This preliminary prospectus supplement relates to an effective registration statement under the Securities Act of 1933, as amended, but the information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell and are not soliciting an offer to buy these securities in any jurisdiction where the offer and sale is not permitted.

Filed pursuant to Rule 497
Securities Act Registration No. 333-179237

Subject to Completion, dated November 27, 2012

Preliminary Prospectus Supplement
(To Prospectus dated February 16, 2012)

5,000,000 Shares

MEDLEY CAPITAL CORPORATION

Common Stock

 

We are offering for sale 5,000,000 shares of our common stock. Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “MCC.” The last reported sale price of our common stock on November 26, 2012 was $14.25 per share. As of September 30, 2012, our estimated net asset value, or NAV, per share was between $12.48 and $12.54. See “Price Range of Common Stock and Distributions.”

 

Investing in our common stock involves certain risks. See “Supplementary Risks” beginning on page S-7 in this prospectus supplement and “Risks” beginning on page 9 of the accompanying prospectus, to read about factors you should consider before investing in our common stock.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

		Per Share				Total
Public offering price		$				$
Underwriting discount		$				$
Proceeds to us, before expenses		$				$

We have granted the underwriters the option to purchase up to an additional 750,000 shares from us on the same terms and conditions set forth above.

 

The underwriters expect to deliver the shares against payment in New York, New York on November   , 2012.

Joint Book-Running Managers

Goldman, Sachs & Co.		Barclays		Credit Suisse		UBS Investment Bank

 

Prospectus Supplement dated         , 2012

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PROSPECTUS SUPPLEMENT

		Page
ABOUT THIS PROSPECTUS SUPPLEMENT			S-iii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			S-iv
PROSPECTUS SUPPLEMENT SUMMARY			S-1
THE OFFERING			S-6
SUPPLEMENTARY RISKS			S-7
USE OF PROCEEDS			S-8
FEES AND EXPENSES			S-9
CAPITALIZATION			S-11
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS			S-12
SELECTED FINANCIAL AND OTHER DATA			S-14
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			S-15
SENIOR SECURITIES			S-27
INVESTMENTS AND PORTFOLIO COMPANIES			S-28
TAX MATTERS			S-34
UNDERWRITING			S-35
VALIDITY OF COMMON STOCK			S-39
EXPERTS			S-39
WHERE YOU CAN FIND MORE INFORMATION			S-39
INDEX TO FINANCIAL STATEMENTS			SF-40

PROSPECTUS

		Page
PROSPECTUS SUMMARY			1
FEES AND EXPENSES			7
RISKS			9
FORWARD-LOOKING STATEMENTS			30
USE OF PROCEEDS			31
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS			32
SELECTED FINANCIAL AND OTHER DATA			34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			35
BUSINESS			47
INVESTMENTS AND PORTFOLIO COMPANIES			57
THE ADVISOR			62
REGULATION			68
MANAGEMENT			75
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RELATED PERSONS			83

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		Page
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES			84
SELLING STOCKHOLDERS			86
DETERMINATION OF NET ASSET VALUE			87
BROKERAGE ALLOCATIONS AND OTHER PRACTICES			89
TAX MATTERS			90
SALES OF COMMON STOCK BELOW NET ASSET VALUE			97
ISSUANCE OF WARRANTS OR SECURITIES TO SUBSCRIBE FOR OR CONVERTIBLE INTO SHARES OF OUR COMMON STOCK			102
DIVIDEND REINVESTMENT PLAN			103
DESCRIPTION OF OUR CAPITAL STOCK			105
DESCRIPTION OF OUR WARRANTS			107
DESCRIPTION OF OUR DEBT SECURITIES			108
DESCRIPTION OF OUR UNITS			121
PLAN OF DISTRIBUTION			122
CUSTODIAN AND TRANSFER AGENT			124
LEGAL MATTERS			124
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			124
AVAILABLE INFORMATION			124
PRIVACY PRINCIPLES			124
INDEX TO FINANCIAL STATEMENTS			F-1

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ABOUT THIS PROSPECTUS SUPPLEMENT

You should read this prospectus supplement along with the accompanying prospectus carefully before you invest in our common stock. This prospectus supplement and the accompanying prospectus contain the terms of this offering of common stock. The accompanying prospectus contains information about our securities generally, some of which does not apply to the common stock covered by this prospectus supplement. This prospectus supplement may add, update or change information contained in the accompanying prospectus. If the information in this prospectus supplement is inconsistent with any information contained in the accompanying prospectus, the information in this prospectus supplement will apply and will supersede the inconsistent information contained in the accompanying prospectus.

It is important for you to read and consider all of the information contained in this prospectus supplement and the accompanying prospectus before making your investment decision. See “Where You Can Find More Information” in this prospectus supplement.

We and the underwriters have not authorized any person to provide you with any information other than the information contained in this prospectus supplement and the accompanying prospectus that is required to be filed with the SEC. We and the underwriters take no responsibility for, and provide no assurance as to the reliability of, any other information that others may give to you. We and the underwriters are not making an offer to sell our common stock in any jurisdiction where the offer or sale is not permitted. You should assume that information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of their respective dates. Our business, financial condition, results of operations and prospects may have changed since those dates. To the extent required by law, we will amend or supplement the information contained in this prospectus supplement and the accompanying prospectus.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this prospectus supplement constitute forward-looking statements, which relate to future events or our future performance or financial condition. In addition to factors previously identified elsewhere in this prospectus supplement, including the “Supplementary Risks” beginning on page S-7 of this prospectus supplement and the “Risks” beginning on page 9 of the accompanying prospectus, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

This prospectus supplement, and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend”, “opportunity”, “pipeline”, “believe”, “comfortable”, “expect”, “anticipate”, “current”, “intention”, “estimate”, “position”, “assume”, “potential”, “outlook”, “continue”, “remain”, “maintain”, “sustain”, “seek”, “achieve” and similar expressions, or future or conditional verbs such as “will”, “would”, “should”, “could”, “may” or similar expressions.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). Actual results could differ materially from those anticipated in forward-looking statements, and future results could differ materially from historical performance, for any reason, including those described under “Risks” in the accompanying prospectus.

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PROSPECTUS SUPPLEMENT SUMMARY

This summary highlights selected information contained elsewhere in this prospectus supplement and the accompanying prospectus. This is only a summary and does not contain all of the information you should consider before investing in our common stock. You should read this prospectus supplement and the accompanying prospectus, especially the risks discussed under “Supplementary Risks” on page S-7 in this prospectus supplement and “Risks” in the accompanying prospectus, before making an investment decision.

Except as otherwise indicated, the terms “we”, “us”, “our”, “Medley Capital” and the “Company” in this prospectus supplement refer to Medley Capital Corporation, a Delaware corporation, and its subsidiaries for the periods after our consummation of the formation transaction, which occurred in January 2011, and to Medley Capital BDC LLC, a Delaware limited liability company, for the periods prior to our consummation of the formation transaction described in the accompanying prospectus. “MCC Advisors” and “Adviser” refer to MCC Advisors LLC, our investment adviser. “Medley” refers collectively to the activities and operations of Medley Capital LLC, MCC Advisors, associated investment funds and their respective affiliates.

Medley Capital

Medley Capital Corporation is a non-diversified closed end management investment company incorporated in Delaware that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We completed our initial public offering (“IPO”) and commenced operations on January 20, 2011. We have elected and qualified to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our first taxable year as a corporation, and we intend to operate in a manner so as to maintain our RIC tax treatment. We are externally managed and advised by our investment adviser, MCC Advisors LLC (“MCC Advisors”), pursuant to an investment management agreement.

Our investment objective is to generate current income and capital appreciation by lending directly to privately held middle market companies to help these companies fund acquisitions, growth or refinancing. Our portfolio generally consists of senior secured first lien loans and senior secured second lien loans. In many of our investments, we receive warrants or other equity participation features, which we believe will increase our total investment returns.

Our investment activities are managed by our investment adviser, MCC Advisors. MCC Advisors is an affiliate of Medley and has offices in New York and San Francisco. MCC Advisors is responsible for sourcing investment opportunities, conducting industry research, performing diligence on potential investments, structuring our investments and monitoring our portfolio companies on an ongoing basis. MCC Advisors’ team draws on its expertise in lending to predominantly privately-held borrowers in a range of sectors, including industrials and transportation, energy and natural resources, financials and real estate. In addition, MCC Advisors seeks to diversify our portfolio of loans by company type, asset type, transaction size, industry and geography.

The members of our management, Brook Taube, Seth Taube and Andrew Fentress, also serve as the principals of MCC Advisors (“Principals”) and have worked together for more than nine years, during which time they have focused on implementing their private debt strategy. A diversified portfolio of secured private debt investments combined with rigorous asset management have allowed Medley, which the Principals of the Adviser manage and operate, to successfully navigate the challenging market that began in 2007. We believe that MCC Advisors’ disciplined and consistent approach to origination, portfolio construction and risk management should allow it to continue to achieve compelling risk-adjusted returns for Medley Capital.

MCC Advisors also serves as our administrator and provides us with office space, equipment and other office services. The responsibilities of our administrator include overseeing our financial records, preparing reports to our stockholders and reports filed with the Securities and Exchange Commission (the “SEC”) and generally monitoring the payment of our expenses and the performance of administrative and professional services rendered to us by others.

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Portfolio

The total value of our investments, including cash and cash equivalents and unsettled transactions, was $366.2 million at June 30, 2012. As of June 30, 2012, our portfolio consisted of investments in 34 portfolio companies with a fair value of approximately $363.1 million. As of June 30, 2012, our average portfolio company investment at fair value was approximately $10.7 million, and our largest portfolio company investment at fair value was approximately $23.4 million. In addition, as of June 30, 2012, the weighted average yield based on the cost basis of our portfolio investments, excluding cash and cash equivalents, was 14.3% and there were no assets on non-accrual status.

The following table summarizes the amortized cost and the fair value of investments and cash and cash equivalents as of June 30, 2012 (dollars in thousands):

		Amortized Cost				Percentage of Total				Fair Value				Percentage of Total
Senior Secured First Lien Term Loans		$	170,998				46.5	%		$	170,205				46.5	%
Senior Secured Second Lien Term Loans			160,687				43.7				159,264				43.5
Senior Secured Notes			31,602				8.6				31,718				8.7
Equities/Warrants			1,391				0.4				1,907				0.5
Cash and Cash Equivalents			3,120				0.8				3,120				0.8
Total		$	367,798				100.0	%		$	366,214				100.0	%

Investment Strategy

We believe that a well-structured portfolio of private debt transactions can generate equity-like returns with the risk profile of secured debt. Private debt combines attractive elements of both equity and fixed-income investments because transactions are generally structured as secured loans with equity upside in the form of options, warrants, cash flow sharing, co-investment rights or other participation features. As a result, we believe our private debt strategy offers upside potential, similar to mezzanine and private equity investments, and downside protection, similar to bank loans.

We believe that private debt offers an attractive investment opportunity for the following reasons:

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Market Opportunity

We believe the credit crisis that began in 2007 and the subsequent exit of traditional lending sources have created a compelling opportunity for skilled debt providers in the middle-market. We expect to take advantage of the following favorable trends in private lending:

Competitive Advantages

We believe that the Company represents an attractive investment opportunity for the following reasons:

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Corporate Information

Our administrative and executive offices are located at 375 Park Avenue, 33rd Floor, New York, NY 10152, and our telephone number is (212) 759-0777. We maintain a website at http://www.medleycapitalcorp.com. Information contained on our website is not incorporated by reference into this prospectus supplement, and you should not consider information contained on our website to be part of this prospectus supplement.

Recent Developments

Exemptive Relief

On March 26, 2012, we received an exemptive order from the SEC which allows us, under certain circumstances, to co-invest with certain of our affiliates, subject to the conditions included therein.

Liquidity

On August 22, 2012, we completed a public offering of 5,750,000 shares of our common stock at a public offering price of $12.95 per share, which included 750,000 shares issued upon full exercise of the underwriters’ option to purchase additional shares. We raised approximately $71.7 million in net proceeds in the offering, after deducting underwriting discounts and commissions and estimated offering expenses.

On August 31, 2012, we entered into a $55 million senior secured term loan (the “Term Loan Facility”). The Term Loan Facility has a bullet maturity in August 2017 and bears interest at LIBOR plus 4.00%, with no floor. Also, on August 31, 2012, we amended our $125 million senior secured revolving credit facility (the “Revolving Facility”) to:

On September 25, 2012, we expanded the total commitments under our Revolving Facility from $132.5 million to $137.5 million. The $5 million increase in total commitments was the result of the addition of one new lender which further diversifies our lending relationships.

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We refer to the Term Loan Facility and the Revolving Facility collectively as the “Facilities.” The Facilities provide for an aggregate accordion feature permitting subsequent increases under the Facilities up to an aggregate maximum amount of $300 million. As of November 26, 2012 we had a total of $192.5 million of available financing under the Facilities. As of November 26, 2012, our outstanding balance on the Revolving Facility was $58.7 million.

Recent Portfolio and Investment Activity

During the three months ended September 30, 2012, our gross new investment originations totaled $81.5 million and consisted of $65.6 million in six new portfolio companies and $15.9 million in five existing portfolio companies. During the three months ended September 30, 2012, we had $44.2 million in aggregate amount of exits and repayments, resulting in net investments of $37.3 million for the period.

For the period from October 1, 2012 through November 26, 2012, our closed and committed new investment originations totaled $87.2 million, which consisted of $75.3 million in seven new portfolio investments and $14.3 million in six existing portfolio companies. For the period from October 1, 2012 through November 26, 2012, we had $11.9 million in aggregate amount of exits and repayments resulting in net investment originations of $75.3 million for the period.

Preliminary Estimates of Results for the Three Months and Fiscal Year Ended September 30, 2012

Set forth below are certain preliminary estimates of our financial condition and results of operations for the three months and fiscal year ended September 30, 2012. These estimates are subject to the completion of financial closing procedures and are not a comprehensive statement of our financial results for the three months and fiscal year ended September 30, 2012. We advise you that our actual results may differ materially from these estimates as a result of the completion of our financial closing procedures, final adjustments and other developments which may arise between now and the time that our financial results for the three months and fiscal year ended September 30, 2012 are finalized. This information is inherently uncertain.

Our net investment income per weighted average share for the three months and fiscal year ended September 30, 2012 is estimated to be between $0.35 and $0.37 and $1.30 and $1.32, respectively. Our estimated NAV per share as of September 30, 2012 was between $12.48 and $12.54.

We currently expect to file our annual report on Form 10-K on or about December 10, 2012. The preliminary financial estimates provided herein have been prepared by, and are the responsibility of, management. Ernst & Young LLP, our independent registered public accounting firm, has not audited, reviewed, compiled, or performed any procedures with respect to the accompanying preliminary financial data. Accordingly, Ernst & Young LLP does not express an opinion or any form of assurance with respect thereto.

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THE OFFERING

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SUPPLEMENTARY RISKS

Investing in our common stock involves a high degree of risk. In addition to the other information contained in this prospectus supplement and the accompanying prospectus, you should carefully consider the following supplementary risk factors together with the risk factors set forth in the accompanying prospectus before making an investment in our common stock. The risks set out below and in the accompanying prospectus are not the only risks we face. Additional risks and uncertainties not presently known to us might also impair our operations and performance. If any of the events described herein or in the accompanying prospectus occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, our net asset value and the market price of our common stock could decline, and you may lose part or all of your investment.

Certain Risks in the Current Environment

The downgrade of the U.S. credit rating, failure to avoid the “fiscal cliff” in the U.S., and the economic crisis in Europe could negatively impact our liquidity, financial condition and earnings.

Recent U.S. debt ceiling and budget deficit concerns and the possibility that U.S. lawmakers may be unable to avoid the “fiscal cliff,” together with signs of deteriorating sovereign debt conditions in Europe, have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the U.S. Although U.S. lawmakers passed legislation to raise the federal debt ceiling, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating on the United States from “AAA” to “AA+” in August 2011. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. In addition, some economists predict the U.S. economy could fall into recession if the U.S. Federal Government fails to achieve a plan to avoid the “fiscal cliff,” which refers to certain tax increases and automatic spending cuts that are scheduled to become effective at the end of 2012. Further, Moody's has warned that it may downgrade the U.S. Federal Government's rating if the federal debt is not stabilized. Absent further quantitative easing by the Federal Reserve, these developments, along with the European sovereign debt crisis, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. Continued adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business

A substantial portion of our portfolio investments may be recorded at fair value as determined in good faith by or under the direction of our board of directors and, as a result, there may be uncertainty regarding the value of our portfolio investments.

The debt and equity securities in which we invest for which market quotations are not readily available will be valued at fair value as determined in good faith by or under the direction of our board of directors. Most, if not all, of our investments (other than cash and cash equivalents) will be classified as Level 3 under ASC Topic 820. This means that our portfolio valuations will be based on unobservable inputs and our own assumptions about how market participants would price the asset or liability in question. We expect that inputs into the determination of fair value of our portfolio investments will require significant management judgment or estimation. Even if observable market data are available, such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information. We have retained the services of an independent service provider to review the valuation of these loans and securities. The types of factors that the board of directors may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these loans and securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such loans and securities.

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USE OF PROCEEDS

The net proceeds of the offering are estimated to be approximately $      (approximately $      if the underwriters exercise their option to purchase additional shares in full), after deducting the underwriting discounts and commissions and estimated offering expenses of approximately $200,000 payable by us. We intend to use the net proceeds from the sale of the shares to fund new investment opportunities, to repay the outstanding indebtedness under our Revolving Facility, and for general corporate purposes. Certain of the underwriters and/or their affiliates are lenders under our Revolving Facility and may receive a portion of the net proceeds from this offering. As of November 26, 2012, we had $58.7 million outstanding under our Revolving Facility. We intend to reborrow under our Revolving Facility to make investments in portfolio companies in accordance with our investment objective.

Outstanding indebtedness under our Revolving Facility bears interest, currently set at LIBOR plus 3.75% annum, with no LIBOR floor, which equals 4.00%. The indebtedness under the Revolving Facility was incurred to make investments in portfolio companies in accordance with our investment objective.

We expect to continue to borrow under our Revolving Facility to make investments in portfolio companies in accordance with our investment objective depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions.

Pending investments as described above, we will invest any remaining net proceeds of this offering primarily in cash, cash equivalents, U.S. Government securities and other high-quality debt instruments that mature in one year or less, or “temporary investments”, as appropriate. These securities may have lower yields than our other investments and accordingly result in lower distributions, if any, by us during such period. See “Regulation — Temporary Investments” and “The Advisor — Investment Management Agreement” in the accompanying prospectus.

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FEES AND EXPENSES

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

Stockholder transaction expenses:
Sales load borne by us (as a percentage of offering price)				%
Offering expenses borne by us (as a percentage of offering price)				%
Dividend reinvestment plan expenses			None	(1)
Total stockholder transaction expenses (as a percentage of offering price)				%
Annual expenses (as a percentage of net assets attributable to common stock):
Base management fee			2.32	%(2)
Incentive fees payable under our Investment Management Agreement			2.52	%(3)
Interest payments on borrowed funds			3.98	%(4)
Other expenses (estimated)			2.00	%(5)
Total annual expenses			10.82	%

EXAMPLE

The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses would remain at the levels set forth in the table above and have excluded performance-based incentive fees. See Note 4 below for additional information regarding certain assumptions regarding our level of leverage.

		1 Year				3 Years				5 Years				10 Years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return		$	108			$	304			$	476			$	819

The first component, which is payable quarterly in arrears, will equal 20.0% of the excess, if any, of our “Pre-Incentive Fee Net Investment Income” over a 2.0% quarterly (8.0% annualized) hurdle rate and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, our investment adviser receives no incentive fee until our net investment income equals the hurdle rate of 2.0% but then receives, as a “catch-up”, 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, our investment adviser will receive 20% of our pre-incentive fee net investment income as if a hurdle rate did not apply. The first component of the incentive fee will be computed and paid on income that may include interest that is accrued but not yet received in cash. Since the hurdle rate is fixed, as interest rates rise, it will be easier for the Adviser to surpass the hurdle rate and receive an incentive fee based on net investment income.

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The second component of the incentive fee will equal 20.0% of our “Incentive Fee Capital Gains”, if any, which will equal our realized capital gains on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. The second component of the incentive fee will be payable, in arrears, at the end of each calendar year (or upon termination of the investment management agreement, as of the termination date), and commenced with the year ended September 30, 2011.

For a more detailed discussion of the calculation of this fee, see “The Advisor — Investment Management Agreement” in the accompanying prospectus.

The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under our investment management agreement is unlikely to be significant assuming a 5% annual return and is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our distributions to our common stockholders and our expenses would likely be higher. In addition, while the example assumes reinvestment of all cash dividends and other cash distributions at NAV, participants in our dividend reinvestment plan will receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the greater of (i) NAV per share, and (ii) 95% of the market price per share of our common stock at the close of regular trading on the New York Stock Exchange on the payment date fixed by our board of directors for such distribution. The market price per share on that date shall be the closing price for such shares on the New York Stock Exchange or, if no sale is reported for such day, at the average of their electronically-reported bid and asked prices. See “Dividend Reinvestment Plan” in the accompanying prospectus for additional information regarding our dividend reinvestment plan.

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CAPITALIZATION

The following table sets forth as of June 30, 2012:

The table below does not take into account the sale of 5,750,000 shares of our common stock completed in August 2012 at the public offering price of $12.95 per share, which includes 750,000 shares issued upon full exercise of the underwriters’ option to purchase additional shares. We raised approximately $71.7 million in net proceeds in connection with the August 2012 offering. Including the net proceeds from our August 2012 offering, our actual capitalization as adjusted for the sale of 5,000,000 shares of our common stock in this offering at the public offering price of $      per share, after deducting underwriting discounts and commissions and estimated offering expenses of approximately $200,000 payable by us, would be $     .

This table should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes thereto included in this prospectus supplement.

		As of June 30, 2012
		Actual				As Adjusted
		(unaudited)
Credit facility payable		$	108,700,000			$
7.125% Senior Notes due 2019			40,000,000
Management and incentive fees payable, net			3,050,223
Accounts payable and accrued expenses			988,420
Administrator expenses payable			395,689
Deferred revenue			98,428
Interest and credit facility fees payable			1,211,149
Due to affiliate			81,391
Deferred offering costs payable			84,963
Total liabilities			154,610,263			$
Common stock, par value $.001 per share, 100,000,000 shares authorized, 17,320,468 shares issued and outstanding (actual), [•] issued and outstanding (as adjusted)		$	17,320			$
Capital in excess of par value			214,509,815
Accumulated undistributed net investment income			5,078,773
Accumulated net realized gain from investments			148,552
Net unrealized depreciation on investments			(1,583,928	)
Total net assets			218,170,532
Total liabilities and net assets		$	372,780,795			$

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PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS

Price Range

Our common stock began trading on January 20, 2011, and is currently traded on the NYSE under the symbol “MCC”. The following table lists the high and low closing sale price for our common stock, the closing sale price as a percentage of NAV and quarterly dividends per share since shares of our common stock began being regularly quoted on the NYSE.

Period		NAV(1)				Closing Sales Price								Premium/ Discount of High Sales Price to NAV(2)				Premium/ Discount of Low Sales Price to NAV(2)				Declared Dividends(3)
						High				Low
Fiscal year ended September 30, 2011
Second quarter(4)		$	12.48			$	12.19			$	11.62				(2.32	)%			(6.89	)%		$	0.16
Third quarter		$	12.55			$	12.19			$	11.12				(2.87	)%			(11.39	)%		$	0.21
Fourth quarter		$	12.57			$	11.63			$	9.84				(7.48	)%			(21.72	)%		$	0.25
Fiscal year ending September 30, 2012
First Quarter		$	12.57			$	10.56			$	8.96				(15.99	)%			(28.72	)%		$	0.28
Second Quarter		$	12.63			$	11.86			$	10.17				(6.10	)%			(19.48	)%		$	0.31
Third Quarter		$	12.60			$	12.04			$	10.72				(4.44	)%			(14.92	)%		$	0.36
Fourth Quarter			*			$	14.36			$	11.91				*				*			$	0.36

The last reported price for our common stock on November 26, 2012 was $14.25 per share. As of November 26, 2012 we had 19 stockholders of record.

As of September 30, 2012, our estimated net asset value per share was between $12.48 and $12.54. The estimate of our net asset value at September 30, 2012 is based on our internal financial information as financial results for the period ending September 30, 2012 have not been prepared, and the estimate has not been reviewed or audited by our independent registered public accounting firm. Accordingly, investors should not place undue reliance on this estimate. See “Recent Developments” beginning on page S-4 of this prospectus supplement.

Distributions

Our dividends, if any, are determined by the board of directors. We have elected to be treated as a RIC under Subchapter M of the Code. To maintain RIC qualification, we must timely distribute to our stockholders at least 90% of our net ordinary income and realized net short-term capital gains in excess of our realized net long-term capital losses, if any, for each year. We will be subject to a 4% nondeductible federal excise tax on our undistributed income unless we distribute to our stockholders in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (3) any income realized, but not distributed in the preceding year.

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The following table reflects the cash distributions, including dividends and returns of capital per share that we have declared on our common stock since completion of our IPO.

Dividends Declared

Period		Payment Dates				Per Share
Fiscal year ended September 30, 2011
Second quarter(1)			June 15, 2011			$	0.16
Third quarter			September 15, 2011			$	0.21
Fourth quarter			December 30, 2011			$	0.25
Total						$	0.62
Fiscal year ending September 30, 2012
First quarter			March 15, 2012			$	0.28
Second quarter			June 15, 2012			$	0.31
Third quarter			September 14, 2012			$	0.36
Fourth quarter			December 14, 2012			$	0.36
						$	1.31

We have adopted a dividend reinvestment plan that provides for reinvestment of our dividends and other distributions on behalf of our stockholders, unless a stockholder elects to receive cash as provided below. As a result, if our board of directors authorizes, and we declare, a cash dividend or other distribution, then our stockholders who have not “opted out” of our dividend reinvestment plan will have their cash distribution automatically reinvested in additional shares of our common stock, rather than receiving the cash distribution. See “Dividend Reinvestment Plan” beginning on page 103 of the accompanying prospectus.

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SELECTED FINANCIAL AND OTHER DATA

The following selected financial data should be read together with our financial statements and the related notes and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus supplement with respect to the nine months ended June 30, 2011 and 2012, and in the accompanying prospectus with respect to the fiscal year ended September 30, 2011. We have derived the selected audited financial data below, excluding the weighted average annual yield on debt investments and number if investments at period end, at and for the fiscal year ended September 30, 2011, from our audited consolidated financial statements, which have been audited by Ernst & Young LLP, our independent registered public accounting firm. We have derived the unaudited selected financial data below from our unaudited consolidated financial statements at and for the nine months ended June 30, 2011 and 2012 included elsewhere in this prospectus supplement. In our opinion, these unaudited consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our financial position and results of operations for the period. Historical financial data is not necessarily indicative of our future results of operations or financial position.

		At and For the Nine Months Ended June 30,								At and For the Year Ended September 30,
		2012				2011				2011
($ in thousands, except per share data)		(unaudited)								(audited)
Statement of Operations data:
Total investment income		$	30,455			$	7,678			$	14,569
Base management fee, net			3,741				840				1,610
Incentive fee			4,111				80				714
All other expenses			6,195				1,557				2,616
Net investment income			16,408				5,201				9,629
Unrealized depreciation on investments			(1,434	)			344				(150	)
Realized gain on investments			93				55				55
Net increase in net assets resulting from operations			15,067				5,600				9,534
Per share data:
Net asset value per common share at year end		$	12.60			$	12.55			$	12.57
Market price at period end			12.04				11.74				10.08
Net investment income			0.95				0.30				0.56
Net realized and unrealized gain/(loss) on investments			(0.08	)			0.03				(0.01	)
Net increase in net assets resulting from operations			0.87				0.33				0.55
Dividends paid			0.84				0.16				0.37
Balance Sheet data at period end:
Total investments at fair value		$	363,094			$	144,664			$	199,207
Cash and cash equivalents			3,120				82,446				17,202
Other assets			6,567				1,541				3,721
Total assets			372,781				228,651				220,130
Total liabilities			154,610				11,285				2,477
Total net assets			218,171				217,366				217,653
Other data:
Weighted average annual yield on debt investments(1) (unaudited)			14.3	%			14.0	%			14.5	%
Number of investments at period end			34				11				18

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

For information regarding the fiscal year ended September 30, 2011, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation” beginning on page 35 of the accompanying prospectus.

Formation Transaction

Prior to the pricing of our initial public offering, Medley Opportunity Fund LP (“MOF LP”) and Medley Opportunity Fund, Ltd. (“MOF LTD”) transferred all of their respective interests in six loan participations in secured loans to middle market companies with a combined fair value, plus payment-in-kind interest and accrued interest thereon, of approximately $84.95 million (the “Loan Assets”) to MOF I BDC LLC (“MOF I BDC”) in exchange for membership interests in MOF I BDC. As a result, MOF LTD owned approximately 90% of the outstanding MOF I BDC membership interests and MOF LP owned approximately 10% of the outstanding MOF I BDC membership interests. On January 18, 2011, each of MOF LTD and MOF LP contributed their respective MOF I BDC membership interests to Medley Capital BDC LLC in exchange for Medley Capital BDC LLC membership interests. As a result, MOF I BDC became a wholly-owned subsidiary of Medley Capital BDC LLC.

On January 18, 2011, Medley Capital BDC LLC, a Delaware limited liability company converted into Medley Capital Corporation, a Delaware corporation. As a result, MOF LTD and MOF LP’s LLC membership interests were exchanged for 5,759,356 shares of the Company’s common stock at $14.75 per share. On January 20, 2011, Medley Capital Corporation filed an election to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (“1940 Act”).

On January 20, 2011, we priced our initial public offering and sold 11,111,112 shares of our common stock at $12.00 per share. On February 24, 2011, an additional 450,000 shares of our common stock were sold at a price of $12.00 per share pursuant to the partial exercise of the underwriters’ over-allotment option. Net of underwriting fees and estimated offering costs, we raised a total of approximately $129.6 million. Our shares began trading on January 20, 2011 on the New York Stock Exchange under the symbol “MCC.”

Overview

We are an externally-managed, non-diversified closed-end management investment company that filed an election to be regulated as a BDC under the 1940 Act. In addition, we have elected and qualified to be treated for U.S. federal income tax purposes, as a regulated investment company (“RIC”), under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), and we intend to operate in a manner so as to maintain our RIC tax treatment.

We commenced operations and completed our initial public offering on January 20, 2011. Our investment activities are managed by MCC Advisors and supervised by our board of directors, of which a majority of the members are independent of us.

Our investment objective is to generate current income and capital appreciation by lending directly to privately-held middle market companies to help these companies fund acquisitions, growth or refinancing. Our portfolio will generally consist of senior secured first lien term loans and senior secured second lien term loans. In many of our investments, we will receive warrants or other equity participation features which we believe will increase the total investment returns.

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

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Revenues

We generate revenue in the form of interest income on the debt that we hold and capital gains, if any, on warrants or other equity interests that we may acquire in portfolio companies. We invest our assets primarily in privately held companies with enterprise or asset values between $25 million and $250 million and focus on investment sizes of $10 million to $50 million. We believe that pursuing opportunities of this size offers several benefits including reduced competition, a larger investment opportunity set and the ability to minimize the impact of financial intermediaries. We expect our debt investments to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either monthly or quarterly. In some cases our debt investments may provide for a portion of the interest to be paid-in-kind (“PIK”). To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be generated in connection with our investments and recognized as earned.

Expenses

Our primary operating expenses include the payment of investment management fees and overhead expenses, including our allocable portion of our administrator’s overhead under the administration agreement. Our investment management fees compensate our investment adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions, including those relating to:

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Portfolio and Investment Activity

As of June 30, 2012, our portfolio consisted of investments in 34 portfolio companies with a fair value of approximately $363.1 million. During the nine months ended June 30, 2012, we invested $177.0 million in seventeen new portfolio companies and $12.3 million in five existing portfolio companies, and we had $26.6 million in aggregate amount of exits and repayments, resulting in net investments of $162.7 million for the period. During the nine months ended June 30, 2011, approximately $84.95 million was contributed to us as part of the formation transaction described above. Additionally, during the nine months ended June 30, 2011, we invested $55.4 million in six new portfolio companies and $5.0 million in one existing portfolio company, and we had $2.0 million in aggregate amount of exits and repayments, resulting in net investments of $58.4 million for the period.

As of June 30, 2012, our average portfolio company investment and our largest portfolio company investment at amortized cost and fair value was approximately $10.7 million and $10.7 million, and $23.4 million and $23.4 million, respectively, and we had approximately $3.1 million of cash and cash equivalents.

The following table summarizes the amortized cost and the fair value of investments and cash and cash equivalents as of June 30, 2012 (dollars in thousands):

		Amortized Cost				Percentage of Total				Fair Value				Percentage of Total
Senior Secured First Lien Term Loans		$	170,998				46.5	%		$	170,205				46.5	%
Senior Secured Second Lien Term Loans			160,687				43.7				159,264				43.5
Senior Secured Notes			31,602				8.6				31,718				8.7
Equities/Warrants			1,391				0.4				1,907				0.5
Cash and Cash Equivalents			3,120				0.8				3,120				0.8
Total		$	367,798				100.0	%		$	366,214				100.0	%

The following table summarizes the amortized cost and the fair value of investments and cash and cash equivalents as of September 30, 2011 (dollars in thousands):

		Amortized Cost				Percentage of Total				Fair Value				Percentage of Total
Senior Secured First Lien Term Loans		$	107,757				49.8	%		$	107,255				49.6	%
Senior Secured Second Lien Term Loans			79,901				36.9				79,414				36.7
Senior Secured Notes			11,668				5.4				11,832				5.5
Equities/Warrants			30				0.0				705				0.3
Cash and Cash Equivalents			17,202				7.9				17,202				7.9
Total		$	216,558				100.0	%		$	216,408				100.0	%

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As of June 30, 2012, the weighted average loan to value ratio (“LTV”) of our portfolio investments was approximately 47.5%. We believe that the LTV ratio for a portfolio investment is a useful indicator of the riskiness of the portfolio investment, or its likelihood of default. As part of our investment strategy we seek to structure transactions with downside protection and seek LTVs of lower than 65%. We regularly evaluate the LTV of our portfolio investments and believe that LTV is a useful indicator for management and investors.

As of June 30, 2012, our income-bearing investment portfolio, which represented nearly 99.5% of our total portfolio, had a weighted average yield based upon cost on our portfolio investments of approximately 14.3%, and 41.9% of our income-bearing investment portfolio bore interest based on floating rates, such as LIBOR, and 58.1% bore interest at fixed rates.

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

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

The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as of June 30, 2012 (dollars in thousands):

Investment Performance Rating		Investments at Fair Value				Percentage
1		$	23,895				6.6	%
2			321,095				88.4
3			18,104				5.0
4			—				—
5			—				—
Total		$	363,094				100.0	%

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The following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as of September 30, 2011 (dollars in thousands):

Investment Performance Rating		Investments at Fair Value				Percentage
1		$	—				—	%
2			199,207				100.00
3			—				—
4			—				—
5			—				—
Total		$	199,207				100.0	%

Results of Operations

Operating results for the nine months ended June 30, 2012 and 2011 are as follows:

		For the nine months ended
		June 30, 2012				June 30, 2011
		($ in thousands)
Total investment income		$	30,455			$	7,678
Total expenses, net			14,011				2,477
Net investment income before excise taxes			16,444				5,201
Excise tax expense			36				—
Net investment income			16,408				5,201
Net realized gains (losses)			93				55
Net unrealized gains (losses)			(1,434	)			344
Net increase in net assets resulting from operations		$	15,067			$	5,600

Investment Income

For the nine months ended June 30, 2012, investment income totaled $30.5 million, of which $26.0 million was attributable to portfolio interest and $4.5 million to other fee income.

For the nine months ended June 30, 2011, investment income totaled $7.7 million, of which $6.8 million was attributable to portfolio interest, $0.1 million to interest earned on cash and cash equivalents and $0.8 million to other fee income.

Operating Expenses

Operating expenses for the nine months ended June 30, 2012 and 2011 are as follows:

		For the nine months ended
		June 30, 2012				June 30, 2011
		($ in thousands)
Base management fees		$	3,782			$	1,689
Incentive fees			4,111				80
Administrator expenses			1,074				520
Professional fees			1,102				366
Interest and financing expenses			2,891				—
Directors fees			378				322
Insurance			343				183
Organizational expense			—				92
General and administrative			372				74
Expenses before management fee waiver		$	14,053			$	3,326

For the nine months ended June 30, 2012, total operating expenses before manager expense waiver and reimbursement increased $10.7 million, or 322.6%, compared to the nine months ended June 30, 2011.

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Interest and financing expenses were higher in the nine months ended June 30, 2012 than the nine months ended June 30, 2011 as a result of the Company closing a four-year senior secured revolving credit facility and issuing $40.0 million in aggregate principal amount of 7.125% senior notes that mature on March 30, 2019.

Excluding interest and financing expenses, expenses increased for the nine month period ended June 30, 2012, due to an increase in professional fees, base management fees, incentive fees, administrative service fees, and general administrative expenses as a result of us becoming a public company. Professional fees increased due to higher legal, audit, and valuation services.

Net Realized Gains/Losses from Investments

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

During the nine months ended June 30, 2012, we recognized $0.1 million of realized gains on our portfolio investments. During the nine months ended June 30, 2011, we recognized $55,000 of realized gains on our portfolio investments.

Net Unrealized Appreciation/Depreciation on Investments

Net change in unrealized appreciation on investments reflects the net change in the fair value of our investment portfolio. For the nine months ended June 30, 2012, we had $1.4 million of unrealized depreciation on our portfolio investments. For the nine months ended June 30, 2011, we had $0.3 million of unrealized appreciation on our portfolio investments.

Changes in Net Assets from Operations

For the nine months ended June 30, 2012, we recorded a net increase in net assets resulting from operations of $15.1 million versus a net increase in net assets resulting from operations of $5.6 million for the nine months ended June 30, 2011. The difference is attributable to an increase in total investment income offset by an increase in total operating expenses, resulting from portfolio growth and an increase in net unrealized depreciation for the nine months ended June 30, 2012, as compared to the same period in the prior year. Based on 17,320,468 and 17,222,642 weighted average common shares outstanding for the nine months ended June 30, 2012 and June 30, 2011, respectively, our per share net increase in net assets resulting from operations was $0.87 for the nine months ended June 30, 2012 versus a per share net increase in net assets from operations of $0.33 for the nine months ended June 30, 2011.

Financial Condition, Liquidity and Capital Resources

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

Our liquidity and capital resources have been generated primarily from the net proceeds of our IPO, as well as cash flows from operations. On January 20, 2011, we completed our IPO and issued 11,111,112 common shares and received net proceeds of $129.6 million.

On August 4, 2011, we closed a four-year senior secured revolving credit facility (the “Revolving Facility”) led by ING Capital LLC with initial commitments of $60 million and an accordion feature that provides for expansion of the Revolving Facility up to $125 million, subject to customary conditions. On January 31, 2012, February 10, 2012, March 30, 2012 and May 3, 2012, we closed $25 million, $15 million, $15 million and $10 million, respectively, of additional commitments to the Revolving Facility. Total commitments to the Revolving Facility, as of June 30, 2012, were $125 million. As of June 30, 2012, there was $108.7 million outstanding under the Revolving Facility.

On March 21, 2012, we issued $40.0 million in aggregate principal amount of 7.125% senior notes that mature on March 30, 2019 (the “Notes”). The Notes may be redeemed in whole or in part at any time or from time to time at our option on or after March 30, 2015. The Notes bear interest at a rate of 7.125% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, beginning

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June 30, 2012. The Notes are listed on the New York Stock Exchange and trade thereon under the trading symbol “MCQ”. As of June 30, 2012, $40.0 million in aggregate principal amount of the Notes were outstanding.

As of June 30, 2012, we had $3.1 million in cash and cash equivalents. We generated cash from the net proceeds of our initial public offering and the exercise of the underwriters’ over-allotment option and the net proceeds of our offering of the Notes. In the future, we may generate cash from future offerings of securities, future borrowings and cash flows from operations, including interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less. Our primary use of funds will be investments in our targeted asset classes, cash distributions to our stockholders, and other general corporate purposes.

We have applied to the Small Business Administration (“SBA”) for a license for Medley SBIC LP to operate as a Small Business Investment Company (“SBIC”) under Section 301(c) of the Small Business Investment Act of 1958. On March 26, 2012, the application was accepted for filing. The application is generally expected to be approved within the next six months from the date of acceptance, although there can be no assurance that the SBA will approve the application. SBICs are designated to stimulate the flow of private equity capital to eligible small businesses. Under SBA regulations, SBICs may make loans to eligible small businesses and invest in the equity securities of small businesses.

The SBIC license would allow our SBIC subsidiary to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, will have a superior claim to our SBIC subsidiary’s assets over our stockholders in the event we liquidate our SBIC subsidiary or the SBA exercises its remedies under the SBA-guaranteed debentures issued by our SBIC subsidiary upon an event of default.

SBA regulations currently limit the amount that our SBIC subsidiary may borrow to a maximum of $150 million when it has at least $75 million in regulatory capital, receives a capital commitment from the SBA and has been through an examination by the SBA subsequent to licensing.

On March 28, 2012, we applied for exemptive relief from the SEC to permit us to exclude the debt of our SBIC subsidiary guaranteed by the SBA from our 200% asset coverage test under the 1940 Act. If we receive an exemption for this SBA debt, we would have increased flexibility under the 200% asset coverage test.

Contractual Obligations and Off-Balance Sheet Arrangements

We may become a party to financial instruments with off-balance sheet risk in the normal course of our business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized on our balance sheet. As of June 30, 2012, we had commitments under loan and financing agreements to fund up to $12.3 million to three portfolio companies. These commitments were primarily composed of senior secured term loans and preferred equity. The commitments were generally subject to the borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject to commitment were comparable to the terms of other loan and equity securities in our portfolio.

We have certain contracts under which we have material future commitments. We have entered into an investment management agreement with MCC Advisors in accordance with the 1940 Act. The investment management agreement became effective upon the pricing of our initial public offering. Under the investment management agreement, MCC Advisors has agreed to provide us with investment advisory and management services. For these services, we have agreed to pay a base management fee equal to a percentage of our gross assets and an incentive fee based on our performance.

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We have also entered into an administration agreement with MCC Advisors as our administrator. The administration agreement became effective upon the pricing of our initial public offering. Under the administration agreement, MCC Advisors has agreed to furnish us with office facilities and equipment, provide us clerical, bookkeeping and record keeping services at such facilities and provide us with other administrative services necessary to conduct our day-to-day operations. MCC Advisors will also provide on our behalf significant managerial assistance to those portfolio companies to which we are required to provide such assistance.

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

Distributions

We have elected and qualified to be taxed as a RIC for U.S. federal income tax purposes under subchapter M of the Code, and we intend to operate in a manner so as to maintain our RIC tax treatment. As a RIC, in any taxable year with respect to which we distribute at least 90% of the sum of our (i) investment company taxable income (which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses) determined without regard to the deduction for dividends paid and (ii) net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions), we (but not our stockholders) generally will not be subject to U.S. federal income tax on investment company taxable income and net capital gains that we timely distribute to our stockholders. We intend to distribute annually all or substantially all of such income for each year. To the extent that we retain our net capital gains or any investment company taxable income, we will be subject to U.S. federal income tax. We may choose to retain our net capital gains or any investment company taxable income, and pay the associated federal corporate income tax, including the federal excise tax described below.

Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S. federal excise tax payable by us. To avoid this tax, we must distribute (or be deemed to have distributed) during each calendar year an amount equal to the sum of:

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

We intend to pay quarterly dividends to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to pay a specified level of dividends or year-to-year increases in dividends. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC could limit our ability to pay dividends. All dividends will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time to time. We cannot assure you that we will pay dividends to our stockholders in the future.

To the extent our taxable earnings for a year fall below the total amount of our distributions for that year, a portion of those distributions may be deemed a return of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may be the original capital invested by the

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stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a distribution carefully and should not assume that the source of any distribution is our ordinary income or gains.

We have adopted an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a cash dividend or other distribution, each stockholder that has not “opted out” of our dividend reinvestment plan will have their dividends automatically reinvested in additional shares of our common stock rather than receiving cash dividends. Stockholders who receive distributions in the form of shares of common stock will be subject to the same federal, state and local tax consequences as if they received cash distributions.

On May 11, 2011, the Company’s board of directors declared a quarterly dividend of $0.16 per share payable on June 15, 2011 to stockholders of record at the close of business on June 1, 2011.

On August 4, 2011, the Company’s board of directors declared a quarterly dividend of $0.21 per share payable on September 15, 2011 to stockholders of record at the close of business on September 1, 2011.

On November 29, 2011, the Company’s board of directors declared a quarterly dividend of $0.25 per share payable on December 30, 2011 to stockholders of record at the close of business on December 15, 2011.

On February 2, 2012, the Company’s board of directors declared a quarterly dividend of $0.28 per share payable on March 15, 2012 to stockholders of record at the close of business on February 24, 2012.

On May 2, 2012, the Company’s board of directors declared a quarterly dividend of $0.31 per share payable on June 15, 2012, to stockholders of record at the close of business on May 25, 2012.

On August 2, 2012, the Company’s board of directors declared a quarterly dividend of $0.36 per share payable on September 14, 2012, to stockholders of record at the close of business on August 24, 2012.

Related Party Transactions

Concurrent with the pricing of our initial public offering, we entered into a number of business relationships with affiliated or related parties, including the following:

MCC Advisors and its affiliates may in the future manage other accounts that have investment mandates that are similar, in whole and in part, with ours. MCC Advisors and its affiliates may determine that an investment is appropriate for us and for one or more of those other accounts. In such event, depending on the availability of such investment and other appropriate factors, and pursuant to MCC Advisors’ allocation policy, MCC Advisors or its affiliates may determine that we should invest side-by-side with one or more other

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accounts. We will not make any investments if they are not permitted by applicable law and interpretive positions of the SEC and its staff, or if they are inconsistent with MCC Advisors’ allocation procedures.

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

Management Fee

Pursuant to the investment management agreement, we pay our investment adviser a fee for investment management services consisting of two components — a base management fee and an incentive fee.

MCC Advisors receives a base management fee from the Company payable quarterly in arrears, at an annual rate of 1.75% of the Company’s gross assets, including any assets acquired with the proceeds of leverage. MCC Advisors agreed to waive the base management fee payable with respect to cash and cash equivalents held by the Company through December 31, 2011.

The investment management agreement also provides that MCC Advisors will be entitled to an incentive fee of 20.0%. The incentive fee consists of two parts: (1) the first component, which is payable quarterly in arrears, will equal 20.0% of the excess, if any, of the pre-incentive fee net investment income over a hurdle rate (2.0% quarterly) and subject to a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, our investment adviser receives no incentive fee until our net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-up”, 100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5%. The effect of this provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, our investment adviser will receive 20% of our pre-incentive fee net investment income as if the hurdle rate did not apply; and (2) the second component, which will be payable in arrears at the end of each calendar year (or upon termination of the investment management agreement, as of the termination date), commencing with the year ending December 31, 2011, will equal 20.0% of our cumulative aggregate realized capital gains less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the investment adviser.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

Valuation of Portfolio Investments

We value investments for which market quotations are readily available at their market quotations, which are generally obtained from an independent pricing service or multiple broker-dealers or market makers. We weight the use of third-party broker quotes, if any, in determining fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer. However, a readily available market value is not expected to exist for many of the investments in our portfolio, and we will value these portfolio investments at fair value as determined in good faith by our board of directors under our valuation policy and process. We may seek pricing information with respect to certain of our investments from pricing services or brokers or dealers in order to value such investments. We will also employ independent third party valuation firms for all of our investments for which there is not a readily available market value.

Valuation methods may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows, the markets in which the portfolio company does business, and other relevant factors. When an external event

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such as a purchase transaction, public offering or subsequent equity sale occurs, we will consider the pricing indicated by the external event to corroborate the private equity valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

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

With respect to investments for which market quotations are not readily available, our board of directors will undertake a multi-step valuation process each quarter, as described below:

Our quarterly valuation process begins with each investment being initially valued by the investment professionals responsible for monitoring the portfolio investment.

In following these approaches, the types of factors that are taken into account in fair value pricing investments include available current market data, including relevant and applicable market trading and transaction comparables; applicable market yields and multiples; security covenants; call protection provisions; information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the portfolio company’s earnings and discounted cash flows; the markets in which the portfolio company does business; comparisons of financial ratios of peer companies that are public; comparable merger and acquisition transactions; and the principal market and enterprise values.

Determination of fair values involves subjective judgments and estimates not verifiable by auditing procedures. Under current auditing standards, the notes to our financial statements refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

Revenue Recognition

Our revenue recognition policies are as follows:

Investments and Related Investment Income. We account for investment transactions on a trade-date basis and interest income, adjusted for amortization of premiums and accretion of discounts, is recorded on an accrual basis. For investments with contractual PIK interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible. Origination, closing and/or commitment fees associated with investments in portfolio companies are recognized as income when the investment transaction closes. Other fees are capitalized as deferred revenue and recorded into income over the respective period. Prepayment penalties received by the Company for debt instruments paid back to the Company prior to the maturity date are recorded as income upon receipt. Realized gains or losses on investments are measured by the difference between the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously recognized. We report changes in the fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments in our consolidated statement of operations.

Non-accrual. We place loans on non-accrual status when principal and interest payments are past due by 90 days or more, or when there is reasonable doubt that we will collect principal or interest. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans

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may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in our management’s judgment, are likely to remain current.

Federal Income Taxes

The Company has elected to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify annually for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements. As a RIC, the Company must timely distribute to its stockholders at least 90% of the sum of investment company taxable income (“ICTI”) including PIK, as defined by the Code, and net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) for each taxable year in order to be eligible for RIC tax treatment under subchapter M of the Code. The Company will be subject to a nondeductible U.S. federal excise tax of 4% on undistributed income if it does not distribute at least 98% of its net ordinary income in any calendar year and 98.2% of its capital gain net income for each one-year period ending on October 31 of such calendar year. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year and pay the 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the consolidated financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

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SENIOR SECURITIES

Information about our senior securities (including debt securities and other indebtedness) is shown in the following table as of the date identified. We had no senior securities outstanding as of September 30 of any prior fiscal year. The information contained in the table as of September 30, 2011 has been audited by Ernst & Young LLP. Ernst & Young LLP’s report on the information contained in the senior securities table as of September 30, 2011 is attached as an exhibit to the registration statement of which this prospectus is a part.

Year or Period End		Total Amount Outstanding Exclusive of Treasury Securities(1)				Asset Coverage Ratio Per Unit(2)				Average Market Value Per Unit
September 30, 2011			—				—				—
June 30, 2012 (Unaudited)
Revolving Facility		$	108,700,000			$	2,467				n/a	(3)
7.125% Senior Notes		$	40,000,000			$	2,467			$	24.96

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INVESTMENTS AND PORTFOLIO COMPANIES

We seek to create a diverse portfolio that includes senior secured first lien term loans, senior secured second lien term loans, unitranche, senior secured notes, senior subordinated notes and warrants and minority equity securities by investing approximately $10 million to $50 million of capital, on average, in the securities of middle-market companies.

As of June 30, 2012, our portfolio consisted of investments in 34 portfolio companies with a fair value of approximately $363.1 million. As of June 30, 2012, our average portfolio company investment and our largest portfolio company investment at fair value were approximately $10.7 million and $23.4 million, respectively. We had approximately $3.1 million of cash and cash equivalents as of June 30, 2012.

The following table shows the portfolio composition by industry grouping at fair value at June 30, 2012 (dollars in thousands):

		Investments at Fair Value				Percentage of Total Portfolio
Healthcare, Education and Childcare		$	57,430				15.8	%
Finance			55,622				15.3
Oil and Gas			31,830				8.8
Aerospace & Defense			30,412				8.4
Personal and Nondurable Consumer Products (Manufacturing Only)			29,890				8.2
Business Services			25,443				7.0
Personal, Food and Miscellaneous Services			24,907				6.9
Diversified/Conglomerate Service			17,216				4.8
Cargo Transport			16,322				4.5
Restaurant & Franchise			13,802				3.8
Containers, Packaging and Glass			10,000				2.8
Electronics			9,601				2.6
Mining, Steel, Iron and Nonprecious Metals			9,600				2.6
Home and Office Furnishings, Housewares, and Durable Consumer Products			8,059				2.2
Grocery			7,980				2.2
Telecommunications			7,027				1.9
Automobile			6,376				1.8
Chemicals, Plastics and Rubber			1,577				0.4
Total		$	363,094				100	%

As of June 30, 2012, the weighted average loan to value ratio (“LTV”) of our portfolio investments was approximately 47.5%. We believe that the LTV ratio for a portfolio investment is a useful indicator of the riskiness of the portfolio investment, or its likelihood of default. As part of our investment strategy we seek to structure transactions with downside protection and seek LTVs of lower than 65%. We regularly evaluate the LTV of our portfolio investments and believe that LTV is a useful indicator for management and investors.

As of June 30, 2012, the weighted average yield based upon original cost on our portfolio investments was approximately 14.3% and 41.9% of our income-bearing investment portfolio bore interest based on floating rates, such as LIBOR, and 58.1% bore interest at fixed rates. The weighted average yield on income producing investments is computed based upon a combination of the cash flows to date and the contractual interest payments, principal amortization and fee notes due at maturity without giving effect to closing fees received, base management fees, incentive fees or general fund related expenses. Each floating rate loan uses LIBOR as its floating rate index. For each floating rate loan, the projected fixed-rate equivalent coupon rate used to forecast the interest cash flows was calculated by adding the interest rate spread specified in the relevant loan document to the fixed-rate equivalent LIBOR rate, duration-matched to the specific loan, adjusted by the LIBOR floor and/or cap in place on that loan.

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Overview of Portfolio Companies

Set forth below is a brief description of the business of our portfolio companies as of June 30, 2012.

Portfolio Company		Brief Description of Portfolio Company
Allied Cash Holdings LLC		Allied Cash Holdings LLC is one of the leading private providers of payday and title lending services in the United States with 185 stores in California, Texas, Arizona, Michigan, Indiana, Virginia, New Mexico, Louisiana, Idaho and Colorado.
Applied Natural Gas Fuels, Inc.		Applied Natural Gas Fuels, Inc. produces, distributes and sells liquefied natural gas to transportation, industrial, and municipal markets in the western U.S. and portions of Mexico.
Aurora Flight Sciences Corporation		Aurora Flight Sciences Corporation designs and manufactures unmanned aircraft systems and components for use in research, defense and homeland security.
Bay Delta Maritime LLC		Bay Delta Maritime LLC is a leading provider of required and regulated tugboat services in the San Francisco Bay. The Company provides ship escorts, assists and towing services to petroleum tankers and other vessels. Container ships and oil tankers are required by maritime law to utilize the Company’s services in the San Francisco Bay, thus creating a strong base of demand.
Bennu Glass, Inc.		Bennu Glass, Inc. owns and operates a glass bottling facility in Kalama, WA, capable of producing nine million cases of high quality wine bottles per year for wineries in Oregon, Washington and California.
Calloway Laboratories, Inc.		Calloway Laboratories, Inc. is one of the nation’s fastest growing clinical toxicology laboratories that specialize in proprietary drug testing protocols to address one of the medical community’s largest challenges — ensuring patients are not abusing prescribed pain medications.
Caregiver Services, Inc.		Caregiver Services, Inc. provides licensed, certified and credentialed home health care services within the comfort and confines of one’s home to assist with the activities of daily living or the management of complex medical conditions.
Cymax Stores, Inc.		Cymax Stores, Inc., headquartered in Vancouver, Canada, operates as an online retailer of furniture, home appliances, accessories, baby products and small electronic items. Cymax also operates a traditional brick and mortar retailer of baby products with a single store in North Vancouver, British Columbia.
Flexera Software LLC		Flexera Software LLC is the market leader in application usage management software. The Company’s software enables software producers, device manufacturers and software buyers to install, track, monitor and manage application usage to maximize value, optimize usage and ensure continuous compliance.
Geneva Wood Fuels LLC		Geneva Wood Fuels LLC is one of the largest wood pellet manufacturers in New England. It owns and operates a 119,000 ton per year facility that produces high quality wood pellets distributed to residential customers in Maine, New Hampshire, Vermont and Massachusetts.

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Portfolio Company		Brief Description of Portfolio Company
The Great Atlantic & Pacific Tea Company, Inc.		The Great Atlantic & Pacific Tea Company is a supermarket, food, drug and liquor store chain in the United States.
Gulf Coast Asphalt Company, Inc.		Gulf Coast Asphalt Company Inc. is both a full service liquid bulk storage terminal company and a premier provider of liquid asphalt products, based on Mobile River in Mobile, Alabama.
Hilex Poly Co.		Hilex Poly Co. is an industry leading manufacturer of plastic bag and film products, focusing primarily on high density polyethylene film products and related services.
Hoffmaster Group, Inc.		Hoffmaster Group, Inc. is a leading North American designer, manufacturer and supplier of decorated, premium disposable tableware. Hoffmaster holds the #1 or #2 market position in nearly all of its core product segments through its line of leading brand names.
Insight Pharmaceuticals LLC		Insight Pharmaceuticals LLC is a leading marketer and distributor of branded over-the-counter pharmaceutical products with a broad platform of over 30 unique brands.
Integra Telecom, Inc.		Integra Telecom, Inc. is one of the largest facilities-based providers of communication and networking services in the western United States.
Kelley Amerit Holdings, Inc.		Kelly-Amerit Fleet Services, Inc. is a leading provider of fleet maintenance services for commercial vehicle fleets in the U.S. for Fortune 50 companies. The Company provides maintenance and repair services, fuel management and staffing services.
Meridian Behavioral Health LLC		Meridian Behavioral Health, LLC, is headquartered in New Brighton, Minnesota, and is the leading provider of high acuity chemical dependency treatment in the state of Minnesota operating 14 behavioral treatment centers, offering both inpatient and outpatient programs.
Prestige Industries LLC		Prestige Industries LLC is one of the leading companies dealing with manufacturing and exporting of stainless steel, alloy steel and carbon steel products.
RCS Management Corporation & Specialized Medical Services, Inc.		RCS Management Corporation & Specialized Medical Services, Inc. provides respiratory equipment, oxygen and related products and services to nursing homes and hospices throughout the U.S.
Renaissance Learning, LLC		Renaissance Learning, LLC is headquartered in Wisconsin Rapids, Wisconsin, and provides technology based student assessment and school improvement programs, focused on reading, math and writing for K-12 students.
Revstone Aero LLC		Revstone Aero LLC is a leading manufacturer of forgings primarily servicing the commercial and military aerospace industry.
Santa Cruz Nutritional		Santa Cruz Nutritional is a leading supplier of confection based nutritional delivery systems.
Sequel Youth and Family Services LLC		Sequel Youth and Family Services, LLC is a national provider of diversified behavioral health services for at-risk, delinquent, autistic and severely emotionally disturbed children and adolescents.

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Portfolio Company		Brief Description of Portfolio Company
Sizzling Platter LLC		Sizzling Platter LLC is a restaurant management company that operates 137 Little Caesars locations, 22 Sizzler locations and 12 other limited service restaurants in the Western United States as a franchisee. Little Caesars is the largest carryout pizza franchise in the United States and the fourth largest pizza franchise behind Pizza Hut, Domino’s and Papa John’s.
Tempel Steel Company		Tempel Steel Company is an independent manufacturer of magnetic steel laminations used in the production of motors and transformers.
Tower International Inc.		Tower International Inc. is a leading integrated global manufacturer of engineered structural metal components and assemblies primarily serving automotive original equipment manufacturers. Tower offers its automotive customers a broad product portfolio, supplying body-structure stampings, frames and other chassis structures, as well as complex welded assemblies, for small and large cars, crossovers, pickups and SUVs.
U.S. Well Services LLC		U.S. Well Services LLC operates as a pressure pumping company. The company operates in Marcellus and Utica, and is based in Houston, Texas.
United Restaurant Group, LP		United Restaurant Group, LP is the second largest franchisee of T.G.I. Friday’s restaurants in the United States. T.G.I. Friday’s a full-service casual dining restaurant chain.
United Road Towing, Inc.		United Road Towing, Inc. is the largest integrated towing company in the United States. The Company provides a complete range of towing, vehicle storage and vehicle auction services through a network of 53 operating locations across 9 states.
Velum Global Credit Management, LLC		Velum Global Credit Management, LLC is a global purchaser and servicer of non-performing consumer debt with operations in Illinois and Sao Paulo, Brazil. Velum owns over five million consumer accounts with a face value of just under $2 billion.
Water Capital USA, Inc.		Water Capital USA, Inc. operates a capital equipment leasing and a receivables financing business. Water Capital originates and monetizes portfolios of equipment leases and servicing receivables from creditworthy businesses.
Welocalize, Inc.		Welocalize, Inc. provides next-generation translation supply chain management that delivers market-ready, translated content — when and where you demand — at a higher output, a faster pace and an affordable price
YRCW Receivables LLC		YRCW Receivables LLC is a special purpose bankruptcy remote subsidiary of YRC Worldwide Inc., a leading provider of transportation and global logistics services. YRCW Receivables LLC purchases receivables from YRC Worldwide Inc.

Recent Investments

In August 2012, we closed on a $10.9 million investment in a senior secured second lien term loan to Brantley Transportation, LLC. Headquartered in Monahans, Texas, Brantley Transportation, LLC is a leading provider of mission-critical transportation services to energy producers and drilling companies in the upstream and midstream energy markets. The loan has a variable coupon of LIBOR + 10.0% cash with a 1.5% LIBOR floor and 2.5% PIK, with principal due at maturity in August 2017.

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In August, September and November 2012, we purchased an additional $11.2 million of senior secured notes of U.S. Well Services LLC at an average purchase price of $98.87.

In August and October 2012, we closed on a $10.1 million investment in a senior secured first lien term loan to American Gaming Systems. Headquartered in Las Vegas, NV, American Gaming Systems, is a leading manufacturer and operator of electronic gaming machines for the class II gaming market. The loan has a variable coupon of LIBOR + 10.0% cash with a 1.5% LIBOR floor and matures in August 2016.

In August and September 2012, we purchased $5.0 million of senior secured notes of Atkore International, Inc. at an average purchase price of $96.49. Atkore International, Inc. is a predominantly U.S. based manufacturer of electrical conduit, armored cable, mechanical pipe, tube and other products. The Company’s yield to maturity on the notes is 11.1%. The notes have a fixed coupon of 9.875% and mature in January 2018.

In August, October and November 2012, we closed on an additional $2.8 million investment a senior secured first lien term loan to Calloway Laboratories, Inc.

In August 2012, we closed on a $15.8 million investment in a senior secured first lien term loan to Strike Holdings LLC. Headquartered in New York, NY, Strike Holdings LLC, owns and operates six upscale bowling properties and offers an upscale bowling model, with emphasis on design, service, quality food and no league play, that generates among the highest returns of any leisure concept. The loan has a variable coupon of LIBOR + 10.0% cash with a 1.0% LIBOR floor and 2.0% PIK and matures in August 2017.

In September 2012, we closed on a $16.0 million investment in a senior secured first lien term loan to Modern VideoFilm, Inc. Headquartered in Burbank, CA, Modern VideoFilm, is a leading provider of content creation and content management services for the film, television and digital content industries. The loan has a variable coupon of LIBOR + 9.0% cash with a 1.5% LIBOR floor and 3.0% PIK, plus warrants for 4.8% of the equity and the loan matures in September 2017.

In September and October 2012, we purchased $12.5 million of the senior secured notes of Exide Technologies at an average purchase price of $85.63. Exide Technologies is a global leader in stored electrical energy solutions, and one of the largest manufacturers and suppliers of lead-acid batteries for transportation and industrial applications in the world. The Company’s yield to maturity on the notes is 12.1%. The notes have a fixed coupon of 8.625% and mature in February 2018.

In September and October 2012, we closed on an additional $8.0 million investment a senior secured second lien term loan to RCS Management Corporation & Specialized Medical Services, Inc.

In September 2012, we purchased an additional $2.0 million of senior secured notes of Tempel Steel Company at a purchase price of $99.00.

In September and October 2012, we closed on an additional $3.8 million investment a senior secured first lien term loan to Meridian Behavioral Health, LLC.

In October 2012, the Company closed on a $3.5 million investment in the senior secured notes of Linc Energy Finance (USA), Inc. Headquartered in Houston, Texas, Linc Energy Finance (USA), Inc. is an independent oil and gas company engaged in the production, development, exploitation and acquisition of crude oil and gas producing properties, with principal interests covering approximately 62,520 acres across 18 fields in onshore and state waters of Texas and Louisiana, Alaska’s North Slope and Wyoming’s Powder River Basin. The notes have a fixed coupon of 12.5% cash, with principal due at maturity in October 2017.

In November 2012, the Company closed on a $14.0 million investment in senior secured second lien term loan to Taylored Services, LLC, Headquartered in Edison, NJ, Taylored Services, LLC is a port-based, third-party logistics provider that specializes in warehousing, fulfillment, transportation and related valueadded services to support the global supply chains of manufacturers and importers of apparel, accessories, toys and sporting goods. The senior secured second lien term loan has a variable coupon of LIBOR + 9.5% cash with a 1.5% LIBOR floor and 2.0% PIK, with principal due at maturity in November 2017.

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In November 2012, the Company closed on a $11.5 million investment in senior secured first lien term loan to Family Christian Stores, Inc., Headquartered in Grand Rapids, Michigan, Family Christian Stores, Inc. is the leading Specialty Christian retailer comprised of 282 stores across 38 states with a significant presence in the Southeast, Midwest, California, and Texas. The senior secured first lien term loan has a variable coupon of LIBOR + 10.75% cash with a 1.25% LIBOR floor, with principal due at maturity in November 2017.

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TAX MATTERS

For the material U.S. federal income tax considerations applicable to an investment in shares of our common stock, see “Tax Matters” on page 90 of the accompanying prospectus. The following section supplements and, to the extent inconsistent with, supersedes the discussion of U.S. federal income tax in the accompanying prospectus.

Under a provision that expired for taxable years beginning after December 31, 2011, properly reported dividends received by a non-U.S. stockholder are generally exempt from U.S. federal withholding tax when they (1) are paid in respect of our “qualified net interest income” (generally, our U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we are at least a 10% stockholder, reduced by expenses that are allocable to such income), or (2) were paid in connection with our “qualified short-term capital gains” (generally, the excess of our net short-term capital gain over our long-term capital loss for such taxable year). If such provision is renewed by the U.S. Congress, depending on the circumstances, we may report all, some or none of our potentially eligible dividends as such qualified net interest income or as qualified short-term capital gains, or treat such dividends, in whole or in part, as ineligible for this exemption from withholding. In order to qualify for this exemption from withholding, a non-U.S. stockholder must comply with applicable certification requirements relating to its non-U.S. status (including, in general, furnishing an IRS Form W-8BEN or an acceptable substitute or successor form). In the case of shares held through an intermediary, the intermediary could withhold even if we designate the payment as qualified net interest income or qualified short-term capital gain. Non-U.S. stockholders should contact their intermediaries with respect to the application of these rules to their accounts. As discussed above, this exemption from withholding for interest-related and short term capital gain dividends has expired for tax years beginning after December 31, 2011. It is unclear whether such exemption will be renewed and, even if renewed, it may again be subject to expiration.

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UNDERWRITING

The Company and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table.      ,       and       are the representatives of the underwriters.

Underwriters		Number of Shares
Goldman Sachs & Co.
Barclays Capital Inc.
Credit Suisse Securities (USA) LLC
UBS Securities LLC
Total

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares being sold directly by us and those covered by the option described below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the table above, we have granted the underwriters an option to buy up to an additional 750,000 shares from us. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following table shows the total underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase 750,000 additional shares.

		No Exercise				Full Exercise
Per Share		$				$
Total		$				$

We estimate that the total expenses of this offering payable by us, exclusive of the underwriting discount or commission, will be approximately $200,000.

Shares sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus supplement. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $      per share from the public offering price. If all the shares are not sold at the public offering price, the underwriters may change the offering price and the other selling terms. The offering of the shares by the underwriters are subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

The Company, the directors and executive officers of the Company have agreed with the underwriters, subject to certain exceptions, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of or hedge any shares of common stock, during the period of 30 days from the date of this prospectus supplement, except with the prior written consent of the underwriters.

The 30-day restricted period described in the preceding paragraph will be automatically extended if:
(1) during the last 17 days of the 30-day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the 30-day restricted period, we announce that we will release earnings results during the 15-day period following the last day of the 30-day restricted period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release of the announcement of the material news or material event.

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than it is required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from the Company in the offering. The

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underwriters may close out any covered short position by either exercising its option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase additional shares pursuant to the option granted to it. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own account, may have the effect of preventing or retarding a decline in the market price of the Company’s stock, and may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Each underwriter has represented and agreed that:

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Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Switzerland

This prospectus does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations (“CO”) and the shares will not be listed on the SIX Swiss Exchange. Therefore, this prospectus may not comply with the disclosure standards of the CO and/or the listing rules (including any prospectus schemes) of the SIX Swiss Exchange. Accordingly, the shares may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors, which do not subscribe to the shares with a view to distribution.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Japan

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity

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organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Other

The Company has agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

The underwriters and their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have in the past and may in the future perform various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Certain of the underwriters and/or their affiliates are lenders under the Company's Revolving Facility and may receive a portion of the net proceeds from this offering. For example, affiliates of Barclays Capital Inc., Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., and UBS Securities LLC are lenders under the Revolving Facility.

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VALIDITY OF COMMON STOCK

The validity of the shares of common stock offered hereby will be passed upon for Medley Capital Corporation by Sutherland, Asbill & Brennan LLP, Washington, DC. The validity of the shares of common stock offered hereby will be passed upon for the underwriters by Fried, Frank, Harris, Shriver & Jacobson LLP, New York, New York.

EXPERTS

Ernst & Young LLP, our independent registered public accounting firm, has audited our consolidated financial statements, including the schedule of investments, at September 30, 2011 and 2010, and for the year ended September 30, 2011 and the period from April 23, 2010 (inception date) to September 30, 2010, respectively, as set forth in their report. Ernst & Young LLP also has audited our senior securities table as of September 30, 2011. We have included our consolidated financial statements, including the schedule of investments, and senior securities table in this prospectus supplement, and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement with the SEC on Form N-2, including amendments, relating to the shares we are offering by this prospectus supplement. This prospectus does not contain all of the information set forth in the registration statement, including any exhibits and schedules it may contain. For further information concerning us or the common stock we are offering, please refer to the registration statement.

We are required to file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. You may inspect and copy these reports, proxy statements and other information, as well as the registration statement and related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information filed electronically by us with the SEC which are available on the SEC’s website at http://www.sec.gov. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the SEC’s Public Reference Section, Washington, D.C. 20549. This information will also be available free of charge by contacting us by mail at 375 Park Avenue, 33rd Floor, New York, NY 10152, by telephone at (212) 759-0777 or on our website at http://www.medleycapitalcorp.com.

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INDEX TO FINANCIAL STATEMENTS

Consolidated Statements of Assets and Liabilities as of June 30, 2012 (unaudited) and September 30, 2011			SF-1
Consolidated Statements of Operations for the nine months ended June 30, 2012 and 2011 (unaudited)			SF-2
Consolidated Statements of Changes in Net Assets for the nine months ended June 30, 2012 and 2011 (unaudited)			SF-3
Consolidated Statements of Cash Flows for the nine months ended June 30, 2012 and 2011 (unaudited)			SF-4
Consolidated Schedule of Investments as of June 30, 2012 (unaudited)			SF-5
Consolidated Schedule of Investments as of September 30, 2011			SF-8
Notes to Consolidated Financial Statements (unaudited)			SF-10

.

Medley Capital Corporation
  
Consolidated Statements of Assets and Liabilities

		As of
		June 30, 2012				September 30, 2011
		(unaudited)
ASSETS
Investments at fair value
Non-controlled/non-affiliated investments (amortized cost of $356,108,198 and $153,268,701, respectively)		$	355,035,060			$	153,385,565
Affiliated investments (amortized cost of $8,569,436 and $46,087,374, respectively)			8,058,646				45,820,982
Total investments at fair value			363,093,706				199,206,547
Cash and cash equivalents			3,120,105				17,201,643
Interest receivable			3,277,289				1,679,738
Deferred financing costs, net			2,961,989				1,259,382
Other assets			160,078				782,006
Deferred offering costs			167,628				—
Total assets		$	372,780,795			$	220,129,316
LIABILITIES
Credit facility payable		$	108,700,000			$	—
Notes payable			40,000,000				—
Management and incentive fees payable, net			3,050,223				1,483,751
Accounts payable and accrued expenses			988,420				626,261
Administrator expenses payable			395,689				346,293
Deferred revenue			98,428				18,648
Interest and fees payable			1,211,149				1,667
Due to affiliate			81,391				—
Deferred offering costs payable			84,963				—
Total liabilities		$	154,610,263			$	2,476,620
NET ASSETS
Common stock, par value $.001 per share, 100,000,000 common shares authorized, 17,320,468 and 17,320,468 common shares issued and outstanding, respectively		$	17,320			$	17,320
Capital in excess of par value			214,509,815				214,509,815
Accumulated undistributed net investment income			5,078,773				3,220,089
Accumulated net realized gain (loss) from investments			148,552				55,000
Net unrealized appreciation (depreciation) on investments			(1,583,928	)			(149,528	)
Total net assets			218,170,532				217,652,696
Total liabilities and net assets		$	372,780,795			$	220,129,316
NET ASSET VALUE PER SHARE		$	12.60			$	12.57

 
 
See accompanying notes to consolidated financial statements.

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Medley Capital Corporation
  
Consolidated Statements of Operations

		For the nine months ended June 30
		2012				2011
		(unaudited)				(unaudited)
INVESTMENT INCOME
Interest from investments
Non-controlled/Non-affiliated investments		$	23,962,160			$	4,116,146
Affiliated investments			2,013,461				2,664,963
Total interest income			25,975,621				6,781,109
Interest from cash and cash equivalents			3,513				63,730
Other fee income			4,475,777				833,454
Total investment income			30,454,911				7,678,293
EXPENSES
Base management fees			3,782,158				1,689,030
Incentive fees			4,110,844				79,785
Administrator expenses			1,074,173				519,762
Professional fees			1,102,278				366,069
Interest and financing expenses			2,890,872				—
Directors fees			377,504				322,058
Insurance			343,325				182,912
General and administrative			371,505				73,814
Organizational expense			—				92,226
Expenses before management fee waiver			14,052,659				3,325,656
Management fee waiver (See Note 6)			(41,126	)			(848,918	)
Total expenses net of management fee waiver			14,011,533				2,476,738
Net investment income before excise taxes			16,443,378				5,201,555
Excise tax expense			(35,501	)			—
NET INVESTMENT INCOME			16,407,877				5,201,555
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain/(loss) from investments			93,552				55,000
Net unrealized appreciation/(depreciation) on investments			(1,434,400	)			343,927
Net gain/(loss) on investments			(1,340,848	)			398,927
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	15,067,029			$	5,600,482
WEIGHTED AVERAGE – BASIC AND DILUTED EARNINGS PER COMMON SHARE		$	0.87			$	0.33
WEIGHTED AVERAGE – BASIC AND DILUTED NET INVESTMENT INCOME PER COMMON SHARE		$	0.95			$	0.30
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING – BASIC AND DILUTED (SEE NOTE 10)			17,320,468				17,222,642
DIVIDENDS DECLARED PER COMMON SHARE		$	0.84			$	0.16

 
 
See accompanying notes to consolidated financial statements.

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Medley Capital Corporation
  
Consolidated Statement of Changes in Net Assets

		For the nine months ended June 30, 2012				For the nine months ended June 30, 2011
		(unaudited)				(unaudited)
INCREASE FROM OPERATIONS:
Net investment income		$	16,407,877			$	5,201,555
Net realized gain/(loss) from investments			93,552				55,000
Net unrealized appreciation/(depreciation) on investments			(1,434,400	)			343,927
Net increase/(decrease) in net assets from operations			15,067,029				5,600,482
SHAREHOLDER DISTRIBUTIONS:
Distributions declared ($0.84 and $0.16 per share, respectively)			(14,549,193	)			(2,771,276	)
Net increase/(decrease) in net assets from shareholder distributions			(14,549,193	)			(2,771,276	)
CAPITAL SHARE TRANSACTIONS:
Issuance of common stock, net of underwriting costs			—				216,051,889
Offering costs			—				(1,422,948	)
Net increase/(decrease) in net assets from capital share transactions			—				214,628,941
Total increase/(decrease) in net assets			517,836				217,458,147
Net assets at beginning of period			217,652,696				(92,050	)
Net assets at end of period		$	218,170,532			$	217,366,097
Net asset value per common share		$	12.60			$	12.55
Common shares outstanding at end of period			17,320,468				17,320,468

 
 
See accompanying notes to consolidated financial statements.

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Medley Capital Corporation
  
Consolidated Statement of Cash Flows

		For the nine months ended June 30, 2012				For the nine months ended June 30, 2011
		(unaudited)				(unaudited)
Cash flows from operating activities
NET INCREASE IN NET ASSETS FROM OPERATIONS		$	15,067,029			$	5,600,482
ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO NET CASH USED BY OPERATING ACTIVITIES:
Paid-in-kind interest income			(2,545,968	)			(1,022,209	)
Net amortization/accretion of premium (discount) on investments			(23,574	)			82,849
Amortization of deferred financing costs			432,836				—
Net realized (gain) loss from investments			(93,552	)			(55,000	)
Net unrealized (appreciation) depreciation on investments			1,434,400				(343,927	)
Proceeds from sale and redemption of investments			26,637,386				2,055,000
Purchase of investments			(189,295,850	)			(60,430,348	)
(Increase) decrease in operating assets:
Interest receivable			(1,597,551	)			(1,296,430	)
Other assets			621,928				(244,795	)
Increase (decrease) in operating liabilities:
Payable for unsettled trades			—				9,849,932
Accounts payable and accrued expenses			362,159				460,613
Management and incentive fees payable, net			1,566,472				630,403
Administrator expenses payable			49,396				329,516
Interest and credit facility fees payable			1,209,482				—
Deferred revenue			79,780				—
Due to affiliate			81,391				6,689
Accrued organizational costs			—				(92,000	)
NET CASH USED BY OPERATING ACTIVITIES			(146,014,236	)			(44,469,225	)
Cash flows from financing activities
Repayment of contributed loan			—				(50,000	)
Proceeds from issuance of common stock, net of underwriting costs			—				131,101,393
Offering cost paid			(82,666	)			(1,380,402	)
Borrowings under credit facility			119,400,000				—
Repayments of credit facility			(10,700,000	)			—
Proceeds from senior notes			40,000,000				—
Financing cost paid			(2,135,443	)			—
Payments of cash dividends			(14,549,193	)			(2,771,276	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			131,932,698				126,899,715
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(14,081,538	)			82,430,490
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			17,201,643				15,190
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	3,120,105			$	82,445,680
Supplemental Information:
Interest paid during the period		$	1,248,554				n/a
Excise tax paid during the period		$	35,501			$	n/a
Supplemental non-cash information
Paid-in-kind interest income		$	2,545,968			$	1,022,209
Net amortization of premium on investments		$	23,574			$	(82,849	)
Amortization of deferred financing costs		$	(432,836	)			n/a
Issuance of 5,759,356 shares of common stock in connection with the formation transaction (See Note 1)		$	—			$	84,950,496

 
 
See accompanying notes to consolidated financial statements.

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Medley Capital Corporation
  
Consolidated Schedule of Investments
June 30, 2012
(unaudited)

Company(1)		Industry				Interest				Maturity				Par Amount(2)				Cost				Fair Value				% of Net Assets(3)				LTV(5) (unaudited)
Non-controlled/ Non-affiliated Investments –  162.7%(3)
Senior Secured First Lien Term Loans
Revstone Aero LLC			Aerospace & Defense				15.46% (LIBOR + 12.00% Cash, 3.00% PIK)				6/30/2017			$	15,000,000			$	14,776,044			$	14,776,044				6.8%				50.2%
Revstone Aero LLC (fee note)(7)			Aerospace & Defense				17.38%(7)				6/30/2017				500,000				224,317				224,317				0.1%				50.2%
Welocalize, Inc. (term loan A)			Business Services				10.00% (LIBOR + 8.00%, 2.00% LIBOR Floor)				11/19/2015				4,746,588				4,746,588				4,746,588				2.2%				36.0%
Welocalize, Inc. (term loan B)			Business Services				12.25% (LIBOR + 9.00%, 2.00% LIBOR Floor, 1.25% PIK)				11/19/2015				5,461,263				5,461,263				5,461,263				2.5%				36.0%
BayDelta Maritime LLC (term loan)			Cargo Transport				13.75% (11.25% Cash, 2.50% Deferred)				6/30/2016				6,669,293				6,541,505				6,541,505				2.9%				37.0%
BayDelta Maritime LLC (fee note)(7)			Cargo Transport				14.88%(7)				6/30/2016				250,000				143,507				143,507				0.1%				37.0%
Hilex Poly Co.			Chemicals, Plastics and Rubber				11.25% (LIBOR + 9.25%, 2.00% LIBOR Floor)				11/19/2015				1,576,878				1,576,878				1,576,878				0.7%				35.5%
Bennu Glass, Inc.			Containers, Packaging and Glass				15.00%				4/30/2013				10,000,000				10,087,813				10,000,000				4.6%				21.8%
Flexera Software LLC			Electronics				7.50% (LIBOR + 6.25%, 1.25% LIBOR Floor)				9/30/2017				3,940,000				3,940,000				3,900,601				1.8%				34.9%
Allied Cash Holdings LLC			Finance				15.00%				9/30/2013				17,000,000				17,051,104				17,000,000				7.8%				20.9%
Velum Global Credit Management LLC			Finance				15.00%				3/31/2014				15,000,000				15,183,962				15,183,962				7.0%				29.6%
Water Capital USA, Inc.			Finance				14.00% (7.00% Cash, 7.00% PIK)				1/3/2013				23,437,803				23,437,803				23,437,803				10.7%				52.5%
The Great Atlantic & Pacific Tea Company, Inc.			Grocery				11.00% (LIBOR + 9.00%, 2.00% LIBOR Floor)				3/13/2017				7,980,000				7,980,000				7,980,000				3.7%				11.5%
Calloway Laboratories, Inc.			Healthcare, Education and Childcare				15.00% (LIBOR + 11.00% ,1.00% LIBOR Floor, 3.00% PIK)				9/30/2013				20,157,076				20,157,076				20,157,076				9.2%				46.0%
Meridian Behavioral Health LLC			Healthcare, Education and Childcare				14.00% (12.00% Cash, 2.00% PIK)				11/14/2016				6,076,757				5,585,370				5,983,044				2.7%				30.4%
Renaissance Learning LLC			Healthcare, Education and Childcare				7.75% (LIBOR + 6.25%, 1.50% LIBOR Floor)				10/19/2017				2,977,500				2,869,056				2,869,056				1.3%				35.6%
Applied Natural Gas Fuels, Inc. (term loan A)			Oil and Gas				13.00%				3/24/2014				5,000,000				5,000,000				5,150,286				2.4%				22.9%
Applied Natural Gas Fuels, Inc. (term loan B)			Oil and Gas				10.00%				3/24/2014				10,844,251				10,844,251				10,641,151				4.8%				22.9%
Geneva Wood Fuels LLC(4)			Personal and Nondurable Consumer Products (Manufacturing Only)				15.50% (LIBOR + 13.00%, 2.50% LIBOR Floor)				12/31/2012				7,500,000				7,500,000				7,046,250				3.2%				69.8%
Total Senior Secured First Lien Term Loans														$	164,117,409			$	163,106,537			$	162,819,331

 
 
See accompanying notes to consolidated financial statements.

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Company(1)		Industry				Interest				Maturity				Par Amount(2)				Cost				Fair Value				% of Net Assets(3)				LTV(5) (unaudited)
Senior Secured Second Lien Term Loans
Aurora Flight Sciences Corporation			Aerospace & Defense				13.25% (11.25% Cash, 2.00% PIK)				3/16/2014			$	15,411,876			$	15,411,876			$	15,411,876				7.1%				35.0%
Kelley Amerit Holdings, Inc.			Business Services				12.20% (LIBOR + 9.70% Cash, 1.00% LIBOR Floor, 1.50% PIK)				12/22/2016				9,337,705				9,337,705				9,337,705				4.3%				46.1%
Prestige Industries LLC			Business Services				13.00% (10.00% Cash, 3.00% PIK)				1/31/2017				5,804,758				5,658,605				5,658,605				2.6%				59.8%
YRCW Receivables LLC			Cargo Transport				11.25% (LIBOR + 9.75%, 1.50% LIBOR Floor)				9/30/2014				9,922,512				9,735,768				9,426,390				4.3%				91.8%
RCS Management Corporation & Specialized Medical Services, Inc.			Diversified/ Conglomerate Service				13.00% (LIBOR + 11.00% Cash, 1.50% LIBOR Floor, 0.50% PIK)				9/23/2015				17,324,040				17,324,040				17,215,783				7.9%				50.6%
Flexera Software LLC			Electronics				11.00% (LIBOR + 9.75%, 1.25% LIBOR Floor)				9/30/2018				6,000,000				6,000,000				5,700,000				2.6%				50.5%
Renaissance Learning LLC			Healthcare, Education and Childcare				12.00% (LIBOR + 10.50%, 1.50% LIBOR Floor)				10/19/2018				2,000,000				1,925,034				1,925,034				0.9%				52.3%
Sequel Youth and Family Services LLC			Healthcare, Education and Childcare				14.00%				12/23/2014				10,500,000				10,500,000				10,710,000				4.9%				42.9%
Caregiver Services, Inc.			Healthcare, Education and Childcare				14.45% (12.45% Cash, 2.00% PIK)				12/29/2017				15,001,667				15,001,667				15,001,667				6.9%				54.6%
Gulf Coast Asphalt Company, Inc.			Oil and Gas				15.50% (LIBOR + 11.00% Cash, 1.00% LIBOR Floor, 3.5% PIK)				6/14/2017				11,080,784				11,080,784				11,080,784				5.1%				54.5%
Santa Cruz Nutritional			Personal and Nondurable Consumer Products (Manufacturing Only)				14.50%				5/25/2015				15,000,000				15,000,000				15,000,000				6.9%				47.3%
Hoffmaster Group, Inc.			Personal and Nondurable Consumer Products (Manufacturing Only)				11.00% (1.50% Base + 9.50% Spread)				1/3/2019				6,000,000				6,000,000				5,933,239				2.7%				64.1%
Hoffmaster Group, Inc.			Personal and Nondurable Consumer Products (Manufacturing Only)				10.25% (LIBOR + 9.0% Cash, 1.25% LIBOR Floor)				1/3/2019				2,000,000				1,980,173				1,910,985				0.9%				64.1%
Insight Pharmaceuticals LLC			Personal, Food and Miscellaneous Services				13.25% (LIBOR + 11.75%, 1.50% LIBOR Floor)				8/25/2017				10,000,000				10,000,000				10,000,000				4.6%				66.1%
United Road Towing Inc.			Personal, Food and Miscellaneous Services				13.50% (11.50% Cash, 2.00% PIK)				10/21/2016				15,368,312				15,368,312				14,907,263				6.8%				67.3%
United Restaurant Group L.P.			Restaurant & Franchise				15.24% (LIBOR + 11.50% Cash, 3.50% PIK)				12/31/2016				10,362,699				10,362,699				10,044,981				4.6%				70.6%
Total Senior Secured Second Lien Term Loans														$	161,114,353			$	160,686,663			$	159,264,312
Senior Secured Notes
Tower International, Inc.			Automobile				10.63%				9/1/2017			$	6,101,000			$	6,221,409			$	6,375,515				2.9%				43.0%
Tempel Steel Company			Mining, Steel, Iron and Nonprecious Metals				12.00%				8/15/2016				10,000,000				9,791,863				9,600,023				4.4%				69.7%
U.S. Well Services LLC			Oil and Gas				14.50% (14.50% PIK until 8/15/12, 14.50% cash therafter)				2/15/2017				5,000,000				4,958,285				4,958,285				2.3%				15.3%
Sizzling Platter LLC			Restaurant & Franchise				12.25%				4/15/2016				3,630,000				3,524,166				3,757,049				1.7%				47.9%
Integra Telecom, Inc.			Telecommunications				10.75%				4/15/2016				7,250,000				7,106,124				7,026,700				3.2%				86.8%
Total Senior Secured Notes														$	31,981,000			$	31,601,847			$	31,717,572

 
 
See accompanying notes to consolidated financial statements.

TABLE OF CONTENTS

Company(1)		Industry				Interest				Maturity				Par Amount(2)				Cost				Fair Value				% of Net Assets(3)				LTV(5) (unaudited)
Equity/Warrants
Prestige Industries LLC			Business Services				Warrants to purchase 3.04% of the outstanding common units				1/31/2017			$	—			$	151,855			$	239,290				0.1%				N/A
BayDelta Maritime LLC			Cargo Transport				Warrants to purchase 10% of the outstanding equity				6/30/2016				—				25,000				210,176				0.1%				N/A
Meridian Behavioral Health LLC			Healthcare, Education and Childcare				Warrants to purchase 8% of the outstanding membership units				11/14/2016				—				536,296				784,379				0.4%				N/A
U.S. Well Services LLC			Oil and Gas				Warrants to purchase 0.88% of the outstanding common membership interests				2/15/2017				—				—				—				0.0%				N/A
Total Common Equity/Warrants														$	—			$	713,151			$	1,233,845
Sub Total Non-controlled/Non-affiliated Investments														$	357,212,762			$	356,108,198			$	355,035,060
Affiliated Investments – 3.7%(3)
Senior Secured First Lien Term Loans
Cymax Stores, Inc.			Home and Office Furnishings, Housewares, and Durable Consumer Products				15.00% (10% Cash, 5% PIK)				8/1/2015			$	8,489,072			$	7,891,282			$	7,385,492				3.4%				54.4%
Equity/Warrants
Cymax Stores, Inc.			Home and Office Furnishings, Housewares, and Durable Consumer Products				190 Class B Common Units (6)				—			$	—			$	678,154			$	673,154				0.3%				N/A
Sub Total Affiliated Investments														$	8,489,072			$	8,569,436			$	8,058,646
Total Investments – 166.4%(3)														$	365,701,834			$	364,677,634			$	363,093,706