudited) and
		-	For the Year ended October 31, 2019	7
		Consolidated Schedules of Investments
		-	January 31, 2020 (Unaudited)	8
		-	October 31, 2019	11
		Notes to Consolidated Financial Statements		13
	Item 2.	Management’s Discussion and Analysis of Financial
		Condition and Results of Operations		42
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		67
	Item 4.	Controls and Procedures		82

Part II.	Other Information			82

	Item 1.	Legal Proceedings		82
	Item 1A.	Risk Factors		82
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		82
	Item 3.	Defaults Upon Senior Securities		82
	Item 4.	Mine Safety Disclosures		82
	Item 5.	Other Information		83
	Item 6.	Exhibits		83

SIGNATURE				84

Exhibits

CONSOLIDATED FINANCIAL STATEMENTS

MVC Capital, Inc.

Consolidated Balance Sheets

	January 31,			October 31,
	2020			2019
	(Unaudited)
ASSETS
Assets
Cash	$	5,343,552		$	1,321,648
Restricted cash equivalents (cost $5,029,519 and $5,009,091)		5,029,519			5,009,091
Cash equivalents (cost $44,964,519 and $5,368,190)		44,964,519			5,368,190
Investments at fair value
U.S. Treasury obligations (cost $24,998,656 and $0)		25,058,198			-
Non-control/Non-affiliated investments (cost $192,674,433 and $246,228,806)		181,993,094			229,322,498
Affiliate investments (cost $89,764,322 and $81,465,911)		56,534,226			61,851,896
Control investments (cost $78,878,948 and $87,972,462)		47,176,411			49,070,701
Total investments at fair value (cost $386,316,359 and $415,667,180)		310,761,929			340,245,095
Escrow receivables, net of reserves		-			1,135,000
Dividends and interest receivables, net of reserves		3,457,841			4,273,018
Deferred financing fees		529,821			614,586
Fee and other receivables		2,207,275			4,013,714
Prepaid expenses		73,345			182,298

Total assets	$	372,367,801		$	362,162,640
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Senior notes II	$	112,889,700		$	112,703,490
Revolving credit facility II		25,000,000			-
Revolving credit facility IV		-			15,100,000
Incentive compensation payable		1,527,849			1,527,849
Provision for incentive compensation (Note 11)		-			-
Professional fees payable		181,478			241,518
Management fee payable		856,516			1,038,431
Accrued expenses and liabilities		259,958			770,205
Interest payable		666,537			670,163
Management fee payable - Asset Management		17,257			395,435
Consulting fees payable		208,879			360,452
Portfolio fees payable - Asset Management		803,933			668,849
Guarantees/Letters of Credit		592,502			726,649
Taxes payable		1,400			915

Total liabilities		143,006,009			134,203,956

Commitments and Contingencies (Note 9)

Shareholders' equity
Common stock, $0.01 par value; 150,000,000 shares authorized; 28,304,448 shares issued and 17,725,118 and 17,725,118 shares outstanding as of January 31, 2020 and October 31, 2019, respectively		283,044			283,044
Additional paid-in-capital		406,258,172			406,258,172
Accumulated overdistributed earnings		(70,666,555	)		(72,069,663	)
Treasury stock, at cost, 10,579,330 and 10,579,330 shares held, respectively		(106,512,869	)		(106,512,869	)

Total shareholders' equity		229,361,792			227,958,684

Total liabilities and shareholders' equity	$	372,367,801		$	362,162,640

Net asset value per share	$	12.94		$	12.86

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

MVC Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

	For the Quarter Ended			For the Quarter Ended
	January 31, 2020			January 31, 2019
Operating Income:
Dividend income
Non-control/Non-affiliated investments	$	-		$	-
Affiliate investments (net of foreign taxes withheld of $0 and $77,403, respectively)		-			262,529
Control investments		-			542,693

Total dividend income		-			805,222

Interest income
Non-control/Non-affiliated investments		6,106,404			4,272,026
Affiliate investments		-			-
Control investments		153,592			109,621

Total interest income		6,259,996			4,381,647

Payment-in-kind/Deferred interest income
Non-control/Non-affiliated investments		916,353			651,901
Affiliate investments		129,938			220,813
Control investments		155,874			120,113

Total payment-in-kind/Deferred interest income		1,202,165			992,827

Fee income
Non-control/Non-affiliated investments		13,099			38,099

Total fee income		13,099			38,099

Fee income - Asset Management ¹
Portfolio fees		225,945			127,823
Management fees		84,774			95,229

Total fee income - Asset Management		310,719			223,052

Total operating income		7,785,979			6,440,847

Operating Expenses:
Interest and other borrowing costs ²		2,205,674			2,484,086
Management fee		1,370,426			1,512,518
Audit & tax preparation fees		504,000			667,780
Consulting fees		242,305			249,935
Portfolio fees - Asset Management ¹		169,459			95,867
Legal fees		110,000			134,400
Other expenses		98,877			129,380
Directors' fees		94,500			85,248
Insurance		69,512			67,305
Management fee - Asset Management ¹		63,581			71,422
Public relations fees		45,393			38,857
Administration		41,475			41,589
Printing and postage		15,200			20,100

Total operating expenses		5,030,402			5,598,487

Less: Voluntary expense waiver by Adviser ³		(37,500	)		(37,500	)
Less: Voluntary management fee waiver by Adviser ⁴		(513,910	)		(567,195	)

Total waivers		(551,410	)		(604,695	)

Net operating income before taxes		3,306,987			1,447,055

Tax Expenses:
Current tax expense		485			480

Total tax expense		485			480

Net operating income		3,306,502			1,446,575

Net Realized and Unrealized Gain (Loss) on Investments:

Net realized gain (loss) on investments
Non-control/Non-affiliated investments		27,867			-
Affiliate investments		(43,164	)		39,420
Control investments		1,123,372			5,184,544
Foreign currency		-			2,162

Total net realized gain on investments		1,108,075			5,226,126

Net unrealized appreciation (depreciation) on investments		1,802			(9,725,453	)

Net realized and unrealized gain (loss) on investments		1,109,877			(4,499,327	)

Net increase (decrease) in net assets resulting from operations	$	4,416,379		$	(3,052,752	)

Net increase (decrease) in net assets per share resulting from operations	$	0.25		$	(0.17	)

Dividends declared per share ⁵	$	0.170		$	0.150

Weighted average number of shares outstanding		17,725,118			17,977,361

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

²Interest and other borrowing costs includes $0 and $91,476 of interest associated with installment sale treatment on the USG&E note.

Please see Note 12 "Tax Matters" for more information.

³Reflects the quarterly portion of the TTG Advisers' voluntary waiver of $150,000 of expenses for the 2020 and 2019 fiscal years that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the "Voluntary Waiver").

Please see Note 10 "Management" for more information.

⁴Reflects the quarterly portion of the TTG Advisers' voluntary waiver of the management fee for the 2020 and 2019

Please see Note 10 "Management" for more information.

⁵Please see Note 13 "Dividends and Distributions to Shareholders, Share Repurchase Program and Tender Offer" for more information.

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

MVC Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Quarter Ended			For the Quarter Ended
	January 31, 2020			January 31, 2019
Cash flows from Operating Activities:
Net increase (decrease) in net assets resulting from operations	$	4,416,379		$	(3,052,752	)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realized gain		(1,108,075	)		(5,226,126	)
Net change in unrealized depreciation (appreciation)		(1,802	)		9,725,453
Amortization of discounts and fees		(726,627	)		(67,065	)
Increase in accrued payment-in-kind dividends and interest		(1,818,906	)		(964,412	)
Amortization of deferred financing fees		270,975			(446,647	)
Changes in operating assets and liabilities:
Dividends, interest and fees receivable		815,177			597,614
Fee and other receivables		1,806,439			(317,500	)
Escrow receivables, net of reserves		1,135,000			(49,000	)
Prepaid expenses		108,953			148,033
Other liabilities		(1,150,010	)		413,938
Purchases of equity investments		(1,870,978	)		(3,353,189	)
Purchases of debt instruments		(6,479,936	)		(3,591,598	)
Purchases of short-term investments		(24,998,664	)		(24,996,336	)
Proceeds from equity investments ⁽¹⁾		4,651,818			8,206,480
Proceeds from debt instruments		61,702,189			1,943,413

Net cash provided by (used in) operating activities		36,751,932			(21,029,694	)

Cash flows from Financing Activities:
Borrowings from revolving credit facility II		25,000,000			25,000,000
Borrowings from revolving credit facility IV		(15,100,000	)		4,000,000
Repurchase of common stock		-			(4,069,924	)
Financing fees paid		-			(875,492	)
Distributions paid to shareholders		(2,906,050	)		(2,591,544	)
Repurchases of common stock under dividend reinvestment plan		(107,221	)		(88,694	)

Net cash provided by financing activities		6,886,729			21,374,346

Net change in cash, cash equivalents, and restricted cash for the period		43,638,661			344,652

Cash, cash equivalents, and restricted cash, beginning of period	$	11,698,929		$	15,887,700

Cash, cash equivalents, and restricted cash, end of period	$	55,337,590		$	16,232,352

⁽¹⁾For the quarter ended January 31, 2019, proceeds from equity investments includes $1,018,000 from escrow receivables, net of reserves.

During the quarter ended January 31, 2020 and 2019, MVC Capital, Inc. paid $1,796,875 and $1,796,875 in interest expense, respectively.

During the quarters ended January 31, 2020 and 2019, MVC Capital, Inc. paid $0 and $0 in income taxes, respectively.

Non-cash activity:

During the quarters ended January 31, 2020 and 2019, MVC Capital, Inc. recorded payment in-kind dividend and interest of $1,818,906 and $964,412, respectively. This amount was added to the principal balance of the investments and recorded as dividend/interest income.

During the quarters ended January 31, 2020 and 2019, the Plan Agent purchased 11,467 and 9,949 shares of common stock in the open market in order to satisfy the reinvestment portion of our dividends.

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

MVC Capital, Inc.

Consolidated Statements of Changes in Net Assets

				Additional		Accumulated						Total Net
For the Quarter Ended January 31, 2019 (Unaudited)	Common Stock			Paid-In-Capital		Overdistributed Earnings			Treasury Stock			Asset Value
Balances at October 31, 2018	$	283,044		$	408,583,787	$	(79,700,440	)	$	(102,442,945	)	$	226,723,446

Net operating income		-			-		1,446,575			-			1,446,575
Accumulated net realized gain		-			-		5,226,126			-			5,226,126
Net unrealized depreciation		-			-		(9,725,453	)		-			(9,725,453	)
Dividends paid to stockholders		-			-		(2,680,238	)		-			(2,680,238	)
Issuance of common stock under dividend reinvestment plan		88,694			-		-			-			88,694
Repurchase of common stock under dividend reinvestment plan		(88,694	)		-		-			-			(88,694	)
Repurchase of common stock		-			-		-			(4,069,924	)		(4,069,924	)

Balances at January 31, 2019	$	283,044		$	408,583,787	$	(85,433,430	)	$	(106,512,869	)	$	216,920,532

For the Quarter Ended January 31, 2020 (Unaudited)
Balances at October 31, 2019	$	283,044		$	406,258,172	$	(72,069,663	)	$	(106,512,869	)	$	227,958,684

Net operating income		-			-		3,306,502			-			3,306,502
Accumulated net realized gain		-			-		1,108,075			-			1,108,075
Net unrealized appreciation		-			-		1,802			-			1,802
Dividends paid to stockholders		-			-		(3,013,271	)		-			(3,013,271	)
Issuance of common stock under dividend reinvestment plan		107,221			-		-			-			107,221
Repurchase of common stock under dividend reinvestment plan		(107,221	)		-		-			-			(107,221	)

Balances at January 31, 2020	$	283,044		$	406,258,172	$	(70,666,555	)	$	(106,512,869	)	$	229,361,792

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

MVC Capital, Inc.

Consolidated Selected Per Share Data and Ratios

	For the			For the			For the
	Quarter Ended			Quarter Ended			Year Ended
	January 31, 2020			January 31, 2019			October 31, 2019
	(Unaudited)			(Unaudited)
Net asset value, beginning of period/year	$	12.86		$	12.46		$	12.46

Income from operations:
Net operating income		0.19			0.08			0.65
Net realized and unrealized gain (loss) on investments		0.06			(0.25	)		0.27

Total gain (loss) from investment operations		0.25			(0.17	)		0.92

Less distributions from:
Income		(0.17	)		(0.08	)		(0.62	)
Realized gain		-			(0.07	)		-
Return of capital		-			-			-

Total distributions		(0.17	)		(0.15	)		(0.62	)

Capital share transactions
Anti-dilutive effect of share repurchase program		-			0.10			0.10

Total capital share transactions		-			0.10			0.10

Net asset value, end of period/year	$	12.94		$	12.24		$	12.86

Market value, end of period/year	$	9.57		$	9.18		$	8.77

Market discount		(26.04	)%		(25.00	)%		(31.80	)%

Total Return - At NAV (a)		1.90	%		(0.63	)%		8.33	%

Total Return - At Market (a)		11.06	%		3.09	%		3.64	%

Ratios and Supplemental Data:

Portfolio turnover ratio		3.12	%		2.37	%		11.48	%

Net assets, end of period/year (in thousands)	$	229,362		$	216,921		$	227,959

Ratios to average net assets:
Expenses including tax expense		7.79	%(c)		8.93	%(c)		8.39	%
Expenses excluding tax expense		7.79	%(c)		8.93	%(c)		8.39	%

Net operating income (loss) before tax expense		5.75	%(c)		2.59	%(c)		5.13	%
Net operating income (loss) after tax expense		5.75	%(c)		2.59	%(c)		5.13	%

Ratios to average net assets excluding waivers:
Expenses including tax expense		8.75	%(c)		10.01	%(c)		9.52	%
Expenses excluding tax expense		8.75	%(c)		10.01	%(c)		9.52	%

Net operating income (loss) before tax expense		4.79	%(c)		1.51	%(c)		4.00	%
Net operating income (loss) after tax expense		4.79	%(c)		1.51	%(c)		4.00	%

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

(b) Supplemental Ratio information

Ratios to average net assets: (b)
Expenses excluding incentive compensation	7.79	%(c)	8.93	%(c)	8.39	%
Expenses excluding incentive compensation, interest and other borrowing costs	3.95	%(c)	4.49	%(c)	4.12	%
Net operating income (loss) before incentive compensation	5.75	%(c)	2.59	%(c)	5.13	%
Net operating income before incentive compensation, interest and other borrowing costs	9.59	%(c)	7.03	%(c)	9.40	%
Ratios to average net assets excluding waivers: (b)
Expenses excluding incentive compensation	8.75	%(c)	10.01	%(c)	9.52	%
Expenses excluding incentive compensation, interest and other borrowing costs	4.91	%(c)	5.57	%(c)	5.25	%
Net operating income (loss) before incentive compensation	4.79	%(c)	1.51	%(c)	4.00	%
Net operating income before incentive compensation, interest and other borrowing costs	8.63	%(c)	5.95	%(c)	8.27	%

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

MVC Capital, Inc.

Consolidated Schedule of Investments

January 31, 2020

(Unaudited)

Company	Industry	Investment	Principal		Cost		Fair Value/Market Value
Non-control/Non-affiliated investments- 79.35% (a, c, f, g)
Apex Industrial Technologies, LLC	Supply Chain Equipment Manufacturer	First Lien Loan 12.0000% Cash, 05/15/2020 (k, n)	$	18,750,000	$	17,152,618	$	18,687,091
		Warrants (d, n)		1		1,870,978		1,870,978
						19,023,596		20,558,069
Black Diamond Equipment Rentals, LLC	Equipment Rental	Second Lien Loan 12.5000% Cash, 06/27/2022 (k, n)		7,500,000		7,205,789		7,575,000
		Warrants (d, n)		1		400,847		1,238,000
						7,606,636		8,813,000
Custom Alloy Corporation	Manufacturer of Pipe Fittings and Forgings	Second Lien Loan 12.0000% Cash, 3.0000% PIK, 04/30/2022 (b, k, n)		33,137,490		33,137,490		32,400,927
		Second Lien Loan 12.0000% Cash, 3.0000% PIK, 04/30/2022 (b, k, n)		6,253,813		6,253,813		6,114,807
		Revolver 12.0000% Cash, 3.0000% PIK, 04/30/2020 (b, k, n)		2,995,808		2,995,808		2,995,808
						42,387,111		41,511,542
Dukane IAS,LLC	Welding Equipment Manufacturer	Second Lien Note 10.5000% Cash, 2.5000% PIK, 11/17/2020 (b, k, n)		4,517,863		4,494,402		4,517,863
FOLIOfn, Inc.	Technology Investment - Financial Services	Preferred Stock (5,802,259 shares) (d, i, n)				15,000,000		12,019,000
Global Prairie PBC, Inc.	Marketing	Second Lien Loan 10.0000% Cash, 4.0000% PIK, 04/16/2025 (b, k, n)		3,025,666		2,968,862		3,025,666
GTM Intermediate Holdings, Inc.	Medical Equipment/Manufacturer	Second Lien Loan 11.0000% Cash, 1.0000% PIK, 12/7/2024 (b ,k, n)		5,077,011		4,990,863		5,077,011
		Common Stock (2 shares) (d, n, s)				766,122		1,583,449
						5,756,985		6,660,460
Highpoint Global LLC	Government Services	Second Lien Note 12.0000% Cash, 2.0000% PIK, 09/30/2022 (b, k, n)		5,227,816		5,173,956		5,227,816
HTI Technologies and Industries, Inc.	Electronic Component Manufacturing	Second Lien Note 12.0000% Cash, 3.7500% PIK, 9/15/2024 (b, k, n)		11,529,285		11,511,074		11,529,285
Initials, Inc.	Consumer Products	Senior Subordinated Debt 8.0000% Cash, 7.0000% PIK, 06/23/2020 (b, h, k, n)		5,642,913		5,642,913		1,169,283
International Precision Components Corporation	Plastic Injection Molding	Second Lien Loan 12.0000% Cash, 2.0000% PIK, 10/3/2024 (b, k, n, t)		8,000,000		7,861,653		8,000,000
Jedson Engineering, Inc.	Engineering and Construction Management	First Lien Loan 12.0000% Cash, 3.0000% PIK, 06/21/2024 (b, k, n)		7,650,048		7,485,396		7,650,048
Legal Solutions Holdings, Inc.	Business Services	Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK, 03/31/2022 (b, k, n)		9,914,412		9,914,412		9,914,412
Powers Equipment Acquisition Company, LLC	Equipment Manufacturer	First Lien Note 13.5000% Cash, 04/30/2024 (k, n, u)		6,500,000		6,389,650		6,500,000
SMA Holdings, Inc.	Consulting	First Lien Loan 11.0000% Cash, 06/26/2024 (k, n)		7,000,000		6,457,686		6,556,201
		Warrants (d, n)		2		504,555		504,555
						6,962,241		7,060,756
Trientis GmbH	Environmental Services	First Lien Note 5.0000% PIK, 10/26/2024 (b, e, h, m, n, q)		1,248,632		1,248,632		248,422
		Warrants (d, e, n, q)		1		67,715		-
						1,316,347		248,422
Tuf-Tug Inc.	Safety Equipment Manufacturer	Second Lien Loan 11.0000% Cash, 2.0000% PIK, 02/24/2024 (b, k, n)		5,010,808		4,974,788		5,060,916
		Common Stock (24.6 shares) (d, n, r)				750,000		715,601
						5,724,788		5,776,517

Company	Industry	Investment	Principal		Cost		Fair Value/Market Value
Non-control/Non-affiliated investments- 79.35% (a, c, f, g)
Turf Products, LLC	Distributor - Landscaping and Irrigation Equipment	Senior Subordinated Debt 10.0000% Cash, 08/07/2020 (k, n)		7,717,056		7,717,056		7,616,508
		Third Lien Loan 10.0000% Cash, 08/07/2020 (k, n)		980,000		980,000		969,019
						8,697,056		8,585,527
U.S. Gas & Electric, Inc.	Energy Services	Second Lien Loan, 9.5000% Cash, 07/05/2025 (l, n)		3,185,428		3,185,428		3,185,428
		Second Lien Loan, 9.5000% Cash, 07/05/2025 (h, l, n)		1,585,291		1,585,291		-
						4,770,719		3,185,428
U.S. Spray Drying Holding Company	Specialty Chemicals	Class B Common Stock (784 shares) (d, n)				5,488,000		1,540,000
		Secured Loan 12.0000% Cash, 04/30/2021 (k, n)		1,500,000		1,500,000		1,500,000
		Senior Secured Loan 12.0000% Cash, 04/30/2021 (k, n)		1,500,000		1,500,000		1,500,000
						8,488,000		4,540,000
United States Technologies, Inc.	Electronics Manufacturing and Repair	Senior Lien Loan 10.5000% Cash, 07/17/2020 (k, n)		5,500,000		5,498,636		5,500,000

Sub Total Non-control/Non-affiliated investments					$	192,674,433	$	181,993,094


Affiliate investments - 24.65% (a, c, f, g)
Advantage Insurance, Inc.	Insurance	Preferred Stock (587,001 shares) (d, e, n)				5,870,010		5,752,024
Equus Total Return, Inc.	Registered Investment Company	Common Stock (3,228,024 shares) (d, k)				7,524,035		5,745,883
JSC Tekers Holdings	Real Estate Management	Common Stock (3,201 shares) (d, e, n)				4,500		-
		Preferred Stock (9,159,085 shares) (d, e, n)				11,810,188		5,260,000
						11,814,688		5,260,000
Security Holdings B.V.	Electrical Engineering	Common Equity Interest (d, e, n)				51,204,270		26,425,000
		Bridge Loan 5.0000% PIK, 05/31/2022 (b, e, k, n)		5,187,508		5,187,508		5,187,508
		Senior Subordinated Loan 3.1000% PIK, 05/31/2022 (b, e, k, n)		8,163,811		8,163,811		8,163,811
						64,555,589		39,776,319

Sub Total Affiliate investments					$	89,764,322	$	56,534,226

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

MVC Capital, Inc.

Consolidated Schedule of Investments - (Continued)

January 31, 2020

(Unaudited)

Company	Industry	Investment	Principal		Cost		Fair Value/Market Value
Control investments - 20.57% (c, f, g)
MVC Automotive Group GmbH	Automotive Dealerships	Common Equity Interest (a, d, e, n)			$	52,185,015	$	21,088,000
		Bridge Loan 6.0000% Cash, 12/31/2020 (a, e, k, n)	$	7,149,166		7,149,166		7,149,166
						59,334,181		28,237,166
MVC Private Equity Fund LP	Private Equity	Limited Partnership Interest (a, d, j, k, n)				7,179,036		11,260,808
		General Partnership Interest (a, d, j, k, n)				183,138		287,265
						7,362,174		11,548,073
RuMe Inc.	Consumer Products	Common Stock (5,297,548 shares) (a, d, n)				924,475		-
		Series C Preferred Stock (23,896,634 shares) (a, d, n)				3,410,694		587,213
		Series B-1 Preferred Stock (4,999,076 shares) (a, d, n)				999,815		-
		Subordinated Debt 10.0000% PIK, 3/31/2020 (a, b, k, n)		3,701,448		3,701,448		3,701,448
		Revolver 10.0000% PIK, 3/31/2021 (a, b, k, n)		2,177,656		2,177,656		2,177,656
		Revolver 10.0000% PIK, 2/28/2020 (a, b, k, n)		413,677		373,961		373,961
		Warrants (a, d, n)		3		594,544		550,894
						12,182,593		7,391,172

Sub Total Control investments					$	78,878,948	$	47,176,411


TOTAL PORTFOLIO INVESTMENTS - 124.57% (f)					$	361,317,703	$	285,703,731

U.S. Treasury Obligations - 10.93% (f, g)
U.S. Treasury Bill	U.S. Government Securities	1.375% Cash, 01/31/25	$	24,985,000	$	24,998,656	$	25,058,198
Sub Total Short-Term Investments						24,998,656		25,058,198

Cash equivalents - 21.80% (f, g)
Fidelity Institutional Government Money Market Fund	Money Market Fund	Beneficial Shares (49,894,474 shares)			$	49,894,474	$	49,894,474
Morgan Stanley Institutional Liquidity Government Portfolio	Money Market Fund	Beneficial Shares (99,564 shares)				99,564		99,564
Total Cash equivalents						49,994,038		49,994,038

TOTAL INVESTMENT ASSETS - 157.30%					$	436,310,397	$	360,755,967

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

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

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

(d) Non-income producing assets.

(e) The principal operations of these portfolio companies are located in Europe and Puerto Rico which represents approximately 21% of the total assets. The remaining portfolio companies are located in United States which represents approximately 55% of the total assets.

(f) Percentages are based on net assets of $229,361,792 as of January 31, 2020.

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

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

(i) Legacy Investments.

(j) MVC Private Equity Fund, LP is a private equity fund focused on control equity investments in the lower middle market. The fund currently holds two investments, one located in the United States and one in Gibraltar, the investments are in the energy services and industrial sectors. The Company owns 18.9% of the fund through its limited partnership interest and owns .5% of the fund through its general partnership interest. The Company's proportional share of Gibdock Limited equity interest and loan, Advanced Oil Field Services, LLC common stock, preferred stock, and loan is $7,308,601 and $3,145,773, respectively. The Company's partnership interests in the MVC Private Equity Fund, LP are not redeemable.

(k) All or a portion of these securities may serve as collateral for the People's United credit facility.

(l) U.S. Gas & Electric, Inc. is an indirect subsidiary of Vistra Energy (NYSE: VST). On October 18, 2019, Vistra Energy notified the Company that it was asserting an offset of Company's loan assets of approximately $1.6 million relating to an indemnification claim obligation attributable to U.S. Gas. The offset is reflected in the fair value of the loan asset as the Company is considering its response to the claim.

(m) Cash/PIK toggle at borrower's option

(n) These securities are valued using unobservable inputs.

(o) Variable rate between 10.5000% and 11.5000% cash.

(p) 12% Cash and 0-4% PIK based on Funded Debt to EBITDA. 4% PIK initially.

(q) During the fiscal year ended October 31, 2018, all assets and liabilities of SGDA Europe were transferred to a new Austrian holding company, Trientis GmbH, to achieve operating efficiencies.

(r) Shares of Tuf-Tug, Inc. are held via Alitus T-T, LP.

(s) Shares of GTM Intermediate Holdings, Inc. are held via GTM Ultimate Holdings, LLC.

(t) Variable PIK rate between 2.0000% and 3.5000%.

(u) Variable cash rate between 10.5000% and 13.5000%.

PIK - Payment-in-kind

- Denotes zero cost or fair value.

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

MVC Capital, Inc.

Consolidated Schedule of Investments

October 31, 2019

Company	Industry	Investment	Principal		Cost		Fair Value/Market Value
Non-control/Non-affiliated investments- 100.60% (a, c, f, g)
Apex Industrial Technologies, LLC	Supply Chain Equipment Manufacturer	First Lien Loan 12.0000% Cash, 12/31/2019 (k, n)	$	15,000,000	$	14,899,274	$	15,000,000
Array Information Technology, Inc.	Information Technology Products and Services	Second Lien Loan 12.0000% Cash, 4.0000% PIK, 10/03/2023 (b, k, n, p)		6,259,648		6,175,991		6,322,216
		Warrants (d, n)		1		-		-
						6,175,991		6,322,216
Black Diamond Equipment Rentals, LLC	Equipment Rental	Second Lien Loan 12.5000% Cash, 06/27/2022 (k, n)		7,500,000		7,174,926		7,575,000
		Warrants (d, n)		1		400,847		960,000
						7,575,773		8,535,000
Custom Alloy Corporation	Manufacturer of Pipe Fittings and Forgings	Second Lien Loan 12.0000% Cash, 3.0000% PIK, 04/30/2022 (b, k, n)		32,471,814		32,471,814		32,061,135
		Second Lien Loan 12.0000% Cash, 3.0000% PIK, 04/30/2022 (b, k, n)		6,128,186		6,128,186		6,050,681
		Revolver 12.0000% Cash, 3.0000% PIK, 04/30/2020 (b, k, n)		2,050,000		2,050,000		2,050,000
						40,650,000		40,161,816
Dukane IAS,LLC	Welding Equipment Manufacturer	Second Lien Note 10.5000% Cash, 2.5000% PIK, 11/17/2020 (b, k, n)		4,489,182		4,458,353		4,534,074
Essner Manufacturing, LP	Defense/Aerospace Parts Manufacturing	First Lien Loan 11.5000% Cash, 12/20/2022 (k, n, o)		3,588,606		3,543,739		3,588,606
FOLIOfn, Inc.	Technology Investment - Financial Services	Preferred Stock (5,802,259 shares) (d, i, n)				15,000,000		6,352,000
Global Prairie PBC, Inc.	Marketing	Second Lien Loan 10.0000% Cash, 4.0000% PIK, 04/16/2025 (b, k, n)		3,000,000		2,940,448		3,000,000
GTM Intermediate Holdings, Inc.	Medical Equipment/Manufacturer	Second Lien Loan 11.0000% Cash, 1.0000% PIK, 12/7/2024 (b ,k, n)		5,064,069		4,973,443		5,064,069
		Common Stock (2 shares) (d, n, t)				766,122		766,122
						5,739,565		5,830,191
Highpoint Global LLC	Government Services	Second Lien Note 12.0000% Cash, 2.0000% PIK, 09/30/2022 (b, k, n)		5,201,232		5,142,323		5,201,232
HTI Technologies and Industries, Inc.	Electronic Component Manufacturing	Second Lien Note 12.0000% Cash, 3.7500% PIK, 9/15/2024 (b, k, n)		11,419,845		11,400,660		11,419,845
Initials, Inc.	Consumer Products	Senior Subordinated Debt 8.0000% Cash, 7.0000% PIK, 06/23/2020 (b, h, k, n)		5,642,913		5,642,913		1,272,188
International Precision Components Corporation	Plastic Injection Molding	Second Lien Loan 12.0000% Cash, 3.5000% PIK, 10/3/2024 (b, k, n, u)		8,000,000		7,854,192		8,000,000
Jedson Engineering, Inc.	Engineering and Construction Management	First Lien Loan 12.0000% Cash, 3.0000% PIK, 06/21/2024 (b, k, n)		6,041,262		5,928,722		6,041,262
Legal Solutions Holdings, Inc.	Business Services	Senior Subordinated Debt 12.0000% Cash, 3.0000% PIK, 03/18/2020 (b, k, n)		12,182,950		12,182,950		12,182,950
Morey's Seafood International, LLC	Food Services	Second Lien Loan 10.0000% Cash, 3.0000% PIK, 08/12/2022 (b, k, n, q)		16,485,324		16,485,324		16,485,324
Powers Equipment Acquisition Company, LLC	Equipment Manufacturer	First Lien Note 13.5000% Cash, 04/30/2024 (k, n, v)		6,500,000		6,383,100		6,500,000
SMA Holdings, Inc.	Consulting	First Lien Loan 11.0000% Cash, 06/26/2024 (k, n)		7,000,000		6,426,640		6,530,794
		Warrants (d, n)		2		504,555		504,555
						6,931,195		7,035,349
Trientis GmbH	Environmental Services	First Lien Note 5.0000% PIK, 10/26/2024 (b, e, h, m, n, r)		1,248,632		1,248,632		176,906
		Warrants (d, e, r, n)		1		67,715		-
						1,316,347		176,906
Tuf-Tug Inc.	Safety Equipment Manufacturer	Second Lien Loan 11.0000% Cash, 2.0000% PIK, 02/24/2024 (b, k, n)		4,985,284		4,947,047		5,035,136
		Common Stock (24.6 shares) (d, n, s)				750,000		778,210
						5,697,047		5,813,346
Turf Products, LLC	Distributor - Landscaping and Irrigation Equipment	Senior Subordinated Debt 10.0000% Cash, 08/07/2020 (k, n)		7,717,056		7,717,056		7,563,104
		Third Lien Loan 10.0000% Cash, 08/07/2020 (k, n)		1,050,000		1,050,000		1,032,473
						8,767,056		8,595,577
U.S. Gas & Electric, Inc.	Energy Services	Second Lien Loan, 9.5000% Cash, 07/05/2025 (l, n)		37,527,881		37,527,881		36,974,616
U.S. Spray Drying Holding Company	Specialty Chemicals	Class B Common Stock (784 shares) (d, n)				5,488,000		1,800,000
		Secured Loan 12.0000% Cash, 04/30/2021 (k, n)		1,500,000		1,500,000		1,500,000
		Senior Secured Loan 12.0000% Cash, 04/30/2021 (k, n)		1,500,000		1,500,000		1,500,000
						8,488,000		4,800,000
United States Technologies, Inc.	Electronics Manufacturing and Repair	Senior Lien Loan 10.5000% Cash, 07/17/2020 (k, n)		5,500,000		5,497,954		5,500,000

Sub Total Non-control/Non-affiliated investments					$	246,228,807	$	229,322,498


Affiliate investments - 27.13% (a, c, f, g)
Advantage Insurance, Inc.	Insurance	Preferred Stock (750,000 shares) (d, e, n)				7,500,000		7,513,627
Equus Total Return, Inc.	Registered Investment Company	Common Stock (3,228,024 shares) (d, k)				7,524,035		4,874,316
JSC Tekers Holdings	Real Estate Management	Common Stock (3,201 shares) (d, e, n)				4,500		-
		Preferred Stock (9,159,085 shares) (d, e, n)				11,810,188		4,910,000
						11,814,688		4,910,000
Security Holdings B.V.	Electrical Engineering	Common Equity Interest (d, e, n)				51,204,270		33,607,000
		Bridge Loan 5.0000% PIK, 12/31/2019 (b, e, k, n)		4,937,218		4,937,218		4,937,218
		Senior Subordinated Loan 3.1000% PIK, 05/31/2020 (b, e, k, n)		6,009,735		6,009,735		6,009,735
						62,151,223		44,553,953

Sub Total Affiliate investments					$	88,989,946	$	61,851,896

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

MVC Capital, Inc.

Consolidated Schedule of Investments - (Continued)

October 31, 2019

Company	Industry	Investment	Principal		Cost		Fair Value/Market Value
Control investments - 21.53% (c, f, g)
MVC Automotive Group GmbH	Automotive Dealerships	Common Equity Interest (a, d, e, n)			$	52,185,015	$	20,602,000
		Bridge Loan 6.0000% Cash, 12/31/2020 (a, e, k, n)	$	7,149,166		7,149,166		7,149,166
						59,334,181		27,751,166
MVC Private Equity Fund LP	Private Equity	Limited Partnership Interest (a, d, j, k, n)				9,034,881		12,252,382
		General Partnership Interest (a, d, j, k, n)				230,481		312,561
						9,265,362		12,564,943
RuMe Inc.	Consumer Products	Common Stock (5,297,548 shares) (a, d, n)				924,475		-
		Series C Preferred Stock (23,896,634 shares) (a, d, n)				3,410,694		1,462,857
		Series B-1 Preferred Stock (4,999,076 shares) (a, d, n)				999,815		-
		Subordinated Debt 10.0000% PIK, 3/31/2020 (a, b, k, n)		3,610,446		3,610,446		3,610,446
		Revolver 10.0000% PIK, 3/31/2021 (a, b, k, n)		2,075,613		2,075,613		2,075,613
		Revolver 10.0000% PIK, 2/28/2020 (a, b, k, n)		403,507		233,297		233,297
		Warrants (a, d, n)		3		594,544		1,372,379
						11,848,884		8,754,592

Sub Total Control investments					$	80,448,427	$	49,070,701


TOTAL PORTFOLIO INVESTMENTS - 149.26% (f)					$	415,667,180	$	340,245,095

Cash equivalents and restricted cash equivalents - 4.55% (f, g)
Fidelity Institutional Government Money Market Fund	Money Market Fund	Beneficial Shares (10,278,123 shares)			$	10,278,123	$	10,278,123
Morgan Stanley Institutional Liquidity Government Portfolio	Money Market Fund	Beneficial Shares (99,158 shares)				99,158		99,158
Total Cash equivalents						10,377,281		10,377,281

TOTAL INVESTMENT ASSETS - 153.81%					$	426,044,461	$	350,622,376

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

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

(d) Non-income producing assets.

(e) The principal operations of these portfolio companies are located in Europe and Puerto Rico which represents approximately 23% of the total assets. The remaining portfolio companies are located in United States which represents approximately 71% of the total assets.

(f) Percentages are based on net assets of $227,958,684 as of October 31, 2019.

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

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

(i) Legacy Investments.

(j) MVC Private Equity Fund, LP is a private equity fund focused on control equity investments in the lower middle market. The fund currently holds two investments, one located in the United States and one in Gibraltar, the investments are in the energy services and industrial sectors. The Company owns 18.9% of the fund through its limited partnership interest and owns .5% of the fund through its general partnership interest. The Company's proportional share of Gibdock Limited equity interest and loan, Advanced Oil Field Services, LLC common stock, preferred stock, and loan is $5,230,958 and $3,433,612, respectively. The Company's partnership interests in the MVC Private Equity Fund, LP are not redeemable.

(k) All or a portion of these securities may serve as collateral for the People's United credit facility.

(l) U.S. Gas & Electric, Inc. is an indirect subsidiary of Vistra Energy (NYSE: VST)

(m) Cash/PIK toggle at borrower's option

(n) These securities are valued using unobservable inputs.

(o) Variable rate between 10.5000% and 11.5000% cash.

(p) 12% Cash and 0-4% PIK based on Funded Debt to EBITDA. 4% PIK initially.

(q) 10% Cash and 3% PIK beginning July 1, 2019.

(r) During the fiscal year ended October 31, 2018, all assets and liabilities of SGDA Europe were transferred to a new Austrian holding company, Trientis GmbH, to achieve operating efficiencies.

(s) Shares of Tuf-Tug, Inc. are held via Alitus T-T, LP.

(t) Shares of GTM Intermediate Holdings, Inc. are held via GTM Ultimate Holdings, LLC.

(u) Variable PIK rate between 2.0000% and 3.5000%.

(v) Variable cash rate between 10.5000% and 13.5000%.

PIK - Payment-in-kind

- Denotes zero cost or fair value.

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

MVC Capital, Inc. (the “Company”)

Notes to Consolidated Financial Statements

January 31, 2020

(Unaudited)

1. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete consolidated financial statements. Certain amounts, when applicable, have been reclassified to adjust to current period presentations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included as required by Regulation S-X, Rule 10-01. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2019, filed with the U.S. Securities and Exchange Commission (the “SEC”). As the Company is an investment company, (as defined by the Investment Company Act of 1940 (the “1940 Act”)), management follows investment company accounting and reporting guidance of Financial Accounting Standards Board (“FASB”) 946-Investment Companies, which is accounting principles generally accepted in the United States of America (“GAAP”).

2. Consolidation

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

On October 14, 2011, the Company formed a wholly-owned subsidiary, MVC Cayman, an exempted company incorporated in the Cayman Islands, to hold certain of its investments and to make certain future investments. The results of MVCFS and MVC Cayman are consolidated into the Company’s financial statements and all inter-company accounts have been eliminated in consolidation. Of the $55.3 million in cash and cash equivalents on the Company’s Consolidated Balance Sheets as of January 31, 2020, approximately $1.1 million was held by MVC Cayman.

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

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

3. Investment Classification

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

Investment Transactions and Related Operating Income – Investment transactions and related revenues and expenses are accounted for on the trade date. The cost of securities sold is determined on a first-in, first-out basis, unless otherwise specified. Dividend income and distributions on investment securities is recorded on the ex-dividend date. The tax characteristics of such distributions received from our Portfolio Companies will be determined by whether or not the distribution was made from the investment's current taxable earnings and profits or accumulated taxable earnings and profits from prior years. Interest income, which includes accretion of discount and amortization of premium, if applicable, is recorded on the accrual basis to the extent that such amounts are expected to be collected. Fee income includes fees for guarantees and services rendered by the Company or its wholly-owned subsidiary to Portfolio Companies and other third parties such as due diligence, structuring, transaction services, monitoring services, and investment advisory services. Guaranty fees are recognized as income over the related period of the guaranty. Due diligence, structuring, and transaction services fees are generally recognized as income when services are rendered or when the related transactions are completed. Monitoring and investment advisory services fees are generally recognized as income as the services are rendered. Any fee income determined to be loan origination fees is accreted into income over the respective terms of the applicable loans and any original issue discount and market discount are capitalized and then amortized into income using the effective interest method. Upon the prepayment of a loan or debt security, any unamortized original issue discount or market discount is recorded as interest income. For investments with PIK interest and dividends, we base income and dividend accrual on the valuation of the PIK notes or securities received from the borrower. If the value of the PIK notes or securities of a portfolio company is not sufficient to cover the contractual interest or dividend, the Company does not accrue interest or dividend income on the notes or securities.

The functional currency of the Company is the U.S. Dollar. Assets and liabilities denominated in a currency other than the U.S. Dollar are translated into U.S. Dollars at the closing rates of exchange on the date of determination. Purchases and sales of investments and income and expenses denominated in currencies other than U.S. Dollars are translated at the rates of exchange on the respective dates of the transactions. The resulting gains and losses from such currency translation are included in the Consolidated Statement of Operations. The Company does not isolate the portion of the results of operations resulting from the changes in foreign exchange rates on investments from the fluctuation arising from changes in fair values of securities held. Such fluctuations are included with the Net Realized and Unrealized Gain (Loss) on Investments and foreign currency in the Consolidated Statement of Operations.

4. Cash and Cash Equivalents

For the purpose of the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, the Company considers all money market and all highly liquid temporary cash investments purchased with an original maturity of less than three months to be cash equivalents. The Company places its cash and cash equivalents with financial institutions and cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insured limit. As of January 31, 2020, the Company had approximately $45.0 million in cash equivalents, approximately $5.0 million in restricted cash equivalents and approximately $5.3 million in cash totaling approximately $55.3 million. Of the approximately $5.3 million in cash and the approximately $45.0 million in cash equivalents, approximately $1.0 million and $100,000, respectively, was held by MVC Cayman. As of October 31, 2019, the Company had approximately $5.4 million in cash equivalents, approximately $5.0 million in restricted cash equivalents and approximately $1.3 million in cash totaling approximately $11.7 million. Of the approximately $1.3 million in cash and the approximately $5.4 million in cash equivalents, approximately $1.0 million and $99,000, respectively, was held by MVC Cayman.

Restricted Cash and Cash Equivalents

Cash and cash equivalent accounts that are not available to the Company for day–to-day use and are legally restricted are classified as restricted cash and cash equivalents. Restricted cash and cash equivalents are carried at cost, which approximates fair value. As of January 31, 2020 and October 31, 2019, the Company had restricted cash or cash equivalents of approximately $5.0 million related to the compensating balance requirement for Credit Facility IV (defined below).

5. Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (Topic 606). ASU 2014-09 addresses the reporting of revenue by most entities and will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU 2015-14 that defers the effective date of ASU 2014-09 for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods therein. Early application is not permitted for public business entities. On December 27, 2016, the FASB issued ASU 2016-20 to make various amendments to Topic 606, going into effect for years beginning after December 15, 2017. The standard impacted the fair value of the PE Fund’s LP interest due to the exclusion of the Company’s portion of the carried interest associated with the PE Fund. This update has had no material impact on our financial statements.

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

In June 2016, FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In addition, ASU 2016-13 requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The new standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company does not expect the adoption of ASU 2016-13 to have a material impact on our financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments (Topic 230). The amendments provide guidance on eight specific cash flow issues in how certain cash receipts and cash payments are presented and classified in the statement of cash flows with the objective of reducing the existing diversity in practice. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. This update has had no material impact on our financial statements.

In October 2016, the FASB issued ASU 2016-17, to amend the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The ASU is effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This update has had no impact on our financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The ASU is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This update has had no material impact on our financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements. The amendments require new disclosures of changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value of instruments held at balance sheet date and the range and weighted average of significant unobservable inputs for recurring and nonrecurring Level 3 fair values. Certain disclosures are being eliminated such as the valuation process required for Level 3 fair value measurements, the policy for timing of transfers between levels and amounts of and reason for transfers between Levels 1 and 2. The ASU is effective for public business entities for fiscal years and interim periods beginning after December 15, 2019. The Company does not expect the adoption of ASU 2018-13 to have a material impact on our financial statements.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to related Party Guidance for Variable Interest Entities. The guidance supersedes the private company alternative for common control leasing arrangements issued in 2014 and expands it to all qualifying common control arrangements. Also under the guidance, a private company could make an accounting policy election to not apply VIE guidance to legal entities under common control (including common control leasing arrangements) when certain criteria are met. Additionally, a private company electing the alternative is required to provide detailed disclosures about its involvement with, and exposure to, the legal entity under common control. The ASU also amends the guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). The ASU is effective for public business entities for fiscal years and interim periods beginning after December 15, 2019. The Company does not expect the adoption of ASU 2018-17 to have a material impact on our financial statements.

6. Investment Valuation Policy

Our investments are carried at fair value in accordance with the Accounting Standards Codification, Fair Value Measurement (“ASC 820”). In accordance with the 1940 Act, unrestricted minority-owned publicly traded securities for which market quotations are readily available are valued at the closing market quote on the valuation date and majority-owned publicly traded securities and other privately held securities are valued as determined in good faith by the Valuation Committee of our Board of Directors. For legally or contractually restricted securities of companies that are publicly traded, the value is based on the closing market quote on the valuation date minus a discount for the restriction. At January 31, 2020, we did not own restricted or unrestricted securities of any publicly traded company in which we have a majority-owned interest, but did own one security in which we have minority-owned interests.

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

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

Valuation Methodology

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

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

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

At January 31, 2020 and October 31, 2019, approximately 75.2% and 92.6%, respectively, of total assets represented investments in portfolio companies recorded at fair value ("Fair Value Investments").

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

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

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

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

For equity securities of portfolio companies, whose securities are not publicly traded, the Valuation Committee estimates the fair value based on market and/or income approach with value then attributed to equity or equity like securities using the enterprise value waterfall ("Enterprise Value Waterfall") valuation methodology. Under the Enterprise Value Waterfall valuation methodology, the Valuation Committee estimates the enterprise fair value of the portfolio company and then waterfalls the enterprise value over the portfolio company's securities in order of their preference relative to one another. To assess the enterprise value of the portfolio company, the Valuation Committee weighs some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise value. The methodologies for performing assets may be based on, among other things: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, third party valuations of the portfolio company, considering offers from third parties to buy the company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company, and third-party asset and real estate appraisals. For non-performing assets, the Valuation Committee may estimate the liquidation or collateral value of the portfolio company's assets. The Valuation Committee also takes into account historical and anticipated financial results.

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

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

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

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

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

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

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

As permitted under GAAP, the Company’s interests in private investment funds are generally valued, as a practical expedient, utilizing the net asset valuations provided by management of the underlying Investment Vehicles, without adjustment, unless TTG Advisers is aware of information indicating that a value reported does not accurately reflect the value of the Investment Vehicle, including any information showing that the valuation has not been calculated in a manner consistent with GAAP. Net unrealized appreciation (depreciation) of such investments is recorded based on the Company’s proportionate share of the aggregate amount of appreciation (depreciation) recorded by each underlying Investment Vehicle. The Company’s proportionate investment interest includes its share of interest and dividend income and expense, and realized and unrealized gains and losses on securities held by the underlying Investment Vehicles, net of operating expenses and fees. Realized gains and losses on distributions from Investment Vehicles are generally recognized on a first in, first out basis.

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

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

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

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

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

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

ASC 460, Guarantees, requires the Company to estimate the fair value of the guarantee obligation at its inception and requires the Company to assess whether a probable loss contingency exists in accordance with the requirements of ASC 450, Contingencies. The Valuation Committee typically will look at the pricing of the security in which the guarantee provided support for the security and compare it to the price of a similar or hypothetical security without guarantee support. The difference in pricing will be discounted for time and risk over the period in which the guarantee is expected to remain outstanding.

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

7. Concentration of Market Risk

Financial instruments that subjected the Company to concentrations of market risk consisted principally of equity investments, subordinated notes, debt instruments and escrow receivables (other than cash equivalents), which collectively represented approximately 76.7% and 94.3% of the Company's total assets at January 31, 2020 and October 31, 2019, respectively. As discussed in Note 8, these investments consist of securities in companies with no readily determinable market values and as such are valued in accordance with the Company's fair value policies and procedures. The Company's investment strategy represents a high degree of business and financial risk due to the fact that the Company’s portfolio investments (other than cash equivalents) are generally illiquid, in small and middle market companies, and include foreign investments (which subject the Company to additional risks such as currency, geographic, demographic and operational risks), entities with little operating history or entities that possess operations in new or developing industries. These investments, should they become publicly traded, would generally be (i) subject to restrictions on resale, if they were acquired from the issuer in private placement transactions; and (ii) susceptible to market risk. Additionally, we are classified as a non-diversified investment company within the meaning of the 1940 Act, and therefore may invest a significant portion of our assets in a relatively small number of portfolio companies, which gives rise to a risk of significant loss should the performance or financial condition of one or more portfolio companies deteriorate. As of January 31, 2020, the fair value of our largest investment, Custom Alloy Corporation (“Custom Alloy”), comprised 11.1% of our total assets and 18.1% of our net assets. The Company's investments in short-term securities are generally in U.S. government securities, with a maturity of greater than three months but generally less than one year or other high quality and highly liquid investments. The Company considers all money market and other cash investments purchased with an original maturity of less than three months to be cash equivalents.

The following table shows the portfolio composition by industry grouping at fair value as a percentage of net assets as of January 31, 2020 and October 31, 2019.

	January 31, 2020			October 31, 2019
Manufacturer of Pipe Fittings		18.10	%		17.62	%
Electrical Engineering		17.34	%		19.55	%
Automotive Dealerships		12.31	%		12.17	%
Supply Chain Equipment Manufacturer		8.96	%		6.58	%
Technology Investment - Financial Services		5.24	%		2.79	%
Private Equity		5.04	%		5.51	%
Electronics Component Manufacturing		5.03	%		5.01	%
Business Services		4.32	%		5.34	%
Equipment Rental		3.84	%		3.74	%
Distributor - Landscaping and Irrigation Equipment		3.74	%		3.77	%
Consumer Products		3.73	%		4.40	%
Plastic Injection Molding		3.49	%		3.51	%
Engineering and Construction Management		3.34	%		2.65	%
Consulting		3.08	%		3.09	%
Medical Equipment Manufacturer		2.90	%		2.56	%
Equipment Manufacturer		2.83	%		2.85	%
Safety Equipment Manufacturer		2.52	%		2.55	%
Insurance		2.51	%		3.30	%
Regulated Investment Company		2.51	%		2.14	%
Electronics Manufacturing and Repair		2.40	%		2.41	%
Real Estate Management		2.29	%		2.15	%
Government Services		2.28	%		2.28	%
Specialty Chemicals		1.98	%		2.11	%
Welding Equipment Manufacturer		1.97	%		1.99	%
Energy Services		1.39	%		16.22	%
Marketing		1.32	%		1.32	%
Environmental Services		0.11	%		0.08	%
Food Services		0.00	%		7.23	%
Information Technology Products and Services		0.00	%		2.77	%
Defense/Aerospace Parts Manufacturing		0.00	%		1.57	%
		124.57	%		149.26	%

The following table shows the portfolio composition by geographic region at fair value as a percentage of total assets as of January 31, 2020 and October 31, 2019.

	January 31, 2020			October 31, 2019
Northeast		21.00	%		21.57	%
Europe		19.74	%		21.37	%
Midwest		14.70	%		17.69	%
Southeast		11.65	%		21.18	%
West		6.54	%		7.72	%
Southwest		1.54	%		2.34	%
Puerto Rico		1.54	%		2.07	%
		76.71	%		93.94	%

8. Portfolio Investments

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

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

•

Level 1: Level 1 inputs are unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We use Level 1 inputs for investments in publicly traded unrestricted securities for which we do not have a controlling interest. Such investments are valued at the closing price on the measurement date. We valued one of our investments using Level 1 inputs as of January 31, 2020.

•

Level 2: Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly or other inputs that are observable or can be corroborated by observable market data.

•

Level 3: Level 3 inputs are unobservable and cannot be corroborated by observable market data. We use Level 3 inputs for measuring the fair value of the vast majority of our investments. See Note 6 “Investment Valuation Policy” for the investment valuation policies used to determine the fair value of these investments.

In determining the appropriate level, the Company considers the length of time until the investment is redeemable, including notice and lock-up periods and any other restriction on the disposition of the investment. The Company also considers the nature of the portfolios of the underlying Investment Vehicles and such vehicles’ ability to liquidate their investment.

The following fair value hierarchy tables set forth our investment related assets and (liabilities) by level as of January 31, 2020 and October 31, 2019 (in thousands):

	January 31, 2020
	Level 1		Level 2		Level 3			Investment measured at NAV		Total
Senior/Subordinated Loans and credit facilities	$	-	$	-	$	189,275		$	-	$	189,275
Common Stock		5,746		-		3,839			-		9,585
Preferred Stock		-		-		23,618			-		23,618
Warrants		-		-		4,164			-		4,164
Common Equity Interest		-		-		47,513			-		47,513
LP Interest of the PE Fund		-		-		-			11,262		11,262
GP Interest of the PE Fund		-		-		-			287		287
Guarantees and letters of credit		-		-		(593	)		-		(593	)
Escrow Receivable		-		-		-			-		-
Short-term investments		-		25,058		-			-		25,058
Total	$	5,746	$	25,058	$	267,816		$	11,549	$	310,169

	October 31, 2019
	Level 1		Level 2		Level 3			Investment measured at NAV		Total
Senior/Subordinated Loans and credit facilities	$	-	$	-	$	242,177		$	-	$	242,177
Common Stock		4,874		-		3,344			-		8,218
Preferred Stock		-		-		20,238			-		20,238
Warrants		-		-		2,837			-		2,837
Common Equity Interest		-		-		54,209			-		54,209
LP Interest of the PE Fund		-		-		-			12,253		12,253
GP Interest of the PE Fund		-		-		-			313		313
Guarantees and letters of credit		-		-		(727	)		-		(727	)
Escrow Receivable		-		-		1,135			-		1,135
Short-term investments		-		-		-			-		-
Total	$	4,874	$	-	$	323,213		$	12,566	$	340,653

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the period in which the reclassifications occur. During the quarter ended January 31, 2020 and the year ended October 31, 2019, there were no transfers in or out of Level 1 or 2.

The following tables set forth a summary of changes in the fair value of investment related assets and liabilities measured using Level 3 inputs for the quarter ended January 31, 2020, and January 31, 2019 (in thousands):

	Balances, November 1, 2019			Realized Gains (Losses) (1)			Reversal of Prior Year (Appreciation) Depreciation on Realization (2)			Unrealized Appreciation (Depreciation) (3)			Purchases (4)		Sales (5)			Transfers In & Out of Level 3		Balances, January 31, 2020			Total Loss for the year Included in Earnings Attibutable to the Change in Unrealized Appreciation (Depreciation) on Investments held as of January 31, 2020
Senior/Subordinated Loans and credit facilities	$	242,177		$	-		$	(190	)	$	68		$	8,795	$	(61,575	)	$	-	$	189,275		$	68
Common Stock		3,344			-			-			495			-		-			-		3,839			495
Preferred Stock		20,238			(33	)		(3	)		5,013			-		(1,597	)		-		23,618			5,013
Warrants		2,837			28			-			(544	)		1,871		(28	)		-		4,164			(544	)
Common Equity Interest		54,209			-			-			(6,696	)		-		-			-		47,513			(6,696	)
Guarantees and letters of credit		(727	)		-			-			134			-		-			-		(593	)		134
Escrow Receivable		1,135			(10	)		-			-			-		(1,125	)		-		-			-
Total	$	323,213		$	(15	)	$	(193	)	$	(1,530	)	$	10,666	$	(64,325	)	$	-	$	267,816		$	(1,530	)

	Balances, November 1, 2018			Realized Gains (Losses) (1)		Reversal of Prior Year (Appreciation) Depreciation on Realization (2)		Unrealized Appreciation (Depreciation) (3)			Purchases (4)		Sales (5)			Transfers In & Out of Level 3		Balances, January 31, 2019			Total Loss for the year Included in Earnings Attibutable to the Change in Unrealized Appreciation (Depreciation) on Investments held as of January 31, 2019
Senior/Subordinated Loans and credit facilities	$	175,781		$	-	$	-	$	(1,870	)	$	4,527	$	(1,943	)	$	-	$	176,495		$	(1,870	)
Common Stock		6,150			-		-		-			346		-			-		6,496			-
Preferred Stock		47,060			-		-		1,812			-		-			-		48,872			1,812
Warrants		401			-		-		389			-		-			-		790			389
Common Equity Interest		50,186			-		-		(140	)		-		-			-		50,046			(140	)
Guarantees and letters of credit		(2,867	)		-		2,399		130			-		-			-		(338	)		130
Escrow Receivable		969			49		-		-			-		-			-		1,018			-
Total	$	277,680		$	49	$	2,399	$	321		$	4,873	$	(1,943	)	$	-	$	283,379		$	321

(1)

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

(2)

Included in net unrealized appreciation (depreciation) of investments in the Consolidated Statements of Operations related to securities disposed of during the quarter ended January 31, 2020 and January 31, 2019, respectively.

(3)

Included in net unrealized appreciation (depreciation) of investments in the Consolidated Statements of Operations related to securities held during the quarter ended January 31, 2020 and January 31, 2019, respectively.

(4)

Includes increases in the cost basis of investments resulting from new portfolio investments, PIK interest or dividends, the amortization of discounts, premiums and closing fees and the exchange of one or more existing securities for new securities. For the quarter ended January 31, 2020 and January 31, 2019, a total of approximately $1.8 million and $964,000, respectively, of PIK interest and dividends and amortization of discounts and fees are included.

(5)

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

In accordance with ASU 2011-04, the following tables summarize information about the Company’s Level 3 fair value measurements as of January 31, 2020 and October 31, 2019 (in thousands):

Quantitative Information about Level 3 Fair Value Measurements*

	Fair value as of					Range						Weighted
	1/31/2020			Valuation technique	Unobservable input	Low			High			average (a)
Common Stock (c) (d)	$	3,839		Adjusted Net Asset Approach	Real Estate Appraisals		N/A			N/A			N/A

				Market Approach	EBITDA Multiple		6.0	x		8.0	x		7.0	x

				Income Approach	Discount Rate		12.2	%		12.2	%		12.2	%
					Perpetual Growth Rate of Free Cash Flow		2.0	%		2.0	%		2.0	%

Senior/Subordinated loans	$	189,275		Market Approach	EBITDA Multiple		6.0	x		7.5	x		7.1	x
and credit facilities (b) (d)					Forward EBITDA Multiple		7.0	x		7.0	x		7.0	x
					Revenue Multiple		0.6	x		1.3	x		1.2	x

				Income Approach	Required Rate of Return		8.4	%		17.2	%		15.1	%
					Discount Rate		13.3	%		14.3	%		14.0	%
					Perpetual Growth Rate of Free Cash Flow		2.0	%		2.5	%		2.3	%

				Adjusted Net Asset Approach	Real Estate Appraisals		N/A			N/A			N/A
					Discount on Liquidation of Assets		17.5	%		25.0	%		23.7	%

Common Equity Interest	$	47,513		Market Approach	Forward EBITDA Multiple		7.0	x		7.0	x		7.0	x
					EBITDA Multiple		7.5	x		7.5	x		7.5	x

				Adjusted Net Asset Approach	Real Estate Appraisals		N/A			N/A			N/A

				Income Approach	Discount Rate		14.3	%		14.3	%		14.3	%
					Perpetual Growth Rate of Free Cash Flow		2.5	%		2.5	%		2.5	%

Preferred Stock (c)	$	23,618		Adjusted Net Asset Approach	Discount to Net Asset Value		0.0	%		10.0	%		4.8	%
					Real Estate Appraisals		N/A			N/A			N/A

				Market Approach	Revenue Multiple		1.3	x		1.3	x		1.3	x
					% of AUM		0.67	%		0.67	%		0.67	%
					Illiquidity Discount		10.0	%		10.0	%		10.0	%
					Multiple of Book Value		1.0	x		1.0	x		1.0	x
					EBT Multiple		27.0	x		27.0	x		27.0	x

				Income Approach	Discount Rate		12.1	%		13.3	%		12.2	%
					Perpetual Growth Rate of Free Cash Flow		2.0	%		2.5	%		2.5	%

Warrants	$	4,164		Market Approach	EBITDA Multiple		6.0	x		6.0	x		6.0	x

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

Guarantees / Letters of Credit	$	(593	)	Income Approach	Discount Rate		6.5	%		20.0	%		18.3	%

Escrows	$	-		Adjusted Net Asset Approach	Discount to Net Asset Value		0.0	%		0.0	%		0.0	%

Total	$	267,816

Notes:

(a) Calculated based on fair values.

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

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

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

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

Quantitative Information about Level 3 Fair Value Measurements*

	Fair value as of				Range						Weighted
	10/31/2019		Valuation technique	Unobservable input	Low			High			average(a)
Common Stock (c) (d)	$	3,344	Adjusted Net Asset Approach	Real Estate Appraisals		N/A			N/A			N/A

			Market Approach	EBITDA Multiple		6.0	x		7.5	x		6.6	x

			Income Approach	Discount Rate		12.7	%		12.7	%		12.7	%
				Perpetual Growth Rate of Free Cash Flow		2.0	%		2.0	%		2.0	%

Senior/Subordinated loans	$	242,177	Market Approach	EBITDA Multiple		6.0	x		8.0	x		7.5	x
and credit facilities (b) (d)				Forward EBITDA Multiple		8.5	x		8.5	x		8.5	x
				Revenue Multiple		0.5	x		1.4	x		1.2	x

			Income Approach	Required Rate of Return		8.6	%		17.4	%		14.1	%
				Discount Rate		14.1	%		15.6	%		15.1	%
				Perpetual Growth Rate of Free Cash Flow		2.0	%		2.5	%		2.3	%

			Adjusted Net Asset Approach	Real Estate Appraisals		N/A			N/A			N/A
				Discount on Liquidation of Assets		17.5	%		25.0	%		24.1	%

Common Equity Interest	$	54,209	Market Approach	Forward EBITDA Multiple		8.5	x		8.5	x		8.5	x
				EBITDA Multiple		7.0	x		7.0	x		7.0	x
			Adjusted Net Asset Approach	Real Estate Appraisals		N/A			N/A			N/A
			Income Approach	Discount Rate		15.6	%		15.6	%		15.6	%
				Perpetual Growth Rate of Free Cash Flow		2.5	%		2.5	%		2.5	%

Preferred Stock (c)	$	20,238	Adjusted Net Asset Approach	Discount to Net Asset Value		0.0	%		10.0	%		4.0	%
				Real Estate Appraisals		N/A			N/A			N/A

			Market Approach	Revenue Multiple		1.4	x		1.4	x		1.4	x
				% of AUM		0.72	%		0.72	%		0.72	%
				Illiquidity Discount		35.0	%		35.0	%	<

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	0	$0

10-Q	2020-03-09	Quarter: 2020-01-31
10-K	2020-01-14	Annual: 2019-10-31
10-Q	2019-09-09	Quarter: 2019-07-31
10-Q	2019-06-10	Quarter: 2019-04-30
10-Q	2019-03-11	Quarter: 2019-01-31
10-K	2019-01-14	Annual: 2018-10-31
10-Q	2018-09-10	Quarter: 2018-07-31
10-Q	2018-06-11	Quarter: 2018-04-30
10-Q	2018-03-12	Quarter: 2018-01-31
10-K	2018-01-16	Annual: 2017-10-31
10-Q	2017-09-11	Quarter: 2017-07-31
10-Q	2017-06-08	Quarter: 2017-04-30
10-Q	2017-03-13	Quarter: 2017-01-31
10-K	2017-01-17	Annual: 2016-10-31
10-Q	2016-09-09	Quarter: 2016-07-31
10-Q	2016-08-29	Quarter: 2016-04-30
10-Q	2016-05-16	Quarter: 2016-01-31
10-K	2016-05-16	Annual: 2015-10-31
10-Q	2016-01-29	Quarter: 2015-07-31
10-Q	2015-12-01	Quarter: 2015-01-31
10-K	2015-10-15	Annual: 2014-10-31
10-Q	2015-12-01	Quarter: 2014-10-31
10-Q	2014-09-09	Quarter: 2014-07-31
10-Q	2014-06-06	Quarter: 2014-04-30
10-Q	2014-03-12	Quarter: 2014-01-31
10-K	2014-01-13	Annual: 2013-10-31
10-Q	2013-09-09	Quarter: 2013-07-31
10-Q	2013-06-10	Quarter: 2013-04-30
10-Q	2013-03-07	Quarter: 2013-01-31
10-K	2012-12-27	Annual: 2012-10-31
10-Q	2012-09-10	Quarter: 2012-07-31
10-Q	2012-06-11	Quarter: 2012-04-30
10-Q	2012-03-12	Quarter: 2012-01-31
10-K	2012-01-12	Annual: 2011-10-31
10-Q	2011-09-07	Quarter: 2011-07-31
10-Q	2011-06-02	Quarter: 2011-04-30
10-Q	2011-03-08	Quarter: 2011-01-31
10-K	2010-12-21	Annual: 2010-10-31
10-Q	2010-09-09	Quarter: 2010-07-31
10-Q	2010-06-01	Quarter: 2010-04-30
10-Q	2010-03-11	Quarter: 2010-01-31

8-K	2020-03-24	Other Events, Exhibits
8-K	2020-02-25	Other Events
8-K	2019-08-30	Enter Agreement, Off-BS Arrangement
8-K	2019-06-24	Shareholder Vote
8-K	2019-06-19	Enter Agreement, Off-BS Arrangement
8-K	2019-04-30	Amend Bylaw, Exhibits
8-K	2019-04-19	Other Events
8-K	2019-01-29	Enter Agreement, Off-BS Arrangement
8-K	2018-12-07	Enter Agreement, Off-BS Arrangement
8-K	2018-10-30	Amend Bylaw, Shareholder Vote, Exhibits
8-K	2018-10-11	Other Events
8-K	2018-09-17	Shareholder Rights, Other Events, Exhibits
8-K	2018-08-10	Enter Agreement, Off-BS Arrangement
8-K	2018-02-26	Enter Agreement
8-K	2018-01-04	Leave Agreement, Exhibits

EX-31	tm2011695d1_ex31.htm
EX-32	tm2011695d1_ex32.htm